L.B. Foster Company DEF 14A
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act Of 1934
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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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):
þ No fee required.
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$125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or |
Item 22(a)(2)of Schedule 14A.
o Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1) Title of each class of securities to which transaction applies: |
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(2) Aggregate number of securities to which transaction applies: |
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule O-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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(4) Proposed maximum aggregate value of transaction: |
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o Fee paid
previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act Rule O-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. |
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(1) Amount Previously Paid: |
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(2) Form, Schedule or Registration Statement No.: |
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L.B. FOSTER
COMPANY
415 Holiday Drive
Pittsburgh, Pennsylvania 15220 |
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2007
To the Shareholders:
L.B. Foster Company will hold its annual shareholders’
meeting at the Company’s principal executive offices at 415
Holiday Drive, Pittsburgh, Pennsylvania on Wednesday,
May 23, 2007 at 11:00 a.m., local time, for the
purposes of:
1. Electing a board of seven directors for the ensuing year.
2. Any other matters that properly come before the
shareholders at the meeting.
Shareholders are cordially invited to attend the meeting. Only
holders of record of common stock at the close of business on
March 29, 2007 will be entitled to vote at the meeting or
at any adjournment thereof.
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.
Stan L. Hasselbusch
President and Chief Executive Officer
Pittsburgh, Pennsylvania
April 18, 2007
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 May 23,
2007 annual meeting of shareholders and at any adjournment
thereof. This proxy statement, the enclosed form of proxy and
the Company’s 2006 Annual Report to Shareholders were
mailed to shareholders on or about April 18, 2007.
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 the close of business on
March 29, 2007, the record date for entitlement to vote at
the meeting (“Record Date”), there were
10,568,245 shares of common stock outstanding. A quorum
will therefore require the presence, in person or by proxy, of
the holders of at least 5,284,123 shares. Where a
shareholder’s proxy or ballot indicates that no vote is to
be cast on a particular matter (including broker non-votes) the
shares of such shareholder 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 the Record Date are entitled to notice of and to
vote at the meeting or at any adjournment thereof. Such
shareholders will have one vote for each share held on that
date. The common stock does not have cumulative voting rights in
the election of directors. Directors shall be elected by a
plurality of the votes cast from the shares present in person or
represented by proxy at the meeting. Abstentions and broker
non-votes are not deemed to be votes cast.
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 seven nominees named
herein. With respect to all matters of which the Company did not
have written notice on or before March 2, 2007, the proxy
confers discretionary authority to vote on such matters to Lee
B. Foster II, Chairman of the Board, and Stan L. Hasselbusch,
President and Chief Executive Officer.
If your shares are held in “street name” (i.e. held
for your account by a broker or other nominee), you should
receive instructions from the holder of record on voting your
shares.
The voting instruction form also serves as the voting
instruction for the trustees who hold shares of record for
participants in the Company’s 401(k) plan. If voting
instructions representing shares in this plan are not received,
those shares will remain unvoted.
You may revoke or change your proxy at any time before it is
voted. For a shareholder “of record”, meaning one
whose shares are registered in his or her own name, to revoke or
change a proxy, the shareholder may (i) submit another
properly signed proxy, which bears a later date;
(ii) deliver a written revocation to our corporate
secretary at the address shown on the Notice of Meeting or
(iii) attend the annual meeting or any adjourned session
thereof and vote in person.
If you are a beneficial owner of our common stock, and not the
shareholder of record (for example your common stock is
registered in “street name” with a brokerage firm),
you must follow the procedures
required by the holder of record, which is usually a brokerage
firm or bank, to revoke or change a proxy. You should contact
the shareholder of record directly for more information on these
procedures.
The cost of soliciting proxies will be borne by the Company.
Officers or employees of the Company may solicit proxies by
mail, telephone,
e-mail or
facsimile. 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 on the Record Date by:
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each person who has reported beneficial ownership of more than
5% of the Company’s common stock;
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each director or nominee for director;
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each executive officer named in the Summary Compensation Table
on page 20 (“NEO”); and
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all directors and executive officers as a group.
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Information concerning the owners of more than 5% of the
Company’s common stock is based upon their reports
furnished to the Company and may not be current.
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Number of
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Shares
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Percent of
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Stock
Ownership
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Owned(a)
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Shares(b)
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More Than 5% Stockholders:
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Keely Asset Management Corp.(c)(d)
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1,690,995
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16.00
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Keely Small Cap Fund(c)(d)
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927,500
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8.78
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Tontine Management, L.L.C.,
Tontine Partners, L.P.(c)(e)
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678,072
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6.42
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Jeffrey L. Gendell(c)(e)
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1,330,936
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12.59
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Nominees for Directors:
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Lee B. Foster II
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322,679
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3.01
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Stan L. Hasselbusch
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232,910
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2.17
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Henry J. Massman IV
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57,829
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*
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G. Thomas McKane
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3,500
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*
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Diane B. Owen
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32,046
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*
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John W. Puth
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63,746
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*
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William H. Rackoff
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86,246
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*
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2
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Number of
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Shares
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Percent of
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Stock
Ownership
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Owned(a)
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Shares(b)
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Certain Executive Officers:
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Donald L. Foster
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6,510
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Senior Vice President —
Construction Products
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Samuel K. Fisher
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10,446
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Senior Vice President —
Rail Products
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David J. Russo
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38,952
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Senior Vice President, Chief
Financial Officer and Treasurer
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John F. Kasel
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13,216
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Senior Vice President —
Operations & Manufacturing
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All Directors and Executive
Officers as a Group
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946,836
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8.50
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Less than one percent of the Company’s outstanding common
stock |
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(a) |
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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 also includes shares which the named person or group had the
right to acquire within 60 days after the Record Date
through the exercise of stock options (155,800 for Mr. Lee
B. Foster, 40,000 for Mr. Massman, 20,000 for
Ms. Owen, 40,000 for Mr. Puth, 40,000 for
Mr. Rackoff, 170,000 for Mr. Hasselbusch, 6,250 for
Mr. Donald Foster, 35,000 for Mr. Russo, 12,500 for
Mr. Kasel and 569,050 for the directors and executive
officers of the Company as a group). The column also includes
the share equivalents contained in the 401(k) plan maintained by
the Company (26,579 for Mr. Lee B. Foster, 25,093 for
Mr. Hasselbusch, 4,771 for Mr. Fisher, 752 for
Mr. Russo, 716 for Mr. Kasel and 72,974 for the
executive officers as a group). Mr. Lee B. Foster also
holds an indirect interest in 5,000 shares held in an
investment plan maintained by a separate company. |
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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 the Record Date have been acquired and
are outstanding. |
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The address of Keely Asset Management Corp. and Keely Small Cap
Fund is 410 South LaSalle Street, Chicago, IL 60608. The address
of Tontine Partners, L.P., Tontine Management, L.L.C. and
Jeffrey L. Gendell is 55 Railroad Avenue, 3rd Floor,
Greenwich, CT 06830. |
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Keely Asset Management Corp. and Keely Small Cap Value Fund
share beneficial ownership of 927,500 shares, which shares
are included in the 1,690,995 shares held by Keely Asset
Management LLC. |
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Tontine Management, L.L.C. (“TM”), the general partner
of Tontine Partners, L.P. (“TP”), has the power to
direct the affairs of TP. Mr. Gendell is the managing
member of TM and certain other entities which own, inter alia,
Company stock. TP owns 678,072 shares of the Company’s
common stock directly and TM owns these 678,072 shares
indirectly. TM’s and Mr. Gendell’s indirect
ownership of TP’s shares of Company stock is included in
the number of shares owned by each of TM and Mr. Gendell. |
3
DIRECTORS
A board of seven directors is to be elected to serve until the
next annual meeting of shareholders 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.
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Nominee
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Lee B. Foster II
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Mr. Foster, age 60, has been
a director of the Company since 1990 and Chairman since 1998. He
was the Chief Executive Officer of the Company from May 1990
until January 2002 and since that time has been an executive
officer and employee of the Company. 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.
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Stan L. Hasselbusch
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Mr. Hasselbusch, age 59, has
been Chief Executive Officer and a director of the Company since
January 2002, and President of the Company since March 2000. He
served as Vice President — Construction and Tubular
Products of the Company from December 1996 to December 1998 and
as Chief Operating Officer from January 1999 until he was named
Chief Executive Officer in January 2002.
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Henry J. Massman IV
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Mr. Massman, age 44, has been
a director of the Company since November 1998. He has been
President and Chief Executive Officer of Massman Construction
Co., a heavy civil, bridge and marine contractor, since 1988.
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G. Thomas McKane
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Mr. McKane, age 63, was
elected as a director in May 2006. Mr. McKane was Chairman
of the Board of A.M. Castle & Co. a metal and plastics
service center business, from January 2004 to January 2007 and
was Chief Executive Officer and President of A.M.
Castle & Co. from May 2000 until February 2006.
Mr. McKane is also a director of American Woodmark
Corporation, a cabinet manufacturer.
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Diane B. Owen
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Ms. Owen, age 51, was elected
as a director in May 2002. She has been Vice
President — Corporate Audit of H.J. Heinz Company, an
international food company, since April 2000 and was Vice
President — Strategy Development for H.J. Heinz
Company from January 2000 to April 2000.
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John W. Puth
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Mr. Puth, age 78, 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 JDA Partners
LP, an investment partnership. Mr. Puth also is a director
of A.M. Castle & Co., a metal and plastics service
center business, and several private companies.
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William H. Rackoff
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Mr. Rackoff, age 58, 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.
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The Board of Directors nominated the foregoing nominees after
they were recommended for nomination by the Nomination and
Governance Committee of the Board of Directors. The nominees
have expressed their willingness to serve as directors, if
elected. However, should any of the nominees 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.
4
The Board of Directors recommends that you vote
“FOR” each of the foregoing nominees to the Board of
Directors.
DIRECTORS’
COMPENSATION TABLE 2006
The following table sets forth directors’ compensation for
2006, except for Mr. Hasselbusch whose 2006 compensation is
set forth in the Summary Compensation Table at page 20.
During 2006, no stock options were granted and no non-equity
incentive compensation was awarded to the named directors.
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Fees Earned
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or Paid
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Stock
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Option
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Total
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Name
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($)
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($)
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(iv)
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$
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($)
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Lee B. Foster II
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165,000
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—
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—
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34,118
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199,118
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(v)
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Henry J. Massman IV
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33,750
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(i)
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82,880
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(iii)
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—
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—
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116,630
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(vi)
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G. Thomas McKane
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22,494
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(i),(ii)
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82,880
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(iii)
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—
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—
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105,374
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Diane B. Owen
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37,250
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(i)
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82,880
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(iii)
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—
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—
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120,130
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John W. Puth
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35,750
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(i)
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82,880
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(iii)
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—
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—
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118,630
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William H. Rackoff
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39,250
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(i)
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82,880
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(iii)
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—
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—
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122,130
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(i) |
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The base annual fee of the respective chairmen of the Audit
Committee, the Nomination and Governance Committee and the
Compensation Committee was increased on June 1, 2006 from
$16,500 to $31,500. The base annual fee for other outside
directors also was increased on June 1, 2006 from $14,000
to $29,000. Outside directors also receive $1,000 for each Board
meeting attended, $500 for each committee meeting attended and
$500 for each telephonic Board or committee meeting in which the
director participated. |
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(ii) |
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Mr. McKane first became a director on May 24, 2006 and
his fees reflect his service for a partial year. |
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(iii) |
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Each of the outside directors automatically is awarded
3,500 shares of the Company’s common stock when the
director is elected or re-elected as a director of the Company.
On May 24, 2006 (the date of the Company’s 2006 annual
shareholders meeting) each outside director was awarded
3,500 shares of the Company’s common stock. Since the
awards were fully vested on the grant date, the aggregate grant
date fair value of each stock award to our non-employee
directors is reflected in the “Stock Awards” column of
the table based on the compensation cost recognized in 2006 for
financial statement reporting purposes and computed in
accordance with SFAS 123(R). For a discussion of valuation
assumptions, see Note 1 of the Company’s 2006
Consolidated Financial Statements in the Company’s Annual
Report on
Form 10-K
for the year ended December 31, 2006. |
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(iv) |
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As of December 31, 2006, Mr. Foster had 155,800
outstanding stock options, Mr. Massman had 40,000
outstanding stock options, Ms. Owen had 20,000 outstanding
stock options, Mr. Puth had 50,000 outstanding stock
options and Mr. Rackoff had 40,000 outstanding stock
options. |
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(v) |
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Mr. Foster is compensated for his services both as Chairman
of the Board and as an executive officer. Included in “All
Other Compensation” for Mr. Foster are: Company
contributions to the 401(k) defined contribution retirement
plan, executive medical reimbursement plan, Company paid term
life insurance, long-term disability premium, the supplemental
executive retirement plan, auto allowance and club
memberships/fees. |
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(vi) |
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The Company reimburses outside directors for expenses associated
with travel to and attendance at Board of Directors’
meetings, including the costs associated with
Mr. Massman’s and usually one or two other
director(s)’ use of Massman Construction Co.’s
airplane for flying to and from Board of Directors’
meetings. For 2006, the Company reimbursed Massman Construction
Co. $21,236 for the cost of using Massman Construction
Co.’s airplane for this purpose. This reimbursement and
other expenses associated with travel to and attendance at Board
of Directors meetings are not included in the table. |
CORPORATE
GOVERNANCE
The Board and
Board Meetings
The Board consists of seven directors. During 2006, the Board
held five meetings. The Board has determined that each of the
directors, with the exception of Messrs. Foster and
Hasselbusch, qualify as “independent” as defined by
applicable
NASDAQ®
rules. In making this determination, the Board has concluded
that none of these members has a relationship which, in the
opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. The Audit Committee and the Board determined that
Massman Construction Co.’s purchase of construction
material from the Company in the ordinary course of business and
pursuant to competitive bids did not impair
Mr. Massman’s independence.
Each director attended at least 75% of the total number of
meetings (held during the period served) of the Board and all
committees on which he or she served, except that
Mr. McKane attended eight out of eleven such Board and
committee meetings.
The directors regularly have attended shareholders’
meetings without a formal policy on attendance and the Company
does not believe that a formal policy is required. All of the
directors attended the 2006 annual meeting of shareholders.
Communications to
Directors
Shareholders and other parties interested in communicating
directly with the Chairman of the Board or with the
non-managerial directors as a group may do so by writing to
L.B. Foster Company, 415 Holiday Drive, Pittsburgh, PA
15220, Attn: Chairman of the Board or Attn: Outside Directors.
The Secretary of the Company shall review all such
correspondence and shall regularly forward to the Board a
summary of all such correspondence and copies of all
correspondence that, in the opinion of the Secretary, deal with
the functions of the Board or committees thereof or that he
otherwise determines requires their attention. Directors may at
any time review a log of all correspondence received by the
Company that is addressed to members of the Board and request
copies of any such correspondence. Concerns relating to
accounting, internal controls or auditing matters are directed
to the Company’s internal audit department and handled in
accordance with procedures established by the Audit Committee
with respect to such matters.
Board
Committees
The Board currently has, and appoints members to, three standing
committees: the Audit Committee, the Compensation Committee and
the Nomination and Governance Committee. Each member of these
6
committees is independent as defined by applicable
NASDAQ®
rules. Each committee has a written charter approved by the
Board.
Audit
Committee
The Audit Committee is composed of Ms. Owen (Chairman) and
Messrs. McKane, Puth and Rackoff. The Board has designated
Diane B. Owen as the Audit Committee “financial
expert” under applicable SEC rules. Certain of
Ms. Owen’s qualifications as a “financial
expert” are included in her biographical data on
page 4 of this Proxy Statement.
The Audit Committee, which held six meetings (two of which were
telephonic meetings) during 2006, is responsible for overseeing,
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, the adequacy of the
Company’s internal controls and the accounting principles
employed in financial reporting. The Audit Committee also is
responsible for the appointment and compensation of the
independent auditors. The Committee’s charter is posted on
the Company’s website, www.lbfoster.com.
The Audit Committee also is responsible for reviewing and, if
appropriate, approving transactions with related persons. Under
the Company’s written policy, no employee, officer or
director is to participate in any transaction (subject to
exceptions for stock ownership in a publicly traded company and
participation in a transaction solely as an employee, director
or shareholder of the Company) with the Company without the
approval of the Audit Committee. The Company’s written
policy on related person transactions may be found in its
Legal & Ethical Conduct Policy at the Company’s
website, www.lbfoster.com.
Compensation
Committee
The Compensation Committee is composed of Messrs. Puth
(Chairman), Massman, McKane and Rackoff.
The Compensation Committee, which met on five occasions in 2006,
is responsible for reviewing and recommending for approval
significant employee benefit programs, determining officer
compensation, reviewing and recommending for approval certain
organizational changes and granting stock options
and/or stock
awards.
The Compensation Committee makes decisions regarding executive
compensation and these decisions are then ratified by the Board
of Directors. The Committee’s charter is available at the
Company’s website, www.lbfoster.com. The Committee
does not delegate its authority to any third party.
The Compensation Committee currently uses a peer group,
identified in the Compensation Discussion and Analysis at
page 11, as a tool to establish competitive compensation
for the Company’s executive officers.
In determining appropriate compensation, the members of the
Compensation Committee may seek to obtain information on
competitive compensation practices from other directors. In
addition, the Committee utilizes the above peer group’s
compensation practices to establish rough guidelines for the
Committee’s exercise of its subjective judgment in
determining competitive compensation practices.
The Compensation Committee gives significant weight to the Chief
Executive Officer’s recommendations regarding other
executive officers’ compensation; such other executive
officers are not present
7
when the compensation is being determined. With respect to the
Chief Executive Officer’s compensation, the Compensation
Committee may solicit the Chairman of the Board’s views,
but does not defer to the Chairman’s views. The Chief
Executive Officer is not present when his compensation is being
determined.
Compensation for our non-employee directors is determined by the
Nomination and Governance Committee. Management did not utilize
compensation consultants in connection with its executive
compensation program for 2006.
Nomination and
Governance Committee
The Nomination and Governance Committee is composed of
Mr. Massman, Ms. Owen and Mr. Rackoff (Chairman).
The Nomination and Governance Committee, which met on eight
occasions (one of which was telephonic) in 2006, is responsible
for overseeing corporate governance, proposing nominees for
directors to the full Board, recommending which directors should
serve on various Board committees and recommending who should
serve as Chairman of the Board and Chairman of each of the
Board’s committees. This Committee also recommends to the
full Board appropriate compensation for non-employee directors.
The Nomination and Governance Committee endeavors to create a
Board of Directors consisting of individuals who are financially
literate and whose experiences and backgrounds will enable the
Board of Directors to provide meaningful counsel to and
oversight of management. The Nomination and Governance Committee
seeks to recommend, to the full Board, nominees who will create
and maintain a Board of Directors that satisfies applicable
legal and regulatory requirements. The Committee’s Charter
is available on the Company’s website,
www.lbfoster.com.
In selecting nominees for election to the Board of Directors,
the Nomination and Governance Committee will consider
submissions from shareholders. A shareholder wishing to
recommend a nominee may notify the Corporation’s Secretary
or any member of the Nomination and Governance Committee in
writing and provide whatever supporting material the shareholder
considers appropriate. Submissions should be sent to the
Company’s principal executive offices, 415 Holiday Drive,
Pittsburgh, PA 15220, Attn: Secretary.
The Nomination and Governance Committee determines appropriate
levels of compensation for the Company’s outside directors
following essentially the same process as the Compensation
Committee follows to determine compensation for the
Company’s executive officers. For example, the Committee
currently utilizes the same peer group as does the Compensation
Committee.
The Nomination and Governance Committee’s members also may
confer with other directors to obtain information on competitive
compensation practices. The Committee uses such information,
together with the peer group’s compensation practices, to
exercise its subjective judgment in determining appropriate
levels of compensation. The Committee then makes recommendations
to the Board for ratification by the full Board. The Committee
does not delegate its responsibilities to any third party.
Code of Conduct
and Ethics
The Company adopted a written code of conduct and ethics that
applies to all the Company’s directors, officers and
employees, including its chief executive officer, chief
financial officer and chief
8
accounting officer. The Company has posted a current copy of the
code, titled “Legal and Ethical Conduct Policy”, on
our website www.lbfoster.com.
Compensation
Committee Interlocks and Insider Participation
All members of the Compensation Committee are independent
directors, and none of them are present or past employees or
officers of the Company or any of its subsidiaries. No member of
the Compensation Committee has had any relationship with the
Company requiring disclosure under Item 404 of the
SEC’s
Regulation S-K.
The Company’s executive officers have not served on the
board or compensation committee (or other committee serving an
equivalent function) of any other entity, whose executive
officers have served on the Company’s Board or Compensation
Committee.
INDEPENDENT
AUDITORS
Fees
Ernst & Young LLP’s (“E&Y”)
aggregate fees (including
out-of-pocket
expenses) billed for fiscal 2006 and 2005 for each of the
following categories of services are set forth below:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Audit fees (includes audits and
reviews of the Company’s fiscal 2006 and 2005 financial
statements and internal control over financial reporting)
|
|
$
|
391,416
|
|
|
$
|
447,406
|
|
Audit-related fees (primarily
audits of the Company’s various employee benefit plans)
|
|
|
23,861
|
|
|
|
22,133
|
|
Tax fees (federal and state)
|
|
|
—
|
|
|
|
—
|
|
All other fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
415,277
|
|
|
$
|
469,539
|
|
|
|
|
|
|
|
|
|
|
The Audit Committee reviews summaries of services provided by
E&Y and the related fees and has concluded that
E&Y’s provision of certain audit-related services is
compatible with maintaining E&Y’s independence. All
services are pre-approved by the Audit Committee.
E&Y has served as the Company’s independent auditors
since 1990 and the Audit Committee has appointed E&Y as the
Company’s independent auditors for the year ending
December 31, 2007. Since the Audit Committee of the Board
of Directors is responsible for the appointment of the
Company’s independent auditors, the Company is not seeking
shareholder approval of the independent auditors’
appointment.
9
Audit Committee
Report
The Audit Committee of the Board of Directors is composed of
independent directors and oversees the Company’s financial
reporting process on behalf of the Board of Directors. The Audit
Committee is responsible for the appointment, compensation and
retention of the Corporation’s independent auditors. In
fulfilling its oversight responsibilities, the Audit Committee
reviewed with management the audited financial statements of the
Company for the year ended December 31, 2006. The Audit
Committee’s charter is available on the Company’s
website, www.lbfoster.com. The Audit Committee held six
meetings during fiscal year 2006, two of which were telephonic.
Management is responsible for the Company’s internal
controls and for the financial reporting process. With respect
to 2006, management advised the Audit Committee that all annual
and quarterly financial statements reviewed by the Audit
Committee had been prepared in accordance with generally
accepted accounting principles.
The Audit Committee held discussions with E&Y, who are
responsible for performing an independent audit of the
Company’s financial statements in accordance with generally
accepted auditing standards and for issuing a report thereon,
regarding the audited financial statements, including a
discussion of the quality, not just the acceptability, of the
Company’s accounting principles and E&Y’s judgment
regarding these matters. The Audit Committee has discussed with
the independent auditors the matters required to be discussed
under auditing standards generally accepted in the United
States, including those matters set forth in Statement on
Auditing Standards Nos. 61 and 90 (Communications with Audit
Committee). Pursuant to Independent Standards Board Standard
No. 1 (Independence Discussion with Audit
Committee(s)), the Audit Committee has discussed with
E&Y the auditors’ independence from management and the
Company, including the matters in the written disclosures
required by the Independence Standards Board. The Audit
Committee concluded that E&Y’s independence had not
been impaired.
The Audit Committee discussed with the Company’s internal
and independent auditors the overall scope and plans for their
respective audits. The Audit 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 Audit Committee
discussed the results of E&Y’s quarterly review
procedures with the Company’s Chief Executive Officer,
Chief Financial Officer and Controller and with E&Y prior to
the Company’s release of quarterly financial information.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in the Annual
Report on
Form 10-K
for the year ended December 31, 2006 for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Diane B. Owen, Chairman
G. Thomas McKane
John W. Puth
William H. Rackoff
10
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
The Company’s compensation policies for executive officers
named in the Summary Compensation Table at page 20 are
intended to retain and attract the best available executives and
to reward performance. With respect to the Company’s fiscal
year ended December 31, 2006, the Company’s NEOs were
Stan L. Hasselbusch, John F. Kasel, Donald L. Foster, David J.
Russo and Samuel K. Fisher.
The Compensation Committee (the “Committee”)
determines executive compensation, and its determinations are
then approved by the Board of Directors. The Committee reviews
information on various companies’ executive compensation
practices and uses this information to establish rough
guidelines for its subjective determinations on executive
compensation. For 2006, the Committee reviewed the executive
compensation practices of the following companies: Alpine Group,
Inc., A.M. Castle & Co., Circor International, Inc.,
Empire Resources, Inc., Encore Wire Corp., Ladish Co. Inc.,
Material Sciences Corp., NN Inc., Olympic Steel, Inc. and Penn
Engineering & Manufacturing Corp. (the “Peer
Group”). The above companies were selected largely because
of earlier recommendations from the compensation consultants (3C
Compensation Consulting Consortium LLC) retained by the
Committee prior to 2006.
After reviewing information on these companies’ executive
compensation practices, the Committee relies upon its subjective
judgment in making decisions on executive compensation,
including deciding the amount of such compensation and the
allocation of compensation between short-term and long-term
compensation. The Committee also takes into account prior equity
and non-equity compensation granted to its NEOs when determining
compensation.
Although the Committee regularly has utilized compensation
consultants, it did not retain such consultants during 2006
because, except with respect to the 2006 Omnibus Plan (discussed
at page 17), the Company in 2006 did not adopt any
materially new compensation practices for NEOs. The 2006
Management Incentive Plan (see discussion at pp. 12-15)
followed the same format as prior annual incentive plans, with
annual bonuses primarily being calculated based on actual
corporate or divisional performance compared to plan.
The Committee’s policy has been to reward performance
through near-term and long-term compensation arrangements.
Salaries and annual incentive bonuses provide incentives and
rewards for short-term performance, while the Three Year Plan
(described at pp. 16-17) is designed to provide incentives
and rewards based on performance over the three year period 2005
- 2007, inclusive. Equity grants under the Omnibus Plan, which
generally will be in lieu of a portion of the cash otherwise
payable under the Three Year Plan (or any successor plan), will
be designed to provide compensation based on the Company’s
longer term performance.
When making decisions on executive compensation, the Committee
takes into account the executive’s entire compensation
package. The Committee, however, has not established any policy
on the allocation of an executive’s total compensation
package between short or long term compensation or between cash
and equity. Instead, the Committee has exercised its subjective
judgment in an effort to fit
11
the elements of its NEOs’ compensation into a total
compensation package that is competitive and will enable the
Company to retain and attract the best available executives.
Salary
NEOs currently are eligible for salary reviews at 12 month
intervals. Using the Peer Group’s compensation practices as
rough guidelines, the Committee subjectively determines
competitive salaries for the NEOs. With respect to NEOs other
than the Chief Executive Officer, the Committee gives
significant weight to the CEO’s performance assessments and
salary adjustment recommendations. Annual salary reviews
accomplish a variety of purposes, including recognizing superior
performance and maintaining a competitive salary structure.
The Compensation Committee may adjust the Chief Executive
Officer’s salary based upon its subjective interpretation
of the above mentioned guidelines and its assessment of the
CEO’s performance (taking into account the health of the
Company’s various markets). In 2006, the Compensation
Committee determined that Mr. Hasselbusch’s
performance had been outstanding. The Committee specifically
recognized his leadership in selling the Company’s
geotechnical business, developing and monitoring strategic and
annual operating plans and overseeing the continued
implementation of processes (such as LEAN manufacturing and the
Balanced Scorecard) to improve efficiency. The Committee also
recognized that the Company’s overall financial performance
has continued to improve and that Mr. Hasselbusch had
driven a significant portion of this improvement. The Committee
recommended (and the Board of Directors approved) increasing
Mr. Hasselbusch’s salary from $400,000 to $430,000,
effective July 1, 2006.
The Compensation Committee may solicit recommendations and
insights regarding Mr. Hasselbusch’s performance from
the Chairman of the Board, Lee B. Foster II. Although the
Committee uses the Chairman as a source of potentially relevant
information, it does not defer to the Chairman’s
recommendations.
Annual
Incentive Plan
In addition to salary, the Compensation Committee has approved
an annual bonus plan, known as the 2006 Management Incentive
Plan (the “2006 Plan”). The 2006 Plan largely is based
on actual 2006 performance compared to “Planned Incentive
Income”.*
|
|
* |
“Planned Incentive Income” is the Company’s
and/or
operating units’ planned annual 2006 pre-tax income, as
approved by the Board of Directors, but excluding benefits
payable under the 2006 Plan and dividend and interest income
with respect to the Company’s Dakota Minnesota &
Eastern Railroad Preferred Stock exceeding $990,000.
“Incentive Income” is defined the same as
“Planned Incentive Income”, except that
“Incentive Income” is based on actual 2006 pre-tax
income. and may exclude any portion of gains or losses from
transactions not in the ordinary course of business which the
Committee determines to exclude; the Committee has excluded from
“Incentive Income” gains from the sale of the
Company’s Geotech division in February 2006.
|
Incentive
Income
|
|
|
|
|
Income From Continuing Operations
before Income Taxes
|
|
$
|
15,789,000
|
|
2006 Plan Expenses
|
|
|
2,159,000
|
|
|
|
|
|
|
Incentive Income
|
|
$
|
17,948,000
|
|
|
|
|
|
|
12
For 2006, “Planned Incentive Income” for Corporate was
$10,241,000. The Company attained actual 2006 Incentive Income
of $17,948,000.
NEOs were assigned initial “target percentages” of
salary ranging from 35% to 45%, as set forth in the following
table:
|
|
|
|
|
|
|
Target
Percentage
|
|
|
Samuel K. Fisher, Senior Vice
President—Rail Products
|
|
|
35
|
%
|
Donald L. Foster, Senior Vice
President—Construction Products
|
|
|
35
|
%
|
John F. Kasel, Senior Vice
President—Operations and Manufacturing
|
|
|
35
|
%
|
David J. Russo, Senior Vice
President, Chief Financial Officer and Treasurer
|
|
|
35
|
%
|
Stan L. Hasselbusch, President and
Chief Executive Officer
|
|
|
45
|
%
|
A NEO’s “Target Percentage” was then multiplied
by the participant’s 2006 salary to determine the
NEO’s “Target Award”.
“Target Awards” for NEOs were allocated between
“Corporate”
and/or
applicable operating units
and/or
departmental/individual goals as set forth in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
Corporate
|
|
|
Unit
|
|
|
Goals
|
|
|
Stan L. Hasselbusch
|
|
|
100
|
%
|
|
|
—
|
|
|
|
—
|
|
Samuel K. Fisher
|
|
|
20
|
%
|
|
|
60
|
%
|
|
|
20
|
%
|
Donald L. Foster
|
|
|
20
|
%
|
|
|
60
|
%
|
|
|
20
|
%
|
John F. Kasel
|
|
|
80
|
%
|
|
|
—
|
|
|
|
20
|
%
|
David J. Russo
|
|
|
80
|
%
|
|
|
—
|
|
|
|
20
|
%
|
A participant’s actual “Incentive Award” was
calculated by multiplying the “Target Award” by the
percentage of Planned Incentive Income achieved (the
“Performance Percentage”) based upon, with respect to
Corporate, Corporate “Incentive Income” and, with
respect to the applicable operating unit, the operating
unit’s “Incentive Income”.
13
The table below explains how individual Incentive Awards were
calculated based on actual 2006 Corporate
and/or
operating unit Incentive Income:
|
|
|
|
|
|
|
|
|
Incentive Income
as
|
|
|
|
Percentage of
|
|
|
|
Planned
Incentive
|
|
Incentive Award,
as Percentage
|
|
Income
|
|
of Target
Award
|
|
Outstanding
|
|
Corporate
|
|
|
Operating
Unit
|
|
|
160% and over
|
|
|
200
|
%
|
|
|
200
|
%
|
155%
|
|
|
190
|
%
|
|
|
190
|
%
|
150%
|
|
|
180
|
%
|
|
|
180
|
%
|
145%
|
|
|
170
|
%
|
|
|
170
|
%
|
140%
|
|
|
160
|
%
|
|
|
160
|
%
|
135%
|
|
|
150
|
%
|
|
|
150
|
%
|
130%
|
|
|
140
|
%
|
|
|
140
|
%
|
125%
|
|
|
130
|
%
|
|
|
130
|
%
|
Exceeding
|
|
|
|
|
|
|
|
|
120%
|
|
|
120
|
%
|
|
|
120
|
%
|
115%
|
|
|
115
|
%
|
|
|
115
|
%
|
110%
|
|
|
110
|
%
|
|
|
110
|
%
|
105%
|
|
|
105
|
%
|
|
|
105
|
%
|
Target
|
|
|
|
|
|
|
|
|
100%
|
|
|
100
|
%
|
|
|
100
|
%
|
Threshold
|
|
|
|
|
|
|
|
|
90%
|
|
|
80
|
%
|
|
|
80
|
%
|
80%
|
|
|
60
|
%
|
|
|
60
|
%
|
70%
|
|
|
40
|
%
|
|
|
-0-
|
|
The Chief Executive Officer, in his discretion, could reduce any
incentive award by 25%. No such reductions were made for 2006.
When the Plan was implemented, it was anticipated that Corporate
and each operating unit should achieve at least “target
levels” of Planned Incentive Income, but that it would
become progressively more difficult for either Corporate or any
operating unit to attain levels of Incentive Income above target
levels, and that it would be unlikely, although possible, that
an NEO would receive maximum awards. Due to the Company’s
substantially stronger than anticipated performance in 2006, the
awards, as disclosed in the Summary Compensation Table,
generally approached or equaled maximum awards payable under the
2006 Plan.
By way of example, Mr. Hasselbusch’s “Incentive
Award” was calculated, pursuant to the above table, based
upon the Company’s 2006 “Incentive Income” of
$17,948,000 being 175% of its $10,241,600 “Planned
Incentive Income”. Since Mr. Hasselbusch’s Target
Award was 100% allocated to “Corporate”,
Mr. Hasselbusch’s “Target Award” of $189,184
(base salary X 45% “Target Percentage”) was
adjusted by
14
200% since, as set forth in the preceding table, the
Company’s Incentive Income exceeded 160% of Planned
Incentive Income. Since Mr. Hasselbusch’s 2006 base
salary was $415,000 he received an Incentive Award of $373,500.
The Plan also provided for discretionary awards, determined by
the Chief Executive Officer, equal to the sum of:
(i) $100,000; (ii) amounts not paid because the
individual was terminated for cause or resigned prior to the
date incentive awards were paid under the Plan; (iii) the
amount of any reduction in incentive awards made by the Chief
Executive Officer and (iv) any amount which was not paid
due to a failure to achieve a departmental/individual goal.
Discretionary awards to NEOs were approved by the Committee. The
Committee approved a discretionary award of $6,500 to
Mr. Fisher.
In March 2007, the Company adopted the 2007 Management Incentive
Plan (“2007 Plan”), which follows the same general
format as the 2006 Plan. Most of the Company’s operating
units’ Planned Incentive Income was increased from their
respective Planned Incentive Income under the 2006 Plan;
Corporate’s Planned Incentive Income was increased from
$10,241,000 under the 2006 Plan to a potential range of
$22,085,000 - $22,485,000 under the 2007 Plan.* It is
anticipated that Corporate and each operating unit should
achieve target levels of income, but that it will become
progressively more difficult for Corporate, or any operating
unit, to attain levels of Incentive Income above target(s). It
is believed to be unlikely, although possible, that a NEO will
receive a maximum award.
Individual
Supplemental Bonus
The Company currently does not contemplate awarding stock
options. When, however, Mr. Kasel was elected a Senior Vice
President in May 2005, the Committee’s practice would have
been to grant him 25,000 options, which would vest in 25%
increments over the next four years. The grant to Mr. Kasel
inadvertently was omitted from the Committee’s May 2005
meeting agenda and, by the time the 25,000 options later were
awarded to Mr. Kasel, the exercise price for such options
had increased. Accordingly, the Company, with the prior approval
of the Compensation Committee, agreed to pay $35,750 to
Mr. Kasel on each of August 10, 2006, August 10,
2007, August 10, 2008 and August 10, 2009 (or as soon
thereafter as practical) minus (for each payment) the amount, if
any, by which the average closing price of the Company’s
common stock for all trading days from June 1 to
July 31, inclusive, of the applicable year was less than
$14.77/share, multiplied by 6,250. Mr. Kasel was paid
$35,750 in August 2006 and is not entitled to additional
payments under this agreement if, for any reason, he is not
employed by the Company on the date a payment is due.
* Under the 2007 Management Incentive Plan, “Planned
Incentive Income” has the same definition as it does under
the 2006 Plan, except for differences in the amounts of pre-tax
Planned Incentive Income approved by the Board of Directors for
each of the respective years. “Planned Incentive
Income” does not constitute a prediction or forecast as to
the Company’s future performance. Various factors could
cause the Company’s actual results to differ materially
from these indicated by forward-looking statements and other
communications. Readers are encouraged to review the risk
factors in the Forward-Looking Statement section of the
Company’s Annual Report on
Form 10-K
for the year ended December 31, 2006 and any other risk
factors noted in the Company’s subsequent filings with the
Securities and Exchange Commission.
15
Three Year
Incentive Plan
On May 25, 2005, the Company’s Board of Directors,
upon the prior recommendation of its Compensation Committee (the
“Committee”), approved the “L.B. Foster Company
2005 Three Year Incentive Plan” (the “Three Year
Plan”). This Plan is designed initially to motivate
selected senior officers to improve the Company’s
performance over the three year period, 2005 - 2007, inclusive,
(the “Three Year Period”). Any stock awards, in lieu
of cash, will provide incentives and rewards based on the longer
term performance of the Company. The Three Year Plan provides
for escalating awards to the extent the Company’s
performance surpasses what the Compensation Committee deemed to
be acceptable levels of improvement.
The amount payable under the Three Year Plan is based on a
“Performance Percentage”. The “Performance
Percentage” is the Company’s “Three Year
Incentive Income”* minus $13,168,000 (with the difference
representing the improvement in the Company’s pre-tax
income for the Three Year Period over what the Committee
considered to be a reasonable three year baseline performance)
divided by $10,341,000 (representing what the Committee
considered to be an acceptable cumulative improvement during the
Three Year Period).
Based upon the “Performance Percentage” attained, the
amount payable will be based on the applicable “Payout
Percentage” in the table below multiplied by $1,825,000:
|
|
|
|
|
Performance
|
|
Payout
Percentage
|
|
Percentage
|
|
(as % of
$1,825,000)
|
|
|
Less than 70%
|
|
|
-0-
|
|
70%
|
|
|
10.0
|
%
|
80%
|
|
|
30.0
|
%
|
90%
|
|
|
62.5
|
%
|
100%
|
|
|
100.0
|
%
|
110%
|
|
|
112.5
|
%
|
120%
|
|
|
130.0
|
%
|
130%
|
|
|
150.0
|
%
|
150%
|
|
|
200.0
|
%
|
The Payout Percentage shall be adjusted proportionately between
the levels in the table to reflect the Performance Percentage
actually achieved.
Individual awards are then calculated by multiplying the total
amount available for awards by a fraction, the numerator of
which is the points assigned to the participant and the
denominator of which is the sum of all points assigned to all
participants in the Plan. The current participants include the
President
* Three Year Incentive Income is the Company’s
aggregate pre-tax income for the Three Year Period, excluding
income with respect to the Company’s investments in the
Dakota, Minnesota & Eastern Railroad or other gains,
losses, charges or income which the Committee, in its sole
discretion deems extraordinary. The Committee has determined
that $2,500,000 of the gain from the February 2006 sale of the
Company’s Geotech division shall be included in “Three
Year Incentive Income”.
16
and Chief Executive Officer, four Senior Vice Presidents, four
Vice Presidents and the Controller. Points have been assigned to
these initial participants as follows:
|
|
|
President/CEO
|
|
4 Points
|
Sr. Vice President
|
|
2 Points
|
Vice President, Controller
|
|
1 Point
|
New participants may be assigned points by the Committee.
A participant’s incentive award will be adjusted so that it
does not exceed the amount that the Participant would have
received if all the initial participants had remained
participants for the full Fiscal Period, and no subsequent
participants had been added to the Plan. The initial
participants in the Plan had a total of nineteen points.
The Committee may issue shares of the Company’s common
stock for up to 50% of the incentive awards payable under the
Three Year Plan. No determination has yet been made as to how
much, if any, stock to issue under the Three Year Plan.
Incentive awards under the Three Year Plan shall be paid on or
before March 15, 2008. Based on the Company’s
performance to date, it is highly likely that a Performance
Percentage of 150% will be achieved, causing Participants to
receive maximum awards. Currently, the sum of all
participants’ points is 16.333 and, if this point total
remains constant, the aggregate payout for all participants
under the Three Year Plan would be $3,137,068 (based upon a
Performance Percentage of 150%).
2006 Omnibus
Plan
The 2006 Omnibus Plan (approved at the Company’s
May 24, 2006 meeting of shareholders) provides for the
issuance of up to 500,000 shares of the Company’s
common stock, which may include newly-issued or treasury shares,
through the exercise of stock options or the award of shares of
common stock.
The 2006 Omnibus Plan, or a successor plan, currently is
intended to be the primary source of future equity grants to
executive officers. Although the 2006 Omnibus Plan provides for
the grant of both options and stock, no options were granted in
2006.
Awards may also be granted to key personnel and directors at the
discretion of the Compensation Committee. Such stock awards will
become vested
and/or
saleable pursuant to the terms of the applicable stock award
agreement approved by the Committee.
Other than automatic awards of 3,500 shares to non-employee
directors each time they are elected or re-elected as directors
by the Company’s shareholders, it is currently anticipated
that the 2006 Omnibus Plan shall be the primary source for the
issuance of stock to participants in the Three Year Plan and its
successors. As described above, the Committee may utilize stock
for up to 50% of awards payable under the Three Year Plan. At
minimum, a recipient of stock, in lieu of cash, under the Three
Year Plan may not voluntarily transfer the stock for at least
two years after the grant date. The Committee believes that
stock awards provide a suitable means of further aligning the
economic interests of the Company’s executives with the
long term interests of the Company’s shareholders.
17
Retirement
Plans
During 2006, the Company maintained the L.B. Foster Company
Voluntary Investment Plan (“VIP”), a defined
contribution retirement plan qualifying under
Section 401(k) of the Internal Revenue Code, covering all
salaried employees. During 2006, the Company contributed 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 on years of
service. Based upon the Company’s financial performance
against predetermined criteria, the Company also contributed an
additional $.50 for each $1.00 so contributed. The Company also
is authorized and directed to make an additional discretionary
contribution of $626,150, with respect to 2006, to the VIP,
which will be shared by salaried and non-bargaining unit hourly
employees participating in the consolidated plan discussed
below. The Company’s contributions for 2006 to the VIP for
Messrs. Hasselbusch, Kasel, Donald L. Foster, Russo and
Fisher are included in the Summary Compensation Table.
The Company amended the VIP in 2007 by consolidating the VIP
with a separate 401(k) plan sponsored by the Company for its
non-union hourly workers. The consolidated plan provides for
automatic enrollment, an adjusted formula for Company matching
contributions (including eliminating the mandatory increased
match based on Company performance), a reduced vesting schedule
and the addition of a Roth feature.
The Company also maintains a Supplemental Executive Retirement
Plan under which executive officers may accrue benefits, which
approximate benefits unavailable under the VIP because of
Internal Revenue Code limitations. These benefits for the NEOs
are also included in the Summary Compensation Table.
The Company maintains these retirement plans in order to provide
a competitive opportunity for its employees to obtain a secure
retirement.
Other
Compensation Plans
At various times in the past, the Company has adopted certain
employee benefit plans in which NEOs have been permitted to
participate and has adopted certain executive officer leased
vehicle, life, long-term disability and health insurance
programs. The incremental cost to the NEOs’ benefits
provided under these programs are included in the Summary
Compensation Table. Benefits under these plans are not directly
or indirectly tied to Company performance.
The Company also provides limited perquisites to the NEOs which
may include leased cars or cash car allowances and membership in
athletic or social clubs. The Company believes that these
perquisites tend to promote the Company’s image, to provide
outlets for interaction between the Company’s executives
and the Company’s vendors/suppliers and other business
associates
and/or to
encourage healthy activities. The Company’s incremental
costs for these perquisites are included in the Summary
Compensation Table.
Miscellaneous
The Company does not provide pension arrangements or
post-retirement health coverage for our NEOs. The NEOs, however,
are eligible to participate in our 401(k) contributory defined
contribution plan as described above.
18
All NEOs are
employees-at-will
and as such do not have employment or change of control
agreements. The Company has not adopted any policies regarding
the adjustment or recovery of awards or payments in the event
the performance measures upon which they are based are restated
or otherwise adjusted. The Company has not adopted equity
ownership requirements or guidelines.
Tax
Considerations
The Compensation Committee has considered the impact of the
applicable tax laws with respect to compensation paid under the
Company’s plans, arrangements and agreements. In certain
instances, applicable tax laws impose potential penalties on
such compensation
and/or
result in a loss of deduction to the Company for such
compensation.
Section 409A. Participation in, and
compensation paid under, the Company’s plans, arrangements
and agreements may, in certain instances, result in the deferral
of compensation that is subject to the requirements of
Section 409A of the Code. To date, the U.S. Treasury
Department and Internal Revenue Service have issued only
preliminary guidance regarding the impact of Section 409A
of the Code on the Company’s plans, arrangements and
agreements. Generally, to the extent that the Company’s
plans, arrangements and agreements fail to meet certain
requirements under Section 409A of the Code, compensation
earned thereunder may be subject to immediate taxation and tax
penalties. It is the intent of the Company that its plans,
arrangements and agreements will be structured and administered
in a manner that complies with the requirements of
Section 409A of the Code.
Section 162(m). With certain exceptions,
Section 162(m) of the Code limits the Company’s
deduction for compensation in excess of $1 million paid to
certain covered employees. Compensation paid to covered
employees is not subject to the deduction limitation if it is
considered “qualified performance-based compensation”
within the meaning of Section 162(m) of the Code. While the
Compensation Committee considers the tax impact of any
compensation arrangement, the Committee evaluates such impact in
light of our overall compensation objectives. The Compensation
Committee reserves the right to approve non-deductible
compensation if the Compensation Committee believes it is in the
best interests of our shareholders. Additionally, if any
provision of a plan or award that is intended to be
performance-based, within the meaning of Section 162(m) of
the Code, is later found to not satisfy the conditions of
Section 162(m), the Company’s ability to deduct such
compensation may be limited.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management and based
on this review and discussion, it has recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in this proxy statement and incorporated by reference
into the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006.
John W. Puth, Chairman
Henry J. Massman IV
G. Thomas McKane
William H. Rackoff
19
SUMMARY
COMPENSATION TABLE FOR 2006
The following table sets forth information regarding
compensation of the Company’s NEOs for the year 2006. No
stock or stock option awards were made in 2006 for the NEOs.
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
&
Nonqualified
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
($)
|
|
|
($)
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
(3)
|
|
|
(4)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Stan L. Hasselbusch
|
|
|
2006
|
|
|
|
415,000
|
|
|
|
—
|
|
|
|
6,487
|
|
|
|
373,500
|
|
|
|
—
|
|
|
|
78,991
|
(5)
|
|
|
873,978
|
|
John F. Kasel
|
|
|
2006
|
|
|
|
166,533
|
|
|
|
35,750
|
(1)
|
|
|
73,946
|
|
|
|
108,414
|
|
|
|
—
|
|
|
|
32,661
|
(6)
|
|
|
417,304
|
|
Donald L. Foster
|
|
|
2006
|
|
|
|
190,837
|
|
|
|
—
|
|
|
|
49,452
|
|
|
|
126,907
|
|
|
|
—
|
|
|
|
39,304
|
(7)
|
|
|
406,500
|
|
David J. Russo
|
|
|
2006
|
|
|
|
204,374
|
|
|
|
—
|
|
|
|
20,186
|
|
|
|
143,062
|
|
|
|
—
|
|
|
|
36,243
|
(8)
|
|
|
403,865
|
|
Samuel K. Fisher
|
|
|
2006
|
|
|
|
196,417
|
|
|
|
6,500
|
(2)
|
|
|
—
|
|
|
|
85,039
|
|
|
|
—
|
|
|
|
39,322
|
(9)
|
|
|
327,278
|
|
|
|
|
(1) |
|
Mr. Kasel received a bonus of $35,750 in August 2006 as
part of an individual bonus arrangement which will be in place
for three additional years. For further information see
page 15. |
|
(2) |
|
Mr. Fisher received a discretionary bonus of $6,500 under
the 2006 Management Incentive Plan. For further information see
page 15. |
|
(3) |
|
Amounts expensed for pre-2006 option awards utilizing the
provisions of SFAS No. 123R. See Note 1 of the
consolidated financial statements in the Company’s Annual
Report on
Form 10-K
for the year ended December 31, 2006. |
|
(4) |
|
Amounts represent cash awards under the 2006 Management
Incentive Plan. For further information see pp. 12-15. |
|
(5) |
|
Includes a $40,170 Company Supplemental Executive Retirement
Plan (“SERP”) contribution, executive medical
reimbursement; Company paid term life insurance premium; Company
contribution to 401(k) defined contribution retirement plan;
Company paid long-term disability premium; personal use of
Company paid automobile lease and club membership. |
|
(6) |
|
Includes a Company paid SERP contribution; executive medical
reimbursement; Company paid term life insurance premium; Company
paid long-term disability premium; Company contribution to
401(k) defined contribution retirement plan; personal use of
Company paid automobile lease and club membership. |
|
(7) |
|
Includes a Company paid SERP contribution; Company paid term
life insurance premium; Company paid long-term disability
premium; Company contribution to 401(k) defined contribution
retirement plan; car allowance; and club membership. |
|
(8) |
|
Includes a Company paid SERP contribution; executive medical
reimbursement; Company paid term life insurance premium; Company
contribution to 401(k) defined contribution retirement plan;
Company paid long-term disability premium; and car allowance. |
|
(9) |
|
Includes a Company paid SERP contribution; executive medical
reimbursement; Company paid term life insurance premium; Company
paid long-term disability premium; Company contribution to
401(k) defined contribution retirement plan; and personal use of
Company paid automobile lease. |
20
GRANTS OF
PLAN-BASED AWARDS IN 2006
The following table provides information on 2006 Non-Equity
Incentive Plan Awards. No stock or option awards were made in
2006 to the NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Possible Payouts Under
|
|
|
|
Non-Equity
Incentive Plan Awards(1)
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Stan L. Hasselbusch
|
|
|
74,700
|
|
|
|
186,750
|
|
|
|
373,500
|
|
John F. Kasel
|
|
|
23,315
|
|
|
|
58,287
|
|
|
|
116,573
|
|
Donald L. Foster
|
|
|
37,404
|
|
|
|
66,793
|
|
|
|
133,586
|
|
David J. Russo
|
|
|
28,612
|
|
|
|
71,531
|
|
|
|
143,062
|
|
Samuel K. Fisher
|
|
|
38,498
|
|
|
|
68,746
|
|
|
|
137,492
|
|
|
|
|
(1) |
|
These grants reflect awards under the 2006 Management Incentive
Plan which is discussed at
pp. 12-15.
Amounts paid under this plan to the NEOs for 2006 are included
in the Summary Compensation Table under Non-Equity Plan
Compensation and, with respect to Mr. Fisher, also under
Bonus. |
OPTION EXERCISES
IN 2006
The following table provides information on stock option
exercises in 2006 by the NEOs. The NEOs did not own any unvested
shares of stock in 2006.
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
|
|
Number of
Shares
|
|
|
Value Realized
on
|
|
|
|
Acquired on
Exercise
|
|
|
Exercise
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
Stan L. Hasselbusch
|
|
|
15,000
|
|
|
|
307,900
|
|
|
|
|
8,000
|
|
|
|
164,080
|
|
|
|
|
27,000
|
|
|
|
553,770
|
|
John F. Kasel
|
|
|
4,000
|
|
|
|
77,080
|
|
|
|
|
6,250
|
|
|
|
123,563
|
|
|
|
|
6,250
|
|
|
|
54,612
|
|
Donald L. Foster
|
|
|
2,500
|
|
|
|
34,950
|
|
|
|
|
3,750
|
|
|
|
55,268
|
|
David J. Russo
|
|
|
13,000
|
|
|
|
268,450
|
|
|
|
|
2,000
|
|
|
|
42,100
|
|
Samuel K. Fisher
|
|
|
1,000
|
|
|
|
19,932
|
|
|
|
|
6,250
|
|
|
|
119,500
|
|
|
|
|
18,000
|
|
|
|
313,740
|
|
|
|
|
10,000
|
|
|
|
182,400
|
|
|
|
|
6,000
|
|
|
|
114,192
|
|
|
|
|
(1) |
|
Difference between the market price of the stock at the time of
exercise and the exercise price of the option, multiplied by the
number of shares acquired. |
21
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information regarding outstanding
stock options awarded to the NEOs as of December 31, 2006.
There were no unvested stock awards as of that date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Securities
|
|
|
Option
|
|
|
|
|
|
|
Underlying
Unexercised Options
|
|
|
Exercise
|
|
|
Option
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(i)
|
|
|
($)
|
|
|
Date
|
|
|
Stan L. Hasselbusch
|
|
|
20,000
|
|
|
|
—
|
|
|
|
2.75
|
|
|
|
2/1/11
|
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
5.25
|
|
|
|
8/12/08
|
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
4.38
|
|
|
|
10/22/08
|
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
5.50
|
|
|
|
5/14/12
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
4.75
|
|
|
|
12/11/11
|
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
3.65
|
|
|
|
5/8/11
|
|
John F. Kasel
|
|
|
—
|
|
|
|
6,250
|
|
|
|
4.23
|
|
|
|
5/12/13
|
|
|
|
|
—
|
|
|
|
18,750
|
|
|
|
14.77
|
|
|
|
12/4/15
|
|
Donald L. Foster
|
|
|
—
|
|
|
|
11,250
|
|
|
|
9.30
|
|
|
|
12/12/14
|
|
|
|
|
6,250
|
|
|
|
12,500
|
|
|
|
8.01
|
|
|
|
10/21/14
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
9.29
|
|
|
|
2/15/15
|
|
David J. Russo
|
|
|
25,000
|
|
|
|
—
|
|
|
|
4.10
|
|
|
|
12/9/12
|
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
4.30
|
|
|
|
7/25/12
|
|
Samuel K. Fisher
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(i) |
|
The following table shows vesting information for the options
that were unexercisable as of December 31, 2006. |
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Shares
|
|
|
John F. Kasel
|
|
|
5/12/07
|
|
|
|
6,250
|
|
|
|
|
5/25/07
|
|
|
|
6,250
|
|
|
|
|
5/25/08
|
|
|
|
6,250
|
|
|
|
|
5/25/09
|
|
|
|
6,250
|
|
Donald L. Foster
|
|
|
5/14/07
|
|
|
|
3,750
|
|
|
|
|
5/14/08
|
|
|
|
3,750
|
|
|
|
|
5/14/09
|
|
|
|
3,750
|
|
|
|
|
10/21/07
|
|
|
|
6,250
|
|
|
|
|
10/21/08
|
|
|
|
6,250
|
|
|
|
|
2/15/07
|
|
|
|
2,500
|
|
|
|
|
2/15/08
|
|
|
|
2,500
|
|
|
|
|
2/15/09
|
|
|
|
2,500
|
|
22
NON-QUALIFIED
DEFERRED COMPENSATION DURING 2006
The following table discloses, for each of the NEOs, Company
contributions and aggregate earnings in 2006 and year end
balances under the Company’s supplemental executive
retirement plan that provides for deferred compensation that is
not tax qualified.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions
in
|
|
|
Earnings in
|
|
|
Balance at
|
|
|
|
2006
|
|
|
2006
|
|
|
Year End
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Name
|
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
Stan L. Hasselbusch
|
|
|
40,710
|
|
|
|
5,420
|
|
|
|
114,032
|
|
John F. Kasel
|
|
|
4,777
|
|
|
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333
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|
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7,006
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Donald L. Foster
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6,101
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305
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6,406
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David J. Russo
|
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7,657
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589
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12,389
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Samuel K. Fisher
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8,613
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719
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15,125
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(1) |
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Amounts represent the 2006 Company contributions to Supplemental
Executive Retirement Plan (“SERP”). The amounts are
included in the Summary Compensation Table. |
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(2) |
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Amounts represent interest earned in 2006. In accordance with
the Plan, the Company applied interest to the benefit amount
using the calendar year’s rate of return of Fidelity’s
Managed Income Portfolio, or a one-year annualized Treasury Bill
interest rate, whichever is higher on the last Friday of each
year. For 2006, these amounts were 4.08% and 4.99% respectively.
The interest rate applied to the benefit in 2006 was 4.99%.
These amounts are not included in the Summary Compensation Table. |
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Eligibility for participation in the Plan is limited to
individuals who comprise a select group of management or highly
compensated employees within the meaning of Section 201(2)
of ERISA. Determining participation in the Plan is solely within
the discretion of the Compensation Committee of the Board. A
participant shall remain a participant only for so long as he
continues in the employ of the Company, or the Compensation
Committee, in its sole discretion determines that the
participant shall no longer be a participant. |
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(3) |
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Amounts represent total SERP balance, as of December 31,
2006. |
SECTION 16(a)
BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company’s directors, officers and persons who
beneficially own more than 10% of the Company’s outstanding
common stock to file initial reports and reports of changes in
ownership with the SEC, and to provide copies of such reports to
the Company. Based solely on a review of copies of reports
furnished to the Company, or written representations that no
reports were required, the Company believes that during 2006 its
executive officers, directors and 10% holders complied with all
filing requirements.
23
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 shareholders and will have an opportunity to make a
statement if they so desire.
Shareholders’ proposals intended to be presented at the
Company’s 2008 annual meeting must be received by the
Company no later than December 31, 2007 to be considered
for inclusion in the Company’s proxy statement and form of
proxy for that meeting. Pursuant to the Company’s By-Laws,
a nomination of a person for election as a director and any
other proposal made by a shareholder shall not be considered at
a shareholders’ meeting unless written notice of the
nomination or proposal has been received by the Company’s
Secretary by the later of (i) the date which is
90 days in advance of the meeting date or (ii), the seventh
calendar day following the first public announcement of the date
of the meeting.
Pittsburgh, Pennsylvania
April 18, 2007
24
ANNUAL MEETING OF STOCKHOLDERS OF
L.B. FOSTER COMPANY
May 23, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
6 Please detach along perforated line and mail in the envelope provided. 6
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR ALL NOMINEES” IN ITEM 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE þ
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Item 1. |
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Election of the following nominees as Directors:
(See Instructions Below) |
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NOMINEES: |
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o
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FOR ALL NOMINEES
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O
O
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Lee B. Foster II
Stan L. Hasselbusch |
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o
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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O
O
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Henry J. Massman IV
G. Thomas McKane |
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O
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Diane B. Owen |
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o
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FOR ALL EXCEPT
(See instructions below)
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O
O
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John W. Puth
William H. Rackoff |
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INSTRUCTION:
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To withhold authority to vote for any
individual nominee(s), mark “FOR ALL EXCEPT” and fill in
the circle next to each nominee you wish to withhold, as
shown here: l
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To change the address on your account, please
check the box at right and indicate your new address
in the address space above. Please note that
changes to the registered name(s) on the account may
not be submitted via this method.
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o
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(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.)
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Signature of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee
or guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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PROXY
L.B. FOSTER COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 23, 2007
The undersigned hereby appoints Lee B. Foster II and Stan L. Hasselbusch, and each or either 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 Company’s headquarters, 415 Holiday Drive,
Pittsburgh, Pennsylvania 15220 on May 23, 2007 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. 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)