Document:

exv10w40

 

EXHIBIT 10.40

FIRST AMENDMENT TO THE ESCO TECHNOLOGIES INC.

2004 INCENTIVE COMPENSATION PLAN

WHEREAS, ESCO Technologies Inc. (“Company”) adopted the ESCO Technologies Inc. 2004 Incentive
Compensation Plan (“Plan”) for the benefits of eligible employees; and

WHEREAS, the Company retained the right to amend the Plan pursuant to Section 15 thereof; and

WHEREAS, the Company desires to amend the Plan effective as of August 3, 2006:

NOW, THEREFORE, effective as of August 3, 2006, the Plan is amended as follows:

1. The last two sentences of section 9(c) are deleted.

2. . Section 9(d) is deleted in its entirety and Sections 9(e) and 9(f) are renumbered Sections
9(d) and 9(e) respectively.

3. The following is added at the end of Section 13(d):

     Provided, however, that the previous sentence shall not apply to the distribution under a
Performance Share Award.

IN WITNESS WHEREOF, the foregoing Amendment was adopted on the 3rd day of August, 2006.exv10w41

 

EXHIBIT: 10.41

August 3, 2006

Mr. Charles J. Kretschmer

President & Chief Operating Officer

ESCO Technologies Inc.

9900A Clayton Road

St. Louis, MO 63124

Dear Chuck,

With regard to your letter of resignation dated August 3, 2006, the following provisions have been
mutually agreed to:

	 	1.	 	Your current compensation, benefits and all agreements between you and ESCO shall
remain in effect through September 30, 2006, the effective date of your resignation as
President and Chief Operating Officer of ESCO.
	 
	 	2.	 	Effective October 1, 2006 and for the duration of your employment with ESCO:

	 	a.	 	You are appointed Vice President of ESCO, as an “at will” employee.
Your salary shall be $250,000 per year. You are not guaranteed any performance
compensation (bonus), except that you will be entitled to receive a bonus for
fiscal year 2006 which is consistent with those paid to the Executive Officers,
pursuant to ESCO’s standard practice.
	 
	 	b.	 	You are not guaranteed the right to receive any stock option awards,
performance-accelerated restricted stock awards, restricted stock awards or any
other similar awards.
	 
	 	c.	 	You will continue to receive a car allowance of $1,500 per month, the
current allowances attributable to your country club membership and financial
planning, in addition to standard ESCO employee benefits.
	 
	 	d.	 	Stock option awards granted to you prior to the date hereof shall
remain in full force and effect.
	 
	 	e.	 	The Performance-Accelerated Restricted Stock Award of 9,500 (post stock-split) ESCO shares,
dated May 4, 2004 (scheduled to be paid out on March 31, 2007 contingent on your continued
employment with ESCO), shall remain in full force and effect. However, any and all other
Performance-Accelerated Restricted Stock Awards granted to you at any time are hereby terminated
and are null and void.

 

 

August 2, 2006

Page 2 of 2

	 	f.	 	Your primary duties shall include:

	 	•	 	Acquisition / divestiture activity
	 
	 	•	 	Contract Manufacturing for the Communications Segment
	 
	 	•	 	Selected major contract negotiations
	 
	 	•	 	Profit improvement initiatives
	 
	 	•	 	Other tasks as assigned

	 	3.	 	The above agreements are made in mutual consideration of each other and your “at will”
employment with ESCO as stated above.

Chuck, please indicate your agreement to the foregoing by signing and returning the attached
copy of this letter.

	 	 	 	 	 
	 	Sincerely,

ESCO Technologies Inc.

 	 
	 	/s/ Victor L. Richey, Jr
 	 
	 	Victor L. Richey, Jr. 	 
	 	Chairman and Chief Executive Officer 	 
	 

Agreed:

/s/ Charles J. Kretschmer

Charles J. Kretschmer

Date: 8-5-06exv10w57

 

Executive Annual Incentive Plan

Fiscal Year 2007 Plan Summary

Plan Name: PLATO Learning FY 2007 Executive Annual Incentive Plan (“the Plan”).

Plan Objectives: The Plan is designed to support the achievement of financial and key strategic
goals. The Plan encourages three specific behaviors by PLATO executives:

	 	a.	 	Increase the focus on financial results.
	 
	 	b.	 	Reinforce pay and performance philosophy.
	 
	 	c.	 	Hold executives accountable for their financial plan.

Plan Structure: Eligible employees will be provided an opportunity to earn a percentage of their
Target Incentive (expressed as a percent of salary) based on the achievement of financial goals.

Eligibility and Incentive Targets: Employees listed in the table below are eligible to participate
in the Plan. Each Participant’s targeted incentive opportunity is expressed as a percent of
his/her annual base salary in effect on October 31, 2007.

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Incentive	 
	 	Executive Job Title	 	 	Target	 
	 	President & CEO

	 	 	 	75	%	 
	 	Chief Financial Officer

	 	 	 	50	%	 
	 	Chief Technology Officer

	 	 	 	50	%	 
	 	Sr. Vice President, Operations

	 	 	 	35	%	 
	 	Vice President, Product Management

	 	 	 	35	%	 
	 	Vice President, Professional Services

	 	 	 	35	%	 
	 	Vice President, Human Resources

	 	 	 	30	%	 
	 	Vice President, Marketing Communications

	 	 	 	30	%	 
	 

The Company reserves the right to determine whether an executive will actually participate in the
Plan. Eligible employees will receive a notification letter indicating they are eligible to
participate in the Plan.

Effective Date: The plan will be effective for fiscal year beginning November 1, 2006.

Performance Measures: Payment will be based upon a financial objective and adjusted by a payout
modifier, which allows the bonus to be increased or decreased up to 20%.

	 	 	 
	Financial Goal:

	 	EBITDA (Earnings Before Interest, Taxes, Depreciation, & Amortization)
	 
	 	 

The objective is based on the company’s achievement of the pre-established financial goal. A
minimum threshold of 50% of financial achievement is necessary to achieve any payment under the
financial component. The following table will be used to determine the actual payment.
Straight-line interpolation will be applied to award payouts between achievement thresholds (ie
50%, 100%, 115%, etc) and above minimum financial performance.

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	 	Achievement of	 	 	Resulting	 	 	Actual Payment %	 
	 	Financial Goal	 	 	EBITDA	 	 	of Target Incentive	 
	 	< 50%

	 	 	< [X] MM
	 	 	 	0	%	 
	 	50%

	 	 	[X] MM
	 	 	 	50	%	 
	 	100%

	 	 	[X} MM
	 	 	 	100	%	 
	 	115%

	 	 	[X} MM
	 	 	 	122.5	%	 
	 	130%

	 	 	[X} MM
	 	 	 	145	%	 
	 	145%

	 	 	[X} MM
	 	 	 	167.5	%	 
	 	175%

	 	 	[X} MM
	 	 	 	225	%	 
	 

Long Term Cash Incentive:
 

An additional $70,000 for each fiscal year, 2007 & 2008, will be added to the participant’s
financial incentive payout if 100% of the 2007 EBITDA goal is achieved. The 2008 Long Term Cash
Incentive will be paid at the same time as the 2008 Fiscal Year EIP payment in December 2008. The
participant must be employed at the end of the fiscal year (2007/2008) to receive the payment for
that year.

	 	 	 
	Payout Modifier:

	 	2007 Order Growth
	 
	 	 

The 2007 Financial Goal incentive payment may be increased or decreased up to 20% based on the
company’s achievement of 2007 Order Growth. A minimum threshold of 50% of the Financial Goal
achievement is necessary before the Payout Modifier will be applicable. Straight-line
interpolation between achievement percentages in the following table will be applied to determine
the actual payment amount.

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	 	Achievement of 2007	 	 	Actual Payment % of	 
	 	Order Growth	 	 	Target Incentive	 
	 	[X] MM

	 	 	 	-20	%	 
	 	[X] MM

	 	 	 	0	%	 
	 	[X] MM

	 	 	 	20	%	 
	 

After the Financial Goal incentive has been adjusted by the Payout Modifier, the 2007 Long Term
Cash Incentive amount will be summed to determine the 2007 EIP payment, and the 2008 Long Term Cash
Incentive amount will be deferred until the end of fiscal 2008.

Example:
 

The Participant earns an annual base salary equal to $180,000 and has a target incentive
opportunity equal 30% (or $54,000). If the company achieves 115% of the financial goal, the
Participant will earn 122.5% of $54,000 or $66,150.

If PLATO achieves 2007 Order growth of 130%, then a Payout Modifier of 20% will be used to adjust
the Financial Goal Incentive. The Financial Goal of $66,150 is multiplied by 20% and summed. This
would result in a Modified Incentive of $79,380 ($66,150 + $13,230). The 2007 Long Term Cash
Incentive of $70,000 is added to the Modified Incentive amount to determine the 2007 EIP payment of
$149,380 ($79,380 + $70,000). The 2008 Long Term Cash Incentive of $70,000 will be deferred until
the end of fiscal 2008. However, the total 2007 EIP Achievement would be $219,380 ($149,380 +
$70,000) including the portion deferred until 2008.

Example Details:

	 	 	 	 	 
	Annual Base Salary:
	 	$	180,000	 
	Target Incentive Percent:
	 	 	x 30	%
	 
	 	 	 
	Targeted Incentive Opportunity:
	 	$	54,000	 
	 
	 	 	 	 
	Financial Goal achieved @ 115%
	 	 	122.5	%
	Financial Goal Incentive:
	 	$	66,150	 
	 
	Payout Modifier:
	 	 	x 20	%
	 
	 	 	 
	 
	 	$	13,230	 
	 
	 	 	 	 
	Modified Incentive:
	 	$	79,380	 
	 
	 
	 	 	 	 
	Long Term Cash Incentive — 2007:
	 	$	70,000	 
	 
	 	 	 	 
	 
	Modified Incentive:
	 	$	79,380	 
	Plus Long Term Cash Incentive — 2007:
	+ 	$	70,000	 
	 
	2007 EIP Payment:
	 	$	149,380	 
	 
	 
	 	 	 	 
	Deferred Long Term Cash Incentive — 2008:
	 	$	70,000	 
	 
	 	 	 	 
	 
	2007 EIP Achievement:
	 	$	219,380	 
	 

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General Provisions:
 

The obligations of the Company, as set forth in this document shall be subject to modification
in such manner and to such extent as the CEO and the Board of Directors deems necessary by
agreement, or as may be necessary to comply with any law, regulation or governmental order
pertaining to compensation

The Plan shall be cancelled in the event of termination of employment with the company. To remain
eligible for a cash payment amount from the Plan, a Participant must be continuously employed by
the Company from date of hire or November 1, 2006, whichever is later, through the end date of the
Plan (October 31, 2007), except for the following circumstances:

     (1) Death or Disability. If a Participant dies or becomes disabled before October 31,
2007, his/her cash payment amount will be prorated to include only the time period for which
the Participant was an active PLATO employee. For the purposes of this Plan “Disability”
means that as a result of physical or mental incapacity the Participant is unable for a period
of 120 consecutive days during any consecutive 180-day period to perform his duties hereunder
on a full-time basis. In the case of death, the payment amount will be given to the
Participant’s estate according to current law and established guidelines and practices.

     (2) Paid or Unpaid Leave of Absence. If a Participant is on a paid or unpaid leave of
absence anytime between November 1, 2006 and October 31, 2007 his/her cash payment amount will
be prorated to exclude the time he/she was on such leave.

     (3) Involuntary Termination without Cause. In the event a Participant’s employment with
the Company is terminated after November 1, 2006 and before the Plan end date (October 31,
2007) his/her cash payment amount will be prorated to include only the time period for which
the Participant was an active PLATO employee.

     (4) Involuntary Termination with Cause. In the event a Participant’s employment with the
Company is terminated after November 1, 2006 and before the Plan end date (October 31, 2007)
the Participant will not be eligible for any payment under the terms of this plan.

     (5) Participation for New Hire or Promotion. The Compensation Committee of the Board of
Directors may decide, in its sole discretion, those individuals who are hired or promoted
within the first six months of a performance period, will be eligible for a prorated award
within the confines of the Plan.

     (6) Change in Control. If at any time during fiscal year 2007 there is a Change in
Control event and the new company does not continue the Plan, the incentive payment will be
pro-rated through the effective date of the Change in Control.

     (7) Plan Administration. The plan will be administered by Plato Learning, which reserves
the right to, at any time, amend, interpret, or terminate the Plan, in whole or in part.

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