Document:

Exhibit 10.1

 

 

Sauer-Danfoss Inc. 2006
Omnibus Incentive Plan

2006 Performance Unit

Amended and Restated
Award Agreement

 

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

 

	
  Participant:

  	
  Dave Anderson

  
	
   

  
	
  Date of Award:

  	
  June 1, 2006

  
	
   

  
	
  Target Number of Performance
  Units Awarded:

  	
  37,403

  
	
   

  
	
  Performance Period:

  	
  1 January 2006 to 31 December 2008

  
	
   

  
	
  Performance Measure:

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

  
						

 

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

 

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

 

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

 

1.     Employment
by the Company.  The Performance Units granted hereunder are
awarded on the condition that the Participant remains employed by the
Sauer-Danfoss Group from the Date of Award through the end of the Performance
Period, as specified above.  Notwithstanding
the preceding sentence and subject to Section 4, the Participant will not
vest in the Performance Units covered by this Award Agreement until the date of
payment as provided in Section 4. 
However, neither such condition regarding further employment nor the
award of the Performance Units shall impose upon the Sauer-Danfoss Group any
obligation to retain the Participant in its employ for any given period or upon
any specific terms of employment.

 

 

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

 

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

 

Achievement
of a Simple Average Annual RoNA over the Performance Period equal to14% will
entitle the Participant to payment of the Target Number of Performance Units
Awarded as set forth above, subject to other provisions of the Plan and this
Award Agreement.  Achievement of a Simple
Average Annual RoNA equal to 16% shall entitle the Participant to payment of
200% of the Target Number of Performance Units Awarded.  Achievement of a Simple Average Annual RoNA
of 8% shall entitle the Participant to payment of 25% of the Target Number of
Performance Units Awarded.  Achievement
of a Simple Average Annual RoNA between 8% and 16% shall entitle the
Participant to payment of the number of Performance Units interpolated
according to a performance achievement function defined by the foregoing
achievement levels, and as reflected on the graph attached hereto.  Achievement of a Simple Average Annual RoNA
of less than 8% shall result in no payment of Performance Units to the
Participant under this Award Agreement.

 

4.     Form and Timing of Payment of Performance
Units.  Payment of earned Performance
Units shall be made within seventy-five (75) calendar days following the
close of the applicable Performance Period. 
Subject to the Plan, the Committee has authorized that the future
payment of any earned Performance Units under this Award Agreement shall be
made 100% in cash, less applicable tax withholdings.  For
purposes of this cash payment, the value of an earned Performance Unit will be
equal to the Fair Market Value, as defined in the Plan, of a Share of common
stock of the Company as of the close of the Performance Period.

 

5.     Voting
Rights and Dividends.  During the Performance Period and until the
date of payment of Performance Units as provided for in Section 4, the
Participant will not have voting rights with respect to the Performance
Units.  During the Performance Period and
until and including the date of payment of Performance Units as provided in Section 4
and as approved by the Committee or the Board, the Participant shall receive
all dividends, dividend equivalents and other distributions paid with respect
to a number of shares of common stock of the Company equal to the Target Number
of Performance Units Awarded under this Award Agreement.  Any 

 

 

such
payment of dividend, dividend equivalent or other distribution will be made on
one of the Participant’s next two regular paydays following the specified
record date.

 

Notwithstanding the previous paragraph, if the
Participant is no longer employed by the Sauer-Danfoss Group but retains a
right to a pro-rated payment under the provisions of Section 6 of this
Award Agreement, the right to receive dividends, dividend equivalents and other
distributions as provided in the previous paragraph will cease.

 

6.     Termination
of Employment Due to Death, Disability, or Retirement.  In the event the employment of a Participant
with the Sauer-Danfoss Group is terminated by reason of death, Disability, or
Retirement during the Performance Period, the Participant or the Participant’s
beneficiary or estate, as the case may be, shall be entitled to receive a
prorated payment of the Performance Units. 
The prorated payment shall be determined by the Committee, in its sole
discretion, based on the number of full months of the Participant’s employment
during the Performance Period, in relation to the total number of months in the
Performance Period, and shall further be adjusted based on the achievement of
the pre-established performance goals set forth in Section 3.

 

The prorated payment of Performance Units pursuant to this Section 6
shall be made at the same time as payments are made to Participants who did not
terminate employment during the Performance Period as set forth in Section 4.

 

For purposes of this Section 6, to the extent permitted by Code Section 409A,
Disability shall have the meaning ascribed to such term in the Participant’s
governing long-term disability plan, or if not so permitted, then the
definition ascribed to such term in Code Section 409A.  For purposes of this Section 6,
Retirement means a termination from employment with the Sauer-Danfoss group on
the normal retirement date on which a Participant qualifies for full (i.e.,
unreduced for early retirement or other actuarial reductions) retirement
benefits under the Participant’s governing defined benefit retirement plan, as
identified by the Committee.

 

7.     Termination
of Employment for Other Reasons.  In the event that the Participant, prior to
the payout date set forth in Section 4, terminates employment with the
Sauer-Danfoss Group for any reason other than those reasons set forth in Section 6
or 8, or in the event that the Sauer-Danfoss Group terminates the employment of
the Participant with cause prior to the payout date set forth in Section 4,
all Performance Units awarded to the Participant under this Award Agreement
shall be forfeited by the Participant; provided, however, that the Committee,
in its sole discretion, may waive such automatic forfeiture provision and pay
out on a pro rata basis in accordance with Section 6.  When the Committee exercises its sole
discretion regarding forfeiture, it may take into consideration any individual
facts and circumstances that it deems relevant for purposes of achieving the
desired objectives under the Plan.  Any
determination regarding forfeiture under this Section 7 for a given
Participant shall not dictate any required result for a different Participant
in a similar or different situation.

 

8.     Change
in Control Event or Certain Termination Events.  If a Change in Control (as defined in the
Plan), a termination by the Company without Cause (as defined in the
Participant’s 

 

 

Executive
Employment Agreement) or a termination by the Participant for Good Reason (as
defined in the Participant’s Executive Employment Agreement) occurs during the
Performance Period, the Target Number of Performance Units Awarded shall become
payable in full and such payment shall be made within seventy-five (75)
calendar days following the date of the Change in Control, termination without
Cause or termination for Good Reason, as the case may be.  The Committee, in its sole discretion, may
make such payment of the Target Number of Performance Units Awarded in the form
of cash or in Shares (or in a combination thereof).  The number of Shares to be issued, if any,
shall be equal to the number of Performance Units designated by the Committee
to be paid in Shares.  The amount of cash
to be paid if any shall be equal to the Fair Market Value, as defined in the
Plan, of a share of the common stock of the Company as of the date of the
Change in Control, termination without Cause or termination for Good Reason, as
the case may be, multiplied by the number of Performance Units designated by
the Committee to be paid in cash.

 

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

 

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

 

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

 

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

 

13.  Covenant
Not to Compete.  Without the consent of the Company, the
Participant shall not, directly or indirectly, anywhere in the world, at any
time during the Participant’s employment 

 

 

with
the Sauer-Danfoss Group, and for a period of eighteen (18) months following the
termination of Participant’s employment with the Sauer-Danfoss Group for any
reason, be associated or in any way connected as an owner, investor, partner,
director, officer, employee, agent, or consultant with any business entity
directly engaged in the manufacture and/or sale of products competitive with
any Material Product or Product Lines of the Sauer-Danfoss Group; provided,
however, that the Participant shall not be deemed to have breached this
undertaking if his 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 Participant holds an interest is listed and traded on a
broadly recognized national or regional securities exchange.  For purposes hereof, the term “Material
Product or Product Line of the Sauer-Danfoss Group” shall mean any product or
product line of the Sauer-Danfoss Group, the consolidated gross sales of which
during any calendar year during the five (5) year period preceding the
Participant’s undertaking such employment were at least $10 million.

 

The
Participant acknowledges that: (a) the services to be performed by him for
the Sauer-Danfoss Group are of a special, unique, unusual, extraordinary, and
intellectual character; (b) the business of the Sauer-Danfoss Group is
worldwide in scope and its products are marketed throughout the world; (c) the
Sauer-Danfoss Group competes with other businesses that are or could be located
in any part of the world; and (d) the provisions of this Section 13
are reasonable and necessary to protect the Sauer-Danfoss Group’s business.

 

If
any covenant in this Section 13 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 Participant.

 

The
period of time applicable to any covenant in this Section 13 will be
extended by the duration of any violation by the Participant of such covenant.

 

The
Participant will, while the covenants under this Section 13 are in effect,
give notice to the Company, within ten days after accepting any other
employment, of the identity of the Participant’s employer.  The Company may notify such employer that the
Participant is bound by this Award Agreement and, at the Company’s election,
may furnish such employer with a copy of this Award Agreement or relevant
portions thereof.

 

Any
nonenforcement of this Section 13 will not be construed to be a waiver by
the Company to enforce such provision in the future.  If the Participant has received a payment
under this Award Agreement, the Company retains the right to demand
verification of employment and compliance with this Section 13 at any time
prior to the date that is eighteen (18) months after the end of the Performance
Period.  The Company or any member of the
Sauer-Danfoss Group may seek restitution and repayment of the total payments
made to the Participant under this Award 

 

 

Agreement
if the Company determines that the Participant has violated this Section 13
during the eighteen (18) month period following the end of the Performance
Period.

 

14.  Disclosure of Confidential Information.  Without the consent of the Company, the
Participant shall not disclose to any other person Confidential Information (as
defined below) concerning the Sauer-Danfoss Group or any of its trade secrets
of which the Participant has gained knowledge during his employment with the
Sauer-Danfoss Group. Any trade secrets of the Sauer-Danfoss Group will be
entitled to all of the protections and benefits under the Iowa Code Annotated Section 550.1
through 550.8 and any other applicable law. 
If any information that the Company deems to be a trade secret is found
by a court of competent jurisdiction not to be a trade secret for purposes of
this Award Agreement, such information will, nevertheless, be considered
Confidential Information for purposes of this Award Agreement.  The Participant hereby waives any requirement
that the Company submits proof of the economic value of any trade secret or
posts a bond or other security.  None of
the foregoing obligations and restrictions apply to any part of the
Confidential Information that the Participant demonstrates was or became
generally available to the public other than as a result of a disclosure by the
Participant.

 

The
Participant will not remove from the premises of the Sauer-Danfoss Group
(except to the extent such removal is for purposes of the performance of the
Participant’s duties at home or while traveling, or except as otherwise
specifically authorized by the Company), any document, record, notebook, plan,
model, component, device, or computer software or code, whether embodied in a
disk or in any other form, that contains Confidential Information
(collectively, the “Proprietary Items”). 
The Participant recognizes that, as between the Company or any member of
the Sauer-Danfoss Group and the Participant, all of the Proprietary Items,
whether or not developed by the Participant, are the exclusive property of the
Company or the member of the Sauer-Danfoss Group, as the case may be.  Upon termination of this Award Agreement by
either party, or upon the request of the Company or any member of the
Sauer-Danfoss Group during the employment period, the Participant will return
to the Company or the Sauer-Danfoss Group member all of the Proprietary Items
in the Participant’s possession or subject to the Participant’s control, and
the Participant shall not retain any copies, abstracts, sketches, or other
physical embodiment of any of the Proprietary Items.

 

For
purposes of this Award Agreement, Confidential Information shall include any
and all information concerning the business and affairs of the Sauer-Danfoss
Group, including, without limitation, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current, and planned research
and development, current and planned distribution methods and processes,
customer lists, current and anticipated customer requirements, price lists,
market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information), historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel, agents,
personnel training and techniques and 

 

 

materials,
insurance products, premium structures, information relating to suppliers and
supplies, sales and marketing information and strategy, notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Sauer-Danfoss Group containing or based, in whole or in part, on any
information included in the foregoing, and any information, however documented,
that is a trade secret within the meaning of the Iowa Code Annotated Section 550.1
through 550.8.

 

Any
nonenforcement of this Section 14 will not be construed to be a waiver by
the Company to enforce such provision in the future.  If the Participant has received a payment
under this Award Agreement, the Company retains the right to demand
verification of compliance with this Section 14 at any time prior to the
date that is eighteen (18) months after the end of the Performance Period.  The Company or any member of the
Sauer-Danfoss Group may seek restitution and repayment of the total payments
made to the Participant under this Award Agreement if the Company determines
that the Participant has violated this Section 14 during the eighteen (18)
month period following the end of the Performance Period.

 

15.  Nonsolicitation.  Without the written consent of the Company,
the Participant shall not, at any time during Employment and for a period of
eighteen (18) months following the termination of Participant’s employment with
the Sauer-Danfoss Group for any reason (a) employ or retain or arrange to
have any other person, firm, or other entity employ or retain or otherwise
participate in the employment or retention of any person who is an employee or
consultant of the Sauer-Danfoss Group; or (b) solicit or arrange to have
any other person, firm, or other entity solicit or otherwise participate in the
solicitation of business from any entity that was a customer of the Sauer-Danfoss
Group during the time of the Participant’s employment, whether or not the
Participant had personal contact with such person.

 

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

 

16.  Injunctive Relief and Additional Remedy;
Essential and Independent Covenants.  The Participant acknowledges that the injury
that would be suffered by the Sauer-Danfoss Group as a result of a breach of
the provisions of this Award Agreement (including any provision of Sections 13,
14, and 15) would be irreparable and that an award of monetary damages to the
Sauer-Danfoss Group for such a breach would be an inadequate remedy.  Consequently, the Company or any member of
the Sauer-Danfoss Group will have the right, in addition to any other rights it
may have, to obtain injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Award
Agreement, and the Company or 

 

 

any
member of the Sauer-Danfoss Group will not be obligated to post bond or other
security in seeking such relief.  Without
limiting the Sauer-Danfoss Group’s rights under this Section 16 or any
other remedies of the Sauer-Danfoss Group, if the Participant breaches any of
the provisions of Sections 13, 14, or 15, the Sauer-Danfoss Group will have the
right to cease making any payments otherwise due to the Participant under this
Award Agreement.

 

The
covenants by the Participant in Sections 13, 14, and 15 are essential elements
and preconditions to this Award Agreement, and without the Participant’s
agreement to comply with such covenants, the Company would not have entered
into this Award Agreement with the Participant. 
The Company and the Participant have been afforded the opportunity to
consult their respective counsel and have been advised or had the opportunity
to obtain advice, in all respects concerning the reasonableness and propriety
of such covenants (including, without limitation, the time period of
restriction and the geographical area of restriction set forth in Section 13),
with specific regard to the nature of the business conducted by the
Sauer-Danfoss Group.  The Participant’s
covenants in Sections 13, 14, and 15 are independent covenants and the
existence of any claim by the Participant against the Company or any member of
the Sauer-Danfoss Group under this Award Agreement or otherwise, will not
excuse the Participant’s breach of any covenant in Sections 13, 14, or 15.

 

If
this Award Agreement or the Participant’s employment with the Sauer-Danfoss
Group is terminated, this Award Agreement will continue in full force and
effect as is necessary or appropriate to enforce the covenants and agreements
of the Participant in Sections 13, 14, 15, and 16.

 

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

 

	
  Beneficiary Designation (name, address, and
  relationship):

  
	
   

  
	
   

  
	
   

  
	
   

  

 

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

 

 

Award
Agreement, all of which shall be binding upon the Participant.  Any inconsistency between the Award Agreement
and the Plan shall be resolved in favor of the Plan.

 

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

 

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

 

21.  Use of
Personal Data.  Participant acknowledges and agrees (by
executing this Award Agreement) to the collection, use, processing and transfer
of certain personal data as described in this Section 21.  The Participant understands that he or she is
not obliged to consent to such collection, use, processing and transfer of
personal data.  However, the Participant
understands that his or her failure to provide such consent may affect his or
her ability to participate in the Plan. 
The Participant understands that the Company may hold certain personal
information about the Participant, including his or her name, salary, nationality,
job title, position evaluation rating along with details of all past Awards and
current Awards outstanding under the Plan, for the purpose of managing and
administering the plan (the “Data”).  The
Company and other members of the Sauer-Danfoss Group will transfer Data amongst
themselves as necessary for the purpose of implementation, administration and
management of the Plan.  The Company or
another member of the Sauer-Danfoss Group may further transfer Data to any
third parties assisting in the implementation, administration and management of
the Plan.  These various recipients of
Data may be located in Europe, or elsewhere throughout the world, including the
United States.  The Participant
authorizes these various recipients of Data to receive, possess, use, retain
and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Plan, including any required
transfer of such Data as may be required for the subsequent holding of Shares
on the Participant’s behalf by a broker or other third party with whom the
Participant may elect to deposit any Shares acquired pursuant to the Plan.  The Participant understands that he or she
may, at any time, review Data with respect to the Participant and require any
necessary amendments to such Data.  The
Participant also understands that he or she may withdraw the consents to use
Data herein by notifying the Company in writing; however, the Participant
understands that by withdrawing his or her consents to use Data, the
Participant may affect his or her ability to participate in the Plan.

 

22.  Severability.  In the event that any provision of this Award
Agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this 

 

 

Award
Agreement, and this Award Agreement shall be construed and enforced as if the
illegal or invalid provision had not been included.

 

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

 

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

 

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

 

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

 

To the extent not preempted by federal law, this
Award Agreement is deemed to have been made and entered into in the State of
Iowa and in all respects the rights and obligations of the parties will be
governed by, and construed and enforced in accordance with, the laws of the
State of Iowa without regard to the principles of conflict of laws.  Any and all lawsuits, legal actions or
proceedings against either party arising out of this Award Agreement will be
brought in Story County, Iowa or federal court of competent jurisdiction
sitting nearest to Ames, Iowa, and each party hereby submits to and accepts the
exclusive jurisdiction of such court for the purpose of such suit, legal action
or proceeding.  Each party irrevocably
waives any objection it may now have or hereinafter have to this choice of
venue of any suit, legal action or proceeding in any such court and further
waives any claim that any suit, legal action or proceeding brought in any such
court has been brought in an inappropriate forum.

 

25.  Designation as Covered Employee for Annual
Incentive Plan Year.  For purposes of Section 13 of the Plan,
Participant has been designated as a Covered Employee for purposes of
determining the Covered Employee Annual Incentive Award for the performance
period from January 1, 2006 to December 31, 2006.  By executing this Award Agreement, the
Company and the Participant acknowledge and agree that, solely for purposes of
the performance period from January 1, 2006 to December 31, 2006, the Plan will serve as a
successor plan to the Annual Officer Performance Incentive Plan as provided for
in Section 5(b) of the Participant’s employment agreement and the
Participant’s annual incentive will be determined solely by the Covered
Employee’s Annual Incentive Award provisions of Section 13 of the
Plan.  The 

 

 

Company and the Participant further acknowledge and agree that, for
purposes of the employment agreement, during the performance period from January 1,
2006 to December 31, 2006, the term Target Incentive Opportunity shall
mean 60% of the Participant’s annualized base salary.

 

IN WITNESS WHEREOF, the
parties have caused this Amended and Restated Award Agreement to be executed
effective as of January 2, 2008.

 

Sauer-Danfoss
Inc.

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ParticipantExhibit 10.2

 

Sauer-Danfoss Inc. 2006
Omnibus Incentive Plan

2007 Performance Unit

Amended and Restated
Award Agreement

 

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

 

	
  Participant:  

  	
  Dave
  Anderson

  
	
   

  	
   

  
	
  Date of Award:  

  	
  March 20,
  2007

  
	
   

  	
   

  	
   

  
	
  Target Number of Performance Units Awarded:  

  	
  26,025

  
	
   

  	
   

  	
   

  
	
  Performance Period:  

  	
  1
  January 2007 to 31 December 2009

  
	
   

  	
   

  	
   

  
	
  Performance Measure:  

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

  
	
   

  	
   

  
								

 

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

 

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

 

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

 

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

 

1

 

Units shall impose
upon the Sauer-Danfoss Group any obligation to retain the Participant in its
employ for any given period or upon any specific terms of employment.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

6.     Form and Timing of Payment of
Performance Units.  Payment of earned Performance Units shall be
made within seventy-five (75) calendar days following the close of the
applicable Performance Period.  Subject
to the Plan, the Committee has authorized that the future payment of any earned
Performance Units under this Award Agreement shall be made 100% in cash, less
applicable tax withholdings.  For
purposes of this cash payment, the value of an earned Performance Unit will be
equal to the Fair Market Value, as defined in the Plan, of a share of common
stock of the Company as of the close of the Performance Period.

 

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

 

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

 

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

 

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

 

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

 

3

 

defined benefit
retirement plan, as identified by the Committee.

 

9.     Termination of Employment for Other Reasons. 
In the event that the Participant, prior to the payout date set forth in
Section 6, terminates employment with the Sauer-Danfoss Group for any
reason other than those reasons set forth in Section 8 or 10, or in the
event that the Sauer-Danfoss Group terminates the employment of the Participant
with cause prior to the payout date set forth in Section 6, all
Performance Units awarded to the Participant under this Award Agreement shall
be forfeited by the Participant; provided, however, that the Committee, in its
sole discretion, may waive such automatic forfeiture provision and pay out on a
pro rata basis in accordance with Section 8.  When the Committee exercises its sole
discretion regarding forfeiture, it may take into consideration any individual
facts and circumstances that it deems relevant for purposes of achieving the
desired objectives under the Plan.  Any
determination regarding forfeiture under this Section 9 for a given
Participant shall not dictate any required result for a different Participant
in a similar or different situation.

 

10.  Change in Control Event or Certain Termination
Events.  If a Change in Control (as defined in the
Plan), a termination by the Company without Cause (as defined in the
Participant’s Executive Employment Agreement) or a termination by the
Participant for Good Reason (as defined in the Participant’s Executive
Employment Agreement) occurs during the Performance Period, the Target Number
of Performance Units Awarded shall become payable in full and such payment
shall be made within seventy-five (75) calendar days following the date of
the Change in Control, termination without Cause or termination for Good
Reason, as the case may be.  The
Committee, in its sole discretion, may make such payment of the Target Number
of Performance Units Awarded in the form of cash or in Shares (or in a
combination thereof).  The number of
Shares to be issued, if any, shall be equal to the number of Performance Units
designated by the Committee to be paid in Shares.  The amount of cash to be paid if any shall be
equal to the Fair Market Value, as defined in the Plan, of a share of the
common stock of the Company as of the date of the Change in Control,
termination without Cause or termination for Good Reason, as the case may be,
multiplied by the number of Performance Units designated by the Committee to be
paid in cash.

 

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

 

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

 

13.  Tax Withholding.  The
Sauer-Danfoss Group shall have the power and the right to deduct or withhold,
or require the Participant or beneficiary to remit to the Sauer-Danfoss Group,
an amount sufficient to satisfy federal, state, and local taxes, domestic or
foreign, required by law or 

 

4

 

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

 

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

 

15.  Covenant Not to Compete. 
Without the consent of the Company, the Participant shall not, directly
or indirectly, anywhere in the world, at any time during the Participant’s
employment with the Sauer-Danfoss Group, and for a period of eighteen (18)
months following the termination of Participant’s employment with the
Sauer-Danfoss Group for any reason, be associated or in any way connected as an
owner, investor, partner, director, officer, employee, agent, or consultant
with any business entity directly engaged in the manufacture and/or sale of
products competitive with any Material Product or Product Lines of the
Sauer-Danfoss Group; provided, however, that the Participant shall not be
deemed to have breached this undertaking if his or her sole relation with such
entity consists of his or her holding, directly or indirectly, an equity
interest in such entity not greater than two percent (2%) of such entity’s
outstanding equity interest, and the class of equity in which the Participant
holds an interest is listed and traded on a broadly recognized national or
regional securities exchange.  For
purposes hereof, the term “Material Product or Product Line of the
Sauer-Danfoss Group” shall mean any product or product line of the
Sauer-Danfoss Group, the consolidated gross sales of which during any calendar
year during the five (5) year period preceding the Participant’s
undertaking such employment were at least $10 million.

 

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

 

If any covenant in this Section 15 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area,
and such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against the
Participant.

 

5

 

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

 

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

 

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

 

16.  Disclosure
of Confidential Information.  Without the
consent of the Company, the Participant shall not disclose to any other person
Confidential Information (as defined below) concerning the Sauer-Danfoss Group
or any of its trade secrets of which the Participant has gained knowledge
during his or her employment with the Sauer-Danfoss Group.  Any trade secrets of the Sauer-Danfoss Group
will be entitled to all of the protections and benefits under the Iowa Code
Annotated Section 550.1 through 550.8 and any other applicable law.  If any information that the Company deems to
be a trade secret is found by a court of competent jurisdiction not to be a
trade secret for purposes of this Award Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of this Award
Agreement.  The Participant hereby waives
any requirement that the Company submits proof of the economic value of any
trade secret or posts a bond or other security. 
None of the foregoing obligations and restrictions apply to any part of
the Confidential Information that the Participant demonstrates was or became
generally available to the public other than as a result of a disclosure by the
Participant.

 

The Participant will not remove from the premises of
the Sauer-Danfoss Group (except to the extent such removal is for purposes of
the performance of the Participant’s duties at home or while traveling, or
except as otherwise specifically authorized by the Company), any document,
record, notebook, plan, model, component, device, or computer software or code,
whether embodied in a disk or in any other form, that contains Confidential
Information (collectively, the “Proprietary Items”).  The Participant recognizes that, as between
the Company or any member of the Sauer-Danfoss Group and the Participant, all
of the Proprietary Items, whether or not developed by the Participant, are the
exclusive property of the Company or the member of the Sauer-Danfoss Group, as
the case may be.  Upon termination of
this Award Agreement by either party, or upon the request of the Company or any
member of the Sauer-Danfoss Group during the 

 

6

 

employment period, the Participant will return to the
Company or the Sauer-Danfoss Group member all of the Proprietary Items in the
Participant’s possession or subject to the Participant’s control, and the
Participant shall not retain any copies, abstracts, sketches, or other physical
embodiment of any of the Proprietary Items.

 

For purposes of this Award Agreement, Confidential
Information shall include any and all information concerning the business and
affairs of the Sauer-Danfoss Group, including, without limitation, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current, and planned research and development, current and planned distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and programs (including object code and source code), computer software and
database technologies, systems, structures, and architectures (and related
formulae, compositions, processes, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information), historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds of
key personnel, agents, personnel training and techniques and materials,
insurance products, premium structures, information relating to suppliers and
supplies, sales and marketing information and strategy, notes, analysis,
compilations, studies, summaries, and other material prepared by or for the
Sauer-Danfoss Group containing or based, in whole or in part, on any
information included in the foregoing, and any information, however documented,
that is a trade secret within the meaning of the Iowa Code Annotated Section 550.1
through 550.8.

 

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

 

17.  Nonsolicitation. 
Without the written consent of the Company, the Participant shall not,
at any time during Employment and for a period of eighteen (18) months
following the termination of Participant’s employment with the Sauer-Danfoss
Group for any reason (a) employ or retain or arrange to have any other
person, firm, or other entity employ or retain or otherwise participate in the
employment or retention of any person who is an employee or consultant of the
Sauer-Danfoss Group; or (b) solicit or arrange to have any other person,
firm, or other entity solicit or otherwise participate in the solicitation of
business from any entity that was a customer of the Sauer-Danfoss Group during
the time of the Participant’s employment, whether or not the Participant had
personal contact with such person.

 

7

 

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

 

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

 

The covenants by the Participant in Sections 15, 16,
and 17 are essential elements and preconditions to this Award Agreement, and
without the Participant’s agreement to comply with such covenants, the Company
would not have entered into this Award Agreement with the Participant.  The Company and the Participant have been
afforded the opportunity to consult their respective counsel and have been
advised or had the opportunity to obtain advice, in all respects concerning the
reasonableness and propriety of such covenants (including, without limitation,
the time period of restriction and the geographical area of restriction set
forth in Section 15), with specific regard to the nature of the business
conducted by the Sauer-Danfoss Group. 
The Participant’s covenants in Sections 15, 16, and 17 are independent
covenants and the existence of any claim by the Participant against the Company
or any member of the Sauer-Danfoss Group under this Award Agreement or
otherwise, will not excuse the Participant’s breach of any covenant in Sections
15, 16, or 17.

 

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

 

19.  Beneficiary Designation. 
The Participant may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under this Award Agreement is to be paid in case of his or her death
before he or she receives any or all of 

 

8

 

such benefit. Each
such designation shall revoke all prior designations by the Participant, shall
be in a form prescribed by the Company, and will be effective only when filed
by the Participant in writing with the Vice President — Human Resources during
the Participant’s lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant’s death shall be paid to the Participant’s
estate.

 

	
  Beneficiary
  Designation (name, address, and relationship):

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

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

 

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

 

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

 

23.  Use of Personal Data. 
Participant acknowledges and agrees (by executing this Award Agreement)
to the collection, use, processing and transfer of certain personal data as
described in this Section 23.  The
Participant understands that he or she is not obliged to consent to such
collection, use, processing and transfer of personal data.  However, the Participant understands that his
or her failure to provide such consent may affect his or her ability to
participate in the Plan.  The Participant
understands that the Company may hold certain personal information about the
Participant, including his or her name, salary, nationality, job title,
position evaluation rating along with details of all past Awards and current
Awards outstanding under the Plan, for the purpose of managing and
administering the plan (the “Data”).  The
Company and other members of the Sauer-Danfoss Group will transfer Data amongst
themselves as necessary for the purpose of implementation, administration and
management of the Plan.  The Company or 

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

To the extent not preempted by federal law, this Award
Agreement is deemed to have been made and entered into in the State of Iowa and
in all respects the rights and obligations of the parties will be governed by,
and construed and enforced in accordance with, the laws of the State of Iowa
without regard to the principles of conflict of laws.  Any and all lawsuits, legal actions or
proceedings against either party arising out of this Award Agreement will be
brought in Story 

 

10

 

County, Iowa or federal court of competent jurisdiction
sitting nearest to Ames, Iowa, and each party hereby submits to and accepts the
exclusive jurisdiction of such court for the purpose of such suit, legal action
or proceeding.  Each party irrevocably
waives any objection it may now have or hereinafter have to this choice of
venue of any suit, legal action or proceeding in any such court and further
waives any claim that any suit, legal action or proceeding brought in any such
court has been brought in an inappropriate forum.

 

IN WITNESS WHEREOF, the parties have caused this
Amended and Restated Award Agreement to be executed effective as of January 2,
2008.

 

	
   

  	
  Sauer-Danfoss Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Participant

  

 

11

 

Exhibit A

 

SAUER-DANFOSS INC.

2006 OMNIBUS INCENTIVE
PLAN

 

2007 PERFORMANCE UNIT
AWARD AGREEMENT

 

 

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

 

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

 

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

 

2007
Performance Measure:  Simple Average
Sales Growth

 

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

 

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

 

12

 

Exhibit B

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