Northwest Pipe Company
2005
LONG TERM INCENTIVE PLAN - SUMMARY PLAN
DESCRIPTION
1. Establishment of the Plan. The name of the Plan is the Northwest Pipe
Company "Performance Unit Plan (PUP)" (hereinafter called the "plan"). The
effective date of the Plan is January 1, 2005 (retroactive to 1/1/02).
2. Purpose. The purpose of the Plan is to provide an incentive to key
employees of Northwest Pipe Company (the "Company") to improve the
earnings and performance of the Company.
3. Administration. The Compensation Committee (the "Committee") of the Board
of Directors of the Company shall administer the Plan. No member of the
Committee shall be eligible to participate in the Plan. The Committee
shall have power to construe and interpret the Plan and to establish and
amend rules, regulations and forms for its administration and to certify
all payments made under the Plan. The determination of the Committee on
all matters relating to the Plan shall be conclusive. No member of the
Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any award thereunder.
4. Eligibility. Employees eligible to participate in the Plan shall be key
employees of the Company (who have been employed for one year) in salary
grade 13 or higher whose efforts may have an effect upon the growth and
performance of the Company and who shall be selected to participate in the
Plan by the Committee or any successor thereto. The eligibility date for
selection by the Committee shall be January 15 in the first year of each
three-year cycle of the Plan ("Eligibility Date").
5. Award of Performance Units. Awards under the Plan consist of Performance
Units. A Performance Unit is a contingent right to receive cash at the end
of a respective vesting period, at the discretion of the Compensation
Committee. Average Return on Assets ("ROA", defined as Operating Income
divided by Average Assets) shall be used as the performance measure for
determining the award of Performance Units. An ROA target range shall be
established by the Committee annually which will be used, in part, to help
determine the number of Performance Units awarded.
6. Value of Performance Units. The value of Performance Units shall be
determined by the Committee using the Company's stock price as an initial
guide, but the Committee has discretion in setting the final value. The
Committee will plan on awarding and valuing units each year in association
with the Company's Annual Meeting, although other dates may be set at
their discretion.
7. Vesting of Performance Units.
A.) The plan is set up to apply "overlapping" three-year performance
periods or cycles. The initial cycle would be for 2002 - 2004.
Thereafter, performance cycles would overlap. Each performance cycle
may generate a performance award that will vest and payout over a
three-year period starting no earlier than April 1 following the
completion of the performance cycle. The dates for each cycle will
be set by the Committee. April 1, 2007 represents the first date
when the overlapping cycles have the opportunity to produce three
cash payouts.
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Overlapping Initial Vesting Subsequent
Period # Periods Date Vesting Dates
-------- ------- ---- -------------
1 02-03-04 4/1/05 4/1/06 & 4/1/07
2 03-04-05 4/1/06 4/1/07 & 4/1/08
3 04-05-06 4/1/07 4/1/08 & 4/1/09
4 05-06-07 4/1/08 4/1/09 & 4/1/10
B.) Performance Units Vest Upon Change in Control. For purposes of this
Plan, a "Change in Control" shall mean the occurrence of any of the
following events:
(i) The approval by the shareholders of the Company of:
(a) any consolidation, merger or plan of share exchange
involving the Company (a "Merger) in which the Company is not
the continuing or surviving corporation or pursuant to which
shares of Common Stock of the Company ("Company Shares") would
be converted into cash, securities or other property, other
than a Merger involving Company Shares in which the holders of
Company Shares immediately prior to the Merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the Merger,
(b) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, the assets of the Company; or
(c) the adoption of any plan or proposal for the liquidation
or dissolution of the Company.
(ii) At any time during a period of two consecutive years,
individuals who at the beginning of such period constituted
the Board ("Incumbent Directors") shall cease for any reason
to constitute at least a majority thereof unless each new
director elected during such two-year period was nominated or
elected by two-thirds of the Incumbent Directors then in
office and voting (with new directors nominated or elected by
two thirds of the Incumbent Directors also being deemed to be
Incumbent Directors); or
(iii) Any Person (as hereinafter defined) shall, as a result of a
tender or exchange offer, open market purchases, or privately
negotiated purchases from anyone other than the Company, have
become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company ordinarily having the
right to vote for he election of directors ("Voting
Securities") representing thirty (30%) or more of the combined
voting power of the then outstanding Voting Securities.
Notwithstanding anything in the foregoing to the contrary,
unless otherwise determined by the Board, no Change in Control
shall be deemed to have occurred with respect to an employee
for purposes of this Plan if (1) such employee shall acquire
(other than on the same basis as all other holders of the
Company Shares) an equity interest in an entity that acquires
the Company in a Change in Control otherwise described under
subparagraph (B) (i) above, or (2) such employee is a part of
a group that constitutes a Person which becomes a beneficial
owner of Voting Securities in a transaction that otherwise
would have resulted in a Change in Control under subparagraph
(B) (iii) above.
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C.) For purposes of the Plan, the term "Person" shall mean and include
any individual, corporation, partnership, group, association or
other "person," as such term is used in Section 13 (d) (3) or
Section 14 (d) (2) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than the Company or any employee benefit
plan(s) sponsored by the Company.
8. Limitation on Value of Performance Units. Prior to the beginning of each
three-year cycle, the Committee will establish a hurdle rate ("Hurdle
Rate") based on the average return on assets. No payments on account of
Performance Units will be paid unless the Company has met or exceeded the
Hurdle Rate.
9. Payments on Account of Performance Units. Payments on account of
Performance Units which have fully vested shall be made to the employees
in whom such Units have vested, in cash within 90 days of the date, or as
soon as practicable thereafter, upon which such units become vested.
10. Adjustments. The Committee may make adjustments from time to time in the
number of Performance Units credited to any employee's account in such
reasonable manner as the Committee may determine to reflect (i) any
increase or decrease in the number of issued shares of common stock of the
Company resulting from a subdivision or consolidation of shares or any
other capital adjustment, the payment of stock dividends or other
increases or decreases in such shares effected without receipt of
consideration by the Company; or (ii) material changes in the Company's
accounting practice or principles; or (iii) material acquisitions or
dispositions, the effect of which would be to distort ROA described above.
11. Death, Disability, Retirement or Termination. If, before the vesting of
Performance Units, an employee holding such Performance Units ceases to be
employed by the Company or any of its subsidiaries for any reason other
than death, disability or retirement, unvested Performance Units will be
forfeited.
In the event of an employee's death, disability or retirement before the
vesting of any Performance Units which he/she may hold, the Committee may,
but is not obligated to, vest his/her unvested Performance Units. Payment
of any such vested Performance Units shall be done on an equitable basis
determined at the sole discretion of the Committee, taking into
consideration, for example, the performance of the Company during the
period beginning on the date when such employee was awarded Performance
Units and ending upon the date of death, disability or retirement.
12. Amendment or Termination of Plan. The Board of Directors, other than
Directors who are participants under the Plan, may amend, suspend or
terminate this Plan at any time.
13. Continuance of Employment. The Plan shall not impose any obligation on the
Company or its subsidiary corporations to continue the employment of any
person.
IN WITNESS WHEROF, the Corporation has caused this instrument as amended and
restated to be executed effective as of except as otherwise stated herein.
7/11/05
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