Exhibit 10.1

 

EXECUTIVE SERVICE AGREEMENT

 

BETWEEN

Sauer-Danfoss ApS

 

 

AND

Mr. Sven Ruder

 

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CONTENTS

 

CONTENTS

 

1.

 

THE EXECUTIVE’S AUTHORITY AND DUTIES

1

1.1

 

Commencement

1

1.2

 

Area of responsibility

1

1.3

 

Offices during service

2

1.4

 

Confidentiality, return of material, and disqualification

2

1.5

 

Inventions

3

1.6

 

Non-competition

3

2.

 

THE EXECUTIVE’S FINANCIAL RIGHTS DURING SERVICE

4

2.1

 

Remuneration - Base Salary

4

2.2

 

Annual Incentive

4

2.3

 

Long-Term Incentive

5

2.4

 

Company Car

5

2.5

 

Travel and Entertainment

5

2.6

 

Pension

6

2.7

 

Insurance

6

2.8

 

Holiday

6

3.

 

TERMINATION

6

3.1

 

Ordinary termination of employment

6

3.2

 

Breach

7

4.

 

SETTLEMENT OF DISPUTES

7

4.1

 

Courts

7

4.2

 

Arbitration

7

5.

 

APPLICABLE LAW

8

6.

 

SIGNATURES

8

 

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EXECUTIVE SERVICE AGREEMENT

 

 

BETWEEN

 

Sauer-Danfoss ApS

Nordborgvej 81

DK-6430 Nordborg

Denmark

(the “Employer”)

 

 

AND

 

Mr. Sven Ruder

Nejs Bjerg 52

DK-6310 Broager

Denmark

(Mr. Ruder or the “Executive”)

 

the following agreement has been concluded on this date:

 

EXECUTIVE SERVICE AGREEMENT

 

1.                                                     THE EXECUTIVE’S AUTHORITY
AND DUTIES

 

1.1                                               COMMENCEMENT

 

1.1.1                                      Effective as of 1 January 2009,
Mr. Ruder shall take up the position as President and Chief Executive Officer of
Sauer-Danfoss Inc. (hereafter only referred to as the “Company”).  As of the
effective date of this Agreement, Mr. Ruder will maintain his current seniority
date of March 1, 1990.

 

1.1.2                                      The work shall be performed in
varying places of work (worldwide), but the address of Sauer-Danfoss ApS,
Nordborgvej 81, 6430 Nordborg, Denmark, will serve as the principal place of
assignment for Mr. Ruder’s activities. By mutual agreement, Mr. Ruder’s
principal place of assignment may be relocated to another of the Company’s
offices or plant sites (including those outside of Denmark).

 

1.2                                               AREA OF RESPONSIBILITY

 

1.2.1                                      Mr. Ruder shall report to the
Chairman of the Board of Sauer-Danfoss Inc. or to the Chairman’s designee.

 

1.2.2                                      Mr. Ruder shall have such
responsibilities, duties and authority as set forth in the Bylaws of the Company
and such additional responsibilities, duties and authority as the Company’s
Board of Directors shall determine from time to time.

 

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1.2.3                                      In accordance with the Company’s
bylaws, the Board of Directors of Sauer-Danfoss Inc. shall control and manage
the property, business and affairs of the Company. The President and Chief
Executive Officer shall have general supervision of the business of the Company,
shall see that all orders and resolutions of the Board of Directors are carried
into effect subject, however, to the right of the directors to delegate any
specific powers to any other officer or officers of the Company except such as
may be by statute exclusively conferred upon the President and Chief Executive
Officer.

 

1.2.4                                      Mr. Ruder’s employment is not covered
by the Danish Salaried Employees’ Act (funktionærloven), the Danish Holiday Act
(ferieloven), or any other law protecting employees, as Mr. Ruder’s terms of
employment and his rights and obligations are such that Mr. Ruder cannot be
considered to work in a subordinate position under the control of an employer.

 

1.3                                               OFFICES DURING SERVICE

 

1.3.1                                      As long as Mr. Ruder occupies the
office of President and Chief Executive Officer of the Company, he shall not
actively or passively participate in another business or have other paid or
unpaid employment or undertake any paid offices without the written consent of
the Board of Directors in each case.

 

Notwithstanding the above and in addition to his position as a board member of
Sauer-Danfoss Inc. or any of the Company’s subsidiaries, Mr. Ruder may serve on
the Board of Directors of up to a maximum of two companies so long as these
companies are not deemed to compete with the Company.

 

1.3.2                                      Mr. Ruder is entitled to invest in
assets normally subject to such investments and not giving rise to any
controlling interest. No investment shall include any business transactions that
may knowingly adversely affect Mr. Ruder’s and/or the Company’s or Employer’s
reputation.

 

1.3.3                                      Mr. Ruder may, from time to time,
serve as a Director and/or Committee Member of the Company.  Mr. Ruder may also,
from time to time, serve as a Director, Committee Member, and/or Officer for any
of the Company’s subsidiaries, affiliates, joint ventures or related companies. 
Mr. Ruder agrees to fulfill his duties as such Director, Committee Member or
Officer without additional compensation other than the compensation provided for
in this Agreement.

 

1.4                                               CONFIDENTIALITY, RETURN OF
MATERIAL, AND DISQUALIFICATION

 

1.4.1                                      The Executive shall have a duty of
confidentiality in respect of any information acquired in connection with his
work as Executive save for matters obviously intended to be communicated to
third parties. This duty of confidentiality shall survive the termination of
this Executive Service Agreement.

 

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1.4.2                                      When the Executive actually leaves
the Employer – for whatever cause – all materials and property belonging to the
Employer or the Company and in the possession of the Executive shall be returned
to the Employer. The Executive shall have no right to exercise a lien on any
material or property belonging to the Employer or the Company.

 

1.4.3                                      Other than this Agreement, the
Executive shall not participate in the transaction of business relating to an
agreement between the Company or the Employer and the Executive himself or to
legal proceedings against him brought by the Company or the Employer. The same
shall apply to issues concerning an agreement between the Company or the
Employer and any third party or proceedings against such third party if the
Executive has a material interest in such third party that may be contrary to
the interests of the Company or the Employer. In such case, the Executive may
submit a memorandum on the matter to the board of directors, but will leave the
meeting until the board of directors has resolved on the matter.

 

1.5                                               INVENTIONS

 

The Company shall have a sole right to use – no separate remuneration payable –
any invention, production method, and other technical advance within the
Company’s work field, in a wide sense, made by or conceived by the Executive
during the course of his employment or up to six months after his leaving the
Employer.

 

The Executive shall notify the Company of any invention, etc. immediately after
its being conceived or coming into existence, such notification to be
accompanied by sufficient information for the Company to assess its relevance
for the Company.

 

If the invention etc. concerns a task assigned to the Executive by the Company,
the Company shall have the same right as mentioned in the previous paragraph,
even where the use of such invention etc. does not fall within the Company’s
field of activities.

 

1.6                                               NON-COMPETITION

 

1.6.1                                      During the continuance of this
Executive Service Agreement and for a period of 18 months after termination, the
Executive shall not – directly or indirectly – commence or have any financial
interest in any business competing wholly or partly with the activities of the
Company in the geographical area where the activities of the Company take place
(worldwide), unless approved in writing by the Board of Directors. Similarly,
Mr. Ruder shall not take up employment with or work for such business, including
in the capacity of director, commissioner or consultant.  Mr. Ruder shall,
however, be allowed to hold, directly or indirectly, an equity interest in any
competing entity, provided that such equity interest is not greater than 2% of
such entity’s outstanding equity interests and that the class of equity in which
the Executive holds such interest is listed and traded on a broadly recognized
securities exchange.

 

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1.6.2                                      At Mr. Ruder’s written request – such
request to comprise the necessary information on the contemplated new business –
the Company shall state in writing within 14 days whether the activity is
considered to be comprised by this clause 1.6 and whether in such case the
Company will consent.

 

1.6.3                                      For the purpose of this
non-competition clause, termination of employment means expiry of the notice
period applicable to the employment, irrespective of whether Mr. Ruder ceases to
work for the Company at an earlier date.

 

1.6.4                                      This non-competition clause shall not
apply if Mr. Ruder is dismissed by the Employer without reasonable cause or if
Mr. Ruder resigns from his office as a consequence of breach of this Agreement
by the Company or the Employer.

 

2.                                                     THE EXECUTIVE’S FINANCIAL
RIGHTS DURING SERVICE

 

2.1                                               REMUNERATION – BASE SALARY

 

MR. RUDER SHALL RECEIVE AN ANNUAL REMUNERATION OF DKK 3,350,000 PAYABLE IN
ARREARS IN MONTHLY INSTALLMENTS OF ONE TWELFTH AS FROM 1 JANUARY 2009. THE
ANNUAL SALARY SHALL BE REVIEWED ANNUALLY BY THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY AND MAY BE INCREASED FROM TIME TO TIME IN
ACCORDANCE WITH THE NORMAL BUSINESS PRACTICES OF THE COMPANY.  AS OF THE
EFFECTIVE DATE, THE COMPANY’S NORMAL BUSINESS PRACTICE FOR EXECUTIVE OFFICERS
PROVIDES FOR ANNUAL SALARY CHANGES TO BE EFFECTIVE ON APRIL 1ST OF EACH YEAR. 
FOR MR. RUDER, THE FIRST SUCH ANNUAL SALARY REVIEW WILL OCCUR ON 1 APRIL, 2010.

 

2.2                                               ANNUAL INCENTIVE

 

Mr. Ruder shall be eligible to earn an annual incentive under the Company’s 2006
Omnibus Incentive Plan, or a successor plan thereto, subject to achievement of
performance goals as established by the Compensation Committee of the Board of
Directors of the Company and communicated to the Executive.  The Annual
Incentive shall be payable pursuant to the terms of the 2006 Omnibus Incentive
Plan and/or any award agreement associated with such Annual Incentive.  Except
as otherwise provided for in any award agreement, Mr. Ruder shall only receive a
payout of the Annual Incentive if he is employed by the Employer or by the
Company through the last day of the fiscal year to which the Annual Incentive
relates.

 

For the 2009 and 2010 Annual Incentive Plan awards, the Compensation Committee
of the Board of Directors of the Company will authorize adjustments to the
performance goals and/or achieved performance results to remove the impact of
restructuring, reorganization or similar activities that are approved by the
Board of Directors of the Company.

 

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2.3                                               LONG-TERM INCENTIVE

 

MR. RUDER SHALL BE ELIGIBLE TO RECEIVE A LONG-TERM INCENTIVE AWARD UNDER THE
COMPANY’S 2006 OMNIBUS INCENTIVE PLAN, OR A SUCCESSOR PLAN THERETO, SUBJECT TO
BOTH THE ACTUAL GRANT OF LONG-TERM INCENTIVE AWARDS BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS AND THE ACHIEVEMENT OF PERFORMANCE GOALS
WITH RESPECT TO SUCH AWARDS AS ESTABLISHED BY THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY AND COMMUNICATED TO THE EXECUTIVE.  ANY EARNED
LONG-TERM INCENTIVE AWARD SHALL BE PAYABLE PURSUANT TO THE TERMS OF THE 2006
OMNIBUS INCENTIVE PLAN AND/OR THE AWARD AGREEMENT ASSOCIATED WITH SUCH LONG-TERM
INCENTIVE AWARD.  EXCEPT AS OTHERWISE PROVIDED FOR IN ANY AWARD AGREEMENT,
MR. RUDER SHALL ONLY RECEIVE A PAYOUT OF A LONG-TERM INCENTIVE AWARD IF HE IS
EMPLOYED BY THE EMPLOYER OR BY THE COMPANY THROUGH THE LAST DAY OF THE
PERFORMANCE PERIOD WITH RESPECT TO SUCH LONG-TERM INCENTIVE AWARD.

 

LONG-TERM INCENTIVE AWARDS ARE MADE ON A FULLY DISCRETIONARY BASIS BY THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY.  THE GRANTING
OF A LONG-TERM INCENTIVE AWARD FOR ANY GIVEN PERIOD DOES NOT LEAD TO A VESTED
RIGHT TO FURTHER LONG-TERM INCENTIVE AWARDS IN THE FUTURE.

 

2.4                                               COMPANY CAR

 

2.4.1                                      The Employer shall make available to
Mr. Ruder a car and defray all expenses incidental to the running of it. The
price range etc. of the car will be in accordance with the Sauer-Danfoss
European Car Policy.

 

2.4.2                                      If released from duty by the
Employer, Mr. Ruder – at the request of the Employer – shall return the car to
the Employer, for which he will receive in return a monthly compensation equal
to the taxable value of such benefit until expiry of the notice period in which
Mr. Ruder is entitled to salary. Mr. Ruder shall have no right to hold
possession or exercise a lien on any material or property belonging to the
Employer in his pursuit of any claim he may have against the Employer.

 

2.4.3                                      The tax consequences, if any, for
Mr. Ruder stemming from the company car provided pursuant to this section shall
be of no concern to the Company or the Employer.

 

2.5                                               TRAVEL AND ENTERTAINMENT

 

2.5.1                                      Expenses incurred by Mr. Ruder in
connection with his travelling and entertainment in the interest of the Company
or the Employer shall be reimbursed by the Employer on presentation of vouchers.
If Mr. Ruder’s spouse also participates in the travelling at the request of the
board of directors, such expenses shall also be reimbursed.

 

2.5.2                                      Along with his wife and children,
Mr. Ruder shall be entitled to a round trip (Denmark – Brazil – Denmark) airfare
tourist class once a year at the expense of the Employer.

 

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2.5.3                                      The Employer shall pay enrollment and
tuition fees for the school and high school education of Mr. Ruder’s three
children. An extension of this clause covering the university education of
Mr. Ruder’s children will be discussed by the parties when pertinent.

 

2.5.4                                      If Mr. Ruder’s employment is
terminated by the Employer or by Mr. Ruder himself, Mr. Ruder shall be
reimbursed for moving expenses (from Denmark to Brazil) according to vouchers.
Mr. Ruder shall be reimbursed for expenses in connection with he,  his wife and
his children moving to Brazil.

 

2.6                                               PENSION

 

In addition to the remuneration fixed in clause 2.1 above, the Employer shall
pay to Mr. Ruder, for the duration of his employment, an annual amount of 12
percent of the said base salary remuneration for pension purposes. Mr. Ruder
himself will contribute an amount of 6 percent of the said base salary
remuneration. The amount shall be placed in Sauer-Danfoss Pension maintained by
the Employer in accordance with the provisions of the Employer’s pension scheme.

 

2.7                                               Insurance

 

2.7.1                                      Mr. Ruder will be provided full-time
personal accident insurance, in accordance with the general policy for Danish
employees of Sauer-Danfoss ApS.

 

2.7.2                                      Mr. Ruder will be provided group life
and disability insurance, in accordance with the general policy for Danish
employees of Sauer-Danfoss ApS.

 

2.8                                               HOLIDAY

 

2.8.1                                      In every full calendar year,
Mr. Ruder is entitled to six weeks holiday.  Mr. Ruder is not covered by the
Holiday Act.

 

2.8.2                                      Mr. Ruder shall decide on the time of
holiday himself with due regard to the interests of the Company.

 

3.                                                     TERMINATION

 

3.1                                               ORDINARY TERMINATION OF
EMPLOYMENT

 

3.1.1                                      The notice of termination of the
employment shall be 24 months on the part of the Employer and 12 months on the
part of Mr. Ruder. Notice of termination shall be given in writing to expire at
the end of a month.

 

3.1.2                                      Notwithstanding any other provision
of this Service Agreement, Mr. Ruder’s employment hereunder shall terminate
without notice upon Mr. Ruder’s death, or if Mr. Ruder is declared bankrupt.  If
Mr. Ruder dies during employment an allowance of 6 months salary, excluding any
Annual Incentive and Long-Term Incentive, is to be paid by the

 

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Employer to his wife.  In the event that Mr. Ruder is not survived by his wife,
the above stated allowance is to be distributed among his children.

 

3.1.3                                      The employment shall terminate
automatically and without notice at the end of the month in which time Mr. Ruder
attains the age of 70.

 

3.1.4                                      If the employment is terminated by
the Employer for any reason other than breach by Mr. Ruder, the Employer shall
reimburse expenses incurred and paid by Mr. Ruder for executive level career
outplacement services by a mutually agreeable outplacement firm.

 

3.2                                               BREACH

 

If either party is in material breach of its duties pursuant to this Executive
Service Agreement or any relevant conditions under which it is made, the
non-breaching party shall notify the breaching party in writing specifying the
breach.  The breaching party has 30 days to remedy such breach.  Should such
breach not be remedied within 30 days of receipt of the notice, the
non-breaching party may terminate this Executive Service Agreement with
immediate effect or give notice of termination to expire at any time. If such
termination is a result of breach by Mr. Ruder, he is entitled to remuneration
only until the time of termination. If such termination is a result of breach by
the Employer, Mr. Ruder shall be entitled to receive remuneration as if he were
receiving notice as per Section 3.1.1 above.  Such notice period will begin 30
days from the written notice of breach provided by Mr. Ruder to the Employer. 
The breaching party shall be liable in damages for any loss the other party may
have suffered as a result of the breach.

 

4.                                                     SETTLEMENT OF DISPUTES

 

4.1                                               COURTS

 

Attempts shall be made first to settle by negotiation any dispute between the
Employer and Mr. Ruder arising out of this Executive Service Agreement. If these
attempts fail, and if the parties do not agree on arbitration pursuant to clause
4.2.1 below, the dispute shall be settled by the courts.

 

4.2                                               ARBITRATION

 

4.2.1                                      Where a dispute between the Parties
in relation to the employment under this Agreement cannot be settled through
negotiation, such dispute shall be settled by arbitration with final, binding
and enforceable effect and in accordance with the following rules:

 

4.2.2                                      The parties shall jointly contact the
Danish Institute of Arbitration, requesting the appointment, upon prior
discussions with the parties, of three arbitrators, one of which

 

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will serve as chairman of the arbitrators. If both parties agree, they may
choose to have only one arbitrator appointed.

 

4.2.3                                      The arbitration proceedings and award
are confidential and may not be disclosed by the Employer or Mr. Ruder.

 

4.2.4                                      The arbitration tribunal shall settle
the dispute in accordance with applicable Danish law and shall determine the
rules of procedure for its own proceedings in accordance with the general
principles of the Danish Administration of Justice Act (retsplejeloven). The
arbitration tribunal shall determine the distribution of the costs related to
the arbitration proceedings. The arbitration tribunal shall determine the
deadline for complying with the award, which is normally not later than 14 days
after the date of the award.

 

5.                                                     APPLICABLE LAW

 

The Service Agreement is subject to Danish law. Thus, the interpretation,
construction and performance of the Service Agreement shall be governed by the
laws of Denmark.

 

6.                                                     SIGNATURES

 

This Executive Service Agreement is executed in two original copies, of which
the Employer and Mr. Ruder shall receive one each.

 

Date: November 7, 2008

 

Date: November 7, 2008

 

 

 

 

 

 

/s/ Michael Willemar-Svanoee

 

/s/ Sven Ruder

Sauer-Danfoss ApS

 

Sven Ruder

 

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