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EXHIBIT 10.1
POWELL INDUSTRIES, INC.
INCENTIVE COMPENSATION PLAN FOR 1996
DECEMBER 1995
1. PLAN PURPOSE
The purpose of the plan is to recognize and reward key corporate and
subsidiary employees for their contributions to the growth and
profitability of Powell Industries, Inc. and its operating
subsidiaries through the opportunity to earn incentive compensation,
in addition to their base salaries, based on the performance of the
Company or subsidiary.
2. GENERAL DESCRIPTION
Key corporate and subsidiary executives and managers will be selected
for participation on an annual basis. For each participant, a maximum
incentive compensation opportunity will be established, and expressed
as a percentage of the individual's base salary at the beginning of
the plan year. The actual amount of incentive compensation earned by
each participant will be based on the performance of the Company or
subsidiary against pre-established performance measures. The
performance measures for the subsidiary participants will include
"return on revenues" and "revenue growth". For corporate
participants, the performance measures will include "Powell
Industries, Inc. earnings per share", and "revenue growth". Specific
performance levels will be established each year based on an
assessment of historical results, the budgeted performance for the
plan year, and general business conditions.
The plan will be administered by the Compensation Committee of the
Board of Directors, in conjunction with the Chief Executive Officer.
3. ELIGIBILITY AND INCENTIVE COMPENSATION OPPORTUNITY
On an annual basis key corporate and subsidiary participants will be
identified for participation. Participation in one year does not
guarantee participation in the following year.
Subsidiary presidents will submit their recommended participants to
the CEO for approval. In addition, each subsidiary president may
identify a general incentive "pool", which may be used to recognize
the contributions of individuals within the subsidiary who are not
named participants.
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The CEO will recommend corporate participants for approval by the
Compensation Committee. The CEO may identify a general incentive
"pool" which may be used to recognize the contributions of individuals
who are not named participants.
For each named participant, their "maximum incentive opportunity" will
be identified, which is expressed as a percentage of base salary at
the beginning of the plan year.
4. PERFORMANCE MEASURES AND WEIGHTS
The following performance measures will be used to measure the
performance of the Company and determine the incentive award earned by
each participant. The weighting percentage reflects the relative
weight given to each performance measure.
SUBSIDIARY PARTICIPANTS
o 70% Return on Revenues - Net profits before taxes divided by
total revenues
o 30% Percent Growth of Total Revenues
CORPORATE PARTICIPANTS
o 70% Powell Industries, Inc. Earnings Per Share
o 30% Percent Growth of Total Revenues Over Prior Year
Prior to the beginning of the plan year, the performance standards for
each subsidiary and Powell Industries, Inc. will be finalized,
approved by the Compensation Committee, and communicated to
participants. The performance standards will be based on historical
results, management's expectations for the coming year, and the
general business environment. The CEO will approve subsidiary
performance standards, and the Compensation Committee will approve the
company-wide performance standards.
For 1995, the revenue growth standard for the corporation and
subsidiaries will be 10%. Beginning in 1996, the standard will be
increased to 15%.
5. COMPUTATION OF AWARDS
For each subsidiary and Powell Industries, Inc., an Incentive
Compensation Calculation Form will be prepared at the beginning of the
plan year, which will include a listing of the participants, their
base salary, and maximum incentive opportunity. For each performance
measure, a funding table will be attached which establishes the amount
of incentive compensation earned at various performance levels. The
Incentive Compensation Calculation Form is attached.
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In order to activate the plan for each subsidiary, the threshold
Return on Revenue (ROR) must be achieved. If the ROR threshold is
not achieved, no incentive awards will be paid, regardless of the
revenue growth percentage.
In order to activate the plan for corporate participants, the
threshold Earnings Per Share (EPS) must be achieved. If the EPS
threshold is not achieved, no incentive awards will be paid,
regardless of the revenue growth percentage.
In computing performance results, ROR and EPS will be net of the
accrued incentive compensation payments.
In addition to the incentive award computed under this plan, the
Compensation Committee may in its sole discretion, make additional
discretionary awards to recognize significant individual
contributions. This discretionary award is limited to no more than
30% of the individual's maximum incentive opportunity.
The Compensation Committee, in conjunction with the CEO, may make
adjustments to the subsidiary or Company performance results to
eliminate the impact of extraordinary charges to earnings, both
positive and negative. The purpose of any such adjustment is to
better reflect the performance of the subsidiary or Company. Each
August, the Committee will meet to review the interim performance
results of the Company and determine if extraordinary charges have
occurred or are likely to occur that should be eliminated.
6. PAYMENT OF AWARDS
The annual incentive awards will be determined after the end of the
plan year and paid as soon as practical. Prior to payment of awards,
the Compensation Committee will review and certify the incentive
awards for all participants.
Incentive awards will be computed based on the participant's base
salary at the beginning of the plan year.
A participant must be an active employee on the last day of the plan
year in order to receive an incentive award.
Participants added to the plan after the beginning of the plan year,
will be eligible to receive a prorated award based on their salary
when they became eligible.
Participants who die, retire, or become disabled during the plan year
will be eligible for a prorated award based on the number of months of
active participation during the plan year.
7. ADMINISTRATION OF PLAN
The plan will be administered by the Compensation Committee, in
conjunction with the CEO. The Committee reserves the right to amend
or terminate the plan at any
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time, except that such amendment or termination will not affect any
awards that have been earned but not paid.
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