SEVERANCE, PROPRIETARY
INFORMATION
AND NONCOMPETITION AGREEMENT
THIS SEVERANCE,
PROPRIETARY INFORMATION AND NONCOMPETITION AGREEMENT (the “
Agreement ”), is made and entered into effective as of
September ___, 2008 between POLARIS INDUSTRIES INC., a Minnesota
corporation (the “ Company ” or “
Polaris ”), and Scott W. Wine (the “
Employee ”).
WHEREAS, Employee
is accepting employment as Chief Executive Officer of the Company;
and
WHEREAS, as an
inducement to accept employment and to enhance the loyalty and
performance of Employee with the Company, the Company desires to
provide the Employee with certain compensation and benefits in the
event a termination of employment under the circumstances set forth
herein. Additionally, as a condition of employment, Employee has
agreed to enter into a proprietary information and noncompetition
covenant in favor of the Company.
NOW, THEREFORE, in
consideration of the mutual premises and agreements set forth
herein, the parties hereby agree as follows:
1.
Definitions . As used in this Agreement, these terms shall
have the following meanings:
(a)
Cause . For purposes of this Agreement only,
“Cause” means (i) the willful and continued or
repeated failure by Employee to substantially perform his duties as
Chief Executive Officer of the Company (other than as a result of
incapacity due to physical or mental illness) after written demand
for substantial performance has been delivered by the Board of
Directors of Polaris which specifically identifies the manner in
which Employee has failed to substantially perform his duties;
(ii) Employee engages in gross negligence, illegal conduct or
gross misconduct which is material and demonstrably injurious to
the Company; or (ii) Employee is convicted of, or enters a
plea of guilty or nolo contendere with respect to, a
felony.
(b)
Change in Control . A “Change in Control” shall
be deemed to have occurred if, prior to the Termination Date (as
defined below):
(i)
Any election has occurred of persons to the Board that causes at
least one-half of the Board to consist of persons other than
(x) persons who were members of the Board on January 1,
2008 and (y) persons who were nominated for election by the
Board as members of the Board at a time when more than one-half of
the members of the Board consisted of persons who were members of
the Board on January 1, 2008; provided, however, that any
person nominated for election by the Board at a time when at least
one-half of the members of the Board were persons described in
clauses (x) and/or (y) or by
persons who
were themselves nominated by such Board shall, for this purpose, be
deemed to have been nominated by a Board composed of persons
described in clause (x) (persons described or deemed described in
clauses (x) and/or (y) are referred to herein as “
Incumbent Directors ”); or
(ii)
The acquisition in one or more transactions, other than from the
Company, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “ Exchange Act ”)) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of a number of Company Voting
Securities equal to or greater than 35% of the Company Voting
Securities unless such acquisition has been designated by the
Incumbent Directors as an acquisition not constituting a Change in
Control for purposes hereof; or
(iii)
A liquidation or dissolution of the Company; or a reorganization,
merger or consolidation of the Company unless, following such
reorganization, merger or consolidation, the Company is the
surviving entity resulting from such reorganization, merger or
consolidation or at least one-half of the Board of Directors of the
entity resulting from such reorganization, merger or consolidation
consists of Incumbent Directors; or a sale or other disposition of
all or substantially all of the assets of the Company unless,
following such sale or disposition, at least one-half of the Board
of Directors of the transferee consists of Incumbent
Directors.
As used herein,
“ Company Voting Securities ” means the combined
voting power of all outstanding voting securities of the Company
entitled to vote generally in the election of the Board.
(c)
Change in Control Termination . “Change in Control
Termination” shall have the meaning set forth in
Paragraph 2 .
(d)
Good Reason . “Good Reason” means any of
(i) a material reduction or diminution of Employee’s
title or in the scope of Employee’s authority and
responsibility as an executive of Polaris (other than isolated,
insubstantial actions not taken in bad faith, which are remedied by
the Company upon notice to the Company); (ii) a material
reduction in Employee’s base compensation; (iii) a
material change in the geographic location of the Employee’s
principal place of employment other than as part of a change of the
Company’s principal executive offices; or (iv) the
Company otherwise fails to perform any of its material obligations
to Employee. The Employee must give the Company notice of the
existence of Good Reason during the 90-day period beginning on the
date of the initial existence of Good Reason. If the Company
remedies the condition giving rise to Good Reason within
30 days thereafter, Good Reason shall not exist and the
Employee will not be entitled to terminate employment for Good
Reason.
(e)
Incentive Compensation Award . “Incentive Compensation
Award” shall have the meaning set forth in the
LTIP.
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(f)
Incentive Compensation Award Period . “Incentive
Compensation Award Period” shall have the meaning set forth
in the LTIP.
(g)
LTIP . “LTIP” means the Polaris Industries Inc.
Long Term Incentive Plan.
(h)
Non-Change in Control Termination . “Non-Change in
Control Termination” shall have the meaning set forth in
Paragraph 3 .
(i)
Participant . “Participant” shall have the
meaning set forth in the LTIP.
(j)
Senior Executive Incentive Plan . “Senior Executive
Incentive Plan” means the Polaris Industries Inc. Senior
Executive Annual Incentive Plan.
(k)
Termination Date . “Termination Date” means the
date on which the Employee’s employment with the Company is
terminated.
2.
Termination upon Change in Control . If a Change in Control
occurs and, upon or within twenty-four (24) months after such
Change in Control, the Employee terminates his or her employment
for Good Reason or the Employee’s employment is terminated by
the Company for any reason other than for Cause (a “
Change in Control Termination ”), then the Employee
shall be entitled to the following severance benefits:
(a)
Termination Payment upon Change in Control . The Company
shall pay the Employee a lump sum cash payment, no later than
thirty (30) days after the Termination Date, in an amount
equal to (i) two times Employee’s average annual cash
compensation (including base salary and cash bonuses, but excluding
the award or exercise of stock options or stock grants) for the
three fiscal years (or lesser number of fiscal years if the
Employee’s employment has been of shorter duration) of the
Company immediately preceding the Change in Control Termination,
plus (ii) the amount of the Employee’s earned but unused
vacation time. If the Employee is a “specified
employee” (within the meaning of Section 409A of the
Internal Revenue Code and the regulations thereunder), and if the
amount otherwise payable to the Employee under this Paragraph 2(a)
during the six-month period beginning on the Termination Date
exceeds two times the limitation applicable as of the Termination
Date under Section 401(a)(17) of the Internal Revenue Code,
then such excess amount shall be paid at the end of such six-month
period.
(b)
Unpaid Annual Bonus Payment for Prior Fiscal Year upon
Termination upon Change in Control . If the Termination Date
occurs before a cash incentive award under the Senior Executive
Incentive Plan for work performed in any preceding fiscal year has
been paid, the Company shall, in addition to the payment to be made
pursuant to Paragraphs 2(a) and 2(c) , pay to the Employee
the amount of the Employee’s cash incentive award under the
Senior Executive Incentive Plan for such preceding fiscal year as
soon as it is determinable and such amount shall be included in the
calculation of the payment to be made pursuant to Paragraphs
2(a) and 2(c) .
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(c)
Annual Bonus Payment for Fiscal Year in which Change in Control
Termination Occurs . If the Change in Control Termination
occurs after June 30 of the fiscal year of the Company in
which the Termination Date occurs, the Company shall, in addition
to payments to be made pursuant to Paragraphs 2(a) and 2(b)
, pay to the Employee the average amount of the Employee’s
cash incentive award under the Senior Executive Incentive Plan for
the three fiscal years (or lesser number of fiscal years if the
Employee’s employment has been of shorter duration) of the
Company immediately preceding the Change in Control Termination
multiplied by a fraction, the numerator of which is the number of
full calendar months of the fiscal year of the Company prior to the
Termination Date, and the denominator of which is
twelve.
3.
Non-Change in Control Termination . Notwithstanding the
foregoing, if the Employee terminates his or her employment for
Good Reason or the Employee’s employment is terminated by the
Company for any reason other than for Cause (a “
Non-Change in Control Termination ”), and such
termination does not occur upon or within twenty-four
(24) months after a Change in Control such that a Change in
Control Termination shall have occurred, then the Employee shall,
subject to the conditions set forth in Paragraph 4 , be
entitled to the following severance benefits:
(a)
Non-Change in Control Termination Payment . The Company
shall pay the Employee (i) an amount equal to the sum of
(A) an amount equal to 100% of the Employee’s annual
base salary as of the Termination Date plus (B) the amount of
the cash incentive award that was paid to the Employee under the
Senior Executive Incentive Plan for work performed in the fiscal
year immediately preceding the fiscal year in which the Termination
Date occurs, which amount shall be payable over a period of one
year beginning on the Termination Date in periodic installments in
accordance with the Company’s normal payroll practices, and
(ii) a lump cash payment, no later than thirty (30) days
after the Termination Date, in an amount equal to the
Employee’s earned but unused vacation time. If the Employee
is a “specified employee” (within the meaning of
Section 409A of the Internal Revenue Code and the regulations
thereunder), and if the amount otherwise payable to the Employee
under this Paragraph 3(a) during the six-month period beginning on
the Termination Date exceeds two times the limitation applicable as
of the Termination Date under Section 401(a)(17) of the Internal
Revenue Code, then such excess amount shall be paid at the end of
such six-month period.
(b)
Unpaid Annual Bonus Payment for Prior Fiscal Year upon
Non-Change in Control Termination . If the Termination Date
occurs before a cash incentive award under the Senior Executive
Incentive Plan for work performed in any preceding fiscal year has
been paid, the Company shall, in addition to the payments to be
made pursuant to Paragraphs 3(a) and 3(c) , pay to the
Employee the amount of the Employee’s cash incentive award
under the Senior Executive Incentive Plan for such preceding fiscal
year as soon as it is determinable and such amount shall be
included in the calculation of the payment to be made pursuant to
Paragraphs 3(a) and 3(c) .
(c)
Annual Bonus Payment for Fiscal Year in which Non-Change in
Control Termination Occurs . If the Non- Change in Control
Termination occurs after June 30 of the fiscal year of the
Company in which the Termination Date occurs, the
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Company shall,
in addition to payments to be made pursuant to Paragraphs 3(a)
and 3(b) , pay to the Employee the amount of the cash incentive
award that was paid to the Employee under the Senior Executive
Incentive Plan for work performed in the fiscal year immediately
preceding the fiscal year in which the Termination Date occurs
multiplied by a fraction, the numerator of which is the number of
full calendar months of the fiscal year of the Company prior to the
Termination Date, and the denominator of which is
twelve.
(d)
LTIP Payment . If the Termination Date occurs before the
Employee receives payment of an Incentive Compensation Award, the
Employee shall receive payment with respect to such Incentive
Compensation Award, in the same form and at the same time as would
have otherwise been payable to him or her as a Participant in the
LTIP (notwithstanding the provisions of Section 11 of the
LTIP) had he or she remained employed by the Company through the
end of the Incentive Compensation Award Period applicable to such
Incentive Compensation Award and had he or she been employed on the
date on which such Incentive Compensation Award is paid. The amount
payable to the Employee with respect to such Incentive Compensation
Award pursuant to this Paragraph 3 shall be equal to
the amount that would otherwise have been payable to the Employee
with respect to such Incentive Compensation Award had the Employee
remained continuously employed by the Company through the end of
the Incentive Compensation Award Period and had he or she been
employed on the date on which such Incentive Compensation Award is
paid, multiplied by a fraction, the numerator of which is the
number of full calendar years of the Incentive Compensation Award
Period prior to the Termination Date, and the denominator of which
is three.
(e)
COBRA Premium . If the Employee elects to receive COBRA
benefits upon termination the Company shall pay the premium for
coverage of the Employee and the Employee’s eligible spouse
and/or dependents under the Company’s group health plan(s)
pursuant to the Consolidated Omnibus Budget Reconciliation Act for
the one-year period beginning on the Termination Date.
(f)
Outplacement Counseling . The Company shall provide the
Employee with reasonable executive outplacement services, in
accordance with Company policy for senior executives as in effect
on the Termination Date.
4.
Condition to Receipt of Severance Benefits under Paragraphs 2
and 3 . As a condition to receiving any severance benefits in
connection with a Change in Control Termination under
Paragraph 2 or in connection with a Non-Change in
Control Termination under Paragraph 3 , the Employee
shall execute a general waiver and release (the “ Waiver
and Release ”) in substantially the form attached hereto
as Exhibit A . The Waiver and Release shall become
effective in accordance with the rescission provisions set forth
therein.
5.
Benefits in Lieu of Severance Pay .
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