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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 H. Claude Fabry
("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.
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.
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.
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 shareholders was approved by a vote of at
least
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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," which is defined for
purposes of this
Agreement as the date the Employee attains 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
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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
Vice President of Global Distribution 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") (other than a reduction in Base Salary
due
solely to the effect of currency exchange rates);
(iii) the Corporation's requiring Employee to be based at an
office
location other than in Southeastern Wisconsin or Nivelles,
Belgium;
(iv) the failure by
the Corporation to continue in effect the
Corporation's retirement plan for Belgian employees, Incentive
Bonus
Program, The Accelerator 401(k) Savings Plan, 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
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
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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
