1
EXHIBIT 10.6
INCENTIVE STOCK OPTION AGREEMENT
UNDER
ESCO TECHNOLOGIES INC.
1999 STOCK OPTION PLAN
THIS AGREEMENT, made this ___ day of ________ , 200__, by and between
ESCO TECHNOLOGIES INC., a Missouri corporation (hereinafter called the
"Company"), and _______________________ (hereinafter called "Optionee"),
WITNESSETH THAT:
WHEREAS, the Board of Directors of the Company ("Board of Directors")
has adopted the ESCO Technologies Inc. 1999 Stock Option Plan (the "Plan")
pursuant to which options covering an aggregate of 610,000 shares of the Common
Stock of the Company may be granted to officers and other key management
employees of the Company and its subsidiaries; and
WHEREAS, Optionee is now an officer or other key management employee of
the Company or a subsidiary of the Company; and
WHEREAS, the Company desires to grant to Optionee the option to
purchase certain shares of its stock under the terms of the Plan;
NOW, THEREFORE, in consideration of the premises, and of the mutual
agreements hereinafter set forth, it is covenanted and agreed as follows:
1. Grant Subject to Plan. This option is granted under and is expressly
subject to, all the terms and provisions of the Plan, which terms are
incorporated herein by reference.
2
The Committee referred to in Paragraph 4 of the Plan ("Committee") has been
appointed by the Board of Directors, and designated by it, as the Committee to
make grants of options.
2. Grant and Terms of Option. Pursuant to action of the Committee,
which action was taken on _______________________ ("Date of Grant"), the Company
grants to Optionee the option to purchase all or any part of ___________________
(________) shares of the Common Stock of the Company, of the par value of $0.01
per share ("Common Stock"), for a period of ten (10) years from the Date of
Grant, at the purchase price of $__________ per share; provided, however, that
the right to exercise such option shall be, and is hereby, restricted so that no
shares may be purchased during the first year of the term hereof; that at any
time during the term of this option after the end of the first year from the
Date of Grant, Optionee may purchase up to 33-1/3% of the total number of shares
to which this option relates; that at any time during the term of this option
after the end of the second year from the Date of Grant, Optionee may purchase
up to an additional 33-1/3% of the total number of shares to which this option
relates; and that at any time after the end of the third year from the Date of
Grant, Optionee may purchase up to an additional 33-1/3% of the total number of
shares to which this option relates; so that upon the expiration of the third
year from the Date of Grant and thereafter during the term hereof, Optionee will
have become entitled to purchase the entire number of shares to which this
option relates. Notwithstanding the foregoing, (i) in the event of a Change of
Control (as hereinafter defined), Optionee may purchase 100% of the total number
of shares to which this option relates, and (ii) if Optionee's employment is
terminated with the consent and approval of the Company, other than a
termination with "cause"
3
(as defined in Section 3.6 of Optionee's Employment Agreement dated as of April
10, 2000), then, effective as of Optionee's last day of employment, and for
three (3) months thereafter, Optionee may purchase 100% of the total number of
shares to which this option relates. In no event may this option or any part
thereof be exercised after the expiration of ten (10) years from the Date of
Grant. Without further action or approval by the Committee, the purchase price
of the shares subject to the option may be paid for (i) in cash, (ii) in the
discretion of the General Counsel of the Company, by tender of shares of Common
Stock already owned by Optionee, or (iii) in the discretion of the General
Counsel of the Company, by a combination of methods of payment specified in
clauses (i) and (ii), but only if Optionee has owned any shares to be tendered
for at least six (6) months, all in accordance with Paragraph 6 of the Plan. No
shares of Common Stock may be tendered in exercise of this option if such shares
were acquired by Optionee through the exercise of an Incentive Stock Option,
unless (i) such shares have been held by Optionee for at least one year, and
(ii) at least two years have elapsed since such Incentive Stock Option was
granted. For the purposes of this Agreement, a Change of Control means:
a. The purchase or other acquisition (other than from the Company) 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
4
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
b. 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 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
c. Approval by the stockholders of the Company of 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 of a
liquidation or dissolution of the
5
Company or of the sale of all or substantially all of the assets of the
Company.
3. Anti-Dilution Provisions. In the event that, during the term of this
Agreement, there is any change in the number of shares of outstanding Common
Stock of the Company by reason of stock dividends, recapitalizations, mergers,
consolidations, split-ups, combinations or exchanges of shares and the like, the
number of shares covered by this option agreement and the price thereof shall be
adjusted, to the same proportionate number of shares and price as in this
original agreement.
4. Investment Purpose. Optionee represents that, in the event of the
exercise by him of the option hereby granted, or any part thereof, he intends to
purchase the shares acquired on such exercise for investment and not with a view
to resale or other distribution; except that the Company, at its election, may
waive or release this condition in the event the shares acquired on exercise of
the option are registered under the Securities Act of 1933, or upon the
happening of any other contingency which the Company shall determine warrants
the waiver or release of this condition. Optionee agrees that the certificates
evidencing the shares acquired by him on exercise of all or any part of this
option, may bear a restrictive legend, if appropriate, indicating that the
shares have not been registered under said Act and are subject to restrictions
on the transfer thereof, which legend may be in the following form (or such
other form as the Company shall determine to be proper), to-wit:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, but have been issued or transferred
to the registered owner pursuant to the exemption afforded by Section
6
4(2) of said Act. No transfer or assignment of these shares by the
registered owner shall be valid or effective, and the issuer of these
shares shall not be required to give any effect to any transfer or
attempted transfer of these shares, including without limitation, a
transfer by operation of law, unless (a) the issuer shall have received
an opinion of its counsel that the shares may be transferred without
requirement of registration under said Act, or (b) there shall have
been delivered to the issuer a 'no-action' letter from the staff of the
Securities and Exchange Commission, or (c) the shares are registered
under said Act."
5. Non-Transferability. Neither the option hereby granted nor any
rights thereunder or under this Agreement may be assigned, transferred or in any
manner encumbered except by will or the laws of descent and distribution, and
any attempted assignment, transfer, mortgage, pledge or encumbrance except as
herein authorized, shall be void and of no effect. The option may be exercised
during Optionee's lifetime only by him.
6. Termination of Employment. In the event of the termination of
employment of Optionee other than by death, the option granted may be exercised
at the times and to the extent provided in section 2 of this Agreement and
paragraph 9 of the Plan.
7. Death of Optionee. In the event of the death of Optionee during the
term of this Agreement and while he is employed by the Company (or a
subsidiary), or within three (3) months after the termination of his employment
(or one (l) year in the case of the termination of employment of an Optionee who
is disabled as provided in the Plan), this option may be exercised, to the
extent that he was entitled to exercise it at the date of his death, by a
legatee or legatees of Optionee under his last will, or by his personal
representatives or
7
distributees, at any time within a period of one (1) year after his death, but
not after ten (10) years from the date hereof, and only if and to the extent
that he was entitled to exercise the option at the date of his death.
8. Shares Issued on Exercise of Option. It is the intention of the
Company that on any exercise of this option it will transfer to Optionee shares
of its authorized but unissued stock or transfer Treasury shares, or utilize any
combination of Treasury shares and authorized but unissued shares, to satisfy
its obligations to deliver shares on any exercise hereof.
9. Committee Administration. This option has been granted pursuant to a
determination made by the Committee, and such Committee or any successor or
substitute committee authorized by the Board of Directors or the Board of
Directors itself, subject to the express terms of this option, shall have
plenary authority to interpret any provision of this option and to make any
determinations necessary or advisable for the administration of this option and
the exercise of the rights herein granted, and may waive or amend any provisions
hereof in any manner not adversely affecting the rights granted to Optionee by
the express terms hereof.
10. Option an Incentive Stock Option. It is intended that this option
shall be treated as an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended.
8
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its Vice President and to be attested by its
Secretary, pursuant to due authorization, and Optionee has signed this Agreement
to evidence his acceptance of the option herein granted and of the terms hereof,
all as of the date hereof.
ESCO TECHNOLOGIES INC.
By
-----------------------
Vice President
ATTEST:
--------------------------
Secretary
--------------------------
Optionee