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EXHIBIT 10.3(a)




OILGEAR VARIABLE COMPENSATION PROGRAM




For Corporate Officers and Key Employees




1) PURPOSE



     
The Plan is intended to provide variable compensation for
corporate officers and other key employees of the Company based
on the profitability of the Company and the Company’s
return on equity. In particular, the plan has been designed to
respond to increasing market pressures to provide competitive
compensation packages to officers and key employees.




2) ELIGIBILITY 



     
Participation shall be limited to corporate officers and
selected key employees. The number of units assigned to each
corporate officer will be established by the Compensation
Committee of the Board of Directors at the beginning of each
year and will be determined by an evaluation of each
individual’s responsibility, ability, experience, past
performance and other factors. In a similar manner, the number
of units assigned to selected key employees will be established
by corporate management.




3) INCENTIVE BONUS CALCULATION



     
a) Participants in the Oilgear Variable Compensation Program for
corporate officers and key employees will receive incentive
payments which will not exceed 40% of the total compensation of
all the participants. In the event that the total payout
calculated as below shall exceed this amount, then each
participant’s bonus shall be reduced pro rata.



     
b) No incentive payment shall be made unless the
Corporation’s net income shall exceed the lesser of
$1,000,000 or 4% of shareholders’ equity. For the purposes
of this plan, the term shareholders’ equity shall be the
amount at the beginning of the year and shall include any amount
shown as the minimum pension liability adjustment on the
company’s statement of shareholders’ equity.



     
c) The basic value of each bonus unit is equal to a defined
percentage of available corporate net income.






		
	 	     
    i) Available corporate net income is defined as net income,
    excluding any net gain arising from the sale of the Leeds
    facility, reduced by a carve out amount which is 4% of
    shareholders’ equity minus the remainder of the percent
    return on shareholders’ equity minus 4%, multiplied by
    shareholders’ equity. ( If return on shareholders’
    equity is 8% or greater, the carveout is zero)
	 
	 	     
    ii) The defined percentage is as follows: .15% if the return on
    shareholders’ equity is under 8%; .15% plus an additional
    .005% for each 1% that the return on shareholders’ equity
    exceeds 7% if the return on equity is between 8% and 23%; and
    the return on equity divided by 100 if return on equity exceeds
    23%.



     
d) The basic value of a bonus unit may be increased by up to 50%
based on an individual or a groups performance against specific
financial targets which are set in selected key result areas.
The targets may vary by group and are changed as appropriate.
Each target is worth 0 to 50 points. If a target is achieved it
is worth 50 points but if only a part of the target is achieved
it is worth the result of 50 points multiplied by the percentage
achieved. The total points from all target goals are averaged
and become the percentage used to increase the basic bonus. Key
result areas may include operating margins, return on assets,
inventory turnover, revenue growth and other goals.




4) TERMINATION



     
If a participant’s employment terminates during the year,
the amount of incentive payment, if any, shall be determined by
the Compensation Committee of the Board of Directors. A
participant’s bonus becomes vested on December 31 of
each year and will not be affected by termination after the
completion of the year.








 




5) PAYMENT OF BONUS



     
a) The Company, at the discretion of corporate management, may
make quarterly payments of up to 75% of the bonus accrued, based
on unaudited financial statements.



     
b) Final payment of the full incentive will be made within
75 days after the end of each year, but not before the
Corporate audit is complete.