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CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT
is executed and entered into as of this ___ day of July,
2005, 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; and
WHEREAS, the
Corporation previously entered into a Change in Control
Severance Agreement with Employee, but due
to the enactment of section 409A
of the Internal Revenue Code, the
Corporation and Employee desire to
terminate that agreement and replace it
with the existing Agreement.
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 1st, 2005; provided, however, that
commencing on November 1, 2005,
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,
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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 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
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 "Normal Retirement Date" as defined in Section 4.1
of Twin Disc
Incorporated Supplemental Retirement Plan, Approved June 21,
1984 and Amended
July 28, 2005 (the "Supplemental Retirement Plans"), as
applicable to
Employee, as of the date hereof, or in accordance with any
retirement
arrangement established with Employee's consent, with respect
to Employee.
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(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.
(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 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
specified in the
Notice of Termination where required or in any other case
the date upon
which Employee ceases to perform services to the
Corporation;
provided that if within thirty (30) days after any Notice of
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Termination one
party notifies the other party that a dispute exists
concerning the
termination, the Date of Termination shall be the date
finally
determined to be the Date of Termination, either by mutual
written
agreement of the
parties or by the final nonappealable determination of a
court of
competent jurisdiction.
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
