Document:

Exhibit
10.1(v)

 

 

 

Employment Agreement

for Ronald C. Hanson

 

Sauer-Danfoss Inc.

December 31, 2008

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (this “Agreement”) is made as of the
31st day of December, 2008 (the “Effective Date”), by and between Sauer-Danfoss
Inc. (the “Company”) and Ronald C. Hanson (the “Executive”).  The existing Employment Agreement between the
Company and the Executive dated July 1, 2003 shall terminate by mutual
agreement as of December 30, 2008 and will be replaced, in its entirety by
this Agreement.

 

WHEREAS, the Company desires to provide for the continued employment of the Executive on the terms
and conditions set forth herein, in the best interest of the Company and its
constituencies; and

 

WHEREAS, the Executive desires to continue to be employed by the Company as provided
herein; and

 

NOW, THEREFORE, in
consideration of the premises and the respective covenants, promises and
agreements of the parties herein contained, the parties agree as follows:

 

1.                                       Employment.  The Company
agrees to continue to employ the Executive and the Executive agrees to continue to be
employed on a full-time basis by the Company for the period and upon the terms
and conditions specified herein.

 

2.                                       Term; Employment Period. 
The term of this Agreement (the “Term”) shall begin on the Effective
Date and continue until terminated according to Section 6 of this
Agreement.  The period during which the
Executive is employed by the Company is referred to as the “Employment Period.”  The date on which the termination of the
Executive’s employment becomes effective is referred to as the “Termination
Date”.

 

3.                                       Position and Duties. 
During the Employment Period, the Executive shall serve as Vice
President, Human Resources of the Company and shall have such responsibilities,
duties and authority as set forth in the Bylaws of the Company and such
additional responsibilities, duties and authority as the Company’s President
and Chief Executive Officer or the Company’s Board of Directors (the “Board”)
shall determine from time to time. 
During the Employment Period, the Executive shall report to the Company’s
President and Chief Executive Officer or designee.  The Executive shall fully comply with the
Company’s Worldwide Code of Legal and Ethical Business Conduct as in effect
from time to time, or any successor or similar Code.  The Executive shall devote substantially all
his working time and efforts to the business and affairs of the Company and
shall use his best efforts to carry out his responsibilities faithfully and
efficiently in a professional and ethical manner.  Notwithstanding the foregoing, it is
understood that during the Employment Period, subject to any conflict of
interest policies of the Company and Section 9, the Executive may (a) serve
in any capacity with any civic, charitable, educational or professional
organization provided that such service does not materially interfere with his
duties and responsibilities to the Company, (b) make and manage personal
investments of his choice, and (c) with the prior consent of the 

 

2

 

Company’s
President and Chief Executive Officer, which shall not be unreasonably
withheld, serve on the board of directors of one (1) for-profit business
enterprise.  The Executive may serve from
time to time as a director and/or member of a committee of the Company and/or
as a director and/or member of a committee and/or officer of one or more
subsidiaries or related or affiliated companies or joint ventures of the
Company.  The Executive agrees to fulfill
his duties as such director, member of committee or officer without additional
compensation other than the compensation provided for in this Agreement.

 

4.                                       Place of Performance. 
During the Employment Period, the Executive’s place of performance of
his services shall be at the Company’s Ames, Iowa USA offices, except for
required travel by the Executive on the Company’s business or as may be
reasonably required by the Company.

 

5.                                       Compensation and Benefits.

 

(a)                                  Salary.  During the
Employment Period, the Company shall pay to the Executive an initial annual
base salary of Two Hundred Fifty One Thousand Five Hundred Dollars ($251,500)
on an annualized basis (as the same may be increased from time to time, the “Base
Salary”), such salary to be paid in periodic installments in accordance with
the Company’s payroll practices as in effect from time to time.  The Base Salary shall be reviewed annually by
the Compensation Committee of the Board and may be increased from time to time
in accordance with normal business practices of the Company and, if so
increased, shall not thereafter be reduced. 
Notwithstanding the foregoing, the Base Salary may be reduced at any
time and from time to time as part of across-the-board reductions applied similarly
to all of the Company’s senior executives. 
All payments of Base Salary or other compensation hereunder shall be
less such deductions or withholdings as are required by applicable law and
regulations.

 

(b)                                 Annual Incentive. 
During the Employment Period, the Executive shall be eligible to earn an
annual incentive under the Company’s 2006 Omnibus Incentive Plan, or a
successor plan thereto, as in effect from time to time (the “Incentive Plan”),
subject to achievement of performance goals determined in accordance with the
terms of the Incentive Plan (such annual incentive referred to herein as the “Annual
Incentive”).    Except as otherwise
specifically provided in this Agreement, the Executive shall only be eligible
to receive the Annual Incentive if the Executive is employed by the Company
through the last day of the fiscal year for which the Annual Incentive is to be
paid.  The actual amount of any Annual
Incentive and the timing for payment shall be determined by and in accordance
with the terms of the Incentive Plan.

 

(c)                                  Expenses.  During the
Employment Period, the Company shall promptly reimburse the Executive for all
reasonable out-of-pocket expenses actually incurred by the Executive in
connection with the business of the Company and the performance of his duties
under this Agreement in accordance with the terms of the Company’s policies and
upon presentation of expense statements or vouchers or such other supporting
information as the Company may customarily require of its senior executives;
provided however, in no event shall any such reimbursement be provided later
than December 31 

 

3

 

of
the calendar year following the calendar year in which such business expense
was incurred.

 

(d)                                 Benefit Plans.  During
the Employment Period, the Executive shall be entitled to participate in all of
the employee benefit plans, long term incentive plans, retirement plans,
programs, agreements and arrangements provided to senior executives of the
Company, as such are in effect, subject to the eligibility requirements and
terms and conditions of such plans, programs, agreements and arrangements.  The Company reserves the right, in its sole
discretion, to adopt, modify, amend or terminate such plans, programs,
agreements and arrangements at any time.

 

(e)                                  Perquisites. 
During the Employment Period, the Executive shall be entitled to
participate in those perquisites provided to senior executives of the Company,
as such are in effect, subject to the eligibility, payment requirements and
other terms and conditions of such perquisites, as outlined in the underlying
Company policy.  The Company reserves the
right, in its sole discretion, to adopt, modify, amend or terminate such
perquisites at any time.

 

(f)                                    Vacations.  During the
Employment Period, the Executive shall be entitled to paid vacation time, paid
holidays and personal days, determined in accordance with the Company’s policy
with respect to its senior executives, as such are in effect, it being
understood that the Executive shall be entitled to not less than four weeks’
paid vacation in any 12-month period during the Employment Period.

 

6.                                       Termination of Employment.

 

(a)                                  Accrued Benefits. 
In the event of the termination of the Executive’s employment hereunder
for any reason, the Executive (or his estate or representative, as applicable)
shall be entitled to receive any Base Salary, Annual Incentive, vacation time
and expenses that have in each case accrued but are unpaid as of the
Termination Date as well as any post-termination benefits to which he may be
entitled according to the Company’s retirement, insurance and other benefit
plans, programs and arrangements as in effect immediately prior to the
Termination Date, other than medical benefit plans (the “Accrued Benefits”).  Accrued Benefits will be paid in accordance
with the underlying plan or policy.  If
no underlying plan or policy exists for a particular component of the Accrued
Benefits, such component will be paid no later than sixty (60) days following
the Termination Date.

 

(b)                                 Retirement.  The Executive’s
employment shall terminate as of the date of his Retirement (as defined in the
retirement benefit plan in effect immediately prior to such Retirement).  Upon the termination of the Executive’s
employment because of his Retirement, the Executive shall be entitled to
receive the Accrued Benefits.

 

(c)                                  Death.  The Executive’s
employment shall terminate as of the date of his death.  Upon the termination of the Executive’s
employment because of his death, the Executive’s estate or representative, as
the case may be, shall be entitled to receive the following:

 

4

 

(i)             the Accrued Benefits; and

 

(ii)           a lump sum payment in cash equal to one year’s Base
Salary as in effect on the Termination Date with such amount being payable no
later than thirty (30) days following the Termination Date; and

 

(iii)        a lump sum payment in cash
equal to the actual annual incentive compensation such Executive would have
received, if any, under the Incentive Plan for the fiscal year which includes
his Termination Date and assuming that the Executive had been employed through
the last day of such fiscal year, multiplied by a fraction (the numerator of which shall
be the number of whole months worked by the Executive during the Company’s
fiscal year in which the Termination Date occurs and the denominator of which
shall be the number 12) (the “Pro Rata Annual Incentive”).  The Pro Rata Annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan.

 

In addition, those
immediate family members who were participating in the Company’s medical
benefit plans as of the date of the Executive’s death shall continue to
participate in the Company’s medical benefit plans at active employee
contribution rates for the one-year period immediately following the date of
the Executive’s death.  Any continuing
medical coverage pursuant to this clause is intended to be exempt from Code Section 409A
to the extent permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).  However, if it
is determined that the continuing medical coverage pursuant to this clause does
not qualify for exemption under Code Section 409A the medical coverage
will expire as of the date of the Employee’s death.  If the medical coverage expires early, as
provided in the previous sentence, the Company shall provide Executive’s immediate
family members with a lump sum cash payment equal to twelve (12) times the then
applicable monthly premium for the relevant medical plan which the Executive
participated in.  Such lump sum payment
amount, if any, will be paid no later than sixty (60) days after the date on
which such medical coverage expires.

 

(d)                                 Disability.  The Executive’s
employment may be terminated by the Company during the Employment Period if the
Executive is incapable of performing his principal duties because of physical
or mental incapacity for a period of 180 consecutive days in any 12-month
period (“Disability”).  In the event that
the Executive’s employment is to be terminated by the Company for Disability:

 

(i)             this Agreement shall terminate on the date specified
in the notice of termination delivered to the Executive by the Company; and

 

(ii)          the Executive shall as of such date resign from all of
his positions, duties and authorities hereunder.

 

In the event of a
termination due to Disability, the Executive (or his representative, as
applicable) shall be entitled to receive the following:

 

5

 

(1) the Accrued Benefits; and

 

(2) the Pro Rata Annual Incentive as defined in Section 6(c)(iii) above.  The Pro Rata Annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan; and

 

(3) a lump sum payment in cash equal to one year’s
Base Salary as in effect on the Termination Date (the “Disability Payment”).  The Disability Payment shall be payable on
the seven month anniversary of such termination.

 

In addition, the
disabled Executive shall be eligible for the continuation of medical benefit
plans at the levels in effect as of the Termination Date, at no additional cost
to the Executive than that which was in effect as of the Termination Date, for
the one-year period immediately following the Termination Date; provided,
however, that such medical benefits shall be reduced to the extent
comparable medical benefits are made available to the Executive from a
successor employer, and the Executive shall be obligated to report such
benefits to the Company.  Any continuing
medical coverage pursuant to this clause is intended to be exempt from Code Section 409A
to the extent permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).  However, if it
is determined that the continuing medical coverage pursuant to this clause does
not qualify for exemption under Code Section 409A the medical coverage
will expire as of the Termination Date. 
If the medical coverage expires early, as provided in the previous
sentence, the Company shall provide Executive with a lump sum cash payment
equal to twelve (12) times the then applicable monthly premium for the relevant
medical plan which the Executive participated in.  Such lump sum payment amount, if any, will be
paid no later than sixty (60) days after the date on which such medical
coverage expires.

 

It is acknowledged
and agreed by the Executive that he shall be precluded from terminating his
employment for Good Reason in the event that his employment is terminated under
this Section 6(d).

 

(e)                                  For Cause; Without Good Reason. 
The Executive’s employment hereunder may be terminated during the
Employment Period:

 

(i)             by the Company for Cause (as defined below); or

 

(ii)          by the Executive without Good Reason (as defined
below).

 

In the event that
the Company terminates the Executive’s employment hereunder for Cause, the
Termination Date shall be the date specified in the notice of termination for
Cause delivered by the Company to the Executive.  In the event that the Executive terminates
his employment hereunder without Good Reason, the Termination Date shall be no
earlier than 30 days following the date on which a notice of termination is
delivered by the Executive to the Company. 
In the event that the Executive’s employment is terminated under this Section 6(e),
the Executive shall be entitled to the Accrued Benefits.

 

6

 

(f)                                    Without Cause; For Good Reason. The Executive’s employment may be
terminated during the Employment Period:

 

(i)             by the Company without Cause; or

 

(ii)          by the Executive for Good Reason.

 

In the event that
the Executive’s employment is terminated under this Section 6(f) (whether
by the Company or by the Executive), the Termination Date shall be no earlier
than 30 days following the date on which a notice of termination is delivered
by one party to the other.  In the event
that the Executive’s employment is terminated under this Section 6(f), the
Executive (or his estate or representative, as the case may be) shall be
entitled to receive:

 

(1) the Accrued Benefits; and

 

(2) executive level career outplacement services
by a mutually agreeable outplacement firm and paid for, as actually incurred by
Executive, by the Company.  The Executive
must commence the outplacement services no later than sixty (60) days following
his Termination Date and in no event shall such services be provided beyond December 31
of the second year following the year of termination or, if earlier, the first
acceptance by the Executive of an offer of employment; and

 

(3) the Pro Rata Annual Incentive as defined in Section 6(c)(iii) above.  The Pro Rata Annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan; and

 

(4) a lump sum payment in cash equal to the
Executive’s Base Salary and Target Incentive Opportunity as in effect on the
Termination Date multiplied by one and one/half (1.5) (the “Separation Payment”).  The Separation Payment shall be payable as
follows:

 

(A) an amount equal
to the least of the following:

 

(I) the Separation
Payment amount; or

 

(II) two (2) times
the Executive’s Base Salary as in effect on the Termination Date; or

 

(III) two (2) times
the annual compensation limit under Code Section 401(a)(17) (i.e.,
$460,000 for 2008)

 

shall be paid to the Executive in a lump sum thirty
(30) days following Executive’s Termination Date; and

 

7

 

(B) the
remainder of the Separation Payment amount, if any, shall be paid to the
Executive in a lump sum on the seventh month anniversary of the Executive’s
Termination Date.

 

In addition, an
Executive whose employment is terminated under this Section 6(f) shall
be eligible for the continuation of medical plan benefits at the levels in
effect as of the Termination Date at no additional cost to the Executive than
that which was in effect as of the Termination Date for a period of one year; provided,
that such medical benefits shall be reduced to the extent comparable medical
benefits are made available to the Executive from a successor employer, and the
Executive shall be obligated to report such benefits to the Company.  Any continuing medical coverage pursuant to
this clause is intended to be exempt from Code Section 409A to the extent
permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).  However, if it
is determined that the continuing medical coverage pursuant to this clause does
not qualify for exemption under Code Section 409A the medical coverage
will expire as of the Termination Date. 
If the medical coverage expires early, as provided in the previous
sentence, the Company shall provide Executive with a lump sum cash payment
equal to twelve (12) times the then applicable monthly premium for the relevant
medical plan which the Executive participated in.  Such lump sum payment amount, if any, will be
paid no later than sixty (60) days after the date on which such medical
coverage expires.

 

(g)                                 Definition of “Cause” and “Good Reason”.

 

For purposes of this Agreement, “Cause” means:

 

(i)                                     the willful failure of the Executive to
perform his material duties with the Company as provided in this Agreement, and
which failure is not cured (if capable of cure) within 15 days after receipt by
the Executive of written notice from the Company of such failure, which notice
identifies the manner in which the Executive has willfully failed to perform;

 

(ii)                                  the engaging by the Executive in willful
conduct which is demonstrably injurious to the Company, monetarily or
otherwise;

 

(iii)                                the conviction (treating a nolo
contendere plea as a conviction) of the Executive of any crime or offense
constituting a felony (whether or not any right to appeal has been or may be
exercised); or

 

(iv)                              a failure by the Executive to comply with
any material provision of this Agreement, which failure is not cured (if
capable of cure) within 15 days after receipt by Executive of written notice
from the Company of such non-compliance by the Executive.

 

Termination of the Executive for Cause shall mean
termination by action of the Company’s Board of Directors, at a meeting duly
called and held upon at least 15 days’ written notice to the Executive
specifying the particulars of the action or inaction alleged to constitute
Cause and at which meeting the Executive and his counsel were entitled to be
present and given adequate opportunity to be heard.  For purposes of clauses (i) and 

 

8

 

(ii) of this definition, action or inaction by
the Executive shall not be considered “willful” unless done or omitted by him (A) intentionally
or not in good faith and (B) without reasonable belief that his action or
inaction was in the best interest of the Company, and shall not include failure
to act by reason of total or partial incapacity due to physical or mental
illness.

 

For purposes of this Agreement, “Good Reason” means
without the Executive’s written consent:

 

(i)                         a material adverse alteration in the
nature or status of the Executive’s position, duties, responsibilities or
authority which is inconsistent with those in effect as of the Effective Date;

 

(ii)                      a material reduction in the Executive’s
Base Salary or level of employee benefits (other than across-the-board
reductions applied similarly to all of the Company’s senior executives);

 

(iii)                   failure to pay or provide any of the compensation set
forth in this Agreement (except for an across-the-board reduction of
compensation applied similarly to all of the Company’s senior executives) which
is not cured within 15 days after receipt by the Company from the Executive of
written notice thereof;

 

(iv)                  the relocation of the Executive’s principal place of
employment more than 50 miles from its location as of the Effective Date except
for required travel on the Company’s business; or

 

(v)                     a failure by the Company to comply with any material
provision of this Agreement, which failure is not cured (if capable of cure)
within 15 days after receipt by the Company of written notice from the
Executive of such non-compliance by the Company.

 

Notwithstanding the foregoing, in order to terminate
employment for Good Reason, the Executive must provide notice of termination
within sixty (60) days of the event that he believes is providing him a Good
Reason termination.  Continuation of
employment without notice of termination during the sixty (60) day period
following such event shall constitute Executive’s acceptance of such event and
any changes stemming from such event and will make null and void the Executive’s
right to terminate for Good Reason with respect to such event.

 

(h)                                 Change in Control Severance Provisions.  Section 7
provides for payment to the Executive if his employment is terminated for
certain reasons following a Change in Control as defined in Section 7.  The Executive acknowledges that in the event
he becomes entitled to the payment specified in Section 7(a), the payment
will be in lieu of any other payments to be made under the terms of this
Agreement.

 

(i)                                     Release Agreement. 
Notwithstanding anything to the contrary contained in this Section 6,
the Executive shall be required to execute the Company’s then current 

 

9

 

standard
release agreement as a condition to receiving any of the payments and benefits
provided for in this Section 6 or Section 7 of this Agreement.  It is acknowledged and agreed that the then
current standard release agreement shall not diminish or terminate the
Executive’s rights under this Agreement including, but not limited to, those
specified in Sections 6(j), 8 and 22.

 

(j)                                     No Mitigation. 
Upon termination of the Executive’s employment with the Company, subject
to the Executive’s affirmative obligations under Section 6(d) and
6(f), the Executive shall be under no obligation to seek other employment or
otherwise mitigate the obligations of the Company under this Agreement.

 

(k)                                  Definition of the Company. 
Whenever this Agreement refers to the Executive’s employment with the
Company, or the termination of the Executive’s employment with the Company, the
term “Company” shall include Sauer-Danfoss Inc. and any of its subsidiaries or
related or affiliated companies or joint ventures that employ the
Executive.  In addition, when used in
Sections 9, 10, 11 and 12 of this Agreement, the term “Company” shall include
Sauer-Danfoss Inc. and any of its subsidiaries or related or affiliated
companies or joint ventures.

 

7.                                       Change in Control.

 

(a)                                  Employment
Terminations After a Change in Control. 
During the term of this Agreement, in the event the Executive’s
employment with the Company is terminated within two years following a Change
in Control (as such term is defined in Section 7(b) herein), unless
such termination is (i) by the Company for Cause (as the term Cause is
defined in Section 6(g) herein), (ii) by reason of Death,
Disability, or Retirement, or (iii) by the Executive without Good Reason
(as the term Good Reason is defined in Section 6(g) herein), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive and provide him with the
following:

 

(i)                                     The Accrued Benefits (in full
satisfaction for these amounts owed to the Executive).

 

(ii)                                  A lump sum payment in cash equal to ten
percent (10%) of the Executive’s Base Salary in effect on the Termination Date
in lieu of medical plan benefits.  The
Executive’s participation in these and all other medical benefits shall cease
upon the termination of Executive’s employment with the Company under
circumstances which entitle the Executive to the payments set forth in this Section 7(a).  The lump sum payment amount under this clause
will be paid no later than sixty (60) days after the date on which such medical
coverage expires.  Any lump sum payment
pursuant to this clause is intended to be exempt from Code Section 409A to
the extent permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).

 

(iii)                               The Pro Rata Annual Incentive as defined in Section 6(c)(iii) above.  The Pro Rata Annual Incentive shall be payable
in accordance with the terms of the

 

10

 

relevant
underlying Incentive Plan and at the same time payments are made to other
Company executives pursuant to such Incentive Plan.  This payment will be in lieu of any other payment to
be made to the Executive under the Incentive Plan for the respective plan year.

 

(iv)                              A lump-sum payment in cash equal to the
Executive’s Base Salary and Target Incentive Opportunity in effect on the
Termination Date multiplied by one and a half (1.5) (the “CIC Separation
Payment”).  The CIC Separation Payment
shall be payable as follows

 

(A) an amount equal to
the least of the following:

 

(I) the CIC
Separation Payment amount; or

 

(II) two (2) times
the Executive’s Base Salary as in effect on the Termination Date;

 

(III) two (2) times
the annual compensation limit under Code Section 401(a)(17) (i.e.,
$460,000 for 2008)

 

shall be paid to the Executive in a lump sum thirty
(30) days following Executive’s Termination Date; and

 

(B) the
remainder of the CIC Separation Payment amount, if any, shall be paid to the
Executive in a lump sum on the seventh month anniversary of the Executive’s
Termination Date.

 

The parties agree that,
in the event of the termination of Executive’s employment with the Company
under circumstances which entitle the Executive to the payments set forth in
this Section 7(a), such payment and benefits (including an Excise Tax
Payment provided in Section 7(c) herein) shall be deemed to
constitute liquidated damages payable by the Company to the Executive in full
satisfaction of the Company’s obligations hereunder or otherwise, and the
Company agrees that the Executive shall not be required to mitigate his damages
by seeking other employment or otherwise.

 

In the event that the
Executive’s employment with the Company is terminated under circumstances which
entitle the Executive to the payments set forth in this Section 7(a) (whether
by the Company or by the Executive), the Termination Date shall be no earlier
than 30 days following the date on which a notice of termination is delivered
by one party to the other.

 

(b)                                 Definition
of “Change in Control”.  “Change in
Control” of the Company means, and shall be deemed to have occurred upon any of
the following events:

 

(i)                                     Any
person (other than those persons in control of the Company as of the Effective
Date, or other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or a corporation or other entity owned 

 

11

 

directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) becomes the beneficial
owner, directly or indirectly, of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the Company’s then
outstanding securities; provided, however, that a Change in Control shall not
result from (a) Danfoss A/S, as defined below, acquiring securities of the
Company from the Murmann Group, as such term is defined below, either directly,
or indirectly by acquiring voting control of Danfoss Murmann Holding A/S or its
successor; or (b) the Murmann Group acquiring securities of the Company
from Danfoss A/S either directly, or indirectly by acquiring voting control of
Danfoss Murmann Holding A/S or its successor; or

 

(ii)                                  During
any period of two (2) consecutive years (not including any period prior to
the Effective Date), individuals who at the beginning of such period constitute
the Board (and any new Director, whose election by the Company’s stockholders
was approved by a vote of at least two-thirds (2/3) of the Directors then still
in office who either were Directors at the beginning of the period or whose
election or nomination for election was so approved), cease for any reason to
constitute a majority thereof; or

 

(iii)                               The
consummation of: (A) a plan of complete liquidation of the Company; or (B) the
sale or disposition of all or substantially all the Company’s assets; or (C) a
merger, consolidation, or reorganization of the Company with or involving any
other corporation, other than a merger, consolidation, or reorganization that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the combined voting power of the voting securities of the
Company (or such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.

 

However, in no event
shall a “Change in Control” be deemed to have occurred with respect to the
Executive, if the Executive is part of a purchasing group which consummates the
Change in Control transaction. The Executive shall be deemed “part of a
purchasing group” for purposes of the preceding sentence if the Executive is an
equity participant in the purchasing company or group (except for (i) passive
ownership of less than one percent (1%) of the stock of the purchasing company;
or (ii) ownership of equity participation in the purchasing company or
group which is otherwise not significant as determined prior to the Change in
Control by a majority of the nonemployee continuing Directors).

 

For purposes of (b)(i) of
this Section 7, (A) Danfoss A/S shall be deemed to mean any one or
more of  Danfoss A/S, any of its
subsidiaries or related or affiliated companies or joint ventures, or any
successor of the foregoing; and (B) the Murmann Group shall be deemed to
mean any one or more of (i) Klaus Murmann, (ii) any member of his immediate
family, (iii) any entity a majority of the voting interests of which are
owned, directly or indirectly, by Klaus Murmann and/or any member or members of
his 

 

12

 

immediate family, or (iv) trust,
a majority of which is owned by, or a majority of the beneficiaries of which
consist of, directly or indirectly, Klaus Murmann, and/or any member or members
of his immediate family.

 

(c)                                  Excise
Tax Payment. 
In the event that any portion of the severance benefits or any other
payment under this Agreement or under any other agreement with or plan of the
Company (in the aggregate “Total Payments”) would constitute an “Excess
Parachute Payment,” such that an “Excise Tax” is due, the Company shall provide
to the Executive, in cash, an additional lump sum payment in an amount to cover
the full cost of the excise tax and the Executive’s state and federal income
and employment taxes on this excise tax payment (and to cover the resulting
excise and income and employment taxes resulting from such payment, and so on).
For this purpose, the Executive shall be deemed to be in the highest marginal
tax rate. The lump sum payment amount
under this clause will be on the later of:

 

(i) sixty
(60) days after written notification from the Executive that such Excise Tax is
due; or

 

(ii) the
seven month anniversary following the Executive’s Termination Date.

 

For purposes of this
Agreement, the terms “Excise Tax” and “Excess Parachute Payment” shall have the
meanings assigned to such terms in Sections 280G and 4999 of the Internal
Revenue Code of 1986, as amended.

 

(d)                                 Subsequent
Recalculation.  In the event the
Internal Revenue Service subsequently adjusts the excise tax computation herein
described, the Company shall reimburse the Executive for the full amount
necessary to make the Executive whole (less any amounts received by the
Executive that the Executive would not have received had the computations
initially been computed as subsequently adjusted), including the value of any underpaid
excise tax, and any related interest and/or penalties due to the Internal
Revenue Service.

 

8.                                       Indemnification. 
In addition to any rights to indemnification to which the Executive is
entitled under the Company’s Restated Certificate of Incorporation or Bylaws,
agreement with the Company, vote of stockholders or disinterested directors or
otherwise, the Company shall indemnify the Executive at all times during and
after the Employment Period to the maximum extent permitted under the Delaware
Business Corporation Act or any successor provision thereof, and any and all
applicable state law of the State of Delaware, and shall pay the Executive’s
expenses (including reasonable attorneys’ fees and expenses, which shall be
paid in advance by the Company as incurred, subject to recoupment in accordance
with applicable law) in defending any civil action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding to the
maximum extent permitted under such applicable state laws for the Executive’s
action or inaction on behalf of the Company under the terms of this
Agreement.  The provisions of this Section 8
shall survive the termination of the Executive’s employment or the termination
of the other provisions of this Agreement.

 

13

 

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

 

The Executive
acknowledges that: (a) the services to be performed by him under this
Agreement are of a special, unique, unusual, extraordinary, and intellectual
character; (b) the business of the Company is worldwide in scope and its
products are marketed throughout the world; (c) the Company competes with
other businesses that are or could be located in any part of the world; and (d) the
provisions of this Section 9 are reasonable and necessary to protect the
Company’s business.

 

If any covenant in this Section 9
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 jurisdiction may determine to be reasonable, not arbitrary,
and not against public policy, will be effective, binding, and enforceable
against the Executive.

 

The period of time
applicable to any covenant in this Section 9 will be extended by the
duration of any violation by the Executive of such covenant.

 

The Executive will, while
the covenants under this Section 9 are in effect, give notice to the
Company, within ten days after accepting any other employment, of the identity
of the Executive’s employer.  The Company
may notify such employer that the Executive is bound by this Agreement and, at
the Company’s election, furnish such employer with a copy of this Agreement or
relevant portions thereof.

 

10.                                 Disclosure of Confidential
Information.  Without the consent of the Company, the
Executive shall not disclose to any other person Confidential Information (as
defined below) concerning the Company or the Company’s trade secrets of which
the Executive has gained knowledge during his employment with the Company.  Any trade secrets of the Company or any of
its subsidiaries or related or affiliated companies or joint ventures will be
entitled to all of the protections and benefits under the Iowa Code 

 

14

 

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 Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of this
Agreement.  The Executive hereby waives
any requirement that the Company submit proof of the economic value of any
trade secret or post a bond or other security. 
None of the foregoing obligations and restrictions apply to any part of
the Confidential Information that the Executive demonstrates was or became generally
available to the public other than as a result of a disclosure by the
Executive.

 

The Executive will not
remove from the premises of the Company (except to the extent such removal is
for purposes of the performance of the Executive’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 Executive recognizes that, as between the
Company and the Executive, all of the Proprietary Items, whether or not
developed by the Executive, are the exclusive property of the Company.  Upon termination of this Agreement by either
party, or upon the request of the Company during the Employment Period, the
Executive will return to the Company all of the Proprietary Items in the
Executive’s possession or subject to the Executive’s control, and the Executive
shall not retain any copies, abstracts, sketches, or other physical embodiment
of any of the Proprietary Items.

 

For purposes of this
Agreement, Confidential Information shall include any and all information
concerning the business and affairs of the Company, 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 Company 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.

 

11.                                 Developments. 
During the course of employment with the Company, Executive may conceive
enhancements to the products manufactured or sold by the Company or may
conceive new products which perform functions similar to products 

 

15

 

manufactured
or sold by the Company or may conceive other new products related to the
business of the Company or may develop ideas, plans and opportunities.  Executive shall disclose promptly and fully
to the Company any and all ideas, business developments, plans and
opportunities, new products or systems, inventions, discoveries, enhancements
and improvements  (“Developments”),
whether or not patentable or subject to copyrights, conceived or made by
Executive during the Employment Period, during work hours or otherwise and on
the Company’s premises or otherwise. 
Employee recognizes that pursuant to this arrangement that the Company
may develop a new product that generates widespread market appeal.

 

Executive
agrees that all Developments shall be the sole property of the Company, and
Executive hereby assigns to the Company, without further compensation, all of
his right, title, and interest in and to such Developments and any and all
related patents, patent applications, copyrights, copyright applications,
trademarks, and trade names in the United States and elsewhere.  Executive shall assist the Company in
obtaining and enforcing patent, copyright, and any other forms of legal
protection for the Developments in any country. 
Upon request, Executive will sign all applications, assignments, instruments
and papers to perform all acts necessary or desired by the Company to assign
all such Developments completely to the Company and to enable the Company, its
successors, assigns and nominees, to secure and enjoy the full and exclusive
benefits and advantages thereof. 
Executive will not, at any time, either during the term of this
Agreement or thereafter, disclose to others, or use for his own benefit or the
benefit of others, any of the Developments. 
Executive agrees that the enhancement and development of all
Developments capable of copyright protection is “Work For Hire” within the
meaning of the Copyright Act of 1976. 
These obligations shall continue beyond the Termination Date with
respect to Developments, whether patentable or not, conceived or made by
Executive during his employment with the Company, and shall be binding upon
Executive’s assigns, personal representatives, administrators and other legal
representatives.

 

12.                                 Nonsolicitation. 
Without the written consent of the Company, the Executive shall not at
any time during the Term and for a period of eighteen (18) months following the
termination of Executive’s employment with the Company 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 Company; 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 Company at any time during the Employment Period, whether or not the
Executive had personal contact with such customer.

 

16

 

13.                                 Injunctive Relief and Additional Remedy;
Essential and Independent Covenants.

 

(a)                                  The
Executive acknowledges that the injury that would be suffered by the Company as
a result of a breach of the provisions of this Agreement (including, without
limitation, any provision of Sections 9, 10, 11,and 12) would be irreparable
and that an award of monetary damages to the Company for such a breach would be
an inadequate remedy.  Consequently, the
Company 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 Agreement, and the
Company will not be obligated to post bond or other security in seeking such
relief.  Without limiting the Company’s
rights under this Section 13 or any other remedies of the Company, if the
Executive breaches any of the provisions of Sections 9, 10, 11 or 12, the
Company will have the right to cease making any payments otherwise due to the
Executive under this Agreement.

 

(b)                                 The
covenants by the Executive in Sections 9, 10, 11 and 12 are essential elements
of this Agreement, and without the Executive’s agreement to comply with such
covenants, the Company would not have entered into this Agreement with the
Executive.  The Company and the Executive
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 9), with specific regard to the nature of
the business conducted by the Company and its subsidiaries and related or
affiliated companies or joint ventures. 
The Executive’s covenants in Sections 9, 10, 11 and 12 are independent
covenants and the existence of any claim by the Executive against the Company
under this Agreement or otherwise, will not excuse the Executive’s breach of
any covenant in Sections 9, 10, 11 or 12.

 

14.                                 Severability. 
It is the desire and intent of the parties that this Agreement shall be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision or
portion of this Agreement shall be adjudicated to be invalid or unenforceable,
this Agreement shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.

 

15.                                 Withholding. 
Any other provision of this Agreement notwithstanding, the Company may
withhold from amounts payable under this Agreement (a) all federal, state,
local and foreign taxes and social security taxes that are required to be
withheld by applicable laws or regulations as the Company shall determine in
its sole discretion, and (b) other ordinary and customary payroll
deductions.

 

17

 

16.                                 Notices.  All notices,
requests, consents and other communications provided for in this Agreement
shall be in writing and shall be given by hand delivery or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

 

If to the Company:

 

Sauer-Danfoss Inc.

250 Parkway Drive

Lincolnshire, Illinois 61069

Attention: 
President

 

If to the Executive, to his residence address set forth on the records
of the Company, or to such other address as either party furnishes to the other
in writing in accordance with this Section 16.  All such notices shall be effective when
actually received by the addressee.

 

17.                                 Governing Law. 
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to its
conflicts of laws provisions, except to the extent that the laws of the State
of Iowa are made applicable for purposes of Section 10 of this Agreement.

 

18.                                 Assignment.  Neither this
Agreement nor any rights or duties hereunder may be assigned by the Executive
without the prior written consent of the Company.  The Company shall have the right at any time
to assign this Agreement to its successors and assigns; provided, however,
that the assignee or transferee is the successor to all or substantially all of
the business and assets of the Company and such assignee or transferee
expressly assumes all of the obligations, duties and liabilities of the Company
specified in this Agreement.

 

19.                                 Amendments.  Any alterations
or amendments to this Agreement shall only be in writing and signed by each
party to this Agreement.

 

20.                                 Binding Effect. 
Except as otherwise provided, this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective legal
representatives, heirs, successors and assigns.

 

21.                                 Execution in Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constituted
one and the same instrument.

 

22.                                 Arbitration. 
Any dispute, controversy or question arising under, out of, or relating
to this Agreement (or the breach thereof), or, the Executive’s employment with
the Company or termination thereof, other than those disputes relating to
Executive’s alleged violations of Sections 9, 10, 11 and 12 of this Agreement,
shall be referred for binding arbitration in Des Moines, Iowa to a neutral
arbitrator selected by the Executive and the Company and this shall be the
exclusive and sole means for resolving such dispute.  Such arbitration shall be conducted in
accordance with the National Rules for 

 

18

 

Resolution
of Employment Disputes of the American Arbitration Association.  The arbitrator shall have the discretion to
award reasonable attorneys’ fees, costs and expenses to the prevailing
party.  Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof.  This Section 22 does not apply to any
action by the Company to enforce Sections 9, 10, 11 and 12 of this Agreement
and does not in any way restrict the Company’s rights under Section 13 of
this Agreement.

 

23.                                 Entire Agreement. 
This Agreement sets forth the entire agreement and understanding of the
parties and supersedes all prior understandings, agreements or representations
by or between the parties, whether written or oral, which relate in any way to
the subject matter hereof, except as expressly provided in Section 8
regarding indemnification agreements. 
Without limiting the generality of the foregoing, all existing
employment agreements, change in control agreements and patent and confidential
information agreements are hereby terminated and of no further force or effect.

 

24.                                 Survivorship.  The provisions of this Agreement necessary to
carry out the intention of the parties as expressed herein shall survive the
termination or expiration of this Agreement, including, without limitation,
Sections 8, 9, 10, 11, 12 and 13.

 

25.                                 Waiver.  Except as
provided herein, the waiver by either party of the other party’s prompt and
complete performance, or breach or violation, of any provision of this
Agreement shall not operate nor be construed as a waiver of any subsequent
breach or violation, and the failure by any party hereto to exercise any right
or remedy which it may possess hereunder shall not operate nor be construed as
a bar to the exercise of such right or remedy by such party upon the occurrence
of any subsequent breach or violation.

 

26.                                 Captions.  The captions
of this Agreement are for convenience and reference only and in no way define,
describe, extend or limit the scope or intent of this Agreement or the intent
of any provision hereof.

 

27.                                 Construction. 
The parties acknowledge that this Agreement is the result of arm’s-length
negotiations between sophisticated parties each afforded representation by
legal counsel.  Each and every provision
of this Agreement shall be construed as though both parties participated
equally in the drafting of same, and any rule of construction that a
document shall be construed against the drafting party shall not be applicable
to this Agreement.

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

 

19

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Ronald
  Hanson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAUER-DANFOSS
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Jim Remus

  
	
   

  	
  Name: Jim Remus

  
	
   

  	
  Title: Director
  – HR Resources

  

 

20Exhibit 10.1(w)

 

 

 

Employment Agreement

for Wolfgang Schramm

 

Sauer-Danfoss Inc.

December 31, 2008

 

 

EXECUTIVE OFFICER EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE OFFICER
EMPLOYMENT AGREEMENT (this “Agreement”) is made effective as of
the 31st day of December, 2008 (the “Effective Date”), by and between
Sauer-Danfoss Inc. (the “Company”) and Wolfgang Schramm (the “Executive”).  The existing Employment Agreement between the
Company and the Executive dated October 1, 2007 shall terminate by mutual
agreement as of December 30, 2008 and will be replaced, in its entirety by
this Agreement.

 

WHEREAS, the Company
desires to provide for the continued employment of the Executive on the terms
and conditions set forth herein, in the best interest of the Company and its constituencies;
and

 

WHEREAS, the Executive
desires to continue to be employed by the Company as provided herein; and

 

NOW, THEREFORE, in
consideration of the premises and the respective covenants, promises and
agreements of the parties herein contained, the parties agree as follows:

 

1.                                       Employment.  The Company agrees to continue to employ the
Executive and the Executive agrees to continue to be employed on an exclusive
and full-time basis by the Company for the period and upon the terms and
conditions specified herein.   During the
Term (set forth in Section 2 below), and consistent with the above, the
Executive agrees to serve the Company faithfully and to the best of the
Executive’s ability, to devote the Executive’s entire business time, energy and
skill to such employment, and to use the Executive’s best efforts, skill and
ability to promote the Company’s interests.

 

2.                                       Term;
Employment Period.  The term of this Agreement (the “Term”) shall
begin on the Effective Date and shall end on the earlier of:

 

(a)                                  October 1,
2009; or

 

(b)                                 such earlier
date on which the Term is terminated pursuant to Section 6;

 

provided, however, that on October 1, 2009 and upon each October 1st
thereafter, the Term shall be automatically extended for one (1) year
unless either the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the Term shall not be so
extended.  The period during which the
Executive is employed by the Company is referred to as the “Employment Period.”  The date on which the termination of the
Executive’s employment becomes effective is referred to as the “Termination
Date.”

 

3.                                       Position
and Duties.  During the
Employment Period, the Executive shall serve as Executive Vice President &
President, Control Products Division of the Company and shall have such
responsibilities, duties and authority as set forth in the Bylaws of the
Company or as otherwise are consistent with such position as well as such
additional responsibilities, duties and authority as the Company’s President
and Chief Executive Officer or the Company’s Board of Directors (the “Board”)
shall determine and assign from time to time. 
During the Employment Period, the Executive shall report to the Company’s
President and Chief Executive Officer or the Chief Executive Officer’s
designee.  The Executive shall fully
comply with the Company’s Worldwide 

 

2

 

Code of Legal and Ethical Business Conduct as in
effect from time to time, or any successor or similar Code or Rules of
Conduct.  The Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Company and shall use his best efforts to carry out his responsibilities
faithfully and efficiently in a professional and ethical manner.  Notwithstanding the foregoing, it is
understood that during the Employment Period, subject to any conflict of
interest policies of the Company and Section 9, the Executive may

 

(a)                                  serve in any
capacity with any civic, charitable, educational or professional organization
provided that such service does not materially interfere with his duties and
responsibilities to the Company;

 

(b)                                 make and manage
personal investments of his choice; and

 

(c)                                  with the prior
consent of the Company’s President and Chief Executive Officer serve on the
board of directors of one (1) for-profit business enterprise.

 

The Executive may serve from time to time as a director and /or member
of a committee of the Company and/or as a director and/or member of a committee
and/or officer of one or more subsidiaries or related or affiliated companies
or joint ventures of the Company.  The
Executive agrees to fulfill his duties as such director, member of committee or
officer without additional compensation other than the compensation provided
for in this Agreement.

 

4.                                       Place
of Assignment.  The Executive’s place of assignment shall be
the Company’s Plymouth, Minnesota plant site. 
During the Employment Period, the Executive’s place of assignment may be
at any of the Company’s plant sites and offices located in Lincolnshire, IL/USA; Plymouth, MN/USA; Nordborg, Denmark;
Neumünster, Germany; or at any other location later defined as a Sauer-Danfoss
Inc. Executive Office or Headquarters location.

 

5.                                       Compensation
and Benefits.

 

(a)                                  Salary.  During the Employment Period, the Company
shall pay to the Executive an initial annual base salary of Three Hundred
Twelve Thousand Dollars ($312,000) on an annualized basis (as the same may be
increased from time to time, the “Base Salary”), such salary to be paid in
periodic installments in accordance with the Company’s regular payroll
practices as in effect from time to time. 
The Base Salary shall be reviewed annually by the Compensation Committee
of the Board and may be increased from time to time in accordance with normal
business practices of the Company and, if so increased, shall not thereafter be
reduced.  Notwithstanding the foregoing,
the Base Salary may be reduced at any time and from time to time as part of
across-the-board reductions applied similarly to other senior executives of the
Company.   All payments of Base Salary or
other compensation hereunder shall be less such deductions or withholdings as
are required by applicable law and regulations.

 

(b)                                 Annual
Incentive.  During the Employment Period, the Executive
shall be eligible to earn an annual incentive under the Company’s 2006 Omnibus
Incentive Plan, or a successor plan thereto, as in effect from time to time,
for executives at the Executive’s level (the “Incentive Plan”), subject to
achievement of performance goals determined in accordance with the terms of the
Incentive Plan (such annual incentive referred to herein as the “Annual
Incentive”).  Except as otherwise
specifically provided in this Agreement, the 

 

3

 

Executive shall only be
eligible to receive the Annual Incentive if the Executive is employed by the
Company through the last day of the fiscal year to which the Annual Incentive
relates.  The actual amount of any Annual
Incentive and the timing for payment shall be determined by and in accordance
with the terms of the Company’s Incentive Plan and the Executive shall have no
absolute right to an Annual Incentive in any year.

 

(c)                                  Expenses.  During the Employment Period, the Company
shall promptly reimburse the Executive for all reasonable out-of-pocket
expenses actually incurred by the Executive in connection with the business of
the Company and the performance of his duties under this Agreement in accordance
with the terms of the Company’s policies and upon presentation of expense
statements or vouchers or such other supporting information as the Company may
customarily require of its senior executives from time to time; provided,
however, in no event shall any such reimbursement be provided later than December 31
of the calendar year following the calendar year in which such business expense
was incurred.

 

(d)                                 Benefit
Plans.  During the
Employment Period, the Executive shall be entitled to participate in all of the
employee benefit plans, long term incentive plans, retirement and health plans,
programs, agreements and arrangements provided to senior executives of the
Company, as such are in effect from time to time, subject to the eligibility
requirements and terms and conditions of such plans, programs, agreements and
arrangements.  The Company reserves the
right, in its sole discretion, to adopt, modify, amend or terminate such plans,
programs, agreements and arrangements at any time.

 

(e)                                  Perquisites.  During the Employment Period, the Executive
shall be entitled to participate in those perquisites provided to senior
executives of the Company, as such are in effect from time to time, subject to
the eligibility, payment requirements and other terms and conditions of such
perquisites, as outlined in the underlying Company policy.  The Company reserves the right, in its sole
discretion, to adopt, modify, amend or terminate such perquisites at any time.

 

(f)                                    Paid
Time Off / Vacations.  During the Employment Period, the Executive
shall be entitled to paid time off, vacation time and paid holidays, in
accordance with the Company’s local policies or practice for its senior
executives, as such are in effect from time to time.  While based in the US, the Executive shall
accrue paid time off, exclusive of paid holidays, at the rate of five weeks per
calendar year.

 

6.                                       Termination
of Employment.

 

(a)                                  Termination
Events.

 

(i)                                     Immediate
Terminations.  Executive’s
employment and the Term shall terminate immediately upon the occurrence of any
of the following:

 

(A)                              Death:  the death of the Executive;

 

(B)                                Disability:  the Disability of the
Executive, where “Disability” shall mean the Executive is incapable of
performing his principal duties because of physical or mental incapacity for a
period of 180 consecutive days in any 12-month period; provided such
Termination Date 

 

4

 

for Disability shall be set
forth in the notice of termination delivered to the Executive by the Company;

 

(C)                                Retirement:  the Retirement of the Executive, where “Retirement”
shall have that meaning as currently in effect under the Company’s defined
contribution retirement plan on the day immediately preceding such Retirement;
and

 

(D)                               For
Cause:  notice of
termination from the Company for Cause, where “Cause” shall means:

 

(I)                                    the willful
failure of the Executive to perform his material duties with the Company as
provided in this Agreement, and which failure is not cured (if capable of cure)
within 15 days after receipt by the Executive of written notice from the
Company of such failure, which notice identifies the manner in which the
Executive has willfully failed to perform;

 

(II)                                gross
negligence or willful misconduct in the performance of the Executive’s duties;

 

(III)                            the engaging by
the Executive in willful conduct which is demonstrably injurious to the
Company, monetarily or otherwise, such as actual or attempted theft or
embezzlement of Company assets;

 

(IV)                            the conviction
(treating a nolo contendere plea as a conviction) of the Executive of any crime
or offense constituting a felony (whether or not any right to appeal has been
or may be exercised);

 

(V)                                use of illegal
drugs;

 

(VI)                            commission or
an act of moral turpitude that in the judgment of the Board of Directors of the
Company can reasonably be expected to have an adverse effect on the business,
reputation or financial situation of the Company and/or the ability of the
Executive to perform the Executive’s duties;

 

(VII)                        a failure by
the Executive to comply with any material provision of this Agreement, which
failure is not cured (if capable of cure) within 15 days after receipt by
Executive of written notice from the Company of such noncompliance by the
Executive; or

 

(VIII)                    breach of fiduciary duty to
the Company.

 

Termination of the Executive
for Cause shall mean termination by action of the Company’s Board of Directors,
at a meeting duly called and held upon at least 15 days’ written notice to the
Executive specifying the particulars of the action or inaction alleged to
constitute Cause and at which meeting the 

 

5

 

Executive and his counsel
were entitled to be present and given adequate opportunity to be heard.  For purposes of clauses (I), (II) and (III) of
the above definition, action or inaction by the Executive shall not be
considered “willful” unless done or omitted by him (1) intentionally or
not in good faith and (2) without reasonable belief that his action or
inaction was in the best interest of the Company, and shall not include failure
to act by reason of total or partial incapacity due to physical or mental
illness.

 

(ii)                                  Terminations
Requiring Notice By Either Party. 
The Executive’s employment may be terminated either by the Company or by
the Executive for any of the below reasons provided notice of termination is
delivered by one party to the other.  The
notice of termination shall set forth the applicable Termination Date; provided, however, in such event, the Term shall terminate
no earlier than thirty (30) days following the date on which such notice of
termination is delivered to the respective party.  Notwithstanding the foregoing, the Company
may require that the Executive cease performing some or all of the Executive’s
duties and/or not be present at the Company’s offices and/or other facilities.

 

(A)                              Termination
by Executive for Good Reason. 
The Executive may resign the Executive’s position for Good reason.  As used herein, “Good Reason” means, without
the Executive’s written consent:

 

(I)                                    a material
diminution in the nature or status of the Executive’s duties, responsibilities
or authority which is inconsistent with those in effect as of the Effective
Date;

 

(II)                                a failure by
the Company to pay or provide any of the compensation set forth in this
Agreement;

 

(III)                            a failure by
the Company to comply with any material provision of this Agreement; or

 

(IV)                            resignation in
compliance with applicable law or rules of professional conduct.

 

Notwithstanding the
foregoing, in order to terminate employment for Good Reason, the Executive must
provide written notice of termination within sixty (60) days of the initial
existence of the condition that he believes is providing him a Good Reason
termination, explaining in detail such condition and the date upon which it
first arose.  Continuation of employment
without written notice of termination during the sixty (60) day period
following the initial existence of the condition shall constitute such
Executive’s acceptance of any change and make null and void the Executive’s
right to terminate for Good Reason with respect to such event.  Upon receipt of a written notice of
termination for Good Reason and underlying condition therefor, the Company will
be allowed sixty (60) days to cure such condition and thereby avoid a Good
Reason termination.

 

6

 

(B)                                Termination
by the Company Without Cause. 
The Company may terminate the Executive’s position without Cause.

 

(C)                                Termination
by Executive Without Good Reason. 
The Executive may resign the Executive’s position without Good Reason.

 

(b)                                 Payments
Upon a Termination Event.

 

(i)                                     Following
a Termination for Any Reason.  In the event of the termination of the
Executive’s employment hereunder for any reason, the Executive (or his estate
or representative, as applicable) shall be entitled to receive any:

 

(A)                              Base Salary;

 

(B)                                Annual
Incentive;

 

(C)                                paid time
off;  and

 

(D)                               expenses

 

that have in each case
accrued but are unpaid as of the Termination Date as well as any
post-termination benefits to which he may be entitled according to the Company’s
retirement, insurance and other benefit plans, programs and arrangements as in
effect immediately prior to the Termination Date, other than medical benefit
plans (the “Accrued Benefits”).  Accrued
Benefits will be paid in accordance with the underlying plan or policy.  If no underlying plan or policy exists for a
particular component of the Accrued Benefits, such component will be paid no
later than sixty (60) days following the Termination Date.

 

(ii)                                  Death.  Upon the termination of the Executive’s
employment because of his death, in addition to the Accrued Benefits set forth
in subparagraph (i) immediately above, the Executive’s estate or
representative, as the case may be, shall also be entitled to receive a lump
sum payment in cash equal to the actual annual incentive compensation such
Executive would have received, if any, under the Incentive Plan for the fiscal
year which includes his Termination Date and assuming that the Executive had
been employed through the last day of such fiscal year, multiplied
by a fraction (the numerator of which shall be the number of
whole months worked by the Executive during the Company’s fiscal year in which
the Termination Date occurs and the denominator of which shall be the number 12
(the “Pro Rata Annual Incentive”)).  The
Pro Rata Annual Incentive shall be payable in accordance with the terms of the
relevant underlying Incentive Plan and at the same time payments are made to
other Company executives pursuant to such Incentive Plan.  In addition, those immediate family members
who were participating in the Company’s medical benefit plans as of the date of
the Executive’s death shall continue to participate in the Company’s medical
benefit plans at active employee contribution rates for the one-year period
immediately following the date of the Executive’s death.  Any continuing medical coverage pursuant to this
clause is intended to be exempt from Code Section 409A to the extent
permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).  However, 

 

7

 

if it is determined that the continuing medical
coverage pursuant to this clause does not qualify for exemption under Code Section 409A
the medical coverage will expire as of the date of the Employee’s death.  If the medical coverage expires early, as
provided in the previous sentence, the Company shall provide Executive’s
immediate family members with a lump sum cash payment equal to twelve (12)
times the then applicable monthly premium for the relevant medical plan which
the Executive participated in.  Such lump
sum payment amount, if any, will be paid no later than sixty (60) days after
the date on which such medical coverage expires.

 

(iii)                               Disability.  Upon the termination of the Executive’s
employment because of his Disability, in addition to the Accrued Benefits set
forth in subparagraph (i) immediately above, the Executive (or his
representative, as applicable) shall be entitled to:

 

(A)                              the Pro Rata
Annual Incentive; as defined in Section 6(b)(ii) above.  The Pro Rata Annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan; and

 

(B)                                the
continuation of medical benefit plans at the levels in effect as of the
Termination Date, at no additional cost to the Executive than that which was in
effect as of the Termination Date, for the one-year period immediately
following the Termination Date; provided, however,
that such medical benefits shall be reduced to the extent comparable medical
benefits are made available to the Executive from a successor employer, and the
Executive shall be obligated to report such benefits to the Company.  Any continuing medical coverage pursuant to this
clause is intended to be exempt from Code Section 409A to the extent
permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).  However, if it
is determined that the continuing medical coverage pursuant to this clause does
not qualify for exemption under Code Section 409A the medical coverage
will expire as of the date of the Employee’s death.  If the medical coverage expires early, as
provided in the previous sentence, the Company shall provide Executive’s
immediate family members with a lump sum cash payment equal to twelve (12)
times the then applicable monthly premium for the relevant medical plan which
the Executive participated in.  Such lump
sum payment amount, if any, will be paid no later than sixty (60) days after
the date on which such medical coverage expires.

 

It is acknowledged and
agreed by the Executive that he shall be precluded from terminating his
employment for Good Reason in the event that his employment is terminated under
this Section 6(b)(iii).

 

(iv)                              Termination
by Company For Cause OR Termination by Executive Without Good Reason.  Upon the termination of the Executive’s 

 

8

 

employment by the Company
for Cause or by the Executive without Good Reason, Executive shall only be
entitled to the Accrued Benefits set forth in subparagraph (i) immediately
above.

 

(v)                                 Termination
by the Company Without Cause OR Termination by the Executive For Good Reason.  Upon the termination of the Executive’s
employment by the Company without Cause or by the Executive for Good Reason, in
addition to the Accrued Benefits set forth in subparagraph (i) immediately
above, the Executive (or his estate or representative, as the case may be)
shall be entitled to receive:

 

(A)                              the Pro Rata
Annual Incentive as defined in Section 6(b)(ii) above.  The Pro Rata annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan;

 

(B)                                a lump sum
payment in cash equal to the Executive’s Base Salary plus
Target Incentive Opportunity as in effect on the Termination Date multiplied by one and one/half (1.5)
(the “Separation Payment”).  The
Separation Payment shall be payable as follows:

 

1.               an amount equal
to the least of the following:

 

a.               the Separation
Payment amount; or

 

b.              two (2) times
the Executive’s Base Salary as in effect on the Termination Date; or

 

c.               two (2) times
the annual compensation limit under Code Section 401(a)(17) (i.e.,
$460,000 for 2008)

 

shall be paid to the
Executive in a lump sum thirty (30) days following Executive’s Termination
Date; and

 

2.               the remainder
of the Separation Payment amount, if any, shall be paid to the Executive in a
lump sum on the seventh month anniversary of the Executive’s Termination Date.

 

(C)                                In addition, an
Executive whose employment is terminated under this Section 6(b)(v) shall
be eligible for the continuation of medical plan benefits at the levels in
effect as of the Termination Date at no additional cost to the Executive than
that which was in effect as of the Termination Date for a period of one year; provided, however, that such medical benefits shall be
reduced to the extent comparable medical benefits are made available to the
Executive from a successor employer, and the Executive shall be obligated to
report such benefits to the Company.  Any continuing medical coverage pursuant
to this clause is intended to be exempt from Code 

 

9

 

Section 409A to the extent permitted under
Treasury Regulation §1.409A-1(B)(9)(v)(B) or §1.409A-3(I)(1)(iv)(B).  However, if it is determined that the
continuing medical coverage pursuant to this clause does not qualify for
exemption under Code Section 409A the medical coverage will expire as of
the date of the Employee’s death.  If the
medical coverage expires early, as provided in the previous sentence, the
Company shall provide Executive’s immediate family members with a lump sum cash
payment equal to twelve (12) times the then applicable monthly premium for the
relevant medical plan which the Executive participated in.  Such lump sum payment amount, if any, will be
paid no later than sixty (60) days after the date on which such medical
coverage expires, and

 

(D)                               executive level
career outplacement services by a mutually agreeable outplacement firm and paid
for, as actually incurred by Executive, by the Company.  The Executive must commence the outplacement
services no later than sixty (60) days following his Termination Date and in no
event shall such services be provided beyond December 31 of the second
year following the year of termination or, if earlier, the first acceptance by
the Executive of an offer of employment.

 

(c)                                  Change
in Control Severance Provisions.  Section 7 provides for payment to the
Executive if his employment is terminated for certain reasons following a
Change of Control as defined in Section 7. 
The Executive acknowledges that in the event he becomes entitled to the
payment specified in Section 7(a), that payment will be in lieu of any
other payments to be made under the terms of this Agreement.

 

(d)                                 Release
Agreement.  Notwithstanding
anything to the contrary contained in this Section 6, the Executive shall
be required to execute the Company’s then current standard release agreement as
a condition to receiving any of the payments and benefits provided for in this Section 6
or Section 7 of this Agreement.  It
is acknowledged and agreed that the then current standard release agreement
shall not diminish or terminate the Executive’s rights under this Agreement
including, but not limited to, those specified in Sections 6(e), 8 and 22.

 

(e)                                  No
Mitigation.  Upon termination of the Executive’s employment
with the Company, subject to the Executive’s affirmative obligations under Section 6(b)(iii) and
(v), the Executive shall be under no obligation to seek other employment or
otherwise mitigate the obligations of the Company under this Agreement.

 

(f)                                    Definition
of the Company.  Whenever this Agreement refers to the
Executive’s employment with the Company, or the termination of the Executive’s
employment with the Company, the term “Company” shall include Sauer-Danfoss
Inc. and any of its subsidiaries or related or affiliated companies or joint
ventures that employ the Executive.  In
addition, when used in Sections 9, 10, 11 and 12 of this Agreement, the term “Company”
shall include Sauer-Danfoss Inc. and any of its subsidiaries or related or
affiliated companies or joint ventures.

 

10

 

7.                                       Change
in Control.

 

(a)                                  Payments
Related to Employment Terminations After a Change in Control.  During the term of this Agreement, in the
event the Executive’s employment with the Company is terminated within two (2) years
following a Change in Control (as such term is defined in  paragraph (b) immediately below), unless such termination is:

 

(i)                                     by the Company
for Cause (as the term Cause is defined in Section 6(a)(i)(D) above);

 

(ii)                                  by reason of
death, Disability, or Retirement; or

 

(iii)                               by the
Executive without Good Reason (as the term Good Reason is defined in Section 6(ii)(A) above),

 

then in lieu of all other
benefits provided to the Executive under the provisions of this Agreement, the
Company shall pay to the Executive and provide him with the following:

 

(A)                              his Accrued
Benefits (in full satisfaction for these amounts owed to the Executive);

 

(B)                                a Pro Rata
Annual Incentive as defined in Section 6(b)(ii) above.  The Pro Rata Annual Incentive shall be
payable in accordance with the terms of the relevant underlying Incentive Plan
and at the same time payments are made to other Company executives pursuant to
such Incentive Plan.  This payment shall
be in lieu of any other payment to be made to the Executive under the Incentive
Plan for the respective plan year);

 

(C)                                a lump-sum
payment in cash equal to the Executive’s Base Salary plus
Target Incentive Opportunity in effect on the Termination Date multiplied by one and a half (1.5)
(the “CIC Separation Payment”).  The CIC
Separation Payment shall be payable as follows:; and

 

1.               an amount equal
to the least of the following:

 

d.              the CIC
Separation Payment amount; or

 

e.               two (2) times
the Executive’s Base Salary as in effect on the Termination Date; or

 

f.                 two (2) times
the annual compensation limit under Code Section 401(a)(17) (i.e.,
$460,000 for 2008)

 

shall be paid to the
Executive in a lump sum thirty (30) days following Executive’s Termination
Date; and

 

2.               the remainder
of the CIC Separation Payment amount, if any, shall be paid to the Executive in
a lump sum on the seventh month anniversary of the Executive’s Termination
Date.

 

11

 

(D)                               a lump sum
payment in cash equal to ten percent (10%) of the Executive’s Base Salary in
effect on the Termination Date in lieu of medical plan benefits; provided, the
Executive’s participation in these and all other medical benefits shall cease
upon the termination of Executive’s employment with the Company under
circumstances which entitle the Executive to the payments set forth in this
paragraph (a).  The lump sum payment
amount under this clause will be paid no later than sixty (60) days after the date
on which such medical coverage expires. 
Any lump sum payment pursuant to this clause is intended to be exempt from Code Section 409A
to the extent permitted under Treasury Regulation §1.409A-1(B)(9)(v)(B) or
§1.409A-3(I)(1)(iv)(B).

 

The
parties agree that, in the event of the termination of Executive’s employment
with the Company under circumstances which entitle the Executive to the
payments set forth in this  paragraph
(a), such payment and benefits shall be deemed to constitute liquidated damages
payable by the Company to the Executive in full satisfaction of the Company’s
obligations hereunder or otherwise, and the Company agrees that the Executive
shall not be required to mitigate his damages by seeking other employment or
otherwise.

 

Additionally,
in the event that the Executive’s employment with the Company is terminated
under circumstances which entitle the Executive to the payments set forth in
this paragraph (a) (whether by the Company or by the Executive), the
Termination Date shall be no earlier than 30 days following the date on which a
notice of termination is delivered by one party to the other.

 

(b)                                 Definition of Change in Control.  “Change
in Control” of the Company means, and shall be deemed to have occurred upon any
of the following events:

 

(i)                                     Any person (other than those persons in
control of the Company as of the Effective Date, or other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or a corporation or other entity owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the beneficial owner, directly or
indirectly, of securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company’s then outstanding securities;
provided, however, that a Change in Control shall not result from:

 

(A)                              Danfoss A/S, as defined below, acquiring
securities of the Company from the Murmann Group, as such term is defined
below, either directly, or indirectly by acquiring voting control of Danfoss
Murmann Holding A/S or its successor; or

 

(B)                                the Murmann Group acquiring securities of the
Company from Danfoss A/S either directly, or indirectly by acquiring voting
control of Danfoss Murmann Holding A/S or its successor; or

 

(ii)                                  During any period of two (2) consecutive
years (not including any period prior to the Effective Date), individuals who
at the beginning of such period constitute the Board (and any new Director, whose
election by the Company’s 

 

12

 

stockholders was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was so approved), cease
for any reason to constitute a majority thereof; or

 

(iii)                               The consummation of:

 

(A)                              a plan of complete liquidation of the
Company; or

 

(B)                                the sale or disposition of all or
substantially all the Company’s assets; or

 

(C)                                a merger, consolidation, or reorganization of
the Company with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least fifty percent (50%) of the combined voting
power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or reorganization.

 

However,
in no event shall a “Change in Control” be deemed to have occurred with respect
to the Executive, if the Executive is part of a purchasing group which consummates
the Change in Control transaction.  The
Executive shall be deemed “part of a purchasing group” for purposes of the
preceding sentence if the Executive is an equity participant in the purchasing
company or group (except for (i) passive ownership of less than one
percent (1%) of the stock of the purchasing company; or (ii) ownership of
equity participation in the purchasing company or group which is otherwise not
significant as determined prior to the Change in Control by a majority of the
nonemployee continuing Directors).

 

For
purposes of (b)(i) of this Section 7, (A) Danfoss A/S shall be
deemed to mean any one or more of 
Danfoss A/S, any of its subsidiaries or related or affiliated companies
or joint ventures, or any successor of the foregoing; and (B) the Murmann
Group shall be deemed to mean any one or more of (i) Klaus Murmann, (ii) any
member of his immediate family, (iii) any entity a majority of the voting
interests of which are owned, directly or indirectly, by Klaus Murmann and/or
any member or members of his immediate family, or (iv) trust, a majority
of which is owned by, or a majority of the beneficiaries of which consist of,
directly or indirectly, Klaus Murmann, and/or any member or members of his
immediate family.

 

(c)                                  Excise Tax Payment.  Notwithstanding anything to the contrary
contained in this Section 7 if, after taking into account all amounts or
benefits otherwise  to be paid or payable
(whether before or after the effective date of the Change of Control), any
amount or benefit to be paid or provided under this Section 7 or any other
plan or agreement would be an “Excess Parachute Payment,” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
or any successor provision thereto, but for the application of this sentence,
then the payment and benefits to be so paid or provided under this Section 7
or any other plan or agreement will be reduced to the minimum extent necessary
(but in no event less than zero) so that no portion of any such payment or
benefit, as so reduced, constitutes an Excess Parachute Payment; provided, however, that the 

 

13

 

foregoing
reduction will be made only if and to the extent that the Executive and the
Company mutually agree that such reduction would result in an increase in the
aggregate payments and benefits to be provided to the Executive, determined on
an after-tax basis (taking into account any excise tax imposed pursuant to Section 4999
of the Code, or any successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable federal, state and local
income taxes).  In the event that any
payment or benefit intended to be provided under this Section 7 or
otherwise is agreed to be reduced pursuant to this section, the Executive will
be entitled to designate the payments and/or benefits to be so reduced in order
to give effect to this section.  The
Company will provide the Executive with all information reasonably requested to
make such designation.

 

8.                                       Indemnification.  In addition to any rights to
indemnification to which the Executive is entitled under the Company’s Restated
Certificate of Incorporation or Bylaws, agreement with the Company, vote of
stockholders or disinterested directors or otherwise, the Company shall
indemnify the Executive at all times during and after the Employment Period to
the maximum extent permitted under the Delaware Business Corporation Act or any
successor provision thereof, and any and all applicable state law of the State
of Delaware, and shall pay the Executive’s expenses (including reasonable
attorneys’ fees and expenses, which shall be paid in advance by the Company as
incurred, subject to recoupment in accordance with applicable law) in defending
any civil action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding to the maximum extent permitted under such
applicable state laws for the Executive’s action or inaction on behalf of the
Company under the terms of this Agreement. 
The provisions of this Section 8 shall survive the termination of
the Executive’s employment or the termination of the other provisions of this
Agreement.

 

9.                                       Covenant
Not to Compete.

 

(a)                                  Competition.  Without the consent of the
Company, the Executive shall not, directly or indirectly, anywhere in the
world, at any time during the Employment Period and for a period of eighteen
(18) months following the termination of Executive’s employment with the
Company 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 Company; provided, however, that the Executive shall not be deemed to
have breached this undertaking if his sole relation with such entity consists
of his 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 Executive 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 Company” shall mean any product or product line
of the Company, the aggregate gross sales of which during any calendar year
during the five (5) year period preceding the Executive’s undertaking such
association with such a competitor were at least $10 million.

 

(b)                                 Acknowledgement
of and Payment for Noncompete. 
The Executive acknowledges that:

 

(i)                                     the services to
be performed by him under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character;

 

14

 

(ii)                                  the business of
the Company is worldwide in scope and its products are marketed throughout the
world;

 

(iii)                               the Company
competes with other businesses that are or could be located in any part of the
world; and

 

(iv)                              the provisions
of this Section 9 are reasonable and necessary to protect the Company’s
business.

As such, Executive
acknowledges and agrees that five percent (5%) of every payment made to him on
each payroll period of his Base Salary from the Company actually represents
consideration for agreeing to the noncompete provisions of this Section 9.

 

(c)                                  Blue
Penciling.  If any covenant
in this Section 9 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 jurisdiction may determine to be
reasonable, not arbitrary, and not against public policy, will be effective,
binding, and enforceable against the Executive.

 

(d)                                 Automatic
Extension for Violation. 
The period of time applicable to any covenant in this Section 9
will be extended by the duration of any violation by the Executive of such
covenant.

 

(e)                                  Agreement
to Identify Subsequent Employer. 
The Executive will, while the covenants under this Section 9 are
in effect, give notice to the Company, within ten (10) days after
accepting any other employment, of the identity of the Executive’s
employer.  The Company may notify such
employer that the Executive is bound by this Agreement and, at the Company’s
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.

 

(f)                                    Penalty
for Violation.  In the event it
is determined that the Executive has violated the provisions of this Section 9,
the Executive, without any further
action by the Company or Executive, shall forfeit, as of the first day of any
such violation any amount owed to Executive under Section 6(b), other than
the Accrued Benefits.  The Company shall
be entitled to reimbursement from the Executive of any fees and expenses
(including attorneys’ fees) incurred by or on behalf of the Company in
enforcing the Company’s rights under this Section 9.  By entering into this Agreement, the
Executive hereby consents to a deduction from any amounts the Company owes to
Executive from time to time (including amounts owed to the Executive as
compensation as well as any other amounts owed to Executive by the Company), to
the extent of any amounts that the Executive owes to the Company under this Section 9
as a forfeiture following a payment to the Executive under Section 6(b),
other than Accrued Benefits, to which he is no longer entitled due to such
violation.  Whether or not the Company
elects to make any set-off in whole or in part, if the Company does not recover
by means of set-off the full amount the Executive owes to the Company, the
Executive agrees to pay immediately the unpaid balance to the Company.

 

15

 

10.                                 Disclosure of Confidential
Information.

 

(a)                                  Nondisclosure.  Without the consent of the
Company, the Executive shall not disclose to any other person Confidential
Information (as defined in paragraph (c) below) concerning the Company or
the Company’s trade secrets of which the Executive has gained knowledge during
his employment with the Company.  Any
trade secrets of the Company or any of its subsidiaries or related or
affiliated companies or joint ventures 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 Agreement, such information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. 
The Executive hereby waives any requirement that the Company submit
proof of the economic value of any trade secret or post a bond or other
security.  None of the foregoing
obligations and restrictions apply to any part of the Confidential Information
that the Executive demonstrates was or became generally available to the public
other than as a result of a disclosure by the Executive.  In the event that the Executive is requested
or required to make disclosure of information subject to this Section 10
under any court order, subpoena or other judicial process, then, except as
prohibited by law, the Executive will promptly notify the Company, take all
reasonable steps requested by the Company to defend against the compulsory
disclosure and permit the Company to control with counsel of its choice any
proceeding relating to the compulsory disclosure.  The Executive acknowledges that all
information, the disclosure of which is prohibited by this section, is of a
confidential and proprietary character and of great value to the Company and
its subsidiaries and affiliates.

 

(b)                                 Safeguard
and Return of Proprietary Items. 
The Executive will not remove from the premises of the Company (except
to the extent such removal is for purposes of the performance of the Executive’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 Executive recognizes that,
as between the Company and the Executive, all of the Proprietary Items, whether
or not developed by the Executive, are the exclusive property of the
Company.  Upon termination of this
Agreement by either party, or upon the request of the Company during the
Employment Period, the Executive will return to the Company all of the
Proprietary Items in the Executive’s possession or subject to the Executive’s
control, and the Executive shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.

 

(c)                                  Definition
of Confidential Information. 
For purposes of this Agreement, “Confidential Information” shall
include any and all information concerning the business and affairs of the
Company, 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 

 

16

 

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 Company
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.

 

(d)                                 Penalty
for Violation.  In the event it
is determined that the Executive has violated the provisions of this Section 10,
the Executive, without any further
action by the Company or Executive, shall forfeit, as of the first day of any
such violation any amount owed to Executive under Section 6(b), other than
the Accrued Benefits.  The Company shall
be entitled to reimbursement from the Executive of any fees and expenses
(including attorneys’ fees) incurred by or on behalf of the Company in
enforcing the Company’s rights under this Section 10.  By entering into this Agreement, the
Executive hereby consents to a deduction from any amounts the Company owes to
Executive from time to time (including amounts owed to the Executive as
compensation as well as any other amounts owed to Executive by the Company), to
the extent of any amounts that the Executive owes to the Company under this Section 10
as a forfeiture following a payment to the Executive under Section 6(b),
other than Accrued Benefits, to which he is no longer entitled due to such
violation.  Whether or not the Company
elects to make any set-off in whole or in part, if the Company does not recover
by means of set-off the full amount the Executive owes to the Company, the
Executive agrees to pay immediately the unpaid balance to the Company.

 

11.                                 Developments.

 

(a)                                  Agreement
to Bring All Developments to the Attention of the Company.  During the course of
employment with the Company, Executive may conceive enhancements to the
products manufactured or sold by  the
Company or may conceive new products which perform functions similar to
products manufactured or sold by the Company or may conceive other new products
related to the business of the Company or may develop ideas, plans and
opportunities.  Executive shall disclose
promptly and fully to the Company any and all ideas, business developments,
plans and opportunities, new products or systems, inventions, discoveries,
enhancements and improvements  (“Developments”),
whether or not patentable or subject to copyrights, conceived or made by
Executive during the Employment Period, during work hours or otherwise and on
the Company’s premises or otherwise. 
Employee recognizes that pursuant to this arrangement that the Company
may develop a new product that generates widespread market appeal.

 

(b)                                 Agreement
that All Developments are Property of the Company.  Executive agrees that all
Developments shall be the sole property of the Company, and Executive hereby
assigns to the Company, without further compensation, all of his right, title,
and interest in and to such Developments and any and all related patents,
patent applications, copyrights, copyright applications, trademarks, and trade
names in the United States and elsewhere. 
Executive shall assist the Company in obtaining and enforcing patent,
copyright, and any other forms of legal protection for the Developments in any
country.  Upon request, Executive will
sign all applications, assignments, instruments and papers to perform all acts
necessary or desired by the Company to assign all such Developments completely
to the Company and to enable the Company, its successors, assigns and nominees,
to secure and 

 

17

 

enjoy the full and exclusive
benefits and advantages thereof. 
Executive will not, at any time, either during the term of this
Agreement or thereafter, disclose to others, or use for his own benefit or the
benefit of others, any of the Developments. 
Executive agrees that the enhancement and development of all
Developments capable of copyright protection is “Work For Hire” within the
meaning of the Copyright Act of 1976. 
These obligations shall continue beyond the Termination Date with
respect to Developments, whether patentable or not, conceived or made by
Executive during his employment with the Company, and shall be binding upon
Executive’s assigns, personal representatives, administrators and other legal
representatives.

 

(c)                                  Penalty
for Violation.  In the event it
is determined that the Executive has violated the provisions of this Section 11,
the Executive, without any further
action by the Company or Executive, shall forfeit, as of the first day of any
such violation any amount owed to Executive under Section 6(b), other than
the Accrued Benefits.  The Company shall
be entitled to reimbursement from the Executive of any fees and expenses
(including attorneys’ fees) incurred by or on behalf of the Company in
enforcing the Company’s rights under this Section 11.  By entering into this Agreement, the
Executive hereby consents to a deduction from any amounts the Company owes to
Executive from time to time (including amounts owed to the Executive as
compensation as well as any other amounts owed to Executive by the Company), to
the extent of any amounts that the Executive owes to the Company under this Section 11
as a forfeiture following a payment to the Executive under Section 6(b),
other than Accrued Benefits, to which he is no longer entitled due to such
violation.  Whether or not the Company
elects to make any set-off in whole or in part, if the Company does not recover
by means of set-off the full amount the Executive owes to the Company, the
Executive agrees to pay immediately the unpaid balance to the Company.

 

12.                                 Nonsolicitation.

 

(a)                                  General
Rule.  Without the
written consent of the Company, the Executive shall not at any time during the
Term and for a period of eighteen (18) months following the termination of
Executive’s employment with the Company for any reason:

 

(i)                                     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 Company; or

 

(ii)                                  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 Company at any time during the Employment Period, whether or not the
Executive had personal contact with such customer.

 

(b)                                 Penalty
for Violation.  In the event it
is determined that the Executive has violated the provisions of this Section 12,
the Executive, without any further
action by the Company or Executive, shall forfeit, as of the first day of any
such violation any amount owed to Executive under Section 6(b), other than
the Accrued Benefits.  The Company shall
be entitled to reimbursement from the Executive of any fees and expenses
(including attorneys’ fees) incurred by or on behalf of the Company in
enforcing the Company’s rights under this Section 12.  By entering into this Agreement, the
Executive hereby consents to a deduction from any amounts the Company owes to
Executive from time to time (including 

 

18

 

amounts
owed to the Executive as compensation as well as any other amounts owed to
Executive by the Company), to the extent of any amounts that the Executive owes
to the Company under this Section 12 as a forfeiture following a payment
to the Executive under Section 6(b), other than Accrued Benefits, to which
he is no longer entitled due to such violation. 
Whether or not the Company elects to make any set-off in whole or in
part, if the Company does not recover by means of set-off the full amount the
Executive owes to the Company, the Executive agrees to pay immediately the
unpaid balance to the Company.

 

13.                                 Injunctive Relief and Additional
Remedy; Essential and Independent Covenants.

 

(a)                                  Acknowledgement by Executive. 
The Executive
acknowledges that the injury that would be suffered by the Company as a result
of a breach of the provisions of this Agreement (including, without limitation,
any provision of Sections 9, 10, 11,and 12) would be irreparable and that an
award of monetary damages to the Company for such a breach would be an
inadequate remedy.  Consequently, the
Company 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 Agreement, and the
Company will not be obligated to post bond or other security in seeking such
relief.  Without limiting the Company’s
rights under this Section 13 or any other remedies of the Company, if the
Executive breaches any of the provisions of Sections 9, 10, 11 or 12, the
Company will have the right to cease making any payments otherwise due to the
Executive under this Agreement.

 

(b)                                 Adequate Time to Consult with
Legal Counsel.  The covenants by the Executive in Sections 9, 10, 11 and 12 are
essential elements of this Agreement, and without the Executive’s agreement to
comply with such covenants, the Company would not have entered into this
Agreement with the Executive.  The
Company and the Executive 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 9), with
specific regard to the nature of the business conducted by the Company and its
subsidiaries and related or affiliated companies or joint ventures.  The Executive’s covenants in Sections 9, 10,
11 and 12 are independent covenants and the existence of any claim by the
Executive against the Company under this Agreement or otherwise, will not
excuse the Executive’s breach of any covenant in Sections 9, 10, 11 or 12.

 

14.                                 Severability.  It is the desire and intent of the parties
that this Agreement shall be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought.  Accordingly, if any
particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, this Agreement shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made.

 

15.                                 Withholding.  Any other provision of this
Agreement notwithstanding, the Company may withhold from amounts payable under
this Agreement:

 

19

 

(a)                                  all federal,
state, local and foreign taxes and social security taxes that are required to
be withheld by applicable laws or regulations as the Company shall determine in
its sole discretion; and

 

(b)                                 other ordinary
and customary payroll deductions.

 

16.                                 Notices.  All notices, requests, consents and other
communications provided for in this Agreement shall be in writing and shall be
given by hand delivery or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

 

If
to the Company:

 

Sauer-Danfoss
Inc.

250
Parkway Drive

Lincolnshire,
Illinois 61069

Attention:  President

 

If to the Executive, to his residence address
set forth on the records of the Company, or to such other address as either
party furnishes to the other in writing in accordance with this Section 16.  All such notices shall be effective when
actually received by the addressee.

 

17.                                 Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to its conflicts of laws provisions, except to the extent that
the laws of the State of Iowa are made applicable for purposes of Section 10
of this Agreement.

 

18.                                 Assignment.  Neither this Agreement nor any rights or
duties hereunder may be assigned by the Executive without the prior written
consent of the Company.  The Company
shall have the right at any time to assign this Agreement to its successors and
assigns; provided, however, that the assignee or
transferee is the successor to all or substantially all of the business and
assets of the Company and such assignee or transferee expressly assumes all of
the obligations, duties and liabilities of the Company specified in this
Agreement.

 

19.                                 Amendments.  Any alterations or amendments to this
Agreement shall only be in writing and signed by each party to this Agreement.

 

20.                                 Binding Effect.  Except as otherwise provided, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective legal representatives, heirs, successors and assigns.

 

21.                                 Execution in Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constituted one and the same instrument.

 

22.                                 Arbitration.  Any dispute, controversy or question arising
under, out of, or relating to this Agreement (or the breach thereof), or, the
Executive’s employment with the Company or termination thereof, other than
those disputes relating to Executive’s alleged violations of Sections 9, 10, 11
and 12 of this Agreement, shall be referred for binding arbitration in Des
Moines, Iowa to a neutral arbitrator selected by the Executive and the Company
and this shall be the exclusive and sole means for resolving such dispute.  Such arbitration shall be conducted in
accordance with the National Rules for Resolution of Employment Disputes
of the American Arbitration Association. 

 

20

 

The arbitrator shall have the discretion to award
reasonable attorneys’ fees, costs and expenses to the prevailing party.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  This Section 22 does not apply to any
action by the Company to enforce Sections 9, 10, 11 and 12 of this Agreement
and does not in any way restrict the Company’s rights under Section 13 of
this Agreement.

 

23.                                 Entire Agreement.  This Agreement sets forth the entire agreement
and understanding of the parties and supersedes all prior understandings,
agreements or representations by or between the parties, whether written or
oral, which relate in any way to the subject matter hereof, except as expressly
provided in Section 8 regarding indemnification agreements.  Without limiting the generality of the
foregoing, all existing employment agreements, change in control agreements and
patent and confidential information agreements are hereby terminated and of no
further force or effect.

 

24.                                 Survivorship.  The provisions of this
Agreement necessary to carry out the intention of the parties as expressed
herein shall survive the termination or expiration of this Agreement,
including, without limitation, Sections 8, 9, 10, 11, 12 and 13.

 

25.                                 Waiver.  Except as otherwise provided under Section 6(a)(ii)(A),
the waiver by either party of the other party’s prompt and complete
performance, or breach or violation, of any provision of this Agreement shall
not operate nor be construed as a waiver of any subsequent breach or violation,
and the failure by any party hereto to exercise any right or remedy which it
may possess hereunder shall not operate nor be construed as a bar to the
exercise of such right or remedy by such party upon the occurrence of any
subsequent breach or violation.

 

26.                                 Captions.  The captions of this
Agreement are for convenience and reference only and in no way define,
describe, extend or limit the scope or intent of this Agreement or the intent
of any provision hereof.

 

27.                                 Construction.  The parties acknowledge that this Agreement is
the result of arm’s-length negotiations between sophisticated parties each
afforded representation by legal counsel. 
Each and every provision of this Agreement shall be construed as though
both parties participated equally in the drafting of same, and any rule of
construction that a document shall be construed against the drafting party
shall not be applicable to this Agreement.

 

IN WITNESS WHEREOF, the parties
have executed this Agreement as of the date first above written.

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Wolfgang Schramm

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SAUER-DANFOSS
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim Remus

  
	
   

  	
  Name:
  Jim Remus

  
	
   

  	
  Title:
  Director – HR
  Resources

  

 

21

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00156-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00156-of-00352.parquet"}]]