1
EXHIBIT 10(s)
July 11, 2001
Xx. Xxxxxx X. Xxxxxx
Polaris Industries Inc.
0000 Xxxxxxx 00
Xxxxxx, XX 00000
Re: Employment Agreement
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 supercedes, effective as of January 1, 2001, that letter
agreement between you and Polaris dated April 1, 1998, 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 and President 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. During the term of your employment 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 positions 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.
During the period of your employment, the Board of Directors of Polaris
will nominate you for election by the shareholders of Polaris to the Board of
Directors of Polaris.
2
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 2
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,
2001 and shall continue until December 31, 2005.
3. Compensation and Benefits
(a) Base Salary. During the term of your employment, you will initially
be paid a base annual salary ("Base Salary") in the amount of $600,000,
payable in accordance with Polaris' customary payroll policy, less all
applicable withholdings and deductions. Your Base Salary will be
reviewed twice during the term of your employment by the Compensation
Committee of the Board of Directors. The first review will be on or
before December 31, 2002 and the second review will be on or before
June 30, 2004. As the result of each review your Base Salary may, at
the discretion of the Board of Directors, be increased.
(b) Annual Cash Incentive Compensation. During the term of your
employment, you will either continue to participate as an "A" level
employee under Polaris' bonus/profit sharing arrangements or,
alternatively, Polaris may adopt a performance-based incentive plan for
one or more of its senior executives in which you will be a
participant. In either case, the Compensation Committee of the Board of
Directors will determine, in accordance with the applicable arrangement
or plan, on an annual basis the actual amount of any bonus, profit
sharing or performance-based incentive award ("Annual Bonus") to be
awarded to you. During the term of your employment you will be eligible
to receive a target annual payment under Polaris' bonus/profit sharing
arrangements or performance-based incentive plan of 200 percent of your
current Base Salary (it being understood that the Compensation
Committee may award incentive compensation in excess of such annual
target amount if the performance criteria established by the
Compensation Committee are exceeded for such year).
(c) Stock Option Grants Upon Signing This Agreement. On the date that
each of us signs and delivers this Agreement, you will be granted a
stock option to purchase 125,000 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 agreement evidencing the
125,000 share stock option will provide that such option will vest on
the third anniversary of the date of grant and will expire on the tenth
anniversary of the date of grant absent earlier expiration in
accordance with the terms of this Agreement due to the termination of
your employment. On the date that each of us signs and delivers this
Agreement you will also be granted a stock option to purchase 250,000
shares of Polaris common stock at an exercise price per share equal to
135% of the fair market value of a share of Polaris common stock on the
date of grant (the "Target Price"). The agreement evidencing the
250,000 share stock option will provide that (i) such option will
become exercisable ("vest") on that date upon which the fair market
value of Polaris common
3
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 3
stock meets or exceeds the Target Price, and (ii) if not then vested,
such option will terminate on December 31, 2005. Once vested, this
option will expire on the tenth anniversary of the date of grant,
absent earlier expiration in accordance with the terms of this
Agreement due to the termination of your employment. Each of these two
stock options will be granted under and subject to the terms and
conditions of the Polaris Industries Inc. 1995 Stock Option Plan or any
substitute or similar successor plan.
(d) Annual Stock Option Grants. During the term of your employment, you
shall, each calendar year as part of your annual fixed compensation,
receive stock option grants to purchase 50,000 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 "Annual
Option Grants"). Each Annual Option Grant shall be in accordance with
and subject to the terms and conditions of the Polaris Industries Inc.
1995 Stock Option Plan or any substitute or similar successor plan and
shall vest based upon the achievement of such goals or milestones as
determined by the Stock Award Compensation Committee of the Board of
Directors.
(e) Annual Performance Restricted Share Awards. During the term of your
employment, you shall, each calendar year as part of your annual fixed
compensation, receive performance restricted share awards for 25,000
shares of Polaris common stock (the "Annual Performance Restricted
Share Awards"). Annual Performance Restricted Share Awards shall be
issued in accordance with and subject to the terms and conditions of
the Polaris Industries Inc. 1996 Restricted Stock Plan or any
substitute or similar successor plan and the form of performance
restricted share award attached as Annex A hereto.
(f) Discretionary Stock Option Grants and Restricted Share Awards. In
addition to the Annual Stock Option Grants and the Annual Performance
Restricted Share Awards, the Stock Award Compensation Committee, upon
consultation with the Compensation Committee, will have the discretion
to award stock options and restricted shares in the event the
performance criteria established by the Compensation Committee are
exceeded.
(g) Supplemental Perquisites. During the term of your employment, 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.
4
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 4
5. Termination
(a) Termination of Agreement.
(i) This Agreement and your employment may be terminated at any
time by the mutual written agreement of you and Polaris.
(ii) This Agreement and your employment 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 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 may be terminated by
Polaris for Cause (as defined below) immediately upon written
notice to you.
(vi) This Agreement and your employment 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 amount equal to the average of the amount of the
Annual Bonuses paid or payable to you in respect of the two
calendar years preceding the year in which such termination takes
place pro rata through the date of termination, when 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 made
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 such bonuses are paid to other executives of
Polaris; and
(iv) Notwithstanding anything to the contrary in the applicable
option or award agreements, any outstanding stock options or
restricted share awards awarded to you under Polaris' stock
option or restricted share plans shall vest immediately.
5
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 5
(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 such awards are paid 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 and unvested restricted share awards 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 an amount equal to the average of
the amount of the Annual Bonuses paid or payable to you in
respect of the two calendar years preceding the year in which
such termination takes place pro rata through the date of
termination at the time bonuses for the year of termination are
customarily paid;
(iii) Polaris will pay to you, for a period of 24 months
following the effective date of termination of employment,
monthly payments equal to 1/12 of your annual Base Salary as of
the effective date of termination at the times such Base Salary
would customarily be paid;
(iv) Polaris will pay to you an amount equal to the average of
the Annual Bonuses paid or payable to you in respect of the two
calendar years preceding the year in which such termination takes
place, payable at the times the next two Annual Bonuses are
customarily paid;
(v) If the effective date of such termination occurs before
payment of the Annual Bonus for any preceding year has been made
to you, Polaris will pay you the amount of such Annual Bonus for
such preceding year at the time such bonuses are paid to other
executives of Polaris;
6
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 6
(vi) 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 and (B)
the date upon which you became employed by another employer; and
(vii) Any stock options or restricted share awards awarded to you
under Polaris' stock option or restricted share 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, in the case of stock options, shall
be exercisable by you during a period ending on the first
anniversary of the date of termination of your employment.
(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 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.
7
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 7
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 nonconfidential
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
8
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 8
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 Competitor
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. 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 compensible 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.
Neither this Agreement nor anything contained herein shall be construed
as conferring upon you or Polaris the right to your continued employment by
Polaris after December 31, 2005.
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.
0000 Xxxxxxx 00
Xxxxxx, Xxxxxxxxx 00000
Attention: Secretary
You: Xxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
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 7 will survive any termination of
this Agreement.
9
Xx. Xxxxxx X. Xxxxxx
July 11 2001
Page 9
This Agreement and the Change in Control Agreement constitute the
entire understanding of the parties hereto and supercede 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,
/s/ W. Xxxx Xxxxxx, Jr.
-----------------------------------------
W. Xxxx Xxxxxx, Jr.
Chairman
Accepted and Confirmed:
July 11, 2001
/s/ Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
