This Addendum or Modifications involves
Title: SAUER-DANFOSS INC. SUPPLEMENTAL EXECUTIVE SAVINGS RETIREMENT PLAN
Governing Law: Iowa Date: 3/24/2009
Industry: Misc. Capital Goods Sector: Capital Goods
SUPPLEMENTAL EXECUTIVE SAVINGS & RETIREMENT PLAN
As Amended and Restated Effective January 1, 2008
SUPPLEMENTAL EXECUTIVE SAVINGS & RETIREMENT PLAN
I. PURPOSE AND EFFECTIVE DATE.
1.1. Purpose . The Sauer-Danfoss Inc. Supplemental Executive Savings & Retirement Plan was established by Sauer-Danfoss Inc. to attract and retain certain key employees by supplementing such employees’ retirement income, available under the Sauer-Danfoss Employees’ Retirement Plan (the “ERP”) and the Sauer-Danfoss Employees’ Savings Plan (the “ESP”), which is otherwise limited by Code Sections 415 and 401(a) (17), and the regulations issued there under.
1.2. Effective Date . The Plan was initially effective January 1, 2004 and was later amended and restated effective January 1, 2005. The Plan is being amended and restated effective January 1, 2008 to ensure full compliance with Code Section 409A. The Plan shall remain in effect until terminated in accordance with Article VIII.
When used in the Plan and initially capitalized, the following words and phrases shall have the meanings indicated:
2.1. “Accounts” means the recordkeeping accounts established for each Participant in the Plan for purposes of accounting for the amount of the Participant’s Supplemental Benefit Amounts determined and credited in accordance with Article IV each year, if any, and all adjusted periodically to reflect the interest earnings or hypothetical investment return on such amounts in accordance with Article V.
2.2. “Administrator” means the Committee or such individual or committee appointed by the Committee to administer the Plan in accordance with Article VII. The Committee shall take such actions it deems necessary or desirable to ensure that such individual or committee has sufficient and appropriate authority for carrying out the intent and purpose of the Plan.
2.3. “Affiliate” means:
(a) any corporation, partnership, joint venture, trust, association or other business enterprise which is a member of the same controlled group of corporations, trades or businesses as the Company (within the meaning of Code Section 414), and
(b) any other entity that is designated as an Affiliate by the Committee.
2.4. “Beneficiary” means the person or entity designated by the Participant to receive the Participant’s Supplemental Benefits Amounts in the event of the Participant’s death. If the Participant does not designate a Beneficiary, or if the Participant’s designated Beneficiary predeceases the Participant, the Participant’s estate shall be the Beneficiary under the Plan.
2.5. “Board” means the Board of Directors of the Company.
2.6. “Cash Balance Employee” means an employee of the Company or an Affiliate whose retirement benefit under the ERP is accrued, on and after January 1, 2001, in whole or in part, under the Cash Balance Formula (as defined under the terms of the ERP).
2.7. “Code” means the Internal Revenue Code of 1986, as amended.
2.8. “Committee” means the Compensation Committee of the Board of Directors of the Company.
2.9. “Company” means Sauer-Danfoss Inc. and any successor thereto.
2.10. “Compensation” means either:
(a) “Compensation” as that term is specifically defined under the ESP, or
(b) “Cash Balance Pay” as that term is specifically defined under the ERP,
as the case may be, depending on the context in which it is being used under this Plan.
2.11. “Eligible Employee” means a key employee of the Company or an Affiliate who (i) is a Cash Balance Employee, and (ii) during a Plan Year is expected to have Compensation from the Company or any Affiliate in excess of the Code Section 401(a)(17) limit for such Plan Year.
2.12. “ERP” means the Sauer-Danfoss Employees’ Retirement Plan.
2.13. “ESP” means the Sauer-Danfoss Employees’ Savings Plan.
2.14. “Investment Fund or Funds” means the investment funds designated by the Administrator as the basis for determining the hypothetical investment return to be credited in accordance with Article V to Participants’ Supplemental ESP Accounts. The Investment Funds shall mirror the available investment funds under the ESP.
2.15. “Participant” means an Eligible Employee who has become a participant in the Plan in accordance with Section 3.1.
2.16. “Plan” means the Sauer-Danfoss Inc. Supplemental Executive Savings & Retirement Plan, as set forth herein and as amended from time to time.
2.17. “Plan Year” means each calendar year commencing on and after January 1, 2004.
2.18. “Supplemental Benefit Amounts” means the amounts accrued on behalf of the Participant under the Plan, if any, and represents the sum of the Participant’s Supplemental ERP Amounts and Supplemental ESP Amounts credited to his or her Account in accordance with Article IV.
2.19. “Supplemental ERP Account” means the bookkeeping account established for purposes of accounting for the amount of the Participant’s Supplemental ERP Amounts determined and credited in accordance with Article IV each year, if any, as adjusted periodically to reflect the interest earnings on such amounts in accordance with Article V.
2.20. “Supplemental ERP Amount” means that portion of the Supplemental Benefit Amounts determined under Section 4.1(a) of the Plan specifically pertaining to the ERP and credited to the Participant’s Supplemental ERP Account in accordance with Article IV.
2.21. “Supplemental ESP Account” means the bookkeeping account established for purposes of accounting for the amount of the Participant’s Supplemental ESP Amounts determined and credited in accordance with Article IV each year, if any, as adjusted periodically to reflect the hypothetical investment return or hypothetical investment loss on such amounts in accordance with Article V.
2.22. “Supplemental ESP Amount” means that portion of the Supplemental Benefit Amounts determined under Section 4.1(b) of the Plan specifically pertaining to the ESP and credited to the Participant’s Supplemental ESP Account in accordance with Article IV.
2.23. “Valuation Date” means a date on which the Investment Funds are valued and the Participant’s Account is adjusted for any resulting gains or losses. The Administrator shall determine the Valuation Date and such date shall be at least once every calendar year.
3.1. Participation . An Eligible Employee shall become a Participant in the Plan when he or she has had credited to his or her Accounts, by the Company, Supplemental Benefit Amounts in accordance with Article IV.
3.2. ERISA Exemption . It is the intent of the Company that the Plan be exempt from Parts 2, 3 and 4 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as an unfunded plan that is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management and highly compensated employees (the “ERISA Exemption”). Notwithstanding anything to the contrary in Section 3.1 or in any other provision of the Plan, the Administrator may, in its sole discretion, exclude any one or more employees from eligibility to participate or from participation in the Plan, exclude any Participant from continued participation in the Plan, and take any further action permissible under Code Section 409A that it considers necessary or appropriate if the Administrator reasonably determines in good faith that such exclusion or further action is necessary in order for the Plan to qualify for, or to continue to qualify for, the ERISA Exemption. In the event a Participant is identified for exclusion from participation in the Plan, such Participant shall be excluded and become an inactive Participant as of the January 1 of the Plan Year immediately following the Plan Year that includes the year such exclusion determination was made.
IV. SUPPLEMENTAL BENEFIT AMOUNTS.
4.1. Computation of Supplemental Benefit Amounts . An Eligible Employee shall be entitled to Supplemental Benefit Amounts for each Plan Year that he or she is an Eligible Employee. Such Supplemental Benefit Amount shall be equal to the sum of:
(a) Supplemental ERP Amount : the excess, if any, of:
(i) the benefit the Eligible Employee otherwise would have been entitled to have credited to his or her Cash Balance Account (as defined under the ERP) for his or her benefit under the ERP for a given year if such benefit was calculated without regard to the following:
1. Code Section 415, and
2. Code Section 401(a)(17), over
(ii) the benefit which the Eligible Employee is entitled to have credited to his Cash Balance Account (as defined under the ERP) for his or her benefit for such given year under the ERP, plus
(b) Supplemental ESP Amount : the excess, if any, of:
(i) the benefit the Eligible Employee otherwise would have been entitled to have credited to his or her Employer Contribution Account (as defined in the ESP), if any, and his or her Matching
Contribution Account (as defined under the ESP), if any, for a given year if such benefit(s) was calculated without regard to the following:
(1) Code Section 415,
(2) Code Section 401(a)(17),
(3) Code Section 401(m)(2), and
(4) Code Section 402(g); over
(ii) the actual benefit which the Eligible Employee is entitled to have credited to a separate account for his benefit for such given year under the ESP with respect to such Employer Contributions and Matching Contributions.
Notwithstanding the foregoing, an Eligible Employee shall not be entitled to Supplemental Benefit Amounts attributable to amounts that would have been credited to his Matching Contribution Account for a Plan Year unless the Eligible Employee had elected Participant Contributions (as defined in the ESP) for such Plan Year equal to the lesser of four percent (4%) of Compensation or the limitation in effect under Code Section 402(g) for such Plan Year.
4.2. Vesting . A Participant’s Supplemental Benefit Amounts calculated by the Company in accordance with Sections 4.1 above shall vest in accordance with the same vesting schedules that may exist, from time to time, in the ERP and the ESP, as the case may be.
4.3. Special One Time Supplemental Benefit Amounts for Certain Participants. Certain Eligible Employees, but for the January 1, 2004 effective date of this Plan, would have had amounts credited to their Accounts as Supplemental Benefit Amounts for certain years prior to 2004. To reflect this fact, special, one-time Supplemental ERP amounts and/or Supplemental ESP amounts will be credited to the Accounts of certain Eligible Employees. The eligibility for, timing and amount of such special, one-time Supplemental Benefit amounts pursuant to this Section 4.3 are to be determined solely at the discretion of the Administrator.
4.4. Crediting of Supplemental Benefit Amounts .
(a) General Rule . The Supplemental Benefit Amounts computed in Section 4.1 above for each Plan Year shall be credited by the Company to the Participant’s Accounts as soon as reasonably practicable after the close of the Plan Year to which the Supplement Benefit Amounts relate.
(b) Current Cash Distribution of Immaterial Supplemental ERP Amounts and Immaterial Supplemental ESP Amounts for a Given Plan Year . Notwithstanding anything to the contrary in the Plan, so long as a Participant is or would be fully vested in his or her Supplemental ERP Account or his or her Supplemental ESP Account, as the case may be, to the extent that the Supplemental ERP Amount or the Supplemental ESP Amount, respectively, for a given Plan Year does not exceed $750, such amounts instead of being credited to the Participant’s Accounts under paragraph (a) immediately above shall be paid out currently as cash compensation in a lump sum within 2½ months of the end of the Plan Year.
V. ACCOUNTS AND INVESTMENTS.
5.1. Valuation of Accounts . The Administrator shall establish a Supplemental ERP Account and a Supplemental ESP Account for each Participant who has been credited with a Supplemental ERP Amount or Supplemental ESP Amount, respectively. Such Accounts shall be credited with a Participant’s Supplemental Benefit Amounts as set forth in Sections 4.4. As of each Valuation Date, the Participant’s Accounts shall be adjusted upward or downward to reflect:
(a) the interest earnings or investment return to be credited as of such Valuation Date pursuant to Section 5.3 below,
(b) the amount of distributions, if any, to be debited as of that Valuation Date under Article VI.
5.2. Earnings and Investments .
(a) Supplemental Benefit Relating to the ERP . Supplemental ERP Accounts shall be credited with interest annually. Such interest credit shall mirror the interest credit on Cash Balance Accounts (as defined by the terms of the ERP) under the ERP. For each Plan Year, the amount credited to the Eligible Employee’s Supplemental ERP Account shall be determined by multiplying the balance of such Supplemental ERP Account on the first day of the Plan Year by the one-year Treasury bill rate in effect as of the first business day of such Plan Year, as published in the Wall Street Journal on such business day.
(b) Supplemental Benefit Relating to the ESP . Each Participant generally may direct the manner in which his or her Supplemental ESP Amounts, if any, shall be deemed invested in and among the Investment Funds; provided, however, that each investment election made by a Participant shall, notwithstanding anything to the contrary in the Plan, be strictly subject to the consent of the Administrator which, in its sole discretion, may elect to honor the Participant’s request or have the Supplement ESP
Account deemed invested in another manner. Such deemed investment election shall be made in accordance with such procedures as the Administrator shall establish and any such election shall be made in whole percentages. The investment authority shall remain at all times with the Administrator. The selection of Investment Funds by a Participant shall be for the sole purpose of determining the rate of return to be credited to his or her Supplement ESP Account and shall not be treated or interpreted in any manner whatsoever as a requirement or direction to actually invest assets in any Investment Fund or any other investment media.
5.3. Crediting of Interest and Investment