SCHEDULE 14A
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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
L.B. FOSTER COMPANY
415 Holiday Drive
[LOGO OF L.B. FOSTER COMPANY] Pittsburgh, Pennsylvania 15220
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
To the Stockholders:
L.B. Foster Company will hold its annual stockholders' meeting at
the Pittsburgh Green Tree Marriott, 101 Marriott Drive, Pittsburgh,
Pennsylvania on Thursday, May 20, 1999 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 1999.
4. Any other matters that properly come before the shareholders
at the meeting.
Only holders of record of common stock at the close of business on
March 26, 1999 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.
David L. Voltz
Secretary
Pittsburgh, Pennsylvania
April 15, 1999
L.B. FOSTER COMPANY
------------
PROXY STATEMENT
------------
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 20, 1999 and at any
adjournment thereof. This proxy statement, the enclosed form of proxy and the
Company's 1998 annual report were mailed to stockholders on or about April 15,
1999. 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. At
March 26, 1999, the record date for entitlement to vote at the meeting, there
were 9,842,404 shares of common stock outstanding. A quorum will therefore
require the presence, in person or by proxy, of the holders of at least
4,921,203 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
26, 1999, 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 1999 and other matters
shall also 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 1999.
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 in so doing.
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
10; and
. the directors and executive officers as a group.
Information furnished by 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:
The TCW Group, Inc. (c) 722,900 7.34
Dimensional Fund Advisors, Inc. (c) 747,300(d) 7.59
Quaker Capital Management Corp. (c) 548,700(e) 5.57
Directors:
Lee B. Foster II 324,232 3.24
Henry J. Massman IV 10,083 0.10
John W. Puth 77,000 0.78
William H. Rackoff 32,000 0.32
Richard L. Shaw 38,000 0.38
Executive Officers:
Dean A. Frenz
Senior Vice President--Rail Distribution Products 65,307 0.66
Stan L. Hasselbusch
Executive Vice President and Chief Operating Officer 60,745 0.61
Roger F. Nejes
Senior Vice President--Finance and Administration 59,605 0.60
Henry M. Ortwein, Jr.
Senior Vice President--Rail Manufactured Products 40,315 0.41
All Directors and Executive Officers as a Group 896,541 8.66
- ------
(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 by
2
him. It includes shares which the named person or group had the right to
acquire within 60 days after March 26, 1999 through the exercise of stock
options (170,000 for Mr. Foster, 10,000 for Mr. Massman, 35,000 for Mr.
Puth, 20,000 for Mr. Rackoff, 35,000 for Mr. Shaw, 50,000 for Mr. Frenz,
48,000 for Mr. Hasselbusch, 37,500 for Mr. Nejes, 25,000 for Mr. Ortwein
and 515,500 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
26, 1999 have been acquired and are outstanding.
(c) The address of the TCW Group, Inc. is 865 South Figueroa Street, Los
Angeles, CA 90017, the address of Dimensional Fund Advisors, Inc. is 1299
Ocean Avenue, 11th Floor, Santa Monica, CA 90401 and the address of Quaker
Capital Management Corp. is 401 Wood Street, Suite 1300, Pittsburgh, PA
15222.
(d) These shares reportedly are owned by investment advisory clients for which
Dimensional Fund Advisors, Inc. serves as investment manager.
(e) Quaker Capital Management Corporation employees reportedly own directly
131,000 of these shares. The remainder reportedly are owned by investment
advisory clients for which Quaker Capital Management Corporation 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 52, has been President, Chief Executive
Officer and a director of the Company since 1990. Mr.
Foster is a director of MotivePower Industries, Inc., a
manufacturer of locomotives and engineered locomotive
components.
Henry J. Massman IV Mr. Massman, age 36, 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 70, has been a director of the Company since
1977. He has been President of J.W. Puth Associates, an
industrial consulting company, since 1989. Mr. Puth is a
director of Lindberg Corporation (industrial
heat treating), BWAY Corporation (a container
manufacturer), US Freightways, Inc. (trucking and freight
forwarding), Allied Products Corp. (manufacturer of farm
equipment and large presses), and A.M. Castle, Inc.
(metals distributor).
William H. Rackoff Mr. Rackoff, age 50, 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 1981 and became Chief
Executive Officer of Asko, Inc. in 1995.
Richard L. Shaw Mr. Shaw, age 71, 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 was Chief Executive Officer
of Michael Baker Corporation from 1984 until May 1992 and
from September 1993 until October 1994.
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 ten meetings during 1998, including five
telephonic meetings. 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. Foster and Puth constitute the Executive Committee of the Board of
Directors. The Finance and 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 Finance and Audit Committee, which held two meetings during 1998, 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 five occasions
in 1998, 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 three times, including
one telephonic meeting, in 1998, 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 1998.
Directors' Compensation
Outside directors are paid a base annual fee of $14,000, plus $1,000 for
each board meeting attended and $500 for each committee meeting attended.
During 1998, Messrs. Puth, Rackoff and Shaw were each awarded non-qualified
stock options to purchase up to 10,000 shares of common stock at an exercise
price of $4.38 per share and Mr. Massman was awarded non-qualified stock
options to purchase up to 10,000 shares of common stock at an exercise price
of $6.00 per share. In addition, each outside director, other than Mr.
Massman, received 1,000 shares of the Company's common stock for services
during 1998; Mr. Massman received 83 shares of common stock for his services
in 1998, which services commenced with his appointment to the Board in
November, 1998. No compensation is paid for participating in special
telephonic meetings or executing unanimous consents in lieu of meetings. If
the Company's stockholders approve the 1998 Long-Term Incentive Plan as
amended and restated, each outside director, commencing with the annual
shareholders' meeting in the year 2000, automatically shall be awarded
annually a non-qualified option to acquire up to 5,000 shares of the Company's
common stock. See "Approval of the 1998 Long-Term Incentive Plan as Amended
and Restated" at page 6. 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 26, 1999, there were only 25,550 shares
available for future option grants under the 1985 Plan.
On October 23,1998, the Board of Directors adopted the 1998 Long-Term
Incentive Plan which provided for the issuance of options to acquire up to
25,000 shares of the Company's common stock. Options to acquire 25,000 shares
of common stock were subsequently awarded to outside directors of the Company
and there are no additional shares available fur further option grants under
this plan. On February 24, 1999, the Board of Directors adopted, subject to
shareholder approval, an amended and restated 1998 Long-Term Incentive Plan
(the "Plan") which, among other things, increased the number of shares of
common stock which may be issued under the Plan from 25,000 to 450,000.
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, beginning in the year 2000. These automatic awards are described
below under "Automatic Stock Options."
General
Up to 450,000 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 36 employees, out of approximately 529
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 quality 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 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, 1999. The Board of Directors
recommends a vote FOR approval of this appointment.
9
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 1998 283,000 114,295 * 31,950 32,500 28,988
President & Chief 1997 280,000 69,049 * 19,480 0 26,493
Executive Officer 1996 275,833 91,364 * 0 0 25,232
Stan L. Hasselbusch 1998 175,721 82,967 * 19,837 50,000 16,081
Executive Vice
President & 1997 151,250 39,900 * 9,845 0 12,822
Chief Operating Officer 1996 139,333 44,560 22,782(5) 0 0 11,604
Henry M. Ortwein, Jr. 1998 143,477 82,816 * 23,152 0 12,486
Senior Vice President-- 1997 130,466 39,545 * 9,748 0 9,157
Rail Manufactured
Products 1996 109,154 30,071 * 0 0 7,738
Dean A. Frenz 1998 162,000 57,287 * 16,014 0 13,856
Senior Vice President-- 1997 160,000 21,469 * 6,057 0 12,911
Rail Distribution 1996 157,300 34,106 * 0 0 13,384
Roger F. Nejes 1998 150,000 50,486 * 14,115 15,000 12,979
Senior Vice President-- 1997 140,000 28,772 18,190(6) 8,118 0 10,485
Finance and
Administration 1996 131,000 36,159 * 0 0 10,118
- ------
(1) The amounts included in this column for 1998 include, in addition to cash,
the value, at $5 3/16 per share of the Company's common stock issued to
the named executive officers on March 2, 1999 pursuant to the Company's
1998 bonus plan. The amounts for 1997 include, in addition to cash, the
value at $5 1/8 per share of the Company's common stock issued to the
named executive officers pursuant to the Company's 1997 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.
(2) The amounts disclosed in this column include the value of Company provided
term life insurance, leased car, executive Medical Reimbursement Plan,
relocation expenses and Country Club dues and fees.
(3) Pursuant to the Company's 1998 bonus plan 20,254 shares of the Company's
common stock were awarded to the named executive officers, with 6,159
shares awarded to Mr. Foster; 3,824 shares awarded to Mr. Hasselbusch;
4,463 shares awarded to Mr. Ortwein; 3,087 shares awarded to Mr. Frenz;
and 2,721 shares awarded to Mr. Nejes. 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, 1998, Mr. Foster held 3,801 shares of restricted common stock
valued at $25,181; Mr. Hasselbusch held 1,921 shares valued at $12,727;
Mr. Ortwein held 1,902 shares valued at $12,601; Mr. Frenz held 1,182
shares valued at $7,831 and Mr. Nejes held 1,584 shares valued at $10,494.
(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.
(5) This amount includes relocation expenses in the amount of $13,348.
(6) This amount includes Country Club dues and fees of $5,446 and $9,396 for a
leased car.
* The total is less than 10% of the executive's total salary and bonus for
the year.
10
Option Grants
The following table provides information on non-qualified stock options
granted to the named executive officers in 1998:
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Shares Options Price Appreciation
Underlying Granted to Exercise for Option Term ($)
Options Employees or Base Expiration ----------------------
Name Granted in 1998 Price ($/Sh) Date 5% 10%
- ---- ---------- ---------- ------------ ---------- ---------- -----------
Lee B. Foster II 32,500 18.57 $4.38 10/22/2008 $ 89,375 $ 226,850
Stan L. Hasselbusch 25,000(a) 14.29 5.25 08/12/2008 82,500 209,250
Stan L. Hasselbusch 25,000(a) 14.29 4.38 10/22/2008 68,750 174,500
Roger F. Nejes 15,000(a) 8.57 4.38 10/22/2008 41,250 104,700
- ------
(a) The 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.
Option Exercises and Year-End Option Values
The following table provides information on option exercises in fiscal 1998
by the named executive officers and such officers' unexercised options at
December 31, 1998. 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 2,500 5,475 170,000 -- $520,776 --
Stan L. Hasselbusch 2,000 3,630 48,000 50,000 141,380 90,500
Henry M. Ortwein, Jr. -- -- 25,000 -- 75,105 --
Dean A. Frenz -- -- 43,750 6,250 131,469 18,281
Roger F. Nejes 12,500 21,906 37,500 15,000 112,963 33,675
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 Board's Compensation
Committee, and Messrs. Puth, Rackoff and Shaw in their capacity as the Option
Committee, and addresses the Company's compensation policies for 1998 as
11
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 1998 were published by Watson
Wyatt Data Services and covered companies that were manufacturers of durable
goods with annual sales of up to $297 million, fabricators of metal products
with annual sales of up to $400 million, or general manufacturers with sales
of up to $300 million. The data shows that the Company's executive officers'
base salaries ranged from 13.6% below to 13.3% above the median base salaries
for comparable positions in the durable goods manufacturing industry, from
15.9% below to 19.9% above the median base salaries for comparable positions
in the metal fabricating industry and from 24.8% below to 7.1% above the
median base salaries for comparable positions 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 1998, 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
1998, cash awards under the Plan ranged from 17.5% to 42.8% of the 1998 base
compensation of the Company's executive officers. Survey data published by
Watson Wyatt Data Services indicate that the aggregate cash compensation
(excluding stock awards under the Incentive Compensation Plan) paid to the
Company's executive officers was 11.2%, 2.0% and 5.7% below the aggregate
median cash compensation paid for comparable executive positions in the,
respectively, durable goods manufacturing industry, metal fabricating industry
and general manufacturing industry. In addition, the Company awarded 34,826
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. Foster, Frenz, Hasselbusch, Nejes and
Ortwein are included in the Summary Compensation Table.
12
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 Plan
The Company's 1985 Long-Term Incentive Plan as Amended and Restated and the
1998 Long-Term Incentive Plan (the "Plans") authorize 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 Plan. 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. The table at page 11 describes options granted to Messrs.
Foster, Hasselbusch and Nejes in 1998.
. 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 Company's contributions for
1998 to the Voluntary Investment Plan for Messrs. Foster, Frenz, Hasselbusch,
Nejes and Ortwein 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
13
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. Foster, Frenz, Hasselbusch, Nejes and Ortwein 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 1998 Compensation
Mr. Foster is eligible to participate in the same executive compensation
plans as are available to other executive officers. Mr. Foster's annual base
salary was increased by $12,000 to $292,000, effective October 1, 1998.
According to data published by Watson Wyatt Data Services, Mr. Foster's salary
is approximately 1.7% below the median base salary for chief executive
officers of metal fabricating companies with median sales of $178 million and
approximately 2.7% below the median base salary for chief executive officers
of durable goods manufacturing companies with median sales of $234 million.
Mr. Foster's salary is 5.2% below the median base salary for chief executive
officers of general manufacturing companies with median sales of $281 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 $82,345 for 1998 plus 6,159 shares of the Company's common
stock. Under the Plan, Mr. Foster's award was based upon the Company's 1998
pre-tax income. According to data published by Watson Wyatt Data Services, Mr.
Foster's 1998 total of base salary and cash incentive compensation (excluding
stock awards) was approximately 15.6% below the median total cash compensation
of chief executive officers in the durable goods manufacturing industry, 6.7%
below the median total cash compensation of chief executive officers in the
metal fabrication industry, and 13.3% below the median total cash compensation
of chief executive officers in general manufacturing. Mr. Foster was also
awarded options to acquire up to 32,500 shares of the Company's common stock
for $4.38/share in October, 1998.
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
14
GRAPH APPEARS HERE
December 31, 1993 1994 1995 1996 1997 1998
L.B. FOSTER COMPANY [.] 100 98 128 113 149 200
PEER GROUP /\ 100 103 101 101 105 76
NASDAQ STOCK MARKET (U.S.) [ ] 100 98 138 170 209 293
The Peer Group is composed of the following steel or iron related companies
where stocks are listed on domestic securities exchanges: Ampco-Pittsburgh
Corp., Armco, Inc., Bayou Steel Corp. La Place, Bethlehem Steel Corp.,
Birmingham Steel Corp., British Steel Plc., Carpenter Technology Corp.,
Friedman Inds. Inc., Geneva Steel Co., Hmi Inds. Inc., Inland Steel Inds. Inc.,
Insteel Inds. Inc., Keystone Cons Inds. Inc., LTV Corp. New, Matec Corp.,
Maverick Tube Corp., Meridian Natl. Corp., N S Group, Inc., National Std Co.,
Nucor Corp., Oregon Steel Mills, Inc., Precision Castparts Corp., Quanex Corp.,
Texas Inds. Inc., Tubos De Acero De Mexico S. A., Tyler Corp. Del., USX US
Steel Group, Weirton Steel Corp., Whx Corp.
15
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 2000
annual meeting must be received by the Company no later than December 31, 1999
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 15, 1999
16
PROXY
L.B. FOSTER COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 20, 1999
The undersigned hereby appoints Lee B. Foster II and David L. Voltz, and each or
either of them, to represent the common stock of the undersigned at the Annual
Meeting of Stockholders of L.B. Foster Company to be held at the Pittsburgh
Green Tree Marriott, 101 Marriott Drive, Pittsburgh, Pennsylvania on May 20,
1999 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 is 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)
\/ 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.
FOR all WITHHOLD AUTHORITY
Nominees to vote for all Nominees FOR AGAINST ABSTAIN
Item 1. [ ] [ ] Nominees: L.B. Foster II 2. Approve 1998 Long-Term [ ] [ ] [ ]
Election of the Henry J. Massman IV Incentive Plan as amended
following J.W. Puth and restated
nominees as Directors: W.H. Rackoff
WITHHOLD AUTHORITY to vote for the following R.L. Shaw 3. Approve appointment of [ ] [ ] [ ]
only: (Write the name of the Nominee(s) in the space Ernst & Young as
below: Independent Auditors in 1999
--------------------------------------------------- (PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE)
SIGNATURE Date , 1999 Date , 1999
------------------------------- ---------- --------------------------------------------------- --------
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 in
partnership name by authorized person.
