POWELL INDUSTRIES INC
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
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<TYPE>EX-10.1
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<FILENAME>h97209exv10w1.txt
<DESCRIPTION>NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
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                                                                    EXHIBIT 10.1






                             POWELL INDUSTRIES, INC.

                     NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN




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                             POWELL INDUSTRIES, INC.

                     NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN



                                TABLE OF CONTENTS

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1.  Purpose................................................................... 1
2.  Effective Date of Plan.................................................... 1
3.  Administration............................................................ 1
4.  Dedicated Shares.......................................................... 1
5.  Grant of Options.......................................................... 1
6.  Eligibility............................................................... 1
7.  Option Grant Size and Grant Dates......................................... 1
8.  Option Price; Fair Market Value........................................... 2
9.  Duration of Options....................................................... 2
10. Amount Exercisable........................................................ 2
11. Exercise of Options....................................................... 2
12. Non-Transferability of Options............................................ 3
13. Termination of Directorship of Optionee................................... 3
14. Requirements of Law....................................................... 3
15. No Rights as Stockholder.................................................. 4
16. No Obligation to Retain Optionee.......................................... 4
17. Changes in the Company's Capital Structure................................ 4
18. Termination and Amendment of Plan......................................... 6
19. Written Agreement......................................................... 7
20. Indemnification of Committee.............................................. 7
21. Forfeitures............................................................... 7
22. Gender.................................................................... 7
23. Headings.................................................................. 8
24. Governing Law............................................................. 8
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                             POWELL INDUSTRIES, INC.

                     NON-EMPLOYER DIRECTOR STOCK OPTION PLAN

         1. PURPOSE. The Powell Industries, Inc. Non-Employee Director Stock
Option Plan (the "Plan") of Powell Industries, Inc. (the "Company") is for the
benefit of members of the Board of Directors of the Company (the "Board"), who,
at the time of their service, are not employees of the Company or any of its
affiliates, by providing them an opportunity to become owners of the Common
Stock of the Company (the "Stock"), thereby advancing the best interests of the
Company by increasing their proprietary interest in the success of the Company
and encouraging them to continue in their present capacity.

         2. EFFECTIVE DATE OF PLAN. The Plan, as amended and restated, is
effective January 18, 2002, having been approved by the Board and the
stockholders of the Company.

         3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). Subject to the terms of the Plan, the
Committee shall have the power to grant Options to Eligible Directors, construe
the provisions of the Plan, Options, and Stock issued hereunder, to determine
all questions arising hereunder, and to adopt and amend such rules and
regulations for administering the Plan as the Committee deems desirable;
provided, however, that the actions and decisions taken by the Committee in its
capacity as administrator of the Plan shall not be effective until submitted to
and ratified by the Board.

         4. DEDICATED SHARES. The total number of shares of Stock with respect
to which Initial Grants and Annual Grants (collectively, the "Options") may be
granted under this Plan shall not exceed, in the aggregate, 100,000 shares;
provided, that the class and aggregate number of shares of Stock which may be
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 17. The shares of Stock may be treasury shares or
authorized but unissued shares of Stock. In the event that any outstanding
Option shall expire or is terminated or canceled for any reason, the shares of
Stock allocable to the unexercised portion of that Option may again be subject
to an Option or Options under the Plan.

         5. GRANT OF OPTIONS. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended.

         6. ELIGIBILITY. The individuals who shall be eligible to receive
Options under the Plan shall be each member of the Board who is not an employee
of the Company or any affiliate of the Company ("Eligible Director").

         7. OPTION GRANT SIZE AND GRANT DATES.

         Annual Grants - If shares of Stock are available for issuance under the
Plan, on a date established by the Committee, each Eligible Director who is
continuing to serve as a director after such date, shall receive a grant of an
Option to purchase the 2000 shares of Stock at the Fair Market Value of the
Stock on the date of grant (an "Annual Grant").


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         Initial Grants -- If an Eligible Director is first elected or appointed
to the Board (whichever is applicable), after the date of the immediately
preceding Annual Grant but before the date chosen for the next Annual Grant, the
Eligible Director shall be granted an Option to purchase the number of shares of
Stock (rounded to the nearest whole share) which is determined my multiplying
2,000 shares by a fraction, the numerator of which is the number of months
served actually served by the Eligible Director until the date of the next
Annual Grant and the denominator of which is 12. The exercise price of such
Stock shall be the Fair Market Value on the date of grant (an "Initial Grant").
The intent of this initial Grant is to provide the new Director with a prorated
Option for the partial year served before the Annual Grant.

         If the General Counsel of the Company determines, in his sole
discretion, that the Company is in possession of material, nonpublic information
about the Company or any of its subsidiaries, he may suspend granting of the
Initial Grant and Annual Grant to each Eligible Director until the second
trading day after public dissemination of the information, and the determination
by the General Counsel that issuance of the Options is then appropriate.

         8. OPTION PRICE; FAIR MARKET VALUE. The price at which shares of Stock
may be purchased by each Eligible Director (the "Optionee") pursuant to his
Initial Grant and each Annual Grant, respectively, shall be 100% of the "Fair
Market Value" of the shares of Stock on the date of grant of the Initial Grant
and each Annual Grant, as applicable.

         For all purposes of this Plan, the "Fair Market Value" of the Stock as
of any date means (a) 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;
(b) 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; (c) 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 (d) 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.

         9. DURATION OF OPTIONS. The term of each Option shall be seven (7)
years from the date of grant. No Option shall be exercisable after the
expiration of seven (7) years from the date the Option is granted.

         10. AMOUNT EXERCISABLE. Each Option granted hereunder shall be
exercisable in full after the first anniversary of the grant of the Option.

         11. EXERCISE OF OPTIONS. Options shall be exercised by the delivery of
written notice to the Company 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 (held by
Optionee for at least six months) at its 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 Eligible Director
certificates for the number of shares with respect to which the Option has been


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exercised, issued in the Eligible Director'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 Eligible Director, at the address specified
by the Eligible Director.

         Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates, (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.

         12. NON-TRANSFERABILITY OF OPTIONS. Options shall not be transferable
by the Optionee other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Optionee's lifetime, only by
him.

         13. TERMINATION OF DIRECTORSHIP OF OPTIONEE. If, before the date of
expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
one (1) year after the date of ceasing to serve as a director. In this event,
the Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise the Option immediately prior
to ceasing to serve as a director, however, in the event that the Optionee has
ceased to serve as a director on or after attaining the age of seventy (70)
years, the Optionee shall be entitled to exercise all or any part of such Option
without regard to any limitations imposed pursuant to Paragraph 10, provided
that in no event shall the Option be exercisable within six months after the
date of grant.

         Upon the death of the Optionee while serving as a director, his
executors, administrators, or any person or 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 earlier of the date of expiration of the Option
or one (1) year following the date of his death, to exercise the Option, in
whole or in part without regard to any limitations imposed pursuant to Paragraph
10, provided that in no event shall the Option be exercisable within six months
after the date of grant.

         14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable state or regulation relating to the registration
of securities, upon exercise of any Option, the Company shall not be required to
issue any Stock unless the Company has received evidence satisfactory to it to
the effect that the holder of that Option will not transfer the Stock except in
accordance with applicable law,


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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 Company 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 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,
or the issuance of shares under it, to comply with any law or regulation of any
governmental authority.

         15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by any Option until the date a stock
certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date thereof is prior to the date of issuance of such certificate.

         16. NO OBLIGATION TO RETAIN OPTIONEE. The granting of any Option shall
not impose upon the Company or its stockholders any obligation to retain or
continue to retain any Optionee or nominate any Optionee for election to
continue in his capacity as a director of the Company. The right of the Company,
the Board, and the stockholders to terminate the service of any Optionee as a
director shall not be diminished or affected by reason of the fact that one or
more Options have been or would be granted to him.

         17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options or Stock 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, recapitalization, 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 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 under this
Plan 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 he would have
received had he exercised his 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.


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         If while unexercised Options remain outstanding under the Plan (i) the
Company shall not be the surviving entity in any merger, consolidation or other
reorganization, (or survives only as a subsidiary of an entity other than an
entity that was wholly-owned by the Company immediately prior to such merger,
consolidation or other reorganization), (ii) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any other person or entity (other than an entity wholly-owned by the
Company), (iii) the Company is to be dissolved, or (iv) the Company is a party
to any other corporate transaction (as defined under Section 424(a) of the Code
and applicable Treasury Regulations) that is not described in clauses (i), (ii)
or (iii) of this sentence (each such event is referred to herein as a "Corporate
Change"), then (x) except as otherwise provided in an Option Agreement or as a
result of the Committee's effectuation of one or more of the alternatives
described below, there shall be no acceleration of the time at which any Option
then outstanding may be exercised, and (y) no later than ten (10) days after the
approval by the stockholders of the Company of such Corporate Change, the
Committee, without the consent or approval of any Optionee, shall act to effect
one or more of the following alternatives, which may vary among individual
Optionees and which may vary among Options held by any individual Optionee:

                  (1) accelerate the time at which some or all of the Options
         then outstanding may be exercised so that such Options may be exercised
         in full for a limited period of time on or before a specified date
         (before or after such Corporate Change) fixed by the Committee, after
         which specified date all such Options that remain unexercised and all
         rights of Optionees thereunder shall terminate,

                  (2) require the mandatory surrender to the Company by all or
         selected Optionees of some or all of the then outstanding Options held
         by such Optionee (irrespective of whether such Options are then
         exercisable under the provisions of this Plan or the Option Agreements
         evidencing such Options) as of a date, before or after such Corporate
         Change, specified by the Committee, in which event the Committee shall
         thereupon cancel such Options and the Company shall pay to each such
         Optionee an amount of cash per share equal to the excess, if any, of
         the per share price offered to stockholders of the Company in
         connection with such Corporate Change over the exercise price(s) under
         such Options for such shares,

                  (3) with respect to all or selected Optionees, have some or
         all of their then outstanding Options (whether vested or unvested)
         assumed or have a new Option substituted for some or all of their then
         outstanding options (whether vested or unvested) by an entity which is
         a party to the transaction resulting in such Corporate Change and which
         is then, employing him, or a parent or subsidiary of such entity,
         provided that (A) such assumption or substitution is on a basis where
         the excess of the aggregate fair market value of the shares subject to
         the Option immediately after the assumption or substitution over the
         aggregate exercise price of such shares is equal to the excess of the
         aggregate fair market value of all shares subject to the Option
         immediately before such assumption or substitution over the aggregate
         exercise price of such shares, and (B) the assumed rights under such
         existing option or the substituted rights under such new Option as the
         case may be will have the same terms and conditions as the rights under
         the existing Option assumed or substituted for, as the case may be,


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                  (4) provide that the number and class of shares of Stock
         covered by an Option (whether vested or unvested) theretofore granted
         shall be adjusted so that such Option when exercised shall thereafter
         cover the number and class of shares of stock or other securities or
         property (including, without limitation, cash) to which the Optionee
         would have been entitled pursuant to the terms of the agreement and/or
         plan relating to such Corporate Change if, immediately prior to such
         Corporate Change, the Optionee had been the holder of record of the
         number of shares of Stock then covered by such Option, or

                  (5) make such adjustments to Options then outstanding as the
         Committee deems appropriate to reflect such Corporate Change (provided,
         however, that the Committee may determine that no such adjustment is
         necessary).

                  In effecting one or more of alternatives (3), (4) or (5)
         above, and except as otherwise may be provided in an Option Agreement,
         the Committee, in its sole and absolute discretion and without the
         consent or approval of any Optionee, may accelerate the time at which
         some or all Options then outstanding may be exercised.

         In the event of changes in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 17,
any outstanding Options and any agreements evidencing such Options shall be
subject to adjustment by the Committee as to the number and price of shares of
stock or other consideration subject to such Options. In the event of any such
change in the outstanding Stock, the aggregate number of shares available under
this Plan may be appropriately adjusted by the Committee.

         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
Restricted Stock appropriately adjusted based on the manner the Stock was
adjusted under the terms of the agreement of merger or consolidation.

         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 such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options
or Stock Awards.

         18. TERMINATION AND AMENDMENT OF PLAN. The Board may amend, terminate
or suspend the Plan at any time, in its sole and absolute discretion; provided,
however, to the extent required to qualify the Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment shall be made more than once every six months that would change the
amount, price or timing of the Initial and Annual Grants, other than to comport
with changes in the Internal Revenue Code of 1986, as amended, the Employee


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Retirement Income Security Act or the rules and regulations promulgated
thereunder, and provided, further, to the extent required to qualify the Plan
under Rule 16b-3, no amendment that would (a) materially increase the number of
shares of the Stock that may be issued under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan, or (c) otherwise
materially increase the benefits accruing to participants under the Plan, shall
be made without the approval of the Company's stockholders.

         19. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied
in written agreement, which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by the Chairman of the Board, the
Vice Chairman, the President or any Vice President of the Company for and in the
name and on behalf of the Company.

         20. INDEMNIFICATION OF COMMITTEE. With respect to administration of the
Plan, the Company shall indemnify each present and future member of the
Committee against, and each member of the Committee 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, whether or not he continues
to be a member of the Committee at the time of incurring the expenses. However,
this indemnity shall not include any expenses incurred by any member of the
Committee (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,
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 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 shall be in
addition to all other rights to which a member of the Committee may be entitled
as a matter of law, contract, or otherwise.

         21. FORFEITURES. Notwithstanding any other provision of this Plan, if,
before or after termination of the Optionee's capacity as a director of the
Company, there is an adjudication by a court of competent jurisdiction that the
Optionee committed fraud, embezzlement, theft, commission of felony, or proves
dishonesty in the course of his advisory relationship to the Company and its
affiliates which conduct materially damaged the Company or its affiliates, or
disclosed trade secrets of the Company or its affiliates, then any outstanding
options which have not been exercised by Optionee shall be forfeited. In order
to provide the Company with an opportunity to enforce this Section, an Option
may not be exercised if a lawsuit alleging that an action described in the
preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.

         22. 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.


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         23. HEADINGS. Headings 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.

         24. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.

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