SUBJECT:       Division Management Incentive Compensation Plan
                                                                              
                                                                            

     The following Plan is to be in effect for the calendar year 1996.  It will
be reviewed at the close of that year and will be continued, modified, or
cancelled with respect to succeeding years solely at the discretion of the Stock
Option and Compensation Committee of the PORTEC, Inc. Board of Directors.

 1.  PARTICIPATION

     a.   The President & General Manager and key management employees of each
          division, employed as of January 1 of the year, will, upon recommenda-
          tion by the President & General Manager and subject to approval of the
          President & Chief Executive Officer of PORTEC, Inc., participate in
          the plan for such division.  Persons promoted or employed subsequent
          to January 1 to fill an eligible management position vacancy may be
          included in the division's incentive compensation program on a pro
          rata basis, upon the President & Chief Executive Officer's approval. 
          The incentive compensation payable to such an employee shall be based
          on the number of calendar months during the year the person has held
          that management position.  However, the inclusion of such an employee
          in the program shall not result in a reduction of the Total Target
          Bonus Fund, defined below, for the other participants.

     b.   "Individual Target Bonus Levels" for each eligible position will be
          established as a percentage of actual salary paid during the calendar
          year, or portion of the years determined by date of entry into the
          program, in accordance with the corporate standards relating to the
          position of the participant (Exhibit A attached).  Exceptions to these
          standards require approval of the President & Chief Executive Officer.
          "Individual Maximum Bonus Levels" shall equal double the Individual
          Target Bonus Levels.

 2.  DIVISION TARGET BONUS FUND

     a.   A "Total Target Bonus Fund" will be calculated for each division by
          means of bonus formulas such that if certain targets for Pre-Tax
          Profit and Working Capital to Sales Objectives are satisfactorily
          attained, an amount equal to the sum of the Individual Target Bonus
          Levels for eligible management people in that division will accrue.

     b.   The minimum point below which no bonus fund will be developed relating
          to the Pre-Tax Profit and Working Capital to Sales Objectives is
          called the "threshold" which will generally be established at 70
          percent of the target performance.  Below this level, no bonus will be
          paid.



DIVISION TARGET BONUS FUND (CONTINUED)

     c.   The "Total Maximum Bonus Fund" shall equal twice the Total Target
          Bonus Fund and will generally be established in the range of 130
          percent to 150 percent of the target performance.

     d.   The bonus fund (meaning the total actual bonuses paid) will be limited
          to 8 percent of Pre-Tax Profits, regardless of other calculations.

                               
                                                                            

 3.  GENERAL PERFORMANCE OBJECTIVES

     a.   Shortly after the beginning of each year, the President & Chief
          Executive Officer will consider the approved profit plan, current
          backlog, and invested capital of each division  together with such
          other factors as he deems appropriate to set Pre-Tax Profit and
          Working Capital to Sales Objectives for each Division subject to
          approval of the Board of Directors' Stock Option and Compensation
          Committee.  These targets will normally be determined at the perfor-
          mance level set by the approved business plan for that year.  However,
          the President & Chief Executive Officer may set targets which are
          different than profit plan performance depending on specific circum-
          stances.

     b.   The percentage of such Total Target Bonus Fund for each division
          related to Pre-Tax Profit and Working Capital to Sales Objectives, and
          the objectives established for Pre-Tax Profits and Working Capital to
          Sales are shown in Exhibit B.

 4.  INDIVIDUAL ALLOCATION AND ADJUSTMENT

     a.   Customary practice will be to distribute available bonus funds pro
          rata over the Target Bonus levels of participants.  However, unless a
          participant 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 designee, 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.



INDIVIDUAL ALLOCATION AND ADJUSTMENT (CONTINUED)

     b.   Notwithstanding, the preceding paragraph, the President & General
          Manager can adjust the bonus level of any participant, other than
          himself by a factor of 75 percent to 125 percent to reflect low or
          high personal performance during the year.  The President & General
          Manager's bonus level may be adjusted in the same manner as recom-
          mended and approved by the President & Chief Executive Officer.

          However, such adjustments cannot increase the Total Bonus Fund as
          determined in Paragraph 2 or exceed a participant's Individual Maximum
          Bonus Level.  Available bonus funds will then be distributed pro rata
          over the bonus levels which exclude these adjustments.

     c.   The adjustment recommendations of each President & General Manager
          will be submitted to and will be subject to the final approval of the
          President & Chief Executive Officer of PORTEC, Inc.  Recommendations
          as to the incentive compensation to be paid to General Managers will
          be made by the President & Chief Executive Officer.

                                                                    
                                                                            

          
 5.  PAYMENT

     a.   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 compensation payments will be taken into
          account in the year of payment.  Incentive compensation payments will
          not influence levels of group insurance coverage.

     b.   Total bonus amounts payable for each individual shall be rounded to
          the nearest dollar.

 6.  ACCOUNTING PROCEDURES

     a.   PRE-TAX PROFIT:  This portion of the bonus will be determined by the
          relationship of actual Pre-Tax Profit relative to the Pre-Tax Profit
          target.  In the determination of Pre-Tax Profits, standard accounting
          practices (as shown below and covered in the Accounting Procedures
          Manual of PORTEC, Inc.) currently in effect at PORTEC, Inc. will be
          continued, including practices as to depreciation charges, allocation
          of general office expense, methods of inventory valuation, retirement
          fund provisions, divisional charges, and other operating procedures. 
          Gains or

ACCOUNTING PROCEDURES (CONTINUED)

          losses on the disposition of fixed assets will be excluded except for
          those realized in the ordinary course of business.  Incentive compen-
          sation will be included in the calculation of both target and actual
          Pre-Tax Profit.

     b.   WORKING CAPITAL TO SALES (WC/S):  This portion 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 Decem-
          ber) A/R, A/P, and Inventory will be averaged for the numerator of the
          ratio.

 7.  ADJUSTMENTS TO THE PLAN

     a.   Changes of major significance not contemplated at the time the Pre-Tax
          Profit Objectives are determined for a division, such as but not
          limited to, acquisitions of products or businesses, major expenditures
          for plant or equipment expansion or modernization, and disposition of
          assets or a product line may require a revision in the Pre-Tax Profit
          Objectives for a particular division.  In such cases, the President &
          Chief Executive Officer can adjust the Pre-Tax Profit Objectives,
          subject to the approval of the Board of Directors' Stock Option and
          Compensation Committee, in order to establish a revised basis for the
          computation of incentive compensation.

     b.   In unusual circumstances, it may not be possible to construct a bonus
          formula meeting all of these criteria to provide reasonable incentives
          for division management.  In this event, the President & Chief
          Executive Officer can seek approval of an alternative bonus formula
          from the Stock Option and Compensation Committee of the Board of
          Directors.

                                    EXHIBIT A

                              TARGET BONUS SCHEDULE




                                         TARGET BONUS
                    POSITION            AS % OF SALARY

               GENERAL MANAGER                    25%


               DIRECT REPORTS TO G.M. OF:

               MANUFACTURING,
               ACCOUNTING, 
               SALES, OR
               ENGINEERING(1)                     20%


               ALL OTHER PARTICIPANTS             15%



NOTES:

(1)  ALSO INCLUDES PLANT MANAGERS OF MAJOR REMOTELY LOCATED MANUFACTURING
     FACILITIES.













                                    EXHIBIT A

                              TARGET BONUS SCHEDULE

                            MATERIALS HANDLING GROUP


                                         TARGET BONUS
                    POSITION            AS % OF SALARY

               VICE PRESIDENT & 
               GENERAL MANAGER                    30%


               DIRECT REPORTS TO G.M. OF:

               MANUFACTURING,
               ACCOUNTING, 
               SALES, OR
               ENGINEERING(1)                     20%


               ALL OTHER PARTICIPANTS             15%









NOTES:

(1)  ALSO INCLUDES PLANT MANAGERS OF MAJOR REMOTELY LOCATED MANUFACTURING
     FACILITIES.

                                                               
                                                                            












                                    EXHIBIT B

                        1996 BONUS PERFORMANCE OBJECTIVES




DIVISION:                                



        CATEGORY               WEIGHT      THRESHOLD      TARGET      MAXIMUM 
                                           

        PRE-TAX PROFITS
                                          $           $            $         

        WORKING CAPITAL 
        TO SALES

                                                                             




     TOTAL               100%  





                                                      

                             DISTRIBUTED ONLY TO THE

                               APPLICABLE DIVISION