exh10-2.htm


                                                                    EXHIBIT 10.2

    TWIN DISC, INCORPORATED

    ENDORSEMENT SPLIT-DOLLAR LIFE INSURANCE PROGRAM

     

    (ENDORSEMENT OF THREE TIMES BASE SALARY)

     

     

    This document
specifies the terms under which Twin Disc, Incorporated, a Wisconsin
corporation, (the “Employer”), sponsors various endorsement split-dollar
policies with certain of its executives designated by the Employer as eligible
to participate in this Plan (each an “Employee”).

     

    BACKGROUND INFORMATION

     

     

    A.                 The Employees are valued employees of Employer and Employer wants to
retain them in its employ.

     

    B.                 The Employer, as an inducement to such continued employment, wants to
assist Employees with personal life insurance protection.

     

    C.               
The Employer is the owner of various life insurance policies (the
“Policies”) issued by The Northwestern Mutual Life Insurance Company (the
“Insurer”) naming the Employees as insured parties.  It is intended that
the Policies will allow the insured party to designate the beneficiary for life
insurance proceeds equal to three times the insured party’s Base Salary should
the insured party die prior to a Rollout Event.

     

    D.                 The Employer wishes to specify the rights of the Employees with respect
to the Policies.

     

     

    The terms of the split-dollar Plan
with respect to the Policies are as follows:

     

    1.           
Definitions.

     

    (a)          “Base Salary” means either:
(i) the annual base salary of the Employee as specified by the Compensation
Committee of the Employer in effect at the time of the Employee’s death if the
Employee dies before Retirement; or (ii) the annual base salary as specified by
the Compensation Committee of the Employer in effect at the time of the
Employee’s Retirement if the Employee dies after Retirement.

     

     

    (b)          “Employer Premiums” means the
cumulative sum of all premiums paid by the Employer on a Policy covering an
Employee.

     

     

    (c)          “Forfeiture Event” means a
Termination of Employment for any reason other than death or Retirement,
regardless of whether such Termination of Employment is voluntary or
involuntary.

     

     

     

    
      
        
        

      

      
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    (d)          “Plan” means the Twin Disc,
Incorporated Endorsement Split-Dollar Life Insurance Program, as set forth
herein.

     

     

    (e)          “Retirement” means an
Employee’s Termination of Employment on or after the date that the
Employee:

     

     

                  
(1)        Has attained age 65 with at least
5 Years of Service;

     

     

                  
(2)        Has attained age 60 with at least
10 Years of Service;

     

     

    (3)        Has accumulated a
combination of age and Years of Service equaling or exceeding 85;
or

     

     

                  
(4)        Has accumulated at least 30 Years
of Service.

     

     

    (f)           “Rollout Event” means, with
respect to each Policy separately, the latest to occur of the following: (i) the
fifteenth anniversary of the Employee’s commencement of coverage under the
Policy; or (ii) the
Employee’s Retirement.

     

     

    (g)          “Termination for Cause” means
an Employee’s Termination of Employment for any of the following reasons: (i)
the willful and continued failure of by the Employee to substantially perform
his or her duties with the Employer; (ii) the willful engaging by the Employee
in conduct which is demonstrably and materially injurious to the Employer; (iii)
the Employee’s conviction of a felony or conviction of a misdemeanor which
materially impairs the ability of the Employee to substantially performs his or
her duties with the Employer; or (iv) the commission by the Employee of an act
of fraud or material dishonesty involving the Employer.

     

     

    (h)          “Termination of Employment”
means a “separation from service” with the Employer and all affiliates, within
the meaning of Code section 409A(a)(2)(A) and the default rules set forth in
Treasury Regulation section 1.409A-1(h).

     

     

    (i)           “Year of Service” means a
calendar year in which an Employee is credited with at least 1,000 hours of
service.  For this purpose, hours of service shall be determined in
accordance with Department of Labor Regulations 2530.200b-2(b) and
(c).

     

     

    2.           
Ownership
of Policies.  Employer shall be the sole Owner of each of the
Policies.  Unless otherwise provided by this Plan, Employees or their
beneficiaries shall have no legal, equitable or beneficial right, title or
interest in or to the Policies or the proceeds payable under the
Policies.

     

     

    3.           
Policy
Endorsement.  With respect to the Policy or Policies naming an
Employee as the insured, the Employer shall execute one or more endorsements (as
appropriate) (the “Policy Endorsements”) documenting the right of the Employee
to designate the direct and contingent beneficiaries of the aggregate death
benefit proceeds of such Policy or Policies equal to three times Employee’s Base
Salary.

     

     

    
      
        
        

      

      
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(a)             
 If the Employer owns more than one Policy naming the Employee as the
insured party and the death benefit from the earliest-issued Policy exceeds an
amount equal to three times the Employee’s Base Salary, the remaining death
benefit from such Policy and all of the death benefit from later-issued Policies
shall be paid to the Employer.

     

     

            
(b)              
If the Employer owns more than one Policy naming the Employee as the insured
party and the death benefit from the earliest-issued Policy does not exceed an
amount equal to three times the Employee’s Base Salary, the Employee shall have
the right to designate the beneficiary for the entire amount of the death
benefit from the earliest-issued Policy, and to designate the beneficiary of the
death benefit from each successive Policy until the aggregate death benefit
payable to the Employee’s beneficiary(ies) equals three times the Employee’s
Base Salary.  The Employer shall retain the right to receive any and all
death benefits from such successive Policies to the extent that such benefits
exceed three times the Employee’s Base Salary.

     

     

            
(c)              
If the total of the death benefits from all Policies naming the Employee as the
insured do not exceed three times the Employee’s Base Salary, Employee’s
designated direct and contingent beneficiaries shall receive the entire amount
of the death benefits from the Policies.

     

     

            
(d)              
Notwithstanding the foregoing provisions of this Section 3:  (i) if the
Employer has obtained any indebtedness secured by a Policy covering an Employee,
the amount payable to the Employer will be reduced by the amount of the
indebtedness that remains outstanding; and (ii) if the amount payable to the
Employer is not sufficient to satisfy such indebtedness, the entire amount
payable to the Employer shall be used to satisfy such indebtedness, and the
amount payable to the Employee shall be reduced by an amount sufficient to
satisfy any remaining indebtedness.

     

     

    4.           
Premium
Payments Before and After Retirement.  Prior to an Employee’s
Retirement, the Employer shall pay the entire premium on each Policy covering
the Employee as it becomes due.  Upon the Employee’s
Retirement:

     

     

            
(a)               
the Employer’s obligation to pay premiums under this Section 4 shall cease; and


     

     

            
(b)              
the death benefit under the Policy shall be adjusted, in accordance with the
Insurer’s standard practices, based on the cash value of the Policy and future
Policy dividends that are used to pay premiums in accordance with Section
5.

     

     

     

    
      
        
        

      

      
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    5.           
Dividends.  Prior to an
Employee’s Retirement, Policy dividends shall be applied to purchase paid-up
additional insurance protection.  After the Employee’s Retirement, Policy
dividends shall be used to pay premiums on the Policy.

     

     

    6.           
Cash
Value.  The cash value of each Policy shall be subject to the claims
of the general creditors of the Employer.

     

     

    7.           
Effect of
Forfeiture Event; Right to Purchase Policies.  Upon the occurrence
of a Forfeiture Event, the Employer shall give the Employee the option to
purchase all (but not less than all) of the Policies naming the Employee as the
insured during a period of 60 days commencing on the date of the Forfeiture
Event.  The purchase price of each Policy shall be the greater of the
Employer Premiums with respect to the Policy or the cash value of the Policy.
 The Employee must pay the purchase price before the end of the 60-day
option period.

     

     

            
(a)            
  If the Employee exercises the option with respect to the Policies, the
Employer shall repay any policy and premium loans and any other indebtedness
secured by each Policy prior to transferring ownership of the Policies to the
Employee.  The Employee’s participation in this Plan shall terminate upon
the transfer of the Policies to the Employee.

     

     

            
(b)              
If the Employee dies during the 60-day option period, death benefits from the
Policies shall be paid in accordance with Section 3 of this Plan.

     

     

            
(c)              If
the Employee fails to exercise the option to purchase the Policies during the
60-day option period, the Employee’s participation in this Plan shall terminate
immediately upon the expiration of the option period.  Upon the termination
of Employee’s participation in the Plan:

     

     

                           
(1)        the Employer’s Policy Endorsements
shall become null and void;

     

     

                           
(2)        the Employee shall have no further
right to any future transfer of ownership of the Policies;

     

     

                           
(3)        the Employer shall have no
obligation to pay any further premiums with respect to the Policies;
and

     

     

                           
(4)        the Employer may, in its full and
absolute discretion, choose to terminate the Policies and recover the cash
value, to maintain the Policies and name itself as the sole beneficiary of any
death proceeds, or to take any other action that it may take as the owner of the
Policies.

     

     

            
(d)              Notwithstanding
the foregoing provisions of this Section 7, if the Employee’s Forfeiture Event
is Termination for Cause, the Employee shall not have the right to purchase the
Policies, and the Employee’s rights under the Plan shall be completely
forfeited.

     

     

     

    
      
        
        

      

      
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    8.           
Effect of
Rollout Event.  Upon the occurrence of a Rollout Event with respect
to a Policy, the Employer shall: (i) recover the Employer Premiums on the
Policy; (ii) pay the full amount of  any outstanding indebtedness obtained
by the Employer that is secured by such Policy; and (iii) take such steps as are
appropriate to transfer ownership of the Policy to the Employee.  If the
Rollout Event is the Employee’s Retirement, or if the fifteenth anniversary of
the Employee’s commencement of coverage under the Policy occurs within six
months after the Employee’s Retirement, the Employer shall take the foregoing
steps immediately following the sixth month anniversary of the Employee’s
Retirement.  The Employer may recover the Employer Premiums using either of
the following methods, in its sole discretion:

     

     

     

               
(a)            By directing
the Insurer to withdraw the Employer Premiums from the cash value of the Policy
and paying such amount to the Employer.

     

     

     

               
(b)            By receipt
of payment from the Employee of an amount equal to the Employer
Premiums.

     

     

     

    An Employee’s participation in this Plan shall terminate automatically
upon the transfer of ownership of the last Policy covering the Employee pursuant
to this Plan.

     

     

    9.           
Insurer Not
Liable.  The Insurer shall be bound only by the provisions of and
endorsements on the Policies, and any payments made or action taken by it in
accordance therewith shall fully discharge it from all claims, suits and demands
of all persons whatsoever.  It shall in no way be bound by or be deemed to
have notice of the provisions of this Plan.

     

     

    10.        Assignment Rights. 
The Employee shall have the right to assign any part or all of the
Employee’s interest in a Policy and this Plan to any person, entity or trust by
execution of a written assignment delivered to the Employer and to the
Insurer.

     

     

    11.        Amendments.
 The Employer and an Employee can mutually agree to amend the
Employee’s rights in this Plan, provided that no such amendment may change the
definition of a Rollout Event or the obligations of the Employer following a
Rollout Event, nor shall any such amendment otherwise cause the Plan not to
comply with Section 409A of the Internal Revenue Code and applicable regulations
thereunder.  Any such amendment shall be in writing and signed by the
Employer and Employee.

     

     

    12.        Binding Effect. 
This Plan shall bind Employer and its successors and assigns, Employee
and his heirs, executors, administrators and assigns, and any Policy
beneficiary.

     

     

    13.        ERISA
Requirements.  The following provisions are part of this Plan and
are intended to meet the requirements of the Employee Retirement Income Security
Act of 1974:

     

     

    (a)               
The named fiduciary is the Employer.

     

     

    (b)              
The funding policy under this Plan is that all premiums on the
Policy shall be remitted to the Insurer when due.

     

     

     

    
      
        
        

      

      
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    (c)              Direct payment by the Insurer is the basis of payment of benefits under
this Plan, with those benefits in turn being based on the payment of
premiums as provided  in the Plan.

     

     

    (d)              
For claims procedure purposes, the “Claims Manager” shall be the
Employer or its designee.

     

     

    (e)               
The Plan’s claims procedures are as follows:

     

     

    (1)            
If for any reason a claim for benefits under this Plan is denied by
the Employer, the Claims Manager shall deliver to the claimant a written
explanation setting forth the specific reasons for the denial, pertinent
references to the section of this document on which the denial is based, a
description of any additional material or information necessary to perfect the
claim and an explanation of why such material or information is necessary, such
other data as may be pertinent, and information on the procedures to be followed
by the claimant in obtaining a review of his claim (including a statement of the
claimant’s right to bring a civil action under Section 502(a) of ERISA following
an adverse benefit determination on review), all written in a manner calculated
to be understood by the claimant. For this purpose:

     

     

    (A)               
The claimant’s claim shall be deemed filed when presented orally or
in writing to the Claims Manager.

     

     

    (B)                
The Claims Manager’s explanation shall be in writing delivered to
the claimant within 90 days of the date the claim is filed.

     

     

    (2)            
The claimant shall have 60 days following his receipt of the denial
of the claim to file with the Claims Manager a written request for review of the
denial. For such review, the claimant or his representative may submit pertinent
documents and written issues and comments.  The claimant shall be provided,
upon request and free of charge, reasonable access to and copies of all
documents, records and other information relevant to the claim.  The review
shall take into consideration all comments, documents, records and other
information submitted by the claimant, without regard to whether such
information was submitted or considered in the initial benefit
determination.

     

     

     

    
      
        
        

      

      
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    (3)            
The Claims Manager shall decide the issue on review and furnish the
claimant with a copy within 60 days of receipt of the claimant’s request for
review of his claim. The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner calculated to be
understood by the claimant, a statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access to and copies of all
documents, records and other information relevant to the claim, as well as
specific references to the pertinent provisions of this document on which the
decision is based.  If a copy of the decision is not so furnished to the
claimant within such 60 days, the claim shall be deemed denied on
review.

     

     

     

     

     

    5372806_6.DOC

     

    
      
        
        

      

      
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