exv10w1






Exhibit No. 10.1




Executive Change-in-Control Severance Agreement




     THIS EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made, entered into, and is effective
this ___day of December, 2009, (hereinafter referred to as the “Effective Date”), by and between
Woodward Governor Company (the “Company”), a Delaware corporation, and                                          (the “Executive”).



     WHEREAS, the Executive is currently employed by the Company and possesses considerable
experience and knowledge of the business and affairs of the Company concerning its policies,
methods, personnel, and operations; and



     WHEREAS, the Company is desirous of assuring insofar as possible, that it will continue to
have the benefit of the Executive’s services; and the Executive is desirous of having such
assurances; and



     WHEREAS, the Company recognizes that circumstances may arise in which a Change in Control of
the Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment
without regard to the Executive’s competence or past contributions. Such uncertainty may result in
the loss of the valuable services of the Executive to the detriment of the Company and its
stockholders; and



     WHEREAS, both the Company and the Executive are desirous that any proposal for a Change in
Control or acquisition will be considered by the Executive objectively and with reference only to
the business interests of the Company and its stockholders; and



     WHEREAS, in order to assure that the Executive would be in a better position to consider the
Company’s best interests if the Executive is afforded reasonable security against altered
conditions of employment which could result from any such Change in Control or acquisition, the
Executive and the Company entered into a Transitional Compensation Agreement dated as of December
19, 2008 (the “Prior Agreement”); and



     WHEREAS, the Company and the Executive now desire to amend and restate the Prior Agreement as
hereinafter provided.



     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
of the parties set forth in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:



Article 1. Definitions




     Wherever used in this Agreement, the following terms shall have the meanings set forth below
and, when the meaning is intended, the initial letter of the word is capitalized:




	 	(a)	 	“Agreement” means this Executive Change-in-Control Severance Agreement.
	 
	 	(b)	 	“Base Salary” means, at any time, the then regular annual rate of pay which the
Executive is receiving as annual base salary.





 









 





	 	(c)	 	“Board” means the Board of Directors of the Company.
	 
	 	(d)	 	“Cause” shall mean the occurrence, prior to any termination of employment, of
any one or more of the following:






	 	(i)	 	The Executive’s willful and continued failure to substantially
perform the Executive’s duties with the Company (other than any such failure
resulting from the incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the Executive that
specifically identifies the manner in which the Committee believes that the
Executive has not substantially performed the Executive’s duties, and the
Executive has failed to remedy the situation within fifteen (15) business days
of such written notice from the Committee; or
	 
	 	(ii)	 	The Executive’s commission of an act materially and
demonstrably detrimental to the financial condition and/or goodwill of the
Company or any of its subsidiaries, which act constitutes gross negligence or
willful misconduct by the Executive in the performance of the Executive’s
material duties to the Company or any of its subsidiaries; or
	 
	 	(iii)	 	The Executive’s commission of any material act of dishonesty
or breach of trust resulting or intended to result in material personal gain or
enrichment of the Executive at the expense of the Company or any of its
subsidiaries; or
	 
	 	(iv)	 	The Executive’s conviction of a felony involving moral
turpitude, but specifically excluding any conviction based entirely on
vicarious liability.






No act or failure to act will be considered “willful” unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. In
addition, no act or omission will constitute Cause unless (A) a resolution finding
that Cause exists has been approved by a majority of all of the members of the Board
at a meeting at which the Executive is allowed to appear with legal counsel and (B)
the Company has given detailed written notice thereof to the Executive and, where
remedial action is feasible, the Executive then fails to remedy the act or omission
within a reasonable time after receiving such notice.




	 	(e)	 	“Change in Control” of the Company shall mean the occurrence during the Term of
any one (1) or more of the following events:






	 	(i)	 	Any “person” (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), excluding
for this purpose the Company or any subsidiary of the Company, or any employee
benefit plan of the Company or any subsidiary of the Company,
or any person or entity organized, appointed or established by the Company
for or pursuant to the terms of such plan which acquires beneficial
ownership of voting securities of the Company, is or becomes




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	 	 	 	the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company’s then outstanding
securities; provided, however, that no Change in Control shall be deemed to
have occurred (1) as the result of an acquisition of securities of the
Company by the Company which, by reducing the number of voting securities
outstanding, increases the direct or indirect beneficial ownership interest
of any person to thirty percent (30%) or more of the combined voting power
of the Company’s then outstanding securities, but any subsequent increase in
the direct or indirect beneficial ownership interest of such a person in the
Company shall be deemed a Change in Control provided that such subsequent
increase either occurs while such person has a direct or indirect beneficial
ownership interest of thirty percent (30%) or more of the combined voting
power of the Company’s then outstanding securities or results in such person
then having a direct or indirect beneficial ownership interest of thirty
percent (30%) or more of the combined voting power of the Company’s then
outstanding securities, or (2) as a result of the acquisition directly from
the Company of securities of the Company representing less than 50% of the
voting power of the Company, or (3) if the Board determines in good faith
that a person who has become the beneficial owner directly or indirectly of
securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Company’s then outstanding securities has
inadvertently reached that level of ownership interest, and if such person
divests as promptly as practicable a sufficient amount of securities of the
Company so that the person no longer has a direct or indirect beneficial
ownership interest in thirty percent (30%) or more of the combined voting
power of the Company’s then outstanding securities; or






	 	(ii)	 	During any period of twelve (12) consecutive months (not
including any period prior to the Effective Date of this Agreement),
individuals who at the beginning of such twelve-month period constitute the
Board and any new director or directors (except for any director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in subparagraph (i), above, or subparagraph (iii), below)
whose election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds 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, cease
for any reason to constitute at least a majority of the Board (such individuals
and any such new directors being referred to as the “Incumbent Board”); or
	 
	 	(iii)	 	Consummation of a plan of merger or consolidation of the
Company with any other corporation or a similar transaction or series of
transactions involving the Company (a “Business Combination”), in each case
unless after such a Business Combination (x) the shareholders of the Company




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	 	 	 	immediately prior to the Business Combination continue to own, directly or
indirectly, at least fifty-one percent (51%) of the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors of the new (or continued) entity (including, but not by
way of limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s former assets either
directly or through one or more subsidiaries) immediately after such Business
Combination, in substantially the same proportion as their ownership of the
Company immediately prior to such Business Combination, and (y) at least a
majority of the members of the board of directors of the entity resulting from
such Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or






	 	(iv)	 	During any period of not more than twelve (12) consecutive
months (not including any period prior to the Effective Date of this
Agreement), the consummation of the sale or disposition by the Company of at
least forty percent (40%) of the total gross fair market value of the Company’s
assets as determined by the Committee (or any transaction or series of
transactions having a similar effect) unless after such transaction or series
of transactions (x) the shareholders of the Company immediately prior to the
transaction or series of transactions continue to own, directly or indirectly,
at least fifty-one percent (51%) of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the acquiring entity (including, but not by way of limitation, an
entity which as a result of such transaction or series of transactions owns the
Company or all or substantially all of the Company’s former assets either
directly or through one or more subsidiaries) immediately after such
transaction or series of transactions, in substantially the same proportion as
their ownership of the Company immediately prior to such transaction or series
of transactions, and (y) at least a majority of the members of the board of
directors of such entity were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such transaction or series of transactions.






	 	(f)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	(g)	 	“Committee” means the Compensation Committee of the Board or, if no
Compensation Committee exists, then the full Board of Directors of the Company, or a
committee of Board members, as appointed by the full Board to administer this
Agreement.
	 
	 	(h)	 	“Company” means Woodward Governor Company, a Delaware corporation, or any
successor thereto as provided in Article 9.





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	 	(i)	 	“Disability” or “Disabled” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for a six-consecutive month
period as a result of incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal representative.
	 
	 	(j)	 	“Effective Date” means the date as specified in the opening sentence of this
Agreement.
	 
	 	(k)	 	“Effective Date of Termination” means the date on which a Qualifying
Termination occurs, as provided in Section 2.2, which triggers the payment of Severance
Benefits hereunder.
	 
	 	(l)	 	“Good Reason” means, without the Executive’s express written consent, the
occurrence after a Change in Control of the Company of any one (1) or more of the
following:






	 	(i)	 	The material diminution in the Executive’s authorities, duties
or responsibilities as an executive and/or officer of the Company; or
	 
	 	(ii)	 	The Company’s requiring the Executive to have a principal job
location in excess of fifty (50) miles from the location of the Executive’s
principal job location at any time during the 12-month period immediately
preceding the Change in Control; except for required travel on the Company’s
business to an extent substantially consistent with the Executive’s then
present business travel obligations; or
	 
	 	(iii)	 	A material reduction by the Company of the Executive’s Base
Salary; or
	 
	 	(iv)	 	A material reduction in the Executive’s overall compensation,
including short- and long-term incentive compensation opportunities, employee
benefits and retirement plans, policies, practices or other compensation
arrangements in which the Executive participates; or
	 
	 	(v)	 	The failure of the Company to obtain an agreement from any
successor to the Company to assume and agree to perform the Company’s
obligations under this Agreement, as contemplated in Article 9; or
	 
	 	(vi)	 	A material breach of this Agreement by the Company.






Unless the Executive becomes Disabled, the Executive’s right to terminate employment
for Good Reason shall not be affected by the Executive’s incapacity due to physical
or mental illness. A termination of employment by the Executive for one of the
reasons set forth in subparagraphs (i) — (vi), above, will not constitute “Good Reason” unless, within the 90 day period immediately following the
occurrence of such Good Reason event, the Executive has given written notice to the
Company specifying the event or events relied upon for such termination,



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the Company has not remedied such event or events within 30 days of the receipt of such notice
and the Executive resigns within six months following the occurrence of the Good
Reason event or at such later time as the Executive and the Company mutually agree
but in no event later than 24 months after the date of the Change in Control.




	 	(m)	 	“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 the Executive’s employment under the provision so indicated.
	 
	 	(n)	 	“Qualifying Termination” means any of the events described in Section 2.2, the
occurrence of which triggers the payment of Severance Benefits hereunder.
	 
	 	(o)	 	“Severance Benefits” mean the payment of severance and non-severance
compensation as provided in Section 2.3.
	 
	 	(p)	 	“Term” shall mean the term of this Agreement as provided in Article 7.





Article 2. Severance Benefits




     2.1. Right to Severance Benefits. Subject to the provisions of Section 11.11, the Executive
shall be entitled to receive from the Company Severance Benefits as described in Section 2.3, if
(i) there has been a Change in Control of the Company and (ii) thereafter but prior to the second
anniversary of the occurrence of the Change in Control, the Executive incurs a Qualifying
Termination.



     The Executive shall not be entitled to receive duplicative severance benefits under any other
Company-related plans or programs if benefits are triggered hereunder.



     2.2. Qualifying Termination. A Qualifying Termination shall be the occurrence of any one of
the following events:




	 	(a)	 	The Company’s termination of the Executive’s employment without Cause; and
	 
	 	(b)	 	The termination of employment by the Executive for Good Reason.





     For purposes of this Agreement, a Qualifying Termination shall not include the Executive’s
termination of employment by reason of death or Disability, or the Executive’s voluntary retirement
or other voluntary termination for reasons other than as specified in Section 2.2(b), or the
Company’s termination for Cause.



     2.3. Description of Severance Benefits. In the event the Executive becomes entitled to
receive Severance Benefits, as provided in Section 2.1, the Company shall pay to the Executive and provide the Executive with the following Severance Benefits subject to the provisions of
Article 5 below:



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	 	(a)	 	A lump-sum amount equal to the Executive’s unpaid Base Salary, accrued vacation
pay, unreimbursed business expenses, and all other items earned by and owed to the
Executive through and including the Effective Date of Termination (the “Accrued
Obligations”).
	 
	 	(b)	 	A lump-sum amount equal to (i) the higher of the following: (A) the Executive’s
annual bonus award earned as of the Effective Date of Termination, based on annualized
actual year-to-date performance, as determined at the Committee’s discretion, under the
annual bonus plan in which the Executive is then participating for the bonus plan year
in which the Executive’s Effective Date of Termination occurs or (B) the Executive’s
annual target bonus established under such plan for such year; multiplied by (ii) a
fraction the numerator of which is the full number of completed days in the annual
bonus plan year as of the Effective Date of Termination, and the denominator of which
is 365. This payment will be in lieu of any other payment to be made to the Executive
under the annual bonus plan in which the Executive is then participating such the plan
year.
	 
	 	(c)	 	A lump-sum amount equal to [(For CEO:) the sum of the following:] / [(For CFO:)
two (2) multiplied by the sum of the following:] (i) the higher of: (A) the Executive’s
Base Salary in effect upon the Effective Date of Termination, or (B) the Executive’s
Base Salary in effect immediately prior to the date of the Change in Control; and (ii)
the higher of: (A) the Executive’s annual target bonus established under the annual
bonus plan in which the Executive is then participating for the bonus plan year in
which the Executive’s Effective Date of Termination occurs, or (B) the Executive’s
annual target bonus for the most recent bonus plan year ended prior to the date of the
Change in Control.
	 
	 	(d)	 	In consideration for the Executive entering into a noncompete agreement as
described in Article 4, an additional lump-sum amount equal to the sum of the
following: (i) the higher of: (A) the Executive’s Base Salary in effect upon the
Effective Date of Termination, or (B) the Executive’s Base Salary in effect immediately
prior to the date of the Change in Control; and (ii) the higher of: (A) the Executive’s
annual target bonus established under the annual bonus plan in which the Executive is
then participating for the bonus plan year in which the Executive’s Effective Date of
Termination occurs, or (B) the Executive’s annual target bonus for the most recent
bonus plan year ended prior to the date of the Change in Control.
	 
	 	(e)	 	Vesting and cash-out of any and all outstanding cash-based long-term incentive
awards held by the Executive, as granted to the Executive by the Company as a component
of the Executive’s compensation. The cash-out of any such award shall be in a lump-sum
amount equal to (i) the higher of the following: (A) the Executive’s cash-based award
earned as of the Effective Date of Termination under the Company’s long-term incentive
plan, based on actual performance, as determined at the Committee’s discretion, for the applicable performance period
through the Effective Date of Termination, or (B) the target award level established
for such award; multiplied by (ii) a fraction the numerator of which is





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the full number of completed days in the preestablished performance period for the award as
of the Effective Date of Termination, and the denominator of which is the full
number of days in the entire performance period (e.g., typically thirty-six (36)
months). This payment(s) will be in lieu of any other payment to be made to the
Executive under these cash-based long-term performance-based awards.




	 	(f)	 	A lump-sum amount equal to the cash equivalent of the aggregate amount of
contributions (other than pre-tax salary deferral contributions by the Executive) that
the Company and its affiliates would have made on behalf of the Executive to its
tax-qualified, defined contribution retirement plan(s), whether or not the Executive
was vested therein, during the twenty-four (24) month period beginning on the Effective
Date of Termination, had (i) the Executive continued as an active participant therein
during such period, (ii) the Executive’s rate of compensation being recognized by each
plan prior to the Effective Date of Termination continued in effect, (iii) in the case
of matching contributions, the Executive’s rate of contributions in effect on the date
immediately prior to the Effective Date of Termination remained in effect and (iv) in
the case of discretionary contributions by the Company or its affiliates, the Company
and its affiliates continued to make such contributions at the rate that applied to the
most recent plan year that ended prior the Effective Date of Termination.
	 
	 	(g)	 	Continuation, for a period of twenty-four (24) months after the Effective Date
of Termination, of the following employee benefits on terms at least as favorable to
the Executive as those which would have been provided if the Executive had continued
employment for that time as an executive of the Company, with the cost of such benefits
to be paid by the Company: medical and dental benefits, life and disability insurance,
and executive physical examinations (“Corporation-Paid Coverage”). Corporation-Paid
Coverage shall be paid directly by the Company to the applicable insurer and/or
administrator when premiums for such coverage are due in accordance with the terms and
conditions of the applicable insurance policy or administrative services agreement.
Notwithstanding the foregoing,






	 	(i)	 	if the Executive is a “specified employee” (as described in
Section 10(c) below) on the date of the Executive’s Effective Date of
Termination, continued coverage under the disability and life insurance plans
shall be solely at the expense of the Executive for the period beginning on the
Executive’s Effective Date of Termination and ending six (6) months thereafter.
On the first day of the seventh following the Executive’s Effective Date of
Termination (or, in the event of the Executive’s earlier death), the Company
shall reimburse the Executive for the Corporation-Paid Coverage under the
disability and life insurance plans portion of such expense in a lump sum cash
payment with interest at the rate specified in Section 11.9. Thereafter,
Corporation-Paid Coverage under the disability and life insurance plans shall be paid directly by the Company to the
applicable insurer and/or administrator when premiums for such coverage





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are due in accordance with the terms and conditions of the applicable insurance
policy or administrative services agreement; and




	 	(ii)	 	with respect to any such benefits providing for the
reimbursement of medical expenses referred to in Section 105(b) of the Code
under any self-insured medical reimbursement plan (within the meaning of Code
Section 105(h)) (a “Self-Insured Medical Plan”), including without limitation
medical and dental benefits, that are incurred following the period the
Executive would be entitled (or would, but for this Section 2.3(g), be
entitled) to continuation coverage under such plan under Code Section 4980B
(COBRA) if the Executive had elected such coverage and paid the applicable
premiums, (A) the reimbursement of an eligible medical expense must be made on
or before the last day of the calendar year following the calendar year in
which the expense was incurred and (B) the Executive shall pay to the Company
the cost, on or after-tax basis, for the premium payments (both the employee
and employer portion) required for such continued coverage under any
Self-Insured Medical Plan. On or about January 31 of the year following the
year in which the Effective Date of Termination occurs and continuing on or
about each January 31 thereafter until the year following the year in which the
Executive’s continued coverage under any Self-Insured Medical Plan terminates
under this Section 2.3(g), the Company will make a payment in cash equal to the
amount, if any (with interest at the rate specified in Section 11.9), the
Executive paid in premium payments during the immediately preceding calendar
year for continued coverage under any Self-Incurred Medical Plan exceeds the
amount the Executive would have paid if the Executive had remained in
employment during such year, provided that each such cash payment by the
Company shall be considered a separate payment and not one of a series of
payments for purposes of Code Section 409A.





     2.4. Termination for Any Reason Other Than a Qualifying Termination. Following a Change in
Control, if the Executive incurs a termination of employment which is not a Qualifying Termination,
the Company shall pay the Executive the Executive’s Accrued Obligations and the Company shall have
no further obligations to the Executive under this Agreement.



     2.5. Notice of Termination. Any termination of the Executive’s employment by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the
other party.



Article 3. Form and Timing of Severance Benefits




     3.1. Form and Timing of Severance Benefits. Subject to the provisions of Article 10, the
Severance Benefits described in Section 2.3(a)-(f) shall be paid in cash to the Executive in a
single lump sum as soon as practicable but, except as provided in Section 11.11, in no event
later than thirty (30) days following the Effective Date of Termination.



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     3.2. Withholding of Taxes. The Company shall withhold from any amounts payable under this
Agreement all federal, state, city, or other taxes as legally shall be required.



Article 4. Restrictive Covenants




     The Executive shall be subject to the following restrictive covenants as of the Effective Date
of this Agreement:




	 	(a)	 	Noncompetition. During the term of employment with the Company or its
affiliates or subsidiaries and for a period of twelve (12) months after the Effective
Date of Termination, the Executive shall not: (i) directly or indirectly act alone or
in concert or conspire with any person in order to engage in or prepare to engage in or
to have a financial or other interest in any business or any activity which the
Executive knows (or reasonably should have known) to be directly competitive with the
business of the Company or its subsidiaries as then being carried on; or (ii) serve as
an employee, agent, partner, shareholder, director or consultant for, or in any other
capacity participate, engage, or have a financial or other interest in any business or
any activity which the Executive knows (or reasonably should have known) to be directly
competitive with the business of the Company or its subsidiaries as then being carried
on (provided, however, that notwithstanding anything to the contrary contained in this
Agreement, the Executive may own up to five percent (5%) of the outstanding shares of
the capital stock of a company whose securities are registered under Section 12 of the
Securities Exchange Act of 1934).
	 
	 	(b)	 	Confidentiality. The Company has advised the Executive, and the Executive
acknowledges, that it is the policy of the Company to maintain as secret and
confidential all Protected Information (as defined below), and that Protected
Information has been and will be developed at substantial cost and effort to the
Company. Other than in the regular course of the Executive’s employment with the
Company, all Protected Information shall remain confidential permanently and the
Executive shall not at any time, directly or indirectly, divulge, furnish, or make
accessible to any person, firm, corporation, association, or other entity, nor use in
any manner, either during the term of employment or after termination, at any time, for
any reason, any Protected Information, or cause any such information of the Company to
enter the public domain, other than with the written consent of the Company or as may
be required by law or legal process (after giving the Company notice and an opportunity
to contest such requirement).
	 
	 	 	 	For purposes of this Agreement, “Protected Information” means trade secrets,
confidential and proprietary business information of the Company and its
subsidiaries, and any other information of the Company and its subsidiaries,
including, but not limited to, customer lists (including potential customers),
sources of supply, processes, plans, materials, pricing information, internal
memoranda, marketing plans, internal policies, and products and services which may
be developed from time to time by the Company and its subsidiaries and their agents
or employees, including the Executive; provided, however, that





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information that is in the public domain (other than as a result of a breach by the Executive of this
Agreement), approved for release by the Company or lawfully obtained from third
parties who are not bound by a confidentiality agreement with the Company, is not
Protected Information.




	 	(c)	 	Nonsolicitation. During the term of employment and for a period of twelve (12)
months after the Effective Date of Termination, the Executive shall not employ or
retain or solicit for employment or arrange to have any other person, firm, or other
entity employ or retain or solicit for employment or otherwise participate in the
employment or retention of any person who is an employee or consultant of the Company
or any subsidiary thereof.
	 
	 	(d)	 	Cooperation. Executive agrees to cooperate with the Company and its attorneys
in connection with any and all lawsuits, claims, investigations, or similar proceedings
that have been or could be asserted at any time arising out of or related in any way to
Executive’s employment by the Company or any of its subsidiaries.
	 
	 	(e)	 	Nondisparagement. At all times, the Executive agrees not to disparage the
Company or otherwise make comments harmful to the Company’s reputation.
	 
	 	(f)	 	Remedies. The Executive and the Company agree that the restrictive covenants
contained in this Article 4 are reasonable under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction any such covenant is not
reasonable in any respect, such court will have the right, power and authority to
excise or modify any provision or provisions of such covenants as to the court will
appear not reasonable and to enforce the remainder of the covenants as so amended. The
Executive acknowledges and agrees that the remedy at law available to the Company for
breach of any of the Executive’s obligations under this Article 4 would be inadequate
and that damages flowing from such a breach may not readily be susceptible to being
measured in monetary terms. Accordingly, the Executive acknowledges, consents and
agrees that, in addition to any other rights or remedies that the Company may have at
law, in equity or under this Agreement, upon adequate proof of the Executive’s
violation of any such provision of this Agreement, the Company will be entitled to seek
immediate injunctive relief, including but not limited to, a temporary order
restraining any threatened or further breach, without the necessity of proof of actual
damage.





Article 5. Golden Parachute




     5.1. Potential Reduction. If any portion of the Severance Benefits or any other payment
under this Agreement, or under any other agreement with, or plan of the Company or its subsidiaries
or affiliates, including, without limitation, any stock option or similar right, or the
lapse or termination of any restriction on or vesting or exercisability of any of the
foregoing (in the aggregate, “Total Payments”) would constitute an “excess parachute payment”
within the meaning of Section 280G of the Code and but for this Section, would be subject to the
excise tax



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imposed by Section 4999 of the Code, then such Total Payments shall be either (i)
delivered in full, or (ii) delivered as to the maximum extent which would result in no portion of
such Total Payments being subject to excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal, state and local income taxes and the
excise tax imposed by Section 4999 or similar state or local law, results in the receipt by the
Executive on an after-tax basis, of the greatest amount of Total Payments, notwithstanding that all
or some portion of such Total Payments may be taxable under Section 4999 of the Code.



     5.2. Determination. A determination as to whether a reduction of Total Payments will be made
pursuant to Section 5.1 shall be made at the Company’s expense by a nationally recognized
accounting or consulting firm (“Advisor”) selected by the Company. The Advisor shall provide such
determination (the “Determination”), together with detailed supporting calculations and
documentation to the Executive and the Company within ten (10) business days of the Effective Date
of Termination if applicable, or such other time as requested by the Company or by the Executive
(provided the Executive reasonably believes that any of the Total Payments may be subject to the
Excise Tax). For purposes of making the calculations required by this paragraph, the Advisor may
make reasonable assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Executive shall furnish to the Advisor such information and documents as
the Advisor may reasonably request in order to make a determination under this Section. Within ten
(10) business days of the delivery of the Determination to the Executive and the Company, the
Executive shall have the right to dispute the Determination. If there is no dispute, the
Determination shall be binding, final and conclusive upon the Company and the Executive subject to
the application of Section 5.3.



     5.3. Assignment of Reduction. In the event the Advisor shall determine that the Total
Payments provided to the Executive should be reduced in order to provide the Executive the greatest
amount of Total Payments, on an after-tax basis, as described in Section 5.1, the Total Payments
under this Agreement shall be reduced by the minimum extent necessary (but in no event to less than
zero) so that no portion of such Total Payments, as so reduced, shall be subject to excise tax
under Section 4999 of the Code. In order of priority, the necessary reduction shall be applied
against the Severance Benefits described in Sections 2.3(b), 2.3(c), 2.3(e), 2.3(f), 2.3(a) and
Section 2.3(g) to the extent necessary to satisfy the required reduction.



Article 6. The Company’s Payment Obligation




     6.1. Payment Obligations Absolute. The Company’s obligation to make the payments and the
arrangements provided for herein shall be absolute and unconditional, and shall not be affected by
any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or
other right which the Company may have against the Executive or anyone else. All amounts payable
by the Company hereunder shall be paid without notice or demand. Each and every payment made
hereunder by the Company shall be final.



     The Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and the obtaining of any such
other employment shall in no event affect the Company’s obligations to make the payments and
arrangements required to be made under this Agreement.



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     6.2. Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a
contractual right to the benefits to which the Executive is entitled hereunder. However, nothing
herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the
Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.



Article 7. Term of Agreement




     The term of this Agreement (the “Term”) will commence on the Effective Date and shall
terminate on the second anniversary thereof; provided, however, on the second anniversary of the
Effective Date and on each anniversary thereafter, the Term shall be extended automatically until
the next subsequent anniversary of the Effective Date, unless either party delivers written notice
to the other party twelve (12) months prior to the end of the Term as it may have been extended,
stating that the Term of this Agreement will not be extended or further extended, as the case may
be. In such case, the Agreement will terminate at the end of the Term, or extended Term, then in
progress.



     However, in the event of a Change in Control of the Company, the Term of this Agreement shall
automatically be extended for two (2) years from the date of the Change in Control.



     The expiration or termination of the Term will not impair the rights or obligations of the
Executive or the Company that accrue hereunder prior to such expiration or termination, except to
the extent specifically stated herein. In addition to the foregoing, (i) provided that the
Executive is entitled to and ultimately receives Severance Benefits under Section 2.1, the
Executive’s covenants contained in Article 4 and release under Section 11.11 will survive the
expiration or termination of this Agreement and the Term or the termination of Executive’s
employment for any reason whatsoever and (ii) in all cases the provisions of Article 11 and the
Company’s obligations under Section 8.1 will survive the expiration or termination of this
Agreement and the Term or the termination of the Executive’s employment for any reason whatsoever.



Article 8. Legal Fees




     8.1. Legal Fees and Expenses. (a) It is the intent of the Company that the Executive not be
required to incur legal fees and the related expenses associated with the interpretation,
enforcement or defense of Executive’s rights in connection with any dispute arising under this
Agreement because the cost and expense thereof would substantially detract from the benefits
intended to be extended to the Executive hereunder. Accordingly, if it should appear to the
Executive that the Company has failed to comply with any of its obligations under this Agreement or
in the event that the Company or any other person takes or threatens to take any action to declare
this Agreement void or unenforceable, or institutes any proceeding designed to
deny, or to recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from time to time to
retain counsel of Executive’s choice, at the expense of the Company as hereafter provided, to
advise and represent the Executive in connection with any such dispute or proceeding.
Notwithstanding any existing or prior attorney-client relationship between the Company and



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such counsel, the Company irrevocably consents to the Executive’s entering into an attorney-client
relationship with such counsel, and in that connection the Company and the Executive agree that a
confidential relationship will exist between the Executive and such counsel. Without respect to
whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all reasonable attorneys’ and
related fees and expenses incurred by the Executive in connection with any of the foregoing during
the period beginning on the Effective Date and ending 10 years after the date of the Executive’s
termination of employment. However, if the Executive brings an action in bad faith, or with no
colorable claim of success, the Company shall not pay for any of Executive’s attorneys’ fees or
related expenses.




	 	(a)	 	Payments due to the Executive under Section 8.1(a) will be made within five
business days (but in any event no later than the last day of the Executive’s tax year
following the tax year in which the Executive incurs the expense) after delivery of the
Executive’s written requests for payment, accompanied by such evidence of fees and
expenses incurred as the Company may reasonably require, provided that (i) the
reimbursements or in-kind benefits to be provided by the Company in one taxable year
will not affect the reimbursement or in-kind benefits that the Company is obligated to
pay in any other taxable year and (ii) the Executive’s right to reimbursement or
in-kind benefits will not be subject to liquidation or exchange for another benefit.





Article 9. Successors




     9.1. Successors to the Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock,
liquidation, or otherwise) of all or a significant portion of the assets of the Company by
agreement, in form and substance satisfactory to the Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon any successor in accordance with the operation of
law and such successor shall be deemed the “Company” for purposes of this Agreement.



     9.2. Assignment by the Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If the Executive dies while any amount
would still be payable to the Executive hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the Executive’s devisee, legatee, or other designee, or if there is no such designee,
to the Executive’s estate.



Article 10. Section 409A of the Code




     Notwithstanding any contrary provision of the Agreement:



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	 	(a)	 	Any amount payable upon the Effective Date of Termination that is deemed
deferred compensation subject to Section 409A of the Code shall not be payable upon the
Effective Date of Termination pursuant to the Agreement unless such Qualifying
Termination of employment constitutes a “separation from service” with the Company
within the meaning of Section 409A of the Code and the Department of Treasury
regulations and other guidance promulgated thereunder.
	 
	 	(b)	 	For purposes of Section 409A of the Code (including, without limitation, for
purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the Executive’s right to
receive any installment payments under the Agreement shall be treated as a right to
receive a series of separate payments and, accordingly, each such installment payment
shall at all times be considered a separate and distinct payment.
	 
	 	(c)	 	Notwithstanding any provision of this Agreement to the contrary, if the
Executive is a “specified employee” (within the meaning of Section 409A and determined
pursuant to the identification methodology selected by the Company from time to time)
on the Executive’s Effective Date of Termination, then the following provisions of this
Section 10(c) shall apply to any payments or benefits to be made under Sections 2.3(b),
2.3(c), 2.3(d), 2.3(e) and 2.3(f) and to any portion of the other payments or benefits
to be received by the Executive under this Agreement upon separation from service
(within the meaning of Section 409A) that would be considered deferred compensation
(within the meaning of Section 409A) the payment or provision of which is required to
be delayed pursuant to the six-month delay rule set forth in Section 409A in order to
avoid taxes or penalties under Section 409A (the “Delay Period”): The Company will not
pay or provide any such amount or benefit on the otherwise scheduled date, but such
payments or benefits (the “Delayed Payments” and the “Delayed Benefits,” respectively)
will instead be accumulated and paid on the earlier of (i) the first day of the seventh
month following the date of the Executive’s Effective Date of Termination and (ii) the
Executive’s death (the applicable date, the “Permissible Payment Date”). The Company
will pay interest on the Delayed Payments and the value of the Delayed Benefits at the
rate specified in Section 11.9. Any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein.
	 
	 	(d)	 	To the extent that there is a material risk that any payments under this
Agreement may result in the imposition of an additional tax to the Executive under
Section 409A, the Company will reasonably cooperate with the Executive to amend this
Agreement such that payments hereunder comply with Section 409A without materially
changing the economic value of this Agreement to either party.





Article 11. Miscellaneous




     11.1. Employment Status. This Agreement is not, and nothing herein shall be deemed to
create, an employment contract between the Executive and the Company or any of its subsidiaries.
The Executive acknowledges that the rights of the Company remain wholly intact



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to change or reduce at any time and from time to time the Executive’s compensation, title, responsibilities, location,
and all other aspects of the employment relationship, or to discharge the Executive at any time
(subject to such discharge possibly being considered a Qualifying Termination pursuant to Section
2.2).



     11.2. Entire Agreement. This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof and amends and restates the Prior
Agreement, which Prior Agreement will, without further action, be superseded and without further
effect as of the Effective Date. In addition, the payment of Severance Benefits provided for under
this Agreement in the event of the Executive’s termination of employment shall be in lieu of any
severance benefits payable under any severance plan, program, or policy of the Company to which the
Executive might otherwise be entitled.



     11.3. Notices. All notices, requests, demands, and other communications hereunder shall be
sufficient if in writing and shall be deemed to have been duly given if delivered by hand or, if
sent by registered or certified mail to the Executive at the last address the Executive has filed
in writing with the Company or, in the case of the Company, at its principal offices.



     11.4. Execution in Counterparts. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be original, but all such counterparts shall
constitute one and the same instrument, and all signatures need not appear on any one counterpart.



     11.5. Conflicting Agreements. The Executive hereby represents and warrants to the Company
that the Executive’s entering into this Agreement, and the obligations and duties undertaken by the
Executive hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms
of, any other employment or other agreement to which the Executive is a party, except to the extent
any such conflict, breach, or violation under any such agreement has been disclosed to the Board in
writing in advance of the signing of this Agreement.



     Notwithstanding any other provisions of this Agreement to the contrary, if there is any
inconsistency between the terms and provisions of this Agreement and the terms and provisions of
Company-sponsored compensation and welfare plans and programs, the Agreement’s terms and provisions
shall completely supersede and replace the conflicting terms of the Company-sponsored compensation
and welfare plans and programs, where applicable.



     11.6. Severability. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included. Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.



     Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have
no obligation to make any payment to the Executive hereunder to the extent, but only
to the extent, that such payment is prohibited by the terms of any final order of a federal or
state court or regulatory agency of competent jurisdiction; provided, however, that such an order
shall



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not affect, impair, or invalidate any provision of this Agreement not expressly subject to
such order.



     11.7. Modification. No provision of this Agreement may be modified, waived, or discharged
unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive
and by a member of the Committee, as applicable, or by the respective parties’ legal
representatives or successors.



     11.8. Applicable Law. To the extent not preempted by the laws of the United States, the laws
of Illinois shall be the controlling law in all matters relating to this Agreement without giving
effect to principles of conflicts of laws.



     11.9. Interest. Without limiting the rights of the Executive at law or in equity, if the
Company fails to make any payment or provide any benefit required to be made or provided hereunder
on a timely basis, the Company will pay interest on the amount or value thereof at an annualized
rate of interest equal to the “prime rate” as set forth from time to time during the relevant
period in The Wall Street Journal “Money Rates” column plus 2%. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as of the date of
such change.



     11.10. Other Benefits. Except as expressly provided herein, this Agreement will not affect
any rights that Executive may have upon the Executive’s termination of employment for any reason
under any other agreement, policy, plan program or arrangement of the Company or any affiliate
providing benefits, which rights shall be governed by the terms thereof.



     11.11. Release. The Executive’s entitlement to receive from the Company Severance Benefits
(other than Accrued Obligations) as provided in Section 2.1 is expressly conditioned on: (i) the
Executive executing and delivering to the Company a Release Agreement, in the form customarily used
by the Company at the executive level prior to the Change in Control, within twenty-one (21) days
(or forty-five (45) days if the Company determines and notifies the Executive in writing that such
longer period is required under the Age Discrimination in Employment Act of 1967, as amended
(“ADEA”)) after the occurrence of the Executive’s Qualifying Termination and (ii) Executive not
revoking such Release Agreement within seven (7) days after execution and delivery of such Release
Agreement to the Company. If the Executive does not execute the Release Agreement and deliver it
to the Company within such period or executes and delivers the Release Agreement to the Company but
revokes it within seven (7) days after execution and delivery, the Executive will not be entitled
to any Severance Benefits (other than Accrued Obligations). In the event, the Company determines,
as provided above, that forty-five (45) days is required under ADEA, the thirty (30) day period to
pay the Severance Benefits as provided in Section 3.1 shall be sixty (60) days.



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     The parties have executed this Agreement on this ___day of December, 2009.



	 	 	 	 	 
	WOODWARD GOVERNOR COMPANY

	 	 	 	EXECUTIVE
	 
	 	 	 	 
	 

	 	 	 	 
	By: James R. Rulseh

       Chairman, Compensation Committee

	 	 	 	Signature
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Printed Name







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