2005 INCENTIVE BONUS PLAN
Published on March 16, 2005
EXHIBIT 10.35
QUANTA SERVICES, INC.
TERM SHEET
ANNUAL INCENTIVE PLAN 2005 - FIELD UNITS
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Participants Employees will be selected to participate in the
Annual Incentive plan annually at the discretion
of the CEO with the approval of the Compensation
Committee.
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Target Incentive o Target incentive ranges have been or will be
developed for each participant in the Plan.
o Management will make recommendations to the
Compensation Committee regarding the target
incentive for each participant based on a
competitive range.
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Performance Measures o The Annual Incentive for each Operating Unit
will be based on an operating income target
to be approved by the Compensation Committee
annually.
o For purposes of the plan, operating income
will be operating income less interest
expense, net of interest income and excluding
gains or losses on sales of property and
equipment.
o There will be no discretionary portion for
the annual incentive.
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Incentive Determination PERCENTAGE OF TARGET/ INCENTIVE AS A % OF
OBJECTIVE OBTAINED TARGET INCENTIVE
---------------------------------------------
Less than 75% 0%
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75% 25%
---------------------------------------------
80% 40%
---------------------------------------------
85% 55%
---------------------------------------------
90% 70%
---------------------------------------------
95% 85%
---------------------------------------------
100% 100%
---------------------------------------------
150% 150%
---------------------------------------------
200% or greater 200%
---------------------------------------------
o Subject to the limitations described below,
the amount of incentive will be determined
based on the table above.
o The salary to be used in the incentive
calculation will be the base salary in effect
on the December 31 immediately preceding the
date of the calculation.
o When performance falls between the designated
points in the table, the incentive will be
determined by interpolation.
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Limitations o The bonus calculation is subject to the
following limitations; sequenced as follows:
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Step 1:
Is target bonus pool > 10% of the operating
income (as defined).
If Yes, Go to Step 2.
If No, use the above chart. Any bonus
earned (for the aggregate pool) is
limited to 10% of operating income.
Further, any individual bonuses are
capped at 200% of the target bonus.
Step 2:
a. Any bonus earned (for the aggregate pool)
is limited to 10% of the operating income
(as defined).
b. For every dollar of operating income (as
defined) in excess of the operating income
goal, $.25 will be contributed to the bonus
pool.
This contribution is limited to 100% of the
target bonus for each of the pool
participants via the aggregate of a. and b.
o Any calculated incentive will be
subject to (i) assessment of overall company
performance to ensure that payout of
calculated incentives will not jeopardize the
financial stability of the company and (ii)
approval by the Compensation Committee.
o A participant must be employed by the
company on the date the bonus is paid. Any
participant not employed by the company on
the payment date forfeits any and all rights
to such bonus. It is the company's intention
to pay bonuses earned under the plan in March
following the end of the calculation period.
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Incentive Payout Any incentive earned under the Annual Incentive
Plan is intended to be paid in cash.
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2
QUANTA SERVICES, INC.
TERM SHEET
ANNUAL INCENTIVE PLAN 2005 - CORPORATE
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Participants Employees will be selected to participate in
the Annual Incentive Plan at the discretion of
the CEO with the approval of the Compensation
Committee.
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Target Incentive o Target incentive ranges have been or will be
developed for each participant in the Plan.
o Management will make recommendations to the
Compensation Committee regarding the target
incentive for each participant based on a
competitive range.
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Performance Measures o The annual incentive will be based on an
operating income target to be determined
annually by the Compensation Committee. This
target will be adjusted, as appropriate, at
the discretion of the Compensation Committee
to take into account any business
acquisitions or divestitures during the Plan
year.
o For purposes of the plan, operating income
will be operating income less interest
expense, net of interest income.
o There will be no discretionary portion for
the annual incentive.
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Incentive Determination PERCENTAGE OF TARGET/ INCENTIVE AS A % OF
OBJECTIVE OBTAINED TARGET INCENTIVE
---------------------------------------------
Less than 75% 0%
---------------------------------------------
75% 25%
---------------------------------------------
80% 40%
---------------------------------------------
85% 55%
---------------------------------------------
90% 70%
---------------------------------------------
95% 85%
---------------------------------------------
100% 100%
---------------------------------------------
150% 150%
---------------------------------------------
200% or greater 200%
---------------------------------------------
o The amount of incentive earned will be based
on the table above.
o The salary to be used in the calculation will
be the base salary in effect on the December
31 immediately preceding the date of the
calculation.
o When performance falls between the designated
points in the table, the incentive will be
determined by interpolation.
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Limitations o Any calculated incentive will be subject to
(i) assessment of overall company performance
to ensure that payout of calculated
incentives will not jeopardize the financial
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3
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stability of the company and (ii) approval by
the Compensation Committee.
o A participant must be employed by the company
on the date the bonus is paid. Any
participant not employed by the company on
the payment date forfeits any and all rights
to such bonus. It is the company's intention
to pay bonuses earned under the plan in March
following the end of the calculation period.
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Incentive Payout Any incentive earned under the Annual Incentive
Plan is intended to be paid in cash.
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4
QUANTA SERVICES, INC.
TERM SHEET
SUPPLEMENTAL INCENTIVE PLAN 2005 - FIELD UNITS
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Participants o Employees will be selected to participate in
the Supplemental Incentive Plan annually at
the discretion of the CEO with the approval
of the Compensation Committee.
o For purposes of the supplemental incentive,
Field Unit participants will be classified
into two categories: Stock Eligible or
Cash-only Eligible participants, at the
discretion of the CEO with the approval of
the Compensation Committee.
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Target Incentive Each participant will be assigned a target
supplemental incentive expressed as a dollar
value annually.
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Performance Measures PERFORMANCE AWARD
o Fifty percent of a participant's supplemental
incentive value will be based on Modified
Return on Asset (MROA) performance versus
target.
o MROA will be calculated by dividing net
operating income (excluding gains or losses
on sales of property and equipment ) by total
assets. Operating Income is defined as
operating income before goodwill amortization
plus/minus the annual/quarterly insurance
true-up adjustment and includes any top-side
entries that are specific to an individual
operating unit. Total assets will be based on
the quarterly average for the fiscal year
excluding inter-company accounts and cash on
hand.
DISCRETIONARY AWARD
For 2005, the remaining fifty percent of the
supplemental incentive will, in lieu of a
discretionary component, be based on the
following:
o Safety:
> Each Operating Unit has a "Total Incident
Injury Rate" ("TIIR") target. Subject to
each participant's ethical behavior and
compliance with the Code of Ethics and
Business Conduct, one-half of the
discretionary award will be based on
achieving the TIIR target.
> Each Operating Unit's performance will be
measured against the "Safety Severity
Rating Index", which analyzes job-related
incidents taking into account both the
work status of the injured employee and
the incurred insurance reserves
associated with the incident. Subject to
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each participant's ethical behavior and
compliance with the Code of Business
Conduct, one- half of the discretionary
award will be based on the Operating
Unit's Safety Severity Rating. Operating
Unit's that achieve a score of 0 to 74
points will earn 100% of this component
of the award, and Operating Unit's that
achieve a score of 75 to 149 points will
earn 75% of this component of the award.
No award is earned under this component
of this plan if an operating unit's score
exceeds 149.
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Incentive Determination PERCENTAGE OF TARGET/ INCENTIVE AS A % OF
OBJECTIVE OBTAINED TARGET INCENTIVE
---------------------------------------------
Less than 75% 0%
---------------------------------------------
75% 25%
---------------------------------------------
80% 40%
---------------------------------------------
85% 55%
---------------------------------------------
90% 70%
---------------------------------------------
95% 85%
---------------------------------------------
100% 100%
---------------------------------------------
150% 150%
---------------------------------------------
200% or greater 200%
---------------------------------------------
o The Performance Award will be determined
according to the table above.
o When performance falls between the designated
points in the table, the incentive will be
determined by interpolation.
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Limitations o Any calculated incentive will be subject to
(i) assessment of overall company performance
to ensure that payout of calculated
incentives will not jeopardize the financial
stability of the company and (ii) approval by
the Compensation Committee.
o In any year, stock awarded under this and all
other plans shall not exceed 1% of the
outstanding stock. The Compensation Committee
and the Board of Directors will review this
limitation annually.
o A participant must be employed by the
company on the date the bonus is paid. Any
participant not employed by the company on
the payment date forfeits any and all rights
to such bonus. It is the company's intention
to pay bonuses earned under the plan in March
following the end of the calculation period.
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Incentive Payout o Stock Eligible participants, at the election
of the CEO with approval by the Compensation
Committee, may receive any incentive earned
under the Supplemental plan in cash,
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6
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restricted stock or a combination thereof.
Subject to the above limitations, the portion
of the incentive awarded in restricted stock
will be multiplied by 1.25 and then that
amount will be divided by the current stock
price to determine the number of shares Any
shares awarded will vest ratably over a
three-year period following the date of
grant. A participant receiving restricted
stock must be employed by the company at each
vesting date. If a participant leaves the
employment of the company, all unvested
restricted stock awards are forfeited.
o Cash-only Eligible participants will receive
any incentive earned for the year in cash.
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7
QUANTA SERVICES, INC.
TERM SHEET
SUPPLEMENTAL INCENTIVE PLAN 2005 - CORPORATE
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Participants o Employees will be selected to participate in
the Supplemental Incentive Plan annually at
the discretion of the CEO with the approval
of the Compensation Committee.
o For purposes of the supplemental incentive,
Corporate participants will be classified
annually into two categories: Stock Eligible
or Cash-only Eligible participants, at the
discretion of the CEO with the approval of
the Compensation Committee.
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Performance Measures PERFORMANCE AWARD
Fifty percent of a participant's supplemental
incentive value will be based on return on
equity after eliminating the effects of goodwill
(ROE) versus the target for the year. This
target will be determined annually by the
Compensation Committee. The target will be
adjusted as appropriate, at the discretion of
the Compensation Committee, to take into account
any business acquisitions or dispositions during
the Plan year.
DISCRETIONARY AWARD
The remaining fifty percent of a participant's
supplemental incentive value will be determined
on a discretionary basis. The Discretionary
Award will be based on obtaining pre-
established objectives established for each
participant for the year and on exhibiting
ethical behavior and compliance with the Code of
Ethics and Business Conduct.
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Incentive Determination PERCENTAGE OF TARGET/ INCENTIVE AS A % OF
OBJECTIVE OBTAINED TARGET INCENTIVE
---------------------------------------------
Less than 75% 0%
---------------------------------------------
75% 25%
---------------------------------------------
80% 40%
---------------------------------------------
85% 55%
---------------------------------------------
90% 70%
---------------------------------------------
95% 85%
---------------------------------------------
100% 100%
---------------------------------------------
150% 150%
---------------------------------------------
200% or greater 200%
---------------------------------------------
o The Performance Award will be determined
according to the table above.
o When performance falls between the designated
points in the table, the incentive will be
determined by interpolation.
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8
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Limitations o Any calculated incentive will be subject to
(i) assessment of overall company performance
to ensure that payout of calculated
incentives will not jeopardize the financial
stability of the company and (ii) approval by
the Compensation Committee.
o In any year, stock awarded under this and all
other plans shall not exceed 1% of the
outstanding stock. The Compensation Committee
and the Board of Directors will review this
limitation annually.
o A participant must be employed by the company
on the date the bonus is paid. Any
participant not employed by the company on
the payment date forfeits any and all rights
to such bonus. It is the company's intention
to pay bonuses earned under the plan in March
following the end of the calculation period.
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Incentive Payout o Stock Eligible participants, at the election
of the CEO with approval by the Compensation
Committee, may receive any incentive earned
under the Supplemental plan in cash,
restricted stock or a combination thereof.
Subject to the above limitations, the portion
of the incentive awarded in restricted stock
will be multiplied by 1.25 and then that
amount will be divided by the current stock
price to determine the number of shares. Any
shares awarded will vest ratably over a
three-year period following the date of
grant. A participant receiving restricted
stock must be employed by the company at each
vesting date. If a participant leaves the
employment of the company, all unvested
restricted stock awards are forfeited.
o Cash-only Eligible participants will receive
any incentive earned for the year in cash.
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9
QUANTA SERVICES, INC.
TERM SHEET
DISCRETIONARY INCENTIVE PLAN 2005 - ALL
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Discretionary Payout Annually, the Compensation Committee shall
establish a discretionary incentive pool that
will be available to reward exceptional
performance. This pool will be awarded at the
discretion of the CEO, with the Compensation
Committee's approval, in cash, restricted stock,
or a combination thereof. A participant must be
employed by the company on the date the bonus is
paid. Any participant not employed by the
company on the payment date forfeits any and all
rights to such bonus. It is the company's
intention to pay bonuses earned under the plan
in March following the end of the calculation
period.
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