SUBJECT:       Key Management Incentive Compensation Plan
                                                                                
                                                    

 1.  The officers and other key executive employees entitled to participate in
     the Plan for each calendar year and the Target Bonus levels for each
     position shall be recommended by the President and Chief Executive Officer
     and approved by the Stock Option and Compensation Committee of the Board of
     Directors, preferably prior to the beginning of such calendar year.

     Customary practice will be to distribute available bonus funds pro rata
     over the Target Bonus levels of participants.  However, unless a partici-
     pant is actively at work for the Company on December 31, or retires (within
     the meaning of the Company's plan), becomes disabled, or dies during the
     operating year, no incentive compensation shall be payable to him.  If any
     participant shall retire, become disabled, or die during the year, the
     incentive compensation for such year payable to him, his estate or designe-
     e, shall be based on the number of months during the year he was in the
     active employ of the Company.  Incentive compensation that would have been
     payable to participants had they remained in the employ of the Company
     during the full calendar year, but not payable to them under the foregoing
     provisions, shall not be used to increase the incentive compensation of the
     other participants.

 2.  "Target Bonus" and "Maximum Bonus" levels for each eligible position shall
     be established by multiplying the applicable percentages shown in Exhibit A
     by the participant's base salary for the calendar year.  Maximum Bonus
     amounts shall be converted to earned bonus amounts by the application of a
     Corporate Bonus Percentage.  This percentage will be determined as de-
     scribed in the following paragraphs.

 3.  A predetermined percent of the Corporate Bonus Percentage shall be deter-
     mined by actual financial performance compared to the Profit Plan.  This
     quantitative portion of the bonus will include two factors:

     A.   PRE-TAX PROFIT:  A predetermined percent of the bonus will be deter-
          mined by the relationship of actual Pre-Tax Profit relative to Pre-Tax
          Profit in the approved business plan for the year.

          Pre-Tax Profit for this purpose is income before provision for taxes
          on income, and before:

         (i)     interest on long-term debt (debt due after one year);

        (ii)     profits and losses derived from the sale or other disposition
                 of property other than in the ordinary course of business;



       (iii)     income and all charges against income from or on account of the
                 disposal or permanent termination of the operations of any
                 plant, division, operating unit, or significant segment there-
                 of, a significant product line of the company in its entirety
                 or substantially in its entirety;

        (iv)     income and all charges against income from or on the account of
                 any unbudgeted expenses associated with: start-up, acquisition,
                 or major capital expansion of a plant, division, operating
                 unit, or significant segment thereof, or a significant product
                 line of the company in its entirety or substantially in its
                 entirety; and
                                                                        
               

         (v)     translation gains or losses due to currency changes.

       B.   WORKING CAPITAL TO SALES (WC/S):  A predetermined percent of the
            bonus will be determined by the relationship of the actual WC/S
            ratio relative to the Plan ratio for that year.  The WC/S ratio for
            this purpose is defined as:

                                     Average (A/R + Inventory - A/P)
            Working Capital to Sales  =
                                              Gross Sales

            Where: A/R = Net Accounts Receivable Trade balance at month-end.

                   INVENTORY = Net Inventory balance at month-end.

                   A/P = Net Accounts Payable Trade & Unvouchered balance at
                            month-end.

                   GROSS SALES = Gross sales for the year.

            In the determination of these items, standard accounting practices
            as shown in the current Accounting Procedures Manual of Portec, Inc.
            will be continued.  Twelve month-end balances for (January through
            December) A/R, A/P, and Inventory will be averaged for the numerator
            of the ratio.

 4.    A predetermined percent of the Corporate Bonus Percentage will be deter-
       mined by the accomplishment of non-financial objectives of Key Management
       Bonus participants.  The factor for this portion of the bonus will depend
       upon a review of planned and unplanned non-financial events which oc-
       curred during the year.  The Chairman or Chief Executive Officer will
       make recommendations to the Stock Option and Compensation Committee for
       this portion of the bonus.



 5.    In addition to the aggregate of bonus amounts payable to officers, the
       Stock  Option and Compensation Committee may approve an amount payable
       for key executive employees other than officers as identified by the
       President & Chief Executive Officer.  This portion of the Key Management
       Incentive Compensation Plan (President's Key Executive Fund) may equal an
       amount based on a Maximum Bonus percentage of 30% of salaries of such
       individuals as of the beginning of the year.  The method of calculating
       the Key Executive Fund is not necessarily indicative of the bonus amount
       payable to any individual participating in the Fund.

 6.    The bonus amount payable to any individual is subject to judgmental
       variation by the President & Chief Executive Officer, but such variation
       shall not result in increasing the calculated total bonus fund or to
       exceed Maximum Bonus for that position.  At the President's & Chief
       Executive Officer's discretion, these funds may also be used for discre-
       tionary awards to other employees.  The Stock Option and Compensation
       Committee shall approve the total bonus amount to be paid under the
       President's Key Executive Fund.

                                                  

 7.    Payment of incentive compensation for the year will not be made until
       after the completion of the year-end Company audit by the outside Public
       Accountants.  Payment should generally be made not later than February 28
       of the next succeeding year.  However, the President & Chief Executive
       Officer may elect to pay 80% of the estimated bonus amounts prior to
       December 31, with the remainder of the bonus amounts paid after the year-
       end audit.  For the purpose of pension plan computations and for making
       deductions for withholding and social security taxes, incentive compensa-
       tion payments will be taken into account in the year of payment.  Incen-
       tive compensation payments will not influence levels of group insurance
       coverage.

 8.    All determinations of the Board or any Committee thereof, made under the
       Plan, shall be final, conclusive, and binding upon all persons partici-
       pating in the plan; and in making such determination the Board, or any
       such Committee, may rely and shall be fully protected in relying, upon
       any statements prepared or reviewed by the independent accountants
       examining the books of account of the Corporation.

 9.    The Board reserves the right at any time and from time to time to amend
       or terminate the Plan, provided, however, that no such amendment or
       termination shall be made after the beginning of any calendar year which
       shall adversely  affect the rights under the Plan of any officer or any
       other employee as theretofore determined, but it is expressly understood
       and agreed that nothing in the Plan shall in any manner prejudice or
       adversely affect the right of the Corporation at any time to terminate
       the employment of any officer or other employee.

                                    EXHIBIT A

                   TARGET AND MAXIMUM BONUS SALARY PERCENTAGES




                                     TARGET BONUS        MAXIMUM BONUS
POSITION                              PERCENTAGE          PERCENTAGE  

PRESIDENT AND CHIEF EXECUTIVE OFFICER     50                  100          
                                          
CHIEF OPERATING OFFICER                   40                   80

SR. VICE PRESIDENT                        35                   70     

VICE PRESIDENT                            30                   60

CHAIRMAN OF THE BOARD                     25                   50

PRESIDENT'S KEY EXEC. FUND PARTICIPANTS   15                   30

ALL OTHER PARTICIPANTS                     5                   10


                                    EXHIBIT B

                           CORPORATE BONUS PERCENTAGE

                                                


 I.    PRE-TAX PROFIT OBJECTIVE PORTION (75% WEIGHTING)

                                                      EARNED % OF
                 % ACHIEVEMENT                        TARGET BONUS

                 70% & BELOW                               0.0%

                 100%                                     75.0%

                 130% & ABOVE                            150.0%

II.    WORKING CAPITAL/SALES PORTION (25% WEIGHTING)

                                                 EARNED % OF
                 % ACHIEVEMENT                   TARGET BONUS

                 70% & BELOW                          0.0%

                 100%                                25.0%

                 130% & ABOVE                        50.0%

III
  .    NON-FINANCIAL PORTION (0% WEIGHTING)

                                                 EARNED % OF
                 % ACHIEVEMENT                  TARGET BONUS

       THIS PERCENTAGE WILL BE DETERMINED                  0.0%
       BY THE STOCK OPTION AND COMPENSATION                TO
       COMMITTEE AFTER RECOMMENDATIONS BY THE              0.0%
       CHAIRMAN OR CHIEF EXECUTIVE OFFICER.

IV.    DETERMINATION OF CORPORATE BONUS PERCENTAGE

       LEVELS OF PROFIT GOAL ACHIEVEMENT AND WORKING CAPITAL MANAGEMENT RETURN
       BETWEEN THE AMOUNTS SHOWN ABOVE WILL EARN BONUSES PROPORTIONAL TO THE
       AMOUNTS ACTUALLY SHOWN, I.E. THE AMOUNTS WILL BE INTERPOLATED FROM THE
       TABLES ABOVE.

       THE CORPORATE EARNED BONUS PERCENTAGE WILL BE THE SUM OF THE EARNED
       PERCENTAGES DERIVED FROM TABLES I, II, AND III.

                                    EXHIBIT C

                                PARTICIPANT LIST




                                    OFFICERS 


       PARTICIPANT'S NAME       POSITION TITLE

       MICHAEL T. YONKER        PRESIDENT & CHIEF EXECUTIVE OFFICER
         
       
       NANCY A. KINDL           VICE PRESIDENT & TREASURER

       ALBERT FRIED             CHAIRMAN OF THE BOARD




                  PRESIDENT'S KEY EXECUTIVE FUND PARTICIPANTS 


       PARTICIPANT'S NAME       POSITION TITLE

       PATRICIA A. RICCIO       EMPLOYEE BENEFITS MANAGER



                             ALL OTHER PARTICIPANTS

       PARTICIPANT'S NAME       POSITION TITLE

       D. MICHAEL DUTLER        TAX/GENERAL ACCOUNTANT

       CAROLINA D. GURSKI       BENEFITS ADMINISTRATOR

       JOHN W. KERR             ACCOUNTANT

       SANDRA J. OZIER          ADMINISTRATIVE SECRETARY

       MELINDA M. WARD          PAYROLL/TAX ACCOUNTANT


                                    EXHIBIT D

                        1996 BONUS PERFORMANCE OBJECTIVES



        CATEGORY               WEIGHT      THRESHOLD      TARGET      MAXIMUM 
                                           

        PRE-TAX PROFITS
                                 75       $           $            $         
                                                       
        WORKING CAPITAL 
        TO SALES
                                                                
                                 25                                          

        NON-FINANCIAL


                                  0   

                                                                             
                                                    

     TOTAL                     100%