Document:

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                                                                   EXHIBIT 10.16

                                     FORM OF
                                CHANGE OF CONTROL
                               SEVERANCE AGREEMENT

      This Agreement (this "AGREEMENT"), dated as of June 14, 2004, is entered
into by and between CHRONIMED INC., a Minnesota corporation ("COMPANY"), and
____________________ ("EMPLOYEE").

      WHEREAS, Company, as a publicly held corporation, recognizes the
possibility that a Change in Control (as defined in Section 4 below) may occur
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of Employee in the
performance of Employee's duties to the detriment of Company and its
shareholders; and

      WHEREAS, Employee is willing to remain in the employ of Company upon the
understanding that Company will provide income security if, in the circumstances
described below, Employee ceases to be employed by Company or its successor upon
or during a period of time after a Change in Control; and

      WHEREAS, it is in the best interests of Company and its shareholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Employee, to their assigned duties without distraction.

      NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed as follows:

      1. OFFER TO BE MADE TO EMPLOYEE UPON A CHANGE OF CONTROL. In the event a
Change of Control occurs or is agreed to by Company, Company or the Surviving
Entity shall either (i) offer to Employee a position with Company or the
Surviving Entity after the Change of Control, or (ii) advise ("TERMINATION
ADVICE") Employee that there will not be a position for Employee after the
Change of Control and that Employee will be terminated by a specified date.
Where a position is offered to Employee, the offer (the "OFFER") shall specify
(a) the entity (the "EMPLOYER") that will employ Employee after the Change of
Control, (b) the title, authority, duties and responsibilities that Employee
will have, (c) the base salary, (d) the terms of any incentive compensation,
bonus and stock option opportunities, (e) employee benefit plans, programs and
policies then in effect which will apply to Employee and (f) the terms of the
non-competition agreement, which shall terminate one year after the termination
of employment with Company, the Surviving Entity and their affiliates and
related entities (the "COMPANY AFFILIATES"), and confidentiality agreement to be
entered into by Employee. The Offer or Termination Advice will be provided to
Employee no later than thirty (30) days after the Change of Control Date, and
may be provided in advance of the Change of Control Date where feasible.

      Where an Offer is extended, Employee shall have thirty (30) days to
consider and discuss the Offer. Employee may accept or decline the Offer in
Employee's sole discretion. If Employee declines the Offer, Employee shall be
entitled to receive the Severance Benefits effective upon termination of
Employee's employment with Company, the Surviving Entity and the Company
Affiliates ("EMPLOYMENT TERMINATION"). If Employee accepts the Offer, Employee
shall be protected under this Agreement as provided in Section 2 for a period of
one year after the Change of Control.

      If Employee receives Termination Advice, Employee shall be entitled to
receive the Severance Benefits effective upon Employment Termination.

      2. ONE YEAR PERIOD AFTER OFFER. If Employee accepts an Offer, then, during
the one year period commencing on the date Employee begins performing services
in accordance with the Offer, if (i) the Employer terminates Employee's
employment without cause, (ii) Employee terminates Employee's employment for
Good Reason, or (iii) Company delivers a notice of termination of this Agreement
or fails to assign this Agreement to a successor employer, then Employee shall
be entitled to receive the Severance Benefits.

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      "GOOD REASON" means (for purposes of this Agreement) :

      a.    Action by the Employer that results in the material diminution of
            Employee's position, authority, duties or responsibilities as set
            forth in the Offer absent Employee's written consent;

      b.    Employer's assignment to Employee of duties inconsistent with
            Employee's position as set forth in the Offer absent Employee's
            written consent;

      c.    Reduction in Employee's salary or material reduction in Employee's
            bonus, long term compensation, retirement or welfare benefits as set
            forth in the Offer absent Employee's written consent; or

      d.    Except as set forth in the Offer or agreed to in writing by
            Employee, Employer requiring that Employee maintain Employee's home
            or principal place of business outside the Minneapolis/St. Paul
            metropolitan area.

      3. SEVERANCE BENEFITS. In the event that Employee is entitled to severance
pursuant to the foregoing provisions, then Employee shall receive (in lieu of
any severance under any other plan, policy or other arrangement for the benefit
of Employee or for the Employer's employees generally) the following payments
and benefits (the "SEVERANCE BENEFITS") effective upon the expiration of the
rescission period appearing in the Release (as described in Section 5) signed by
Employee:

      i.    Employee shall receive regular pay through the date of Employment
            Termination (the "TERMINATION DATE"), including pro-rated bonus
            earned for the partial year, if any;

      ii.   Employee shall receive payments equal to twelve (12) months of
            Employee's then current annualized salary, payable monthly, plus an
            amount equal to the average of any bonus or incentive compensation
            paid or payable to Employee for the two most recent fiscal years,
            payable in equal monthly installments; and

      iii.  All unvested stock options held by Employee shall immediately vest.

      Other than the Severance Benefits identified above, Company shall have no
obligation past the Termination Date to provide Employee with severance payments
or employee benefits except for (a) benefits generally payable to terminated
employees under 401(k) plans, qualified benefit plans, and other employee
benefit plans and (b) as may be mandated by state or federal benefits
continuation laws.

      4. CHANGE OF CONTROL. For purposes of this Agreement, "CHANGE IN CONTROL"
shall be defined as follows:

      A.    When, subsequent to the effective date of this Agreement, any
            "person" as defined in Section 3(a)(9) of the Securities Exchange
            Act of 1934, as amended (the "SECURITIES EXCHANGE ACT"), as used in
            Sections 13(d) and 14(d) thereof, including a "group" as defined in
            Section 13(d) of the Securities Exchange Act, but excluding Company
            or any subsidiary or parent or any employee benefit plan sponsored
            or maintained by Company or any subsidiary or parent (including any
            trustee of such plan acting as trustee), directly or indirectly,
            becomes the "beneficial owner" (as defined in Rule 13d-3 under the
            Securities Exchange Act, as amended from time to time), of
            securities of Company representing greater than 50 (fifty) percent
            of the combined voting power of Company's then outstanding
            securities; or

      B.    When, subsequent to the effective date of this Agreement, the
            individuals who, at the beginning of such period, constitute the
            Board ("INCUMBENT DIRECTORS") cease for any reason other than

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            death to constitute at least a majority thereof; provided, however,
            that a director who was not a director at the beginning of this
            period will be deemed to have satisfied the definition of "Incumbent
            Director" if such director was elected by, or with the approval of,
            at least 60% (sixty percent) of the directors who then qualified as
            Incumbent Directors; or

      C.    Any sale, lease, exchange or other transfer (in one transaction or a
            series of related transactions) of all or substantially all of the
            assets of Company or the approval by the shareholders of Company of
            any such transaction, whichever first occurs, or the adoption of any
            plan or proposal for the liquidation or dissolution of Company.

      For purposes of this Agreement, the "CHANGE OF CONTROL DATE" shall mean
the first date on which an event constituting a Change of Control occurs.

      For purposes of this Agreement, the "SURVIVING ENTITY" shall mean Company
or its successor, or the parent of Company or its successor if Company or its
successor becomes a subsidiary of another entity as a result of a Change in
Control.

      5. RELEASE OF CLAIMS. Employee acknowledges that payment of Severance
Benefits under this Agreement is conditioned upon execution of a General Release
in the form attached as Exhibit A before the end of the thirty (30) consecutive
day period which starts on the effective date of Employee's Employment
Termination. If Employee is eligible for and wishes to receive Severance
Benefits, Employee shall sign said General Release after Employee's last day of
employment.

      6.    NONDISCLOSURE.

      A.    Introduction. Employee acknowledges and agrees that Employee has
            been, is and will be employed as the [___________________] of
            Company, serves as director, board member and/or officer of several
            other the Company Affiliates, and in Employee's executive role has
            been, is and will be privy to confidential and proprietary
            information relating to Company and the Company Affiliates. In light
            of the foregoing, Employee agrees to hold in a fiduciary capacity
            and keep confidential certain information relating to Company and
            the Company Affiliates, as set forth in this Section 6.

      B.    Nondisclosure of Attorney-Client Communications and Work Product.
            Employee acknowledges and agrees that during the term of Employee's
            employment, Employee has been, is and will be exposed to or has had,
            has and will have access to the confidential attorney-client
            communications of Company and the Company Affiliates and attorney
            work product relating to Company and the Company Affiliates.
            Employee hereby agrees that he shall not directly or indirectly use
            or disclose any information or document conveyed to Employee in the
            course of his employment that is a confidential attorney client
            communication or is attorney work product except to the attorneys of
            the applicable Company or the Company Affiliates or as required by a
            validly issued court order.

      C.    Acknowledgement of Access to Trade Secrets and Confidential
            Information. Employee acknowledges and agrees during his employment
            as the [______________] of Company and in Employee's capacity as an
            officer, director, and/or board member of other Company Affiliates,
            Employee was, is and will be intimately involved in developing
            business strategy and planning for Company and the Company
            Affiliates, and was, is and will be provided or had, has and will
            have access to Trade Secrets and Confidential Information of Company
            and the Company Affiliates, including but not limited to present and
            future operations of Company and the Company Affiliates, their
            employees, customers, distributors, and suppliers, marketing,
            pricing and bidding strategies, general financial information and
            the methods used by Company and the Company Affiliates and their
            respective employees. Employee acknowledges and agrees that

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            such information has been developed or obtained by Company and the
            Company Affiliates by the investment of significant time, effort and
            expense, and that such information is a valuable, special and unique
            asset of Company and the Company Affiliates which provides them with
            a significant competitive advantage. Employee further understands
            and acknowledges that such information is proprietary to Company and
            the Company Affiliates and that, if used, disclosed or otherwise
            exploited by Employee in contravention of this Agreement, would
            seriously, adversely and irreparably affect the business of Company
            and the Company Affiliates.

      D.    Nondisclosure of Trade Secrets. Employee hereby agrees that Employee
            shall not directly or indirectly use or disclose any Trade Secret of
            Company or the Company Affiliates for so long as such information
            remains a Trade Secret. As used herein, a "TRADE SECRET" includes,
            but is not limited to, any technical or non-technical data, a
            formula, a pattern, a compilation, a program, a device, a method, a
            technique, a drawing, a process, financial data, financial plans,
            product plans, or a list of actual or potential customers or
            suppliers which: (i) derives economic value, actual or potential
            from not being generally known to, and not being readily
            ascertainable by proper means by, other persons who can obtain
            economic value from its disclosure or use; (ii) is the subject of
            reasonable efforts by Company or any Company Affiliate to maintain
            its secrecy; and (iii) is not otherwise in the public domain.

      E.    Nondisclosure of Confidential Information. In addition to the
            foregoing, and not in limitation thereof, Employee agrees that for a
            period of 12 months after the Termination Date, Employee shall hold
            in a fiduciary capacity for the benefit of Company and each of the
            Company Affiliates and shall not directly or indirectly use or
            disclose any Confidential Information that Employee may have
            acquired (whether or not developed or compiled by Employee and
            whether or not Employee was authorized to have access to such
            information) during the term of, in the course of or as a result of
            Employee's employment by or in the performance of Employee's duties
            for Company or any Company Affiliate. The term "CONFIDENTIAL
            INFORMATION" as used in this Agreement means any secret,
            confidential or proprietary information of Company or any Company
            Affiliate not otherwise included in the definition of "TRADE
            SECRETS" above. The term "CONFIDENTIAL INFORMATION" does not include
            information that has become generally available to the public
            (unless Employee is aware that the information has been made public
            in contravention of a contractual, statutory or fiduciary duty).

      F.    Remedies Not Exclusive. Employee hereby acknowledges and agrees that
            the prohibitions against disclosure of Confidential Information or
            Trade Secrets recited herein are in addition to, and not in lieu of,
            any rights or remedies that Company or any Company Affiliate may
            have available pursuant to the laws of any jurisdiction or common
            law or judicial precedent, to prevent the disclosure of trade
            secrets or proprietary information, and the enforcement by Company
            or any Company Affiliate of their rights and remedies pursuant to
            this Agreement shall not be construed as a waiver of any other
            rights or available remedies that they may possess in law or equity
            absent this Agreement.

      G.    Severability. In the event that any provision of this Section 6
            should be held to be invalid or unenforceable, each and all of the
            other provisions of this Section 6 shall remain in full force and
            effect. If any provision of this Section 6 is found to be invalid or
            unenforceable, such provision shall be modified as necessary to
            permit this Section 6 to be upheld and enforced to the maximum
            extent permitted by law.

      7.    NONSOLICITATION.

      A.    Nonsolicitation of Employees. Employee covenants and agrees that,
            for a period of 12 months following the Termination Date, Employee
            shall not solicit, or take away, or attempt to solicit or take away
            or hire, any person who either is an employee of Company or any
            Company Affiliate

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            as of the Termination Date or who was an employee or independent
            contractor of Company or any Company Affiliate at any time during
            the six-month period immediately preceding the Termination Date,
            either on Employee's behalf or on behalf of any other individual or
            entity.

      B.    Nonsolicitation of Suppliers, Customers and Business Partners.
            Employee covenants and agrees that, for a period of 12 months
            following the Termination Date, Employee shall not solicit, call
            upon, divert or take away, or attempt to solicit, call upon, divert
            or take away, for the purpose of competing with Company or any
            Company Affiliate, any supplier or customer of Company or any
            Company Affiliate with whom Employee had any contact while employed
            by the Company or any Company Affiliate.

      C.    Equitable Relief. Employee acknowledges that the services rendered
            by Employee to Company and the Company Affiliates have been of a
            special, unique, unusual and extraordinary character, which gives
            them a peculiar value, the loss of which cannot reasonably or
            adequately be compensated in damages in an action at law, and that a
            breach by Employee of any of the provisions contained in this
            Agreement shall cause Company and the Company Affiliates irreparable
            injury and damage. Employee further acknowledges that Employee
            possesses confidential and proprietary information regarding Company
            and the Company Affiliates and that any material breach of the
            provisions of this Agreement would be extremely detrimental to
            Company and the Company Affiliates. By reason thereof, Employee
            agrees that Company and the Company Affiliates shall be entitled, in
            addition to any other remedies they may have under this Agreement or
            otherwise, to injunctive and other equitable relief to prevent or
            curtail any breach of this Agreement by Employee; provided, however,
            that no recital in this Agreement of a specific legal or equitable
            remedy shall be construed as a waiver or prohibition against the
            pursuing of other legal or equitable remedies in the event of a
            breach.

      D.    Severability. In the event that any provision of this Section 7
            should be held to be invalid or unenforceable, each and all of the
            other provisions of this Section 7 shall remain in full force and
            effect. If any provision of this Section 7 is found to be invalid or
            unenforceable, such provision shall be modified as necessary to
            permit this Section 7 to be upheld and enforced to the maximum
            extent permitted by law.

      8.    TERM. This Agreement shall commence on June 14, 2004 and, unless a
Change of Control shall occur on or before June 14, 2005, shall terminate on
June 14, 2005.

      9.    DISPUTE RESOLUTION. Except with respect to disputes related to
Section 6 and Section 7 of this Agreement, Company and Employee agree that prior
to commencing any legal action arising out of a dispute over provisions in this
Agreement, the parties shall first negotiate for a period of not less than 30
days in an effort to resolve the dispute. If these efforts are not successful,
then the parties shall submit to non-binding mediation conducted by an
independent third-party mediator in an effort to resolve the dispute, provided
that such mediation must be completed with in 60 days after the date on which it
commences. Thereafter, if the dispute remains unresolved, either party may
commence legal action to resolve the dispute, it being understood that, if
mutually agreed, the parties may instead elect to submit the dispute to binding
arbitration.

      10.   NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to have
been given when mailed at any general or branch United States Post Office
enclosed in a certified postpaid envelope, return receipt requested, and
addressed to the address of the respective party stated below or to such changed
address as the party may have fixed by notice:

      If to Employee:

              _________________

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      If to Company:

            General Counsel
            Chronimed Inc.
            10900 Red Circle Drive
            Minnetonka, MN  55343

      Any notice of change of address shall only be effective, however, when
received.

      11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of,
and be binding upon, Company, its successors and assigns, including, without
limitation, any corporation which may acquire all or substantially all of
Company's assets and business or into which Company may be consolidated or
merged, and Employee, his heirs, executors, administrators and legal
representatives. Employee may assign his right to payment, but not his
obligations, under this Agreement.

      12. APPLICABLE LAW. This Agreement shall be governed, enforced and
construed under the laws of the State of Minnesota.

      13. OTHER AGREEMENTS. This Agreement supersedes all prior understandings
and agreements between the parties. It may not be amended orally, but only by a
writing signed by the parties hereto.

      14. NON-WAIVER. No delay or failure by either party in exercising any
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right.

      15. HEADINGS. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.

      16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

CHRONIMED INC.

By _______________________________________
       Its _______________________________

EMPLOYEE

_______________________________________

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                         EXHIBIT A TO CHANGE OF CONTROL
                               SEVERANCE AGREEMENT
                         (TO BE SIGNED AFTER EMPLOYEE'S
                             LAST DAY OF EMPLOYMENT)

                                 GENERAL RELEASE

      In exchange for the Severance Benefits set forth in the Change in Control
Severance Agreement I executed on _________________, 2004 ("Agreement") to which
this Exhibit A is attached and with respect to which I would not otherwise be
entitled I, __________________ ("Employee"), hereby enter into this General
Release ("Release") as required under the terms of the Agreement:

      1. Termination of Employment. Employee's employment with Chronimed Inc. or
its successor ended effective ________________.

      2. Complete Release. In return for the Severance Benefits provided for in
the Agreement, Employee agrees, on behalf of Employee and Employee's heirs,
spouse, representatives, administrators, and assigns, to release Chronimed Inc.
and its officers, agents, directors, employees, employee benefit plans, insurers
and representatives, both individually and in any representative capacity, any
affiliated companies, businesses or entities, any predecessors, successors,
parents, subsidiaries, divisions, and assigns, and all other persons and
entities from each and every legal claim or demand of any kind that Employee
ever had or might now have arising out of any action, conduct or decision taking
place during Employee's employment with Chronimed Inc. or any Company Affiliates
(as defined in the Agreement) or employment with any successor of Chronimed Inc.
or its affiliates, or arising out of Employee's separation from employment with
Chronimed Inc. or any Company Affiliates or any successor of Chronimed Inc. or
its affiliates, whether or not any such claim is known to Employee at the
present time.

      Employee understands that this Release is a full, final and complete
settlement and release of all Employee's claims, whether known or unknown,
including but not limited to any claims or rights Employee may have under the
Employment Retirement Income Security Act of 1974, 29 U.S.C. Section 1001 et
seq., the Minnesota Human Rights Act, Minn. Stat. Chapter 363, Title VII of the
Civil Rights Act of 1964, 42 U.S.C. Section 2000e, et seq., the Age
Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., the Americans
with Disabilities Act, 42 U.S.C. Section 12101, et seq., the Family and Medical
Leave Act, 29 U.S.C. Section 2601 et seq., the Minnesota Whistleblower Act,
Minn. Stat. Section 181.932, the Fair Labor Standards Act, 29 U.S.C. Section 201
et seq., the Equal Pay Act, 29 U.S.C. Section 206 et seq., the National Labor
Relations Act, 29 U.S.C. Section 1501 et seq., and any other federal, state, or
local laws and regulations or any executive orders governing employment.
Employee further understands that Employee is releasing any claims Employee may
have, whether known or unknown, for payment of compensation of any kind, fraud
or misrepresentation, breach of contract, promissory estoppel, wrongful or
constructive discharge, defamation, invasion of privacy, breach of covenant of
good faith and fair dealing, reprisal or retaliation, unjust enrichment,
negligent hiring, supervision and retention, intentional or negligent infliction
of emotional distress, and any other claims arising under the common law of any
state.

      Employee also agrees that if any claim Employee releases in this Release
is prosecuted by the EEOC or by any other party in Employee's name before any
court or administrative agency, Employee will waive any benefits Employee may
obtain through such prosecution and agrees not to take any award of money or
other damages from such suit.

      Notwithstanding the foregoing, this Release does not release any rights or
claims Employee may have under the Minnesota Human Rights Act or the Age
Discrimination in Employment Act which arise after Employee signs this Release
or which arise from acts occurring after Employee signs this Release. This
Release also does not release any rights under any 401k plan, defined benefit
plan, or other applicable benefit plans, any right existing by statute,
contract, or corporate bylaws to defense or indemnification for liability
incurred by Employee as a result of acts alleged to have been performed or not
performed while Employee was employed by Chronimed Inc. or its successor, and
any rights under the Agreement.

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      4. Employee's Right To Rescind Agreement. Employee understands that
Employee may rescind this Release within fifteen (15) calendar days of its
execution. To be effective, the rescission must be in writing, and delivered to
the General Counsel of Chronimed Inc. (or its successor, if Employee was
employed by a successor of Chronimed Inc.) either by hand or mail within the
15-day period. If delivered by mail, the rescission must be (1) postmarked
within the 15-day period; (2) properly addressed to said applicable General
Counsel; and (3) sent by certified mail return receipt requested.

      5. Period for Review and Consideration. Employee acknowledges that
Employee has been advised to obtain legal counsel before signing the Agreement
and Employee is hereby advised to seek legal counsel before signing this
Release. Employee also acknowledges that Employee has been given a period of at
least twenty-one (21) days to review and consider this Release before signing
it. Employee further understands that Employee is allowed to use as much of this
period as Employee wishes prior to signing this document. Employee did not sign
this document until after Employee's last day of employment with Chronimed Inc.
or its successor or any Company Affiliate.

      6. Miscellaneous.

      (a) Employee warrants and represents that Employee has made no sale,
assignment, or other transfer, or attempted sale, assignment, or other transfer,
of any of the claims released pursuant to this Release.

      (b) Employee covenants and agrees (i) that Employee waives any
reemployment rights with Chronimed Inc. or its successor or any Company
Affiliate and will not apply for reemployment with Chronimed Inc. or its
successor or any Company Affiliate in any capacity and (ii) that Employee shall
cooperate with Chronimed Inc., any Company Affiliate and each of their
respective successors and assigns in any pending or future matters, including
without limitation any threatened, pending or potential litigation or dispute,
governmental, regulatory or other investigation (including internal
investigations), or other dispute, in which Employee, by virtue of Employee's
prior employment with Chronimed Inc., any Company Affiliate or their respective
successors and assigns, has relevant knowledge, information, documents, or other
materials in any form or manner whatsoever; provided that (A) if anything more
than ten hours of services are to be provided hereunder, Employee shall, to the
extent permissible under applicable law, be paid reasonable compensation for the
services that Employee provides; (B) the provision of any services by Employee
shall be scheduled on a reasonable basis, giving full consideration to the
requirements of any commitments Employee then has; and (C) the requirement to
cooperate shall not be construed to influence any testimony that Employee may be
required to give in any dispute.

      (c) If there is any claim for loss of consortium, or any other similar
claim, arising out of or related to Employee's employment or separation of
employment with Chronimed Inc. or its successor or any Company Affiliate,
Employee will indemnify and hold Chronimed Inc. or its successor or any Company
Affiliate and any other adversely affected beneficiaries of this Release ("Other
Releasees") harmless from any liability, including costs and expenses (as well
as reasonable attorneys' fees) incurred by Chronimed Inc. or its successor or
any Company Affiliate and such Other Releasees as a result of any such claim.

      (d) Employee additionally understands and agrees that this Release is not
and shall not be construed to be an admission of liability of any kind on the
part of Chronimed Inc. or its successor or any Company Affiliate or any of the
Other Releasees.

      (e) This Release is the complete understanding between Employee and
Chronimed Inc. with respect to the subject matter of this Release and supersedes
all prior agreements relating to the same subject matter. Employee has not
relied upon any representations, promises, or agreements of any kind except
those set forth in the Agreement in signing this Release.

      (f) In the event that any provision of this Release should be held to be
invalid or unenforceable, each and all of the other provisions of this Release
shall remain in full force and effect. If any provision of this Release is found
to be invalid or unenforceable, such provision shall be modified as necessary to
permit this Release to be

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upheld and enforced to the maximum extent permitted by law.

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      7. Signature. By Employee's signature below, Employee acknowledges that
Employee has been provided full opportunity to review and reflect on the terms
of this Release and to seek the advice of legal counsel of choice if Employee so
chooses. Employee fully understands and accepts the terms of the Agreement,
including but not limited to this Release, and Employee represents and agrees
that Employee's signature is freely, voluntarily, and knowingly given.

Dated this _____ day of __________, 200_.

                          ____________________________
                             [Signature of Employee]

                                      E-10exv4w1

 

Exhibit 4.1

POLARIS INDUSTRIES INC.

EMPLOYEE STOCK PURCHASE PLAN

As Amended and Restated

Effective January 1, 1999

Reflecting Certain Corrections to Reform Plan Text

Made as of February 16, 2004

 

 

ARTICLE I – PURPOSE

	1.01	 	Purpose

          The Polaris Industries Inc. Employee Stock Purchase Plan (the “Plan”) is
intended to provide a method whereby employees of Polaris Industries Inc. and
its subsidiary corporations (the “Company”) will have an opportunity to acquire
a proprietary interest in the Company through the purchase of shares of the
common stock, par value $.01 per share (“Common Stock”) of the Company. It is
the intention of the Company to have the Plan qualify as an “employee stock
purchase plan” under section 423 of the Internal Revenue Code of 1986, as
amended (the “Code”). The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.

ARTICLE II — DEFINITIONS

	2.01	 	Base Pay

          “Base Pay” shall mean a participant’s wages, salary and other cash
remuneration from the Company. The term “Base Pay” is intended to coincide
with the definition of “Covered Compensation” as defined in the 401(k)
Retirement/Savings Plan of Polaris.

	2.02	 	Committee

          “Committee” shall mean the committee described in Article IX.

	2.03	 	Employee

          “Employee” shall mean any person who is customarily employed on a
full-time or part-time basis by the Company or a Participating Subsidiary and
is regularly scheduled to work more than twenty (20) hours per week.

	2.04	 	Fair Market Value

          “Fair Market Value” shall mean, as of any applicable date: (i) if the
Common Stock is listed on a national securities exchange or is authorized for
quotation on the National Association of Securities Dealers Inc.’s NASDAQ
National Market System (“NASDAQ/NMS”), the closing price, regular way, of the
Common Stock on such exchange or NASDAQ/NMS, as the case may be, or if no such
reported sale of the Common Stock shall have occurred on such date, on the next
preceding date on which there was such a reported sale; or (ii) if the Common
Stock is not listed for trading on a national securities exchange or authorized
for quotation on NASDAQ/NMS, the closing bid price as reported by the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”), or if
no such prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported; or (iii) if the Common Stock is
not listed for trading on a national securities exchange or authorized for
quotation

 

 

on NASDAQ, the last reported bid price published in the “pink sheets” or
displayed on the NASD Electronic Bulletin Board, as the case may be; or (iv) if
the Common Stock is not listed for trading on a national securities exchange,
or is not authorized for quotation on NASDAQ/NMS or NASDAQ, or is not published
in the “pink sheets” or displayed on the NASD Electronic Bulletin Board, the
Fair Market Value of the Common Stock as determined in good faith by the
Committee.

	2.05	 	Fund Account

          “Fund Account” shall mean the bookkeeping account established for each
participant to which the participant’s payroll deductions shall be credited.

	2.06	 	Investment Account

          “Investment Account” shall mean the bookkeeping account established for
each participant to which Common Stock purchased by the participant under the
Plan shall be credited.

	2.07	 	Participating Subsidiary

          “Participating Subsidiary” shall mean any corporation which (i) is a
“subsidiary corporation” of Polaris as that term is defined in section 424 of
the Code and (ii) is designated as a participating employer under the Plan by
the Board of Directors of the Company.

	2.08	 	Trustee

          “Trustee” shall mean the person(s) or institution designated by the Board
of Directors of the Company as trustee of the Plan, and any successors thereto.

ARTICLE III — ELIGIBILITY AND PARTICIPATION

	3.01	 	Initial Eligibility

          Each salaried Employee shall be eligible to participate in the Plan for
calendar months which commence on or after such salaried Employee’s date of
hire. Each hourly paid Employee shall be eligible to participate in the Plan
for calendar months which commence on or after the earlier of (i) the date on
which such hourly Employee completes 480 Hours of Service or (ii) the second
anniversary of such hourly Employee’s date of hire. For purposes of this
Section 3.01, the term “Hours of Service” shall mean “Hours of Service” as that
term is defined in the Polaris Industries, Inc. Employee Stock Ownership Plan.

	3.02	 	Restrictions on Participation

          Notwithstanding any provisions of the Plan to the contrary, no Employee
shall be granted an option under the Plan:

2

 

               (a) if, immediately after the grant, such Employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more
of the total combined voting power or value of all classes of stock of
the Company (for purposes of this paragraph, the rules of section 424(d)
of the Code shall apply in determining stock ownership of any Employee);
or

               (b) which permits his or her rights to purchase stock under all Code
section 423 employee stock purchase plans of the Company to accrue at a
rate which exceeds $25,000 in fair market value of the stock (determined
at the time such option is granted) for each calendar year in which such
option is outstanding; or

               (c) if such Employee is an officer of the Company for purposes of
section 16 of the Securities Exchange Act of 1934, as amended, unless the
Committee, in its sole discretion, determines that such officers shall be
eligible to participate in the Plan.

	3.03	 	Commencement of Participation

          An eligible Employee may become a participant by completing an
authorization for a payroll deduction on the form provided by the Company and
filing it with the office of the Treasurer of the Company. Participation in
the Plan and payroll deductions for a participant shall commence on the first
day of the month following the date his or her authorization for a payroll
deduction is filed. A participant’s payroll deduction authorization shall
remain in effect unless amended or terminated by the participant as provided in
Section 4.03 or Article VII.

	3.04	 	Special Participation with Respect to Profit Sharing Distribution

          With the approval of the Committee, eligible Employees may be permitted to
participate in the Plan on a separate basis with respect to the participant’s
distribution from the Polaris Industries Inc. Profit Sharing Plan (in addition
to any level of participation pursuant to the eligible Employee’s regular
payroll deduction election) by completing an authorization for a deduction from
the profit sharing distribution on the form provided by the Company and filing
it with the office of the Treasurer of the Company on or before the date set
therefor by the Committee. References herein to “payroll” deductions shall be
deemed to include any amounts deducted from a participant’s profit sharing
distribution.

ARTICLE IV — PAYROLL DEDUCTIONS

	4.01	 	Amount of Deduction

          At the time a participant files his authorization for payroll deduction,
he or she shall elect to have deductions made from his or her Base Pay on each
payday during the time he or she is a participant computed as a percentage of
his Base Pay, not to exceed a maximum of ten percent.

3

 

	4.02	 	Participant’s Fund Account

          All payroll deductions made for a participant shall be credited to a Fund
Account established in his or her name under the Plan. A participant may not
make any separate cash payment into such account. No interest shall be
credited or paid on amounts credited to participants’ Fund Accounts under the
Plan.

	4.03	 	Changes in Payroll Deductions

          A participant may discontinue his participation in the Plan as provided in
Article VII, and may change his or her payroll deduction percentage as of the
first day of any calendar quarter.

ARTICLE V — OPTIONS

	5.01	 	Number of Options

          On the first day of each month, a participant shall be deemed to have been
granted an option to purchase a maximum number of whole shares of Common Stock
as can be purchased at the applicable option price (as described in Section
5.02) with payroll deductions credited to his or her Fund Account during such
month.

	5.02	 	Option Price

          The option price of Common Stock purchased with payroll deductions made
for a participant shall be 85% of the average of the Fair Market Values of the
Common Stock on the date such option is granted (as set forth in Section 5.01)
and the date such option is exercised (as set forth in Section 6.01).

	5.03	 	Option Period

          All options which shall be deemed granted under Section 5.01 of this Plan
as of the first day of a month shall be automatically exercised in accordance
with Section 6.01 unless sooner terminated in accordance with Article VII.

ARTICLE VI — EXERCISE OF OPTIONS

	6.01	 	Automatic Exercise

          Unless a participant sooner withdraws from the Plan as provided in Article
VII, his option for the purchase of Common Stock with payroll deductions
credited to his or her Fund Account will be deemed to have been exercised
automatically on the last day of each calendar month, for the purchase from the
Company of the number of whole shares of Common Stock which the accumulated
payroll deductions credited to his or her Fund Account at that time will
purchase at the applicable option price (but not in excess of the number of
shares for which options have been granted to the participant pursuant to

4

 

Section 5.01). Any excess amount credited to a participant’s Fund Account at
the end of the calendar year will be promptly returned to him or her.

	6.02	 	Fractional Shares

          The shares of Common Stock purchased by a participant upon the deemed
exercise of his option as specified above shall not include fractional shares.
Amounts credited to a participant’s Fund Account which would have been used to
purchase fractional shares shall remain credited to such Fund Account until
subsequently used to purchase shares or paid to the participant or his or her
beneficiary in accordance with Section 6.01 or Article VII.

	6.03	 	Investment Accounts

          All shares of Common Stock purchased under the Plan shall be maintained by
the Trustee in separate Investment Accounts for participants. All cash
dividends paid with respect to the shares so purchased shall be reinvested in
Common Stock and added to the shares held for a participant in his or her
Investment Account.

ARTICLE VII — WITHDRAWAL

	7.01	 	In General

          A participant may withdraw payroll deductions credited to his or her Fund
Account and the shares of Common Stock credited to his or her Investment
Account under the Plan at any time by giving written notice of withdrawal to
the Treasurer of the Company. All of the cash credited to his or her Fund
Account and not used to buy Common Stock shall be paid to the participant and
one or more stock certificates representing the shares of Common Stock credited
to his or her Investment Account shall be delivered to the participant promptly
after receipt of his or her notice of withdrawal, and no further payroll
deductions will be made from his or her pay except as provided in Section 7.02.
Upon such a withdrawal, all unexercised options of the participant shall
immediately terminate.

	7.02	 	Effect on Subsequent Participation

          If a participant withdraws from participation in the Plan as provided in
Section 7.01, such participant shall not be eligible to participate in the Plan
for a period of time following the date of such withdrawal. If the withdrawal
occurs during the period from January 1 to June 30 of a year, participation may
begin again no earlier than January 1 of the next year. If the withdrawal
occurs during the period from July 1 to December 31 of a year, participation
may begin again no earlier than July 1 of the next year.

	7.03	 	Termination of Employment

          Upon termination of the participant’s employment for any reason, including
retirement, his or her unexercised options shall immediately terminate and the
payroll deductions credited to his or her Fund Account and not used to buy
Common Stock will be

5

 

paid to him or her, and one or more stock certificates representing the shares
of Common Stock credited to his or her Investment Account will be delivered to
the participant, or, in the case of his or her death subsequent to the
termination of his employment, to the person or persons entitled thereto under
Section 10.01.

ARTICLE VIII — COMMON STOCK

	8.01	 	Maximum Number of Shares

          The maximum number of shares of Common Stock which the Company shall have
authority to issue under this Plan, subject to adjustment upon changes in
capitalization of the Company as provided in Section 10.04, shall be 750,000
shares. Such shares may be authorized but unissued shares or reacquired shares
of Common Stock, as the Company shall determine. If the total number of shares
for which options are exercised on any exercise date exceeds the maximum number
of shares available, the Company shall make a pro rata allocation of the shares
available for delivery and distribution in as nearly a uniform manner as shall
be practicable and as it shall determine to be equitable, and the balance of
payroll deductions credited to the Fund Account of each participant under the
Plan shall be returned to him or her as promptly as possible.

	8.02	 	Participant’s Interest in Option Stock

          The participant will have no interest in Common Stock covered by his or
her option until such option has been exercised.

	8.03	 	Registration of Stock

          Shares of Common Stock purchased under the Plan will be held by the
Trustee for the benefit of participants, until withdrawn by the participant in
accordance with Article VII. Upon such withdrawal, the shares shall be
registered in the name of the participant, or, if the participant so directs by
written notice to the Treasurer of the Company, in the names of the participant
and one such other person as may be designated by the participant, as joint
tenants with rights of survivorship or as tenants by the entireties, to the
extent permitted by applicable law.

	8.04	 	Restrictions on Exercise

          The Board of Directors of the Company may, in its discretion, require as
conditions to the exercise of any option that the shares of Common Stock
reserved for issuance upon the exercise of the option shall have been duly
listed, upon official notice of issuance, on a stock exchange, and that either:

          (a) a Registration Statement under the Securities Act of 1933, as amended,
with respect to said shares shall be effective, or

6

 

          (b) the participant shall have represented at the time of purchase, in
form and substance satisfactory to the Company, that it is his or her intention
to purchase the shares for investment and not for resale or distribution.

ARTICLE IX — ADMINISTRATION

	9.01	 	Appointment of Committee

          The Board of Directors of the Company shall appoint a Committee to
administer the Plan. No member of the Committee shall be eligible to purchase
Common Stock under the Plan.

	9.02	 	Authority of Committee

          Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its sole and absolute discretion to interpret and construe
any and all provisions of the Plan, to adopt rules and regulations for
administering the Plan, and to make all other determinations deemed necessary
or advisable for administering the Plan. The Committee’s determination on the
foregoing matters shall be conclusive.

	9.03	 	Rules Governing the Administration of the Committee

          The Board of Directors of the Company may from time to time appoint
members of the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee may select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall deem advisable and may hold
telephonic meetings. A majority of the members of the Committee shall
constitute the vote of a quorum. All determinations of the Committee shall be
made by a majority of its members present. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan, in the manner
and to the extent it shall deem desirable. Any decision or determination
reduced to writing and signed by a majority of the members of the Committee
shall be as fully effective as if it had been made by a majority vote at a
meeting duly called and held. The Committee may appoint a secretary and shall
make such rules and regulations for the conduct of its business as it shall
deem advisable.

ARTICLE X — MISCELLANEOUS

	10.01	 	Designation of Beneficiary

            A participant may file a written designation of a beneficiary who is to
receive any cash and shares of Common Stock credited to the participant’s
Investment and Fund Accounts upon the participant’s death. Such designation of
beneficiary may be changed by the participant at any time by written notice to
the Treasurer of the Company. Upon the death of a participant and upon receipt
by the Company of proof of identity and existence at the participant’s death of
a beneficiary validly designated by him under the Plan, the

7

 

Company shall deliver such cash and shares of Common Stock to such beneficiary.
In the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant’s death, the Company shall deliver such cash and shares of Common
Stock to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such cash and shares of
Common Stock to the spouse or to any one or more dependents of the participant
as the Company may designate. No beneficiary shall, prior to the death of the
participant by whom he has been designated, acquire any interest in the cash
and shares of Common Stock credited to the participant under the Plan.

	10.02	 	Transferability

            During a participant’s lifetime, his or her options can only be exercised
by him or her. Neither the amounts credited to a participant’s Fund Account
nor any rights with regard to the exercise of an option or to receive stock
under the Plan may be assigned, transferred, pledged, or otherwise disposed of
in any way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 7.01.

	10.03	 	Use of Funds

            All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose and the Company shall not be
obligated to segregate such amounts.

	10.04	 	Adjustment Upon Changes in Capitalization

          (a) If the outstanding shares of Common Stock are increased,
decreased, changed into, or been exchanged for a different number or kind
of shares or securities of the Company through reorganization, merger
recapitalization, reclassification, stock split, reverse stock split or
similar transaction, appropriate and proportionate adjustments may be
made by the Committee in the number and/or kind of shares which are
available for issuance under the Plan or subject to purchase under
outstanding options and on the option exercise price or prices applicable
to outstanding options. No adjustments shall be made for stock
dividends. For the purposes of this paragraph, any distribution of shares to shareholders in an amount aggregating less than twenty percent
(20%) of the outstanding shares shall be deemed a stock dividend.

          (b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving
corporation, or upon a sale of substantially all of the property or stock
of the Company to another corporation, the holder of each option then
outstanding under the Plan will thereafter be entitled to receive at the
next exercise date upon the exercise of such

8

 

option for each share as to which such option shall be exercised, as
nearly as reasonably may be determined, the cash, securities and/or
property which a holder of one share of the Common Stock was entitled to
receive upon and at the time of such transaction. The Board of Directors
of the Company shall take such steps in connection with such transactions
as the Board shall deem necessary to assure that the provisions of this
Section 10.04 shall thereafter be applicable, as nearly as reasonably may
be determined, in relation to the said cash, securities and/or property
as to which such holder of such option might thereafter be entitled to
receive.

	10.05	 	Amendment and Termination

            The Board of Directors of the Company shall have complete power and
authority to terminate or amend the Plan; provided, however, that the Board of
Directors of the Company shall not, without the approval of the stockholders of
the Company (i) increase the maximum number of shares which the Company may
purchase to provide participants with stock under the Plan; (ii) amend the
requirements as to the class of employees eligible to purchase stock under the
Plan; or (iii) permit the members of the Committee to purchase Common Stock
under the Plan. No termination, modification, or amendment of the Plan may,
without the consent of an Employee then having an option under the Plan to
purchase Common Stock, adversely affect the rights of such Employee under such
option. The Plan shall automatically terminate at the close of business on the
tenth anniversary of the effective date unless sooner terminated by action of
the Board of Directors.

	10.06	 	Effective Date

            The Plan shall become effective as of January 1, 1997, or such earlier
date as the Board of Directors may determine, subject to approval by the
holders of the majority of the Common Stock present and represented at a
special or annual meeting of the shareholders of the Company to be held within
12 months before or after the date the Plan is adopted by the Board of
Directors of the Company. If the Plan is not so approved, the Plan shall not
become effective.

	10.07	 	No Employment Rights

            The Plan does not, directly or indirectly, create any right for the
benefit of any employee or class of employees to purchase any shares under the
Plan, or create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company’s right to terminate, or otherwise
modify, an employee’s employment at any time.

	10.08	 	Costs and Expenses

            No brokerage commissions or fees shall be charged by the Company in
connection with the purchase of shares of Common Stock by participants under
the Plan. All costs and expenses incurred in administering the Plan shall be
borne by the Company.

9

 

	10.09	 	Effect of Plan

            The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of all, all successors of each Employee
participating in the Plan, the executors, administrators or trustees thereof,
heirs and legatees, and any receiver, trustee in bankruptcy or representative
of creditors of such Employee.

	10.10	 	Governing Law

            The law of the State of Minnesota, other than the conflict of laws
provisions of such law, shall govern all matters relating to this Plan except
to the extent it is superseded by the laws of the United States.

10

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