Document:

Exhibit 10.20

 

SHORT-TERM INCENTIVES

 

At its August 7, 2002 meeting, the
Compensation Committee of the Board reviewed and agreed to, in principle,
recommendations regarding short-term incentives.  The recommendations were as follows:

 

•                  Adopt an executive target incentive plan with
awards contingent upon an appropriate combination of quantifiable corporate,
business unit and/or division results along with a non-quantifiable element.

•                  Consider setting goals in the following
quantifiable performance areas:

•                  Corporate – ROIC, after-tax profit

•                  Business Unit – New work margin, gross
profit, ROCE

•                  Division – New work margin, gross profit,
ROCE

•                  Use a target incentive worksheet to manage
short-term incentives and document and communicate the program to participants.

 

TARGET INCENTIVE APPROACH

 

Under this approach, a target amount of
incentive compensation is identified for each participant.

•                  This target award is expressed as a percent
of salary.

•                  This amount is not guaranteed.  It reflects what is payable if expected
results are achieved.

•                  Actual awards could be larger or smaller than
targeted amounts based on results.

 

PERFORMANCE GOALS

 

For each quantifiable performance
measure selected, three levels of goals will be defined to determine the amount
of incentive that will be payable (adjusted for weighting).

 

•                  Threshold
– At 70% of “Ambitious but Expected” performance, 25% of target incentives
would be payable.

•                  Ambitious but Expected – At this level of performance, 100% of target incentive values would
be payable.

•                  Clearly Outstanding – At 130% of “Ambitious but Expected” performance, 150% of target
incentive values would be payable.

 

For non-quantifiable performance
measures, e.g., safety, diversity, cooperation among business units,
discretionary judgments will be made from unacceptable to clearly outstanding.

 

The goals will be reviewed each year to make
sure they are appropriate for the coming year and are reflective of current
circumstances and budgets.

 

 

AWARD GUIDELINES

 

Based on competitive practices, we have
developed the following target incentive percentages by level, and the
corresponding mix of corporate, business unit, and/or division measures:

 

	
  Level

  	
   

  	
  Position

  	
   

  	
  Target

  	
   

  	
  Quantifiable

  	
   

  	
  Non–

  Quantifiable

  	
   

  
	
   

  	
   

  	
   

  	
  Corporate

  	
   

  	
  Business
  Unit

  	
   

  	
  Division

  	
   

  	
   

  
	
  42

  	
   

  	
  President / CEO

  	
   

  	
  120

  	
  %

  	
  80

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  20

  	
  %

  
	
  41

  	
   

  	
  Sr. EVP

  	
   

  	
  100

  	
  %

  	
  80

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  20

  	
  %

  
	
  40

  	
   

  	
  EVP

  	
   

  	
  100

  	
  %

  	
  80

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
  Bus. Unit President

  	
   

  	
  100

  	
  %

  	
  50

  	
  %

  	
  30

  	
  %

  	
  —

  	
   

  	
  20

  	
  %

  
	
  32

  	
   

  	
  Sr. VP

  	
   

  	
  50

  	
  %

  	
  80

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
  Bus. Unit EVP*

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  	
  30

  	
  %

  	
  —

  	
   

  	
  20

  	
  %

  
	
  31

  	
   

  	
  VP (Corporate)

  	
   

  	
  35

  	
  %

  	
  80

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
  Bus. Unit SVP

  	
   

  	
  35

  	
  %

  	
  50

  	
  %

  	
  30

  	
  %

  	
  —

  	
   

  	
  20

  	
  %

  
	
  30

  	
   

  	
  Bus. Unit VP

  	
   

  	
  25%
  - 35

  	
  %

  	
  40

  	
  %

  	
  20

  	
  %

  	
  20

  	
  %

  	
  20

  	
  %

  

 

* It is planned that future targets for Business
Development will be set at the same level as Bus. Unit Presidents.

 

ESTIMATED COSTS

 

Targeted incentive awards for meeting
expected performance objectives and maximum incentive awards for meeting
outstanding performance objectives are as follows:

 

•                  Number of executives = approximately 120

•                  Target Incentives = approximately $10,500,000

•                  Maximum Incentives = approximately
$15,750,000

 

MIDDLE MANAGEMENT INCENTIVE PLAN

 

•                  A similar target incentive approach will be
used for middle management positions.

•                  Approximately 230 managers are eligible for
participation.

•                  Target incentive values will typically range
from 10% to 15% of salary.

•                  Total estimated target incentive awards would
equal $3.7 million.

 

2Exhibit 10.21

 

RESTORATION
PLAN

 

At its August 7, 2002
meeting, the Compensation Committee of the Board reviewed and agreed to, in
principle, a recommendation regarding a nonqualified benefit restoration
plan.  The recommendation was as
follows:

 

“Establish
a restoration plan for the executives who are impacted by limits on
tax-qualified defined contribution plans to make up for benefits lost due to
statutory limitations.”

 

The recommended plan provisions are
summarized below:

 

	
  PROVISION

  	
   

  	
  DETAILS

  	
   

  	
  COMMENTS

  
	
  Effective Date

  	
   

  	
  First payroll following
  January 1, 2003

  	
   

  	
   

  
	
  Plan Objective

  	
   

  	
  To restore employer
  matching contributions that would be otherwise limited due to eligible
  participants reaching the compensation and deferral limit caps imposed on
  qualified plan contributions and benefits reductions occurring from
  nondiscrimination test

  	
   

  	
  For government business
  unit executives, this plan also restores benefits lost because bonuses are
  not included in compensation under the qualified plan

  
	
  Eligibility

  	
   

  	
  All approved Executives
  (approximately 120)

  	
   

  	
  Currently approximately 100
  would receive benefits

  
	
  Plan Year

  	
   

  	
  Calendar Year

  	
   

  	
   

  
	
  Eligible Compensation

  	
   

  	
  Annual Base Salary  

  Annual Cash Incentive Awards 

  Retention and Emergence Awards 
  

  

  (inclusive of any amounts that are voluntarily deferred)

  	
   

  	
  For non-government business
  unit executives, this is the same definition of compensation as the qualified
  plan.  For government
  business unit executives, compensation considered for qualified plan excludes
  bonuses

  
	
  Deferral Requirements

  	
   

  	
  Executive must defer at
  least the lesser of 5% (6% for “Government) of qualified plan “eligible
  compensation” or the 402(g) deferral limit ($12,000 in 2003)

  	
   

  	
   

  
	
  Allocation Frequency

  	
   

  	
  Participant accounts will
  be credited beginning with the first payroll period in which limits are
  triggered and each payroll period thereafter

  	
   

  	
  For “government” executives
  not on Washington Group payroll system, it will be necessary to credit
  accounts on an annual basis

  
	
  Years of Service/Vesting

  	
   

  	
  Participants will be
  immediately 100% vested in all amounts credited

  	
   

  	
   

  
	
  Account Crediting Rate

  	
   

  	
  Matching amounts are
  credited with an interest rate equal to Moody’s August long-term corporate
  bond yield average (Aaa, Aa, A, Baa) based on bonds with maturities 20 years
  and above, adjusted annually on a predetermined date

  	
   

  	
  Moody’s long-term corporate
  bond yield average for the month of August was 7.06%

  
	
  Additional Employer Contributions

  	
   

  	
  At the company’s discretion
  additional amounts may be contributed to meet special circumstances

  	
   

  	
  e.g. , an executive hired
  mid-year who has already hit contribution limits with a previous employer

  
	
  Forms of Payment

  	
   

  	
  Lump sum or  

  

  Five-, Ten- or
  Fifteen-year installments (for balances of at least $50,000).  

  

  Election made upon
  participation, may change any time but effective only if made at least 12
  months before retirement, termination, death or disability

  	
   

  	
  Valued at termination

  
	
  Funding

  	
   

  	
  Benefits will not be funded
  and no trust will be established  Individual, notional accounts established and maintained by the
  company (or third party administrator)

  	
   

  	
   

  

 

 

Proposed
Restoration Plan – Estimated Cost

 

	
  Total number of executives*

  	
   

  	
  Approximately 120

  	
   

  
	
  Projected 2002 executive compensation

  	
   

  	
  $

  	
  33,640,000

  	
   

  
	
  Annual cost based on projected 2002
  executive compensation

  	
   

  	
  $

  	
  513,000

  	
   

  
	
  2003 Emergence Bonuses (1 year after
  emergence)

  	
   

  	
  $

  	
  5,533,000

  	
   

  
	
  Additional one-time cost in 2003 Emergence
  Bonuses

  	
   

  	
  $

  	
  268,000

  	
   

  

 

•                  Assumes all executives defer at least the
lesser of 5% (6% for Government)  of  qualified plan “eligible compensation” or the
402(g) deferral limit ($12,000 in 2003).

 

•                  Compensation = Base salary plus target bonus

 

•                  For non-government executives, this is the
same definition of pay as the qualified plan.

 

•                  For government executives, pay considered for
qualified plan does not include bonuses.

 

•                  Benefit Restoration plan restores benefits
lost due to the 401(a)(17) compensation limit ($200,000) and the 402(g)
deferral limit ($11,000).

 

•                  For the government executives, the Benefit
Restoration plan also restores benefits lost because bonuses are not included
in compensation for the qualified plan.

 

•                  We have not considered the potential effects
of limitations due to nondiscrimination testing.

 

2

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