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.
1
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
2
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
3
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.
4
(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
5
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
6
Corporation's Supplemental Retirement
Plans, and its retirement, survivor's benefi
