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EXHIBIT 10.26
TELECT, INC.
PERFORMANCE INCENTIVE PLAN
AUGUST 2000
PHILOSOPHY
The purpose of the Performance Incentive Plan (PIP) is to provide incentive
compensation to those employees who have a direct impact on corporate and
strategic success and to drive performance to higher standards. The PIP supports
Telect's strategy and culture by focusing people on business priorities for
individuals at higher levels. Individual objectives are established to link with
corporate objectives.
The PIP also supports Telect's compensation philosophy of attracting and
retaining the best and brightest employees. Incentive opportunities are compared
to market to ensure competitiveness.
The Performance Incentive Plan is a discretionary program and may be terminated
at any time at the discretion of the Officer Team and/or the Board of Directors.
ELIGIBILITY
The President/CEO, vice presidents and directors are eligible to participate in
the PIP. Employees who are classified as Managers and have two or more direct
reports are also eligible, as well as individual contributors in salary grade 23
and above. Additional participants may be approved at the discretion of the
President/CEO. .
Employees who are on a sales commission are not eligible to participate in the
PIP even if they hold a position as a director, manager or individual
contributor in salary grade 23 and above. All other employees who do not fall
into the categories of positions as stated in the previous paragraph are not
eligible to participate in the PIP. This includes temporary employees, interns
and contractors/consultants.
DESIGN
The PIP links company performance with individual performance and pays out an
incentive on a quarterly basis based on each participant's quarterly base
salary. The PIP is designed to offer an upside opportunity with payouts ranging
from 100 to 150% of targets. The PIP minimizes subjectivity by directly tying
metrics to participant's performance.
OBJECTIVES
Objective setting is an integral part of the PIP and occurs once per year.
Participants receive guidance and approval from their managers and individual
objectives may be modified as needed on a quarterly basis. The Officer Team sets
financial and corporate objectives for the new fiscal year that are approved by
the Board of Directors. Each participant is held accountable to these objectives
and sets individual objectives that tie to financial and corporate objectives.
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Objectives are established for three categories: 1) Financial, 2) Corporate and
3) Individual.
Financial objectives are based on overall financial measurements such as revenue
and net income. Financial objectives are established by the Officer Team and
approved by the Board of Directors.
Corporate Objectives are based on yearly goals that require a focused effort to
accomplish, such as gross margins, lead times, inventory turns, and customer
service. Corporate Objectives are established by the Officer Team and approved
by the Board of Directors.
Individual Objectives are established based on their contribution to Financial
and Corporate Objectives. Each participant's objectives are to be approved by
his or her immediate supervisor and department and/or organizational vice
president and reviewed by the Officer Team to ensure fairness and consistency.
Participants may be asked to change their objectives based on a comparison of
their objectives to other participants. Each participant fills out the PIP
Objectives Worksheet that identifies required criteria and approval.
Financial and Corporate Objectives will be paid on the following three tiers: 1)
threshold, 2) target and 3) stretch.
<TABLE>
<CAPTION>
TIER DEFINITION PAYOUT
<S> <C> <C>
Threshold Minimum acceptable attainment 100%
Target Target of acceptable attainment 125%
Stretch Extraordinary achievement 150%
</TABLE>
Quarterly Individual Objectives will be based on a target completion date
(usually by the end of the quarter).
Potential percentage payouts of base salary, at threshold as defined above, are
as follows:
<TABLE>
<S> <C>
Officers 35%
Directors 25%
Managers/Individual Contributors 15%
</TABLE>
For payout purposes, each category is weighted depending upon level of
responsibility as follows:
<TABLE>
<CAPTION>
FINANCIAL* CORPORATE* INDIVIDUAL
<S> <C> <C> <C>
Officers 50% 25% 25%
Directors 40% 30% 30%
Managers/Individual Contributors 25% 25% 50%
</TABLE>
The Officer Team will approve the formula for payout each quarter.
*In the event of an error in calculation, the Officer Team will review the
circumstances and take appropriate action at their discretion.
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Employees are eligible to participate in the PIP immediately upon hire. Managers
will submit their employees' PIP objectives to HR as of their eligibility date.
Payouts will be on a pro-rated basis from their eligibility date. An employee
must be a continuous regular full-time employee through the end of the quarter
in order to receive a payout for that quarter. A terminated employee does not
receive a payout for the quarter in which they terminate unless their
termination date is on the last day of the quarter.
SCHEDULE
The PIP schedule will be based on an annual/fiscal year basis.
Nov/Dec The Officer Team develops Financial Performance and
Corporate Objectives for the new year for Board of
Directors approval.
Dec Financial Performance and Corporate Objectives are
communicated and individual objectives are
established.
Jan The Officer Team approves all objectives.
Apr/Jul/Oct/Jan Participants submit their accomplishments against
approved objectives.
May/Aug/Nov/Feb Results of Financial Performance and Corporate
Objectives are communicated and payouts are
distributed.
Dec/Mar/Jun/Sep Participants submit modifications quarterly to HR
with approval from respective VP.
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