Exhibit 10.1(z)


 


SAUER-DANFOSS
INC.


 


ANNUAL
MANAGEMENT PERFORMANCE INCENTIVE PLAN


 


Amended and
Restated as of December 29, 2008


 

















 


SAUER-DANFOSS
INC.


ANNUAL
MANAGEMENT PERFORMANCE INCENTIVE PLAN


Amended
and Restated as of December 29, 2008


 


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


 


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


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


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


d)             Provide
a competitive compensation opportunity.


 


ARTICLE I


DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE
II


ELIGIBILITY
AND MEASUREMENT BASIS


 


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


 


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


 


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


 


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ARTICLE
III


INCENTIVE
COMPENSATION AWARDS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE
IV


ADMINISTRATION


 


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


 


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


 


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


 


ARTICLE V


AMENDMENT
AND TERMINATION


 


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


 


ARTICLE
VI


MISCELLANEOUS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


 


	
  Executed
  this 29th day of December, 2008

  	
   

  
	
   

  	
   

  
	
  Sauer-Danfoss
  Inc.

  	
   

  
	
   

  	
   

  
	
  By

  	
      /s/
  Ron Hanson

  	
   

  
	
   

  	
   Ron
  Hanson – VP HR

  	
   

  



 


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