WOODWARD GOVERNOR CO
FORM OF TRANSITIONAL COMPENSATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>11
<FILENAME>exhibit10f.txt
<DESCRIPTION>FORM OF TRANSITIONAL COMPENSATION AGREEMENT
<TEXT>

Exhibit 10 (f)

Form of Transitional Compensation Agreement


                      TRANSITIONAL COMPENSATION AGREEMENT

     THIS AGREEMENT, made and entered into as of _____________________ by and
between Woodward Governor Company, a Delaware corporation, (hereinafter called
the "Corporation") and _____________ (hereinafter called the "Executive").

WITNESSETH THAT:

     WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that it is in the best interests of the Corporation and its
shareholders to assure that the Corporation will have the continued dedication
of the Executive, despite the possibility, threat or occurrence of a Change in
Control (as defined below) of the Corporation; and

     WHEREAS, the Board believes that it is imperative to diminish the
inevitable distraction of the Executive which would result from the personal
uncertainties and risks created by a threatened or pending Change in Control and
to encourage the Executive's full attention and dedication to the business of
the Corporation currently and in the event of any threatened or pending Change
in Control and to provide the Executive with appropriate compensation and
benefit protection upon a Change in Control;

     NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:

          1. TERM. This Agreement shall become effective upon the occurrence of
     a Change in Control (as defined in Paragraph 4(d), below) (hereinafter
     called the "Effective Date") and shall remain in effect for a term
     continuing until the end of the twenty-fourth (24th) calendar month
     following the month in which the Effective Date occurs; provided, however,
     that, anything in this Agreement to the contrary notwithstanding, if a
     Change in Control occurs and if the Executive's employment with the
     Corporation was terminated prior to the date on which the Change in Control
     occurs, and if it is reasonably demonstrated by the Executive that such
     termination of employment (a) was at the request of a third party who was
     taking steps reasonably calculated to effect a Change in Control or (b)
     otherwise arose in connection with or anticipation of a Change in Control,
     then for all purposes of this Agreement the "Effective Date" shall mean the
     date immediately prior to the date of such termination of employment.


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<PAGE>

          2. EMPLOYMENT. After the Effective Date, the Corporation shall employ
     the Executive to, and the Executive shall, exercise such authority and
     perform such executive duties as are commensurate with the authority being
     exercised and performed by the Executive during the ninety-day period
     immediately prior to the Effective Date, which services shall be performed
     at the location where the Executive was employed immediately prior to the
     Effective Date. The Executive shall also continue to serve as a member of
     the Board of Directors of the Corporation, if serving as such as of the
     Effective Date. The Executive shall devote substantially his entire time
     during reasonable business hours (reasonable sick leave and vacations
     excepted) and reasonable best efforts to fulfill faithfully and responsibly
     his duties hereunder. During the period of employment after the Effective
     Date, it shall not be a violation of this Agreement for the Executive to
     serve on corporate, civic or charitable boards or committees, or be
     involved in civic, charitable or educational endeavors, or manage personal
     investments, so long as such activities do not significantly interfere with
     the performance of Executive's responsibilities as an employee of the
     Corporation hereunder. It is expressly agreed and understood that to the
     extent any such activities were conducted by the Executive prior to the
     Effective Date, the continued conduct of such or similar activities
     subsequent to the Effective Date shall not thereafter be deemed to
     interfere with the performance of the Executive's responsibilities to the
     Corporation.

          3. COMPENSATION AND BENEFITS. For the Executive's employment with the
     Corporation after the Effective Date, the Executive shall be compensated as
     follows:

               (a) The Executive shall receive an annual base salary at a rate
          not less than the highest aggregate annual base salary and
          seniority-based vacation plan amount paid or payable to the Executive
          by the Corporation during the 24 month period immediately prior to the
          Effective Date, to be paid in accordance the Corporation's regular
          payroll practices. Such amount, or such greater annual base salary
          rate which may be paid or payable to the Executive after the Effective
          Date, is hereinafter referred to as the "Annual Base Salary."

               (b) The Executive shall be eligible to participate on a
          reasonable basis in the Corporation's bonus and incentive compensation
          plans and programs which provide opportunities to receive compensation
          which are not less than opportunities provided by the Corporation for
          executives with comparable annual base salary.

               (c) The Executive shall be entitled to receive executive and
          employee benefits and perquisites which are not less than the
          executive and employee benefits and perquisites provided by the
          Corporation to executives with comparable duties or annual base
          salary.

          4. TERMINATION. Unless earlier terminated in accordance with the
     following provisions of this Paragraph 4, the Corporation shall continue to
     employ the Executive and the Executive shall remain employed by the
     Corporation from the Effective Date through


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     the end of the term of this Agreement as set forth in Paragraph 1, above.
     Paragraph 6 hereof sets forth certain obligations of the Corporation in the
     event that the Executive's employment hereunder is terminated prior to the
     expiration of such term. Certain capitalized terms used in this Paragraph 4
     and in Paragraphs 5 and 6 hereof are defined in Paragraph 4(d), below.

     (a) DEATH OR DISABILITY. The Executive's employment shall terminate
immediately as of the Date of Termination in the event of the Executive's death
or in the event that the Executive becomes disabled. The Executive will be
deemed to be disabled upon the earlier of (i) the end of a six (6)-consecutive
month period during which, by reason of physical or mental injury or disease,
the Executive has been unable to perform substantially all of his usual and
customary duties under this Agreement or (ii) the date that a reputable
physician selected by the Board, and as to whom the Executive has no reasonable
objection, determines in writing that the Executive will, by reason of physical
or mental injury or disease, be unable to perform substantially all of the
Executive's usual and customary duties under this Agreement for a period of at
least six (6) consecutive months. If any question arises as to whether the
Executive is disabled, upon reasonable request therefor by the Board, the
Executive shall submit to reasonable medical examination for the purpose of
determining the existence, nature and extent of any such disability. The Board
shall promptly give the Executive written notice of any such determination of
the Executive's disability and of any decision of the Board to terminate the
Executive's employment by reason thereof. Until the Date of Termination for
disability, the base salary payable to the Executive shall be reduced
dollar-for-dollar by the amount of any disability benefits paid to the Executive
in accordance with any disability policy or program of the Corporation.

     (b) DISCHARGE FOR CAUSE. In accordance with the procedures hereinafter set
forth, the Board may discharge the Executive from his employment hereunder for
Cause. Any discharge of the Executive for Cause shall be communicated by a
Notice of Termination to the Executive given in accordance with Paragraph 14 of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date, which may be as early as the date of the giving of such notice. No
purported termination of the Executive's employment for Cause shall be effective
without a Notice of Termination.


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     (c) TERMINATION FOR OTHER REASONS. The Corporation may discharge the
Executive without Cause by giving written notice to the Executive in accordance
with Paragraph 14 at least fifteen (15) days prior to the Date of Termination.
The Executive may resign from his employment, without liability to the
Corporation, by giving written notice to the Corporation in accordance with
Paragraph 14 at least fifteen (15) days prior to the Date of Termination.

     (d) DEFINITIONS. For purposes of this Agreement, the following capitalized
terms shall have the meanings set forth below:

          (i) "Accrued Obligations" shall mean, as of the Date of Termination,
     the sum of (A) the Executive's base salary through the Date of Termination
     to the extent not theretofore paid, (B) the amount of any bonus, incentive
     compensation, deferred compensation and other cash compensation accrued by
     the Executive as of the Date of Termination to the extent not theretofore
     paid and (C) any vacation pay, expense reimbursements and other cash
     entitlements accrued by the Executive as of the Date of Termination to the
     extent not theretofore paid. For the purpose of this Paragraph 4(d)(i),
     amounts shall be deemed to accrue ratably over the period during which they
     are earned, but no discretionary compensation shall be deemed earned or
     accrued until it is specifically approved by the Board or the Compensation
     Committee in accordance with the applicable plan, program or policy.

          (ii) "Cause" shall mean: (A) the Executive's commission of an act
     materially and demonstrably detrimental to the financial condition and/or
     goodwill of the Corporation or any of its subsidiaries, which act
     constitutes gross negligence or willful misconduct by the Executive in the
     performance of his material duties to the Corporation or any of its
     subsidiaries, or (B) the Executive's commission of any material act of
     dishonesty or breach of trust resulting or intended to result in material
     personal gain or enrichment of the Executive at the expense of the
     Corporation or any of its subsidiaries, or (C) the Executive's conviction
     of a felony involving moral turpitude, but specifically excluding any
     conviction based entirely on vicarious liability. No act or failure to act
     will be considered "willful" unless it is done, or omitted to be done, by
     the Executive in bad faith or without reasonable belief that his action or
     omission was in the best interests of the Corporation. In addition, no act
     or omission will constitute Cause unless (A) a resolution finding that
     Cause exists has been approved by a majority of all of the members of the
     Board at a meeting at which the Executive is allowed to appear with his
     legal counsel and (B) the Corporation has given detailed written notice
     thereof to the Executive and, where remedial action is feasible, he then
     fails to remedy the act or omission within a reasonable time after
     receiving such notice.


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<PAGE>

          (iii) A "Change in Control" shall be deemed to have occurred if:

               (A) Any "person" (as defined in Section 13(d) and 14(d) of the
          Securities Exchange Act of 1934, as amended (the "Exchange Act")),
          excluding for this purpose the Corporation or any subsidiary of the
          Corporation, or any employee benefit plan of the Corporation or any
          subsidiary of the Corporation, or any person or entity organized,
          appointed or established by the Corporation for or pursuant to the
          terms of such plan which acquires beneficial ownership of voting
          securities of the Corporation, 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 fifteen
          percent (15%) or more of the combined voting power of the
          Corporation's then outstanding securities; provided, however, that no
          Change in Control shall be deemed to have occurred (1) as the result
          of an acquisition of securities of the Corporation by the Corporation
          which, by reducing the number of voting securities outstanding,
          increases the direct or indirect beneficial ownership interest of any
          person to fifteen percent (15%) or more of the combined voting power
          of the Corporation's then outstanding securities, but any subsequent
          increase in the direct or indirect beneficial ownership interest of
          such a person in the Corporation shall be deemed a Change in Control,
          or (2) as a result of the acquisition directly from the Corporation of
          securities of the Corporation representing less than 50% of the voting
          power of the Corporation, or (3) if the Board of Directors of the
          Corporation determines in good faith that a person who has become the
          beneficial owner directly or indirectly of securities of the
          Corporation representing fifteen percent (15%) or more of the combined
          voting power of the Corporation's then outstanding securities has
          inadvertently reached that level of ownership interest, and if such
          person divests as promptly as practicable a sufficient amount of
          securities of the Corporation so that the person no longer has a
          direct or indirect beneficial ownership interest in fifteen percent
          (15%) or more of the combined voting power of the Corporation's then
          outstanding securities; or

               (B) During any period of two (2) consecutive years (not including
          any period prior to the Effective Date of this Agreement), individuals
          who at the beginning of such two-year period constitute the Board of
          Directors of the Corporation and any new director or directors (except
          for any director designated by a person who has entered into an
          agreement with the Corporation to effect a transaction described in
          subparagraph (A), above, or subparagraph (C), below) whose election by
          the Board or nomination for election by the Corporation's shareholders
          was approved by a vote of at least two-thirds of the directors then
          still in office who either were directors at the beginning of the
          period or whose election or nomination for election was previously so
          approved, cease for any reason to constitute at least a majority of
          the Board (such individuals and any such new directors being referred
          to as the "Incumbent Board"); or


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<PAGE>

               (C) Consummation of (1) an agreement for the sale or disposition
          of the Corporation or all or substantially all of the Corporation's
          assets, (2) a plan of merger or consolidation of the Corporation with
          any other corporation, or (3) a similar transaction or series of
          transactions involving the Corporation (any transaction described in
          parts (1) through (3) of this subparagraph (C) being referred to as a
          "Business Combination"), in each case unless after such a Business
          Combination (x) the shareholders of the Corporation immediately prior
          to the Business Combination continue to own, directly or indirectly,
          more than fifty-one percent (51%) of the combined voting power of the
          then outstanding voting securities entitled to vote generally in the
          election of directors of the new (or continued) entity (including, but
          not by way of limitation, an entity which as a result of such
          transaction owns the Corporation or all or substantially all of the
          Corporation's former assets either directly or through one or more
          subsidiaries) immediately after such Business Combination, in
          substantially the same proportion as their ownership of the
          Corporation immediately prior to such Business Combination, and (y) at
          least a majority of the members of the board of directors of the
          entity resulting from such Business Combination were members of the
          Incumbent Board at the time of the execution of the initial agreement,
          or of the action of the Board, providing for such Business
          Combination; or

               (D) Approval by the shareholders of the Corporation of a complete
          liquidation or dissolution of the Corporation.

          (iv) "Date of Termination" shall mean (A) in the event of a discharge
     of the Executive by the Board for Cause, the date specified in such Notice
     of Termination, (B) in the event of a discharge of the Executive without
     Cause or a resignation by the Executive, the date specified in the written
     notice to the Executive (in the case of discharge) or the Corporation (in
     the case of resignation), which date shall be no less than fifteen (15)
     days from the date of such written notice, (C) in the event of the
     Executive's death, the date of the Executive's death, and (D) in the event
     of termination of the Executive's employment by reason of disability
     pursuant to Paragraph 4(a), the date the Executive receives written notice
     of such termination.

          (v) "Good Reason" shall mean any of the following without the written
     consent of the Executive: (A)(1) assignment of duties inconsistent with the
     Executive's position, authority, duties or responsibilities referred to in
     Paragraph 2, or any action by the Corporation which results in a
     substantial diminution of such position, authority, duties or
     responsibilities, other than an isolated, insubstantial and inadvertent
     action not taken in bad faith and which is remedied by the Corporation
     promptly after receipt of notice thereof given by the Executive, or (2) if
     applicable, removal or other failure to continue Executive as a member of
     the Board as required by Paragraph 2, (B) any reduction in Executive's
     Annual Base Salary, or bonus or incentive opportunities from those referred
     to in Paragraph 3(a) or 3(b), other than an isolated, insubstantial and
     inadvertent reduction not made in bad faith and which is remedied by the
     Corporation promptly after receipt of notice thereof given by the
     Executive, or (C) a relocation of Executive to an office location more than
     30 miles from the location referred to in


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<PAGE>

     Paragraph 2, or (D) failure by the Corporation to provide Executive with
     the executive or employee benefits and perquisities referred to in
     Paragraph 3(c), other than an isolated, insubstantial and inadvertent
     reduction not made in bad faith and which is remedied by the Corporation
     promptly after receipt of notice thereof given by the Executive, or (E)
     failure by any successor to enter into the assumption of and agreement to
     perform this Agreement referred to in Paragraph 13. For purposes of this
     Paragraph 4(d)(v), any good faith determination by the Executive that one
     of the foregoing events has occurred shall be conclusive. In addition,
     resignation for any reason by the Executive, which resignation is to be
     effective at any time during the 30 day period beginning twelve (12) months
     after the Effective Date shall constitute a resignation for Good Reason;
     provided, further, that if the Executive dies after the execution of a
     definitive agreement for a transaction which will constitute a Change in
     Control but before the expiration of such 30-day period, then the Executive
     shall be deemed to have terminated employment for Good Reason on the later
     of (1) the effective date of the Change in Control or (2) the date of the
     Executive's death or termination of employment due to disability.

          (vi) "Qualifying Termination" shall mean termination of the
     Executive's employment after the Effective Date and during the term of this
     Agreement as described in Paragraph 1, above, (A) by reason of the
     discharge of the Executive by the Corporation other than for Cause or
     disability or (B) by reason of the resignation of the Executive for Good
     Reason within six (6) months after an event constituting Good Reason or (C)
     in accordance with the last sentence of the definition of Good Reason in
     subparagraph (v), above.

     5. VESTING OF EQUITY AWARDS UPON A CHANGE IN CONTROL. Immediately upon a
Change in Control, all stock options, restricted stock and other equity awards
to the Executive which are not otherwise vested shall vest in full, and all
options shall remain exercisable for the period provided for in the applicable
plan or award agreement.

     6. OBLIGATIONS OF THE CORPORATION UPON TERMINATION. The following
provisions describe certain obligations of the Corporation to the Executive
under this Agreement upon termination of his employment. However, except as
explicitly provided in this Agreement, nothing in this Agreement shall limit or
otherwise adversely affect any rights which the Executive may have under
applicable law, under any other agreement with the Corporation or any of its
subsidiaries, or under any compensation or benefit plan, program, policy or
practice of the Corporation or any of its subsidiaries.

     (a) DEATH, DISABILITY, DISCHARGE FOR CAUSE, OR RESIGNATION WITHOUT GOOD
REASON. In the event the Executive's employment terminates by reason of the
death or disability of the Executive (other than in circumstances which
constitute a Qualifying Terminiation under Paragraph 4(d)(vi)(C)), or by reason
of the discharge of the Executive by the Corporation for Cause, or by reason of
the resignation of the Executive other than for Good Reason, the Corporation
shall pay to the Executive, or his designated beneficiaries, heirs or estate, in
the event of the Executive's death, all Accrued Obligations in a lump sum


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within thirty (30) days after the Date of Termination; provided, however, that
any portion of the Accrued Obligations which consists of bonus, deferred
compensation, or incentive compensation shall be determined and paid in
accordance with the terms of the relevant plan as applicable to the Executive.
In addition, if the Executive's employment is terminated by death, disability or
retirement under a retirement plan of the Corporation or by resignation of the
Executive other than for Good Reason, the Executive may, in the discretion of
the Compensation Committee, be awarded a pro rata cash bonus for the year in
which the Date of Termination occurs.

     (b) QUALIFYING TERMINATION. In the event of a Qualifying Termination, the
Executive shall receive the following benefits:

          (i) Payment of all Accrued Obligations in a lump sum on the Date of
     Termination; provided, however, that any portion of the Accrued Obligations
     which consists of bonus, deferred compensation or incentive compensation
     shall be determined and paid in accordance with the terms of the relevant
     plan as applicable to the Executive,

          (ii) A pro rata cash bonus for the year in which the Date of
     Termination occurs, determined and paid in accordance with the terms of the
     then current annual bonus plan applicable to the Executive,

          (iii) Payment in a lump sum on the Date of Termination of a salary
     replacement amount equal to three hundred percent (300%) of the annual base
     salary required to be paid to Executive pursuant to Paragraph 3(a) above,
     or if greater, the rate of annual salary as in effect immediately prior to
     the Date of Termination,

          (iv) Payment in a lump sum on the Date of Termination of a bonus
     replacement amount equal to three hundred percent (300%) of the highest of
     the annual bonus paid or payable to the Executive for the three (3) years
     preceding the year in which the Date of Termination occurs or, if greater,
     the Executive's target bonus for year in which the Date of Termination
     occurs,

          (v) Payment in a lump sum on the Date of Termination of a retirement
     replacement amount equal to 300% of the sum of the Member Investment and
     Stock Ownership Plan, Retirement Income Plan and Unfunded Deferred
     Compensation Plan contributions made or credited by the Corporation for the
     benefit of the Executive for the plan year of each such plan during which
     the Date of Termination occurs or, if greater, for the plan year of each
     such plan (or any successor or replacement plan) immediately preceding the
     plan year in which the Effective Date occurs,

          (vi) Continuation, for a period of three (3) years after the Date of
     Termination, of the following employee benefits on terms at least as
     favorable


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     to the Executive as those which would have been provided if the Executive's
     employment had continued for that time pursuant to this Agreement, with the
     cost of such benefits to be paid by the Corporation: medical and dental
     benefits, life and disability insurance, and executive physical
     examinations. To the extent the Corporation is unable to provide comparable
     insurance for reasons other than cost, the Corporation may provide a lesser
     level or no coverage and compensate the Executive for the difference in
     coverage through a cash lump sum payment grossed up for taxes. This payment
     will be tied to the cost of an individual insurance policy if it were
     assumed to be available. Upon the expiration of the coverage provided under
     this paragraph (vi), the Executive and Executive's dependents will be
     entitled to elect COBRA continuation coverage on the same basis as would be
     extended with respect to an employee whose employment terminated at the
     time of such expiration.

          (vii) Outplacement services, at the expense of the Corporation, from a
     provider reasonably selected by the Executive, and

          (viii) Tax preparation services for the Executive's taxable year in
     which the Date of Termination occurs, provided at the expense of the
     Corporation, on the same basis as provided to Executive immediately prior
     to the Effective Date.

     7. CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION. The Corporation agrees
that:

          (a) Anything in this Agreement to the contrary notwithstanding, in the
     event it shall be determined that any payment or distribution by the
     Corporation to or for the benefit of the Executive (whether paid or payable
     or distributed or distributable pursuant to the terms of this Agreement or
     otherwise, but determined without regard to any additional payments
     required under this Paragraph 7) (a "Payment") would be subject to the
     excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
     amended, (the "Code") or if any interest or penalties are incurred by the
     Executive with respect to such excise tax (such excise tax, together with
     any such interest and penalties, being hereinafter collectively referred to
     as the "Excise Tax"), then the Executive shall be entitled to receive an
     additional payment (a "Gross-Up Payment") in an amount such that, after
     payment by the Executive of all taxes (including any interest or penalties
     imposed with respect to such taxes), including, without limitation, any
     income taxes (and any interest and penalties imposed with respect thereto)
     and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
     amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
     Payment.

          (b) Subject to the provisions of paragraph (c), below, all
     determinations required to be made under this Paragraph 7, including
     whether and when a Gross-Up Payment is required and the amount of such
     Gross-Up Payment and the assumptions to be utilized in arriving at such
     determination, shall be made by the accounting firm which is then serving
     as the auditors for the Corporation (the "Accounting Firm"), which shall
     provide detailed supporting calculations both to the Corporation and the
     Executive within fifteen (15)


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<PAGE>

     business days of the receipt of notice from the Executive that there has
     been a Payment, or such earlier time as is requested by the Corporation. In
     the event that the Accounting Firm is serving as accountant or auditor for
     the individual, entity or group effecting the Change in Control, the
     Executive shall appoint another nationally recognized accounting firm to
     make the determinations required hereunder (which accounting firm shall
     then be referred to as the Accounting Firm hereunder). All fees and
     expenses of the Accounting Firm shall be borne solely by the Corporation.
     Any Gross-Up Payment, as determined pursuant to this Paragraph 7, shall be
     paid by the Corporation to the Executive within five (5) days of the
     receipt of the Accounting Firm's determination. If the Accounting Firm
     determines that no Excise Tax is payable by the Executive, it shall furnish
     the Executive with a written opinion that failure to report the Excise Tax
     on the Executive's applicable federal income tax return would not result in
     the imposition of a negligence or similar penalty. Any good faith
     determination by the Accounting Firm shall be binding upon the Corporation
     and the Executive. As a result of the uncertainty in the application of
     Section 4999 of the Code at the time of the initial determination by the
     Accounting Firm hereunder, it is possible that Gross-Up Payments which will
     not have been made by the Corporation should have been made
     ("Underpayment"), consistent with the calculations required to be made
     hereunder. In the event that the Corporation exhausts its remedies pursuant
     to paragraph (c), below, and the Executive thereafter is required to make a
     payment of any Excise Tax, the Accounting Firm shall determine the amount
     of the Underpayment that has occurred and any such Underpayment shall be
     promptly paid by the Corporation to or for the benefit of the Executive.

          (c) The Executive shall notify the Corporation in writing of any claim
     by the Internal Revenue Service that, if successful, would require the
     payment by the Corporation of a Gross-Up Payment. Such notification shall
     be given as soon as practicable but no later than fifteen (15) business
     days after the Executive is informed in writing of such claim and shall
     apprise the Corporation of the nature of such claim and the date on which
     such claim is requested to be paid. The Executive shall not pay such claim
     prior to the expiration of the thirty (30)-day period following the date on
     which Executive gives such notice to the Corporation (or such shorter
     period ending on the date that any payment of taxes with respect to such
     claim is due). If the Corporation notifies the Executive in writing prior
     to the expiration of such period that it desires to contest such claim, the
     Executive shall:

               (i) Give the Corporation any information reasonably requested by
          the Corporation relating to such claim,

               (ii) Take such action in connection with contesting such claim as
          the Corporation shall reasonably request in writing from time to time,
          including, without limitation, accepting legal representation with
          respect to such claim by an attorney reasonably selected by the
          Corporation,


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<PAGE>

               (iii) Cooperate with the Corporation in good faith in order
          effectively to contest such claim, and

               (iv) Permit the Corporation to participate in any proceedings
          relating to such claim;

provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for all taxes (including interest and penalties
with respect thereto), including without limitation any Excise Tax and income
tax (including interest and penalties with respect thereto), imposed as a result
of such representation and payment of costs and expenses. Without limiting the
foregoing provisions of this paragraph (c), the Corporation shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner; and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the Corporation directs
the Executive to pay such claim and sue for a refund, the Corporation shall
advance the amount of such payment to the Executive on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, for
all taxes (including interest and penalties with respect thereto), including
without limitation any Excise Tax and income tax (including interest or
penalties with respect thereto), imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

     (d) If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to paragraph (c), above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Corporation's complying with the requirements of said paragraph (c))
promptly pay to the Corporation the amount of such refund (together with any
interest paid or credited thereon, after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Corporation pursuant
to said paragraph (c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Corporation does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of


                                       11
<PAGE>

thirty (30) days after such determination, then such advance shall be forgiven
and shall not be required to be repaid; and the amount of such advance shall
offset, to the extent thereof, the amount of the Gross-Up Payment required to be
paid.

     8. DEFERRAL; GRANTOR TRUST. The Corporation shall provide Executive the
opportunity to defer the receipt of any amounts payable under Paragraph 6(b)(i),
(ii), (iii), (iv) and (v) hereunder and under the Unfunded Deferred Compensation
Plan to such dates or dates as are reasonably chosen by the Executive, such
deferred amounts to appreciate at an annual rate equivalent to 120% of the
Moody's Long Term Corporate Bond Yield Average for the twelve month period
ending on September 30 of the calendar year preceding the calendar year in which
such rate shall be used. The election to so defer shall be made by Executive no
later than one year prior to the date such payments would otherwise due or such
shorter period as the Corporation and the Executive shall reasonably agree upon.
The amounts deferred shall be distributed as elected by the Executivbe from
distributions options simialar to those available under the Unfunded Deferred
Compensation Plan as in effect immediately prior to the Effective Date of this
Agreement. In the event the Executive shall make an election to defer receipt of
amounts described in this Paragraph 8, the Corporation shall deposit into a
grantor trust that meets the requirements of Rev. Proc. 92-64, 1992-2 C.B. 422,
solely for the benefit of Executive, on terms reasonably acceptable to the
Executive, an amount equal to 110% of the amount so deferred. Such deposit shall
be made on the date such deferred amount would otherwise have been paid to
Executive. On each anniversary of the Date of Termination, the Corporation shall
deposit into the trust an amount sufficient so that, as of such anniversary, the
value of the assets of the trust are not less than the obligations of the
Corporation to the Executive under this Agreement.

     9. NO SET-OFF OR MITIGATION. The Corporation's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Corporation may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.

     10. PAYMENT OF CERTAIN EXPENSES. The Corporation shall pay the reasonable
legal fees and expenses incurred by the Executive in connection with the
negotiation and preparation of this Agreement. In addition, the Corporation
shall pay promptly as incurred, to the fullest extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest by the Corporation, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest initiated by the Executive about the
amount of any payment due pursuant to this Agreement), plus in each case
interest on any delayed payment at the


                                       12
<PAGE>

applicable federal rate provided for in Section 7872(f)(2)(A) of the Code, plus
an additional amount such that after payment by the Executive of all taxes
imposed on such additional amount, the Executive shall retain an amount equal to
the total taxes imposed on the Executive due to the payment by the Corporation,
to or for the Executive, of legal fees and expenses with respect to any such
contest; provided, however, that the Corporation shall not be obligated to make
such payment with respect to any contest in which the Corporation prevails over
the Executive.

     11. INDEMNIFICATION. To the full extent permitted by law, the Corporation
shall, both during and after the term of the Executive's employment, indemnify
the Executive (including the advancement of expenses) for any judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred by the Executive in connection with the defense of any lawsuit or other
claim to which he is made a party by reason of being (or having been) an
officer, director or employee of the Corporation or any of its subsidiaries. In
addition, the Executive shall be covered, both during and after the term of the
Executive's employment, by director and officer liability insurance to the
maximum extent that such insurance covers any officer or director (or former
officer or director) of the Corporation.

     12. CONFIDENTIALITY. During and after the period of employment with the
Corporation, the Executive shall not, without prior written consent from the
Chief Executive Officer or the General Counsel of the Corporation, directly or
indirectly disclose to any individual, corporation or other entity, other than
to the Corporation or any subsidiary or affiliate thereof or their officers,
directors or employees entitled to such information or any other person or
entity to whom such information is disclosed in the normal course of the
business of the Corporation) or use for the Executive's own benefit or for the
benefit of any such individual, corporation or other entity, any Confidential
Information of the Corporation. For purposes of this Agreement, "Confidential
Information" is information relating to the business of the Corporation or its
subsidiaries or affiliates (a) which is not generally known to the public or in
the industry, (b) which has been treated by the Corporation and its subsidiaries
and affiliates as confidential or proprietary, (c) which provides the
Corporation or its subsidiaries or affiliates with a competitive advantage, and
(d) in the confidentiality of which the Corporation has a legally protectable
interest. Confidential Information which becomes generally known to the public
or in the industry, or in the confidentiality of which the Corporation and its
subsidiaries and affiliates cease to have a legally protectable interest, shall
cease to be subject to the restrictions of this Paragraph 12.

     13. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the successors and
assigns of the Corporation. Amounts payable under this Agreement upon the
Executive's death shall be paid to his beneficiaries, if any, designated in
writing and filed with the Corporate Secretary, and in the absence of such
designation, shall be paid to his heirs by will or laws of descent


                                       13
<PAGE>

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

     14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered by hand or by recognized commercial delivery service or on the third
business day after being mailed within the continental United States by first
class certified mail, return receipt requested, postage prepaid, addressed as
follows:

          (a)  If to the Board or the Corporation, to:

               Woodward Governor Company
               5001 North Second Street
               P.O. Box 7001
               Rockford, Illinois 61125
               Attn:  Corporate Secretary

          (b)  If to the Executive, to:

               ___________________________________
               ___________________________________
               ___________________________________

Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.

     15. TAX WITHHOLDING. The Corporation shall provide for the withholding of
any taxes required to be withheld by federal, state, or local law with respect
to any payment in cash, shares of stock and/or other property made by or on
behalf of the Corporation to or for the benefit of the Executive under this
Agreement or otherwise. The Corporation may, at its option: (a) withhold such
taxes from any cash payments owing from the Corporation to the Executive, (b)
require the Executive to pay to the Corporation in cash such amount as may be
required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.


                                       14
<PAGE>

     16. ARBITRATION. Any dispute or controversy between the Corporation and the
Executive arising out of or relating to this Agreement or the breach of this
Agreement shall be settled by arbitration administered by the American
Arbitration Association ("AAA") in accordance with its Commercial Arbitration
Rules then in effect, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. Any arbitration shall be
held before a single arbitrator who shall be selected by the mutual agreement of
the Corporation and the Executive, unless the parties are unable to agree to an
arbitrator, in which case the arbitrator will be selected under the procedures
of the AAA. The arbitrator shall have the authority to award any remedy or
relief that a court of competent jurisdiction could order or grant, including,
without limitation, the issuance of an injunction. However, either party may,
without inconsistency with this arbitration provision, apply to any court
otherwise having jurisdiction over such dispute or controversy and seek interim
provisional, injunctive or other equitable relief until the arbitration award is
rendered or the controversy is otherwise resolved. Except as necessary in court
proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Corporation and the Executive. The Corporation
and the Executive acknowledge that this Agreement evidences a transaction
involving interstate commerce. Notwithstanding any choice of law provision
included in this Agreement, the United States Federal Arbitration Act shall
govern the interpretation and enforcement of this arbitration provision. The
arbitration proceeding shall be conducted in Rockford, Illinois or such other
location to which the parties may agree. The Corporation shall pay the costs of
any arbitrator appointed hereunder.

     17. NO ASSIGNMENT. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.

     18. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

     19. JURISDICTION AND GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
Illinois, other than the conflict of laws provisions of such laws.

     20. SEVERABILITY. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit


                                       15
<PAGE>

enforcement of such restriction or requirement to its full extent, then such
restriction or requirement shall be enforced to the maximum extent permitted by
law, and the Executive consents and agrees that any court of competent
jurisdiction may so modify such scope in any proceeding brought to enforce such
restriction or requirement.

     21. PRIOR UNDERSTANDINGS. This Agreement embodies the entire understanding
of the parties hereto and supersedes all other oral or written agreements or
understandings between them regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
each of the parties hereto. The headings in this Agreement are for convenience
of reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.

Attest:                                    WOODWARD GOVERNOR COMPANY

__________________________                 By: ______________________________

                                           Title: ___________________________

                                           [EXECUTIVE]


                                           __________________________________


                                       17
</TEXT>
</DOCUMENT>
