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 calen-
      dar year.

      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.

 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 described in the following paragraphs.

 3.   A  predetermined  percent of  the  Corporate Bonus  Percentage  shall be
      determined 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
            determined 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 disposi-
                    tion  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 thereof, 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 en-
                    tirety 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 prac-
              tices 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
        determined 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 occurred  during the year.  The Chairman  or Chief Execu-
        tive Officer will make recommendations to the Stock Option and Compen-
        sation 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 Manage-
        ment 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 varia-
        tion 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
        discretionary awards to other employees.  The Stock Option and Compen-
        sation 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  compensation payments  will be  taken into
        account  in the year of payment.  Incentive 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
        participating 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              PERCENT
--------                                    ------------             ---------
AGE  

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
        ------------------            --------------

        CAROLINA D. GURSKI            BENEFITS ADMINISTRATOR

        SANDRA J. OZIER               ADMINISTRATIVE SECRETARY

        KELLY M. GOODMAN              ACCOUNTANT

        MELINDA M. WARD               PAYROLL/TAX ACCOUNTANT


                                   EXHIBIT D

                       1997 BONUS PERFORMANCE OBJECTIVES



          CATEGORY             WEIGHT       THRESHOLD       TARGET       MAXIMUM
          

          Pre-Tax Profits        75         $               $            $  
                                

          Working Capital 
          to Sales               25     
 

         Non-Financial            0    
                               


     TOTAL                  100%