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EXHIBIT 10.7
MARCH 1996
REVISED
POWELL INDUSTRIES, INC.
EXECUTIVE SEVERANCE PROTECTION PLAN
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of Powell Industries,
Inc. (the "Company") has determined that, in the event the Company becomes
subject to any proposed or threatened Change of Control (as defined in the
Plan), the Board and the Company must be able to rely on the continued advice
and support of key management personnel without concern that such personnel
might be distracted by personal financial concerns and leave the employ of the
Company;
WHEREAS, the Board has determined that a formal executive severance
protection plan should be adopted to insure stability and continuity of
employment of key management personnel in the event of a proposed or threatened
Change of Control;
WHEREAS, it is intended that this Plan set forth the terms and
conditions upon which benefits are payable to certain executives under this
Plan; and
WHEREAS, this Plan constitutes an employee welfare benefit plan, as
that term is defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974 ("ERISA"); and
WHEREAS, it is intended that this Plan shall comply with the
requirements of Section 402 of ERISA that an employee benefit plan be
maintained pursuant to a written instrument;
NOW, THEREFORE, the Company has adopted this Plan which provides as
follows:
1. NAME OF PLAN:
Powell Industries, Inc. Executive Severance Protection Plan
(the "Plan").
2. NAME OF ADMINISTRATOR AND PLAN FIDUCIARY:
For purposes of Section 3(16) of ERISA, the Company is
administrator of this Plan. Unless the Board of Directors of the Company
designates a different committee, the Compensation Committee of the Company
(the "Committee") is designated Plan Administrator and Fiduciary of this Plan
and is charged with the general administration of this Plan.
3. FUNDING POLICY:
This Plan is not separately funded by the Company, and all
Plan benefits will be paid, as needed, from the general assets of the Company.
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4. PLAN OPERATION AND POWERS OF THE COMMITTEE AS PLAN ADMINISTRATOR AND
FIDUCIARY:
A. THE COMMITTEE. The Committee is authorized in its sole
discretion to make all rules, regulations and procedures it deems necessary or
appropriate for administering this Plan within policies established by the
Board of Directors of the Company, to construe its provisions, to correct its
defects, and supply any omissions or reconcile any inconsistencies which may
appear in this Plan, to determine all questions of eligibility and entitlement
to benefits and resolve all controversies. The Board of Directors of the
Company may allocate discretionary responsibilities to the Committee as
Fiduciary provided it is in writing. The Board of Directors of the Company may
in writing permit the Committee as Fiduciary to designate other persons to
carry out discretionary responsibilities.
B. CLAIMS. If an Executive believes any benefit under this Plan
has been incorrectly calculated or denied, he or she may file a claim with the
Committee. The Committee shall follow claims procedures substantially
identical to the claims procedures in the Powell Industries, Inc. Employees
Incentive Savings Plan.
C. STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The
Committee has full and absolute discretion in the exercise of its authority
under this Plan, including without limitation, the authority to determine any
person's right to benefits under this Plan, the correct amount and form of any
benefits, the authority to decide any appeal, the authority to review and
correct the actions of any prior administrative committee, and all of the
rights, powers, and authorities specified in this Section 4 and this Plan.
Notwithstanding any provision of law or any explicit or implicit provision of
this document, any action taken or ruling or decision made by the Committee in
the exercise of any of its powers and authorities under this Plan, shall be
final and conclusive as to all parties, regardless of whether the Committee or
one or more of its members may have an actual or potential conflict of interest
with respect to the subject matter of the action, ruling, or decision. Thus,
no final action, ruling, or decision of the Committee shall be subject to de
novo review in any judicial proceeding and no final action, ruling, or decision
of the Committee may be set aside unless it is held to have been arbitrary and
capricious by a final judgment of a court having jurisdiction with respect to
the issue.
5. ELIGIBILITY FOR PLAN BENEFITS:
The Board of Directors shall designate the executives eligible
to receive benefits under this Plan (the "Executives") in the event of that
Executive's termination of employment following a Change of Control as
described in this Plan, and the Board shall designate whether each such
Executive is eligible for benefits under Executive Benefit Group 1 or Group 2.
The Board may change the benefit classification of an Executive, or add or
delete names from the list, from time to time, prior to a Change of Control.
The initial list of Executives and the Group designation of each is contained
on Attachment A hereto.
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6. PLAN BENEFITS:
The benefits payable under this Plan shall be calculated as follows:
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BENEFITS INVOLUNTARY TERMINATION TERMINATION FOR CAUSE
Base Salary Group 1: 3 times the current annual Group 1 and 2: None
base salary
Group 2: 2 times the current annual
base salary
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Annual Incentive Under Group 1: 3 times the maximum incentive Group 1 and 2: None.
Executive Incentive Plan opportunity for the current year
Group 2: 2 times the maximum incentive
opportunity for the current year
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Employee Benefits Group 1: Continuation of medical, Group 1 and 2:
dental, and life benefits for executive
and dependents for up to 3 years.*
Executive would pay normal group rates None
for this coverage.
* These benefits cease Group 2: Continuation of medical,
at the earliest to occur dental, and life benefits for executive
of (i) maximum number of and dependents for up to 2 years.* None
years indicated or Executive would pay normal group rates
(ii) the Executive is for this coverage.
covered under another
plan. Group 1 and 2: COBRA coverage period,
if applicable, begins after the
benefits continuation period has ended.
Group 1 and 2: COBRA coverage
begins at termination unless
Executive is terminated for
gross misconduct.
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BENEFITS PROVIDED BY OTHER PLANS
Qualified Retirement Group 1 and 2: All vested balances, (as Group 1 and 2: All vested
Plans required by law). balances, (as required by law).
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Restricted Stock and Group 1 and 2: Immediate vesting at Group 1 and 2: Immediate vesting
Stock Options time of change of control per Option at time of change of control per
Plan. Option Plan.
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Benefits are not payable under this Plan if an Executive's employment
is terminated following the sale or disposition of any subsidiary of the
Company unless that transaction is in conjunction with a Change of Control of
Powell Industries, Inc.
If an Executive dies during the Covered Period after his Involuntary
Termination, but before the payment or provision of all benefits to which that
Executive has become entitled, then (a) cash payments due under Section 7 shall
be made in accordance with the terms thereof, and (2) coverage for the
Executive's dependents shall continue for the applicable term provided in this
Section 6.
7. PLAN PAYMENTS:
Payments from this Plan will consist of the payment and
provision of severance benefits by the Company out of its general assets in
accordance with the terms of this Plan. Cash payments due will be paid to the
Executive or his estate within 90 days of the event causing the benefit payment
under this Plan.
8. PLAN AMENDMENT AND/OR TERMINATION:
This Plan may be amended at the sole discretion of the Company
by appropriate action by the Board of Directors of the Company, provided that
this Plan may not be amended following a "Change of Control" which has occurred
so as to reduce any benefits to which an Executive might become entitled under
this Plan. Notwithstanding the preceding sentence, no amendment which
adversely affects the benefits which would be payable to an Executive hereunder
shall be effective if adopted within one year of an actual Change of Control.
9. COORDINATION WITH EMPLOYMENT AND OTHER AGREEMENTS:
The severance benefits provided under this Plan to an
Executive of the Company shall be coordinated with any severance benefits
provided to such officer under any employment contract or other agreements
between the Company and its consolidated subsidiaries and such Executive, such
that for each item of severance benefit described herein, the Executive shall
be entitled to the most favorable of the benefits provided by this Plan and by
the employment contract or other agreement, but the Company shall not be
required under this Plan to pay or provide twice any item of severance benefit
that is covered both by this Plan and by such employment contract or other
agreement. Split dollar agreements, if any, between the Company and an
Executive shall operate according to their terms and shall not be affected by,
or affect, payments due under this Plan.
10. DEFINITIONS:
The following definitions shall apply for the purposes of this Plan:
"CHANGE OF CONTROL" of Powell Industries, Inc. means the date of
occurrence of one or more of the following:
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(a) Any "person", including a "syndication" or "group" as
those terms are used in Section 13(d)(3) of the Securities Exchange
Act of 1934, becomes, after the effective date of this Plan, the
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities which ordinarily possess the power to vote
in the election of the Board of Directors without the happening of any
precondition or contingency ("Voting Securities");
(b) The Company is merged or consolidated with another
corporation and immediately after giving effect to the merger or
consolidation either (x) less than 80% of the outstanding Voting
Securities of the surviving or resulting entity are then beneficially
owned in the aggregate by the stockholders of the Company immediately
prior to the merger or consolidation, or if a record date has been set
to determine the stockholders of the Company entitled to vote on the
merger or consolidation, the stockholders of the Company as of the
record date, or (y) the Board of Directors, or similar governing body,
of the surviving or resulting entity does not have as a majority of
its members the persons specified in clause (c)(x) and (y) below;
(c) If at any time the following do not constitute a
majority of the Board of Directors of the Company (or any successor
entity referred to in clause (b) above): (x) persons who are directors
of the Company on December 31, 1995; and (y) persons who, prior to
their election as a director of the Company (or successors entity if
applicable) were nominated, recommended or endorsed by the Board of
Directors of the Company;
(d) The Company transfers substantially all of its assets
to another corporation which is a less than 80% owned subsidiary of
the Company.
"COVERED PERIOD" means three years from the date of occurrence of a
Change of Control.
"INVOLUNTARY TERMINATION" means, within the Covered Period,
termination of an Executive's employment following:
a) an Executive's resignation, for any reason, which is requested
by the Company;
b) a significant change or reduction in job duties and
responsibilities without the Executive's consent including,
but not limited to his position title, work location,
responsibility, or authority;
c) reduction in his base salary, incentive award opportunity,
employee benefits, or perquisites; and
d) resignation by the Executive for "good reason". "Good reason"
means the failure of the Company to provide a comparable
position and compensation.
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"TERMINATION FOR CAUSE" means a termination of the Executive's
employment because of (a) the conviction of the Executive by a state or federal
court of competent jurisdiction of any felony, (b) the conviction of the
Executive by a state or federal court of competent jurisdiction for
embezzlement or misappropriation of funds of the Company or its consolidated
subsidiaries, (c) gross negligence or willful misconduct of the Executive which
causes a material monetary injury to the Company or its consolidated
subsidiaries, or (d) the Executive's continued failure to substantially perform
material stated duties of his positions with the Company and its consolidated
subsidiaries.
11. GENERAL PROVISIONS:
A. NO ASSIGNMENT OF PROPERTY RIGHTS. Unless it is specifically
required by applicable law, the interest or property rights of any Executive in
this Plan or in any severance benefit to be paid pursuant to its terms, shall
not be assigned (either at law or in equity), alienated, anticipated or subject
to attachment, bankruptcy, garnishment, levy, execution or other legal or
equitable process. Any act in violation of this section shall be void.
B. NO EMPLOYMENT CONTRACT. This Plan is not an employment
contract and nothing contained in it shall prohibit the adjustment from time to
time of the terms of employment of any Executive, including his current
compensation and fringe benefits to which he may otherwise be entitled. No
provision in this Plan shall be construed to affect in any way the Company's
right to discharge any Executive at any time and for any reason, which right is
hereby reserved, subject to any separate contract with such Executive.
C. INTERPRETATION. The interpretation, performance and
enforcement of this Plan shall be governed by ERISA and, to the extent not
preempted, by the laws of the State of Texas, without regard to Texas rules
concerning conflicts of laws. Except when otherwise indicated by the context,
the use of masculine terminology in this Plan shall include the feminine.
D. TAX WITHHOLDING. If any Federal or state tax withholding is
required with respect to an Executive's severance benefit under this Plan, the
Committee shall make appropriate arrangements to withhold the required amount
from the Executive's benefit payment under this Plan.
E. NO OFFSET REQUIRED. An Executive shall not be required to
offset benefits received under this Plan by any compensation received from
future employers.
F. GROSS UP. Benefits paid to an Executive pursuant to this Plan
shall be "grossed-up" by the Company to cover (1) any federal excise tax due by
that Executive on account of these benefit payments and (2) any federal income
and employment taxes due on the federal excise tax described in this Section
11.F.
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G. REIMBURSEMENT FOR LEGAL FEES. The Company shall reimburse an
Executive for legal fees incurred by an Executive to enforce the terms of this
Plan in an amount which does not exceed the following maximums:
Executive in Group 1 $150,000
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Executive in Group 2 $100,000
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Reimbursement shall be made by the Company to the Executive
within 30 days of receipt by the Company of a statement for such legal fees
submitted by the Executive.
12. EXECUTION.
To record the adoption of this Executive Severance Protection
Plan as set forth in this document, effective as of ______________, 1996, the
effective date for this Plan as approved by its Board, Powell Industries, Inc.
has caused its authorized representative to affix his name hereto.
POWELL INDUSTRIES, INC.
By
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Date
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ATTACHMENT A
POWELL INDUSTRIES, INC.
EXECUTIVE SEVERANCE PROTECTION PLAN
EXECUTIVE BENEFIT GROUP
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Group I
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T. Powell
J.F. Ahart
R. L. Mitchell
R. Murphy
K. Shaw
A. Janas
T. Burtnett
G. Zeller
D. Dimlich
G. Auer
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Group II
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J. Thomas
R. Rammler
M. Dehart
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