Exhibit 10.1


 


EXECUTIVE SERVICE AGREEMENT


 


	
  BETWEEN

  	
  Sauer-Danfoss ApS

  
	
   

  	
   

  
	
  AND

  	
  Mr. Sven Ruder

  



 

















 


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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