January 18, 2007
Exhibit 10.q
January 18, 2007
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Polaris Industries Inc.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Polaris Industries Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇:
On behalf of the Board of Directors of Polaris Industries Inc., a Minnesota corporation
(“Polaris”), I am writing regarding your continuing employment with Polaris. This letter agreement
(the “Agreement”) amends, restates, replaces and supersedes, effective as of January 1, 2007, that
letter agreement between you and Polaris dated February 20, 2006, and is written for the purpose of
setting forth the terms and conditions of your continued employment by Polaris and to protect
Polaris’ knowledge, expertise, and relationships and the confidential information Polaris has
developed about its customers, suppliers, products, operations and services.
1. Title and Position.
During the term of your employment hereunder you shall be employed as Chief Executive Officer
of Polaris and, subject to the supervision and control of the Board of Directors of Polaris,
perform such duties, have such power and exercise such supervision and control with regard to the
business of Polaris as are commonly associated with or appropriate to the office of Chief Executive
Officer, including but not limited to the day-to-day general management, supervision and control of
all of the businesses and operations of Polaris and its subsidiaries. In discharging your duties
and responsibilities, you may also serve as an executive officer and/or director of any direct or
indirect subsidiary of Polaris or as a director or in an equivalent capacity of entities in which
Polaris has an investment. During the term of your employment hereunder you shall apply on a
full-time basis (allowing for ordinary course vacations and sick leave) all of your skill and
experience to the performance of your duties in your position with Polaris and its subsidiaries.
It is understood that you may have other business investments and participate in other business
ventures which may, from time to time, require minor portions of your time, but which will not
interfere or be inconsistent with your duties under this letter agreement.
2. Term of Employment.
Unless sooner terminated as provided in Section 5 below, your employment under the terms of
this Agreement shall commence as of January 1, 2007 and shall continue until December 31, 2008
(such period referred to herein as the “Term”).
3. Compensation and Benefits.
(a) Base Salary. During the term of your employment hereunder, you will be paid a
base annual salary (“Base Salary”) in the amount of $750,000, payable in accordance with Polaris’
customary payroll policy, less all applicable withholdings and deductions. Your Base Salary may,
at the discretion of the Board of Directors, be increased during the term of your employment under
this Agreement.
(b) Annual Cash Incentive Compensation. During the term of your employment hereunder,
you will continue to participate in Polaris’ Senior Executive Annual Incentive Compensation Plan
(the “Plan”). The Compensation Committee of the Board of Directors will determine, in accordance
with the Plan, on an annual basis the actual amount of any performance incentive award (“Annual
Bonus”) to be awarded to you under the Plan. During the term of your employment you will be
eligible to receive a target annual payment under the Plan equal to 200 percent of your Base Salary
(the “Bonus Target Amount”) subject to the performance criteria established by the Compensation
Committee under the Plan.
(c) Stock Option Grant. On or before January 31, 2007, you will be granted a stock
option to purchase 192,000 shares of Polaris common stock at an exercise price per share equal to
the fair market value of a share of Polaris common stock on the date of grant (the “2007 Stock
Option”). The 2007 Stock Option will be granted under and subject to the terms and conditions of
the Polaris Industries Inc. 1995 Stock Option Plan (the “Stock Option Plan”) and the form of the
nonqualified stock option agreement attached as Exhibit A hereto. The 2007 Stock Option is
intended to be in lieu of any annual grants of stock options that might otherwise be awarded to you
at the time that Polaris might award stock options to other members of Polaris’ management group.
(d) Performance Restricted Share Award. On or before January 31, 2007, you will be
granted a performance restricted share award for 40,000 shares of Polaris common stock (the “2007
Performance Restricted Share Award”). The 2007 Performance Restricted Share Award will be issued
in accordance with and subject to the terms and conditions of the Polaris Industries Inc.
Restricted Stock Plan (the “Restricted Stock Plan”) and the form of performance restricted share
award attached as Exhibit B hereto. The 2007 Performance Restricted Share Award is intended to be
in lieu of any annual grants of restricted shares that might otherwise be awarded to you at the
time that Polaris awards restricted shares to other members of Polaris’ management group and in
lieu of any awards under the Polaris Industries Inc. Long Term Incentive Plan (“LTIP”) that might
otherwise be awarded to you at the time that Polaris makes awards under the LTIP to other members
of Polaris’ management team.
(e) Supplemental Perquisites. During the term of your employment hereunder, you will
participate in Polaris’ benefit programs and receive the perquisites made available by Polaris to
its executive officers, including without limitation, medical, dental and life insurance coverage,
financial planning and tax preparation services, 401(k) retirement savings plan and Supplemental
Executive Retirement Plan participation and a country club membership.
4. Change in Control Agreement
The Change in Control Agreement between you and Polaris dated April 1, 1998 is hereby ratified
and confirmed in its entirety.
5. Termination
(a) Termination of Agreement
(i) This Agreement and your employment hereunder may be terminated at any time by the
mutual written agreement of you and Polaris.
(ii) This Agreement and your employment hereunder may be terminated by Polaris for any
reason and at any time upon 30 days’ prior written notice to you.
(iii) You may resign your employment and terminate this Agreement without Good Reason
(as defined below) upon 30 days’ prior written notice to Polaris.
(iv) This Agreement and your employment hereunder will automatically terminate upon
your death or permanent disability as defined in Polaris’ long term disability plan then in
effect.
(v) This Agreement and your employment hereunder may be terminated by Polaris for Cause
(as defined below) immediately upon written notice to you.
(vi) This Agreement and your employment hereunder may be terminated by you for Good
Reason upon 30 days’ prior written notice from you to Polaris specifying such Good Reason,
provided that such notice is given within 120 days of such Good Reason; and provided further
that the events giving rise to such Good Reason shall not have been remedied as of the date
of such notice.
(b) Termination of Employment Upon Death or Disability. If your employment with
Polaris is terminated under Section 5(a)(iv) due to death or disability, then upon termination of
your employment:
(i) Polaris will pay to you or your beneficiaries, as appropriate, your Base Salary pro
rata through the date of termination, when such salary would customarily be paid;
(ii) Polaris will pay to you or your beneficiaries, as appropriate, an Annual Bonus for
the year of termination equal in amount to the Bonus Target Amount for such
year pro rated through the date of termination, which Annual Bonus would be payable at
the time that bonuses for the year of termination would customarily be paid;
(iii) If the effective date of such termination occurs before the payment of the Annual
Bonus for any preceding year has been paid to you, Polaris will pay to you or your
beneficiaries, as applicable, the amount of the Annual Bonus for such preceding year at the
time that bonuses are paid for such year to other executives of Polaris; and
(iv) Notwithstanding anything to the contrary in the applicable option or award
agreements, any outstanding stock options (including the 2007 Stock Option) or restricted
share awards (other than the 2007 Performance Restricted Share Award which shall vest in
accordance with its terms) awarded to you under the Stock Option Plan or the Restricted
Stock Plan shall vest immediately.
(c) Termination of Employment by Polaris for Cause or by You without Good Reason. If
your employment with Polaris is terminated by Polaris under Section 5(a)(v) for Cause, or by you
under Section 5(a)(iii) without Good Reason, then upon termination of your employment:
(i) Polaris will pay you your Base Salary pro rata through the date of termination,
when such salary would customarily be paid;
(ii) If the effective date of such termination occurs before the payment of the Annual
Bonus for any preceding year has been paid to you, Polaris will pay the amount of the Annual
Bonus for such preceding year at the time that bonuses are paid for such year to other
executives of Polaris;
(iii) Notwithstanding anything to the contrary in the applicable option or award
agreements, all of your theretofore outstanding stock options awarded to you under the Stock
Option Plan and unvested restricted share awards awarded to you under the Restricted Stock
Plan shall terminate immediately; and
(iv) You may purchase health insurance under the then existing health insurance plans
of Polaris in accordance with applicable government requirements, including COBRA.
(d) Termination of Employment by Polaris Without Cause or by You for Good Reason. If
your employment is terminated by Polaris under Section 5(a)(ii) without Cause or if your employment
with Polaris is terminated by you under Section 5(a)(vi) for Good Reason, then upon termination of
your employment:
(i) Polaris will pay to you your Base Salary pro rata through the date of termination,
when such salary would customarily be paid;
(ii) Polaris will pay to you within 45 days of the date of termination of employment,
in a lump sum less all applicable withholdings, an amount equal to the lesser of (A) 24
months of your then annual Base Salary, and (B) your then annual Base Salary for the
remainder of the Term following the effective date of termination;
(iii) Polaris will pay to you an Annual Bonus for the year of termination and for any
subsequent year remaining in the Term, each equal to the Bonus Target Amount for the year of
termination, which Annual Bonus or Annual Bonuses shall be payable at the time or times that
such Annual Bonus or Annual Bonuses would customarily be paid;
(iv) If the effective date of such termination occurs before payment of the Annual
Bonus for any preceding year has been paid to you, Polaris will pay you the amount of such
Annual Bonus for such preceding year at the time that bonuses are paid to other executives
of Polaris;
(v) Polaris will provide you with medical and dental insurance coverage substantially
the same as provided to other executives of Polaris for a period ending on the earlier of
(A) the second anniversary of the date of termination of your employment, (B) December 31,
2008, or (C) the date upon which you became employed by another employer; and
(vi) Notwithstanding anything to the contrary contained in the applicable option
agreement, any unvested stock options (including the 2007 Stock Options) awarded to you
under the Stock Option Plan that would, in accordance with their terms, otherwise vest on or
before the first anniversary of the date of termination of your employment shall vest
immediately and shall be exercisable by you during a period ending on the first anniversary
of the date of termination of your employment.
(vii) Notwithstanding anything to the contrary contained in an applicable award
agreement, any unvested restricted share awards awarded to you under the Restricted Stock
Plan (other than the 2007 Performance Restricted Share Award which shall vest in accordance
with its terms) that would otherwise vest on or before the first anniversary of the date of
termination of your employment shall vest immediately.
(e) Definitions. For purposes of this Agreement:
(i) “Cause” means (A) the willful and continued failure by you to substantially perform
your duties hereunder (other than any such failure resulting from incapacity due to physical
or mental illness) after a written demand for substantial performance has been delivered by
the Board of Directors of Polaris which specifically specifies the manner in which the Board
of Directors believes you have not substantially performed your duties; (B) the willful
engaging by you in gross negligence, illegal conduct or gross misconduct which is materially
and demonstrably injurious to Polaris; (C) you are convicted of, or enter a guilty or nolo
contendere plea with respect to, a felony; or (D) any other willful and material breach of
this Agreement by you that you have not remedied within a reasonable time after receipt of a
written notice from the Board of Directors of Polaris that specifically identifies such
breach.
For purposes of this paragraph, no act, or failure to act, on your part will be deemed
“willful” unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of Polaris.
(ii) “Good Reason” means any of (A) a material reduction or diminution of your title or
in the scope of your authority and responsibility as an executive of Polaris (other than
isolated, insubstantial actions not taken in bad faith and which are remedied by Polaris
upon notice to Polaris, or as temporarily required due to your illness or injury), (B) a
reduction in your base compensation; (C) Polaris requires your principal place of employment
to be other than at its principal executive offices; or (D) Polaris otherwise fails to
perform any of its material obligations to you.
(f) Waiver of Claims; Withholding. All amounts payable under this Agreement will be
net of any applicable requisite tax withholding and in lieu of any other rights or claims you may
have against Polaris including under the Change in Control Agreement referred to in Section 4
above, all of which such rights or claims you hereby waive.
All payments to be made under this Agreement will be less applicable withholding or
deductions.
6. Proprietary Information; Noncompetition.
(a) Proprietary Information. Except with the prior written permission of Polaris, you
agree that you will not, through the actual date of any termination of your employment with Polaris
and for a period of 60 months thereafter, disclose or use any Proprietary Information (as defined
below) of Polaris or any of its subsidiaries of which you become informed during your employment
with Polaris, whether or not developed by you, except as required by your duties to Polaris or any
of its subsidiaries. Proprietary Information means, as to Polaris or any of its subsidiaries,
business plans, operating plans, procedures or manuals, financial statements, projections or
reports, or other confidential information of the Company, excluding, however, (i) such information
which is then or later becomes generally available to the public other than through you; (ii) such
information which is received by you from a third party owing no obligation of confidentiality to
Polaris; and (iii) such information which has been or is later disclosed by Polaris to an unrelated
third party on a non-confidential basis. Information does not lose its Proprietary Information
status merely because it was known by other persons or entities or because it did not entirely
originate with Polaris. Upon termination of your employment with Polaris for any reason, you agree
to deliver to Polaris all materials (in whatever form or format) that include Proprietary
Information. You agree and understand that the Proprietary Information and all information
contained therein shall be at all times the property of Polaris. Further, upon termination of your
employment for any reason, you agree to make available to any person designated by Polaris or any
of its subsidiaries all information concerning pending or preceding transactions which may affect
the operation of Polaris or any of its subsidiaries about which you have knowledge.
(b) Noncompetition. It is mutually acknowledged that by virtue of your employment
hereunder, Polaris and its subsidiaries will divulge and make accessible to you, and you will
become possessed of, certain valuable and confidential information concerning the business and
operations of Polaris and its subsidiaries. Without limitation it is also specifically
acknowledged that great trust on the part of Polaris and its subsidiaries will reside in you
because your duties will include involvement in the management, promotion and development of
Polaris’ operations and business. Accordingly, it is necessary to enter into the following
protective agreements:
(i) You agree with Polaris and for the benefit of Polaris and its subsidiaries through
the actual date of termination of your employment, and for a period of two years thereafter,
you will not own or have any interest in and will not, on your behalf or on the behalf of
any third party, perform any services for, directly or indirectly, any person or entity (a
“Polaris Competitor”) which engages in a business that Polaris or any of its subsidiaries
conducts or contemplates conducting in the near future at the time of the termination of
your employment (each, a “Competitive Activity”), except that you may own up to 1% of the
outstanding securities of any corporation if such securities are registered under the
Securities Exchange Act of 1934, as amended and you may provide services for businesses of
Polaris Competitors that are not engaged in or provide goods or services to a Competitive
Activity.
(ii) You agree that during your employment with Polaris and for a period of two years
following the termination of such employment that you will not, either directly or
indirectly, on your own behalf or in the service or on behalf of others solicit, divert or
hire away, or in any manner attempt to solicit, divert or hire away any full-time employee
of Polaris or any of its subsidiaries, and whether or not such employment was pursuant to a
written or oral contract of employment and whether or not such employment was for a
determined period or was at-will.
7. Retirement; Continued Employment. Upon the completion of the Term, provided that
your employment with Polaris has not been terminated prior thereto, you will be eligible to retire
from Polaris for all purposes and eligible to participate in the benefit plans and receive the
perquisites described in Exhibit C hereto. Notwithstanding the forgoing, you and Polaris have
agreed that prior to the end of Term, if your employment at Polaris has not previously terminated,
you and Polaris will make a good faith effort to negotiate the terms of an agreement for your
continued employment with Polaris through December 31, 2011 in other than an executive officer
capacity in which you will provide services to Polaris with respect to such matters as to be
determined during such negotiations.
8. Miscellaneous. You understand and agree that a breach by you of any of the
provisions of this Agreement may cause Polaris or its subsidiaries irreparable injury and damage
which cannot be compensable by receipt of money damages. You, therefore, expressly agree that
Polaris and its subsidiaries shall be entitled, in addition to any other remedies legally available
to it, to injunctive and/or other equitable relief to prevent a breach of this Agreement or any
part hereof.
All notices under this Agreement shall be in writing and shall be deemed given if delivered by
hand or mailed by registered or certified mail, return receipt requested, to the party to receive
the same at the address set forth below or such other address as may have been furnished by proper
notice.
| Polaris: | Polaris Industries Inc. | |||
| ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ | ||||
| ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||||
| Attention: Secretary | ||||
| You: | ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| [Address] |
This Agreement is entered into in the State of Minnesota and shall be construed, interpreted
and enforced according to the statutes, rules of law and court decisions of the State of Minnesota.
The provisions of Sections 5, 6 and 8 will survive any termination of this Agreement.
This Agreement and the Change in Control Agreement constitute the entire understanding of the
parties hereto and supersede all prior understandings, whether written or oral, between the parties
with respect to your employment with Polaris.
Please sign and return a copy of this letter indicating that you accept our offer and
confirming the terms of your employment.
| Very truly yours, | ||
| Polaris Industries Inc. | ||
| /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | ||
| By ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | ||
| Chairman of the Board of Directors |
Accepted and Confirmed:
January 18, 2007
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
EXHIBIT C
RETIREMENT PERQUISITES
RETIREMENT PERQUISITES
Medical Insurance
and Physical Exams
(“Medical Benefits”)
|
Polaris will provide individual medical insurance through Blue Cross/Blue Shield or cash equivalent for eligible retirees and spouses. Full coverage is provided through age 64 then coverage coincides with Medicare B for age 65+. Details are outlined in the plan documents. Continued annual physicals at the Mayo Clinic for retired officer and spouse in accordance with the active officer benefit. | |
Dental Insurance
(“Dental Benefits”)
|
Dental insurance will be continued for the retiree and spouse at the same coverage level and with the same provider as an active Polaris employee. |
If you become employed by another employer and are eligible to receive Medical
Benefits or Dental Benefits under another employer-provided plan, the Medical
Benefits and Dental Benefits described herein shall be secondary to those provided
under such other plan.
Company Products
|
Continued use of Company products in accordance with the policy applicable to you as Chief Executive Officer. | |
Travel Arrangements/Company Airplane
|
Continued use of the Company’s travel agent for travel arrangements and use of the company airplane in accordance with the active officer benefit. | |
Secretarial Services
|
Secretarial services and reasonable office facilities will be provided at Company’s expense. |
For purposes of paragraph 3(f) of the Agreement, if at the time of your retirement
you are a “specified employee” (within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”)),
(i) you will not be permitted to use any Company products, the Company airplane or
the Company’s travel agent during the six-month period beginning on the date of
your separation from service (within the meaning of Section 409A of the Code), and
(ii) you must pay the cost of any secretarial services provided during the
six-month period beginning on the date of your separation from service and the
Company will reimburse you for the cost of any such services at the end of such
six-month period.