SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
L. B. FOSTER COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Notes:
L.B. FOSTER COMPANY
415 Holiday Drive
[LOGO OF L.B. FOSTER COMPANY] Pittsburgh, Pennsylvania 15220
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2001
To the Stockholders:
L.B. Foster Company will hold its annual stockholders' meeting at
the Radisson Hotel Green Tree, 101 Marriott Drive, Pittsburgh,
Pennsylvania on Wednesday, May 9, 2001 at 11:00 a.m., local time,
for the purposes of:
1. Electing a board of five directors for the ensuing year.
2. Approving the 1998 Long-Term Incentive Plan as Amended and
Restated.
3. Approving the appointment of Ernst & Young, LLP as our
independent auditors for 2001.
4. Any other matters that properly come before the stockholders
at the meeting.
Only holders of record of common stock at the close of business on
March 29, 2001 will be entitled to vote at the meeting or at any
adjournment thereof. The stock transfer books will not be closed.
The list of stockholders entitled to vote will be available for
examination by any stockholder, during ordinary business hours, at
the Company's principal executive offices, 415 Holiday Drive,
Pittsburgh, Pennsylvania, 15220, for a period of ten days prior to
the meeting.
Your vote at the annual meeting is important to us. Please vote
your shares of common stock by completing the enclosed proxy card
and returning it to us in the enclosed envelope.
/s/ David L. Voltz
Secretary
Pittsburgh, Pennsylvania
April 5, 2001
L.B. FOSTER COMPANY
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of L.B. Foster Company (the "Company") for
use at the annual meeting of stockholders to be held May 9, 2001 and at any
adjournment thereof. This proxy statement, the enclosed form of proxy and the
Company's 2000 Annual Report were mailed to stockholders on or about April 5,
2001. Any proxy given pursuant to this solicitation may be revoked at any time
before its use by written notice of revocation delivered to the Company at its
principal executive offices, 415 Holiday Drive, Pittsburgh, Pennsylvania
15220, attention: Secretary, or by attendance at the meeting and voting in
person.
The presence, in person or by proxy, of the record holders of a majority of
the Company's outstanding common stock is necessary to constitute a quorum. On
March 29, 2001, the record date for entitlement to vote at the meeting, there
were 9,438,112 shares of common stock outstanding. A quorum will therefore
require the presence, in person or by proxy, of the holders of at least
4,719,057 shares. Where a stockholder's proxy or ballot indicates that no vote
is to be cast on a particular matter (including broker non-votes) the shares
of such stockholders are nevertheless counted as being present at the meeting
for the purposes of the vote on that matter.
Only holders of record of the common stock at the close of business on March
29, 2001, are entitled to notice of and to vote at the meeting or at any
adjournment thereof. Such stockholders will have one vote for each share held
on that date. The common stock does not have cumulative voting rights.
Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting. The approval of the 1998
Long-Term Incentive Plan as Amended and Restated, the appointment of Ernst and
Young, LLP as the Company's independent auditors for 2001 and other matters
shall require that more votes be cast in favor of the item than are cast
against the item.
If the enclosed form of proxy is properly executed and returned, it will be
voted as directed. If no directions are given, the proxy will be voted FOR the
election of the five nominees named herein as directors, FOR the approval of
the 1998 Long-Term Incentive Plan as Amended and Restated and FOR approval of
the independent auditors for 2001.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegram by officers or employees of the Company. The Company does not expect
to pay any compensation for the solicitation of proxies, but under
arrangements made with brokers, custodians, nominees and fiduciaries to send
proxy material to the beneficial owners of shares held by them, the Company
may reimburse them for their expenses.
Stock Ownership
The following table shows the number of shares of common stock beneficially
owned by:
. each person who has reported beneficial ownership of more than 5% of the
Company's common stock;
. each director;
. each executive officer named in the Summary Compensation Table on page
11; and
. the directors and executive officers as a group.
Information concerning the owners of more than 5% of the Company's common
stock is based upon the latest report furnished to the Company and may not be
current.
Number of
Shares Percent of
Name Owned (a) Shares (b)
- ---- --------- ----------
More Than 5% Stockholders:
Artisan Partners Limited Partnership (c) 898,800(d) 9.52
Dimensional Fund Advisors Inc. (c) 804,700(e) 8.53
The TCW Group, Inc. (c) 526,800 5.58
Royce and Associates (c) 515,500 5.46
Directors:
Lee B. Foster II 402,034 4.17
Henry J. Massman IV 18,581 0.20
John W. Puth 84,498 0.89
William H. Rackoff 39,498 0.42
Richard L. Shaw 45,498 0.48
Executive Officers:
Alec C. Bloem 27,682 0.29
Senior Vice President--Concrete Products
Stan L. Hasselbusch 133,826 1.41
President and Chief Operating Officer
Roger F. Nejes 90,339 0.95
Senior Vice President--Finance and Administration
and Chief Financial Officer
Gary E. Ryker 22,500 0.24
Executive Vice President--Rail Products
All Directors and Executive Officers as a Group 1,091,426 10.89
- ------
(a) This column shows the number of shares with respect to which the named
person or group had direct or indirect sole or shared voting or investment
power, whether or not beneficially owned. It includes shares which the
named person or group had the right to acquire within 60 days
2
after March 29, 2001 through the exercise of stock options (202,500 for Mr.
Foster, 15,000 for Mr. Massman, 40,000 for Mr. Puth, 25,000 for Mr.
Rackoff, 40,000 for Mr. Shaw, 85,500 for Mr. Hasselbusch, 48,750 for Mr.
Nejes, 12,500 for Mr. Ryker, 8,750 for Mr. Bloem, and 580,750 for the
directors and executive officers of the Company as a group).
(b) The percentages in this column are based on the assumption that any shares
which the named person has the right to acquire within 60 days after March
29, 2001 have been acquired and are outstanding.
(c) The address of Artisan Partners Limited Partnership is 1000 North Water
Street, Los Angeles, CA 90017, the address of Dimensional Fund Advisors,
Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401, the address
of The TCW Group, Inc. is 865 South Figuero Street, Los Angeles,
California 90017 and the address of Royce and Associates, Inc. is 1414
Avenue of Americas, New York, NY 10019.
(d) These shares reportedly have been acquired on behalf of discretionary
clients of Artisan Partners Limited Partnership.
(e) These shares reportedly are owned by investment advisory clients for which
Dimensional Fund Advisors, Inc. serves as investment manager.
3
ELECTION OF DIRECTORS
A board of five directors is to be elected to serve until the next annual
meeting of stockholders and until their successors are elected and qualified.
Information concerning the nominees is set forth below. The nominees are
currently serving on the Board of Directors.
Nominee
-------
Lee B. Foster II Mr. Foster, age 54, has been Chief Executive Officer and a
director of the Company since 1990. Mr. Foster is a
director of Wabtec Corporation, a manufacturer of
components for locomotives, freight cars and passenger
transit vehicles. Wabtec Corporation also provides
aftermarket services, including locomotive and freight car
maintenance.
Henry J. Massman IV Mr. Massman, age 38, has been a director of the Company
since November, 1998. He has been President and Chief
Executive Officer of Massman Construction Co., Inc., a
heavy civil, bridge and marine contractor, since 1988.
John W. Puth Mr. Puth, age 72, has been a director of the Company since
1977. He is a managing member of J.W. Puth Associates, LLC
and a general partner of BVCF III and BVCF IV
(institutional venture capital funds). Mr. Puth is a
director of BWAY Corporation (a container manufacturer),
US Freightways, Inc. (trucking logistics and freight
forwarding), A.M. Castle, Inc. (metal fabrication and
distributor) and several private manufacturing companies.
William H. Rackoff Mr. Rackoff, age 52, has been a director of the Company
since 1996. Mr. Rackoff has been President of Asko, Inc.,
which manufactures custom engineered tooling for the
metalworking industry, since 1991 and became Chief
Executive Officer of Asko, Inc. in 1995.
Richard L. Shaw Mr. Shaw, age 73, has been a director of the Company since
1992. He has served as Chairman of the Board of Michael
Baker Corporation, an engineering and construction
company, since 1991. Mr. Shaw is also the Chief Executive
Officer of Michael Baker Corporation.
The foregoing nominees were nominated by the Board of Directors and have
expressed their willingness to serve as directors if elected. However, should
any of such persons be unavailable for election, the proxies (except for
proxies that withhold authority to vote for directors) will be voted for such
substitute nominee or nominees as may be chosen by the Board of Directors, or
the number of directors may be reduced by appropriate action of the Board.
Board and Committee Meetings
The Board of Directors held nine meetings during 2000. Each incumbent
nominee attended more than seventy-five percent of the total number of
meetings held by the Board of Directors and the committees of the Board on
which he served.
4
Messrs. Puth (Chairman) and Foster constitute the Executive Committee of the
Board of Directors. The Audit Committee is composed of Messrs. Shaw
(Chairman), Puth and Rackoff, the Personnel & Compensation Committee is
composed of Messrs. Puth (Chairman), Massman and Shaw, and the Option
Committee is composed of Messrs. Puth, Rackoff and Shaw.
The Audit Committee, which held two meetings during 2000, is responsible for
reviewing, with the independent auditors and management, the work and findings
of the auditors as well as the effectiveness of the Company's internal
auditing department and the adequacy of the Company's internal controls and
the accounting principles employed in financial reporting. The Personnel &
Compensation Committee, which met on six occasions in 2000, is responsible for
reviewing and approving all general employee benefit programs and recommending
for approval officer compensation and organizational changes. The Option
Committee, which met four times in 2000, is responsible for the administration
of the Company's stock option plan. The Company has no standing nominating
committee of the Board of Directors. The Executive Committee did not meet in
2000.
Directors' Compensation
Outside directors are paid a base annual fee plus $1,000 for each board
meeting attended and $500 for each committee meeting attended. The cash
component of the base annual fee was reduced from $14,000 to $7,000 on July 1,
2000 and commencing on July 1, 2000 each outside director receives restricted
Company stock valued at $3,500 in both July and January. No compensation is
paid for participating in special telephonic meetings or executing unanimous
consents in lieu of meetings. Each outside director, automatically is awarded
annually a non-qualified option to acquire up to 5,000 shares of the Company's
common stock after the annual stockholders' meeting and following the annual
meeting in 2000 Messrs. Massman, Rackoff, Puth and Shaw were each awarded an
option to acquire up to 5,000 shares of the Company's common stock at $3 5/8
per share. Management directors receive no separate compensation for their
services as directors.
5
APPROVAL OF THE 1998 LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED
The 1985 Long-Term Incentive Plan as Amended and Restated ("1985 Plan")
provides for the granting of options to acquire up to 1,500,000 shares of the
Company's common stock. As of March 29, 2001 there were only 3,550 shares
available for future option grants under the 1985 Plan. The 1985 Plan will
expire January 1, 2005 unless earlier terminated by the Board of Directors.
The 1998 Long-Term Incentive Plan as Amended and Restated was approved by
the stockholders at the annual meeting on May 20, 1999. That plan provided for
the issuance of options to acquire up to 450,000 shares of the Company's
common stock. As of March 29, 2001, there were only 14,500 shares available
for future option grants under that plan. On February 24, 2001, the Board of
Directors adopted, subject to stockholder approval, a revised 1998 Long-Term
Incentive Plan as Amended and Restated (the "Plan") which, among other things,
increased the number of shares of common stock which may be issued under the
Plan from 450,000 to 900,000.
The purpose of the Plan is to provide financial incentives for selected key
personnel and directors and to enable the Company to offer competitive
compensation to them.
Administration
The Plan is administered by a Committee consisting of either (a) at least
two "non-employee" directors (within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934) or (b) the full Board of Directors. The
Committee currently consists of Messrs. Puth, Rackoff and Shaw. Within the
parameters set forth in the Plan, the Committee has the authority to determine
those key employees or directors who shall receive a discretionary award and
the terms and conditions of each such award. The Committee may also prescribe
regulations for the operation of the Plan and interpret the Plan and option
agreements issued under the Plan. In addition to discretionary awards made by
the Committee, non-employee directors automatically shall be awarded options
to acquire up to 5,000 shares of common stock after each annual shareholders
meeting. These automatic awards are described below under "Automatic Stock
Options."
General
Up to 900,000 shares of common stock of the Company may be issued under the
Plan, which may include newly issued or treasury shares. An option's exercise
price must be at least the closing market price of the shares on the day
before the option is granted. Each option must be evidenced by a stock option
agreement in a form prescribed by the Committee. Options granted under the
Plan are not transferable other than by will or the laws of descent and
distribution.
The number and price of shares subject to outstanding options are subject to
appropriate adjustment for stock splits, stock dividends, reverse splits,
reclassifications and other similar events. The aggregate fair market value
(determined at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by a
participant during any calendar year (under all plans of the Company) shall
not exceed $100,000.
Awards under the Plan consist of incentive stock options ("ISOs") and non-
qualified stock options ("NSOs"). Under the current tax law, only NSOs may be
granted to non-employee directors.
6
Automatic Stock Options
Commencing in the year 2000, immediately after each annual meeting of
shareholders each non-employee director who is elected at the meeting or whose
term in office continues after the meeting will automatically be granted an
option to purchase up to 5,000 shares of common stock, subject to adjustment
for any future stock splits, stock dividends, reverse splits,
reclassifications or other similar events (the "Automatic Options"). The
Automatic Options will have an exercise price per share equal to the last
reported sale price of the common stock on the Nasdaq National Market before
the date of the meeting, will have a term of 10 years and will be immediately
exercisable. The Automatic Options may be exercised only upon payment to the
Company of the full amount of the exercise price of the shares with respect to
which the option is exercised. No stock appreciation rights may be awarded in
conjunction with an Automatic Option.
When a director has served less than five years, the director may exercise
his or her options only within one year after termination of service, unless
the director's service is terminated due to death, disability or retirement
with the consent of the Company, in which case the options may be exercised
during their full ten year term. A director who has served five years or
longer may exercise his or her options during their full ten year term.
Notwithstanding the foregoing, if a director is removed for cause, all of his
or her options shall immediately terminate.
Messrs. Massman, Puth, Rackoff and Shaw currently are the Company's non-
employee directors.
Discretionary Stock Options
In addition to the Automatic Options, stock options may be granted to key
personnel and directors, including both employee directors and non-employee
directors, in the discretion of the Committee ("Discretionary Options").
Discretionary Options granted to directors are hereinafter referred to as
"Director Options." Discretionary Options are subject to the following
provisions of the Plan, and the terms and provisions of such options need not
be uniform:
. Eligibility
Discretionary Options may be granted by the Committee to directors or to key
employees who occupy a responsible executive, sales, professional or
administrative position and, in the Committee's view, have the capacity to
contribute to the success of the Company. In addition to the Company's non-
employee directors, the Company has about 65 employees, out of approximately
743 total employees, whose grade level makes them likely candidates for option
awards.
. Exercise Price
The exercise price of Discretionary Options is determined by the Committee,
but shall be not less than the last reported sale price of the common stock on
the Nasdaq National Market before the date of grant. The exercise price is
payable in cash or other medium acceptable to the Company.
. Term
The term of Discretionary Options is determined by the Committee, but shall
not exceed 10 years from the date of grant. Director Options have the same
early-termination provisions as Automatic
7
Options. Except as otherwise provided in the option agreement, all other
Discretionary Options will terminate 30 days after termination of the
participant's employment with the Company for any reason other than death,
disability or retirement with the consent of the Company.
. Vesting
Director Options are immediately exercisable. Except as otherwise provided
in the option agreement, all other Discretionary Options may be exercised in
cumulative annual installments, each for one-fourth of the total optioned
shares, commencing one year from the date of grant.
. Stock Appreciation Rights
Stock appreciation rights ("SARs") may be awarded at any time prior to six
months before a Discretionary Option's expiration date, and shall represent
the right to receive payment of an amount not greater than the amount, if any,
by which the average of the reported high and low sales prices of the
Company's common stock on the trading day immediately preceding the date of
exercise of the SAR exceeds the option exercise price. An SAR is exercisable
only under the same terms and conditions as the option to which it is related
and is exercisable only when the value of a share of Company stock subject to
the option exceeds the option exercise price. Exercise of an SAR cancels the
related option. Unless the holder instructs otherwise, an SAR shall
automatically be exercised on the last trading day prior to expiration of the
related option.
Amendments and Termination
The Board of Directors may at any time amend the Plan or amend any
outstanding option for purposes of satisfying the requirements of any changes
in applicable laws or regulations or, in the case of Discretionary Options,
for any other purpose which may at the time be permitted by law. The Board may
not, however, amend the Plan if the amendment would result in Rule 16b-3
becoming inapplicable to any options.
The Board may terminate the Plan at any time. In the event of a
consolidation or merger in which the Company is not the surviving corporation,
or any other merger in which the shareholders of the Company exchange their
shares of stock in the Company for stock of another corporation, or in the
event of complete liquidation of the Company, or in the case of a tender offer
accepted by the Board, all outstanding stock options and SARs shall thereupon
terminate, provided that the Board may, prior to the effective date of any
such consolidation or merger, either (i) make all outstanding options and SARs
immediately exercisable or (ii) arrange to have the surviving corporation
grant to the participants replacement options and SARs on terms which the
Board shall determine to be fair and reasonable.
Federal Income Tax Consequences
Under the Internal Revenue Code of 1986, as amended, there is no taxable
income to an optionee when an ISO is granted to the optionee or when the ISO
is exercised. The excess, however, of the fair market value of the underlying
shares on the date of exercise over the option exercise price will be an item
of tax preference and, accordingly, must be taken into account in determining
whether the optionee is subject to the alternative minimum tax for the year of
exercise. A portion of the tax
8
preference, however, may be added to the optionee's tax basis for future
alternative minimum tax purposes. If the optionee disposes of the shares both
one year after the shares are transferred to the optionee and two years after
the option is granted, any gain realized upon the disposition will be taxable
as long-term capital gain. However, if the optionee does not satisfy the
applicable holding period, the excess of the fair market value of the shares
at the date of exercise over the option exercise price (but not exceeding the
amount by which the sale price of the shares exceeds the option exercise
price) will be taxable as ordinary income for the year in which the shares are
disposed of. Upon the exercise of an SAR or NSO, the excess of the fair market
value of the underlying shares at the date of exercise over the option
exercise price for such shares will be taxable to the optionee as ordinary
income. The Company will be entitled to a corresponding tax deduction for any
amounts which are taxable to an optionee as ordinary income.
Approval of the Plan will require that more votes be cast in favor of the
Plan than against the Plan. The Plan is being submitted for shareholder
approval in order for the options to qualify for the special tax treatment
accorded ISOs, to insure that certain transactions under the Plan qualify for
an exemption from the "short swing profits" provisions of the Securities
Exchange Act of 1934, and to comply with the regulations of the National
Association of Securities Dealers. The Company intends to register additional
the common stock issuable under the Plan pursuant to the Securities Act of
1933.
The Board of Directors recommends a vote FOR approval of the Plan.
APPROVAL OF APPOINTMENT OF AUDITORS
The firm of Ernst & Young, LLP has served as the Company's independent
auditors since 1990 and has been appointed as the Company's independent
auditors for the fiscal year ending December 31, 2001. The Board of Directors
recommends a vote FOR approval of this appointment.
Audit Fees
Ernst & Young LLP's audit fees and expenses for the 2000 fiscal year were
$134,000.
All Other Fees
The Company also paid Ernst & Young, LLP an additional $22,750 for audit
related services during 2000. Audit related services generally include fees
for pension audits, business acquisitions or divestitures, accounting
consultations and SEC registration statements.
9
REPORT OF THE AUDIT COMMITTEE
Management has the primary responsibility for the financial statements and
the reporting process. Pursuant to its charter attached to this Proxy
Statement as Exhibit A, the Audit Committee oversees the Company's financial
reporting process on behalf of the Board of Directors. In fulfilling its
oversight responsibilities, the Committee reviewed the audited financial
statements in the Company's 2000 Annual Report with management and discussed
the accounting principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The Committee reviewed with Ernst & Young, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgments as to the
quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee
under generally accepted auditing standards. In addition, the Committee has
discussed with Ernst & Young the auditors' independence from management and
the Company including the matters in the written disclosures required by the
Independence Standards Board. The Committee considered the compatibility of
nonaudit services with the auditors' independence.
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
with the independent auditors, with and without management present, to discuss
the results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Committee held two meetings during fiscal year 2000. The Committee's Chairman
also reviewed with Ernst & Young and the Company's Chief Financial Officer the
Company's interim reports during the fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee and the Board have also appointed Ernst & Young as
the Company's independent auditors for the year ending December 31, 2001.
AUDIT COMMITTEE
Richard L. Shaw, Chairman
John W. Puth
William H. Rackoff
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding the compensation of the
Company's five most highly paid executive officers (the "Named Executive
Officers").
Long-Term
Annual Compensation Compensation Awards
------------------------------- ---------------------
Restricted
Other Annual Stock Options/ All Other
Name and Bonus Compensation Awards SARs Compensation
Principal Position Year Salary ($) ($)(1) ($)(2) ($)(3) (# Shares) ($)(4)
- ------------------ ---- ---------- ------- ------------ ---------- ---------- ------------
Lee B. Foster II 2000 307,000 62,258 * 17,252 100,000 28,332
Chief Executive Officer 1999 292,000 73,353 * 18,858 0 29,376
and Chairman 1998 283,000 114,295 * 31,950 32,500 28,988
Stan L. Hasselbusch 2000 225,000 45,629 * 12,644 50,000 17,750
President and 1999 200,000 50,241 * 12,919 0 18,162
Chief Operating Officer 1998 175,721 82,967 * 19,837 50,000 16,081
Alec C. Bloem 2000 186,250 28,832 * 5,219 25,000 10,627
Senior Vice President-- 1999 168,250 25,372 99,781(5) 5,236 15,000 9,142
Concrete Products 1998(6) 58,526 9,443 * 992 10,000 1,756
Roger F. Nejes 2000 155,625 26,301 * 7,288 25,000 11,532
Senior Vice President-- 1999 154,219 32,284 18,744(7) 8,300 0 12,732
Finance and 1998 150,000 50,486 * 14,115 15,000 12,979
Administration and
Chief Financial Officer
Gary E. Ryker 2000(8) 143,926 20,284 * 5,621 50,000 0
Executive Vice
President--
Rail Products
- ------
(1) The amounts included in this column for 2000 include, in addition to cash,
the value at $3.25 per share of the Company's Stock issued to the named
executive officers pursuant to the Company's 2000 bonus plan. The amounts
for 1999 include $4 1/16 share of the Company's Common Stock issued to the
named executive officers pursuant to the Company's 1999 bonus plan. The
stock is subject to forfeiture if, subject to certain exceptions, the
recipient's employment with the Company terminates within two years after
the date of the stock's issuance. The amounts for 1998 include $5 3/16
share for common stock issued pursuant to the Company's 1998 bonus plan.
(2) The amounts disclosed in this column include the value of Company provided
term life insurance, leased car, Medical Reimbursement Plan, relocation
expenses and country club dues and fees.
(3) Pursuant to the Company's 2000 bonus plan, 14,778 shares of the Company's
common stock were awarded to the named executive officers, with 5,308
shares awarded to Mr. Foster; 3,891 shares awarded to Mr. Hasselbusch;
1,606 shares awarded to Mr. Bloem; 2,243 shares awarded to Mr. Nejes; and
1,730 shares awarded to Mr. Ryker. Dividends are payable on the restricted
shares to the same extent as other shares of common stock. The awards set
forth in this column also are included in the named executive officer's
annual bonus and are further described in footnote (1). As of December 31,
2000, Mr. Foster held 10,801 shares of restricted common stock valued at
$27,002; Mr. Hasselbusch held 7,004 shares valued at $17,510; Mr. Nejes
held 4,764 shares valued at $11,910; and Mr. Bloem held 1,289 shares
valued at $3,223.
(4) The amounts disclosed in this column include the Company contributions to
the L.B. Foster Company Voluntary Investment Plan and the Supplemental
Executive Retirement Plan.
11
(5) This amount includes relocation expenses in the amount of $92,363.
(6) The amounts disclosed are for a partial 1998 calendar year.
(7) This amount includes country club dues and fees of $5,378 and $9,807 for a
leased car.
(8) Mr. Ryker began his employment with the Company in March, 2000 and the
amounts disclosed are for a partial year.
* The total is less than 10% of the executive's total salary and bonus for
the year.
Option Grants
The following table provides information on non-qualified stock options
granted to the named executive officers in 2000:
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Shares Options Price Appreciation
Underlying Granted to Exercise for Option Term ($)
Options Employees or Base Expiration ----------------------
Name Granted (a) in 2000 Price ($/Sh) Date 5% 10%
- ---- ----------- ---------- ------------ ---------- ---------- -----------
Lee B. Foster II 100,000 25.16 $4.44 2/28/10 $ 279,000 $ 708,000
Stan L. Hasselbusch 50,000 12.58 4.44 2/28/10 140,000 354,000
Alec C. Bloem 25,000 6.29 3.44 10/10/10 54,000 137,000
Roger F. Nejes 25,000 6.29 4.44 2/28/10 70,000 177,000
Gary E. Ryker 50,000 12.58 4.44 3/05/10 140,000 354,000
- ------
(a) Other than with respect to options granted to Mr. Foster, each option
vests at the rate of 25% per year, commencing one year after the date of
grant, and is exercisable until ten years after the date of the grant. Mr.
Foster's options are fully vested and also are exercisable until ten years
after the date of the grant.
Option Exercises and Year-End Option Values
The following table provides information on option exercises in fiscal 2000
by the named executive officers and such officers' unexercised options at
December 31, 2000. The Company has not awarded any stock appreciation rights.
Number of Securities
Underlying Unexercised Value of Unexercised
Options At Fiscal In-the-Money Options at
Shares Year-End (#) Fiscal Year-End ($)
Acquired On Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Lee B. Foster II 35,000 32,900 182,500 -- -- --
Stan L. Hasselbusch -- -- 73,000 75,000 -- --
Alan C. Bloem -- -- 8,750 41,250 -- --
Roger F. Nejes -- -- 42,500 32,500 -- --
Gary E. Ryker -- -- -- 50,000 -- --
12
PERSONNEL & COMPENSATION COMMITTEE
AND OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The three member Personnel & Compensation Committee (the "Compensation
Committee") of the Board of Directors is composed of non-employee directors
and is generally responsible for determining the compensation of the Company's
executive officers, except for decisions made by the Option Committee
concerning stock option awards. The decisions by the Compensation Committee
are then reviewed by the full board. This report is submitted by Messrs.
Massman, Puth and Shaw in their capacity as the Personnel & Compensation
Committee, and by Messrs. Puth, Rackoff and Shaw in their capacity as the
Option Committee, and addresses the Company's compensation policies for 2000
as they were generally applicable to the Company's executive officers and as
they were specifically applicable to Mr. Foster.
COMPENSATION POLICIES REGARDING EXECUTIVE OFFICERS
The Compensation Committee's policies are designed to enable the Company to
attract and retain qualified executives and to provide incentives for the
achievement of the Company's annual and long-term performance goals. The
vehicles for compensating and motivating executive officers include cash
compensation, stock awards, stock options, participation in a 401(k), a
supplemental executive retirement plan and other benefits. The Company has not
established a policy with regard to Section 162(m) of the Internal Revenue
Code of 1986, as amended, since the Company has not and currently does not
anticipate paying compensation in excess of $1 million per annum to any
employee.
. Cash Compensation
Each year the Company obtains survey data in order to determine the
competitiveness of its pay structure for senior management. The surveys
considered in determining the pay scales for 2000 covered companies that were
manufacturers of durable goods with annual sales of up to $345 million,
fabricators of metal products with annual sales of up to $381 million, or
general manufacturers with sales of up to $362 million. The data indicates
that the Company's executive officers' average base salaries were
approximately equal to the blended average of the median base salaries for
comparable positions in the durable goods manufacturing industry, in the metal
fabricating industry and in the general manufacturing industry.
The Company uses survey data only to establish rough guidelines for its
decisions on executive compensation. Specific decisions are then made largely
on subjective assessments of the officer's performance, the responsibilities
and importance of the officer's position within the Company and the overall
performance of the Company.
During 2000, the Company also maintained an Incentive Compensation Plan to
provide incentives and rewards for employees. Awards to executive officers
under the Incentive Compensation Plan are in the form of both cash and Company
stock and are based upon the Corporation's overall profitability, the
officer's grade level and base salary and, for officers who are responsible
for particular operating units, the performance of such operating units. For
2000, cash awards under the Plan ranged from
13
6.1% to 14.7% of the 2000 base pay of the Company's respective executive
officers. Survey data indicate that the current salaries plus cash incentive
compensation (excluding stock awards under the Incentive Compensation Plan)
paid to the Company's executive officers were below the blended aggregate
median cash compensation for comparable executive positions in the durable
goods manufacturing industry, metal fabricating industry and general
manufacturing industry. In addition, the Company awarded 24,882 shares of the
Company's common stock to its executive officers, which stock is subject to
forfeiture if, subject to certain exceptions, the executive's employment with
the Company terminates within two years from the date of the award. Awards of
stock to Messrs. Bloem, Foster, Hasselbush, Nejes and Ryker are included in
the Summary Compensation Table.
Many of the companies included in the peer group used to compare shareholder
returns are substantially larger than the Company and do not necessarily
represent the Company's most direct competition for executive talent.
Consequently, the survey data used by the Compensation Committee does not
correspond to the peer group index in the five-year Total Return graph
included in the proxy statement.
. Stock Option Plans
The Company's 1985 Long-Term Incentive Plan as Amended and Restated and the
1998 Long-Term Incentive Plan (the "Plans") authorizes the award of stock
options and stock appreciation rights ("SAR's") to key employees, officers and
directors of the Company and its subsidiaries. The Plans are designed to
motivate key employees by providing participants with a direct, financial
interest in the long-term performance of the Company. The participants and
their awards are determined by the Option Committee of the Board of Directors.
The purchase price of optioned shares must be at least the fair market value
of the common stock on the date the option is granted, and the term of options
may not exceed ten (10) years. Both "incentive stock options" and "non-
qualified stock options" may be awarded under the Plans. Stock appreciation
rights may be awarded at any time prior to six months before the stock
option's expiration date and represent the right to receive payment of an
amount not exceeding the amount by which the average of the reported high and
low sales prices of the Company's common stock on the trading day immediately
preceding the date of exercise of the SAR exceeds the option exercise price.
The exercise of a SAR cancels the related stock option. In determining the
number of options to award a participant, the Option Committee generally takes
into account, among other factors, the number of options previously awarded to
the participant.
. Retirement Plan
The Company maintains the L.B. Foster Company Voluntary Investment Plan, a
salary reduction plan qualifying under Section 401(k) of the Internal Revenue
Code, covering all salaried employees with over one (1) year of service.
Eligible employees may contribute up to 15% (10% maximum on a pre-tax basis)
of their compensation to the Plan, and the Company is required to contribute
1% of the employee's compensation plus $.50 for each $1.00 contributed by the
employee, subject to a maximum of from 4% to 6% of the employee's
compensation. Based upon the Company's financial performance against
predetermined criteria, the Company may be required to contribute up to an
additional $.50 for each $1.00 so contributed. The Company also may make
additional discretionary contributions to the Plan. Company contributions vest
upon completion of five (5) years of service. The
14
Company's contributions for 2000 to the Voluntary Investment Plan for Messrs.
Foster, Hasselbusch, Bloem, Nejes and Ryker are included in the Summary
Compensation Table. The Company also maintains a Supplemental Executive
Retirement Plan under which executive officers may accrue benefits which
approximate the benefits which the executives cannot receive under the
Voluntary Investment Plan because of Internal Revenue Code limitations.
. Other Compensation Plans
At various times in the past, the Company has adopted certain broad-based
employee benefit plans in which executive officers have been permitted to
participate and has adopted certain executive
officer leased vehicle, life and health insurance programs. The incremental
cost to the Company of the executive officers' benefits provided under these
programs for Messrs. Bloem, Foster, Hasselbusch, Nejes and Ryker are included
in the Summary Compensation Table, if such benefits exceeded 10% of named
officer's salary and bonus for the year. Benefits under these plans are not
directly or indirectly tied to Company performance.
Mr. Foster's 2000 Compensation
Mr. Foster is eligible to participate in the same executive compensation
plans as are available to other executive officers. Mr. Foster's salary was
increased on March 1, 2000 to an annual salary of $310,000. Mr. Foster's 2000
base compensation was approximately 7.03% below the blended average of the
median base salary for chief executive officers of metal fabricating companies
with median sales of $97 million, durable goods manufacturing companies with
median sales of $245 million and general manufacturing companies with median
sales of $300 million. Consistent with the Compensation Committee's general
practice, there was no special attempt to set Mr. Foster's compensation in any
particular relationship to the compensation data.
As a participant in the Incentive Compensation Plan, Mr. Foster received a
cash award of $45,006 for 2000 plus 5,308 restricted shares of the Company's
common stock. Under the Plan, Mr. Foster's award was based upon the Company's
2000 pre-tax income. Mr. Foster's 2000 total of base salary and cash incentive
compensation (excluding stock awards) was below the blended median total cash
compensation of chief executive officers in the durable goods manufacturing
industry, in the metal fabrication industry and in general manufacturing.
Consistent with its goal of aligning management and shareholder interests, the
Option Committee on March 1, 2000 awarded to Mr. Foster an option to purchase
up to 100,000 shares of the Company's common stock at a price of $4.44/share.
PERSONNEL & COMPENSATION COMMITTEE
John W. Puth, Chairman
Richard L. Shaw
Henry J. Massman IV
OPTION COMMITTEE
John W. Puth
William H. Rackoff
Richard L. Shaw
15
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG L.B. FOSTER COMPANY, PEER GROUP INDEX AND NASDAQ STOCK MARKET (U.S.) INDEX
Measurement period L.B. FOSTER PEER GROUP NASDAQ STOCK
(Fiscal year Covered) COMPANY INDEX INDEX MARKET (U.S.)
Measurement PT -
12/31/95 $100 $100 $100
FYE 12/31/1996 $ 88 $ 99 $123
FYE 12/31/1997 $116 $111 $151
FYE 12/31/1998 $156 $ 78 $213
FYE 12/31/1999 $115 $ 93 $395
FYE 12/31/2000 $ 59 $ 74 $238
The Peer Group is composed of the following steel or iron related companies
where stocks are listed on domestic securities exchanges: Ampco-Pittsburgh
Corp., Bayou Steel Corp. La Place, Bethlehem Steel Corp., Birmingham Steel
Corp., Carpenter Technology Corp., Friedman Inds. Inc., Hmi Inds. Inc.,
Keystone Cons Inds. Inc., LTV Corp. New, Matec Corp., Maverick Tube Corp.,
Meridian Natl. Corp., N S Group, Inc., Nucor Corp., Oregon Steel Mills, Inc.,
Precision Castparts Corp., Quanex Corp., Texas Inds. Inc., Tubos De Acero De
Mexico S. A., Tyler Technologies, Inc. Del., USX-US Steel Company, Weirton
Steel Corp., Whx Corp.
16
ADDITIONAL INFORMATION
Management is not aware at this time of any other matters to be presented at
the meeting. If, however, any other matters should come before the meeting or
any adjournment thereof, the proxies will be voted in the discretion of the
proxyholders.
Representatives of Ernst & Young, LLP are expected to be in attendance at
the meeting to respond to appropriate questions from stockholders and will
have an opportunity to make a statement if they so desire.
Stockholders' proposals intended to be presented at the Company's 2002
annual meeting must be received by the Company no later than December 31, 2001
to be considered for inclusion in the Company's proxy statement and form of
proxy for that meeting. A nomination of a person for election as a director
and any other proposal made by a shareholder shall not be considered unless
written notice has been received by the Company's Secretary not less than 90
days in advance of the meeting or, if later, the seventh calendar day
following the first public announcement of the date of the meeting.
Pittsburgh, Pennsylvania
April 5, 2001
17
Exhibit A
L.B. FOSTER COMPANY
------------
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
------------
CHARTER
I.Purpose
The Audit Committee's primary function is to fulfill its oversight
responsibilities by reviewing: the Corporation's audited financial reports
and interim financial reports; the Corporation's systems of internal
controls regarding finance, accounting and legal compliance that management
and the Board have established; and the Corporation's auditing, accounting
and financial reporting processes. The Audit Committee's primary duties and
responsibilities are to:
.Monitor the Corporation's financial reporting process and internal control
system.
. Review and evaluate the work of the Corporation's independent accountants
and internal auditing department.
. Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department and the Board of Directors.
The Audit Committee will fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter.
II.Composition
The Audit Committee shall consist of three or more directors as determined
by the Board, each of whom shall be independent directors and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.
The term "independent director" in this Section II shall have the meaning
set forth both in the NASDAQ's Audit Committee Requirements, as from time
to time amended. All members of the Committee shall have a working
familiarity with basic finance and accounting practices and at least one
member of the Committee shall have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless the Chair
A-1
is elected by the full Board, the members of the Committee may designate a
Chair by majority vote of the full Committee membership. A member of the
Committee shall immediately resign if he should cease to be an independent
director and his successor shall be selected by the full Board.
III.Meetings
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. Special meetings may be called by either the
Chairman of the Board or the Chairman of the Committee. In order to foster
open communication, the Committee should meet at least annually with
management and the independent accountants in separate executive sessions
to discuss any matters that the Committee or either of these groups believe
should be discussed privately. In addition, the Committee, or at least its
Chair, should meet with the independent accountants and management
quarterly to review the Corporation's interim financial statements.
IV.Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports; Review, Discussion and Recommendations
1. Review this Charter at least annually and, if appropriate, update this
Charter.
2. Review and discuss the Corporation's audited financial statements with
management.
3. Discuss with the independent auditors the matters required to be
discussed by SAS 61, as it may be modified or supplemented.
4. Receive the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1, as
it may be modified or supplemented, and discuss with the independent
accountants their independence.
5. If appropriate, and based on the review and discussion referred to in
paragraphs (IV) 2 through (IV) 4 of this Charter, recommend to the Board
of Directors that the Corporation's audited financial statements be
included in the Corporation's Annual Report on Form 10-K.
6. Review with financial management and the independent accountants each
Quarterly Report on Form 10-Q prior to its filing. The Chair of the
Committee may represent the entire Committee for purposes of this
review.
Independent Accountants
7. Review and recommend to the Board of Directors the independent
accountants to be appointed to audit the books of the Corporation, its
operating groups and subsidiaries, approve the compensation of the
outside accountants and review and approve any recommendations for the
discharge of the independent accountants.
8. Periodically consult with the independent accountants about internal
controls and the quality and accuracy of the Corporation's financial
statements and elicit the independent accountants' recommendations for
improving the Corporation's internal controls.
A-2
9. Periodically confirm that the independent accountants understand that
their ultimate accountability is to the Board of Directors and the
Audit Committee, as representatives of the shareholders.
Financial Reporting Processes
10. In consultation with the independent accountants and the internal
auditors, review the integrity of the organization's financial
reporting processes, both internal and external.
11. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management or the internal
auditing department.
Process Improvement
12. Following completion of the annual audit, review separately with
management and the independent accountants any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
13. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the
financial statements.
14. Review with the independent accountants, the internal auditing
department and management the extent to which changes or improvements
in financial or accounting practices, as approved by the Audit
Committee, have been implemented.
15. Review activities, organizational structure and qualifications of the
internal audit department.
16. Review, with the Corporation's counsel or other counsel selected by
the Committee, any legal matter that could have a significant impact
on the Corporation's financial statements.
17 Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
V.Resources
The Audit Committee will be provided with the necessary resources (both
internal and external) to carry out its duties. The Committee may retain
outside counsel, accountants or others to assist the Committee discharge
its duties when, in the Committee's judgment, such assistance is
appropriate.
A-3
PLEASE MARK, DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
L.B. FOSTER COMPANY
MAY 9, 2001
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1,
"FOR" ITEM 2 AND "FOR" ITEM 3.
Item 1. Election of the following nominees as Directors.
FOR all WITHHOLD AUTHORITY
Nominees to vote for all nominees Nominees: L.B. Foster II
H.J. Massman IV
[ ] [ ] J.W. Puth
W.H. Rackoff
R.L. Shaw
WITHHOLD AUTHORITY to vote for the following only: (Write the name
of the Nominee(s)) in the space below.
________________________________________________________________________________
Item 2. Approve 1998 Long-Term Incentive Plan as amended and restated.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. Approve appointment of Ernst & Young as Independent Auditors for 2001.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE)
Signature: __________________________________________ Date: ______________, 2001
_____________________________________________________ Date: ______________, 2001
SIGNATURE IF HELD JOINTLY
NOTE: Please sign exactly as name appears on the certificate representing
shares to be voted by this proxy, as shown on the label above. When
signing as executor, administrator, attorney, trustee or guardian, please
sign full title as such. If a corporation, please sign full corporate name
by president or other authorized officer. If a partnership, please sign
the partnership name by authorized person.
PROXY
L.B. FOSTER COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 9, 2001
The undersigned hereby appoints Lee B. Foster II and Stan L. Hasselbusch, and
each or any of them, to represent the L.B. Foster Company common stock of the
undersigned at the Annual Meeting of Stockholders of L.B. Foster Company to be
held at the Radisson Hotel Green Tree, 101 Marriott Drive, Pittsburgh,
Pennsylvania on May 9, 2001 at 11:00 a.m. or at an adjournment thereof.
The shares represented by this proxy will be voted as directed by the
stockholder. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1, "FOR" ITEM 2 AND "FOR"
ITEM 3. If any other matter should come before the meeting or any adjournment
thereof, this proxy will be voted in the discretion of the proxyholders. If any
nominee for director in unavailable for election, this proxy may be voted for a
substitute nominee chosen by the Board of Directors.
(PLEASE DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY)