K. STOCK-BASED COMPENSATION

In the first quarter of fiscal 2025, the Company adopted the Twin Disc, Incorporated Amended and Restated 2021 Omnibus Incentive Plan (the “Omnibus Plan”), which was subsequently approved by the Company’s shareholders. The Omnibus Plan amended and restated the Twin Disc, Incorporated 2021 Long-Term Incentive Plan (the “2021 LTI Plan”), and effectively replaced the Twin Disc, Incorporated 2020 Stock Incentive Plan for Non-Employee Directors (the “2020 Directors' Plan”). Benefits under the Omnibus 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. The Omnibus Plan is designed to benefit key employees and consultants of the Company and its subsidiaries, as well as non-employee directors of the Company.

There is reserved for issuance under the Plan an aggregate of 1,636,550 shares of the Company’s common stock, which consists of the previously-approved 715,000 shares of common stock reserved for issuance under the 2021 LTI Plan prior to its amendment and restatement to become the Omnibus Plan; 521,550 shares of common stock that remained available for issuance under the 2020 Directors' Plan; and 400,000 newly authorized shares of common stock. Shares issued under the Omnibus Plan 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.

Shares available for future awards as of June 30 were as follows (assuming that outstanding performance awards are issued at the target level of performance):

Performance Stock Awards (“PSA”)

In fiscal 2026 and 2025, the Company granted a target number of 166,537 and 116,091 PSAs, respectively, to various employees and consultants of the Company, including executive officers.

The PSAs granted in fiscal 2026 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2028. These PSAs are subject to adjustment if the Company's return on invested capital and cumulative EBITDA 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 333,074. Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.

The PSAs granted in fiscal 2025 will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2027. These PSAs are subject to adjustment if the Company’s return on invested capital and cumulative EBITDA 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 227,610. Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.

There were 280,342 and 233,154 unvested PSAs outstanding at June 30, 2026 and 2025, 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. A total of 2,810 and 2,286 shares of performance stock awards were forfeited during fiscal 2026 and 2025, respectively. The compensation expense for the year ended June 30, 2026 and 2025, related PSAs, was $2,018 and $1,951, respectively. The tax expense from compensation expense for the year ended June 30, 2026 and 2025, related PSAs, was $473 and $417, respectively. The weighted average grant date fair value of the unvested awards at June 30, 2026 was $10.69. At June 30, 2026, the Company had $1,543 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2026 and 2025 awards. The total fair value of performance stock awards vested in fiscal 2026 and fiscal 2025 was $2,762.

Performance Stock Unit Awards (“PSUA”)

The PSUAs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date. The fiscal 2025 PSUAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital and cumulative EBITDA (as defined in the PSUA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2026. These PSUAs are subject to adjustment if the Company's return on invested capital and cumulative EBITDA 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 16,006.

There were 0 and 8,003 unvested PSUAs outstanding at June 30, 2026 and 2025, respectively. A total of 0 and 2,470 shares of PSUAs were forfeited during fiscal 2026 and 2025, respectively. The compensation expense for the year ended June 30, 2026 and 2025, related to PSUAs was $202 and $24. respectively. The tax expense from compensation expense for the year ended June 30, 2026 and 2025, related PSUAs, was $47 and $6, respectively. The weighted average grant date fair value of the unvested awards at June 30, 2026 was $12.15. At June 30, 2026, the Company had $0 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2026 and 2025 awards. The total fair value of performance stock awards vested in fiscal 2026 and fiscal 2025 was $190 and $0.

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 1 to 3 years. During fiscal 2026 and 2025, the Company granted 148,750 and 48,733 service based restricted shares, respectively, to employees and non-employee directors in each year. A total of 2,195 and 0 shares of restricted stock were forfeited during fiscal 2026 and 2025, respectively. There were 221,727 and 252,888 unvested shares outstanding at June 30, 2026 and 2025, respectively. Compensation expense of $1,196 and $1,266 was recognized during the year ended June 30, 2026 and 2025, respectively, related to these service-based awards. The tax benefit from compensation expense for the year ended June 30, 2026 and 2025, related to these service-based awards, was $280 and $297, respectively. The total fair value of restricted stock grants vested in fiscal 2026 and 2025 was $1,896 and $464, respectively. As of June 30, 2026, the Company had $910 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.

Restricted Stock Unit Awards (“RSU”)

The RSUs entitle an individual to shares of common stock of the Company or cash in lieu of shares of Company common stock if specific terms and conditions or restrictions are met through a specified date, generally three years from the date of grant or when performance conditions have been met. In fiscal 2026 and 2025, the Company granted 0 and 77,395 RSUs, respectively, to various employees of the Company, including executive officers. A total of 0 and 1,601 shares of restricted stock unit awards were forfeited during fiscal 2026 and 2025, respectively. There were 79,174 and 82,883 unvested RSUs outstanding at June 30, 2026 and June 30, 2025, respectively. Compensation expense of $429 and $866 was recognized during the year ended June 30, 2026 and 2025, respectively. The tax benefit from compensation expense for the year ended June 30, 2026 and 2025, related to these service-based awards, was $101 and $203, respectively. The total fair value of restricted stock grants vested in fiscal 2026 and 2025 was $33 and $1,779, respectively. The weighted average grant date fair value of the unvested awards at June 30, 2026 was $12.84. As of June 30, 2026, the Company had $350 of unrecognized compensation expense related to RSUs which will be recognized over the next year.