April 10, 2002
L. B. FOSTER COMPANY 2002
MANAGEMENT INCENTIVE COMPENSATION PLAN
I. PURPOSE
To provide incentives and rewards to salaried non-sales managers based
upon overall corporate profitability and the performance of individual operating
units.
II. CERTAIN DEFINITIONS
The terms below shall be defined as follows for the purposes of the L. B.
Foster Company 2002 Management Incentive Compensation Plan. The definitions
shall be subject to such adjustments as, from time to time, may be, by the
Corporation's Chief Executive Officer.
2.1 "Adjusted Operating Unit Target Award" shall be a Participant's
Operating Unit Target Award multiplied by the applicable Operating Unit
Performance Percentage determined under Section 3.5B(b).
2.2 "Base Compensation" shall mean the total base salary, rounded to the
nearest whole dollar, actually paid to a Participant during 2002, excluding
payment of overtime, incentive compensation, commissions, reimbursement of
expenses, severance, car allowances or any other payments not deemed part of a
Participant's base salary; provided, however, that the Participant's
contributions to the Corporation's Voluntary Investment Plan shall be included
in Base Compensation. Base Compensation for employees who die, retire or are
terminated shall include only such compensation paid to such employee during
2002 with respect to the period prior to death, retirement or termination.
2.3 "Base Fund" shall mean the aggregate amount of all cash payments to be
made pursuant to this Plan prior to adjustments pursuant to Article IV, which
amount shall be determined pursuant to Section 3.1 hereof.
2.4 "Committee" shall mean the Personnel and Compensation Committee of the
Board of Directors and any successors thereto.
2.5 "Corporation" shall mean L. B. Foster Company and those subsidiaries
thereof in which L.B. Foster Company owns 100% of the outstanding common stock,
excluding (except for the purpose of calculating "Pre-Incentive Income")
Natmaya, Inc., Fosmart, Inc. and Fexco, Ltd.
2.6 "Fund" shall mean the aggregate amount of all payments made to Plan
Participants under this Plan, after deducting all discretionary payments made
pursuant to Section 3.3 hereof and subject to Article IV.
2.7 "Individual Incentive Award" shall mean the amount paid to a
Participant pursuant to this Plan, which amount shall be determined pursuant to
Section 3.5 hereof and which award shall not exceed the lower of: (a) twice the
amount of a Participant's Target Award; or (b) the Participant's Target Award
allocable to the Product Pool multiplied by a percentage equal to twice the
percentage of Target Award paid to Participants in the General Pool. The
limitations herein shall not affect amounts distributed under Section 3.3.
2.8 "Operating Unit" shall mean the following units or divisions which are
reported in the Company's internal financial statements: CXT Rail, CXT
Buildings, Foster Coated Pipe, Threaded Products, Rail Products (excluding CXT
Rail and Foster Technologies), Piling, Fabricated Products, Foster Technologies
and Geotech, subject to such adjustments as may be made by the Chief Executive
Officer.
2.9 "Operating Unit Target Award" shall mean the portion of a Participant's
Target Award allocated to a specific Operating Unit pursuant to Section 3.5B(a).
2.10 "Operating Unit Performance Percentage" shall mean the sum of the
percentages earned by the applicable Operating Unit pursuant to Section 3.5B(b)
and/or with respect to a Rail Business Unit under Section 3.5(B)(b)(iii) and
(iv).
2.11 "Participant" shall mean a salaried employee of the Corporation who
satisfies all of the eligibility requirements set forth in Article V hereof.
2.12 "Performance Percentage" shall be each of the Percentages earned by an
Operating Unit and/or Rail Business Unit under Section 3(B)(b) and which
together equal the Operating Unit Performance Percentage.
2.13 "Plan" shall mean the L. B. Foster Company 2002 Management Incentive
Compensation Plan, which Plan shall be in effect only with respect to the fiscal
year ending December 31, 2002.
2.14 "Pool" shall mean the Product Pool and the General Pool, as calculated
pursuant to Section 3.4 hereof, subject to such adjustments as may be made by
the Chief Executive Officer.
2.15 "Pre-Incentive Income" shall mean the audited pre-tax income, after,
inter alia, deductions for benefits payable under the 2002 Sales Incentive Plan,
of the Corporation for the fiscal year ending December 31, 2002 determined in
accordance with generally-accepted accounting principles, excluding (i) benefits
payable under this Plan; and (ii) any portion of gains or losses arising from
transactions not in the ordinary course of business which the Committee, in its
sole discretion, determines to exclude.
2.16 "Pre-Tax Income" shall mean an Operating Unit's and/or a Rail Business
Unit's Pre-Tax Income as shown in the Corporation's financial statements and
subject to such adjustments as may be made by the Chief Executive Officer,
without taking into account incentive compensation under the 2002 Sales
Incentive Plan.
2.17 "Target Award" shall mean the product of a Participant's Base
Compensation multiplied by said Participant's Target Percentage.
2.18 "Target Percentage" shall mean those percentages assigned to
Participants pursuant to Section 3.2 hereof.
III. PLAN DESCRIPTION
3.1 Base Fund. Subject to Article IV, the amount of the Base Fund shall be
calculated by adding the flat rate contribution determined in 3.1A to the
marginal rate contributions determined in 3.1B.
3.1A Flat Rate Contribution. The flat rate contribution shall be determined
by multiplying the Corporation's Pre-Incentive Income by the following
percentages:
Pre-Incentive Income Percentage Flat Rate Contribution
$0 - $5,999,999 0 0
$6,000,000 and Over 13 $780,000 and Over
3.1B Marginal Rate Contribution. If the Corporation achieves any of the
following levels of Pre-Incentive Income, the marginal rate contribution shall
be determined by adding together the marginal rate contributions through the
level of Pre-Incentive Income actually achieved.
Marginal Maximum Marginal Rate
Pre-Incentive Income Percentage Rate Contribution
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$0 - $6,999,999 0 0
- --------------------------------------------------------------------------------
$7,000,000 - $7,999,999 2 $20,000
- --------------------------------------------------------------------------------
$8,000,000 - $8,999,999 4 $40,000
- --------------------------------------------------------------------------------
$9,000,000 - $9,999,999 6 $60,000
- --------------------------------------------------------------------------------
$10,000,000 and over 8 $80,000 and over
- --------------------------------------------------------------------------------
Example: If the Corporation earned $11,500,000 in Pre-Incentive Income the Base
Fund would be $1,735,000, calculated as follows:
a. Calculate Flat Rate Contribution
$11,500,000 X 13% = $1,495,000
b. Calculate Marginal Rate Contribution
$20,000 + $40,000 + $60,000 + ($1,500,000 X 8%) = $240,000
c. Calculate Base Fund
$1,495,000+ $240,000 = $1,735,000
3.2 Target Percentages. Subject to adjustment as set forth below, each
Participant shall have a Target Percentage based upon the grade level of such
Participant, unless determined otherwise by the Chief Executive Officer, on July
1, 2002, as follows:
% Of Base
Grade Levels Compensation
Grade 6 I Sales 15.0
Grade 7 I, Sales 15.0
Grade 8 I, Sales 20.0
Grade 10 I, Sales/Management 22.0
Grade 10 P, Professional/ Management 12.5
Grade 11 I, Sales/ Management 23.0
Grade 11 P, Professional/ Management 15.0
Grade 12, Management Positions 25.0
Grade 13, Management Positions 27.0
Grade 14, Management Positions 30.0
Grade 15, Management Positions 32.0
Grade 16, Management Positions 36.0
Grade 17, Management Positions 38.0
Grade 18, Management Positions 39.0
Grade 19, Management Positions 40.0
Grade 20, Management Positions 50.0
Grade 21, Management Positions 52.0
Grade 22, Management Positions 54.0
Grade 23 and Above 60.0
Other Employees selected, in writing, by L. B. Foster Company's Chairman of the
Board or Chief Executive Officer may also be made Participants in the Plan on
such terms as may be approved by the Chairman of the Board or Chief Executive
Officer.
The Committee may determine performance goals for the Chief Executive
Officer and such other officers as the Committee may, in its discretion, select
and the Target Percentage for each such Participant will be adjusted upward or
downward based upon such Participant's achievement of such goals. The precise
method for determining such adjustments for each such Participant shall be
separately scheduled and deemed incorporated herein by reference.
Those Participants who have retired or died prior to July 1, 2002 shall
have a Target Percentage based upon their grade level at death or retirement.
3.3 Discretionary Payments. Ten percent (10%) of the Base Fund, plus
amounts reallocated pursuant to Section 6, shall be reserved for discretionary
payments to employees of the Corporation. The recipients of all such awards and
the amounts of any such awards initially shall be selected by the Chief
Executive Officer, subject to final approval by the Committee. If any amounts
are not paid from the amount herein reserved, such remaining amount shall, at
the discretion of the Chief Executive Officer, either revert to the Corporation
or be allocated to Participants in proportion to their respective Individual
Incentive Awards prior to the allocation herein.
3.4 Calculation of Pools. Each Participant and all or any portion of each
Participant's Target Award shall be assigned to a Pool by the Chief Executive
Officer of the Company with at least 25% of each Participant's Target Award
being allocated to the General Pool. The dollar amount of each Pool will be
determined by dividing the portion of the Target Awards assigned to the Pool by
the total Target Awards of all Participants and then multiplying such amount by
the Fund.
EXAMPLE 1:
THE CORPORATION'S PRE-INCENTIVE INCOME IS $7,100,000. THE TOTAL OF ALL TARGET
AWARDS FOR ALL PLAN PARTICIPANTS IS $2,100,000, WITH $1,000,000 ALLOCATED TO THE
GENERAL POOL AND $1,100,000 ALLOCATED TO THE PRODUCT POOL. THE DOLLAR AMOUNT OF
EACH POOL WOULD BE CALCULATED AS FOLLOWS:
(a) Determine Base Fund
($7,100,000) x 13%) + ($100,000 x 2%) = $925,000
(b) Calculate Fund By Deducting 10% For "Discretionary Awards"
$ 925,000 x 90% = $832,500
(c) Determine Amount of Each Pool
1. General Pool
$1,000,000
--------------- x $832,500 = $396,429
$2,100,000
2. Product Pool
$1,100,000
--------------- x $832,500 = $436,071
$2,100,000
3.5 Calculation of Individual Incentive Awards. The calculation of an
Individual Incentive Award shall be determined based on the Pool(s) to which a
Participant is assigned.
3.5A General Pool Individual Incentive Awards. A General Pool Participant's
Individual Incentive Award shall be calculated, subject to the limitations in
Section 2.9, as follows:
(a) Divide Participant's Target Award allocated to General Pool by the sum
of all Target Awards allocated to General Pool;
(b) Multiply (a) by amount of General Pool.
EXAMPLE 2:
THE GENERAL POOL IS $396,429. THE SUM OF ALL GENERAL POOL PARTICIPANTS' TARGET
AWARDS IS $1,000,000. MANAGER JONES HAS A TARGET AWARD OF $19,200:
$ 19,200
------------- x $396,429 = $7,611
$1,000,000 (Individual Incentive Award)
3.5B Product Pool Individual Incentive Awards
(a) The Chief Executive Officer shall assign all or any portion of a
Participant's Target Award to an Operating Unit for purposes of calculating
percentages earned under 3.5(B)(b)(i), and (b)(ii), may adjust such
allocation(s) at any time (the "Operating Unit Target Award"). The Participant's
Individual Incentive Award shall be calculated by: (i) multiplying each such
Operating Unit Target Award by the sum of the percentages (the "Operating Unit
Performance Percentage") earned by the Operating Unit under 3.5B(b), with the
resulting product being the "Adjusted Operating Unit Target Award" and (ii)
multiplying the amount in the Product Pool by a fraction, the numerator of which
is the Participant's Adjusted Operating Unit Target Award and the denominator of
which is the sum of all Adjusted Operating Unit Target Awards of all
Participants in the Product Pool.
(b) The Operating Unit Performance Percentage with respect to the applicable
Operating Unit shall be the sum of the following percentages:
(i) The single "Pre-Tax Income Performance Percentage" set forth below
opposite the "Pre-Tax Income as % of the Operating Unit's 2002 Operating
Plan" earned by the applicable Operating Unit (subject to the $5,000
thresholds set forth below and subject to adjustment by the Chief Executive
Officer):
- -------------------------------------- -------------------------------------
Pre-Tax Income as % of Operating Pre-Tax Income
Unit's 2002 Operating Plan* Performance Percentage
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
75% 5%
- -------------------------------------- -------------------------------------
80% 10%
- -------------------------------------- -------------------------------------
85% 20%
- -------------------------------------- -------------------------------------
90% 30%
- -------------------------------------- -------------------------------------
95% 40%
- -------------------------------------- -------------------------------------
100% 50%
- -------------------------------------- -------------------------------------
110% 65%
- -------------------------------------- -------------------------------------
120% 80%
- -------------------------------------- -------------------------------------
130% and up 100%
- -------------------------------------- -------------------------------------
* Once an Operating Unit has achieved 75% of the Operating Unit's 2002
Operating Plan Pre-Tax Income, the Operating Unit shall receive credit for
additional percentage points under the column on the left above only to the
extent each such percentage point represents at least $5,000 in Pre-Tax
Income.
EXAMPLE:
An Operating Unit's 2002 Operating Pre-Tax Income Plan is $200,000 and
in 2002 the Operating Unit achieves exactly $200,000 in Operating Income.
Since $150,000 in Pre-Tax Income ($200,000 X 75%) was required to meet
the threshold for any Performance Percentage to be earned under 3.5(b)(i),
the $50,000 "excess" ($200,000 - $150,000) will be used to calculate
additional Performance Percentages, i.e. $50,000 / $5,000 = 10.
Accordingly, the Operating Unit would be considered to have achieved
85% of the Operating Unit's 2002 Operating Plan (75% + 10%) and to
have earned a 20% Performance Percentage instead of the 50%
Performance Percentage that otherwise would have been earned due to
the Operating Unit achieving 100% of its 2002 Operating Plan Pre-Tax
Income.
(ii) 25% if the Operating Unit met or exceeded its Return on
Investment set forth in such Operating Unit's 2002 Operating Plan
(subject to adjustment by the Chief Executive Officer), otherwise 0%.
(c) Notwithstanding any provision herein to the contrary, the sum of
all Individual Incentive Awards allocable to an Operating Unit may not
exceed 25% of such Operating Unit's Operating Unit Income. A Participant
assigned to an Operating Unit affected by this limit shall receive a share
of the available Operating Unit Income (i.e. 25% of the Operating Unit's
Operating Unit Income) equal to the Participant's applicable Adjusted
Operating Unit Target Award divided by the sum of applicable Adjusted
Operating Unit Target Awards for all applicable Participants assigned to
such Operating Units. Amounts not payable because of this limitation shall
be used for discretionary payments under Section 3.3.
EXAMPLE 1:
THE PRODUCT POOL IS $436,071. MANAGER SMITH'S TARGET AWARD ALLOCATED TO THE
PRODUCT POOL IS $50,000 AND IS ALLOCATED TO CXT RAIL. THE ADJUSTED TARGET AWARD
OF ALL PARTICIPANTS IN THE PRODUCT POOL IS $800,000. CXT RAIL MEETS THE
REQUIREMENTS OF B(I) AND B(II) AND HAS ALSO EXCEEDED ITS PLANNED PRE-TAX INCOME
BY 10% AND $500,000. MANAGER SMITH'S BONUS WOULD BE CALCULATED AS FOLLOWS:
(a) Operating Performance Percentage
65% + 25% + = 90%
(i) (ii)
(b) Determine Smith's Adjusted Operating Target Award
$50,000 X 90% = $45,000
(c) Determine Smith's Individual Award from the Product Pool
$ 45,000 X $436,071 = $ 24,529
--------
$800,000 (sum of all Adjusted
Operating Target Awards)
EXAMPLE 2:
The Product Pool is $436,071. Manager Jones' Target Award allocated to the
Product Pool is $50,000, with 50% being allocated to Geotech and 50% allocated
to CXT Buildings. Geotech's Operating Unit Income is 88% of its 2002 Planned
Pre-Tax Income and Geotech has achieved its planned return on investment. CXT
Building's Operating Unit Income is both $1M above and 200% of its 2002 Planned
Pre-Tax Income and CXT Buildings has satisfied all requirements under 3.5B(b).
The sum of Adjusted Operating Unit Target Awards for all Participants with
respect to Geotech is $100,000, for all Participants with respect to CXT
Buildings is $200,000 and for all Participants within all Operating Units is
$800,000. Disregarding the requirement that awards may not exceed 30% of the
Operating Unit Income for the applicable Operating Unit, Manager Jones'
Individual Incentive Award would be calculated as follows:
(a) Operating Unit Performance Percentage
For CXT Buildings:
100% + 25% = 125%
b(i) + b(ii)
For Geotech
20% + 25% = 45%
b(i) + b(ii)
(b) Determine Jones' Adjusted Operating Unit Target Awards
For CXT Buildings:
($50,000 X 50%) X 125% = $31,250
For Geotech:
($50,000 X 50%) X 45% = $11,250
(c) Determine Jones' Individual Incentive Award
For CXT Buildings:
$31,250 X $436,071 = $17,034
-------
$800,000 (Product Pool)
For Geotech:
$11,250 X $436,071 = $6,132
-------
$800,000
Total Individual Incentive Award $23,166 (excluding General Pool)
Award
EXAMPLE 3:
Same facts as Example 2, except that CXT Building's Operating Unit Income
is $300,000 and the sum of CXT Building's Individual Incentive Awards would be,
but for the limits in 3.5B(c), $100,646.
(a) Determine Maximum Individual Incentive Awards for CXT Building's
Participants
30% X $300,000 = $90,000
(b) Determine Manager Jones' Share
Jones' Adjusted Operating Unit Target Award X Maximum Aggregate
- -------------------------------------------
Sum of All CXT Building Adjusted Operating CXT Building Incentive Awards
Unit Target Awards
$31,250 X $90,000 = $14,062
-------
$200,000
(c) Determine Amount Available for Discretionary Payments
($100,646 - $90,000) = $10,646
(d) Notwithstanding any provision herein to the contrary, a Participant's
Individual Incentive Award from the Product Pool may not exceed twice the
applicable Performance Percentage for each Performance Percentage earned by the
Participant's applicable Operating Unit under each of 3(B)(b)(i), and (ii)
multiplied by the Participant's applicable Operating Unit Target Award. Amounts
not payable because of this limitation shall be available for discretionary
payments under Section 3.3.
IV. STOCK IN LIEU OF CASH FOR EXECUTIVE OFFICERS
Notwithstanding any other provision of this Plan, the Corporation's
executive officers, as determined by the Committee, shall receive shares of the
Corporation's Common Stock ("Stock"), subject to such restrictions on
transferability as the Corporation's legal counsel may deem necessary or
appropriate (such restrictions shall provide for no less than a two-year
restriction on the voluntary transfer of such stock), in lieu of cash equal to
25% of the Individual Incentive Awards (without taking into account any
discretionary payments under Section 3.3) that would otherwise be payable to
such officers under the Plan. In the event such restriction on transferability
should be violated, all proceeds derived from such transaction shall be
forfeited to the Company. Such stock shall be forfeited and revert to the
Company in the event the Participant's employment with the Company should cease
within two (2) years after the date of grant, unless such forfeiture is waived
by the Committee or said termination is attributable to the Participant's death,
permanent disability, retirement with the consent of the Company's Chief
Executive Officer or in the event of a "Change of Control". The amount of stock
to be granted to an executive officer shall be calculated by: (a) dividing the
average closing price of the stock for the ten business days preceding the date
cash distributions are made under the Plan into a sum equal to 25% of the
Individual Incentive Award that, but for this Article IV, would have been
payable to such executive officer; and (b) multiplying the resulting quotient by
115% with fractional share interest being rounded to the nearest number of whole
shares. Stock shall be deemed distributed to the executive officers on the first
day of the calendar month following the date cash distributions are made or as
soon thereafter as is practicable but the corporation shall retain custody of
such shares until the Participant's risk of forfeiture has ended. Cash which
would have been payable to executive officers, but for this Article IV, shall
not be distributed and shall remain the property of the Corporation.
"Change of Control" shall mean: (i) any person or group of persons (as used
in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder) shall have become the
beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated by the
Securities and Exchange Commission (the "SEC") under the Exchange Act) of 20% or
more of the combined voting power of all the outstanding voting securities of
the Corporation or, (ii) at any time following any merger, consolidation,
acquisition, sale of assets or other corporate restructuring of Corporation,
during any period of six consecutive calendar months, individuals who were
directors of the Corporation on the first day of such period, together with
individuals elected as directors by not less than two-thirds of the individuals
who were directors of the Corporation on the first day of such period, shall
cease to constitute a majority of the members of the board of directors of the
Corporation.
V. ELIGIBILITY
Unless changed or amended by the Committee, an employee shall be deemed a
Participant in the Plan only if all of the following requirements are satisfied:
A. A Participant must be a salaried employee of the Corporation, at a
grade level set forth in Section 3.2 or as otherwise approved by L. B.
Foster Company's Chairman of the Board or Chief Executive Officer, for
at least six (6) months of the entire fiscal year, unless deceased or
retired.
B. A Participant may not have: (i) been terminated for cause; (ii)
voluntarily have resigned (other than due to retirement with the
Company's consent) prior to the date Individual Incentive Awards are
paid; or (iii), unless the Corporation agrees in writing that the
employee shall remain a Participant in this Plan, been terminated for
any reason whatsoever and have received money from the Corporation in
connection with said termination.
C. A Participant's services may not primarily be provided to the
Natmaya, Inc., Fosmart, Inc. or Fexco, Ltd. unless otherwise approved
by the Chief Executive Officer.
D. A Participant may not, unless agreed to in writing by the Chief
Executive Officer, be a participant in any other incentive plan
maintained by the Corporation, other than the Corporation's stock
option plans.
Notwithstanding the foregoing, Brian N. Southon, George H. Nelson
and Franklin B. Davis shall not be Participants in the Plan.
As used herein, "cause" to terminate employment shall exist upon
(i) the failure of an employee to substantially perform his duties
with the Corporation; (ii) the engaging by an employee in any criminal
act or in other conduct injurious to the Corporation; or (iii) the
failure of an employee to follow the reasonable directives of the
employee's superior(s).
VI. REALLOCATIONS
Any portion of the Fund not otherwise distributed shall be
available for discretionary payments under Section 3.3.
VII. PAYMENT OF AWARDS
Payment of Individual Incentive Awards will be made on or before
March 15, 2003, except that the timing of the distribution of stock
pursuant to Article IV shall be governed by Article IV.
VIII. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Chief Executive Officer, if there is a dispute, shall
determine the Operating Unit(s) that will receive credit for any sale
and/or how credit for any sale is to be allocated among any Operating
Units. The Chief Executive Officer's decisions are subject to final
review by the Committee if the Committee requests such review.
A determination by the Committee in carrying out, administering
or interpreting this Plan shall be final and binding for all purposes
and upon all interested persons and their heirs, successors and
personal representatives.
The Committee may, from time to time, amend the Plan; provided,
however, that the Committee may not amend, terminate or suspend the
Plan so as to reduce the Base Fund payable under the Plan, subject to
any reversions permitted under Section 3.3.
The Chief Executive Officer may delegate any of his duties
herein.
The Corporation's independent public accountants will review and
verify the Corporation's determination of Pre-Incentive Income. The
Corporation's Internal Audit Department will review and verify the
calculation of Individual Incentive Awards.
Employees are expected to act in the best interests of the
Company and in accordance with Company policies. Any actions that
conflict with these expectations may result in disciplinary action, up
to and including termination.