EXHIBIT 10.7(b)

NOTICE OF AWARD

 

To:        ______________

 

From:Human Resources and Compensation Committee of the Board of Directors
(“Committee”)

 

Subject:ESCO Technologies Inc. 2013 Incentive Compensation Plan (“Plan”) – 2014
Award

 

1.   Award. On ________, 20__ the Committee awarded to you ____ shares of
Performance-Accelerated Restricted Stock under the terms of the Plan (“Award”)
which entitles you to receive _____ shares of Common Stock of ESCO Technologies
Inc. (the “Company”) upon satisfaction of the terms hereinafter set forth. The
Award is subject to all of the terms of this Notice of Award and of the Plan, a
copy of which has been delivered to you.

 

2.   Terms.   The following are the terms of the Award:

 

(a) The Period of the Award is five years commencing on October 1, 20__ and
ending on September 30, 20__. During the period commencing on October 1, 20__
and ending September 30, 20__ (the “Initial Period”), no portion of this Award
may be earned.

 

(b) If, during the period commencing October 1, 20__ and ending on September 30,
20__ (the “Performance Period”), the Average Value Per Share of Company Stock
reaches the amount set forth in column (A), a percentage of the Award will be
accelerated equal to the amount set forth under column (B) subject to the
limitations set forth in paragraph 2(d) and provided you comply with the other
terms of this Award.

 

A
If the Average Value
Per Share of Company
Stock reaches:   B
The Cumulative
Percent of Award
Accelerated shall be: $_____ or more   100% $_____   50% less than $_____   0%

 

(c)     If you are still employed by the Company or a subsidiary of the Company
on September 30, 20__ and have been continuously so employed since the date
hereof, you will earn 100% of the portion of the Award not yet accelerated.

 

(d)    The following additional terms will apply to the Award:

 

(i)     During the Performance Period, up to one hundred percent (100%) of the
total Award may be accelerated as provided in paragraph 2(b).

 

(ii)    Once a portion of the Award is accelerated under paragraph 2(b), you
must remain employed with the Company or a subsidiary of the Company until the
March 31st following the end of the Fiscal Year in which that portion of the
Award was accelerated. If you terminate employment (voluntarily or
involuntarily) prior to such time, you will forfeit that portion of the Award.
Provided, however, that if your employment is terminated on account of death, or
total and permanent disability the foregoing employment requirement shall not
apply.

 

(iii) If there is a Change of Control and you are employed by the Company on the
date of the Change of Control, the employment requirement of subparagraph (ii)
shall cease to apply to the portion of the Award which is accelerated or earned
and the number of shares representing that portion of the Award which is
accelerated or earned as of the date of the Change of Control shall be
distributed to you. In addition, the portion of the Award which is not yet
accelerated or earned shall be determined and distributed to you at the end of
the Fiscal Year in which the Change of Control occurred provided you are still
employed on such date, in lieu of all other provisions of this Award. If you are
not employed by the Company as of the end of the foregoing Fiscal Year, no such
distribution will be made; provided, however, that if you are involuntarily
terminated for reasons other than Cause or if you terminate for Good Reason the
remaining shares not yet accelerated or earned shall be distributed in full upon
such termination of employment.

 

 

 

 

(A)     Notwithstanding the foregoing provisions of this subparagraph (iii), in
the event a certified public accounting firm designated by the Committee (the
“Accounting Firm”) determines that any payment (whether paid or payable pursuant
to the terms of this Award or otherwise and each such payment hereinafter
defined as a “Payment” and all Payments in the aggregate hereinafter defined as
the “Aggregate Payment”), would subject you to tax under Section 4999 of the
Internal Revenue Code of 1986 (“Code”) then such Accounting Firm shall determine
whether some amount of payments would meet the definition of a “Reduced Amount”.
If the Accounting Firm determines that there is a Reduced Amount, payments shall
be reduced so that the Aggregate Payments shall equal such Reduced Amount. For
purposes of this subparagraph, the “Reduced Amount” shall be the largest
Aggregate Payment which (a) is less than the sum of all Payments and (b) results
in aggregate Net After Tax Receipts which are equal to or greater than the Net
After Tax Receipts which would result if Payments were made without regard to
this paragraph 2(c). “Net After Tax Receipt” means the Present Value (defined
under Section 280G(d)(4) of the Code) of a Payment net of all taxes imposed on
you under Section 1 and 4999 of the Code by applying the highest marginal rate
under Section 1 of the Code.

 

(B)     As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination of the Accounting Firm hereunder,
it is possible that Payments will be made by the Company which should not have
been made (the “Overpayments”) or that additional Payments which the Company has
not made could have been made (the “Underpayments”), in each case consistent
with the calculations of the Accounting Firm. In the event that the Accounting
Firm, based either upon (A) the assertion of a deficiency by the Internal
Revenue Service against the Company or you which the Accounting Firm believes
has a high probability of success or (B) controlling precedent or other
substantial authority, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to you which you shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code; provided, however, that no
amount shall be payable by you to the Company if and to the extent such payment
would not reduce the amount which is subject to taxation under Section 1 and
Section 4999 of the Code or if the period of limitations for assessment of tax
has expired. In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to you
together with interest at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.

 

3.     Share Ownership Requirements. You are expected to own shares of Common
Stock with a fair market value equal to a multiple of your total cash
compensation (the “Share Ownership Requirement”). If you do not currently meet
your Share Ownership Requirement, you must retain 50% of any
Performance-Accelerated Restricted Stock Award distribution which you receive
under paragraphs 2(b) and 2(c) (which will be net of any Company tax
withholdings) until the Share Ownership Requirement is satisfied. Thereafter you
must maintain ownership of shares of Common Stock so that the Share Ownership
Requirement remains satisfied. The satisfaction of the requirements of this
paragraph 3 will be reviewed periodically as determined by the Committee.

 

4.     Definitions. For purposes of the Award, the following terms shall have
the following meanings:

 

(a)     “Average Value Per Share” shall mean the average for any consecutive 30
day trading period in which Company Stock is traded of the daily closing prices
of Company Stock on the New York Stock Exchange.

 

(b)     “Cause” shall mean:

 

[Alternate A–for Awards to CEO:](i)     The willful and continued failure to
substantially perform your duties with the Company or one of its subsidiaries
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for such performance is delivered to you by
ESCO’s Board of Directors or their delegate which specifically identifies the
manner in which such ESCO’s Board of Directors or their delegate believes that
you have not substantially performed your duties; or

 

[Alternate B–for all other Awards:](i)    The willful and continued failure to
substantially perform your duties with the Company or one of its subsidiaries
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for such performance is delivered to you by
ESCO’s CEO or his delegate which specifically identifies the manner in which
such ESCO’s CEO or his delegate believes that you have not substantially
performed your duties; or

 

 

 

 

(ii)     The willful engaging in (A) illegal conduct (other than minor traffic
offenses), or (B) conduct which is in breach of your fiduciary duty to the
Company or one of its subsidiaries and which is demonstrably injurious to the
Company or one of its subsidiaries, any of their reputations, or any of their
business prospects. For purposes of this subparagraph (ii) and subparagraph (i)
above, no act or failure to act on your part shall be considered “willful”
unless it is done, or omitted to be done, by you in bad faith or without
reasonable belief that your action or omission was in the best interests of the
Company or one of its subsidiaries. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board of Directors
of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company or one of its subsidiaries;

 

[Alternate A–for Awards to CEO:]The cessation of your employment shall not be
deemed to be for “Cause” unless and until there shall have been delivered to you
a written notice that in the Board of Directors’ or their delegate’s opinion you
are guilty of the conduct described in subparagraph (i) or (ii)above, and
specifying the particulars thereof in detail.

 

[Alternate B–for all other Awards:]The cessation of your employment shall not be
deemed to be for “Cause” unless and until there shall have been delivered to you
a written notice that in the CEO’s or his delegate’s opinion you are guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.

 

(c)     “Change of Control” shall mean:

 

(i)    The purchase or other acquisition (other than from the Company) by any
persons, entity or group of persons, within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
(excluding, for this purpose, the Company or its subsidiaries or any employee
benefit plan of the Company or its subsidiaries), of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then-outstanding shares of Common Stock of the Company or the
combined voting power of the Company’s then-outstanding securities entitled to
vote generally in the election of directors; or

 

(ii)    Individuals who, as of the date hereof, constitute the Board (as the
date hereof, the “Incumbent Board”) cease for any reason to constitute at least
a majority of the Board, provided that any person who becomes a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this subparagraph (ii), considered as though such
person were a member of the Incumbent board; or

 

(iii)    Approval by the stockholders of the Company of a reorganization, merger
or consolidation, in each with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of,
respectively, the common stock and the combined voting power entitled to vote
generally in the elections of directors of the reorganized, merged or
consolidated corporations’ then-outstanding voting securities, or of a
liquidation or dissolution of the Company or of the sale of all or substantially
all of the assets of the Company.

 

(d)     “Company Stock” shall mean common stock of the Company.

 

(e)      “Fiscal Year” shall mean the fiscal year of the Company which, as of
the date hereof, is the twelve month period commencing October 1 and ending
September 30.

 

(f)      “Good Reason” shall mean:

 

(i)     Requiring you to be based at any office or location more than 50 miles
from your office or location as of the date of the Change of Control;

 

(ii)    The assignment to you of any duties inconsistent in any respect with
your position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as of the date of the Change of Control or
in conjunction with a Change in Control any action by the Company or any of its
subsidiaries which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an action taken by the Company
or one of its subsidiaries, to which you object in writing by notice to the
Company within 10 business days after you receive actual notice of such action,
which is remedied by the Company or one of its subsidiaries promptly but in any
event no later than 5 business days after you provided such notice, or

 

(iii)    The reduction in your total compensation and benefits below the level
in effect as of the date of the Change of Control.

 

 

 

 

5.     Parallel Incentive. The Committee may, but is not obligated to, authorize
a payment of a portion of the Award based upon its discretionary evaluation of
the Company’s financial performance during the Performance Period even if the
foregoing objectives are not fully met. Examples of performance measures the
Committee may consider include, but are not limited to, cash flow, earnings,
sales and margins.

 

6.    Medium of Payment. The Committee shall direct that sufficient shares of
Common Stock of the Company shall be withheld from any distribution hereunder to
satisfy the Company’s tax withholding requirements in respect of such
distribution.

 

7.    Covenants.

 

(a)    You agree that for the period beginning on the first day of the Period of
Award and ending two (2) years after the expiration of the Period of the Award,
you will not do any of the following:

 

(i)     as an individual or as a partner, employee, agent, advisor, consultant
or in any other capacity of or to any person, firm, corporation or other entity,
directly or indirectly carry on any business or become involved in any business
activity, which is (i) competitive with the business of the Company (or any
affiliate of the Company), as presently conducted and as said business may
evolve in the ordinary course, and (ii) a business or business activity in which
you were engaged in the course of your employment with the Company (or any
affiliate of the Company); notwithstanding the foregoing, nothing herein shall
prevent you from being a 2% or less shareholder of a publicly traded
corporation;

 

(ii)    as an individual or as a partner, employee, agent, advisor, consultant
or in any other capacity of or to any person, firm, corporation or other entity,
directly or indirectly recruit, solicit or hire, or assist anyone else in
recruiting, soliciting or hiring, any employee of the Company (or any affiliate
of the Company);

 

(iii)    induce or attempt to induce, or assist anyone else to induce or attempt
to induce, any customer of the Company (or any affiliate of the Company), to
discontinue its business with the Company (or with any affiliate of the
Company);

 

(iv)    engage in the unauthorized use or disclosure of confidential information
or trade secrets of the Company or its affiliates resulting in harm to the
Company or its affiliates; or

 

(v)    engage in intentional misconduct resulting in a financial restatement or
in an increase in your incentive or equity compensation.

 

(b)     In the event of a breach or threatened breach of the covenants described
in this paragraph 7, the Company shall be entitled, in addition to any other
legal or equitable remedies it may have:

 

(i)      to temporary, preliminary and permanent injunctive relief restraining
such breach or threatened breach. You hereby expressly acknowledge that the harm
which might result as a result of any noncompliance by you would be largely
irreparable, and you agree that if there is a question as to the enforceability
of any of the provisions of this Award, you will abide by the Award until after
the question has been resolved by a final judgment of a court of competent
jurisdiction;

 

(ii)     to cancel this Award; and/or

 

(iii)    to recover from you (1) any shares of stock transferred to you under
this Award during any period(s) (A) that you were in breach of any of the above
described covenants or (B) in the case of intentional misconduct resulting in a
financial restatement during the periods that required statement, but in either
case not to exceed three years , and (2) the proceeds from any sales of such
shares received under this Award during the above time periods to the extent
such shares transferred to you under this Award have been sold or retained by
the Company to pay your taxes. The Committee shall have sole discretion in
determining the amount that shall be recovered from you under this subparagraph
(iii).

 

[For Awards to licensed attorneys only]8.     Ethical Obligations. In
recognition of your ethical duties and responsibilities as a licensed attorney,
the parties agree that nothing in this Award shall prevent you from providing
legal advice or otherwise being engaged in the practice of law; provided,
however, that you agree not to breach any ethical obligations you have by virtue
of being, or having been, the Company’s corporate counsel.

 

9.      Choice of Law. This Award shall be construed and administered in
accordance with the laws of the State of Missouri without regard to the
principles of conflicts of law which might otherwise apply. Any litigation
concerning any aspect of this Award shall be conducted in the State or Federal
Courts in the State of Missouri.

 

10.    Amendment. The Award may be amended by written consent between the
Company and you.

  

[Signatures on Following Page]

 

 

 

 

Executed this ___ day of _______, 20__.               ESCO TECHNOLOGIES INC.  
AGREED TO AND ACCEPTED:             By:           Vice President   Participant