Document:

Exhibit 10.1(ab)

 

SAUER-DANFOSS INC.

 

ANNUAL MANAGEMENT PERFORMANCE

INCENTIVE PLAN

 

Amended
and Restated as of March 4, 2003

 

 

SAUER-DANFOSS INC.

ANNUAL MANAGEMENT PERFORMANCE INCENTIVE PLAN

Amended and Restated as of March 4, 2003

 

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

 

a)              Link variable pay to strategic business
objectives;

b)             Create a more balanced focus on profitability
and growth;

c)              Create a better line-of-sight on the measures
of performance and, therefore, improve the motivational qualities of the Plan;

d)             Reward the on-going demonstration of
alignment with the Company culture;

e)              Facilitate the attraction and retention of
talent; and

f)                Provide a competitive compensation
opportunity.

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

5.                    An “Employee” shall mean any person employed
by the Company or a Subsidiary in a non-officer, high executive or management
position.

 

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

 

2

 

7.                    The “Plan Year” means the fiscal year of the
Company, which as of January 1, 2002 coincides with the calendar year.

 

8.                    An “Incentive Compensation Award” shall mean
the cash payment that may be awarded to a Participant pursuant to the Plan with
respect to any Plan Year.

 

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

 

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

 

11.              “Actual Market Composite Growth” shall mean
the actual sales growth achieved at the end of the Plan Year for each of the
market segments the Company serves as determined by external market references
and approved by the Executive Office.

 

12.              “Assumed Market Composite Growth” shall mean
the projected sales growth for each Plan Year for each of the market segments
the Company serves as determined at the beginning of the Plan Year and approved
by the Executive Office.

 

13.              “Performance Measures” shall mean the
measurements of Profitability (Earnings Before Interest and Taxes (“EBIT”)
Margin) and Sales Growth upon which a Participant’s Incentive Compensation
Award will be based.  These measures
will be part of a performance matrix that will be communicated to Plan
Participants on an annual basis.

 

14.              “Performance Targets” shall mean the
financial performance targets determined through the annual budgeting process
for any Plan Year as approved by the Executive Office.

 

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

 

16.              “Company EBIT Margin” (Company Earnings
Before Interest and Taxes Margin) is defined as EBIT Margin for the Company as
determined from the year-end, audited consolidated financial statements or from
the quarter-end unaudited consolidated financial statements as appropriate.

 

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17.              “GBU EBIT Margin” (Global Business Unit
Earnings Before Interest and Taxes Margin) for any GBU is defined as GBU EBIT
Margin for the fiscal year of the GBU as determined from internal, consolidated
financial statements, which support the quarter-end and year-end audited
financial statements for the Company.

 

18.              “Sales Growth” will be measured as sales
growth on a comparable basis, for the Plan Year as compared to the previous
Plan Year.  Sales means total third
party trade sales for the Company or the GBU, as the case may be, less effects
of any acquisitions.

 

19.              “Company Sales Growth” is defined as Sales
Growth for the Company as determined from the year-end, audited consolidated
financial statements or from the quarter-end unaudited consolidated financial
statements as appropriate.

 

20.              “GBU Sales Growth” (Global Business Unit
Sales Growth) for any GBU is defined as Sales Growth for the fiscal year of the
GBU as determined from internal, consolidated financial statements, which
support the quarter-end and year-end audited financial statements for the
Company.

 

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

 

22.              “Participant’s Company Factor” shall mean a
total Company-weighting factor, from 0% to 100%, assigned by the Executive
Office to the Participant for the Plan Year. 
The sum of the Participant’s Company Factor plus the Participant’s GBU
factor shall equal 100%.

 

23.              “Participant’s GBU Factor” shall mean a GBU
weighting factor, from 0% to 100% assigned by the Executive Office to the
Participant for the Plan Year.  The sum
of the Participant’s Company Factor plus the Participant’s GBU Factor shall
equal 100%.

 

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

 

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

 

ARTICLE II

ELIGIBILITY AND MEASUREMENT BASIS

 

The Executive Office shall,
in its discretion, select the Employees who are to participate in the Plan and
the Chief Executive Officer shall notify such selected Employees of their
selection in writing.  Participation for
each Employee shall be determined on an annual basis.

 

4

 

The Executive Office shall
also select the Global Business Unit, if any, that will be used to determine
each Participant’s Incentive Compensation Award.  The Executive Office will also select the Participant’s Company
Factor and the Participant’s GBU Factor, as defined above.  Once determined by the Executive Office, in
its discretion, the applicable Global Business Unit, the Participant’s Company
Factor and the Participant’s GBU Factor will be communicated to each
Participant at the same time as the selection notification.

 

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

 

ARTICLE III

INCENTIVE COMPENSATION AWARDS

 

1.               The annual Incentive Compensation Award will
be determined based on a combination of Profitability and Sales Growth
measures.

 

2.               At the beginning of the Plan Year,
Performance Targets are established by the Executive Office for Company EBIT
Margin, GBU EBIT Margin, Company Sales Growth and GBU Sales Growth.

 

3.               Sales Growth Performance Targets are
established at the beginning of the Plan Year based on the Assumed Composite
Market Growth for both the Company and GBU. 
At the end of the Plan Year, Actual Composite Market Growth will be
determined, and Performance Targets adjusted. 
For example, if the Company Sales Growth Performance Target set at the
beginning of the year was 10% (with an Assumed Composite Market Growth of 5%)
and the Actual Composite Market Growth for the year, as determined following
the end of the Plan Year, was only 1%, then the Company revenue growth
performance target for the Plan Year in question shall be reduced to 6%.

 

The purpose of the year-end
adjustment feature is to take into consideration the external market factors
that may influence Sales Growth Performance for the Plan Year.  It is the Company’s belief that Plan
Participants should not be penalized as a result of unforeseen negative
conditions in the marketplace, nor should Participants receive a windfall when
an unforeseen upturn in the market occurs during the Plan Year.

 

4.               Achievement of Performance Targets will
result in an Incentive Compensation Award for the Plan Year to which it relates
equal to the Target Incentive Opportunity.

 

5.               Achievement of Performance Measures exceeding
target will result in an Incentive Compensation Award for the Plan Year to
which it relates up to 200% of the Target Incentive Opportunity.

 

5

 

6.               Achievement of Performance Measures results
below Performance Targets will result in an Incentive Compensation Award for
the Plan Year to which it relates from 0% - 100% of the Target Incentive
Opportunity.

 

7.               The Incentive Compensation Target Award may
be increased or decreased by as much as 20% on a discretionary basis.  The degree to which the incentive awards
will be adjusted, if at all, shall be determined by the Executive Office, in
its discretion.

 

8.               The Incentive Compensation Award granted to a
Participant shall, based upon the extent Performance Measures are achieved in
relation to Performance Targets, be paid in cash to the Participant on or
before May 1 of the year following the Plan Year with respect to which such
Incentive Compensation Award is granted.

 

9.               Notwithstanding anything to the contrary
contained in the Plan, subject to the approval of the Executive Office, the
right of a Participant to receive an Incentive Compensation Award which has
been granted but which has not been paid will be forfeited in the event the
Participant’s employment with the Company or any Subsidiary is terminated under
circumstances other than death, Permanent and Total Disability, Retirement or
other retirement under conditions of eligibility for a retirement benefit.  Furthermore, if the Executive Office, in its
sole discretion, determines that a Participant has engaged in activities
constituting gross misconduct, the right of such Participant to be granted an
Incentive Compensation Award will be forfeited.

 

In the event of termination
due to death, Permanent and Total Disability, Retirement or other retirement
under conditions of eligibility for retirement benefits, any Incentive
Compensation Award which has been granted but which has not been paid will be
paid to the Participant’s Beneficiary or the Participant, as the case may be,
on a pro rata basis as soon as practicable after the end of the Plan Year
following the determination of the amount of the Incentive Compensation Award
that would have been paid to the Participant had he survived or remained an
employee of the Company or any Subsidiary for the entire Plan Year.

 

ARTICLE IV

ADMINISTRATION

 

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

 

6

 

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

 

ARTICLE V

AMENDMENT AND TERMINATION

 

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

 

ARTICLE VI

MISCELLANEOUS

 

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

 

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

 

3.                    Interest of Participant and Beneficiary.  The obligation of the Company under the Plan
to make payments of an Incentive Compensation Award merely constitutes the
unsecured promise of the Company to make payments from its general assets as
provided therein, and no Participant or Beneficiary shall have any interest, or
a lien or prior claim upon any property of the Company or any Subsidiary.

 

7

 

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

 

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

 

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

 

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

 

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

 

8Exhibit 10.1(ad)

 

FIRST AMENDMENT TO THE

SAUER-SUNDSTRAND COMPANY

SUPPLEMENTAL RETIREMENT BENEFIT PLAN

FOR CERTAIN KEY EXECUTIVES

 

WHEREAS, Sauer-Sundstrand Company previously adopted
the Sauer-Sundstrand Company Supplemental Retirement Benefit Plan for Certain
Key Executives (the “Plan”); and

 

WHEREAS, Sauer-Danfoss Inc. (the “Company”) assumed
sponsorship of the Plan; and

 

WHEREAS, the Company desires to amend the Plan to
change the name thereof and to make certain design changes thereto;

 

NOW,
THEREFORE, the Plan
is hereby amended as follows, effective as of January 1, 2004:

 

1.                                       The Plan is hereby renamed as the
“Sauer-Danfoss Inc. Supplemental Retirement Benefit Plan for Certain Key
Executives.”

 

2.                                       Section 2(a) of the Plan is hereby
amended in its entirety to read as follows:

 

“(a)                            “Company” shall mean Sauer-Danfoss Inc.
(including the predecessor Sundstrand-Sauer Company or any successor of
Sauer-Sundstrand Company) or any subsidiary or other entity which, together
with Sauer-Danfoss Inc., would constitute a single employer under Code
Section 414, as amended.”

 

3.                                       Section 3 of the Plan is hereby amended
in its entirety to read as follows:

 

“3.  Supplemental Retirement Benefit.

 

FIRST, the benefit(s) to
which the Executive is entitled under the Company Retirement Plans, exclusive
of any benefits derived under the Cash Balance Account portion of the
Sauer-Danfoss Employees’ Retirement Plan, shall be determined.

 

SECOND, such benefit(s),
exclusive of any benefits derived under the Cash Balance Account portion of the
Sauer-Danfoss Employees’ Retirement Plan, shall be determined as if the
limitations of Code Sections 415 and 401(a)(17) and any provisions of such Plan
incorporating such limitations, were inapplicable to those Company Retirement
Plans which are defined benefit Plans.

 

 

THIRD, the amount of the
Supplemental Retirement Benefit shall be determined by subtracting the amounts
determined under the second paragraph above from the amount determined under
the first paragraph above.

 

IN WITNESS WHEREFORE, the
undersigned has caused this First Amendment to be executed this 18th
day of May, 2004.

 

	
   

  	
  SAUER-DANFOSS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron Hanson

  	
   

  
	
   

  	
  Its:

  	
  VP Human Resources

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