Document:

exv10w1

Exhibit 10.1

1992 POWELL INDUSTRIES, INC.

STOCK OPTION PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I. PLAN
	 	 	1	 
	1.1 PURPOSE
	 	 	1	 
	1.2 EFFECTIVE DATE OF PLAN
	 	 	1	 
	ARTICLE II. DEFINITIONS
	 	 	1	 
	2.1 “AFFILIATE”
	 	 	1	 
	2.2 “AWARD”
	 	 	2	 
	2.3 “BOARD OF DIRECTORS”
	 	 	2	 
	2.4 “CODE”
	 	 	2	 
	2.5 “COMMITTEE”
	 	 	2	 
	2.6 “COMPANY”
	 	 	2	 
	2.7 “DISINTERESTED PERSON”
	 	 	2	 
	2.8 “EMPLOYEE”
	 	 	2	 
	2.9 “FAIR MARKET VALUE”
	 	 	2	 
	2.10 “INCENTIVE OPTION”
	 	 	2	 
	2.11 “MATURITY DATE”
	 	 	2	 
	2.12 “NONQUALIFIED OPTION”
	 	 	2	 
	2.13 “OPTION”
	 	 	2	 
	2.14 “OPTION AGREEMENT”
	 	 	3	 
	2.15 “PLAN”
	 	 	3	 
	2.16 “RELOAD OPTION”
	 	 	3	 
	2.17 “RESTRICTED STOCK”
	 	 	3	 
	2.18 “RESTRICTED STOCK AGREEMENT”
	 	 	3	 
	2.19 “RESTRICTED STOCK PURCHASE PRICE”
	 	 	3	 
	2.20 “STOCK”
	 	 	3	 
	2.21 “STOCK APPRECIATION RIGHT”
	 	 	3	 
	2.22 “STOCK APPRECIATION RIGHTS AGREEMENT”
	 	 	3	 
	2.23 “10% SHAREHOLDER”
	 	 	3	 
	ARTICLE III. ELIGIBILITY 
	 	 	4	 
	ARTICLE IV. GENERAL PROVISIONS RELATING TO OPTIONS, RELOAD OPTIONS, STOCK APPRECIATION RIGHTS AND AWARDS
	 	 	4	 
	4.1 AUTHORITY TO GRANT OPTIONS, RELOAD OPTIONS, STOCK
APPRECIATION RIGHTS AND AWARDS 
	 	 	4	 
	4.2 DEDICATED SHARES 
	 	 	4	 
	4.3 NON-TRANSFERABILITY OF OPTIONS, RELOAD OPTIONS,
STOCKAPPRECIATION RIGHTS AND AWARDS 
	 	 	4	 
	4.4 REQUIREMENTS OF LAW 
	 	 	5	 
	4.5 NO RIGHTS AS STOCKHOLDER 
	 	 	5	 
	4.6 CHANGES IN THE COMPANY’S CAPITAL STRUCTURE 
	 	 	5	 
	4.7 ELECTION UNDER SECTION 83(B) OF THE CODE 
	 	 	7	 
	ARTICLE V. OPTIONS AND RELOAD OPTIONS
	 	 	7	 
	5.1 TYPE OF OPTION 
	 	 	7	 
	5.2 OPTION PRICE 
	 	 	7	 
	5.3 DURATION OF OPTIONS 
	 	 	8	 

 

 

	 	 	 	 	 
	 	 	Page	 
	5.4 AMOUNT EXERCISABLE 
	 	 	8	 
	5.5 EXERCISE OF OPTIONS 
	 	 	8	 
	5.6 EXERCISE ON TERMINATION OF EMPLOYMENT 
	 	 	8	 
	5.7 RELOAD OPTIONS 
	 	 	9	 
	5.8 SUBSTITUTION OPTIONS 
	 	 	10	 
	ARTICLE VI. STOCK APPRECIATION RIGHTS
	 	 	10	 
	6.1 STOCK APPRECIATION RIGHTS INCLUDED IN OPTIONS 
	 	 	10	 
	6.2 STOCK APPRECIATION RIGHTS NOT INCLUDED IN OPTIONS 
	 	 	10	 
	6.3 PAYMENT ON EXERCISE OF A STOCK APPRECIATION RIGHT 
	 	 	11	 
	6.4 EXERCISE ON TERMINATION OF EMPLOYMENT 
	 	 	11	 
	ARTICLE VII. AWARDS
	 	 	11	 
	7.1 AWARD AND RESTRICTED STOCK AGREEMENT 
	 	 	11	 
	7.2 RESTRICTION PERIOD 
	 	 	11	 
	7.3 EXERCISE ON TERMINATION OF EMPLOYMENT 
	 	 	11	 
	ARTICLE VIII. ADMINISTRATION
	 	 	12	 
	ARTICLE IX. AMENDMENT OR TERMINATION OF PLAN 
	 	 	12	 
	ARTICLE X. MISCELLANEOUS
	 	 	13	 
	10.1 NO ESTABLISHMENT OF A TRUST FUND 
	 	 	13	 
	10.2 NO EMPLOYMENT OBLIGATION 
	 	 	13	 
	10.3 FORFEITURE 
	 	 	13	 
	10.4 TAX WITHHOLDING 
	 	 	14	 
	10.5 WRITTEN AGREEMENT 
	 	 	14	 
	10.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF
DIRECTORS 
	 	 	14	 
	10.7 GENDER 
	 	 	15	 
	10.8 HEADINGS 
	 	 	15	 
	10.9 OTHER COMPENSATION PLANS 
	 	 	15	 
	10.10 OTHER OPTIONS OR AWARDS 
	 	 	15	 
	10.11 GOVERNING LAW 
	 	 	15	 

 

 

ARTICLE I. PLAN

     1.1 PURPOSE. This instrument amends Section 4.2 of the Plan and restates the Plan. The
Plan was originally adopted as the “1989 Powell Industries, Inc. Stock Option Plan”, effective
March 17, 1989, and was previously amended and restated effective January 1, 1992, which amendment
and restatement renamed the Plan the “1992 Powell Industries, Inc. Stock Option Plan.” All Options
and Awards granted prior to December 31, 1991, will remain subject to all of the terms and
conditions of the Plan prior to the first amendment and restatement which was effective January 1,
1992, and all Options, Reload Options, Stock Appreciation Rights, and Awards issued on or after
that date and prior to the effective date of this amendment and restatement will be subject to the
terms and conditions of the Plan as first amended and restated. All Options, Reload Options, Stock
Appreciation Rights, and Awards issued on or after the effective date of this amendment and
restatement will be subject to the terms and conditions of the Plan as hereby amended and restated.
This Plan continues to be a Plan for key employees of the Company and is intended to advance the
best interests of the Company and its shareholders by providing those persons who have a
substantial responsibility for the Company’s growth with additional incentives and an opportunity
to obtain or increase their proprietary interest in the Company, thereby encouraging them to
continue their
employment with the Company.

     1.2 EFFECTIVE DATE OF PLAN. The Plan became effective on March 17, 1989 and the first
amendment and restatement became effective January 1, 1992. This amendment and restatement shall
become effective on January 1, 1996, if within one year of that date it shall have been approved by
the holders of at least a majority of the outstanding shares of voting stock of the Company voting
in person or by proxy at a duly held stockholders’ meeting, or if the provisions of the corporate
charter, by-laws or applicable state law prescribes a greater degree of stockholder approval for
this action, the approval by the holders of that percentage, at a duly held meeting of
stockholders. No Option, Reload Option, Stock Appreciation Right, or Award shall be granted
pursuant to the Plan after March 16, 1999.

ARTICLE II. DEFINITIONS

     The words and phrases defined in this Article shall have the meaning set out in the definition
unless the context in which any such word or phrase appears reasonably requires a broader,
narrower, or different meaning.

     2.1 “AFFILIATE” shall mean any parent corporation and any subsidiary corporation. The
term “parent corporation” means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if, at the time of the action or transaction, each of the
corporations other than the Company owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in the chain. The term
“subsidiary corporation” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the action or transaction, each of the
corporations other than the last corporation in the unbroken chain owns stock possessing

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50 percent or more of the total combined voting power of all classes of stock in one of the other
corporations in the chain.

     2.2 “AWARD” shall mean an award of Restricted Stock.

     2.3 “BOARD OF DIRECTORS” shall mean the board of directors of Powell Industries, Inc.

     2.4 “CODE” shall mean the Internal Revenue Code of 1986, as amended.

     2.5 “COMMITTEE” shall mean the Compensation Committee of the Board of Directors, exclusive
of any person who is not a Disinterested Person.

     2.6 “COMPANY” shall mean Powell Industries, Inc., a Nevada corporation.

     2.7 “DISINTERESTED PERSON” shall mean a “disinterested person” as that term is defined in
Rule 16b-3 under the Securities Exchange Act of 1934.

     2.8 “EMPLOYEE” shall mean a person employed by the Company or an Affiliate to whom an
Option, a Reload Option, a Stock Appreciation Right, or an Award is granted.

     2.9 “FAIR MARKET VALUE” of the Stock as of any date shall mean (i) the average of the high
and low sale prices of the Stock on that date on the principal securities exchange on which the
Stock is listed; or (ii) if the Stock is not listed on a securities exchange, the average of the
high and low sale prices of the Stock on that date as reported on the NASDAQ National Market
System; or (iii) if the Stock is not listed on the NASDAQ National Market System, the average of
the high and low bid quotations for the Stock on that date as reported by the National Quotation
Bureau Incorporated; or (iv) if none of the foregoing is applicable, the average between the
closing bid and ask prices per share of stock on the last preceding date on which those prices were
reported or that amount as determined by the Committee.

     2.10 “INCENTIVE OPTION” shall mean an Option granted under this Plan which is designated as
an “Incentive Option” and satisfies the requirements of Section 422 of the Code.

     2.11 “MATURITY DATE” shall mean the date the Stock Appreciation Right given in a Stock
Appreciation Rights Agreement vests.

     2.12 “NONQUALIFIED OPTION” shall mean an Option other than an Incentive Option.

     2.13 “OPTION” shall mean an option granted under this Plan to purchase shares of Stock.

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     2.14 “OPTION AGREEMENT” shall mean the written agreement which sets out the terms of an
Option and/or Reload Option.

     2.15 “PLAN” shall mean the 1992 Powell Industries, Inc. Stock Option Plan, as amended and
restated as set out in this document and as it may be amended from time to time.

     2.16 “RELOAD OPTION” shall mean an Option which the Committee may, in its sole discretion,
grant in connection with the issuing of an Option if the exercise price of the Option is paid in
whole or in part, by exchanging Stock owned by the Employee. A Reload Option shall be an Incentive
Option or Nonqualified Option depending on the type of Option previously granted under the Option
Agreement containing the Reload Option feature. The Reload Options will be subject to the same
restrictions and provisions of the Plan as the original Option, except when specific changes are
set out in the Option Agreement.

     2.17 “RESTRICTED STOCK” shall mean stock awarded or purchased under a Restricted Stock
Agreement entered into pursuant to this Plan. The terms and conditions of the Restricted Stock
shall be determined by the Committee.

     2.18 “RESTRICTED STOCK AGREEMENT” shall mean the agreement between the Company and the
Employee under which the Employee is awarded or may purchase Restricted Stock.

     2.19 “RESTRICTED STOCK PURCHASE PRICE” shall mean the purchase price per share of
Restricted Stock subject to an Award. The Restricted Stock Purchase Price shall be determined by
the Committee. It may be greater than or less than the Fair Market Value of the Stock on the date
of the grant or Award.

     2.20 “STOCK” shall mean the common stock of the Company, $.01 par value or, in the event
that the outstanding shares of common stock are later changed into or exchanged for a different
class of stock or securities of the Company or another corporation, that other stock or security.

     2.21 “STOCK APPRECIATION RIGHT” shall mean a right granted to an Employee under the terms
of the Plan to receive an amount equal to the excess of the Fair Market Value of one share of Stock
as of the date of exercise of the Stock Appreciation Right over the price per share of Stock
specified in the Stock Appreciation Rights Agreement or Option Agreement of which it is a part.

     2.22 “STOCK APPRECIATION RIGHTS AGREEMENT” shall mean the written
agreement which sets out the terms of a Stock Appreciation Right. All of the terms and conditions
of a Stock Appreciation Right shall be determined by the Committee.

     2.23 “10% SHAREHOLDER” shall mean an individual who, at the time the Option is granted,
owns stock possessing more than 10% of the total combined voting

3

 

power of all classes of stock of the Company or of any Affiliate. An individual shall be
considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters
(whether by the whole or half blood), spouse, ancestors, and lineal descendants; and stock owned,
directly or indirectly, by or for a corporation, partnership, estate, or
trust, shall be considered as being owned proportionately by or for its shareholders, partners, or
beneficiaries.

ARTICLE III. ELIGIBILITY. The individuals who shall be eligible to receive Incentive Options,
Nonqualified Options, Reload Options, Stock Appreciation Rights, and Awards of Restricted Stock
shall be those key employees as the Committee shall determine from time to time. However, no
member of the Committee shall be eligible to receive any Option, Reload Option, Stock Appreciation
Right or Award of Restricted Stock or to receive stock, stock options, or stock appreciation rights
under any other plan of the Company or any of its Affiliates, if receipt of it would cause the
individual not to be a Disinterested Person. The Board of Directors may designate one or more
individuals who shall not be eligible to receive any Option, Reload Option, Stock Appreciation
Right, or Award of Restricted Stock under this Plan or under other similar plans of the Company.

ARTICLE IV. GENERAL PROVISIONS RELATING TO OPTIONS, RELOAD OPTIONS, STOCK APPRECIATION RIGHTS AND
AWARDS

     4.1 AUTHORITY TO GRANT OPTIONS, RELOAD OPTIONS, STOCK APPRECIATION RIGHTS AND AWARDS. The
Committee may grant to those key Employees as it shall from time to time determine, Options, Reload
Options, Stock Appreciation Rights, or Awards of Restricted Stock under the terms and conditions of
this Plan. Subject only to any applicable limitations set out in this Plan, the number of shares
of Stock to be covered by any Option, Reload Option, Stock Appreciation Right or Award of
Restricted Stock to be granted to an Employee shall be as determined by the Committee.

     4.2 DEDICATED SHARES. The total number of shares of Stock with respect to which Options,
Reload Options, Stock Appreciation Rights and Awards may be granted under this Plan shall be
2,700,000 shares. That number of shares shall be subject to adjustment in accordance with the
provisions of Section 4.6. The shares may be treasury shares or authorized but unissued shares. In
the event that any outstanding Option, Reload Option, Stock Appreciation Right or Award shall
expire or terminate for any reason or any Option, Reload Option, Stock Appreciation Right or Award
is surrendered, the shares of Stock and the Stock Appreciation Rights, if any, allocable to the
unexercised portion of that Option, Reload Option, Stock Appreciation Right or
Award may again be subject to an Option, Reload Option, Stock Appreciation Right or Award under
this Plan.

     4.3 NON-TRANSFERABILITY OF OPTIONS, RELOAD OPTIONS, STOCK
APPRECIATION RIGHTS AND AWARDS. Options, Reload Options and Stock Appreciation Rights shall not be
transferable by the Employee otherwise than by will or

4

 

under the laws of descent and distribution, and shall be exercisable, during the Employee’s
lifetime, only by him. Restricted Stock shall be purchased or earned under a Restricted Stock
Agreement during the Employee’s lifetime, only by him. Any attempt to transfer an Award other than
under the terms of the Plan and the Restricted Stock Agreement shall terminate the Award and all
rights of the Employee to that Restricted Stock.

     4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or issue any Stock
under any Option, Reload Option, Stock Appreciation Right or Award if issuing that Stock would
constitute or result in a violation by the Employee or the Company of any provision of any law,
statute, or regulation of any governmental authority. Specifically, in connection with any
applicable statute or regulation relating to the registration of securities, upon exercise of any
Option, Reload Option, Stock Appreciation Right or Award, the Company shall not be required to
issue any Stock unless the Committee has received evidence satisfactory to it to the effect that
the holder of that Option, Reload Option, Stock Appreciation Right or Award will not transfer the
Stock except in accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies with applicable law.
The determination by the Committee on this matter shall be final, binding and conclusive. The
Company may, but shall in no event be obligated to, register any Stock covered by this Plan
pursuant to applicable securities laws of any country or any political subdivision. In the event
the Stock issuable on exercise of an Option, Reload Option, Stock Appreciation Right or Award is
not registered, the Company may imprint on the certificate evidencing the Stock any legend that
counsel for the Company
considers necessary or advisable to comply with applicable law. The Company shall not be obligated
to take any other affirmative action in order to cause the exercise of an Option, Reload Option,
Stock Appreciation Right or Award or the issuance of shares under any of them to comply with any
law or regulation of any governmental authority.

     4.5 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a stockholder with
respect to Stock covered by his Option, Reload Option, Stock Appreciation Right or Award until the
date a stock certificate is issued for the Stock unless the granting agreement specifically gives
him a right.

     4.6 CHANGES IN THE COMPANY’S CAPITAL STRUCTURE. The existence of outstanding Options,
Reload Options, Stock Appreciation Rights, or Awards shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company’s capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business, or any other
corporate
act or proceeding, whether of a similar character or otherwise.

     If the Company shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend, or other increase or reduction of

5

 

the number of shares of the Stock outstanding, without receiving compensation for it in money,
services or property, then (a) the number, class, and per share price of shares of Stock subject to
outstanding Options or Reload Options under this Agreement shall be appropriately adjusted in such
a manner as to entitle an Employee to receive upon exercise of an Option, for the same aggregate
cash consideration, the equivalent total number and class of shares as he would have received had
he exercised his Option or
Reload Option in full immediately prior to the event requiring the adjustment; and (b) the number
and class of shares of Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved, that number and class
of shares of Stock that would have been received by the owner of an equal number of outstanding
shares of each class of Stock as the result of the event requiring the adjustment. In addition, if
the Company shall effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction in the number of shares of the
Stock outstanding, without
receiving compensation for it in money, services or property, the Committee shall make an
appropriate adjustment in the number of Stock Appreciation Rights and/or Awards created under the
Plan.

     If the Company is merged or consolidated with another corporation or if the Company is
liquidated or sells or otherwise disposes of substantially all its assets while unexercised Options
remain outstanding under the Plan, (a) subject to the provisions of clause (c) below, after the
effective date of the merger, consolidation, liquidation, sale or other disposition, as the case
may be, each holder of an outstanding Option or Reload Option shall be entitled, upon exercise of
the Option or Reload Option, to receive, in lieu of shares of Stock, the number and class or
classes of shares of stock or other securities or property to which the holder would have been
entitled if, immediately prior to the merger, consolidation, liquidation, sale or other
disposition, the holder had been the holder of record of a number of shares of Stock equal to the
number of shares as to which the Option and Reload Option shall be so exercised; (b) the Board of
Directors may waive any limitations set out in or imposed under this Plan so that all Options, from
and after a date prior to the effective date of the merger, consolidation, liquidation, sale or
other disposition, as the case may be, specified by the Board of Directors, shall be exercisable in
full; and (c) all outstanding Options may be canceled by the Board of Directors as of the effective
date of any merger, consolidation, liquidation, sale or other disposition, if (i) notice of
cancellation shall be given to each holder of an Option and (ii) each holder of an Option shall
have the right to exercise that Option and any underlying Reload Option in full (without regard to
any limitations set out in or imposed under the Plan) during a period set by the Board of Directors
preceding the effective date of the
merger, consolidation, liquidation, sale or other disposition and, if in the event all outstanding
Options and Reload Options may not be exercised in full under applicable securities laws without
registration of the shares of Stock issuable on exercise of the Options or Reload Options, the
Board of Directors may limit the exercise of the Options and Reload Options to the number of shares
of Stock, if any, as may be issued without registration. The method of choosing which Options and
Reload Options may be exercised and the number of shares of Stock for which Options and Reload
Options may be exercised shall be solely within the discretion of the Board of Directors.

6

 

     After a merger of one or more corporations into the Company or after a consolidation of the
Company and one or more corporations in which the Company shall be the surviving corporation, each
Employee shall be entitled to have his Stock Appreciation Rights and/or Award appropriately
adjusted based on the manner the Stock was adjusted under the terms of the agreement of merger or
consolidation. If the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation, or if the Company is liquidated,
or sells or otherwise disposes of substantially all of its assets to another corporation while
unmatured Stock Appreciation Rights remain outstanding under the Plan, all outstanding Stock
Appreciation Rights shall be cancelled as of the effective date of the merger, consolidation,
liquidation or sale but payment shall be made under the Agreement prior to its cancellation as
though each Stock Appreciation Right matured on the effective date of the merger, consolidation,
liquidation or sale.

     The issue by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe for them, or upon conversion of shares
or obligations of the Company convertible into shares or other securities, shall not affect, and no
adjustment by reason of it shall be made with respect to, the number, class, or price of shares of
Stock then subject to outstanding Options, Reload Options, Stock Appreciation Rights or Awards then
subject to outstanding grants.

     4.7 ELECTION UNDER SECTION 83(B) OF THE CODE. No Employee shall exercise the election
permitted under Section 83(b) of the Code without written approval of the Committee. Any Employee
doing so shall forfeit all Options, Reload Options, Stock Appreciation Rights and/or Awards issued
to him under this Plan.

ARTICLE V. OPTIONS AND RELOAD OPTIONS

     5.1 TYPE OF OPTION. The Committee shall specify whether a given Option shall constitute
an Incentive Option or a Nonqualified Option.

     5.2 OPTION PRICE. The price at which Stock may be purchased under an Incentive Option
shall not be less than the greater of (a) 100% of the Fair Market Value of the shares of Stock on
the date the Option is granted or (b) the aggregate par value of the shares of Stock on the date
the Option is granted. The Committee in its discretion may provide that the price at which shares
of Stock may be purchased shall be more than 100% of Fair Market Value. In the case of any 10%
Shareholder, the price at which shares of Stock may be purchased under an Incentive Option shall
not be less than 110% of the Fair Market Value of the Stock on the date the Incentive Option is
granted.

     The price at which shares of Stock may be purchased under a Nonqualified Option shall be the
price determined by the Committee in its discretion, so long as the price is not less than the par
value of the shares of Stock on the date the Option is granted.

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     5.3 DURATION OF OPTIONS. No Option shall be exercisable after the expiration of 10 years
from the date the Option is granted. A Reload Option shall have a term which is no longer than the
original term of the underlying Option unless it is expressly provided otherwise in the Option
Agreement. In the case of a 10% Shareholder, no Incentive Option shall be exercisable after the
expiration of five years from the date the Incentive Option is granted.

     5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to time, in whole or in
part, in the manner and subject to the conditions the Committee, in its discretion, may provide in
the Option Agreement, as long as the Option is valid and outstanding. To the extent that the
aggregate Fair Market Value (determined as of the time an Incentive Option is granted) of the Stock
with respect to which Incentive Options first become exercisable by the Optionee during any
calendar year (under this Plan and any other incentive stock option plan(s) of the Company or any
Affiliate) exceeds $100,000, the Options shall be treated as Nonqualified Options.

     5.5 EXERCISE OF OPTIONS. Options shall be exercised by the delivery of written notice to
the Committee setting forth the number of shares with respect to which the Option is to be
exercised, together with: (a) cash, certified check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option price of the shares, (b)
Stock at the Fair Market Value on the date of exercise, and/or (c) any other form of payment which
is acceptable to the Committee, and specifying the address to which the certificates for the shares
are to be mailed. As promptly as practicable after receipt of written notification and payment,
the Company
shall deliver to the Employee certificates for the number of shares with respect to which the
Option has been exercised, issued in the Employee’s name. If shares of Stock are used in payment,
the Fair Market Value of the shares of Stock tendered must be less than the Option Price of the
shares being purchased and the difference must be paid by check. Delivery shall be deemed effected
for all purposes when a stock transfer agent of the Company shall have deposited the certificates
in the United States mail, addressed to the
optionee, at the address specified by the Employee.

     5.6 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly provided otherwise in
the Option Agreement, Options (including Reload Options) shall terminate immediately upon severance
of employment of the Employee from the Company for any reason, with or without cause, other than
death, retirement for age or disability under the then established rules of the Company or
severance for disability. Whether authorized leave of absence or absence on military or government
service shall constitute severance of the employment of the Employee shall be determined by the
Committee at that time.

     If, before the expiration of an Incentive Option, the Employee shall be retired in good
standing from the employ of the Company because of his age under the then established rules of the
Company, the Incentive Option shall terminate on the earlier of the Option’s expiration date or one
day less than three months after his retirement. If before the expiration of a Nonqualified
Option, the Employee shall be retired in good

8

 

standing from the employ of the Company because of his age under the then established rules of the
Company, the Nonqualified Option shall terminate on the earlier of the Option’s expiration date or
one day more than six months after his retirement. In the event of retirement for age the Employee
shall have the right prior to the termination
of the Option to exercise the Option, but without the right to exercise any Reload Option feature
of the Option, to the extent to which he was entitled to exercise it immediately prior to his
retirement unless it is expressly provided otherwise in the Option Agreement.

     If, before the expiration of an Option, the Employee shall be retired for disability under the
then established rules of the Company, or severed from the employ of the Company for disability,
the Option shall terminate on the earlier of the Option’s expiration date or one day less than one
year after the date he retired or was severed because of disability. In the event that the
Employee shall be retired for disability under the then established rules of the Company or severed
from the employ of the Company for disability, the Employee shall have the right prior to the
termination of the Option to
exercise the Option, but without the right to exercise any Reload Option feature of the Option, to
the extent to which he was entitled to exercise it immediately prior to his retirement or severance
of employment for disability unless it is expressly provided otherwise in the Option Agreement.

     If, before the expiration of an Option, the Employee, whether in the employ of the Company or
after he has retired for age or disability or was severed for disability, dies the Option shall
continue until the earlier of the Option’s expiration date or one year following the date of his
death. After the death of the Employee, his executors, administrators or any persons to whom his
Option may be transferred by will or by the laws of descent and distribution shall have the right,
at any time prior to the Option’s
termination, to exercise it, but without the right to exercise any Reload Option feature, to the
extent to which he was entitled to exercise it immediately prior to the death unless it is
expressly provided otherwise in the Option Agreement.

     In determining the employment relationship between the Company and the Employee, employment by
any Affiliate shall be considered employment by the Company, as shall employment by a corporation
issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, or
by a parent corporation or subsidiary corporation of the corporation issuing or assuming a stock
option (and for this purpose, the phrase “corporation issuing or assuming a stock option” shall be
substituted for the word “Company” in the definitions of parent corporation and subsidiary
corporation in Section 2.1, and the parent-subsidiary relationship shall be determined at the time
of the corporate action described in Section 424(a) of the Code).

     5.7 RELOAD OPTIONS. From time to time, the Committee may grant Reload Options to
Employees. The time of grant of a Reload Option shall be the time the Employee surrenders the
shares of Stock with respect to which the Reload Option is granted. The Reload Option shall be for
the number of shares of Stock surrendered by the Employee as payment upon the exercise of the
previously granted Option. The Reload Option shall be subject to the following restrictions: (a)
the Reload Option shall

9

 

be subject to the same restrictions on exercise and other Plan rules that are imposed on the
underlying Option which contained the Reload Option feature; and (b) the Reload Option shall not be
exercisable until the expiration of any retention holding period imposed on the disposition of any
shares of Stock covered by the underlying Option which contained the Reload Option Feature unless
it is expressly provided otherwise
in the Option Agreement.

     5.8 SUBSTITUTION OPTIONS. Options may be granted under this Plan from time to time in
substitution for stock options held by employees of other corporations who are about to become
employees of or affiliated with the Company or any Affiliate as the result of a merger or
consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the
Company or any Affiliate of stock of the employing corporation as the result of which it becomes an
Affiliate of the Company. The terms and conditions of the substitute Options granted may vary from
the terms
and conditions set out in this Plan to the extent the Board of Directors, at the time of grant, may
deem appropriate to conform, in whole or in part, to the provisions of the stock options in
substitution for which they are granted.

ARTICLE VI. STOCK APPRECIATION RIGHTS

     6.1 STOCK APPRECIATION RIGHTS INCLUDED IN OPTIONS. Stock Appreciation Rights may be
included in any Option granted to permit the Employee to surrender the Option or a portion of it
which is then exercisable and receive in exchange an amount equal to the excess of the Fair Market
Value of the Stock covered by the Option surrendered, or a portion of it, determined on the date of
surrender, over the aggregate Option price of the Stock. If authorized by the Committee, an
Employee may, by providing written notice to the Committee, elect to surrender all or any portion
of an Option for Stock Appreciation Rights.

     Stock Appreciation Rights included in Options may be exercised only when the Fair Market Value
of the Stock covered by the Option surrendered exceeds the Option price of the Stock. Each of the
Stock Appreciation Rights included in an Option (a) shall have a term no later than the term of the
underlying Option, (b) may be for no more than 100% of the difference between the exercise price of
the underlying Option and the Fair Market Value of a share of the Stock at the time the Stock
Appreciation Right is exercised, (c) is
transferable only when the underlying Option is transferable, and under the same conditions, and
(d) may be exercised only when the underlying Option is eligible to be exercised. The limitations
set out in this paragraph may be changed by the Committee in the grant of the Option and/or Stock
Appreciation Rights except when the grant is of Stock Appreciation Rights granted in connection
with an Incentive Option.

     6.2 STOCK APPRECIATION RIGHTS NOT INCLUDED IN OPTIONS. The grant to an Employee of a
Stock Appreciation Right that is not a feature of an Option shall, subject to the conditions
contained in the Stock Appreciation Rights Agreement, entitle the Employee to an amount equal to
the excess of the Fair Market Value of a share of Stock as of the date of exercise of the Stock
Appreciation Right over the Fair Market

10

 

Value of a share of Stock as of the date that the Stock Appreciation Right is granted. The
Committee shall fix the term of the Stock Appreciation Right which may not be in excess of 10 years
from the date the Stock Appreciation Right is granted. Within the 10 year period the Committee
may, in its discretion, provide that portions of the grant may mature at intervals throughout the
period.

     6.3 PAYMENT ON EXERCISE OF A STOCK APPRECIATION RIGHT. Upon exercise of Stock
Appreciation Rights, the Committee may pay the Employee in
shares of Stock valued at Fair Market Value, in cash, or partly in cash and partly in shares of
Stock as the Committee determines in the exercise of its sole discretion.

     6.4 EXERCISE ON TERMINATION OF EMPLOYMENT. Any Stock Appreciation Right included in an
Incentive Option shall expire because of termination of
employment at the time the underlying Option expires. Any Stock Appreciation Right included in a
Nonqualified Option or not included in an Option shall expire as provided for Nonqualified Options
in Section 5.6 generally unless it is expressly provided otherwise in the Option Agreement and/or
the Stock Appreciation Rights Agreement.

ARTICLE VII. AWARDS

     7.1 AWARD AND RESTRICTED STOCK AGREEMENT. Each Award granted shall be evidenced by a
written Restricted Stock Agreement dated as of the date
of grant of the Award and executed by the Company and the Employee. The Restricted Stock Agreement
may vary any terms and conditions as the Committee determines to be appropriate, including without
limitation: (a) conditions consistent with Section 16(b) of the Securities Exchange Act of 1934 and
the rules and regulations promulgated under it, as the same may be amended from time to time, (b)
the period during which the Award may be exercised, (c) the manner of exercising the Award, (d) the
minimum number of shares of Stock for which the Award may be exercised, (e) the withholding of
taxes in connection with the exercise of the Award, (f) the period during which the Restricted
Stock may vest, (g) termination of Award rights upon certain events and (h) any other matters the
Committee shall determine. If any payment is required to exercise the Award, subject to any
restrictions as the Committee, in its sole discretion, may include in the Restricted Stock
Agreement, upon payment by the Employee of the Restricted Stock Purchase Price, the Employee shall
have all of the rights of a shareholder with respect to the Stock, including the right to vote the
shares and receive all dividends and other distributions paid or made with respect to it.

     7.2 RESTRICTION PERIOD. No Award granted may have restrictions continuing beyond 10 years
from the date of the Award.

     7.3 EXERCISE ON TERMINATION OF EMPLOYMENT. Any Award which has not been exercised or upon
which restrictions have not lapsed will expire upon
termination of the Employee’s employment with the Company or its Affiliates unless it is expressly
provided otherwise in the Award.

11

 

ARTICLE VIII. ADMINISTRATION

     The Plan shall be administered by the Committee. All questions of interpretation and
application of the Plan, Options, Reload Options, Stock Appreciation Rights, or Awards shall be
subject to the determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by a majority of the members
shall be as effective as if it had been made by a majority vote at a meeting properly called and
held. This Plan shall be administered in such a manner as to permit the Options granted under it
which are designated to be Incentive Options to qualify as Incentive Options. In carrying out its
authority under the Plan, the Committee shall have full and final authority and discretion,
including but not limited to the following rights, powers and authorities, to:

          (a) determine the Employees to whom and the time or times at which Options and/or Reload
Options (with or without Stock Appreciation Rights), Stock Appreciations Rights, or Awards will be
made,

          (b) determine the number of shares and the purchase price of Stock covered in each
Option, Reload Option, Stock Appreciation Right, or Award,

          (c) determine the terms, provisions and conditions of each Option, Reload Option, Stock
Appreciation Right and Award, which need not be identical,

          (d) define the effect, if any, on an Option, Reload Option, Stock Appreciation Right or
Award of the death, disability, retirement, or termination of employment of the Employee,

          (e) prescribe, amend and rescind rules and regulations relating to the Plan, and

          (f) make all other determinations and take all other actions deemed necessary,
appropriate, or advisable for the proper administration of the Plan.

     The actions of the Committee in exercising all of the rights, powers, and authorities set out
in this Article and all other Articles of this Plan, when performed in good faith and in its sole
judgment, shall be final, conclusive and binding on all parties.

ARTICLE IX. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may modify, revise or
terminate this Plan at any time and from time to time. However, without the further approval of
the holders of at least a majority of the outstanding shares of Stock, or if the provisions of the
corporate charter, by-laws or applicable state law prescribes a greater degree of stockholder
approval for this action, without the degree of stockholder approval thus required, the Board of
Directors may not (a) change the aggregate number of shares of Stock which may be issued under
Incentive
Options or under all Options, Reload Options, Stock Appreciation Rights or Awards which may be
issued under this Plan, (b) change the class of individuals eligible to

12

 

receive Options, Reload Options, Stock Appreciation Rights, or Awards or (c) decrease the option
price for Incentive Options below the Fair Market Value of the Stock at the time it is granted.
The Board shall have the power to make any changes in the Plan and in the regulations and
administrative provisions under it or in any outstanding Incentive Option as in the opinion of
counsel for the Company may be necessary or appropriate from time to time to enable any Incentive
Option granted under this Plan to qualify as an incentive stock option or such other stock option
as may be defined under the Code so as
to receive preferential federal income tax treatment.

ARTICLE X. MISCELLANEOUS

     10.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor shall a trust
fund of any kind be established to secure the rights of any Employee under this Plan. All amounts
at any time attributable to Stock Appreciation Rights granted shall be solely a charge upon the
Company, and all Employees shall at all times rely solely upon the general credit of the Company
for the payment of any benefit which becomes payable under this Plan.

     10.2 NO EMPLOYMENT OBLIGATION. The granting of any Option, Reload
Option, Stock Appreciation Right, or Award shall not constitute an employment contract, express or
implied, nor impose upon the Company or Affiliate any obligation to employ or continue to employ
any Employee. The right of the Company or any Affiliate to terminate the employment of any person
shall not be diminished or affected by reason of the fact that an Option, a Reload Option, a Stock
Appreciation Right, or an Award
has been granted to him.

     10.3 FORFEITURE. Notwithstanding any other provisions of this Plan, if the Committee finds
by a majority vote after full consideration of the facts that the Employee, before or after
termination of his employment with the Company or an Affiliate for any reason (a) committed or
engaged in fraud, embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the Company or Affiliate,
or disclosed trade secrets of the Company or an Affiliate, or (b) participated, engaged in or had a
financial or other interest, whether as an employee, officer, director, consultant, contractor,
shareholder, owner, or otherwise, in any commercial endeavor in the United
States which is competitive with the business of the Company or an Affiliate without the written
consent of the Company or Affiliate, the Employee shall forfeit all outstanding Options, Reload
Options, and Stock Appreciation Rights, and all outstanding Awards which have not fully vested,
including all rights related to such matters, and including all unexercised Options and/or Reload
Options, and exercised Options and/or Reload Options, Stock Appreciation Rights and other elections
pursuant to which the Company has not yet delivered a stock certificate, and any additional Options
not yet granted pursuant to a Reload Option. Clause (b) shall not be deemed to have been violated
solely by reason of the Employee’s ownership of stock or securities of any publicly owned
corporation, if that ownership does not result in effective control of the corporation, and if
written notice of the ownership is given the Committee by the Employee within 60 days after the
later of the date on which the Employee is notified of a grant of an Option,

13

 

Reload Option, Stock Appreciation Right, or Award under this Plan or the date on which the Employee
acquires the ownership.

     The decision of the Committee as to the cause of the Employee’s discharge, the damage done to
the Company or an Affiliate, and the extent of the Employee’s competitive activity shall be final.
No decision of the Committee, however, shall affect the finality of the discharge of the Employee
by the Company or an Affiliate in any manner. To provide the Company with an opportunity to
enforce this Section, no certificate for Stock may be issued under this Plan without the
certification by the Committee that no action forbidden by this provision has been raised for their
determination.

     10.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to deduct from other
compensation payable to each Employee any sums required by federal, state, or local tax law to be
withheld with respect to the grant or exercise of an Option, a Reload Option, a Stock Appreciation
Right or an Award. In the alternative, the Company may require the Employee (or other person
exercising the Option, Reload Option or Stock Appreciation Right or receiving the Award) to pay the
sum directly to the employer corporation. If the Employee (or other person exercising the Option,
Reload Option, the Stock Appreciation Right, or receiving the Award) is required to pay the sum
directly, payment in cash or by check of such sums for taxes shall be delivered within 10 days
after the date of exercise. The Company shall have no obligation upon exercise of any Option,
Reload Option, Stock Appreciation Right or receipt of an Award until payment has been received,
unless withholding (or offset against a cash payment) as of or prior to the date of exercise is
sufficient to cover all sums due with respect to that exercise. The Company shall not be obligated
to advise an Employee of the existence of the tax or the amount which the employer corporation will
be required to withhold.

     10.5 WRITTEN AGREEMENT. Each Option, Reload Option, Stock Appreciation Right and Award
shall be embodied in a written Option Agreement, Stock Appreciation Rights Agreement, or Restricted
Stock Agreement which shall be subject to the terms and conditions of this Plan and shall be signed
by the Employee and by a member of the Committee on behalf of the Committee and the Company. The
Option Agreement, Stock Appreciation Rights Agreement, or Restricted Stock Agreement may contain
any other provisions that the Committee in its discretion shall deem advisable.

     10.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With respect to
administration of the Plan, the Company shall indemnity each present and future member of the
Committee and the Board of Directors against, and each member of the Committee and the Board of
Directors shall be entitled without further act on his part to indemnity from the Company for, all
expenses (including the amount of judgments and the amount of approved settlements made with a view
to the curtailment of costs of litigation, other than amounts paid to the Company itself)
reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in
which he may be involved by reason of his being or having been a member of the Committee and/or the
Board of Directors, whether or not he continues to be a

14

 

member of the Committee and/or the Board of Directors at the time of incurring the expenses.
However, this indemnity shall not include any expenses incurred by any member of the Committee
and/or the Board of Directors (a) in respect of matters as to which he shall be finally adjudged in
any action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as a member of the Committee and the Board of Directors, or (b) in respect
of any matter in which any settlement is effected, to an amount in excess of the amount approved by
the Company on the advice of its legal counsel. In addition, no right of indemnification under
this Plan shall be available to or enforceable by any member of the Committee and the Board of
Directors unless, within 60 days after institution of any action, suit or proceeding, he shall have
offered the Company, in writing, the opportunity to handle and defend same at its own expense.
This right of indemnification shall inure to the benefit of the heirs, executors or administrators
of each member of the Committee and the Board of Directors and shall be in addition to all other
rights to which a member of the Committee and the Board of Directors may be entitled as a matter of
law, contract, or otherwise.

     10.7 GENDER. If the context requires, words of one gender when used in this Plan shall
include the others and words used in the singular or plural shall include the other.

     10.8 HEADINGS. Headings of Articles and Sections are included for convenience of reference
only and do not constitute part of the Plan and shall not be used in construing the terms of the
Plan.

     10.9 OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any other stock
option, incentive or other compensation or benefit plans in effect for the Company or any
Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive
or other compensation for employees of the Company or any Affiliate.

     10.10 OTHER OPTIONS OR AWARDS. The grant of an Option, Reload Option, Stock Appreciation
Right, or Award shall not confer upon the Employee the right to receive any future or other
Options, Reload Options, Stock Appreciation Rights or Awards under this Plan, whether or not
Options, Reload Options, Stock Appreciation Rights or Awards may be granted to similarly situated
Employees, or the right to receive future Options, Reload Options, Stock Appreciation Rights or
Awards upon the same terms or conditions as previously granted.

     10.11 GOVERNING LAW. The provisions of this Plan shall be construed, administered, and
governed under the laws of the State of Texas and, to the extent applicable, the laws of the United
States.

15exv10w2

Exhibit 10.2

POWELL INDUSTRIES, INC.

2006 EQUITY COMPENSATION PLAN

     The Powell Industries, Inc. 2006 Equity Compensation Plan (“Plan”) was adopted by the Board of
Directors of Powell Industries, Inc., a Delaware corporation (“Company”), effective as of September
29, 2006, and was approved by the stockholders of the Company at a meeting duly called and held on
February 23, 2007.

ARTICLE 1

PURPOSE

     The purpose of the Plan is to attract and retain the services of key management employees of
the Company and to provide such persons with a proprietary interest in the Company through the
granting of restricted stock awards, incentive stock options, non-qualified stock options,
performance awards or stock appreciation rights, whether granted singly, in combination or in
tandem, that will:

     (a) increase the interest of such persons in the Company’s welfare;

     (b) furnish an incentive to such persons to continue their services for the Company;
and

     (c) provide a means through which the Company may attract able persons as employees.

ARTICLE 2

DEFINITIONS

     For the purpose of the Plan, unless the context requires otherwise, the following terms shall
have the meanings indicated:

     2.1 “Affiliate” means (i) any corporation, partnership or other entity which owns, directly or
indirectly, a majority of the voting equity securities of the Company, (ii) any corporation,
partnership or other entity of which a majority of the voting equity securities or equity interest
is owned, directly or indirectly, by the Company, and (iii) with respect to an Option that is
intended to be an Incentive Stock Option, (A) any “parent corporation” of the Company, as defined
in Section 424(e) of the Code or (B) any “subsidiary corporation” of the Company, as defined in
Section 424(f) of the Code, any other entity that is taxed as a corporation under Section
7701(a)(3) of the Code and is a member of the “affiliated group” as defined in Section 1504(a) of
the Code, of which the Company is the common parent, and any other entity as may be permitted from
time to time by the Code or by the Internal Revenue Service to be an employer of Employees to whom
Incentive Stock Options may be granted.

 

 

     2.2 “Award” means the grant of Restricted Stock, a Stock Option, a Performance Award or SAR,
whether granted singly, in combination or in tandem (each individually an “Incentive”).

     2.3 “Award Agreement” means the written agreement between a Participant and the Company which
sets out the terms of the grant of an Award, including any amendment thereto. Each Award Agreement
shall be subject to the terms and conditions of the Plan.

     2.4 “Award Period” means the period during which one or more Incentives granted under an Award
may be exercised.

     2.5 “Board” means the board of directors of the Company.

     2.6 “Cause” shall mean (i) “cause” as that term may be defined in any written employment
agreement between a participant and the company or a subsidiary which may at any time be in effect,
(ii) in the absence of such a definition in a then-effective written employment agreement (in the
determination of the board), “cause” as that term may be defined in any Award Agreement under this
Plan, or (iii) in the absence of such a definition in a then-effective written employment
agreement (in the determination of the board) or in an Award Agreement under the Plan, termination
of a Participant’s employment with the Company or n Affiliate upon the occurrence of one or more of
the following events:

     (a) The Participant’s failure to substantially perform such Participant’s duties with
the Company or any Affiliate as determined by the Board or the Company;

     (b) The Participant’s willful failure or refusal to perform specific directives of the
Board or the Company, which directives are consistent with the scope and nature of the
Participant’s duties and responsibilities;

     (c) The Participant’s conviction of a felony;

     (d) A breach of the Participant’s fiduciary duty to the Company or any Affiliate or any
act or omission of the Participant that (A) results in the assessment of a criminal penalty
against the Company, (B) is otherwise in violation of any federal, state, local or foreign
law or regulation (other than traffic violations and other similar misdemeanors), (C)
adversely affects or could reasonably be expected to adversely affect the business
reputation of the Company, or (D) otherwise constitutes willful misconduct, gross
negligence, or any act of dishonesty or disloyalty, (ii) the violation by the Participant of
any policy, rule or directive established by the Company, or (iii) the Company’s
determination that the Employee’s performance or conduct was unacceptable.

 

 

     2.7 “Change of Control” means the first to occur of the following:

     (a) A change in ownership of the Company. A change in ownership of the Company
occurs on the date that any person, or more than one person acting as a group, becomes the
owner of more than fifty percent (50%) of the total fair market value or combined voting
power of the stock of the Company. A person, or more than one person acting as a group,
will be considered to have become the owner of more than fifty percent (50%) of the total
fair market value or combined voting power of the stock of the Company if the person’s
percentage ownership increases because the Company acquires its stock in exchange for
property. This subparagraph shall not apply if an acquiring person, or more than one person
acting as a group, immediately prior to the acquisition of additional stock of the Company
owned more than fifty percent (50%) of the total fair market value or combined voting power
of the stock of the Company; or

     (b) A change in the effective control of the Company. A change in the
effective control of the Company occurs on the date that either:

     (1) any one person, or more than one person acting as a group, acquires or
has acquired during the twelve (12)-month period ending on the date of the most
recent acquisition by such person, or persons, stock of the Company possessing
thirty-five percent (35%) or more of the total fair market value or combined voting
power of the stock of the Company; or

     (2) a majority of members of the board of directors of the Company is replaced
during any twelve (12)-month period by directors whose appointment or election is
not endorsed by a majority of board of directors of the Company prior to the date of
the appointment or election.

     (3) this subparagraph shall not apply if an acquiring person, or more than
one person acting as a group, immediately prior to the acquisition of additional
stock of the Company already had effective control of the Company because the
person, or persons, own thirty-five percent (35%) or more of the total fair market
value or combined voting power of the stock of the Company; or

     (c) A change in the ownership of a substantial portion of the Company assets.
A change in the ownership of a substantial portion of the Company assets occurs on the date
that any one person, or more than one person acting as a group, acquires, or has acquired
during the twelve (12)-month period ending on the date of the most recent acquisition by
such person or persons, Company assets that have a total gross fair market value [the value
of the assets being disposed of without regard to any liabilities associated with those
assets] equal to forty percent (40%) or more of the total gross fair market value of all of
the assets of the Company immediately prior to such acquisition or acquisitions. A transfer
of a substantial portion of the assets of the Company does not constitute a change in
ownership giving rise to a change of control if:

     (1) the transfer of a substantial portion of the Company assets is to an entity
that immediately after the transfer is controlled by shareholders of the Company; or

 

 

     (2) the transfer is to

     (A) an individual who is a shareholder of the Company immediately
before the asset transfer in exchange for or respect to the individual’s
stock in the Company;

     (B) an entity in which fifty percent (50%) or more of the total fair
market value or combined voting power of the stock of the entity is owned by
the Company;

     (C) a person, or more than one person acting as a group, who owns fifty
percent (50%) or more of the total fair market value or combined voting
power of the stock of the Company; or

     (D) an entity in which fifty percent (50%) or more of the total fair
market value or combined voting power of the stock of the entity is owned by
a person described in (2)(C), above.

     2.8 “Chief Executive Officer” means the individual serving at any relevant time as the chief
executive officer of the Company.

     2.9 “Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any
section of the Code shall be deemed to include any amendments or successor provisions to such
section and any Treasury regulations promulgated under such section.

     2.10 “Committee” means the Compensation Committee of the Board as such Compensation Committee
may be constituted from time to time pursuant to the terms of the Compensation Committee Charter of
the Board. Membership on the Committee shall be limited to Directors who (i) meet the independence
requirements of the NASDAQ and any other regulatory requirements, (ii) qualify as “Non-Employee
Directors” (as that term is defined in Rule 16b-3 (or any successor to such rule) promulgated under
the Exchange Act), and (iii) satisfy the requirements of an “outside director,” for purposes of
Section 162(m) of the Code and such Treasury regulations as may be promulgated thereunder.
Membership in the Committee shall be subject to the rotation policy set forth in the Company’s
corporate governance guidelines. All members of the Committee will serve at the pleasure of the
Board. Notwithstanding the foregoing, if the composition of the Committee does not comply with the
foregoing provisions of this Subsection, the entire Board shall constitute the Committee until such
time as a proper Committee is appointed in accordance with the foregoing provisions of this
Subsection.

     2.11 “Common Stock” means the common stock, par value $0.01 per share, which the Company is
currently authorized to issue or may in the future be authorized to issue.

     2.12 “Company” means Powell Industries, Inc., a Delaware corporation, and any successor entity
and shall, unless the context indicates otherwise, include its Affiliates.

 

 

     2.13 “Consultant” means any person (other than an Employee or a Director, solely with respect
to rendering services in such person’s capacity as a Director) who is engaged by the Company, or
any of its Affiliates to render consulting or advisory services to the Company or such Affiliate.

     2.14 “Continuous Service” means that the provision of services to the Company or an Affiliate
in any capacity as Employee, Director or Consultant is not interrupted or terminated. Except as
otherwise provided in a particular Award Agreement, service shall not be considered interrupted or
terminated for this purpose in the case of (i) any approved leave of absence, (ii) transfers among
the Company, any Affiliate, or any successor, in any capacity as Employee, Director or Consultant,
or (iii) any change in status as long as the individual remains in the service of the Company or an
Affiliate in any capacity as Employee, Director or Consultant. An approved leave of absence shall
include sick leave, military leave or any other authorized personal leave. For purposes of each
Incentive Stock Option, if such leave exceeds ninety (90) days, and re-employment upon expiration
of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be
treated as a Non-Qualified Stock Option on the day that is three (3) months and one (1) day
following the expiration of such ninety (90)-day period.

     2.15 “Date of Grant” means the effective date on which an Award is made to a Participant as
set forth in the applicable Award Agreement.

     2.16 “Director” means a member of the Board or the board of directors of an Affiliate.

     2.17 “Disability” means the “disability” of a person as defined in a then effective long-term
disability plan maintained by the Company that covers such person, or if such a plan does not exist
at any relevant time, “Disability” means the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code. For purposes of determining the time during which an
Incentive Stock Option may be exercised under the terms of an Award Agreement, “Disability” means
the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
Section 22(e)(3) of the Code provides that an individual is totally and permanently disabled if he
is unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve (12) months.

     2.18 “Employee” means any person, including an Officer or Director, who is employed, within
the meaning of Section 3401 of the Code, by the Company or an Affiliate. The provision of
compensation by the Company or an Affiliate to a Director solely with respect to such individual
rendering services in the capacity of a Director, however, shall not be sufficient to constitute
“employment” by the Company or that Affiliate.

     2.19 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor
statute. Reference in the Plan to any section of the Exchange Act shall be deemed to include any
amendments or successor provisions to such section and any rules and regulations relating to such
section.

 

 

     2.20 “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

     (a) If the Common Stock is listed on any established stock exchange or traded on the
NASDAQ National Market or the NASDAQ SmallCap Market, the Fair Market Value of a share of
Common Stock shall be the closing sales price for such a share of Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in the Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall Street Journal
or such other source as the Committee deems reliable.

     (b) In the absence of any such established markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Committee.

     2.21 “Grantee” means an Employee or Consultant to whom a Restricted Stock Award has been
granted under the Plan.

     2.22 “Incentive Stock Option” or “ISO” means a Stock Option granted under the Plan to an
Employee that meets the requirements of Section 422 of the Code.

     2.23 “Non-Qualified Stock Option” or “NQSO” means a Stock Option granted under the Plan that
does not qualify as an Incentive Stock Option (including, without limitation, any Stock Option to
purchase Common Stock originally designated as or intended to qualify as an Incentive Stock Option
but which does not (for whatever reason) qualify as an Incentive Stock Option).

     2.24 “Officer” means a person who is an “officer” of the Company or an Affiliate within the
meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the
requirements of the Exchange Act).

     2.25 “Option Price” means the price which must be paid by a Participant upon exercise of a
Stock Option to purchase a share of Common Stock.

     2.26 “Optionee” means an individual to whom a Stock Option has been granted under the Plan.

     2.27 “Participant” shall mean an Employee of the Company or an Affiliate or any Consultant to
whom an Award is granted under this Plan.

     2.28 “Performance Award” means mean any Award granted pursuant to this Plan of Common Stock,
rights based upon, payable in or otherwise related to shares of Common Stock (including Restricted
Stock) or cash, as the Committee may determine, at the end of a specified Performance Period
established by the Committee and may include, without limitation, Performance Shares or Performance
Units.

     2.29 “Performance Goal” shall mean any goal established by the Committee or its designee that
must be satisfied before a Performance Award will be payable to the recipient of the Award. With
respect to a Performance Measure selected by the Committee for purposes of

 

 

complying with Section 162(m) of the Code, “Performance Goal” shall mean the specific target
that must be met before a Performance Award subject to Section 162(m) of the Code will be payable
to the recipient of the Award.

     2.30 “Performance Measure” shall mean each of the business criteria the Company may use in
establishing a Performance Goal. For purposes of the Plan, Performance Measures are limited to
earnings per share; return on assets; return on equity; return on capital; net profit after taxes;
net profit before taxes; operating profits; stock price; sales or expenses; and “EBITDA,” which
means earnings before interest, taxes, depreciation and amortization, or as the definition of such
term may be modified from time to time by the Company.

     2.31 “Performance Period” shall mean the period established by the Committee at the time any
Award is granted or at any time thereafter over which a Performance Goal specified by the Committee
with respect to such Award will be measured.

     2.32 “Plan” means this Powell Industries, Inc. 2006 Equity Compensation Plan, as set forth
herein and as it may be amended from time to time.

     2.33 “Regulation S-K” means Regulation S-K promulgated under the Securities Act, as it may be
amended from time to time, and any successor to Regulation S-K. Reference in the Plan to any item
of Regulation S-K shall be deemed to include any amendments or successor provisions to such item.

     2.34 “Reporting Participant” means a Participant who is subject to the reporting requirements
of Section 16 of the Exchange Act.

     2.35 “Restriction Period” means the period during which the Common Stock under a Restricted
Stock Award is nontransferable and subject to “Forfeiture Restrictions” as defined in Section 6.5
of this Plan and set forth in an Award Agreement

     2.36 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant
pursuant to Section 6.5 of this Plan that are subject to restrictions or limitations set forth in
this Plan and in an Award Agreement.

     2.37 “Retirement” means the termination of employment of an Employee of the Company or any
Affiliate, other than discharge for Cause, on or after age 60 if the Employee has five (5) years of
Continuous Service or on or after age 62 regardless of the Employee’s years of Continuous Service.

     2.38 “SAR” means the right to receive a payment in shares of Common Stock, at the discretion
of the Committee, equal to the excess of the Fair Market Value of a specified number of shares of
Common Stock on the date the SAR is exercised over the SAR Price for such shares.

     2.39 “SAR Price” means the Fair Market Value of each share of Common Stock covered by an SAR,
determined on the Date of Grant of the SAR.

     2.40 “Securities Act” means the Securities Act of 1933, as amended, and any successor statute.
Reference in the Plan to any section of the Securities Act shall be deemed to include any

 

 

amendments or successor provisions to such section and any rules and regulations relating to
such section.

     2.41 “Stock Option” means a stock option granted pursuant to the Plan to purchase a specified
number of shares of Common Stock, whether granted as an Incentive Stock Option or as a
Non-Qualified Stock Option.

     2.42 “Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) at the time an Option is granted stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or of any of its
Affiliates.

     2.43 “Termination of Service” occurs when a Participant who is an Employee of the Company or
any of its Affiliates shall cease to serve as an Employee of the Company or such Affiliate or
Affiliates, for any reason.

ARTICLE 3

ADMINISTRATION

     The Plan shall be administered by the Committee. The Committee shall determine and designate
from time to time the eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other terms, provisions,
limitations and performance requirements including the Performance Measure, Performance Goal and
Performance Period applicable to any Performance Award, as are approved by the Committee, but not
inconsistent with the Plan. The Committee shall determine whether an Award shall include a single
type of Incentive, two or more types of Incentive granted in combination, or two or more types of
Incentive granted in tandem (that is, a joint grant where exercise of one Incentive results in
cancellation of all or a portion of the other Incentive).

     The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend and
rescind any rules and regulations necessary or appropriate for the administration of the Plan and
(iii) make such other determinations and take such other action as it deems necessary or advisable
in the administration of the Plan. Any interpretation, determination or other action made or taken
by the Committee shall be final, binding and conclusive on all interested parties.

     With respect to restrictions in the Plan that are based on the rules of any exchange or
inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any
other applicable law, rule or restriction, to the extent that any such restrictions are no longer
required by applicable law, the Committee shall have the sole discretion and authority to prescribe
terms for Restricted Stock Awards that are not subject to such mandated restrictions and/or to
waive any such mandated restrictions with respect to outstanding Restricted Stock Awards.

     Notwithstanding the foregoing, all rights and powers reserved to the Committee under this
Article 3 may also be exercised by the Board.

 

 

ARTICLE 4

ELIGIBILITY

     Any Employee (including an Employee who is also a Director or an Officer) or Consultant is
eligible to participate in the Plan; provided, however, that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be
required to grant, an Award to any Employee or Consultant.

     A Participant may be granted more than one Award and Awards may be granted by the Committee at
any time and from time to time to new Participants, or to Participants already participating in the
Plan, or to a greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine. Except as required by this Plan, Awards granted at
different times need not contain similar provisions. The Committee’s determinations under the Plan
(including without limitation determinations of which Employees or Consultants, if any, are to
receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards
and the agreements evidencing same) need not be uniform and may be made by it selectively among
Employees and Consultants who receive, or are eligible to receive, Awards under the Plan.

ARTICLE 5

SHARES SUBJECT TO PLAN

     Subject to adjustment as provided in Articles 13 and 14, the maximum number of shares of
Common Stock that may be delivered pursuant to Awards granted under the Plan shall not exceed
750,000. The following shares of Common Stock related to Awards will be available for issuance
again under the Plan:

     (a) Common Stock related to Awards settled in cash;

     (b) Common Stock related to Awards that expire, are forfeited or cancelled or terminate
for any other reason without the issuance of the Common Stock;

     (c) During the first ten (10) years of the Plan, Common Stock equal in number to the
 shares of Common Stock surrendered in payment of the exercise price of an Option; and

     (d) Common Stock tendered or withheld in order to satisfy withholding tax obligations.

     Shares to be issued may be made available from authorized but unissued Common Stock, Common
Stock held by the Company in its treasury or Common Stock purchased by the Company on the open
market or otherwise. During the term of this Plan, the Company will at all times reserve and keep
available a number of shares of Common Stock sufficient to satisfy the requirements of this Plan.

 

 

ARTICLE 6

GRANT OF AWARDS

     6.1 General. The grant of an Award shall be authorized by the Committee and shall be
evidenced by an Award Agreement setting forth the type of Award or Awards being granted, the total
number of shares of Common Stock subject to the Award(s), the Option Price (if applicable), the
Restriction Period (if applicable), the Award Period, the Date of Grant and such other terms,
provisions, limitations and Performance Measures as are approved by the Committee, but not
inconsistent with the Plan. The Company shall execute an Award Agreement with a Participant after
the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be
granted within ten (10) years of the date of adoption of this Plan. The Plan shall be submitted to
the Company’s stockholders for approval. The grant of an Award to a Participant shall not be
deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any
other Award under the Plan.

     Each Award Agreement shall be in such form and shall contain such terms and conditions, as the
Committee shall deem appropriate. The terms and conditions of such Award Agreements may change from
time to time, and the terms and conditions of separate Award Agreements need not be identical, but
each such Award Agreement shall be subject to the terms and conditions of this Article 6.

     If the Committee establishes a purchase price for an Award, the Participant must accept such
Award within a period of thirty (30) days (or such shorter period as the Committee may specify)
after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.

     6.2 Maximum Individual Grants. No Participant may receive during any fiscal year of
the Company Awards covering an aggregate of more than One Hundred Thousand (100,000) shares of
Common Stock.

     6.3 Terms And Conditions of Restricted Stock Awards

     (a) General. The Committee may grant Restricted Stock Awards to any Employee
or Consultant for such minimum consideration, if any, as may be required by applicable law
or such greater consideration as may be determined by the Committee. The Company shall
execute an Award Agreement specifying the terms and conditions of the Restricted Stock Award
with a Participant after the issuance of a Restricted Stock Award.

     (b) Forfeiture Restrictions. Shares of Common Stock that are the subject of a
Restricted Stock Award shall be subject to restrictions on disposition by the Grantee and to
an obligation of the Grantee to forfeit and surrender the shares to the Company under
certain circumstances (“Forfeiture Restrictions”). The Forfeiture Restrictions shall be
determined by the Committee, in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions shall lapse on the passage of time or the occurrence of such other
event or events determined to be appropriate by the Committee. The Forfeiture

 

 

Restrictions applicable to a particular Restricted Stock Award (which may differ from
any other such Restricted Stock Award) shall be stated in the Award Agreement.

     (c) Restricted Stock Awards. At the time any Restricted Stock Award is granted
under the Plan, the Company and the Grantee shall enter into an Award Agreement setting
forth the Forfeiture Restrictions, the vesting schedule (which may be based on service,
attainment of one or more pre-established Performance Goals, or other factors) and rights to
acceleration of vesting (including without limitation whether non-vested shares are
forfeited or vested upon termination of employment). Further, the Committee may grant
Performance Awards consisting of Restricted Stock by conditioning the grant, or vesting or
such other factors, such as the release, expiration or lapse of restrictions of any such
Award (including the acceleration of any such conditions or terms) upon the attainment of
specified Performance Goals or such other factors as the Committee may determine. Shares of
Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock
certificate registered in the name of the Grantee of such Restricted Stock Award or by a
book entry account with the Company’s transfer agent. The Grantee shall have the right to
receive dividends with respect to the shares of Common Stock subject to a Restricted Stock
Award; provided, however, that, at the discretion of the Committee, any such dividends shall
be credited to an account for the benefit of the Grantee. If any dividends related to a
Restricted Stock Award are credited to an account for the benefit of a Grantee and the
Grantee forfeits any or all of a Restricted Stock Award, the Grantee shall have no further
rights with respect to such Restricted Stock Award, and shall forfeit any dividends credited
to the account for the Grantee’s benefit which are related to the portion of the Restricted
Stock Award which was forfeited. To the extent the Forfeiture Restrictions lapse with
respect to all or apportion of a Restricted Stock Award, all dividends, if any, credited to
the account for the benefit of Grantee shall be used, to the extent necessary, to satisfy
any applicable federal, state and local income and employment tax withholding obligations as
described in Section 6.3(i) of the Plan. The Grantee shall have the right to vote the
 shares of Common Stock subject to a Restricted Stock Award and to enjoy all other
stockholder rights with respect to the shares of Common Stock subject thereto, except that,
unless provided otherwise in the Award Agreement, (i) the Grantee shall not be entitled to
delivery of the certificate representing the Restricted Stock until the Forfeiture
Restrictions have expired, (ii) the Company or an escrow agent shall retain custody of the
certificate representing such shares (or such shares shall be held in a book entry account
with the Company’s transfer agent) until the Forfeiture Restrictions have expired, (iii) the
Grantee may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the
Restricted Stock until the Forfeiture Restrictions have expired and (iv) a breach of the
terms and conditions established by the Committee pursuant to the Award Agreement shall
cause a forfeiture of the Restricted Stock Award. At the time of such Restricted Stock
Award, the Committee may, in its sole discretion, prescribe additional terms, conditions or
restrictions relating to the Restricted Stock Award, including rules pertaining to the
Grantee’s Termination of Service before expiration of the Forfeiture Restrictions. Such
additional terms, conditions or restrictions shall also be set forth in the Award Agreement
made in connection with the Restricted Stock Award. The forfeiture of any or all of the
Common Stock that is the subject of a Restricted Stock Award shall

 

 

not invalidate any votes given by the Grantee with respect to such Common Stock prior
to forfeiture.

     (d) Restriction Period. The Restriction Period for a Restricted Stock Award
shall commence on the Date of Grant of the Restricted Stock Award and, unless otherwise
established by the Committee and stated in the Award Agreement, shall expire upon
satisfaction of the conditions set forth in the Award Agreement pursuant to which the
Forfeiture Restrictions will lapse. The Committee may, in its sole discretion, accelerate
the Restriction Period for all or a part of a Restricted Stock Award unless to do would
jeopardize the deductibility of any such Performance Award pursuant to Section 162(m) of the
Code.

     (e) Securities Restrictions. The Committee may impose other conditions on any
 shares of Common Stock subject to a Restricted Stock Award as it may deem advisable,
including (i) restrictions under applicable state or federal securities laws and (ii) the
requirements of any stock exchange or national market system upon which shares of Common
Stock are then listed or quoted.

     (f) Payment for Restricted Stock. The Committee shall determine the amount and
form of any payment for shares of Common Stock received pursuant to a Restricted Stock
Award. If no such determination is made, the Grantee shall not be required to make any
payment for shares of Common Stock received pursuant to a Restricted Stock Award, except to
the extent otherwise required by law.

     (g) Forfeiture of Restricted Stock. Unless otherwise stated in the particular
Award Agreement, on Grantee’s Termination of Service during the Restriction Period, the
Restricted Stock still subject to the Forfeiture Restrictions contained in the Restricted
Stock Award shall be forfeited by the Grantee. Upon any forfeiture, all rights of the
Grantee with respect to the forfeited Restricted Stock subject to the Restricted Stock Award
shall cease and terminate, without any further obligation on the part of the Company, except
that, if so provided in the Award Agreement applicable to the Restricted Stock Award, the
Company shall repurchase the Restricted Stock forfeited for the purchase price per share
paid by the Grantee. The Committee will have discretion to determine the date of the
Grantee’s Termination of Service. Each Award Agreement shall require that (i) the Grantee,
by his or her acceptance of the Restricted Stock Award, shall irrevocably grant to the
Company a power of attorney to transfer any shares so forfeited to the Company and agrees to
execute any documents requested by the Company in connection with such forfeiture and
transfer, and (ii) such provisions regarding transfers of forfeited Restricted Stock shall
be specifically performable by the Company in a court of equity or law.

     (h) Lapse of Forfeiture Restrictions in Certain Events; Committee’s Discretion.
Notwithstanding the provisions of this Section 6.3(h) or any other provision in the Plan to
the contrary, the Committee may, on account of the Grantee’s Retirement, death or Disability
or otherwise, in its discretion and as of a date determined by the Committee, fully vest any
or all Restricted Stock awarded to the Grantee pursuant to a Restricted Stock Award, and
upon such vesting, all Forfeiture Restrictions applicable to

 

 

such Restricted Stock Award shall lapse or terminate. The Committee shall have
discretion to determine whether a Grantee’s Termination of Service was as a result of a
Grantee’s Retirement, death or Disability. Any action by the Committee pursuant to this
Section 6.3(h) may vary among individual Grantees and may vary among the Restricted Stock
Awards held by any individual Grantee.

     (i) Withholding Taxes. The Committee may establish such rules and procedures
as it considers desirable in order to satisfy any obligation of the Company to withhold
applicable federal, state and local income and employment taxes with respect to the lapse of
Forfeiture Restrictions applicable to Restricted Stock Awards. Before delivery of shares of
Restricted Stock upon the lapse of Forfeitures Restrictions applicable to a Restricted Stock
Award, the Grantee shall pay or make adequate provision acceptable to the Committee for the
satisfaction of all tax withholding obligations of the Company.

     (j) Rights and Obligations of Grantee. One or more stock certificates
representing shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to
the Grantee promptly after, and only after, the Forfeiture Restrictions have expired and
Grantee has satisfied all applicable federal, state and local income and employment tax
withholding requirements.

     6.4 Terms And Conditions of Options. The Committee may grant Stock Options alone or
in addition to other Awards granted pursuant to this Plan to any Employee or Consultant. The
Committee shall determine (a) whether each Stock Option shall be granted as an Incentive Stock
Option or a Non-Qualified Stock Option and (b) the provisions, terms and conditions of each Stock
Option including, but not limited to, the vesting schedule, the number of shares of Common Stock
subject to the Stock Option, the exercise price of the Stock Option, the period during which the
Stock Option may be exercised, repurchase provisions, forfeiture provisions, methods of payment,
and all other terms and conditions of the Stock Option, subject to the following:

     (a) Form of Stock Option Grant. Each Stock Option granted under the Plan shall
be evidenced by a written Award Agreement in such form (which need not be the same for each
Optionee) as the Committee, or if applicable the Chief Executive Officer, from time to time
approves, but which is not inconsistent with the Plan, including any provisions that may be
necessary to assure that any Stock Option that is intended to be an Incentive Stock Option
will comply with Section 422 of the Code.

     (b) Date of Grant. The Date of Grant of a Stock Option will be the date on
which the Committee makes the determination to grant such Stock Option unless otherwise
specified by the Committee. The Award Agreement evidencing the Stock Option will be
delivered to the Optionee with a copy of the Plan and other relevant Stock Option documents,
within a reasonable time after the Date of Grant.

     (c) Exercise Price. The exercise price of a Stock Option shall be not less
than 100% of the Fair Market Value of a share of the Common Stock on the Date of Grant of
the Stock Option. The exercise price of any Incentive Stock Option granted to a Ten

 

 

Percent Shareholder shall not be less than 110% of the Fair Market Value of a share of
Common Stock on the Date of Grant of the Stock Option.

     (d) Exercise Period. Stock Options shall be exercisable within the time or
times or upon the event or events determined by the Committee and set forth in the Award
Agreement; provided, however, that no Stock Option shall be exercisable later than the day
before the expiration of ten (10) years from the Date of Grant of the Stock Option, and
provided further that no Incentive Stock Option granted to a Ten Percent Shareholder shall
be exercisable after the expiration of five (5) years from the Date of Grant of the Stock
Option.

     (e) Limitations on Incentive Stock Options. The aggregate Fair Market Value
(determined as of the Date of Grant of a Stock Option) of Common Stock which any Employee is
first eligible to purchase during any calendar year by exercise of Incentive Stock Options
granted under the Plan and by exercise of incentive stock options (within the meaning of
Section 422 of the Code) granted under any other incentive stock option plan of the Company
or an Affiliate shall not exceed $100,000. If the Fair Market Value of stock with respect
to which all incentive stock options described in the preceding sentence held by any one
Optionee are exercisable for the first time by such Optionee during any calendar year
exceeds $100,000, the Stock Options that are intended to be Incentive Stock Options on the
Date of Grant thereof for the first $100,000 worth of shares of Common Stock to become
exercisable in such year shall be deemed to constitute incentive stock options within the
meaning of Section 422 of the Code and the Stock Options that are intended to be Incentive
Stock Options on the Date of Grant thereof for the shares of Common Stock in the amount in
excess of $100,000 that become exercisable in that calendar year shall be treated as
Non-Qualified Stock Options. If the Code or the Treasury regulations promulgated thereunder
are amended after the effective date of the Plan to provide for a different limit than the
one described in this Section 6.4(e), such different limit shall be incorporated herein and
shall apply to any Stock Options granted after the effective date of such amendment.

     (f) Acquisitions and Other Transactions. The Committee may, from time to time,
assume outstanding options granted by another entity, whether in connection with an
acquisition of such other entity or otherwise, by either (i) granting a Stock Option under
the Plan in replacement of or in substitution for the option assumed by the Company, or
(ii) treating the assumed option as if it had been granted under the Plan if the terms of
such assumed option could be applied to a Stock Option granted under the Plan. Such
assumption shall be permissible if the holder of the assumed option would have been eligible
to be granted a Stock Option hereunder if the other entity had applied the rules of this
Plan to such grant. The Committee also may grant Stock Options under the Plan in settlement
of or substitution for outstanding options or obligations to grant future options in
connection with the Company or an Affiliate acquiring another entity, an interest in another
entity or an additional interest in an Affiliate whether by merger, stock purchase, asset
purchase or other form of transaction. Notwithstanding the foregoing provisions of this
Section 6.4, in the case of a Stock Option issued or assumed pursuant to this
Section 6.4(f), the exercise price for the Stock Option shall be determined

 

 

in accordance with the principles of Section 424(a) of the Code and the Treasury
regulations promulgated thereunder.

     6.5 Exercise of Stock Options.

     (a) Notice. Stock Options may be exercised only by delivery to the Company of
a written exercise notice approved by the Committee (which need not be the same for each
Optionee), stating the number of shares of Common Stock being purchased, the method of
payment, and such other matters as may be deemed appropriate by the Company in connection
with the issuance of shares of Common Stock upon exercise of the Stock Option, together with
payment in full of the exercise price for the number of shares of Common Stock being
purchased. Such exercise notice may be part of an Optionee’s Award Agreement.

     (b) Early Exercise. An Award Agreement may, but need not, include a provision
that permits the Optionee to elect at any time while an Employee or Consultant, to exercise
any part or all of the Stock Option before full vesting of the Stock Option. Any unvested
 shares of Common Stock received pursuant to such exercise may be subject to a repurchase
right in favor of the Company or an Affiliate or to any other restriction the Committee
determines to be appropriate.

     (c) Payment. Payment for the shares of Common Stock to be purchased upon
exercise of a Stock Option may be made in cash (by check) or, if elected by the Optionee, in
one or more of the following methods as may be stated in the Award Agreement (at the Date of
Grant with respect to any Stock Option granted as an Incentive Stock Option) and where
permitted by law: (i) if a public market for the Common Stock exists, through a “same day
sale” arrangement between the Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers, Inc. (an “NASD Dealer”) whereby the Optionee
elects to exercise the Stock Option and to sell a portion of the shares of Common Stock so
purchased to pay for the exercise price and whereby the NASD Dealer commits upon receipt of
such shares of Common Stock to forward the exercise price directly to the Company; (ii) if a
public market for the Common Stock exists, through a “margin” commitment from the Optionee
and an NASD Dealer whereby the Optionee elects to exercise the Stock Option and to pledge
the shares of Common Stock so purchased to the NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD
Dealer commits upon receipt of such shares of Common Stock to forward the exercise price
directly to the Company; (iii) by surrender for cancellation of shares of Common Stock at
the Fair Market Value per share at the time of exercise if such surrender does not result in
an accounting charge for the Company; (iv) where approved by the Committee at the time of
exercise, by delivery of the Optionee’s promissory note with such recourse, interest,
security, redemption and other provisions as the Committee may require, subject to payment
in cash of the aggregate par value of the shares of Common Stock to be purchased; or (v) in
any other form of valid consideration that is acceptable to the Committee in its sole
discretion. No shares of Common Stock may be issued until full payment of the purchase
price therefor has been made. The payment options provided in Section 6.5(c)(i), (ii), or
(iv) above shall not be available to any Optionee who is a

 

 

Director or executive officer of the Company or any Affiliate if such payment option
would be treated as a personal loan prohibited under Section 13(k) of the Exchange Act.

     Upon payment of all amounts due from the Participant, the Company shall cause
certificates for the Common Stock then being purchased to be delivered as directed by the
Participant (or the person exercising the Participant’s Stock Option in the event of his
death) at its principal business office promptly after the Exercise Date. If the
Participant has exercised an Incentive Stock Option, the Company may at its option retain
physical possession of the certificate evidencing the shares acquired upon exercise until
the expiration of the holding periods described in Section 422(a)(1) of the Code. The
obligation of the Company to deliver shares of Common Stock shall, however, be subject to
the condition that if at any time the Committee shall determine in its discretion that the
listing, registration or qualification of the Stock Option or the Common Stock upon any
securities exchange or inter-dealer quotation system or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Stock Option or the issuance or purchase of shares
of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.

     If the Participant fails to pay for any of the Common Stock specified in such notice or
fails to accept delivery thereof, the Participant’s right to purchase such Common Stock may
be terminated by the Company.

     (d) Withholding Taxes. The Committee may establish such rules and procedures
as it considers desirable in order to satisfy any obligation of the Company to withhold the
statutory prescribed minimum amount of federal or state income taxes or other taxes with
respect to the exercise of any Stock Option granted under the Plan. Before issuance of the
 shares of Common Stock upon exercise of a Stock Option, the Optionee shall pay or make
adequate provision acceptable to the Committee for the satisfaction of the statutory
prescribed minimum amount of any federal or state income or other tax withholding
obligations of the Company, if applicable. Upon exercise of a Stock Option, the Company
shall withhold or collect from the Optionee an amount sufficient to satisfy such tax
withholding obligations.

     (e) Exercise of Stock Option Following Termination of Continuous Service.

     (1) A Stock Option may not be exercised after the expiration date of such Stock
Option set forth in the Award Agreement and may be exercised following the
termination of an Optionee’s Continuous Service only to the extent provided in the
Award Agreement.

     (2) Where the Award Agreement permits an Optionee to exercise a Stock Option
following the termination of the Optionee’s Continuous Service for a specified
period, the Stock Option shall terminate to the extent not exercised on the last day
of the specified period or the last day of the original term of the Stock Option,
whichever occurs first.

 

 

     (3) Any Stock Option designated as an Incentive Stock Option, to the extent not
exercised within the time permitted by law for the exercise of Incentive Stock
Options following the termination of an Optionee’s Continuous Service, shall convert
automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as
a Non-Qualified Stock Option to the extent exercisable by its terms for the period
specified in the Award Agreement.

     (4) The Committee shall have discretion to determine whether the Continuous
Service of an Optionee has terminated and the effective date on which such
Continuous Service terminates and whether the Optionee’s Continuous Service
terminated as a result of the Disability of the Optionee.

     (5) Notwithstanding the forgoing, all Stock Options which have not been
previously exercised will be forfeited if an Optionee is terminated for Cause.

     (f) Limitations on Exercise.

     (1) The Committee may specify a reasonable minimum number of shares of Common
Stock or a percentage of the shares subject to a Stock Option that may be purchased
on any exercise of a Stock Option. Such minimum number shall not prevent Optionee
from exercising the full number of shares of Common Stock as to which the Stock
Option is then exercisable.

     (2) The obligation of the Company to issue any shares of Common Stock pursuant
to the exercise of any Stock Option shall be subject to the condition that such
exercise and the issuance and delivery of such shares pursuant thereto comply with
the Securities Act, all applicable state securities laws and the requirements of any
stock exchange or national market system upon which the shares of Common Stock may
then be listed or quoted, as in effect on the date of exercise. The Company shall
be under no obligation to register the shares of Common Stock with the Securities
and Exchange Commission or to effect compliance with the registration, qualification
or listing requirements of any state securities laws or stock exchange or national
market system, and the Company shall have no liability for any inability or failure
to do so.

     (3) As a condition to the exercise of a Stock Option, the Company may require
the person exercising such Stock Option to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares of
Common Stock if, in the opinion of counsel for the Company, such a representation is
required by any securities or other applicable laws.

     (g) Modification, Extension And Renewal of Stock Options. The Committee shall
have the power to modify, cancel, extend or renew outstanding Stock Options and to authorize
the grant of new Stock Options and/or Restricted Stock Awards in substitution therefor
(regardless of whether any such action would be treated as a repricing for

 

 

financial accounting or other purposes), provided that (except as permitted by
Section 11 of this Plan) any such action may not, without the written consent of any
Optionee, impair any rights under any Stock Option previously granted to such Optionee. Any
outstanding Incentive Stock Option that is modified, extended, renewed or otherwise altered
will be treated in accordance with Section 424(h) of the Code.

     (h) Privileges of Stock Ownership. No Optionee will have any of the rights of
a shareholder with respect to any shares of Common Stock subject to a Stock Option until
such Stock Option is properly exercised and the purchased shares are issued and delivered to
the Optionee, as evidenced by an appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to such date of issuance
and delivery, except as provided in the Plan.

     6.6 Stock Appreciation Rights.

     (a) Grants. The Committee or the Board may grant to any eligible Employee or
Consultant a stand-alone Stock Appreciation Right or a Stock Appreciation Right issued in
tandem with a Stock Option. Stock Appreciation Rights shall be subject to such terms and
conditions as the Committee or the Board shall impose. The grant of the Stock Appreciation
Right may provide that the holder will be paid for the value of the Stock Appreciation Right
either in cash or in shares of Common Stock, or a combination thereof, at the sole
discretion of the Committee or the Board. In the event of the exercise of a Stock
Appreciation Right payable in shares of Common Stock, the holder of the Stock Appreciation
Right shall receive that number of whole shares of Common Stock having an aggregate Fair
Market Value on the date of exercise equal to the value obtained by multiplying (i) either
(a) in the case of a Stock Appreciation Right issued in tandem with a Stock Option, the
difference between the Fair Market Value of a share of Common Stock on the date of exercise
over the exercise price per share of the related Stock Option, or (b) in the case of a
stand-alone Stock Appreciation Right, the difference between the Fair Market Value of a
share of Common Stock on the date of exercise over the Fair Market Value of a share of
Common Stock on the date of the grant of the Stock Appreciation Right by (ii) the number of
 shares of Common Stock with respect to which the Stock Appreciation Right is exercised.
However, notwithstanding the foregoing, the Committee or the Board, in its sole discretion,
may place a ceiling on the amount payable upon exercise of a Stock Appreciation Right, but
any such limitation shall be specified at the time that the Stock Appreciation Right is
granted.

     (b) Exercisability. A Stock Appreciation Right granted in tandem with an
Incentive Stock Option (i) may be exercised at, and only at, the times and to the extent the
related Incentive Stock Option is exercisable, (ii) will expire upon the termination or
expiration of the related Incentive Stock Option, (iii) may not result in a Participant
realizing more than 100% of the difference between the exercise price of the related
Incentive Stock Option and the Fair Market Value of the shares of Common Stock subject to
the related Incentive Stock Option at the time the Stock Appreciation Right is exercised,
and (iv) may be exercised at, and only at, such times as the Fair Market Value of the shares
of Common Stock subject to the related Incentive Stock Option exceeds the

 

 

exercise price of the related Incentive Stock Option. A Stock Appreciation Right
granted in tandem with a Non-Qualified Stock Option will be exercisable as provided by the
Committee or the Board and will have such other terms and conditions as the Committee or the
Board may determine. A Stock Appreciation Right may be transferred at, and only at, the
times and to the extent the related Stock Option is transferable. If a Stock Appreciation
Right is granted in tandem with a Stock Option, there shall be surrendered and cancelled
from the related Stock Option at the time of exercise of the Stock Appreciation Right, in
lieu of exercise pursuant to the related Stock Option, that number of shares of Common Stock
as shall equal the number of shares of Common Stock as to which the tandem Stock
Appreciation Right shall have been exercised.

     (c) Certain Limitations on Non-Tandem Stock Appreciation Rights. A stand-alone
Stock Appreciation Right will be exercisable as provided by the Committee or the Board and
will have such other terms and conditions as the Committee or the Board may determine. A
stand-alone Stock Appreciation Right is subject to acceleration of vesting or immediate
termination in certain circumstances in the same manner as Stock Options pursuant to
Subsections 6.5 and 6.6 of this Plan.

     (d) Limited Stock Appreciation Rights. The Committee and the Board may grant
Stock Appreciation Rights which will become exercisable only upon the occurrence of a Change
in Control or such other event as the Committee or the Board may designate at the time of
grant or thereafter. Such a Stock Appreciation Right may be issued either as a stand-alone
Stock Appreciation Right or in tandem with a Stock Option.

     (e) Method of Exercise. Subject to the conditions of this Section 6.6(b) and
such administrative regulations as the Committee may from time to time adopt, a Stock
Appreciation Right may be exercised by the delivery (including by fax) of written notice to
the Committee setting forth the number of shares of Common Stock with respect to which the
Stock Appreciation Right is to be exercised and the date of exercise thereof (“Exercise
Date”) which shall be at least three (3) days after giving such notice unless an earlier
time shall have been mutually agreed upon. On the Exercise Date, the Participant shall
receive from the Company in exchange therefor the amount set forth in Section 6.6(a) above.

     6.7 Terms and Conditions of Performance Awards

     (a) General. A Performance Award may consist of either or both, as the
Committee may determine, of (a) the right to receive shares of Common Stock of the Company
or Restricted Stock or any combination thereof as the Committee may determine or (b) the
right to receive a fixed dollar amount payable in shares of Common Stock of the Company,
Restricted Stock, cash or any combination thereof, as the Committee may determine. The
Committee may grant Performance Awards to any Employee or Consultant for such minimum
consideration, if any, as may be required by applicable law or such greater consideration as
may be determined by the Committee in its sole discretion. The terms and conditions of
Performance Awards shall be specified at the time of the grant and may include provisions
establishing the Performance Period, the Performance Measure to be used to determine whether
a Performance Goal for a

 

 

Performance Period has been achieved, the criteria used to determine vesting (including
the acceleration thereof), whether Performance Awards are forfeited or vest upon termination
of employment during a Performance Period and the maximum or minimum settlement values.
Each Performance Award shall have its own terms and conditions, which shall be determined by
the Committee in its sole discretion. If the Committee in its sole discretion determines
that the established Performance Measures or objectives are no longer suitable because of a
change in the Company’s business, operations, corporate structure or for other reasons that
the Committee deems satisfactory, the Committee may modify the Performance Measures or
objectives and/or the Performance Period unless to do would jeopardize the deductibility of
any such Performance Award pursuant to Section 162(m) of the Code. Except to the extent
otherwise specified by the Committee, Performance Awards are subject to acceleration of
vesting, termination of restrictions and termination in the same manner as Stock Options.

     (b) Performance Measures. Performance Awards may be valued by reference to the
Fair Market Value of a share of Common Stock or according to any other formula or method
deemed appropriate by the Committee, including without limitation achievement of specific
Performance Measure that the Committee believes relevant or the Company’s performance or the
performance of the Common Stock measured against the performance of the market, the
Company’s industry segment or its direct competitors. Performance Awards may also be
conditioned upon the applicable Participant remaining in the employ of the Company for a
specified period. Performance Awards may be paid in cash, shares of Common Stock (including
Restricted Stock) or other consideration or any combination thereof. Performance Awards may
be payable in a single payment or in installments and may be payable at a specified date or
dates or upon attaining the performance objective or objectives, all at the sole discretion
of the Committee. The extent to which any applicable performance objective has been
achieved shall be conclusively determined by the Committee in its sole discretion.

     6.8 Tandem Awards. The Committee may grant two or more Incentives in one Award in the
form of a “tandem award,” so that the right of the Participant to exercise one Incentive shall be
canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option
and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to 100
shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be
canceled to the extent of 100 shares of Common Stock.

     6.9 Disqualifying Disposition of ISO. If shares of Common Stock acquired upon
exercise of an Incentive Stock Option are disposed of by a Participant before the expiration of
either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer
of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant
shall notify the Company in writing of the date and terms of such disposition. A disqualifying
disposition by a Participant shall not affect the status of any other Stock Option granted under
the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.

 

 

ARTICLE 7

AMENDMENT OR DISCONTINUANCE

     Subject to the limitations set forth in this Article 7, the Board may at any time and from
time to time, without the consent of the Participants, alter, amend, revise, suspend, or
discontinue the Plan in whole or in part; provided, however, that no amendment which requires
stockholder approval in order for the Plan and Incentives awarded under the Plan to continue to
comply with Section 162(m) of the Code, including any successors to such Section, shall be
effective unless such amendment shall be approved by the requisite vote of the stockholders of the
Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or
advisable by the committee, be applicable to any outstanding Incentives theretofore granted under
the Plan, notwithstanding any contrary provisions contained in any stock option agreement. In the
event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan
shall, upon request of the Committee and as a condition to the exercisability thereof, execute a
conforming amendment in the form prescribed by the Committee to any Award Agreement relating
thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law,
no action contemplated or permitted by this Article 7 shall adversely affect any rights of
Participants or obligations of the Company to Participants with respect to any Incentive
theretofore granted under the Plan without the consent of the affected Participant.

ARTICLE 8

TERM

     The Plan shall be effective from the date that this Plan is approved by the Board, subject to
approval of the stockholders of the Company. Unless sooner terminated by action of the Board, the
Plan will terminate on December 31, 2016, but Incentives granted before that date will continue to
be effective in accordance with their terms and conditions.

ARTICLE 9

CAPITAL ADJUSTMENTS

     If at any time while the Plan is in effect, or Incentives are outstanding, there shall be any
increase or decrease in the number of issued and outstanding shares of Common Stock resulting from
(1) the declaration or payment of a stock dividend, (2) any recapitalization resulting in a stock
split-up, combination, or exchange of shares of Common Stock or (3) other increase or decrease in
such shares of Common Stock effected without receipt of consideration by the Company, then and in
such event:

     (a) An appropriate adjustment shall be made in the maximum number of shares of Common
Stock then subject to being awarded under the Plan and in the maximum number of shares of
Common Stock that may be awarded to a Participant to the end that the same proportion of the
Company’s issued and outstanding shares of Common Stock shall continue to be subject to
being so awarded.

 

 

     (b) Appropriate adjustments shall be made in the number of shares of Common Stock and
the Option Price thereof then subject to purchase pursuant to each such Stock Option
previously granted and unexercised, to the end that the same proportion of the Company’s
issued and outstanding shares of Common Stock in each such instance shall remain subject to
purchase at the same aggregate Option Price.

     (c) Appropriate adjustments shall be made in the number of SARs and the price thereof
then subject to exercise pursuant to each such SAR previously granted and unexercised, to
the end that the same proportion of the Company’s issued and outstanding shares of Common
Stock in each instance shall remain subject to exercise at the same aggregate price.

     (d) Appropriate adjustments shall be made in the number of outstanding shares of
Restricted Stock with respect to which restrictions have not yet lapsed before any such
change.

     Except as otherwise expressly provided herein, the issuance by the Company of shares of its
capital stock of any class, or securities convertible into shares of capital stock of any class,
either in connection with direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall be made with
respect to (i) the number of or Option Price of shares of Common Stock then subject to outstanding
Stock Options granted under the Plan, (ii) he number of or SAR Price of SARs then subject to
outstanding SARs granted under the Plan or (iii) he number of outstanding shares of Restricted
Stock.

     Upon the occurrence of each event requiring an adjustment with respect to any Incentive, the
Company shall communicate by reasonable means intended to reach to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding upon each such
Participant.

ARTICLE 10

RECAPITALIZATION, MERGER AND CONSOLIDATION;

CHANGE IN CONTROL

     10.1 Authority. The existence of this Plan and Incentives granted hereunder shall not
affect in any way the right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital
structure and its business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock
or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or otherwise.

     10.2 Adjustment upon Merger. Subject to any required action by the stockholders, if
the Company shall be the surviving or resulting corporation in any merger, consolidation or

 

 

share exchange, any Incentive granted hereunder shall pertain to and apply to the securities
or rights (including cash, property, or assets) to which a holder of the number of shares of Common
Stock subject to the Incentive would have been entitled. In the event of any merger, consolidation
or share exchange pursuant to which the Company is not the surviving or resulting corporation,
there shall be substituted for each share of Common Stock subject to the unexercised portions of
such outstanding Incentives, that number of shares of each class of stock or other securities or
that amount of cash, property, or assets of the surviving, resulting or consolidated company which
were distributed or distributable to the stockholders of the Company in respect to each share of
Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock,
securities, cash, or property in accordance with their terms. Notwithstanding the foregoing,
however, all such Incentives may be canceled by the Company as of the effective date of any such
reorganization, merger, consolidation, share exchange or any dissolution or liquidation of the
Company by giving notice to each holder thereof or his personal representative of its intention to
do so and by permitting the purchase during the thirty (30) day period next preceding such
effective date of all of the shares of Common Stock subject to such outstanding Incentives.

     10.3 Change of Control. Upon the occurrence of a Change of Control, then,
notwithstanding any other provision in this Plan to the contrary, all unmatured installments of
Incentives outstanding shall thereupon automatically be accelerated and exercisable in full and all
Restriction Periods applicable to Awards of Restricted Stock shall automatically expire. The
determination of the Committee that any of the foregoing conditions in this Article 10 has been met
shall be binding and conclusive on all parties.

ARTICLE 11

LIQUIDATION OR DISSOLUTION

     If the Company shall, at any time while any Incentive under this Plan shall be in force and
remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate or
wind up its affairs, then each Participant shall be thereafter entitled to receive, in lieu of each
share of Common Stock of the Company which such Participant would have been entitled to receive
under an Incentive, pursuant to the terms of the Participant’s Award Agreement as of the date the
Company sells all or substantially all of its property, or dissolves, liquidates or winds up its
affairs, the same kind and amount of any securities or assets as may be issuable, distributable or
payable upon any such sale, dissolution, liquidation or winding up with respect to each share of
Common Stock of the Company. If the Company shall, at any time before the expiration of any
Incentive, make any partial distribution of its assets, in the nature of a partial liquidation,
whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out
of earned surplus and designated as such) then in such event the exercise price of outstanding
Stock Options or price then in effect with respect to outstanding SARs shall be reduced, on the
payment date of such distribution, in proportion to the percentage reduction in the tangible book
value of the shares of the Company’s Common Stock (determined in accordance with generally accepted
accounting principles) resulting by reason of such distribution.

 

 

ARTICLE 12

INCENTIVES IN SUBSTITUTION FOR INCENTIVES

GRANTED BY OTHER CORPORATION

     Incentives may be granted under the Plan from time to time in substitution for similar
instruments held by employees of a corporation who become or are about to become management
Employees of the Company or any of its Affiliates as a result of a merger or consolidation of the
employing corporation with the Company or the acquisition by the Company of stock of the employing
corporation. The terms and conditions of the substitute Incentives so granted may vary from the
terms and conditions set forth in this Plan to such extent as the Board at the time of grant may
deem appropriate to conform, in whole or in part, to the provisions of the Incentives in
substitution for which they are granted.

ARTICLE 13

MISCELLANEOUS PROVISIONS

     13.1 Investment Intent. The Company may require that there be presented to and filed
with it by any Participant under the Plan such evidence as it may deem necessary to establish that
the Incentives granted or the shares of Common Stock to be purchased or transferred are being
acquired for investment and not with a view to their distribution.

     13.2 No Effect on Retirement and Other Benefit Plans. Except as specifically provided
in a retirement or other benefit plan of the Company or an Affiliate, Options shall not be deemed
compensation for purposes of computing benefits or contributions under any retirement plan of the
Company or an Affiliate, and shall not affect any benefits under any other benefit plan of any kind
or any benefit plan subsequently instituted under which the availability or amount of benefits is
related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

     13.3 No Right to Continued Employment. Neither the Plan nor any Incentive granted
under the Plan shall confer upon any Participant any right with respect to continuance of
employment by the Company or any Subsidiary.

     13.4 Indemnification of Board and Committee. No member of the Board or the Committee,
nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action, determination or
interpretation.

     13.5 Effect of the Plan. Neither the adoption of this Plan nor any action of the
Board or the Committee shall be deemed to give any person any right to be granted an Award or any
other rights except as may be evidenced by an Award Agreement, or any amendment thereto,

 

 

duly authorized by the Committee and executed on behalf of the Company, and then only to the
extent and upon the terms and conditions expressly set forth therein.

     13.6 Severability and Reformation. The Company intends all provisions of the Plan to
be enforced to the fullest extent permitted by law. Accordingly, should a court of competent
jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as
written, the court should reform the provision to such narrower scope as it determines to be
enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid or
unenforceable under present or future law, such provision shall be fully severable and severed, and
the Plan shall be construed and enforced as if such illegal, invalid or unenforceable provision
were never a part hereof, and the remaining provisions of the Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable provision or by its
severance.

     13.7 Governing Law. The Plan shall be construed and interpreted in accordance with
the laws of the State of Texas.

     13.8 Code Section 83(b) Elections. Neither the Company nor any of its Affiliates have
any responsibility for a Participant’s election, attempt to elect or failure to elect to include
the value of an Award subject to Section 83 in the Participant’s gross income for the year of grant
pursuant to Section 83(b) of the Code. Any Participant who makes an election pursuant to Section
83(b) will promptly provide the Committee with a copy of the election form.

     13.9 Code Section 162(m). It is the intent of the Company that the Plan comply in all
respects with Section 162(m) of the Code and that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such intention. If the Committee intends
for a Performance Award or the Award of Restricted Stock Award to be granted and administered in a
manner designed to preserve the deductibility of the resulting compensation in accordance with
Section 162(m) of the Code, then the Performance Measure selected, the Performance Goal (in terms
of an objective formula or standard pursuant to which a third party with knowledge of the relevant
performance results could calculate the amount to be paid), the maximum number of shares of Common
Stock that may be awarded, within the limit described in Section 6.2 hereof, and the Performance
Period applicable to such Award shall be established in writing by the Committee no later than the
earlier of (i) 90 days after the commencement of the relevant Performance Period and (ii) the date
as of which 25% of the Performance Period has elapsed. At the time a Performance Goal is
established, its outcome must be substantially uncertain. The Committee’s discretion to modify or
waive the Performance Goal related to the vesting of the Award may be restricted in order to comply
with Section 162(m) of the Code.

     13.10 Code Section 409A. It is the intent of the Company that no Award under the Plan
be subject to Section 409A of the Code. The Committee shall design and administer the Awards under
the Plan so that they are not subject to Section 409A of the Code.

     13.11 Compliance With Other Laws and Regulations. Notwithstanding anything contained
herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock
under any Incentive if the issuance thereof would constitute a violation by the Participant or the
Company of any provisions of any law or regulation of any governmental

 

 

authority or any national securities exchange or inter-dealer quotation system or other forum
in which shares of Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale or issuance of shares
of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if
any, as the Committee may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the
Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any government or regulatory agency as
may be required.

     13.12 Tax Requirements.

     (a) Whenever shares of Common Stock are to be issued under an Award of Restricted Stock
or a Performance Award, or pursuant to the exercise of a Stock Option or Stock Appreciation
Right, or other Award or cash is to be paid pursuant to the terms of the Plan, under
circumstances in which the Company, or its designee, believes that any federal, state or
local tax withholding may be imposed, the Company or Affiliate, as the case may be, shall
have the right to require the Participant to remit to the Company or Affiliate, as the case
may be, an amount sufficient to satisfy the minimum federal, state and local tax withholding
requirements prior to the electronic transfer of ownership, the delivery of any certificate
for shares of Common Stock, if applicable, or any proceeds; provided, however, that in the
case of a Participant who receives an Award of Restricted Stock or a Performance Award under
the Plan which remains subject to forfeiture restrictions or is not fully vested, the
Participant shall remit such amount on the first business day following the Tax Date. The
“Tax Date” for purposes of this Section 13.12 shall be the date on which the amount of tax
to be withheld is determined. If a Participant makes a disposition of Common Stock acquired
upon the exercise of an Incentive Stock Option within either two years after the Stock
Option was granted or one year after its exercise by the Participant, the Participant shall
promptly notify the Company and the Company shall have the right to require the Participant
to pay to the Company an amount sufficient to satisfy federal, state and local tax
withholding requirements.

     (b) A Participant who is obligated to pay the Company an amount required to be withheld
under applicable tax withholding requirements may pay such amount (i) in cash; (ii) in the
discretion of the Committee, or its designee, through the delivery to the Company of
previously-owned shares of Common Stock having an aggregate Fair Market Value on the Tax
Date equal to the tax obligation provided that the previously owned shares of Common Stock
delivered in satisfaction of the withholding obligations must have been held by the
Participant for at least six (6) months; (iii) in the discretion of the Company, or its
designee, through the Company’s withholding shares of Common Stock otherwise issuable to the
Participant having a Fair Market Value on the Tax Date equal to the amount of tax required
to be withheld, or (iv) in the discretion of the Committee, or its designee, through a
combination of the procedures set forth in subsections (i), (ii) and (iii) of this Section
13.12(b).

 

 

     13.13 Assignability.

     (a) Other than pursuant to a valid qualified domestic relations order as defined in
Section 414(p) of the Code or Title I of ERISA, as provided in paragraph (b) of this
Section 15.13, below, Incentive Stock Options may not be transferred or assigned
other than by will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or the Participant’s legally authorized
representative, and each Award agreement in respect of an Incentive Stock Option shall so
provide. The designation by a Participant of a Beneficiary will not constitute a transfer
of the Stock Option. The Committee may waive or modify any limitation contained in the
preceding sentences of this Section 13.13 that is not required for compliance with Section
422 of the Code. The Committee may, in its discretion, authorize all or a portion of a
Non-Qualified Stock Option or SAR to be granted to a Participant to be on terms which permit
transfer by such Participant to (i) the spouse, children or grandchildren of the Participant
(“Immediate Family Members”), (ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are
the only partners, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled
income fund described in Section 2522(c)(2) of the Code or any successor provision,
provided that (w) there shall be no consideration for any such transfer, (x) the
Award Agreement pursuant to which such Non-Qualified Stock Option or SAR is granted must be
approved by the Committee and must expressly provided for transferability in a manner
consistent with this Section 13.13, (y) no such transfer shall be permitted if the Common
Stock issuable under such transferred Stock Option would not be eligible to be registered on
Form S-8 promulgated under the Securities Act, and (z) subsequent transfers of transferred
Non-Qualified Stock Options or Stock Appreciation Rights shall be prohibited except those by
will or the laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of ERISA. Following transfer, any such
Non-Qualified Stock Option and SAR shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for purposes of
Section 6.5(c) or Section 6.6, as applicable, and Articles 7, 9, 10, 11, 12 and 13 hereof
the term “Participant” shall be deemed to include the transferee. The events of a
termination of service shall continue to be applied with respect to the original
Participant, following which the Non-Qualified Stock Options and Stock Appreciation Rights
shall be exercisable by the transferee only to the extent and for the periods specified in
the original Award Agreement and applicable to the Participant. The Committee and the
Company shall have no obligation to inform any transferee of a Non-Qualified Stock Option or
SAR of any expiration, termination, lapse or acceleration of such Option. The Company shall
have no obligation to register with any federal or state securities commission or agency any
Common Stock issuable or issued under a Non-Qualified Stock Option or SAR that has been
transferred by a Participant under this Section 13.13.

     (b) Notwithstanding the foregoing, Stock Options and such other Awards as the Committee
may determine may be transferred pursuant to a valid qualified domestic relations order as
defined in Section 414(p) of the Code or Title I of ERISA pursuant to which a court has
determined, in connection with a divorce proceeding, that a spouse or

 

 

former spouse of a Participant has an interest in the Participant’s Award under the
Plan. Any Incentive Stock Option transferred pursuant to this Section 13.13 shall cease to
be an Incentive Stock Option on the date of such transfer and shall be treated for all
purposes as a Non-Qualified Stock Option in the hands of the transferee. Following any such
transfer each Award transferred shall continue to be subject to the same terms and
conditions of the Plan and the Award agreement applicable to the Award immediately prior to
transfer, provided that for all purposes under the Plan the term “Participant” shall be
deemed to include the transferee. The effect a Termination of Service shall have on the
exercisability of an Award with respect to the original Participant shall continue to apply
to a transferee after a transfer pursuant to this Section 13.13, so that the Award
transferred shall be exercisable by the transferee only to the extent and for the periods
specified in the Plan, unless different periods are otherwise provided in a Participant’s
original Award agreement. The Committee and the Company shall have no obligation to inform
any transferee of an Award of any expiration, termination, lapse or acceleration of such
Award. The Company shall have no obligation to register with any federal or state
securities commission or agency any Company Stock issuable or issued under an Award that has
been transferred pursuant to this Section 13.13.

     13.14 Interpretive Matters. Whenever required by the context, pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular
shall include the plural, and visa versa. The term “include” or “including” does not denote or
imply any limitation. The captions and headings used in the Plan are inserted for convenience and
shall not be deemed a part of the Plan for construction or interpretation.

     13.15 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to
Incentives granted under this Plan shall constitute general funds of the Company.

     13.16 Legend. Each certificate representing shares of Restricted Stock issued to a
Participant shall bear the following legend, or a similar legend deemed by the Company to
constitute an appropriate notice of the provisions hereof (any such certificate not having such
legend shall be surrendered upon demand by the Company and so endorsed):

          On the face of the certificate:

“Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate.”

          On the reverse:

“The shares of stock evidenced by this certificate are
subject to and transferable only in accordance with that
certain Powell Industries, Inc. 2005 Equity Compensation
Plan, a copy of which is on file at the principal office of
the Company in Houston, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance
with and subject to the provisions of said Plan. By
acceptance of this certificate, any holder, transferee or

 

 

pledgee hereof agrees to be bound by all of the provisions
of said Plan.”

     The following legend shall be inserted on a certificate evidencing Common Stock issued under
the Plan if the shares were not issued in a transaction registered under the applicable federal and
state securities laws:

“Shares of stock represented by this certificate have been
acquired by the holder for investment and not for resale,
transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of applicable
state and federal securities laws, and may not be offered
for sale, sold or transferred other than pursuant to
effective registration under such laws, or in transactions
otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as
to which the Company may rely upon an opinion of counsel
satisfactory to the Company.”

     A copy of this Plan shall be kept on file in the principal office of the Company in Houston,
Texas.

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