AEGION CORPORATON MANAGEMENT ANNUAL INCENTIVE PLAN

This Management Annual Incentive Plan (the “Plan”) of Aegion Corporation (the “Company”) is effective as of the 1st day of January, 2013.

The purpose of this Plan is to enhance business performance by motivating and rewarding executive and management employees for the achievement of incentive goals structured to achieve desired corporate results.

A committee comprised of the Company’s Chief Executive Officer, General Counsel and Chief Administrative Officer, Chief Financial Officer and Vice President – Human Resources (together, the “Plan Committee”), shall designate the employees of the Company and its subsidiaries who are to be participants (the “Participants”) in the Plan for the applicable fiscal year (the “Plan Year”).  Except where prohibited by law, as a condition to participation in the Plan and the receipt of any payment hereunder, Participants shall be required to sign any confidentiality, non-solicitation and/or non-competition agreement and/or acknowledgement of the Company’s right to recoup  any incentive compensation required by the Company.

The Plan Committee shall establish an incentive award goal (a “Goal”) for each Participant that shall be expressed as a percentage of such Participant’s annual base salary.  Participant Goals shall be reviewed and approved by the Plan Committee on an annual basis.  The Compensation Committee shall approve Goals of all executive officers of the Company.  Notwithstanding anything herein to the contrary, with respect to individuals covered by the Company’s Executive Performance Plan, the terms of such plan shall override any inconsistent terms contained herein, and no amount shall be payable hereunder in excess of the amount authorized by such Executive Performance Plan.

Each award under the Plan shall be based upon total Company performance for the Plan Year, subject to the negative discretion of the Compensation Committee based upon other subjective performance factors.  Total Company performance shall be measured based on the actual consolidated Company Net Income achieved (“Actual Net Income”) as compared against the targeted consolidated Company Net Income (“Net Income Target”) for the Plan Year, as approved by the Board of Directors of the Company.  Goal awards shall be earned based on an individual Participant’s performance during the Plan Year, as determined by the individual Participant’s achievement of certain measurable business objectives (“MBOs”) assigned to such Participant.

 

A select number of Participants who are employees of a business unit may participate in both this Plan and the plan for business unit employees, with a total award based in part on performance in this Plan and in part on performance under the plan for business unit employees.

For purposes of this Plan, “Net Income” shall be defined as “net income before extraordinary items” of the Company for the Plan Year, which shall mean the consolidated net income of the Company during the fiscal year, as determined by the Plan Committee in conformity with accounting principles generally accepted in the United States of America and contained in financial statements that are subject to an audit report of the Company's independent public accounting firm, but excluding:

 

(i)

losses associated with the write-down of assets of a subsidiary, business unit or division that has been designated by the Board of Directors as a discontinued business operation or to be liquidated;

 

(ii)

gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof;

 

(iii)

gains or losses from the disposition of material capital assets (other than in a transaction described in subsection (ii)) or the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees;

 

(iv)

losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired;

 

(v)

gains or losses from material property casualty occurrences or condemnation awards taking into account the proceeds paid by insurance companies and other third parties in connection with the casualty or condemnation;

 

(vi)

any other material income or loss item the realization of which is not directly attributable to the actions of current senior management of the Company;

 

(vii)

any income statement effect resulting from a change in generally accepted accounting principles, except to the extent the effect of such a change is already reflected in the target Net Income amount;

 

(viii)

the income taxes (benefits) of any of the above-designated gains or losses; and

 

(ix)

restructuring charges and acquisition related transaction costs.

The Compensation Committee shall have final authority with respect to any determination by the Plan Committee regarding the definition of “Net Income” and, in exercising such authority, may consult with the Company’s independent auditor and/or Audit Committee as it deems necessary and advisable.

 

The Plan shall be funded based on the financial performance of the Company as a whole (such funding pool shall be referred to as the “Consolidated Company Financial Performance Pool”).   At the outset of each Plan Year, the Compensation Committee shall determine the Net Income Target for the Plan Year and the target funding amount (the “Company Target”) for the Consolidated Company Financial Performance Pool.  The actual amount funded to the Consolidated Company Financial Performance Pool shall be determined upon calculation of Actual Net Income after the end of the Plan Year, subject to any deletions or additions required pursuant to Section E hereof.

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If Actual Net Income equals the Net Income Target, the Consolidated Company Financial Performance Pool shall be equal to the Company Target, subject to the additional terms specified in Exhibit A or B, as applicable.

 

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If Actual Net Income exceeds or falls below the Net Income Target, the Consolidated Company Financial Performance Pool shall be determined in accordance with the chart in Exhibit A or B, as applicable (using interpolation for Actual Net Income levels as specified therein), and subject to the additional terms specified therein.

 

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If Actual Net Income is less than the threshold percentage of the Net Income Target specified in the chart in Exhibit A or B, as applicable, no amount shall be funded to the Consolidated Company Financial Performance Pool.

The maximum funding amount for the Consolidated Company Financial Performance Pool shall be 200% of the Company Target.  In all events, the Compensation Committee, subject to any required approval of the Board of Directors, shall have the ability and authority to increase or decrease the amount of the Consolidated Company Financial Performance Pool calculated in accordance with the provisions of this Plan to reflect any extraordinary or unforeseen events or occurrences during the Plan Year.

The Consolidated Company Financial Performance Pool shall be awarded to Participants subject to available pool funding.   Except as otherwise provided in Section I below, a Participant must be an employee in good standing at the time the award is paid (that is, the Participant must be an active employee not on a performance improvement plan in order to be eligible for an award from this pool).

Individual performance shall be measured by such Participant’s achievement of designated MBOs for the Plan Year.  The level of achievement of a Participant’s individual MBOs shall be determined by such participant’s direct supervisor.  All awards are subject to pool funding as set forth above.

Awards for a Plan Year are annual and shall be awarded by March 15 of the succeeding year.  Except as otherwise provided below, Participants who are not employed on the payment date shall not be eligible to receive any payment.  Participants must be employed as of October 1 in a Plan Year to be eligible to participate in the Plan for that Plan Year.  A Participant who is employed after January 1 but prior to October 1 of a Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was employed during the Plan Year (based on the number of days of employment out of 365).  A Participant who takes an approved leave of absence for more than 30 days during the Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was actively employed as a Participant during the Plan Year (based on the number of days out of 365).

 

A Participant who Retires (as defined below) during a Plan Year (or before an amount for a Plan Year becomes payable) shall be eligible to receive an award prorated for the amount of time the Participant was employed as a Participant during such Plan Year (based on the number of days of employment out of 365).  For these purposes, “Retires” means that the Participant voluntarily terminates his or her employment by written notice to the Company during the Plan Year after: (i) attaining the age of 55and completing at least 10 years of service for the Company; (ii) attaining the age of 60 and completing at least five years of service for the Company; or (iii) attaining the age of 65.

The Beneficiary (as defined below) of a Participant who dies during a Plan Year shall be eligible to receive an award prorated for the amount of time the individual was a Participant during such Plan Year prior to his or her death (based on the number of days of employment out of 365).  The amount of such award shall be based on the Participant’s annualized base salary and the target award level (i.e., without regard to actual performance).  Payment shall be made within 30 days of the date of death.  For these purposes, “Beneficiary” means the Participant’s surviving spouse, and if the Participant leaves no surviving spouse, the Participant’s estate.

A Participant who incurs a Disability (as defined below) during a Plan Year shall be eligible to receive an award prorated for the amount of time the individual was a Participant during such Plan Year prior to his or her Disability (based on the number of days of active employment out of 365).  The amount of such award shall be based on the Participant’s annualized base salary and the target award level (i.e., without regard to actual performance).  Payment shall be made within 30 days of the date of the Disability.  For these purposes, “Disability” means that the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

In the event of a Change in Control (as defined below), outstanding awards shall become payable, based on the annualized base salary of each Participant, prorated based on the days in the Plan Year prior to the Change in Control, using the greater of the actual performance at the date of the Change in Control or the target award level.  Payment shall be made within 30 days of the date of the Change in Control.  For these purposes, “Change in Control” means: (i) the acquisition by any “person” or “group” (as defined pursuant to Section 13(d) under the Securities Exchange Act of 1934) of “beneficial ownership” (as defined in Rule 13d-3 under said Act) of in excess of 30% of the combined voting power of the outstanding voting securities (the “Voting Securities”) of the Company entitled to vote generally in the election of directors; and/or (ii) the replacement of 50% or more of the members of the Company’s Board of Directors (excluding, for purposes of such calculation, the Chairman of the Board) over a one-year period from the directors who constituted such Board at the beginning of such period, where such replacement shall not have been approved by a vote including at least a majority of the directors who were members of the Board at the beginning of such one-year period or whose election as members of the Board was previously so approved; and/or (iii) the consummation of a merger, statutory share exchange or consolidation involving the Company or sale or other disposition of all or substantially all of the assets of the Company, unless following such transaction: (a) all or substantially all of the individuals and entities who were the “beneficial owners” (as hereinabove defined), respectively, of the outstanding Voting Securities immediately prior to such transaction “beneficially owned”, directly or indirectly, more than 30% of the combined voting power of the then outstanding Voting Securities of the corporation resulting from such transaction in substantially the same proportion as their ownership immediately prior to such transaction of the outstanding Voting Securities of the Company, (b) no “person” or “group” (as hereinabove defined) “beneficially owns”, directly or indirectly, 30% or more of the combined voting power of the then outstanding Voting Securities of such corporation except to the extent that such ownership existed prior to such transaction and (c) at least a majority of the members of the board of directors resulting from such transaction were members of the Company’s Board of Directors immediately prior to such transaction or were nominated by at least a majority of the members of the Company’s Board of Directors at the time of the execution of the initial agreement for such transaction, or by the action of the Company’s Board of Directors providing for such transaction; and/or  (iv) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

Any accrued bonus amount attributable to (1) employees on performance improvement plans or (2) employees who are no longer eligible to receive bonus awards due to their employment ending prior to the bonus award payment date, shall be reallocated to other eligible bonus award.

The maximum Award payable under this Plan to any Participant shall be 200% of such Participant’s Goal.

The Award payable to a Participant whose employment position changes during a Plan Year shall be adjusted to reflect the prorated annualized base salary and award opportunity percentage based on the number of days the Participant was employed in each eligible position during the Plan Year out of 365.

For a Participant who receives a promotion during the Plan Year, and such promotion includes an increase in the incentive award target opportunity percentage, the award will be prorated by utilizing the respective incentive target award opportunity percentage for each time period during the calendar year. Both incentive award target percentages will be calculated by utilizing the annualized base salary as of December 15th for each period of time and adding the numbers together.

This Plan is a statement of intent and is not a contract.  It is not a guarantee of employment, and each Participant’s employment with the company remains “at will” to the maximum extent permitted by applicable law.  This Plan may be modified, suspended or terminated at any time, and all awards are at the discretion of the Company’s Board of Directors or the Compensation Committee.  This Plan may be changed during a Plan Year without any obligation of the Company to pay for the elapsed part of the Plan Year in the manner described in the Plan.   The decisions of Company management, the Plan Committee, the Board of Directors and/or the Compensation Committee in administering and interpreting the Plan are final and binding on all persons.  Information regarding an employee’s annual incentive payment will be part of the employee’s personnel record.