-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WH6qylZPvPlCgJji4q3vrSQbB8l51QBi756Mp8OMaYPeumvD1hx7sAjgTb3Yj6jW jQBJXlqblk+WeGSug8KXQw== 0000950123-98-005508.txt : 19980601 0000950123-98-005508.hdr.sgml : 19980601 ACCESSION NUMBER: 0000950123-98-005508 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980529 EFFECTIVENESS DATE: 19980529 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAUER INC CENTRAL INDEX KEY: 0000865754 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 363482074 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-53927 FILM NUMBER: 98634365 BUSINESS ADDRESS: STREET 1: 2800 EAST 13TH STREET CITY: AMES STATE: IA ZIP: 50010 BUSINESS PHONE: 5152396000 MAIL ADDRESS: STREET 1: 2800 EAST 13TH STREET CITY: AMES STATE: IA ZIP: 50010 S-8 1 FORM S-8 1 As filed with the Securities and Exchange Commission on May 29, 1998 Registration No. 333-___ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------ SAUER INC. (Exact name of Registrant as specified in its charter) ------------ Delaware 36-3482074 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2800 EAST 13TH STREET AMES, IOWA 50010 (515) 239-6000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------ SAUER INC. NON-EMPLOYEE DIRECTOR STOCK OPTION AND RESTRICTED STOCK PLAN SAUER INC. 1998 LONG-TERM INCENTIVE PLAN (Full Title of the Plans) ------------ KENNETH D. MCCUSKEY TREASURER AND SECRETARY SAUER INC. 2800 EAST 13TH STREET AMES, IOWA 50010 (515) 239-6364 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------ COPY TO: JAMES W. KAPP, JR., ESQ. SPENCER FANE BRITT & BROWNE LLP 1000 WALNUT STREET, SUITE 1400 KANSAS CITY, MISSOURI 64106 (816) 292-8141 ------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF TO BE REGISTERED TO BE REGISTERED(1)(2) PER SHARE(3) OFFERING PRICE(3) REGISTRATION FEE Common Stock, $.01 par 2,650,000 $16.6875 $44,221,875.00 $13,045.46 value per share
(1) 250,000 shares of Sauer Inc. Common Stock, par value $.01 per share (the "Shares"), are being registered pursuant to the Sauer Inc. Non- Employee Director Stock Option and Restricted Stock Plan and 2,400,000 Shares are being registered pursuant to the Sauer Inc. 1998 Long-Term Incentive Plan (2) This Registration Statement also covers such additional shares of Common Stock as may be issuable pursuant to antidilution provisions. (3) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(c), based on the average of the high and low prices per share of the Shares as reported by the New York Stock Exchange on May 26, 1998. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. Sauer Inc. (the "Registrant") hereby incorporates by reference into this Registration Statement the following documents filed by it with the Commission: (a) The Registrant's final prospectus dated May 11, 1998, as filed with the Commission pursuant to Rule 424(b) of the Securities Act, which contains audited financials for the fiscal year ended December 31, 1997; (b) The description of the Registrant's Common Stock, par value $.01 per share (the "Common Stock"), contained in the Registrant's Registration Statement on Form 8-A filed with the Commission on May 7, 1998. In addition, all documents and reports filed by the Registrant subsequent to the date hereof pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of filing of such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. (The Common Stock is registered under Section 12 of the Exchange Act.) ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL") permits a provision in the certificate of incorporation of each corporation organized thereunder, eliminating or limiting, with certain exceptions, the personal liability of a director to the corporation or its 3 stockholders for monetary damages for certain breaches of fiduciary duty as a director. The Certificate of Incorporation of the Company eliminates the personal liability of directors to the fullest extent permitted by Delaware law. Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware corporation, within certain limitations, to indemnify its officers, directors, employees and agents against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by them in connection with any suit or proceeding other than by or on behalf of the corporation, if they acted in good faith and in a manner reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to a criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. With respect to a actions by or on behalf of the corporation, Section 145 permits a corporation to indemnify its officers, directors, employees and agents against expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit, provided such person meets the standard of conduct described in the preceding paragraph, except that no indemnification is permitted in respect of any claim where such person has been found liable to the corporation, unless the Court of Chancery or the court in which such action or suit was brought approves such indemnification and determines that such person is fairly and reasonably entitled to be indemnified. Article Ninth of the Restated Certificate of Incorporation of the Company provides for the indemnification of officers and directors and certain other parties of the Company to the fullest extent permitted by law. In addition, the Company has entered into Indemnification Agreements with its directors and certain officers pursuant to which the Company generally is obligated to indemnify its directors and officers to the maximum extent permitted by law. The Company also maintains directors and officers liability insurance. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. Reference is made to the Exhibit Index filed herewith. ITEM 9. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; 4 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 5 (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Ames, State of Iowa, on the 29th day of May, 1998. SAUER INC. By: /s/ Kenneth D. McCuskey ------------------------------ Name: Kenneth D. McCuskey Title: Treasurer and Secretary 6 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Tonio P. Barlage and Kenneth D. McCuskey, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing), to sign any and all amendments, including post-effective amendments and supplements, to this Registration Statement on Form S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or his or their substitute may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signatures Title Date - -------------------------------------------------------------------------------- /s/ Klaus H. Murmann - ------------------------- Chairman and Chief 5/29/98 Klaus H. Murmann Executive Officer and Director (Principal Executive Officer) /s/ Tonio P. Barlage - ------------------------- President and Chief 5/25/98 Tonio P. Barlage Operating Officer and Director /s/ David L. Pfeifle - ------------------------- Executive Vice President 5/28/98 David L. Pfeifle and Director /s/ Nicola Keim 5/27/98 - ------------------------- Director Nicola Keim /s/ Johannes F. Kirchhoff - ------------------------- Director 5/29/98 Johannes F. Kirchhoff /s/ Sven Murmann - ------------------------- Director 5/28/98 Sven Murmann 7 /s/ Agustin A. Ramirez - ------------------------ Director 5/26/98 Agustin A. Ramirez /s/ Richard M. Schilling - ------------------------ Director 5/28/98 Richard M. Schilling /s/ Kenneth D. McCuskey - ------------------------ Treasurer and Secretary 5/29/98 Kenneth D. McCuskey (Principal Accounting Officer) 8 SAUER INC. EXHIBIT INDEX Exhibit Number Description 4.1 Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1(c) to Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-48299) filed with the Commission on April 23, 1998). 4.2 Restated By-laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 (File No. 333-48299) filed with the Commission on March 20, 1998). 4.3 Form of Certificate of the Common Stock of the Registrant (incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-48299) filed with the Commission on April 23, 1998). 4.4 Sauer Inc. 1998 Long-Term Incentive Plan. 4.5 Sauer Inc. Non-Employee Director Stock Option and Restricted Stock Plan. 5.1 Opinion of Spencer Fane Britt & Browne LLP regarding the validity of the Common Stock. 23.1 Consent of Arthur Anderson LLP. 23.3 Consent of Spencer Fane Britt & Browne LLP (included in Exhibit 5.1). 24.1 Power of Attorney (included in Signature Page). EX-4.4 2 LONG TERM INCENTIVE PLAN 1 Exhibit 4.4 SAUER INC. 1998 LONG-TERM INCENTIVE PLAN (Effective April 22, 1998) 2 CONTENTS Article 1. Establishment, Objectives, and Duration 1 Article 2. Definitions 1 Article 3. Administration 5 Article 4. Shares Subject to the Plan and Maximum Awards 6 Article 5. Eligibility and Participation 7 Article 6. Stock Options 7 Article 7. Stock Appreciation Rights 9 Article 8. Restricted Stock 11 Article 9. Performance Units and Performance Shares 12 Article 10. Other Incentive Awards 14 Article 11. Performance Measures 14 Article 12. Beneficiary Designation 15 Article 13. Deferrals 15 Article 14. Rights of Employees 16 Article 15. Change in Control 16 Article 16. Amendment, Modification, and Termination 17 Article 17. Withholding 17 Article 18. Indemnification 18 Article 19. Successors 18 Article 20. Legal Construction 18 3 SAUER INC. 1998 LONG-TERM INCENTIVE PLAN ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Sauer Inc., a Delaware corporation (hereinafter referred to as the "Company"), hereby establishes an incentive compensation plan to be known as the "Sauer Inc. 1998 Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares and Performance Units, and Other Incentive Awards. Subject to approval by the Company's stockholders, the Plan shall be effective as of April 22, 1998 (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof. 1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the profitability and growth of the Company through incentives which are consistent with the Company's goals and which link and align the personal interests of Participants to those of the Company's stockholders; to provide Participants with an incentive for excellence in individual performance; and to promote teamwork among Participants. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company's success and to allow Participants to share in the success of the Company. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 16 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after April 21, 2008. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized: 2.1 "AWARD" means, individually or collectively, a grant under this Plan of Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or Performance Units, or Other Incentive Awards. 2.2 "AWARD AGREEMENT" means an agreement entered into by the Company and a Participant evidencing and setting forth the terms and provisions applicable to an Award granted under this Plan, in such form as the Committee may, from time to time, approve. 2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. 4 2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company. 2.5 "CHANGE IN CONTROL" of the Company means, and shall be deemed to have occurred upon, any of the following events: (a) Any Person (other than those Persons in control of the Company as of the Effective Date, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board (and any new Director, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) 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 so approved), cease for any reason to constitute a majority thereof; or (c) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a "Change in Control" be deemed to have occurred, with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for (i) passive ownership of less than one percent (1%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the nonemployee continuing Directors). 2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time to time. 2.7 "COMMITTEE" means the Compensation Committee of the Board, or such other 5 committee appointed by the Board to administer the Plan, as described in Article 3 herein. 2.8 "COMPANY" means Sauer Inc., a Delaware corporation, as well as any successor to the Company as provided in Article 19 herein. 2.9 "DIRECTOR" means any individual who is a member of the Board of Directors of the Company. 2.10 "DISABILITY" shall have the meaning ascribed to such term in the Participant's governing long-term disability plan. 2.11 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section 1.1 hereof. 2.12 "EMPLOYEE" means any employee of the Company or its Subsidiaries. Nonemployee Directors shall not be considered Employees under this Plan unless specifically designated otherwise. 2.13 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. 2.14 "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the New York Stock Exchange or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. If the Shares are not traded on the New York Stock Exchange, Fair Market Value shall be determined by the Committee in its absolute discretion, such amount to be calculated pursuant to the formula established under the Sauer Inc. 1996 Phantom Share Plan, which formula is hereby incorporated by reference and made a part hereof. 2.15 "FREESTANDING SAR" means an SAR that is granted independently of any Options, as described in Article 7 herein. 2.16 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares granted under Article 6 herein and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422. 2.17 "INSIDER" shall mean an individual who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act. 2.18 "NAMED EXECUTIVE OFFICER" means a Participant who, as of the date of vesting and/or payout of an Award, as applicable, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute. 2.19 "NONEMPLOYEE DIRECTOR" means a Director who is not also an Employee. 2.20 "NON-QUALIFIED STOCK OPTION" or "NQSO" means an option to purchase Shares 6 granted under Article 6 herein and which is not intended to meet the requirements of Code Section 422. 2.21 "OPTION" means an Incentive Stock Option or a Non-qualified Stock Option, as described in Article 6 herein. 2.22 "OPTION PRICE" means the price at which a Share may be purchased by a Participant pursuant to an Option. 2.23 "OTHER INCENTIVE AWARD" means an award granted pursuant to Article 10 hereof. 2.24 "PARTICIPANT" means any individual selected to receive an Award by the Committee in accordance with Article 5 and who has an outstanding Award granted under the Plan. 2.25 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from the tax deductibility limitations of Code Section 162(m). 2.26 "PERFORMANCE PERIOD" means the time period during which performance goals must be achieved with respect to an Award, as determined by the Committee. 2.27 "PERFORMANCE SHARE" means an Award granted to a Participant, as described in Article 9 herein. 2.28 "PERFORMANCE UNIT" means an Award granted to a Participant, as described in Article 9 herein. 2.29 "PERIOD OF RESTRICTION" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein. 2.30 "PERSON" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof. 2.31 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to Article 8 herein. 2.32 "RETIREMENT" means the normal retirement date on which a Participant qualifies for full retirement benefits under the Company's qualified retirement plan, as identified by the Committee. 2.33 "SHARES" means the shares of Common Stock of the Company. 2.34 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of 7 Article 7 herein. 2.35 "SUBSIDIARY" means any corporation, limited liability company, partnership, joint venture, affiliate, or other entity in which the Company has a majority voting interest. 2.36 "TANDEM SAR" means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). ARTICLE 3. ADMINISTRATION 3.1 THE COMMITTEE. The Plan shall be administered by the Board, the Committee, or by any other committee appointed by the Board. The Board may delegate to the Committee any or all of the administration of the Plan. Any such Committee shall be comprised entirely of Nonemployee Directors who meet the applicable requirements of a "nonemployee director" under Rule 16b-3 of the General Rules and Regulations under the Exchange Act and of an "outside director" under Section 162(m) of the Code. To the extent that the Board has delegated to the Committee any authority and responsibility under the Plan, all applicable references to the Board in the Plan shall be to the Committee. To the extent that the Board has not delegated to the Committee any authority and responsibility under the Plan or has delegated such authority and responsibility to any other committee appointed by the Board, all applicable references to the Committee in the Plan shall be to the Board or other committee, as applicable. The Committee shall have the authority to delegate administrative duties to officers or Directors of the Company. 3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select from eligible persons as described in Section 5.1, those persons who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 16 herein) amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority as identified herein. 3.3 DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Committee shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS 4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as provided in Section 4.3 herein, the number of Shares hereby reserved for issuance under the Plan shall be two million four hundred thousand (2,400,000). However, the aggregate maximum number of Shares of Restricted Stock which may be granted pursuant to Article 8 shall be 8 one million two hundred thousand (1,200,000). Shares issued pursuant to the Plan may be either authorized and unissued Shares or issued Shares which have been reacquired by the Company, or any combination thereof. Unless and until the Committee determines that an Award to a Named Executive Officer shall not be designed to comply with the Performance-Based Exception, the following rules shall apply to grants of such Awards under the Plan: (a) STOCK OPTIONS. The maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to Awards granted in any one fiscal year to any one Participant shall be two hundred thousand (200,000). (b) SARS. The maximum aggregate number of Shares that may be granted in the form of Stock Appreciation Rights, pursuant to Awards granted in any one fiscal year to any one Participant shall be two hundred thousand (200,000). (c) RESTRICTED STOCK. The maximum aggregate number of Shares that may be granted in the form of Restricted Stock, pursuant to Awards granted in any one fiscal year to any one Participant shall be fifty thousand (50,000). (d) PERFORMANCE SHARES/PERFORMANCE UNITS/OTHER INCENTIVE AWARDS. The maximum aggregate payout (determined as of the end of the applicable Performance Period) with respect to Awards of Performance Shares, Performance Units, or Other Incentive Awards granted in any one fiscal year to any one Participant shall not exceed the value of fifty thousand (50,000) Shares. 4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Award again shall be available for the grant of an Award under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1 herein, in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and in the Award Limits set forth in subsections 4.1(a) through (d) herein, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. ARTICLE 5. ELIGIBILITY AND PARTICIPATION 5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all Employees and officers of the Company or its Subsidiaries, including Employees who reside in countries other than the United States of America, provided, however, that ISOs shall be granted only to Employees. 9 5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee from time to time, shall, in its discretion, select from all eligible persons those to whom Awards shall be granted and shall determine the nature and amount and other terms and conditions of each Award. In making such determinations, the Committee may consider the position and responsibilities of the Participant, the nature and value to the Company of his or her services and accomplishments, his or her present and potential contribution to the Company, and such other factors as the Committee may deem relevant. ARTICLE 6. STOCK OPTIONS 6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time, as shall be determined by the Committee in its absolute discretion. No Employee may be granted ISOs under the Plan which would result in Shares with an aggregate Fair Market Value (measured on the date of grant) of more than $100,000 first becoming exercisable in any one calendar year. 6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Option Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Code Section 422, or an NQSO whose grant is intended not to fall under the provisions of Code Section 422. 6.3 OPTION PRICE. Unless otherwise designated by the Committee at the time of grant, the Option Price for each grant of an NQSO under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the NQSO is granted. The Option Price for each grant of an ISO under this Plan shall be at least equal to one hundred percent of the Fair Market Value of a Share on the date the ISO is granted, provided, however, in the event that an ISO is granted to an Employee who possesses more than 10% of the total combined voting power of all classes of stock of the Company, taking into account the attribution rules of Code Section 422(d), the Option price for each grant of such an ISO shall be determined by the Committee on the date of grant and shall not be less than 110% of the Fair Market Value of a Share on the date of grant. 6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, that: (a) no ISO shall be exercisable later than the tenth anniversary date of its grant, and (b) unless otherwise designated by the Committee at the time of grant, no NQSO shall be exercisable later than the tenth anniversary date of its grant. Any Option not exercised within these time periods shall automatically terminate at the expiration of such period. 6.5 EXERCISE OF OPTIONS. Subject to the other provisions of this Article 6, options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant, provided, however, that in the event ISOs are granted to an Employee who possesses more than 10% of the total combined voting power of all classes of stock of the Company, taking into account the attribution rules of Code Section 422(d), such ISOs shall not be exercisable later than the fifth anniversary 10 of their grant. 6.6 PAYMENT. Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.8 TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with the Company and/or its Subsidiaries, provided, however, that an ISO shall not be exercisable later than three months following the termination of the Employee's employment with the Company and/or its Subsidiaries, or later than one year if the termination is due to disability. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination of employment. 6.9 NONTRANSFERABILITY OF OPTIONS. (a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. (b) NON-QUALIFIED STOCK OPTIONS. Except as otherwise determined by the Committee and provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or 11 hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise determined by the Committee and provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant. ARTICLE 7. STOCK APPRECIATION RIGHTS 7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR. Subject to the terms and provisions of the Plan, the Committee shall have absolute discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and in determining the terms and conditions pertaining to such SARs. Unless otherwise designated by the Committee at the time of grant, the grant price of a Freestanding SAR shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option. 7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. 7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them. 7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine, subject to the terms and provisions of the Plan. 7.5 TERM OF SARS. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that unless otherwise designated by the Committee, such term shall not exceed ten (10) years. 7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) The difference between the Fair Market Value of a Share on the date of 12 exercise less the grant price; by (b) The number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 7.7 TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with the Company and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. 7.8 NONTRANSFERABILITY OF SARS. Except as otherwise determined by the Committee and provided in a Participant's Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise determined by the Committee and provided in a Participant's Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. ARTICLE 8. RESTRICTED STOCK 8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to Participants in such amounts as the Committee shall determine. 8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine, subject to the terms and provisions of the Plan. 8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 8.4 OTHER RESTRICTIONS. Subject to Article 11 herein, the Committee may impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws. 13 The Committee may in its absolute discretion terminate, shorten, or accelerate any period of restriction or waive any terms or conditions applicable to all or any portion of a Restricted Stock Award. The Company shall retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied and such certificates shall bear an appropriate legend referring to the restrictions applicable thereto. If and to the extent that the restrictions and other terms and conditions applicable to Shares of Restricted Stock are not satisfied, such Shares and any dividends or other rights applicable thereto shall be forfeited and reacquired by the Company, and all rights of the Participant shall terminate to the extent of the forfeiture without further obligation on the part of the Company. Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction. 8.5 VOTING RIGHTS. Unless otherwise designated by the Committee at the time of grant, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares during the Period of Restriction. 8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. Unless otherwise designated by the Committee at the time of grant, Participants holding Shares of Restricted Stock granted hereunder shall be credited with regular cash dividends paid with respect to the underlying Shares while they are so held during the Period of Restriction. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. 8.7 TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Shares following termination of the Participant's employment with the Company and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment; provided, however, that except in the cases of terminations connected with a Change in Control and terminations by reason of death or Disability, the vesting of Shares of Restricted Stock which qualify for the Performance-Based Exception and which are held by Named Executive Officers shall occur at the time they otherwise would have, but for the employment termination. ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES 9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan, Performance Units and/or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The Committee shall establish at the time of grant the Performance Period and the performance measures, as described in Article 11, for each Award. 14 9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its absolute discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant. 9.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this Plan and the Award Agreement, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/ SHARES. Payment of earned Performance Units/Shares shall be made in a single lump sum within seventy-five (75) calendar days following the close of the applicable Performance Period. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Prior to the beginning of each Performance Period, Participants may elect to defer the receipt of Performance Unit/Share payout upon such terms as the Committee deems appropriate. At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Shares which have been earned in connection with grants of Performance Units and/or Performance Shares which have been earned, but not yet distributed to Participants. In addition, Participants may, at the discretion of the Committee, be entitled to exercise their voting rights with respect to such Shares. 9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In the event the employment of a Participant is terminated by reason of death, Disability, or Retirement during a Performance Period, the Participant shall receive a prorated payout of the Performance Units/Shares. The prorated payout shall be determined by the Committee, in its absolute discretion, shall be based upon the length of time that the Participant held the Performance Units/Shares during the Performance Period, and shall further be adjusted based on the achievement of the pre-established performance goals. Payment of earned Performance Units/Shares shall be made at the time specified by the Committee in its sole discretion as set forth in the Participant's Award Agreement. Notwithstanding the foregoing, with respect to Employees who retire during the Performance Period, payments shall be made at the same time as payments are made to Participants who did not terminate employment during the applicable Performance Period. 9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a Participant's employment terminates for any reason other than those reasons set forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by the Participant to the 15 Company unless determined otherwise by the Committee in its sole discretion as set forth in the Participant's Award Agreement. 9.7 NONTRANSFERABILITY. Except as otherwise determined by the Committee and provided in a Participant's Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise determined by the Committee and provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. ARTICLE 10. OTHER INCENTIVE AWARDS 10.1 GRANT OF OTHER INCENTIVE AWARDS. Subject to the terms and provisions of the Plan, Other Incentive Awards may be granted to Participants in such amount, upon such terms, and at any time and from time to time as shall be determined by the Committee. 10.2 OTHER INCENTIVE AWARD AGREEMENT. Each Other Incentive Award grant shall be evidenced by an Award Agreement that shall specify the amount of the Other Incentive Award granted, the terms and conditions applicable to such Other Incentive Award, the applicable Performance Period and performance goals, and such other provisions as the Committee shall determine, subject to the terms and provisions of the Plan. 10.3 NONTRANSFERABILITY. Except as otherwise determined by the Committee and provided in a Participant's Award Agreement, Other Incentive Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. 10.4 FORM AND TIMING OF PAYMENT OF OTHER INCENTIVE AWARDS. Payment of Other Incentive Awards shall be made at such times and in such form, either in cash or in Shares (or a combination thereof) as established by the Committee subject to the terms of the Plan. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Without limiting the generality of the foregoing, annual incentive awards may be paid in the form of Other Incentive Awards (which may or may not be subject to restrictions, at the discretion of the Committee). ARTICLE 11. PERFORMANCE MEASURES Unless and until the Committee proposes for stockholder vote and stockholders approve a change in the general performance measures set forth in this Article 11, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Named Executive Officers which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of granting performance-based Awards shall be chosen from among the following alternatives: (a) Return on Assets ("ROA"); (b) Cash Flow Return on Investment ("CFROI"); (c) Earnings Before Interest and Taxes ("EBIT"); 16 (d) Net Earnings; (e) Total Shareholder Return; (f) Return on Sales ("ROS"); (g) Return on Equity ("ROE); (h) Economic Value Added; (i) Division Operating Income; or (j) Return on Net Assets. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Named Executive Officers, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing performance measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the Performance-Based Exception, the Committee may make such grants without satisfying the requirements of Code Section 162(m). ARTICLE 12. BENEFICIARY DESIGNATION Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. ARTICLE 13. DEFERRALS The Committee may permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or the satis faction of any requirements or goals with respect to Performance Units/Shares, Cash Bonus Awards, or Other Incentive Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. ARTICLE 14. RIGHTS OF EMPLOYEES 14.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way the right 17 of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of this Plan, a transfer of a Participant's employment between the Company and a Subsidiary, or between Subsidiaries, shall not be deemed to be a termination of employment. Upon such a transfer, the Committee may make such adjustments to outstanding Awards as it deems appropriate to reflect the changed reporting relationships. 14.2 PARTICIPATION. No Employee or officer of the Company or its Subsidiaries shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. ARTICLE 15. CHANGE IN CONTROL 15.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges: (a) Any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term. (b) Any restriction periods and restrictions imposed on Restricted Shares shall lapse. (c) The target payout opportunities attainable under all outstanding Awards of Performance Units and Performance Shares and Other Incentive Awards shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control. The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change in Control, and there shall be paid out to Participants within thirty (30) days following the effective date of the Change in Control a pro rata number of shares based upon an assumed achievement of all relevant targeted performance goals and upon the length of time within the Performance Period which has elapsed prior to the Change in Control. Awards denominated in cash shall be paid pro rata to Participants in cash within thirty (30) days following the effective date of the Change in Control, with the pro-ration determined as a function of the length of time within the Performance Period which has elapsed prior to the Change in Control, and based on an assumed achievement of all relevant targeted performance goals. (d) Subject to Article 16 herein, the Committee shall have the authority to make any modifications to the Awards as determined by the Committee to be appropriate before the effective date of the Change in Control. 15.2 TERMINATION, AMENDMENT, AND MODIFICATION OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 15 may not be terminated, amended, or modified to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, that the Board, upon recommendation of the Committee, may terminate, amend, 18 or modify this Article 15 at any time and from time to time prior to the date of a Change in Control to affect Awards not yet granted under the Plan. ARTICLE 16. AMENDMENT, MODIFICATION, AND TERMINATION 16.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that unless the Board specifically provides otherwise, any revision or amendment that would cause the Plan to fail to comply with any requirement of applicable law, regulation, or rule if such amendment were not approved by stockholders, shall not be effective unless and until such approval of stockholders of the Company is obtained. 16.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. 16.3 COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section 162(m) is applicable, all Awards granted under this Plan shall comply with the requirements of Code Section 162(m); provided, however, that in the event the Committee determines that such compliance is not desired with respect to any Award or Awards available for grant under the Plan, then compliance with Code Section 162(m) will not be required. In addition, in the event that changes are made to Code Section 162(m) to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Article 16, make any adjustments it deems appropriate. ARTICLE 17. WITHHOLDING 17.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 17.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. ARTICLE 18. INDEMNIFICATION Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the 19 Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. ARTICLE 19. SUCCESSORS All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE 20. LEGAL CONSTRUCTION 20.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. 20.2 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 20.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 20.4 SECURITIES LAW AND TAX LAW COMPLIANCE. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 20.5 GOVERNING LAW. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Delaware. EX-4.5 3 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1 Exhibit 4.5 SAUER INC. NON-EMPLOYEE DIRECTOR STOCK OPTION AND RESTRICTED STOCK PLAN Effective April 22, 1998 2 CONTENTS Article 1. Establishment, Purpose, and Duration 1 Article 2. Definitions 1 Article 3. Administration 4 Article 4. Shares Subject to the Plan 4 Article 5. Eligibility and Participation 5 Article 6. Non-qualified Stock Options 5 Article 7. Restricted Stock 7 Article 8. Change in Control 8 Article 9. Amendment, Modification, and Termination 9 Article 10. Withholding 9 Article 11. Miscellaneous 9 3 SAUER INC. NON-EMPLOYEE DIRECTOR STOCK OPTION AND RESTRICTED STOCK PLAN ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION 1.1 ESTABLISHMENT OF THE PLAN. Sauer Inc., a Delaware corporation (the "Company"), hereby establishes an incentive compensation plan to be known as the "Sauer Inc. Non-employee Director Stock Option and Restricted Stock Plan" (the "Plan"), as set forth in this document. The Plan permits the grant of Non-qualified Stock Options and Shares of Restricted Stock, subject to the terms and provisions set forth herein. Subject to approval by the Company's stockholders, the Plan shall become effective as of April 22, 1998 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 hereof. 1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the achievement of long-term objectives of the Company by linking the personal interests of Non-employee Directors to those of Company shareholders, and to attract and retain Non-employee Directors of outstanding competence. 1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 9 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may Stock Options or Restricted Stock be granted under the Plan on or after April 21, 2008. ARTICLE 2. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "AWARD" means the grant of a Stock Option and/or the grant of Restricted Stock hereunder. (b) "AWARD AGREEMENT" means an agreement entered into by and between the Company and a Non-employee Director, setting forth the terms and provisions applicable to an Option and/or Restricted Stock grant under the Plan. (c) "BENEFICIAL OWNER" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the Company. (e) "CHANGE IN CONTROL" of the Company means, and shall be deemed to have occurred upon, any of the following events: (i) Any Person (other than those Persons in control of the Company as of the Effective Date, or other than a trustee or other fiduciary holding securities 4 under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (ii) During any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board (and any new Director, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) 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 so approved), cease for any reason to constitute a majority thereof; or (iii) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a "Change in Control" be deemed to have occurred, with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction. A Participant shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Participant is an equity participant in the purchasing company or group (except for (i) passive ownership of less than one percent (1%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-employee continuing Directors). (f) "CODE" means the Internal Revenue Code of 1986, as amended from time to time. (g) "COMPANY" means Sauer Inc., a Delaware corporation. (h) "DIRECTOR" means any individual who is a member of the Board of Directors of the Company. (i) "DISABILITY" shall have the meaning ascribed to it in the Company's governing long-term disability plan. (j) "EMPLOYEE" means any employee of the Company or of the Company's Subsidiaries. For purposes of the Plan, an individual whose only employment 5 relationship with the Company is as a Director or Chairman of the Board shall not be deemed to be an Employee. (k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. (l) "FAIR MARKET VALUE" shall be determined on the basis of the closing sale price on the New York Stock Exchange, or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. If the shares are not traded on the New York Stock Exchange, Fair Market Value shall be determined by the Committee in its absolute discretion, such amount to be calculated pursuant to the formula established under the Sauer, Inc. 1996 Phantom Stock Plan, which Formula is hereby incorporated by reference and made a part hereof. (m) "1998 INITIAL PUBLIC OFFERING" means the initial public offering of Common Stock of the Company in the United States, Europe, and elsewhere as described in the Form S-1 filed with the Securities and Exchange Commission on March 20, 1998. (n) "NON-EMPLOYEE DIRECTOR" means a Director who is not also an Employee. (o) "NON-QUALIFIED STOCK OPTION," "NQSO," or "OPTION" means an option to purchase Shares, granted under Article 6 herein. (p) "OPTION PRICE" means the price at which a Share may be purchased pursuant to an Option. (q) "PARTICIPANT" means a Non-employee Director of the Company, who has an outstanding Option and/or Restricted Stock grant under the Plan. (r) "RESTRICTED STOCK" means a grant of Shares that is subject to certain restrictions, as provided in Article 7 herein. (s) "SHARES" means the shares of Common Stock of the Company. (t) "SUBSIDIARY" means any corporation, limited liability company, partnership, joint venture, affiliate, or other entity in which the Company has a majority voting interest. ARTICLE 3. ADMINISTRATION 3.1 THE BOARD OF DIRECTORS. The Plan shall be administered by the Board (excluding those Directors who are eligible to be Participants under the Plan), subject to the restrictions set forth in the Plan. The Board shall have the authority to delegate its authority to any committee appointed by the Board. To the extent that the Board has delegated any authority and responsibility under the Plan to such a committee, all applicable references to the Board in the Plan shall be to such committee. ADMINISTRATION BY THE BOARD. The Board shall have the full power, discretion, and authority to interpret and administer the Plan in a manner which is consistent with 6 the Plan's provisions. In addition, the Board shall have the power to determine Plan eligibility, to determine the number, the value, the vesting period, the timing, and other terms and conditions of Options and Restricted Stock to be granted under the Plan. The Board shall also have full power to construe and interpret the Plan and any agreement or instrument entered into under the Plan, including but not limited to Award Agreements; establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 9 herein) amend the terms and conditions of any Option and Restricted Stock granted hereunder. Further, the Board shall make all other determinations which may be necessary or advisable for the administration of the Plan. DECISION BINDING. All determinations and decisions made by the Board pursuant to the provisions of the Plan, and all related orders or resolutions of the Board shall be final, conclusive, and binding on all persons, including the Company, its stockholders, employees, Participants, and their estates and beneficiaries. ARTICLE 4. SHARES SUBJECT TO THE PLAN 4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3 herein, the number of Shares hereby reserved for issuance under the Plan shall be two hundred fifty thousand (250,000). The grant of an Award shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award. 4.2 LAPSED AWARDS. If any Award granted under the Plan is canceled, terminates, expires, or lapses for any reason, any Share underlying such Award again shall be available for grant under the Plan. 4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1 herein and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, as may be determined to be appropriate and equitable by the Board, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number. ARTICLE 5. ELIGIBILITY AND PARTICIPATION Persons eligible to participate in the Plan are limited to Non-employee Directors who are serving on the Board on the date of each scheduled grant under the Plan. ARTICLE 6. NON-QUALIFIED STOCK OPTIONS 6.1 GRANTS OF OPTIONS. During the time period beginning as of the Effective Date and ending April 21, 2008, and subject to the limitation on the number of Shares subject to the Plan, on the day following each annual meeting of the Company's stockholders, beginning with the first annual meeting after consummation of the Company's 1998 Initial Public Offering during which the Board agrees that these automatic annual Stock Option grants should begin, each Non-employee Director shall be granted a Non-qualified Stock 7 Option to purchase such number of Shares as the Board shall determine in its absolute discretion, effective as of each such day following the annual stockholders' meeting. However, the Board has the absolute discretion to make additional Non-qualified Stock Option grants to Non-employee Directors at any time and to determine the number of shares to which each such Option pertains. The grants of and number of Shares pertaining to Non-qualified Stock Options need not be uniform amongst the Participants. The specific terms and provisions of such Non-qualified Stock Options shall be incorporated in Award Agreements, executed pursuant to Section 6.2 of the Plan. 6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Board shall determine. 6.3 OPTION PRICE. Unless otherwise designated by the Board at the time of grant, the Option Price for each grant of an Option under this Plan shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. 6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire at such time as the Board shall determine at the time of grant; provided, however, that unless otherwise designated by the Board at the time of grant, no Option shall be exercisable later than the tenth anniversary date of its grant. 6.5 VESTING OF SHARES SUBJECT TO OPTION. Unless otherwise designated by the Board, all Options granted under this Plan shall vest one hundred percent (100%) and shall be exercisable in whole or in part on the date of grant, and shall remain exercisable in whole or in part, at any time and from time to time, until the tenth anniversary of their grant date. 6.6 TERMINATION OF DIRECTORSHIP. Unless otherwise designated by the Board, all unvested Options will be forfeited upon termination of service from the Board for any reason. Unless otherwise designated by the Board, in the event of death or Disability of a Participant, all vested Options held by such Participant shall remain exercisable at any time prior to such Option's expiration date, or for one (1) year after the date of death or the date of Disability as determined by the Board, whichever period is shorter, by the Participant or such person or persons that have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. For reasons other than death or Disability, all vested Options shall remain exercisable for six (6) months following the date the Director's service on the Board terminates or until their expiration date, whichever period is shorter. 6.7 PAYMENT. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having a Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares tendered upon Option exercise have been held by the Participant for at least six (6) 8 months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). The Board also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Board determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased pursuant to the exercise of the Option. 6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. The Board may impose such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. 6.9 NONTRANSFERABILITY OF OPTIONS. Except as otherwise determined by the Board and provided in a Participant's Award Agreement, no Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise determined by the Board and provided in a Participant's Award Agreement, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant, or in the event of Disability, by his or her legal representative if one is appointed. 6.10 RIGHTS WITH RESPECT TO SHARES. No Participant or beneficiary, as applicable, shall have rights as a shareholder with respect to any Shares issuable pursuant to an Option until the date of issuance of a stock certificate to the Participant or beneficiary, as applicable, for such Shares. Except as provided in Section 4.3, no adjustment shall be made for dividends, distributions, or other rights for which a record date is prior to the date such stock certificate is issued. ARTICLE 7. RESTRICTED STOCK 7.1 GRANT OF RESTRICTED STOCK. Subject to the limitation on the number of Shares subject to the Plan, beginning with the first meeting of the Board after the consummation of the 1998 Initial Public Offering during which the Board agrees that these automatic Restricted Stock grants should begin, upon first being elected or appointed to the Board, newly elected or appointed Non-employee Directors will each receive a one-time grant of such number of Shares of Restricted Stock as the Board shall determine in its absolute discretion, on the day following such election or appointment. Those persons who are currently Non-employee Directors and who continue as Non-employee Directors will each also receive a one-time grant of such number of Shares of Restricted Stock as the Board shall determine in its absolute discretion, on the day following the first meeting of the Board after the consummation of the 1998 Initial Public Offering. However, the Board has the absolute discretion to provide additional grants of Restricted Stock to Non-employee Directors at any time and to determine the number of Shares pertaining to each such grant. The number of Shares pertaining to grants of Restricted Stock need not be uniform 9 amongst the Participants. The specific terms and provisions of such Restricted Stock grants shall be incorporated in an Award Agreement, executed pursuant to Section 7.2 of the Plan. 7.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Board shall determine. 7.3 VESTING OF RESTRICTED STOCK. Unless otherwise designated by the Board, all Shares of Restricted Stock granted under this Plan shall vest ratably over a three (3) year period such that one-third (1/3) of the award vests on each anniversary of the date of grant. 7.4 RESTRICTIONS ON SHARE TRANSFERABILITY. The Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable vesting period established by the Board and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Board in its sole discretion and set forth in the Restricted Stock Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 7.5 OTHER RESTRICTIONS. The Board may impose other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws or other statutes. The Company shall retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied and such certificates shall bear an appropriate legend referring to the restrictions applicable thereto. If and to the extent that the restrictions and other terms and conditions applicable to Shares of Restricted Stock are not satisfied, such Shares and any dividends or other rights applicable thereto shall be forfeited and reacquired by the Company, and all rights of the Participant shall terminate to the extent of the forfeiture without further obligation on the part of the Company. Except as otherwise provided in this Article 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable vesting period. 7.6 VOTING RIGHTS. Unless otherwise designated by the Board at the time of grant, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares during the vesting period. 7.7 DIVIDENDS AND OTHER DISTRIBUTIONS. Unless otherwise designated by the Board at the time of grant, Participants holding Shares of Restricted Stock granted hereunder shall be credited with regular cash dividends paid with respect to the underlying Shares while 10 they are so held during the vesting period. The Board may apply any restrictions to the dividends that the Board deems appropriate. 7.8 TERMINATION OF DIRECTORSHIP. Unless otherwise designated by the Board, all unvested Shares of Restricted Stock will be forfeited upon termination of service from the Board for any reason. ARTICLE 8. CHANGE IN CONTROL 8.1 TREATMENT OF OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges: (a) To the extent that any Options granted hereunder are not already vested, any and all Options shall become immediately exercisable, and shall remain exercisable throughout their entire term. (b) Any restriction periods and restrictions imposed on outstanding Restricted Stock grants shall immediately lapse. 8.2 TERMINATION, AMENDMENT, AND MODIFICATION OF CHANGE-IN-CONTROL PROVISIONS. Notwithstanding any other provision of this Plan or any Award Agreement provision, the provisions of this Article 8 may not be terminated, amended, or modified to affect adversely any Award theretofore granted under the Plan without the prior written consent of the Participant with respect to said Participant's outstanding Awards; provided, however, that the Board may terminate, amend, or modify this Article 8 at any time and from time to time prior to the date of a Change in Control to affect Awards not yet granted under the Plan. ARTICLE 9. AMENDMENT, MODIFICATION, AND TERMINATION 9.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and from time to time, alter, amend, suspend, or terminate the Plan in whole or in part; provided, however, that unless the Board specifically provides otherwise, any revision or amendment that would cause the Plan to fail to comply with any requirement of applicable law, regulation, or rule if such amendment were not approved by stockholders, shall not be effective unless and until such approval of stockholders of the Company is obtained. 9.2 AWARDS PREVIOUSLY GRANTED. Unless required by law, no termination, amendment, or modification of the Plan shall in any material manner adversely affect any Award previously granted under the Plan, without the written consent of the Participant holding the Award. ARTICLE 10. WITHHOLDING 10.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan. 10.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise of Options or upon the lapse of restrictions on Restricted Stock, or upon any other taxable 11 event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Board, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Board, in its sole discretion, deems important. ARTICLE 11. MISCELLANEOUS 11.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. 11.2 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 11.3 BENEFICIARY DESIGNATION. Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in the event of his or her death. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Board, and will be effective only when filed by the Participant in writing with the Board during his or her lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. 11.4 NO RIGHT OF NOMINATION. Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for reelection by the Company's shareholders. 11.5 SHARES AVAILABLE. The Shares made available pursuant to the Plan may be either authorized but unissued Shares, or Shares which have been or may be reacquired by the Company, as determined from time to time by the Board. 11.6 SUCCESSORS. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 11.7 REQUIREMENTS OF LAW. The granting of Awards under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 11.8 GOVERNING LAW. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Delaware. EX-5.1 4 OPINION RE LEGALITY 1 Exhibit 5.1 May 29, 1998 Board of Directors Sauer Inc. 2800 East 13th Street Ames, IA 50010 Gentlemen: This firm has acted as counsel to Sauer Inc., a Delaware corporation (the "Company"), in connection with its registration, pursuant to a registration statement on Form S-8 filed on or about the date hereof (the "Registration Statement"), of 2,650,000 shares (the "Shares") of Common Stock, par value $.01 per share of the Company, pursuant to the Sauer Inc. Non-Employee Director Stock Option and Restricted Stock Plan and the Sauer Inc. 1998 Long-Term Incentive Plan (collectively, the "Plans"). This letter is furnished to you pursuant to the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section 229.601(b)(5), in connection with such registration. For purposes of this opinion letter, we have examined copies of the following documents: 1. An executed copy of the Registration Statement. 2. A copy of the Plans, as certified by the Secretary of the Company on the date hereof as then being complete, accurate, and in effect. 3. The Restated Certificate of Incorporation of the Company, as certified by the Secretary of State of the State of Delaware on May 27, 1998, and by the Secretary of the Company on the date hereof as then being complete, accurate, and in effect. 4. The Restated By-Laws of the Company, as certified by the Secretary of the Company on the date hereof as then being complete, accurate, and in effect. 5. A unanimous consent of the Board of Directors of the Company dated April 6, 1998, as certified by the Secretary of the Company on the date hereof as then being complete, accurate, and in effect relating to, among other things, approval of the Plans. Page 1 2 6. Resolutions of the stockholders of the Company adopted on April 22, 1998, as certified by the Secretary of the Company on the date hereof as then being complete, accurate, and in effect relating to, among other things, approval of the Plans. We have not, except as specifically identified above, made any independent review or investigation of factual or other matters, including the organization, existence, good standing, assets, business or affairs of the Company or its subsidiaries. In our examination of the aforesaid certificates, records, and documents, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity, accuracy, and completeness of all documents submitted to us as originals, and the authenticity, accuracy, and completeness in conformity with the original documents of all documents submitted to us as certified, telecopied, photostatic, or reproduced copies. We have assumed the authenticity and accuracy of the foregoing certifications of corporate officers, on which we are relying, and have made no independent investigations thereof. This opinion is given in the context of the foregoing. This opinion letter is based as to matters of law solely on the General Corporation Law of the State of Delaware. We express no opinion herein as to any other laws, statutes, regulations, or ordinances. Based upon, subject to, and limited by the foregoing, we are of the opinion that the Shares, when issued and delivered in the manner and on the terms contemplated in the Registration Statement and the Plans (with the Company having received the consideration therefore, the form of which is in accordance with applicable law), will be validly issued, fully paid, and non-assessable by the Company. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion letter. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date of this letter, and may not be quoted in whole or in part or otherwise be referred to, nor be filed with or furnished to any governmental agency or other person or entity, without the prior written consent of this firm. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. In giving this consent, we do not thereby admit that we are an "expert" within the meaning of the Securities Act of 1933, as amended. Very truly yours, SPENCER FANE BRITT & BROWNE LLP Page 2 EX-23.1 5 CONSENT OF ARTHUR ANDERSON LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated February 27, 1998 (except with respect to matters discussed in Note 3 and Note 17, as to which the date is April 22, 1998), included in the final prospectus of Sauer Inc. dated May 11, 1998, as filed with the Securities and Exchange Commission pursuant to Rule 424(b) of the Securities Act of 1933. /s/ ARTHUR ANDERSEN LLP - ------------------------ Arthur Andersen LLP Chicago, Illinois May 29, 1998 -----END PRIVACY-ENHANCED MESSAGE-----