PERFORMANCE STOCK UNIT AWARD GRANT AGREEMENT

THIS PERFORMANCE STOCK UNIT AWARD GRANT AGREEMENT (the “Agreement”), by and between TWIN DISC, INCORPORATED (the “Company”) and _____________________________________ (the “Employee”) is dated as of the 3 rd day of August, 2009, to memorialize an award of performance stock units of even date herewith.

WHEREAS, the Company adopted a Long Term Incentive Compensation Plan in 2004, as amended in 2006 (the “Plan”), whereby the Compensation Committee of the Board of Directors (the “Committee”) is authorized to grant awards of various types to certain key employees of the Company; and

WHEREAS the Company amended the Plan on January 20, 2006, to authorize the award of performance stock units, which entitle an employee of the Company receiving such an award to a cash payment equal to the value of the common stock of the Company if the Company achieves a predetermined performance objective; and

WHEREAS, effective August 3, 2009, the Committee made an award of performance stock units to the Employee as an inducement to achieve the below described performance objective.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein set forth, the parties hereto agree as follows:

1.   Performance Stock Unit Award Grant .  Subject to the terms of the Plan, a copy of which has been provided to the Employee and is incorporated herein by reference, the Company has granted Employee an award of performance stock units effective August 3, 2009.  Such performance stock units entitle the Employee to receive a cash payment equal to the product of the number of units awarded pursuant to the table below, multiplied by the fair market value of the Company’s common stock as of June 30, 2012, if the Company achieves the economic profit objective stated below (the “Performance Objective”):

The Performance Objective is the amount of the Company’s economic profit (measured as the difference between the Company’s cumulative net operating profit after taxes and the Company’s cumulative capital charge) for the cumulative three fiscal year period ending June 30, 2012, as specified in the table above.  If the Company achieves the maximum Performance Objective as specified on the table above, the Employee will earn the maximum number of performance stock units.  If the Company achieves the target Performance Objective as specified on the table above, the Employee will receive the target number of performance stock units.  If the Company achieves the threshold Performance Objective stated above, the Employee will earn the threshold number of performance stock units. No performance stock units will be earned for performance below the 3-year cumulative economic profit threshold and no additional performance stock units will be earned for performance exceeding the 3-year cumulative economic profit maximum.  In the event that the Company’s economic profit is between the achievement levels set forth in the above table, the number of performance stock units awarded shall be determined by interpolation.  The Committee shall certify whether and to what extent such Performance Objective is satisfied before any payment pursuant to a performance stock unit is made.  Such certification, and payments pursuant to such certification, shall be made within 2½ months after June 30, 2012.

2.   Price Paid by Employee .  The price to be paid by the Employee for the performance stock units granted shall be         No           Dollars ($ 0.00 ) per share.

3.   Voluntary Termination of Employment Prior to Retirement/Termination for Cause .  If prior to attaining the Performance Objective the Employee voluntarily terminates employment prior to the Employee becoming eligible for normal or early retirement under the Company’s defined benefit pension plan covering the Employee or the employment of the Employee is terminated for cause, the performance stock units granted to the Employee shall be forfeited.  The Committee shall conclusively determine whether the Employee was terminated for cause for purposes of this performance stock unit award.

4.   Termination of Employment due to Death or Disability .  If prior to attaining the Performance Objective the Employee terminates employment due to death or disability, a prorated portion of the performance stock units granted shall immediately vest, and the Company shall make a cash payment pursuant to such prorated awards as if the maximum Performance Objective had been fully achieved.  In such event, the calculation of the cash payment due to the Employee shall be based on the fair market value of the Company’s common stock as of t