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TWIN DISC, INCORPORATED
2004 STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the Twin Disc, Incorporated 2004 Stock
Incentive Plan for Non-Employee Directors (the "Directors' Plan" or "Plan")
is to promote the financial interests of Twin Disc, Incorporated (the "Company")
and its shareholders by providing non-employee members of the Company's Board of
Directors (each a "Participant") the opportunity to acquire Common Stock of the
Company ("Common Stock"), thereby assisting the Company in its efforts to
attract and retain well qualified individuals to serve as directors and further
aligning the interests of such directors with those of the Company's
shareholders. Common Stock under the Plan will be made available to
Participants as either options to purchase Common Stock ("Options") or Common
Stock with certain imposed restrictions as defined herein ("Restricted Stock")
collectively with Options, "Awards"). Options granted under the Directors' Plan
are not intended to meet all of the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Directors' Plan shall be
construed so as to carry out that intent.
ARTICLE 11
EFFECTIVE DATE AND TERM
2.1 EFFECTIVE DATE. The Directors' Plan shall become effective on
the date that it is approved by shareholders holding a majority of the
outstanding shares of Common Stock of the Company (the "Effective Date").
2.2 TERM. No Option may be granted or Restricted Stock awarded more
than ten (10) years after the Effective Date.
2.3 POST TERM ACTIVITY. Options granted within the term of the Plan
as set forth in Section 2.2, subject to the all other terms and conditions
of the Plan and the agreement(s) governing the grant of the Options, may
be exercised, paid out, or modified more than ten years after the
Effective Date. Restrictions on Restricted Stock may lapse more than ten
(10) years after the Effective Date.
ARTICLE III
STOCK SUBJECT TO PLAN
3.1 MAXIMUM NUMBER. The maximum number of shares of Common Stock
that may be issued pursuant to Awards under the Plan is 36,000 subject to
the adjustments provided in Article XII, below. Such shares may be
newly-issued shares, authorized but unissued shares or shares reacquired
by the Company on the open market or otherwise.
3.2 AVAILABILITY OF SHARES FOR AWARD. Shares of Common Stock that
are subject to issuance pursuant to an Award may thereafter be subject to a
new Award:
(a) if the prior Award to which such shares were subject lapses,
expires or terminates without the issuance of such shares; or
(b) shares issued pursuant to an Award are reacquired by the Company
pursuant to rights reserved by the Company upon the issuance of such shares;
provided, that shares reacquired by the Company may only be subject to new
Awards if the Participant received no benefit of ownership from the shares.
Shares of Common Stock that are received by the Company in
connection with the exercise of an Option, including the satisfaction of any
tax liability or the satisfaction of a tax withholding obligation, may be made
subject to issuance pursuant to a later Option.
ARTICLE IV
ADMINISTRATION
4.1 GENERAL ADMINISTRATION. The Company's Board of Directors (the
"Board") will supervise and administer the Plan; provided, however, that the
Board may appoint a committee (the "Committee") of two (2) or more directors to
administer the Plan if deemed necessary or advisable in order to comply with
the exemptive rule promulgated pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
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4.2 POWERS. Grants of Options under the Plan and the amount, price
and timing of the awards to be granted will be automatic as described in
Article VI. Awards of Restricted Stock under the Plan and the amount and timing
of the awards will be automatic as described in Article IX. However, the Board
or Committee shall have discretionary authority to determine all issues with
respect to the interpretation of the Plan, Options granted under the Plan and
Restricted Stock awarded under the Plan, and with respect to all Plan
administration issues.
4.3 SECTION 16 COMPLIANCE. Transactions under this Directors' Plan
are intended to comply with all applicable conditions of the exemptive rules
promulgated pursuant to Section 16(b) of the Exchange Act. To the extent any
provision of the Directors' Plan or action of the Board or Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board or Committee.
ARTICLE V
ELIGIBILITY
5.1 ELIGIBILITY. All present or future directors of the Company
who are not employees of the Company shall be eligible to participate in the
Directors' Plan.
ARTICLE VI
GRANT OF OPTIONS
6.1 AUTOMATIC GRANT. On each annual stockholders' meeting
beginning in calendar year 2004, each eligible director who is elected or
re-elected to the Board, and each eligible director who is continuing to serve
on the Board, shall be granted Options to purchase 300 shares of Common Stock,
and the grant date for such Options shall be the day of the annual stockholders'
meeting.
6.2 EXERCISE PRICE. The exercise price per share shall be the fair
market value per share of Common Stock on the date the Option is granted. For
this and all other purposes under the Plan, the fair market value shall be the
closing price per share of Common Stock on the New York Stock Exchange ("NYSE")
on the date of grant; provided, that if the Common Stock ceases to be listed on
the NYSE, the Board or Committee shall designate an alternative method of
determining the fair market value of the Common Stock.
6.3 OPTION PERIOD. No Option granted under the Plan shall be
exercisable unless and until shareholder approval of the Plan is obtained.
Following such approval, Options may be exercised in whole at any time or in
part from time to time. An Option shall not be exercisable more than ten years
after the date it is granted, and will terminate no later than three years
after termination of director status for any reason other than death.
6.4 WRITTEN AGREEMENT. Each Option shall be evidenced by an
appropriate written agreement, the form of which shall be consistent with the
terms and conditions of the Plan and applicable law, which shall be signed by
an officer of the Company and the Participant. A single written agreement may
cover the grant of Options in subsequent or prior years.
ARTICLE VII
PAYMENT FOR OPTIONS
7.1 GENERAL. Payments required, if any, upon a Participant's
exercise of an Option under the Plan may be made in the form of: (i) cash; (ii)
Company stock; (iii) a combination of cash and Company stock; or (iv) such other
forms or means that the Board or Committee shall determine in its discretion and
in such manner as is consistent with the Plan's purpose and the Code, the
Exchange Act, or other applicable laws or regulations.
ARTICLE VIII
TRANSFERABILITY OF OPTIONS AND EFFECT OF
ARTICLE OF IXTERMINATION OF DIRECTOR STATUS
8.1 GENERAL. Except as provided herein, no Option or interest
therein shall be transferable by a Participant other than by will or by the laws
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of descent and distribution.
8.2 EXERCISE UPON DEATH. In the event of the death of a Participant
prior to termination of an Option held by such director, each such Option shall
be exercisable to the extent provided therein, but not later than one year
after the date of death (and not beyond the stated duration of the Option).
Any such exercise shall be made only:
(a) By the executor or administrator of the estate of the
deceased Participant or the person or persons to whom the deceased
Participant's rights under the Option shall pass by will or the
laws of descent and distribution; and
(b) To the extent, if any, that the deceased Participant was entitled
to exercise such Option at the date of his death.
8.3 TRANSFERABILITY OF OPTION DURING LIFETIME. Except as
otherwise provided herein, every Option granted under the Plan to a Participant
may be assigned or transferred by the Participant to or for the benefit of a
member of the Participant's immediate family or to trusts created for their
benefit and may thereafter be exercised pursuant to its terms by the person or
entity to whom assigned; provided, however, that such transfer does not result
in liability under Section 16 of the Exchange Act to the Participant or other
Participants and is consistent with registration of the Options and sale of
Common Stock on Form S-8 (or a successor form) or the Committee's waiver of
such condition.
8.4 FORFEITURE. Any unexpired and unexercised Options held by
a Participant shall be immediately forfeited if the Participant is prohibited
from serving on the Board by any court of competent jurisdiction or other
government authority, or if, in the discretion of the Board or Committee, a
Participant is no longer competent to serve on the Board due to the
Participant's violation of state or federal securities law or other rule of
the NYSE (or such other listing standards then applicable to the Company).
8.5 RESALE LIMITATION. Shares of Common Stock issued upon
exercise of Options under the Plan are subject to effective registration
statements filed with the Securities and Exchange Commission and are freely
transferable. However, any sale of shares acquired through the exercise of
Options by a director must be made pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or under an applicable
exemption from registration (such as SEC Rule 144). Any such sale be reported
to the SEC in accordance with the applicable provisions of Section 16 of the
Exchange Act and rules promulgated thereunder.
ARTICLE IX
AWARD OF RESTRICTED STOCK
9.1 AUTOMATIC AWARD. On each annual Shareholders' meeting
beginning in calendar year 2004, each eligible director who is elected or
re-elected to the Board, and each eligible director who is continuing to serve
on the Board, shall be awarded 300 shares of Common Stock with the
transferability restrictions set forth in Article X ("Restricted Stock"),
and the award date for such Restricted Stock awarded shall be the day of the
annual Shareholders' meeting.
9.2 WRITTEN AGREEMENT. Each Restricted Stock award shall be
evidenced by an appropriate written agreement, the form of which shall be
consistent with the terms and conditions of the Plan and applicable law, which
shall be signed by an officer of the Company and the Participant. A single
written agreement may cover the award of Restricted Stock in subsequent or
prior years.
9.3 RIGHTS OF HOLDER OR RESTRICTED STOCK. Except for the
restrictions on transfer and risk of forfeiture, the Participant shall have,
with respect to shares of Restricted Stock, all of the rights of a shareholder
of Common Stock, including, if applicable, the right to vote the shares and the
right to receive any cash or stock dividends. Unless otherwise determined by
the Board or Committee and subject to the terms of the Plan, cash or stock
dividends on shares of Restricted Stock shall be payable to the Participant as
they are paid by the Company, even if the restrictions on the shares to which
such dividends relate have not yet lapsed. Cash dividends, if deferred, shall
be paid with an appropriate rate of interest, as determined by the Board or
Committee.
ARTICLE X
TRANSFERABILITY OF RESTRICTED STOCK
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10.1 TRANSFERABILITY RESTRICTION. Except as otherwise provided
for in this Article X, for a period of three (3) years from the date of award,
the Restricted Stock shall not be subject to sale, assignment, pledge or other
transfer of disposition by the Participant, except by reason of an exchange or
conversion of such shares because of merger, consolidation, reorganization or
other corporate action. Any shares into which the Restricted Stock may be
converted or for which the Restricted Stock may be exchanged in a merger,
consolidation, reorganization or other corporate action shall be subject to the
same transferability restrictions as the Restricted Stock.
10.2 RELEASE OF THE TRANSFERABILITY RESTRICTION. One-third (1/3)
of the Restricted Stock awarded on a particular date shall become freely
transferable on each of the subsequent three (3) anniversaries of the date of
award:
Example: If a Restricted Stock award of 90 shares is made on January 1,
2004, 30 shares of that award become freely transferable on
January 1, 2005, another 30 shares of that award become freely
transferable on January 1, 2006 and the final 30 shares of that
award become freely transferable on January 1, 2007.
10.3 TRANSFERABILITY OF RESTRICTED STOCK UPON DEATH OR VOLUNTARY
RETIREMENT. Subject to the forfeiture provisions set forth in Article XI, all
Restricted Stock held by a Participant shall become freely transferable upon the
death of the Participant or the Participant's voluntary retirement from the
Board.
10.4 RESALE LIMITATION. Restricted Stock awarded under the Plan
is subject to effective registration statements filed with the Securities and
Exchange Commission and is freely transferable, except as provided in this
Article X. However, any sale of Restricted Stock by a director must be made
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or under an applicable exemption from registration (such as
SEC Rule 144). Any such sale be reported to the SEC in accordance with the
applicable provisions of Section 16 of the Exchange Act and rules promulgated
thereunder.
ARTICLE XI
FORFEITURE OF RESTRICTED STOCK
11.1 GENERAL. Any Restricted Stock held by a Participant that
remains subject to the transfer restrictions set forth in Section 10.2 shall be
immediately forfeited if the Participant:
(a) is recommended by the Company to be re-elected to the Board
and fails to be re-elected by the shareholders of the Company to
the Board in that election; or
(b) is prohibited from serving on the Board by any court of competent
jurisdiction or other government authority, or in the discretion of
the Board or Committee is no longer competent to serve on the
Board due to the Participant's violation of state or federal
securities law or other rule of the NYSE (or such other listing
standards then applicable to the Company).
ARTICLE XII
ADJUSTMENT PROVISIONS
12.1 CHANGES IN CAPITALIZATION. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (by stock dividends, stock splits, split-up, spin-off, or similar
transactions), the total number of shares reserved for issuance under this Plan
and the number of shares subject to each outstanding Option shall be adjusted so
that the aggregate consideration payable to the Company, if any, and the value
of each such Option shall not be changed.
12.2 REORGANIZATION, SALE,ETC. Options granted hereunder may also
contain provisions for their continuation, acceleration, immediate vesting, or
for other equitable adjustments after changes in the Common Stock resulting from
reorganization, sale, merger, consolidation, dissolution, liquidation or similar
circumstances.
ARTICLE XIII
AMENDMENT AND TERMINATION OF PLAN
13.1 GENERAL. The Board, without further approval of the Company's
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shareholders, may amend the Plan from time to time or terminate the Plan at any
time, provided that:
(a) no action authorized by this Article shall reduce the amount of
any existing Option or Restricted Stock award or change the terms
and conditions thereof without the Participant's consent; and
(b) no amendment of the Plan shall, without the approval of the
Company's shareholders, (i) increase the total number of shares of
Common Stock that may be issued under the Plan or increase the
amount or type of Option that may be granted under the Plan or
increase the amount of Restricted Stock that may be awarded under
the Plan; (ii) change the minimum purchase price, if any, of shares
of Common Stock that may be made subject to Options under the Plan;
(iii) modify the requirements as to eligibility for an Option under
the Plan; (iv) extend the term of the Plan; or (v) constitute a
material revision of the Plan under the listing standards of the
NYSE (or such other listing standards then applicable to the
Company).
ARTICLE XIV
MISCELLANEOUS
14.1 WITHHOLDING TAXES. No later than the date as of which an
amount first becomes includible in the gross income of the Participant for
federal income tax purposes with respect to the award of Restricted Stock or
the exercise of any Option granted under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Company or other entity
identified by the Board or Committee regarding the payment of any federal,
state, local or foreign taxes of any kind required by law to be withheld.
Such withholding obligations may be settled with Common Stock, including Common
Stock that is received upon the exercise of the Option that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall be
conditional upon such payment or arrangements, and the Company shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
14.2 TENURE. A Participant's right, if any, to continue to serve
the Company as a director shall not be enlarged or otherwise affected by his
designation as a Participant under the Directors' Plan.
14.3 CONTROLLING LAW. The Plan, all Options granted, all
Restricted Stock awarded and actions taken hereunder shall be governed by and
construed in accordance with the laws of the State of Wisconsin (other than
its law respecting choice of law). The Plan shall be construed to comply with
all applicable law and to avoid liability to the Company or a Subsidiary,
including, without limitation, liability under Section 16(b) of the Exchange
Act.
14.4 HEADINGS. The headings contained in the Plan are for
reference purposes only, and shall not affect the meaning or interpretation
of the Plan.
14.5 SEVERABILITY. If any provision of the Plan shall for any
reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereby, and this Plan
shall be construed as if such invalid or unenforceable provision were omitted.
14.6 SUCCESSORS AND ASSIGNS. This Plan shall inure to the benefit
of and be binding upon each successor and assign of the Company. All
obligations imposed upon a Participant, and all rights granted to the Company
hereunder, shall be binding upon the Participant's heirs, legal
representatives and successors.
14.7 ENTIRE AGREEMENT. This Plan and any agreements governing the
grant of Options or Restricted Stock awards hereunder to any Participant
constitutes the entire agreement with respect to the subject matter hereof with
respect to such Participant, provided that in the event of any inconsistency
between the Plan and any such agreement(s), the terms and conditions of the Plan
shall control.