SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
SAUER-DANFOSS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[SAUER-DANFOSS LOGO]
2800 EAST 13TH STREET
AMES, IOWA 50010
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2001
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TO OUR STOCKHOLDERS:
The annual meeting of stockholders of Sauer-Danfoss Inc., a Delaware
corporation, will be held at The Northland Inn, 7025 Northland Drive, Brooklyn
Park, Minnesota 55428, on Wednesday, May 16, 2001, commencing at 8:30 a.m. local
time. At the meeting, stockholders will act on the following matters:
1. To elect ten (10) directors for a term expiring at the annual meeting of
stockholders to be held in 2002, and until their respective successors
are duly elected and shall qualify.
2. To ratify the appointment of KPMG LLP as the Company's independent
accountants for 2001.
3. To transact such other business as may properly come before the meeting
or any postponement, adjournment, or adjournments.
Stockholders of record at the close of business on March 29, 2001 are
entitled to notice of and to vote at the annual meeting or any postponement,
adjournment, or adjournments.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE EITHER
COMPLETE, DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY CARD IN THE PROVIDED
ENVELOPE OR VOTE YOUR SHARES BY TELEPHONE OR VIA THE INTERNET USING THE
INSTRUCTIONS ON THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY,
WHETHER BY MAIL, BY TELEPHONE, OR VIA THE INTERNET, YOU MAY STILL VOTE IN PERSON
IF YOU ATTEND THE MEETING. IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK,
OR OTHER NOMINEE ("STREET NAME") YOU WILL NEED TO OBTAIN FROM THE RECORD HOLDER
AND BRING TO THE MEETING A PROXY ISSUED IN YOUR NAME, AUTHORIZING YOU TO VOTE
THE SHARES.
By order of the Board of Directors,
/s/ Kenneth D. McCuskey
Kenneth D. McCuskey
CORPORATE SECRETARY
Ames, Iowa
April 11, 2001
SAUER-DANFOSS INC.
2800 EAST 13TH STREET
AMES, IOWA 50010
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PROXY STATEMENT
APRIL 11, 2001
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GENERAL INFORMATION
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is being solicited on behalf of the Board of Directors of
Sauer-Danfoss Inc. (the "Company") for use at the annual meeting of the
stockholders to be held on May 16, 2001 (the "Annual Meeting"), and at any
postponement, adjournment, or adjournments. Most stockholders have a choice of
voting via the Internet, by using a toll-free telephone number, or by completing
a proxy card and mailing it in the envelope provided. Check your proxy card or
the information forwarded by your bank, broker, or other holder of record to see
which options are available to you. Please be aware that if you vote over the
Internet, you may incur costs such as telecommunication and Internet access
charges for which you will be responsible. The Internet and telephone voting
facilities for stockholders of record will be available until midnight of
May 15, 2001, the day prior to the Annual Meeting.
Any proxy given does not affect your right to vote in person at the meeting
and may be revoked at any time before it is exercised by notifying Kenneth D.
McCuskey, Corporate Secretary, by mail, telegram, or facsimile, by timely
delivery of a properly executed, later-dated proxy (including an Internet or
telephone vote) or by appearing at the Annual Meeting in person and voting by
ballot. Persons whose shares are held of record by a brokerage house, bank, or
other nominee and who wish to vote at the meeting, must obtain from the record
holder a proxy issued in such person's name.
The Company intends to mail this Proxy Statement and the accompanying proxy
on or about April 11, 2001.
EXPENSE OF SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
the preparation, assembly, printing, and mailing of this Proxy Statement, the
accompanying proxy and any additional information furnished to stockholders. The
Company will reimburse banks, brokerage houses, custodians, nominees, and
fiduciaries for reasonable expenses incurred in forwarding proxy material to
beneficial owners. In addition to solicitations by mail, regular employees and
directors of the Company may solicit proxies in person or by telephone. The
Company does not expect to pay any compensation for the solicitation of proxies.
1
VOTING OF PROXIES
All shares entitled to vote and represented by properly completed proxies
received prior to the Annual Meeting and not revoked will be voted in accordance
with the instructions on the proxy. IF NO INSTRUCTIONS ARE INDICATED ON A
PROPERLY COMPLETED PROXY, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR DESIGNATED BELOW AND FOR RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR
2001.
PERSONS ENTITLED TO VOTE
Only holders of common stock of the Company of record as of the close of
business on March 29, 2001 are entitled to notice of and to vote at the Annual
Meeting. At the close of business on that date, 47,402,768 shares of common
stock were outstanding. Holders of common stock are entitled to one (1) vote for
each share held on all matters to be voted upon. Shares cannot be voted at the
Annual Meeting unless the owner is present in person or represented by proxy.
The directors shall be elected by an affirmative vote of a plurality of the
shares that are entitled to vote on the election of directors and that are
represented at the meeting by stockholders who are present in person or by
proxy, assuming a quorum is present. The ten nominees for directors receiving
the greatest number of votes at the Annual Meeting will be elected as directors.
For all other matters to be voted upon at the Annual Meeting, the affirmative
vote of a majority of shares present in person or represented by proxy, and
entitled to vote on the matter, is necessary for approval.
When a broker or other nominee holding shares for a customer votes on one
proposal, but does not vote on another proposal because the broker or nominee
does not have discretionary voting power with respect to such proposal and has
not received instructions from the beneficial owner, it is referred to as a
"Broker Nonvote." Properly executed proxies marked "Abstain" or proxies required
to be treated as "Broker Nonvotes" will be treated as present for purposes of
determining whether there is a quorum at the meeting. Abstentions will be
considered shares entitled to vote in the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker Nonvotes are counted towards a quorum, but are not counted for any
purpose in determining whether a matter has been approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 29, 2001,
with respect to shares of common stock of the Company that were owned
beneficially by: (i) each beneficial owner of more than 5% of the outstanding
shares of common stock; (ii) each of the directors; (iii) each of the executive
officers of the Company named in the Summary Compensation table; and (iv) all
executive officers and directors of the Company as a group.
2
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNERS, DIRECTORS, AND EXECUTIVE OFFICERS OWNED(1) SHARES
- ---------------------------------------------------- ---------------- -----------
Klaus Murmann & Co. KG(2)................................... 36,053,462(3) 76.1%
Danfoss Murmann Holding A/S(4).............................. 35,415,962(5) 74.7%
Danfoss A/S(4).............................................. 35,415,962(5) 74.7%
Sauer Holding GmbH(2)....................................... 36,053,462(3) 76.1%
Sauer GmbH(2)............................................... 10,474,000(6) 22.1%
Klaus H. Murmann, Director and Chairman(2).................. 36,181,687(3) 76.3%
Hannelore Murmann(2)........................................ 36,320,562(3) 76.6%
Nicola Keim, Director(2).................................... 36,055,462(3) 76.1%
Sven Murmann, Director(2)................................... 36,055,462(3) 76.1%
Ulrike Murmann-Knuth(2)..................................... 36,053,462(3) 76.1%
Jan Murmann(2).............................................. 36,053,462(3) 76.1%
Anja Murmann(2)............................................. 36,053,462(3) 76.1%
Brigitta Zoellner(2)........................................ 36,053,462(3) 76.1%
Christa Zoellner(2)......................................... 36,053,462(3) 76.1%
David L. Pfeifle, Director, President and Chief Executive
Officer(7)................................................ 282,200 *
Niels Erik Hansen, Executive Vice President and Chief
Operating Officer(2)...................................... 0 0%
David J. Anderson, Vice President--Sales and
Marketing--Americas and East Asia(7)...................... 145,000(8) *
Kenneth D. McCuskey, Vice President--Finance, Treasurer and
Secretary(7).............................................. 142,500(8) *
Albert Zahalka, Vice President--Electrohydraulics(7)........ 7,500 *
Jorgen Clausen, Director and Vice Chairman(4)............... 59,000 *
Ole Steen Andersen, Director(4)............................. 1,000 *
Johannes F. Kirchhoff, Director(2).......................... 2,400 *
Hans Kirk, Director(4)...................................... 1,000 *
F. Joseph Loughrey, Director(7)............................. 3,000(9) *
Richard M. Schilling, Director(7)........................... 7,000 *
All directors and executive officers as a group
(21 persons).............................................. 37,242,737(10) 78.6%
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* Represents less than 1%.
(1) Unless otherwise indicated in the following notes, each of the stockholders
named in this table has sole voting and investment power with respect to
the shares shown as beneficially owned.
(2) The mailing address for each of these entities and persons is c/o Sauer
Holding GmbH, Krokamp 35, 24539 Neumunster, Federal Republic of Germany.
(3) These shares include 10,474,000 shares owned directly by Sauer GmbH, a
German limited liability company, 6,812,500 shares owned directly by Sauer
Holding GmbH, a German limited liability company ("Sauer Holding"), 525,000
shares owned directly by EMF Europaische Marketing und Finanzmanagement AG,
a German corporation ("EMF"), and 18,241,962 shares owned directly by
Danfoss Murmann Holding A/S ("the Holding Company"). Sauer GmbH possesses
only shared dispositive power and no voting power over 10,361,500 of the
shares which it owns directly, as to
3
which an irrevocable voting proxy (the "Voting Proxy") has been granted to
the Holding Company. Sauer Holding possesses only shared voting and
dispositive power over the 6,812,500 shares which it owns directly. As a
result of its 100% ownership of Sauer GmbH, Sauer Holding has shared voting
and dispositive power over 112,500 of the shares owned directly by Sauer
GmbH. As a result of its 99.9% interest in Sauer GmbH & Co. Hydraulik KG, a
German limited partnership, which is the 100% owner of EMF, Sauer Holding
has shared voting and dispositive power over the 525,000 shares owned
directly by EMF. As a result of its 50% voting power over the Holding
Company, Sauer Holding has shared voting and dispositive power over the
18,241,962 shares owned directly by the Holding Company and over the
10,361,500 shares owned directly by Sauer GmbH that are subject to the
Voting Proxy. Sauer Holding disclaims beneficial ownership of the
29,240,962 shares directly owned in the aggregate by Sauer GmbH, EMF and
the Holding Company. As a result of its 100% ownership of Sauer Holding,
Klaus Murmann & Co. KG, a German partnership ("Murmann KG"), has shared
voting and dispositive power over the 36,053,462 shares owned in the
aggregate by Sauer GmbH, Sauer Holding, EMF and the Holding Company. Klaus
H. Murmann and Hannelore Murmann, as the general partners of Murmann KG,
and Nicola Keim, Sven Murmann, Ulrike Murmann-Knuth, Anja Murmann, Jan
Murmann, Brigitta Zoellner and Christa Zoellner, as limited partners of
Murmann KG who share the power to vote on investment decisions, also have
shared voting and dispositive power over these 36,053,462 shares. Murmann
KG, Klaus H. Murmann, Hannelore Murmann, Nicola Keim, Sven Murmann, Ulrike
Murmann-Knuth, Anja Murmann, Jan Murmann, Brigitta Zoellner and Christa
Zoellner each disclaim beneficial ownership of the 36,053,462 shares owned
directly in the aggregate by Sauer GmbH, Sauer Holding, EMF and the Holding
Company.
(4) The mailing address for each of these entities and persons is DK-6430
Nordborg, Denmark.
(5) These shares include 18,241,962 shares owned directly by the Holding
Company. As a result of its 50% voting power over the Holding Company,
Danfoss A/S has shared voting and dispositive power over these shares.
These shares also include 10,361,500 shares owned directly by Sauer GmbH,
that are subject to the Voting Proxy. The Holding Company has sole voting
power, but no dispositive power (sole or shared), over these shares.
Danfoss A/S has shared voting and dispositive power over these shares.
These shares also include 6,812,500 shares owned directly by Sauer Holding,
as to which the Holding Company and Danfoss A/S have shared voting and
dispositive power. The Holding Company disclaims beneficial ownership of
6,812,500 of these shares. Danfoss A/S disclaims beneficial ownership of
all 35,415,962 of these shares.
(6) These shares are owned directly by Sauer GmbH but, pursuant to the Voting
Proxy, Sauer GmbH has neither sole nor shared voting or dispositive power
over 10,361,500 of these shares.
(7) The mailing address for these persons is 2800 East 13th Street, Ames, Iowa
50010.
(8) Includes stock owned by the spouses and children of these officers, as to
which they disclaim beneficial ownership.
(9) Mr. Loughrey disclaims beneficial ownership with respect to 2,000 of these
shares which are owned directly by his wife.
(10) Includes stock owned by the spouses and children of certain directors and
executive officers.
4
THE DANFOSS TRANSACTION
The Company acquired all of the outstanding shares of common stock of
Danfoss Fluid Power A/S and Danfoss Fluid Power Inc., (the "Danfoss Fluid Power
Companies") as approved at the special meeting of the stockholders held on
May 3, 2000. In exchange for the acquisition of all of the outstanding shares of
common stock of the Danfoss Fluid Power Companies on May 3, 2000 (the "Danfoss
Transaction") the Company issued 16,149,812 shares of its common stock to
Danfoss Murmann Holding A/S (the "Holding Company"). The Holding Company is a
Danish company owned by entities and persons under the control of Klaus H.
Murmann, a director and Chairman of the Company (the "Murmann Family") and
Danfoss A/S ("Danfoss") and formed to effect the Danfoss Transaction. Prior to
the consummation of the Danfoss Transaction, the Murmann Family contributed to
the Holding Company 1,000 shares of the Company's common stock in exchange for
shares of the Holding Company's common stock and gave the Holding Company an
irrevocable proxy to vote an additional 10,361,500 of the Company's common
stock. Danfoss contributed to the Holding Company all of the outstanding shares
of common stock of the Danfoss Fluid Power Companies in exchange for shares of
the Holding Company's common stock. The Holding Company's voting rights are
shared equally by the Murmann Family and Danfoss.
On May 3, 2000, the Company also issued 2,250,000 shares of common stock to
three entities owned by the Murmann Family in exchange for termination of their
limited partnership interests in Sauer-Sundstrand GmbH & Co., the Company's
German operating company, see "CERTAIN RELATIONSHIPS AND TRANSACTIONS--MURMANN
FAMILY LIMITED PARTNERSHIP INTEREST IN THE GERMAN OPERATING COMPANY." The
termination of the limited partnership interests was a condition to the
consummation of the Danfoss Transaction.
Prior to the Danfoss Transaction, the Murmann Family owned the majority of
the outstanding shares of the Company. Immediately following the closing of the
Danfoss Transaction and the issuances of stock described above, the Holding
Company owned and had the power to vote at future meetings 26,512,312 shares of
the Company's common stock (or approximately 58.5% of the outstanding shares of
Company's common stock). The Murmann Family owned and had power to vote an
additional 7,847,325 shares of the Company's common stock (or approximately
17.3% of the outstanding shares of the Company's stock). Accordingly, the
Holding Company and the Murmann Family controlled, in the aggregate,
approximately 75.8% of the outstanding shares of the Company's common stock.
Also, on March 14, 2001, the Company issued to the Holding Company 2,091,150
additional shares of Company common stock in connection with the acquisition of
substantially all of the assets of certain sales companies of Danfoss. As of
March 29, 2001, the Holding Company owns, and has the power to vote, 28,603,462
shares (or approximately 60.3%) of the outstanding common stock of the Company.
Together, the Holding Company and the Murmann family control, in the aggregate,
76.9% of the Company's outstanding common stock.
In connection with the Danfoss Transaction, the Murmann Family and Danfoss
have entered into an agreement regarding the Holding Company and their ownership
of the Holding Company's common stock (the "Holding Company Agreement").
Pursuant to the Holding Company Agreement, the Murmann Family and Danfoss will
each identify for recommendation to the Company's Nominating Committee three
candidates for Director who may be associated with the Murmann Family or
Danfoss. In addition, the Murmann Family and Danfoss will each identify for
recommendation two additional candidates for Director. One such candidate
recommended by the Murmann Family will be the Company's Chief Executive Officer
and President and the remaining three such candidates must be independent from
and not associated or affiliated with the Murmann Family or Danfoss. With
respect to the current nominees for election as Directors, Klaus H. Murmann,
Nicola Keim and Sven Murmann were recommended by the Murmann Family and
Messrs. Andersen, Clausen and Kirk were recommended by Danfoss.
5
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") has nominated the ten
current directors for election. All directors are elected annually.
Each of the ten nominees for directors are currently directors and if
elected, will serve until the 2002 Annual Meeting and until a successor has been
elected and qualified, or until such director's earlier death, resignation, or
removal.
Each share is entitled to one vote for each of ten directors. The persons
named in the accompanying proxy will vote it for the election of the nominees
named below as directors unless otherwise directed by the stockholder. Each
nominee has consented to be named and to continue to serve if elected. In the
unanticipated event that a nominee becomes unavailable for election for any
reason, the proxies will be voted for the other nominees and for any substitute.
NOMINEES TO SERVE FOR DIRECTORS
OLE STEEN ANDERSEN, age 54, has been a director of the Company since May 3,
2000. Mr. Andersen has been an Executive Vice President and member of the
Executive Committee of Danfoss A/S for more than the past five years.
JORGEN M. CLAUSEN, age 52, has been a director and Vice Chairman of the
Company since May 3, 2000. He has served as the President and Chief Executive
Officer and a member of the Executive Committee of Danfoss A/S for more than the
past five years. He is also Chairman of the Board of Risoe National
Laboratories, a Danish government-owned research organization, and a member of
the Academy of Technical Sciences, a non-profit organization promoting the
technical sciences in Denmark. He is a member of the Nominating Committee of the
Board.
HANS KIRK, age 58, has been a director of the Company since May 3, 2000. He
has served as an Executive Vice President and member of the Executive Committee
of Danfoss A/S for more than the past five years. He is also a director of NIRAS
Group.
NICOLA KEIM, age 40, has been a director of the Company since April 1990.
Ms. Keim served as a Member of the Supervisory Board of Sauer Getriebe from
November 1990 through June 1997. She is employed part-time in the human
resources department of HypoVereinsbank, a German bank. Ms. Keim is the daughter
of Klaus H. Murmann, Chairman of the Company and a sister of Sven Murmann, a
director of the Company.
JOHANNES F. KIRCHHOFF, age 43, has been a director of the Company since
April 1997. Mr. Kirchhoff has been owner and Managing Director of the FAUN
Umwelttechnik GmbH & Co., a German manufacturer of vehicles for waste disposal,
since December 1994. He is Chairman of the Compensation Committee of the Board
and a member of the Audit Committee of the Board.
F. JOSEPH LOUGHREY, age 51, was appointed a director of the Company on
June 23, 2000, to fill an existing vacancy. He has served as Executive Vice
President of Cummins Inc. and President--Engine Business since October 1999.
From 1996 to 1999, Mr. Loughrey served as Executive Vice President of Cummins
Engine Company and Group President--Industrial and Chief Technical Officer. He
also is a director of Tower Automotive, Inc. Mr. Loughrey is a member of the
Audit Committee and the Compensation Committee of the Board.
6
KLAUS H. MURMANN, age 69, a director of the Company since April 1990, is
currently Chairman. From 1987 to May 3, 2000, he served as Chairman and Chief
Executive Officer of the Company and its predecessor. Mr. Murmann founded Sauer
Getriebe in 1967, which, as a licensee of and later joint venture partner with
Sundstrand Corporation, has been involved in the hydrostatics business since
1967. He is a member of the supervisory board of PreussenElektra AG, Hannover, a
German utility. He is Chairman of the Board of Gothaer Insurance Group,
Gottingen/Cologne, a German insurance company, Chairman of the Board of PSVaG, a
national pension fund, a member of the board of Bankgesellschaft Berlin AG,
Berlin, a German bank, and a director of GKN PLC, United Kingdom, an engineering
company. Klaus Murmann is the father of Nicola Keim and Sven Murmann, each of
whom is a director of the Company. He is a member of the Executive Committee and
the Nominating Committee of the Board.
SVEN MURMANN, age 33, has been a director of the Company since April 1994.
Mr. Murmann is presently employed as Manager of Sauer Holding and as Manager of
HAKO Holding GmbH & Co., a German company engaged in indoor and outdoor
maintenance and transportation. He served an internship at IBM from December 1,
1999 through May 31, 2000. He served as an Assistant Professor at the University
of Zurich from October 1997 to October 1999, and was a research assistant at
Ludwig-Maximilians University in Munich from April 1994 through August 1995.
Mr. Murmann is the son of Klaus H. Murmann, Chairman of the Company and a
brother of Nicola Keim, a director of the Company.
DAVID L. PFEIFLE, age 56, a director of the Company since April 1994, has
been Chief Executive Officer since May 3, 2000 and President since March 31,
2000 and President of Sauer-Danfoss (US) Company, the primary U.S. operating
subsidiary of the Company, since 1994. He served as Chief Operating Officer of
the Company from January 20, 2000 to May 3, 2000. Prior to his appointment as
President, Mr. Pfeifle served as Executive Vice President since 1994. For more
than five years prior to 1994, he held various senior management positions with
Sauer-Sundstrand Company with increasing responsibility. Mr. Pfeifle is a member
of the board of the Construction Industry Manufacturers Association and of the
board of the National Fluid Power Association. He is a member of the Executive
Committee of the Board.
RICHARD M. SCHILLING, age 63, has been a director of the Company since
April 1990, and of its predecessor since 1987. He began his career at Sundstrand
Corporation, a manufacturer of components for aerospace and industrial
applications, in April 1968 as a corporate attorney and assistant secretary. In
1978, he was named General Counsel and Vice President, and in 1988, he was
elected Secretary of Sundstrand Corporation. Mr. Schilling retired from
Sundstrand Corporation on December 31, 1997, and is currently a partner at
Hinshaw & Culbertson, a law firm in Rockford, Illinois. He is Chairman of the
Audit Committee of the Board and a member of the Compensation Committee of the
Board.
Pursuant to the Holding Company Agreement, Ms. Keim, Klaus Murmann and Sven
Murmann were recommended as nominees by the Murmann Family and
Messrs. Andersen, Clausen and Kirk were recommended as nominees by Danfoss, see
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--THE DANFOSS
TRANSACTION."
BOARD COMMITTEES AND MEETINGS
The Board held seven meetings during 2000, including three meetings by
telephone. The Board has an Executive Committee, an Audit Committee, a
Compensation Committee and a Nominating Committee. Each director attended at
least 75% of the aggregate of the total number of meetings of the Board and the
total number of meetings held by all committees of the Board on which the
director served during 2000.
7
EXECUTIVE COMMITTEE. The Executive Committee possesses all of the powers of
the Board, except for certain powers specifically reserved by Delaware law to
the Board. The Executive Committee held no formal meetings during 2000, but took
action by unanimous written consent. Klaus H. Murmann and David L. Pfeifle are
the current members of the Executive Committee.
AUDIT COMMITTEE. The Audit Committee is composed of three directors, none
of whom is an employee of the Company. The Audit Committee makes recommendations
to the Board regarding the independent auditors to be appointed for ratification
by the stockholders, reviews the scope of the annual audit activities of the
independent auditors and the Company's internal auditors, reviews audit results
and administers the Code of Business Conduct and Lawful Practices. The Audit
Committee held five meetings during 2000, including one telephonic meeting. The
Audit Committee currently consists of Messrs. Schilling (Chairman), Kirchhoff
and Loughrey.
The Company's Board of Directors has adopted a written charter for the Audit
Committee, a copy of which appears as Appendix A to this proxy statement. The
members of the Audit Committee are independent, as independence is defined in
Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange's current
listing standards.
COMPENSATION COMMITTEE. The Compensation Committee is composed of three
directors, none of whom is an employee of the Company. The Compensation
Committee reviews and determines the salaries of the executive officers of the
Company and administers the Company's Bonus Plan and 1998 Long-Term Incentive
Plan. The Compensation Committee met three times in 2000. The current members of
the Compensation Committee are Messrs. Kirchhoff (Chairman), Loughrey and
Schilling.
NOMINATING COMMITTEE. The current members of the Nominating Committee are
Messrs. Clausen and Klaus Murmann. The Nominating Committee recommends to the
Board proposed nominees whose election at the next annual meeting of
stockholders will be recommended by the Board. The Nominating Committee met once
in 2000. The Committee has not established any procedures with respect to
considering nominees recommended by stockholders.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive quarterly retainers
of $5,000 ($20,000 per annum), plus $1,000 for each Board meeting attended and
$500 for participation in a telephonic meeting, together with expenses relating
to their duties as directors. The Vice Chairman, if not an employee, receives a
quarterly retainer of $10,000 ($40,000 per annum) and the Chairman, if not an
employee, receives a quarterly retainer of $20,000 ($80,000 per annum).
Pursuant to the Non-Employee Director Stock Plan, the Board has determined
that following each annual meeting of stockholders, each non-employee director
shall receive 1,000 shares of Restricted Common Stock of the Company. All shares
of Restricted Common Stock of the Company will vest on the third anniversary of
the date of grant. The non-employee directors will have voting and dividend
rights with respect to the Restricted Common Stock, but the Restricted Common
Stock will be forfeited upon termination of service from the Board for any
reason prior to the third anniversary of the grant.
8
REPORT OF THE AUDIT COMMITTEE
In fulfilling its oversight responsibilities, the Audit Committee of the
Board reviewed the scope of the annual audit activities of the independent
auditors and the Company's internal auditors. The Audit Committee has discussed
with KPMG LLP ("KPMG"), the Company's independent auditors, the overall scope
and plans for their audit. The Audit Committee met with KPMG, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls and the overall quality of the
Company's financial reporting. The Audit Committee continued to monitor the
scope and adequacy of the Company's internal auditing program.
The Audit Committee met with both management and KPMG to review and discuss
the audited financial statements.
The Audit Committee reviewed with KPMG their judgments as to the quality and
acceptability of the Company's accounting principles. The Audit Committee's
review included discussion with KPMG of the matters required to be discussed
pursuant to STATEMENT ON AUDITING STANDARDS NO. 61, "COMMUNICATIONS WITH AUDIT
COMMITTEES."
The Audit Committee has received and reviewed the written disclosures and
the letter from KPMG required by the INDEPENDENCE STANDARDS BOARD, STANDARD
NO. 1, "INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES," and has discussed with
KPMG, among other things, matters relating to its independence. The Audit
Committee has also considered the compatibility of the nonaudit services
provided by KPMG with its independence.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board that the audited financial statements for the year
ended December 31, 2000 be included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.
AUDIT COMMITTEE
Richard M. Schilling, Chairman
Johannes F. Kirchhoff
F. Joseph Loughrey
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning total compensation
awarded or paid to or earned by each person who served as the Chief Executive
Officer during 2000 and the four other most highly compensated executive
officers of the Company, who served in such capacities as of December 31, 2000
(the "Named Executive Officers") for services rendered to the Company in all
capacities during each of the last three fiscal years ended December 31, 2000.
9
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------------- ------------------------------
AWARDS PAYOUTS
OTHER ANNUAL ---------------- -----------
COMPENSATION RESTRICTED STOCK LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) AWARDS($)(1)(2) PAYOUTS ($)
- --------------------------- -------- --------- --------- ------------ ---------------- -----------
Klaus H. Murmann............. 2000 333,333 262,000(3) 2,770 -- --
Chairman and Former 1999 500,000 269,600 -- -- --
Chief Executive Officer 1998 500,000 407,800 -- -- --
David L. Pfeifle............. 2000 368,416 179,050 7,277 -- 78,750
President and 1999 300,843 161,770 3,150 -- 29,625
Chief Executive Officer 1998 286,661 220,216 1,920 188,250 216,320
Niels Erik Hansen............ 2000 200,000 97,200 3,324 -- --
Executive Vice President
and 1999 NA NA NA NA NA
Chief Operating Officer 1998 NA NA NA NA NA
David J. Anderson............ 2000 170,160 62,023 2,271 -- 109,375
Vice President-Sales and 1999 154,599 45,498 3,500 -- --
Marketing-Americas and 1998 141,077 57,094 -- 196,094 --
East Asia
Kenneth D. McCuskey.......... 2000 162,253 59,141 1,816 -- 52,500
Vice President-Finance, 1999 128,812 25,882 2,100 -- 19,750
Treasurer and Secretary 1998 120,933 38,019 1,192 125,500 118,976
Albert K. Zahalka............ 2000 161,899 39,341 1,758 -- 109,375
Vice President- 1999 122,141 33,784 2,625 130,469 --
Electrohydraulics 1998 NA NA NA NA NA
- ------------------------
(1) Performance Units granted in 2000 are set forth below in the table under
"LONG-TERM INCENTIVE PLAN AWARDS."
(2) On December 31, 2000, the Named Executive Officers held the following target
number of Performance Units with the following value, based on the closing
per share price of common stock of the Company on December 29, 2000, of
$9.375: Mr. Klaus Murmann--13,189 Units with a value of $123,646.88;
Mr. Pfeifle--31,654 Units with a value of $296,756.25; Mr. Hansen--15,827
Units with a value of $148,378.13; Mr. Anderson--6,647 Units with a value of
$62,315.63; Mr. McCuskey--6,647 Units with a value of $62,315.63; and
Mr. Zahalka--4,204 Units with a value of $39,412.50. These Units are
performance-based target units and are only paid out if and when the
performance goals (described below in the table under "LONG-TERM INCENTIVE
PLAN AWARDS") are satisfied. Each of the Named Executive Officers has the
right to receive dividend equivalents on the target number of Performance
Units.
(3) Includes a one-time additional $100,000 bonus to Dr. Murmann for 2000,
approved by the Compensation Committee due to the 50% reduction in salary
and bonus that he himself proposed for 2000, without a significant change in
responsibilities.
10
LONG-TERM INCENTIVE AWARDS
The following table sets forth, for the Named Executive Officers, certain
information regarding grants made in 2000 under the Sauer-Danfoss Inc. 1998
Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE NON-STOCK PRICE-BASED
SHARES, OR OTHER PLANS(2)
UNITS OR PERIOD UNTIL -------------------------------
OTHER RIGHTS MATURATION OR THRESHOLD TARGET MAXIMUM
NAME AND PRINCIPAL POSITION (#)(1) PAYOUT (#) (#) (#)
- --------------------------- ------------ ------------- --------- -------- --------
Klaus H. Murmann.......................... 13,189 3 Years 6,595 13,189 19,784
Chairman and Former
Chief Executive Officer
David L. Pfeifle.......................... 31,654 3 Years 15,827 31,654 47,481
President and
Chief Executive Officer
Niels Erik Hansen......................... 15,827 3 Years 7,914 15,827 23,741
Executive Vice President and
Chief Operating Officer
David J. Anderson......................... 6,647 3 Years 3,324 6,647 9,971
Vice President-Sales and
Marketing-Americas and
East Asia
Kenneth D. McCuskey....................... 6,647 3 Years 3,324 6,647 9,971
Vice President-Finance,
Treasurer and Secretary
Albert K. Zahalka......................... 4,204 3 Years 2,102 4,204 6,306
Vice President-
Electrohydraulics
- ------------------------
(1) Above awards were made in accordance with the terms of the
Sauer-Danfoss Inc. 1998 Long-Term Incentive Plan. The awards are the target
number of Performance Units with the actual number of units to be based on
performance. Dividend equivalents are paid on the units at the same rate and
at the same time as dividends on the number of shares of common stock equal
to the target number of units. Target awards are based upon a percentage of
base salary and vary depending upon the individual's position and
responsibilities within the organization.
(2) Estimated Future Payouts are based upon the Simple Average Actual Return on
Net Assets (RONA) as derived from the consolidated financial statements of
the Company for the Performance Period of January 1, 2000 to December 31,
2002. The achievement of 15% RONA will result in payment of the Threshold
amount (50% of Target); achievement of 20% RONA will result in payment of
the Target amount (100% of Target); and achievement of 25% RONA will result
in payment of the Maximum
11
amount (150% of Target). The Compensation Committee, in its sole discretion,
may pay earned Performance Units in the form of cash or in shares of the
Company's common stock. The number of shares of common stock to be issued,
if any, shall equal the number of earned Performance Units designated by the
Compensation Committee to be paid in shares. The amount of cash, if any,
shall be equal to the fair market value of a share of common stock of the
Company as of the close of the applicable performance period multiplied by
the number of earned Performance Units designated by the Compensation
Committee to be paid in cash.
RETIREMENT PLANS
U.S. RETIREMENT PLAN. The following table sets forth the estimated annual
benefits payable under the Sauer-Danfoss Employees' Retirement Plan (the "U.S.
Retirement Plan") to participants retiring at a normal retirement date of
January 1, 2001, for the specified average annual earnings and years of
participation. The benefits have been calculated on the basis of a straight-life
annuity.
U.S. RETIREMENT PLAN TABLE
AVERAGE YEARS OF PARTICIPATION
ANNUAL ------------------------------------------------------------------
EARNINGS 15 20 25 30
- -------- --------------- --------------- --------------- ---------------
$150,000 $37,596 $50,128 $62,667 $75,151
$175,000 $43,718 $58,291 $72,872 $87,388
$200,000 $44,686 $59,582 $74,485 $89,323
$225,000 $44,686 $59,582 $74,485 $89,323
$250,000 $44,686 $59,582 $74,485 $89,323
$275,000 $44,686 $59,582 $74,485 $89,323
NOTE: Compensation shown is for the final year in each calculation. In
order to obtain Final Average Compensation, historic salary growth was assumed
to have been 5% per year.
Under the U.S. Retirement Plan, the monthly amount of a participant's
retirement benefit at the participant's normal retirement date (the date the
participant reaches age 65) is calculated pursuant to a formula contained in the
plan based on (i) the average of the participant's highest five-year annual
earnings less an offset for Social Security benefits and (ii) the participant's
years of participation in the Retirement Plan. Mr. Zahalka's benefit is provided
by a 2% of pay annual credit under the "cash balance" component of the
Retirement Plan.
The U.S. Retirement Plan is a defined benefit pension plan intended to be
qualified under Section 401(a) of the Code. Benefits are based only on salary
and any sales commissions (the Company currently pays no sales commissions). The
current compensation covered by the U.S. Retirement Plan for Messrs. Anderson,
McCuskey, Pfeifle and Zahalka are the amounts set forth under "Salary" in the
Summary Compensation Table. No other Named Executive Officer participated in the
U.S. Retirement Plan.
Messrs. Anderson, McCuskey, Pfeifle and Zahalka have completed 16, 12, 29
and 1 years of participation, respectively, and their estimated annual U.S.
Retirement Plan benefits at their normal
12
retirement dates, assuming their present salaries and present Social Security
benefits remain unchanged, would be $85,794, $89,288, $91,684 and $8,281
respectively.
U.S. SUPPLEMENTAL PLANS. The Code generally limits to $140,000 indexed for
inflation, the amount of any annual benefit that may be paid from the U.S.
Retirement Plan. Moreover, the Retirement Plan may consider no more than
$170,000 as indexed for inflation, of a participant's annual compensation in
determining that participant's retirement benefit. In recognition of these two
limitations, the Company has adopted two Supplemental Retirement Benefit Plans
(the "U.S. Supplemental Plans"). Both of these U.S. Supplemental Plans are
designed to provide supplemental retirement benefits to the extent that a
participant's benefits under the Retirement Plan are limited by either the
$140,000 annual benefit limitation or the $170,000 annual compensation
limitation.
One of these two U.S. Supplemental Plans has an additional purpose. It
provides supplemental retirement benefits equal to the difference between the
benefit the participant would have received under the applicable Sundstrand
Corporation ("Sundstrand") pension plan for former employees of Sundstrand (if
the participant's earnings and service with the Company had been taken into
account under the Sundstrand plan) and the benefit payable under the U.S.
Retirement Plan. Under both U.S. Supplemental Plans, however, the actual payment
of supplemental benefits is entirely at the discretion of the Company.
At January 1, 2001, Messrs. Pfeifle, Anderson and McCuskey were eligible to
participate in the U.S. Supplemental Plans, but only Mr. Pfeifle was eligible
for the supplement for benefits that would have been payable under the
Sundstrand plan. The estimated annual supplemental retirement benefit for
Messrs. Pfeifle, Anderson and McCuskey at their normal retirement dates at age
65, assuming their present salaries until retirement, would be $165,021, $9,612
and $9,609, respectively. No other Named Executive Officer is entitled to
benefits under the U.S. Supplemental Plans.
EUROPEAN PENSION PLANS. The Company has a Post-Retirement Care Agreement
with Mr. Klaus Murmann that provides for the payment to him of an annual
retirement benefit in the amount of $300,000. These benefits commence on the
date Mr. Murmann retires from his regular employment with the Company. In the
event Mr. Murmann leaves a surviving spouse, his spouse would be entitled to a
straight-life annuity benefit equal to 60% of the benefit payable to
Mr. Murmann.
The Company has an Employment Agreement Addendum--Deferred Compensation with
Mr. Hansen that provides a retirement benefit in the amount of 5% of his base
salary. This deferred compensation account will earn interest at the prime rate
and shall be payable in one lump sum amount upon termination of Mr. Hansen's
employment with the Company. In the event of Mr. Hansen's death prior to
retirement or termination, any payment payable under this agreement will be
payable to his designated beneficiary, or if no beneficiary has been designated
or does not survive Mr. Hansen, then such amount will be paid to Mr. Hansen's
estate.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company has an employment contract with Mr. Murmann providing for an
annual salary of not less than $250,000. The employment contract with
Mr. Murmann provides that he shall participate in the Company's benefit plans
for which he is presently eligible and in any plans substituted therefor, and he
shall be entitled to certain retirement benefits. In the event the Company
terminates the employment of Mr. Murmann in violation of the contract, he would
be entitled to receive all compensation and benefits provided for under the
contract until such time as his employment would otherwise terminate pursuant to
13
the contract. The employment contract with Mr. Murmann expires on December 31,
2001, and contains an agreement not to compete during the period of the
employment contract.
The Company has an employment contract with Mr. Pfeifle that provides for an
annual base salary of at least $300,000 and participation in the Company's bonus
plan and benefit plans for which he is presently eligible and in any plans
substituted therefore. Mr. Pfeifle's employment contract expires on
December 31, 2001, with automatic one-year extensions unless terminated by
either party, and contains a covenant not to compete for a term of two years
following termination of the employment contract. If Mr. Pfeifle terminates the
contract for good reason or if the Company terminates the contract without good
cause, the contract provides that, for the greater of two years or the remainder
of his employment period under the contract, (a) Mr. Pfeifle will continue to
receive monthly payments equal to (i) 1/12 of his annual base salary at the time
of termination plus (ii) 1/12 of the amount of his target bonus for the year of
termination and (b) that he will remain eligible to participate in benefits
plans (except Retirement Plans) for which he was eligible at the time of
termination. If Mr. Pfeifle's employment is terminated within two years
following a change in control of the Company for any reason other than by the
Company for cause, by Mr. Pfeifle without good reason, or by reason of
retirement, death, or disability, Mr. Pfeifle will be entitled to receive the
following lump sum payments in amounts equal to: (x) all accrued salary plus a
pro-rata share of the current year's target bonus; (y) three times his current
annual base pay and target bonus opportunity; and (z) 15% of his base salary for
the year of termination in lieu of health, dental, disability, or life insurance
for which he was eligible as an employee of the Company.
The Company has an employment contract with Mr. Hansen that provides for an
annual base salary of at least $300,000 and participation in the Company's bonus
plan and benefit plans for which he is presently eligible and in any plans
substituted therefore. Mr. Hansen's employment contract expires on April 30,
2002, with automatic one-year extensions unless terminated by either party, and
contains a covenant not to compete for a term of two years following termination
of the employment contract. If Mr. Hansen terminates the contract for good
reason or if the Company terminates the contract without good cause, the
contract provides that, for the greater of two years or the remainder of his
employment period under the contract, (a) Mr. Hansen will continue to receive
monthly payments equal to (i) 1/12 of his annual base salary at the time of
termination plus (ii) 1/12 of the amount of his target bonus for the year of
termination and (b) that he will remain eligible to participate in benefits
plans (except Retirement Plans) for which he was eligible at the time of
termination. If Mr. Hansen's employment is terminated within two years following
a change in control of the Company for any reason other than by the Company for
cause, by Mr. Hansen without good reason, or by reason of retirement, death, or
disability, Mr. Hansen will be entitled to receive the following lump sum
payments in amounts equal to: (x) all accrued salary plus a pro-rata share of
the current year's target bonus; (y) three times his current annual base pay and
target bonus opportunity; and (z) 15% of his base salary for the year of
termination in lieu of health, dental, disability, or life insurance for which
he was eligible as an employee of the Company.
The Company has entered into Change-in-Control Agreements with
Mr. Anderson, Mr. McCuskey and Mr. Zahalka. These agreements expire on
December 31, 2001, with automatic one-year extensions unless terminated by
either party, and contain a covenant not to compete for a term of two years
following termination. If employment is terminated within two years following a
change in control of the Company for any reason other than by the Company for
cause, by said Executive without good reason, or by reason of retirement, death,
or disability, said Executive will be entitled to receive lump sum payments in
the amounts equal to: (a) all unpaid base salary plus a pro-rata share of the
current year's target bonus; (b) his
14
current annual base salary and target annual bonus opportunity multiplied by
two; and (c) 10% of his then-current base salary in lieu of continued
participation in Company provided benefits.
Tonio Barlage resigned as President and a director of the Company effective
as of March 31, 2000. Pursuant to a Termination Agreement entered into with
Mr. Barlage, the Company made a lump-sum payment of $1,200,000, said amount
being equal to the base compensation that would have been paid to him during the
remaining term of his Employment Agreement with the Company, a lump-sum payment
of $1,500,000 in full satisfaction of any and all future pension claims based on
his Post-Retirement Care Agreement, in return for which Mr. Barlage agreed to a
covenant not to compete for a term ending on December 31, 2001, and his
Employment Agreement with the Company was terminated. The Company also purchased
600,000 shares of the Company's Common Stock owned by Mr. Barlage and his wife
pursuant to a Stock Purchase Agreement, for a per-share price of $9.5367,
aggregating $5,722,020.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Committee") establishes and
administers the executive compensation program for the officers of the Company
("Executives"), including base salaries, the Company's Bonus Plan and the
Company's 1998 Long-Term Incentive Plan. The Committee consists of three
non-employee directors, who have no interlocking relationships.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee has reaffirmed that the Company's compensation philosophy and
objectives as they pertain to Executives are as follows:
(a) To motivate top leadership to superior performance by providing
opportunity for above-average total compensation comprised of an
appropriate balance of base salary and short- and long-term incentives;
(b) To provide a total compensation package that will attract, retain, and
motivate top talent; and
(c) To ensure that the objectives of the Company's Executives are aligned
with stockholder interests.
The current components of the Company's executive total compensation program
include:
(a) An annual base salary;
(b) An annual variable cash incentive;
(c) Stock-based incentives; and
(d) A competitive benefit package.
These components consider individual performance, the Company's performance,
and survey data regarding comparable positions at other companies in the
industry.
It is the intent of the Committee to provide to the Company's Executives the
opportunity for a total compensation package that, when compared to the
marketplace, shall exceed the 75th percentile of such comparisons.
15
BASE SALARIES
Upon completion of the Company's combination with the Danfoss Fluid Power
companies in May 2000, the Committee reviewed and approved annual base salaries
for the Company's Executives. The Committee based its decision on market survey
data, as well as the Executive's performance, position and responsibilities.
INCENTIVE COMPENSATION PLANS
Again, with the completion of the Company's combination with the Danfoss
Fluid Power companies, the Committee approved several changes to incentive plans
during 2000.
The Sauer Inc. Bonus Plan was renamed the Sauer-Danfoss Inc. Bonus Plan. New
incentive opportunity levels were established and participation of the Company's
Executives in the Plan was approved by the Committee. The incentive opportunity
levels are according to the Executive's position and responsibilities, and are
based on achievement of Return On Net Assets.
The Sauer Inc. 1998 Long-Term Incentive Plan was renamed the
Sauer-Danfoss Inc. 1998 Long-Term Incentive Plan. The Committee approved new
awards during 2000 of Performance Units, as allowed under the terms of the Plan.
Threshold, Target and Maximum performance-based payouts based on Return On Net
Assets over a three-year performance period were approved. Participation and
Target Awards were approved according to the Executive's position and
responsibilities. The Committee, in its sole discretion, may pay earned
Performance Units in the form of cash or in shares of common stock (or in a
combination thereof). The number of shares of common stock to be issued, if any,
shall equal the number of earned Performance Units designated by the Committee
to be paid in shares. The amount of cash, if any, shall be equal to the fair
market value of a share of common stock of the Company as of the close of the
applicable performance period multiplied by the number of Performance Units
designated by the Committee to be paid in cash.
CHIEF EXECUTIVE OFFICER ("CEO") COMPENSATION
The Company's employment contract with Mr. Pfeifle provides for an annual
salary of not less than $300,000. In conjunction with Mr. Pfeifle's appointment
as CEO, the Committee approved an increase in pay comprised of $400,000 base
annual salary plus the issuance of an additional $100,000 in Performance Unit
value under the Sauer-Danfoss Inc. 1998 Long-Term Incentive Plan during 2000.
The cash bonus earned by Mr. Pfeifle for 2000 was $179,050 based on achievement
of 16.2% Return on Net Assets. This payment was made in accordance with the
terms of the Sauer-Danfoss Inc. Bonus Plan.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Internal Revenue Code Section 162(m) limits the deductibility by the Company
of compensation in excess of $1,000,000 paid to each of the Named Executive
Officers. The compensation paid to each of the Named Executive Officers did not
exceed $1,000,000 in 2000, and the Company does not anticipate that any of its
Named Executive Officers for 2001 will receive compensation in excess of
$1,000,000 in 2001.
COMPENSATION COMMITTEE
Johannes F. Kirchhoff, Chairman
F. Joseph Loughrey
Richard M. Schilling
16
PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total returns from
May 12, 1998 (the date of the Company's initial public offering of its common
stock), to December 31, 2000, for the Company, the Russell 2000 Index, and the
Media General Financial Services, Inc.--Diversified Machinery Index ("MG--
Diversified Machinery Index").
COMPARE CUMULATIVE TOTAL RETURN
AMONG SAUER-DANFOSS INC.,
RUSSELL 2000 INDEX AND MG GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
5/12/98 12/31/98 12/31/99 12/29/00
Sauer-Danfoss Inc. 100 43.02 52.7 56.18
Diversified Machinery 100 83.8 93.98 83.19
Russell 2000 Index 100 87.83 105.03 100.5
ASSUMES $100 INVESTED ON 05/12/98
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING 12/31/00
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MURMANN FAMILY LIMITED PARTNERSHIP INTEREST IN THE GERMAN OPERATING COMPANY
The Company conducts its German operations through Sauer-Danfoss
(Neumunster) GmbH & Co. OHG, a German partnership (the "German Operating
Company"). The Company and Sauer-Danfoss (Neumunster) GmbH, a company
wholly-owned by the Company, are the general partners of the German Operating
Company. Sauer GmbH and Klaus Murmann & Co. KG, as holding company for Sauer
GmbH & Co. Hydraulik KG, had limited partnership interests (the "Limited
Partners") in the German Operating Company. The Limited Partners are owned
entirely by Klaus H. Murmann (a director and Chairman of the Company) and
members of his family. The creation of the limited partnership interests
occurred in connection with the formation of the Company in 1989 and such
interests remained essentially unchanged since that date. The German Operating
Company was required to pay annually to the Limited Partners an amount in cash
(the "Annual Cash Payment") equal to a percentage of the Company's consolidated
income before taxes and the Limited Partners' interests ("Percentage"). The
Percentage was subject to adjustment based on changes in the number of
outstanding shares of common stock of the Company during the applicable year.
The Percentage was equal to the ratio of 2,250,000 shares divided by the sum of
2,250,000 shares and the number of outstanding shares of common stock of the
Company.
The Annual Cash Payment was based on the overall income of the Company in
order to avoid any potential conflicts between the Company and the Limited
Partners regarding whether, for example, sales should be made by the U.S.
Operating Company or the German Operating Company and the pricing of
intercompany sales between the U.S. Operating Company and the German Operating
Company. The amount of the Annual Cash Payment made by the Company for the
period ended May 2, 2000 was $1,486,000, which was converted to DM 3,188,000 and
paid on June 9, 2000.
The Company elected, by the action of its independent directors, to
terminate the limited partnership interests. Pursuant to the terms of the
agreement creating the limited partnership, in exchange for the termination of
the limited partnership interests, the Company issued an aggregate of 2,250,000
shares of Company common stock, paid the balance of the current accounts of the
Limited Partners, and will pay the Limited Partners an amount in cash equal to
the income tax payable as a result of the exchange of the shares of common stock
of the Company for the limited partnership interests, but not to exceed
23,354,400 Deutsche marks. The Company has made an initial reimbursement of DM
3,200,000 ($1,411,000), in September, 2000, with the balance to be paid when the
total income tax due on such exchange has been finally determined. The Company's
agreement to acquire all of the outstanding shares of common stock of the
Danfoss Fluid Power Companies provided that the termination of the limited
partnership interests was a condition to closing the Danfoss Transaction.
DANFOSS RELATED TRANSACTION
The Company issued an additional 2,091,150 shares to Danfoss Murmann Holding
A/S in March of 2001 in connection with the acquisition of assets of certain
sales companies of Danfoss.
18
RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG LLP as independent accountants to examine the
consolidated financial statements of the Company and its subsidiaries for 2001,
subject to ratification of the stockholders at the Annual Meeting.
Representatives of KPMG LLP are not expected to be present at the Annual
Meeting, but if such representatives are present they will have the opportunity
to make a statement and to respond to appropriate questions. The affirmative
vote of a majority of the shares present and entitled to vote on this item at
the Annual Meeting is necessary for the approval of the appointment of KPMG LLP
as independent accountants for 2001. In the event stockholders do not ratify the
appointment of KPMG LLP, the appointment will be reconsidered by the Audit
Committee and the Board. Even if the selection is ratified, the Audit Committee
and the Board in their discretion may direct the appointment of different
independent auditors at anytime during the year if they determine that such a
change would be in the best interests of the Company and its stockholders.
Fees paid to KPMG LLP for services relating to the year ended December 31,
2000, were:
AUDIT FEES
$407,000
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
$0
ALL OTHER FEES
$40,000
KPMG LLP commenced serving as the Company's independent accountants in June
of 2000. On June 23, 2000, the Company dismissed its independent auditor, Arthur
Andersen LLP, and appointed KPMG LLP as its new independent auditor. The
decision to change the Company's auditor was recommended by the Audit Committee
of the Company's Board and approved by the Company's Board.
The reports of Arthur Andersen LLP on the Company's financial statements for
the years 1999 and 1998 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During 1999 and 1998 and any subsequent interim period preceding the
replacement of Arthur Andersen LLP as its independent auditor, there were no
disagreements between the Company and Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused it to make reference to the subject
matter of the disagreements in connection with its reports. None of the
"reportable events" described in paragraphs (A) through (D) of clause (v) of
Item 304(a)(1) of Regulation S-K of the rules of the Securities and Exchange
Commission occurred during 1999 or 1998 or any subsequent interim period
preceding the replacement of Arthur Andersen LLP as independent auditor for the
Company.
19
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 2001.
ADDITIONAL INFORMATION
NOTICE REQUIREMENTS
To permit the Company and its stockholders to deal with stockholder
proposals in an informed and orderly manner, the Bylaws of the Company establish
an advance notice procedure. No stockholder proposals, nominations for the
election of directors or other business may be brought before an annual meeting
unless written notice of such proposal or other business is received by the
Secretary of the Company at the address set forth on page 1 of this Proxy
Statement not less than 120 calendar days in advance of the date that the
Company's proxy statement was released to stockholders in connection with the
previous year's Annual Meeting. Such notice must contain certain specified
information concerning the matters to be brought before the meeting as well as
the stockholder submitting the proposal. For the Company's annual meeting in the
year 2002, the Company must receive this notice on or before December 12, 2001.
A copy of the applicable Bylaw provisions may be obtained, without charge, upon
written request to the Secretary of the Company at the address set forth on page
1 of this Proxy Statement.
In addition, stockholder proposals intended to be included in the Company's
Proxy Statement for the annual meeting in 2002 must be received by the Secretary
of the Company at the address set forth on page 1 of this Proxy Statement, not
later than December 12, 2001. Such proposals must comply with certain rules and
regulations promulgated by the Securities and Exchange Commission.
DISCRETIONARY AUTHORITY
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the persons named as
proxies and acting thereunder will have discretion to vote on those matters to
the same extent as the person delivering the proxy would be entitled to vote. If
any other matter is properly brought before the Annual Meeting, proxies in the
enclosed form returned to the Company prior to the Annual Meeting will be voted
in accordance with the recommendation of the Board or, in the absence of such a
recommendation, in accordance with the judgment of the proxy holder. At the date
this Proxy Statement went to press, the Company did not anticipate that any
other matters would be properly brought before the Annual Meeting.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES, AND LIST OF EXHIBITS. REQUESTS
SHOULD BE SENT TO KENNETH D. MCCUSKEY, CORPORATE SECRETARY, AT THE ADDRESS SET
FORTH ON PAGE 1 OF THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ Kenneth D. McCuskey
Kenneth D. McCuskey
CORPORATE SECRETARY
April 11, 2001
20
APPENDIX A
SAUER-DANFOSS INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is a committee of the Board of Directors. Its primary
function is to assist the Board in fulfilling its oversight responsibilities by
reviewing and overseeing the financial reporting process, the systems of
internal controls, compliance with laws, regulations and the business conduct
policy, and the audit process (both internal and independent). In doing so, the
Audit Committee will strive to provide an open avenue of communication between
the Board of Directors, management, the internal auditors, and the independent
auditors.
ORGANIZATION
- The Audit Committee shall be appointed annually by the Board of Directors.
- The Audit Committee shall be composed of at least three independent
directors, as defined by the New York Stock Exchange ("NYSE").
- Only independent directors may be members of the Audit Committee.
- At least one member of the committee shall have a background as required
to meet the experience requirement of the NYSE.
- The Board shall appoint one of the members of the Audit Committee as
Chairperson. It is the responsibility of the Chairperson to schedule all
meetings of the committee and provide the committee with a written agenda
for all meetings.
- The Company Secretary shall assist the Chairperson in the scheduling of
meetings and setting of the agenda, and keeping minutes of the meetings.
- The Audit Committee shall monitor the Company's compliance with applicable
NYSE Audit Committee rules and requirements.
STATEMENT OF POLICY
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's business conduct
policy.
21
In meeting its responsibilities, the committee shall:
GENERAL
- Have the power to conduct or authorize investigations into any matters
within the committee's scope of responsibilities. The committee shall have
unrestricted access to members of management and all information relevant
to its responsibilities. The committee shall be empowered to retain
independent counsel, accountants, or others to advise the committee.
- Report committee actions to the Board of Directors with such
recommendations as the committee may deem appropriate.
- Review and recommend updates of the committee's charter to the Board of
Directors.
- Meet with the director of internal auditing, the independent auditors, and
management in separate sessions to discuss any matters that the committee
or these groups believe should be discussed privately with the Audit
Committee.
- Review and approve the Audit Committee's required annual stock exchange
certification and proxy statement disclosures.
FINANCIAL REPORTING
- Review with management and the independent auditors at the completion of
the annual examination:
- The Company's annual financial statements and related footnotes.
- Any significant changes required in the independent auditor's audit
plan.
- Any serious difficulties or disputes with management encountered during
the course of the audit.
- The existence of significant estimates and judgments underlying the
financial statements, including the rationale behind those estimates as
well as the details on material accruals and reserves.
- Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards.
- Based on the review, recommend to the Board whether the annual audited
financial statements should be included in the Annual Report on Form 10-K
for filing with the SEC.
INTERNAL CONTROLS AND RISK ASSESSMENT
- Consider and review with management, the director of internal auditing and
the independent auditors:
- The effectiveness of or weaknesses in the Company's internal controls
including computerized information system controls and security, the
overall control environment and accounting and financial controls.
22
- Any related significant findings and recommendations of the internal
auditors and independent auditors together with management's responses
thereto, including the timetable for implementation of recommendations
to correct weaknesses in internal controls.
- Review with the director of internal auditing and the independent auditors
the coordination of audit effort.
COMPLIANCE WITH LAWS, REGULATIONS AND THE BUSINESS CONDUCT POLICY
- Review and assess the Company's processes for administering its business
conduct policy.
- Review with the director of internal auditing the results of their review
of the Company's monitoring of compliance with the Company's business
conduct policy.
- Review policies and procedures with respect to officers' expense accounts
and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the internal auditor. Review
summary of officers' expense accounts and perquisites on an annual basis.
INTERNAL AUDITOR
- Evaluate the internal audit process for establishing the annual internal
audit plan and the focus on risk.
- Review and evaluate the scope, risk assessment and nature of the internal
auditors' plan and any subsequent changes.
- Consider and review with management and the director of internal auditing:
- Significant findings during the year and management's responses
thereto, including the timetable for implementation of the
recommendations to correct weaknesses in internal control.
- Any difficulties encountered in the course of their audits, including
the timetable for implementation of the recommendations to correct
weaknesses in internal control.
- Any changes required in the planned scope of their audit plan.
- The internal auditing department budget and staffing.
- Review and concur in the appointment, replacement, reassignment, or
dismissal of the director of internal auditing.
- Instruct the internal auditors to communicate and to report directly to
the Audit Committee any serious difficulties or disputes with management.
INDEPENDENT AUDITOR
- The independent auditor, while working day to day with management, is
ultimately accountable to the Board of Directors and Audit Committee.
23
- Select the independent auditors to be nominated, approve the compensation
of the independent auditors, evaluate the performance of the independent
auditors, and review and approve the discharge of the independent
auditors.
- Discuss with the independent auditors the matters required to be discussed
by SAS 61.
- Confirm and assure the independence of the independent auditors, including
a review of the nature of all services and related fees provided by the
independent auditors, ensure that the independent auditor submits a formal
written statement regarding relationships and services which may affect
their objectivity and independence as required by Independence Standards
Board Standard No. 1, and make recommendations to the Board of Directors
to take appropriate action to ensure the independence of the independent
auditor.
- Instruct the independent auditors to communicate and to report directly to
the Audit Committee any serious difficulties or disputes with management.
- Conduct the annual and quarterly quality discussions with the independent
auditors as required.
- Confirm that the Company's quarterly financial statements have been
reviewed by the Company's independent auditor as required.
24
P
R
O SAUER-DANFOSS INC.
X 2800 EAST 13TH STREET, AMES, IOWA 50010
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON MAY 16, 2001
The undersigned hereby appoints Klaus H. Murmann, and David L. Pfeifle, and
each of them, with full power of substitution, as proxies, to vote all the
shares of Common Stock of Sauer-Danfoss Inc. (the "Company") which the
undersigned is entitled to vote at the 2001 Annual Meeting of Stockholders to
be held May 16, 2001, and any adjournment thereof, upon the matters set forth
below, AND IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. A majority of said proxies, or any substitute or
substitutes, who shall be present and act at the meeting (or if only one
shall be present and act, then that one) shall have all the powers of said
proxies hereunder.
- -------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
[SAUER-DANFOSS LOGO]
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 16, 2001 AT 8:30 A.M. LOCAL TIME
THE NORTHLAND INN
7025 NORTHLAND DRIVE
BROOKLYN PARK, MINNESOTA 55428
2730
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
THIS PROXY, IF SIGNED AND RETURNED, WILL BE VOTED AS SPECIFIED BELOW. IF NO
SPECIFICATIONS ARE MADE, YOUR SHARES WILL BE VOTED FOR ALL NOMINEES LISTED
BELOW AND FOR THE RATIFICATION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS.
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED BELOW.
- -----------------------------------------------------------------------------------------------------------------------------------
To elect the following nominees, and FOR WITHHELD FOR AGAINST ABSTAIN
while the Company has no reason to Election of Directors / / / / 2. To ratify the / / / / / /
believe that any of the nominees will appointment of
decline or be unable to serve, if any KPMG LLP as
do, to vote with discretionary independent
authority: accountants
01. OLE STEEN ANDERSEN,
02. JORGEN M. CLAUSEN, 03. NICOLA
KEIM, 04. JOHANNES F. KIRCHHOFF, 05. FOR all nominees
HANS KIRK, 06. F. JOSEPH LOUGHREY, except the following:
07. KLAUS H. MURMANN, 08. SVEN
MURMANN, 09. DAVID L. PFEIFLE, and
10. RICHARD M. SCHILLING ----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Please sign exactly as name appears. Joint
owners should each sign. Attorneys-in-
fact, executors, administrators, trustees,
guardians, or corporation officers should
indicate the capacity in which they are
signing.
PLEASE SIGN, DATE, AND MAIL THIS PROXY
PROMPTLY WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING. YOU MAY NEVERTHELESS
VOTE IN PERSON IF YOU DO ATTEND.
2001
--------------------------------------------
2001
--------------------------------------------
SIGNATURE DATE
- -----------------------------------------------------------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
SAUER-DANFOSS INC.
Dear Stockholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your
proxy card. You will need your proxy card and Social Security Number (where
applicable) when voting your shares electronically. The Voter Control Number
that appears in the box above, just below the perforation, must be used in
order to vote by telephone or via the Internet
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
TO VOTE BY TELEPHONE:
Using a touch-tone phone call Toll-free 1-877-PRX-VOTE (1-877-779-8683)
TO VOTE BY INTERNET
Log on to the Internet and go to the website: HTTP://WWW.EPROXYVOTE.COM/SHS
NOTE: IF YOU VOTE OVER THE INTERNET, YOU MAY INCUR COSTS SUCH AS
TELECOMMUNICATION AND INTERNET ACCESS CHARGES FOR WHICH YOU WILL BE
RESPONSIBLE.
THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET.
SAUER-DANFOSS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2001
Dear 40l(k) Plan Participant:
This letter and the enclosed proxy materials are being sent to you in
connection with the 2001 Annual Meeting of Stockholders of Sauer-Danfoss Inc.
because you are a participant in either the Sauer-Danfoss Employees' Savings and
Retirement Plan or the LaSalle Factory Employee Savings Plan and you have
elected to invest a portion of your 401(k) plan contributions in Sauer-Danfoss
stock. In order to direct Institutional Trust Company, the trustee of your
40l(k) plan (the "Trustee"), to vote the shares of Sauer-Danfoss stock held on
your behalf under your 40l(k) plan, you must return the enclosed proxy card to
the Company's transfer agent in the enclosed return envelope by no later than
May 11, 2001. The transfer agent will tabulate the votes for the 401(k) plan
participants and transmit the information to the Trustee to permit the Trustee
to vote the shares.
Most 401(k) plan participants also have the option of directing the Trustee
via the Internet or by using a toll-free telephone number. Check your proxy card
to see which options are available to you. Please be aware that if you transmit
your instructions over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
The Internet and telephone facilities will be available until 5:00 p.m. (EST) on
May 11, 2001.
Please note that the enclosed proxy materials begin with a cover letter
addressed generally to Sauer-Danfoss stockholders. The information about the
annual meeting in that letter is applicable to all stockholders, including those
who hold securities through the Company's 401(k) plans, BUT THE MAILING AND
VOTING INSTRUCTIONS IN THAT LETTER APPLY ONLY TO SHARES HELD OUTSIDE THE 401(k)
PLANS. This letter provides the specific mailing instructions applicable to
instructing the Trustee on how to vote the Sauer-Danfoss shares held through
your 401(k) plan. The proxy card and return envelope enclosed herewith have been
specifically coded for 401(k) plan participants.
If you also hold shares of Sauer-Danfoss Inc. stock outside of your 40l(k)
plan as a beneficial owner, you will receive a separate set of proxy materials
to enable you to vote the shares held in your individual capacity. The proxy
card enclosed with this mailing cannot be used to vote the shares held in your
individual capacity; it may only be used to direct the Trustee to vote the
shares held on your behalf under the 40l(k) plan in which you participate. The
Trustee will vote the shares held in the 40l(k) plan on your behalf in
accordance with your instructions on the enclosed proxy card or transmitted over
the Internet or by telephone. If you do not give your instructions via the
Internet, by using the toll-free telephone number, or by returning the proxy
card to the transfer agent by May 11, 2001, the Trustee will vote the shares
held on your behalf in the same proportion as the Trustee votes the shares held
on behalf of the other participants in your 40l(k) plan for whom the Trustee
does receive voting instructions.
1
The 2001 Annual Meeting of Stockholders of Sauer-Danfoss Inc. will be held
on Wednesday, May 16, 2001, at 8:30 a.m. (local time), at The Northland Inn,
7025 Northland Drive, Brooklyn Park, Minnesota 55428. At the meeting,
stockholders will act on the following matters:
1. To elect ten (10) directors for a term expiring at the Annual Meeting of
Stockholders to be held in 2002, and until their respective successors
are duly elected and shall qualify.
2. To ratify the appointment of KPMG LLP as the Company's independent
accountants for 2001.
3. To transact such other business as may properly come before the meeting
or any postponement, adjournment, or adjournments.
You cannot attend the meeting to vote the shares held for your account
under your 401(k) plan in person; you can only direct the Trustee to vote on
your behalf. Stockholders of record at the close of business on March 29, 2001,
are entitled to notice of and to vote at the annual meeting or any postponement,
adjournment, or adjournments.
In order to direct the Trustee to vote the shares held on your behalf under
the 40l(k) plan in accordance with your wishes, you must transmit your
instructions via the Internet, by telephone, or by returning the enclosed proxy
card to the transfer agent prior to 5:00 p.m. (EST) on or before Friday, May 11,
2001, which is three business days prior to the date of the Annual Meeting of
Stockholders, so that the Trustee may properly tabulate and carry out the voting
instructions it receives.
By order of the Board of Directors,
Kenneth D. McCuskey
CORPORATE SECRETARY
Ames, Iowa
April 11, 2001
2