Document:

ex_407746.htm

 

Exhibit 10.4

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

THIS AGREEMENT is executed and entered into as of the 3rd day of August, 2022 (the “Effective Date”), by and between Twin Disc, Incorporated, a Wisconsin corporation, with its principal offices located at 1328 Racine Street, Racine, Wisconsin ("Corporation"), and _____________________ ("Employee").

 

WITNESSETH:

 

WHEREAS, the Board of Directors of the Corporation is aware of the uncertainties created by the current business environment in which tender offers for publicly-held corporations are increasingly frequent, is aware that the possibility of a change in control of the Corporation raises questions and uncertainties, and is aware that these questions and uncertainties are cause for legitimate concern among key Corporation employees about their future with the Corporation; and

 

WHEREAS, the Board of Directors of the Corporation recognizes that the efforts of those employees identified by the Board as key management employees have contributed and will continue to contribute to the growth and success of the Corporation; and

 

WHEREAS, the Board of Directors of the Corporation is concerned that the uncertainties associated with the current business environment may adversely affect the morale of key management employees of the Corporation, undermine the confidence of such key management employees in the ability of the Corporation to remain a viable and competitive entity and jeopardize the ability of the Corporation to attract and retain the services of key management employees in the future; and

 

WHEREAS, the Board of Directors of the Corporation believes that in the best interests of the Corporation, it is essential that key management employees, including Employee, be retained and that the Corporation be in a position to rely on their ongoing dedication and commitment to render services to the Corporation, irrespective of whether the Corporation is or may be acquired or merged with or into another corporation.

 

NOW, THEREFORE, in consideration of, and as a specific inducement for, the continued services of Employee, the parties hereto agree as follows:

 

1.         Term of Agreement; Replacement of Prior Agreement. This Agreement shall commence as of the date hereof and shall continue in effect until November 1st, 2022; provided, however, that commencing on November 1, 2022, and each November 1st thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than August 1 of that year, the Corporation shall have given notice that it does not wish to extend this Agreement; provided, further, if a Change in Control (as defined in Section 2 below) of the Corporation shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such Change in Control of the Corporation occurred.

 

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The prior Change in Control Severance Agreement entered into between the Corporation and Employee, dated as of _____________, is hereby terminated and replaced with this Agreement.

 

2.         Change in Control of the Corporation. No benefits shall be payable hereunder unless there shall have been a Change in Control of the Corporation, as set forth below. For purposes of this Agreement, a "Change in Control of the Corporation" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") whether or not the Corporation is then subject to such reporting requirement; provided that without limitation, such a change in control shall be deemed to have occurred in any of the following circumstances:

 

(a)         if any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than John H. Batten or any member of his family (the "Batten Family"), is or becomes the "beneficial owner' (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing thirty percent (30%) or more of the combined voting power of the Corporation's then outstanding securities, except that any acquisition of securities of the Corporation directly from the Corporation (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Corporation) shall not constitute a Change in Control of the Corporation;

 

(b)         if at any time after the Effective Date and during the initial or extended term of this Agreement, individuals who as of the Effective Date constitute the Board of Directors (as of the Effective Date, the “Incumbent Board”) shall cease to constitute a majority of the Board of Directors; provided however, that any person becoming a director after the Effective Date whose appointment or nomination for election to the Board of Directors was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board; and provided further, that no such individual whose initial assumption of office occurs as a result of an actual or threatened election contest which was (or, if threatened, would have been) subject to Exchange Act Rule 14a-12(c) shall be deemed to have been a member of the Incumbent Board; or

 

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(c)         upon the consummation of a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation that results in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the consummation of complete liquidation of the Corporation or the sale or disposition by the Corporation of all or substantially all the Corporation's assets.

 

3.         Termination Following a Change in Control of the Corporation. If any of the events described in Section 2 hereof constituting a Change in Control of the Corporation shall have occurred, Employee shall be entitled to the benefits provided in Subsection 4(d) hereof immediately upon a termination of his employment which occurs during the term of this Agreement unless such termination is (i) due to Employee's death, Disability or Retirement as those terms are defined in Subsection 3(a) below, (ii) by the Corporation for Cause, as that term is defined in Subsection 3(b) below, or (iii) by Employee other than for Good Reason, as that term is defined in Subsection 3(c) below.

 

(a)         Disability; Retirement. If, as a result of Employee's incapacity due to physical or mental illness, Employee shall have been absent from the full-time performance of his duties with the Corporation for six (6) consecutive months, and within thirty (30) days after written notice of termination is given, Employee shall not have returned to the full-time performance of his duties, the Corporation may terminate Employee's employment for "Disability." Termination by the Corporation or by Employee of Employee's employment by reason of "Retirement" shall mean termination on or after Employee's attainment of age 65.

 

(b)         Cause. Termination by the Corporation of Employee's employment for "Cause" shall mean termination because of (i) any act or failure to act deemed to constitute cause under the Corporation’s established practices or guidelines applicable to Employee, or (ii) Employee’s act or omission constituting gross misconduct with respect to the Corporation or a subsidiary of the Corporation.

 

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(c)         Good Reason. Employee shall be entitled to terminate his employment for Good Reason.

 

(i)         For purposes of this Agreement, "Good Reason" shall mean, without Employee's express written consent, the occurrence after a Change in Control of the Corporation of any one or more of the following:

 

(A)         the assignment to Employee of duties, responsibilities or status that constitute a material diminution from his or her present duties, responsibilities and status as ____________________ of the Corporation or a material reduction or alteration in the nature or status of Employee's duties and responsibilities from those in effect as of the date hereof;

 

(B)         a material reduction by the Corporation in Employee's annual base salary as in effect immediately prior to the Change in Control of the Corporation or as the same shall be increased after the Change in Control of the Corporation (“Base Salary”);

 

(C)         a material change in the geographic location at which the Employee must provide services;

 

(D)         a material change or termination of the Corporation’s benefit plans or programs or the Employee’s participation in such plans or programs (outside of a good faith, across-the-board reduction of general application) in a manner that effectively reduces their aggregate value;

 

(E)         the failure of the Corporation to obtain a satisfactory agreement from any successor to the Corporation to assume and agree to perform this Agreement as contemplated in Section 5 hereof; or

 

(F)         any purported termination by the Corporation of Employee's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 4(d) below, and for purposes of this Agreement, no such purported termination shall be effective.

 

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(ii)         To constitute a termination for Good Reason hereunder, Employee must provide notice to the Corporation of the existence of a condition that would constitute Good Reason within 90 days following the initial existence of such condition. The Corporation shall be provided a period of 30 days following such notice during which it may remedy the condition. If the condition is remedied, the Employee’s subsequent voluntary termination of employment shall not constitute termination for Good Reason based upon the prior existence of such condition. Employee's continued employment during such 90 and 30 day periods shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

 

(iii)         Employee's right to terminate his employment pursuant to this Subsection 3(c) shall not be affected by his incapacity due to physical or mental illness.

 

(d)         Notice of Termination. Any termination by the Corporation for Cause or by Employee for Good Reason shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a "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 Employee's employment under the provision so indicated.

 

(e)         Date of Termination. "Date of Termination" shall mean the date as of which Employee’s expected services permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately-preceding 36-month period.

 

4.         Compensation Upon Termination or During Disability. Following a Change in Control of the Corporation, as defined in Section 2 hereof, upon termination of Employee's employment or during a period of disability Employee shall be entitled to the following benefits:

 

(a)         During any period that Employee fails to perform his full-time duties with the Corporation as a result of incapacity due to Disability as that term is defined in Subsection 3(a) herein, Employee shall continue to receive his Base Salary at the rate in effect at the commencement of any such period, until Employee's employment is terminated pursuant to Subsection 3(a) hereof. Thereafter, Employee's benefits shall be determined in accordance with the Corporation's retirement, insurance and other applicable programs and plans then in effect.

 

(b)         If Employee's employment shall be terminated by the Corporation for Cause or by Employee other than for Good Reason, the Corporation shall pay Employee his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given or on the Date of Termination if no Notice of Termination is required hereunder, plus all other amounts to which Employee is entitled under any compensation plan of the Corporation at the time such payments are due, and the Corporation shall have no further obligations to Employee under this Agreement.

 

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(c)         If Employee's employment terminates by reason of his Retirement or by reason of his death, then Employee's benefits shall be determined in accordance with the Corporation's Supplemental Retirement Plans, and its retirement, survivor's benefits, insurance, and/or such other applicable programs and plans then in effect.

 

(d)         If Employee's employment by the Corporation shall be terminated by the Corporation other than for Cause, Retirement or Disability, or by Employee for Good Reason, Employee shall be entitled to the benefits (the "Severance Payments") provided below:

 

(i)         the Corporation shall pay Employee his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, or the Date of Termination where no Notice of Termination is required hereunder;

 

(ii)         the Corporation shall pay as severance benefits to Employee, on the date specified in Subsection 4(g) below, a lump sum severance payment equal to the product of

 

(A) the sum of (I) Employee's annual Base Salary in effect immediately prior to the Date of Termination (or, if Employee’s employment terminates for Good Reason based on a reduction in Base Salary, the Employee’s annual Base Salary as in effect immediately prior to such reduction), and (II) the greater of (x) the annual bonus awarded to Employee under the Corporation’s Corporate Incentive Plan for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs (or, if no annual bonus was received for such fiscal year, the average of the annual bonuses awarded to Employee under the Corporation’s Corporate Incentive Plan for the three fiscal years immediately preceding the fiscal year in which the Date of Termination occurs), or (y) the Employee’s target annual bonus under the Corporation’s Corporate Incentive Plan for the fiscal year in which the Date of Termination occurs; times

 

(B) __________;

 

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(iii)         in lieu of shares of common stock of the Corporation ("Option Shares") issuable upon exercise of outstanding options ("Options"), if any, granted to Employee under the Corporation's 2021 Long-Term Incentive Compensation Plan, together with any additional, substitute or successor option program or plan as may be in effect from time to time, (which Options shall be canceled upon the making of the payment referred to below), Employee shall receive, on the date specified in Subsection 4(g) below, an amount in cash equal to the product of (i) the higher of the closing price of shares reported on the NASDAQ Stock Market on the Date of Termination or the highest per share price for Option Shares actually paid in connection with any Change in Control of the Corporation, over the per share exercise price of each Option held by Employee, times (ii) the number of Option Shares covered by each such Option;

 

(iv)         for a twenty-four (24) month period after such termination, the Corporation will arrange to provide Employee, at the Corporation's expense, with benefits under the Corporation's applicable employee fringe benefit plans, which benefits shall be the same or substantially similar to the benefits Employee was receiving immediately prior to the Notice of Termination; but in no event shall Employee be provided the benefits described herein after the first day of the month after Employee attains age 65; and provided further that benefits otherwise receivable by Employee pursuant to this Subsection (iv) shall be reduced to the extent comparable benefits are actually received by Employee during the twenty-four (24) month period following Employee's termination and any such benefits actually received by Employee shall be reported to the Corporation. In the event the Corporation’s contributions for coverage under the fringe benefit plans would be treated as deferred compensation under Section 409A of the Code and contributions during the six (6) months following Employee’s Date of Termination would cause Employee to be subject to an additional tax under Section 409A of the Code, Employee shall pay the entire cost of coverage during such six-month period and the Corporation shall reimburse Employee for the amount that the Corporation would have paid during such period on the first date that the Corporation may make such payment without causing an additional tax to be paid by Employee under Section 409A of the Code. In addition, to the extent that any such fringe benefit plan provides for reimbursement of any expenses or the provision of any in-kind benefits that are subject to Section 409A of the Code, (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, during any one calendar year shall not affect the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year (provided, that, this clause (i) will not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect); (ii) reimbursement of any such expense shall be made by no later than December 31 of the year following the calendar year in which such expense is incurred; and (iii) Employee's right to receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

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(e)         In the event that Employee becomes entitled to the Severance Payments, if it is determined that any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") (or any similar tax that may hereafter be imposed), the Severance Payments to which Employee is entitled hereunder shall be reduced to the extent necessary to avoid the imposition of any Excise Tax upon such Severance Payments. In the event Severance Payments shall have previously been made to Employee which are or would be subject to the Excise Tax, Employee shall immediately repay to the Corporation that portion of the Severance Payments determined to be subject to such Excise Tax. For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by Employee in connection with a Change in Control of the Corporation or Employee's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person) shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Corporation's independent auditors and acceptable to Employee such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax, (ii) the amount of the Severance Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Severance Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) (after applying clause (i) above), and (iii) the value of any non-cash benefits or any deferred payment or benefits shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Employee's employment, the Corporation shall repay to the Employee at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Severance Payments previously repaid by Employee to the Corporation hereunder attributable to such reduction plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of Employee's employment, Employee shall repay to the Corporation such further excess portion of the Severance Payments as would be subject to the Excise Tax (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined.

 

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(f)         In the event the amount of Severance Payments that Employee would be entitled to receive hereunder, following a Change in Control of the Corporation, upon termination of Employee's employment, would, under any applicable provision of law, render the validity, legality or enforceability of this Agreement and the Severance Payments made hereunder contingent upon this Agreement having first been approved by the affirmative vote of a majority of the aggregate outstanding voting securities of the Corporation, (i) the Severance Payments due Employee hereunder shall be reduced to the extent necessary to avoid rendering this Agreement subject, under any applicable provision of law, to prior shareholder approval as specified above; or (ii) if Severance Payments have previously been made to Employee hereunder, the amount of which Severance Payments would render this Agreement subject to prior shareholder approval, as specified above, as a condition precedent to its validity, legality or enforceability, Employee shall immediately repay to the Corporation that portion of the Severance Payments which served to render this Agreement subject to said prior shareholder approval.

 

(g)         The payments provided for in Subsection (d) (ii) and (iii) above, together with interest on such amounts from the Date of Termination until the date such amounts are paid at the rate provided in Section 1274(b)(2)(B) of the Code, shall be made on the date that is 6 months after the Date of Termination; provided, that if a bona fide dispute exists regarding Employee’s right to payment on such date, payments (if any) shall be made in accordance with the provisions of Treasury Regulation 1.409A-3(g), which generally requires that (1) Employee accept the portion of the payment that the Corporation is willing to pay (unless such acceptance would result in a relinquishment of Employee’s claim to payment of the remaining amount); (2) Employee make good faith efforts to collect the remaining portion of the payment; and (3) any further payment is made no later than the end of the first taxable year of Employee in which: (i) Employee and the Corporation settle the dispute, (ii) the Corporation concedes the disputed amount is payable; or (iii) the Corporation is required to make such payment pursuant to a final and nonappealable judgment or other binding decision.

 

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(h)         The Corporation shall also pay to Employee all legal fees and expenses incurred by Employee as a result of such termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). No such payments shall be made prior to the date which is 6 months after the Date of Termination. On the date that is 6 months after the Date of Termination, the Corporation shall make a lump sum payment of all legal fees and expenses (if any) that accrued during such six month period, along with interest on such amounts from the date incurred by Employee to the date of payment at the rate provided in Section 1274(b)(2)(B) of the Code.

 

(i)         Employee shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by Employee as the result of employment by another employer after the Date of Termination, or otherwise.

 

(j)         The Severance Payments to be paid pursuant to Subsection (d) above are not intended as stipulated or liquidated damages for breach of any promise of a term of employment, no such promise being made herein, but are payments which shall be fully earned as of the Date of Termination, and shall be compensation for: Employee's continued services rendered to the Corporation after the date hereof and prior to such Date of Termination; the foregoing of other possibly more secure employment; consequential losses which may result from such termination, including, but not limited to, permanent injury to reputation, loss of career development opportunities, and emotional stress; and actual losses which may result from such termination including, but not limited to, lost wages and expenses of securing other employment.

 

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(k)         The Corporation shall have no obligation to provide or cause to be provided to Employee the benefits described in this Agreement if the Corporation or Employee shall terminate Employee's employment prior to a Change of Control. This Agreement is not and nothing contained herein shall be deemed to create a contract of employment between the Employee and the Corporation.

 

5.         Successors; Binding Agreement.

 

(a)         The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation or of any division or subsidiary thereof employing Employee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to terminate employment and receive compensation from the Corporation in the same amount and on the same terms as Employee would be entitled hereunder if Employee terminated his employment for Good Reason.

 

(b)         This Agreement shall inure to the benefit of and be enforceable by Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amount would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein. shall be paid in accordance with the terms of this Agreement to Employee's devisee, legatee or other designees or, if there is no such designee, to Employee's estate.

 

6.         Administration of Agreement; Claims Procedures.

 

(a)         This Agreement shall be administered by the Compensation and Executive Development Committee of the Corporation’s Board of Directors, which has been given complete and discretionary authority by the Board of Directors to administer and interpret this Plan.

 

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(b)         The Committee shall notify Employee in writing, within 90 days of his written application for benefits, of his eligibility or ineligibility for benefits under this Agreement. If the Committee determines that Employee is not eligible for benefits or full benefits, the notice shall set forth (a) the specific reasons for such denial, (b) a specific reference to the provisions of this Agreement on which the denial is based, (c) a description of any additional information or material necessary for the Employee to perfect his claim, and a description of why it is needed, (d) an explanation of this Agreement’s claims review procedure and other appropriate information as to the steps to be taken if the Employee wishes to have the claim reviewed (including the applicable time limits, a statement that the Employee is entitled to receive upon request, free of charge, access to and copies of all documents and other information relevant to the claim, and a statement regarding the Employee’s right to bring a civil action if the Employee’s review is denied), and (e) in the case of claims where the Committee determines that the Employee’s termination of employment was due to disability, copies of or the right to request free of charge any internal rule, guideline or protocol that was relied upon in denying the claim. If the Committee determines that there are special circumstances requiring additional time to make a decision, the Committee shall notify the Employee of the special circumstances and of the date by which a decision is expected to be made, and may extend the time for up to an additional 90-day period.

 

If the Committee determines that Employee is ineligible for benefits, or if the Employee believes that he is entitled to greater or different benefits, the Employee shall have the opportunity to have such claim reviewed by the Committee by filing a petition for review with the Committee within 60 days after receipt of the notice issued by the Committee. Said petition shall state the specific reasons why the Employee believes that he is entitled to benefits, greater benefits, or different benefits. Within 60 days after receipt by the Committee of said petition, the Committee shall afford the Employee (and counsel, if any) an opportunity to present his position to the committee orally or in writing, and the Employee (or counsel, if any) an opportunity to present his position to the Committee orally or in writing, ad the Employee (or counsel) shall have the right to review the pertinent documents. Within the 60-day period, the Committee shall notify the Employee of its decision in writing. The Committee’s written notice to the Employee shall set forth specifically the basis of the Committee’s decision and the specific provisions of this Agreement on which the decision is based and shall be written in a manner calculated to be understood by the Employee. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60-day period at the election of the Committee, but notice of this deferral shall be given to the Employee. In the event of the death of Employee, the same procedure shall be applicable to the Employee’s beneficiaries.

 

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Special procedures apply if a claim or claim denial is based upon an assertion that the Employee is disabled. In such cases, the Committee must furnish the Employee with a written notice of this denial no later than 45 days after the receipt of the claim. However, the Committee may request up to two extensions of up to 30 days each to process the claim by providing notice of the extension within the original 45 day period or within the initial 30 day extension period (whichever applies). Each notice must state the special circumstances requiring the extension of time, the standards on which the determination of disability are based, and the date by which the Committee expects to render a decision on the claim. If additional information is needed to process the claim, the Employee will be given at least 45 days to provide such information.

 

If the Committee determines that the Employee terminated employment due to disability, and the Employee wishes to submit the claim for a hearing and review, the Employee must file the claim for review no later than 180 days after receiving written notifica‐tion of the denial of his claim for benefits. The Employee may submit written documents and other information relating to the claim. The review will be conducted by an appropriate named fiduciary of this Agreement who is neither the person who denied the initial claim nor a subordinate of that person, and no deference will be given to the initial decision of the claim. If the claim is based on a medical judgment, the person conducting the review will consult with an appropriate health care professional (but not the same professional who was consulted in connection with the original denial of the claim, or his or her subordinate), and will, upon the request of the Employee, provide the Employee with the names of all medical or vocational experts whose advice was obtained in connection with the original denial of the claim. A hearing on the claim will be conducted within 45 days. At the hearing, or prior to the hearing upon 5 business days' written notice to the Committee, the Employee may review all pertinent documents relating to the denial of the claim. If the review of the claim is denied, the Employee will be provided with written notice of this denial within 45 days after the Committee’s receipt of the written claim for review. There may be times when this 45 day period may be extended. This extension may only be made, however, where there are special circumstances that are communicated to the Employee in writing within the 45 day period. If the decision on review is not furnished to the Employee within the time limitations described above, the claim shall be deemed denied on review.

 

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If the review of a claim is denied, the Committee will provide the Employee with a notice containing the specific reasons for the denial, a reference to this Agreement provisions on which the denial is based, a statement that the Employee is entitled to receive upon request, free of charge, access to and copies of all documents and other information relevant to the claim, a statement of the Employee’s right to bring a civil action under federal law, and, in the case of claims based on disability, copies of or the right to request free of charge any internal rule, guideline or protocol that was relied upon in denying the claim.

 

No person or entity claiming Plan benefits may bring legal action against the Committee or its members, the Corporation, any affiliate of the Corporation, the Board of Directors of the Corporation or its members, or any employee of the Corporation based upon this Agreement before exhausting the claim and appeal procedures set forth in the preceding paragraphs of this Section 6. No person or entity claiming benefits under this Agreement may commence legal action with respect to this Agreement more than 120 days after receiving notice of the Committee’s final decision on the claim appeal of such person or entity.

 

7.         Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

 

(a)         If to the Corporation:

 

Twin Disc, Incorporated

1328 Racine Street

Racine, Wisconsin 53403

 

Attention: Corporate Secretary

 

(b)         If to Employee:

 

_________________________

Twin Disc, Incorporated

1328 Racine Street

Racine, Wisconsin 53403

 

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8.         Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and such officer as may be specifically designated by the Board. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Wisconsin.

 

9.          Validity. The invalidity or unenforceability of any provision of this shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

10.       Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, to the extent any payments paid or payable to Employee are subject to Section 409A of the Code, as amended, (a) this Agreement shall be interpreted in a manner that complies with Code Section 409A and any related regulations or guidance, and (b) all such payments shall comply with Code Section 409A and any related regulations or guidance.

 

11.        Interpretation. All terms used herein in the singular shall be construed to include the plural and all terms used herein in the masculine gender shall be construed to include the feminine gender as may be required by the context in which the terms are used.

 

12.        Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby.

 

IN WITNESS WHEREOF, the parties have executed this Agreement in the City and County of Racine, Wisconsin, effective as of the date first set forth above.

 

TWIN DISC, INCORPORATED

 

	By:	 	 
	 	 	 
	Attest:	 	 
	 	 	 
	 	 	 
	EMPLOYEE:	 
	 	 	 
	 	 	 
	[NAME]	 

 

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Exhibit 10.2

CERTAIN CONFIDENTIAL INFORMATION, IDENTIFIED BY BRACKETED ASTERISKS “[*****]”, HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.

FIRST AMENDED AND RESTATED TRANSACTION CONFIRMATION

Date: June 10, 2022
Contract: 27853
Confirmation Number: 16471870

(A)The parties hereto entered into a Transaction Confirmation dated August 2, 2021 pursuant to which, among other things, Seller agreed to sell biogas with green attributes associated therewith to Buyer (“Original Transaction Confirmation”);

(B)The parties hereto wish to make certain amendments to the Original Transaction Confirmation by way of an amendment and restatement of the Original Transaction Confirmation reflecting such amendments;

NOW THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt of which are hereby acknowledged, the parties agree as follows:

This First Amended and Restated Transaction Confirmation (“this Transaction Confirmation”) is subject to the Base Contract for Sale and Purchase of Natural Gas, including the Special Provisions and Biogas Addendum thereto (the “Base Contract”), by and between Buyer and Seller and dated July 22, 2021. The terms of this Transaction Confirmation are binding. Capitalized terms not otherwise defined in this Transaction Confirmation shall have the meaning given in the Base Contract or the Biogas Addendum. For purposes of this Transaction Confirmation, “Gas” as used in the Base Contract shall also include Biogas.

						
	BUYER:
BP Canada Energy Marketing Corp.
30 S Wacker
Chicago, IL 60606

Attn: John Armstrong Phone: 801-939-9159

Base Contract No.: 27853
Transporter:      Transporter Contract Number:      

BUYER’S AFFILIATE:
BP Products North America Inc. 30 S. Wacker Drive, Suite 900
Chicago, IL 60606

Attn: GOA Legal
Email: GOALegalNotices@bp.com
	SELLER:
Gevo NW Iowa RNG, LLC
345 Inverness Drive South, Building C Suite 310
Englewood, CO 80112

Attn: Tim Cesarek Phone: 832-314-5677
Base Contract No.
Transporter:      Transporter Contract Number:      

I.Commercial Terms

1.Contract Price

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(a)The Contract Price is equal to the sum of the Biogas Value, plus the RIN Value, plus the LCFS Value. The Contract Price is payment for the Biogas and the Seller’s proportion of RINs and the Seller’s proportion of LCFS Credits (if any were generated from the Biogas hereunder) generated from the sale of the Biogas sold hereunder to Buyer and ultimately sold to a Vehicle Fuel Producer by Buyer or Buyer’s Affiliate.

In the event that any RINs generated from the Biogas are not Q-RIN, then a [*****] discount (“Non-QAP Discount”) shall be applied to the RIN Price applicable to such RINs.

(b)Biogas Value.
(i)The “Biogas Value” is the product of the Biogas Price on any Day that Biogas is delivered to Buyer multiplied by the portion of the Biogas Quantity delivered on such Day, measured in MMBtus. The Biogas Value is paid by the Buyer.

(ii)The “Biogas Price” means [*****].

(a)RIN Value.

(iii)The “RIN Value” shall be paid by Buyer’s Affiliate and is calculated by multiplying the RIN Price (including any Non-QAP Discount, if applicable) by the RIN Quantity.

(iv)The “RIN Price” shall be determined as follows:

(1)If the [*****] has been Validated (as defined in clause (3) below), then the RIN Price shall be the average of the [*****] for the applicable Month of Biogas delivery.

(2)If the [*****] has not been Validated, then the RIN Price shall be the volume-weighted average cash price realized by Buyer’s Affiliate from the sale of its Portfolio D3 RINs within the applicable Month of Biogas delivery and Buyer’s Affiliate shall use commercially reasonable efforts to maximize the value of the D3 cellulosic RINs by selling such RINs to an unaffiliated third party or by purchasing such RINs directly from the Seller. If Buyer does not sell all of the RINs, then the RIN Price for the unsold portion shall be the greater of:

(A)[*****] of the average [*****] (non-Validated) for the applicable Month of Biogas delivery, and

(B)the average [*****] for the applicable Month of Biogas delivery (non- Validated).

(1)Validation. With respect to an applicable Month of Biogas delivery, the [*****] shall be considered validated (“Validated”) for the current-year vintage RIN if the D3 cellulosic RIN has traded, as supported by a published [*****], for any ten (10) Business Days in the twenty (20) consecutive Business Day period that immediately precedes the Advance Notice Deadline applicable to such month. Once the [*****] has been Validated, it shall remain Validated for the RINs generated in the then-current vintage year for a three-month period, starting with the month following Validation (See Exhibit B for an example).

(2)RIN Market and Trades. For the avoidance of doubt, Seller acknowledges and agrees that (i) the market for RINs may lack liquidity, (ii) Buyer’s Affiliate shall at all times retain control over the evaluation of potential sales of RINs and the ultimate sale of RINs into the market, and (iii) Seller shall have no right to participate in or direct the sales of RINs.

(3)Seller Election to Generate and Retain RINs In-Kind. In lieu of receiving the RIN Value as a financial element in the Contract Price, Seller may elect by the Advanced Notice Deadline to retain one hundred percent (100%) of its RINs in-kind for each Biogas delivery Month. If Seller makes such election, then Seller must retain its entire [*****] share of RINs for Biogas allocated to Vehicle Fuel Producer(s) and shall establish and manage its EMTS Account required for such RINs. Seller shall not have the right to present any RINs that it retains in-kind to Buyer for monetization at will. Any arrangement in which Buyer monetizes such RINs for Seller shall be a separate negotiated transaction that is not included under this Transaction Confirmation.

(c)LCFS Value.

(v)The “LCFS Value” shall be paid by Buyer’s Affiliate and is calculated by summing all the LCFS Monthly Values for the Calendar Quarter in which Biogas was delivered to the Buyer (each such Month, a “Delivery Month”).
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(vi)The “LCFS Monthly Value” is calculated by multiplying the average LCFS Price for the Delivery Month by the LCFS Quantity for the Delivery Month.
(vii)The “LCFS Price” for the applicable Month means (i) for Biogas delivered to California, the [*****], and/or (ii) for Biogas delivered to Oregon, the [*****] (if the [*****] is not published, then the [*****]).

(viii)Seller Election to Generate and Retain LCFS Credits In-Kind. In lieu of receiving the LCFS Value as a financial element in the Contract Price, Seller may elect by the Advanced Notice Deadline to retain one hundred percent (100%) of its LCFS Credits in-kind for each Biogas delivery Month. If Seller makes such election, then Seller must retain its entire share of LCFS Credits for Biogas allocated to Vehicle Fuel Producer(s) inside the state of California and shall establish and manage its LRT Account required for such LCFS Credits. Seller shall not have the right to present any LCFS Credits that it retains in-kind to Buyer for monetization at will. Any arrangement in which Buyer monetizes such LCFS Credits for Seller shall be a separate negotiated transaction that is not included under this Transaction Confirmation.

(ix)CARB CI Review. In respect of any Biogas for which the LCFS Value is payable hereunder, the Parties acknowledge that CARB may conduct a review to compare CARB’s temporary, provision or certified carbon intensity of the Biogas (“Pre-Approved CI”) against the actual carbon intensity (“Actual CI”), which could result in a finding by CARB that the Actual CI for CARB’s review period (“Review Period”) is worse than the Pre-Approved CI, in which case Buyer or Buyer’s Affiliate could be responsible, directly or indirectly, to retire LCFS Credits issued on the basis of the Pre-Approved CI. Accordingly, despite any provision to the contrary herein, the LCFS Value payable shall be calculated based on the lower of: (a) the number of LCFS Credits generated and transferred to Buyer’s Affiliate’s account using the Pre-Approved CI during the applicable Calendar Quarter; and (b) the number of LCFS Credits the Biogas would be eligible to generate using the carbon intensity as estimated by the consultant of Buyer or Buyer’s Affiliate during the applicable Calendar Quarter. Seller shall cooperate with Buyer’s Affiliate and provide all data and information to assist with the estimation of the carbon intensity by such consultant.

Once CARB has determined the Actual CI, Buyer’s Affiliate shall calculate the Seller’s portion of the number of LCFS Credits associated with the Biogas purchased during the Review Period that would have been eligible to be generated based on the Actual CI (“Actual LCFS Quantity”) and: (a) if the Actual LCFS Quantity is lower than Seller’s portion of the number of LCFS Credits determined for the Review Period under the paragraph above (“Paid LCFS Quantity”), then Buyer or Buyer’s Affiliate shall have the right to the difference between the Actual LCFS Quantity and the Paid LCFS Quantity, then multiplied by the True- Up Price (“True-Up Value”). At Buyer’s option, the True-Up Value will be (i) netted against any future payables to the Seller or (ii) paid by Seller to Buyer or Buyer’s Affiliate within five (5) Business Days after receipt of invoice for same; and (b) if the Actual LCFS Quantity is greater than the Paid LCFS Quantity, then Buyer or Buyer’s Affiliate shall pay Seller the True-Up Value within five (5) Business Days after receipt of invoice for same. “True-Up Price” means the average of the daily midpoints of the LCFS Credit daily prices published by [*****] (or any successor thereto) for the twenty (20) Business Days following Buyer’s Affiliate receipt of notice from CARB of the Actual CI

2.Delivery Period:

(d)Biogas Daily Delivery (the “Delivery Period”)

Begin Date:    Later of COD or January 1, 2022
End Date:    The last day of the 120th Month following Begin Date

(e)RIN Monthly Delivery - One Month after the Biogas delivery Month

(f)LCFS Quarterly Delivery - One Calendar Quarter after the Calendar Quarter in which Biogas was delivered.

3.Contract Quantity and Performance Obligation:

(g)Biogas Quantity

(x)On each Day of the Delivery Period, Seller shall sell and deliver, and Buyer shall purchase and receive, at the Delivery Point on a Firm basis, one hundred percent (100%) of the Biogas produced by Seller at the facility, but no more than [*****] MMBtu/Day (“Maximum Daily Quantity”), determined as an average daily amount calculated on a delivery Month basis, subject to the following:

(1)From the start of the second Contract Year, Seller shall have a Firm obligation to deliver no less than [*****] MMBtu/Day (“Minimum Daily Quantity”), determined as an average daily amount 
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calculated on a delivery Month basis. If Seller fails to deliver the Minimum Daily Quantity in any Month, Seller shall deliver the shortfall of the Minimum Daily Quantity within the following three Months. If Seller fails to deliver the shortfall within such period, then Seller shall pay Buyer an amount equal to Buyer’s share of the RINs and LCFS Credits reflected in the Contract Price for the Month in which the shortfall occurred, and

(2)In respect of the delivery Month of May 2025 and every Month thereafter, as long as Seller meets its Minimum Daily Quantity delivery obligation, Seller may elect to retain either the Biogas (for the avoidance of doubt, inclusive of the Green Attributes associated therewith) or only the Green Attributes associated with the Biogas PROVIDED THAT Seller provides written notice of such election prior to the seventh (7th) last Business Day in the calendar month prior to the relevant Month.

(h)RIN Quantity

The “RIN Quantity” shall be [*****] of the RINs generated from the Biogas Quantity delivered to a VFP, provided that if a Downstream Distressed Event occurs, the RIN Quantity in respect of Biogas Quantities affected by such Downstream Distressed Event and sold pursuant to another Vehicle Fuel Producer Biogas Contract shall be [*****] and, provided, further, (i) Buyer shall use commercially reasonable efforts to minimize the amount of such Biogas Quantities that are sold pursuant to another Vehicle Fuel Producer Biogas Contract and (ii) in no event shall the amount of such Biogas Quantities that are subject to the lower RIN Quantity of [*****] exceed the proportion that (A) the total amount of Biogas Quantity sold to Buyer by Seller that is subject to such Downstream Distressed Event bears to (B) the total amount of Biogas purchased by Buyer from all suppliers (including Seller) during such Downstream Distressed Event. The conversion factor for determining the quantity of RINs generated for the quantity of Biogas delivered is [*****] RINs for every 1 MMBtu of Biogas ([*****] RINs/1MMBtu), or as otherwise specified by the EPA.

(i)LCFS Quantity

The “LCFS Quantity” shall be [*****] of the LCFS Credits generated from the Biogas Quantity delivered to a VFP in California or Oregon based on a weighted average Carbon Intensity of [*****], provided that if a Downstream Distressed Event occurs, the LCFS Quantity in respect of Biogas Quantities affected by such Downstream Distressed Event and sold pursuant to another Vehicle Fuel Producer Biogas Contract shall be [*****] and, provided, further, (i) Buyer shall use commercially reasonable efforts to minimize the amount of such Biogas Quantities that are sold pursuant to another Vehicle Fuel Producer Biogas Contract and (ii) in no event shall the amount of such Biogas Quantities that are subject to the lower LCFS Quantity of [*****] exceed the proportion that (A) the total amount of Biogas Quantity sold to Buyer by Seller that is subject to such Downstream Distressed Event bears to (B) the total amount of Biogas purchased by Buyer from all suppliers (including Seller) during such Downstream Distressed Event. In the event the actual weighted average carbon intensity of the Biogas is not [*****], the LCFS Quantity shall be adjusted by [*****] for every carbon intensity increase or decrease of [*****]. For example, if the actual carbon intensity is [*****], then the LCFS Quantity shall be adjusted to [*****]. If the actual carbon intensity is [*****], then the LCFS Quantity shall be adjusted to [*****].

(j)Throughout the Delivery Period, Seller shall have an obligation to certify on a periodic schedule as required (i) by the EPA, that the Biogas quantities delivered to Buyer qualify for the creation of RINs under the EPA RFS when used as a Vehicle Fuel and (ii) by the LCFS, that the Biogas quantities delivered to Buyer qualify for the creation of LCFS Credits under the LCFS when used as a Vehicle Fuel.

(k)Throughout the Delivery Period, Buyer shall have an obligation to sell and deliver Biogas purchased under this Transaction Confirmation to a VFP using an EPA-approved pathway that converts all of such Biogas to a Vehicle Fuel in the Biogas delivery Month, all in accordance with the EPA RFS and, if applicable, the LCFS, up to the Biogas Quantity. As needed, Buyer may update the list of VFP in Exhibit A by sending Seller a notification via email. In such event, Seller shall update the VFP registrations with the respective Green Attribute Regulator(s), and Buyer shall assist Seller with such registration.

(l)For purposes of this Transaction Confirmation, a “Downstream Distressed Event” has occurred when (i) a Vehicle Fuel Producer is in default under a Vehicle Fuel Producer Biogas Contract due to the bankruptcy or other insolvency event of the Vehicle Fuel Producer and (A) such contract terminates based solely on such default and (B) Buyer has no other Vehicle Fuel Producer Biogas Contract pursuant to which it can deliver the affected Biogas and (ii) Buyer cannot enter into a replacement contract on similar or better terms than the terminated Vehicle Fuel Producer Biogas Contract.

4.Delivery Point:
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The Delivery Point shall be [*****]

II.Special Conditions

1.Definitions.

“Biogas Price” has the meaning set forth in the Contract Price section above. “Buyer’s Affiliate” means BP Products North America Inc.
“COD” or “Commercial Operation Date” shall mean the date that Seller confirms that the facility is completed such that it is capable of producing Biogas and injecting it into a Commercial Distribution System.

“LCFS Price” has the meaning set forth in in Section I.1.(d)(ii) above.

“Non-QAP Discount” has the meaning set forth in the Contract Price section above.

“Portfolio D3 RINs” means the D3 RINs in Buyer’s Affiliate’s trading portfolio, other than those excluded in accordance with the next sentence. Buyer’s Affiliate may exclude D3 RINs where they may, in Buyer’s Affiliate’s good faith opinion, have unrepresentative prices, including: (i) D3 RINs where Buyer’s Affiliate acts as marketing agent for a seller who has the right to designate the purchasers; or (ii) RINs for which there are good faith invalidity concerns or other reasons to deem their prices unrepresentative.

“PTD” means a product transfer document, as set forth in the applicable Green Attribute Program.

“Q-RIN” means a RIN verified by a registered independent third-party auditor using a QAP that has been approved under 40 C.F.R. § 80.1469(c) following the audit process described in 40 C.F.R. § 80.1472.

“Quality Assurance Plan” or “QAP” means the list of elements that an independent third-party auditor will check to verify that the RINs generated by a renewable fuel producer or importer are valid pursuant to § 40 C.F.R. 80.1469.

“RIN Price” has the meaning set forth in Section I.1.(c)(ii) above. “Validated” has the meaning set forth in Section I.1.(c)(ii)(3) above.
“Vehicle Fuel Producer” or “VFP” means a Vehicle Fuel Producer identified on Exhibit A.

2.Representations by Both Parties. Each of the parties to this Transaction Confirmation represents and warrants that, as of the date of this Transaction Confirmation specified above:

(a)It has full and complete authority to enter into and perform this Transaction Confirmation;

(b)The person who executes this Transaction Confirmation on its behalf has full and complete authority to do so and is empowered to bind it thereby; and

(c)It is not insolvent and has not sought protection from its creditors under the United States Bankruptcy Code, or under any similar laws.

3.Buyer Representations. Buyer and Buyer’s Affiliate represent and warrant to Seller as of the execution date of this Transaction Confirmation that and on each Day during the Delivery Period that:

(a)The VFPs have entered into Biogas Contracts with Buyer;

(b)Neither Buyer nor Buyer’s Affiliate has taken any action that would invalidate Green Attributes that would otherwise be valid and in material compliance with all applicable laws and regulations;

(c)The Biogas delivered to Buyer will be used as Vehicle Fuel to the extent possible;

(d)The Biogas delivered to Buyer will be delivered to a Vehicle Fuel Producer in California for the subsequent generation of RINs and LCFS Credits throughout the Delivery Period as long as such programs exist, subject to the provisions of the Base Contract, Biogas Addendum, and this Transaction Confirmation that excuse Buyer’s performance hereunder (including, for the avoidance of doubt, Seller Force Majeure Events or Buyer Force Majeure Events, Regulatory Cessation, Regulatory Events, or an Illegality). Any failure by Buyer to satisfy the above warranty shall not be an 
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Event of Default hereunder and the sole and exclusive remedy available to Seller in the event of such failure is the payment by Buyer of the RIN Value or LCFS Value, as applicable, that would have otherwise been generated had Buyer satisfied the warranty stated in this Section II.3(c); and

(e)As of the execution date hereof, Buyer’s VFPs meet the eligibility standards for registration under the applicable Green Attribute Program, including the EPA RFS, and, in the case of VFPs in California, under LCFS.

4.Seller Representations. Seller represents and warrants to Buyer and Buyer’s Affiliate as of the execution date of the Transaction Confirmation and on each Day during the Delivery Period that:

(a)The Biogas Supply Source meets the eligibility standards for Registration of the Green Attributes Program, including under the EPA RFS;

(b)Seller shall not sell, trade, remarket, give away, claim, or otherwise sell separately the Green Attributes from the Biogas supply source; and

(c)the Biogas delivered to Buyer shall have been processed to meet applicable pipeline quality specifications and injected into a Commercial Distribution System connected to the Delivery Points in accordance with the requirements of the applicable Green Attribute Program, including EPA RFS or LCFS.

5.Vehicle Fuel Producers. VFPs are those listed on Exhibit A. In the event that Buyer needs to sell Biogas purchased under this Transaction Confirmation to other VFPs not cited in Exhibit A in order to meet its purchase obligations under this Transaction Confirmation, Buyer shall send an updated Exhibit A to Seller listing the additional VFPs, which may be sent by email. Within seven (7) Business Days of acceptance, Seller shall update the VFP registrations with the respective Green Attribute Regulator(s).

6.Credit Support. For purposes of this Transaction Confirmation, Seller shall have no obligation to provide credit support or security in support of its obligations hereunder. Buyer shall provide a parent company guaranty in favor of Gevo in support of its obligations hereunder.

7.Third Party Verification Support Requirement. Buyer may terminate this Transaction Confirmation if Seller, not later than thirty (30) Days following the date of this Transaction Confirmation specified above, does not execute a contract to work with Weaver or EcoEngineers to provide all necessary information required for registration with the EPA under the EPA RFS with regard to Q-RINs for RIN generation and allocation or if Seller terminates such contract with Weaver or EcoEngineers during the Delivery Period. If the Seller opts to generate RINs before receiving Q-RIN status, or if Seller failed to receive Q-RIN status or terminates the contract with Weaver or EcoEngineers (or some other service provider acceptable to Buyer in its sole discretion), then the Non-QAP Discount shall be applied to the RIN Price until such time as the Seller receives Q-RIN status.

8.EPA and CARB Registration Cost.

(f)Renewable Fuel Standard Registration Cost. Seller and Buyer’s Affiliate will share equally all initial costs associated with Registration of the production facilities and fuel pathways in line with EPA requirements to provide RINs and for registration under the QAP. Seller will cooperate with Buyer’s Affiliate and provide all necessary information required to complete registration. Seller shall be responsible for any ongoing reporting and costs associated with integrity and compliance of the pathway, including QAP costs in Special Condition 7 above (Third Party Verification Support Requirement).

(g)Low Carbon Fuel Standard Registration Cost. Buyer’s Affiliate will pay all initial costs associated with registration of the production facilities and fuel pathways in line with CARB requirements to generate LCFS Credits. Seller will cooperate with Buyer’s Affiliate and provide all necessary information required to complete registration. Seller shall be responsible for any ongoing reporting and costs associated with integrity and compliance of the pathway.

9.Alternate Green Attribute Programs. Notwithstanding Section 3.6 of the Base Contract, if the Biogas, Green Attributes, RINs or LCFS Credits become eligible under another Green Attribute Program, Buyer shall have the option, exercisable at its sole discretion, to redirect the Biogas, Green Attributes, RINs or LCFS Credits to such program for the remainder of the Delivery Period.

If such option is exercised by Buyer, then:

(d)Any additional value (net of costs incurred as a result of redirection, including costs associated with Sections 9(b) and
(c) below) achieved over the Contract Price as a result of the redirection to an alternative Green Attribute Program shall be shared equally between Buyer and Seller.
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(e)Seller shall comply with all reasonable requests from Buyer or Buyer’s Affiliate to complete regulatory documentation necessary for such redirection, which includes, but is not limited to, any affidavits, reporting or attestations, and any other documentation required to certify that production and the transportation of the Biogas from its point of production to the Delivery Point is compliant with the transportation routing or pathing requirements of the Green Attribute Program; and

(f)Seller shall comply on an ongoing basis with all requirements of such Green Attribute Program, including completion of any regulatory documentation, which includes, but is not limited to, any affidavits, reporting or attestations, and any other documentation required to certify that production and the transportation of the Biogas from its point of production to the Delivery Point is compliant with the transportation routing or pathing requirements of the Green Attribute Program, provided that the foregoing shall not require Seller to incur any capital expenditures.

10.CARB LCFS Regulated Entity Status. Pursuant to Section 95483 of the California LCFS, Seller hereby transfers to Buyer, and Buyer hereby accepts from Seller, the LCFS compliance obligation as the regulated entity with respect to all Biogas sold by Seller to Buyer; provided that, in the event the Biogas sold and delivered to Buyer is not in compliance with all pathway requirements of the California LCFS, including the certified CI, as it relates to the Biogas production process, Seller shall remain the regulated entity with respect to such Biogas and indemnify Buyer for any and all claims, fines or penalties that Buyer may incur as a result of such Biogas being non-compliant, to the extent that the non-compliance of such Biogas is not as a result of the actions or inactions of Buyer nor Buyer’s Affiliate. In addition, in order to make such transfer effective as required under Section 95483 of the California LCFS, Seller shall provide Buyer with a PTD which shall prominently states: (i) the volume and average CI of the transferred fuel; and (ii) that Buyer is the regulated entity for the acquired fuel and, accordingly, is responsible for meeting the requirements of the California LCFS with respect to the fuel.

11.Storage Cost. Buyer and Seller shall share equally in any and all storage costs incurred by either Party during: (i) the period beginning on the date that the facility achieves COD and the date that the EPA approves the applicable RFS pathway and (ii) the period of time during any Downstream Distressed Event, it being understood and agreed that the purpose of such storage is to preserve any Green Attributes during such period.

12.Regulatory Cessation. Upon the occurrence of a Regulatory Cessation, then Buyer and Seller shall work together in good faith to deliver the Biogas and Green Attributes into another market with the goal that it will be delivered into the highest value market that is commercially practicable. For the purposes of this Transaction Confirmation, the term “Regulatory Cessation” shall mean any of the following: [*****]. If Buyer and Seller are unable to agree on the renegotiated Delivery Period or Contract Price within sixty (60) days from the date that a Party initiated such renegotiation, then either Party shall have the right to terminate this Transaction Confirmation and no Party shall have any further right or obligation hereunder (except for such rights or obligations that arose prior to the date of such Regulatory Cessation). For the avoidance of doubt, [*****]. Any termination under this Section 12 shall be conducted as though the Parties had selected “Early Termination Damages Do Not Apply” under Section 10.3 of the Base Contract.

13.Termination Rights.

(h)In the event that Seller does not produce and deliver Biogas to Buyer from facility by December 31, 2022, either party shall have the right to terminate this Transaction Confirmation upon at least thirty (30) days’ prior written notice to the other party.

(i)If within thirty-six (36) Months of the date hereof Seller elects to refinance those certain Solid Waste Facility Revenue Bonds (Gevo NW Iowa RNG, LLC Renewable Natural Gas Project), Series 2021 (Green Bonds), issued by the Iowa Finance Authority on April 15, 2021 and the inclusion of Section 3.5 (Regulatory Event) of the Special Provisions to the Contract prevents Seller from obtaining such refinancing, then Seller will notify Buyer. If after thirty (30) Days from receipt of such notice Buyer, Buyer’s Affiliate and Seller are not able to reform Section 3.5 of the Special Provisions in such a way as to allow Seller to obtain its refinancing, Seller may terminate this Transaction Confirmation on written notice to Buyer.

Any such termination under this Section 13 shall be conducted as though the parties had selected “Early Termination Damages Do Not Apply” under Section 10.3 of the Base Contract.

[Signature Page Follows]
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Please confirm the foregoing correctly sets forth the terms of our agreement with respect to this transaction by signing in the space provided below and returning a copy of the executed Transaction Confirmation by faxing it to (281) 227-8470.

						
	BP Canada Energy Marketing Corp.

By: /s/ John Armstrong
Name: John Armstrong
Title: Attorney-in-Fact Date: June 10, 2022

BP Products North America Inc.

By: /s/ Sean Reavis
Name: Sean Reavis
Title: Attorney-in-Fact Date: June 10, 2022
	Gevo NW Iowa RNG, LLC

By: /s/ Timothy Cesarek
Name: Timothy Cesarek
Title:    Chief Commercial Officer
Date:    06/10/22

[Biogas Transaction Confirmation]
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Exhibit A Vehicle Fuel Producers

						
	Vehicle Fuel Producers:
	Location:
	[*****]	[*****]

		
		
		
		
		

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Exhibit B
Validation Example

The following example is intended to explain how the RIN Price is Validated, as described in Section 1.(c)(ii)(3) of the Contract Price section.

																					
	Biogas Delivery
	Vintage
	Vintage 2017
	

	

	Vintage 2016
	Vintage 2017

	Month
	2016 D3
	D3 RINs
	[*****]
	[*****]
	D3 RIN
	D3 RIN

		RINs	# of Trades
	for Vintage 2016
	for Vintage 2017
	BP Sale
	BP Sale Vol/Price

		# of
				Volume/Price	
		Trades
					
	June 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	July 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	August 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	September 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	October 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	November 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	December 2016
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	January 2017
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	February 2017
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	March 2017
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]
	[*****]

	April 2017
		[*****]
		[*****]
		
	May 2017
		[*****]
		[*****]
		

1)For the September 2016 Biogas delivery Month, [*****] D3 RINs were generated.

a)Validation was not achieved in any of the three Months prior because there were only 8 days of trading as opposed to the required 10 Days. Therefore, to price the September 2016 RINs, you must follow Section 1(c)(ii)(2) of the Contract Price section.

b)The 2nd price tier would value[*****] D3 RINs at the actual sold price of $[*****] per RIN.

c)The remaining [*****] D3 RINs would be priced at the greater of [*****] of the [*****] ([*****] per RIN) and the [*****] (which for the sake of this example will be $[*****]/RIN). So, the [*****] D3 RINs are priced at $[*****].

d)Thus, on a weighted-average basis, the RIN Price for September 2016 is $[*****] per RIN.

2)For the Months of October 2016, November 2016, and December 2016, the [*****] has been Validated based on the fact that there were 12 trades during the 20 Business Days prior to the Advance Notice Deadline. Therefore, the price of 2016 D3 RINs for October, would be $[*****], for November would be $[*****] and for December would be $[*****].

3)For January 2017 Biogas delivery Month, [*****] D3 RINS were generated.

a)The price needs to be Validated for 2017 RINs. Validation was not achieved in any of the three Months prior to January because there were only 5 days of trading as opposed to the required 10 Days. The 10 trading days for vintage 2016 do not validate a vintage 2017 [*****]. Therefore, to price the January 2017 RINs, you must follow Section 1(c)(ii) of the Contract Price section.

b)The RIN price would be $[*****] based on BP’s actual sales of vintage 2017 RINs during the Month of January 2017.

4)For February 2017 Biogas delivery Month, [*****] D3 RINs were generated.

e)Validation was not achieved in any of the three Months prior to February because the month with the most trades was still below the required 10 Days. Therefore, to price the February 2017 RINs, you must follow Section 1(c)(ii) of the Contract Price section.

f)The RIN price would be $[*****] based on BP’s actual sales of vintage 2017 RINs during the Month of February 2017.

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5)For the months of March 2017, April, 2017 and May 2017, the [*****] has been Validated based on the fact that there were 10 trades during the 20 Business Days prior to the Advance Notice Deadline. Therefore, the price of 2017 D3 RINs for March, would be $[*****], for April would be $[*****], and for May would be $[*****].
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