. STOCK

-BASED COMPENSATION

In fiscal

2019,

the Company adopted the Twin Disc, Incorporated

2018

Long-Term Incentive Plan (the

“2018

LTI Plan”). Benefits under the

2018

LTI Plan

may

be granted, awarded or paid in any

one

or a combination of stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash-settled restricted stock units, performance stock awards, performance stock unit awards, performance unit awards, and dividend equivalent awards. There is reserved for issuance under the Plan an aggregate of

850,000

shares of the Company's common stock, which

may

be authorized and unissued shares or shares reacquired by the Company in the open market or a combination of both. The aggregate amount is subject to proportionate adjustments for stock dividends, stock splits and similar changes.

In fiscal

2011,

the Company adopted the Twin Disc, Incorporated

2010

Stock Incentive Plan for Non-Employee Directors (the

“2010

Directors' Plan”), a plan to grant non-employee directors equity-based awards up to

250,000

shares of common stock, and the Twin Disc, Incorporated

2010

Long-Term Incentive Compensation Plan (the

“2010

Employee Incentive Plan”), a plan under which officers and key employees

may

be granted equity-based awards up to

650,000

shares of common stock. Equity-based awards granted under these plans include performance shares and restricted stock.

Shares available for future awards as of

June 30

were as follows:

	2020		2019
2018 LTI Plan		492,591		742,325
2010 Directors' Plan		12,865		61,354

Performance Stock Awards (“PSA”)

In fiscal

2020

and

2019,

the Company granted a target number of

131,688

and

50,004

PSAs, respectively, to various employees of the Company, including executive officers.

The PSAs granted in fiscal

2020

will vest if the Company achieves performance-based target objectives relating to average return on invested capital, average annual sales and average annual Earnings Per Share (“EPS”) (as defined in the PSA Grant Agreement), in the cumulative

three

fiscal year period ending

June 30, 2022.

These PSAs are subject to adjustment if the Company's return on invested capital, net sales, and EPS for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is

184,766.

Based upon actual results to date, the Company is

not

currently accruing compensation expense for these PSAs.

The PSAs granted in fiscal

2019

three

fiscal year period ending

June 30, 2021.

67,007.

Based upon actual results to date, the Company is

not

currently accruing compensation expense for these PSAs.

There were

167,848

and

96,124

unvested PSAs outstanding at

June 30, 2020

and

2019,

respectively. A total of

13,844

and

shares of performance stock awards were forfeited during fiscal

2020

and

2019,

respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. The compensation (benefit) expense for the year ended

June 30, 2020

and

2019,

related PSAs, was (

$368

) and

$1,196,

respectively. The tax (expense) benefit from compensation (benefit) expense for the year ended

June 30, 2020

and

2019,

related PSAs, was (

$87

) and

$278,

respectively. The weighted average grant date fair value of the unvested awards at

June 30, 2020

was

$14.78.

June 30, 2020,

the Company had

$2,480

of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal

2020

and

2019

awards. The total fair value of performance stock awards vested in fiscal

2020

was

$167.

The total fair value of performance stock awards vested in fiscal

2019

was

$1,228.

Restricted Stock Awards (“RS”)

The Company has unvested RS outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation over the vesting period, which is generally

years. During fiscal

2020

and

2019,

the Company granted

180,379

and

43,305

service based restricted shares, respectively, to employees and non-employee directors in each year. A total of

20,511

and

3,784

shares of restricted stock were forfeited during fiscal

2020

and

2019,

respectively. There were

231,379

and

172,637

unvested shares outstanding at

June 30, 2020

and

2019,

respectively. Compensation expense of

$1,200

and

$1,096

was recognized during the year ended

June 30, 2020

and

2019,

respectively, related to these service-based awards. The tax benefit from compensation expense for the year ended

June 30, 2020

and

2019

related to these service-based awards, was

$283

and

$255,

respectively. The total fair value of restricted stock grants vested in fiscal

2020

and

2019

was

$1,241

and

$2,391,

respectively. As of

June 30, 2020,

the Company had

$1,307

of unrecognized compensation expense related to restricted stock which will be recognized over the next

three

years.

Restricted Stock

Unit

Awards (“RS

”)

Under the

2018

Long Term Incentive Plan, the Company has been authorized to issue RSUs. The RSUs entitle the employee to shares of common stock of the Company if the employee remains employed by the Company through a specified date, generally

three

years from the date of grant. During fiscal

2019,

the Company granted

37,950

RSUs to various employees of the Company, including executive officers. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period. There were

37,950

unvested RSUs outstanding at

June 30, 2020

and

June 30, 2019.

Compensation expense of

$326

and

$299

was recognized during the year ended

June 30, 2020

and

2019,

respectively. The tax benefit from compensation expense for the year ended

June 30, 2020

and

2019,

related to these service-based awards, was

$77

and

$69,

respectively. The weighted average grant date fair value of the unvested awards at

June 30, 2020

was

$25.77.

As of

June 30, 2020,

the Company had

$353

of unrecognized compensation expense related to RSUs which will be recognized over the next

two

years.

Stock Options

The

2010

Directors' Plan

may

grant options to purchase shares of common stock, at the discretion of the Board of Directors, to non-employee directors who are elected or reelected to the board, or who continue to serve on the board. Such options carry an exercise price equal to the fair market value of the Company's common stock as of the date of grant, vest immediately, and expire

ten

years after the date of grant. Options granted under the

2018

Employee Incentive Plan are determined to be non-qualified or incentive stock options as of the date of grant, and

may

carry a vesting schedule. For options under the

2018

Employee Incentive Plan that are intended to qualify as incentive stock options, if the optionee owns more than

10%

of the total combined voting power of the Company's stock, the price will

not

be less than

110%

of the grant date fair market value and the options expire

five

years after the date of grant. There were

incentive options granted to a greater than

10%

shareholder during the years presented. There were

options outstanding under the

2010

Directors' Plan and the

2018

Employee Incentive Plan as of

June 30, 2020

and

2019.