<page> 1 AMENDED PERFORMANCE STOCK AWARD GRANT AGREEMENT THIS AMENDED PERFORMANCE STOCK AWARD GRANT AGREEMENT (the "Agreement"), by and between TWIN DISC, INCORPORATED (the "Company") and _______________________ (the "Employee") is dated this _____ day of February 2005, to memorialize an amendment of an award of performance stock previously granted on October 15, 2004. WHEREAS, the Company adopted an Incentive Compensation Plan in 1998 (the (Plan") whereby the Compensation Committee of the Board of Directors (the "Committee") is authorized to grant performance stock awards that entitle an employee of the Company receiving such award to shares of common stock of the Company if the Company achieves a predetermined performance objective; and WHEREAS, effective October 15, 2004, the Committee made an award of performance stock to the Employee as an inducement to achieve the below described performance objective; and WHEREAS, the Committee has determined it to be in its best interests of the Company to amend the performance stock award granted to the Employee and took action to effectuate such amended grant on February 3, 2005. 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 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 a performance stock award effective October 15, 2004. Such performance stock award shall entitle the Employee to receive _____ shares of the Company's common stock (the "Shares") if the Company achieves ____________________________ ($____________) in consolidated annual revenue in the fiscal year beginning on July 1, 2006 and ending on June 30, 2007 (the "Performance Objective"), subject to the terms and conditions and restrictions set forth below. This Agreement amends and replaces any prior agreement between the Employee and the Company covering the October 15, 2004, grant of a performance stock award to the Employee. 2. Price Paid by Employee. The price to be paid by the Employee for the shares granted shall be No Dollars ($ 0.00) per share. 3. Voluntary Termination of Employment Prior to Retirement/Termination for Cause. If prior to attaining the Performance Objective an 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 an Employee is terminated for cause, the performance stock awards granted to such Employee shall be forfeited. The Committee shall conclusively determine whether an Employee was terminated for cause for purposes of this performance stock award. 4. Death/Disability/Other Termination of Employment Other than Change of Control of Company. If prior to attaining the Performance Objective an Employee dies, becomes permanently disabled, voluntarily terminates employment after becoming eligible for normal or early retirement under the Company's defined benefit pension plan covering the Employee, or is terminated for any reason other than for cause or following a Change in Control of the Company as described in Section 5 (each a "Qualifying Event"), the performance stock awards granted to such Employee shall be paid on a prorated basis if and when the Performance Objective is achieved. Such prorated performance stock awards shall be subject to the following terms and conditions: (a) The prorated award shall be determined by multiplying the number of shares underlying the award by a fraction, the numerator of which is the number of days from July 1, 2004, through the Employee's last day of employment, and the denominator or which is the number of days from July 1, 2004, through June 30, 2007. Any fractional share of the Company resulting from such a prorated award shall be rounded up to a whole share of the Company. (b) Except as otherwise provided in Section 4(c), shares of the Company underlying such prorated awards shall be delivered in the ordinary course after the determination by the Committee that the Performance Objective has been achieved (and no later than 2-1/2 months after June 30, 2007). <page> 2 (c) The Committee has the authority in its sole discretion to immediately vest the prorated portion of the performance stock awards granted hereunder of an Employee who experiences a Qualifying Event and deliver shares of Company stock underlying such prorated awards as if the Performance Objective had been fully achieved. (d) The Committee shall conclusively determine whether an Employee shall be considered permanently disabled for purposes of this performance stock award. 5. No Rights of Shareholder. Until the Performance Objective is met, the performance stock award grant shall not entitle the Employee any rights of a shareholder, including the right to receive dividends or to vote the Shares. In the event that the Performance Objective is met, the Shares of the Company shall be issued to the Employee whose performance stock award has not been forfeited, and a certificate representing the Shares shall be delivered to the Employee. 6. Employment Status. Neither this Agreement nor the Plan impose on the Company any obligation to continue the employment of the Employee. TWIN DISC, INCORPORATED By:______________________________ Its:_____________________________ EMPLOYEE: _________________________________