EXHIBIT 10.10
ENPRO INDUSTRIES, INC.
SENIOR EXECUTIVE ANNUAL PERFORMANCE PLAN
PURPOSE
The EnPro Industries, Inc. Senior Executive Annual Performance Plan
(the "Plan") has been established effective as of the Distribution Date, as such
term is defined in the Distribution Agreement among ▇▇▇▇▇▇▇▇ Corporation, EnPro
Industries, Inc. and Coltec Industries Inc (the "Effective Date") to provide
opportunities to certain senior executives to receive incentive compensation as
a reward for high levels of personal performance above the ordinary performance
standards compensated by base salary, and for their contributions to the strong
performance of the Company. The Plan, together with base compensation, is
designed to provide above average total cash compensation when all relevant
performance objectives are achieved and below average total cash compensation
when such objectives are not achieved.
ELIGIBILITY
Participation in the Plan will be limited to those senior executives
whose compensation may become subject to the non-deductibility provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended, or any similar
successor provision (the "Code"). Participants will be selected prior to or
within 90 days of the beginning of each Plan Year by the Compensation and Human
Resources Committee of the Company's Board of Directors or a subcommittee of the
committee consisting only of those members of that committee who are "outside"
Directors as defined in regulations under the Code if any members of the
committee are not "outside" Directors as so defined (the "Committee").
INCENTIVE CATEGORIES
Each year the Committee will assign each Participant to an incentive
category based on organizational level and potential impact on important Company
or division results. The incentive categories define the target level of
incentive opportunity, stated as a percentage of base salary as determined by
the Committee, that will be available to the Participant if the Company's target
performance levels are met for the Plan Year (the "Target Incentive Amount").
MAXIMUM AND THRESHOLD AWARDS
Each Participant will be assigned maximum and threshold award levels.
Maximum award level represents the maximum amount of incentive award that may be
paid to a Participant for a Plan Year. Threshold award level represents the
level above which an incentive award will be paid to a Participant. Performance
at or below the threshold level will earn no incentive payments. Each
Participant's maximum award level will be 200% of his or her Target Incentive
Amount. Under no circumstances will any Participant be paid an award exceeding
$2,500,000.
PERFORMANCE MEASURES
Performance measures that may be used under the Plan include Net
Income, Pretax Income, Consolidated Operating Income, Segment Operating Income,
Return on Equity, Operating Income Return on Net Capital Employed, Return on
Assets, Cash Flow (with or without regard to asbestos), Working Capital, Share
Appreciation, Total Shareholder Return relative to the manufacturing companies
within the S&P 400 index, Total Business Return (calculated utilizing Earnings
Before Interest, Taxes, Depreciation and Amortization and cash flow) and
Earnings per Share of Common Stock of the Company for the Plan Year.
PARTIAL PLAN YEAR PARTICIPATION
Subject to the Change in Control provisions described below, incentive
awards to Participants who terminate during the Plan Year for reasons of death,
disability (under the Company's Long-Term Disability Plan), or retirement (under
the Company's Salaried Retirement Plan) will be calculated as specified above
and will be paid pro rata based on a fraction, the numerator of which is the
number of full and partial months of the Plan Year during which the Participant
was employed by the Company, and the denominator of which is the total number of
months in the Plan Year. Subject to the Change in Control provisions described
below, Participants who terminate during a Plan Year for reasons other than
death, disability, or retirement will receive no incentive award payments for
such Plan Year.
PERFORMANCE GOALS
The Committee will designate, prior to or within 90 days of the
beginning of each Plan Year:
- The incentive category and percentage of base salary for each
Participant to determine his or her Target Incentive Amount;
- The performance measures and calculation methods to be used
for the Plan Year;
- A schedule for each performance measure relating achievement
levels for the performance measure to incentive award levels
as a percentage of Participants' Target Incentive Amounts; and
- The relative weightings of the performance measures for the
Plan Year.
PERFORMANCE CERTIFICATION
As soon as practicable following the end of each Plan Year, the
Committee will certify the Company's performance with respect to each
performance measure used for that Plan Year.
AWARD CALCULATION AND PAYMENT
Individual incentive awards will be calculated and paid as soon as
practicable following the Committee's certification of performance for each Plan
Year. The amount of a
2
Participant's incentive award to be paid based on each individual performance
measure will be calculated based on the following formula (the "Formula").
Participant's Participant's Percentage of Relative Amount of
total gross X incentive category x target award x weighting of = incentive award
base salary percentage to be paid performance based on
for achievement measure performance
against performance measure
measure
The incentive amounts to be paid to the Participant based on each performance
measure will be summed to arrive at the Participant's total incentive award
payment for the Plan Year.
PAYMENT UPON CHANGE IN CONTROL
Anything to the contrary notwithstanding, within five days following
the occurrence of a Change in Control, the Company shall pay to each Participant
an interim lump-sum cash payment (the "Interim Payment") with respect to his or
her participation in the Plan. The amount of the Interim Payment shall equal the
product of (x) the number of months in the Plan Year in which the Change in
Control occurs, including fractional months, that elapsed before the occurrence
of the Change in Control and (y) one-twelfth of the greater of (i) the amount
most recently paid to each Participant for a full Plan Year under the Plan or
(ii) the Target Incentive Amount for each Participant in effect prior to the
Change in Control for the Plan Year in which the Change in Control occurs. The
Interim Payment shall not reduce the obligation of the Company to make a final
payment under the terms of the Plan, but any Interim Payment made shall be
offset against any later payment required under the terms of the Plan for the
Plan Year in which a Change in Control occurs. Notwithstanding the foregoing, in
no event shall any Participant be required to refund to the Company, or have
offset against any other payment due any Participant from or on behalf of the
Company, all or any portion of the Interim Payment.
For purposes of the Plan, a Change in Control shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock")
or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change
in Control: (A) any acquisition directly from the Company (other than
by exercise of a conversion privilege), (B) any acquisition by the
Company or any of its subsidiaries, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any of its subsidiaries or (D) any acquisition by any company with
respect to which, following such acquisition, more than 70% of,
respectively, the then outstanding shares of common stock of such
company and the
3
combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, solely in their
capacity as shareholders of the Company, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be; or
(ii) individuals who, as of the Effective Date, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest; or
(iii) shareholder approval of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization,
merger or consolidation, do not, following such reorganization, merger
or consolidation, beneficially own, directly or indirectly, solely in
their capacity as shareholders of the Company, more than 70% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(iv) shareholder approval of (A) a complete liquidation or
dissolution of the Company or (B) a sale or other disposition of all or
substantially all of the assets of the Company, other than to a
company, with respect to which following such sale or other
disposition, more than 70% of, respectively, the then outstanding
shares of common stock of such company and the combined voting power of
the then outstanding voting securities of such company entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities, solely in their capacity as shareholders of the Company,
who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other
4
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be.
PLAN YEAR
The Plan Year shall be the fiscal year of the Company, provided that
the first Plan Year shall commence on the Effective Date of the Plan.
PLAN ADMINISTRATION
The Plan will be administered by the Committee. In administering the
Plan, the Committee shall be empowered to interpret the provisions of the Plan
and to perform and exercise all of the duties and powers granted to it under the
terms of the Plan by action of a majority of its members in office from time to
time. The Committee is empowered to set preestablished performance targets,
measure the results and determine the amounts payable according to the Formula.
While the Committee may not increase the amounts payable under the Formula, it
retains discretionary authority to reduce the amount of compensation that would
otherwise be payable to the Participants if the goals are attained. The
Committee may also adopt such rules and regulations for the administration of
the Plan as are consistent with the terms hereof and shall keep adequate records
of its proceedings and acts. All interpretations and decisions made (both as to
law and fact) and other action taken by the Committee with respect to the Plan
shall be conclusive and binding upon all parties having or claiming to have an
interest under the Plan. Not in limitation of the foregoing, the Committee shall
have the discretion to decide any factual or interpretative issues that may
arise in connection with its administration of the Plan (including without
limitation any determination as to claims for benefits hereunder), and the
Committee's exercise of such discretion shall be conclusive and binding on all
affected parties as long as it is not arbitrary or capricious.
MISCELLANEOUS
(i) Amendment and termination. The Board of Directors of the
Company may amend, modify, or terminate the Plan at any time, provided that no
amendment, modification or termination of the Plan shall reduce the amount
payable to a Participant under the Plan as of the date of such amendment,
modification or termination.
(ii) Shareholder Approval. No amounts shall be payable hereunder on
or after the first annual shareholders meeting that occurs after the Effective
Date unless the terms of the Plan are approved by the shareholders of the
Company on or before such annual shareholders meeting consistent with the
requirements of Section 162(m) of the Code. In accordance with Section
162(m)(4)(C)(ii) of the Code, the continued effectiveness of the Plan is subject
to its approval by the shareholders of the Company at such other times as
required by Section 162(m)(4)(C)(ii) of the Code.
(iii) Applicable law. The Plan shall be governed and construed in
accordance with the laws of the State of North Carolina, except to the extent
such laws are preempted by the laws of the United States of America.
5
