Document:

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              SHARE PURCHASE AND TRANSFER AGREEMENT

MADE BETWEEN

1.  Krister Lindkvist, Angshult, 341 77 AGUNNARYD

2.  Sture Bernhardsson, Ostarod 1222, 28064 GLIMAKRA

3.  Goran Nilsson, Buhult 1269, 343 73 VIRESTAD

- HEREINAFTER COLLECTIVELY REFERRED TO AS "SELLERS" AND INDIVIDUALLY AS
"SELLER" -

AND

Sauer Inc., 2800 E. 13th Street, Ames, IA 50010, Iowa, USA,

                                         - HEREINAFTER REFERRED TO AS "BUYER" -

PREAMBLE
--------

The Sellers are the sole shareholders of the company

                  CUSTOM DESIGN ELECTRONICS OF SWEDEN AB

registered in the Swedish Companies' Register under the registration no.
556496-9177 and having its registered seat at Stalgatan 1, Almhult, Sweden
(hereinafter referred to as "CDE").

The fully paid in share capital of CDE amounts to SEK 100.200 divided into
1002 shares with a par value of SEK 100 each. The Sellers hold the following
shares in CDE:

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                                                                     - 2 -

       Sture Bernhardsson     400 shares

       Goran Nilsson          400 shares

       Krister Lindkvist      202 shares

CDE is the sole shareholder of the company

                                  NOB ELECTRONIK AB

registered in the Swedish Companies' register under Registration no.
556263-5705 having its registered seat at Stalgatan 1, Almhult, Sweden
(hereinafter referred to as "NOB"; CDE and NOB hereinafter collectively
referred to as "the Companies"). NOB has a fully paid in share capital of SEK
200.400 divided into 501 shares with a par value of 400 SEK each. NOB is a
consulting and manufacturing firm within the electronic business area having
developed a set of electronic products mainly designed for working vehicles
and partly subject of patents and patent applications.

The Buyer is predominantly interested in purchasing the business of NOB and
therefore intends to acquire from the Sellers the shares of CDE and thereby
indirectly of NOB.

In consideration of the premises and the mutual covenants and conditions set
forth in this Agreement (hereinafter referred to as "the Agreement"), Sellers
and Buyer agree as follows:

                                SECTION 1

                      OBJECT OF PURCHASE, TRANSFER

1.  With economic effect as of January 1, 2000 (hereinafter referred to as
    the "Economic Effective Date") Sellers sell and assign their Shares in
    CDE in the aggregate par amount of SEK 100.200 as set forth in subset. 1
    of the preamble hereto (hereinafter referred to as the "Shares") to Buyer.

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                                                                     - 3 -

    Such sale and assignment shall include all dividend rights for the past
    years to the extent that dividends have not yet been distributed as well
    as all other ancillary rights.

2.  The Buyer accept such sale and assignment.

3.  The legal transfer of title shall be subject to the condition precedent
    that the consideration shall have been fully effected as more precisely
    described in Section 2 below.

                                    SECTION 2

                                   CONSIDERATION

As consideration for the transfer of the Shares, Buyer shall

    a)  pay by wire transfer the following amounts to Sellers on bank
        accounts to be specified by the Sellers:

             to Krister Lindkvist         DM 1.376.257,--

             to Sture Bernhardsson        DM 2.752.513,--

             to Goran Nilsson             DM 2.752.513,--
                                          ---------------

             IN TOTAL                     DM 6.881.283,--
                                          ===============

    b)  deliver to the Escrow Account specified in Section 4.13 below
        103.256 duly endorsed shares of SAUER Inc. common stock (hereinafter
        referred to as "Purchase Shares"), which shall be allocated to the
        Sellers as follows:

             Krister Lindkvist            20.816 Purchase Shares

             Sture Bernhardsson           41.220 Purchase Shares

             Goran Nilsson                41.220 Purchase Shares

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The Sellers shall deliver duly endorsed certificates representing the Shares
and all thereto ancillary rights on the date hereof.

                                SECTION 3

                  REPRESENTATIONS AND WARRANTIES OF SELLER

The Sellers guarantee by way of an independent guarantee that the following
statements as of the date hereof, and as of the Economic Effective Date are
complete and correct, except if another reference date is specifically
mentioned herein.

1.  The companies are duly established, organised, validly existing and in
    good standing under the laws of Sweden. The information contained in
    subset. 1 of the Preamble is true and correct in every respect.

2.  The Shares in the Companies are fully paid in and are neither repaid
    entirely nor partially including by way of not permitted profit
    distribution, are non-assessable and free or secondary of other
    obligations or restrictions. They are neither subject to a charge nor a
    lien, encumbrance or other security interest and give Buyer all rights
    rested in an owner of shares pursuant to Swedish law.

3.  Sellers are the sole and unrestricted owners of the Shares and Sellers
    can transfer such Shares to Buyer. There are no restrictions to sell and
    transfer the Shares. No third party is entitled to exercise rights
    relating to the Shares in case of a direct or indirect change of control
    over CDE. This Agreement and its implementation do not constitute a
    breach of any agreement by which the Sellers or CDE are bound. No third
    parties have any right to acquire any of the Shares.

    The same applies with respect to the Shares of CDE in NOB.

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                                                                     - 5 -

4.  Except for the real estate owned by NOB located at Hackan 1, Almhult as
    set forth in Schedule 3.4 the Companies do not own any other real estate.
    The excerpts from the land register attached in Schedule 3.4 are still up
    to date and reflect properly the legal and actual status of the real
    estate. There are no other mortgages, encumbrances, liens, charges, any
    other securities rested on the land or rights of third parties,
    regardless whether they are registered or not registered than those set
    forth in Schedule 3.4

5.  The Companies do not hold, directly or indirectly, shares or
    participations in any other companies, partnerships, foundations or
    enterprises.

6.  The presently valid versions of the Articles of Association of the
    Companies are enclosed as Schedule 3.6. There are no supplementary or
    side agreements with respect to the Articles of Association of the
    Companies; especially, there are no voting or trust agreements,
    sub-participation agreements, silent partnership agreements,
    intercompany agreements, shareholder agreements, control agreements or
    similar agreements.

7.  Attached hereto as Schedule 3.7 are the audited Companies' annual reports
    as per December 31, 1998 and as per December 31, 1999 (hereinafter
    referred to as the "Financial Statements"). The Financial Statements have
    been prepared in accordance with the statutory provisions concerning
    annual accounts and the Swedish General Accepted Bookkeeping and
    Accounting Principles (Swedish GAAP) and present a true and fair view of
    the financial situation of the Companies as well as of their business
    results.

    All legal provisions and all general accepted principles for the
    evaluation and depreciation (including, but not limited to, the
    application of the principles of completeness, balance sheet continuity
    and continuity of evaluation) have been applied.

8.  The Companies do not have any obligations or liabilities accrued or
    contingent which exist on the Economic Effective Date or may arise from
    acts, omissions or circumstances prior to the Economic Effective Date,
    which are not reflected in or reserved for in the

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                                                                     - 6 -

    Financial Statements or which have been incurred thereafter outside the
    ordinary course of business.

9.  Apart from the reservations made in the Financial Statements, no product
    warranty claim or product liability claim relating to products sold by
    the Companies prior to the Economic Effective Date have been raised nor,
    to the best of Seller's knowledge, is there any threat of a product
    warranty or product liability claim.
    The Buyer is however informed of a claim of goodwill nature that has been
    raised in January 2000 and which is accounted for in Schedule 3.9

10. With the exception of the floating charges and the mortgages, the
    Companies have good and marketable title to all of their assets, whether
    tangible or intangible, free and clear of all claims, liens, charges,
    encumbrances, restrictions on transfer and defects from any nature,
    whatsoever.

    The machinery, equipment, motor vehicles, furniture and other tangible
    personal property reflected on the balance sheet as per December 31, 1999
    were, as of the date hereof, maintained in accordance with standard
    industrial practises.

11. There are no loan agreements or other agreements related to loans except
    as enclosed in Schedule 3.11.

12. Schedule 3.12 contains the insurance contract maintained by NOB with
    respect to its business.

    There is nothing indicating that the insurance contract attached in
    Schedule 3.12 might be terminated or that premiums might be increased.
    All premiums under the insurance contract set forth in Schedule 3.12
    hereto until the Economic Effective Date have been or will be paid in a
    timely manner.

13. Schedule 3.13 is a true and complete list of each contract, to which the
    Companies are bound, for example, but not limited to, corporation
    contracts, joint ventures, supply

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    contracts, license agreements, lease agreements, manufacturing contracts,
    agency agreements, agreements with advisors and consultants, agreements
    with managing directors, as well as other important agreements, which the
    Companies are a party to, which either

         -  involves payments by the Companies or by Sellers in relation to
            the Companies of more than SEK 500.000 p.a. as provided as
            consideration in such contract; or

         -  extends (without right of termination by Seller or the Companies)
            more than 1 year from the date hereof.

    Schedule 3.13 also contains copies of the unanimous termination of the
    lease agreement between NOB and EMC Center Smaland AB with effect as of
    December 31, 1999 and of the purchase contract between NOB and EMC Center
    Smaland AB regarding the fixed assets of EMC Center Smaland AB as well as
    a consulting- and lease agreement with Storningskonsult AB.

14. The Companies' Standard Terms for Sale provide an exclusion of liability
    for consequential damages; except as disclosed in Schedule 3.14 the
    Companies have confirmed all orders for their products with reference to
    the Standard Terms for Sales Contracts within the last 18 months. True
    and complete copies of the documents referred to above have been
    delivered to Buyer or its representatives; all of the rights, contracts,
    agreements, licenses, plans and leases set forth therein are, to the best
    of Sellers' knowledge, valid and enforceable in accordance with their
    respective terms for the period stated therein; neither Sellers nor the
    Companies being a party thereto or bound thereby are in default or have
    been given any notice of any default in the performance of its respective
    obligations thereunder.

15. The Companies are neither bound nor obliged by a performance, surety or
    other bond and have never issued and is not obliged by any letter of
    credit.

16. Except as disclosed in the list attached as Schedule 3.16, the change of
    ownership and the execution and consummation of this Agreement do not
    give rise to an independent right to change or terminate any of the
    agreements as listed in Schedule 3.13, in any repayment

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    of any grants, tax advantages or comparable benefits granted to the
    Companies or the acceleration of any material obligation of the Companies
    or the reduction or termination of any supply or delivery relationship
    with suppliers or customers of the Companies.

17. Except as disclosed in Schedule 3.17 there are no claims, actions, suits,
    proceedings or investigations pending or, to the best of Sellers'
    knowledge, threatened against or relating to the Companies or their
    assets or in any way affecting this Agreement or the transactions
    contemplated hereby, nor, is there, to the best of Sellers' knowledge, a
    basis for such claims, action, suit, proceeding or investigation. There
    is no order, decree or judgement of any kind in existence with respect to
    the business of the Companies enjoining or restraining the Companies, or
    any officer or employee of the Companies from taking any action of any
    kind and with respect to the Companies business.

    The Companies and the Sellers are not in default with respect to any
    order, judgment, writ, injunction or decree of any governmental agency or
    instrumentality or any other public authority.

18. Schedule 3.18 is a true and correct list of the patents, patent
    applications, trademarks and other Industrial Property Rights
    (hereinafter referred to as "Industrial Property Rights") owned or
    controlled by Sellers or the Companies and used in the business presently
    performed by the Companies or intended to be used by the Companies in
    future. The validity of such Industrial Property Rights and the title
    thereto has not been questioned in any litigation or, to the best of
    Sellers' knowledge, in any threatened litigation.

    None of the claims of Industrial Property Rights set forth in Schedule
    3.18 have been reduced or withdrawn. No other Industrial Property Rights
    than set forth in Schedule 3.18 are necessary for the continuation of the
    Companies business.

    The Companies are not, to the best of Sellers' knowledge, infringing upon
    or otherwise violating the rights of any third party with respect to any
    industrial property rights, copyright, know how or trade secret, or,
    where applicable, applications hereto; no proceedings have been
    instituted or threatened, nor has any claim been made against the

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    Sellers or the Companies alleging any infringements or violation of any
    of the rights mentioned above.

    So far not owned by them the Companies own or possess adequate licenses
    or other rights to use all Industrial Property Rights, patents,
    proprietary information, copyrights, formulae, production outlines and
    development records used in the business. The Companies have made an
    extensive check-up and evaluation of their need and coverage as to
    computer program licenses and possess, as of the date hereof, enough
    licenses with regard to the number of work stations. Except as disclosed
    in Schedule 3.18 A) the Companies are not required and, to the best of
    Sellers' knowledge, will not be required to pay any royalty, license fee
    or a similar compensation fee in connection with industrial property
    rights. There are no rights or claims of any officer, director or
    employee of the Companies or any other third party related to the
    Industrial Property Rights, know how and the business trade secrets.

19. The Companies have filed all tax returns when due, and has paid all due
    taxes, public dues, social security charges and other charges, and has
    paid all related delayed charges and penalties and has made sufficient
    reserves for all taxes and/or charges resulting from circumstances before
    the Economic Effective Date, respectively shown such tax liabilities in
    the Financial Statements.

    The Buyer is informed of a possible re-taxation during 2000 as to value
    added tax for the personal computers leased by the personnel from the
    Companies according to contracts from 1996 and 1998 as a result of a new
    tax law from 1999 as specified in Schedule 3.19. The financial
    obligations of the Companies related hereto will not exceed SEK 50.000.

20. The Companies have all requisite licenses, permits, certifications and
    other approvals from all federal, state, local and foreign authorities to
    the extent necessary and material to the conduct of the business
    performed by the Companies and to the ownership of the assets of the
    business (collectively referred to as the "Operating Permits"). The
    Companies on the date hereof, are not, to the best of Sellers' knowledge,
    in violation of any federal, state, local or foreign laws, regulations or
    orders (including, but not limited

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    to, any of the regulations to employment discrimination, occupational
    safety, government contract or corrupt practises) and has not been in any
    such violation within the past 5 years. The Companies have not had notice
    or communication from any federal, state, local or foreign governmental
    or regulatory authority or otherwise of any such violation during the
    last 6 years. The Buyer is informed that an inspection made by the public
    authority as to the employment environment protection has taken place;
    the results of this inspection will not lead to any financial
    obligations of the Companies or the Buyer, as specified in Schedule 20.
    None of the Operating Permits will be invalidated, terminated or become
    subject to a modification solely as a result of the consummation of the
    transaction, contemplated by this Agreement.

21. Schedule 3.21 includes the individual labour contracts with employees of
    the Companies as well as a list properly reflecting the 43 employees of
    NOB with their year of birth, date of employment, present position and
    present income and benefits. Except for the Companies' policy as
    described in Schedule 3.21 A) the labour contracts between the Companies
    and the employees do not grant any specific rights as to, e.g., profit
    sharing, boni, period of termination etc.

    There are no pension commitments, benefit plans, shop agreements or
    collective bargaining agreements by which the Companies are bound other
    than those listed in Schedule 3.21 B).

    The Companies are, to the best of Sellers' knowledge, in compliance with
    all laws regarding employment and employment practises, terms and
    conditions of employment, wages and hours and are not engaged in any
    unfair labour practices. There are no claims of former employees against
    the Companies nor, to the best of Sellers' knowledge, are such claims
    threatened.

22. In Schedule 3.22 the 10 major customers of the Companies are listed
    and the according agreements with such customers are attached. To the
    best of the Seller's knowledge, there is no indication that the business
    with such customers will be reduced or terminated

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    except for effects resulting from the general economic environment or the
    development of the market situation.

23. There are no activities, actions or releases (including continuing
    releases) of the Companies' business prior to the Economic Effective
    Date, including without limitation any arrangement for the disposal of
    any hazardous material of whatever nature (substance, material, fluid,
    waste or chemical), which are a violation of environmental law, in each
    case with respect to the property owned, controlled or operated by the
    Companies or its business prior to the Economic Effective Date or which
    relate to or arise in connection with events or releases occurring before
    the Economic Effective Date at or upon any property not owned, controlled
    or operated by the Companies.

24. Except as set forth in Schedule 3.24 or any other Schedule to this
    Agreement, since December 31, 1999, there have not been, without the
    written consent of the Buyer, any events, which might result in the
    guarantees in this Section 3 no longer being true, complete or complied
    with or transactions, which are not within the ordinary course of
    business of the Companies.

25. The Companies have not entered into any competitive or trust agreement
    and have never received any communication from any national, European or
    international antitrust or merger task forces. The Companies have never
    violated any national, European or international antitrust, merger or
    competition act.

26. All facts known to any Seller, which are relevant for purposes of
    assessing the Companies as well as the business and which might be
    relevant for the Buyer's decision concerning the acquisition have been
    disclosed to the Buyer in writing.

27. As the Companies are planned to be integrated in the Buyer's business,
    the Sellers and the Buyer agree that circumstances related to the
    transition and the concentration of business focus may affect the
    business with existing customers.

    As of the date hereof, there is, to the best of Sellers' knowledge, no
    indication of a

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    material adverse change in the performance of the Companies business
    except for effects resulting from general economic environment and the
    market situation.

28. The Sellers have not negotiated any sale of the Companies or their
    business with any third party within the last 4 years.

                                   SECTION 4

                                INDEMNIFICATION

1.  If a guarantee in Section 3 above is untrue, incomplete or not complied
    with, the Sellers shall, subject to the limitations set out in this
    Section 4, indemnify Buyer, or at its a choice, the Companies, for any
    damage including reasonable expenses, which would not exist, if such
    guarantee were true, complete and complied with. This obligation exists
    regardless of whether or not the misrepresentation or misstatement is
    attributable to the negligence of the Sellers.

    The same shall apply with respect to any damage and reasonable expenses
    arising from the failure of the Sellers to perform any agreement,
    covenant or undertaking required by this Agreement to be performed with
    respect to the Companies' business.

2.  The liability of the Sellers under Section 4 section 1 above shall be
    joint and several. However the joint and several liability shall be
    limited for each Seller up to an amount equal to the value of his Pro
    rata Ownership.

3.  The Sellers shall not be liable for any claim in respect of the
    guarantees unless the amount for any individual claims exceeds SEK 75.000
    and the aggregate amount of liability of the Sellers for claims in
    respect of the guarantees exceeds SEK 750.000, in which event the Buyer
    shall be entitled to claim the full amount of the damage including the
    first SEK

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    750.000. The total liability of the Sellers under this Section 4 shall
    be restricted to DM 5 million.

4.  The Sellers shall not be liable for a breach of any of the guarantees to
    the extent that the Buyer's claim against the Sellers is otherwise
    compensated for without cost to the Buyer. If in respect of any matter
    which would give rise to a breach of the guarantees, the Buyer receives
    full compensation of its claim against the Sellers under any policy of
    insurance, then no such matter shall be subject of a claim under the
    guarantees.

5.  No claim shall lie against the Sellers under the guarantees to the extent
    that it is shown that such claim is attributable to any voluntary act,
    omission, transaction or arrangement which has been wilfully or gross
    negligently caused by the Buyer, or on its behalf, by persons deriving
    their title from the Buyer.

6.  No liability shall arise in respect of any breach of the guarantees if
    and to the extent that liability for such breach occurs or is increased
    as a result of any tax legislation not in force as of the date of the
    signing of this Agreement which takes effect retrospectively.

7.  The Buyer shall give the Sellers the opportunity to repair the breach of
    the guarantee, under Section 3 within a reasonable time period, at the
    latest within 30 days.

8.  Upon the Buyer becoming aware of any claim, action or demand in respect
    of the guarantees, the Buyer shall

    a)  as soon as practicable notify the Sellers as soon as it appears to
        the Buyer that the Sellers or any of them are or may become liable
        under the guarantees;

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    b)  subject to the Sellers indemnifying the Buyer to its reasonable
        satisfaction against any liability, cost, damages or expenses which
        may be incurred thereby, take such action, give such information and
        access to personnel, premises, documents and records to the Sellers
        and their professional advisors as the Sellers may reasonably
        require; and the Sellers shall be entitled to require the Buyer to
        take such reasonable action and give such information and assistance
        in order to avoid, dispute, resist, mitigate, settle, compromise,
        defend or appeal any claim in respect thereto;

    d)  make no admission of liability, agreement, settlement or compromise
        with any third parties in relation to such claim without the prior
        written approval of the Sellers which is not to be unreasonably
        withheld.

9.  If a tax audit of the Companies for the time period until the Economic
    Effective Date takes place, the Buyer shall allow representatives of the
    Sellers to participate at the Sellers' expense in such tax audit.
    Furthermore, the Buyer shall enable the Sellers to file, with respect to
    taxes relating to time periods until the Economic Effective Date, all
    proceedings before the competent authorities and/or courts and make
    available to the Sellers all information and documents (including a power
    of attorney) reasonably required to safeguard the interests of Sellers.

10. The Buyer shall not be entitled to exercise its rights under or in
    connection with this Agreement, if the Buyer, its accountants, legal
    advisors or any of its directors or employees were aware by written
    documentation provided to Buyer of the fact that a guarantee is untrue,
    incomplete or not complied with or a failure of the Sellers or the
    Companies to perform any agreement, covenant or undertaking required by
    this Agreement is existing.

11. The claims of the Buyer under this Section 4 above shall be time-barred
    18 months after the date hereof, provided, however, that claims directly
    or indirectly relating to taxes shall be time-barred 3 months after they
    have finally and completely been assessed.

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12. The Buyer shall be entitled to no indemnification of whatever kind other
    than those mentioned in this Section 4 except for damages and losses
    based on wilful acts or gross negligence.

13. For purposes of securing the Buyer's claims regarding the violation of
    guarantees given by the Sellers in Section 3 hereof, an escrow account
    shall be opened by the parties hereto for a time period of 18 months upon
    the signing of this Agreement ("Escrow Period"), to which Buyer shall
    deliver and pledge the Purchase Shares. The conditions of such escrow
    account are set forth in Schedule 4.13.

                                     SECTION 5
                       HANDING OVER OF BUSINESS DOCUMENTS; SECRECY

1.  On the date hereof, Sellers shall hand over all documents and information,
    whether written, stored on data storage medias or otherwise related to the
    business of the Companies to the Companies or, at Buyer's sole
    discretion, to Buyer.

2.  Sellers shall not at any time disclose to any party other than the Buyer
    any secret or confidential information, knowledge or data - including
    all copies - (including, without limitation, customer lists, pricing
    lists, service manuals, trade secrets, processes, formulae, plans and
    proposals) of the Companies' business as of the Economic Effective Date.
    Nothing herein is intended to preclude Sellers from submitting such data
    or information in connection with tax returns or other lawful
    requirements of governmental agencies or authorities.

<PAGE>

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                                     SECTION 6
                               COVENANT NOT TO COMPETE

Until December 31, 2002 the Sellers shall not compete, neither directly nor
indirectly, in any manner with the Companies' or the Buyer's business in
particular, but not limited to establish, participate in or support any
enterprise or other legal entity engaged in such business. Buyer and Sellers
will conclude employment agreements in the form attached hereto as Schedule 6.
The consideration agreed upon in Section 2 hereof also covers this covenant
not to compete.

                                     SECTION 7
                                    MISCELLANEOUS

1.  All notices and all other communciation given or made pursuant hereto
    shall be in writing and shall be deemed to have been given or made if in
    writing and delivered personally or send by registered or certified mail
    (postage prepaid, return receipt requested) to the parties at the
    following addresses:

    a)  IF TO BUYER, TO:

        SAUER Inc.
        attn. Mr. John Langrick
        Krokamp 35
        D-24539 Neumunster
        Germany

    b)  IF TO SELLERS, TO:

        1.  Krister Lindkvist, Angshult, 341 77, Agunnaryd
        2.  Sture Bernhardsson, Ostarod 1222, 28064 Glimakra
        3.  Goran Nilsson, Buhult 1269, 343 73 Virestad.

    or at such other addresses as either of the parties hereto shall have
    specified.

2.  Sellers shall, at any time after the Economic Effective Date, upon
    request of Buyer, execute, acknowledge and deliver, or will cause to
    be executed, acknowledged and

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                                                                     - 17 -

    delivered, all such further acts and legal declarations as maybe
    reasonably required for the consummation of this Agreement.

3.  This Agreement shall not be assignable by any of the parties hereto
    without the prior written consent of the other party for a period of 18
    months after the date hereof. Afterwards, the rights of the Buyer under
    this Agreement are freely assignable.

4.  This Agreement shall inure to the benefit of and be binding upon the
    parties hereto, their successors and assigns; nothing in this Agreement
    expressed or implied is intended to confer on any other person, other
    than the parties hereto, any rights, remedies, agreements, undertakings,
    obligations or liabilities under or by the reason of this Agreement.

5.  This Agreement (including all documents referred to herein) constitutes
    the entire agreement between the parties and supersedes all other prior
    agreements and understandings, both oral and written, between the
    parties, with respect to the subject matter thereof. This Agreement has
    21 numbered Schedules, which shall be deemed to be part of this
    Agreement.

6.  The Buyer and the Sellers shall consult with one other before issuing any
    press release or public announcement about the transactions contemplated
    by this Agreement. Except as maybe required by applicable law, no party
    shall issue any press release or other public announcement without the
    consent of the other party, which consent shall not be unreasonably
    withheld.

                                     SECTION 8
                             WRITTEN FORM AND SEVERABILITY

1.  This Agreement including this provision cannot be altered or otherwise
    amended except pursuant to an instrument in writing signed by the parties
    hereto.

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                                                                     - 18 -

2.  Should any provision of this Agreement or any part of any provision of
    this Agreement be or become invalid, the validity of the remaining
    provision or the remaining provision shall remain unaffected thereby. The
    parties hereto shall in such cases agree on a valid provision or a valid
    part of a provision, which most closely reflects the economic objective
    pursued by the parties. The same principle applies, if this Agreement
    proves to be incomplete.

                                     SECTION 9
                            GOVERNING LAW AND ARBITRATION

1.  This Agreement shall be governed, construed and enforced in accordance
    with the substantive laws of Sweden as applicable between domestic
    parties.

2.  All disputes arising out of or in connection with this Agreement shall be
    finally settled according to the Rules of Arbitration of the
    International Chamber of Commerce, Paris (ICC) by three Arbitrators to be
    appointed in accordance with said rules. The language of arbitration
    shall be English. The place of arbitration shall be Copenhagen. Except
    for reliefs as preliminary injunction and the like the recourse to the
    state courts shall be excluded.

                                     SECTION 10
                                  COSTS AND EXPENSES

All legal and other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.

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Almhult, January 24, 2000

                                               SAUER Inc.

/s/ Krister Lindkvist                          /s/ Albert Zahalka
----------------------------                   ----------------------
(Krister Lindkvist)

/s/ Sture Bernhardsson
----------------------------
(Sture Bernhardsson)

/s/ Goran Nilsson
----------------------------
(Goran Nilsson)<PAGE>

SAUER INC.
EXECUTIVE EMPLOYMENT AGREEMENT

David L. Pfeifle

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CONTENTS

<TABLE>
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<S>               <C>                                                                           <C>
Section 1.        Employment ................................................................    1

Section 2.        Employment Period .........................................................    1

Section 3.        Compensation ..............................................................    2

Section 4.        Expenses ..................................................................    3

Section 5.        Employment Terminations ...................................................    3

Section 6.        Change in Control .........................................................    6

Section 7.        Covenant Not to Compete ...................................................    8

Section 8.        Disclosure of Confidential Information ....................................    9

Section 9.        Nonsolicitation ...........................................................   10

Section 10.       Injunctive Relief and Additional Remedy;
                  Essential and Independent Covenants .......................................   11

Section 11.       Arbitration ...............................................................   11

Section 12.       Notices ...................................................................   12

Section 13.       Successors ................................................................   12

Section 14.       Entire Agreement; Modification, Waiver, and Interpretation ................   12

Section 15.       Severability ..............................................................   12

Section 16.       Counterparts ..............................................................   12

Section 17.       Headings ..................................................................   12
</TABLE>

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EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT has been entered into this 24th day of
February, 2000, between Sauer Inc., a Delaware corporation (the "Company"),
and DAVID L. PFEIFLE (the "Executive"). The Executive is employed as EXECUTIVE
VICE PRESIDENT AND CHIEF OPERATING OFFICER and will become PRESIDENT AND CHIEF
EXECUTIVE OFFICER upon the combination of the Company and the Fluid Power
Business of Danfoss A/S. The Company desires to assure the benefit of the
Executive's future services, and the Executive is willing to commit to render
such services, upon the terms and conditions set forth below.

         It is therefore mutually agreed as follows:

         1.   EMPLOYMENT. The Company agrees to employ the Executive in an
executive capacity, and the Executive agrees to serve the Company, upon the
terms and conditions and for the period of employment hereinafter set forth.
Throughout the Employment Period (as hereinafter defined), unless otherwise
agreed in writing by the Executive and the Company, the Company shall neither
demote the Executive nor assign to the Executive any duties or
responsibilities that are inconsistent with his present position, duties,
responsibilities, and status. Executive may serve from time to time as a
director of the Company and/or as a director and/or officer of one or more
subsidiaries of the Company. Executive agrees to fulfill his duties as such
director or officer without additional compensation other than the
compensation provided for in this Agreement.

         The Executive agrees, that during the Employment Period (as
hereinafter defined) he will devote substantially all of his business time,
attention, skill, and energy to the business of the Company, will use his
best efforts to promote the success of the Company's business and will
cooperate fully with the Board of Directors in the advancement of the best
interests of the Company.

         2.   EMPLOYMENT PERIOD. The Initial Term of the Executive's
employment under this Agreement shall commence as of 1 January 2000 (the
"Effective Date"), and shall expire, subject to the earlier termination of
the Executive's employment as hereinafter provided, on 31 December 2001 (the
"Initial Term"). The Initial Term of employment automatically shall be
extended for one (1) additional year at the end of the Initial Term, and then
again after each successive year thereafter (a "Successive Term"). The
Initial Term and any Successive Term are sometimes referred to in this
Agreement as the "Employment Period." However, either party may terminate
this Agreement at the end of the Initial Term or at the end of any Successive
Term thereafter, by giving the other party written notice of intent not to
renew, delivered at least ninety (90) calendar days prior to the end of such
Initial Term or Successive Term.

         In the event such notice of intent not to renew is properly
delivered by either party, this Agreement, along with all corresponding
rights, duties, and covenants, shall automatically expire

<PAGE>

at the end of the Initial Term or Successive Term then in progress, with the
exception of the covenants provided in Sections 7, 8, and 9 herein (which
shall survive such expiration).

         However, regardless of the above, if at any time during the term of
this Agreement, a Change in Control of the Company occurs, then this
Agreement shall become immediately irrevocable for the greater of two (2)
years from the date of the Change in Control or for the amount of time
remaining in the term of this Agreement.

         3.   COMPENSATION. Throughout the Employment Period, the Company
shall pay or provide the Executive with the following, and the Executive
shall accept the same, as compensation for the performance of his
undertakings and the services to be rendered by him under this Agreement:

              (a)   A base salary at a rate of not less than 300,000
                    US-Dollar per year payable not less often than in monthly
                    installments. The annual rate of base salary shall be
                    reviewed at least annually while this Agreement is in
                    force, to ascertain whether, in the judgment of the Board
                    of Directors of the Company (the "Board") or the Board's
                    designee (currently the Compensation Committee), such base
                    salary should be increased. Such judgment shall be based on
                    such criteria as the Board may determine in its sole
                    discretion, which criteria may include, without limitation,
                    the performance of the Executive during the year, survey
                    data representing average base pay for executives employed
                    in similar positions in comparable industries, and the rate
                    of inflation. If so increased, the annual base salary as
                    stated above shall, likewise, be increased for all purposes
                    of this Agreement.

              (b)   Participation in the Company's Bonus Plan as long as such
                    plan remains in effect, and participation in any future
                    incentive compensation or other bonus plan (including
                    annual and long-term incentive plans) covering the
                    Company's executive officers.

              (c)   Participation in the Company's employee benefit plans,
                    policies, practices, and arrangements in which the
                    Executive is presently eligible to participate or plans and
                    arrangements substituted therefore or in addition thereto,
                    including the savings plan, retirement plan, supplemental
                    retirement plans, health and dental plan, disability plan,
                    survivor income and life insurance plan or other
                    arrangement (collectively, the "Benefit Plans").

              (d)   Paid vacations in accordance with the Company's vacation
                    policy as in effect from time to time, and all paid
                    holidays given by the Company to its executive officers.

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              (e)   All fringe benefits and perquisites including without
                    limitation the use of an automobile and the payment by the
                    Company of initiation fees and dues for country clubs,
                    luncheon clubs, or similar facilities in accordance with the
                    Company's policy presently in effect.

         4.   EXPENSES. During the Employment Period, the Company shall promptly
pay or reimburse the Executive for all reasonable expenses incurred by the
Executive in the performance of duties hereunder.

         5.   EMPLOYMENT TERMINATIONS.

              (a) TERMINATION DUE TO RETIREMENT. In the event the Executive's
employment is terminated during the Employment Period by reason of Retirement
(as defined in the retirement benefit plan provided for in Section 3(c)), the
Executive's benefits shall be determined in accordance with the Company's
Benefit Plans then in effect as of the date of Retirement.

              Upon the effective date of such termination, the Company's
obligation to pay and provide to the Executive annual base salary, bonuses,
and benefits (as provided in Section 3 herein, respectively), shall
immediately expire, except to the extent such rights and benefits are vested
pursuant to, and in accordance with, the Benefit Plans.

              In the event of termination of employment as provided for in this
Section 5(a), the provisions of Sections 7, 8, 9, 10, and 11 herein shall
survive such termination.

              (b) TERMINATION DUE TO DEATH. In the event of the death of the
Executive during the Employment Period, or during any period of Disability
during which he is receiving compensation pursuant to Section 5(c) herein,
the Executive's estate, heirs, and beneficiaries shall be entitled to receive
the full amount of his base salary for the month in which death occurs, and
all other benefits available to them under the Company's Benefit Plans
(including, but not limited to, the Executive Life Insurance Program covering
the Executive) then in effect as of the date of death of the Executive.

              (c) TERMINATION DUE TO DISABILITY. In the event that during the
Employment Period the Executive becomes Disabled (as defined in the Company's
governing long-term disability plan then in effect) and is, therefore, unable
to perform his duties herein, the Company shall have the right to terminate
the Executive's active employment as provided in this Agreement by delivering
written notice to the Executive at least thirty (30) calendar days prior to
the effective date of such termination.

             A termination for Disability shall become effective upon the end
of the thirty (30) calendar day notice period. Upon such effective date, the
Company's obligation to pay and provide to the Executive annual base salary,
bonuses, and benefits (as provided in Section 3 herein), shall immediately
expire except to the extent such rights and benefits are vested pursuant

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<PAGE>

to, and in accordance with, the Benefit Plans. Further, the Executive shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and
long-term disability benefits and retirement benefits as described in Section
3(c).

              (d) VOLUNTARY TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON.
The Executive may terminate this Agreement at any time by giving the Board of
Directors of the Company written notice of intent to terminate, delivered at
least ninety (90) calendar days prior to the effective date of such
termination (such period not to include vacation). The termination
automatically shall become effective upon the expiration of the ninety (90)
calendar days notice period.

              Upon the effective date of such termination, the Company shall
pay to the Executive his base salary through the effective date of
termination, plus all other rights and benefits to which the Executive has a
vested right to at that time including, but not limited to, accrued vacation
pay. The Company also shall provide to the Executive the retirement benefits,
if any, set forth in the Benefit Plans described in Section 3(c) herein.
Further, in the event of termination of employment as provided for in this
Section 5(d), the provisions of Sections 7, 8, 9, 10, and 11 herein shall
survive such termination.

              (e) TERMINATION FOR GOOD REASON. The Executive may terminate this
Agreement for Good Reason by giving the Board thirty (30) calendar days' written
notice of such intent to terminate which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for such termination. Good
Reason shall mean, without the Executive's prior written consent, the occurrence
of any one or more of the following:

              (i)    The assignment to the Executive of any duties inconsistent
                     in any respect with the Executive's position (including
                     status, offices, titles, and reporting requirements),
                     authorities, duties, or other responsibilities as
                     contemplated by Section 1 of this Agreement, or any other
                     action of the Company which results in a diminishment in
                     such position, authority, duties, or responsibilities,
                     other than (A) an insubstantial and inadvertent action
                     which is remedied by the Company within 30 days after
                     receipt of notice thereof given by the Executive, or (B)
                     Executive being removed as a director of the Company and/or
                     as a director or officer of any subsidiary of the Company.

              (ii)   The Company's requiring the Executive, without the
                     Executive's consent, to relocate his principal residence at
                     that time;

              (iii)  A material reduction or elimination of any component of the
                     Executive's compensation as provided for in Section 3
                     herein; or

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              (iv)   A breach by the Company of any provision of this Agreement
                     which is not remedied by the Company within 30 days after
                     receipt of notice thereof given by the Executive.

         Upon the lapse of the thirty (30) calendar days' notice period, the
Good Reason termination shall take effect and the Executive's obligation to
serve the Company, and the Company's obligation to employ the Executive,
under the terms of this Agreement, shall terminate simultaneously, and, (a)
if such termination is prior to a Change in Control (as such term is defined
in Section 6(b) herein), then the Executive shall receive those benefits
similar to those had the Executive been terminated involuntarily by the
Company Without Cause, as provided in Section 5(f) herein, and (b) if such
termination is after a Change in Control, then the Executive shall receive
those benefits as provided in Section 6(a) herein.

         The parties agree that, in such event, such payments and benefits
shall be deemed to constitute liquidated damages for the Company's breach of
this Agreement, and the Company agrees that the Executive shall not be
required to mitigate his damages (with the exception for participation in
Benefit Plans) by seeking other employment or otherwise.

         In the event of termination of employment as provided for in this
Section 5(e), the provisions of Sections 7, 8, 9, 10, and 11 herein shall
survive such termination.

         (f) INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company
may terminate the Executive's employment, as provided under this Agreement,
at any time, for any reason other than Death, Disability, Retirement, or for
Cause, by notifying the Executive in writing of the Company's intent to
terminate, at least thirty (30) calendar days prior to the effective date of
such termination. The termination automatically shall become effective upon
the expiration of the thirty (30) calendar day notice period; provided,
however, that the provisions of Sections 7, 8, 9, 10, and 11 herein shall
survive such termination.

         For the greater of two (2) years or the remainder of the Employment
Period, the Company shall continue to make monthly payments to the Executive
equal to the Executive's then current annual base salary plus target annual
bonus divided by twelve (12). Further, during such period the Executive shall
continue to participate in all Benefit Plans (except retirement plans) of the
Company; provided, however, that such continued participation shall cease
upon the Executive becoming eligible for similar benefits from a subsequent
employer. Further, in the event the Executive violates any of the provisions
of Sections 7, 8, or 9, any such payments and benefits shall immediately
cease.

         The parties agree that, in such event, such payments and benefits
shall be deemed to constitute liquidated damages for the Company's breach of
this Agreement, and the Company agrees that Executive shall not be required
to mitigate his damages (with the exception for participation in Benefit
Plans) by seeking other employment or otherwise.

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         (g) TERMINATION FOR CAUSE. Nothing in this Agreement shall be
construed to prevent the Board from terminating the Executive's employment
under this Agreement for "Cause". In the event the Board determines that
Cause exists, the Board shall deliver written notice to the Executive of the
facts and circumstances leading to the Board's determination. Upon receipt of
this written notification, all provisions of this Agreement shall terminate,
except for the provisions of Sections 7, 8, 9, 10, and 11 herein (which shall
survive such termination). The Company shall pay the Executive his base
salary and accrued vacation time through the date notice of a for Cause
termination is delivered to the Executive, plus all other benefits to which
the Executive has a vested right to at that time. The Company and the
Executive thereafter shall have no further obligations under this Agreement.

         "Cause" shall be determined by the Board in the exercise of good
faith and reasonable judgment, and shall mean (i) willful misconduct or
fraud; (ii) conviction of a felony; (iii) consistent gross neglect of duties
or wanton negligence by the Executive in the performance of his duties
hereunder; (iv) the material breach by the Executive of the terms of this
Agreement; or (v) other misconduct of such magnitude that the continued
employment of the Executive may reasonably be expected to adversely affect
the business or properties of the Company.

         6.  CHANGE IN CONTROL.

             (a) EMPLOYMENT TERMINATIONS AFTER A CHANGE IN CONTROL. During
the term of this Agreement, in the event the Executive's employment with the
Company is terminated within two years following a Change in Control (as such
term is defined in Section 6(b) herein), unless such termination is (i) by
the Company for Cause (as provided in Section 5(g) herein), (ii) by reason of
Death, Disability, or Retirement, or (iii) by the Executive without Good
Reason (as such term is defined in Section 5(e) herein), then in lieu of all
other benefits provided to the Executive under the provisions of this
Agreement, the Company shall pay to the Executive and provide him with the
following:

                 (i)  A lump-sum cash amount equal to the Executive's unpaid
                      base salary, accrued vacation pay, unreimbursed
                      business expenses, and all other items earned by and
                      owed to the Executive through and including the date of
                      termination (in full satisfaction for these amounts
                      owed to the Executive).

                (ii)  A lump-sum cash amount equal to the Executive's then
                      current annual target bonus opportunity, established
                      under the annual incentive plan for the bonus plan year
                      in which the Executive's termination occurs, multiplied
                      by a fraction, the numerator of which is the number of
                      full completed days in the bonus plan year through the
                      effective date of termination, and the denominator of
                      which is 365 or, if greater, the full bonus earned at
                      that time based on the level of goal achievement. This
                      payment will be in lieu of

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<PAGE>

                      any other payment to be made to the Executive under the
                      annual bonus plan for the respective plan year.

                (iii) A lump-sum cash amount equal to the Executive's then
                      current annual base salary and target annual bonus
                      opportunity multiplied by three (3).

                (iv)  A lump-sum cash amount equal to 15 percent of the
                      Executive's then current base salary in lieu of health,
                      dental, long-term disability, and life insurance
                      continuation. The Executive's participation in these
                      and all other such benefits including bonus, savings
                      and retirement plans shall cease upon the termination
                      of Executive's employment with the Company.

         The parties agree that, in the event of such termination, such
payment and benefits (including an Excise Tax Payment provided in Section
6(c) herein) shall be deemed to constitute liquidated damages for the
Company's breach of this Agreement, and the Company agrees that the Executive
shall not be required to mitigate his damages by seeking other employment or
otherwise.

         The parties also agree that, in the event of a termination of
employment that obligates the Company to make the payments set forth in this
Section 6(a), the provisions of Sections 7, 8, 9, 10 and 11 herein shall
survive such termination.

         (b) DEFINITION OF "CHANGE IN CONTROL." "Change in Control" of the
Company means, and shall be deemed to have occurred upon any of the following
events taking place after the combination of the Company and the fluid power
business of Danfoss A/S:

                (i)   Any person (other than those persons in control
                      of the Company as of the date immediately
                      following the date upon which the combination of
                      the Company and the Fluid Power Business of
                      Danfoss A/S is completed, 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

                (ii)  During any period of two (2) consecutive years
                      (not including any period prior to the Effective
                      Date of the combination of the Company and the
                      Fluid Power Business of Danfoss A/S), individuals
                      who at the beginning of such period constitute
                      the

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                      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: (A) a
                      plan of complete liquidation of the Company; or
                      (B) an agreement for the sale or disposition of
                      all or substantially all the Company's assets; or
                      (C) 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 the Executive, if the Executive
             is part of a purchasing group which consummates the Change in
             Control transaction. The Executive shall be deemed "part of a
             purchasing group" for purposes of the preceding sentence if
             the Executive 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).

       (c) EXCISE TAX PAYMENT. In the event that any portion of the severance
benefits or any other payment under this Agreement or under any other
agreement with or plan of the Company (in the aggregate "Total Payments")
would constitute an "Excess Parachute Payment," such that an "Excise Tax" is
due, the Company shall provide to the Employee, in cash, an additional
payment in an amount equal to the excise tax divided by 0.329 to offset the
excise tax and the Employee's state and federal income and employment taxes
on this excise tax payment. This payment shall be made as soon as possible
following the date of the Employee's qualifying termination, but in no event
later than thirty (30) calendar days of such date.

         For purposes of this Agreement, the terms "Excise Tax" and "Excess
Parachute Payment" shall have the meanings assigned to such terms in Sections
280G and 4999 of the Internal Revenue Code of 1986, as amended.

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         (d) SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service subsequently adjusts the excise tax computation herein described, the
Company shall reimburse the Executive for the full amount of any underpaid
excise tax, and any related interest and/or penalties due to the Internal
Revenue Service.

         7.   COVENANT NOT TO COMPETE. Without the consent of the Company,
the Executive shall not, directly or indirectly, anywhere in the world, at
any time during the Employment Period and for a period of two (2) years
following the termination of Executive's employment with the Company for any
reason, be associated or in any way connected as an owner, investor, partner,
director, officer, employee, agent, or consultant with any business entity
directly engaged in the manufacture and/or sale of products competitive with
any material product or product lines of the Company or any of its
subsidiaries; provided, however, that the Executive shall not be deemed to
have breached this undertaking if his sole relation with such entity consists
of his holding, directly or indirectly, an equity interest in such entity not
greater than two percent (2%) of such entity's outstanding equity interest,
and the class of equity in which the Executive holds an interest is listed
and traded on a broadly recognized national or regional securities exchange.
For purposes hereof, the term "material product or product line of the
Company" shall mean any product or product line of the Company or any of its
subsidiaries, the gross sales of which during any calendar year during the
five (5) year period preceding the Executive's undertaking such employment
were at least $10 million.

         The Executive acknowledges that: (a) the services to be performed by
him under this Agreement are of a special, unique, unusual, extraordinary,
and intellectual character; (b) the business of the Company and its
subsidiaries is worldwide in scope and its products are marketed throughout
the world; (c) the Company and its subsidiaries compete with other businesses
that are or could be located in any part of the world; and (d) the provisions
of this Section 7 are reasonable and necessary to protect the Company's
business.

         If any covenant in this Section 7 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.

         The period of time applicable to any covenant in this Section 7 will
be extended by the duration of any violation by the Executive of such
covenant.

         The Executive will, while the covenants under this Section 7 are in
effect, give notice to the Company, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Company may
notify such employer that the Executive is bound by this Agreement and, at
the Company's election, furnish such employer with a copy of this Agreement
or relevant portions thereof.

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         8.   DISCLOSURE OF CONFIDENTIAL INFORMATION. Without the consent of
the Company, the Executive shall not disclose to any other person
Confidential Information (as defined below) concerning the Company or any of
its subsidiaries or the Company's or any of its subsidiaries' trade secrets
of which the Executive has gained knowledge during his employment with the
Company. Any trade secrets of the Company or any of its subsidiaries will be
entitled to all of the protections and benefits under the Iowa Code Annotated
Section 550.1 through 550.8 and any other applicable law. If any information
that the Company deems to be a trade secret is found by a court of competent
jurisdiction not to be a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential Information for
purposes of this Agreement. The Executive hereby waives any requirement that
the Company submit proof of the economic value of any trade secret or post a
bond or other security. None of the foregoing obligations and restrictions
apply to any part of the Confidential Information that the Executive
demonstrates was or became generally available to the public other than as a
result of a disclosure by the Executive.

         The Executive will not remove from the premises of the Company or
any of its subsidiaries (except to the extent such removal is for purposes of
the performance of the Executive's duties at home or while traveling, or
except as otherwise specifically authorized by the Company), any document,
record, notebook, plan, model, component, device, or computer software or
code, whether embodied in a disk or in any other form, that contains
Confidential Information (collectively, the "Proprietary Items"). The
Executive recognizes that, as between the Company and the Executive, all of
the Proprietary Items, whether or not developed by the Executive, are the
exclusive property of the Company or its subsidiaries, as the case may be.
Upon termination of this Agreement by either party, or upon the request of
the Company during the Employment Period, the Executive will return to the
Company all of the Proprietary Items in the Executive's possession or subject
to the Executive's control, and the Executive shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the Proprietary
Items.

         For purposes of this Agreement, Confidential Information shall
include any and all information concerning the business and affairs of the
employer, including, without limitation, product specifications, data,
know-how, formulae, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned distribution methods and
processes, customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software and programs
(including object code and source code), computer software and database
technologies, systems, structures, and architectures (and related formulae,
compositions, processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information), historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, agents, personnel training and techniques and
materials, insurance products, premium structures, information relating to
suppliers and supplies, sales and marketing information and strategy, notes,
analysis, compilations, studies, summaries, and other material prepared by or
for the Company or any of its subsidiaries containing or based, in whole or
in

                                      10

<PAGE>

part, on any information included in the foregoing, and any information,
however documented, that is a trade secret within the meaning of the Iowa
Code Annotated Section 550.1 through 550.8.

         9.   NONSOLICITATION. Without the written consent of the Company,
the Executive shall not at any time during the Employment Period and for a
period of two (2) years following the termination of Executive's employment
with the Company for any reason (a) employ or retain or arrange to have any
other person, firm, or other entity employ or retain or otherwise participate
in the employment or retention of any person who is an employee or consultant
of the Company or its subsidiaries; or (b) solicit orders as a customer or
arrange to have any other person, firm, or other entity (where such entity is
directly engaged in the manufacture and/or sale of products competitive with
any material product or product lines of the Company or any of its
subsidiaries) solicit orders as a customer or otherwise participate in such
solicitation of any entity that was a customer of the Company or any of its
subsidiaries during the time of the Executive's employment, whether or not
the Executive had personal contact with such person.

         10.  INJUNCTIVE RELIEF AND ADDITIONAL REMEDY; ESSENTIAL AND
INDEPENDENT COVENANTS.

              (a)  The Executive acknowledges that the injury that would
         be suffered by the Company as a result of a breach of the provisions
         of this Agreement (including any provision of Sections 7, 8, and 9)
         would be irreparable and that an award of monetary damages to the
         Company for such a breach would be an inadequate remedy.
         Consequently, the Company will have the right, in addition to any
         other rights it may have, to obtain injunctive relief to restrain
         any breach or threatened breach or otherwise to specifically enforce
         any provision of this Agreement, and the employer will not be
         obligated to post bond or other security in seeking such relief.
         Without limiting the Company's rights under this Section 10 or any
         other remedies of the Company, if the Executive breaches any of the
         provisions of Sections 7, 8, or 9, the Company will have the right
         to cease making any payments otherwise due to the Executive under
         this Agreement.

              (b)  The covenants by the Executive in Sections 7, 8, and 9
         are essential elements of this Agreement, and without the
         Executive's agreement to comply with such covenants, the Company
         would not have entered into this Agreement with the Executive. The
         Company and the Executive have independently consulted their
         respective counsel and have been advised in all respects concerning
         the reasonableness and propriety of such covenants (including,
         without limitation, the time period of restriction and the
         geographical area of restriction set forth in Section 7), with
         specific regard to the nature of the business conducted by the
         Company and its subsidiaries. The Executive's covenants in Sections
         7, 8, and 9 are independent covenants and the existence of any claim
         by the Executive against the Company under this Agreement or
         therwise, will not excuse the Executive's breach of any covenant in
         Sections 7, 8, or 9.

                                      11

<PAGE>

         If the Executive's employment hereunder expires or is terminated,
this Agreement will continue in full force and effect as is necessary or
appropriate to enforce the covenants and agreements of the Executive in
Sections 7, 8, 9, 10, and 11.

         11.  ARBITRATION. All disputes, including, without limitation,
discrimination claims of all types and claims of sexual harassment, arising
under this Agreement between the Company and Executive, other than those
disputes relating to Executive's alleged violations of Sections 7, 8, and 9
herein, which cannot otherwise be resolved amicably, shall be submitted to
binding arbitration by the American Arbitration Association ("AAA") in Des
Moines, Iowa, pursuant to the rules and procedures of the AAA. The fee and
expense of the arbitrators shall be split equally between the Company and
Executive. The decision of the arbitrator shall be final and binding and
there shall be no appeal from any award rendered. In any judicial enforcement
proceeding, the losing party shall reimburse the prevailing party for its
reasonable costs and attorney's fees for enforcing its rights under this
Agreement, in addition to any damages or other relief granted. This Section
11 does not apply to any action by the Company to enforce Section 7, 8, or 9
of this Agreement and does not in any way restrict the Company's rights under
Section 10(a) of this Agreement.

         12.  NOTICES. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received and if mailed shall be mailed
by United States registered or certified mail, return receipt requested,
addressee only, postage prepaid if to the Company, to the Board of Directors
of Sauer Inc., Attention Chairman, 2800 East 13th Street, Ames, Iowa 50010,
U.S.A., or if to the Executive, at 1071 E. Michener Way, Highlands Ranch,
Colorado 80126 or to such other address as either party may have previously
designated by notice to the other party given in the foregoing manner.

         13.  SUCCESSORS. This Agreement may not be assigned by the Company,
and the obligations of the Company provided for in this Agreement shall be
binding legal obligations of any successor to the Company by purchase,
merger, consolidation, or otherwise. This Agreement may not be assigned by
the Executive during his life, and upon his death will be binding upon and
inure to the benefit of his heirs, legatees, and the legal representatives of
his estate.

         14.  ENTIRE AGREEMENT; MODIFICATION, WAIVER, AND INTERPRETATION.
This Agreement contains the entire agreement between the parties with respect
to the subject matter of this Agreement and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect
to the subject matter of this Agreement. No provision of this Agreement may
be modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in a writing signed by the Executive and an
appropriate officer of the Company empowered to sign same by the Board. No
waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed
by the other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
This Agreement shall be deemed to have been executed in Ames, Iowa and the
validity, interpretation, construction, and

                                      12

<PAGE>

performance of this Agreement shall be governed by the laws of the State of
Iowa without regard to conflicts of laws principles.

         15.  SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.

         16.  COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.

         17.  HEADINGS. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation
of any provision of this Agreement.

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

         THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH
MAY BE ENFORCED BY THE PARTIES.

                                   SAUER INC.

                                   By: /s/ Klaus H. Murmann
                                       ----------------------------------------

                                       Chairman and Chief Executive Officer
                                       ----------------------------------------
                                       (print name and title of Officer)

                                       /s/ David L. Pfeifle
                                       ----------------------------------------
                                       Executive

                                      13

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