Exhibit 10.1

 

 

[g254971ke01i001.gif]

 

 

Employment Agreement
for Wolfgang Schramm

 

Sauer Danfoss Inc.

 

--------------------------------------------------------------------------------

 

EXECUTIVE OFFICER EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE OFFICER EMPLOYMENT AGREEMENT (this “Agreement”) is made effective
as of the 1st day of October, 2007 (the “Effective Date”), by and between
Sauer-Danfoss Inc. (the “Company”) and Wolfgang Schramm (the “Executive”).

 

WHEREAS, the Company desires to provide for the continued employment of the
Executive on the terms and conditions set forth herein, in the best interest of
the Company and its constituencies; and

 

WHEREAS, the Executive desires to continue to be employed by the Company as
provided herein; and

 

NOW, THEREFORE, in consideration of the premises and the respective covenants,
promises and agreements of the parties herein contained, the parties agree as
follows:

 

1.             EMPLOYMENT. THE COMPANY AGREES TO CONTINUE TO EMPLOY THE
EXECUTIVE AND THE EXECUTIVE AGREES TO CONTINUE TO BE EMPLOYED ON AN EXCLUSIVE
AND FULL-TIME BASIS BY THE COMPANY FOR THE PERIOD AND UPON THE TERMS AND
CONDITIONS SPECIFIED HEREIN. DURING THE TERM (SET FORTH IN SECTION 2 BELOW), AND
CONSISTENT WITH THE ABOVE, THE EXECUTIVE AGREES TO SERVE THE COMPANY FAITHFULLY
AND TO THE BEST OF THE EXECUTIVE’S ABILITY, TO DEVOTE THE EXECUTIVE’S ENTIRE
BUSINESS TIME, ENERGY AND SKILL TO SUCH EMPLOYMENT, AND TO USE THE EXECUTIVE’S
BEST EFFORTS, SKILL AND ABILITY TO PROMOTE THE COMPANY’S INTERESTS.

 

2.             TERM; EMPLOYMENT PERIOD. THE TERM OF THIS AGREEMENT (THE “TERM”)
SHALL BEGIN ON THE EFFECTIVE DATE AND SHALL END ON THE EARLIER OF:

 

(A)           THE SECOND ANNIVERSARY OF THE EFFECTIVE DATE; OR

 

(B)           SUCH EARLIER DATE ON WHICH THE TERM IS TERMINATED PURSUANT TO
SECTION 6;

 

PROVIDED, HOWEVER, THAT UPON THE SECOND ANNIVERSARY OF THE EFFECTIVE DATE, AND
UPON EACH ANNIVERSARY THEREAFTER, THE TERM SHALL BE AUTOMATICALLY EXTENDED FOR
ONE (1) YEAR UNLESS EITHER THE COMPANY OR THE EXECUTIVE SHALL HAVE GIVEN WRITTEN
NOTICE TO THE OTHER AT LEAST NINETY (90) DAYS PRIOR THERETO THAT THE TERM SHALL
NOT BE SO EXTENDED. THE PERIOD DURING WHICH THE EXECUTIVE IS EMPLOYED BY THE
COMPANY IS REFERRED TO AS THE “EMPLOYMENT PERIOD.”  THE DATE ON WHICH THE
TERMINATION OF THE EXECUTIVE’S EMPLOYMENT BECOMES EFFECTIVE IS REFERRED TO AS
THE “TERMINATION DATE.”

 

3.             POSITION AND DUTIES. DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE
SHALL SERVE AS EXECUTIVE VICE PRESIDENT & PRESIDENT, CONTROL PRODUCTS DIVISION
OF THE COMPANY AND SHALL HAVE SUCH RESPONSIBILITIES, DUTIES AND AUTHORITY AS SET
FORTH IN THE BYLAWS OF THE COMPANY OR AS OTHERWISE ARE CONSISTENT WITH SUCH
POSITION AS WELL AS SUCH ADDITIONAL RESPONSIBILITIES, DUTIES AND AUTHORITY AS
THE COMPANY’S PRESIDENT AND CHIEF EXECUTIVE OFFICER OR THE COMPANY’S BOARD OF
DIRECTORS (THE “BOARD”) SHALL DETERMINE AND ASSIGN FROM TIME TO TIME. DURING THE
EMPLOYMENT PERIOD, THE EXECUTIVE SHALL REPORT TO THE COMPANY’S PRESIDENT AND
CHIEF EXECUTIVE OFFICER OR THE CHIEF EXECUTIVE OFFICER’S DESIGNEE. THE EXECUTIVE
SHALL FULLY COMPLY WITH THE COMPANY’S WORLDWIDE CODE OF LEGAL AND ETHICAL
BUSINESS CONDUCT AS IN EFFECT FROM TIME TO TIME, OR ANY SUCCESSOR OR SIMILAR
CODE OR RULES OF CONDUCT. THE EXECUTIVE SHALL DEVOTE SUBSTANTIALLY ALL HIS
WORKING TIME AND EFFORTS TO THE BUSINESS AND AFFAIRS OF THE COMPANY AND SHALL
USE HIS BEST EFFORTS TO CARRY OUT HIS

 

2

--------------------------------------------------------------------------------

 

RESPONSIBILITIES FAITHFULLY AND EFFICIENTLY IN A PROFESSIONAL AND ETHICAL
MANNER. NOTWITHSTANDING THE FOREGOING, IT IS UNDERSTOOD THAT DURING THE
EMPLOYMENT PERIOD, SUBJECT TO ANY CONFLICT OF INTEREST POLICIES OF THE COMPANY
AND SECTION 9, THE EXECUTIVE MAY

 

(A)           SERVE IN ANY CAPACITY WITH ANY CIVIC, CHARITABLE, EDUCATIONAL OR
PROFESSIONAL ORGANIZATION PROVIDED THAT SUCH SERVICE DOES NOT MATERIALLY
INTERFERE WITH HIS DUTIES AND RESPONSIBILITIES TO THE COMPANY;

 

(B)           MAKE AND MANAGE PERSONAL INVESTMENTS OF HIS CHOICE; AND

 

(C)           WITH THE PRIOR CONSENT OF THE COMPANY’S PRESIDENT AND CHIEF
EXECUTIVE OFFICER SERVE ON THE BOARD OF DIRECTORS OF ONE (1) FOR-PROFIT BUSINESS
ENTERPRISE.

 

THE EXECUTIVE MAY SERVE FROM TIME TO TIME AS A DIRECTOR AND /OR MEMBER OF A
COMMITTEE OF THE COMPANY AND/OR AS A DIRECTOR AND/OR MEMBER OF A COMMITTEE
AND/OR OFFICER OF ONE OR MORE SUBSIDIARIES OR RELATED OR AFFILIATED COMPANIES OR
JOINT VENTURES OF THE COMPANY. THE EXECUTIVE AGREES TO FULFILL HIS DUTIES AS
SUCH DIRECTOR, MEMBER OF COMMITTEE OR OFFICER WITHOUT ADDITIONAL COMPENSATION
OTHER THAN THE COMPENSATION PROVIDED FOR IN THIS AGREEMENT.

 

4.             PLACE OF ASSIGNMENT. FOLLOWING A BRIEF INTRODUCTORY PERIOD WHERE
THE EXECUTIVE SHALL WORK OUT OF HIS MICHIGAN HOME, THE EXECUTIVE’S PLACE OF
ASSIGNMENT SHALL BE THE COMPANY’S PLYMOUTH, MINNESOTA PLANT SITE. DURING THE
EMPLOYMENT PERIOD, THE EXECUTIVE’S PLACE OF ASSIGNMENT MAY BE AT ANY OF THE
COMPANY’S PLANT SITES AND OFFICES LOCATED IN LINCOLNSHIRE, IL/USA; PLYMOUTH,
MN/USA; NORDBORG, DENMARK; NEUMÜNSTER, GERMANY; OR AT ANY OTHER LOCATION LATER
DEFINED AS A SAUER-DANFOSS INC. EXECUTIVE OFFICE OR HEADQUARTERS LOCATION.

 

5.             COMPENSATION AND BENEFITS.

 

(A)           SALARY. DURING THE EMPLOYMENT PERIOD, THE COMPANY SHALL PAY TO THE
EXECUTIVE AN INITIAL ANNUAL BASE SALARY OF THREE HUNDRED THOUSAND DOLLARS
($300,000) ON AN ANNUALIZED BASIS (AS THE SAME MAY BE INCREASED FROM TIME TO
TIME, THE “BASE SALARY”), SUCH SALARY TO BE PAID IN PERIODIC INSTALLMENTS IN
ACCORDANCE WITH THE COMPANY’S REGULAR PAYROLL PRACTICES AS IN EFFECT FROM TIME
TO TIME. THE BASE SALARY SHALL BE REVIEWED ANNUALLY BY THE COMPENSATION
COMMITTEE OF THE BOARD AND MAY BE INCREASED FROM TIME TO TIME IN ACCORDANCE WITH
NORMAL BUSINESS PRACTICES OF THE COMPANY AND, IF SO INCREASED, SHALL NOT
THEREAFTER BE REDUCED. NOTWITHSTANDING THE FOREGOING, THE BASE SALARY MAY BE
REDUCED AT ANY TIME AND FROM TIME TO TIME AS PART OF ACROSS-THE-BOARD REDUCTIONS
APPLIED SIMILARLY TO OTHER  SENIOR EXECUTIVES OF THE COMPANY. ALL PAYMENTS OF
BASE SALARY OR OTHER COMPENSATION HEREUNDER SHALL BE LESS SUCH DEDUCTIONS OR
WITHHOLDINGS AS ARE REQUIRED BY APPLICABLE LAW AND REGULATIONS.

 

(B)           ANNUAL INCENTIVE. DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE
SHALL BE ELIGIBLE TO EARN AN ANNUAL INCENTIVE UNDER THE COMPANY’S ANNUAL
PERFORMANCE INCENTIVE PLAN, AS IN EFFECT FROM TIME TO TIME, FOR EXECUTIVES AT
THE EXECUTIVE’S LEVEL (THE “INCENTIVE PLAN”), SUBJECT TO ACHIEVEMENT OF
PERFORMANCE GOALS DETERMINED IN ACCORDANCE WITH THE TERMS OF THE INCENTIVE PLAN
(SUCH ANNUAL INCENTIVE REFERRED TO HEREIN AS THE “ANNUAL INCENTIVE”). THE ANNUAL
INCENTIVE SHALL BE PAYABLE IN A CASH LUMP SUM AT SUCH TIME AS IT IS ORDINARILY
PAID IN ACCORDANCE WITH THE TERMS OF THE INCENTIVE PLAN, BUT IN NO EVENT LATER
THAN THE 15TH DAY OF THE THIRD MONTH FOLLOWING THE END OF EACH FISCAL YEAR OF
THE COMPANY. EXCEPT AS OTHERWISE

 

3

--------------------------------------------------------------------------------

 

SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE EXECUTIVE SHALL ONLY BE ELIGIBLE TO
RECEIVE THE ANNUAL INCENTIVE IF THE EXECUTIVE IS EMPLOYED BY THE COMPANY THROUGH
THE LAST DAY OF THE FISCAL YEAR TO WHICH THE ANNUAL INCENTIVE RELATES. THE
ACTUAL AMOUNT OF ANY ANNUAL INCENTIVE SHALL BE DETERMINED BY AND IN ACCORDANCE
WITH THE TERMS OF THE COMPANY’S INCENTIVE PLAN AND THE EXECUTIVE SHALL HAVE NO
ABSOLUTE RIGHT TO AN ANNUAL INCENTIVE IN ANY YEAR.

 

(C)           EXPENSES. DURING THE EMPLOYMENT PERIOD, THE COMPANY SHALL PROMPTLY
REIMBURSE THE EXECUTIVE FOR ALL REASONABLE OUT-OF-POCKET EXPENSES ACTUALLY
INCURRED BY THE EXECUTIVE IN CONNECTION WITH THE BUSINESS OF THE COMPANY AND THE
PERFORMANCE OF HIS DUTIES UNDER THIS AGREEMENT IN ACCORDANCE WITH THE TERMS OF
THE COMPANY’S POLICIES AND UPON PRESENTATION OF EXPENSE STATEMENTS OR VOUCHERS
OR SUCH OTHER SUPPORTING INFORMATION AS THE COMPANY MAY CUSTOMARILY REQUIRE OF
ITS SENIOR EXECUTIVES FROM TIME TO TIME.

 

(D)           BENEFIT PLANS. DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE SHALL
BE ENTITLED TO PARTICIPATE IN ALL OF THE EMPLOYEE BENEFIT PLANS, LONG TERM
INCENTIVE PLANS, RETIREMENT AND HEALTH PLANS, PROGRAMS, AGREEMENTS AND
ARRANGEMENTS PROVIDED TO SENIOR EXECUTIVES OF THE COMPANY, AS SUCH ARE IN EFFECT
FROM TIME TO TIME, SUBJECT TO THE ELIGIBILITY REQUIREMENTS AND TERMS AND
CONDITIONS OF SUCH PLANS, PROGRAMS, AGREEMENTS AND ARRANGEMENTS. THE COMPANY
RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO ADOPT, MODIFY, AMEND OR TERMINATE
SUCH PLANS, PROGRAMS, AGREEMENTS AND ARRANGEMENTS AT ANY TIME.

 

(E)           PERQUISITES. DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE SHALL BE
ENTITLED TO PARTICIPATE IN THOSE PERQUISITES PROVIDED TO SENIOR EXECUTIVES OF
THE COMPANY, AS SUCH ARE IN EFFECT FROM TIME TO TIME, SUBJECT TO THE ELIGIBILITY
REQUIREMENTS AND TERMS AND CONDITIONS OF SUCH PERQUISITES. THE COMPANY RESERVES
THE RIGHT, IN ITS SOLE DISCRETION, TO ADOPT, MODIFY, AMEND OR TERMINATE SUCH
PERQUISITES AT ANY TIME.

 

(F)            PAID TIME OFF / VACATIONS. DURING THE EMPLOYMENT PERIOD, THE
EXECUTIVE SHALL BE ENTITLED TO PAID TIME OFF, VACATION TIME AND PAID HOLIDAYS,
IN ACCORDANCE WITH THE COMPANY’S LOCAL POLICIES OR PRACTICE FOR ITS SENIOR
EXECUTIVES, AS SUCH ARE IN EFFECT FROM TIME TO TIME. WHILE BASED IN THE US, THE
EXECUTIVE SHALL ACCRUE PAID TIME OFF, EXCLUSIVE OF PAID HOLIDAYS, AT THE RATE OF
FIVE WEEKS PER CALENDAR YEAR. IN 2007, THE FIRST YEAR OF THE EMPLOYMENT PERIOD,
A PRO-RATA AMOUNT OF PAID TIME-OFF WILL BE ACCRUED OVER THE COURSE OF THE YEAR.

 

6.             TERMINATION OF EMPLOYMENT.

 

(A)           TERMINATION EVENTS.

 

(I)            IMMEDIATE TERMINATIONS. EXECUTIVE’S EMPLOYMENT AND THE TERM SHALL
TERMINATE IMMEDIATELY UPON THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

(A)          DEATH:  THE DEATH OF THE EXECUTIVE;

 

(B)           DISABILITY:  THE DISABILITY OF THE EXECUTIVE, WHERE “DISABILITY”
SHALL MEAN THE EXECUTIVE IS INCAPABLE OF PERFORMING HIS PRINCIPAL DUTIES BECAUSE
OF PHYSICAL OR MENTAL INCAPACITY FOR A PERIOD OF 180 CONSECUTIVE DAYS IN ANY
12-MONTH PERIOD; PROVIDED SUCH TERMINATION DATE

 

4

--------------------------------------------------------------------------------

 

FOR DISABILITY SHALL BE SET FORTH IN THE NOTICE OF TERMINATION DELIVERED TO THE
EXECUTIVE BY THE COMPANY;

 

(C)           RETIREMENT:  THE RETIREMENT OF THE EXECUTIVE, WHERE “RETIREMENT”
SHALL HAVE THAT MEANING AS CURRENTLY IN EFFECT UNDER THE COMPANY’S DEFINED
CONTRIBUTION RETIREMENT PLAN ON THE DAY IMMEDIATELY PRECEDING SUCH RETIREMENT;
AND

 

(D)          FOR CAUSE:  NOTICE OF TERMINATION FROM THE COMPANY FOR CAUSE, WHERE
“CAUSE” SHALL MEANS:

 

(I)            THE WILLFUL FAILURE OF THE EXECUTIVE TO PERFORM HIS MATERIAL
DUTIES WITH THE COMPANY AS PROVIDED IN THIS AGREEMENT, AND WHICH FAILURE IS NOT
CURED (IF CAPABLE OF CURE) WITHIN 15 DAYS AFTER RECEIPT BY THE EXECUTIVE OF
WRITTEN NOTICE FROM THE COMPANY OF SUCH FAILURE, WHICH NOTICE IDENTIFIES THE
MANNER IN WHICH THE EXECUTIVE HAS WILLFULLY FAILED TO PERFORM;

 

(II)           GROSS NEGLIGENCE OR WILLFUL MISCONDUCT IN THE PERFORMANCE OF THE
EXECUTIVE’S DUTIES;

 

(III)         THE ENGAGING BY THE EXECUTIVE IN WILLFUL CONDUCT WHICH IS
DEMONSTRABLY INJURIOUS TO THE COMPANY, MONETARILY OR OTHERWISE, SUCH AS ACTUAL
OR ATTEMPTED THEFT OR EMBEZZLEMENT OF COMPANY ASSETS;

 

(IV)         THE CONVICTION (TREATING A NOLO CONTENDERE PLEA AS A CONVICTION) OF
THE EXECUTIVE OF ANY CRIME OR OFFENSE CONSTITUTING A FELONY (WHETHER OR NOT ANY
RIGHT TO APPEAL HAS BEEN OR MAY BE EXERCISED);

 

(V)           USE OF ILLEGAL DRUGS;

 

(VI)         COMMISSION OR AN ACT OF MORAL TURPITUDE THAT IN THE JUDGMENT OF THE
BOARD OF DIRECTORS OF THE COMPANY CAN REASONABLY BE EXPECTED TO HAVE AN ADVERSE
EFFECT ON THE BUSINESS, REPUTATION OR FINANCIAL SITUATION OF THE COMPANY AND/OR
THE ABILITY OF THE EXECUTIVE TO PERFORM THE EXECUTIVE’S DUTIES;

 

(VII)        A FAILURE BY THE EXECUTIVE TO COMPLY WITH ANY MATERIAL PROVISION OF
THIS AGREEMENT, WHICH FAILURE IS NOT CURED (IF CAPABLE OF CURE) WITHIN 15 DAYS
AFTER RECEIPT BY EXECUTIVE OF WRITTEN NOTICE FROM THE COMPANY OF SUCH
NONCOMPLIANCE BY THE EXECUTIVE; OR

 

(VIII)       BREACH OF FIDUCIARY DUTY TO THE COMPANY.

 

TERMINATION OF THE EXECUTIVE FOR CAUSE SHALL MEAN TERMINATION BY ACTION OF THE
COMPANY’S BOARD OF DIRECTORS, AT A MEETING DULY CALLED AND HELD UPON AT LEAST 15
DAYS’ WRITTEN NOTICE TO THE EXECUTIVE SPECIFYING THE PARTICULARS OF THE ACTION
OR INACTION ALLEGED TO CONSTITUTE CAUSE AND AT WHICH MEETING THE

 

5

--------------------------------------------------------------------------------

 

EXECUTIVE AND HIS COUNSEL WERE ENTITLED TO BE PRESENT AND GIVEN ADEQUATE
OPPORTUNITY TO BE HEARD. FOR PURPOSES OF CLAUSES (I), (II) AND (III) OF THE
ABOVE DEFINITION, ACTION OR INACTION BY THE EXECUTIVE SHALL NOT BE CONSIDERED
“WILLFUL” UNLESS DONE OR OMITTED BY HIM (1) INTENTIONALLY OR NOT IN GOOD FAITH
AND (2) WITHOUT REASONABLE BELIEF THAT HIS ACTION OR INACTION WAS IN THE BEST
INTEREST OF THE COMPANY, AND SHALL NOT INCLUDE FAILURE TO ACT BY REASON OF TOTAL
OR PARTIAL INCAPACITY DUE TO PHYSICAL OR MENTAL ILLNESS.

 

(II)           TERMINATIONS REQUIRING NOTICE BY EITHER PARTY. THE EXECUTIVE’S
EMPLOYMENT MAY BE TERMINATED EITHER BY THE COMPANY OR BY THE EXECUTIVE FOR ANY
OF THE BELOW REASONS PROVIDE NOTICE OF TERMINATION IS DELIVERED BY ONE PARTY TO
THE OTHER. THE NOTICE OF TERMINATION SHALL SET FORTH THE APPLICABLE TERMINATION
DATE; PROVIDED, HOWEVER, IN SUCH EVENT, THE TERM SHALL TERMINATE NO EARLIER THAN
THIRTY (30) DAYS FOLLOWING THE DATE ON WHICH SUCH NOTICE OF TERMINATION IS
DELIVERED TO THE RESPECTIVE PARTY. NOTWITHSTANDING THE FOREGOING, THE COMPANY
MAY REQUIRE THAT THE EXECUTIVE CEASE PERFORMING SOME OR ALL OF THE EXECUTIVE’S
DUTIES AND/OR NOT BE PRESENT AT THE COMPANY’S OFFICES AND/OR OTHER FACILITIES.

 

(A)          TERMINATION BY EXECUTIVE FOR GOOD REASON. THE EXECUTIVE MAY RESIGN
THE EXECUTIVE’S POSITION FOR GOOD REASON. AS USED HEREIN, “GOOD REASON” MEANS,
WITHOUT THE EXECUTIVE’S WRITTEN CONSENT:

 

(I)            A MATERIAL DIMINUTION IN THE NATURE OR STATUS OF THE EXECUTIVE’S
DUTIES, RESPONSIBILITIES OR AUTHORITY WHICH IS INCONSISTENT WITH THOSE IN EFFECT
AS OF THE EFFECTIVE DATE;

 

(II)           A FAILURE BY THE COMPANY TO PAY OR PROVIDE ANY OF THE
COMPENSATION SET FORTH IN THIS AGREEMENT;

 

(III)         A FAILURE BY THE COMPANY TO COMPLY WITH ANY MATERIAL PROVISION OF
THIS AGREEMENT; OR

 

(IV)         RESIGNATION IN COMPLIANCE WITH APPLICABLE LAW OR RULES OF
PROFESSIONAL CONDUCT.

 

NOTWITHSTANDING THE FOREGOING, IN ORDER TO TERMINATE EMPLOYMENT FOR GOOD REASON,
THE EXECUTIVE MUST PROVIDE WRITTEN NOTICE OF TERMINATION WITHIN SIXTY (60) DAYS
OF THE INITIAL EXISTENCE OF THE CONDITION THAT HE BELIEVES IS PROVIDING HIM A
GOOD REASON TERMINATION, EXPLAINING IN DETAIL SUCH CONDITION AND THE DATE UPON
WHICH IT FIRST AROSE. CONTINUATION OF EMPLOYMENT WITHOUT WRITTEN NOTICE OF
TERMINATION DURING THE SIXTY (60) DAY PERIOD FOLLOWING THE INITIAL EXISTENCE OF
THE CONDITION SHALL CONSTITUTE SUCH EXECUTIVE’S ACCEPTANCE OF ANY CHANGE AND
MAKE NULL AND VOID THE EXECUTIVE’S RIGHT TO TERMINATE FOR GOOD REASON WITH
RESPECT TO SUCH EVENT. UPON RECEIPT OF A WRITTEN NOTICE OF TERMINATION FOR GOOD
REASON AND UNDERLYING CONDITION THEREFOR, THE COMPANY WILL BE ALLOWED SIXTY (60)
DAYS TO CURE SUCH CONDITION AND THEREBY AVOID A GOOD REASON TERMINATION.

 

6

--------------------------------------------------------------------------------

 

(B)           TERMINATION BY THE COMPANY WITHOUT CAUSE. THE COMPANY MAY
TERMINATE THE EXECUTIVE’S POSITION WITHOUT CAUSE.

 

(C)           TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. THE EXECUTIVE MAY
RESIGN THE EXECUTIVE’S POSITION WITHOUT GOOD REASON.

 

(B)           PAYMENTS UPON A TERMINATION EVENT.

 

(I)            FOLLOWING A TERMINATION FOR ANY REASON. IN THE EVENT OF THE
TERMINATION OF THE EXECUTIVE’S EMPLOYMENT HEREUNDER FOR ANY REASON, THE
EXECUTIVE (OR HIS ESTATE OR REPRESENTATIVE, AS APPLICABLE) SHALL BE ENTITLED TO
RECEIVE ANY:

 

(A)          BASE SALARY;

 

(B)           ANNUAL INCENTIVE;

 

(C)           PAID TIME OFF; AND

 

(D)          EXPENSES

 

THAT HAVE IN EACH CASE ACCRUED BUT ARE UNPAID AS OF THE TERMINATION DATE AS WELL
AS ANY POST-TERMINATION BENEFITS TO WHICH HE MAY BE ENTITLED ACCORDING TO THE
COMPANY’S RETIREMENT, INSURANCE AND OTHER BENEFIT PLANS, PROGRAMS AND
ARRANGEMENTS AS IN EFFECT IMMEDIATELY PRIOR TO THE TERMINATION DATE, OTHER THAN
MEDICAL BENEFIT PLANS (THE “ACCRUED BENEFITS”).

 

(II)           DEATH. UPON THE TERMINATION OF THE EXECUTIVE’S EMPLOYMENT BECAUSE
OF HIS DEATH, IN ADDITION TO THE ACCRUED BENEFITS SET FORTH IN SUBPARAGRAPH (I)
IMMEDIATELY ABOVE, THE EXECUTIVE’S ESTATE OR REPRESENTATIVE, AS THE CASE MAY BE,
SHALL ALSO BE ENTITLED TO RECEIVE A LUMP SUM PAYMENT IN CASH EQUAL TO A “PRO
RATA” INCENTIVE PAYMENT WHICH IS THE PRODUCT OF THE EXECUTIVE’S TARGET INCENTIVE
OPPORTUNITY (AS DEFINED IN THE INCENTIVE PLAN) AS IN EFFECT ON THE TERMINATION
DATE, MULTIPLIED BY A FRACTION (THE NUMERATOR OF WHICH SHALL BE THE NUMBER OF
WHOLE MONTHS WORKED BY THE EXECUTIVE DURING THE COMPANY’S FISCAL YEAR IN WHICH
THE TERMINATION DATE OCCURS AND THE DENOMINATOR OF WHICH SHALL BE THE NUMBER 12
(THE “PRO RATA ANNUAL INCENTIVE”)). IN ADDITION, THOSE IMMEDIATE FAMILY MEMBERS
WHO WERE PARTICIPATING IN THE COMPANY’S MEDICAL BENEFIT PLANS AS OF THE DATE OF
THE EXECUTIVE’S DEATH SHALL CONTINUE TO PARTICIPATE IN THE COMPANY’S MEDICAL
BENEFIT PLANS AT ACTIVE EMPLOYEE CONTRIBUTION RATES FOR THE ONE-YEAR PERIOD
IMMEDIATELY FOLLOWING THE DATE OF THE EXECUTIVE’S DEATH.

 

(III)          DISABILITY. UPON THE TERMINATION OF THE EXECUTIVE’S EMPLOYMENT
BECAUSE OF HIS DISABILITY, IN ADDITION TO THE ACCRUED BENEFITS SET FORTH IN
SUBPARAGRAPH (I) IMMEDIATELY ABOVE, THE EXECUTIVE (OR HIS REPRESENTATIVE, AS
APPLICABLE) SHALL BE ENTITLED TO:

 

(A)          A LUMP SUM PAYMENT IN CASH EQUAL TO THE PRO RATA ANNUAL INCENTIVE;
AND

 

7

--------------------------------------------------------------------------------

 

(B)           THE CONTINUATION OF MEDICAL BENEFIT PLANS AT THE LEVELS IN EFFECT
AS OF THE TERMINATION DATE, AT NO ADDITIONAL COST TO THE EXECUTIVE THAN THAT
WHICH WAS IN EFFECT AS OF THE TERMINATION DATE, FOR THE ONE-YEAR PERIOD
IMMEDIATELY FOLLOWING THE TERMINATION DATE; PROVIDED, HOWEVER, THAT SUCH MEDICAL
BENEFITS SHALL BE REDUCED TO THE EXTENT COMPARABLE MEDICAL BENEFITS ARE MADE
AVAILABLE TO THE EXECUTIVE FROM A SUCCESSOR EMPLOYER, AND THE EXECUTIVE SHALL BE
OBLIGATED TO REPORT SUCH BENEFITS TO THE COMPANY.

 

IT IS ACKNOWLEDGED AND AGREED BY THE EXECUTIVE THAT HE SHALL BE PRECLUDED FROM
TERMINATING HIS EMPLOYMENT FOR GOOD REASON IN THE EVENT THAT HIS EMPLOYMENT IS
TERMINATED UNDER THIS SECTION 6(B)(III).

 

(IV)          TERMINATION BY COMPANY FOR CAUSE OR TERMINATION BY EXECUTIVE
WITHOUT GOOD REASON. UPON THE TERMINATION OF THE EXECUTIVE’S EMPLOYMENT BY THE
COMPANY FOR CAUSE OR BY THE EXECUTIVE WITHOUT GOOD REASON, EXECUTIVE SHALL ONLY
BE ENTITLED TO THE ACCRUED BENEFITS SET FORTH IN SUBPARAGRAPH (I) IMMEDIATELY
ABOVE.

 

(V)           TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION BY THE
EXECUTIVE FOR GOOD REASON. UPON THE TERMINATION OF THE EXECUTIVE’S EMPLOYMENT BY
THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON, IN ADDITION TO
THE ACCRUED BENEFITS SET FORTH IN SUBPARAGRAPH (I) IMMEDIATELY ABOVE, THE
EXECUTIVE (OR HIS ESTATE OR REPRESENTATIVE, AS THE CASE MAY BE) SHALL BE
ENTITLED TO RECEIVE:

 

(A)          THE PRO RATA ANNUAL INCENTIVE;

 

(B)           A LUMP SUM PAYMENT IN CASH EQUAL TO THE EXECUTIVE’S BASE SALARY
PLUS TARGET INCENTIVE OPPORTUNITY AS IN EFFECT ON THE TERMINATION DATE
MULTIPLIED BY ONE AND ONE/HALF (1.5);

 

(C)           THE CONTINUATION OF MEDICAL PLAN BENEFITS AT THE LEVELS IN EFFECT
AS OF THE TERMINATION DATE AT NO ADDITIONAL COST TO THE EXECUTIVE THAN THAT
WHICH WAS IN EFFECT AS OF THE TERMINATION DATE FOR A PERIOD OF ONE YEAR;
PROVIDED, HOWEVER, THAT SUCH MEDICAL BENEFITS SHALL BE REDUCED TO THE EXTENT
COMPARABLE MEDICAL BENEFITS ARE MADE AVAILABLE TO THE EXECUTIVE FROM A SUCCESSOR
EMPLOYER, AND THE EXECUTIVE SHALL BE OBLIGATED TO REPORT SUCH BENEFITS TO THE
COMPANY; AND

 

(D)          EXECUTIVE LEVEL CAREER OUTPLACEMENT SERVICES, PROVIDED SUCH
SERVICES ARE PERFORMED BY A MUTUALLY AGREEABLE OUTPLACEMENT FIRM AND ARE
PERFORMED WITHIN 12 MONTHS OF THE TERMINATION DATE; TO THE EXTENT THE EXECUTIVE
INCURS QUALIFYING COSTS UNDER THIS PROVISION, THE COMPANY WILL REIMBURSE THE
EXECUTIVE OR PAY SUCH COSTS DIRECTLY, AS APPROPRIATE.

 

(C)           CHANGE IN CONTROL SEVERANCE PROVISIONS. SECTION 7 PROVIDES FOR
PAYMENT TO THE EXECUTIVE IF HIS EMPLOYMENT IS TERMINATED FOR CERTAIN REASONS
FOLLOWING A CHANGE OF CONTROL AS DEFINED IN SECTION 7. THE EXECUTIVE
ACKNOWLEDGES THAT IN THE EVENT HE BECOMES

 

8

--------------------------------------------------------------------------------

 

ENTITLED TO THE PAYMENT SPECIFIED IN SECTION 7(A), THAT PAYMENT WILL BE IN LIEU
OF ANY OTHER PAYMENTS TO BE MADE UNDER THE TERMS OF THIS AGREEMENT.

 

(D)           RELEASE AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION 6, THE EXECUTIVE SHALL BE REQUIRED TO EXECUTE THE
COMPANY’S THEN CURRENT STANDARD RELEASE AGREEMENT AS A CONDITION TO RECEIVING
ANY OF THE PAYMENTS AND BENEFITS PROVIDED FOR IN THIS SECTION 6 OR SECTION 7 OF
THIS AGREEMENT. IT IS ACKNOWLEDGED AND AGREED THAT THE THEN CURRENT STANDARD
RELEASE AGREEMENT SHALL NOT DIMINISH OR TERMINATE THE EXECUTIVE’S RIGHTS UNDER
THIS AGREEMENT INCLUDING, BUT NOT LIMITED TO, THOSE SPECIFIED IN SECTIONS 6(E),
8 AND 22.

 

(E)           NO MITIGATION. UPON TERMINATION OF THE EXECUTIVE’S EMPLOYMENT WITH
THE COMPANY, SUBJECT TO THE EXECUTIVE’S AFFIRMATIVE OBLIGATIONS UNDER SECTION
6(B)(III) AND (V), THE EXECUTIVE SHALL BE UNDER NO OBLIGATION TO SEEK OTHER
EMPLOYMENT OR OTHERWISE MITIGATE THE OBLIGATIONS OF THE COMPANY UNDER THIS
AGREEMENT.

 

(F)            DEFINITION OF THE COMPANY. WHENEVER THIS AGREEMENT REFERS TO THE
EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, OR THE TERMINATION OF THE EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY, THE TERM “COMPANY” SHALL INCLUDE SAUER-DANFOSS INC.
AND ANY OF ITS SUBSIDIARIES OR RELATED OR AFFILIATED COMPANIES OR JOINT VENTURES
THAT EMPLOY THE EXECUTIVE. IN ADDITION, WHEN USED IN SECTIONS 9, 10, 11 AND 12
OF THIS AGREEMENT, THE TERM “COMPANY” SHALL INCLUDE SAUER-DANFOSS INC. AND ANY
OF ITS SUBSIDIARIES OR RELATED OR AFFILIATED COMPANIES OR JOINT VENTURES.

 

7.             CHANGE IN CONTROL.

 

(A)           PAYMENTS RELATED TO EMPLOYMENT TERMINATIONS AFTER A CHANGE IN
CONTROL. DURING THE TERM OF THIS AGREEMENT, IN THE EVENT THE EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY IS TERMINATED WITHIN TWO (2) YEARS FOLLOWING A
CHANGE IN CONTROL (AS SUCH TERM IS DEFINED IN  PARAGRAPH (B) IMMEDIATELY BELOW),
UNLESS SUCH TERMINATION IS:

 

(I)            BY THE COMPANY FOR CAUSE (AS THE TERM CAUSE IS DEFINED IN SECTION
6(A)(I)(D) ABOVE);

 

(II)           BY REASON OF DEATH, DISABILITY, OR RETIREMENT; OR

 

(III)          BY THE EXECUTIVE WITHOUT GOOD REASON (AS THE TERM GOOD REASON IS
DEFINED IN SECTION 6(II)(A) ABOVE),

 

THEN IN LIEU OF ALL OTHER BENEFITS PROVIDED TO THE EXECUTIVE UNDER THE
PROVISIONS OF THIS AGREEMENT, THE COMPANY SHALL PAY TO THE EXECUTIVE AND PROVIDE
HIM WITH THE FOLLOWING:

 

(A)          HIS ACCRUED BENEFITS (IN FULL SATISFACTION FOR THESE AMOUNTS OWED
TO THE EXECUTIVE);

 

(B)           A PRO RATA ANNUAL INCENTIVE (WITH THIS PAYMENT BEING IN LIEU OF
ANY OTHER PAYMENT TO BE MADE TO THE EXECUTIVE UNDER THE INCENTIVE PLAN FOR THE
RESPECTIVE PLAN YEAR);

 

9

--------------------------------------------------------------------------------

 

(C)           A LUMP-SUM PAYMENT IN CASH EQUAL TO THE EXECUTIVE’S BASE SALARY
PLUS TARGET INCENTIVE OPPORTUNITY IN EFFECT ON THE TERMINATION DATE MULTIPLIED
BY ONE AND A HALF (1.5); AND

 

(D)          A LUMP SUM PAYMENT IN CASH EQUAL TO TEN PERCENT (10%) OF THE
EXECUTIVE’S BASE SALARY IN EFFECT ON THE TERMINATION DATE IN LIEU OF MEDICAL
PLAN BENEFITS; PROVIDED, THE EXECUTIVE’S PARTICIPATION IN THESE AND ALL OTHER
MEDICAL BENEFITS SHALL CEASE UPON THE TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH
THE COMPANY UNDER CIRCUMSTANCES WHICH ENTITLE THE EXECUTIVE TO THE PAYMENTS SET
FORTH IN THIS  PARAGRAPH (A).

 

The parties agree that, in the event of the termination of Executive’s
employment with the Company under circumstances which entitle the Executive to
the payments set forth in this  paragraph (a), such payment and benefits shall
be deemed to constitute liquidated damages payable by the Company to the
Executive in full satisfaction of the Company’s obligations hereunder or
otherwise, and the Company agrees that the Executive shall not be required to
mitigate his damages by seeking other employment or otherwise.

 

Additionally, in the event that the Executive’s employment with the Company is
terminated under circumstances which entitle the Executive to the payments set
forth in this  paragraph (a) (whether by the Company or by the Executive), the
Termination Date shall be no earlier than 30 days following the date on which a
notice of termination is delivered by one party to the other.

 

(b)           Definition of Change in Control. “Change in Control” of the
Company means, and shall be deemed to have occurred upon any of the following
events:

 

(i)            Any person (other than those persons in control of the Company as
of the Effective Date, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or a corporation or
other entity owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company)
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing thirty percent (30%) or more of the combined voting power
of the Company’s then outstanding securities; provided, however, that a Change
in Control shall not result from:

 

(A)          Danfoss A/S, as defined below, acquiring securities of the Company
from the Murmann Group, as such term is defined below, either directly, or
indirectly by acquiring voting control of Danfoss Murmann Holding A/S or its
successor; or

 

(B)           the Murmann Group acquiring securities of the Company from Danfoss
A/S either directly, or indirectly by acquiring voting control of Danfoss
Murmann Holding A/S or its successor; or

 

(ii)           During any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board (and any new Director, whose election by the
Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the Directors then

 

10

--------------------------------------------------------------------------------

 

still in office who either were Directors at the beginning of the period or
whose election or nomination for election was so approved), cease for any reason
to constitute a majority thereof; or

 

(iii)          The consummation of:

 

(A)          a plan of complete liquidation of the Company; or

 

(B)           the sale or disposition of all or substantially all the Company’s
assets; or

 

(C)           a merger, consolidation, or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power of
the voting securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.

 

However, in no event shall a “Change in Control” be deemed to have occurred with
respect to the Executive, if the Executive is part of a purchasing group which
consummates the Change-in-Control transaction. The Executive shall be deemed
“part of a purchasing group” for purposes of the preceding sentence if the
Executive is an equity participant in the purchasing company or group (except
for (i) passive ownership of less than one percent (1%) of the stock of the
purchasing company; or (ii) ownership of equity participation in the purchasing
company or group which is otherwise not significant as determined prior to the
Change in Control by a majority of the nonemployee continuing Directors).

 

For purposes of (b)(i) of this Section 7, (A) Danfoss A/S shall be deemed to
mean any one or more of  Danfoss A/S, any of its subsidiaries or related or
affiliated companies or joint ventures, or any successor of the foregoing; and
(B) the Murmann Group shall be deemed to mean any one or more of (i) Klaus
Murmann, (ii) any member of his immediate family, (iii) any entity a majority of
the voting interests of which are owned, directly or indirectly, by Klaus
Murmann and/or any member or members of his immediate family, or (iv) trust, a
majority of which is owned by, or a majority of the beneficiaries of which
consist of, directly or indirectly, Klaus Murmann, and/or any member or members
of his immediate family.

 

(c)           Excise Tax Payment. Notwithstanding anything to the contrary
contained in this Section 7 if, after taking into account all amounts or
benefits otherwise  to be paid or payable (whether before or after the effective
date of the Change of Control), any amount or benefit to be paid or provided
under this Section 7 or any other plan or agreement would be an “Excess
Parachute Payment,” within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”), or any successor provision thereto, but
for the application of this sentence, then the payment and benefits to be so
paid or provided under this Section 7 or any other plan or agreement will be
reduced to the minimum extent necessary (but in no event less than zero) so that
no portion of any such payment or benefit, as so reduced, constitutes an Excess
Parachute Payment; provided, however, that the foregoing reduction will be made
only if and to the extent that the Executive and the

 

11

--------------------------------------------------------------------------------

 

Company mutually agree that such reduction would result in an increase in the
aggregate payments and benefits to be provided to the Executive, determined on
an after-tax basis (taking into account any excise tax imposed pursuant to
Section 4999 of the Code, or any successor provision thereto, any tax imposed by
any comparable provision of state law, and any applicable federal, state and
local income taxes). In the event that any payment or benefit intended to be
provided under this Section 7 or otherwise is agreed to be reduced pursuant to
this section, the Executive will be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this section. The Company
will provide the Executive with all information reasonably requested to make
such designation.

 

8.             INDEMNIFICATION. IN ADDITION TO ANY RIGHTS TO INDEMNIFICATION TO
WHICH THE EXECUTIVE IS ENTITLED UNDER THE COMPANY’S RESTATED CERTIFICATE OF
INCORPORATION OR BYLAWS, AGREEMENT WITH THE COMPANY, VOTE OF STOCKHOLDERS OR
DISINTERESTED DIRECTORS OR OTHERWISE, THE COMPANY SHALL INDEMNIFY THE EXECUTIVE
AT ALL TIMES DURING AND AFTER THE EMPLOYMENT PERIOD TO THE MAXIMUM EXTENT
PERMITTED UNDER THE DELAWARE BUSINESS CORPORATION ACT OR ANY SUCCESSOR PROVISION
THEREOF, AND ANY AND ALL APPLICABLE STATE LAW OF THE STATE OF DELAWARE, AND
SHALL PAY THE EXECUTIVE’S EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND
EXPENSES, WHICH SHALL BE PAID IN ADVANCE BY THE COMPANY AS INCURRED, SUBJECT TO
RECOUPMENT IN ACCORDANCE WITH APPLICABLE LAW) IN DEFENDING ANY CIVIL ACTION,
SUIT OR PROCEEDING IN ADVANCE OF THE FINAL DISPOSITION OF SUCH ACTION, SUIT OR
PROCEEDING TO THE MAXIMUM EXTENT PERMITTED UNDER SUCH APPLICABLE STATE LAWS FOR
THE EXECUTIVE’S ACTION OR INACTION ON BEHALF OF THE COMPANY UNDER THE TERMS OF
THIS AGREEMENT. THE PROVISIONS OF THIS SECTION 8 SHALL SURVIVE THE TERMINATION
OF THE EXECUTIVE’S EMPLOYMENT OR THE TERMINATION OF THE OTHER PROVISIONS OF THIS
AGREEMENT.

 

9.             COVENANT NOT TO COMPETE.

 

(A)           COMPETITION. WITHOUT THE CONSENT OF THE COMPANY, THE EXECUTIVE
SHALL NOT, DIRECTLY OR INDIRECTLY, ANYWHERE IN THE WORLD, AT ANY TIME DURING THE
EMPLOYMENT PERIOD AND FOR A PERIOD OF EIGHTEEN (18) MONTHS FOLLOWING THE
TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY FOR ANY REASON, BE
ASSOCIATED OR IN ANY WAY CONNECTED AS AN OWNER, INVESTOR, PARTNER, DIRECTOR,
OFFICER, EMPLOYEE, AGENT, OR CONSULTANT WITH ANY BUSINESS ENTITY DIRECTLY
ENGAGED IN THE MANUFACTURE AND/OR SALE OF PRODUCTS COMPETITIVE WITH ANY MATERIAL
PRODUCT OR PRODUCT LINES OF THE COMPANY; PROVIDED, HOWEVER, THAT THE EXECUTIVE
SHALL NOT BE DEEMED TO HAVE BREACHED THIS UNDERTAKING IF HIS SOLE RELATION WITH
SUCH ENTITY CONSISTS OF HIS HOLDING, DIRECTLY OR INDIRECTLY, AN EQUITY INTEREST
IN SUCH ENTITY NOT GREATER THAN TWO PERCENT (2%) OF SUCH ENTITY’S OUTSTANDING
EQUITY INTEREST, AND THE CLASS OF EQUITY IN WHICH THE EXECUTIVE HOLDS AN
INTEREST IS LISTED AND TRADED ON A BROADLY RECOGNIZED NATIONAL OR REGIONAL
SECURITIES EXCHANGE. FOR PURPOSES HEREOF, THE TERM “MATERIAL PRODUCT OR PRODUCT
LINE OF THE COMPANY” SHALL MEAN ANY PRODUCT OR PRODUCT LINE OF THE COMPANY, THE
AGGREGATE GROSS SALES OF WHICH DURING ANY CALENDAR YEAR DURING THE FIVE (5) YEAR
PERIOD PRECEDING THE EXECUTIVE’S UNDERTAKING SUCH ASSOCIATION WITH SUCH A
COMPETITOR WERE AT LEAST $10 MILLION.

 

(B)           ACKNOWLEDGEMENT OF AND PAYMENT FOR NONCOMPETE. THE EXECUTIVE
ACKNOWLEDGES THAT:

 

(I)            THE SERVICES TO BE PERFORMED BY HIM UNDER THIS AGREEMENT ARE OF A
SPECIAL, UNIQUE, UNUSUAL, EXTRAORDINARY, AND INTELLECTUAL CHARACTER;

 

12

--------------------------------------------------------------------------------

 

(II)           THE BUSINESS OF THE COMPANY IS WORLDWIDE IN SCOPE AND ITS
PRODUCTS ARE MARKETED THROUGHOUT THE WORLD;

 

(III)          THE COMPANY COMPETES WITH OTHER BUSINESSES THAT ARE OR COULD BE
LOCATED IN ANY PART OF THE WORLD; AND

 

(IV)          THE PROVISIONS OF THIS SECTION 9 ARE REASONABLE AND NECESSARY TO
PROTECT THE COMPANY’S BUSINESS.

 

AS SUCH, EXECUTIVE ACKNOWLEDGES AND AGREES THAT FIVE PERCENT (5%) OF EVERY
PAYMENT MADE TO HIM ON EACH PAYROLL PERIOD OF HIS BASE SALARY FROM THE COMPANY
ACTUALLY REPRESENTS CONSIDERATION FOR AGREEING TO THE NONCOMPETE PROVISIONS OF
THIS SECTION 9.

 

(C)           BLUE PENCILING. IF ANY COVENANT IN THIS SECTION 9 IS HELD TO BE
UNREASONABLE, ARBITRARY, OR AGAINST PUBLIC POLICY, SUCH COVENANT WILL BE
CONSIDERED TO BE DIVISIBLE WITH RESPECT TO SCOPE, TIME, AND GEOGRAPHIC AREA, AND
SUCH LESSER SCOPE, TIME, OR GEOGRAPHIC AREA, OR ALL OF THEM, AS A COURT OF
COMPETENT JURISDICTION MAY DETERMINE TO BE REASONABLE, NOT ARBITRARY, AND NOT
AGAINST PUBLIC POLICY, WILL BE EFFECTIVE, BINDING, AND ENFORCEABLE AGAINST THE
EXECUTIVE.

 

(D)           AUTOMATIC EXTENSION FOR VIOLATION. THE PERIOD OF TIME APPLICABLE
TO ANY COVENANT IN THIS SECTION 9 WILL BE EXTENDED BY THE DURATION OF ANY
VIOLATION BY THE EXECUTIVE OF SUCH COVENANT.

 

(E)           AGREEMENT TO IDENTIFY SUBSEQUENT EMPLOYER. THE EXECUTIVE WILL,
WHILE THE COVENANTS UNDER THIS SECTION 9 ARE IN EFFECT, GIVE NOTICE TO THE
COMPANY, WITHIN TEN (10) DAYS AFTER ACCEPTING ANY OTHER EMPLOYMENT, OF THE
IDENTITY OF THE EXECUTIVE’S EMPLOYER. THE COMPANY MAY NOTIFY SUCH EMPLOYER THAT
THE EXECUTIVE IS BOUND BY THIS AGREEMENT AND, AT THE COMPANY’S ELECTION, FURNISH
SUCH EMPLOYER WITH A COPY OF THIS AGREEMENT OR RELEVANT PORTIONS THEREOF.

 

(F)            PENALTY FOR VIOLATION. IN THE EVENT IT IS DETERMINED THAT THE
EXECUTIVE HAS VIOLATED THE PROVISIONS OF THIS SECTION 9, THE EXECUTIVE, WITHOUT
ANY FURTHER ACTION BY THE COMPANY OR EXECUTIVE, SHALL FORFEIT, AS OF THE FIRST
DAY OF ANY SUCH VIOLATION ANY AMOUNT OWED TO EXECUTIVE UNDER SECTION 6(B), OTHER
THAN THE ACCRUED BENEFITS. THE COMPANY SHALL BE ENTITLED TO REIMBURSEMENT FROM
THE EXECUTIVE OF ANY FEES AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED BY
OR ON BEHALF OF THE COMPANY IN ENFORCING THE COMPANY’S RIGHTS UNDER THIS SECTION
9. BY ENTERING INTO THIS AGREEMENT, THE EXECUTIVE HEREBY CONSENTS TO A DEDUCTION
FROM ANY AMOUNTS THE COMPANY OWES TO EXECUTIVE FROM TIME TO TIME (INCLUDING
AMOUNTS OWED TO THE EXECUTIVE AS COMPENSATION AS WELL AS ANY OTHER AMOUNTS OWED
TO EXECUTIVE BY THE COMPANY), TO THE EXTENT OF ANY AMOUNTS THAT THE EXECUTIVE
OWES TO THE COMPANY UNDER THIS SECTION 9 AS A FORFEITURE FOLLOWING A PAYMENT TO
THE EXECUTIVE UNDER SECTION 6(B), OTHER THAN ACCRUED BENEFITS, TO WHICH HE IS NO
LONGER ENTITLED DUE TO SUCH VIOLATION. WHETHER OR NOT THE COMPANY ELECTS TO MAKE
ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT RECOVER BY MEANS OF
SET-OFF THE FULL AMOUNT THE EXECUTIVE OWES TO THE COMPANY, THE EXECUTIVE AGREES
TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE COMPANY.

 

13

--------------------------------------------------------------------------------

 

10.           DISCLOSURE OF CONFIDENTIAL INFORMATION.

 

(A)           NONDISCLOSURE. WITHOUT THE CONSENT OF THE COMPANY, THE EXECUTIVE
SHALL NOT DISCLOSE TO ANY OTHER PERSON CONFIDENTIAL INFORMATION (AS DEFINED IN
PARAGRAPH (C) BELOW) CONCERNING THE COMPANY OR THE COMPANY’S TRADE SECRETS OF
WHICH THE EXECUTIVE HAS GAINED KNOWLEDGE DURING HIS EMPLOYMENT WITH THE COMPANY.
ANY TRADE SECRETS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR RELATED OR
AFFILIATED COMPANIES OR JOINT VENTURES WILL BE ENTITLED TO ALL OF THE
PROTECTIONS AND BENEFITS UNDER THE IOWA CODE ANNOTATED SECTION 550.1 THROUGH
550.8 AND ANY OTHER APPLICABLE LAW. IF ANY INFORMATION THAT THE COMPANY DEEMS TO
BE A TRADE SECRET IS FOUND BY A COURT OF COMPETENT JURISDICTION NOT TO BE A
TRADE SECRET FOR PURPOSES OF THIS AGREEMENT, SUCH INFORMATION WILL,
NEVERTHELESS, BE CONSIDERED CONFIDENTIAL INFORMATION FOR PURPOSES OF THIS
AGREEMENT. THE EXECUTIVE HEREBY WAIVES ANY REQUIREMENT THAT THE COMPANY SUBMIT
PROOF OF THE ECONOMIC VALUE OF ANY TRADE SECRET OR POST A BOND OR OTHER
SECURITY. NONE OF THE FOREGOING OBLIGATIONS AND RESTRICTIONS APPLY TO ANY PART
OF THE CONFIDENTIAL INFORMATION THAT THE EXECUTIVE DEMONSTRATES WAS OR BECAME
GENERALLY AVAILABLE TO THE PUBLIC OTHER THAN AS A RESULT OF A DISCLOSURE BY THE
EXECUTIVE. IN THE EVENT THAT THE EXECUTIVE IS REQUESTED OR REQUIRED TO MAKE
DISCLOSURE OF INFORMATION SUBJECT TO THIS SECTION 10 UNDER ANY COURT ORDER,
SUBPOENA OR OTHER JUDICIAL PROCESS, THEN, EXCEPT AS PROHIBITED BY LAW, THE
EXECUTIVE WILL PROMPTLY NOTIFY THE COMPANY, TAKE ALL REASONABLE STEPS REQUESTED
BY THE COMPANY TO DEFEND AGAINST THE COMPULSORY DISCLOSURE AND PERMIT THE
COMPANY TO CONTROL WITH COUNSEL OF ITS CHOICE ANY PROCEEDING RELATING TO THE
COMPULSORY DISCLOSURE. THE EXECUTIVE ACKNOWLEDGES THAT ALL INFORMATION, THE
DISCLOSURE OF WHICH IS PROHIBITED BY THIS SECTION, IS OF A CONFIDENTIAL AND
PROPRIETARY CHARACTER AND OF GREAT VALUE TO THE COMPANY AND ITS SUBSIDIARIES AND
AFFILIATES.

 

(B)           SAFEGUARD AND RETURN OF PROPRIETARY ITEMS. THE EXECUTIVE WILL NOT
REMOVE FROM THE PREMISES OF THE COMPANY (EXCEPT TO THE EXTENT SUCH REMOVAL IS
FOR PURPOSES OF THE PERFORMANCE OF THE EXECUTIVE’S DUTIES AT HOME OR WHILE
TRAVELING, OR EXCEPT AS OTHERWISE SPECIFICALLY AUTHORIZED BY THE COMPANY), ANY
DOCUMENT, RECORD, NOTEBOOK, PLAN, MODEL, COMPONENT, DEVICE, OR COMPUTER SOFTWARE
OR CODE, WHETHER EMBODIED IN A DISK OR IN ANY OTHER FORM, THAT CONTAINS
CONFIDENTIAL INFORMATION (COLLECTIVELY, THE “PROPRIETARY ITEMS”). THE EXECUTIVE
RECOGNIZES THAT, AS BETWEEN THE COMPANY AND THE EXECUTIVE, ALL OF THE
PROPRIETARY ITEMS, WHETHER OR NOT DEVELOPED BY THE EXECUTIVE, ARE THE EXCLUSIVE
PROPERTY OF THE COMPANY. UPON TERMINATION OF THIS AGREEMENT BY EITHER PARTY, OR
UPON THE REQUEST OF THE COMPANY DURING THE EMPLOYMENT PERIOD, THE EXECUTIVE WILL
RETURN TO THE COMPANY ALL OF THE PROPRIETARY ITEMS IN THE EXECUTIVE’S POSSESSION
OR SUBJECT TO THE EXECUTIVE’S CONTROL, AND THE EXECUTIVE SHALL NOT RETAIN ANY
COPIES, ABSTRACTS, SKETCHES, OR OTHER PHYSICAL EMBODIMENT OF ANY OF THE
PROPRIETARY ITEMS.

 

(C)           DEFINITION OF CONFIDENTIAL INFORMATION. FOR PURPOSES OF THIS
AGREEMENT, “CONFIDENTIAL INFORMATION” SHALL INCLUDE ANY AND ALL INFORMATION
CONCERNING THE BUSINESS AND AFFAIRS OF THE COMPANY, INCLUDING, WITHOUT
LIMITATION, PRODUCT SPECIFICATIONS, DATA, KNOW-HOW, FORMULAE, COMPOSITIONS,
PROCESSES, DESIGNS, SKETCHES, PHOTOGRAPHS, GRAPHS, DRAWINGS, SAMPLES, INVENTIONS
AND IDEAS, PAST, CURRENT, AND PLANNED RESEARCH AND DEVELOPMENT, CURRENT AND
PLANNED DISTRIBUTION METHODS AND PROCESSES, CUSTOMER LISTS, CURRENT AND
ANTICIPATED CUSTOMER REQUIREMENTS, PRICE LISTS, MARKET STUDIES, BUSINESS PLANS,
COMPUTER SOFTWARE AND PROGRAMS (INCLUDING OBJECT CODE AND SOURCE CODE), COMPUTER
SOFTWARE AND DATABASE TECHNOLOGIES, SYSTEMS, STRUCTURES, AND ARCHITECTURES (AND
RELATED FORMULAE, COMPOSITIONS, PROCESSES, IMPROVEMENTS, DEVICES, KNOW-HOW,
INVENTIONS, DISCOVERIES, CONCEPTS, IDEAS, DESIGNS, METHODS AND INFORMATION),
HISTORICAL FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS AND BUDGETS, HISTORICAL
AND PROJECTED SALES, CAPITAL SPENDING BUDGETS AND PLANS, THE NAMES AND

 

14

--------------------------------------------------------------------------------

 

BACKGROUNDS OF KEY PERSONNEL, AGENTS, PERSONNEL TRAINING AND TECHNIQUES AND
MATERIALS, INSURANCE PRODUCTS, PREMIUM STRUCTURES, INFORMATION RELATING TO
SUPPLIERS AND SUPPLIES, SALES AND MARKETING INFORMATION AND STRATEGY, NOTES,
ANALYSIS, COMPILATIONS, STUDIES, SUMMARIES, AND OTHER MATERIAL PREPARED BY OR
FOR THE COMPANY CONTAINING OR BASED, IN WHOLE OR IN PART, ON ANY INFORMATION
INCLUDED IN THE FOREGOING, AND ANY INFORMATION, HOWEVER DOCUMENTED, THAT IS A
TRADE SECRET WITHIN THE MEANING OF THE IOWA CODE ANNOTATED SECTION 550.1 THROUGH
550.8.

 

(D)           PENALTY FOR VIOLATION. IN THE EVENT IT IS DETERMINED THAT THE
EXECUTIVE HAS VIOLATED THE PROVISIONS OF THIS SECTION 10, THE EXECUTIVE, WITHOUT
ANY FURTHER ACTION BY THE COMPANY OR EXECUTIVE, SHALL FORFEIT, AS OF THE FIRST
DAY OF ANY SUCH VIOLATION ANY AMOUNT OWED TO EXECUTIVE UNDER SECTION 6(B), OTHER
THAN THE ACCRUED BENEFITS. THE COMPANY SHALL BE ENTITLED TO REIMBURSEMENT FROM
THE EXECUTIVE OF ANY FEES AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED BY
OR ON BEHALF OF THE COMPANY IN ENFORCING THE COMPANY’S RIGHTS UNDER THIS SECTION
10. BY ENTERING INTO THIS AGREEMENT, THE EXECUTIVE HEREBY CONSENTS TO A
DEDUCTION FROM ANY AMOUNTS THE COMPANY OWES TO EXECUTIVE FROM TIME TO TIME
(INCLUDING AMOUNTS OWED TO THE EXECUTIVE AS COMPENSATION AS WELL AS ANY OTHER
AMOUNTS OWED TO EXECUTIVE BY THE COMPANY), TO THE EXTENT OF ANY AMOUNTS THAT THE
EXECUTIVE OWES TO THE COMPANY UNDER THIS SECTION 10 AS A FORFEITURE FOLLOWING A
PAYMENT TO THE EXECUTIVE UNDER SECTION 6(B), OTHER THAN ACCRUED BENEFITS, TO
WHICH HE IS NO LONGER ENTITLED DUE TO SUCH VIOLATION. WHETHER OR NOT THE COMPANY
ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT RECOVER
BY MEANS OF SET-OFF THE FULL AMOUNT THE EXECUTIVE OWES TO THE COMPANY, THE
EXECUTIVE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE COMPANY.

 

11.           DEVELOPMENTS.

 

(A)           AGREEMENT TO BRING ALL DEVELOPMENTS TO THE ATTENTION OF THE
COMPANY. DURING THE COURSE OF EMPLOYMENT WITH THE COMPANY, EXECUTIVE MAY
CONCEIVE ENHANCEMENTS TO THE PRODUCTS MANUFACTURED OR SOLD BY  THE COMPANY OR
MAY CONCEIVE NEW PRODUCTS WHICH PERFORM FUNCTIONS SIMILAR TO PRODUCTS
MANUFACTURED OR SOLD BY THE COMPANY OR MAY CONCEIVE OTHER NEW PRODUCTS RELATED
TO THE BUSINESS OF THE COMPANY OR MAY DEVELOP IDEAS, PLANS AND OPPORTUNITIES.
EXECUTIVE SHALL DISCLOSE PROMPTLY AND FULLY TO THE COMPANY ANY AND ALL IDEAS,
BUSINESS DEVELOPMENTS, PLANS AND OPPORTUNITIES, NEW PRODUCTS OR SYSTEMS,
INVENTIONS, DISCOVERIES, ENHANCEMENTS AND IMPROVEMENTS  (“DEVELOPMENTS”),
WHETHER OR NOT PATENTABLE OR SUBJECT TO COPYRIGHTS, CONCEIVED OR MADE BY
EXECUTIVE DURING THE EMPLOYMENT PERIOD, DURING WORK HOURS OR OTHERWISE AND ON
THE COMPANY’S PREMISES OR OTHERWISE. EMPLOYEE RECOGNIZES THAT PURSUANT TO THIS
ARRANGEMENT THAT THE COMPANY MAY DEVELOP A NEW PRODUCT THAT GENERATES WIDESPREAD
MARKET APPEAL.

 

(B)           AGREEMENT THAT ALL DEVELOPMENTS ARE PROPERTY OF THE COMPANY.
EXECUTIVE AGREES THAT ALL DEVELOPMENTS SHALL BE THE SOLE PROPERTY OF THE
COMPANY, AND EXECUTIVE HEREBY ASSIGNS TO THE COMPANY, WITHOUT FURTHER
COMPENSATION, ALL OF HIS RIGHT, TITLE, AND INTEREST IN AND TO SUCH DEVELOPMENTS
AND ANY AND ALL RELATED PATENTS, PATENT APPLICATIONS, COPYRIGHTS, COPYRIGHT
APPLICATIONS, TRADEMARKS, AND TRADE NAMES IN THE UNITED STATES AND ELSEWHERE.
EXECUTIVE SHALL ASSIST THE COMPANY IN OBTAINING AND ENFORCING PATENT, COPYRIGHT,
AND ANY OTHER FORMS OF LEGAL PROTECTION FOR THE DEVELOPMENTS IN ANY COUNTRY.
UPON REQUEST, EXECUTIVE WILL SIGN ALL APPLICATIONS, ASSIGNMENTS, INSTRUMENTS AND
PAPERS TO PERFORM ALL ACTS NECESSARY OR DESIRED BY THE COMPANY TO ASSIGN ALL
SUCH DEVELOPMENTS COMPLETELY TO THE COMPANY AND TO ENABLE THE COMPANY, ITS
SUCCESSORS, ASSIGNS AND NOMINEES, TO SECURE AND

 

15

--------------------------------------------------------------------------------

 

ENJOY THE FULL AND EXCLUSIVE BENEFITS AND ADVANTAGES THEREOF. EXECUTIVE WILL
NOT, AT ANY TIME, EITHER DURING THE TERM OF THIS AGREEMENT OR THEREAFTER,
DISCLOSE TO OTHERS, OR USE FOR HIS OWN BENEFIT OR THE BENEFIT OF OTHERS, ANY OF
THE DEVELOPMENTS. EXECUTIVE AGREES THAT THE ENHANCEMENT AND DEVELOPMENT OF ALL
DEVELOPMENTS CAPABLE OF COPYRIGHT PROTECTION IS “WORK FOR HIRE” WITHIN THE
MEANING OF THE COPYRIGHT ACT OF 1976. THESE OBLIGATIONS SHALL CONTINUE BEYOND
THE TERMINATION DATE WITH RESPECT TO DEVELOPMENTS, WHETHER PATENTABLE OR NOT,
CONCEIVED OR MADE BY EXECUTIVE DURING HIS EMPLOYMENT WITH THE COMPANY, AND SHALL
BE BINDING UPON EXECUTIVE’S ASSIGNS, PERSONAL REPRESENTATIVES, ADMINISTRATORS
AND OTHER LEGAL REPRESENTATIVES.

 

(C)           PENALTY FOR VIOLATION. IN THE EVENT IT IS DETERMINED THAT THE
EXECUTIVE HAS VIOLATED THE PROVISIONS OF THIS SECTION 11, THE EXECUTIVE, WITHOUT
ANY FURTHER ACTION BY THE COMPANY OR EXECUTIVE, SHALL FORFEIT, AS OF THE FIRST
DAY OF ANY SUCH VIOLATION ANY AMOUNT OWED TO EXECUTIVE UNDER SECTION 6(B), OTHER
THAN THE ACCRUED BENEFITS. THE COMPANY SHALL BE ENTITLED TO REIMBURSEMENT FROM
THE EXECUTIVE OF ANY FEES AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED BY
OR ON BEHALF OF THE COMPANY IN ENFORCING THE COMPANY’S RIGHTS UNDER THIS SECTION
11. BY ENTERING INTO THIS AGREEMENT, THE EXECUTIVE HEREBY CONSENTS TO A
DEDUCTION FROM ANY AMOUNTS THE COMPANY OWES TO EXECUTIVE FROM TIME TO TIME
(INCLUDING AMOUNTS OWED TO THE EXECUTIVE AS COMPENSATION AS WELL AS ANY OTHER
AMOUNTS OWED TO EXECUTIVE BY THE COMPANY), TO THE EXTENT OF ANY AMOUNTS THAT THE
EXECUTIVE OWES TO THE COMPANY UNDER THIS SECTION 11 AS A FORFEITURE FOLLOWING A
PAYMENT TO THE EXECUTIVE UNDER SECTION 6(B), OTHER THAN ACCRUED BENEFITS, TO
WHICH HE IS NO LONGER ENTITLED DUE TO SUCH VIOLATION. WHETHER OR NOT THE COMPANY
ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT RECOVER
BY MEANS OF SET-OFF THE FULL AMOUNT THE EXECUTIVE OWES TO THE COMPANY, THE
EXECUTIVE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE COMPANY.

 

12.           NONSOLICITATION.

 

(A)           GENERAL RULE. WITHOUT THE WRITTEN CONSENT OF THE COMPANY, THE
EXECUTIVE SHALL NOT AT ANY TIME DURING THE TERM AND FOR A PERIOD OF EIGHTEEN
(18) MONTHS FOLLOWING THE TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY
FOR ANY REASON:

 

(I)            EMPLOY OR RETAIN OR ARRANGE TO HAVE ANY OTHER PERSON, FIRM, OR
OTHER ENTITY EMPLOY OR RETAIN OR OTHERWISE PARTICIPATE IN THE EMPLOYMENT OR
RETENTION OF ANY PERSON WHO IS AN EMPLOYEE OR CONSULTANT OF THE COMPANY; OR

 

(II)           SOLICIT OR ARRANGE TO HAVE ANY OTHER PERSON, FIRM, OR OTHER
ENTITY SOLICIT OR OTHERWISE PARTICIPATE IN THE SOLICITATION OF BUSINESS FROM ANY
ENTITY THAT WAS A CUSTOMER OF THE COMPANY AT ANY TIME DURING THE EMPLOYMENT
PERIOD, WHETHER OR NOT THE EXECUTIVE HAD PERSONAL CONTACT WITH SUCH CUSTOMER.

 

(B)           PENALTY FOR VIOLATION. IN THE EVENT IT IS DETERMINED THAT THE
EXECUTIVE HAS VIOLATED THE PROVISIONS OF THIS SECTION 12, THE EXECUTIVE, WITHOUT
ANY FURTHER ACTION BY THE COMPANY OR EXECUTIVE, SHALL FORFEIT, AS OF THE FIRST
DAY OF ANY SUCH VIOLATION ANY AMOUNT OWED TO EXECUTIVE UNDER SECTION 6(B), OTHER
THAN THE ACCRUED BENEFITS. THE COMPANY SHALL BE ENTITLED TO REIMBURSEMENT FROM
THE EXECUTIVE OF ANY FEES AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED BY
OR ON BEHALF OF THE COMPANY IN ENFORCING THE COMPANY’S RIGHTS UNDER THIS SECTION
12. BY ENTERING INTO THIS AGREEMENT, THE EXECUTIVE HEREBY CONSENTS TO A
DEDUCTION FROM ANY AMOUNTS THE COMPANY OWES TO EXECUTIVE FROM TIME TO TIME
(INCLUDING

 

16

--------------------------------------------------------------------------------

 

AMOUNTS OWED TO THE EXECUTIVE AS COMPENSATION AS WELL AS ANY OTHER AMOUNTS OWED
TO EXECUTIVE BY THE COMPANY), TO THE EXTENT OF ANY AMOUNTS THAT THE EXECUTIVE
OWES TO THE COMPANY UNDER THIS SECTION 12 AS A FORFEITURE FOLLOWING A PAYMENT TO
THE EXECUTIVE UNDER SECTION 6(B), OTHER THAN ACCRUED BENEFITS, TO WHICH HE IS NO
LONGER ENTITLED DUE TO SUCH VIOLATION. WHETHER OR NOT THE COMPANY ELECTS TO MAKE
ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT RECOVER BY MEANS OF
SET-OFF THE FULL AMOUNT THE EXECUTIVE OWES TO THE COMPANY, THE EXECUTIVE AGREES
TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE COMPANY.

 

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

 

(a)           Acknowledgement by Executive. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the
provisions of this Agreement (including, without limitation, any provision of
Sections 9, 10, 11,and 12) would be irreparable and that an award of monetary
damages to the Company for such a breach would be an inadequate remedy.
Consequently, the Company will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement, and
the Company will not be obligated to post bond or other security in seeking such
relief. Without limiting the Company’s rights under this Section 13 or any other
remedies of the Company, if the Executive breaches any of the provisions of
Sections 9, 10, 11 or 12, the Company will have the right to cease making any
payments otherwise due to the Executive under this Agreement.

 

(b)           Adequate Time to Consult with Legal Counsel. The covenants by the
Executive in Sections 9, 10, 11 and 12 are essential elements of this Agreement,
and without the Executive’s agreement to comply with such covenants, the Company
would not have entered into this Agreement with the Executive. The Company and
the Executive have been afforded the opportunity to consult their respective
counsel and have been advised, or had the opportunity to obtain advice, in all
respects concerning the reasonableness and propriety of such covenants
(including, without limitation, the time period of restriction and the
geographical area of restriction set forth in Section 9), with specific regard
to the nature of the business conducted by the Company and its subsidiaries and
related or affiliated companies or joint ventures. The Executive’s covenants in
Sections 9, 10, 11 and 12 are independent covenants and the existence of any
claim by the Executive against the Company under this Agreement or otherwise,
will not excuse the Executive’s breach of any covenant in Sections 9, 10, 11 or
12.

 

14.           SEVERABILITY. IT IS THE DESIRE AND INTENT OF THE PARTIES THAT THIS
AGREEMENT SHALL BE ENFORCED TO THE FULLEST EXTENT PERMISSIBLE UNDER THE LAWS AND
PUBLIC POLICIES APPLIED IN EACH JURISDICTION IN WHICH ENFORCEMENT IS SOUGHT.
ACCORDINGLY, IF ANY PARTICULAR PROVISION OR PORTION OF THIS AGREEMENT SHALL BE
ADJUDICATED TO BE INVALID OR UNENFORCEABLE, THIS AGREEMENT SHALL BE DEEMED
AMENDED TO DELETE THEREFROM THE PORTION THUS ADJUDICATED TO BE INVALID OR
UNENFORCEABLE, SUCH DELETION TO APPLY ONLY WITH RESPECT TO THE OPERATION OF SUCH
PROVISION IN THE PARTICULAR JURISDICTION IN WHICH SUCH ADJUDICATION IS MADE.

 

15.           WITHHOLDING. ANY OTHER PROVISION OF THIS AGREEMENT
NOTWITHSTANDING, THE COMPANY MAY WITHHOLD FROM AMOUNTS PAYABLE UNDER THIS
AGREEMENT:

 

17

--------------------------------------------------------------------------------

 

(A)           ALL FEDERAL, STATE, LOCAL AND FOREIGN TAXES AND SOCIAL SECURITY
TAXES THAT ARE REQUIRED TO BE WITHHELD BY APPLICABLE LAWS OR REGULATIONS AS THE
COMPANY SHALL DETERMINE IN ITS SOLE DISCRETION; AND

 

(B)           OTHER ORDINARY AND CUSTOMARY PAYROLL DEDUCTIONS.

 

16.           NOTICES. ALL NOTICES, REQUESTS, CONSENTS AND OTHER COMMUNICATIONS
PROVIDED FOR IN THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE GIVEN BY HAND
DELIVERY OR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, ADDRESSED AS FOLLOWS:

 

IF TO THE COMPANY:

 

SAUER-DANFOSS INC.

250 PARKWAY DRIVE

LINCOLNSHIRE, ILLINOIS 61069

ATTENTION:  PRESIDENT

 

IF TO THE EXECUTIVE, TO HIS RESIDENCE ADDRESS SET FORTH ON THE RECORDS OF THE
COMPANY, OR TO SUCH OTHER ADDRESS AS EITHER PARTY FURNISHES TO THE OTHER IN
WRITING IN ACCORDANCE WITH THIS SECTION 16. ALL SUCH NOTICES SHALL BE EFFECTIVE
WHEN ACTUALLY RECEIVED BY THE ADDRESSEE.

 

17.           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO ITS CONFLICTS OF LAWS PROVISIONS, EXCEPT TO THE EXTENT THAT THE LAWS
OF THE STATE OF IOWA ARE MADE APPLICABLE FOR PURPOSES OF SECTION 10 OF THIS
AGREEMENT.

 

18.           ASSIGNMENT. NEITHER THIS AGREEMENT NOR ANY RIGHTS OR DUTIES
HEREUNDER MAY BE ASSIGNED BY THE EXECUTIVE WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY. THE COMPANY SHALL HAVE THE RIGHT AT ANY TIME TO ASSIGN THIS
AGREEMENT TO ITS SUCCESSORS AND ASSIGNS; PROVIDED, HOWEVER, THAT THE ASSIGNEE OR
TRANSFEREE IS THE SUCCESSOR TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS AND
ASSETS OF THE COMPANY AND SUCH ASSIGNEE OR TRANSFEREE EXPRESSLY ASSUMES ALL OF
THE OBLIGATIONS, DUTIES AND LIABILITIES OF THE COMPANY SPECIFIED IN THIS
AGREEMENT.

 

19.           AMENDMENTS. ANY ALTERATIONS OR AMENDMENTS TO THIS AGREEMENT SHALL
ONLY BE IN WRITING AND SIGNED BY EACH PARTY TO THIS AGREEMENT.

 

20.           BINDING EFFECT. EXCEPT AS OTHERWISE PROVIDED, THIS AGREEMENT SHALL
BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF THE PARTIES AND THEIR
RESPECTIVE LEGAL REPRESENTATIVES, HEIRS, SUCCESSORS AND ASSIGNS.

 

21.           EXECUTION IN COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY
NUMBER OF COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF
WHICH TOGETHER SHALL CONSTITUTED ONE AND THE SAME INSTRUMENT.

 

22.           ARBITRATION. ANY DISPUTE, CONTROVERSY OR QUESTION ARISING UNDER,
OUT OF, OR RELATING TO THIS AGREEMENT (OR THE BREACH THEREOF), OR, THE
EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR TERMINATION THEREOF, OTHER THAN THOSE
DISPUTES RELATING TO EXECUTIVE’S ALLEGED VIOLATIONS OF SECTIONS 9, 10, 11 AND 12
OF THIS AGREEMENT, SHALL BE REFERRED FOR BINDING ARBITRATION IN DES MOINES, IOWA
TO A NEUTRAL ARBITRATOR SELECTED BY THE EXECUTIVE AND THE COMPANY AND THIS SHALL
BE THE EXCLUSIVE AND SOLE MEANS FOR RESOLVING SUCH DISPUTE. SUCH ARBITRATION
SHALL BE CONDUCTED IN ACCORDANCE WITH THE NATIONAL RULES FOR RESOLUTION OF
EMPLOYMENT DISPUTES OF THE AMERICAN ARBITRATION ASSOCIATION.

 

18

--------------------------------------------------------------------------------

 

THE ARBITRATOR SHALL HAVE THE DISCRETION TO AWARD REASONABLE ATTORNEYS’ FEES,
COSTS AND EXPENSES TO THE PREVAILING PARTY. JUDGMENT UPON THE AWARD RENDERED BY
THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. THIS
SECTION 22 DOES NOT APPLY TO ANY ACTION BY THE COMPANY TO ENFORCE SECTIONS 9,
10, 11 AND 12 OF THIS AGREEMENT AND DOES NOT IN ANY WAY RESTRICT THE COMPANY’S
RIGHTS UNDER SECTION 13 OF THIS AGREEMENT.

 

23.           ENTIRE AGREEMENT. THIS AGREEMENT SETS FORTH THE ENTIRE AGREEMENT
AND UNDERSTANDING OF THE PARTIES AND SUPERSEDES ALL PRIOR UNDERSTANDINGS,
AGREEMENTS OR REPRESENTATIONS BY OR BETWEEN THE PARTIES, WHETHER WRITTEN OR
ORAL, WHICH RELATE IN ANY WAY TO THE SUBJECT MATTER HEREOF, EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 8 REGARDING INDEMNIFICATION AGREEMENTS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, ALL EXISTING EMPLOYMENT AGREEMENTS, CHANGE IN
CONTROL AGREEMENTS AND PATENT AND CONFIDENTIAL INFORMATION AGREEMENTS ARE HEREBY
TERMINATED AND OF NO FURTHER FORCE OR EFFECT.

 

24.           SURVIVORSHIP. THE PROVISIONS OF THIS AGREEMENT NECESSARY TO CARRY
OUT THE INTENTION OF THE PARTIES AS EXPRESSED HEREIN SHALL SURVIVE THE
TERMINATION OR EXPIRATION OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SECTIONS 8, 9, 10, 11, 12 AND 13.

 

25.           WAIVER. EXCEPT AS OTHERWISE PROVIDED UNDER SECTION 6(A)(II)(A),
THE WAIVER BY EITHER PARTY OF THE OTHER PARTY’S PROMPT AND COMPLETE PERFORMANCE,
OR BREACH OR VIOLATION, OF ANY PROVISION OF THIS AGREEMENT SHALL NOT OPERATE NOR
BE CONSTRUED AS A WAIVER OF ANY SUBSEQUENT BREACH OR VIOLATION, AND THE FAILURE
BY ANY PARTY HERETO TO EXERCISE ANY RIGHT OR REMEDY WHICH IT MAY POSSESS
HEREUNDER SHALL NOT OPERATE NOR BE CONSTRUED AS A BAR TO THE EXERCISE OF SUCH
RIGHT OR REMEDY BY SUCH PARTY UPON THE OCCURRENCE OF ANY SUBSEQUENT BREACH OR
VIOLATION.

 

26.           CAPTIONS. THE CAPTIONS OF THIS AGREEMENT ARE FOR CONVENIENCE AND
REFERENCE ONLY AND IN NO WAY DEFINE, DESCRIBE, EXTEND OR LIMIT THE SCOPE OR
INTENT OF THIS AGREEMENT OR THE INTENT OF ANY PROVISION HEREOF.

 

27.           CONSTRUCTION. THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT IS THE
RESULT OF ARM’S-LENGTH NEGOTIATIONS BETWEEN SOPHISTICATED PARTIES EACH AFFORDED
REPRESENTATION BY LEGAL COUNSEL. EACH AND EVERY PROVISION OF THIS AGREEMENT
SHALL BE CONSTRUED AS THOUGH BOTH PARTIES PARTICIPATED EQUALLY IN THE DRAFTING
OF SAME, AND ANY RULE OF CONSTRUCTION THAT A DOCUMENT SHALL BE CONSTRUED AGAINST
THE DRAFTING PARTY SHALL NOT BE APPLICABLE TO THIS AGREEMENT.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

 

EXECUTIVE

 

 

 

 

 

By: /s/ Wolfgang Schramm

 

 

 

 

 

 

SAUER-DANFOSS INC.

 

 

 

 

 

By: /s/ Ronald C. Hanson

 

 

Name: Ronald C. Hanson

 

Title: Vice President, Human Resources

 

19

--------------------------------------------------------------------------------