Exhibit 10.1(ay)


 


FIH|LOAN
AGREEMENT


 


	
   

  	
   

  	
  FIH-LOAN
  AGREEMENT #1204901

  
	
   

  	
   

  	
   

  
	
  Debtors

  	
   

  	
  The Term Loan can be
  allocated between the following Debtors at the Debtors’ discretion (subject
  only as set forth below):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sauer-Danfoss Inc.

  
	
   

  	
   

  	
  250 Parkway Drive, Suite 270

  
	
   

  	
   

  	
  Lincolnshire

  
	
   

  	
   

  	
  IL 60069

  
	
   

  	
   

  	
  USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sauer-Danfoss Holding
  ApS

  
	
   

  	
   

  	
  Nordborgvej 81

  
	
   

  	
   

  	
  6430 Nordborg

  
	
   

  	
   

  	
  Denmark

  
	
   

  	
   

  	
  CVR-no. 20161612

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Principal must be
  fully drawn in one draw down notice. If the Principal is split between the two
  Debtors, each term loan will have a separate FIH-loan number. Both term loans
  will be governed by this Loan Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The borrowing amount
  allocated to Sauer-Danfoss Holding ApS must be approved by both Sauer-Danfoss
  Holding ApS and Sauer-Danfoss Inc. Enclosed in the draw down and approval
  letter to the Creditor (as defined below) must be a confirmation of the
  guarantee from Sauer-Danfoss Inc. covering the payments under the allocation
  to Sauer-Danfoss Holding ApS to the Creditor according the paragraph “Guarantor”
  and “Draw down” in this Loan Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A Debtor will only be
  liable for the repayments (including interests, amortization, fees, etc.)
  related to amounts allocated to that Debtor (i.e., the Debtors will not be
  jointly liable for all payments under this Loan Agreement). However,
  Sauer-Danfoss Inc. will be responsible for all payments under this Loan
  Agreement as either Debtor or Guarantor for the allocated amount to
  Sauer-Danfoss Holding ApS.

  
	
   

  	
   

  	
   

  
	
  Creditor

  	
   

  	
  FIH Erhvervsbank A/S

  
	
   

  	
   

  	
  Langelinie Alle 43

  
	
   

  	
   

  	
  2100 Copenhagen O

  
	
   

  	
   

  	
  Denmark

  



 

















 


	
  Principal
  

  	
   

  	
  USD 75,000,000 

  
	
   

  	
   

  	
   

  
	
  Currencies
  

  	
   

  	
  USD or EUR 

  
	
   

  	
   

  	
   

  
	
  Loan
  structure

  	
   

  	
  Term Loan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Principal must be fully drawn in one draw down notice. If
  the Principal is partly or fully repaid, this part can not be redrawn.

  
	
   

  	
   

  	
   

  
	
  Maturity
  

  	
   

  	
  10 years

  
	
   

  	
   

  	
   

  
	
  Amortization

  	
   

  	
  20 consecutive
  quarterly payments consisting of interest only followed by 20 consecutive
  quarterly payments each equal to 1/20th of the Principal outstanding after 20
  quarterly payments (the loan will be fully repaid after 10 years). Any
  prepayments shall be applied pro rata to the remaining Principal payments.

  
	
   

  	
   

  	
   

  
	
  Interest
  rate

  	
   

  	
  ·

  	
  Fixed interest rate

  
	
  `

  	
   

  	
  ·

  	
  Credit commitment and margin commitment 10 years

  
	
   

  	
   

  	
  ·

  	
  The interest rate will be based on FIH cost-of-funds
  + 0,40%

  
	
   

  	
   

  	
  ·

  	
  Interest payment quarterly in arrear

  
	
   

  	
   

  	
  ·

  	
  Based on the
  market interest level of 28 October 2005, the interest rate can be
  indicated to 5,71% (USD) and 4,03% (EUR)

  
	
   

  	
   

  	
   

  
	
  Payment
  dates 

  	
   

  	
  1 January, 1 April, 1 July and
  1 October

  
	
   

  	
   

  	
   

  
	
  Up
  Front Fee

  	
   

  	
  0,20% of the Principal

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Up Front Fee will
  be deducted when drawing the Principal.

  
	
   

  	
   

  	
   

  
	
  Conversion

  	
   

  	
  By notice from
  Sauer-Danfoss Inc. either portion of the Term Loan can at any time be
  converted to other currencies and/or interest rate-base:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
  Term Loans with
  floating rates can be converted at Payment dates without fees, breakage costs
  or compensation to the Creditor 

  
	
   

  	
   

  	
  ·

  	
  Term Loans with
  floating rates covered with a swap can be converted at Payment dates without
  fees or compensation to the Creditor. However ordinary breakage costs,
  excluding margins will apply for the cancellation of the swap 

  
	
   

  	
   

  	
  ·

  	
  Term Loans with
  fixed interest rates will be converted using the NPV at the conversion date
  as the new Principal 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Conversion amount must be not less than USD 10
  mill. 

  



 

















 


	
  Repayment

  	
   

  	
  The Term Loan can at
  any time be fully or partly repaid:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
  Term Loans with
  floating rates can be repaid at Payment dates without fees, breakage costs or
  compensation to the Creditor 

  
	
   

  	
   

  	
  ·

  	
  Term Loans with
  floating rates covered with a swap can be repaid at Payment dates without
  fees or compensation to the Creditor. However ordinary breakage costs,
  excluding margins will apply for the cancellation of the swap

  
	
   

  	
   

  	
  ·

  	
  Term Loans with fixed
  interest rates can be terminated by repaying the NPV at the conversion date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Prepayments must be not
  less than USD 5 mill.

  
	
   

  	
   

  	
   

  
	
  Collateral
  

  	
   

  	
  Unsecured

  
	
   

  	
   

  	
   

  
	
  Financial
  covenants

  	
   

  	
  Debt covenant:
  NIBD / EBITDA < 3,50

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Interest coverage:
  EBITDA / Net interest > 3,00

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The financial covenants
  will be tested quarterly in connection with the Payment dates on a running 12
  month rolling basis.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sauer-Danfoss Inc. must
  prepare a compliance certificate for delivery with each financial statement
  referred to below. The compliance certificate covering the end of the
  financial year must include a positive statement, that the Debtors are not in
  breach with the “disposal of asset”-covenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If a financial covenant
  is not met, the Loan Agreement can be considered in default by the Creditor.

  
	
   

  	
   

  	
   

  
	
  Financial
  information

  	
   

  	
  The Debtors are obliged
  to send the Creditor:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
  A copy of the
  annual (both Debtors) and quarterly financial statements (only Sauer-Danfoss
  Inc.) plus information provided to the lenders under the US $250,000,000
  Multicurrency Revolving Facility Agreement, dated 12 September 2003, or
  any refinancing or replacement thereof, as and when so provided

  
	
   

  	
   

  	
  ·

  	
  Other relevant
  information sent to the lenders under the US $250,000,000 Multicurrency
  Revolving Facility Agreement, dated 12 September 2003, or any
  refinancing or replacement thereof 

  
	
   

  	
   

  	
  ·

  	
  A compliance
  certificate with each of the foregoing financial statements prepared by
  Sauer-Danfoss Inc. on a consolidated 

  



 

















 


	
   

  	
   

  	
   

  	
  basis.

  
	
   

  	
   

  	
   

  	
   

  
	
  Other
  terms and conditions

  	
   

  	
  ·

  	
  Material Adverse
  Clause. Not included (see however the Pari Passu paragraph below).

  
	
   

  	
   

  	
  ·

  	
  Pari Passu. The
  payments under the Term Loan are to be treated at least pari passu with other
  senior loans taken up by the Debtors, also, if, to the extent and for so long
  as any other senior loan made to the Debtor provides the lender thereunder
  with an option to terminate the senior loan based on a material adverse
  change, such clause shall apply to this loan

  
	
   

  	
   

  	
  ·

  	
  Cross default.
  Any financial indebtedness of any member of the Sauer-Danfoss group is not
  paid when due nor within any original applicable grace period over the amount
  of USD 10,000,000, provided the non-payment is not disputed or remedied
  within 10 business days after the due date or the end of any original grace
  period, the Term Loan can be terminated by the Creditor

  
	
   

  	
   

  	
  ·

  	
  Change-of-control.
  If any person or two or more persons acting in concert (other than (a) Klaus
  H. Murmann, his family or any trust or other entity owned or controlled by
  Klaus H. Murmann or his family, and/or (b) Danfoss A/S, directly or
  indirectly), acquires a beneficial ownership (within the meaning of Rule 13d-3
  of the SEC under the Securities Act of 1934) of thirty (30) per cent, or more
  of the outstanding shares of voting stock of Sauer-Danfoss Inc., the Term
  Loan can be terminated by the Creditor

  
	
   

  	
   

  	
  ·

  	
  Negative Pledge.
  The Debtors are not allowed to pledge securities, except securities
  representing 65% of Sauer-Danfoss Inc.’s interests in Sauer-Danfoss Holding
  ApS, Sauer-Danfoss GmbH, Sauer-Danfoss GmbH & Co. OHG and such other
  additional equity interests as may be required from time to time to be
  pledged as collateral security for the refinancing of the US $250,000,000
  Multicurrency Revolving Facility Agreement, dated 12 September 2003, or
  any refinancing or replacement thereof, can be pledged; provided, however, as
  a condition precedent to the effectiveness of this Agreement and the ability
  of the Debtors to borrow hereunder, the Creditor shall have entered into a
  satisfactory intercreditor agreement with respect to such pledged interests.
  Securities below accumulated USD 5,000,000 can be pledged

  
	
   

  	
   

  	
  ·

  	
  The Debtors,
  collectively, are not allowed to dispose (sell, lease, transfer, etc.) assets
  with an accumulated book value of more than 10 percent of the total assets of
  the Sauer-Danfoss group

  



 

















 


	
   

  	
   

  	
   

  	
  each year.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
  The Debtors are
  not allowed to enter into any merger, except for a solvent restructuring not
  involving a liquidation of a Debtor.

  
	
   

  	
   

  	
  ·

  	
  The Creditor may
  not demand redemption if the failure to pay interest, installments or
  commission when due occurs solely for technical or administrative reasons and
  payment is received by the Creditor within 3 business days of the due date.

  
	
   

  	
   

  	
  ·

  	
  The Debtors’
  obligation to pay increases in the Creditor’s initial expenses or costs to
  maintain the Term Loan shall not apply to taxes on the overall net income of
  the Creditor.

  
	
   

  	
   

  	
   

  	
   

  
	
  General
  terms and conditions

  	
   

  	
  ·

  	
  FIH general
  terms and conditions of lending – Foreign Currency, February 2004 (if
  not altered by the Loan Agreement)

  
	
   

  	
   

  	
  ·

  	
  The Loan
  Agreement shall be governed by and shall be construed in accordance with
  Danish law

  
	
   

  	
   

  	
  ·

  	
  The Loan
  Agreement shall be enforceable in accordance with Section 478, paragraph
  1, number 5 and paragraph 4 of the Danish Administration of Justice Act
  (Retsplejelovens §478, stk. 1, nr. 5 og stk. 4)

  
	
   

  	
   

  	
  ·

  	
  The Loan
  Agreement, including the guarantee and the pledge of securities, is subject
  to approval by the Board of Directors of Sauer-Danfoss Inc. (expected 7 December 2005).

  
	
   

  	
   

  	
   

  
	
  Guarantor

  	
   

  	
  Sauer-Danfoss Inc. is
  acting as Guarantor for the repayments (including interests, amortization,
  fees etc.) related to amounts allocated to Sauer-Danfoss Holding ApS. If a
  due payment is not made by Sauer-Danfoss Holding ApS, the Creditor can choose
  immediately to call the payment from the Guarantor including penalty interest
  according to FIH general terms and conditions of lending – Foreign Currency, February 2004.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The guarantee shall be
  enforceable in accordance with Section 478, paragraph 1, number 5 and
  paragraph 4 of the Danish Administration of Justice Act (Retsplejelovens
  §478, stk. 1, nr. 5 og stk. 4)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sauer-Danfoss Holding
  ApS shall not be liable for the amount drawn or assumed by Sauer-Danfoss Inc.

  
	
   

  	
   

  	
   

  
	
  Draw
  down

  	
   

  	
  The Principal must be
  fully drawn before 31 December 2005. The Principal must be fully drawn
  in one draw down notice by the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Creditor must be
  notified of the final allocation (the confirmation of the guarantee for any
  payments under the Sauer-Danfoss Holding ApS - allocation

  



 

















 


	
   

  	
  must be enclosed)
  between the Debtors at least 3 days before the transfer.

  
	
   

  	
   

  	
   

  
	
  Acceptance
  of the first Debtor

  	
  The Loan Agreement is
  hereby accepted.

  
	
   

  	
   

  	
   

  
	
   

  	
  Sauer-Danfoss, Inc

  
	
   

  	
   

  	
   

  
	
   

  	
  LINCOLNSHIRE

  	
   

  	
  11-14-2005

  
	
   

  	
  (City)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Karl Schmidt

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Please, state name in capital letters below signature

  
	
   

  	
   

  	
   

  	
   

  
	
  Acceptance
  of the second Debtor

  	
  The Loan Agreement is
  hereby accepted.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Sauer-Danfoss Holding ApS

  
	
   

  	
   

  
	
   

  	
  LINCOLNSHIRE

  	
   

  	
  11-14-2005

  
	
   

  	
  (City)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Karl Schmidt

  	
   

  	
  /s/ Chuck Cohrs

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Please, state name in
  capital letters below signature 

  
	
   

  	
   

  	
   

  	
   

  
	
  Acceptance
  of the Guarantor

  	
  The Guarantee is hereby
  accepted.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Sauer-Danfoss, Inc

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LINCOLNSHIRE

  	
   

  	
  11-14-2005

  
	
   

  	
  (City)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Karl Schmidt

  	
   

  	
   

  



 

















 


	
   

  	
  Please, state name in
  capital letters below signature

  
	
   

  	
   

  	
   

  	
   

  
	
  Signed
  in the presence of

  	
  Name 

  	
   

  	
  : ANDREW V. BALLANTINE

  
	
   

  	
  Position

  	
   

  	
  : CORPORATE COUNSEL

  
	
   

  	
  Private address

  	
   

  	
  : 1720 MAPLE AVENUE

  
	
   

  	
  Zip code

  	
   

  	
  : 60201

  
	
   

  	
  City 

  	
   

  	
  : EVANSTON ILLINOIS

  
	
   

  	
  Signature

  	
   

  	
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name 

  	
   

  	
  : DAVID J. ANDERSON

  
	
   

  	
  Position

  	
   

  	
  : PRESIDENT & CEO

  
	
   

  	
  Private address

  	
   

  	
  : 402 FARRINGTON DR,

  
	
   

  	
  Zip code

  	
   

  	
  : 60069

  
	
   

  	
  City 

  	
   

  	
  : LINCOLNSHIRE, IL

  
	
   

  	
  Signature

  	
   

  	
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  
	
  Acceptance
  of the Creditor

  	
  The Loan Agreement is
  hereby accepted.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FIH Erhvervsbank

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LINCOLNSHIRE

  	
   

  	
  11-14-2005

  
	
   

  	
  (City)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Please, state name in
  capital letters below signature

  
						



 

















 


FIH|GENERAL
TERMS AND CONDITIONS


OF LENDING - FOREIGN CURRENCY, FEBRUARY 2004


 


Termination


Loans may be redeemed by the debtor subject to fourteen days’ notice
against payment of the remaining instalments and interest discounted back to
the day of redemption. The discounting rate will be fixed by FIH A/S with the
secondary styles of Finance for Danish Industry A/S (FIH) on the basis of the rate
of interest of the time of redemption. A redemption charge will be added in
accordance with FIHs standard rates.


 


Loans
are non-terminable on the part of FIH, except that FIH may demand redemption if
and when


 


	
  ·

  	
  interest,
  instalments and commission are not paid when due

  
	
  ·

  	
  the
  debtor or a guarantor defaults, enters into liquidation, bankruptcy, debt
  reconstruction, makes attempts to commence negotiations for compulsory
  composition or other arrangements with creditors, is placed under a legal
  guardianship, dies or if attachment, execution or distress is levied against
  the debtor or the guarantor

  
	
  ·

  	
  the
  debtor is a private limited company or a public limited company and a share
  or shareholding therein with controlling influence changes owner without the
  consent of FIH or the management of the company is altered so that, in the
  opinion of FIH, this will have essential influence on the financial situation
  of the company

  
	
  ·

  	
  debtor’s activities discontinue or the ownership is transferred

  
	
  ·

  	
  the
  debtor or a guarantor takes up permanent residence outside Denmark, or
  otherwise changes residence without prior notice to FIH

  
	
  ·

  	
  the
  value of the pledge is reduced

  
	
  ·

  	
  the
  pledge is disposed of without the consent of FIH or exchanged with equipment
  which is not covered by the security, owing to the prior right of a third
  party

  
	
  ·

  	
  the
  insurance required by FIH is not updated with adequate coverage on a
  continuous basis

  
	
  ·

  	
  other
  material assumptions for the continuance of the loan are, in the opinion of
  FIH, no longer present.

  



 


The
amount of redemption is made up in the same way as if the loan had been
redeemed by the debtor.


 


Pledge provided by the debtor


The
pledge serves as security for any obligation which the debtor has now or will
have later towards FIH and/or other companies of the FIH Group.


 


Pledge provided by third parties and guarantors


FIH has the right to grant respite with payment and to allow payments to
lapse without the consent of guarantors and/or third-party pledgers.


 


If FIH fails to prove its claim in the estate of the debtor, the
guarantor and/or third-party pledger, or payments from the debtor are annulled
or pledges may be differently encum bered than assumed or renewal of the
registration of the pledge has been neglected, none of this will affect FIHs
claim against guarantors and third-party pledgers.


 


Pledge in general


The principal of the mortgage deeds is increased gradually with the rate
of interest mentioned in the mortgage deed from the date of the mortgaging to
FIH and up to 5 years after this date.


 


FIHs dispositions in respect of pledge and agreements with guarantors
are binding on debtor, third-party pledgers and co-guarantors in all and every
respect. FIH may at its own option determine the account against which money
received from the security provided shall be written off.


 


Floating rate loans


The
debtor may at any time demand an interest rate adjustment or a fixed rate. The
loan will be discounted back to the interest roll-over date. The interest roll-over
is effected on the day the debtor’s demand is received by FIH during all
business hours.


 


Floating rate annuity loans


FIH can adjust any repayments without notice in order that the life of
the loan remains unchanged.


 


Other terms and conditions


The debtor and the guarantor shall submit a copy of the Annual Accounts
with specifications and auditor’s remarks and, upon demand, deliver quarterly
and semi-annual accounts and additional information as to the operation of the
company.


 


FIH may at 14 days’ notice demand security, respectively additional
security, if FIH considers that a substantial, negative change in the economic
position of debtor or possible guarantors has taken place, or that the value of
the pledge is reduced.


 


With respect to foreign exchange loans FIH reserves the same right in
case the exchange rate of the loan currency increases compared to Danish
kroner.


 


If
the loan is to be effected as an advance loan, FIH shall approve the guarantor
or the bank where the suspensed account is kept before disbursement.


 


If payment is delayed. FIH has the right to charge interest on overdue
payments and a fee for sending reminders etc. and the debtor can be charged
with fees for any additional service from FIH in accordance with FIHs current
standard rates. FIH will inform the current rates upon request. Stamp duty and
other costs shall be paid by the debtor.


 


Disbursement and Repayment


The loan will be disbursed in the currency selected or in Danish kroner
adjusted to FIHs buying rate on the day of disbursement.


 


On the day of disbursement, the borrower is to decide whether future
repayments shall be paid in the currency selected or in Danish kroner adjusted
to FIHs selling rate.


 


Repayments - without deduction of dividend tax - is
to be effected to FIH or a bank approved by FIH.


 


Payments
falling due on a day when FIH or the approved bank is closed shall be paid on
the last banking day before the due date.


 


Modifications to Acts and Regulations


In
case the legislature or the taxation-, foreign exchange- or other authority
modifies policies or implements regulations imposing restrictions etc. on FIH,
thereby increasing FIHs initial expenses or costs to maintain such loan, the
borrower shall agree to pay such additional amounts.


 


Venue and Law


This
loan agreement shall be governed by and construed in accordance with Danish law
and any disputes shall be settled by Danish courts.


 


February 2004