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EXHIBIT 10.1
POWELL INDUSTRIES, INC.
INCENTIVE COMPENSATION PLAN FOR 1997
JANUARY, 1997
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.
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
- 70% Return on Revenues -- Net profits before taxes divided by total
revenues
- 30% Growth of Total Revenues
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Corporate Participants
- 70% Powell Industries, Inc. Earnings Per Share
- 30% 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 1997 the revenue growth standard for the corporation and subsidiaries
will be 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.
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 Company 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.
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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 time, except that such amendment or termination will not affect any awards
that have been earned but not paid.
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