Document:

Unassociated Document

    
      EXHIBIT
 10.6

    

    

    

    Compensation
Recovery Policy

    

    

    The Human
Resources and Compensation Committee has adopted a Compensation Recovery Policy
for executive and senior officers.  Under this Policy, the Company, to
the extent permitted by governing law, may recover equity or other at-risk
income that was based on achievement of quantitative performance targets, or
cease payments under an employment agreement, if an executive or other senior
officer engaged in intentional misconduct resulting in a financial restatement
or in any increase in his or her incentive or equity income.  Equity
or other at-risk income includes, without limitation, income related to the
annual Performance Compensation and Incentive Compensation Plans, Stock Option
Awards, Restricted Stock Awards, Performance-Accelerated Restricted Stock
Awards, and employment agreements, where applicable.  The Company will
also, pursuant to the terms of the plans, notice of awards, or other agreements,
recover any equity or at-risk income received by an executive or officer should
such individual engage in activity that competes with, or is otherwise harmful
to the Company or its affiliated companies.

    

    The
Committee will have sole discretion in determining (i) whether the executive’s
or officer’s conduct has or has not met any particular standard of conduct under
the law or this Compensation Recovery Policy, and (ii) the amount of
compensation that may be recovered from the executive or
officer.  Recoverable compensation will include equity or at-risk
income exercised, earned or distributed (as applicable) during the period(s)
that required restatement or during the period(s) in which the executive or
officer engaged in competitive or otherwise harmful conduct (not to exceed 3
years), up to the amount (adjusted for interest) which the executive or officer
obtained as a result of such conduct.  The amount of Recoverable
Compensation may also include fines, penalties, and other expenses incurred by
the Company as a result of such wrongful conduct under the Policy, including
expenses incurred to recoup compensation under this Policy.  In making
the above determinations, the Committee shall conduct a hearing at which the
executive or officer will have the opportunity to defend his actions and
otherwise explain his conduct.  The Committee shall carefully consider
the statements of the executive or officer at such a hearing prior to making its
determination.

     

    Recovery
under this Policy shall not preclude the Company from seeking relief under any
other agreement, policy or law.  The attached matrix entitled
“CLAWBACK” shall be construed as part of this Compensation Recovery
Policy

    .

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      

    

    CLAWBACK

     

     

    
      	
              Employee
      Group

            	
              Clawback
      Provision and Timeframe*

            	
              Comments

            
	 
      	
              Exec
      Officer

            	
              Corp
      Officer

            	
              Pres/

              GM

            	
               

              CFO

            	 
      	 
      
	
              Stock
      Options

            	
              X

            	
              X

            	
              X

            	
              X

            	
               

              · All
      gains from exercise(s) that occurred during any period(s) that required
      restatement up to the amount of the excess obtained by the prohibited
      activity or restatement.

               

            	
              Not
      to exceed 3 years

            
	
              Performance
      Shares

            	
              X

            	
              X

            	
              X

            	
              X

            	
               

              · The
      full value of any performance shares distributed for any period(s) that
      required restatement up to the amount of the difference caused by such
      restatement.

               

            	
              Not
      to exceed 3 years

            
	
              ICP

            	
              X

            	 
      	 
      	 
      	
               

              · All
      payments made that were in excess of the correct multiplier for the
      relevant timeframe**.

               

            	
              Not
      to exceed 3 years

            
	
              PCP

            	
              X

            	
              X

            	
              X

            	
              X

            
	
              Employment
      Agreement

            	
              X

            	
              X

            	 
      	 
      	
               

              · All
      payments to date.  No future payments will be
      provided.

               

            	
              N/A

            

    

    

    *In all
cases, the amount recoverable shall include interest and fines, penalties, and
other expenses, including expenses incurred to recoup such amounts (as described
in the Policy).

    

    **The
“relevant timeframe” – the timeframe that covers the period of time when the
misconduct first occurred to the date it was corrected.  Inclusive of
any amounts paid to, or incurred/owed to the
employee.Unassociated Document

     

    EXHIBIT 10.7

    NOTICE OF
AWARD

    

    

    To:

    

    

    
      	
              From:

            	
              Human
      Resources and Compensation Committee of the Board of Directors
      ("Committee")

            

    

    

    
      	
              Subject:

            	
              ESCO
      Technologies Inc. 2001 Stock Incentive Plan ("Plan") ____
      Award

            

    

    

    1.           Award.  The Committee has
awarded to you _______ shares of Performance-Accelerated Restricted Stock under
the terms of the Plan ("Award") which entitled you to receive _______ shares of
Common Stock of the Company upon satisfaction of the terms hereinafter set
forth.  The Award is subject to all of the terms of the Plan, a copy
of which has been delivered to you.

    

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

    

    (a)           Notwithstanding
(b), below if, during the Period of the Award, 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 (c) and provided you comply with the terms of
the remainder of this Notice of 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%

            
	
                      $_____

               

            	
                         0%

            
	 
      	 
      

    

    (b)           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 provided you
comply with the requirements of paragraph 3.

    

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

    

                               (i)  No
portion of this Award may be accelerated prior to October 1, 20__. One hundred
percent (100%) of the total Award may be accelerated prior to the end of the
Fiscal Year ending September 30, 20__.

    

                               (ii)  Once
a portion of the Award is accelerated under subparagraph (a), 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 is
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 (as defined in the Plan) 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 subsection (e). "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 Paragraph 2(a), above 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:

    

                               (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;

    

    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)
"Company Stock" shall
mean common stock of the Company.

    

                 (d)"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.

    

                 (e)
"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.

    

                 (f)
"Period of the
Award" means the period commencing October 1, 20__ and ending on
September 30, 20__.

    

    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 Period of the Award 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.           Restrictions. You agree that for the
period ending two (2) years after the expiration of the Period of the Award, you
will not, 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, other than as a 2% or less shareholder of a publicly
traded corporation, do any of the following:

    

            (a)
carry on any business or become involved in any business activity, which is (i)
competitive with the business of the Company (or a subsidiary or joint venture
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 a subsidiary or
joint venture of the Company);

    

            (b)
recruit, solicit or hire, or assist anyone else in recruiting, soliciting or
hiring, any employee of the Company (or any subsidiary or joint venture of the
Company), for employment with any competitor of the Company (or any subsidiary
or joint venture of the Company);

    

            (c)
induce or attempt to induce, or assist anyone else to induce or attempt to
induce, any customer of the Company (or any subsidiary or joint venture of the
Company), to discontinue its business with the Company (or with any subsidiary
or joint venture of the Company), or disclose to anyone else any confidential
information relating to the identities, preferences, and/or requirements of any
such customer; or

    

            (d)
engage in any other conduct inimical, contrary or harmful to the interests of
the Company (or any subsidiary or joint venture of the Company), including, but
not limited to, conduct related to your employment, or violation of any Company
policy.

    

    In the
event of a breach or, with respect to subparagraph (i), threatened breach of
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 Agreement, you will abide by the Agreement
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 the three-year period preceding such breach, and (2) the proceeds from
any sales of such shares.  The Company shall also be entitled to
recover from you any expenses incurred by the Company in exercising its right of
recovery hereunder.  The Committee shall have sole discretion in
determining the amount that shall be recovered from you under this subparagraph
(iii).

    

    8.           Compensation
Recovery Policy.  In addition to,
and not in limitation of, the Company’s rights under Paragraph 7, in the event
of any intentional misconduct on your part (as determined by the Committee in
its sole discretion pursuant to applicable law and the Compensation Recovery
Policy adopted by the Committee, including, but not limited to, embezzlement,
fraud, and breach of fiduciary duty) which results in, or substantially
contributes to, the need to restate the Company’s financial statements, the
Company shall be entitled to recover from you (i) any shares of stock
transferred to you under this Award during any period for which restatement of
the Company’s financial statements is required (but, if such period is longer
than three years, not to exceed the three most recent years thereof), and
(ii) the proceeds from any sales of such shares.  Any such amount
recovered by the Company may also be adjusted for interest, as determined by the
Committee.  The Company shall also be entitled to recover from you any
fines, penalties, and other expenses incurred by the Company as a result of your
misconduct, including expenses incurred by the Company in exercising its right
of recovery hereunder.  The Committee shall have sole discretion in
determining the amount that shall be recovered from you under this Paragraph
8.

    

    9.           Choice of
Law.                                This
Agreement 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 Agreement
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 Committee and you.

    

    Executed
this   day
of  ,
20__.

    

    ESCO
TECHNOLOGIES
INC.                                                                                     AGREED
TO AND ACCEPTED:

    

    

    By:
__________________________                            
                                     ____________________________   

                          
Vice President                                                                                                    
Participant

     

     

    ATTEST:
_________________________

                          Secretary

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