SAUER-DANFOSS INC. DEFERRED COMPENSATION PLAN FOR SELECTED EMPLOYEES

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Exhibit 10.1(bk)

SAUER-DANFOSS INC.
DEFERRED COMPENSATION PLAN
FOR SELECTED EMPLOYEES

Article 1. Establishment and Purpose

        1.1   Establishment. Sauer-Danfoss Inc., a Delaware corporation (the "Company"), hereby establishes, effective as of January 1, 2004, a deferred compensation plan for selected employees of the Company or of a member of a Related Group with the Company. Such plan shall be known as the "Sauer-Danfoss Inc. Deferred Compensation Plan for Selected Employees" (the "Plan").

        1.2   Purpose. The primary purpose of the Plan is to provide a select group of management or highly compensated employees of the Company with the opportunity to voluntarily defer all or a portion of their Compensation subject to the terms of the Plan. By adopting the Plan, the Company desires to enhance the ability of the Company to attract and retain employees of outstanding competence.

Article 2. Definitions

        Whenever used herein, the following terms shall have the meanings set forth below, and, when the defined meaning is intended, the term is capitalized:

(a)

"Board" or "Board of Directors" means the Board of Directors of the Company.

(b)

"Beneficiary" shall mean any legal or natural person designated by a Participant to receive any benefits payable under the Plan on account of the Participant's death. Each designation by a Participant shall be filed with the Company during the Participant's lifetime on a form substantially in the form of the attached Exhibit "A" ("Beneficiary Designation Form") and may include successive or contingent Beneficiaries. A Participant, by filing a Beneficiary Designation Form with the Company during the Participant's lifetime, may change a Beneficiary Designation at any time, and from time to time, without the consent of or notice to any person previously designated by the Participant.

(c)

"Change in Control" of the Company means, and shall be deemed to have occurred upon any of the following events:

(i)  Any person (other than those persons in control of the Company as of the Effective Date, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation or other entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the beneficial owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; provided, however, that a Change in Control shall not result from (a) Danfoss A/S, as defined below, acquiring securities of the Company from the Murmann Group, as such term is defined below, either directly, or indirectly by acquiring voting control of Danfoss Murmann Holding A/S or its successor; or (b) the Murmann Group acquiring securities of the Company from Danfoss A/S either directly, or indirectly by acquiring voting control of Danfoss Murmann Holding A/S or its successor; or

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

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

However, in no event shall a "Change in Control" be deemed to have occurred with respect to 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).

For purposes of (c)(i) of this Article 2, (A) Danfoss A/S shall be deemed to mean any one or more of Danfoss A/S, any of its subsidiaries or related or affiliated companies or joint ventures, or any successor of the foregoing; and (B) the Murmann Group shall be deemed to mean any one or more of (i) Klaus Murmann, (ii) any member of his immediate family, (iii) any entity a majority of the voting interests of which are owned, directly or indirectly, by Klaus Murmann and/or any member or members of his immediate family, or (iv) trust, a majority of which is owned by, or a majority of the beneficiaries of which consist of, directly or indirectly, Klaus Murmann, and/or any member or members of his immediate family.

(d)

"Code" means the Internal Revenue Code of 1986, as amended.

(e)

"Committee" means the Compensation Committee of the Board or such other committee appointed by the Board to administer the Plan, as described in Article 3 herein.

(f)

"Company" means Sauer-Danfoss Inc., a Delaware corporation .

(g)

"Company Officer" means any executive officer of the Company, as defined by Regulation C, Rule 405 of the Securities Act of 1933 and as determined by the Company and its legal counsel from time to time.

(h)

"Compensation" means the total amount of base compensation and annual incentive plan bonus paid to an Employee by the Company for services rendered during a Plan Year.

(i)

"Deferral Period" means the time period between the date a deferral election takes effect and the date the deferred amount will be paid.

(j)

"Director" means a member of the Board of Directors of the Company on or following the Effective Date of the Plan.

(k)

"Disability" means a condition which would entitle a Participant to disability benefits under a Group Long-Term Disability Income Plan sponsored by the Company or by any other entity which is a member of a Related Group with the Company and which serves as employer to the Employee Participant.

(l)

"Earnings Credit Rate means an quarterly interest rate, equal to ¹ / 4 of the sum of the annual yield on 10-year U.S. Treasury notes plus 300 basis points (3%). The Earnings Credit Rate will be redetermined quarterly pursuant to the Plan. For purposes of this definition, the yield on 10-year

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U.S. Treasury notes shall be such yield as published in the Wall Street Journal, or an equivalent yield if the Wall Street Journal published rates become unavailable.

(m)

"Effective Date" means the date the Plan becomes effective, as set forth in Section 1.1 herein.

(n)

"Employee" means any full-time, salaried employee of the Company or of a member of a Related Group with the Company.

(o)

"Executive Office" means the Executive Office of the Company, as the same shall from time to time exist.

(p)

"Participant" means any Employee who has participated in, and accrued a benefit under, the Plan.

(q)

"Plan" means the Sauer-Danfoss Inc. Deferred Compensation Plan for Selected Employees.

(r)

"Plan Year", generally, means the twelve month period ending each December 31. So long as Sauer-Danfoss continues to pay its employees on a bi-weekly schedule, the beginning of a Plan Year will coincide with the beginning of the payroll period that includes January 1 ^st and the end of a Plan Year will coincide with the end of payroll period that falls latest in the following December.

(s)

"Related Group" shall mean a controlled group of corporations (as defined in Code §414(b)), trades or businesses (whether or not incorporated) which are under common control (as defined in Code §414(c)) or an affiliated service group (as defined in Code §14(m) or in Code §414(o)).

Article 3. Administration

        3.1   Administration of the Plan. The Plan shall be administered by the Committee with respect to Company Officers and by the Executive Office with respect to Employees other than Company Officers. Subject to the provisions set forth herein, the Committee and the Executive Office shall, for their respective constituencies, have full power to determine the terms and conditions of each Employee's participation in the Plan; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend or waive rules and regulations for the Plan's administration; to amend (subject to the provisions of Article 10 herein) the terms and conditions of the Plan and any agreement or instrument entered into under the Plan; and to make other determinations which may be necessary or advisable for the administration of the Plan.

        Subject to the terms of the Plan, the Committee and the Executive Office may, for their respective constituencies, delegate any or all of its authority granted under the Plan to a committee appointed by the Board or to an executive or executives of the Company.

        3.2   Decisions Binding. For their respective constituencies, all determinations and decisions of the Committee and the Executive Office as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, conclusive and binding on all parties.

        3.3   Indemnification. Each person who is or shall have been a member of the Committee or the Executive Office or who is or shall have been a delegate pursuant to Section 3.1 shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party, or which such person may be involved by reason of any action taken or failure to act under the Plan unless such action or failure to act is the result of intentional misconduct. The Company shall, subject to the requirements and limitations of Delaware law, pay such loss, cost, liability or expense imposed on or incurred by such person promptly upon demand by such person, whether or not such person has actually advanced such amount prior thereto.

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        Except with respect to intentional misconduct, the Company shall also indemnify each such person who is or shall have been a member of the Committee and the Executive Office against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such action, suit or proceeding against such person, provided suc