Exhibit 10.1(z)

 

SAUER-DANFOSS INC.

 

ANNUAL MANAGEMENT PERFORMANCE INCENTIVE PLAN

 

Amended and Restated as of December 29, 2008

 

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SAUER-DANFOSS INC.

ANNUAL MANAGEMENT PERFORMANCE INCENTIVE PLAN

Amended and Restated as of December 29, 2008

 

The Sauer-Danfoss Inc. Annual Management Performance Incentive Plan is designed
to achieve the following objectives:

 

a)              Link variable pay to strategic business objectives and
performance;

b)             Provide a means to recognize and reward outstanding individual
performance;

c)              Facilitate the attraction, retention and motivation of talent;
and

d)             Provide a competitive compensation opportunity.

 

ARTICLE I

DEFINITIONS

 

For the purposes of this Plan, the following words and phrases shall have the
meaning indicated, unless a different meaning is clearly required by the
context:

 

1.                   The “Plan” means this Sauer-Danfoss Inc. Annual Management
Performance Incentive Plan with all amendments and supplements hereafter made.

 

2.                   The “Company” means Sauer-Danfoss Inc., a Delaware
corporation, its successors, and the surviving companies or corporations
resulting from any merger or consolidation of Sauer-Danfoss Inc. with any other
corporation or partnership.

 

3.                   A “Subsidiary” means any corporation, partnership, limited
liability company, joint venture, affiliate or other entity in which the
Company, directly or indirectly, has a majority voting interest.

 

4.                   The “Executive Office” means the Executive Office of
Sauer-Danfoss Inc., as the same shall from time to time exist.

 

5.                   An “Employee” shall mean any person employed by the Company
or a Subsidiary.

 

6.                   A “Participant” shall mean any Employee who is eligible to
participate in the Plan as provided in Article II.

 

7.                   The “Plan Year” means the fiscal year of the Company, which
as of January 1, 2007 coincides with the calendar year.

 

8.                   An “Incentive Compensation Award” shall mean the incentive
compensation amount determined for a Participant pursuant to the Plan with
respect to any Plan Year, prior to

 

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any increase or reduction by the “Business Discretionary Adjustment” and/or the
“Individual Performance Modifier” as provided by Article III, Paragraphs 6 and
7.

 

9.                   A “Beneficiary” shall mean the person or persons designated
by a Participant in accordance with the Plan to receive payment of the
Participant’s Incentive Compensation Award in the event of the death of the
Participant prior to payment of the Participant’s Incentive Compensation Award.

 

10.             The “Target Incentive Opportunity” means an amount equal to a
target percentage multiplied by the base salary paid to the Participant from the
Participant’s effective date of participation through the end of the Plan Year. 
Should a Participant have periods of illness or injury during the Plan Year,
payments such as sick leave or disability pay, which are paid to the Participant
in lieu of base salary during those periods, will be considered as base salary
for the purpose of computing the Target Incentive Opportunity.

 

11.             “Achieved Performance” shall mean the actual EBIT Margin for the
Company, Division or Business Unit per the Company’s yearend audited financial
statements, measured on the same basis and with the same adjustments as the
Participant’s original Performance Target and as otherwise adjusted pursuant to
Article III, Paragraph 2.

 

12.             “Performance Target” shall mean the financial performance target
for EBIT Margin for the Company, Division or Business Unit, as the case may be,
as determined through the annual budgeting process for any Plan Year, as
approved by the Executive Office and as further described in Article III,
Paragraph 2.

 

13.             “EBIT Margin” (Earnings Before Interest and Taxes Margin) for
the Company or for any Division or Business Unit, as the case may be, shall be
defined as net income adjusted to remove any income tax expense or benefit and
to remove any Net Interest Expense; divided by gross revenue for the Company or
the corresponding Division or Business Unit, as the case may be.

 

14.             “Net Interest Expense” for Sauer-Danfoss Inc. or for any
Division or Business Unit, as the case may be, shall be defined as interest
expense, net of interest income, on interest bearing indebtedness plus minority
interest expense, net of minority interest income.

 

15.             “Total Company Factor” shall mean a weighting factor, from 0% to
100%, assigned by the Executive Office to the Participant for the Plan Year and
representing the relative importance that the total Company’s performance shall
have on a Participant’s Incentive Compensation Award.  The sum of the
Participant’s Company Factor plus the Participant’s Division / Business Unit
factor shall equal 100%.

 

16.             “Division / Business Unit Factor” shall mean a weighting factor,
from 0% to 100% assigned by the Executive Office to the Participant for the Plan
Year and representing the relative importance that the Division / Business Unit
shall have on a Participant’s

 

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Incentive Compensation Award.  The sum of the Participant’s Total Company Factor
plus the Participant’s Division / Business Unit Factor shall equal 100%.

 

17.             “Permanent and Total Disability” shall have the meaning ascribed
to such term in the Participant’s governing long-term disability plan.

 

18.             “Retirement” shall mean the normal retirement date on which a
Participant qualifies for full retirement benefits under the Company’s qualified
retirement plan, as identified by the Executive Office.

 

19.             “Business Discretionary Adjustment” shall mean an adjustment,
solely at the discretion of the Executive Office, to increase or decrease the
Incentive Compensation Awards for the Total Company and/or a specific Division
and/or a specific Business Unit by up to 20 percentage points prior to payment.

 

20.             “Individual Performance Modifier” shall mean a percentage
multiplier, from 0% to 125% that can be applied, at the discretion of the
Executive Office, to increase or decrease an individual Participant’s Incentive
Compensation Award, as adjusted by any Business Discretionary Adjustment, prior
to payment.

 

ARTICLE II

ELIGIBILITY AND MEASUREMENT BASIS

 

The Executive Office shall, in its discretion, select the Employees who are to
participate in the Plan and the selected Employees shall be notified of their
selection in writing or electronically.  Notwithstanding the previous sentence,
an Employee’s whose total compensation package is determined and administered by
the Compensation Committee of the Sauer-Danfoss Inc. Board of Director’s shall
be eligible to participate in this Plan only as dictated by the Compensation
Committee.  Participation for each Employee shall be determined on an annual
basis.  The Executive Office shall determine, for each Participant, the target
percentage of base salary to be used in determining the Participant’s Target
Incentive Opportunity.

 

The Executive Office shall also determine the business elements (Company and/or
Division and/or Business Unit) that will be used to determine each Participant’s
Incentive Compensation Award.  The Executive Office will also select the
Participant’s Total Company Factor and the Participant’s Division / Business
Unit  Factor, as defined above.  The relevant business element and the  Total
Company Factor and/or Divison / Business Unit Factor will be communicated to
each Participant at the same time as the selection notification.

 

If a Participant transfers responsibilities during the course of a Plan Year,
the Executive Office will determine, on a case-by-case basis, the Incentive
Compensation Award for such Participant for the Plan Year.

 

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ARTICLE III

INCENTIVE COMPENSATION AWARDS

 

1.              The Incentive Compensation Award determined for a Participant
will be based upon Achieved Performance relative to the pre-established
Performance Targets in accordance with the provisions of paragraphs (2) through
(6) below and subject to all other provisions of this Plan.  The Incentive
Compensation Award so determined will be subject to adjustment, prior to
payment, in accordance with paragraphs (6) and (7) below.

 

2.              At the beginning of the Plan Year, Performance Targets are
established by the Executive Office for Company EBIT Margin, Division EBIT
Margin and Business Unit EBIT Margin. At the discretion of the Executive Office,
the Performance Targets can be adjusted to remove the impact of significant
operations (e.g. Hydro-Gear) that are not directly influenced by the
Participant’s actions.  At the discretion of the Executive Office, the
Performance Targets can be adjusted to remove the impact of significant events
(e.g. plant closings, financial accounting changes).  Where adjustments to
Performance Targets are made to remove the impact of significant operations or
events, the yearend audited results will be adjusted accordingly to measure
Achieved Performance relative to the Performance Targets.  Achieved Performance
can also be adjusted, at the discretion of the Executive Office, to remove the
impact of any significant non-recurring or extraordinary items that were not
reflected in the original Performance Targets.

 

3.              Achieved Performance equal to the Performance Target will result
in an Incentive Compensation Award for the Plan Year to which it relates equal
to the Target Incentive Opportunity.

 

4.              Achieved Performance which exceeds the Performance Target will
result in an Incentive Compensation Award for the Plan Year to which it relates
of up to 200% of the Target Incentive Opportunity, based on a pre-determined
scale approved by the Executive Office.

 

5.              Achieved Performance which falls short of the Performance Target
will result in an Incentive Compensation Award for the Plan Year to which it
relates from 0% - 100% of the Target Incentive Opportunity, based on a
pre-determined scale approved by the Executive Office.

 

6.              The Incentive Compensation Awards for Company, Division or
Business Unit Participants, considered as an entire group, may be increased or
decreased, prior to payment, by the Business Discretionary Adjustment.  The
degree to which Incentive Compensation Awards will be adjusted by a Business
Discretionary Adjustment shall be determined by the Executive Office, in its
sole discretion.

 

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7.              The Incentive Compensation Award for the Participant, as
adjusted by the Business  Discretionary Adjustment in Paragraph 6 immediately
above, may be further adjusted by an Individual Performance Modifier, prior to
payment, as determined by the Executive Office in its sole discretion.  As a
multiplier, a 0% Individual Performance Modifier would operate to eliminate a
Participant’s Incentive Compensation Award for a given Plan Year, since 0% times
any number would be zero.  The 0% Individual Performance Modifier is intended to
be used in instances where a Participant engages in misconduct detrimental to
the Company or a Subsidiary or where any payout is otherwise not warranted based
on the Executive Office’s discretion.

 

8.              The maximum payout to any one Participant under the Plan for any
given Plan Year, including any Business Discretionary Adjustment and any
Individual Performance Modifier, shall be 200% of the Target Incentive
Opportunity.

 

9.              The Incentive Compensation Award, as adjusted in Article III —
Paragraphs 6 and 7, shall be paid in cash in a lump sum to the Participant on or
before May 31st of the year following the Plan Year with respect to which such
Incentive Compensation Award is determined to be earned.

 

10.        Notwithstanding anything to the contrary contained in the Plan and
except where prohibited by local employment laws, the right of a Participant to
receive an Incentive Compensation Award will be forfeited in the event the
Participant’s employment with the Company or any Subsidiary is terminated prior
to payment under circumstances other than death, Permanent and Total Disability,
or Retirement.    Notwithstanding the previous sentence, the Executive Office
reserves the right to waive such automatic forfeiture provisions and pay out a
terminated Participant on a full or pro-rata basis as it determines appropriate
under the circumstances.

 

In the event of termination due to death, Permanent and Total Disability or
Retirement any  Incentive Compensation Award will be paid to the Participant’s
Beneficiary or the Participant, as the case may be, on a pro rata basis as soon
as practicable following the determination of the amount of the Incentive
Compensation Award that would have been paid to the Participant had he or she
survived or remained an Employee of the Company or any Subsidiary for the entire
Plan Year.

 

ARTICLE IV

ADMINISTRATION

 

The Executive Office shall be responsible for the general administration of the
Plan and for carrying out the provisions hereof and shall have all such powers,
authorities and responsibilities expressly retained by it herein and as may be
necessary to carry out the provisions of the Plan, including the power to
determine all questions relating to eligibility for and the amount of an
Incentive Compensation Award, all questions pertaining to claims for benefits
and procedures for claim review, and the power to resolve any and all other
questions arising under the Plan,

 

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including any questions of construction.  The Executive Office may designate
such person or persons as it shall determine to carry out any such powers,
authorities or responsibilities.

 

The actions taken and the decisions made by the Executive Office hereunder shall
be final and binding upon all interested parties.  The Executive Office may, as
to all questions of accounting, rely conclusively upon any determination made by
the independent public accountants for the Company.

 

ARTICLE V

AMENDMENT AND TERMINATION

 

The Executive Office reserves the right to amend or terminate the Plan at any
time by written action of the Executive Office; provided, however, that no such
action shall adversely affect any Participant or Beneficiary with respect to the
amount of an Incentive Compensation Award theretofore granted.

 

ARTICLE VI

MISCELLANEOUS

 

1.                   Nonalienation.  No Participant or Beneficiary shall in any
manner encumber or dispose of the right to receive any payment of an Incentive
Compensation Award hereunder.  If a Participant or Beneficiary attempts to
assign, transfer, alienate or encumber the right to receive the amount of an
Incentive Compensation Award hereunder or permits the same to be subject to
alienation, garnishment, attachment, execution or levy of any kind, then the
Executive Office in its sole discretion may hold or apply such amount or any
part thereof to or for the benefit of such Participant or Beneficiary, the
Participant’s or Beneficiary’s spouse, children, blood relatives or other
dependents, or any of them in such manner and in such proportions as the
Executive Office may consider proper.  Any such application of the amount of an
Incentive Compensation Award may be made without the intervention of a
guardian.  The receipt by the payee shall constitute a complete acquittance to
the Company with respect thereto and neither the Company nor any Subsidiary nor
the Executive Office shall have any responsibility for the proper application
thereof.

 

2.                   Plan Noncontractual.  Nothing herein contained shall be
construed as a commitment or agreement on the part of any person employed by the
Company or a Subsidiary to continue such person’s employment with the Company or
Subsidiary, and nothing herein contained shall be construed as a commitment or
agreement on the part of the Company or any Subsidiary to continue the
employment or the annual rate of compensation of any such person for any period,
and all Participants shall remain subject to discharge to the same extent as if
the Plan had never been put into effect.

 

3.                   Interest of Participant and Beneficiary.  The obligation of
the Company under the Plan to make payments of an Incentive Compensation Award
merely constitutes the unsecured promise of the Company to make payments from
its general assets as provided therein, and

 

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no Participant or Beneficiary shall have any interest, or a lien or prior claim
upon any property of the Company or any Subsidiary.

 

4.                   Claims of other Persons.  The provisions of the Plan shall
in no event be construed as giving any person, firm or corporation any legal or
equitable right as against the Company or any Subsidiary, their officers,
employees, or directors, except any such rights as are especially provided for
in the Plan or are hereafter created in accordance with the terms and provisions
of the Plan.

 

5.                   Facility of Payment.  If any person to whom an Incentive
Compensation Award is payable is unable to care for his affairs because of
illness or accident, any payment due (unless prior claim therefore shall have
been made by a duly qualified guardian or other legal representative) may be
paid to the spouse, parent, child, brother or sister, or any other individual
deemed by the Executive Office to be maintaining or responsible for the
maintenance of such person.  Any payment made in accordance with the provisions
of this Section 5 shall be a complete discharge of any liability of the Plan
with respect to such payment.

 

6.                   Absence of Liability.  No member of the Board of Directors
of the Company or of a Subsidiary, no member of the Executive Office, or the
Chairman and Chief Executive Officer, or any officers of the Company or a
Subsidiary shall be liable for any act or action hereunder, whether of
commission or omission, taken by any other member, or by any officer, agent, or
employee, or except in circumstances involving his bad faith, for anything done
or omitted to be done by him.

 

7.                   Severability.  The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.

 

8.                   Governing Law.  The provisions of the Plan shall be
governed and construed in accordance with the laws of the State of Iowa, U.S.A.

 

 

Executed this 29th day of December, 2008

 

 

 

Sauer-Danfoss Inc.

 

 

 

By

    /s/ Ron Hanson

 

 

 Ron Hanson – VP HR

 

 

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