Exhibit
10.1


Sauer-Danfoss Inc. 2006 Omnibus Incentive Plan

2007 Performance Unit Award Agreement


You
have been selected to be a Participant in the Sauer-Danfoss Inc. 2006 Omnibus
Incentive Plan (the “Plan”), as specified below:


	
  Participant:

  	
   

  
	
   

  	
   

  
	
  Date of Award:

  	
   

  
	
   

  	
   

  
	
  Target Number of Performance Units Awarded:

  	
   

  
	
   

  	
   

  
	
  Performance Period:

  	
   

  
	
   

  	
   

  
	
  Performance Measure:

  	
  Simple Average Annual Return on Net Assets and Sales
  Growth Pursuant to Sec. 3 below

  
						



 




	
  This document constitutes part of the prospectus covering securities
  that have been registered under the Securities Act of 1933.

  






 


THIS
AWARD AGREEMENT, effective as of the Date of Award set forth above, represents
the award of Performance Units by Sauer-Danfoss Inc., a Delaware U.S.A.
corporation (the “Company”), to the Participant named above, pursuant to the
provisions of the Plan.


The
Plan provides a complete description of the terms and conditions governing
Performance Units.  If there is any
inconsistency between the terms of this Award Agreement and the terms of the
Plan, the Plan’s terms shall completely supersede and replace the conflicting
terms of this Award Agreement.  All
capitalized terms shall have the meanings ascribed to them in the Plan, unless
specifically set forth otherwise herein. 
For purposes of this Award Agreement, the term Sauer-Danfoss Group shall
mean the Company, its Subsidiaries and any Affiliate designated as such by the
Committee pursuant to Section 2.1 of the Plan. 
In consideration of the mutual promises contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:


1.             Employment by the Company.  The Performance Units granted hereunder are
awarded on the condition that the Participant remains employed by the
Sauer-Danfoss Group from the Date of Award through the end of the Performance
Period, as specified above. 
Notwithstanding the preceding sentence and subject to Section 6, the
Participant will not vest in the Performance Units covered by this Award
Agreement until the date of payment as provided in Section 6.  However, neither such condition regarding
further employment nor the award of the Performance Units shall impose upon the
Sauer-Danfoss Group any obligation to retain the Participant in its employ for
any given period or upon any specific terms of employment.



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2.             Earning Performance Units.  Subject to the terms of the Plan and this
Award Agreement, the Participant shall be entitled to receive payment of the
number and value of Performance Units earned by the Participant over the
Performance Period, where the number of Performance Units is determined as a
function of the extent to which the corresponding performance goals have been
achieved.


3.             Performance Measures.  The Performance Measures under this Award
Agreement shall be the Simple Average Annual Return on Net Assets and the
Simple Average Annual Sales Growth as further defined in Exhibit A.


4.             Performance Goals.  Achievement of a Simple Average Annual RoNA
over the Performance Period equal to the pre-determined performance goal target
will entitle the Participant to payment of 90% of the Target Number of
Performance Units Awarded as set forth above, subject to other provisions of
the Plan and this Award Agreement. 
Achievement of a Simple Average Annual RoNA equal to or greater than the
pre-determined performance goal maximum shall entitle the Participant to
payment of 130% of the Target Number of Performance Units Awarded.  Achievement of a Simple Average Annual RoNA
equal to the pre-determined performance goal threshold shall entitle the
Participant to payment of 46% of the Target Number of Performance Units
Awarded.  Achievement of a Simple Average
Annual RoNA between the pre-determined performance goal threshold and the
pre-determined performance goal maximum shall entitle the Participant to
payment of the number of Performance Units interpolated according to a
performance achievement function defined by the foregoing achievement levels,
and as reflected on the graph attached hereto as Exhibit B.  Achievement of a Simple Average Annual RoNA
of less than the performance goal threshold shall result in no payment of
Performance Units to the Participant under this Award Agreement.


The earned
performance units computed pursuant to the preceding paragraph may be
increased, depending upon the achieved, Average Annual Sales Growth.  The increase shall be in the form of a
percentage add-on, according to the table reflected on Exhibit B.


5.             Certification Of Achieved
Performance and Approval of Payouts.  Actual achieved performance with
respect to the Performance Measures shall be derived from the consolidated
financial statements of the Company for the Performance Period as defined above
and on Exhibit A.  The ultimate
determination of payout under this Agreement is subject to:


i)                 completion of the
financial audits for each fiscal year during the Performance Period;


ii)              certification and
approval of the performance results by the Committee; and


iii)           a decision as to the
appropriate payout by the Committee, in its complete and sole discretion.  In exercising such discretion, the Committee
will follow the provisions or Article 12.3 of the Plan, which specifically prohibits
the upward adjustment of any Awards intended to qualify as Performance-Based
Compensation.



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6.             Form and Timing of Payment of
Performance Units. 
Payment of earned Performance Units shall be made within
seventy-five (75) calendar days follow­ing the close of the applicable
Performance Period.  Subject to the Plan,
the Committee has authorized that the future payment of any earned Performance
Units under this Award Agreement shall be made 100% in Shares.   The Sauer-Danfoss Group shall withhold from
any such payout Shares having a value equivalent to the amount needed to
satisfy the minimum statutory tax withholding requirements of the Sauer-Danfoss
Group in the appropriate taxing jurisdiction.


[ Alternative
Language for Participants To Be Paid In Cash. 
Subject to the Plan, the Committee has authorized that
the future payment of any earned Performance Units under this Award Agreement
shall be made 100% in cash, less applicable tax withholdings.  For purposes of this cash payment, the value
of an earned Performance Unit will be equal to the Fair Market Value, as
defined in the Plan, of a share of common stock of the Company as of the close
of the Performance Period.]


7.             Voting Rights and Dividends.  During the Performance Period and until the
date of payment of Performance Units as provided for in Section 6, the
Participant will not have voting rights with respect to the Performance
Units.  During the Performance Period and
until and including the date of payment of Performance Units as provided in
Section 6 and as approved by the Committee or the Board, the Participant shall
receive all dividends, dividend equivalents and other distributions paid with
respect to a number of shares of common stock of the Company equal to the
Target Number of Performance Units Awarded under this Award Agreement.  Any such payment of dividend, dividend
equivalent or other distribution will be made on one of the Participant’s next
two regular paydays following the specified record date.


Notwithstanding the previous paragraph, if the Participant is no longer
employed by the Sauer-Danfoss Group but retains a right to a pro-rated payment
under the provisions of Section 8 of this Award Agreement, the right to receive
dividends, dividend equivalents and other distributions as provided in the previous
paragraph will cease.


8.             Termination of Employment Due to
Death, Disability, or Retirement.  In the event the employment of a Participant
with the Sauer-Danfoss Group is terminated by reason of death, Disability, or
Retirement during the Performance Period, the Participant or the Participant’s
beneficiary or estate, as the case may be, shall be entitled to receive a
prorated payment of the Performance Units. 
The prorated payment shall be determined by the Committee, in its sole
discretion, based on the number of full months of the Participant’s employment
during the Performance Period, in relation to the total number of months in the
Performance Period, and shall further be adjusted based on the achievement of
the pre-established performance goals set forth in Section 4.


The prorated
payment of Performance Units pursuant to this Section 8 shall be made at the
same time as payments are made to Participants who did not terminate employment
during the Performance Period as set forth in Section 6.



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For purposes of
this Section 8, to the extent permitted by Code Section 409A, Disability shall
have the meaning ascribed to such term in the Participant’s governing long-term
disability plan, or if not so permitted, then the definition ascribed to such
term in Code Section 409A.  For purposes
of this Section 8, Retirement means a termination from employment with the
Sauer-Danfoss Group on the normal retirement date on which a Participant
qualifies for full (i.e., unreduced for early retirement or other actuarial reductions)
retirement benefits under the Participant’s governing defined benefit
retirement plan, as identified by the Committee.


9.               Termination
of Employment for Other Reasons.  In the event that the Participant, prior to
the payout date set forth in Section 6, terminates employment with the
Sauer-Danfoss Group for any reason other than those reasons set forth in
Section 8, or in the event that the Sauer-Danfoss Group terminates the
employment of the Participant with cause prior to the payout date set forth in
Section 6 or without cause prior to the end of the Performance Period, all
Performance Units awarded to the Participant under this Award Agreement shall
be forfeited by the Participant; provided, however, that the Committee, in its
sole discretion, may waive such automatic forfeiture provision and pay out on a
pro rata basis in accordance with Section 8.  When the Committee exercises its sole
discretion regarding forfeiture, it may take into consideration any individual
facts and circumstances that it deems relevant for purposes of achieving the
desired objectives under the Plan.  Any
determination regarding forfeiture under this Section 9 for a given Participant
shall not dictate any required result for a different Participant in a similar
or different situation.


10.          Change in Control.  In the event of a Change in Control (as
defined in the Plan) during the Performance Period, the Target Number of
Performance Units Awarded shall become payable in full and such payment shall
be made within seventy-five (75) calendar days following the date of the
Change in Control.  The Committee, in its
sole discretion, may make such payment of the Target Number of Performance
Units Awarded in the form of cash or in Shares (or in a combination
thereof).  The number of Shares to be
issued, if any, shall be equal to the number of earned Performance Units
designated by the Committee to be paid in Shares.  The amount of cash to be paid if any shall be
equal to the Fair Market Value, as defined in the Plan, of a share of the common
stock of the Company as of the date of the Change in Control multiplied by the
number of Performance Units designated by the Committee to be paid in cash.


11.          Nontransferability.  Performance Units may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.  Further, except as otherwise determined by
the Committee and provided in this Award Agreement, a Participant’s rights
under the Plan shall be exercisable during the Participant’s lifetime only by
the Participant or the Participant’s legal representative.


12.          Adjustments in Authorized Shares.  The Committee shall have the sole discretion
to adjust the number of Performance Units awarded pursuant to this Award Agreement,
in accordance with Section 4.4 of the Plan.


13.          Tax Withholding.  The Sauer-Danfoss Group shall have the power
and the right to deduct or withhold, or require the Participant or beneficiary
to remit to the Sauer-Danfoss Group, an 



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amount sufficient
to satisfy federal, state, and local taxes, domestic or foreign, required by
law or regulation to be withheld with respect to any taxable event arising as a
result of this Award Agreement.  For
Awards payable in Shares, the Sauer-Danfoss Group’s power and right to withhold
includes the right to withhold Shares with a value equivalent to the amount
needed to satisfy the minimum statutory tax withholding requirements of the
Sauer-Danfoss Group in the appropriate taxing jurisdiction.


14.          Share Withholding.  With respect to withholding required upon any
other taxable event arising as a result of Awards granted hereunder, the
Participant may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Sauer-Danfoss Group
withhold Performance Units having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which could be withheld
on the transaction.  All such elections
shall be irrevocable, made in writing, signed by the Participant, and shall be
subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.


15.          Covenant Not to Compete.  Without the consent of the Company, the
Participant shall not, directly or indirectly, anywhere in the world, at any
time during the Participant’s employment with the Sauer-Danfoss Group, and for
a period of eighteen (18) months following the termination of Participant’s
employment with the Sauer-Danfoss Group 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 Sauer-Danfoss Group; provided, however, that the
Participant shall not be deemed to have breached this undertaking if his or her
sole relation with such entity consists of his or her 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 Participant 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
Sauer-Danfoss Group” shall mean any product or product line of the
Sauer-Danfoss Group, the consolidated gross sales of which during any calendar
year during the five (5) year period preceding the Participant’s undertaking
such employment were at least $10 million.


The
Participant acknowledges that: (a) the services to be performed by him for the
Sauer-Danfoss Group are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the business of the Sauer-Danfoss Group is
worldwide in scope and its products are marketed throughout the world; (c) the
Sauer-Danfoss Group competes with other businesses that are or could be located
in any part of the world; and (d) the provisions of this Section 15 are
reasonable and necessary to protect the Sauer-Danfoss Group’s business.


If any
covenant in this Section 15 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 



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jurisdiction
may determine to be reasonable, not arbitrary, and not against public policy,
will be effective, binding, and enforceable against the Participant.


The
period of time applicable to any covenant in this Section 15 will be extended
by the duration of any violation by the Participant of such covenant.


The
Participant will, while the covenants under this Section 15 are in effect, give
notice to the Company, within ten days after accepting any other employment, of
the identity of the Participant’s employer. 
The Company may notify such employer that the Participant is bound by
this Award Agreement and, at the Company’s election, may furnish such employer
with a copy of this Award Agreement or relevant portions thereof.


Any
nonenforcement of this Section 15 will not be construed to be a waiver by the
Company to enforce such provision in the future.  If the Participant has received a payment
under this Award Agreement, the Company retains the right to demand
verification of employment and compliance with this Section 15 at any time
prior to the date that is eighteen (18) months after the end of the Performance
Period.  The Company or any member of the
Sauer-Danfoss Group may seek restitution and repayment of the total payments
made to the Participant under this Award Agreement if the Company determines
that the Participant has violated this Section 15 during the eighteen (18)
month period following the end of the Performance Period.


16.          Disclosure of Confidential Information.  Without the consent of the Company, the
Participant shall not disclose to any other person Confidential Information (as
defined below) concerning the Sauer-Danfoss Group or any of its trade secrets
of which the Participant has gained knowledge during his or her employment with
the Sauer-Danfoss Group.  Any trade
secrets of the Sauer-Danfoss Group 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 Award Agreement,
such information will, nevertheless, be considered Confidential Information for
purposes of this Award Agreement.  The
Participant hereby waives any requirement that the Company submits proof of the
economic value of any trade secret or posts a bond or other security.  None of the foregoing obligations and
restrictions apply to any part of the Confidential Information that the
Participant demonstrates was or became generally available to the public other
than as a result of a disclosure by the Participant.


The
Participant will not remove from the premises of the Sauer-Danfoss Group
(except to the extent such removal is for purposes of the performance of the
Participant’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 Participant recognizes that, as between the Company or any member of
the Sauer-Danfoss Group and the Participant, all of the Proprietary Items,
whether or not developed by the Participant, are the exclusive property of the
Company or the member of the 



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Sauer-Danfoss
Group, as the case may be.  Upon
termination of this Award Agreement by either party, or upon the request of the
Company or any member of the Sauer-Danfoss Group during the employment period,
the Participant will return to the Company or the Sauer-Danfoss Group member
all of the Proprietary Items in the Participant’s possession or subject to the
Participant’s control, and the Participant shall not retain any copies,
abstracts, sketches, or other physical embodiment of any of the Proprietary
Items.


For
purposes of this Award Agreement, Confidential Information shall include any
and all information concerning the business and affairs of the Sauer-Danfoss
Group, 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 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 Sauer-Danfoss Group 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.


Any
nonenforcement of this Section 16 will not be construed to be a waiver by the
Company to enforce such provision in the future.  If the Participant has received a payment
under this Award Agreement, the Company retains the right to demand
verification of compliance with this Section 16 at any time prior to the date
that is eighteen (18) months after the end of the Performance Period.  The Company or any member of the
Sauer-Danfoss Group may seek restitution and repayment of the total payments
made to the Participant under this Award Agreement if the Company determines
that the Participant has violated this Section 16 during the eighteen (18)
month period following the end of the Performance Period.


17.          Nonsolicitation.  Without the written consent of the Company,
the Participant shall not, at any time during Employment and for a period of
eighteen (18) months following the termination of Participant’s employment with
the Sauer-Danfoss Group for any reason (a) 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 Sauer-Danfoss Group; or (b) 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 



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Sauer-Danfoss
Group during the time of the Participant’s employment, whether or not the
Participant had personal contact with such person.


Any
nonenforcement of this Section 17 will not be construed to be a waiver by the
Company to enforce such provision in the future.  If the Participant has received a payment
under this Award Agreement, the Company retains the right to demand
verification of compliance with this Section 17 at any time prior to the date
that is eighteen (18) months after the end of the Performance Period.  The Company or any member of the
Sauer-Danfoss Group may seek restitution and repayment of the total payments
made to the Participant under this Award Agreement if the Company determines
that the Participant has violated this Section 17 during the eighteen (18)
month period following the end of the Performance Period.


18.          Injunctive Relief and Additional Remedy;
Essential and Independent Covenants.  The Participant acknowledges that the injury
that would be suffered by the Sauer-Danfoss Group as a result of a breach of
the provisions of this Award Agreement (including any provision of Sections 15,
16, and 17) would be irreparable and that an award of monetary damages to the
Sauer-Danfoss Group for such a breach would be an inadequate remedy.  Consequently, the Company or any member of
the Sauer-Danfoss Group 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 Award
Agreement, and the Company or any member of the Sauer-Danfoss Group will not be
obligated to post bond or other security in seeking such relief.  Without limiting the Sauer-Danfoss Group’s
rights under this Section 18 or any other remedies of the Sauer-Danfoss Group,
if the Participant breaches any of the provisions of Sections 15, 16, or 17,
the Sauer-Danfoss Group will have the right to cease making any payments
otherwise due to the Participant under this Award Agreement.


The
covenants by the Participant in Sections 15, 16, and 17 are essential elements
and preconditions to this Award Agreement, and without the Participant’s
agreement to comply with such covenants, the Company would not have entered
into this Award Agreement with the Participant. 
The Company and the Participant 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 15),
with specific regard to the nature of the business conducted by the
Sauer-Danfoss Group.  The Participant’s
covenants in Sections 15, 16, and 17 are independent covenants and the
existence of any claim by the Participant against the Company or any member of
the Sauer-Danfoss Group under this Award Agreement or otherwise, will not
excuse the Participant’s breach of any covenant in Sections 15, 16, or 17.


If
this Award Agreement or the Participant’s employment with the Sauer-Danfoss
Group is terminated, this Award Agreement will continue in full force and
effect as is necessary or appropriate to enforce the covenants and agreements
of the Participant in Sections 15, 16, 17, and 18.



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19.          Beneficiary Designation.  The Participant may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under this Award Agreement is to be paid in
case of his or her death before he or she receives any or all of such benefit.
Each such designation shall revoke all prior designations by the Participant,
shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Vice President — Human Resources
during the Participant’s lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant’s death shall be paid to the
Participant’s estate.


Beneficiary
Designation (name, address, and relationship):


	
  

  
	
   

  
	
   

  
	
   

  
	
   

  



 


20.          Administration.  This Award Agreement and the rights of the
Participant hereunder are subject to all the terms and conditions of the Plan,
as the same may be amended from time to time, as well as to such rules and
regulations as the Committee may adopt for administration of the Plan.  It is expressly understood that the Committee
is authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Award Agreement, all of
which shall be binding upon the Participant. 
Any inconsistency between the Award Agreement and the Plan shall be
resolved in favor of the Plan.


21.          Continuation
of Employment.  This
Award Agreement is not an employment agreement, it shall not confer upon the
Participant any right to continuation of employment by the Sauer-Danfoss Group,
nor shall this Award Agreement interfere in any way with the Sauer-Danfoss
Group’s right to terminate the Participant’s employment at any time, subject to
employment laws in the appropriate jurisdiction.


22.          No
Vested Right In Future Awards.  Participant acknowledges and agrees (by
executing this Award Agreement) that the granting of Awards under this Award
Agreement are made on a fully discretionary basis by the Committee and that
this Award Agreement does not lead to a vested right to further Awards in the
future.  Further, the Awards set forth in
this Award Agreement constitute a non-recurrent benefit and the terms of this
Award Agreement are only applicable to the Awards distributed pursuant to this
Award Agreement.


23.          Use
of Personal Data. 
Participant acknowledges and agrees (by executing this Award Agreement)
to the collection, use, processing and transfer of certain personal data as
described in this Section 23.  The
Participant understands that he or she is not obliged to consent to such
collection, use, processing and transfer of personal data.  However, the Participant understands that his
or her failure to provide such consent may affect his or her ability to
participate in the Plan.  The Participant
understands that the Company may hold certain personal information about the
Participant, including his or her name, salary, nationality, job title,
position evaluation rating along with details of all past Awards and current
Awards outstanding under the Plan, for 



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the
purpose of managing and administering the plan (the “Data”).  The Company and other members of the
Sauer-Danfoss Group will transfer Data amongst themselves as necessary for the
purpose of implementation, administration and management of the Plan.  The Company or another member of the
Sauer-Danfoss Group may further transfer Data to any third parties assisting in
the implementation, administration and management of the Plan.  These various recipients of Data may be
located in Europe, or elsewhere throughout the world, including the United
States.  The Participant authorizes these
various recipients of Data to receive, possess, use, retain and transfer the
Data, in electronic or other form, for the purposes of implementing,
administering and managing the Plan, including any required transfer of such
Data as may be required for the subsequent holding of Shares on the Participant’s
behalf by a broker or other third party with whom the Participant may elect to
deposit any Shares acquired pursuant to the Plan.  The Participant understands that he or she
may, at any time, review Data with respect to the Participant and require any
necessary amendments to such Data.  The Participant
also understands that he or she may withdraw the consents to use Data herein by
notifying the Company in writing; however, the Participant understands that by
withdrawing his or her consents to use Data, the Participant may affect his or
her ability to participate in the Plan.


24.          Severability.  In the event that any provision of this Award
Agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this Award Agreement, and
this Award Agreement shall be construed and enforced as if the illegal or
invalid provision had not been included.


25.          Miscellaneous.  The Committee may terminate, amend, or modify
the Plan; provided, however, that no such termination, amendment, or
modification of the Plan shall adversely affect in any material way the
Participant’s rights under this Award Agreement, without the Participant’s
written approval.


26.          Award Agreement.  This
Award Agreement shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.


All obligations of the Company under the Plan and this
Award Agreement, with respect to the Performance Units granted hereunder, shall
be binding (i) on the Company and on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company; and (ii) on the Participant and his or
her heirs and legal representatives.


Each of the terms of this Award Agreement is deemed
severable in whole or in part, and if any term or provision, or the application
thereof, in any circumstance should be illegal, invalid or unenforceable, the
remaining terms and provisions will not be affected thereby and will remain in
full force and effect.


To the extent not preempted by federal law, this Award
Agreement is deemed to have been made and entered into in the State of Iowa and
in all respects the rights and obligations of the parties 



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will be governed by, and construed and enforced in
accordance with, the laws of the State of Iowa without regard to the principles
of conflict of laws.  Any and all
lawsuits, legal actions or proceedings against either party arising out of this
Award Agreement will be brought in Story County, Iowa or federal court of
competent jurisdiction sitting nearest to Ames, Iowa, and each party hereby
submits to and accepts the exclusive jurisdiction of such court for the purpose
of such suit, legal action or proceeding. 
Each party irrevocably waives any objection it may now have or
hereinafter have to this choice of venue of any suit, legal action or
proceeding in any such court and further waives any claim that any suit, legal
action or proceeding brought in any such court has been brought in an
inappropriate forum.


IN WITNESS WHEREOF, the parties have caused this Award
Agreement to be executed effective as of _______________________.


	
  

  	
  Sauer-Danfoss Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participant

  



 



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Exhibit A


SAUER-DANFOSS INC.


2006 OMNIBUS INCENTIVE PLAN


2007 PERFORMANCE UNIT AWARD AGREEMENT


2007
Performance Measure:  Simple Average
Annual Return on Net Assets (RoNA)


Annual Return on Net Assets (“Annual RoNA”) is defined
as earnings before taxes, net interest expense, and minority interest per the
audited consolidated financial statements of the Company for the fiscal year
divided by the average Net Assets for the four quarters in the fiscal year
(i.e. the sum of Net Assets at the beginning of the year plus Net Assets at the
end of each of the next four quarters divided by five).  Net Assets are defined as the sum of total
equity including minority interests, and all interest bearing indebtedness
shown in the consolidated balance sheet of the Company.  The Simple Average Annual RoNA is defined as
the sum of the three Annual RoNA calculations for each of the three fiscal
years comprising the Performance Period divided by three.


In determining the Net Assets for at the end of any
given quarter, an amount will be added back to reflect the cumulative reduction
on Net Assets caused by the implementation of FAS 158 in December of 2006,
which required the recognition on the Company’s balance sheet of certain
unfunded pension and retiree health care liabilities.


2007
Performance Measure:  Simple Average
Sales Growth


Annual Sales Growth is defined as the total
consolidated sales for the current fiscal year (e.g. 2007) divided by the total
consolidated sales for the immediately prior fiscal year (e.g. 2006).  The Simple Average Sales Growth is defined as
the sum of the three Annual Sales Growth calculations for each of the three
fiscal years comprising the Performance Period, divided by three.


In the event that the total consolidated sales decline
from one year to the next, the Annual Sales Growth for that fiscal year shall
be a negative number, which shall work to reduce the Simple Average Sales
Growth computation.



 12















Exhibit B





 



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