Document:

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 

 

2

 

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 

 

3

 

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.

 

4

 

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.

 

5

 

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, 

 

6

 

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 

 

7

 

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

  	
   

  

 

8Exhibit 10.1(ao)

 

SAUER-DANFOSS INC.

SUPPLEMENTAL EXECUTIVE SAVINGS &
RETIREMENT PLAN

 

As Amended and Restated Effective January 1,
2008

 

 

SAUER-DANFOSS INC.

SUPPLEMENTAL EXECUTIVE SAVINGS &
RETIREMENT PLAN

 

I.              PURPOSE AND EFFECTIVE DATE.

 

1.1.          Purpose.  The Sauer-Danfoss Inc. Supplemental Executive
Savings  & Retirement Plan was established by Sauer-Danfoss Inc. to
attract and retain certain key employees by supplementing such employees’
retirement income, available under the Sauer-Danfoss Employees’ Retirement Plan
(the “ERP”) and the Sauer-Danfoss Employees’ Savings Plan (the “ESP”), which is
otherwise limited by Code Sections 415 and 401(a) (17), and the
regulations issued there under.

 

1.2.          Effective Date.  The Plan was initially effective January 1,
2004 and was later amended and restated effective January 1, 2005.  The Plan is being amended and restated
effective January 1, 2008 to ensure full compliance with Code Section 409A.  The Plan shall remain in effect until
terminated in accordance with Article VIII.

 

II.            DEFINITIONS.

 

When used in the Plan and initially capitalized, the following words
and phrases shall have the meanings indicated:

 

2.1.          “Accounts” means the recordkeeping accounts
established for each Participant in the Plan for purposes of accounting for the
amount of the Participant’s Supplemental Benefit Amounts determined and
credited in accordance with Article IV each year, if any, and all adjusted
periodically to reflect the interest earnings or hypothetical investment return
on such amounts in accordance with Article V.

 

2.2.          “Administrator” means the Committee or such
individual or committee appointed by the Committee to administer the Plan in
accordance with Article VII.  The
Committee shall take such actions it deems necessary or desirable to ensure
that such individual or committee has sufficient and appropriate authority for
carrying out the intent and purpose of the Plan.

 

2.3.          “Affiliate” means:

 

(a)                                  any
corporation, partnership, joint venture, trust, association or other business
enterprise which is a member of the same controlled group of corporations,
trades or businesses as the Company (within the meaning of Code Section 414),
and

 

(b)                                 any
other entity that is designated as an Affiliate by the Committee.

 

 

2.4.          “Beneficiary” means the person or entity
designated by the Participant to receive the Participant’s Supplemental
Benefits Amounts in the event of the Participant’s death.  If the Participant does not designate a
Beneficiary, or if the Participant’s designated Beneficiary predeceases the
Participant, the Participant’s estate shall be the Beneficiary under the Plan.

 

2.5.          “Board” means the Board of Directors of the
Company.

 

2.6.          “Cash Balance Employee” means an employee
of the Company or an Affiliate whose
retirement benefit under the ERP is accrued, on and after January 1, 2001,
in whole or in part, under the Cash Balance Formula (as defined under the terms
of the ERP).

 

2.7.          “Code” means the Internal Revenue Code of
1986, as amended.

 

2.8.          “Committee” means the Compensation
Committee of the Board of Directors of the Company.

 

2.9.          “Company” means Sauer-Danfoss Inc. and any
successor thereto.

 

2.10.        “Compensation” means either:

 

(a)           “Compensation” as that
term is specifically defined under the ESP, or

 

(b)           “Cash Balance Pay” as
that term is specifically defined under the ERP,

 

as the case may be, depending on the context
in which it is being used under this Plan.

 

2.11.        “Eligible Employee” means a key employee of the Company or an
Affiliate who (i) is a Cash Balance Employee, and (ii) during a Plan
Year is expected to have Compensation from the Company or any Affiliate in
excess of the Code Section 401(a)(17) limit for such Plan Year.

 

2.12.        “ERP” means the Sauer-Danfoss Employees’ Retirement Plan.

 

2.13.        “ESP” means the Sauer-Danfoss Employees’ Savings Plan.

 

2.14.         “Investment Fund or Funds” means the investment funds
designated by the Administrator as the basis for determining the hypothetical
investment return to be credited in accordance with Article V to
Participants’ Supplemental ESP Accounts. 
The Investment Funds shall mirror the available investment funds under
the ESP.

 

2.15.        “Participant” means an Eligible Employee who has become a
participant in the Plan in accordance with Section 3.1.

 

2

 

2.16.        “Plan” means the Sauer-Danfoss Inc. Supplemental Executive
Savings & Retirement Plan, as set forth herein and as amended from
time to time.

 

2.17.        “Plan Year” means each calendar year commencing on and after January 1,
2004.

 

2.18.        “Supplemental Benefit Amounts” means the amounts accrued on
behalf of the Participant under the Plan, if any, and represents the sum of the
Participant’s Supplemental ERP Amounts and Supplemental ESP Amounts credited to
his or her Account in accordance with Article IV.

 

2.19.        “Supplemental ERP Account” means the bookkeeping account
established for purposes of accounting for the amount of the Participant’s
Supplemental ERP Amounts determined and credited in accordance with Article IV
each year, if any, as adjusted periodically to reflect the interest earnings on
such amounts in accordance with Article V.

 

2.20.        “Supplemental ERP Amount” means that portion of the
Supplemental Benefit Amounts determined under Section 4.1(a) of the
Plan specifically pertaining to the ERP and credited to the Participant’s
Supplemental ERP Account in accordance with Article IV.

 

2.21.        “Supplemental ESP Account” means the bookkeeping account
established for purposes of accounting for the amount of the Participant’s
Supplemental ESP Amounts determined and credited in accordance with Article IV
each year, if any, as adjusted periodically to reflect the hypothetical
investment return or hypothetical investment loss on such amounts in accordance
with Article V.

 

2.22.        “Supplemental ESP Amount” means that portion of the
Supplemental Benefit Amounts determined under Section 4.1(b) of the
Plan specifically pertaining to the ESP and credited to the Participant’s
Supplemental ESP Account in accordance with Article IV.

 

2.23.        “Valuation Date” means a date on which the Investment Funds
are valued and the Participant’s Account is adjusted for any resulting gains or
losses.   The Administrator shall
determine the Valuation Date and such date shall be at least once every
calendar year.

 

III.                                 PARTICIPATION.

 

3.1.          Participation. An Eligible Employee
shall become a Participant in the Plan when he or she has had credited to his
or her Accounts, by the Company, Supplemental Benefit Amounts in accordance
with Article IV.

 

3

 

3.2.          ERISA Exemption.  It is the
intent of the Company that the Plan be exempt from Parts 2, 3 and 4 of Subtitle
B of Title I of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), as an unfunded plan that is maintained by the Company primarily for
the purpose of providing deferred compensation for a select group of management
and highly compensated employees (the “ERISA Exemption”).  Notwithstanding anything to the contrary in Section 3.1
or in any other provision of the Plan, the Administrator may, in its sole
discretion, exclude any one or more employees from eligibility to participate
or from participation in the Plan, exclude any Participant from continued
participation in the Plan, and take any further action permissible under Code Section 409A
that it considers necessary or appropriate if the Administrator reasonably
determines in good faith that such exclusion or further action is necessary in
order for the Plan to qualify for, or to continue to qualify for, the ERISA
Exemption.  In the event a Participant is
identified for exclusion from participation in the Plan, such Participant shall
be excluded and become an inactive Participant as of the January 1 of the
Plan Year immediately following the Plan Year that includes the year such
exclusion determination was made.

 

IV.                                SUPPLEMENTAL BENEFIT AMOUNTS.

 

4.1.          Computation of Supplemental Benefit Amounts.  An Eligible Employee shall be entitled to
Supplemental Benefit Amounts for each Plan Year that he or she is an Eligible
Employee.  Such Supplemental Benefit
Amount shall be equal to the sum of:

 

(a)                                  Supplemental ERP Amount:  the excess, if any, of:

 

(i)                                     the
benefit the Eligible Employee otherwise would have been entitled to have
credited to his or her Cash Balance Account (as defined under the ERP) for his
or her benefit under the ERP for a given year if such benefit was calculated
without regard to the following:

 

1.             Code Section 415, and

 

2.             Code Section 401(a)(17), over

 

(ii)                                  the
benefit which the Eligible Employee is entitled to have credited to his Cash
Balance Account (as defined under the ERP) for his or her benefit for such
given year under the ERP, plus

 

(b)                                 Supplemental ESP Amount:  the excess, if any, of:

 

(i)                                     the
benefit the Eligible Employee otherwise would have been entitled to have
credited to his or her Employer Contribution Account (as defined in the ESP),
if any, and his or her Matching 

 

4

 

Contribution Account (as defined under the ESP), if any, for a given
year if such benefit(s) was calculated without regard to the following:

 

(1)           Code Section 415,

 

(2)           Code Section 401(a)(17),

 

(3)           Code Section 401(m)(2),
and

 

(4)           Code Section 402(g);
over

 

(ii)           the
actual benefit which the Eligible Employee is entitled to have credited to a
separate account for his benefit for such given year under the ESP with respect
to such Employer Contributions and Matching Contributions.

 

Notwithstanding the foregoing, an Eligible Employee shall not be
entitled to Supplemental Benefit Amounts attributable to amounts that would
have been credited to his Matching Contribution Account for a Plan Year unless
the Eligible Employee had elected Participant Contributions (as defined in the
ESP) for such Plan Year equal to the lesser of four percent (4%) of
Compensation or the limitation in effect under Code Section 402(g) for
such Plan Year.

 

4.2.          Vesting.  A Participant’s Supplemental Benefit Amounts
calculated by the Company in accordance with Sections 4.1 above shall vest in
accordance with the same vesting schedules that may exist, from time to time,
in the ERP and the ESP, as the case may be.

 

4.3.          Special One Time Supplemental Benefit Amounts for
Certain Participants. 
Certain Eligible Employees, but for the January 1, 2004 effective
date of this Plan, would have had amounts credited to their Accounts as
Supplemental Benefit Amounts for certain years prior to 2004.  To reflect this fact, special, one-time
Supplemental ERP amounts and/or Supplemental ESP amounts will be credited to
the Accounts of certain Eligible Employees. 
The eligibility for, timing and amount of such special, one-time
Supplemental Benefit amounts pursuant to this Section 4.3 are to be
determined solely at the discretion of the Administrator.

 

4.4.          Crediting of Supplemental Benefit Amounts.

 

(a)                                  General Rule.  The Supplemental Benefit Amounts computed
in Section 4.1 above for each Plan Year shall be credited by the Company
to the Participant’s Accounts as soon as reasonably practicable after the close
of the Plan Year to which the Supplement Benefit Amounts relate.

 

5

 

(b)                                 Current Cash Distribution of Immaterial Supplemental
ERP Amounts and Immaterial Supplemental ESP Amounts for a Given Plan Year.  Notwithstanding anything to the contrary in
the Plan, so long as a Participant is or would be fully vested in his or her
Supplemental ERP Account or his or her Supplemental ESP Account, as the case
may be, to the extent that the Supplemental ERP Amount or the Supplemental ESP
Amount, respectively, for a given Plan Year does not exceed $750, such amounts
instead of being credited to the Participant’s Accounts under paragraph (a) immediately
above shall be paid out currently as cash compensation in a lump sum within 21⁄2
months of the end of the Plan Year.

 

V.                                    ACCOUNTS AND INVESTMENTS.

 

5.1.          Valuation of Accounts.  The Administrator shall establish a
Supplemental ERP Account and a Supplemental ESP Account for each Participant
who has been credited with a Supplemental ERP Amount or Supplemental ESP
Amount, respectively.  Such Accounts
shall be credited with a Participant’s Supplemental Benefit Amounts as set
forth in Sections 4.4.  As of each
Valuation Date, the Participant’s Accounts shall be adjusted upward or downward
to reflect:

 

(a)                                  the
interest earnings or investment return to be credited as of such Valuation Date
pursuant to Section 5.3 below,

 

(b)                                 the
amount of distributions, if any, to be debited as of that Valuation Date under Article VI.

 

5.2.          Earnings and Investments.

 

(a)                                  Supplemental Benefit Relating to the ERP.  Supplemental ERP Accounts shall be credited
with interest annually.  Such interest
credit shall mirror the interest credit on Cash Balance Accounts (as defined by
the terms of the ERP) under the ERP.  For each Plan Year, the amount credited to the
Eligible Employee’s Supplemental ERP Account shall be determined by
multiplying the balance of such Supplemental ERP Account on the first day of
the Plan Year by the one-year Treasury bill rate in effect as of the first
business day of such Plan Year, as published in the Wall Street Journal on such
business day.

 

(b)                                 Supplemental Benefit Relating to the ESP.  Each Participant generally may direct the
manner in which his or her Supplemental ESP Amounts, if any, shall be deemed
invested in and among the Investment Funds; provided, however, that each
investment election made by a Participant shall, notwithstanding anything to
the contrary in the Plan, be strictly subject to the consent of the
Administrator which, in its sole discretion, may elect to honor the Participant’s
request or have the Supplement ESP 

 

6

 

Account deemed invested in another
manner.  Such deemed investment election
shall be made in accordance with such procedures as the Administrator shall
establish and any such election shall be made in whole percentages.  The investment authority shall remain at all
times with the Administrator.  The
selection of Investment Funds by a Participant shall be for the sole purpose of
determining the rate of return to be credited to his or her Supplement ESP
Account and shall not be treated or interpreted in any manner whatsoever as a
requirement or direction to actually invest assets in any Investment Fund or
any other investment media.

 

5.3.          Crediting of Interest and Investment Return.

 

(a)                                  Supplemental ERP Account. As provided
for in Section 5.2(a) above, interest shall be credited, on the last
day of each Plan Year, to the Supplemental ERP Account of each Participant who
had a Supplemental ERP Account as of the first day of such Plan Year.  A Participant’s Supplemental ERP Account
shall continue to be credited with such interest credits until the date on
which the Participant’s Accounts are paid out in accordance with Article VI.

 

If the date on which the Participant’s Accounts are paid occurs during
the applicable Plan Year, the interest credit shall be prorated on a monthly
basis for that portion of the Plan Year before such payment date.

 

(b)                                 Supplemental ESP Account.  Each Participant’s Supplemental ESP Account
shall be credited on each Valuation Date with his or her allocable share of
investment gains or losses of each Investment Fund in which his or her
Supplemental ESP Amounts, if any, are hypothetically invested.  The Administrator shall adopt a protocol for
allocating the deemed investment gains and losses similar to that used in the
ESP.

 

5.4.          Changing Investment Fund Options for the Supplemental
ESP Account.  A
Participant may, as provided by the Administrator, make a new election with
respect to the hypothetical Investments Funds in which his or her Supplemental
ESP Amounts, if any, shall be deemed invested in the future.  Any such election shall be made in the form
specified by the Administrator.

 

VI.                                PAYMENT OF BENEFITS.

 

6.1.          Distribution Upon Termination of Employment For Any
Reason Other Than Death.

 

(a)                                  General Rule.  If a Participant terminates employment
with the Company and/or an Affiliate for any reason other than death, the
vested portion of the Participant’s Accounts shall be paid in a lump sum
payment no later 

 

7

 

than thirty (30) days following the date
which is six months after such Participant’s termination of employment.

 

(b)           Continuity of Service in a Different Form.  Whether a Participant has incurred a
termination of employment in various situations is a facts and circumstances
analysis.  Treasury Regulation Section 1.409A-1(h) contemplates
that certain transfers of employment or reclassifications of employment status
or reclassifications to an independent contractor status will not be deemed to
be a termination of employment under Code Section 409A so long as the
qualifications regarding the new arrangement meet the parameters provided for
in the guidance.  To the extent
consistent with any guidance issued under Code Section 409A, the Company
intends that in the event a Participant

 

(i)                                   transfers
employment from the Company to an Affiliate whom is also participating in this
Plan and, if applicable, subsequently transfers employment from the
participating Affiliate back to the Company, such transfer of employment shall not be viewed as a termination of
employment for purposes of the Plan but instead shall be deemed a continuation
of employment; or

 

(ii)                                is
reclassified in status to an independent contractor and employed by the Company
or an Affiliate in such capacity, such reclassification, to the extent it meets
the parameters under any Code Section 409A guidance governing whether a
termination of employment has occurred in this situation, shall not be viewed as
a termination of employment for purposes of the Plan but instead shall be
deemed a continuation of employment.

 

6.2.          Distribution Upon Death.  If a Participant dies prior to commencement
of payment of his or her Accounts, the Participant’s Beneficiary shall receive
a survivor benefit in an amount equal to the vested portion of the Participant’s
Accounts to be paid in a single lump sum no later than thirty (30) days
following the date of the Participant’s death.

 

6.3.          Form of Payment and Withholding.  All payments under the Plan shall be made in
cash and are subject to the withholding of all applicable federal, state and
local and foreign governmental taxes.

 

8

 

VII.         ADMINISTRATION.

 

7.1.          Authority of Administrator.  The Administrator shall have full power and
authority to carry out the terms of the Plan. 
The Administrator may establish such rules and regulations as it
may consider necessary or desirable for the effective and efficient
administration of the Plan.  The
Administrator’s interpretation, construction and administration of the Plan,
including any adjustment of the amount or recipient of the payments to be made,
shall be binding and conclusive on all persons for all purposes.  None of the Company, the Administrator, the
Board or the Committee, or any employee, director or member thereof, shall be
liable to any person for any action taken or omitted in connection with the
interpretation, construction and administration of the Plan.

 

7.2.          Participant’s Duty to Furnish Information.  Each Participant shall furnish to the
Administrator such information as it may from time to time request for the
purpose of the proper administration of this Plan.

 

7.3.          Interested Employee of Administrator.  If any employee serving as Administrator is
also a Participant in the Plan, he or she may not decide or determine any
matter or question concerning his or her benefits unless such decision or
determination could be made by him or her under the Plan if he or she were not
the Administrator.

 

7.4.          Indemnification.  No person (including any present or
former employee of the Administrator, and any present or former officer or
employee of the Company or any Affiliate) shall be personally liable for any
act done or omitted to be done in good faith in the administration of the
Plan.  Each present or former officer or
employee of the Company or any Affiliate to whom the Administrator has
delegated any portion of its responsibilities under the Plan and each present
or former employee serving as Administrator shall be indemnified and saved
harmless by the Company (to the extent not indemnified or saved harmless under
any liability insurance or other indemnification arrangement with respect to
the Plan) from and against any an all claims of liability to which they are
subjected by reason of any act done or omitted to be done in good faith in
connection with the administration of the Plan, including all expenses
reasonably incurred in their defense if the Company fails to provide such
defense.  No individual serving as the
Administrator shall be liable for any act or omission of any other employee
serving as Administrator, nor for any act or omission upon his or her own part,
excepting his or her own willful misconduct or gross neglect.

 

7.5.          Claims Procedure.

 

(a)           Claims
for benefits under the Plan shall be made in writing to the Administrator or
its duly authorized delegate.  If the
Administrator or such delegate wholly or partially denies a claim for benefits,
the Administrator or, if applicable, its delegate shall, within a reasonable
period of time, but 

 

9

 

no later than ninety (90) days after receipt
of the claim, notify the claimant in writing or electronically of the adverse
benefit determination.  Notice of an
adverse benefit determination shall be written in a manner calculated to be
understood by the claimant and shall contain:

 

(i)            the specific reason or reasons for the
adverse benefit determination,

 

(ii)           a specific reference to the pertinent Plan
provisions upon which the adverse benefit determination is based,

 

(iii)          a description of any additional material or
information necessary for the claimant to perfect the claim, together with an
explanation of why such material or information is necessary, and

 

(iv)          an explanation of the Plan’s review procedure
and the time limits applicable to such procedure including a statement of the claimant’s right to bring a
civil action under section 502(a) of ERISA following an adverse benefit
determination.

 

If the Administrator or its delegate determines that an extension of
time is necessary for processing the claim, the Administrator or its delegate
shall notify the claimant in writing of such extension, the special
circumstances requiring the extension and the date by which the Administrator
expects to render the benefit determination. 
In no event shall the extension exceed a period of ninety (90) days from
the end of the initial ninety (90) day period. 
If notice of the denial of a claim is not furnished in accordance with
this paragraph (a) within ninety (90) days after the Administrator or its
duly authorized delegate receives it (or within one hundred and eighty (180)
days after such receipt if the Administrator or its delegate determines an
extension is necessary), the claim shall be deemed denied and the claimant
shall be permitted to proceed to the review stage described in paragraph (b) below.

 

(b)           Within sixty (60) days
after the claimant receives the written or electronic notice of an adverse
benefit determination, or the date the claim is deemed denied pursuant to
paragraph (a) above, or such later time as shall be deemed reasonable in
the sole discretion of the Administrator taking into account the nature of the
benefit subject to the claim and other attendant circumstances, the claimant
may file a written request with the Administrator that it conduct a full and
fair review of the adverse benefit determination, including the holding of a
hearing, if deemed necessary by the Administrator.  In connection with the claimant’s appeal of
the adverse benefit determination, the claimant may review pertinent documents
and may submit issues and comments in writing. 
The Administrator shall render a decision on the appeal promptly, but
not later than sixty (60) days 

 

10

 

after the receipt of the claimant’s request
for review, unless special circumstances (such as the need to hold a hearing,
if necessary) require an extension of time for processing, in which case the
sixty (60) day period may be extended to one hundred and twenty (120)
days.  The Administrator shall notify the
claimant in writing of any such extension, the special circumstances requiring
the extension, and the date by which the Administrator expects to render the
determination on review.  The claimant
shall be notified of the Administrator’s decision in writing or
electronically.  In the case of an
adverse determination, such notice shall:

 

(i)            include specific reasons for the adverse
determination,

 

(ii)           be written in a manner calculated to be
understood by the claimant,

 

(iii)          contain specific references to the pertinent
Plan provisions upon which the benefit determination is based,

 

(iv)          contain a statement that the claimant is
entitled to receive upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the
claimant’s claim for benefits, and

 

(v)           contain a statement of the claimant’s right
to bring an action under section 502(a) of ERISA.

 

VIII.        AMENDMENT AND TERMINATION.

 

The Committee may amend or terminate the Plan at any time; provided,
however, that no such amendment or termination shall have a material adverse effect
on any Participant’s rights under the Plan accrued as of the date of such
amendment or termination without such Participant’s written consent.

 

IX.           MISCELLANEOUS.

 

9.1.          No Implied Rights; Rights on Termination of Service.  Neither the establishment of the Plan nor any
amendment thereof shall be construed as giving any Participant, Beneficiary or
any other person, individually or as a employee of a group, any legal or
equitable right unless such right shall be specifically provided for in the
Plan or conferred by specific action of the Committee or the Administrator in
accordance with the terms and provisions of the Plan.  Except as expressly provided in this Plan,
neither the Company nor any of its Affiliates shall be required or be liable to
make any payment under the Plan.

 

9.2.          No Employment Rights.  Nothing herein shall constitute a contract of
employment or of continuing service or in any manner obligate the Company or 

 

11

 

any Affiliate to continue the services of any
Participant, or obligate any Participant to continue in the service of the
Company or Affiliate, or as a limitation of the right of the Company or
Affiliates to discharge any of their employees, with or without cause.

 

9.3.          Unfunded Plan.  Nothing herein contained shall require or be
deemed to require the Company to segregate, earmark or otherwise set aside any
funds or other assets to provide for any payments made hereunder. Benefits
hereunder shall be paid from assets which shall continue, for all purposes, to
be part of the general, unrestricted assets of the Company and its
Affiliates.  The obligations of the
Company hereunder shall be an unfunded and unsecured promise to pay money in
the future.  However, the Company may
establish one or more trusts to assist in meeting its obligations under the
Plan, the assets of which shall be subject to the claims of the Company’s
general creditors.  No current or former
Participant, Beneficiary or other person, individually or as a employee of a group,
shall have any right, title or interest in any account, fund, grantor trust, or
any asset that may be acquired by the Company in respect of its obligations
under the Plan (other than as a general creditor of the Company with an
unsecured claim against its general assets).

 

9.4.          Nontransferability.  Prior to payment thereof, no benefit
under the Plan shall be assignable or subject to any manner of alienation,
sale, transfer, claims of creditors, pledge, attachment or encumbrances of any
kind.

 

9.5.          Successors and Assigns.  The rights, privileges, benefits and
obligations under the Plan are intended to be, and shall be treated as legal
obligations of and binding upon the Company, its successors and assigns,
including successors by merger, consolidation, reorganization or otherwise.

 

9.6.          Payment with Respect to Incapacitated Persons.  Any amounts payable hereunder to any person
who is a minor or under a legal disability, as determined under applicable
state law, or who is unable to manage properly his or her financial affairs may
be paid (a) to the legal representative of such person, (b) to anyone
acting as the person’s agent under a durable power of attorney, (c) to an
adult relative or friend of the person or (d) to anyone with whom the
person is residing.  Any payment of a
benefit made in accordance with the provisions of this section shall be a
complete discharge of any liability for the making of such payment under the
Plan.  The Administrator’s reliance on
the written power of attorney or other instrument of agency governing a
relationship between the person entitled to benefit the person to whom the
Administrator directs payment of the benefit shall be fully protected at least
to the same extent as though the Administrator had dealt directly with the
person entitled to the benefit as a fully competent person.  In the absence of actual knowledge to the
contrary, the Administrator may assume that the instrument of agency was
validly executed, that the person was competent at the time of execution and that
at the time of reliance, the agency had not been terminated or amended.

 

12

 

9.7.          Arbitration.  Any controversy or claim arising out of or
relating to this Plan, or breach hereof, shall be settled by arbitration in the
City of Ames in accordance with the laws of the State of Iowa with an
arbitrator appointed by the Company.  The
arbitration shall be conducted in accordance with the rules of the
American Arbitration Association, except with respect to the selection of an
arbitrator.  The arbitrator’s
determination shall be final and binding upon all parties and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.

 

9.8.          Gender and Number.  Except when otherwise indicated by the
context, words in the masculine gender shall include the feminine and neuter
genders, the plural shall include the singular, and the singular shall include
the plural.

 

9.9.          Headings.  The headings of the various Articles and
Sections in the Plan are solely for convenience and shall not be relied upon in
construing any provisions hereof.  Any
reference to a Section shall refer to a Section of the Plan unless
specified otherwise.

 

9.10.        Severability.  Whenever possible, each provision of the Plan
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, and the Plan shall be reformed,
construed and enforced in such jurisdiction so as to best give effect to the
intent of the Company under the Plan.

 

9.11.        Effect on Other Employee Benefit Plans.  Any benefit paid or payable under this Plan
shall not be included in a Participant’s compensation for purposes of computing
benefits under any employee benefit plan maintained or contributed by the
Company or any Affiliate except as may otherwise be required under the specific
terms of such employee benefit plan.

 

9.12.        Non-U.S. Participants.  With respect to any Affiliate which employs
Participants who reside outside the United States, and notwithstanding anything
herein to the contrary, the Administrator may, in its sole discretion, amend
the terms of the Plan in order to conform such terms with the requirements of
local law or to meet the objectives of the Plan, and may, where appropriate,
establish one or more sub-plans to reflect such amended provisions.

 

9.13.        Applicable Law.  This Plan is established under and will be
construed according to the laws of the State of Iowa, to the extent not
preempted by the laws of the United States.

 

*              *              *

 

13

 

IN WITNESS WHEREOF,
the undersigned has caused this Plan to be executed this 15th day
of December, 2008.

 

 

	
   

  	
  SAUER-DANFOSS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald Hanson

  
	
   

  	
  Its: 

  	
  Vice President, Human Resources

  

 

14

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