EXHIBIT 10
SEVERANCE PLAN
Initially adopted as of August 10, 1995
Restated February, 2002
This Executive Severance Plan ("Plan") was originally adopted as of the
10th day of August, 1995 by ESCO ELECTRONICS CORPORATION, a Missouri
Corporation, now ESCO TECHNOLOGIES INC. (the "Company"). The Plan is hereby
restated on February 5, 2002. The participants designated to be subject to this
Plan (each an "Executive" and collectively the "Executives") shall be determined
by the Chief Executive Officer of the Company ("CEO"), except that the Human
Resources and Ethics Committee ("HREC") of the Board of Directors of the Company
("Board") shall make any decision concerning the CEO. The Executives designated
and the Applicable Multipliers determined with respect to such Executives
pursuant to Section 4(a)(i)(D), are set forth in Appendix A. Appendix A may be
changed from time to time as determined by the CEO or HREC.
1. Certain Definitions. For purposes of this Plan the following words
shall have the following meanings:
(a) "Change of Control" shall mean:
(i) The purchase or other acquisition by any person, 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
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 voting securities entitled to vote
generally in the election of directors; or
(ii) When individuals who, as of the date hereof, constitute the
Board of Directors of the Company (the "Board" and, as of 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 the 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 section, considered as though such
person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of (a) a
reorganization, merger or consolidation, in each case 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
election of directors of the reorganized, merged or consolidated
corporation's then-outstanding voting securities, or (b) a liquidation
or dissolution of the Company or of the sale of all or substantially
all of the assets of the Company.
Notwithstanding the foregoing, an isolated sale, spin-off, joint venture or
other business combination by the Company, which involves one or more divisions
or subsidiaries of the Company and is approved by a majority vote of the
Incumbent Board, shall not be deemed to be a Change of Control.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Effective Date" shall mean the first date on which a Change of Control
occurs. Anything in this Plan to the contrary notwithstanding, if an Officer's
employment with the Company is terminated or if the Plan is amended, changed or
modified and if such termination of employment or amendment, change or
modification to the Plan (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control, or (ii) otherwise
arose in connection with, or in anticipation of, a Change of Control, then for
all purposes of this Plan the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment, or amendment, change or
modification to the Plan as the case may be.
(d) "Employment Period" shall mean the period commencing on the Effective
Date and ending on the third anniversary of such date.
(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.
2. Terms of Employment.
(a) Location and Duties.
(i) The Company shall keep each Officer in its employ for the
Employment Period. During the Employment Period, each Officer's services
shall be required to be performed at the location where the Officer was
employed immediately preceding the Effective Date, or at any office or
location less than 50 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which an Officer is entitled, each Officer will
be expected to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Officer, to use
the Officer's reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period it shall not be a
violation of this Plan for an Officer to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with
the performance of the Officer's assigned responsibilities. To the extent
that any such activities have been conducted by an Officer prior the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective
Date shall not hereafter be deemed to interfere with the performance of the
Officer's responsibilities to the Company.
(b) Compensation.
During the Employment Period, unless his employment is
earlier terminated pursuant to Section 3, each Officer shall receive:
(i) Base Salary. A minimum base salary ("Base Salary"),
which shall be paid at a monthly rate, in an amount not less than the
annualized monthly base salary rate paid or payable to the Officer during
the month immediately preceding the month in which the Effective Date
occurs, including any base salary which was earned but payment of which was
deferred and any base salary which was paid or payable to the Officer by
the Company and its affiliated companies. As used in this Plan, the term
"affiliated companies" shall include any company directly or indirectly
controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. A minimum annual bonus ("Annual Bonus")
in cash, payable in accordance with past practices of the Company,
calculated by multiplying the Base Salary defined in Section 2(b)(i) times
the Average Annual Bonus Percentage. The "Average Annual Bonus Percentage"
is the average of the percentages of the Officer's base salary earned in a
Fiscal Year represented by his annual bonus earned in respect of that
Fiscal Year from the Company or its affiliated companies for each of the
five Fiscal Years most recently ended, after disregarding the highest and
lowest of such percentages.
(iii) Benefits. All pension, welfare and other employee
benefits, fringe benefits and perquisites in amounts and on terms not less
favorable than those to which the Officer was entitled on the Effective
Date, subject only to benefits reductions within the scope of
Section 3(c)(i).
3. Termination of Employment.
(a) Death or Disability. An Officer's employment shall terminate
automatically upon the Officer's death during the Employment Period.
If the Company determines in good faith and as set forth below that
the Disability of the Officer has occurred or is continuing during the
Employment Period, it may give to the Officer written notice of its
intention to terminate the Officer's employment. In such event, the
Officer's employment with the Company shall terminate effective on the
30th day after receipt of such notice by the Officer (the "Disability
Effective Date"), provided that, within the 30 days after such
receipt, the Officer shall not have returned to full-time performance
of the Officer's duties. For purposes of this Plan, "Disability" shall
mean the absence of the Officer from the Officer's duties with the
Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Officer or the Officer's
legal representative (such agreement as to acceptability not to be
withheld unreasonably).
(b) Cause. The Company may terminate an Officer's employment
during the Employment Period for Cause. For the sole and
exclusive purposes of this Plan, "Cause" shall mean:
(i) The willful and continued failure of the Officer to perform
substantially the Officer's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for such
performance is delivered to the Officer by the Board (or the CEO of
the Company in the case of another Officer) which specifically
identifies the manner in which the Board (or CEO) believes that the
Officer has not substantially performed the Officer's duties, or
(ii) The willful engaging by the Officer in (A) illegal conduct
(other than minor traffic offenses), or (B) conduct which is in breach
of the Officer's fiduciary duty to the Company and which is
demonstrably injurious to the Company, its reputation or its business
prospects. For purposes of this provision, no act or failure to act,
on the part of the Officer, shall be considered "willful" unless it is
done, or omitted to be done, by the Officer in bad faith or without
reasonable belief that the Officer's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board (or
upon the instructions of the CEO in the case of another Officer) or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Officer in good
faith and in the best interests of the Company. The cessation of
employment of the Officer shall not be deemed to be for Cause unless
and until there shall have been delivered to the Officer a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is
provided to the Officer and the Officer is given an opportunity,
together with counsel, to be heard before the Board), finding that, in
the good-faith opinion of the Board, the Officer is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying
the particulars thereof in detail.
(c) Good Reason. An Officer may voluntarily terminate his
employment for Good Reason. For the sole and exclusive purposes of
this Plan, "Good Reason" shall mean:
(i) any failure by the Company to comply with any of the
provisions of this Plan, other than an isolated failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Officer and
other than a failure to comply with Section 2(b)(iii) solely by
reason of a reduction in benefits that applies to all salaried
employees who are exempt from the wage and hour provisions of the
Fair Labor Standards Act;
(ii) the Company's requiring the Officer to be based at any
office or location other than as provided in Section 2(a)(i);
(iii) the occurrence on or after the Effective Date of (A)
any change in the Officer's status, title, position or
responsibilities (including reporting responsibilities) which, in
the Officer's reasonable judgement, represents a reduction in his
status, title, position or responsibilities as in effect
immediately prior thereto, (B) the assignment to the Officer of
any duties or responsibilities which, in the Officer's reasonable
judgement, are inconsistent with such status, title, position or
responsibilities, or (C) any removal of the Officer from or
failure to reappoint or re-elect the Officer to any of such
positions, except in connection with the termination of his
employment by reason of the Officer's death or Disability, for
Cause, or by the Officer without Good Reason;
(iv) any purported termination by the Company of the
Officer's employment otherwise than as expressly permitted by
this Plan; or
(v) any failure by the Company to comply with and satisfy
Section 9(c).
(d) Notice of Termination. Any termination of employment hereunder
shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 10(c). For purposes of this Plan, a
"Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Plan relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Officer's employment
under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 90 days after the
giving of such notice). Any failure by an Officer or the Company to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right
to the Officer or the Company, respectively, hereunder or preclude the
Officer or the Company, respectively, from asserting such fact or
circumstance in enforcing the Officer's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Officer's employment is terminated by the Company for Cause, or by the
Officer for Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the
Officer's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date 90 days after the
date on which the Company notifies the Officer of such termination and
(iii) if the Officer's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Officer or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the
Officer's employment other than for Cause or Disability or the
Officer shall terminate employment for Good Reason:
(i) The Company shall pay to the Officer in a lump sum
in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(A) To the extent not theretofore paid, the
Officer's current base salary; plus
(B) All previously deferred base salary, bonuses
and other compensation (together with any accrued interest thereon)not yet
paid by the Company; plus
(C) A bonus equal to the base salary earned from
the beginning of the Fiscal Year in which the termination occurred to the Date
of Termination multiplied by the Average Annual Bonus Percentage defined in
Section 2(b)(ii); plus
(D) The product of (1)a multiplier which
shall be equal to "Three" (the "Applicable Multiplier"), and (2)Final
Compensation. "Final Compensation" is the sum of (x)the Base Salary defined
in Section 2(b)(i), plus (y) the Average Annual Bonus Percentage defined in
Section 2(b)(ii) multiplied by such base salary; plus
(E) Vacation pay equal to Final Compensation
per day multiplied by the number of days of earned vacation not taken as of
the Date of Termination; plus
(F) The lump sum actuarial equivalent of a
supplemental retirement benefit equal to the difference between
a) the amounts which would have been payable under any tax-qualified defined
benefit retirementplan (and any non-qualified supplement to such plan) of the
Company or a subsidiary applicable to the Officer (collectively, the "Retirement
Plan") if the Officer had remained employed by the Company at the
Final Compensation level for a number of years after the Date of
Termination equal to the Applicable Multiplier (or until reaching 67
years of age, if earlier) and (b) the amounts actually payable under
the Retirement Plan.
(ii) The Company shall continue to provide to the Officer, or
reimburse the Officer for the cost of, all medical, hospitalization,
disability, dental, life insurance, club membership and automobile benefits
in amounts and on terms not less favorable than those to which the Officer
was entitled on the Date of Termination, for a number of years after the
Date of Termination equal to the Applicable Multiplier, and shall pay or
provide any other amounts or benefits required by law to be paid or
provided to the Officer or which the Officer is entitled to receive under
any plan, program, policy, practice, contract or agreement of the Company
or any of its affiliated companies. (iii) If the aggregate amounts under
(i) above are not paid to the Officer when due, interest thereon shall
accrue and be paid to the Officer at the rate of the lesser of (A) 15% per
annum, compounded monthly or (B) the maximum rate allowed by law.
(iv) As a condition of receiving payments and benefits under this
Section 4(a), the Officer must provide the Company with a release,
satisfactory to the Company in its sole discretion, of all claims, charges
and causes of action the Officer may have arising out of or relating in any
way to the Officer's employment by the Company and its affiliated companies
and the termination of such employment, including, but not limited to, ADEA
waivers.
(b) Termination in Other Cases. If an Officer's employment
is terminated during the Employment Period by reason of the Officer's
death or Disability, for Cause, or as a result of the
Officer's termination thereof without Good Reason, this Plan shall
terminate with respect to the Officer without further obligations to the
Officer or the Officer's legal representative under this Plan.
5. Non-exclusivity of Rights. Nothing shall herein limit or otherwise
affect such rights as an Officer may have under any other contract or agreement
with the Company or any of its affiliated companies or by law. Amounts which are
vested benefits or which any Officer is otherwise entitled to receive under any
other plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with its terms, unless explicitly
modified by this Plan.
6. No Obligation to Mitigate. The Company's obligation to make the payments
provided for in this Plan and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against any Officer. Except as
otherwise provided in this Section 6, in no event shall any Officer be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Officer under any of the provisions of this Plan and such
amounts shall not be reduced whether or not the Officer obtains other
employment. Notwithstanding the foregoing, if the Officer obtains other
employment, the Company's obligation to provide medical, hospitalization,
disability, dental or life insurance benefits under Section 4(a)(ii) shall be
reduced to the extent such benefits are provided to the Officer as a result of
such other employment.
7. Legal Expenses. The Company and its affiliated companies shall pay
promptly upon submission of appropriate invoices, to the full extent permitted
by law, all reasonable attorneys' fees and related expenses which any Officer
reasonably deems necessary to incur in connection with any dispute with respect
to the validity or enforceability of, or liability under, any provision of this
Plan (including without limitation any dispute as to the amount of any payment
pursuant to this Plan); provided, however, that if the Company is advised by
independent counsel that it will probably prevail if the dispute is litigated on
a motion for summary judgment, the Company may refrain from such payments so
long as the Company actively pursues a decision on such motion,
and if such motion is granted and becomes a final, non-appealable order, the
Company shall have no obligation under this Section 7 with respect to the
Officer's attorneys' fees and related expenses in connection with such dispute.
However, if such motion for summary judgment is denied and if such denial
becomes a final, non-appealable order, the Company shall pay such attorneys'
fees and related expenses, or, if the Officer had already paid such attorneys'
fees and related expenses, the Company shall reimburse the Officer for such
payment, together with interest, from the date of such payment to the date of
reimbursement, at the rate of the lesser of (A) 15% per annum, compounded
monthly or (B) the maximum rate allowed by law.
8. Provisions Relating to Taxation of Payments.
(a) Anything in this Plan to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of any Officer (whether paid or
payable or distributed or distributable pursuant to the terms of this
Plan or otherwise) would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1988 (the "Code") (or any
other provision of the Code relating to excise taxes or "excess parachute
payments") or any interest or penalty is imposed on an Officer with
respect to such excise tax, the Officer shall
not be entitled to receive any additional payment in any amount to
compensate for such tax, interest or penalty.
(b) For purposes of this section, (i) "Payment" shall mean any payment
or distribution in the nature of compensation to or for the benefit of an
Officer, whether paid or payable pursuant to this Plan or otherwise; (ii)
"Net After Tax Receipt" shall mean the Present Value of a Payment net of
all taxes imposed on the Officer with respect thereto under Section 1 and
4999 of the Code, determined by applying the highest marginal rate under
Section 1 of the Code which applied to the Officer's taxable income for the
immediately preceding taxable year; (iii) "Present Value" shall mean such
value determined in accordance with Section 280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the largest aggregate amount of Payments
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 relate to or would result if Payments were made without
regard to this Section 8.
(c) Anything in this Plan to the contrary notwithstanding,
in the event a certified public accounting firm designated by the
Company (the "Accounting Firm") shall determine that receipt of
all Payments would subject the Officer to tax under Section 4999
of the Code, it 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, the
Payments under this Plan shall be reduced so that the aggregate
Payments shall equal such Reduced Amount.
(d) While it is the intention of the Company that the amount
of Payments to the Officer shall result in the maximum aggregate
Net After Tax Receipts to each Officer, as a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or
distributed by the Company to or for the benefit of the Officer
pursuant to this Plan which should not have been so paid or
distributed ("Overpayment") or that additional amounts which will
have not been paid or distributed by the Company to or for the
benefit of the Officer pursuant to this Plan could have been so
paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount hereunder. In the
event that the Accounting Firm, based either upon the assertion
of a deficiency by the Internal Revenue Service against the
Company or the Officer which the Accounting Firm believes has
high probability of success or controlling precedent or other
substantial authority, determines that an Overpayment has been
made, any such Overpayment paid or distributed by the Company to
or for the benefit of the Officer shall be treated for all
purposes as a loan ab initio to the Officer which the Officer
shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the
Code; provided, however, that no such loan shall be deemed to
have been made and no amount shall be payable by the Officer to
the Company if and to the extent such deemed loan and payment
would not either reduce the amount on which the Officer is
subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. 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 or for the
benefit of the Officer together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
9. Successors.
(a) This Plan shall inure to the benefit of and be
enforceable by the Officer and the Officer's legal
representative.
(b) This Plan shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, sale of assets
or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Plan in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. As used in this Plan, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Plan by operation of law, or otherwise.
10. Miscellaneous.
(a) This Plan shall be governed by and construed in
accordance with the laws of the State of Missouri, without
reference to principles of conflict of laws. The captions of this
Plan are not part of the provisions hereof and shall have no
force or effect.
(b) This Plan may be amended, changed or modified by the
Company prior to the Effective Date in any manner (including
adding or deleting Officers or changing Applicable Multipliers)
by written notice to all affected Officers given in accordance
with subparagraph (c) below; provided, however, that unless the
first anniversary of the giving of such notice occurs prior to
the Effective Date, no such amendment, change or modification
adverse to the rights of any Officer hereunder shall become
effective. This Plan is intended to benefit and create a binding
contractual relationship between each Officer and the Company,
and to be enforceable by any Officer, with respect to such
Officer, according to its terms.
(c) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Officer:
At the current home address of the Officer identified in the
personnel records of the Company.
If to the Company: General
Counsel (Chief Executive Officer, if from the General Counsel)
ESCO Technologies Inc.
8888 Ladue Road - Suite 200
St. Louis, MO 63124
Notices and communications shall be effective at the time they are given in the
foregoing manner.
(d) The Company shall withhold from any amounts payable
under this Plan such Federal, state, local or foreign taxes as
may be required to be withheld pursuant to any applicable law or
regulation.
(e) An Officer's or the Company's failure to insist upon
strict compliance with any provision hereof or any other
provision of this Plan or the failure to assert any right the
Officer or the Company may have hereunder, including, without
limitation, the right of an Officer to terminate employment for
Good Reason of this Plan, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this
Plan.
(f) Except as may otherwise be provided under any other
written agreement between an Officer and the Company, the
employment of the Officers by the Company is "at will" and, prior
to the Effective Date, any Officer's employment may be terminated
by either the Officer or the Company, in which case such Officer
shall have no further rights under this Plan.
IN WITNESS WHEREOF, the foregoing Plan was adopted as of the
10th day of August, 1995, and restated on February 5, 2002. ESCO
TECHNOLOGIES INC.
By: ______________________
[SEAL]
ATTEST: _____________________
APPENDIX A
Name Multiplier
D. J. Moore 3x
V. Richey 2x
C. Kretschmer 2x
A. Barclay 2x