Exhibit 10

EX-10 3 exhibit_10.htm NON-EMPLOYEE DIRECTOR STOCK PLAN 2001 Exhibit 10

BALDOR ELECTRIC COMPANY

STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS

as approved by the
Company's Board of Directors on February 5, 2001,
and the Company's Shareholders on April 28, 2001

1. Purpose

The purpose of this Stock Option Plan for Non-Employee Directors (the "Plan") of Baldor Electric Company (the
"Company") is to increase the ownership interest in the Company of non-employee directors whose services are
considered essential to the Company's continued progress and to provide a further incentive to serve as a
director of the Company. Your Board of Directors believes that this Plan is in your and the Company's best
interests since it will better align the non-employee Directors' compensation with creating and sustaining
shareholder value. The Plan will also assist in attracting and retaining highly qualified individuals to serve
as Directors of the Company.

2. Administration

The Plan shall be administered by a committee consisting of directors who are not eligible to participate in
the Plan (the "Committee"). Subject to the provisions of the Plan:

a. the Committee shall be authorized to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, and to make all other determinations necessary or advisable for the
administration of the Plan;

b. the Committee shall have no discretion with respect to the eligibility or selection of directors to receive
options under the Plan, the number of shares of stock subject to any such options under the Plan, or the
purchase price thereunder; and the Committee shall not have the authority to take any action or make any
determination that would materially increase the benefits accruing to participants under the Plan.

c. the determination of the Committee in the administration of the Plan, as described herein, shall be final and
conclusive and binding upon all persons including, without limitation, the Company, its shareholders,
and persons granted options under the Plan.

d. the Secretary of the Company shall be authorized to implement the Plan in accordance with its terms and to
take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes
thereof.

e. the validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall
be determined in accordance with the laws of the State of Missouri.

3. Participation in the Plan
Directors of the Company who are not employees of the Company or any affiliate of the Company on an Option
Grant Date shall be eligible to participate in the Plan ("Eligible Directors") on that Option Grant Date.

4. Shares Subject to the Plan

Subject to adjustment as provided in Section 7:

a. an aggregate of 200,000 shares of Company common stock ("Stock") shall be available for issuance upon the
exercise of options granted under the Plan and may be increased from time to time as approved by the
Company's shareholders;

b. the shares of Stock deliverable upon the exercise of options may be made available from authorized but
unissued shares or shares reacquired by the Company, including shares purchased in the open market or in
private transactions.

c. if any option granted under the Plan shall expire or terminate for any reason without having been exercised
in full, the shares subject to, but not delivered under, such option may again become available for the
grant of other options under the Plan.

5. Non-Statutory Stock Options

All options granted under the Plan shall be non-statutory options not intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended.

6. Terms, Conditions, and Form of Options

Each option granted under this Plan may be evidenced by a written agreement in such form as the Committee shall
from time to time approve, which agreements shall comply with and be subject to the following terms and
conditions:

a. Option Grant Dates. Options shall be granted automatically to each Eligible Director on the first trading
day of Stock on the New York Stock Exchange following the Company's annual shareholders' meeting beginning
in the year 2001. Any Eligible Director who received an Annual Grant from the Company's 1996 Stock Option
Plan for Non-Employee Directors in the calendar year 2001 shall not be eligible to receive a grant from
this Plan in 2001 unless the Eligible Director first became an Eligible Director during the calendar year
2000.

b. Option Grant Shares. Options to purchase 5,400 shares of Stock (as adjusted pursuant to Section 7) shall be
granted automatically to each Eligible Director pursuant to the terms in this Section 6.

c. Purchase Price. The purchase price per share of Stock for which each option is exercisable will be as
follows:

i) for 60% of the Annual Grant (i.e. 3,240 of the 5,400 shares), the purchase price per share of Stock shall be
the fair market value per share of Stock on the date the option is granted (the closing price per
share of the Stock based upon its consolidated trading as generally reported for New York Stock
Exchange listed stocks); and

ii) for 40% of the Annual Grant (i.e. 2,160 of the 5,400 shares), the purchase price per share of Stock shall be
50% of the fair market value per share of Stock on the date the option is granted (the closing price
per share of the Stock based upon its consolidated trading as generally reported for New York Stock
Exchange listed stocks).

d. Exercisability and Term of Options. Each option granted under the Plan will become exercisable immediately.
Each option granted under the Plan shall expire ten years from the date of the grant, and shall be subject
to earlier termination as hereinafter provided.

e. Death or Termination of Service. In the event of death of the holder of any option, each of the then
outstanding options of such holder will immediately mature in full and become exercisable by the holder's
legal representative at any time within a period of five years after death, but in no event after the
expiration date of the term of the option. However, if the holder dies within five years following
termination of service on the Board, such option shall only be exercisable for two years after the
holder's death or five years after termination of service, whichever is longer, or until the expiration
date of the term of the option, if earlier. In the event of termination of service on the Board by a
holder of an option, each of the then outstanding options of such holder will continue to mature and
become exercisable in accordance with paragraph c. above and the holder may exercise the matured
installments at any time within five years after such termination of service but in no event after the
expiration date of the term of the option.

f. Payment. Options may be exercised only upon payment to the Company in full of the purchase price of the
shares to be delivered. Such payment shall be made in cash, in Stock, or in a combination of cash and
Stock. The sum of the cash and the fair market of such Stock shall be at least equal to the aggregate
price of the shares to be delivered.

7. Adjustment upon Changes in Stock

If there shall be any change in the Stock subject to the Plan or to any option granted thereunder through
merger, consolidation, reorganization, recapitalization, stock dividend, stock split, exchange of stock or
other change in the corporate structure, appropriate adjustments shall be made in the aggregate number and kind
of shares or other securities or property subject to the Plan, and the number and kind of shares or other
securities or property subject to outstanding and to subsequent option grants and in the purchase price of
outstanding options to reflect such changes.

8. Options Non-Assignable and Non-Transferable

Each option and all rights thereunder shall be non-assignable and non-transferable other than by will or the
laws of descent and distribution and shall be exercisable during the holder's lifetime only by the holder or
the holder's guardian or legal representative (the "Optionee").

9. Tax Obligations

The Optionee may direct that the Company pay on his or her behalf any and all tax obligations, sufficient to
satisfy the minimum required federal, state, and local withholding taxes, if any, incurred by the Optionee due
to the exercise of the Options (the "Tax Obligation"). To pay for the Tax Obligation, the Optionee may remit
cash, surrender shares previously owned by the Optionee, or the Optionee may direct the Company to withhold
shares of stock issuable from the exercise. If the Optionee so directs, then the Optionee shall reimburse the
Company with that number of shares of the Company's common stock which are necessary to reimburse the Company
for the amount of the Tax Obligation. The number of shares necessary will be based on the fair market value on
the day immediately preceding the date of exercise.

10. Limitation of Rights

a. No Right to Continue as a Director. Neither the Plan, nor the granting of an option, nor any other action
taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or
implied, that the Eligible Director has a right to continue as a director for any period of time, or at
any particular rate of compensation.

b. No Shareholders' Right for Options. An Optionee shall have no rights as a shareholder with respect to the
shares covered by options granted hereunder until the date of the issuance of a stock certificate
therefor, and no adjustment will be made for dividends or other rights for which the record date is prior
to the date such certificate is issued.

11. Effective Date and Duration of Plan

The Plan shall become effective immediately following approval by the shareholders at the 2001 Annual Meeting
of Shareholders. The Plan shall terminate when the Company's Board of Directors determines that the Plan is
inadequate for sustaining the Plan's Purpose as stated in Section 1 and/or when additional shares for issuance
upon the exercise of options granted under the Plan are not approved by the Company's shareholders. Such
termination shall not affect the terms of any then outstanding options.

12. Amendment, Suspension, or Termination of the Plan

The Board of Directors may suspend or terminate the Plan or revise or amend it in any respect whatsoever;
provided, however, that without approval of the Shareholders, no revision or amendment shall change the
selection or eligibility of directors to receive options under the Plan, the number of shares of Stock subject
to any such options or the Plan, the purchase price thereunder, or materially increase the benefits accruing to
participants under the Plan.

13. Notice

Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the
Secretary of the Company and shall become effective when it is received.

14. Use of Proceeds

Proceeds from the sale of Stock pursuant to options granted under the Plan shall constitute general funds of
the Company.

15. Fractional Shares

No fractional shares of Stock shall be issued pursuant to options granted hereunder, but in lieu thereof, the
cash value of such fraction shall be paid.