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:

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:

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:

(a)                                  Together with securities of the Company already held by such Person, any Person (other than those Persons already 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 more than fifty percent (50%) of the total voting power of the Company’s then outstanding securities provided, however, that a change in control shall not result from (a) Danfoss A/S, or (b) Klaus Murmann, any  member or members of his immediate family or any entity or trust a majority of which is owned by Klaus Murmann or a member or members of his immediate family, acquiring securities of Sauer-Danfoss Inc. from the other, either directly, or indirectly by acquiring voting control of Danfoss Murmann Holding A/S or its successor; or

(b)                                 During any period of two (2) consecutive years (not including any period prior to the Effective Date), a majority of the individuals who at the beginning of such period constitute the Board are replaced during such period by individuals whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election; or

(c)                                  The consummation of a plan of complete liquidation of the Company; or

(d)                                 The sale or disposition of all or substantially all the Company’s assets (i.e., greater than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such sale or disposition) within a 12-month period ending on the date of the most recent sale or disposition; or

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(e)                                  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) more than 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 a Participant, if the Participant is part of a purchasing group which consummates the Change-in-Control transaction.  A Participant shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Participant 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).

Notwithstanding anything to the contrary, this definition of Change in Control must comply, at all times, with Code Section 409A, any regulations issued with respect to Code Section 409A and any other guidance issued the IRS and authoritative on the issue.

(ii)                                  Disability.  Solely for purposes of determining whether a Disability has occurred that will require the payout of previously deferred Performance Units under Article 13.3(b), the definition of Disability per Article 2.10 of the Plan shall be ignored in its entirety and Disability shall be deemed to have the following meaning:

(a)          Subject to paragraph (f) immediately below, any and all Options granted hereunder shall become immediately vested and exercisable;

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(b)         Any and all SARs granted hereunder shall become immediately vested and exercisable, and shall remain exercisable throughout their entire term;

(c)          Any Period of Restriction and restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse;

(d)         The incentive pool used to determine Covered Employee Annual Incentive Awards shall be based on the EBIT or Operating Cash Flow or Net Income of the Plan Year immediately preceding the year of the Change of Control, or such other method of payment as may be determined by the Committee at the time of the Award or thereafter but prior to the Change of Control;

(e)          The target payout opportunities attainable under all outstanding Awards of performance-based Restricted Stock, performance-based Restricted Stock Units, Performance Units, and Performance Shares, shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change of Control;

(i)             The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control, and shall be paid out to Participants within thirty (30) days following the effective date of the Change of Control. The Committee has the authority to pay all or any portion of the value of the Shares in cash;

(ii)         Awards denominated in cash shall be paid to Participants in cash within thirty (30) days following the effective date of the Change of Control;

(f)            Subject to the acceleration of vesting of outstanding Options, the Committee, in its discretion, may provide that in the event of a Change of Control pursuant to Section 2.8(b), (c), or (d), no later than ten (10) days after the approval by the shareholders of the Company of such merger, consolidation, reorganization, sale, lease, or exchange of assets or dissolution or such election of directors, or in the event of a Change of Control pursuant to Section 2.8(a), no later than thirty (30) days after the occurrence of such Change of Control, that (i) Options may be exercised in full only for a limited period of time on or before a specified date (before or after such Change of Control) fixed by the Committee, after which specified date all unexercised Options and all rights of the Participants thereunder shall terminate, or (ii) require the mandatory surrender to the Company by selected Participants of some or all of the outstanding Options held by such Participants as of a date, before or after such Change of Control, specified by the Committee, in which event the Committee shall thereupon cancel such Options and the Company shall pay to each Participant an amount of cash per Share equal to the excess, if any of the “Change of Control Value” of the Shares subject to such Option over the Option Price(s) under such Options for such Shares.

(g)          For the purpose of Section 18.1(f)(ii), “Change of Control Value” shall equal the amount determined in clause (i), (ii), or (iii), whichever is applicable, as follows: (i) the per Share price offered to shareholders of the Company in any such merger, consolidation, reorganization, sale of assets, or dissolution transaction, (ii) the price per Share offered to shareholders of the Company in any tender offer or exchange offer whereby a Change of Control takes place, or (iii) if such Change of Control occurs other than pursuant to a tender or exchange offer, the Fair Market Value per Share of the Shares in which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to shareholders of the Company in any transaction described in Section 2.8 consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.

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(a)          Subject to paragraph (f) immediately below, any and all Options granted hereunder shall become immediately vested and exercisable;

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(b)         Any and all SARs granted hereunder shall become immediately vested and exercisable, and shall remain exercisable throughout their entire term;

(c)          Any Period of Restriction and restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse;

(d)         The incentive pool used to determine Covered Employee Annual Incentive Awards shall be based on the EBIT or Operating Cash Flow or Net Income of the Plan Year immediately preceding the year of the Change of Control, or such other method of payment as may be determined by the Committee at the time of the Award or thereafter but prior to the Change of Control;

(e)          The target payout opportunities attainable under all outstanding Awards of performance-based Restricted Stock, performance-based Restricted Stock Units, Performance Units, and Performance Shares, shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change of Control;

(i)             The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control, and shall be paid out to Participants within thirty (30) days following the effective date of the Change of Control. The Committee has the authority to pay all or any portion of the value of the Shares in cash;

(ii)         Awards denominated in cash shall be paid to Participants in cash within thirty (30) days following the effective date of the Change of Control;

(f)            Subject to the acceleration of vesting of outstanding Options, the Committee, in its discretion, may provide that in the event of a Change of Control pursuant to Section 2.8(b), (c), or (d), no later than ten (10) days after the approval by the shareholders of the Company of such merger, consolidation, reorganization, sale, lease, or exchange of assets or dissolution or such election of directors, or in the event of a Change of Control pursuant to Section 2.8(a), no later than thirty (30) days after the occurrence of such Change of Control, that (i) Options may be exercised in full only for a limited period of time on or before a specified date (before or after such Change of Control) fixed by the Committee, after which specified date all unexercised Options and all rights of the Participants thereunder shall terminate, or (ii) require the mandatory surrender to the Company by selected Participants of some or all of the outstanding Options held by such Participants as of a date, before or after such Change of Control, specified by the Committee, in which event the Committee shall thereupon cancel such Options and the Company shall pay to each Participant an amount of cash per Share equal to the excess, if any of the “Change of Control Value” of the Shares subject to such Option over the Option Price(s) under such Options for such Shares.

(g)          For the purpose of Section 18.1(f)(ii), “Change of Control Value” shall equal the amount determined in clause (i), (ii), or (iii), whichever is applicable, as follows: (i) the per Share price offered to shareholders of the Company in any such merger, consolidation, reorganization, sale of assets, or dissolution transaction, (ii) the price per Share offered to shareholders of the Company in any tender offer or exchange offer whereby a Change of Control takes place, or (iii) if such Change of Control occurs other than pursuant to a tender or exchange offer, the Fair Market Value per Share of the Shares in which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to shareholders of the Company in any transaction described in Section 2.8 consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.

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