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CHANGE OF
CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is
executed and entered into as of this ___ day of July, 2007, by and
between Twin Disc, Incorporated, a Wisconsin corporation, with its
principal offices located at 1328 Racine Street, Racine, Wisconsin
("Corporation"), and ________________ ("Employee").
WITNESSETH:
WHEREAS, the Board
of Directors of the Corporation is aware of the uncertainties
created by the current business environment in which tender offers
for publicly-held corporations are increasingly frequent, is aware
that the possibility of a change in control of the Corporation
raises questions and uncertainties, and is aware that these
questions and uncertainties are cause for legitimate concern among
key Corporation employees about their future with the Corporation;
and
WHEREAS, the Board of Directors of the Corporation recognizes that
the efforts of those employees identified by the Board as key
management employees have contributed and will continue to
contribute to the growth and success of the Corporation;
and
WHEREAS, the Board of Directors of the Corporation is concerned
that the uncertainties associated with the current business
environment may adversely affect the morale of key management
employees of the Corporation, undermine the confidence of such key
management employees in the ability of the Corporation to remain a
viable and competitive entity and jeopardize the ability of the
Corporation to attract and retain the services of key management
employees in the future; and
WHEREAS, the Board of Directors of the Corporation believes that in
the best interests of the Corporation, it is essential that key
management employees, including Employee, be retained and that the
Corporation be in a position to rely on their ongoing dedication
and commitment to render services to the Corporation, irrespective
of whether the Corporation is or may be acquired or merged with or
into another corporation;
WHEREAS, the Corporation previously entered into a Change in
Control Severance Agreement with Employee; and
WHEREAS, the Corporation wishes to further modify the Change in
Control Severance Agreement to formally comply with the final
regulations issued under section 409A of the Internal Revenue
Code.
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NOW, THEREFORE, in
consideration of, and as a specific inducement for, the continued
services of Employee, the parties hereto agree as
follows:
1.
Term
of Agreement; Replacement of Prior Agreement . This Agreement
shall commence as of the date hereof and shall continue in effect
until November 1 st
, 2007;
provided, however, that commencing on November 1, 2007, and each
November 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later
than August 1 of that year, the Corporation shall have given notice
that it does not wish to extend this Agreement; provided, further,
if a Change in Control (as defined in Section 2 below) of the
Corporation shall have occurred during the original or extended
term of this Agreement, this Agreement shall continue in effect for
a period of twenty-four (24) months beyond the month in which such
Change in Control of the Corporation occurred.
The prior Change in
Control Severance Agreement entered into between the Corporation
and Employee, dated as of _____________ , is hereby
terminated and replaced with this Agreement
2. Change in Control
of the Corporation .
(a) No benefits shall be payable hereunder unless there shall have
been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a "Change in Control of the
Corporation" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act") whether or not the
Corporation is then subject to such reporting requirement; provided
that without limitation, such a change in control shall be deemed
to have occurred if: (i) any "person" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) other than Michael Batten or any
member of his family (the "Batten Family"), is or becomes the
"beneficial owner' (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation
representing thirty percent (30%) or more of the combined voting
power of the Corporation's then outstanding securities; (ii) during
any period of two (2) consecutive years (not including any period
prior to the execution of this Agreement) there shall cease to be a
majority of the Board comprised as follows: individuals who at the
beginning of such period constitute the Board and any new
director(s) whose election by the Board or nomination for election
by the Corporation's
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shareholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of
the period or whose election or nomination for election was
previously so approved; or
(iii) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 80% of the combined voting power of the voting securities of
the Corporation or such surviving entity outstanding immediately
after such merger or consolidation, or the shareholders of the
Corporation approve a plan of complete liquidation of the
Corporation or an agreement for the sale or disposition by the
Corporation of all or substantially all the Corporation's
assets.
(b) For purposes of
this Agreement a "Potential Change in Control of the Corporation"
shall be deemed to have occurred if (i) the Corporation enters into
an agreement, the consummation of which would result in the
occurrence of a Change in Control of the Corporation, (ii) any
person (including the Corporation) publicly announces an intention
to take or to consider taking actions which if consummated would
constitute a Change in Control of the Corporation, (iii) any
person, other than a member of the Batten Family or a trustee or
other fiduciary holding securities under an employee benefit plan
of the Corporation or a corporation owned, directly or indirectly,
by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation, who is
or becomes the beneficial owner, directly or indirectly, of
securities of the Corporation representing 9.5% or more of the
combined voting power of the Corporation's then outstanding
securities, increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on the
date hereof; or (iv) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control
of the Corporation has occurred. Employee agrees that, subject to
the terms and conditions of this Agreement, in the event of a
Potential Change in Control of the Corporation, Employee shall not
terminate his employment with the Corporation until the earliest of
(i) a date which is six (6) months from the occurrence of such
Potential Change in Control of the Corporation, (ii) the
termination by Employee of his employment by reason of Disability
or
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Retirement (at
Employee's normal retirement age), as defined in Subsection 3(a)
hereof, or (iii) the occurrence of a Change in Control of the
Corporation.
3.
Termination
Following a Change in Control of the Corporation
. If any
of the events described in Section 2 hereof constituting a change
in control of the Corporation shall have occurred, Employee shall
be entitled to the benefits provided in Subsection 4(d) hereof
immediately upon a termination of his employment which occurs
during the term of this Agreement unless such termination is (i)
due to Employee's death, Disability or Retirement as those terms
are defined in Section 3(a) below, (ii) by the Corporation for
Cause, as that term is defined in Section 3(b) below, or (iii) by
Employee other than for Good Reason, as that term is defined in
Section 3(c) below.
(a)
Disability;
Retirement . If, as a result
of Employee's incapacity due to physical or mental illness,
Employee shall have been absent from the full-time performance of
his duties with the Corporation for six (6) consecutive months, and
within thirty (30) days after written notice of termination is
given, Employee shall not have returned to the full-time
performance of his duties, the Corporation may terminate Employee's
employment for "Disability." Termination by the Corporation or by
Employee of Employee's employment by reason of "Retirement" shall
mean termination on or after Employee's attainment of age
65.
(b)
Cause
.
Termination by the Corporation of Employee's employment for "Cause"
shall mean termination upon (i) the willful and continued failure
by Employee to substantially perform his duties with the
Corporation (other than any such failure resulting from termination
for Good Reason) after a demand for substantial performance is
delivered to Employee that specifically identifies the manner in
which the Corporation believes that Employee has not substantially
performed his duties, and Employee has failed to resume substantial
performance of his duties on a continuous basis within fourteen
(14) days of receiving such demand, (ii) the willful engaging by
Employee in conduct which is demonstrably and materially injurious
to the Corporation, monetarily or otherwise or (iii) Employee's
conviction of a felony or conviction of a misdemeanor which
materially impairs Employee's ability substantially to perform his
duties with the Corporation or (iv) commission of an act of fraud
or material dishonesty involving the Corporation. For purposes of
this Subsection, no act or failure to act, on Employee's part shall
be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that his action or
omission was in the best interest of the Corporation.
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(c)
Good
Reason . Employee shall be
entitled to terminate his employment for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean, without Employee's
express written consent, the occurrence after a Change in Control
of the Corporation of any one or more of the following:
(i) the assignment to Employee of duties, responsibilities or
status inconsistent with his present duties, responsibilities and
status as _______________________ of the Corporation or a
reduction or alteration in the nature or status of Employee's
duties and responsibilities from those in effect as of the date
hereof;
(ii) a reduction by the Corporation in Employee's base salary as in
effect on the date hereof or as the same shall be increased from
time to time ("Base Salary");
(iii) the Corporation's requiring Employee to be based at an office
location other than in southeastern Wisconsin;
(iv) the failure by the Corporation to continue in effect the
Corporation's Salaried Retirement Plan, Supplemental Retirement
Plan, Choice Plan (Cafeteria plan under section 125 for qualified
group insurance benefits), Incentive Bonus Program, The Accelerator
401(k) Savings Plan, Executive Life Insurance Program, Travel
Accident Insurance, Qualified and Non-Qualified Stock Option Plans
or any other of the Corporation's employee benefit plans, policies,
practices or arrangements in which Employee participates or the
failure by the Corporation to continue Employee's participation
therein on substantially the same basis, both in terms of the
amount of benefits provided and the level of Employee's
participation relative to other participants, as existed as of the
date hereof;
(v) the failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and agree
to perform this Agreement as contemplated in Section 5 hereof;
and
(vi) any purported termination by the Corporation of Employee's
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (d) below, and for
purposes of this Agreement, no such purported termination shall be
effective. Employee's right to terminate his employment pursuant to
this Subsection shall not be affected by his incapacity due to
physical or mental illness. Employee's continued
employment
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shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(d)
Notice of
Termination . Any termination
by the Corporation for Cause or by Employee for Good Reason shall
be communicated by Notice of Termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision
so indicated.
(e)
Date
of Termination . "Date of
Termination" shall mean the date as of which Employee’s
expected services permanently decrease to no more than 20 percent
of the average level of bona fide services performed over the
immediately-preceding 36-month period.
4.
Compensation Upon
Termination or During Disability . Following a
Change in Control of the Corporation, as defined in Section 2
hereof, upon termination of Employee's employment or during a
period of disability Employee shall be entitled to the following
benefits:
(a) During any period that Employee fails to perform his full-time
duties with the Corporation as a result of incapacity due to
Disability as that term is defined in Section 3(a) herein, Employee
shall continue to receive his Base Salary at the rate in effect at
the commencement of any such period, until Employee's employment is
terminated pursuant to Subsection 3(a) hereof. Thereafter,
Employee's benefits shall be determined in accordance with the
Corporation's retirement, insurance and other applicable programs
and plans then in effect.
(b) If Employee's
employment shall be terminated by the Corporation for Cause or by
Employee other than for Good Reason, the Corporation shall pay
Employee his full Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given or on
the Date of Termination if no Notice of Termination is required
hereunder, plus all other amounts to which Employee is entitled
under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further
obligations to Employee under this Agreement.
(c) If Employee's
employment terminates by reason of his Retirement or by reason of
his death, then Employee's benefits shall be determined in
accordance with the
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Corporation's
Supplemental Retirement Plans, and its retirement, survivor's
bene
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