URS CORPORATION
1998 INCENTIVE
COMPENSATION PLAN
TABLE OF CONTENTS
I. PURPOSE OF THE PLAN
II. HOW AWARDS ARE EARNED UNDER THE PLAN
III. OTHER PLAN PROVISIONS
IV. DEFINITIONS
V. EXAMPLES OF PLAN OPERATION
I. PURPOSE OF THE PLAN
I.1 PURPOSE
The URS Corporation ("URS") 1998 Incentive Compensation Plan (the "Plan") is
intended to provide incentive compensation to individuals who make an important
contribution to URS's financial performance. Specific Plan objectives are to:
o Focus key Employees on achieving specific financial
targets;
o Reinforce a team orientation;
o Provide significant award potential for achieving
outstanding performance; and
o Enhance the ability of URS to attract and retain highly
talented and competent individuals.
I-1
II. HOW AWARDS ARE EARNED UNDER THE PLAN
II.1 GENERAL PLAN DESCRIPTION
The Plan provides the opportunity for key Employees of URS to receive cash
Awards based on a combination of URS's and individual performance.
Here is an overview of how the Plan works. In general, certain Employees will be
selected to participate in the Plan at the beginning of or during the Plan Year.
These individuals are referred to as "Designated Participants." Upon selection
to participate in the Plan, each Designated Participant will be assigned a
Target Award Percentage. This Target Award Percentage, multiplied by the
Participant's Base Salary earned during the Plan Year, will equal the
Participant's Target Award. This Target Award represents the amount that is
expected to be paid to a Designated Participant if certain financial Performance
Objectives for URS have been fully met.
In addition, funds will be set aside for discretionary Awards to selected other
Employees (referred to as "Non-designated Participants"), who have demonstrated
outstanding individual performance during the Plan Year. It is expected that the
amount available to Non-designated Participants for the 1998 Plan Year will be
$25,000, assuming that URS meets its financial objectives.
The sum of all Target Awards for Designated Participants and expected payouts to
Non-designated Participants will equal the Target Bonus Pool. The Actual Bonus
Pool will vary from the Target Pool upward or downward based on URS's actual
performance in relationship to its Performance Objectives.
Actual Awards to Designated Participants and actual funds available for
distribution to Non-designated Participants will vary from target amounts based
on the relationship between the Actual Bonus Pool and the Target Bonus Pool.
A detailed description of how the Plan works is presented in the following
sections of this document.
II-1
II.2 DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Plan participation is extended to selected Employees who, in the opinion of the
Chief Executive Officer ("CEO") of URS, have the opportunity to significantly
impact the annual operating success of the Company. These Employees are the
Designated Participants and will be notified in writing of their selection to
participate in the Plan. This notification letter, for all Participants except
the CEO of URS, will be signed by the CEO of URS. The letter of participation
for the CEO will be signed by the Chairman of the Compensation/Option Committee
("Committee") of URS's Board of Directors.
In addition to the Designated Participants, there may be a group of other
Employees who are selected to receive Awards based on their outstanding
individual performance during the Plan Year. These other Employees are the
Non-designated Participants and will not be selected until the completion of the
Plan Year. The selection of Non-designated Participants will be determined by
the CEO of URS at his sole discretion.
II.3 TARGET AWARD PERCENTAGES FOR DESIGNATED PARTICIPANTS
Each Designated Participant will be assigned a Target Award Percentage. This
Target Award Percentage, when multiplied by the individual's Base Salary earned
during the Plan Year, represents the anticipated payout to a Designated
Participant if URS's Performance Objectives are met.
Each Designated Participant's Target Award Percentage will be included in the
letter of notification mentioned in Section II.2.
II.4 TARGET BONUS POOL
The Target Bonus Pool ("Target Pool") will equal the sum of all Target Awards
for Designated Participants plus an amount set aside for possible distribution
to Non-designated Participants. For 1998, the Target Bonus Pool equals $482,200.
II-2
II.5 URS PERFORMANCE OBJECTIVES
For 1998, URS's Performance Objectives are focused on the need to reach the
Company's Target for Net Income. The Performance Objectives and weightings for
the 1998 Plan Year are as follows:
URS Corporation Performance Objectives and Weightings
Performance Measure Weighting Performance Objective
------------------- --------- ---------------------
Net Income ($000s) 100% $19,000
Net Income will be calculated after all URS and URS Consultants ("URSC") bonuses
are accrued and assumed to have been paid.
II.6 RELATIONSHIP BETWEEN PERFORMANCE AND THE ACTUAL BONUS POOL
The Actual Bonus Pool ("Actual Pool") will vary from the Target Pool based on
the relationship between the actual performance of URS and the Performance
Objectives. The Actual Pool will vary in relationship to the Target Pool based
on the following table:
Relationship Between URS Performance and the
Actual Bonus Pool as a % of the Target Bonus Pool(1)
Actual
Performance as a Net Income Actual Pool
% of Performance Actual as a % of
Objective Performance Target Pool
--------- ----------- -----------
(%) ($000's) (%)
greater or equal to 125% greater or equal to $23,750 200%
100% $19,000 100%
75% $14,250 30%
less than 75% less than $14,250 0%
<FN>
- ------------------------------------
(1) The calculation of the Actual Award as a percent of Target will be
interpolated for performance between discrete points on a straight-line
basis.
</FN>
Based on the table above, the Actual Award will vary depending upon actual
performance in relation to Target Net Income.
II-3
II.7 ACTUAL AWARDS TO DESIGNATED AND NON-DESIGNATED PARTICIPANTS
Actual Awards to Designated Participants will vary from Target levels based on
the relationship between the Actual Bonus Pool and the Target Pool.
After allocating Actual Awards to Designated Participants, the remaining funds
in the Actual Pool will be available for allocation to Non-designated
Participants.
Actual Awards distributed to Non-designated Participants will be determined on a
discretionary basis by the CEO. URS is under no obligation to distribute any or
all of the Actual Pool. The sum of all Awards to Non-designated Participants may
not exceed the amount available in the Actual Pool after Actual Awards have been
allocated to Designated Participants.
EXAMPLE OF INTERPOLATION CALCULATION
To interpolate the Actual Award based on performance, apply the appropriate
formula for actual performance above or below the Performance Objective. In all
cases, solve for "X".
o For performance above Objective:
(Act. Perf. - Perf. Obj.) = X
------------------------- -------------------------------
(Max. Perf. - Perf. Obj.) (Max. Award % - Target Award %)
o For performance below Objective:
(Act. Perf. - Perf. Obj.) = X
------------------------- -------------------------------
(Min. Perf. - Perf. Obj.) (Min. Award % - Target Award %)
o Once you have solved for "X", add X to 100%.
II-4
Below is a hypothetical example:
EXAMPLE OF ACTUAL BONUS POOL CALCULATION
The following example illustrates the weighting of the Performance Objectives,
and calculates the Actual Bonus Pool:
Hypothetical Assumptions:
o Target Bonus Pool = $ 482,200
o Net Income Objective (after bonus accrual) = $19,000,000
o Actual Net Income (after bonus accrual) = $21,800,000
Interpolation:
o Net Income Performance = 159%
Actual Bonus Pool = $ 751,700
II-5
III. OTHER PLAN PROVISIONS
III.1 AWARD PAYMENT
Assessment of actual performance and payout of Awards will be subject to the
completion of the 1998 Year-end independent audit.
The Actual Award earned, up to and in excess of the Target Award level, will be
paid to the Participant (or the Participant's heirs in the case of death) in
cash within 30 days of the completion of the independent audit. Payroll and
other taxes will be withheld as required by law.
III.2 EMPLOYMENT
In order to receive an Award under the Plan, a Participant must be employed by
URS or an Affiliate at the end of the Plan Year, except as otherwise noted
below. Selection for participation in the Plan does not convey any employment
rights. Terms and conditions of Participants' employment agreements with URS, if
any, supersede the terms and conditions of the Plan.
III.3 TERMINATION
If Termination of a Designated Participant's employment occurs during the Plan
Year by reason of death, permanent disability, or retirement, the Designated
Participant (or the Participant's heirs in the case of death) will be eligible
to receive a pro-rata Award based on the time employed as a Participant and the
Objectives achieved for the Plan Year. Participants who have earned an Award on
this basis will receive payment on the same schedule as other Plan Participants.
A Participant whose employment with URS or its Affiliates is terminated prior to
the end of the Plan Year for any other reason (whether voluntarily or
involuntarily) will forfeit the opportunity to earn an Award under the Plan,
except as otherwise provided for.
III.4 OTHER PRO-RATA AWARDS
Individuals who have been selected during the Year for Plan participation and
who have a minimum of three months as a Designated Participant will be eligible
to receive a pro-rata Award based on the time employed as a Participant and the
Objectives achieved for the Plan Year, provided that the Participant is employed
by URS or an Affiliate at Year-end.
III-1
III.5 PLAN FUNDING
Estimated payouts for the Plan will be accrued monthly and charged as an expense
against the income statement of URS. At the end of each fiscal quarter, the
estimated Actual Awards under the Plan will be evaluated based on actual
performance to date. The monthly accrual rate will then be adjusted so that the
cost of the Plan is fully accrued at Year-end.
Accrual of Awards will not imply vesting of any individual Awards to
Participants.
III.6 PLAN ADMINISTRATION
Responsibility for decisions and/or recommendations regarding Plan
administration are divided among the URS CEO and the Committee. Section III.7
outlines the levels of responsibility and authority assigned to each.
Notwithstanding the above, the Committee retains final authority regarding all
aspects of Plan administration, and the resolution of any disputes. The
Committee may, without notice, amend, suspend or revoke the Plan.
III-2
III.7 INCENTIVE PLAN GOVERNANCE
URS
Area of Administration CEO Committee
- ---------------------- --- ---------
Overall Plan Design R A
Determination of Performance
Objectives R A
Designated Participants R A
- --------------------------------------------------------------------------------
Individual Target Awards R A
Target funding for Non-
Designated Participants R A
Target Award for CEO R/A
- --------------------------------------------------------------------------------
Certification of actual
performance against Objectives R A
Awards to Designated
Participants R A
Award to CEO R/A
- --------------------------------------------------------------------------------
Amendment, suspension, or
termination of the Plan R A
Adjustments due to extraordinary
events R A
--------------------------------------------------
KEY: R = Authority A = Authority
to Recommend to Approve
--------------------------------------------------
III.8 ASSIGNMENT OF EMPLOYEE RIGHTS
No employee has a claim or right to be a Participant in the Plan, to continue as
a Participant, or to be granted an Award under the Plan. URS is not obligated to
give uniform treatment (e.g., Target Award Percentages, discretionary Awards,
etc.) to Employees or Participants under the Plan. Participation in the Plan
does not give an Employee the right to be retained in the employment of URS, nor
does it imply or confer any other employment rights.
Nothing contained in the Plan will be construed to create a contract of
employment with any Participant. URS reserves the right to elect any person to
its offices and to remove Employees in any manner and upon any basis permitted
by law.
III-3
Nothing contained in the Plan will be deemed to require URS to deposit, invest
or set aside amounts for the payment of any Awards. Participation in the Plan
does not give a Participant any ownership, security, or other rights in any
assets of URS or any of its Affiliates.
III.9 WITHHOLDING TAX
URS will deduct from all Awards paid under the Plan any taxes required by law to
be withheld.
III.10 EFFECTIVE DATE
The Plan is effective as of November 1, 1997, and will remain in effect for the
Fiscal Year ending October 31, 1998 unless otherwise terminated or extended by
the Committee.
III.11 VALIDITY
In the event any provision of the Plan is held invalid, void, or unenforceable,
the same will not affect, in any respect whatsoever, the validity of any other
provision of the Plan.
III.12 APPLICABLE LAW
The Plan will be governed by and construed in accordance with the laws of the
State of California.
III-4
IV. DEFINITIONS
IV.1 DEFINITIONS
"Affiliates" refers to any entity owned partially or totally by URS Corporation
including URS Corporation.
"Actual Award" or "Award" refers to the incentive amount earned under the Plan
by a Designated or Non-designated Participant.
"Actual Bonus Pool" or "Actual Pool" refers to the calculated amount available
for distribution to all Designated and Non- designated Participants under the
terms and provisions of the Plan.
"Base Salary" refers to the actual base earnings of a Designated Participant for
the Plan Year exclusive of any bonus payments under this Plan or any other prior
or present commitment, including contractual arrangements, any salary advance,
any allowance or reimbursement, and the value of any basic or supplemental
Employee benefits or perquisites. Base Salary refers only to amounts earned
while a Designated Participant during the Plan Year.
"Compensation/Option Committee" or "Committee" refers to the Compensation/Option
Committee of the Board of Directors of URS Corporation.
"Designated Participant" refers to an Employee of URS Corporation designated by
the CEO of URS to participate in the Plan. Designation will be established only
in writing.
"Employee" refers to an Employee of URS Corporation.
"Fiscal Year" refers to the twelve months beginning November 1, 1997 and ending
October 31, 1998.
"Net Income" refers to the consolidated revenue less all expenses (including tax
and interest charges) of URS Corporation.
"Non-designated Participant" refers to an Employee of URS Corporation selected
to receive an Award under the Plan on the basis of outstanding individual
performance. Employee selection will be made at the end of the Plan Year, at the
recommendation of the CEO of URS. Unlike Designated Participants, Non-designated
Participants will not be assigned Target Award Percentages or individual
Performance Objectives.
IV-1
"Performance Objectives" or "Objectives" refers to the pre-established financial
goals upon which URS Corporation performance will be assessed.
"Plan" refers to the URS Corporation 1998 Incentive Compensation Plan, as
described in this document. Any incentives for future years will be covered by
subsequent plan documents.
"Plan Year" or "Year" refers to the twelve months beginning November 1, 1997,
and ending October 31, 1998, over which performance is measured under this Plan.
"Target Award" refers to a Designated Participant's Target Award Percentage,
multiplied by the Participant's Base Salary earned during the Plan Year. This
amount represents the anticipated payout to the Designated Participant if all
URS Corporation's Performance Objectives are met.
"Target Award Percentage" refers to a percentage of Base Salary assigned to a
Designated Participant in accordance with the terms and provisions of the Plan.
"Target Bonus Pool" or "Target Pool" refers to the amount anticipated to be
distributed to all Designated and Non-designated Participants if all URS
Corporation's Performance Objectives are met.
"Termination" means the Participant's ceasing his/her service with the Company
or any of its Affiliates for any reason whatsoever, whether voluntarily or
involuntarily, including by reason of death or permanent disability.
"URS" refers to URS Corporation.
"Year-end" refers to the end of the Fiscal Year, October 31, 1998.
IV-2
V. EXAMPLES OF PLAN OPERATION
URS CORPORATION PERFORMANCE TABLE
Actual
Net Income Actual vs.
(100% weighting) Target Pool
- --------------------------------------------------------------------
greater than or equal to = $23,750 MM 200%
$19,000 MM 100%
$14,250 MM 30%
less than = $14,250 MM 0%
- --------------------------------------------------------------------
Scenario 1 - URS net income performance exceeds objectives
Net income Objective ($MMs) $19.0 ($21.8 - 19.0)/($23.750 - $19.0) = 59.0%
URS Actual Net Income ($Mms) $21.8
+ 100% = 159%
TARGET BONUS POOL ($000s) $482.200
ACTUAL BONUS POOL ($000s) $751.704 ($482.200 * 159%)= $751.704
Scenario 2 - URS net income performance less than objectives
Net income Objective ($MMs) $19.0 ($17.6 - $19.0)/($14.250 - $19.0)*(.7) =
URS Actual Net Income ($MMs) $17.6
- 29% + 100% = 71%
TARGET BONUS POOL ($000s) $482.200
ACTUAL BONUS POOL ($000s) $347.445 ($482.200 * 71%) = $347.445