POLARIS INDUSTRIES PARTNERS L P
DEFS14A, 1994-11-21
MISCELLANEOUS TRANSPORTATION EQUIPMENT
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<PAGE>
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1994
    
                                                       REGISTRATION NO. 33-55769
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
   
                                AMENDMENT NO. 2
                                       TO
                                    FORM S-4
    
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                            POLARIS INDUSTRIES INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                   <C>                                   <C>
             MINNESOTA                                3700                               41-1790959
  (State or other Jurisdiction of         (Primary Standard Industrial                (I.R.S. Employer
   Incorporation or Organization)         Classification Code Number)              Identification Number)
</TABLE>

                             1225 HIGHWAY 169 NORTH
                             MINNEAPOLIS, MN 55441
                                 (612) 542-0500
    (Address, Including Zip Code, and Telephone Number, Including Area Code,
                  of Registrant's Principal Executive Offices)
                         ------------------------------

                               JOHN H. GRUNEWALD
                           EXECUTIVE VICE PRESIDENT,
                     CHIEF FINANCIAL OFFICER AND SECRETARY
                            POLARIS INDUSTRIES INC.
                             1225 HIGHWAY 169 NORTH
                             MINNEAPOLIS, MN 55441
                                 (612) 542-0500
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent For Service)
                         ------------------------------

                        Copies of all communications to:

<TABLE>
<S>                                 <C>                          <C>                          <C>
ANDRIS A. BALTINS                   GEORGE R. KROUSE, JR.        HILLEL M. BENNETT            BLAINE V. FOGG
KAPLAN, STRANGIS AND KAPLAN, P.A.   SIMPSON THACHER & BARTLETT   STROOCK & STROOCK & LAVAN    SKADDEN, ARPS, SLATE, MEAGHER & FLOM
90 SOUTH 7TH STREET                 425 LEXINGTON AVENUE         7 HANOVER SQUARE             919 THIRD AVENUE
MINNEAPOLIS, MN 55402               NEW YORK, NY 10017           NEW YORK, NY 10004           NEW YORK, NY 10022
(612) 375-1138                      (212) 455-2730               (212) 806-6014               (212) 735-3900
</TABLE>

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
                            ------------------------

    If  the  securities  being registered  on  this  form are  being  offered in
connection with the formation of a holding company and there is compliance  with
General Instruction G, check the following box. / /

    If  any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to  Rule 415 under the Securities Act  of
1933, check the following box. / /
                            ------------------------

                        CALCULATION OF REGISTRATION FEE

   
<TABLE>
<CAPTION>
                                                                 PROPOSED MAXIMUM
                                               PROPOSED MAXIMUM     AGGREGATE         AMOUNT OF
   TITLE OF EACH CLASS OF        AMOUNT TO      OFFERING PRICE    OFFERING PRICE    REGISTRATION
SECURITIES TO BE REGISTERED    BE REGISTERED     PER UNIT (1)          (1)               FEE
<S>                           <C>              <C>               <C>               <C>
Common Stock, $.01 par
 value......................    18,110,684         $35.313         $639,542,584      $224,337.21
</TABLE>
    

(1) Estimated  solely for  the purpose  of calculating  the registration  fee in
    accordance with Rule 457(f)  under the Securities Act  of 1933 based on  the
    average  of the high and  low prices of BACs  of Polaris Industries Partners
    L.P. on the American Stock Exchange on September 28, 1994.
                         ------------------------------

    THE REGISTRANT HEREBY  AMENDS THIS  REGISTRATION STATEMENT ON  SUCH DATE  OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE  A  FURTHER  AMENDMENT  WHICH SPECIFICALLY  STATES  THAT  THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE  IN ACCORDANCE WITH SECTION 8(A)  OF
THE  SECURITIES ACT  OF 1933 OR  UNTIL THIS REGISTRATION  STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION  8(A),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                     [LOGO]

                        POLARIS INDUSTRIES PARTNERS L.P.
                            POLARIS INDUSTRIES INC.

   
                                                               November 21, 1994
    

Dear BAC Holder:

   
    You  are cordially  invited to  attend a Special  Meeting of  the holders of
units of Beneficial Assignment of Class A Limited Partnership Interests ("BACs")
of Polaris Industries Partners  L.P. (the "Partnership") which  will be held  at
Holiday  Inn West, Highway 394, Minneapolis, Minnesota on Thursday, December 22,
1994 commencing at 9:00 a.m. local time.
    

    At the Special  Meeting, you will  vote on  a proposal --  sponsored by  the
senior  operating management of Polaris (the  "Sponsors") and recommended by EIP
Associates L.P., the General Partner -- to convert the Partnership to  corporate
form  (the "Conversion"). After the consummation of the Conversion, the business
currently conducted by the Partnership  will be conducted by Polaris  Industries
Inc.,  a newly formed  Minnesota corporation (the  "Corporation"), with the same
operating management, but without involvement by the General Partner.

    In the Conversion, each BAC will be exchanged for one share of Common  Stock
of  the Corporation.  BAC holders  and holders  of previously  granted rights to
acquire BACs will receive, in exchange for their BACs and upon exercise of  such
rights,  88.6%, and affiliates of the  General Partner will receive, in exchange
for their interests  in the General  Partner and its  affiliates, 11.4%, of  the
Corporation's   Common  Stock  to  be   outstanding  immediately  following  the
Conversion (assuming  exercise of  such rights).  This allocation  of  ownership
resulted  from  negotiations between  certain of  the  Sponsors and  the General
Partner. The Sponsors own approximately 9.1% of the outstanding BACs and have no
economic interest  in the  General  Partner. The  allocation was  determined  by
reference  to  the rights  of  the General  Partner  and BAC  holders  under the
agreement governing the Partnership, pursuant  to which the General Partner  and
its  affiliates  receive  20.8%  of  Partnership  distributions  and  an  annual
management fee  of  $500,000  and  are  entitled  to  reimbursement  of  certain
expenses.  Such distributions and  fees totalled approximately  $10.3 million in
1993 and will exceed $11 million  in 1994. These arrangements and payments  will
end upon consummation of the Conversion.

   
    Subject to legal and contractual requirements and the financial requirements
of  the business, the Sponsors intend  to recommend that the Corporation's Board
of Directors establish  an initial  cash dividend rate  of $0.15  per share  per
quarter,  and pay  three special  cash distributions,  each of  $1.92 per share,
payable during  each  of  the last  three  quarters  of 1995  (reduced,  if  the
Conversion is not consummated in 1994, to the extent that any cash distributions
declared  and  paid  by the  Partnership  after  January 1,  1995  exceed,  on a
quarterly basis, $0.15 per BAC). Thus, it is expected that BAC holders who  hold
Common  Stock from the date of the  Conversion through 1997 will receive a total
of $7.56 per share for the years 1995, 1996 and 1997 -- the amount per BAC  they
would  have  received  had  the  Conversion  not  occurred  and  the Partnership
maintained its existing cash distribution policy (i.e. $2.52 per BAC per annum).
    

   
    If the  Conversion  Proposal is  approved  by  BAC holders  at  the  Special
Meeting,  it is expected that  the Conversion will be  consummated by the end of
1994. In that case, assuming the  declaration by the Partnership of the  regular
quarterly  distribution in accordance with past  practice, BAC holders of record
on or about December 15, 1994  would receive the regular quarterly  distribution
of  $0.63 per BAC for the fourth quarter  of 1994 on or about February 15, 1995,
and there will be no further distributions by the Partnership to BAC holders.
    

    The General Partner and the Sponsors believe that the Conversion is fair  to
BAC  holders and recommend that BAC  holders approve the Conversion proposal. In
arriving at  their recommendation,  the General  Partner and  the Sponsors  gave
consideration  to a number  of factors including the  fairness opinions of Smith
Barney Inc. and Dillon, Read & Co.  Inc., each delivered to the Partnership  and
each  to  the effect  that, based  upon  the considerations  and subject  to the
assumptions and limitations set forth in their opinions, each of the  allocation
of  ownership between BAC holders and affiliates  of the General Partner and the
consideration to be received by  BAC holders in the  Conversion is fair, from  a
financial point of view, to BAC holders.
<PAGE>
    BAC  holders are  urged to  review carefully  the attached  Proxy Statement,
which contains a detailed description  of the proposed Conversion and  describes
certain  risk factors,  conflicts of interest  and other  considerations for BAC
holders. The Conversion  is subject  to the  approval of  BAC holders  described
below  and certain other conditions more fully set forth in the Proxy Statement,
including, among  others, the  receipt of  all necessary  government  approvals,
appraisal  rights  not  being  sought  with  respect  to  more  than  5%  of the
outstanding BACs, and the receipt of  certain tax opinions. Such conditions  may
be  waived  by the  Corporation  and/or the  General  Partner. In  addition, the
General Partner  has  the right  to  terminate  the agreement  relating  to  the
Conversion if it determines that as a result of any subsequent development, such
termination is necessary to discharge its fiduciary duties to BAC holders.

    It  is  important that  your  BACs be  represented  at the  Special Meeting.
Accordingly, whether or not you plan to attend the Special Meeting, please sign,
date and promptly return  the enclosed proxy card  in the postage-paid  envelope
that has been provided to you for your convenience. The Conversion Proposal will
require  (i) the approval of BAC holders  holding a majority of BACs outstanding
and (ii) the approval  of unaffiliated BAC holders  (BAC holders other than  the
Sponsors  and affiliates of the General Partner) holding a majority of BACs held
by them. Failure to forward a proxy or to vote in person at the Special  Meeting
will  have the same effect  as if a BAC holder  had voted against the Conversion
Proposal. BAC holders who do not vote for the Conversion Proposal and who follow
the procedures  described  in  the  Proxy Statement  are  entitled  to  exercise
appraisal rights.

    Because  of the significance of  the proposed Conversion, your participation
in the Special  Meeting, in  person or by  proxy, is  especially important.  THE
GENERAL PARTNER AND THE SPONSORS URGE YOU TO VOTE "FOR" THE CONVERSION PROPOSAL.

                                   Sincerely,

   
                 [LOGO]

     [LOGO]
Victor K. Atkins, Jr.                     W. Hall Wendel, Jr.
President, EIP Capital Corporation,       Chief Executive Officer, Polaris
Managing General Partner of EIP           Industries Capital Corporation, and
Associates L.P., the General Partner      Chairman of the Board and Chief
                                          Executive Officer, Polaris Industries
                                          Inc.

    

IF YOU HAVE ANY QUESTIONS CONCERNING THE CONVERSION OR NEED ASSISTANCE IN VOTING
YOUR BACS, PLEASE CALL
D.F.  KING & CO., INC.,  THE INFORMATION AGENT FOR  THE CONVERSION, TOLL FREE AT
1-800-488-8075.

                                       2
<PAGE>
   
                                     [LOGO]
                        POLARIS INDUSTRIES PARTNERS L.P.
    

   
                    NOTICE OF SPECIAL MEETING OF BAC HOLDERS
                        TO BE HELD ON DECEMBER 22, 1994
    

To the Holders of BACs of Polaris Industries Partners L.P.:

   
    NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
holders ("BAC Holders")  of units of  Beneficial Assignment of  Class A  Limited
Partnership  Interests ("BACs") of Polaris  Industries Partners L.P., a Delaware
limited partnership  (the "Partnership"),  will  be held  at Holiday  Inn  West,
Highway  394, Minneapolis,  Minnesota on December  22, 1994 at  9:00 a.m., local
time.
    

    At the  Special  Meeting,  BAC  Holders  will  vote  upon  a  proposal  (the
"Conversion  Proposal") that,  if approved and  implemented, will  result in the
conversion  of  the  Partnership  to  corporate  form  (the  "Conversion").  The
Conversion  will be accomplished by merging  a subsidiary partnership of Polaris
Industries Inc., a newly formed Minnesota corporation (the "Corporation"),  into
the  Partnership (the "Merger"). Upon consummation  of the Merger, each BAC will
be exchanged  for one  share of  common stock,  par value  $.01 per  share  (the
"Common  Stock"), of the Corporation. If the Conversion Proposal is approved and
the Conversion is effected, (i)  the Corporation will, directly and  indirectly,
own  100%  of the  Partnership and  will  continue to  conduct the  business and
operations  of  Polaris   Industries  L.P.  (the   "Operating  Partnership"   or
"Polaris"),  and (ii)  BAC Holders and  holders of previously  granted rights to
acquire BACs ("First Rights") will receive, in exchange for their BACs and  upon
exercise  of such First Rights, as the case may be, 88.6% of the Common Stock of
the Corporation, and affiliates of the General Partner will receive, in exchange
for their interests  in the General  Partner and its  affiliates, the  remaining
11.4%  of  the Common  Stock  of the  Corporation  (after giving  effect  to the
exercise of such First Rights).

    The Merger, Conversion and related matters  are more fully described in  the
attached  Proxy Statement/Prospectus,  which (together with  the annexes thereto
and the documents incorporated by reference therein) forms a part of this Notice
and is incorporated herein by reference.

   
    The Conversion Proposal will require (i) the approval of BAC Holders holding
a majority of BACs outstanding and (ii) the approval of unaffiliated BAC Holders
(BAC Holders other  than the  Sponsors and  affiliates of  the General  Partner)
holding a majority of BACs held by them. Only BAC Holders of record at the close
of  business on Monday, November 21, 1994 are  entitled to notice of and to vote
at the Special Meeting and at any adjournment or postponement thereof.
    

    You are  cordially invited  to attend  the Special  Meeting. If  you  cannot
attend,  please  sign and  date the  accompanying  form of  proxy and  return it
promptly in the enclosed envelope.  If you attend the  meeting, you may vote  in
person regardless of whether you have given your proxy. Any proxy may be revoked
at  any time before it  is exercised, as indicated  herein. Failure to forward a
proxy or to vote in person at the  Special Meeting will have the same effect  as
if a BAC Holder had voted against the Conversion Proposal.

                                          By Order of EIP Associates L.P., the
                                          General Partner
                                          Victor K. Atkins, Jr., President and
                                          Secretary, EIP Capital Corporation,
                                          Managing General Partner of the
                                          General Partner

   
November 21, 1994
    

YOUR  VOTE  IS  IMPORTANT. ACCORDINGLY,  YOU  ARE  URGED TO  COMPLETE,  SIGN AND
PROMPTLY RETURN  THE ACCOMPANYING  PROXY CARD  IN THE  ENVELOPE PROVIDED,  WHICH
REQUIRES  NO POSTAGE IF MAILED  IN THE UNITED STATES.  IF YOU HAVE ANY QUESTIONS
CONCERNING THE CONVERSION OR  NEED ASSISTANCE IN VOTING  YOUR BACS, PLEASE  CALL
D.F.  KING & CO., INC.,  THE INFORMATION AGENT FOR  THE CONVERSION, TOLL FREE AT
1-800-488-8075.
<PAGE>
INFORMATION   CONTAINED  HEREIN  IS  SUBJECT   TO  COMPLETION  OR  AMENDMENT.  A
REGISTRATION STATEMENT  RELATING TO  THESE SECURITIES  HAS BEEN  FILED WITH  THE
SECURITIES  AND EXCHANGE  COMMISSION. THESE SECURITIES  MAY NOT BE  SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR  TO THE TIME THE REGISTRATION STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE AN  OFFER  TO  SELL  OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN  ANY STATE IN WHICH SUCH OFFER,  SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROXY STATEMENT/PROSPECTUS
   
                                  SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1994
    

   
                                     [LOGO]

                       18,110,684 SHARES OF COMMON STOCK
    
   
    This Proxy Statement (which is also a Prospectus) relates to the issuance of
common stock,  par  value  $.01  per share  (the  "Common  Stock"),  of  Polaris
Industries Inc., a Minnesota corporation, which has been newly formed by certain
members  of  the  senior  operating  management  of  Polaris  Industries Capital
Corporation, a Delaware  corporation ("PICC").  PICC and  its affiliates  manage
Polaris  Industries L.P., a Delaware limited  partnership, 99% of which is owned
by Polaris Industries  Partners L.P.,  a Delaware limited  partnership. In  this
Proxy  Statement, Polaris Industries  Inc. is referred  to as the "Corporation,"
Polaris Industries Partners L.P. is referred  to as the "Partnership," PICC  and
Polaris   Industries  L.P.  collectively  are  referred  to  as  the  "Operating
Partnership," and the term  "Polaris" refers to the  business and operations  of
the  Operating Partnership. Other frequently  used capitalized terms are defined
in the Glossary of Defined Terms attached as Annex A to this Proxy Statement.
    
   
    This Proxy  Statement is  being  sent by  EIP  Associates L.P.,  a  Delaware
limited partnership (the "General Partner"), which is the general partner of the
Partnership, to the holders of units of Beneficial Assignment of Class A Limited
Partnership  Interests  in  the  Partnership  ("BACs")  in  connection  with the
solicitation by the General Partner of proxies (each, a "Proxy") to be voted  at
a  special meeting (the "Special Meeting") of holders of BACs ("BAC Holders") in
Minneapolis, Minnesota on Thursday, December 22, 1994 (the "Meeting Date"),  and
at  any adjournment or postponement thereof. At the Special Meeting, BAC Holders
will vote upon a  proposal (the "Conversion Proposal")  that, if approved,  will
result   in  the   conversion  of  the   Partnership  to   corporate  form  (the
"Conversion"). The  Conversion  will be  accomplished  by merging  a  subsidiary
partnership  of  the  Corporation  into  the  Partnership  (the  "Merger"). Upon
consummation of the Merger, each BAC will  be exchanged for one share of  Common
Stock  of  the  Corporation. If  the  Conversion  Proposal is  approved  and the
Conversion is effected, (i) the  Corporation will, directly and indirectly,  own
100% of the Partnership and will continue to conduct the business and operations
of  the Operating  Partnership, and  (ii) BAC Holders  and holders  of rights to
acquire BACs ("First Rights") previously  granted will receive, in exchange  for
their  BACs and upon exercise of such First Rights, as the case may be, 88.6% of
the Common Stock of the Corporation, and affiliates of the General Partner  will
receive,  in  exchange  for  their  interests in  the  General  Partner  and its
affiliates, the remaining 11.4%  of the Common Stock  of the Corporation,  after
giving effect to the exercise of such First Rights (the "Exchange Ratio").
    
    The  Conversion Proposal is sponsored by  the senior operating management of
the Operating Partnership (the "Sponsors") who own an aggregate of approximately
9.1% of  outstanding BACs  and who  have  no economic  interest in  the  General
Partner.  The  Exchange  Ratio was  determined  with reference  to  the existing
economic interests of the General Partner and BAC Holders referred to above  and
the  rights of the General  Partner under various provisions  of the amended and
restated partnership  agreement  governing  the  Partnership  (the  "Partnership
Agreement").  Currently, and for the foreseeable future, the General Partner and
its affiliates receive 20.8% of the Partnership's distributions and $500,000 per
year in management fees and are entitled to certain expense reimbursements  from
the  Partnership. These arrangements and payments  will end upon consummation of
the Conversion.
    The Sponsors and the General Partner  recommend that BAC holders vote  "FOR"
the  Conversion  Proposal for  the reasons  set forth  under "The  Conversion --
Reasons for the  Conversion" and  "-- Alternatives  to the  Conversion" in  this
Proxy Statement.
   
    Subject to legal and contractual requirements and the financial requirements
of  the business, the Sponsors intend  to recommend that the Corporation's Board
of Directors establish  an initial  cash dividend rate  of $0.15  per share  per
quarter,  and pay  three special  cash distributions,  each of  $1.92 per share,
payable during  each  of  the last  three  quarters  of 1995  (reduced,  if  the
Conversion is not consummated in 1994, to the extent that any cash distributions
declared  and  paid  by the  Partnership  after  January 1,  1995  exceed,  on a
quarterly basis,  $0.15 per  BAC) (the  "Proposed Distributions").  Thus, it  is
expected  that  BAC Holders  who retain  the  Common Stock  they receive  in the
Conversion through 1997 will receive  a total of $7.56  per share for the  years
1995,  1996 and 1997 -- the amount per  BAC that BAC Holders would have received
had the Conversion not occurred and the Partnership maintained its existing cash
distribution policy.
    
    THE GENERAL PARTNER AND THE SPONSORS BELIEVE THAT THE CONVERSION IS FAIR  TO
BAC HOLDERS AND RECOMMEND THAT BAC HOLDERS VOTE "FOR" THE CONVERSION PROPOSAL.

                                                        (CONTINUED ON NEXT PAGE)
                            ------------------------
NEITHER  THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES  COMMISSION
   NOR  HAS THE SECURITIES AND EXCHANGE  COMMISSION OR ANY STATE SECURITIES
       COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS  TRANSACTION
       OR  THE  ACCURACY  OR  ADEQUACY OF  THIS  PROXY  STATEMENT. ANY
                REPRESENTATION  TO  THE  CONTRARY  IS  A  CRIMINAL
                                    OFFENSE.
                            ------------------------

   
NOVEMBER 1994
    
<PAGE>
(COVER PAGE CONTINUED)

    The Conversion involves certain additional factors that should be considered
by all BAC Holders. The effects of the Conversion may differ for each BAC Holder
and   may  be   disadvantageous  to   some,  depending   upon  their  individual
circumstances  and  investment  objectives.  See  "Risk  Factors,  Conflicts  of
Interest  and  Other Considerations"  and "The  Conversion." In  particular, BAC
Holders should consider, among other factors described herein, that:

    - Because of the Conversion,  BAC Holders will  forego the potential  future
      tax  benefits associated with an investment  in a partnership (I.E. no tax
      paid at the Partnership level  on its taxable income) immediately,  rather
      than beginning after December 31, 1997.

   
    - The  General Partner may be  viewed as having a  conflict of interest with
      BAC Holders with respect to the determination of the Exchange Ratio in the
      Conversion, and the General Partner  will benefit from the elimination  of
      liability  of  the  General  Partner for  obligations  and  liabilities of
      Polaris  after  the  Conversion.  In   addition,  BAC  Holders  were   not
      represented  separately in establishing the  terms of the Conversion. Such
      representation might  have  caused  the  terms of  the  Conversion  to  be
      different in material respects from those described herein.
    

    - The  Corporation  is  under  no  legal  obligation  to  make  the Proposed
      Distributions  and  the  timing  and   amount  of  future  dividends   and
      distributions  will be at the discretion of  the Board of Directors of the
      Corporation and will depend, among  other things, on the future  after-tax
      earnings,   operations,  capital  requirements,   borrowing  capacity  and
      financial condition of the Corporation and general business conditions.

    - The Corporation expects to incur  indebtedness in excess of that  incurred
      by  the Partnership,  including indebtedness  to finance  the special cash
      distributions referred to above if such distributions are declared by  the
      Board  of Directors of the Corporation.  Incurrence of indebtedness by the
      Corporation  could  have  important  consequences  to  investors  in   the
      Corporation's securities. There can be no assurance that the Corporation's
      future   operating  results  will   be  sufficient  for   payment  of  the
      Corporation's indebtedness and other commitments.

    - Prior to the  Conversion there  will have been  no public  market for  the
      Common Stock. The Common Stock may trade at prices substantially below the
      historical  trading levels of BACs. If a large number of holders of Common
      Stock were to offer their  shares for sale immediately after  consummation
      of  the Conversion,  the market  price of  the Common  Stock could decline
      substantially  absent  a  corresponding  demand  for  Common  Stock   from
      institutional and retail investors.

    - All  costs and  expenses to be  incurred by the  Partnership in connection
      with the Conversion,  estimated to  be approximately $9  million, will  be
      paid  by the Partnership whether or  not the Conversion is consummated. An
      additional $2 million is  expected to be paid  by the Partnership only  if
      the Conversion is consummated.

    In addition to the factors noted above, an investment in Polaris (whether in
partnership  or corporate  form) is subject  to risks  associated with operating
conditions, competitive factors, economic conditions, seasonal factors, industry
conditions, regulatory developments and equity market conditions.

    The Conversion Proposal will require (i) the approval of BAC Holders holding
a majority of  the BACs outstanding  and (ii) the  approval of unaffiliated  BAC
Holders  (BAC  Holders other  than the  Sponsors and  affiliates of  the General
Partner) holding  a  majority  of BACs  held  by  them. See  "Voting  and  Proxy
Information."  Such approval  will bind  all BAC  Holders (other  than those who
exercise Appraisal Rights) regardless of whether  some fail to vote in favor  of
the  Conversion Proposal. See "Appraisal Rights."  The affiliates of the General
Partner and  members  of  the  senior  operating  management  of  the  Operating
Partnership,  who own  approximately 14% of  outstanding BACs  in the aggregate,
have advised the  Partnership that  they will vote  in favor  of the  Conversion
Proposal. Failure to forward a Proxy or to vote in person at the Special Meeting
will  have the same effect  as if a BAC Holder  had voted against the Conversion
Proposal.

   
    This Proxy Statement and the related form  of Proxy are first being sent  to
BAC Holders on or about November 21, 1994.
    

   
    The  Common  Stock  has been  approved  for  listing on  the  American Stock
Exchange and  the Pacific  Stock Exchange  under the  symbol "SNO",  subject  to
official notice of issuance.
    

                                       2
<PAGE>
    NO   PERSON  IS  AUTHORIZED   TO  GIVE  ANY  INFORMATION   OR  TO  MAKE  ANY
REPRESENTATION NOT CONTAINED  IN THIS  PROXY STATEMENT, AND  ANY INFORMATION  OR
REPRESENTATION  NOT  CONTAINED HEREIN  MUST NOT  BE RELIED  UPON AS  HAVING BEEN
AUTHORIZED BY  THE PARTNERSHIP,  THE GENERAL  PARTNER OR  THE CORPORATION.  THIS
PROXY  STATEMENT DOES NOT CONSTITUTE  AN OFFER OF ANY  SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO  WHICH IT  RELATES OR  AN OFFER  TO ANY  PERSON IN  ANY
JURISDICTION  WHERE SUCH OFFER  WOULD BE UNLAWFUL. NEITHER  THE DELIVERY OF THIS
PROXY STATEMENT NOR  ANY SALES  MADE HEREUNDER SHALL,  UNDER ANY  CIRCUMSTANCES,
CREATE  ANY IMPLICATION  THAT THERE  HAS BEEN  NO CHANGE  IN THE  AFFAIRS OF THE
PARTNERSHIP OR THE CORPORATION SINCE THE DATE HEREOF.

    UNTIL 25 DAYS AFTER THE DATE OF THIS PROXY STATEMENT, ALL DEALERS  EFFECTING
TRANSACTIONS  IN  THE  COMMON  STOCK,  WHETHER  OR  NOT  PARTICIPATING  IN  THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROXY STATEMENT.

                             AVAILABLE INFORMATION

   
    The Partnership is (and following  the Conversion, the Corporation will  be)
subject  to the  informational requirements  of the  Securities Exchange  Act of
1934, as amended (the  "Exchange Act"), and in  accordance therewith files  (and
will  file)  reports  and other  information  with the  Securities  and Exchange
Commission (the "SEC"). Such reports and other information may be inspected  and
copied  at the public  reference facilities maintained  by the SEC  at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at Seven
World Trade Center, 13th  Floor, New York, New  York 10048, and at  Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
copies may be obtained at the prescribed rates from the Public Reference Section
of  the SEC at its  principal office in Washington,  D.C. Such reports and other
information concerning the Partnership  can also be inspected  at the office  of
the American Stock Exchange, 86 Trinity Place, New York, New York 10006, and the
Pacific  Stock Exchange, 301  Pine Street, San  Francisco, California 94104, the
exchanges on which the BACs  are listed (and on which  the Common Stock will  be
listed).
    
    The  Corporation has filed with the SEC a Registration Statement on Form S-4
under the  Securities Act  of  1933, as  amended  (the "Securities  Act"),  with
respect  to  the  Common  Stock  offered  hereby.  This  Proxy  Statement, which
constitutes part of the Registration Statement, omits certain of the information
contained in the Registration Statement  and the exhibits and schedules  thereto
on  file  with  the  SEC  pursuant  to the  Securities  Act  and  the  rules and
regulations of the SEC thereunder. Statements contained in this Proxy  Statement
as  to the contents of any contract  or other document are necessarily summaries
of such documents, are not necessarily  complete and in each instance  reference
is  made to the copy of  such contract or other document  filed as an exhibit to
the Registration Statement, each such statement being qualified in all  respects
by  such reference. The Registration Statement, including exhibits and schedules
thereto, is on file at the offices of  the SEC and may be obtained upon  payment
of  the fee  prescribed by  the SEC, or  may be  examined without  charge at the
public reference facilities of the SEC described above.

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   
    THIS PROXY  STATEMENT  INCORPORATES DOCUMENTS  BY  REFERENCE WHICH  ARE  NOT
PRESENTED  HEREIN  OR  DELIVERED HEREWITH.  THESE  DOCUMENTS  (WITHOUT EXHIBITS,
UNLESS SUCH  EXHIBITS ARE  SPECIFICALLY INCORPORATED  BY REFERENCE  HEREIN)  ARE
AVAILABLE  WITHOUT CHARGE TO EACH PERSON TO  WHOM A COPY OF THIS PROXY STATEMENT
IS DELIVERED,  UPON WRITTEN  OR  ORAL REQUEST  ADDRESSED TO  POLARIS  INDUSTRIES
PARTNERS  L.P., 1225 HIGHWAY 169 NORTH, MINNEAPOLIS, MINNESOTA 55441, ATTENTION:
JOHN  H.  GRUNEWALD,  EXECUTIVE  VICE  PRESIDENT,  FINANCE  AND  ADMINISTRATION,
TELEPHONE  NUMBER  (612) 542-0500.  IN ORDER  TO ENSURE  TIMELY DELIVERY  OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER 14, 1994.
    
   
    The following documents of the Partnership have been filed with the SEC  and
are  incorporated herein by  reference: (a) Annual  Report on Form  10-K for the
fiscal year ended December 31, 1993; (b) Quarterly Reports on Form 10-Q for  the
quarterly  periods ended March 31,  1994, June 30, 1994  and September 30, 1994;
and (c) Current Reports on Form 8-K dated August 25, 1994 and October 14, 1994.
    
    All documents filed by the Partnership pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement  and
prior  to the date of the Special Meeting  shall be deemed to be incorporated by
reference into this Proxy  Statement and to  be a part hereof  from the date  of
filing of such documents.

    Any statement contained in a document incorporated by reference herein shall
be  deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or  in any other  subsequently filed document  which
also  is incorporated  herein) modifies or  supersedes such  statement. Any such
statement so modified  or superseded shall  not be deemed  to constitute a  part
hereof except as so modified or superseded.

                                       3
<PAGE>
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
AVAILABLE INFORMATION...................................................     3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.........................     3
SUMMARY.................................................................     6
  Overview of the Conversion............................................     6
  Risk Factors, Conflicts of Interest and Other Considerations..........     7
  Reasons for the Conversion............................................     9
  Existing Economic Interests of the Partners...........................    11
  Alternatives to the Conversion........................................    11
  Allocation of Common Stock Between BAC Holder Interests and General
   Partner Interests....................................................    14
  Fairness Opinions.....................................................    14
  Recommendation of the General Partner and the Sponsors................    14
  Summary of Certain Federal Income Tax Considerations..................    14
  Conditions to the Conversion..........................................    15
  Consequences if Conversion Proposal is Not Approved or the Conversion
   is Not Consummated...................................................    15
  Management and Compensation...........................................    16
  Voting at the Special Meeting.........................................    16
  Appraisal Rights......................................................    17
  List of BAC Holders...................................................    17
  The Partnership and the Corporation...................................    17
SUMMARY OF SELECTED FINANCIAL INFORMATION...............................    19
POLARIS ORGANIZATIONAL CHARTS...........................................    20
RISK FACTORS, CONFLICTS OF INTEREST AND OTHER CONSIDERATIONS............    21
  Risks, Conflicts of Interest and Considerations Related to the
   Conversion...........................................................    21
    Adverse Tax Implications............................................    21
    Potential Conflicts of Interest.....................................    21
    No Independent Representation.......................................    22
    No Assurance of Future Distributions................................    22
    Effects of Additional Indebtedness..................................    22
    Uncertainty Regarding Market Price for Common Stock.................    22
    Changes in Ownership Rights.........................................    22
    Changes in Voting Rights............................................    23
    Elimination of General Partner Liability for Polaris Obligations....    23
    Changes in Fiduciary Obligations....................................    23
    Future Dilution of Common Stock.....................................    24
    Costs of Conversion.................................................    24
    Risks for Nonapproving BAC Holders..................................    24
    Provisions That May Discourage Changes of Control...................    24
  Risks Related to the Business.........................................    24
    Product Safety and Regulation.......................................    24
    Informal Supply Arrangements........................................    25
    Competition.........................................................    26
    Effects of Weather..................................................    26
    Product Liability...................................................    26
    Warranties and Product Recalls......................................    26
THE CONVERSION..........................................................    27
  The Partnership.......................................................    27
  Background of the Conversion..........................................    27

<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
  Reasons for the Conversion............................................    30
    Changes in Tax Status of the Partnership............................    30
    Proposed Distribution Equivalency...................................    30
    Anticipated Reduction of Partnership Tax Benefit to Investors.......    31
    Greater Access to Capital Markets and Expansion of Investor Base....    31
    Enhanced Growth Potential...........................................    31
    Ability to Diversify................................................    32
    Tax Reporting.......................................................    32
    Direct Election of the Board of Directors...........................    32
  Structure of the Conversion...........................................    32
  Existing Economic Interests of the Partners...........................    34
  Benefit Plans after the Conversion....................................    35
  Alternatives to the Conversion........................................    35
    Continuance of the Partnership; No Cessation of Trading.............    35
    Continuance of the Partnership; Cessation of Trading................    36
    Continuance of the Partnership; Cessation of Trading and Exchange
     Offer of Stock in New Corporate Limited Partner....................    36
    Continuance of the Partnership; Cessation of Trading and Exchange
     Offer of Debt Securities...........................................    36
    Conversion to Corporation with Cash and Stock.......................    36
    Conversion by Liquidation...........................................    36
    Management Buyout or Other Strategic Sale...........................    37
    Conversion Pursuant to Section 17.5 of the Partnership Agreement....    37
    Liquidation and Winding Up of the Partnership.......................    37
    Future Alternatives Available to Polaris............................    38
  Fairness Opinions.....................................................    38
    Opinion of Smith Barney.............................................    38
    Opinion of Dillon Read..............................................    42
    Other...............................................................    45
  Recommendation of the General Partner and the Sponsors................    45
  Potential Conflicts of Interest.......................................    46
  Effective Time........................................................    46
  Description of the Merger Agreement...................................    46
  Consequences if Conversion Proposal is Not Approved or the Conversion
   is Not Consummated...................................................    48
  Costs of the Conversion...............................................    49
  Exchange of Certificates..............................................    49
COMPARATIVE RIGHTS OF BAC HOLDERS AND HOLDERS OF COMMON STOCK...........    50
  Taxation..............................................................    50
  Distributions and Dividends...........................................    50
  Voting Rights.........................................................    51
  Rights to Call Special Meetings and Submit Proposals..................    51
  Removal of General Partner and Directors of the Corporation...........    52
  Liquidation Rights....................................................    52
  Assessments and Limited Liability.....................................    53
  Transferability.......................................................    53
</TABLE>

                                       4
<PAGE>
   
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
  Redemption Rights.....................................................    53
  Change of Control.....................................................    53
  Management and Compensation...........................................    54
  Indemnification.......................................................    55
  Fiduciary Duties......................................................    55
  Limits on Management's Liability......................................    56
  Appraisal Rights......................................................    56
  Duration of Investment................................................    57
  Right to Investor Lists...............................................    57
  Inspection of Books and Records.......................................    57
  Dilution..............................................................    58
  Investment Policy.....................................................    58
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS...............................    58
  Summary of Tax Consequences to BAC Holders............................    59
  Partnership Status and Taxation of the Partnership....................    59
  General Tax Treatment of the Merger and Issuance of Common Stock......    59
  Certain Tax Consequences of the Merger and Issuance of Common Stock to
   BAC Holders..........................................................    60
  Other Tax Issues Affecting BAC Holders................................    61
  Exercise of Appraisal Rights..........................................    62
  Tax Consequences to the Corporation and the Partnership...............    62
  Post-Conversion Treatment of the Corporation and Its Shareholders.....    63
  Unrelated Business Taxable Income.....................................    64
  Other Tax Aspects.....................................................    64
  Proposed Legislation..................................................    65
ACCOUNTING TREATMENT OF THE CONVERSION..................................    65
VOTING AND PROXY INFORMATION............................................    65
  Voting Procedures.....................................................    65
  Vote Required; Quorum.................................................    65
  Proxies...............................................................    66
  Revocation of Proxies.................................................    66
  Solicitation of Proxies...............................................    66
  Information Agent.....................................................    67
  Independent Auditors..................................................    67
APPRAISAL RIGHTS........................................................    67
BUSINESS................................................................    71
  Industry Background...................................................    71
  Products..............................................................    71
  Manufacturing Operations..............................................    72
  Production Scheduling.................................................    73
  Sales and Marketing...................................................    73
  Engineering, Research and Development.................................    74
  Competition...........................................................    75
  Product Safety and Regulation.........................................    75
  Product Liability.....................................................    77
  Effects of Weather....................................................    77
  Employment............................................................    77
  Properties............................................................    77
  Legal Proceedings.....................................................    78
CAPITALIZATION..........................................................    79
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION.................    80
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
 OF OPERATIONS..........................................................    82
    Results of Operations...............................................    82
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
    Cash Distributions..................................................    84
    Liquidity and Capital Resources.....................................    84
    Inflation and Exchange Rates........................................    86
MARKET PRICES AND DISTRIBUTIONS.........................................    87
MANAGEMENT..............................................................    89
  Directors and Executive Officers of EIPCC.............................    89
  Directors and Executive Officers of PICC..............................    90
  Directors and Executive Officers of the Corporation after the
   Conversion...........................................................    91
  Executive Compensation................................................    92
  Death and Disability Benefits and Deferred Compensation...............    92
  Long-Term Incentive Compensation......................................    93
  Retirement Savings Plan...............................................    95
  Purchase of BACs......................................................    95
  Compensation Committee Interlocks and Insider Participation...........    95
  Director Compensation.................................................    95
  Certain Relationships and Related Transactions........................    95
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........    97
SUMMARY OF CERTAIN PROVISIONS OF THE PARTNERSHIP AGREEMENT..............    99
  Management of the Partnership.........................................    99
  Liability of the General Partner and BAC Holders to Third Parties.....    99
  Dissolution and Liquidation...........................................    99
  Voting Rights of BAC Holders..........................................   100
  Removal of the General Partner........................................   100
  Withdrawal of the General Partner.....................................   100
  Additional General Partners...........................................   100
  Effect of Removal, Bankruptcy, Death, Dissolution, Incompetency or
   Withdrawal of the General Partner....................................   100
  Reimbursement of General Partner Expenses.............................   101
  Amendments............................................................   101
  Designation of Tax Matters Partner....................................   101
  Reorganization of the Partnership.....................................   101
  Applicable law........................................................   102
  Books and Records.....................................................   102
  Transferability of the BACs...........................................   102
DESCRIPTION OF CAPITAL STOCK............................................   102
  Common Stock..........................................................   102
  Preferred Stock.......................................................   102
  Voting................................................................   103
  Board of Directors....................................................   103
  Anti-takeover Provisions..............................................   103
  Limitation of Liability...............................................   104
  Transfer Agent and Registrar..........................................   104
RESALE OF COMMON STOCK..................................................   105
LEGAL MATTERS...........................................................   105
EXPERTS.................................................................   105
INDEX TO FINANCIAL STATEMENTS...........................................   F-1
ANNEX A -- Glossary of Defined Terms....................................   A-1

ANNEX B -- Fairness Opinion of Smith Barney Inc. .......................   B-1

ANNEX C -- Fairness Opinion of Dillon, Read & Co. Inc. .................   C-1

ANNEX D --Agreement and Plan of Conversion..............................   D-1
</TABLE>
    

                                       5
<PAGE>
                                    SUMMARY

   
    THE  FOLLOWING  IS NOT  INTENDED  TO BE  COMPLETE  AND IS  QUALIFIED  IN ALL
RESPECTS BY THE  MORE DETAILED  INFORMATION SET  FORTH ELSEWHERE  IN THIS  PROXY
STATEMENT  AND THE  DOCUMENTS INCORPORATED  BY REFERENCE  HEREIN. A  GLOSSARY OF
FREQUENTLY USED CAPITALIZED AND OTHER SPECIALIZED TERMS IS ATTACHED AS ANNEX  A.
ORGANIZATIONAL  CHARTS  FOR  THE  PARTNERSHIP (BEFORE  THE  CONVERSION)  AND THE
CORPORATION (AFTER THE CONVERSION)  ARE INCLUDED FOR REFERENCE  ON PAGE 20.  BAC
HOLDERS  ARE URGED TO REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT AND TO REQUEST
SUCH DOCUMENTS INCORPORATED BY REFERENCE HEREIN AS THEY DESIRE.
    

OVERVIEW OF THE CONVERSION

   
    This Proxy Statement relates  to a proposal  (the "Conversion Proposal")  by
the  senior operating  management of  Polaris Industries  Capital Corporation, a
Delaware Corporation  ("PICC"),  who  conduct the  business  and  operations  of
Polaris  Industries  L.P. (PICC  and  Polaris Industries  L.P.  collectively are
referred to  as  the "Operating  Partnership"),  to convert  Polaris  Industries
Partners  L.P.,  a  Delaware  limited partnership  (the  "Partnership"),  from a
publicly traded  limited  partnership  to a  publicly  traded  corporation  (the
"Conversion").  The Conversion  Proposal is  sponsored by  W. Hall  Wendel, Jr.,
Chief Executive  Officer,  Kenneth  D. Larson,  President  and  Chief  Operating
Officer,   John   H.   Grunewald,   Executive   Vice   President,   Finance  and
Administration, James Bruha, Vice President -- Manufacturing, Charles A. Baxter,
Vice President -- Engineering and Product Safety, Ed Skomoroh, Vice President --
Sales and Marketing and Michael W. Malone, Chief Financial Officer and Treasurer
(collectively, the "Sponsors").  Such individuals together  comprise the  senior
operating  management  of the  Operating Partnership  and  own in  the aggregate
approximately 9.1% of the outstanding units of Beneficial Assignment of Class  A
Limited  Partnership Interests  ("BACs") in the  Partnership. Polaris Industries
Inc. (the  "Corporation") was  formed recently  by certain  of the  Sponsors  in
contemplation  of the Conversion. Subsequent  to consummation of the Conversion,
the business currently  conducted by the  Partnership will be  conducted by  the
Corporation  with the same operating management,  but without involvement by EIP
Associates L.P., a Delaware limited partnership (the "General Partner").
    

   
    Pursuant to the terms of  an Agreement and Plan  of Conversion, dated as  of
September 29, 1994, among the Corporation, the Partnership, the General Partner,
the  Operating  Partnership,  EIP  Capital  Corporation  ("EIPCC";  the managing
general partner of the General Partner) and the other parties thereto (as may be
amended, modified or supplemented from time to time, the "Merger Agreement"), if
the Conversion Proposal is approved and the Conversion is implemented, (i)  each
BAC will be exchanged tax-free for one share of common stock, par value $.01 per
share  ("Common  Stock"), of  the  Corporation and  each  right to  receive BACs
("First Rights") previously granted will be converted into the right to  receive
one  share  of  Common Stock  of  the  Corporation, (ii)  the  Corporation will,
directly and  indirectly, own  100%  of the  Partnership  and will  continue  to
conduct  the business and operations of the Operating Partnership, and (iii) BAC
Holders (including affiliates of the General Partner) and holders of  previously
granted  First Rights will receive, in exchange for their BACs and upon exercise
of such First  Rights, as  the case may  be, 88.6%  of the Common  Stock of  the
Corporation, and affiliates of the General Partner will receive, in exchange for
their  interests in the General Partner  and its affiliates, the remaining 11.4%
of the Common Stock of the Corporation, each after giving effect to the exercise
of such First Rights (the "Exchange Ratio").
    

    The Exchange Ratio was agreed to after extended discussions and negotiations
beginning in early June  1994 between W. Hall  Wendel, Jr., the Chief  Executive
Officer of Polaris, and certain other members of the senior operating management
of  the  Operating Partnership,  who have  no economic  interest in  the General
Partner,  and  affiliates  of  the  General  Partner.  The  Exchange  Ratio  was
determined  with reference  to the  existing economic  interests of  the General
Partner and BAC Holders referred to above and the rights of the General  Partner
under  various provisions  of the Partnership  Agreement. Currently  and for the
foreseeable future, the General Partner and its affiliates receive 20.8% of  the
Partnership's  distributions and  $500,000 per year  in management  fees and are
entitled to

                                       6
<PAGE>
certain expense reimbursements from the Partnership. Such distributions and fees
totalled approximately $10.3 million  in 1993 and will  aggregate more than  $11
million  in 1994. These arrangements and  payments will end upon consummation of
the Conversion.  See  "The Conversion  --  Existing Economic  Interests  of  the
Partners" and "The Conversion -- Background of the Conversion."

   
    Subject to legal and contractual requirements and the financial requirements
of  the business, the Sponsors intend  to recommend that the Corporation's Board
of Directors establish an initial cash  dividend rate of $0.15 per quarter,  and
pay  three special cash  distributions, each of $1.92  per share, payable during
each of the  last three  quarters of  1995 (reduced,  if the  Conversion is  not
consummated in 1994, to the extent that any cash distributions declared and paid
by the Partnership after January 1, 1995 exceed, on a quarterly basis, $0.15 per
BAC)  (the "Proposed Distributions"). Thus, it  is expected that BAC Holders who
hold Common Stock from the  date of the Conversion  through 1997 will receive  a
total of $7.56 per share for the years 1995, 1996 and 1997 -- the amount per BAC
they  would have  received had the  Conversion not occurred  and the Partnership
maintained its existing cash distribution policy (I.E. $2.52 per BAC per annum).
The Sponsors and the General Partner believe that such distributions should ease
the transition in the Corporation's ownership between primarily  income-oriented
investors in the Partnership and the growth-oriented and institutional investors
that are expected to invest in the Corporation.
    

    The affirmative vote by holders of (i) a majority of BACs outstanding on the
Record  Date and (ii) a majority of BACs  held on the Record Date by BAC Holders
other than the Sponsors and affiliates of the General Partner ("Unaffiliated BAC
Holders"), is required to approve the Conversion Proposal. Since the approval of
the Conversion  Proposal  by BAC  Holders  and  Unaffiliated BAC  Holders  is  a
condition  to the consummation of the  Conversion, the Conversion will not occur
if the requisite  vote is not  obtained. The affiliates  of the General  Partner
(including  Victor K. Atkins, Jr., a general  partner of the General Partner and
the President of EIPCC)  and the Sponsors own  approximately 14% of  outstanding
BACs in the aggregate, and they have advised the Partnership that they each will
vote  in favor of the Conversion Proposal.  See "Voting and Proxy Information --
Vote Required; Quorum."

    Subsequent to the  consummation of  the Conversion,  the business  currently
conducted  by the Partnership will be conducted by the Corporation with the same
operating management and pursuant  to substantially the  same operating plan  as
the Partnership, but without involvement by the General Partner.

    Except  as required to accommodate the change  to corporate form, all of the
existing employee benefit plans of the Partnership and the Operating Partnership
are  expected  to  be  assumed  and  adapted  for  use  by  the  Corporation  on
substantially  the same terms. Without limiting the generality of the foregoing,
upon the Conversion, each of the outstanding First Rights representing the right
to receive BACs under an employee benefit plan, whether vested or unvested, will
be deemed to constitute the right to receive on the same terms and conditions as
were applicable under  such First Rights,  the same number  of shares of  Common
Stock  as the holder  of such First  Rights would have  been entitled to receive
pursuant to the Merger had such holder received BACs upon exercise of such First
Rights immediately prior to the Merger.

    NOTHING IN  THE  MERGER  AGREEMENT  OR IN  THIS  PROXY  STATEMENT  SHALL  BE
INTERPRETED  TO ALTER THE FIDUCIARY DUTY OF THE GENERAL PARTNER SET FORTH IN THE
PARTNERSHIP AGREEMENT OR UNDER DELAWARE  LAW, INCLUDING THE POSSIBLE  OBLIGATION
OF  THE GENERAL PARTNER  TO UNILATERALLY TERMINATE THE  MERGER AGREEMENT IF SUCH
TERMINATION SHOULD BE NECESSARY TO DISCHARGE SUCH FIDUCIARY DUTY.

RISK FACTORS, CONFLICTS OF INTEREST AND OTHER CONSIDERATIONS

    In evaluating  the Conversion,  BAC  Holders should  take into  account  the
following  risk factors, conflicts of interest and other special considerations,
which are discussed at greater length  herein under "Risk Factors, Conflicts  of
Interest and Other Considerations" and "The Conversion."

    - Because  of the Conversion,  BAC Holders will  forego the potential future
      tax benefits associated with an investment  in a partnership (I.E. no  tax
      paid  at the Partnership level on  its taxable income) immediately, rather
      than  beginning  after  December  31,   1997.  The  General  Partner   has

                                       7
<PAGE>
      participated in efforts to have the December 31, 1997 deadline extended or
      eliminated.  To date such efforts have been inconclusive. Such efforts, in
      which the General  Partner has ceased  to participate, may  or may not  be
      successful  in the  future. See "Risk  Factors, Conflicts  of Interest and
      Other Considerations --  Risks, Conflicts of  Interest and  Considerations
      Related to the Conversion -- Adverse Tax Implications."

    - The  General Partner may be  viewed as having a  conflict of interest with
      BAC Holders with respect to the determination of the Exchange Ratio in the
      Conversion.  Furthermore,  the  General  Partner  will  benefit  from  the
      elimination  of  liability  of  the General  Partner  for  obligations and
      liabilities of Polaris after the Conversion. In addition, BAC Holders were
      not represented separately  in establishing the  terms of the  Conversion.
      Such  independent  representation  might  have  caused  the  terms  of the
      Conversion to  be  different in  material  respects from  those  described
      herein.  See "Risk Factors, Conflicts of Interest and Other Considerations
      --  Risks,  Conflicts  of  Interest  and  Considerations  Related  to  the
      Conversion  --  Potential Conflicts  of Interest"  and "--  No Independent
      Representation."

    - The Corporation  is  under  no  legal  obligation  to  make  the  Proposed
      Distributions   and  the  timing  and   amount  of  future  dividends  and
      distributions will be at the discretion  of the Board of Directors of  the
      Corporation  and will depend, among other  things, on the future after-tax
      earnings,  operations,  capital   requirements,  borrowing  capacity   and
      financial  condition of  the Corporation and  general business conditions.
      There can be no  assurance that the  foregoing dividends or  distributions
      will  be  adopted or  maintained by  the  Corporation. See  "Risk Factors,
      Conflicts of  Interest and  Other Considerations  -- Risks,  Conflicts  of
      Interest  and  Considerations  Related  to  the  Conversion  --  Change in
      Distribution Policy."

    - After the Conversion,  the Corporation  expects to  incur indebtedness  in
      excess   of  that  previously  incurred   by  the  Partnership,  including
      indebtedness to finance the  Proposed Distributions if such  distributions
      are  declared by the Board of Directors of the Corporation. No commitments
      from  lenders  for  such  financing  have  been  obtained.  Incurrence  of
      indebtedness  by  the  Corporation could  have  important  consequences to
      investors in the  Corporation's securities, including  the following:  (i)
      the Corporation's ability to obtain additional financing in the future may
      be limited; (ii) a portion of the Corporation's income from operations and
      cash  flow will be dedicated  to the payment of  principal and interest on
      its indebtedness, thereby reducing the funds available to the  Corporation
      for  its operations; and (iii) the agreements relating to the indebtedness
      are likely  to  contain financial  and  other restrictive  covenants,  the
      failure  to comply with which may result  in an event of default which, if
      not cured or waived, could adversely affect the Corporation. There can  be
      no  assurance  that the  Corporation's  future operating  results  will be
      sufficient  for  payment  of  the  Corporation's  indebtedness  and  other
      commitments.   See  "Risk   Factors,  Conflicts  of   Interest  and  Other
      Considerations -- Risks, Conflicts of Interest and Considerations  Related
      to the Conversion -- Effects of Additional Indebtedness."

    - Prior  to the Conversion,  there will have  been no public  market for the
      Common Stock. The Common Stock may trade at prices substantially below the
      historical trading levels of BACs. If a large number of holders of  Common
      Stock  were to offer their shares  for sale immediately after consummation
      of the Conversion,  in the absence  of a corresponding  demand for  Common
      Stock  from institutional  and retail investors,  the market  price of the
      Common Stock could decline substantially. See "Risk Factors, Conflicts  of
      Interest  and  Other Considerations  -- Risks,  Conflicts of  Interest and
      Considerations Related to the  Conversion -- Uncertainty Regarding  Market
      Price for Common Stock."

    - As  a  result of  the  Conversion, BAC  Holders  will lose  certain rights
      associated with their ownership of BACs, including, in particular, receipt
      of future quarterly distributions  from the Partnership  of Net Cash  from
      Operations (after giving effect to appropriate reserves). See "Comparative
      Rights of BAC Holders and Holders of Common Stock."

                                       8
<PAGE>
    - The  fiduciary duties of a general  partner to limited partners may differ
      from those of corporate  directors to shareholders. Therefore,  situations
      may  occur in which owners  of Common Stock of  the Corporation would have
      less recourse, on the basis of breach of fiduciary duty, against directors
      of the Corporation than they would  have had against the General  Partner.
      See  "Risk  Factors, Conflicts  of  Interest and  Other  Considerations --
      Risks, Conflicts of Interest and Considerations Related to the  Conversion
      --  Changes  in  Fiduciary  Obligations" and  "Comparative  Rights  of BAC
      Holders and Holders of Common Stock -- Fiduciary Duties" and "-- Limits on
      Management's Liability."

    - Transaction costs  of  approximately  $9  million  will  be  paid  by  the
      Partnership,  whether or not the  Conversion is consummated. An additional
      $2 million  is  expected  to  be  paid by  the  Partnership  only  if  the
      Conversion  is consummated. See  "Risk Factors, Conflicts  of Interest and
      Other Considerations --  Risks, Conflicts of  Interest and  Considerations
      Related to the Conversion -- Costs of Conversion."

    - If the Conversion Proposal is approved by the required vote of BAC Holders
      and  Unaffiliated  BAC  Holders, all  BAC  Holders (other  than  those who
      exercise Appraisal  Rights) will  be bound  by such  approval even  though
      they,  individually,  may  not  have  voted  in  favor  of  the Conversion
      Proposal.  See   "Risk   Factors,   Conflicts  of   Interest   and   Other
      Considerations  -- Risks, Conflicts of Interest and Considerations Related
      to the Conversion --  Risks for Nonapproving  BAC Holders" and  "Appraisal
      Rights."

    In addition to the factors noted above, an investment in Polaris (whether in
partnership  or corporate  form) is subject  to risks  associated with operating
conditions,  competitive  factors,  economic  conditions,  weather   conditions,
regulatory  developments  and  equity  market  conditions.  See  "Risk  Factors,
Conflicts  of  Interest  and  Other  Considerations  --  Risks  Related  to  the
Business."

REASONS FOR THE CONVERSION

    The  General Partner  and the  Sponsors believe  that the  following are the
principal reasons to consummate the Conversion at this time:

    - Under current law  the Partnership will  be treated as  a corporation  for
      federal   income  tax  purposes  after   December  31,  1997,  unless  the
      Partnership takes  action  to  prevent trading  in  BACs  thereafter.  See
      "Certain  Federal  Income  Tax Considerations  --  Partnership  Status and
      Taxation of the Partnership." For the reasons more fully set forth in this
      Proxy Statement (see "The Conversion -- Alternatives to the  Conversion"),
      the General Partner and the Sponsors did not consider cessation of trading
      of  BACs or  otherwise reducing  the liquidity of  the BACs  after 1997 an
      advantageous way  to  preserve the  tax  status of  the  Partnership.  The
      Sponsors  and  General Partner  also did  not  believe that  continuing to
      operate as a  partnership while being  taxed as a  corporation after  1997
      would be advantageous to BAC Holders.

    - The  General Partner and  the Sponsors believe it  is advantageous for the
      Partnership to convert to corporate  form now because: (i) the  Conversion
      will   resolve  uncertainty   about  the  Partnership's   future  tax  and
      organizational status,  which  uncertainty  would  otherwise  increase  as
      December  31, 1997 approaches, (ii) the  receipt of shares of Common Stock
      in the Conversion can  be effected on a  tax-free basis under current  law
      and  (iii)  the  Conversion  is facilitated  by  the  Partnership's strong
      financial  performance,  currently  favorable  equity  market   conditions
      generally  and  other  factors set  forth  below. See  "The  Conversion --
      Reasons for  the Conversion."  Accordingly, the  General Partner  and  the
      Sponsors believe that it is advantageous for the Partnership to convert to
      corporate  form  at  the  present  time  rather  than  postponing  such  a
      transaction until 1997, which could result in the Partnership's  inability
      to  consummate such  a transaction  in an  orderly manner  under favorable
      circumstances.

    - The Conversion is not expected to adversely affect the anticipated  amount
      of  cash distributions to be received by investors through 1997. After the
      Conversion, and  subject  to legal  and  contractual limitations  and  the
      financial   requirements  of   the  business,   the  Sponsors   intend  to

                                       9
<PAGE>
      recommend that  the  Corporation's Board  of  Directors pay  the  Proposed
      Distributions. Assuming the Corporation makes such distributions, each BAC
      Holder  who  continues to  hold Common  Stock  received in  the Conversion
      through 1997 will receive  from the Partnership  and the Corporation  cash
      distributions  and dividends during the  period commencing January 1, 1995
      and ending December 31, 1997 equal in amount to cash distributions  ($7.56
      per BAC) that BAC Holders would have received from the Partnership had the
      Conversion  not  occurred  and  the  Partnership  maintained  its existing
      distribution policy.  The  Sponsors  believe  the  Proposed  Distributions
      should   ease  the  transition  in  the  Corporation's  ownership  between
      primarily  income-oriented   investors   in  the   Partnership   and   the
      growth-oriented and institutional investors that are expected to invest in
      the Corporation. See "Market Prices and Distributions."

   
    - The  tax benefits to BAC Holders  of the Partnership continuing to operate
      in partnership form  (i.e. one  level of  income tax)  are anticipated  to
      diminish  over time. Distributions to BAC Holders have remained relatively
      constant during  the  past  three  years  and  it  is  unlikely  that  the
      Partnership  will increase the present level of cash distributions even if
      its taxable income was to continue to increase, because Polaris' continued
      growth could  require  reinvesting  significant amounts  of  cash  in  its
      business.  Accordingly,  absent  the  Conversion,  assuming  income growth
      continues in 1994 and  subsequent years, BAC Holders  will be required  to
      report  and pay  tax on  their share  of the  Partnership's taxable income
      without a corresponding  increase in  cash distributions.  It is  expected
      that  this disparity  between taxable  income and  cash distributions will
      continue to increase in the foreseeable future and will be substantial, at
      least in  1994. See  "The  Conversion --  Reasons  for the  Conversion  --
      Anticipated Reduction of Partnership Tax Benefit to Investors."
    

    - The  Conversion  is expected  to provide  Polaris  with greater  access to
      capital markets at a potentially lower cost of capital and thereby enhance
      its ability to fund future growth.  In this regard, the Conversion  should
      expand  Polaris' potential investor  base to a  broader array of investors
      (e.g. pension plans, mutual funds  and other institutional investors)  who
      do not typically invest in publicly traded limited partnerships because of
      tax  considerations  and  administrative burdens.  Conversion  also should
      result in increased research coverage  of Polaris by investment  analysts.
      Such  factors should result in greater  trading activity and liquidity for
      the Common Stock, as compared to the BACs. See "The Conversion --  Reasons
      for  the Conversion -- Greater Access  to Capital Markets and Expansion of
      Investor Base."

    - Operating  in  corporate   form  should  provide   Polaris  with   greater
      flexibility  to consummate acquisitions, including  the use of its capital
      stock as  acquisition currency  and the  ability to  diversify into  other
      lines of business without the constraints that presently are placed by the
      tax  laws on publicly traded partnerships. Polaris believes the advantages
      of doing business  in corporate  form are  demonstrated by  the fact  that
      Polaris  is one of the few remaining substantial manufacturing concerns in
      the United States  organized as  a publicly traded  partnership. See  "The
      Conversion -- Reasons for the Conversion -- Enhanced Growth Potential" and
      "-- Ability to Diversify."

   
    - The  Conversion will simplify Polaris' organizational structure and reduce
      significantly costs of tax reporting for Polaris and investors in Polaris.
      See "Polaris Organizational Charts" and "The Conversion -- Reasons for the
      Conversion -- Tax Reporting."
    

    - The General  Partner will  be replaced  by  a Board  of Directors  of  the
      Corporation,  which will be  elected directly by  holders of Common Stock.
      See "The Conversion --  Reasons for the Conversion  -- Direct Election  of
      the Board of Directors."

    THE  GENERAL PARTNER AND THE SPONSORS BELIEVE THAT THE CONVERSION IS FAIR TO
BAC HOLDERS AND RECOMMEND THAT BAC HOLDERS VOTE "FOR" THE CONVERSION PROPOSAL.

                                       10
<PAGE>
EXISTING ECONOMIC INTERESTS OF THE PARTNERS

    Currently, the  holders  of  BACs  and  General  Partner  interests  in  the
Partnership  have rights to quarterly distributions of the proceeds of available
cash flow from operations of the Partnership and the proceeds of certain capital
transactions by the Partnership.

    The Partnership currently  makes quarterly distributions  of Cash  Available
for  Distribution (generally  cash flow from  operations and sales  of assets or
refinancings, after deducting such reserves as the General Partner, in its  sole
discretion,  determines to be necessary for Partnership expenses, debt payments,
capital improvements, replacements and contingencies) in the following manner:

<TABLE>
<CAPTION>
                                                                       INTERESTS OF
CASH AVAILABLE                                INTERESTS OF         GENERAL PARTNER AND
FOR DISTRIBUTION                              BAC HOLDERS             ITS AFFILIATES
- -----------------------------------------------------------       ----------------------
<S>                                          <C>                  <C>
Net Cash From Operations.....................         79.2  %                       20.8%
Net Cash from Sales or Refinancings (after
 return of capital to BAC Holders of $10 per
 BAC)........................................         98.0  %                        2.0%
</TABLE>

For a more detailed description of rights of the General Partner and BAC Holders
to Cash Available  for Distribution,  see "The Conversion  -- Existing  Economic
Interests of the Partners" and "Comparative Rights of BAC Holders and Holders of
Common Stock -- Distributions and Dividends."

    In  addition, if the General Partner is removed without cause, it can compel
any successor to purchase its General  Partner interest at "fair market  value."
See "Comparative Rights of BAC Holders and Holders of Common Stock -- Removal of
General Partner and Directors of the Corporation -- BACs."

ALTERNATIVES TO THE CONVERSION

    The  alternatives to  the Conversion  that were  considered by  the Sponsors
were: (a)  continuance of  the Partnership  with no  cessation of  trading,  (b)
continuance  of  the  Partnership  and cessation  of  trading  before  1998, (c)
conversion of the Partnership,  with a single cash  and stock distribution,  (d)
conversion  by liquidation, (e)  a management buyout or  other strategic sale of
the Partnership  and (f)  liquidation and  winding up  of the  Partnership.  The
alternatives  to the Conversion that were  considered by the General Partner, in
addition to (a),  (b), (c) and  (f), were: (g)  continuance of the  Partnership,
with  cessation of  trading and an  exchange offer  of stock in  a new corporate
limited partner, (h) continuance of  the Partnership, with cessation of  trading
and  an  exchange offer  of debt  securities  and (i)  a conversion  pursuant to
Section 17.5 of the Partnership Agreement.

    - CONTINUANCE OF THE PARTNERSHIP; NO CESSATION OF TRADING. The Sponsors  and
      the  General  Partner believe  that the  Conversion  is a  more beneficial
      alternative to BAC Holders than the continuance of the Partnership in  its
      current form and that any benefits to be derived through the Partnership's
      current   form  are  outweighed  by   the  potential  long  term  benefits
      anticipated to be derived  from the Conversion.  Under current law,  after
      December 31, 1997, absent a cessation of trading, the Partnership would be
      treated  as  a  corporation  for  tax  purposes.  See  "The  Conversion --
      Alternatives to the Conversion" and "-- Reasons for the Conversion."

   
    - CONTINUANCE OF THE PARTNERSHIP; CESSATION OF TRADING. The Sponsors and the
      General Partner considered continuing the Partnership and, before  January
      1998,  delisting the  BACs from  the American  Stock Exchange  and Pacific
      Stock Exchange  and prohibiting,  except  in very  limited  circumstances,
      transfers of BACs. Such a transaction would create a private security with
      virtually  no liquidity  or trading market  value, but  would preserve the
      current tax  status  of  the  Partnership after  December  31,  1997.  The
      Sponsors  and  the General  Partner believed  that  the loss  of liquidity
      resulting from such an  alternative would be adverse  to the interests  of
      BAC  Holders and  the Partnership since  BACs are  publicly traded, listed
      securities, and therefore they did  not pursue this alternative. See  "The
      Conversion  --  Alternatives  to  the  Conversion  --  Continuance  of the
      Partnership; Cessation of Trading."
    

                                       11
<PAGE>
    - CONTINUANCE OF THE PARTNERSHIP; CESSATION OF TRADING AND EXCHANGE OFFER OF
      STOCK IN NEW  CORPORATE LIMITED  PARTNER. The  General Partner  considered
      continuing  the Partnership and,  before January 1998,  delisting the BACs
      and, except in  very limited  circumstances, prohibiting  the transfer  of
      BACs.  At the same time, a new corporate limited partner would be admitted
      to the  Partnership and  BAC Holders  would be  given the  opportunity  to
      exchange  their BACs  for publicly traded  shares of common  stock in such
      corporation. However, exchanging  BAC Holders would  forego the  potential
      future  tax benefits associated  with an investment  in a partnership, and
      non-exchanging BAC Holders would be  left with little, if any,  liquidity.
      In  addition, the General Partner  believed this alternative would further
      complicate rather than simplify the  capital structure of the  Partnership
      and  would  not  provide  the  benefits  of  operating  in  corporate form
      described under "Reasons for the Conversion" above. See "The Conversion --
      Alternatives  to  the  Conversion  --  Continuance  of  the   Partnership;
      Cessation  of Trading and Exchange Offer of Stock in New Corporate Limited
      Partner."

    - CONTINUANCE OF THE PARTNERSHIP; CESSATION OF TRADING AND EXCHANGE OFFER OF
      DEBT SECURITIES. The General Partner considered continuing the Partnership
      and, before January 1998, delisting the  BACs and, except in very  limited
      circumstances,  prohibiting the  transfer of BACs.  At the  same time, BAC
      Holders would be given the opportunity to exchange their BACs for publicly
      traded debt securities  of the  Partnership. Although  such a  transaction
      would  preserve the  current tax  status of  the Partnership,  the General
      Partner believed it  would not be  optimal in that  the Partnership  could
      have burdensome leverage, the exchange might have adverse tax consequences
      to  the electing  BAC Holders,  there could  be no  assurance of  a liquid
      market in the debt securities,  the non-exchanging BAC Holders would  have
      little,  if  any, liquidity  and such  a  transaction would  generally not
      provide the  benefits  of  operating in  corporate  form  described  under
      "Reasons for the Conversion" above. See "The Conversion -- Alternatives to
      the Conversion -- Continuance of the Partnership; Cessation of Trading and
      Exchange Offer of Debt Securities."

    - CONVERSION  TO CORPORATION WITH  CASH AND STOCK.  The Sponsors proposed to
      the General Partner that the Partnership be converted to a corporation  in
      a  transaction in which BAC Holders and affiliates of the General Partner,
      in exchange for their respective interests in the Partnership, would  each
      receive  a one-time cash distribution, as well as stock in the corporation
      surviving  the   transaction.  The   Sponsors  proposed   that  the   cash
      distribution  be  paid  to  BAC  Holders,  the  General  Partner  and  its
      affiliates in accordance with their respective economic interests and that
      the stock  be  distributed  in  accordance  with  the  respective  capital
      accounts of the partners. The General Partner felt that such a transaction
      would  result in  the successor corporation  being burdened  at the outset
      with significant indebtedness to pay such a one-time cash distribution and
      would reduce  financial flexibility  for the  successor corporation  going
      forward.   In  addition,  the  General  Partner  was  concerned  that  the
      distribution would, in  effect, be fully  taxable to BAC  Holders and  the
      General  Partner and its affiliates and  did not believe that the proposed
      terms recognized  the  fair value  of  the General  Partner's  independent
      economic  interest  in the  Partnership (on  a  going concern  basis). The
      Sponsors did not pursue this transaction because of the General  Partner's
      concerns.  See  "The  Conversion  --  Alternatives  to  the  Conversion --
      Conversion to Corporation with Cash and Stock."

    - CONVERSION BY  LIQUIDATION. The  Sponsors  also considered  a  transaction
      whereby  the  Partnership  would  be  converted  to  a  corporation  in  a
      transaction in which BAC Holders,  the General Partner and its  affiliates
      would, in exchange for their respective interests in the Partnership, each
      receive  a one-time  liquidating distribution  consisting of  cash and new
      common stock in the corporation surviving the transaction. Pursuant to the
      terms of  the Partnership  Agreement, liquidating  distributions would  be
      made  in  accordance  with partners'  capital  accounts.  Accordingly, the
      General Partner and its affiliates  would receive approximately 2% of  the
      cash  and  stock  distributed. (For  a  more detailed  description  of the
      procedures required to  effectuate a liquidation  of the Partnership,  see
      "The Conversion -- Alternatives to the Conversion --

                                       12
<PAGE>
      Liquidation  and Winding  Up of  the Partnership").  The Sponsors  did not
      propose this transaction to the  General Partner because of  uncertainties
      under  the Partnership  Agreement of  the Sponsors'  ability to consummate
      such a  transaction in  a timely  and tax  effective manner,  without  the
      recommendation  of  the General  Partner. The  Sponsors believed  that the
      General Partner's cooperation  in such  a transaction  would be  unlikely,
      since  its terms did not recognize the fair value of the General Partner's
      independent economic  interest  in the  Partnership  (on a  going  concern
      basis) and because it understood that the General Partner believed that it
      had  no duty to cooperate in a transaction which did not fairly value such
      economic interest and which the General Partner believed would  constitute
      a termination without cause of the General Partner. See "The Conversion --
      Existing Economic Interests of the Partners."

    - MANAGEMENT  BUYOUT OR OTHER  STRATEGIC SALE. The  Sponsors also considered
      proposing a management buyout or other strategic sale of the  Partnership.
      These  alternatives would  not provide  BAC Holders  with their continuing
      equity  interest  in  the  Partnership  and  might  not  be  able  to   be
      accomplished  on a tax-advantaged basis. The Sponsors did not propose such
      transactions to the  General Partner  because they believed  that, in  the
      long  term, the value of  the Common Stock would  exceed the value of cash
      and securities that would  be distributed to BAC  Holders in a  management
      buyout or other strategic sale. See "The Conversion -- Alternatives to the
      Conversion -- Management Buyout or Other Strategic Sale."

    - CONVERSION  PURSUANT TO SECTION 17.5 OF THE PARTNERSHIP AGREEMENT. Section
      17.5 of the Partnership Agreement permits the General Partner, in response
      to  the  tax  law  amendment  treating  publicly  traded  partnerships  as
      corporations,  in its sole discretion and  without any partner consent, to
      convert the  Partnership into  a  corporation in  whatever manner  and  by
      whatever  method the General  Partner determines. See  "Summary of Certain
      Provisions  of  the  Partnership   Agreement  --  Reorganization  of   the
      Partnership." Under such section of the Partnership Agreement, the General
      Partner  is required to  effectuate the conversion so  that, to the extent
      possible, the respective interests of BAC Holders and the General  Partner
      in  the assets  and income of  the successor  entity immediately following
      such conversion are substantially equivalent to such interests immediately
      prior thereto. The General Partner is required to appoint two  independent
      appraisers  to determine the value of  such interests. The General Partner
      decided not to proceed  with a conversion under  Section 17.5 in light  of
      the  proposal  by the  Sponsors which  it  believed was  fair to  both BAC
      Holders  and  the  General  Partner  and  which  involved  the  additional
      procedural  step of  being submitted to  BAC Holders  and Unaffiliated BAC
      Holders  for  approval.  See  "The  Conversion  --  Alternatives  to   the
      Conversion  --  Conversion Pursuant  to  Section 17.5  of  the Partnership
      Agreement."

    - LIQUIDATION AND WINDING UP OF THE PARTNERSHIP. The General Partner and the
      Sponsors rejected this alternative  because liquidation would not  provide
      BAC Holders and the General Partner with any continuing equity interest in
      the   Partnership  and  would   be  unlikely  to   be  accomplished  on  a
      tax-advantaged basis. The General Partner  would not be able to  determine
      with  any certainty prior  to dissolution whether and  at what price there
      would be  any buyers  for the  Partnership's assets.  The General  Partner
      believes  that in the  long term the  value of the  Partnership as a going
      concern, whether or not the Conversion is effected, to the General Partner
      and BAC Holders would exceed the  value of the proceeds of a  liquidation.
      See  "The Conversion -- Alternatives to  the Conversion -- Liquidation and
      Winding Up of the Partnership."

    - FUTURE ALTERNATIVES  AVAILABLE TO  POLARIS. The  General Partner  and  the
      Sponsors  believe that  other long-term  strategies available  to Polaris,
      such as diversification and acquisition of assets, or a management  buyout
      or  other strategic sale, are not  adversely affected (and, in some cases,
      should be  enhanced)  by  the  decision to  convert  from  partnership  to
      corporate  form and can be considered by  the Corporation in the future if
      the Conversion is consummated. No other

                                       13
<PAGE>
      transaction currently  is  being  considered  by  the  Partnership  as  an
      alternative  to the Conversion, although the  Partnership may from time to
      time explore  other alternatives  if the  Conversion is  not  consummated,
      including  a  conversion  pursuant  to  Section  17.5  of  the Partnership
      Agreement. See "The Conversion -- Alternatives to the Conversion -- Future
      Alternatives Available to Polaris."

ALLOCATION OF COMMON STOCK BETWEEN BAC HOLDER INTERESTS AND GENERAL PARTNER
INTERESTS

    Upon consummation of the Conversion, BAC Holders (including the Sponsors and
affiliates of  the General  Partner)  and holders  of previously  granted  First
Rights  will receive, in exchange for their BACs and upon exercise of such First
Rights, as the case may  be, 88.6% of the Common  Stock of the Corporation,  and
affiliates  of the General Partner will receive, in exchange for their interests
in the General  Partner and its  affiliates, the remaining  11.4% of the  Common
Stock  of the  Corporation, after  giving effect to  the exercise  of such First
Rights.

    The Exchange Ratio was agreed to after extended discussions and negotiations
beginning in early June  1994 between W. Hall  Wendel, Jr., the Chief  Executive
Officer of Polaris, and certain other members of the senior operating management
of  the  Operating Partnership,  who have  no economic  interest in  the General
Partner, and  representatives of  the General  Partner. The  Exchange Ratio  was
determined  with reference  to the  existing economic  interests of  the General
Partner and BAC Holders referred to above and the rights of the General  Partner
under  various provisions  of the Partnership  Agreement. Currently  and for the
foreseeable future, the General Partner and its affiliates receive 20.8% of  the
Partnership's  distributions and  $500,000 per year  in management  fees and are
entitled  to  certain   expense  reimbursements  from   the  Partnership.   Such
distributions  and fees  totalled approximately $10.3  million in  1993 and will
aggregate more than $11  million in 1994. These  arrangements and payments  will
end  upon consummation of  the Conversion. See "The  Conversion -- Background of
the Conversion" and "-- Existing Economic Interests of the Partners."

FAIRNESS OPINIONS

   
    On September 29, 1994 and the date hereof, each of Smith Barney Inc. ("Smith
Barney")  and  Dillon,  Read  &  Co.  Inc.  ("Dillon  Read")  delivered  to  the
Partnership  its written  opinion to  the effect  that, as  of the  date of such
opinion and based upon and subject to certain matters as stated therein, each of
the Exchange Ratio and the  consideration to be received  by BAC Holders in  the
Conversion  is fair, from a  financial point of view,  to such holders. The full
text of the  written opinions of  Smith Barney  and Dillon Read  dated the  date
hereof, which set forth the assumptions made, matters considered and limitations
on  the review  undertaken, are attached  as Annex B  and Annex C  to this Proxy
Statement and are  incorporated herein by  reference. BAC holders  are urged  to
read these opinions carefully in their entirety. See "The Conversion -- Fairness
Opinions."
    

RECOMMENDATION OF THE GENERAL PARTNER AND THE SPONSORS

    As  a  result of  their  review of  the  business, properties  and financial
condition of the Partnership, their review of the terms of the Conversion, their
analysis of the  benefits and  disadvantages of,  and the  alternatives to,  the
Conversion,  and their review of fairness  opinions from Smith Barney and Dillon
Read, each to the effect that each  of the Exchange Ratio and the  consideration
to  be received by BAC Holders in the Conversion is fair, from a financial point
of view, to BAC Holders, the General  Partner and the Sponsors believe that  the
Conversion  is fair to  BAC Holders and  recommend that BAC  Holders approve the
Conversion  Proposal.  See  "The  Conversion  --  Fairness  Opinions"  and   "--
Recommendation of the General Partner and the Sponsors."

SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

    In the Conversion, each BAC Holder will receive one share of Common Stock in
exchange  for each BAC. BAC Holders will not be subject to federal income tax on
the receipt of  the shares of  Common Stock and  their tax basis  in the  shares
received   will   be   determined   with  reference   to   the   tax   basis  of

                                       14
<PAGE>
their BACs immediately prior to the Conversion. BAC Holders are advised that the
precise tax  treatment to  an individual  BAC  Holder will  depend on  each  BAC
Holder's  particular situation. See "The Conversion" and "Certain Federal Income
Tax Considerations."

    The receipt by the Corporation of the BACs and other interests in connection
with the Conversion will not be taxable to the Corporation.

    For federal income tax purposes, the formation of the transitory partnership
(the "Transitory  Partnership") and  its  merger into  the Partnership  will  be
disregarded.  The Partnership will continue its existence, with the Corporation,
EIPCC and the General Partner as its sole partners. The merger of the  Operating
Partnership into the Partnership will not be a taxable event for the Partnership
or the Operating Partnership.

    As  a  corporation, the  Corporation's net  income,  which will  include the
Partnership's net income,  will be  subject to federal  corporation income  tax.
Distributions to shareholders, including the Proposed Distributions, if and when
made,  will  be  taxable  as  ordinary dividend  income  to  the  extent  of the
Corporation's earnings  and profits  and  will be  classified as  investment  or
portfolio  income. Sales  of shares  of Common Stock  which are  held as capital
assets will  produce  capital gain  or  loss  to the  selling  shareholder.  See
"Certain Federal Income Tax Considerations."

CONDITIONS TO THE CONVERSION

   
    The   Merger  Agreement  provides  that  neither  the  Corporation  nor  the
Partnership will be obligated to consummate the Conversion unless the  following
conditions  are satisfied or waived: (i)  approval of the Conversion Proposal by
the affirmative vote of the  holders of more than  50% of the outstanding  BACs,
and  by the affirmative vote of the holders  of more than 50% of the outstanding
BACs held by Unaffiliated BAC Holders, (ii)  listing of the Common Stock on  the
American  Stock  Exchange and  the Pacific  Stock  Exchange subject  to official
notice of issuance, (iii) the receipt of certain necessary government approvals,
following certain government  imposed waiting periods  (including under the  HSR
Act,  if applicable) and  the making of  certain necessary governmental filings;
(iv) effectiveness of a Registration Statement under the Securities Act of 1933,
as amended, relating to  the Common Stock  to be issued in  the Merger, and  the
absence  of any stop  order or proceeding  seeking a stop  order with respect to
such Registration  Statement;  (v) the  absence  of  any court  order  or  legal
restraint preventing consummation of the Merger; (vi) Appraisal Rights not being
sought with respect to more than 5% of the outstanding BACs (which condition may
be waived by the Corporation); (vii) no withdrawal of the Smith Barney or Dillon
Read  fairness opinions; (viii) the Corporation's receipt of a favorable opinion
of its special tax counsel, Skadden, Arps, Slate, Meagher & Flom, as to  certain
matters  related to the  tax free nature  of the Conversion  to BAC Holders; and
(ix) the Partnership's receipt  of a favorable opinion  of its special  counsel,
Stroock  & Stroock & Lavan, as to certain matters related to the tax-free nature
of the  Conversion  to  BAC  Holders  and  affiliates  of  the  General  Partner
transferring  their  partnership  interests  in  the  general  partners  of  the
Partnership and  the Operating  Partnership  and their  stock  of EIPCC  to  the
Corporation  (such  affiliates,  the  "Transferors").  See  "The  Conversion  --
Description of the Merger Agreement -- Conditions."
    

CONSEQUENCES IF CONVERSION PROPOSAL IS NOT APPROVED OR THE CONVERSION IS NOT
CONSUMMATED

    If the Conversion Proposal is not  approved by BAC Holders and  Unaffiliated
BAC  Holders, or if the Conversion is  not consummated for any other reason, the
Partnership expects to continue to operate as an ongoing business in its current
form and to continue making cash  distributions at recent historical levels.  As
discussed under "-- Reasons for the Conversion," if Polaris continues to operate
in  partnership form, BAC Holders may be  required to report taxable income from
the Partnership that  exceeds the amount  of its cash  distributions, and it  is
likely  that BAC Holders will experience, on a per BAC basis, increasing taxable
income without a corresponding  increase in cash  distributions. If current  tax
laws remain unchanged and if before 1998 the Partnership fails to take action to
cease  trading of  BACs, the  Partnership will be  treated as  a corporation for
federal income tax purposes. No other transaction currently is being  considered
by the Partnership as an alternative to the Conversion, although the Partnership
may   from  time  to  time  explore  other  alternatives,  including  conversion

                                       15
<PAGE>
pursuant to Section 17.5  of the Partnership Agreement.  See "The Conversion  --
Alternatives   to  the  Conversion"  and  "The  Conversion  --  Consequences  if
Conversion Proposal is Not Approved or the Conversion is Not Consummated."

MANAGEMENT AND COMPENSATION

    The Partnership is managed exclusively  by the General Partner. The  General
Partner  and its affiliates are entitled  to receive 20.8% of distributions from
the Partnership, which approximated $9.8 million in 1993 and which are  expected
to  approximate $10.6 million in 1994.  See "The Conversion -- Existing Economic
Interests of  the  Partners."  Since the  Partnership's  inception,  EIPCC,  the
managing  general  partner  of the  General  Partner,  has been  paid  an annual
management fee of $500,000 a year and been entitled to be reimbursed for certain
expenses. These arrangements and payments will end upon the consummation of  the
Conversion.

    As authorized by Minnesota law and provided by the Corporation's Articles of
Incorporation, the Corporation will be managed by and under the direction of its
Board  of Directors, any member of which  may be removed, with or without cause,
by the  holders of  75%  of the  voting power  of  all outstanding  shares  then
entitled  to vote at an election of  directors. Pursuant to the voting agreement
between Victor K. Atkins, Jr., a general partner of the General Partner and  the
President  of EIPCC, the managing general partner of the General Partner, and W.
Hall  Wendel,  Jr.  described  under  "The  Conversion  --  Background  of   the
Conversion,"  Mr. Atkins has agreed that, for so long as he owns no less than 3%
of the  outstanding voting  securities of  the Corporation,  he will  vote  such
securities  in favor of the Corporation's nominees  for election to the Board of
Directors of the Corporation.

    W. Hall Wendel,  Jr., the Operating  Partnership's Chief Executive  Officer,
who owns approximately 5.4% of outstanding BACs, and other members of the senior
operating  management of the Operating Partnership,  will become the officers of
the Corporation  at the  time of  the Conversion  and will  continue to  operate
Polaris after the Conversion. See "Management."

    The  Corporation will  assume the Operating  Partnership's existing employee
benefit plans. Except as required to  accommodate the change to corporate  form,
all  of the existing employee benefit plans of the Partnership and the Operating
Partnership  are  expected  to  be  adapted  for  use  by  the  Corporation   on
substantially  the same terms. Without limiting the generality of the foregoing,
upon the Conversion, each of the outstanding First Rights representing the right
to receive BACs  under an employee  benefit plan, whether  vested or unvested  ,
will  be  deemed to  constitute  the right  to receive,  on  the same  terms and
conditions as were applicable under such First Rights, the same number of shares
of Common Stock as the holder of  such First Rights would have been entitled  to
receive  pursuant to the Merger  had such holder received  BACs upon exercise of
such First Rights immediately prior to the Merger.

VOTING AT THE SPECIAL MEETING

   
<TABLE>
<S>                            <C>
The Special Meeting..........  The Special  Meeting  will  be held  at  Holiday  Inn  West,
                               Highway  394, Minneapolis,  Minnesota on  Thursday, December
                               22, 1994 at 9:00 a.m., local time.
Voting.......................  Each BAC entitles the holder  thereof to one vote. Only  BAC
                               Holders  of record on November  21, 1994 (the "Record Date")
                               are entitled  to vote  at  the Special  Meeting and  at  any
                               adjournment or postponement thereof.
BACs Outstanding.............  On the Record Date, 16,010,441 BACs were outstanding.
Approval Required............  The Conversion Proposal will require (i) the approval of BAC
                               Holders  holding a majority  of the BACs  outstanding on the
                               Record Date  and  (ii)  the  approval  of  Unaffiliated  BAC
                               Holders  holding a majority of BACs  held by such persons on
                               the Record Date. The Sponsors and affiliates of the  General
                               Partner,  owning,  in  the aggregate,  approximately  14% of
                               outstanding BACs,  have advised  the Partnership  that  they
                               will vote "FOR" the Conversion Proposal.
</TABLE>
    

                                       16
<PAGE>
APPRAISAL RIGHTS

    BAC  Holders who have not voted in favor of, or consented in writing to, the
Conversion  Proposal  will  be  entitled  to  contractual  rights  of  appraisal
("Appraisal  Rights")  that  are  intended  to  be  substantially  identical  to
statutory rights of appraisal that  stockholders of a Delaware corporation  have
under  the Delaware  General Corporation Law.  BAC Holders  who demand Appraisal
Rights will not be entitled  to receive any portion  of the consideration to  be
received  in the Merger, but  will have the right to  receive the value of their
interests in the  Partnership as  determined in  a separate  proceeding and  any
distribution  declared by the Partnership prior  to the Conversion provided they
were BAC Holders on the record date for such distribution. It is a condition  to
the  consummation of the  Merger that Appraisal  Rights not be  exercised by BAC
Holders holding BACs representing more than 5% of the outstanding BACs (although
this condition  may  be waived  by  the  Corporation). See  "The  Conversion  --
Description  of  the  Merger  Agreement  --  Conditions."  For  a  more complete
description of the procedures that must be followed to perfect Appraisal Rights,
see "Appraisal Rights."

LIST OF BAC HOLDERS

    A list of all registered BAC Holders  of the Partnership may be obtained  by
any  BAC Holder from the Partnership upon written request to the Partnership, at
1225 Highway  169  North,  Minneapolis,  Minnesota  55441,  Attention:  John  H.
Grunewald, Executive Vice President, Finance and Administration, and at such BAC
Holder's sole cost and expense, provided that such request is for a purpose that
is reasonably related to such BAC Holder's interest in the Partnership.

THE PARTNERSHIP AND THE CORPORATION

    The  Partnership  was  formed  under the  Delaware  Revised  Uniform Limited
Partnership Act for the purpose of acquiring, through the Operating Partnership,
substantially  all  of  the  business  and  assets  of  Northwestern   Equipment
Manufacturing  Company  (then known  as  Polaris Industries  Inc.),  a Minnesota
corporation ("Northwestern"), in  1987. Concurrently with  the acquisition,  the
Partnership  completed  a public  offering of  $110 million  of BACs.  The funds
received from the public offering were used by the Partnership to acquire an 80%
undivided interest  in substantially  all  of the  assets of  Northwestern.  The
remaining  20% was contributed  by Northwestern to  the Operating Partnership in
exchange for additional BACs and Class  B BACs (which have since been  converted
into BACs). See "The Conversion -- The Partnership."

    The  primary objectives of the Partnership  are: (i) cash distributions from
the operations of  the Partnership sufficient  to provide BAC  Holders with  not
less  than a 12% cumulative, noncompounded annual return on the initial purchase
price of the BACs (as reduced  by any distributions from sales and  refinancings
of  the property of the  Partnership), (ii) capital appreciation  as a result of
expanding distributable cash flow, and (iii) preservation and protection of  the
Partnership's  capital.  While  the Partnership  believes  that it  has  to date
achieved  these  objectives,  the  Partnership  has  no  present  intention   of
increasing  the present  level of cash  distributions in  the foreseeable future
even if  there  is  an  increase  in taxable  income.  See  "Market  Prices  and
Distributions."

    Polaris   designs,  engineers  and  manufactures  snowmobiles,  all  terrain
vehicles ("ATVs") and motorized water scooters also known as personal watercraft
("PWC") and markets these products,  together with related accessories,  through
dealers  and distributors located  principally in the  United States, Canada and
Europe. Polaris  designs  its  products  to  provide  superior  performance  and
convenience at competitive prices.

    Total  revenues  have  grown  from approximately  $243  million  in  1989 to
approximately $528 million in  1993 (in excess of  a 20% compound growth  rate).
Operating  income has grown from approximately  $26 million to approximately $53
million over the same period (in excess of a 19% compound growth rate). For  the
nine  months ended September 30, 1994 total revenues increased approximately 52%
over the first nine months of  1993, while operating income increased more  than
50% during the same period.

                                       17
<PAGE>
    Polaris' principal product lines include:

        SNOWMOBILES:   Polaris  was   founded  in   the  mid-fifties   as  a
    manufacturer of  a "gas  powered sled,"  the forerunner  of the  Polaris
    snowmobile.  Polaris  has the  largest share  of the  snowmobile market.
    Polaris produces a full line of snowmobiles including utility,  economy,
    high  performance and competition  models with list  prices for the 1994
    model year ranging from approximately $2,450 to $8,150. Polaris believes
    its snowmobile has a long standing reputation for quality, dependability
    and  performance.  Polaris   also  believes  that   industry  sales   of
    snowmobiles  were approximately 171,000 units for the season ended March
    31, 1994, representing a 10% increase  in units sold worldwide over  the
    prior year.

        ALL  TERRAIN VEHICLES: Polaris  also manufactures four-and six-wheel
    ATVs with balloon-style  tires designed for  off-road use in  recreation
    and  for utility purposes on farms,  ranches and construction sites. Its
    line of ATVs consists of ten models with list prices for the 1994  model
    year  ranging from approximately $2,900 to  $6,200. Polaris ATVs offer a
    number of features developed  by Polaris which  it believes provide  for
    enhanced  control and stability. Polaris  estimates worldwide demand for
    ATVs reached approximately 247,000  units in calendar 1993  representing
    an increase of approximately 13% over calendar 1992. Polaris believes it
    was  the only  major ATV  manufacturer to  chart a  material increase in
    market share in 1993.

   
        PERSONAL WATERCRAFT: Polaris' most  significant new product was  the
    introduction  in 1992 of  the Polaris PWC. PWC  are sit-down versions of
    water scooter  vehicles designed  for  principally recreational  use  on
    lakes,  rivers, bays and oceans. List prices for Polaris PWC ranged from
    $5,500 to $6,300  for the 1994  model year. Polaris  estimates that  the
    worldwide  market for  PWC was approximately  122,000 units  in 1993, an
    increase of 27%  over 1992. Polaris  believes it is  well positioned  to
    take  advantage of the opportunities in this growing market by utilizing
    its established reputation for quality and performance through its  more
    than 1,200 PWC dealers worldwide.
    

    Introduction  of ATVs and PWC  has significantly reduced Polaris' dependence
on a single  product line. In  1989 sales  of snowmobiles accounted  for 67%  of
total revenues. By 1993 sales of snowmobiles accounted for 50% of total revenues
with  sales of PWC  (9%), ATVs (26%)  and clothing, accessories  and parts (15%)
accounting for the rest. In addition to reducing dependence on a single  product
line,  the introduction of PWC and ATVs has improved Polaris' plant utilization,
reducing seasonal and employee downtime and improved Polaris' penetration of its
dealer network by providing dealers with Polaris products to sell throughout the
year.

    Polaris currently employs  approximately 2,650 full  and part time  workers,
principally  in its design and manufacturing  facility in Roseau, Minnesota, and
its manufacturing facility in Osceola, Wisconsin. It also recently entered  into
a  lease, with an  option to purchase,  of an existing  facility in Spirit Lake,
Iowa which  will be  converted  to PWC  production,  with snowmobiles  and  ATVs
produced  in the  off season.  Polaris maintains  its executive  offices at 1225
Highway 169 North, Minneapolis, Minnesota 55441 and the telephone number at that
address is (612) 542-0500.

    The Corporation is a  Minnesota corporation which has  been newly formed  by
certain  of  the  Sponsors  in connection  with  the  Conversion.  The principal
executive offices of  the Corporation  are located  at 1225  Highway 169  North,
Minneapolis,  Minnesota 55441, and the telephone number at that address is (612)
542-0500.

                                       18
<PAGE>
                   SUMMARY OF SELECTED FINANCIAL INFORMATION
          (IN THOUSANDS, EXCEPT PER BAC AND PRO FORMA PER SHARE DATA)

   
<TABLE>
<CAPTION>
                                                                                                                 NINE MONTHS ENDED
                                                                       YEARS ENDED DECEMBER 31,                    SEPTEMBER 30,
                                                         ----------------------------------------------------   --------------------
                                                           1989       1990       1991       1992       1993       1993       1994
                                                         --------   --------   --------   --------   --------   --------   ---------
<S>                                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
STATEMENTS OF OPERATIONS DATA
  Sales...............................................   $242,618   $296,147   $297,677   $383,818   $528,011   $385,153   $ 584,725
                                                         --------   --------   --------   --------   --------   --------   ---------
  Income before provision for income taxes............     26,865     33,010     33,430     39,681     53,270     35,988      56,618
  Provision for Income Taxes..........................        675      1,647      1,968      4,980      7,457      4,546       6,007
                                                         --------   --------   --------   --------   --------   --------   ---------
  Net income..........................................   $ 26,190   $ 31,363   $ 31,462   $ 34,701   $ 45,813   $ 31,442   $  50,611
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
  Net income applicable to limited partners (1).......   $ 24,701   $ 24,840   $ 24,918   $ 27,483   $ 36,284   $ 24,902   $  40,084
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
  Net income per BAC..................................   $   1.65   $   1.65   $   1.65   $   1.73   $   2.25   $   1.54   $    2.46
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
UNAUDITED PRO FORMA INFORMATION (2)
  Income before provision for income taxes............   $ 26,865   $ 33,010   $ 33,430   $ 39,681   $ 51,539   $ 35,619   $  53,646
  Provision for income taxes..........................      9,670     11,885     12,035     14,285     18,555     12,825      19,313
                                                         --------   --------   --------   --------   --------   --------   ---------
  Net income..........................................   $ 17,195   $ 21,125   $ 21,395   $ 25,396   $ 32,984   $ 22,794   $  34,333
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
  Net income per share................................   $   1.01   $   1.23   $   1.25   $   1.41   $   1.81   $   1.25   $    1.86
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
  Weighted average number of common and common
   equivalent shares outstanding (3)..................     17,088     17,136     17,162     17,968     18,215     18,225      18,415
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
CASH FLOW DATA
  Cash flow from operating activities.................   $ 44,447   $ 54,782   $ 46,642   $ 55,316   $ 79,323   $ 43,116   $  77,801
  Cash purchases of property and equipment............      7,065      7,158     15,988     12,295     18,126     13,055      20,544
  Cash distributions to partners......................     32,514     42,582     42,581     44,025     46,493     34,641      37,322
  Cash distributions per BAC..........................       2.27       2.50       2.50       2.50       2.51       1.88        1.89
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
UNAUDITED PRO FORMA INFORMATION (2 and 4)
  Dividends...........................................                                                 10,925      8,193       8,193
  Dividends per share.................................                                                   0.60       0.45        0.45
  Special cash distributions..........................                                                104,877     69,918
  Special cash distributions per share................                                                   5.76       3.84
                                                         --------   --------   --------   --------   --------   --------   ---------
                                                         --------   --------   --------   --------   --------   --------   ---------
</TABLE>
    

   
<TABLE>
<CAPTION>
                                                                                                     SEPTEMBER 30,
                                                          DECEMBER 31,                    -----------------------------------
                                        ------------------------------------------------                           1994
                                          1989      1990      1991      1992      1993      1993      1994     PRO FORMA (5)
                                        --------  --------  --------  --------  --------  --------  --------  ---------------
<S>                                     <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
BALANCE SHEET DATA
  Cash and cash equivalents...........  $ 27,886  $ 32,025  $ 20,098  $ 19,094  $ 33,798  $ 14,514  $ 53,733     $  7,931
  Net increase (decrease) in cash and
   cash equivalents...................    12,287     4,139   (11,927)   (1,004)   14,704    (4,580)   19,935      (25,867)
  Current assets......................    60,344    66,893    59,200    74,999   109,748   110,705   178,443      144,641
  Total assets........................   137,628   138,704   135,509   146,681   180,548   181,030   250,377      246,575
  Total liabilities...................    38,875    46,602    52,646    69,054    98,055   102,327   149,399      230,399
  General Partner's capital
   (deficit)..........................      (419)   (2,753)   (5,066)   (7,105)   (7,397)   (7,921)   (4,817)     --
  Limited Partners' capital...........    99,172    94,855    87,929    84,732    89,890    86,624   105,795      --
  Stockholders' equity (6)............     --        --        --        --        --        --        --          16,176
  Net book value per weighted average
   BAC and BAC equivalents............      6.59      6.13      5.50      4.89      5.12      4.88      6.19      --
  Net book value per share (3 and
   6).................................     --        --        --        --        --        --        --            0.88
<FN>
- ----------------------------------------
(1)  Represents net  income  to BAC  Holders  after allocation  to  the  General
     Partner  and its affiliates and therefore does not represent all of the net
     income of the Partnership.
(2)  The unaudited pro forma data are  derived from the financial statements  of
     the  Partnership as if the  Conversion had occurred on  January 1, 1993 for
     the statements of operations  and cash flows data.  Such periods have  been
     adjusted to eliminate the General Partner's annual fee of $500,000. The pro
     forma  statements  of operations  and cash  flows  exclude the  $11 million
     estimated costs of the Conversion, which will be recognized at the time  of
     the  Conversion. Adjustments have been made  to the pro forma statements of
     operations and  cash flows  to provide  for interest  expense on  long-term
     borrowings  of approximately $70,000,000 anticipated  to be incurred in the
     third and fourth quarters of 1993, the  year of the special pro forma  cash
     distributions.  Further, the  pro forma  statements of  operations and cash
     flows assume  the additional  debt  will be  repaid  at $8.75  million  per
     quarter,  commencing  in 1994,  the year  following  the pro  forma special
     distributions. All periods have  been adjusted to  reflect a provision  for
     income  taxes calculated at  a rate of  36%. Such rate  reflects a combined
     federal and state statutory rate,  net of related research and  development
     credits  and anticipated foreign sales corporation benefits. See Note 10 of
     Notes to Financial Statements for additional information regarding the  pro
     forma adjustments.
(3)  Pro  forma weighted average  number of common  and common equivalent shares
     outstanding and the number of shares of common stock utilized to  calculate
     the  unaudited pro  forma net  book value per  share includes  shares to be
     issued to  BAC  Holders,  to  affiliates of  the  General  Partner  and  to
     employees  in connection with First Rights granted but not yet converted to
     BACs.
(4)  Pro forma stockholder dividends, special cash distributions and the related
     per share  amounts  reflect the  Sponsors'  intent to  recommend  that  the
     Corporation's  Board  of Directors  establish an  initial dividend  rate of
     $0.15 per  share  per quarter,  and  pay three  special  nonrecurring  cash
     distributions,  each of  $1.92 per share,  payable during each  of the last
     three quarters of 1995.  The Corporation is under  no legal or  contractual
     obligation  to make  such distributions and  dividends, and  the timing and
     amount of future distributions and dividends  will be at the discretion  of
     the  Board of Directors and will depend,  among other things, on the future
     after tax earnings, operations,  capital requirements, borrowing  capacity,
     and financial condition of the Corporation and general business conditions.
     There  can be  no assurance that  such distributions and  dividends will be
     adopted or maintained by the Corporation.
(5)  The unaudited pro forma balance sheet  data are derived from the  financial
     statements  of the  Partnership as if  the Conversion  and anticipated cash
     distributions and dividends for the year following the Conversion  occurred
     on  September 30,  1994. Estimated deferred  tax assets  resulting from the
     Conversion transaction  of  $42 million  have  been recorded  and  will  be
     recalculated   when  the  Conversion  is  completed  and  actual  temporary
     differences can be determined. The change  in deferred tax assets could  be
     material.  The $11 million estimated costs  of the Conversion were recorded
     at  the  balance  sheet  date  as  an  accrued  expense.  Anticipated  cash
     distributions  and  dividends on  Polaris Industries  Inc. common  stock of
     $115.8 million for the year following  the Conversion were recorded at  the
     balance  sheet date, resulting in a deficit  in retained earnings, on a pro
     forma basis. See footnote (4). The  approximate $70 million expected to  be
     borrowed  in connection  with the  proposed special  cash distributions has
     also been recorded at the balance sheet date.
(6)  Pro forma stockholders'  equity includes estimated  amounts related to  the
     recording of anticipated cash distributions and dividends on Polaris Indus-
     tries  Inc.  common stock  of  $115.8 million  for  the year  following the
     Conversion, expenses for  the transaction  and deferred  tax assets,  which
     will  be recalculated when the Conversion is completed and actual temporary
     differences can be determined. The change  in deferred tax assets could  be
     material.  Pro forma net book value per  share is adjusted for shares to be
     issued to affiliates of the General Partner and for shares to be issued for
     First Rights granted but  not yet converted to  BACs. For purposes of  this
     transaction, assets and liabilities will be recorded at historical cost.
</TABLE>
    

                                       19
<PAGE>
   
                                     [LOGO]
                             ORGANIZATIONAL CHARTS
    
   
BEFORE CONVERSION
    

   
                            [CHART]

AFTER CONVERSION
    

                                    [CHART]

                                       20
<PAGE>
                      RISK FACTORS, CONFLICTS OF INTEREST
                            AND OTHER CONSIDERATIONS

    BEFORE  COMPLETING  THE  ENCLOSED  FORM OF  PROXY,  EACH  BAC  HOLDER SHOULD
CAREFULLY READ  THIS  ENTIRE PROXY  STATEMENT,  INCLUDING THE  ANNEXES  AND  THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE, AND SHOULD GIVE PARTICULAR ATTENTION
TO THE FOLLOWING CONSIDERATIONS.

   RISKS, CONFLICTS OF INTEREST AND CONSIDERATIONS RELATED TO THE CONVERSION

ADVERSE TAX IMPLICATIONS

    A  primary disadvantage of converting to  corporate form is tax related. The
Corporation will pay  taxes on  its taxable  income, and  shareholders will  pay
taxes on after-tax earnings of the Corporation distributed to them as dividends.
In  contrast, the Partnership generally pays no  income tax and its partners pay
tax on their  distributive share (whether  or not actually  distributed) of  the
Partnership's  taxable income. See "Selected  Historical and Pro Forma Financial
Information -- Unaudited Pro Forma Information" for the pro forma provision  for
income  taxes for fiscal year  1993 had Polaris been  operating as a corporation
throughout such year.  Under current law,  the Partnership would  be taxed as  a
corporation after December 31, 1997 if the BACs continued to be actively traded.
The  General Partner has participated  in efforts to have  the December 31, 1997
deadline extended or eliminated.  To date such  efforts have been  inconclusive.
Such efforts, in which the General Partner has ceased to participate, may or may
not  be successful in the future. See "Certain Federal Income Tax Considerations
- -- Partnership Status and Taxation of the Partnership."

POTENTIAL CONFLICTS OF INTEREST

   
    DETERMINATION OF EXCHANGE RATIO.  There is a potential conflict of  interest
between the General Partner and BAC Holders with respect to the determination of
the  Exchange Ratio in  the Conversion. The Exchange  Ratio was determined after
extended discussions and negotiations between affiliates of the General  Partner
and  W. Hall Wendel, Jr. and other members of the Sponsors with reference to the
existing economic  interests of  the General  Partner and  BAC Holders  and  the
rights  of  the  General Partner  under  various provisions  of  the Partnership
Agreement. BAC Holders were not separately represented in such discussions,  and
the interests of BAC Holders may differ from those of the representatives of the
Sponsors who negotiated the Exchange Ratio with the General Partner.
    

   
    Since  the Sponsors  have no  economic interest  in the  General Partner and
collectively own approximately 9.1% of the outstanding BACs, their interests  in
the  determination of the Exchange Ratio should be closely aligned with those of
BAC Holders generally. However,  Victor K. Atkins, Jr.  and W. Hall Wendel,  Jr.
have also entered into an agreement which provides, among other matters, that as
long  as he owns  3% of the outstanding  Common Stock, Mr.  Atkins will vote his
shares of Common Stock  in favor of the  Corporation's nominees for election  to
its  Board of  Directors. Mr.  Wendel is  expected to  be nominated  to serve as
Chairman of  the  Board  of  Directors of  the  Corporation.  Accordingly,  such
agreement  provides  a benefit  to the  Sponsors  that is  not available  to BAC
Holders generally. This may  present a conflict of  interest to the Sponsors  in
recommending the Conversion to BAC Holders.
    

   
    REDUCTION  IN LIABILITY.  As  a result of the  Conversion, affiliates of the
General Partner will benefit from  the elimination of their potential  liability
for  obligations and  liabilities of Polaris  after the  Conversion. Because BAC
Holders are not liable for obligations  and liabilities of the Partnership,  BAC
Holders  will not realize this  benefit from the Conversion.  This may present a
conflict of interest to  the General Partner in  recommending the Conversion  to
BAC Holders.
    

    For  additional information  concerning the potential  conflicts of interest
among the General Partner, the Sponsors  and BAC Holders in the Conversion,  see
"The Conversion -- Background of the Conversion," "-- Fairness Opinions" and "--
Recommendation of the General Partner and the Sponsors."

                                       21
<PAGE>
NO INDEPENDENT REPRESENTATION

    The  Conversion was proposed by certain  of the Sponsors and negotiated with
the  General  Partner  without   independent  representation  of  BAC   Holders.
Independent  representation on behalf of BAC Holders might have caused the terms
of the Conversion  to be  different in  material respects  from those  described
herein.  In addition, Dillon  Read and Smith  Barney, the independent investment
banking firms that were  retained on behalf of  the Partnership to render  their
opinions  as to the  fairness, from a  financial point of  view, of the Exchange
Ratio and the  consideration to be  received in the  Conversion by BAC  Holders,
were not separately selected by BAC Holders.

NO ASSURANCE OF FUTURE DISTRIBUTIONS

    The  Corporation is  under no  legal or  contractual obligation  to make the
Proposed Distributions  and  the  timing  and amount  of  future  dividends  and
distributions  will be  at the  discretion of  the Board  of Directors  and will
depend, among  other  things,  on the  future  after-tax  earnings,  operations,
capital  requirements,  borrowing  capacity,  and  financial  condition  of  the
Corporation and general business conditions.  In addition, the revolving  credit
line  of  the Partnership,  which  will be  in  place immediately  following the
Conversion, is insufficient in amount to fund, and contains restrictions on  the
ability  of the Partnership to borrow  for funding the Proposed Distributions if
such distributions are declared  by the Board of  Directors of the  Corporation.
Although  the Corporation believes it will be able to secure additional lines of
credit (or  waivers with  respect to  the  existing credit  line) on  terms  and
conditions  acceptable to the Corporation, the Corporation has no commitment for
such lines of credit and  does not intend to seek  such commitment prior to  the
effective  date of the  Conversion. Accordingly, there can  be no assurance that
the foregoing dividends or  distributions will be adopted  or maintained by  the
Corporation.

EFFECTS OF ADDITIONAL INDEBTEDNESS

    Incurrence  of  additional  indebtedness  by the  Corporation,  to  fund the
Proposed Distributions  or  otherwise,  could  have  important  consequences  to
investors  in  the Corporation's  securities, including  the following:  (i) the
Corporation's ability  to  obtain additional  financing  in the  future  may  be
limited,  (ii) a  portion of the  Corporation's income from  operations and cash
flow will  be  dedicated  to  the  payment of  principal  and  interest  on  its
indebtedness,  thereby  reducing  the  funds available  to  the  Corporation for
operations and (iii) the agreements relating  to the indebtedness are likely  to
contain  financial and other  restrictive covenants, the  failure to comply with
which may result in  an event of  default which, if not  cured or waived,  could
adversely   affect  the  Corporation.  There  can   be  no  assurance  that  the
Corporation's future operating  results will  be sufficient for  payment of  the
Corporation's indebtedness and other commitments.

UNCERTAINTY REGARDING MARKET PRICE FOR COMMON STOCK

   
    At  present, there  is no  trading market for  the Common  Stock. The Common
Stock is expected to be  listed on the American  Stock Exchange and the  Pacific
Stock  Exchange under the trading  symbol "SNO." There can  be no assurance that
holders of the  Common Stock  will be  able to  sell their  shares at  favorable
prices  or  that the  per  share trading  prices for  the  Common Stock  will be
comparable to  the  trading  prices  for  BACs  prior  to  consummation  of  the
Conversion. A large number of shares of Common Stock may be traded by former BAC
Holders  immediately following completion of the Conversion for various reasons,
including  in  connection  with   the  anticipated  transition  from   primarily
income-oriented  to principally growth-oriented investors.  If a large number of
holders of Common Stock were to offer their shares for sale, in the absence of a
corresponding demand for Common Stock  from institutional and retail  investors,
the  market  price  of the  Common  Stock could  decline  substantially. Various
anti-takeover  provisions  which  would  apply  to  the  Corporation  after  the
Conversion  could also have a negative effect  on the market price of the Common
Stock. See "-- Provisions That May Discourage Changes of Control" below.
    

CHANGES IN OWNERSHIP RIGHTS

    As a  result  of  the  Conversion, BAC  Holders  will  lose  certain  rights
associated  with their ownership  of BACs, including,  in particular, receipt of
future quarterly distributions from the Partnership of

                                       22
<PAGE>
Net Cash from Operations (after giving effect to appropriate reserves), and will
acquire instead  rights associated  with  their ownership  of shares  of  Common
Stock. A comparison of these rights and related factors, which may relate to, or
be  inconsistent with,  investment objectives  of BAC  Holders, is  set forth in
"Comparative Rights of BAC Holders and Holders of Common Stock."

CHANGES IN VOTING RIGHTS

    The Conversion will effect a change in the voting rights of BAC Holders. BAC
Holders are entitled to one vote per BAC on matters submitted to BAC Holders for
a vote, including  amendments to  the Partnership Agreement,  mergers and  other
extraordinary transactions. Most amendments to the Partnership Agreement require
the  approval of BAC Holders who own two-thirds of outstanding BACs. The General
Partner is not permitted to vote  its general partner interest on matters  voted
upon  by  BAC Holders,  although the  General Partner's  consent is  required to
effect any merger of  the Partnership under Delaware  law and for certain  other
matters  to  be voted  on by  BAC Holders.  The Sponsors  and affiliates  of the
General  Partner  in  the  aggregate  beneficially  own  approximately  14%   of
outstanding  BACs and have the right to vote  such BACs on matters voted upon by
BAC Holders.

    Each share of  Common Stock received  upon the Conversion  will entitle  its
holder  to cast one vote on matters as  to which voting is permitted or required
by Minnesota law. Generally, matters requiring the vote of the Common Stock  are
approved  by the  affirmative vote of  the holders  of a majority  of the Common
Stock at a  meeting of shareholders  at which  a quorum is  present, except  for
removal   of  directors,   class  voting   under  certain   situations  and  the
anti-takeover provisions of Minnesota law.  Unlike the general partner  interest
now held by the General Partner, the Common Stock to be received in exchange for
the  general  partner interest  and interests  in its  affiliates (approximately
11.4% of the  outstanding shares  of Common Stock,  after giving  effect to  the
exercise  of previously  granted First Rights),  together with  the Common Stock
received in exchange  for the  BACs already held  by affiliates  of the  General
Partner,  will  be entitled  to vote  on all  matters submitted  to shareholders
together with  all other  outstanding shares  of Common  Stock. Mr.  Atkins  has
agreed  that for so long as  Mr. Atkins owns no less  than 3% of the outstanding
Common Stock of  the Corporation, he  will vote  his shares of  Common Stock  in
favor  of the  Corporation's nominees  for election  to its  Board of Directors.
However, the General Partner will not have any exceptional veto or class  voting
rights.  See "The Conversion  -- Background of  the Conversion" and "Comparative
Rights of BAC Holders and Holders of Common Stock -- Voting Rights."

ELIMINATION OF GENERAL PARTNER LIABILITY FOR POLARIS OBLIGATIONS

    Affiliates of the General Partner will  benefit from the elimination of  its
liability for obligations and liabilities of Polaris after the Conversion. Under
Delaware  law, as a general  partner of the Partnership,  the General Partner is
liable to  the  extent of  its  assets for  the  debts and  obligations  of  the
Partnership.  If the  Conversion is consummated,  the affiliates  of the General
Partner will be shareholders of the Corporation and will not have liability  for
the  debts and  obligations of the  Corporation. See "--  Potential Conflicts of
Interest" above.

CHANGES IN FIDUCIARY OBLIGATIONS

    A general partner  in a limited  partnership owes fiduciary  duties of  good
faith,  loyalty and  fair dealing to  all the limited  partners. Under Minnesota
law, a director of a  corporation must discharge the  duties of the position  of
director  in good faith, in  a manner the director  reasonably believes to be in
the best interests of the corporation,  and with the care an ordinarily  prudent
person  in  a  like  position would  exercise  under  similar  circumstances. In
addition, the  Corporation's  Articles  of  Incorporation  limit  the  potential
liabilities  of the directors  for breach of  their fiduciary duties. Therefore,
situations may occur in  which owners of Common  Stock of the Corporation  would
have  less recourse, on the basis of breach of fiduciary duty, against directors
of the Corporation  than they would  have had against  the General Partner.  See
"Comparative  Rights of  BAC Holders  and Holders  of Common  Stock -- Fiduciary
Duties" and "-- Limits on Management's Liability."

                                       23
<PAGE>
FUTURE DILUTION OF COMMON STOCK

    The Corporation  will  be  permitted  to issue  additional  equity  or  debt
securities,  including shares of preferred stock. The Corporation has no present
intention to  issue additional  equity securities  other than  shares of  Common
Stock  to  be issued  in  connection with  assumption  and adaption  of employee
benefit plans  by  the  Corporation  on substantially  the  same  terms  as  are
currently in effect in the Partnership. Issuances of additional shares of Common
Stock  or shares  of preferred  stock could  adversely affect  the shareholders'
equity interest in the Corporation and the market price of the Common Stock, and
the interests in the assets, liabilities, cash flow and results of operations of
the Corporation represented by the shares of Common Stock issued pursuant to the
Conversion may be  diluted. Issuances of  additional shares may  be more  likely
after  the Conversion because the General  Partner and the Sponsors believe that
one of the advantages of the Conversion  is that the corporate form will  expand
the  potential  investor base,  provide Polaris  with  greater access  to equity
markets and permit its use of capital stock as acquisition currency. Holders  of
Common  Stock  will not  be  entitled to  preemptive  rights. Under  the current
partnership structure, the General Partner has  the right to cause the  issuance
of  authorized but unissued BACs which dilute  the BAC Holders' interest but not
the General Partner's interest.

COSTS OF CONVERSION

    Transaction  costs  of  approximately  $9  million  will  be  paid  by   the
Partnership,  whether  or  not the  Conversion  is completed.  An  additional $2
million is expected  to be paid  by the  Partnership only if  the Conversion  is
consummated.  For a more detailed discussion  of the costs and expenses expected
to be incurred, see "The Conversion -- Costs of the Conversion."

RISKS FOR NONAPPROVING BAC HOLDERS

    If the Conversion Proposal  is approved, all BAC  Holders (other than  those
who  exercise Appraisal Rights) will be bound by such approval even though they,
individually,  may  not  have  voted  in  favor  of  the  Conversion   Proposal.
Non-approving  BAC Holders who exercise Appraisal Rights will not be entitled to
receive shares of Common Stock. See "Appraisal Rights."

PROVISIONS THAT MAY DISCOURAGE CHANGES OF CONTROL

    The Corporation's Articles of Incorporation and By-laws, and Minnesota  law,
contain  certain  provisions that  may have  the  effect of  encouraging persons
considering an acquisition or takeover of the Corporation to negotiate with  the
Board of Directors rather than to pursue non-negotiated acquisitions or takeover
attempts  that  a shareholder  might consider  to be  in the  shareholders' best
interest, including offers that might result in a premium over market price  for
the  Common Stock.  These provisions  include a  classified board  of directors,
authorization for the Board of Directors to issue classes or series of preferred
stock,  super-majority  provisions  relating  to  removal  of  directors  and  a
prohibition  on shareholder action  by less than  unanimous written consent. See
"Description of Capital Stock -- Anti-takeover Provisions."

    The Partnership Agreement contains many provisions which vest in the General
Partner the right  to manage the  business of the  Partnership and restrict  the
right  of BAC  Holders to  approve transactions  of a  type which  generally are
subject to shareholder approval  in the case of  a corporation. The  Partnership
does  not hold annual meetings of BAC Holders and does not permit BAC Holders to
vote on many of the matters upon  which shareholders of the Corporation will  be
permitted to vote.

                         RISKS RELATED TO THE BUSINESS

    The following risk factors are relevant to an investment in Polaris, whether
in  partnership or corporate form. See  "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."

PRODUCT SAFETY AND REGULATION

    Snowmobiles, all-terrain vehicles ("ATVs")  and personal watercraft  ("PWC")
are  motorized vehicles that may be operated at high speeds and in a careless or
reckless manner. Accidents involving

                                       24
<PAGE>
property damage, personal injuries and deaths  occur in the use of  snowmobiles,
ATVs and PWC. With respect to ATVs, the Consumer Products Safety Commission (the
"CPSC") has found a greater incidence of such occurrences with three-wheel ATVs.
Polaris  presently manufactures only four-wheel and six-wheel ATVs. The CPSC has
conducted  investigations  regarding   the  safety   of  ATVs,   and  has   made
recommendations   regarding   their   regulation,   marketing   and   use.  Such
recommendations include that the ATV  industry voluntarily cease marketing  ATVs
intended  for use  by children  under 12  years of  age; that  warning labels be
placed on  ATVs intended  for use  by adults,  stating that  such ATVs  are  not
recommended  for children  under age  16; and  that the  CPSC work  closely with
states  and  other  federal  agencies   to  develop  practical,  uniform   state
regulations.  In  February 1987,  the CPSC  formally  requested that  the United
States Department of Justice (the "Justice Department") initiate an  enforcement
action  against  the  ATV industry  seeking  a  recall of  three-wheel  ATVs and
four-wheel ATVs intended for use by children under age 16 and requiring that ATV
purchasers receive "hands on" training. In addition, in May 1987 the CPSC issued
a safety  alert  advising  of  the potential  risks  associated  with  three-and
four-wheel ATVs.

    In  May 1987,  Polaris responded to  the CPSC's  proposed enforcement action
indicating its willingness  to adopt  additional warning labels  and notices  to
consumers  and its  support of various  actions designed to  enhance vehicle and
user safety. On December  30, 1987, Polaris reached  an agreement with the  CPSC
calling for the repurchase of all three-wheel ATVs remaining in the hands of its
distributors   and  dealers,   the  provision  of   additional  safety  oriented
point-of-purchase materials in all Polaris ATV dealerships, and the addition  of
a  mandatory "hands on" consumer and  dealer safety training program designed to
give all  Polaris ATV  dealers and  consumers maximum  exposure to  safe  riding
techniques,  as outlined by the Specialty  Vehicle Institute of America. Polaris
conditions its ATV warranties  described in "Business  -- Product Liability"  on
completion of the mandatory "hands on" consumer training program.

    In  June 1989, the CPSC conducted an  "undercover" survey of 227 ATV dealers
selected randomly, including Polaris. Based on the survey results, the degree of
compliance of Polaris'  dealers with the  provisions of the  consent decree  was
better  than the industry average in some areas and worse in others. Pursuant to
an agreement with  the CPSC, Polaris  has procedures in  place for  ascertaining
dealer  compliance with  the provisions  of the  CPSC consent  decree, including
random "undercover" on-site inspections of dealerships to ensure compliance with
the age restriction. Polaris has notified its dealers that it will terminate any
dealer it determines to have violated the provisions of the CPSC consent  decree
and to date has terminated five dealers for such reason.

    The Partnership does not believe that the agreement with the CPSC has had or
will have a material adverse effect on the Partnership or Polaris. Nevertheless,
there  can be no assurance that  future recommendations or regulatory actions by
the CPSC, the Justice Department or individual states would not have an  adverse
effect  on  the Partnership  or Polaris.  Certain  state attorneys  general have
asserted that the CPSC agreement is inadequate and have indicated that they will
seek stricter ATV regulation. The Partnership  is unable to predict the  outcome
of such action or the possible effect on its ATV business.

   
    Certain  states have  proposed certain legislation  involving more stringent
emission  standards  for  two-cycle  engines,  the  engines  used  on   Polaris'
snowmobiles,  ATVs and PWC.  In addition, certain  materials used in snowmobile,
ATV and PWC manufacturing which are toxic, flammable, corrosive, or reactive are
classified by federal and state  governments as "hazardous materials."  Finally,
local  ordinances have been and may from  time to time be considered and adopted
which restrict the use of PWC to specified hours and locations.
    

    For a  more detailed  description of  the above  risks related  to  Polaris'
business, see "Business -- Product Safety and Regulation."

INFORMAL SUPPLY ARRANGEMENTS
    Pursuant to informal agreements between Polaris and Fuji Heavy Industries in
Japan  ("Fuji"), Fuji  has been  the exclusive  manufacturer of  the Polaris two
cycle snowmobile engines since 1968. Fuji has manufactured engines for  Polaris'
ATV   products   since   their  introduction   in   the  spring   of   1985  and

                                       25
<PAGE>
also supplies engines for the PWC  products. Such engines are developed by  Fuji
to  the specific  requirements of Polaris.  In the  fall of 1987,  Fuji became a
Partnership  investor.  Polaris  believes  its  relationship  with  Fuji  to  be
excellent. With the absence of a written agreement, if the informal relationship
were  terminated  by Fuji,  Polaris may  be  unable to  enforce any  rights, and
interruption in the supply of engines would adversely affect Polaris' production
pending the establishment of substitute supply arrangements. Currently,  Polaris
is in the process of investigating manufacturing alternatives for its engines to
reduce the risk of dependence on a single supplier and to minimize the effect of
fluctuations   in  the   Japanese  yen.   Polaris  anticipates   no  significant
difficulties in obtaining substitute supply arrangements for other raw materials
or components for which it relies upon  limited sources of supply. There can  be
no  assurance that  alternate supply arrangements  will be  made on satisfactory
terms.

COMPETITION
    The snowmobile, ATV  and PWC  markets in the  United States  and Canada  are
highly  competitive.  Competition in  such  markets is  based  upon a  number of
factors, including price,  quality, reliability, styling,  product features  and
warranties.  At the dealer  level, competition is  based on a  number of factors
including  sales  and  marketing  support   programs  (such  as  financing   and
cooperative  advertising). Certain of Polaris'  competitors are more diversified
and have financial and marketing resources which are substantially greater  than
those  of  Polaris.  In  addition, Polaris'  products  compete  with  many other
recreational products for  the discretionary  spending of consumers,  and, to  a
lesser extent, with other vehicles designed for utility applications.

EFFECTS OF WEATHER

    Lack  of snowfall in any year in  any particular region of the United States
or Canada may adversely affect snowmobile  retail sales in that region.  Polaris
seeks  to  minimize  this potential  effect  by stressing  pre-season  sales and
shifting dealer inventories from one location  to another. However, there is  no
assurance  that weather conditions would not  have a material effect on Polaris'
sales of snowmobiles, ATVs or PWC.

PRODUCT LIABILITY

    Product liability claims are made against  Polaris from time to time.  Since
its  inception in 1981 through September 30, 1994, Polaris has paid an aggregate
of less  than $1.4  million in  product liability  claims and  had accrued  $4.4
million  at  September 30,  1994, for  the possible  payment of  pending claims.
Polaris believes such accruals are adequate.  Polaris does not believe that  the
outcome of any pending product liability litigation will have a material adverse
effect on the operations of Polaris. However, no assurance can be given that its
historical  claims record,  which did  not include PWC  prior to  1992, will not
change or that  material product liability  claims against Polaris  will not  be
made in the future.

    Polaris'   product  liability  insurance  limits  and  coverages  have  been
adversely affected  by the  general  decline in  the availability  of  liability
insurance.  As  a  result of  the  high cost  of  premiums  and in  view  of the
historically  small  amount  of  claims  paid  by  Polaris,  Polaris  has   been
self-insured   since  June  1985.  Adverse  determination  of  material  product
liability claims made against  Polaris would have a  material adverse effect  on
Polaris' financial condition.

WARRANTIES AND PRODUCT RECALLS

    Polaris  warrants its snowmobiles,  ATVs and PWC  under a "limited warranty"
for a period of one year, six months, and one year, respectively. For certain of
its products, Polaris also offers for sale to its consumers an extended warranty
contract for an  additional one-year  period. Although  Polaris employs  quality
control  procedures, a  product is sometimes  distributed which  needs repair or
replacement.  Historically,  product  recalls  have  been  administered  through
Polaris' dealers and distributors and have not had a material effect on Polaris'
business.

                                       26
<PAGE>
                                 THE CONVERSION

THE PARTNERSHIP

    The  Partnership  was  formed  under the  Delaware  Revised  Uniform Limited
Partnership Act  on April  7, 1987  for the  purpose of  acquiring, through  the
Operating  Partnership, substantially all of the business and assets of Polaris'
predecessor, Northwestern.  The acquisition  took place  on September  9,  1987.
Concurrently  with the acquisition, the  Partnership completed a public offering
of $110 million of BACs. The funds  received from the public offering were  used
by   the  Operating  Partnership  to  acquire   an  80%  undivided  interest  in
substantially  all  of  the  assets  of  Northwestern.  The  remaining  20%  was
contributed  by  Northwestern  to  the  Operating  Partnership  in  exchange for
additional BACs and Class B BACs (which have since been converted into BACs).

    The primary objectives of the  Partnership are: (i) cash distributions  from
the  operations of  the Partnership sufficient  to provide BAC  Holders with not
less than a 12% cumulative, noncompounded annual return on the initial  purchase
price  of the BACs (as reduced by  any distributions from sales and refinancings
of the property of  the Partnership), (ii) capital  appreciation as a result  of
expanding  distributable cash flow and (iii)  preservation and protection of the
Partnership's capital. Based on the  history of the Partnership's  distributions
and  recent sale prices  for the BACs,  management believes that  it has to date
achieved these objectives. Distributions to BAC Holders have remained relatively
constant during  each of  the  past three  years and  it  is unlikely  that  the
Partnership  will increase the  present level of  cash distributions (i.e. $2.52
per BAC per annum) even if Polaris' taxable income was to continue to  increase,
because  financing  Polaris'  continued  growth  could  be  expected  to require
reinvesting significant amounts of cash in the business. See "Market Prices  and
Distributions."

    Neither  the Sponsors nor  the General Partner  believe that the Partnership
has experienced any material adverse  financial developments since December  31,
1993,  and  are  not aware  of  any fact  that  would  make it  likely  that the
Partnership will experience any material  adverse financial developments in  the
forseeable future.

BACKGROUND OF THE CONVERSION

    Pursuant to amendments to the Internal Revenue Code of 1986 (as amended, the
"Code")  adopted in 1987 and a transition rule adopted thereunder (collectively,
the "1987 Code Amendments"),the Partnership will be treated as a corporation for
federal income tax purposes subsequent to December 31, 1997 if the BACs continue
to be  publicly  traded.  From time  to  time,  certain members  of  the  senior
operating  management of the Operating Partnership have considered and discussed
with various representatives  of the  General Partner  what actions  to take  in
response to the 1987 Code Amendments including the possibility of converting the
Partnership  to a corporation. See "The Conversion -- Reasons for the Conversion
- -- Changes in Tax Status of the Partnership."

    Commencing in early 1994, certain members of the senior operating management
held a series of  discussions with various  investment banking firms,  including
Smith  Barney Inc.  ("Smith Barney"),  regarding various  strategic alternatives
available to  Polaris, including,  but not  limited to,  the conversion  of  the
Partnership   to  a  corporation.   During  1994,  Smith   Barney  made  several
presentations to the  senior operating management  of the Operating  Partnership
and  representatives  of  the  General  Partner  and  delivered  certain written
materials to  such  parties  analyzing  alternatives  to  the  Conversion.  Such
alternatives  are more fully described under  "The Conversion -- Alternatives to
the Conversion" below.

    In June and July 1994, representatives  of Smith Barney and certain  members
of  the  senior  operating management  had  several discussions  with  Victor K.
Atkins, Jr.,  who is  the  President and  principal  shareholder of  EIPCC  (the
managing  general partner  of the  General Partner)  and the  individual general
partner of the General Partner, in which it was proposed to Mr. Atkins that  the
General  Partner pursue  a conversion  of the  Partnership to  corporate form in
which the Partnership would incur indebtedness  and BAC Holders and the  General
Partner  and its affiliates would receive  a one-time taxable cash distribution,
as  well  as  stock  in  the  new  corporation,  for  their  interests  in   the

                                       27
<PAGE>
Partnership.  During these discussions, Mr. Atkins stated that he would consider
the proposal and suggested he needed additional time to do so. In addition,  Mr.
Atkins  stated that he would continue  to study other alternatives and indicated
that he believed  it desirable to  continue to seek  relief for the  Partnership
from the 1987 Code Amendments so that the Partnership could remain a partnership
and be treated as a partnership for federal income tax purposes after 1997.

    At  a meeting  on July  29, 1994 between  Mr. Atkins  and representatives of
Smith Barney, Mr. Atkins stated that he thought a conversion of the  Partnership
to  corporate form  might be  advisable and  deserved further  consideration and
study. However, he said that he did not believe he was in a position to  propose
a  conversion  pending the  resolution of  a  lawsuit brought  on March  5, 1993
against him,  EIPCC, Paul  Bagley (a  director of  EIPCC) and  others by  Lehman
Brothers  Inc. ("Lehman Brothers"),  the owner of a  limited partner interest in
the General Partner. Lehman Brothers had initiated such litigation to  challenge
Mr.  Atkins'  control  over,  and  equity  ownership  in,  the  General Partner.
Settlement discussions between Mr. Atkins and Lehman Brothers commenced in  July
1994,  at which  time the discovery  phase of  the litigation had  ended and the
parties were preparing  for trial.  Mr. Atkins also  indicated that  he felt  it
would  be  preferable  for the  longer-term  interests  of BAC  Holders  and the
successor entity  that any  conversion  be accomplished  on an  equity-only,  as
opposed  to  a  leveraged, basis.  See  "Management --  Directors  and Executive
Officers of EIPCC."

    On July 29, 1994,  Mr. Wendel advised Mr.  Atkins, telephonically, that  Mr.
Wendel and other members of the senior operating management favored a conversion
of  the  Partnership  in which  BAC  Holders  and the  General  Partner  and its
affiliates would  receive a  one-time cash  distribution and  stock in  the  new
corporation.  At  that time,  Mr. Atkins  reiterated the  position which  he had
conveyed earlier to Smith Barney  regarding the litigation with Lehman  Brothers
and the form of the transaction.

    On   August  11,   1994,  representatives  of   Smith  Barney   met  with  a
representative of Lehman Brothers  to advise Lehman  Brothers of Smith  Barney's
discussions  with members of the senior operating management and Mr. Atkins. The
Lehman Brothers  representative,  while  noting that  Lehman  Brothers  did  not
control  the  General Partner,  said  that Lehman  Brothers  would not  oppose a
conversion of the  Partnership, provided that  such conversion was  in the  best
interests  of BAC Holders and that upon  such conversion the General Partner and
its affiliates would receive fair and adequate consideration for their interests
in the Partnership.

    During the period between  August 12, 1994 and  August 22, 1994, Mr.  Wendel
and  Smith Barney had discussions regarding the views of the General Partner and
the terms of an engagement of Smith Barney by Mr. Wendel and possibly other  BAC
Holders if a consensual plan of conversion with the General Partner could not be
effected.

    On  August 23, 1994,  Mr. Wendel and  other members of  the senior operating
management, together with legal and financial advisors, met with Mr. Atkins  and
representatives  of  Lehman Brothers  and the  Partnership's legal  advisor. Mr.
Wendel outlined to the General Partner the basis for management's belief that  a
conversion of the Partnership to a corporation would be desirable at the present
time.  Mr. Wendel and  his advisors then  suggested to the  General Partner that
such conversion be accomplished  in a transaction in  which BAC Holders and  the
General  Partner and its  affiliates would each receive  a one-time taxable cash
distribution as well as stock in the corporation surviving the transaction.  Mr.
Wendel  said that  if the  General Partner would  not support  such a conversion
transaction, the Sponsors intended to propose such a transaction directly to BAC
Holders. Representatives of the General Partner and Lehman Brothers agreed  that
converting the Partnership into a corporation was desirable at the present time,
but  they disagreed with the method  proposed for accomplishing such conversion.
The General  Partner then  proposed that  the conversion  be accomplished  in  a
transaction  in  which BAC  Holders and  the affiliates  of the  General Partner
receive only stock in the surviving corporation. The General Partner stated such
a method was preferable to the leveraged transaction proposed by Mr. Wendel. See
"The Conversion -- Alternatives to the Conversion." Mr. Wendel and other members
of the senior operating management agreed to consider an all-equity conversion.

                                       28
<PAGE>
   
    On August 24 and 25, 1994, Mr. Wendel and John H. Grunewald, Executive  Vice
President, Finance and Administration of Polaris, together with Smith Barney and
their  respective legal advisors, met with Mr. Atkins, representatives of Lehman
Brothers and the Partnership's legal advisors. At that time, Mr. Wendel proposed
to the  representatives of  the  General Partner  that  (i) the  Partnership  be
converted  to  a corporation  in  a transaction  in  which BAC  Holders  and the
affiliates of the General Partner would  receive only equity in the  corporation
surviving   the  transaction  and  (ii)   consummation  of  the  transaction  be
conditioned upon receipt of approval of  the Conversion Proposal by BAC  Holders
and  the receipt by the Partnership of an  opinion of counsel to the effect that
the receipt of such equity by BAC Holders and affiliates of the General  Partner
would  be tax free for  federal income tax purposes.  Mr. Wendel in consultation
with his advisors and  consultants then negotiated  with the representatives  of
the  General  Partner concerning  the appropriate  percentage allocation  of the
surviving corporation's equity between BAC  Holders and the General Partner  and
its  affiliates.  After extensive  negotiations, based  in  part on  the General
Partner's and the  Operating General Partner's  interests in distributions  from
the  Partnership and the Operating Partnership, respectively, as described under
"Existing Economic Interests of the Partners" below, and the $500,000 management
fee that  the  Partnership  has  paid EIPCC  annually  since  the  Partnership's
inception,  the parties ultimately agreed that BAC Holders together with holders
of previously granted First  Rights outstanding at the  time of such  Conversion
would  receive 88.6% of  the stock of the  surviving corporation (including upon
exercise of such First Rights) and  the affiliates of the General Partner  would
receive  the  remaining 11.4%  in exchange  for their  interests in  the General
Partner and  its affiliates  (after  giving effect  to  exercise of  such  First
Rights).  On behalf  of the Partnership,  Smith Barney was  engaged as financial
advisor and Smith Barney orally  advised the Partnership that the  consideration
to  be received  by BAC  Holders in  the proposed  transaction was  fair, from a
financial point of view,  to BAC Holders. The  General Partner also advised  Mr.
Wendel  that  its  willingness  to proceed  with  the  proposed  transaction was
conditioned upon receipt of a fairness opinion from a second investment  banking
firm.
    

    On  August 25, 1994, all parties to  the action commenced by Lehman Brothers
described above entered into a settlement agreement pursuant to which the action
was subsequently  dismissed with  prejudice. See  "Management --  Directors  and
Executive Officers of EIPCC."

    On  August 25,  1994, Mr.  Wendel and Mr.  Atkins entered  into an agreement
providing, among other things, that (i) each  of Mr. Atkins and Mr. Wendel  will
vote their BACs in favor of the Conversion, (ii) subject to his fiduciary duties
as  advised by  counsel, Mr.  Atkins will  work diligently  to proceed  with the
Conversion and submit the Conversion Proposal to BAC Holders for their  approval
as  soon as possible, (iii) each of Mr.  Atkins and Mr. Wendel will use his best
efforts to see that the  business and affairs of  Polaris will be conducted  and
distributions  will be made only in the ordinary course and consistent with past
practice and  (iv) for  so  long as  Mr. Atkins  owns  no less  than 3%  of  the
outstanding  Common Stock  of the Corporation,  he will vote  such securities in
favor of the Corporation's nominees for  election to its Board of Directors.  In
addition,  the agreement states that  it is understood that  Mr. Atkins does not
desire to and will not serve as an officer or director of the Corporation or its
subsidiaries following  consummation of  the Conversion.  On the  same day,  the
Partnership  issued a press release announcing its intention to undertake a plan
of conversion.

    On August 29, 1994, representatives of  the General Partner and counsel  for
the Partnership and the Sponsors discussed with representatives of Lazard Freres
& Co. ("Lazard") the possibility of Lazard being engaged to render an opinion as
to  the fairness,  from a financial  point of  view, of the  consideration to be
received  in  the  Conversion  to  BAC   Holders.  On  September  14,  1994,   a
representative  of  Lazard advised  representatives of  the General  Partner and
counsel to  Smith Barney  that Lazard  had decided  not to  accept the  possible
engagement. At no time did Lazard express any opinion as to the fairness or lack
of  fairness  of the  consideration to  be  received in  the Conversion,  from a
financial point of view or otherwise.

                                       29
<PAGE>
    On September 16, 1994, Dillon Read was engaged by the Partnership to  render
its  opinion to the  Partnership as to  the fairness, from  a financial point of
view, to BAC Holders of the consideration  to be received by BAC Holders in  the
Conversion. See "The Conversion -- Fairness Opinions."

    In order to attempt to ease the transition between primarily income-oriented
investors in the Partnership and the growth-oriented and institutional investors
expected  to invest in the Corporation following the Conversion, representatives
of the Sponsors and Smith Barney met with representatives of the General Partner
during the week of  September 19 to discuss  the anticipated dividend policy  of
the  Corporation after the  Conversion. They concluded  that it would  be in the
best interests of current and future security holders of the Partnership and the
Corporation that there be some continuation of cash dividends for three calendar
quarters after  the  Conversion  at  a level  approximating  that  of  the  cash
distributions  which the Partnership  has paid in recent  years. In this regard,
the General Partner and the Sponsors agreed that some degree of leverage for the
Corporation would  be  appropriate if  necessary  in connection  therewith.  See
"Market Prices and Distributions."

REASONS FOR THE CONVERSION

    The  Sponsors and  the General  Partner believe  that the  following are the
principal reasons to consummate the Conversion  at this time. These factors  are
closely interrelated, and relative weights were not assigned to them.

    CHANGES  IN TAX  STATUS OF  THE PARTNERSHIP.   The  Partnership currently is
treated as a  partnership for federal  income tax purposes  under a  grandfather
provision of the 1987 Code Amendments. Assuming no cessation of trading of BACs,
under  the  1987 Code  Amendments, this  tax treatment  ends immediately  if the
Partnership engages in  a substantial new  line of business,  and in any  event,
ends  on December  31, 1997, after  which the  Partnership will be  treated as a
corporation for  federal  income tax  purposes.  Thus, under  current  law,  the
principal advantage of conducting business as a publicly traded partnership will
cease  for the  Partnership on  December 31,  1997 unless  the Partnership takes
action to  prevent  trading in  BACs  thereafter  or unless  such  provision  is
eliminated  or extended. The General Partner has participated in efforts to have
the grandfather protection made permanent or further extended, but these efforts
have been inconclusive. Such efforts, in which the General Partner has ceased to
participate, may or may not be successful in the future.

    The General Partner  and the Sponsors  did not consider  delisting the  BACs
from the American Stock Exchange and the Pacific Stock Exchange, prohibiting the
transfer  of BACs, except in very  limited circumstances, and otherwise reducing
liquidity an advantageous way to preserve the tax status of the Partnership. The
General Partner and the Sponsors also did not believe that continuing to operate
as a  partnership  while  being taxed  as  a  corporation after  1997  would  be
advantageous  to  BAC Holders.  Instead, the  General  Partner and  the Sponsors
believe that it is advantageous for the Partnership to convert to corporate form
now because: (i) the Conversion will resolve uncertainty about the Partnership's
future tax  and  organizational  status,  which  uncertainty  necessarily  would
otherwise  increase as December 31, 1997  approaches, (ii) the receipt of shares
in the Conversion  can be effected  on a  tax-free basis under  current law  and
(iii)  the  Conversion  is  facilitated by  the  Partnership's  strong financial
performance, currently favorable  equity market conditions  generally and  other
factors  set  forth below.  Accordingly, the  General  Partner and  the Sponsors
believe that it is advantageous for the Partnership to convert to corporate form
at the present time rather than postpone such a transaction until 1997 and  that
any potential benefit derived from maintaining the Partnership's current form is
outweighed  by the (i) long-term benefits to  be derived from the Conversion and
(ii) the risk that postponing  such a conversion until  a later date, when  many
partnerships  losing  the benefit  of  the grandfather  provision  similarly are
expected to  convert  to  corporate  form, could  result  in  the  Partnership's
inability  to consummate such a transaction in an orderly manner under favorable
circumstances.

    PROPOSED DISTRIBUTION  EQUIVALENCY.    The Conversion  is  not  expected  to
adversely  affect the anticipated amount of cash distributions to be received by
investors  through  1997.  After  the  Conversion  and  subject  to  legal   and
contractual   limitations  and  the  financial  requirements  of  the  business,

                                       30
<PAGE>
   
the Sponsors intend to recommend that  the Corporation's Board of Directors  pay
the Proposed Distributions of $0.15 per share per quarter and three special cash
distributions,  each of $1.92 per  share, payable during each  of the last three
quarters of 1995 (reduced to the extent that any cash distributions declared and
paid by the  Partnership after  January 1, 1995  exceed, on  a quarterly  basis,
$0.15  per BAC).  Assuming the  Corporation makes  such distributions,  each BAC
Holder who continues  to hold Common  Stock received in  the Conversion  through
1997  will receive from  the Partnership and  the Corporation cash distributions
and dividends during the period commencing  January 1, 1995 and ending  December
31,  1997 equal in amount to cash distributions ($7.56 per BAC) that BAC Holders
would have received from the Partnership had the Conversion not occurred and the
Partnership maintained its  existing distribution policy.  The Sponsors  believe
that  the Proposed Distributions should ease the transition in the Corporation's
ownership between primarily income-oriented investors in the Partnership and the
growth-oriented and institutional investors that  are expected to invest in  the
Corporation. See "Market Prices and Distributions."
    

   
    ANTICIPATED  REDUCTION OF  PARTNERSHIP TAX  BENEFIT TO  INVESTORS.   The tax
benefits to BAC Holders of the Partnership continuing to operate in  partnership
form  (i.e. one  level of  income tax)  are anticipated  to diminish  over time.
Distributions to BAC Holders have  remained relatively constant during the  past
three  years  and the  Partnership has  no present  intention of  increasing the
present level of  cash distributions  even if  its taxable  income continues  to
increase,   because   Polaris'  continued   growth  could   require  reinvesting
significant amounts of cash in its business. Accordingly, absent the Conversion,
assuming income growth continues in 1994 and subsequent years, BAC Holders  will
be  required to report and  pay tax on their  share of the Partnership's taxable
income without a corresponding  increase in cash  distributions. It is  expected
that  this disparity between taxable income and cash distributions will continue
to increase for the forseeable future, and will be substantial at least in 1994.
This disparity will be  greater for those  BAC Holders that  have held BACs  for
longer  periods of time and  purchased their BACs at  lower prices. Increases in
taxable income  are likely  to correspond  to increases  in book  income of  the
Partnership which, for the nine-month period ended September 30, 1994, increased
by over 50% compared to the same period in 1993.
    

    GREATER  ACCESS  TO CAPITAL  MARKETS AND  EXPANSION OF  INVESTOR BASE.   The
General Partner and  the Sponsors  expect the  Corporation will  benefit from  a
simpler and more readily understandable capital structure which should result in
greater access to capital markets than the Partnership, potentially enabling the
Corporation  to raise capital on more favorable  terms than are now available to
the Partnership. In  this regard, the  General Partner and  the Sponsors  expect
that the Conversion should ultimately expand Polaris' potential investor base to
a  broader  array  of investors  (e.g.  pension  plans, mutual  funds  and other
institutional investors) that do not typically invest in publicly traded limited
partnership securities because  of various  tax and  administrative reasons.  In
addition,  the General Partner and the Sponsors anticipate that the Common Stock
(as compared to  the BACs)  should receive broadened  investor interest  through
increased  review and evaluation by investment research analysts. Although there
can be  no assurance  in this  regard,  such factors  should result  in  greater
activity and liquidity for the Common Stock, as compared to the BACs.

    ENHANCED  GROWTH POTENTIAL.   The General  Partner and  the Sponsors believe
that current industry conditions may  provide opportunities for Polaris to  grow
through  acquisitions of  businesses and assets.  In certain  cases, Polaris may
want to be able to issue equity securities in payment of the purchase price  for
such  acquisitions, and  the General  Partner and  the Sponsors  believe that in
certain circumstances  an  equity interest  in  a  corporation will  be  a  more
attractive  acquisition currency to prospective sellers  than BACs. From time to
time Polaris contacts, and is contacted by, others concerning the acquisition by
Polaris of assets of  others in complementary  lines of business.  Occasionally,
the  sellers might have been willing to  consider receiving equity of Polaris in
payment  of  the  asset  purchase  price  if  Polaris  were  reorganized  as   a
corporation.  None of these potential transactions progressed to the stage of an
agreement in principle and no discussions are currently taking place  concerning
the  issuance of Polaris' equity in payment  of the purchase price of businesses
or assets.

                                       31
<PAGE>
    ABILITY TO DIVERSIFY.  Under current tax laws, the Partnership is unable  to
enter into new lines of business without having to operate such businesses under
substantial  constraints (if it  is to maintain its  partnership tax status). By
converting to corporate form, Polaris should have the ability, when appropriate,
without constraint insofar as current tax laws are concerned, to enter into  new
lines  of  business  that  may  present  favorable  opportunities,  although the
Partnership currently has no specific plans to enter into new lines of business.
Polaris believes  the  advantages  of  doing  business  in  corporate  form  are
demonstrated  by the fact that Polaris is one of the few remaining manufacturing
concerns in the United States organized as a publicly traded partnership.

    TAX REPORTING.   The  General  Partner and  the  Sponsors believe  that  the
complexities  of  tax  reporting  associated  with  partnership  investments are
regarded as  unduly burdensome  by many  BAC Holders  under current  conditions,
although  there are  proposals before  Congress to  simplify the  procedures and
eliminate the Schedule K-1 reporting requirement. The ownership of Common  Stock
rather  than BACs will greatly simplify  reporting with respect to an investment
in Polaris on each BAC Holder's individual federal and state income tax  returns
for  future years and  will avoid the current  requirement of multi-state income
tax  filings.  Furthermore,  such  simplification  of  Polaris'   organizational
structure  and tax reporting also will result in administrative and cost savings
to the Corporation.

    DIRECT ELECTION OF THE  BOARD OF DIRECTORS.   The Partnership is managed  by
the  General Partner, which is in turn  managed by the Managing General Partner.
BAC Holders do not participate in the election of the Board of Directors of  the
Managing  General Partner. After the Conversion, the Corporation will be managed
by the Corporation's Board of Directors,  which will be elected directly by  the
holders  of Common  Stock. As  a result,  holders of  Common Stock  will have an
opportunity to evaluate, on an annual basis, the performance of the  Corporation
and  to vote their shares for the  election of directors accordingly, subject to
the limitations on election  and removal of  the Board of  Directors due to  the
staggered nature of the Board of Directors of the Corporation and subject to the
agreement between Mr. Atkins and Mr. Wendel with respect to the voting of shares
held by Mr. Atkins. See "Comparative Rights of BAC Holders and Holders of Common
Stock" and "Description of Capital Stock."

    FOR THE REASONS SET FORTH BELOW UNDER "RECOMMENDATION OF THE GENERAL PARTNER
AND  THE SPONSORS," THE GENERAL PARTNER  AND THE SPONSORS BELIEVE THE CONVERSION
IS FAIR TO BAC HOLDERS. THE GENERAL PARTNER AND THE SPONSORS RECOMMEND THAT  BAC
HOLDERS VOTE "FOR" THE CONVERSION PROPOSAL.

STRUCTURE OF THE CONVERSION

   
    Pursuant to the terms of the Merger Agreement, if the Conversion Proposal is
approved  by  BAC Holders  and  the other  conditions  thereto are  satisfied or
waived, the  Conversion  will  be  effected as  described  below.  Each  of  the
following steps is part of an integrated transaction, and all such steps must be
completed  to effect the  Conversion. Organizational charts  for the Partnership
(before the Conversion) and the Corporation (after the Conversion) are  included
for reference on page 20.
    

    MERGER  OF PICC WITH EIPCC.  PICC,  which is the managing general partner of
the Operating General Partner, will be merged with and into EIPCC. As a  result,
EIPCC will become the managing general partner of the Operating General Partner.

    TRANSFER  OF EIPCC  COMMON STOCK  TO THE  CORPORATION.   The stockholders of
EIPCC will transfer all of their shares of EIPCC common stock to the Corporation
in exchange for shares of Common Stock. As a result, EIPCC will become a  wholly
owned  subsidiary of  the Corporation  and the former  owners of  EIPCC will own
shares of Common Stock.

    TRANSFER OF INTERESTS IN THE GENERAL PARTNER TO THE CORPORATION.  The owners
of partnership interests in the General Partner, other than EIPCC, will transfer
their partnership  interests  in  the  General Partner  to  the  Corporation  in
exchange  for shares of Common Stock. As a result, the Corporation will directly
and indirectly  (through EIPCC)  own all  of the  partnership interests  in  the
General Partner, and the former owners of the General Partner, other than EIPCC,
will own shares of Common Stock.

                                       32
<PAGE>
    TRANSFER   OF   INTERESTS  IN   THE   OPERATING  GENERAL   PARTNER   TO  THE
CORPORATION.   The owners  of  partnership interests  in the  Operating  General
Partner,  other than  EIPCC, will  transfer their  partnership interests  to the
Corporation in exchange for shares of Common Stock. As a result, the Corporation
will directly  and  indirectly  (through  EIPCC)  own  all  of  the  partnership
interests  in  the  Operating General  Partner,  and  the former  owners  of the
Operating General Partner, other than EIPCC, will own shares of Common Stock.

    FORMATION OF  TRANSITORY  PARTNERSHIP.   The  Corporation will  form  a  new
Delaware  limited partnership (the  "Transitory Partnership"), with  itself as a
limited partner and EIPCC as a general partner.

    MERGER.   Pursuant to  the terms  of the  Merger Agreement,  the  Transitory
Partnership  will be merged with and  into the Partnership, with the Partnership
as the surviving partnership.  At the Effective Time  of the Merger (as  defined
below  under "-- Effective Time"), each outstanding BAC (other than BACs held by
persons who have exercised Appraisal Rights) will automatically be exchanged for
one share  of  Common  Stock,  and each  previously  granted  First  Right  will
automatically  be converted into the right to receive one share of Common Stock.
As a result of the Merger, the Corporation and EIPCC will be limited partners of
the Partnership, and  the General  Partner will  remain general  partner of  the
Partnership.

    MERGER  OF THE OPERATING GENERAL PARTNER  AND THE OPERATING PARTNERSHIP WITH
PARTNERSHIP.  The Operating Partnership  and the Operating General Partner  will
be  merged with and into  the Partnership. As a  result the Partnership will own
the business and  operations of  the Operating Partnership  and the  Corporation
will become a general partner in the Partnership and EIPCC's general partnership
interest  in  the  Operating  Partnership  will  be  converted  into  a  limited
partnership interest in the Partnership.

    CONTINUATION OF THE PARTNERSHIP, THE GENERAL PARTNER AND EIPCC.  As a result
of the Conversion, the Corporation  will directly and indirectly (through  EIPCC
and  the  General  Partner)  own  all of  the  general  and  limited partnership
interests in the Partnership. For a period of at least two years after the  date
the  Conversion is consummated,  the Corporation will  keep the Partnership, the
General Partner and EIPCC in existence and will not cause the Partnership or the
General Partner to cease being treated  as a partnership for federal income  tax
purposes.

    As  a  result  of  the foregoing  transactions,  (i)  the  Corporation will,
directly and  indirectly, own  100%  of the  Partnership  and will  conduct  the
business  and operations of  Polaris after the Conversion,  and (ii) BAC Holders
and holders of  previously granted First  Rights will receive,  in exchange  for
their  BACs and upon exercise of such First Rights, as the case may be, 88.6% of
the Common Stock of the Corporation, and affiliates of the General Partner  will
receive,  in  exchange  for  their  interests in  the  General  Partner  and its
affiliates, the remaining 11.4%  of the Common Stock  of the Corporation,  after
giving effect to the exercise of such First Rights.

    The transaction was structured as described above for the following reasons:

    (i)  The  integrated  transaction including,  in  particular,  formation and
existence of the Transitory Partnership and its subsequent merger with and  into
the  Partnership,  provides  a means  of  assuring  that, upon  approval  of the
Conversion Proposal by BAC Holders, all BAC Holders (other than those exercising
Appraisal Rights) would participate in the exchange of their BACs for shares  of
Common Stock and the Partnership and all its affiliated entities would either be
dissolved or directly or indirectly wholly owned by the Corporation.

   
    (ii)  For federal  income tax  purposes, the  Merger will  be treated  as an
exchange by BAC Holders of their BACs  for shares of Common Stock in a  tax-free
transaction  qualifying  under Section  351 of  the  Code. As  a result  of such
treatment, the aggregate  tax basis  of the Partnership's  assets following  the
Conversion  will be  increased to  reflect the  aggregate tax  basis of  the BAC
Holders in their BACs. See "Certain Federal Income Tax Considerations -- General
Tax Treatment  of  the  Merger  and  Issuance  of  Common  Stock"  and  "--  Tax
Consequences to the Corporation and the Partnership."
    

                                       33
<PAGE>
   (iii)  Legislation has been proposed that  in certain circumstances would tax
the distribution  of  marketable  securities by  a  partnership.  Although  this
provision is not directed at the type of transaction being proposed, structuring
the transaction in the manner described above provides additional assurance that
the  provisions of the proposed  legislation, if enacted, will  not apply to the
issuance of shares of Common Stock to BAC Holders and affiliates of the  General
Partner.   See   "Certain  Federal   Income   Tax  Considerations   --  Proposed
Legislation."

EXISTING ECONOMIC INTERESTS OF THE PARTNERS

    Currently, BAC Holders, the General Partner and an affiliate, through  their
interests  in the Partnership, and the  Operating General Partner have rights to
quarterly distributions of the proceeds  of available cash flow from  operations
of the Operating Partnership and the proceeds of certain capital transactions by
the Operating Partnership.

    BAC Holders and the General Partner and its affiliate, the Operating General
Partner,  currently  receive  quarterly  distributions  of  Cash  Available  for
Distribution (generally  cash  flow  from  operations and  sales  of  assets  or
refinancings,  after deducting such reserves as the General Partner, in its sole
discretion, determines to be necessary for Partnership expenses, debt  payments,
capital improvements, replacements and contingencies) in the following manner:

<TABLE>
<CAPTION>
                                                                            INTERESTS OF GENERAL
                                                          INTERESTS OF         PARTNER AND ITS
CASH AVAILABLE FOR DISTRIBUTION                            BAC HOLDERS           AFFILIATES
- -------------------------------------------------------  ---------------  -------------------------
<S>                                                      <C>              <C>
Net Cash From Operations...............................         79.2%                 20.8%
Net Cash from Sales or Refinancings (after return of
 capital to BAC Holders of $10 per BAC)................         98.0%                  2.0%
</TABLE>

    The  Operating  General  Partner  receives  1%  of  all  distributions (from
operations and  from sales  and refinancings)  from the  Operating  Partnership.
Currently,  the General Partner receives 20% and  BAC Holders receive 80% of Net
Cash From  Operations  (as  defined  in  the  Partnership  Agreement)  from  the
Partnership, after the 1% distribution to the Operating General Partner, so long
as  distributions  to  BAC Holders  have  provided  them with  a  15%  per annum
cumulative, noncompounded yield on the adjusted initial issuance price of  BACs.
The  percentages in the above table reflect the various interests of the General
Partner and its  affiliates in these  distributions. The 20.8%  interest of  the
General  Partner and its  affiliates in Net  Cash From Operations  is derived by
adding the  1%  received by  the  Operating General  Partner  of Net  Cash  From
Operations   plus  20%  of  the  remaining  99%  of  Net  Cash  From  Operations
distributable to  the  General  Partner  and  the  BAC  Holders.  After  the  1%
distribution to the Operating General Partner, the General Partner also receives
1%  and  BAC Holders  receive 99%  of Net  Cash From  Sales or  Refinancings (as
defined in the  Partnership Agreement)  from the Partnership  after BAC  Holders
have  received a return of the initial  adjusted issuance price of the BACs ($10
per BAC after giving effect to the two-for-one split in 1993).

    If distributions from the Partnership at any time do not provide BAC Holders
with the specified return, distributions would be made instead 1% to the General
Partner and 99%  to BAC  Holders until BAC  Holders had  received the  specified
return.  Based on BAC Holders' prior  distributions, current level of return and
on the Partnership's  business, results of  operations and financial  condition,
the  General  Partner does  not expect  BAC  Holders' return  to fall  below the
specified return in  the foreseeable future.  Consequently, the General  Partner
should  continue to receive 20% of cash distributions by the Partnership for the
foreseeable future. See "Comparative Rights of BAC Holders and Holders of Common
Stock -- Distributions and Dividends -- BACs."

    Distributions and fees to the General Partner and its affiliates,  including
EIPCC,  totalled approximately $10.3 million in 1993 and will exceed $11 million
in 1994. EIPCC, the managing general

                                       34
<PAGE>
partner  of  the General  Partner, has  been  paid an  annual management  fee of
$500,000 and has been entitled to  be reimbursed for certain expenses since  the
Partnership's   inception.  These  arrangements  and   payments  will  end  upon
consummation of the Conversion.

    In addition, if the General Partner is removed without cause, it can  compel
its  successor to purchase its General  Partner interest at "fair market value."
For a definition of "fair market value," see "Comparative Rights of BAC  Holders
and  Holders of Common Stock -- Removal  of General Partner and Directors of the
Corporation -- BACs."

    Upon the formation  of the  Partnership and the  Operating Partnership,  the
General  Partner and  the Operating  General Partner  each made  $100 in capital
contributions for their  respective partnership interests.  The General  Partner
and  the Operating General Partner received their respective general partnership
interests in exchange for structuring and completing the acquisition of  Polaris
by  the  Partnership  and  acting  in  the  roles  of  general  partners  of the
Partnership and the Operating Partnership,  in which roles the general  partners
were  responsible for the management of  the respective partnerships and assumed
unlimited liability for all partnership  obligations (including, in the case  of
Mr.  Atkins, the individual  general partner of  the general partners, unlimited
personal liability).

BENEFIT PLANS AFTER THE CONVERSION

    Except as required to accommodate the  change to corporate form, all of  the
existing employee benefit plans of the Partnership and the Operating Partnership
are  expected to be adapted for use by the Corporation on substantially the same
terms. The employee benefit plans  of the Partnership and Operating  Partnership
in  effect at the  date that the  Conversion is consummated  will, to the extent
practicable, remain in effect until otherwise determined by the Corporation.  In
the  case of benefit  plans which are  continued and under  which the employees'
interests are based upon BACs, such interests shall be based on Common Stock  in
an equitable manner.

    Without  limiting the generality of the foregoing, upon the Conversion, each
of the previously granted  First Rights representing the  right to receive  BACs
under  an employee benefit plan,  whether vested or unvested,  will be deemed to
constitute the  right  to receive  on  the same  terms  and conditions  as  were
applicable under such First Rights, the same number of shares of Common Stock as
the  holder of such First Rights would have been entitled to receive pursuant to
the Merger had  such holder  received BACs upon  exercise of  such First  Rights
immediately prior to the Merger.

ALTERNATIVES TO THE CONVERSION

    As  discussed above under "The Conversion  -- Background of the Conversion,"
the Conversion was proposed to the General Partner by the Sponsors. The  General
Partner  participated  in  determining  the  structure  of  the  Conversion  and
recommends that BAC Holders  vote to approve the  Conversion Proposal. See  "The
Conversion -- Recommendation of the General Partner and the Sponsors" below.

    The  alternatives to  the Conversion  that were  considered by  the Sponsors
were: (a)  continuance of  the Partnership  with no  cessation of  trading,  (b)
continuance  of  the  Partnership  and cessation  of  trading  before  1998, (c)
conversion of the Partnership,  with a single cash  and stock distribution,  (d)
conversion  by liquidation, (e)  a management buyout or  other strategic sale of
the Partnership  and (f)  liquidation and  winding up  of the  Partnership.  The
alternatives  to the Conversion that were  considered by the General Partner, in
addition to (a), (b), (c) and (f) were: (g) continuance of the Partnership, with
cessation of trading and an exchange offer  of stock in a new corporate  limited
partner,  (h) continuance of  the Partnership, with cessation  of trading and an
exchange offer of debt securities and (i) a conversion pursuant to Section  17.5
of the Partnership Agreement

    CONTINUANCE  OF THE PARTNERSHIP; NO CESSATION  OF TRADING.  The Sponsors and
the General Partner believe that the Conversion is a more beneficial alternative
to BAC Holders than the continuance of  the Partnership in its current form  and
that any benefit derived through the Partnership's current

                                       35
<PAGE>
form  are  outweighed by  the  potential long  term  benefits anticipated  to be
derived from the Conversion. Under current law, after December 31, 1997,  absent
a  cessation of trading, the  Partnership would be treated  as a corporation for
tax purposes. See "The Conversion -- Reasons for the Conversion" above.

   
    CONTINUANCE OF THE PARTNERSHIP; CESSATION OF TRADING.  The Sponsors and  the
General  Partner considered continuing the Partnership and, before January 1998,
delisting the BACs from the American  Stock Exchange and Pacific Stock  Exchange
and prohibiting, except in very limited circumstances, transfers of BACs. Such a
transaction  would  create a  private security  with  virtually no  liquidity or
trading market  value,  but  would  preserve  the  current  tax  status  of  the
Partnership  after  December  31, 1997.  The  Sponsors and  the  General Partner
believed that the loss of liquidity resulting from such an alternative would  be
adverse  to the  interests of  BAC Holders  and the  Partnership since  BACs are
publicly traded, listed  securities, and therefore  they did not  pursue such  a
transaction.
    

    CONTINUANCE  OF THE PARTNERSHIP; CESSATION OF  TRADING AND EXCHANGE OFFER OF
STOCK IN  NEW  CORPORATE  LIMITED  PARTNER.    The  General  Partner  considered
continuing  the Partnership  and, before January  1998, delisting  the BACs and,
except in very limited circumstances, prohibiting  the transfer of BACs. At  the
same  time, a new corporate limited partner would be admitted to the Partnership
and BAC  Holders would  be given  the  opportunity to  exchange their  BACs  for
publicly  traded shares of common stock in such corporation. However, exchanging
BAC Holders would forego  the potential future tax  benefits associated with  an
investment  in a partnership, and non-exchanging  BAC Holders would be left with
little, if any, liquidity. In addition,  the General Partner believed that  this
alternative  would further complicate rather than simplify the capital structure
of the Partnership and would not provide the benefits of operating in  corporate
form described under "The Conversion -- Reasons for the Conversion."

    CONTINUANCE  OF THE PARTNERSHIP; CESSATION OF  TRADING AND EXCHANGE OFFER OF
DEBT SECURITIES. The General Partner considered continuing the Partnership  and,
before   January  1998,  delisting   the  BACs  and,   except  in  very  limited
circumstances, prohibiting the transfer of BACs.  At the same time, BAC  Holders
would  be given the opportunity to exchange  their BACs for publicly traded debt
securities of the Partnership.  Although such a  transaction would preserve  the
current  tax status  of the  Partnership, the  General Partner  believed that it
would not be optimal in that the Partnership could have burdensome leverage, the
exchange might have adverse tax consequences to the electing BAC Holders,  there
could  be  no  assurance  of  a  liquid  market  in  the  debt  securities,  the
non-exchanging BAC  Holders would  have little,  if any,  liquidity and  such  a
transaction  would generally not provide the  benefits of operating in corporate
form described under "The Conversion -- Reasons for the Conversion."

    CONVERSION TO CORPORATION WITH CASH AND STOCK.  The Sponsors proposed to the
General Partner  that  the  Partnership  be converted  to  a  corporation  in  a
transaction  in which BAC Holders and the  affiliates of the General Partner, in
exchange for their respective interests in the Partnership, would each receive a
one-time cash distribution, as  well as stock in  the corporation surviving  the
transaction.  The Sponsors  proposed that the  cash distribution be  paid to BAC
Holders, the  General  Partner  and  its affiliates  in  accordance  with  their
respective  economic interests and  that the stock  be distributed in accordance
with the respective capital accounts of  the partners. The General Partner  felt
that such a transaction would result in the successor corporation being burdened
at  the  outset  with  significant  indebtedness to  pay  such  a  one-time cash
distribution  and  would   reduce  financial  flexibility   for  the   successor
corporation  going forward. In addition, the  General Partner was concerned that
the distribution  would, in  effect, be  fully taxable  to BAC  Holders and  the
General  Partner and its affiliates and did  not believe that the proposed terms
recognized the fair value of the General Partner's independent economic interest
in the Partnership (on a going concern basis). The Sponsors did not pursue  this
transaction because of the General Partner's concerns.

    CONVERSION  BY  LIQUIDATION.   The  Sponsors also  considered  a transaction
whereby the Partnership could be converted to a corporation in a transaction  in
which BAC Holders, the General Partner and its affiliates, in exchange for their
respective    interests   in    the   Partnership,   would    each   receive   a

                                       36
<PAGE>
one-time liquidating distribution consisting of cash and new common stock in the
corporation surviving the transaction. Pursuant to the terms of the  Partnership
Agreement,  liquidating distributions would be made in accordance with partners'
capital accounts.  Accordingly, the  General Partner  and its  affiliates  would
receive approximately 2% of the cash and stock distributed. (For a more detailed
description  of  the  procedures required  to  effectuate a  liquidation  of the
Partnership,  see  "The  Conversion  --  Liquidation  and  Winding  Up  of   the
Partnership").  The Sponsors  did not  propose this  transaction to  the General
Partner  because  of  uncertainties  under  the  Partnership  Agreement  of  the
Sponsors' ability to consummate such a transaction in a timely and tax effective
manner  without the recommendation of the General Partner. The Sponsors believed
that the General Partner's cooperation in such a transaction would be  unlikely,
since  its  terms did  not recognize  the  fair value  of the  General Partner's
independent economic interest in the Partnership (on a going concern basis)  and
because they understood that the General Partner believed that it had no duty to
cooperate in a transaction which did not fairly value such economic interest and
which  the General Partner believed would constitute a termination without cause
of the General Partner.  See "The Conversion --  Existing Economic Interests  of
the Partners."

    MANAGEMENT  BUYOUT OR  OTHER STRATEGIC SALE.   The  Sponsors also considered
proposing a management buyout or other strategic sale of the Partnership.  These
alternatives would not provide BAC Holders with their continuing equity interest
in  the Partnership and might not be able to be accomplished on a tax-advantaged
basis. The Sponsors  did not propose  such transactions to  the General  Partner
because  they believed  that, in the  long term,  the value of  the Common Stock
would exceed the value of cash and  securities that would be distributed to  BAC
Holders in a management buyout or other strategic sale.

    CONVERSION  PURSUANT TO SECTION 17.5 OF  THE PARTNERSHIP AGREEMENT.  Section
17.5 of the Partnership  Agreement permits the General  Partner, in response  to
the  tax law amendment treating publicly traded partnerships as corporations, in
its sole discretion and without any partner consent, to convert the  Partnership
into a corporation in whatever manner and by whatever method the General Partner
determines.  See "Summary of Certain Provisions  of the Partnership Agreement --
Reorganization of  the  Partnership."  Under such  section  of  the  Partnership
Agreement, the General Partner is required to effectuate the conversion so that,
to  the extent possible, the respective interests of BAC Holders and the General
Partner in the assets and income  of the successor entity immediately  following
such conversion are substantially equivalent to such interests immediately prior
thereto.  The General Partner is required  to appoint two independent appraisers
to determine the  value of such  interests. The General  Partner decided not  to
proceed  with a conversion  under Section 17.5  in light of  the proposal by the
Sponsors which it believed was fair to both BAC Holders and the General  Partner
and  which involved  the additional  procedural step  of being  submitted to BAC
Holders and Unaffiliated BAC Holders for approval.

    LIQUIDATION AND  WINDING  UP OF  THE  PARTNERSHIP.   Under  the  Partnership
Agreement,  two-thirds  in interest  of  BAC Holders  may  vote to  dissolve the
Partnership. Upon  dissolution  of  the  Partnership,  the  General  Partner  is
required to liquidate the assets of the Partnership as promptly as is consistent
with  obtaining the  fair value  thereof and  apply and  distribute the proceeds
thereof. In the event the General  Partner determines that an immediate sale  of
part  or all of the  Partnership's assets would cause  undue loss to the General
Partner and BAC Holders, the General Partner,  in order to avoid such loss,  may
defer  liquidation of and  withhold from distribution for  a reasonable time any
assets of the Partnership  except those necessary  to satisfy the  Partnership's
debts and obligations. No BAC Holder has the right to demand or receive proceeds
other  than cash  upon dissolution  and termination  of the  Partnership. In the
event of a dissolution and sale of the Partnership's assets, the General Partner
and Operating General  Partner would receive  approximately 2% of  distributions
and  BAC Holders would receive approximately 98%, after BAC Holders had received
a return of their capital.

    The General Partner  and the  Sponsors rejected this  alternative because  a
liquidation  would  not provide  BAC Holders  and the  General Partner  with any
continuing equity  interest in  the  Partnership and  would  be unlikely  to  be
accomplished   on  a  tax-advantaged  basis.   The  General  Partner  would  not

                                       37
<PAGE>
be able to determine with any certainty prior to dissolution whether and at what
price there  would be  any  buyers for  the  Partnership's assets.  The  General
Partner  believes that in the long term the  value of the Partnership as a going
concern, whether or not the Conversion  is effected, to the General Partner  and
BAC Holders would exceed the value of the proceeds of a liquidation.

    FUTURE  ALTERNATIVES  AVAILABLE TO  POLARIS.   The  General Partner  and the
Sponsors believe that other long-term  strategies available to Polaris, such  as
diversification  and  acquisition of  assets, or  a  management buyout  or other
strategic sale,  are not  adversely  affected (and,  in  some cases,  should  be
enhanced)  by the decision to convert from partnership to corporate form and can
be considered by the Corporation in the future if the Conversion is consummated.
No other transaction  currently is  being considered  by the  Partnership as  an
alternative  to the Conversion,  although the Partnership may  from time to time
explore other alternatives  if the  Conversion is not  consummated, including  a
conversion pursuant to Section 17.5 of the Partnership Agreement.

FAIRNESS OPINIONS

OPINION OF SMITH BARNEY

   
    The Partnership has retained Smith Barney to act as its financial advisor in
connection  with the Conversion. In connection with its engagement, Smith Barney
has delivered to the Partnership its written opinions, dated September 29,  1994
and  the date  hereof, each  to the  effect that,  as of  the date  of each such
opinion and based upon and subject to certain matters as stated therein, each of
the consideration to be received by the  holders of BACs and the Exchange  Ratio
in the Conversion is fair, from a financial point of view, to such holders.
    

   
    In  rendering its opinion  dated the date hereof,  Smith Barney, among other
things, reviewed the Merger Agreement and certain other related agreements, this
Proxy Statement  and  the partnership  agreements  of the  Partnership  and  the
Operating  Partnership and held discussions with certain of the senior operating
management of the Operating  Partnership ("Management") and representatives  and
advisors of the Partnership to discuss the business, operations and prospects of
the  Partnership. Smith Barney also examined certain publicly available business
and financial  information  relating to  the  Partnership as  well  as  internal
financial   statements,  forecasts  and  other   financial  and  operating  data
concerning the Partnership  prepared by  Management. Smith  Barney reviewed  the
financial  terms  of the  Conversion as  set  forth in  the Merger  Agreement in
relation to,  among  other things,  current  and historical  market  prices  and
trading  volumes of  the BACs, historical  and projected  earnings and operating
data of the Partnership, and the  capitalization and financial condition of  the
Partnership.  Smith  Barney considered,  to the  extent publicly  available, the
financial terms  of  certain  other  similar  transactions  which  Smith  Barney
considered  comparable to the  Conversion and analyzed  certain financial, stock
market and other publicly  available information relating  to the businesses  of
other  companies whose operations Smith Barney considered comparable to those of
the Partnership. In addition to the foregoing, Smith Barney conducted such other
analyses and  examinations and  considered such  other financial,  economic  and
market criteria as it deemed necessary to arrive at its opinion.
    

   
    In  rendering its  opinion dated the  date hereof, Smith  Barney assumed and
relied, without independent verification, upon the accuracy and completeness  of
all  financial  and  other information  publicly  available or  furnished  to or
otherwise reviewed by or discussed with Smith Barney. With respect to  financial
forecasts  and  other  information  furnished to  or  otherwise  reviewed  by or
discussed with Smith Barney, Smith Barney assumed that such forecasts and  other
information  were  reasonably prepared  on bases  reflecting the  best currently
available estimates  and  judgments of  Management  as to  the  expected  future
financial  performance  of  the  Partnership.  Smith  Barney  assumed,  with the
Partnership's consent, that  no material  change has occurred  in the  business,
operations,  financial condition  or prospects of  Polaris as set  forth in this
Proxy Statement. Smith Barney did not express  any opinion as to what the  value
of  the Common Stock actually will be when issued to holders of BACs pursuant to
the Conversion or the prices at which the Common Stock will trade subsequent  to
the Conversion. In addition, Smith Barney did not make and was not provided with
an independent
    

                                       38
<PAGE>
evaluation  or appraisal of the assets  or liabilities (contingent or otherwise)
of the Partnership. Smith Barney was not asked to and did not express an opinion
as to  the relative  merits of  the Conversion  as compared  to any  alternative
business  strategies that might exist  for the Partnership or  the effect of any
other transaction in which  the Partnership might engage.  Smith Barney was  not
asked  to solicit  third-party indications of  interest in acquiring  all or any
part of  the  Partnership. Smith  Barney's  opinion is  necessarily  based  upon
financial,  stock  market and  other conditions  and circumstances  existing and
disclosed to Smith  Barney as  of the  date of  its opinion.  No limitation  was
imposed  by the Partnership on the scope of the investigation by Smith Barney in
connection with its fairness opinion.

   
    THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED THE DATE  HEREOF,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW  UNDERTAKEN,  IS ATTACHED  AS  ANNEX B  TO  THIS PROXY  STATEMENT  AND IS
INCORPORATED HEREIN BY  REFERENCE. BAC HOLDERS  ARE URGED TO  READ THIS  OPINION
CAREFULLY  IN  ITS ENTIRETY.  SMITH  BARNEY'S OPINION  IS  DIRECTED ONLY  TO THE
FAIRNESS OF THE  CONSIDERATION TO BE  RECEIVED BY BAC  HOLDERS AND THE  EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO BAC HOLDERS AND HAS BEEN PROVIDED SOLELY
FOR THE USE OF THE GENERAL PARTNER IN ITS EVALUATION OF THE CONVERSION, DOES NOT
ADDRESS  ANY OTHER ASPECT OF THE CONVERSION  OR ANY RELATED TRANSACTION AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY BAC  HOLDER AS TO HOW SUCH HOLDER  SHOULD
VOTE  AT THE  SPECIAL MEETING. THE  SUMMARY OF  THE OPINION OF  SMITH BARNEY SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED  IN ITS ENTIRETY BY REFERENCE TO  THE
FULL TEXT OF SUCH OPINION.
    

   
    In  preparing its  opinion to the  Partnership dated the  date hereof, Smith
Barney performed  a variety  of financial  and comparative  analyses,  including
those  described below. The  summary of such  analyses does not  purport to be a
complete description  of the  analyses underlying  Smith Barney's  opinion.  The
preparation  of  a  fairness opinion  is  a complex  analytic  process involving
various determinations  as  to the  most  appropriate and  relevant  methods  of
financial  analyses  and  the application  of  those methods  to  the particular
circumstances and, therefore, such an opinion is not necessarily susceptible  to
summary  description. In arriving at its opinion, Smith Barney did not attribute
any particular weight  to any analysis  or factor considered  by it, but  rather
made qualitative judgments as to the significance and relevance of such analysis
and  factor.  Accordingly,  Smith  Barney believes  that  its  analyses  must be
considered as a whole and that  selecting portions of its analyses and  factors,
without  considering  all analyses  and factors,  could  create a  misleading or
incomplete view of the  processes underlying such analyses  and its opinion.  In
its  analyses,  Smith  Barney  made numerous  assumptions  with  respect  to the
Partnership, the Operating Partnership, industry performance, general  business,
economic,  market and financial conditions and  other matters, many of which are
beyond the control of the Partnership. The estimates contained in such  analyses
are  not necessarily indicative of actual  values or predictive of actual future
results or  values, which  may  be significantly  more  or less  favorable  than
suggested  by such analyses. In addition, analyses  relating to the value of the
businesses or  securities do  not purport  to be  appraisals or  to reflect  the
prices  at which the businesses or securities may actually be sold. Accordingly,
such analyses and estimates are inherently subject to substantial uncertainty.
    

    COMPARABLE COMPANY  ANALYSIS. Using  publicly available  information,  Smith
Barney  analyzed, among other things, the market values and trading multiples of
a group of eight selected comparable outdoor product corporations comprised  of:
Anthony  Industries,  Arctco Inc.,  Brunswick  Corp., Coleman  Co.  Inc., Harley
Davidson Inc.,  Huffy Corporation,  Outboard  Marine Corporation  and  Winnebago
Industries (collectively the "Comparable Companies").

   
    Smith  Barney compared  market values as  multiples of,  among other things,
historical net income and projected 1994  and 1995 net income. The multiples  of
latest  twelve months ("LTM") net income and  projected 1994 and 1995 net income
of the  Comparable Companies  were between  the following  ranges: (i)  LTM  net
income:  9.6x  to 26.0x  (with a  mean of  16.5x  and a  median of  15.9x); (ii)
projected 1994 income:  9.2x to  20.7x (with  a mean of  15.5x and  a median  of
15.4x);  and (iii)  projected 1995 net  income: 10.4x  to 17.8x (with  a mean of
14.1x and a median of 14.3x).  Smith Barney also compared adjusted market  value
(equity market value, plus the book value of debt and preferred stock, less cash
    

                                       39
<PAGE>
   
and  cash  equivalents)  to,  among  other  things,  historical  earnings before
interest, taxes, depreciation and amortization ("EBITDA"). The multiples of  LTM
EBITDA of the Comparable Companies were 4.7x to 11.8x (with a mean of 8.4x and a
median of 9.0x).
    

   
    Smith  Barney  also  compared  the profit  margins,  debt  to capitalization
ratios, historical revenue and net income growth, returns on average assets  and
equity,  and  projected  earnings per  share  ("EPS") growth  of  the Comparable
Companies. All projected EPS figures for the Comparable Companies were based  on
the  consensus net income estimates of selected investment banking firms and all
estimates for  the Corporation  were  based on  internal estimates  prepared  by
management.  All multiples were based on closing stock prices as of November 15,
1994.
    

   
    Smith Barney  applied a  range of  trading multiples  representative of  the
Comparable Companies to pro forma historical and projected operating data of the
Corporation  (derived by  adjusting such  operating data  of the  Partnership to
reflect consummation  of the  Conversion, but  not for  payment of  the  Special
Distributions  or for any borrowings  to finance the same,  and application of a
36% corporate tax rate) to  arrive at a range of  implied equity values for  the
shares  of Common Stock to be exchanged for the BACs pursuant to the Conversion.
Smith Barney applied  multiples of  9.0x to 10.0x  to LTM  EBITDA, multiples  of
16.0x  to 19.0x to LTM net income, multiples of 15.0x to 17.0x to projected 1994
net income, and multiples of 14.0x to 16.0x to projected 1995 net income.  Based
on  the  average of  such  valuation methodologies  Smith  Barney arrived  at an
implied equity valuation range of $39.63 to $45.22 per share of Common Stock.
    

   
    Smith Barney also applied the trading multiples of Arctco Inc., based on  an
Arctco  closing stock price as  of November 15, 1994 of  $20.25, to arrive at an
implied equity value for the shares of Common Stock to be issued in exchange for
the BACs pursuant to  the Conversion. Smith Barney  believes Arctco is the  most
appropriate  of  the  Comparable  Companies for  valuation  purposes,  given the
similarity of  Arctco's products,  markets and  general business  conditions  to
those of the Partnership. Smith Barney applied Arctco's multiple of 21.1x to LTM
net  income, Arctco's multiple  of 19.0x to projected  1994 net income, Arctco's
multiple of 16.3x to  projected 1995 net income,  Arctco's multiple of 18.2x  to
LTM  cash flow,  Arctco's multiple  of 1.9x to  LTM sales,  Arctco's multiple of
11.8x to  LTM EBITDA  and Arctco's  multiple  of 13.2x  to LTM  earnings  before
interest  and taxes. Based on the  average of such valuation methodologies Smith
Barney arrived at  an implied  equity valuation of  $54.32 per  share of  Common
Stock.
    

    No  company  used in  the  Comparable Company  analyses  as a  comparison is
identical to the  Partnership. Accordingly, an  analysis of the  results of  the
foregoing   is   not  entirely   mathematical;   rather,  it   involves  complex
considerations and judgments concerning  differences in financial and  operating
characteristics  and other factors that could affect the public trading value of
the Comparable Companies or the company to which they are being compared.

    DISCOUNTED CASH FLOW  ANALYSIS.   Smith Barney performed  a discounted  cash
flow  analysis of the projected free cash  flows of the Corporation for the four
fiscal years ended December  31, 1998, assuming  the Conversion occurs  December
31,  1994 and a  36% corporate tax  rate. Smith Barney  also assumed among other
things, discount rates of 12%, 14% and  16% and terminal multiples of EBITDA  of
7.5x to 8.5x. Smith Barney performed these analyses on the operating projections
prepared  by Management. These analyses resulted  in an implied equity valuation
range per share  of Common Stock  of $43.76  to $55.83 and  a composite  implied
equity valuation range of $47.30 to $51.77.

   
    Smith  Barney then  derived an implied  equity valuation range  of $43.47 to
$48.49 for the shares of Common Stock to be exchanged for BACs in the Conversion
by averaging  the  composite  values  derived  through  the  Comparable  Company
analyses  and the Discounted Cash Flow  analyses described above. This range was
compared to $36.50, the average of the closing market price of a BAC on the five
trading days preceding August  25, 1994, the day  the Partnership announced  its
intent  to  convert to  a corporation  (the "Announcement  Date"). The  range of
premiums of such implied Common Stock price over such average market price for a
BAC was 19.1% to 32.9%.
    

                                       40
<PAGE>
   
    VALUATION OF  GENERAL PARTNER  INTERESTS.   Smith Barney  also analyzed  the
value  of the  Common Stock  to be  exchanged for  the interests  of the General
Partner in the Partnership and the Operating Partnership pursuant to the  Merger
Agreement  (the "General Partner Consideration") using the equity values implied
by the Comparable Company,  Arctco trading multiples,  and Discounted Cash  Flow
analyses described above. Based on the Comparable Company analysis, Smith Barney
estimated the range of the implied value of the General Partner Consideration to
be  $71.3 million to $88.4 million, with a composite valuation of $82.7 million.
Based on the Arctco trading multiples,  Smith Barney estimated the range of  the
implied  value of the General Partner Consideration  to be $94.1 million to $114
million with a composite value of  $105.5 million. Based on the Discounted  Cash
Flow  analysis, Smith  Barney estimated  the range of  the value  of the General
Partner Consideration to  be $99.7 million  to $108.3 million  with a  composite
valuation  of $104.5  million. Smith Barney  then averaged  the composite values
derived from the three  valuation methodologies and  derived an average  implied
equity value of the General Partner Consideration of $97.5 million.
    
    Smith  Barney  then  analyzed the  value  of the  General  Partner's current
interests in  the Partnership.  Smith Barney  performed a  discounted cash  flow
analysis  of the projected distributions made  by the partnership to the General
Partner through  2037, assuming  (i)  that the  Partnership remains  in  limited
partnership form through 2037, but pays corporate taxes at 36% beginning in 1998
("Scenario  One"), and (ii) that the  Partnership remains in limited partnership
form through 2037, but delists the  BACs in 1997 ("Scenario Two"). Smith  Barney
also  assumed  discount  rates of  12%,  14% and  16%  for the  purposes  of its
analysis. Smith Barney  calculated the  present value of  the General  Partner's
interest  assuming  normal  distributions  of $2.52  per  BAC  plus  the General
Partner's interests, a 5% annual growth  rate in distributions after 1998 and  a
14.0%  discount  rate, which  resulted  in an  implied  present value  of $112.5
million. Smith  Barney  calculated  the  present value  of  the  maximum  future
distributions  to the General Partner (I.E., the Partnership distributes 100% of
distributable cash flow)  assuming Scenario  One, which resulted  in an  implied
present  value of $169.6 million. Smith  Barney calculated the net present value
of  the  maximum  future  distributions  to  the  General  Partner  (I.E.,   the
Partnership  distributes 100% of distributable cash flow) assuming Scenario Two,
which resulted in an implied present value of $232.6 million.

    Smith Barney also analyzed the implied  current equity value of the  General
Partner's  interest  in  the  Partnership  by  multiplying  the  number  of BACs
outstanding by the average market price  on the five trading days preceding  the
Announcement  Date,  adjusting that  value  to reflect  a  100% interest  in the
Partnership rather than the  79.2% interest in the  Partnership's net cash  from
operations  attributable to the BACs  and assigning 20.8% of  such value for the
General Partner's interests. This resulted in an implied current equity value of
$156.5 million. Smith Barney  then compared the results  of the discounted  cash
flow  and  implied  current  equity  value  analysis  to  $99.2  million,  which
represented  the  average  of  the  composite  values  of  the  General  Partner
Consideration described above.

    OTHER  FACTORS AND  COMPARATIVE ANALYSES.   In rendering  its opinion, Smith
Barney considered certain other factors and conducted certain other  comparative
analyses,  including among other things, a review of (i) the projected financial
results of the Partnership, the Operating Partnership and the Corporation,  (ii)
the  history  of  trading  prices  for the  BACs  and  the  relationship between
movements of  the BACs  and movements  of  the common  stock of  the  Comparable
Companies,  (iii)  the  treatment  of  general  partner  interests  in  selected
partnership conversions,  (iv)  certain pro  forma  effects on  the  Corporation
resulting   from  the  Conversion  and  (v)  the  pro  forma  ownership  of  the
Corporation.

   
    The Partnership  entered into  an  engagement letter  with Smith  Barney  on
August 25, 1994 pursuant to which the Partnership has agreed to pay Smith Barney
a  transaction fee of $5  million, comprised of a  retainer fee of $1.5 million,
which was paid upon execution of the  engagement letter, an opinion fee of  $1.5
million, paid upon delivery of Smith Barney's opinion, dated September 29, 1994,
and  the remainder of which is payable  upon consummation of the Conversion. The
Partnership has agreed to reimburse Smith Barney for its out-of-pocket expenses,
including reasonable fees and
    

                                       41
<PAGE>
   
disbursements of counsel. The Partnership has also agreed, in a separate  letter
agreement,  to  indemnify  Smith  Barney and  its  affiliates,  their respective
directors, officers, agents and employees  and each person, if any,  controlling
Smith  Barney or  any of its  affiliates against  certain liabilities, including
liabilities under  the federal  securities laws  and expenses  related to  Smith
Barney's   engagement.  In  light  of   Smith  Barney's  familiarity  with,  and
understanding of, the operations of the Partnership, the Sponsors believed  that
it  was in the Partnership's best interest  to engage Smith Barney in connection
with the proposed Conversion and, in  the event the proposed Conversion did  not
occur,  any other extraordinary corporate transaction involving the Partnership.
The terms of  the engagement  letter were designed  to ensure  the retention  of
Smith  Barney's  services  through consummation  of  the Conversion  or,  if the
Conversion was not consummated for any  reason, through the consummation of  any
other transaction.
    

   
    Smith  Barney  is a  nationally recognized  investment  banking firm  and is
regularly engaged  in  the  valuation  of businesses  and  their  securities  in
connection  with mergers and acquisitions, negotiated underwritings, competitive
bids,  secondary  distributions  of  listed  and  unlisted  securities,  private
placements  and valuations for estate, corporate  and other purposes. Other than
acting as financial advisor in connection  with the Conversion (and delivery  of
its  fairness  opinion), Smith  Barney  has not  previously  rendered investment
banking services  to the  Partnership in  the past  two years.  In the  ordinary
course  of  its business,  Smith Barney  may, from  time to  time, buy  and sell
securities of the Partnership.
    

OPINION OF DILLON READ

   
    Dillon Read has rendered its opinions to the Partnership dated September 29,
1994 and the date hereof, each to the effect that each of the Exchange Ratio and
the consideration to be received by the  BAC Holders in the conversion is  fair,
from a financial point of view, to the BAC Holders. DILLON READ'S OPINION, DATED
THE  DATE HEREOF, IS SET FORTH  IN FULL AS ANNEX C  TO THIS PROXY STATEMENT, AND
SHOULD BE READ  IN ITS  ENTIRETY. Dillon Read's  opinion does  not constitute  a
recommendation  to  any BAC  Holder as  to how  such holder  should vote  at the
Special Meeting. The summary  of the opinion  of Dillon Read  set forth in  this
Proxy  Statement is qualified in  its entirety by reference  to the full text of
such opinion.
    

   
    In connection with rendering its opinion  dated the date hereof and as  more
fully   set  forth  therein,  Dillon   Read  relied  upon,  without  independent
verification, the accuracy and completeness  of this Proxy Statement,  including
the  description under  "Certain Federal Income  Tax Considerations"  of the tax
consequences to the Partnership and the  BAC Holders of the Conversion, as  well
as  other information that was publicly available or furnished to Dillon Read by
the Partnership, including the Merger Agreement and information provided  during
discussions with management. In addition, Dillon Read compared certain financial
and operating data of the Partnership with that of certain other publicly traded
corporations  whose operations Dillon Read believed to be comparable to those of
the Partnership,  reviewed  market  prices  and trading  volumes  of  the  BACs,
reviewed  the  cash distributions  that were  made  to the  BAC Holders  and the
General Partner  and the  prospects for  future cash  distributions to  the  BAC
Holders  and the General Partner, compared the financial terms of the conversion
as set  forth in  the Merger  Agreement  with the  financial terms  of  selected
partnership  conversions which Dillon Read believed to be comparable to those of
the Conversion  and conducted  such additional  analyses as  Dillon Read  deemed
appropriate.  Dillon Read  did not make  or obtain any  independent appraisal or
valuation of the  assets or liabilities  of the Partnership.  No limitation  was
imposed  by the Partnership on the scope  of the investigation by Dillon Read in
connection with its fairness opinion.
    

   
    In rendering its  opinion dated the  date hereof, Dillon  Read assumed  that
financial  forecasts and other information furnished to or otherwise reviewed by
Dillon Read, were  reasonably prepared  on bases reflecting  the best  currently
available  estimates and  judgments of management  of the Partnership  as to the
expected future  financial  performance of  the  Partnership. Dillon  Read  also
assumed  that  no  material change  has  occurred in  the  business, operations,
financial condition or prospects of the  Partnership as set forth in this  Proxy
Statement.  Dillon Read did not express any opinion  as to what the value of the
Common Stock actually will be when issued to BAC Holders or the prices at  which
the
    

                                       42
<PAGE>
Common  Stock will trade subsequent to  the Conversion. Dillon Read's opinion is
based upon economic, monetary and market conditions existing on the date of  its
opinion.  Dillon Read was not requested to,  and did not, recommend the decision
to effect the Conversion or determine the Exchange Ratio or express any  opinion
as to whether any alternative transactions to the Conversion may be more or less
favorable  to the BAC Holders. Dillon Read  was not asked to solicit third-party
indications of interest in acquiring all or any part of the Partnership.

   
    In preparing its  opinion dated  the date  hereof, Dillon  Read performed  a
variety  of financial and comparative analyses, including those described below.
The summary of such analyses  does not purport to  be a complete description  of
the  analyses underlying  Dillon Read's opinion.  The preparation  of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analyses and the  application
of those methods to the particular circumstances and, therefore, such an opinion
is  not  necessarily  susceptible to  summary  description. In  arriving  at its
opinion, Dillon Read did not attribute any particular weight to each analysis or
factor considered  by it,  but  rather made  qualitative  judgements as  to  the
significance and relevance of such analysis and factor. Accordingly, Dillon Read
believes  that its  analyses must  be considered as  a whole  and that selecting
portions of  its analyses  and  factors, without  considering all  analyses  and
factors,  could  create  a  misleading  or  incomplete  view  of  the  processes
underlying such analyses  and its  opinion. In  its analyses,  Dillon Read  made
numerous  assumptions  with respect  to  the Partnership,  industry performance,
general business, economic  market and financial  conditions and other  matters,
many of which are beyond the control of the Partnership. The estimates contained
in  such analyses are not  necessarily indicative of actual  values or of actual
future results or values, which may be significantly more or less favorable than
suggested by such analyses. In addition,  analyses relating to the value of  the
businesses  or securities  do not  purport to  be appraisals  or to  reflect the
prices at which the businesses or securities may actually be sold.  Accordingly,
such analyses and estimates are inherently subject to substantial uncertainty.
    

    COMPARABLE  COMPANY ANALYSIS.  Using  publicly available information, Dillon
Read analyzed among other things,  the financial performance, market values  and
trading  multiples of a group of  eight selected comparable corporations engaged
in the  sporting  goods industry:  Anthony  Industries, Arctco  Inc.,  Brunswick
Corp.,  Coleman  Co.  Inc.,  Harley Davidson  Inc.,  Huffy  Corporation, Johnson
Worldwide Associates, Inc., and  Outboard Marine Corporation (collectively,  the
"Sporting Goods Comparable Companies").

   
    Financial  information analyzed included (i) market valuations and multiples
thereof, including LTM  net income and  projected 1994 and  1995 net income  and
(ii)  market valuation adjusted for  net debt and book  value of preferred stock
and multiples thereof,  including (x)  LTM sales, (y)  LTM EBITDA,  and (z)  LTM
operating   income.   Dillon  Read   applied  a   range  of   trading  multiples
representative  of  the  Sporting  Goods  Comparable  Companies  to  pro   forma
historical  and projected operating data of the Corporation (derived by applying
a 36% tax rate to Partnership net  income) to arrive at an implied equity  value
for  the shares  of Common Stock  to be exchanged  for the BACs  pursuant to the
Conversion. Dillon Read's  analysis consisted of  applying trading multiples  of
the   Sporting  Goods  Comparable   Companies:  (a)  a   multiple  of  7.7x  the
Corporation's LTM  EBITDA,  (b)  a  multiple  of  10.8x  the  Corporation's  LTM
Operating  Income, (c) a multiple of 16.4x the Corporation's LTM net income, (d)
a multiple  of 16.3x  the Corporation's  projected  1994 net  income and  (e)  a
multiple  of  12.8x  the  Corporation's projected  1995  net  income.  The above
analysis yielded implied equity  values per share of  Common Stock ranging  from
$39.28  to  $45.57.  Dillon  Read  also compared  the  profit  margins,  debt to
capitalization ratios,  historical revenue  and net  income growth,  returns  on
average  assets and equity,  and projected earnings per  share ("EPS") growth of
the Sporting  Goods Comparable  Companies.  All projected  EPS figures  for  the
Sporting  Goods  Comparable Companies  were based  on  the consensus  net income
estimates of  selected  investment  banking  firms and  all  estimates  for  the
Corporation  were  based on  internal estimates  prepared  by management  of the
Partnership. All multiples were based on closing stock prices as of November 16,
1994.
    

                                       43
<PAGE>
   
    Dillon Read also applied  the average trading multiples  of Arctco Inc.  and
Harley  Davidson Inc.  to arrive at  an implied  equity value for  the shares of
Common Stock to be issued in exchange  for the BACs pursuant to the  Conversion.
Dillon  Read believes Arctco and Harley  Davidson are more closely comparable to
the Partnership than certain of  the other Sporting Goods Comparable  Companies.
Dillon  Read's analysis is based upon (a) Arctco's and Harley Davidson's average
multiple of 19.3x the Corporation's LTM  net income, (b) an average multiple  of
21.2x  the Corporation's projected  1994 net income, (c)  an average multiple of
16.9x the corporation's projected  1995 net income, (d)  an average multiple  of
10.4x  the Corporation's LTM  EBITDA, and (e)  an average multiple  of 12.2x the
Corporation's LTM EBIT.  The above  analysis yielded implied  equity values  per
share  of Common  Stock ranging from  $46.65 to  $57.88. No company  used in the
Sporting Goods Comparable Company analyses as  a comparison is identical to  the
Partnership.  Accordingly, an  analysis of the  results of the  foregoing is not
entirely mathematical, rather, it involves complex considerations and  judgments
concerning  differences  in financial  and  operating characteristics  and other
factors that  could  affect the  public  trading  value of  the  Sporting  Goods
Comparable Companies or the company to which they are being compared.
    

    ANALYSIS   OF  RELATIVE  ALLOCATION  OF   EQUITY  INTEREST  TO  THE  LIMITED
PARTNERS.   Dillon  Read  performed  discounted  cash  flow  valuations  of  the
Partnership  assuming that the  Partnership remains in  limited partnership form
through 2037 but  begins paying  taxes at 36%  in 1998,  while maintaining  cash
distributions  as  a percentage  of cash  available  for distribution  at levels
similar to or higher than those currently paid. These projections were  prepared
by  Dillon Read in consultation with Partnership management. For the period 2005
to 2037 Dillon  Read varied the  annual percentage growth  of the  Partnership's
cash  distributions from 2.5% to  7.5% in order to  assess the relative value of
the General Partner's  interests compared  to the BAC  Holders' interests  under
these  various growth scenarios. Assuming dissolution  of the Partnership in the
year 2037 pursuant to the terms of the Partnership Agreement, discount rates  of
9.0%, 9.5% and 10% and terminal multiples of 10.0, 10.5 and 11.0x 2037 projected
net income, the relative interest of the BAC Holders ranges from 79.6% to 82.4%.

   
    ANALYSIS  OF COMPARABLE CONVERSION  TRANSACTIONS.  Dillon  Read analyzed the
terms and allocations of economic interest between general and limited  partners
of  selected conversions  of publicly  traded limited  partnerships to corporate
form. The limited partners'  interest in these partnerships  ranged from 75%  to
99%  of distributable cash from operations and  80% to 100% of the proceeds from
sales of partnership assets, while the limited partners' interest in the  common
stock  of the newly  formed corporate entities in  these conversions ranged from
85% to 100%  of the total  common stock outstanding.  Each of these  partnership
structures has its own unique characteristics, and each of these conversions was
undertaken  considering  its own  unique  circumstances; therefore  none  of the
partnerships or conversion transactions utilized for comparison is identical  to
the  Partnership  or to  the  Conversion. An  analysis  of the  results  of such
comparison is not  mathematical; rather it  involves complex considerations  and
judgments  concerning differences in financial  and operating characteristics of
the comparable partnerships and conversion  transactions and other factors  that
could  affect the  allocation of  common stock  between the  general and limited
partners in the comparable conversions.
    

   
    For its services rendered  in connection with its  opinion, Dillon Read  has
received a fee of $1.5 million, of which one-half was paid upon execution of the
engagement  letter  between  Dillon  Read  and  the  Partnership.  The remaining
one-half was paid  upon delivery  of the opinion  dated September  29, 1994.  In
addition,  the  Partnership  has agreed  to  reimburse Dillon  Read  for certain
out-of-pocket expenses and has agreed  to indemnify Dillon Read against  certain
liabilities,  including certain  liabilities under the  federal securities laws.
The fee was negotiated between the Partnership and Dillon Read.
    

    Dillon  Read  is  an  internationally  recognized  investment  banking  firm
engaged, among other things, in the valuation of businesses and their securities
in   connection  with   mergers  and   acquisitions,  negotiated  underwritings,
competitive biddings, secondary distributions of listed and unlisted  securities
and private placements. In 1989 and 1990 Dillon Read performed general financial
advisory  services for the  Partnership and received  customary compensation for
such services. In addition, in

                                       44
<PAGE>
the ordinary course of its business, Dillon Read may trade the BACs for its  own
account  and for the account of customers and it  may at any time hold a long or
short position  in such  securities.  The Partnership  selected Dillon  Read  to
render  the  opinion  because of  its  expertise  and its  familiarity  with the
operations of the Partnership.

OTHER

    Representatives of  the General  Partner discussed  with representatives  of
Lazard  the possibility of engaging Lazard, but Lazard decided not to accept the
possible engagement.  Lazard was  not  requested to,  and  did not,  render  any
opinion  in connection with the Conversion  or otherwise. See "The Conversion --
Background of the Conversion."

RECOMMENDATION OF THE GENERAL PARTNER AND THE SPONSORS

    As a  result of  their  review of  the  business, properties  and  financial
condition of the Partnership, their review of the terms of the Conversion, their
analysis  of  the  benefits  and  disadvantages  of,  and  alternatives  to, the
Conversion, and their  review of  the fairness  opinions from  Smith Barney  and
Dillon  Read,  each  to the  effect  that each  of  the Exchange  Ratio  and the
consideration to be received in the  Conversion is fair, from a financial  point
of  view, to BAC Holders, the General  Partner and the Sponsors believe that the
Conversion is fair  to BAC Holders  and recommend that  BAC Holders approve  the
Conversion  Proposal. No  particular weight  was assigned  to any  one factor in
arriving at their recommendation.

    The General Partner's and the Sponsors' determination to recommend that  the
Partnership  convert  to  corporate  form  is based  on  their  belief  that the
Conversion will result in the benefits to BAC Holders described above under  "--
Reasons  for  the  Conversion."  The  General  Partner  and  the  Sponsors  also
considered the potential  disadvantages of  the Conversion,  as described  under
"Risk Factors, Conflicts of Interest and Other Considerations," but believe that
the advantages of the Conversion outweigh the potential disadvantages.

    In  making their recommendation,  the General Partner  and the Sponsors also
gave significant weight to the analysis  of the Conversion and the  alternatives
to the Conversion described above under "-- Alternatives to the Conversion." For
the  reasons described thereunder, the General  Partner and the Sponsors believe
that the  Conversion  is  attractive  and  fair  when  compared  to  the  viable
alternatives they considered and that it is in the best interests of BAC Holders
to consummate the Conversion at this time.

    The  General Partner and the Sponsors  believe that the allocation of Common
Stock between BAC Holders and the General Partner in the Partnership is fair  to
BAC  Holders. This belief is principally based on the fairness opinions of Smith
Barney and  Dillon  Read  and  the other  considerations  described  under  "The
Conversion  -- Background of the Conversion" and "-- Existing Economic Interests
of the Partners."  The General Partner  also took into  account the  requirement
that  the  Conversion would  be subject  to  approval by  BAC Holders  holding a
majority of the outstanding BACs and Unaffiliated BAC Holders holding a majority
of BACs held by such persons.

    The General Partner and the  Sponsors sought to provide procedural  fairness
to the BAC Holders in connection with the consideration of the Conversion by (i)
obtaining  the fairness opinions from Smith Barney  and Dillon Read that each of
the Exchange Ratio  and the consideration  to be received  in the Conversion  is
fair,  from a financial point  of view, to BAC  Holders, (ii) giving BAC Holders
who do not  vote for  the Conversion Proposal  the right  to exercise  Appraisal
Rights,   and  (iii)  implementing  the  Conversion  only  if  approved  by  the
affirmative vote  of BAC  Holders holding  a majority  of BACs  outstanding  and
Unaffiliated  BAC  Holders holding  a  majority of  BACs  held by  such persons.
Through these  arrangements, the  General  Partner and  the Sponsors  sought  to
minimize  the extent to which  the determination of the  terms of the Conversion
was subject to conflicts of interest among the General Partner, the Sponsors and
BAC Holders.

    In reaching a  recommendation with  respect to the  Conversion, the  General
Partner  and the Sponsors  also considered the  consequences to the Partnership,
the General Partner and BAC Holders

                                       45
<PAGE>
if the Conversion  is not  consummated, as  discussed under  "The Conversion  --
Consequences  if Conversion  Proposal is Not  Approved or the  Conversion is Not
Consummated"  below  and  other  information   about  the  Conversion  and   the
Corporation included in this Proxy Statement.

   
POTENTIAL CONFLICTS OF INTEREST
    

   
    DETERMINATION  OF EXCHANGE RATIO.__There is a potential conflict of interest
between the General Partner and BAC Holders with respect to the determination of
the Exchange Ratio in  the Conversion. The Exchange  Ratio was determined  after
extended  discussions and negotiations between affiliates of the General Partner
and W. Hall Wendel, Jr. and other members of the Sponsors with reference to  the
existing  economic  interests of  the General  Partner and  BAC Holders  and the
rights of  the  General Partner  under  various provisions  of  the  Partnership
Agreement.  BAC Holders were not separately represented in such discussions, and
the interests of BAC Holders may differ from those of the representatives of the
Sponsors who negotiated the Exchange Ratio with the General Partner.
    

   
    Since the Sponsors  have no  economic interest  in the  General Partner  and
collectively  own approximately 9.1% of the outstanding BACs, their interests in
the determination of the Exchange Ratio should be closely aligned with those  of
BAC  Holders generally. However, Victor  K. Atkins, Jr. and  W. Hall Wendel, Jr.
have also entered into an agreement which provides, among other matters, that as
long as he owns  3% of the  outstanding Common Stock, Mr.  Atkins will vote  his
shares  of Common Stock in  favor of the Corporation's  nominees for election to
its Board of  Directors. Mr.  Wendel is  expected to  be nominated  to serve  as
Chairman  of  the  Board  of Directors  of  the  Corporation.  Accordingly, such
agreement provides  a benefit  to the  Sponsors  that is  not available  to  BAC
Holders  generally. This may present  a conflict of interest  to the Sponsors in
recommending the Conversion to BAC Holders.
    

   
    REDUCTION IN LIABILITY.   As a result of  the Conversion, affiliates of  the
General  Partner will benefit from the  elimination of their potential liability
for obligations and  liabilities of  Polaris after the  Conversion. Because  BAC
Holders  are not liable for obligations  and liabilities of the Partnership, BAC
Holders will not realize  this benefit from the  Conversion. This may present  a
conflict  of interest to  the General Partner in  recommending the Conversion to
BAC Holders.
    
EFFECTIVE TIME
   
    If the  Conversion  Proposal is  approved  by  BAC Holders  at  the  Special
Meeting, the Conversion is expected to be effected in accordance with the Merger
Agreement,  presently  anticipated to  be on  or before  December 30,  1994 (the
"Effective Time").
    

DESCRIPTION OF THE MERGER AGREEMENT
    The following  summary of  certain  provisions of  the Merger  Agreement  is
incomplete  and  is  qualified by  reference  to  the full  text  of  the Merger
Agreement, a copy of which is attached to this Proxy Statement as Annex D.

   
    CLOSING.    The  Merger  Agreement  provides  that  the  Merger  and   other
transactions outlined under "The Conversion -- Structure of the Conversion" (the
"Transactions")  shall be consummated at closings to  be held on the date of the
Special Meeting of BAC Holders or on such other date as the Corporation and  the
Partnership may agree (the "Closing"). If the Conversion Proposal is approved by
BAC Holders at the Special Meeting, it is currently anticipated that the Closing
will occur not later than December 30, 1994.
    
   
    PARTNERSHIP  DISTRIBUTIONS  PENDING  CLOSING.    Pending  the  Closing,  the
Partnership expects  to continue  to make  quarterly cash  distributions to  BAC
Holders,  the  General Partner  and the  Operating General  Partner in  the same
amounts as  prior distributions  in 1994  ($0.63 per  BAC per  quarter). If  the
Effective  Time occurs in  a calendar quarter before  declaration of the regular
quarterly distribution, the final Partnership cash distribution for the  quarter
in which the Closing takes place will be prorated based on the number of days in
such  quarter prior to the Closing and be paid within 60 days after the Closing.
However, if the Conversion  Proposal is approved by  BAC Holders at the  Special
Meeting  and if the Partnership declares the regular distribution for the fourth
quarter of 1994 in
    

                                       46
<PAGE>
   
accordance with prior practice, as is  expected, the Effective Time is  expected
to  occur prior  to December  31, 1994, and  BAC Holders  of record  on or about
December 15,  1994  would  receive on  or  about  February 15,  1995  a  regular
distribution  of $0.63 per BAC for the fourth  quarter of 1994 and there will be
no further distributions made by the  Partnership to BAC Holders. Affiliates  of
the General Partner will be entitled to receive the cash distributions otherwise
payable  to the General Partner and the  Operating General Partner which are not
paid until after the Closing.
    

   
    CONDITIONS.    Consummation  of  the   Conversion  is  subject  to   certain
conditions, including (i) approval of the Conversion Proposal by the affirmative
vote  of  the holders  of more  than 50%  of  the outstanding  BACs, and  by the
affirmative vote of the holders of more than 50% of the outstanding BACs held by
Unaffiliated BAC Holders, (ii) listing of the Common Stock on the American Stock
Exchange and the Pacific Stock Exchange subject to official notice of  issuance,
(iii) the receipt of certain necessary governmental approvals, the expiration of
certain  government imposed  waiting periods  (including under  the HSR  Act, if
applicable) and  the  making of  certain  necessary governmental  filings,  (iv)
effectiveness  of a Registration Statement under  the Securities Act of 1933, as
amended, relating to the Common Stock to be issued in the Merger and the absence
of any  stop order  or proceeding  seeking a  stop order  with respect  to  such
Registration  Statement, (v) the  absence of any court  order or legal restraint
preventing consummation of the  Merger, (vi) Appraisal  Rights not being  sought
with  respect to more  than 5% of  the outstanding BACs  (which condition may be
waived by the Corporation),  (vii) no withdrawal of  the Smith Barney or  Dillon
Read  fairness opinions, (viii) the Corporation's receipt of a favorable opinion
of its special tax counsel, Skadden, Arps, Slate, Meagher & Flom, as to  certain
matters related to the tax-free nature of the Conversion to BAC Holders and (ix)
the Partnership's receipt of a favorable opinion of its special counsel, Stroock
&  Stroock & Lavan, as to certain matters  related to the tax-free nature of the
Conversion to  BAC  Holders  and  the Transferors  who  are  transferring  their
partnership  interest in the  General Partner and  the Operating Partnership and
their stock of EIPCC to the Corporation.
    

    TERMINATION.  The Merger  Agreement may be terminated  at any time prior  to
the  Effective Time, whether before or after approval of the Conversion Proposal
by BAC  Holders,  (a) by  mutual  consent of  the  Corporation and  the  General
Partner,   (b)  by  either  the  Corporation  or  the  General  Partner  if  the
Transactions shall not have been consummated before April 15, 1995 (unless  such
failure  is due to the willful action or  failure to act in breach of the Merger
Agreement by the party  seeking termination) and (c)  by the General Partner  as
described  in the following sentence. The Merger Agreement provides that nothing
contained therein  shall alter  the General  Partner's fiduciary  duties to  BAC
Holders,  including the right  to terminate the Merger  Agreement if the General
Partner, as advised  by counsel, determines  that, as a  result of  developments
occurring  after the date of the Merger Agreement, such termination is necessary
to discharge its fiduciary duties.

    REPRESENTATIONS, INDEMNITIES AND COVENANTS.   The Merger Agreement  contains
representations  and indemnities  by the  Transferors to  the Corporation, which
survive the consummation of  the Transactions, with respect  to such matters  as
their  ability to comply with their obligations under the Merger Agreement; that
such compliance  will  not result  in  liabilities  to the  Partnership  or  the
Corporation;  and that the General Partner, the Operating General Partner, EIPCC
and PICC  do  not  have certain  tax  or  other liabilities.  It  also  contains
covenants  by the  Partnership and  the Operating  Partnership to  conduct their
businesses in the  ordinary course  and consistent with  past practices  pending
consummation  of  the Transaction,  and covenants  by  PICC, EIPCC,  the General
Partner and  the Operating  General Partner  not to  take certain  actions  with
respect  to their organization and capitalization,  and covenants by the parties
thereto to use reasonable best efforts to satisfy conditions and consummate  the
Transactions as soon as practicable.

    INDEMNIFICATION.   The Merger  Agreement requires the  Partnership, prior to
the Conversion, and  the Corporation,  after the Conversion,  to indemnify  each
person  who  is,  or  becomes  prior to  the  Conversion,  a  director, officer,
employee, shareholder or partner of the Partnership, the Operating  Partnership,
EIPCC,  PICC,  the  Operating  General  Partner,  the  General  Partner  or  the
Corporation, or an employee, agent or affiliate of such person, in each case  to
the  full extent a partnership is permitted under Delaware law to indemnify such
persons or entities and a corporation is permitted

                                       47
<PAGE>
under Minnesota Law to indemnify its own directors, officers, employees,  agents
and affiliates; and that such persons will be indemnified by the Corporation for
any expenses and liabilities incurred by them which is based on or arises out of
the  fact that such person served in  one of the capacities described above. The
Merger Agreement  requires  the Partnership  and  Corporation to  indemnify  the
General  Partner  and its  affiliates and  their partners,  officers, directors,
employees and agents for any expenses and liabilities incurred by them based on,
arising out of or pertaining to the Merger Agreement and the Transactions to the
maximum extent permitted by law.

    COSTS AND  EXPENSES.   The  Merger Agreement  provides  that all  costs  and
expenses incurred by the parties in connection with the Merger Agreement and the
Transactions  shall be paid  by the Partnership whether  or not the Transactions
are consummated.

    EMPLOYEE BENEFIT PLANS; FIRST  RIGHTS.  The  Merger Agreement provides  that
the employee benefit plans of the Operating Partnership in effect at the date of
the  Merger Agreement shall, to the extent  practicable, remain in effect and be
adapted to the  Corporation's corporate  form, and  that plans  under which  the
employees'  interests are  based on  BACs will  be based  on Common  Stock in an
equitable manner.  Following consummation  of  the Transactions,  First  Rights,
whether  vested or unvested, shall be deemed to constitute the right to receive,
on the same terms and conditions presently applicable, the same number of shares
of Common Stock as  the holders thereof  would have received  in the Merger  had
BACs  been issued in respect thereof immediately  prior to the Merger (one share
for each BAC).

    APPRAISAL RIGHTS.  The Merger Agreement  provides that BAC Holders who  have
not  voted for the Merger  and who have demanded  appraisal rights in the manner
provided in the  Merger Agreement  will be entitled  to exercise  the rights  of
appraisal that are provided therein. See "Appraisal Rights."

    REGISTRATION RIGHTS.  The Merger Agreement provides that, at or prior to the
Closing, the Corporation and the two Transferors receiving the most Common Stock
in  the Transactions shall enter into  a registration rights agreement providing
such Transferors with demand and  piggyback registration rights with respect  to
such  Common Stock. The number  of demand registrations will  be limited to four
(two for each such Transferor), each demand for registration must cover at least
300,000 shares and  no demand  for registration may  be made  within six  months
after  the effective date  of a prior  demand registration statement. Generally,
such  Transferors  will  pay  the  expenses  of  demand  registrations  and  the
Corporation will pay the expenses of piggyback registrations.

CONSEQUENCES IF CONVERSION PROPOSAL IS NOT APPROVED OR THE CONVERSION IS NOT
CONSUMMATED
    If  the Conversion Proposal is not  approved by BAC Holders and Unaffiliated
BAC Holders, or if the Conversion is  not consummated for any other reason,  the
Partnership  currently expects to continue to  operate as an ongoing business in
its current form and to continue making cash distributions at recent  historical
levels.  As discussed  above under "--  Reasons for the  Conversion," if Polaris
continues to operate in partnership form, BAC Holders may be required to  report
and  pay tax on taxable  income from the Partnership  that exceeds the amount of
its cash distributions, and it is likely that BAC Holders will experience, on  a
per  BAC basis, increasing taxable income relative to cash actually received. If
current tax laws remain unchanged, and  if before 1998 the Partnership fails  to
take  action  to  cease trading  BACs,  the  Partnership will  be  treated  as a
corporation for federal income tax  purposes. No other transaction currently  is
being  considered  by  the  Partnership as  an  alternative  to  the Conversion,
although the  Partnership may  from  time to  time explore  other  alternatives,
including  conversion pursuant to Section 17.5 of the Partnership Agreement. See
"The Conversion -- Alternatives to the Conversion."

                                       48
<PAGE>
COSTS OF THE CONVERSION

    All costs and expenses  incurred by the Partnership  in connection with  the
Conversion will be paid by the Partnership out of available cash, whether or not
the  Conversion  is  consummated.  The  following  is  an  estimate  of  certain
anticipated fees and expenses  to be incurred by  the Partnership in  connection
with the Conversion:

<TABLE>
<S>                                                             <C>
Securities and Exchange Commission registration fees..........  $   225,000
Stock exchange listing fees...................................       25,000
Legal fees and expenses.......................................    3,550,000
Financial advisory fees and expenses..........................    6,550,000
Accounting fees and expenses..................................      275,000
Solicitation fees and expenses................................      200,000
Printing and engraving expenses...............................      150,000
Miscellaneous.................................................       25,000
                                                                -----------
    Total.....................................................  $11,000,000
                                                                -----------
                                                                -----------
</TABLE>

EXCHANGE OF CERTIFICATES

    BAC  Holders should not send any  certificates with the enclosed Proxy. They
should retain such certificates until  they receive further instructions if  the
Conversion is consummated.

    Promptly  after the  Effective Time,  the Corporation  will mail  to all BAC
Holders of record a letter  of transmittal containing instructions with  respect
to  the  surrender  of  certificates  for  BACs  in  exchange  for  certificates
representing shares of Common Stock. Upon surrender to the Corporation of one or
more certificates  for  BACs,  together  with a  properly  completed  letter  of
transmittal,  there will be issued and mailed to former BAC Holders of record at
the Effective  Time a  certificate or  certificates representing  the number  of
shares  of Common  Stock to which  such holder  is entitled. From  and after the
Effective Time, each such certificate for  BACs will evidence only the right  to
receive certificates representing shares of Common Stock.

    No dividends or other distributions with respect to the Common Stock payable
to  the holders of record  thereof after the Effective Time  will be paid to the
holder of any unsurrendered  certificates for BACs  until such certificates  are
surrendered  for exchange,  at which  time accumulated  dividends will  be paid,
without interest, subject to any applicable escheat laws.

    If any certificate representing Common Stock is to be issued in a name other
than that in which the certificate  for BACs surrendered in exchange thereof  is
registered  on the books of the Partnership as of the Effective Time, it will be
a condition of such issuance that (i) the certificate so surrendered be properly
endorsed and  otherwise  in  proper  form  for  transfer  and  (ii)  the  person
requesting  such exchange  pay to  the Corporation  any transfer  or other taxes
required by reason of the issuance of a certificate representing Common Stock in
any name other than that of the registered owner of the certificate surrendered,
or the person  requesting such  exchange establish  to the  satisfaction of  the
Corporation that such tax has been paid or is not applicable.

    After the Effective Time, there will be no further registration of transfers
of BACs that were issued and outstanding immediately before such time. If, after
the  Effective Time, certificates representing  BACs are presented for transfer,
they will be cancelled and exchanged  for one or more certificates  representing
shares of Common Stock.

                                       49
<PAGE>
         COMPARATIVE RIGHTS OF BAC HOLDERS AND HOLDERS OF COMMON STOCK

    The  following summary compares a number of differences between ownership of
BACs and ownership of shares of Common Stock and the effects relating thereto.

                                    TAXATION

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Under current law, the Partnership  is    The  Corporation will  pay federal and
not a taxpaying  entity. Rather,  each    state   tax   on   its   net   income.
BAC Holder includes  its share of  the    Shareholders  will  not be  taxed with
Partnership's income or  loss, as  the    respect  to  Corporation  income,  but
case may  be,  without regard  to  the    will  generally be  taxed with respect
cash distributed  to BAC  Holders,  in    to   dividends   received   from   the
computing taxable  income.  Generally,    Corporation    to   the    extent   of
cash distributions to BAC Holders  are    accumulated  earnings and  profits for
not taxable, unless distributions  ex-    tax purposes.
ceed  a BAC  Holder's basis  in a BAC.
Under current tax law, the Partnership    No portion of the earnings of, or  any
will  be taxed as  a corporation if it    dividends from,  the Corporation  will
engages in a substantially new line of    constitute  unrelated business taxable
business or, in any event, at the  end    income   to  tax-exempt  shareholders,
of 1997, if  the BACs remain  publicly    except  to the  extent that investment
tradeable.                                in  stock   of  the   Corporation   is
                                          debt-financed.
Substantially all of the Partnership's
taxable  income  constitutes unrelated
business taxable income and,
therefore, is taxable  to BAC  Holders
that are tax-exempt organizations.
                          DISTRIBUTIONS AND DIVIDENDS
                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The   Partnership  Agreement  provides
that the
General Partner  will  make  quarterly    The By-laws of the Corporation provide
distributions   of   Net   Cash   From    that the  Board of  Directors has  the
Operations  and Net Cash From Sales or    authority and  discretion  to  declare
Refinancings.  The  Operating  General    dividends and other distributions upon
Partner receives 1% of all                the shares of  the Corporation to  the
distributions   from   the   Operating    extent permitted  by law.  Holders  of
Partnership.   The   General   Partner    Common Stock will have no  contractual
receives  20% and  BAC Holders receive    right to dividends.
80% of Net
Cash   From   Operations   from    the    The  Sponsors intend to recommend that
Partnership so long as the                the Corporation's  Board of  Directors
distributions  to BAC  Holders provide    pay the  Proposed  Distributions.  See
them   a  15%  per  annum  cumulative,    "Market  Prices  and   Distributions."
noncompounded  yield  on  the adjusted    However,   subject   to   legal    and
initial issuance price of the BACs. If    contractual   limitations,   dividends
the   distributions   made   in   such    will  be paid at the discretion of the
proportions do not provide BAC Holders    Board of  Directors and  will  depend,
with  such return,  distributions will    among  other  things,  on  the  future
be  made  instead  1%  to  the General    earnings, operations, capital
Partner and 99%  to BAC Holders  until    requirements,  borrowing capacity, and
BAC Holders have received such return.    financial condition of the Corporation
The General Partner believes, based on    and general  business conditions,  and
prior    distributions,    that   such    there can  be  no assurance  that  the
threshold  return will  continue to be    foregoing dividends and  distributions
met  for  the  foreseeable  future. To    will be paid.
date, the  BAC Holders  have  received
distributions  substantially in excess
of  a   15%   per   annum   cumulative
(noncompounded)  yield on the adjusted
initial issuance  price of  the  BACs.
The General Partner receives 1% of Net
Cash  From Sales  or Refinancings from
the Partnership after BAC Holders have
received  a  return  of  the  adjusted
initial  issuance  price  of  the BACs
($10 per BAC).
For the years ended December 31, 1993,
1992 and 1991, cash distributions  per
BAC   aggregating  $2.51,   $2.50  and
$2.50, respectively, were declared  by
the  Partnership.  See  "Market Prices
and Distributions."

                                       50
<PAGE>

   
                                 VOTING RIGHTS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Except as described below, BAC Holders
do not
have the right  to participate in  the    Under    Minnesota    law    and   the
management   or    control   of    the    Corporation's Articles of
Partnership's   business.   Each   BAC    Incorporation and By-laws,
Holder is entitled to one vote per BAC    shareholders have  voting rights  with
on  matters  submitted to  BAC Holders    respect  to   (i)  the   election   of
for  a vote. Two-thirds in interest of    directors,   (ii)   the   removal   of
BAC  Holders, without  the concurrence    directors, (iii)  certain mergers  and
of   the  General   Partner,  may  (i)    share exchanges involving the
subject to certain exceptions             Corporation,  (iv)  the  sale,  lease,
described below, amend the Partnership    transfer    or   other   disposal   of
Agreement, (ii) approve or  disapprove    substantially all of the assets of the
the  sale of all  or substantially all    Corporation other than in the  regular
of  the Partnership  assets, except in    course   of    business,    (v)    the
connection   with   the  Partnership's    dissolution of  the Corporation,  (vi)
dissolution   and  liquidation  for  a    amendments   to   the    Corporation's
reason  other  than  such  sale, (iii)    Articles of  Incorporation, and  (vii)
dissolve  the  Partnership,  and  (iv)    any other  matters designated  by  the
remove  a General Partner  and elect a    Board  of  Directors.  Each  share  of
replacement.  If a General Partner has    Common Stock  entitles its  holder  to
been   removed   without   cause,  the    cast one vote on each matter presented
removed Gener-                            to   shareholders.    There   is    no
                                          cumulative voting.
al Partner can compel any successor to    Approval  of  any matter  submitted to
acquire   its   general    partnership    shareholders  requires the affirmative
interest at the then fair market value    vote of the greater of (a) a  majority
of  such interest. See  "-- Removal of    of the  voting  power  of  the  shares
General  Partner and  Directors of the    present and entitled  to vote on  that
Corporation."    Amendments   to   the    item of business or (b) a majority  of
Partnership   Agreement  altering  the    the voting power of the minimum number
rights, powers, fees or duties of  the    of  shares entitled to vote that would
General Partner, the  interest of  the    constitute    a    quorum    for   the
General Partner in profits, losses and    transaction of business at a duly held
distributions, provisions relating  to    meeting  of shareholders;  except that
changes in the General Partner or  any    the Corporation's Articles of Incorpo-
of  the  terms  of  the  First  Rights    ration,  pursuant  to  Minnesota  law,
require  the  consent  of  the General    provide that the  affirmative vote  of
Partner.  The  General Partner  may in    the holders  of at  least 75%  of  the
some circumstances amend the              voting power of all outstanding shares
Partnership   Agreement   without  the    entitled to vote  is required for  the
consent  of  BAC  Holders  to  correct    removal of a director, with or without
certain deficiencies  or  comply  with    cause, from office.
certain legal requirements.
                                          If  the Corporation has  more than one
                                          class  of  stock  outstanding  in  the
                                          future, class voting will
Under  Delaware law, a merger requires    be required  on certain  matters  that
the  approval  of the  General Partner    generally  have  a  material   adverse
and approval of a majority in interest    effect   on  shares  of  a  particular
of  BAC   Holders,  unless   otherwise    class.
provided  in the  relevant partnership
agreement. The  Partnership  Agreement
is silent as to mergers.

              RIGHTS TO CALL SPECIAL MEETINGS AND SUBMIT PROPOSALS
                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The   Partnership  Agreement  provides    Special meetings  of shareholders  may
that   the  General   Partner  or  BAC    be called for any purpose or  purposes
Holders  holding at  least 10%  of the    at any time, by (i) the  Corporation's
outstanding BACs may call a meeting of    chief executive officer, (ii) the Cor-
the   Partnership.   The   Partnership    poration's  chief  financial  officer,
Agreement  provides  that  any request    (iii) by the Board of Directors or any
for a meeting  must state the  purpose    two or more members thereof, or (iv) a
of   the  proposed   meeting  and  the    shareholder  or  shareholders  holding
matters  to  be  acted  upon  at  such    10% or more of the voting power of all
meeting, and  no matter  may be  acted    shares  entitled  to  vote  (except in
upon at the meeting other than as  set    specified circumstances when a special
forth  in such request or as otherwise    meeting must be called by 25% or  more
permitted by the General Partner.         of  the  voting  power  of  all shares
                                          entitled to vote).

    

                                       51
<PAGE>

   
          REMOVAL OF GENERAL PARTNER AND DIRECTORS OF THE CORPORATION

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
BAC Holders may, by vote of two-thirds    Under the  Corporation's  Articles  of
in   interest,   remove   any  General    Incorporation,  the  Corporation  will
Partner  from the  Partnership with or    have a classified  or staggered  Board
without   cause  and  consent  to  the    of Directors and any one or all of the
appointment of a replacement therefor.    directors may be removed at any  time,
If  removal is for  cause, the removed    with  or   without   cause,   by   the
General  Partner  is  entitled  to  no    affirmative vote of the holders of 75%
consideration for  its  general  part-    of the voting power of all outstanding
nership   interest.   If   removal  is    shares  entitled   to   vote,   voting
without  cause,  the  removed  General    together as a single class.
Partner can  compel any  successor  to
purchase   its   general   partnership
interest  at  the  then  "fair  market
value"  of such interest  in an amount
equal to the  sum of  (i) the  present
value  of such interest  over the life
of  the  Partnership  plus  (ii)   the
present   value  of  the  annual  man-
agement fee of $500,000 over the  life
of  the  Partnership. The  fair market
value shall be determined by agreement
of the removed General Partner and its
successor, or if they cannot agree, by
arbitration.

                               LIQUIDATION RIGHTS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------

Upon liquidation  of the  Partnership,    In  the event of  a liquidation of the
BAC  Holders  share   in  any   assets    Corporation,  the  holders  of  Common
available for distribution in             Stock  would  be  entitled  to   share
accordance    with    the   applicable    ratably in any assets remaining  after
provisions of the Partnership             the  satisfaction  of  obligations  to
Agreement. The liquidation  provisions    creditors and any liquidation
generally  provide that  the assets of    preferences of any series of preferred
the Partnership  remaining  after  the    stock  of the Corporation  that may be
payment  of  all  of  its  debts   and    then  outstanding. Under  the Articles
liabilities, and the establishment  of    of   Incorporation,   the   Board   of
a  reasonable  reserve  in  connection    Directors is authorized to issue up to
therewith,  will be distributed to the    20,000,000 shares  of preferred  stock
General  Partner  and  BAC  Holders in    in one or more  series and to fix  and
accordance with their respective capi-    determine relative rights and
tal account balances.                     preferences, including with respect to
                                          preferences on liquidation.

                                       52
    
<PAGE>
<TABLE>
<S>                                       <C>
                       ASSESSMENTS AND LIMITED LIABILITY

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Under  the  terms  of  the Partnership    Shares of Common  Stock will be  fully
Agreement, BAC Holders are not subject    paid  and  nonassessable. Shareholders
to   additional    assessments.    The    generally   will  not   be  personally
liability of BAC Holders with  respect    liable for obligations of the Corpora-
to  the activities  of the Partnership    tion. In  certain circumstances,  they
is generally limited to their original    may  be liable for amounts distributed
capital contributions, any  additional    or returned to them.
capital contributions, and their share
of  assets and  undistributed profits.
In certain circumstances, they may  be
liable   for  amounts  distributed  or
returned to them. Under Delaware  law,
BAC  Holders may  be personally liable
for the obligations of the Partnership
to the extent  that they, in  addition
to  exercising  their  rights  as  BAC
Holders, also take part in the control
of Partnership business.
</TABLE>

   
                                TRANSFERABILITY

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The BACs are listed for trading on the    The  Common  Stock   will  be   freely
American   Stock   Exchange   and  the    transferable, and  has  been  approved
Pacific Stock Exchange. The               for  listing  on  the  American  Stock
Partnership may restrict or  terminate    Exchange  and  the  Pacific  Stock Ex-
transferability to prevent termination    change, subject to official notice  of
of  the Partnership  under federal tax    issuance.
law or to preserve  the tax status  of
the Partnership as a partnership.

                               REDEMPTION RIGHTS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
There  are  no  mandatory  or optional    The Common  Stock  is not  subject  to
redemption provisions in the              mandatory or optional redemption.
Partnership Agreement.

                               CHANGE OF CONTROL

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
There  is no provision in the Delaware    Minnesota law (i) restricts  specified
Revised  Uniform  Limited  Partnership    transactions   with   a    shareholder
Act  or in  the Partnership Agreement,    acquiring 10%  or more  of the  voting
except  as  described above  under "--    shares of the  Corporation unless  the
Removal  of General Partner and Direc-    share acquisition  or  transaction  is
tors   of   the   Corporation,"   that    approved by  the  Board  of  Directors
restricts change of control               prior  to the acquisition  of such 10%
transactions with partners. Changes in    interest, and  (ii) requires  approval
management  can  only  be  effected by    by disinterested  shareholders of  any
removal of the General Partner.           acquisition   of  voting  power  above
                                          specified levels of  ownership of  the
                                          Common  Stock.  The  Corporation  will
                                          have a classified  or staggered  Board
                                          of  Directors,  and  its  Articles  of
                                          Incorporation require  a 75%  vote  of
                                          all  outstanding  shares  to  remove a
                                          director, with or without cause, which
                                          may have the effect of making a change
                                          of   control   move   difficult.   See
                                          "Description   of  Capital   Stock  --
                                          Anti-takeover Provisions."

    

                                       53
<PAGE>

   
                          MANAGEMENT AND COMPENSATION

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The  business  and   affairs  of   the    The   business  and   affairs  of  the
Partnership are managed by the General    Corporation are  managed by  or  under
Partner   subject  to  certain  narrow    the  direction   of   the   Board   of
limitations.  Pursuant to  the Manage-    Directors  of  the  Corporation.   The
ment  Agreement,  EIPCC,  the managing    Articles  of   Incorporation  of   the
general   partner   of   the   General    Corporation provide that  for so  long
Partner, receives an annual management    as  the Board of Directors consists of
fee  of  $500,000.  In  addition,  the    three or more persons, directors shall
General Partner and its affiliates are    be  divided  into three  classes, with
entitled  to  reimbursement  from  the    each  class  of  directors  serving  a
Partnership for the actual                three-year term,  staggered among  the
out-of-pocket costs of direct             classes.  Approximately  one-third  of
telephone and travel expenses incurred    the Board of Directors will be elected
by  them   on  Partnership   business,    annually  by shareholders to serve for
direct  out-of-pocket  fees,  expenses    three-year  terms. An affirmative vote
and charges  paid  by  them  to  third    of  75%  of  the voting  power  of all
parties for rendering legal,              outstanding shares entitled to vote is
consulting,   auditing,    accounting,    required   for   the   removal   of  a
bookkeeping  and  computer   services,    director,  with or without cause, from
expenses of preparing and distributing    office.
reports to  BAC Holders,  the cost  of    After  consummation of the Conversion,
compliance with all state and  federal    the   Corporation   intends   to   pay
regulatory  requirements   and   stock    directors  who are  not also employees
exchange listing fees and charges  and    an  annual director's  fee of $27,500,
other payments  to third  parties  for    at  least  $5,000  of  which  will  be
services rendered to the  Partnership.    payable  in  restricted  stock  of the
The  General  Partner  and   Operating    Corporation.    See   "Management   --
General  Partner  also  receive  their    Directors  and  Executive  Officers of
respective   allocated    shares    of    the Corporation After the Conversion."
Partnership   distributions.  See  "--    The  individuals   who   will   become
Distributions and Dividends."             executive  officers of the Corporation
                                          on  or  before  consummation  of   the
                                          Conversion, all of whom currently hold
                                          similar  responsibilities in PICC, are
                                          described in "Management --  Directors
                                          and    Executive   Officers   of   the
                                          Corporation After the Conversion." The
                                          Corporation will assume the  Operating
                                          Partnership's existing executive
                                          compensation   and   employee  benefit
                                          plans   adapted   for   use   by   the
                                          Corporation  on substantially the same
                                          terms. Executive  compensation,  death
                                          and  disability benefits  and deferred
                                          compensation,   long-term    incentive
                                          compensation  and  retirement  savings
                                          plans are described in "Management  --
                                          Executive Compensation," "-- Death and
                                          Disability   Benefits   and   Deferred
                                          Compensation," "-- Long-Term Incentive
                                          Compensation"   and   "--   Retirement
                                          Savings Plan."

    

                                       54
<PAGE>

                                INDEMNIFICATION

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The   Partnership  Agreement  provides    The   Corporation   is   required   by
that  the  Partnership  will indemnify    Minnesota   law   to   indemnify   all
the  General  Partner,  its employees,    officers and directors of the Corpora-
agents  or   affiliates  against   any    tion   for  expenses  and  liabilities
liability, loss  or damage  (including    (including  attorneys'  fees) incurred
attorneys' fees) incurred by any  such    as  the result  of proceedings against
person   in   connection   with    the    them    in   connection   with   their
Partnership in respect of services  or    capacities  as officers  or directors.
duties  performed  on  behalf  of  the    In   order  to  be   entitled  to  in-
Partnership, provided  that  any  such    demnification   with   respect   to  a
liability,  loss  or  damage  did  not    purported  act or omission, an officer
result  from   such  person's   actual    or  director  must (i)  have  acted in
fraud, gross  negligence,  willful  or    good  faith,  (ii)  have  received  no
wanton   misconduct   or   breach   of    improper  personal  benefit,  (iii) in
fiduciary duty. In  addition, any  act    the  case  of  a  criminal proceeding,
or omission, if done or omitted to  be    have   had  no   reasonable  cause  to
done in  reliance  on the  opinion  of    believe  the  conduct to  be unlawful,
independent  legal   counsel,   public    and  (iv) reasonably believed that the
accountants  or  consultants  selected    conduct  was in the  best interests of
with   reasonable   care,   will    be    the   Corporation.   See,   also,  the
conclusively  presumed  to  have  been    description   of  the  indemnification
done or omitted in good faith and  not    provisions  of  the  Merger  Agreement
to  constitute  gross  negligence   or    under  "The Conversion  -- Description
willful  or  wanton  misconduct.  See,    of the Merger Agreement."
also,  the  description of  the indem-
nification provisions  of  the  Merger
Agreement  under  "The  Conversion  --
Description of the Merger Agreement."

                                FIDUCIARY DUTIES

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Under  Delaware   law,   the   General    Under  Minnesota law, a  director of a
Partner   of   the   Partnership   has    corporation  must discharge the duties
fiduciary  duties   of   good   faith,    of  the position  of director  in good
loyalty  and  fair   dealing  to   BAC    faith,   in  a   manner  the  director
Holders   in    the   management    of    reasonably  believes to be in the best
Partnership affairs.                      interests of the corporation, and with
                                          the care an ordinarily prudent  person
                                          would exercise under similar
                                          circumstances.

                                       55
<PAGE>
<TABLE>
<S>                                       <C>
                        LIMITS ON MANAGEMENT'S LIABILITY

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
As  a general matter  of Delaware law,    The Corporation's Articles of
the General Partner has liability  for    Incorporation   contains  a  provision
the payment  of  the  obligations  and    that   limits  the  liability  of  the
debts  of   the   Partnership   unless    Corporation's  directors  as permitted
limitations  on  such  liability   are    by  the Minnesota Business Corporation
stated in the  document or  instrument    Act.  The  provision  eliminates  per-
evidencing the  obligation. Under  the    sonal  liability of a  director to the
Partnership  Agreement,  none  of  the    Corporation  or  its  shareholders for
General Partner, its employees, agents    monetary  damages  for  a  breach   of
or  affiliates will have any liability    fiduciary duty. The provision does not
to the Partnership or BAC Holders  for    change the liability of a director for
any liability, loss or damage that did    a  breach  of duty  of loyalty  to the
not result from  such person's  actual    Corporation  or to  shareholders, acts
fraud, gross  negligence,  willful  or    or  omissions  not  in  good  faith or
wanton   misconduct   or   breach   of    which  involve  intentional misconduct
fiduciary duty.                           or a knowing violation of the law,  or
                                          an  act  or  omission  for  which  the
                                          liability of a  director is  expressly
                                          provided for in an applicable statute,
                                          or  in respect of any transaction from
                                          which a director received an  improper
                                          personal   gain.   Pursuant   to   the
                                          Articles   of    Incorporation,    the
                                          liability of directors will be further
                                          limited  or eliminated  without action
                                          by shareholders  if Minnesota  law  is
                                          amended  to further limit or eliminate
                                          the personal liability of directors.
                                          An  officer  of  the  Corporation   is
                                          required by Minnesota law to discharge
                                          duties  in  good  faith,  in  a manner
                                          which the  officer believes  to be  in
                                          the best interests of the Corporation,
                                          and  with the  care which  an ordinary
                                          prudent  person  in  a  like  position
                                          would exercise under similar
                                          circumstances.
</TABLE>

                                APPRAISAL RIGHTS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Generally,  none. However,  the Merger    Subject   to    certain    exceptions,
Agreement  provides for rights similar    Minnesota   law   provides   that    a
to  the  appraisal  rights  of  common    shareholder who does not approve of  a
stock   under  the   Delaware  General    proposed amendment to the Articles  of
Corporation Law in connection with the    Incorporation   that   materially  and
Merger. See "Appraisal Rights."           adversely affects  certain  rights  or
                                          preferences  of the  dissenting share-
                                          holder or certain fundamental
                                          corporate changes  may obtain  payment
                                          of  the fair value  of such dissenting
                                          shareholder's shares.

                                       56
<PAGE>
<TABLE>
<S>                                       <C>
                             DURATION OF INVESTMENT

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The  Partnership  Agreement   provides    Minnesota  law  and  the Corporation's
that  the   Partnership   is   to   be    Articles of Incorporation provide that
dissolved  and its affairs wound up on    the Corporation shall have a perpetual
the first to occur of (i) December 31,    existence. Therefore, investors in the
2037,  (ii)  the  bankruptcy  of   the    Corporation  would have  to sell their
Partnership,  (iii)  the   retirement,    shares  of  Common Stock  in  order to
death, dissolution,  legal  disability    liquidate their investment.
or  the passage of  120 days after the
bankruptcy  of   a  General   Partner,
subject  to the right of any remaining
General   Partner(s)   or,   in   lieu
thereof,  the vote of  all BAC Holders
to continue the Partnership, (iv)  the
sale  or other  disposition of  all or
substantially all of the assets of the
Partnership  or   of   the   Operating
Partnership,  (v)  the  vote  by  two-
thirds in interest  of BAC Holders  to
dissolve  the Partnership, or (vi) the
happening of any  other event  causing
the  dissolution  of  the  Partnership
under  the  laws   of  the  State   of
Delaware.

                            RIGHT TO INVESTOR LISTS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
Any  BAC Holder or  (a duly authorized    Under  Minnesota  law,  upon   written
representative  of  a BAC  Holder) has    request, at reasonable times and for a
the right  to  receive by  mail,  upon    proper  purpose,  a  shareholder shall
written request to the Partnership and    have the  right  to examine  and  copy
at  such  BAC Holder's  sole  cost and    relevant corporate  records  including
expense, a copy of a list of names and    the Corporation's share register.
addresses   of  BAC  Holders  and  the
number of BACs owned by each of  them,
provided  that such  request is  for a
purpose that is reasonably related  to
such  BAC  Holder's  interest  in  the
Partnership.

                        INSPECTION OF BOOKS AND RECORDS

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The  Partnership  Agreement   provides    Under   Minnesota  law,  upon  written
that books and  records of account  be    request, at reasonable times and for a
kept   at   the  principal   place  of    proper purpose,  a  shareholder  shall
business  of  the  Partnership  and be    have the  right  to examine  and  copy
open  to inspection by  any BAC Holder    relevant corporate  records  including
(or by an authorized representative of    the Corporation's share register.
a  BAC Holder)  upon reasonable notice
and during ordinary business hours.
</TABLE>

                                       57
<PAGE>

                                    DILUTION

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The Partnership Agreement permits  the    The   Board   of   Directors   of  the
issuance of additional BACs,  pursuant    Corporation  is authorized to issue up
to which the interests in the  assets,    to  80,000,000 shares  of Common Stock
liabilities, cash flow and results  of    and  up to  20,000,000 shares  of pre-
operations of the Partnership             ferred stock. At the completion of the
represented by the  BACs, but not  the    Conversion,   18,110,684   shares   of
general partnership  interest, may  be    Common   Stock   and   no   shares  of
diluted. Issuance  of additional  BACs    preferred  stock  will  be outstanding
could dilute the existing BAC Holders'    and 312,500  shares  of  Common  Stock
equity  interests in  the Partnership,    will  be  reserved  for  issuance  for
but   not   the   general  partnership    previously granted First Rights  under
interest.                                 employee  compensation plans. Issuance
                                          of  additional  authorized  shares  of
                                          Common  Stock as  well as  issuance of
                                          shares of preferred stock could dilute
                                          the  existing   shareholders'   equity
                                          interest in the Corporation.

                               INVESTMENT POLICY

                 BACS                                  COMMON STOCK
- --------------------------------------    --------------------------------------
The  purpose of the Partnership was to    The Corporation may engage in any  and
acquire,   own  and   operate  Polaris    all activities permitted  by law.  The
through the Operating Partnership. The    Corporation  may borrow money and make
Operating Partnership  may  engage  in    acquisitions.
any  and all activities  related to or
incidental to the foregoing
activities. The  Partnership  and  the
Operating  Partnership have  the power
to borrow money.

                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

   
    The following general discussion summarizes the material federal income  tax
considerations  relating to the Conversion. The discussion reflects, as to those
matters noted,  the  opinion  of Stroock  &  Stroock  & Lavan,  counsel  to  the
Partnership and the General Partner. The discussion does not address all aspects
of  taxation that  may be  relevant to  particular taxpayers  in light  of their
personal circumstances, or to certain  types of taxpayers (including dealers  in
securities,  insurance companies,  non-U.S. persons,  financial institutions and
tax-exempt entities) subject to special  treatment under the federal income  tax
laws,  and the opinion of counsel set forth herein, to the extent relevant, does
not cover  such  persons. The  Partnership  and  the General  Partner  have  not
requested  and  do not  intend to  request  a ruling  from the  Internal Revenue
Service (the  "Service") concerning  any  of the  matters discussed  herein.  An
opinion of counsel is not binding on the Service or the courts, and no assurance
can  be given that the  Service will not challenge  the tax treatment of certain
matters discussed  herein  or,  if  it  does,  that  it  will  be  unsuccessful.
Accordingly,  each BAC Holder should consult its  tax advisor as to the specific
tax consequences of the  Conversion and the receipt  of Common Stock,  including
the application and effect of state or local income and other tax laws.
    

    The  following  discussion  is based  on  existing provisions  of  the Code,
existing and proposed regulations,  existing administrative interpretations  and
court decisions. Future legislation, regulations, administrative interpretations
or   court  decisions   could  significantly  change   such  authorities  either
prospectively or retroactively.

                                       58
<PAGE>
SUMMARY OF TAX CONSEQUENCES TO BAC HOLDERS

    In the Conversion, each  BAC Holder will receive  one share of Common  Stock
for  each BAC  held. The  tax treatment  of the  Conversion to  a BAC  Holder is
expected to be as follows:

    - BAC Holders will not recognize  gain or loss on  the receipt of shares  of
      Common Stock in exchange for their BACS.

    - BAC  Holders' tax basis  in Common Stock received  will be determined with
      reference to the tax  basis of their  BACs exchanged therefor  immediately
      prior to the Conversion.

    The  precise tax treatment to individual BAC Holders will depend on each BAC
Holder's particular situation.

    With respect to the tax consequences  to BAC Holders who exercise  Appraisal
Rights, see "--
Exercise of Appraisal Rights" below.

PARTNERSHIP STATUS AND TAXATION OF THE PARTNERSHIP

    Each of the Partnership and the Operating Partnership is properly classified
for  federal income  tax purposes  as a  partnership rather  than an association
taxable as a  corporation. The Partnership  received a ruling  from the  Service
that  its manufacture and production of personal watercraft did not constitute a
new line of business for purposes  of maintaining its status as a  grandfathered
publicly-traded partnership.

    Currently,  the Partnership  is not  itself subject  to federal  income tax.
Rather, each BAC Holder is subject to income tax based on its allocable share of
Partnership taxable income, gain, loss,  deduction, and credits, whether or  not
any  cash is  actually distributed  to such BAC  Holder. The  federal income tax
benefits resulting from the pass-through nature of the Partnership, however, are
offset in part  by the  additional administrative expenses  associated with  tax
reporting and other costs associated with operating in partnership form.

    The  Revenue Act of  1987 amended the Code  to treat certain publicly-traded
partnerships as corporations  rather than  partnerships for  federal income  tax
purposes.   Under  a  transition  rule,  however,  an  existing  publicly-traded
partnership, such as the  Partnership, will not be  classified as a  corporation
until  the earlier of  (i) the partnership's first  taxable year beginning after
December 31, 1997, or (ii) the time at which the partnership adds a new line  of
business that is substantial. In certain circumstances, an activity conducted by
a  corporation  controlled  by an  existing  partnership  may be  treated  as an
activity of the  existing partnership if  the effect of  the arrangement,  based
upon  all the facts and circumstances, is to permit the partnership to engage in
an activity the income from  which is not subject  to a corporate-level tax  and
which  would be a new line of business if conducted directly by the partnership.
Under the above-described transition  rule, the Partnership will  be taxed as  a
corporation no later than its taxable year beginning on January 1, 1998. At that
time  the Partnership will be treated as if it had transferred all of its assets
(subject to its liabilities) to a  newly formed corporation in exchange for  the
stock  of the corporation,  and then distributed  such stock to  its partners in
liquidation of  their interests  in the  Partnership. Upon  classification as  a
corporation for tax purposes, the Partnership would be subject to federal income
tax on its earnings at a current maximum effective rate of 35%.

GENERAL TAX TREATMENT OF THE MERGER AND ISSUANCE OF COMMON STOCK

    The  Partnership  has been  a Delaware  limited  partnership since  it began
operations in 1987.  As two of  the steps  forming part of  a single  integrated
transaction  resulting in BAC Holders  becoming shareholders of the Corporation,
(i) pursuant to the Merger, the Transitory Partnership will merge with and  into
the Partnership, with the Partnership surviving, and (ii) shares of Common Stock
will  be issued by the Corporation directly to BAC Holders in exchange for their
BACs.

    There is no  specific authority  dealing with the  merger of  a new  limited
partnership  into an existing limited partnership under circumstances similar to
the Merger. Accordingly, counsel  cannot predict with  certainty how the  Merger
and    issuance    of   Common    Stock    will   be    treated    for   federal

                                       59
<PAGE>
income tax purposes. However, counsel is  of the opinion that (i) the  formation
and  existence of the Transitory Partnership, and its subsequent merger with and
into the Partnership, will be disregarded  for federal income tax purposes,  and
(ii) BAC Holders will be treated as exchanging directly their BACs for shares of
Common Stock in an exchange described in Section 351(a) of the Code, pursuant to
which  BAC Holders should  not recognize gain  or loss. The  Partnership will be
treated as continuing in existence for federal income tax purposes, following  a
constructive  termination and  reconstitution, with the  Corporation, EIPCC, and
the General Partner as the sole partners.

    Counsel's opinion that  (i) the  formation and existence  of the  Transitory
Partnership,  and its subsequent  merger with and into  the Partnership, will be
disregarded for  federal income  tax  purposes, and  (ii)  BAC Holders  will  be
treated  as exchanging directly their BACs  for Common Stock of the Corporation,
is based on the federal income tax treatment of analogous transactions involving
corporations rather than partnerships. It is  well settled, and the Service  has
issued  published rulings to  the effect that,  if a parent  corporation forms a
transitory subsidiary corporation and  merges it into  a another corporation  to
enable  the parent to acquire the stock of such other corporation, the merger of
the transitory  subsidiary  corporation  into such  other  corporation  will  be
ignored,  and  the shareholders  of the  target corporation  will be  treated as
receiving directly from the  parent corporation stock or  other property of  the
parent  in exchange for their shares of the target. In addition, the Service has
issued private letter rulings addressing the treatment of transactions in  which
a  corporation forms  a transitory  partnership and  merges it  into an existing
partnership as a means of transforming the partners of the existing  partnership
into  shareholders of the corporation. The  conclusions expressed in the private
letter rulings are consistent with the  treatment of the Merger and issuance  of
Common Stock expressed above. BAC Holders should be aware that, unlike published
rulings,  private letter rulings cannot be cited as authority, and may be relied
upon only  by  the taxpayer  requesting  the ruling,  although  the  conclusions
expressed  therein  are indicative  of the  Service's  thinking on  a particular
matter.

    The Partnership and the Corporation intend to treat, for federal income  tax
purposes,  the  Merger  and issuance  of  Common  Stock in  accordance  with the
positions reflected in  the foregoing opinions  and to prepare  reports and  tax
information  accordingly. Except  as otherwise  noted, the  following discussion
assumes the correctness of such treatment.

CERTAIN TAX CONSEQUENCES OF THE MERGER AND ISSUANCE OF COMMON STOCK TO BAC
HOLDERS

    NONRECOGNITION OF GAIN  OR LOSS.   Section 351(a) of  the Code provides,  in
general,  that no gain  or loss is recognized  upon the transfer  by one or more
persons of property (such as partnership  interests) to a corporation solely  in
exchange  for stock in such corporation if, immediately after the exchange, such
person or persons are in  control of the corporation  to which the property  was
transferred.  Section 368(c)  of the  Code defines  control as  the ownership of
stock possessing at least 80% of the total combined voting power of all  classes
of  stock entitled to vote and at least 80% of the total number of shares of all
other classes of stock.  Section 351(b) of  the Code provides  that if money  or
other  property  ("boot")  is received  in  addition  to stock  in  an otherwise
qualifying transaction, taxable income must be recognized in an amount equal  to
the  lesser of (i) any gain realized on  the exchange or (ii) the amount of boot
received. For this purpose, gain realized  is generally equal to the excess,  if
any,  of (x) the  amount of cash  and the fair  market value of  stock and other
property received from the corporation over  (y) the adjusted basis of  property
transferred  to the corporation. In determining realized gain, a Partner's share
of partnership  liabilities  is treated  as  cash received  upon  the  transfer.
Section 357(c) of the Code generally provides that if the sum of the liabilities
assumed  in the  Section 351  exchange exceeds  the aggregate  tax basis  of the
assets transferred in the exchange, such excess is treated as gain from the sale
or exchange  of  the assets  transferred.  Section  752 of  the  Code  generally
provides  that a partner's  tax basis for its  partnership interest includes its
share of  the  liabilities of  the  partnership, as  determined  under  Treasury
regulations.  A  published ruling  issued  by the  Service  holds that  upon the
transfer  of  a  partnership  interest  to  a  corporation  in  a  Section   351
transaction,  the transferor's  share of  partnership liabilities  is treated as
assumed by the corporation for purposes of Section 357(c) of the Code.

                                       60
<PAGE>
   
    Assuming the Merger  and issuance  of Common  Stock is  treated for  federal
income  tax  purposes  in  the  manner described  above  under  "--  General Tax
Treatment of the Merger and Issuance  of Common Stock," it is counsel's  opinion
that  the exchange by BAC Holders of their  BACs for shares of Common Stock will
be  treated  as  part  of  a  transaction  described  in  Code  Section  351(a).
Accordingly,  BAC  Holders should  incur no  federal income  tax liability  as a
result of  the exchange  of  their BACs  for shares  of  Common Stock.  See  "--
Post-Conversion   Treatment  of   the  Corporation   and  its   Shareholders  --
Distributions by the Corporation" below for  a discussion of the Federal  income
tax treatment of the
Proposed Distributions. BAC Holders will not be permitted to recognize a loss on
the  exchange. This conclusion is  based on the assumption  that (i) BAC Holders
exchanging BACs  and the  affiliates  of the  General Partner  exchanging  their
interests   in   the  General   Partner  and   its  affiliates   (together,  the
"Transferors") to  the  Corporation  as  steps  in  the  integrated  transaction
consisting  of the Merger and issuance  of Common Stock and related transactions
will own, immediately after such transfers, more  than 80% of the only class  of
stock  of the  Corporation and (ii)  not more than  20% of the  shares of Common
Stock transferred  to  the  Transferors  pursuant  to  the  Conversion  will  be
subsequently  disposed  of pursuant  to contracts  or  other formal  or informal
agreements entered into prior to  the Conversion (the "Control Assumption").  If
the Control Assumption were not correct, each BAC Holder could recognize gain or
loss  on  the Conversion  as if  the BAC  Holder  had sold  its interest  in the
Partnership in a taxable  transaction for an  amount equal to  the value of  the
Common  Stock received in the Conversion. Counsel  is not aware of any contracts
or other formal or informal agreements entered into by persons receiving  shares
of  Common Stock to dispose  of such shares. Notwithstanding  the above, any BAC
Holders who are  treated as  receiving shares of  Common Stock  in exchange  for
services  will be taxed on the receipt of  the Common Stock to the extent of the
value thereof.
    

    Based on information provided by the Partnership's independent  accountants,
no  portion of the liabilities of the Partnership has ever been allocated to BAC
Holders. In  this circumstance,  a  BAC Holder's  share  of liabilities  of  the
Partnership  cannot exceed the tax basis  of such BAC Holder's BACs, eliminating
the possibility of any gain recognition by a BAC Holder on the exchange of  BACs
for shares of Common Stock under Section 357(c) of the Code.

    BASIS  AND HOLDING PERIOD OF COMMON STOCK.  It is counsel's opinion that the
basis of  the Common  Stock that  a BAC  Holder receives  will be  equal to  the
aggregate basis of its BACs immediately prior to the Merger.

    A  former  BAC Holder's  holding  period for  Common  Stock received  in the
Conversion will include such BAC Holder's holding period for BACs, provided such
BAC Holder held the BACs as capital assets at the time of the Conversion.  Under
a ruling issued by the Service, to the extent the Common Stock received by a BAC
Holder   is  attributable  to  the  holder's  share  of  Partnership  unrealized
receivables,  substantially  appreciated  inventory  and  certain  other   items
including depreciation recapture ("Section 751 assets") that are neither Section
1231  assets nor  capital assets  of the  Partnership, the  BAC Holder's holding
period for such Common Stock would commence on the day following the date of the
Conversion. Due  to such  allocation,  former BAC  Holders  would have  a  split
holding  period for their Common Stock. The Corporation intends to advise former
BAC Holders of  the Corporation's estimate  of the percentage  of such  "Section
751" assets that were held by the Partnership on the date of the Merger.

    If  the Control Assumption described above is not correct and a BAC Holder's
exchange of BACs for Common Stock is treated as a taxable transaction, each  BAC
Holder's  basis in the Common Stock received would  be equal to the value of the
Common Stock received in the Conversion, and each BAC Holder's holding period in
the shares of Common Stock received would begin on the day following the date of
the Conversion.

OTHER TAX ISSUES AFFECTING BAC HOLDERS

    PARTNERSHIP INCOME AND LOSS FOR YEAR OF MERGER.  Because the Partnership  is
characterized  as a partnership for federal income tax purposes, each BAC Holder
currently is required to take into account  its allocable share of each item  of
income,    gain,    loss,    deduction    and    credit    generated    by   the

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Partnership. For  the year  in which  the  Merger occurs,  BAC Holders  will  be
allocated  the income,  gains, losses, deductions  and credits  generated by the
Partnership for the period  ending with the Merger  regardless of the amount  of
cash  attributable to such net  income that is distributed  to BAC Holders. If a
BAC Holder's  taxable year  differs from  the calendar  year, there  could be  a
"bunching" of more than one year of the Partnership's income or loss in such BAC
Holder's tax return for such taxable year. The General Partner intends to advise
BAC  Holders as to the amount of income  allocated to them for the period ending
with the Merger.

EXERCISE OF APPRAISAL RIGHTS

    RECOGNITION OF  TAXABLE GAIN  OR LOSS.   Except  as described  below, a  BAC
Holder  that holds its BACs as capital assets at the time of the Merger and that
exercises its Appraisal Rights probably will  recognize capital gain or loss  at
the  time of the Merger  equal to the difference  between the amount realized by
such BAC Holder and such BAC Holder's  basis in its BACs. For this purpose,  the
amount  realized generally should  equal the trading  value of the  BACs held by
such BAC Holder immediately  prior to the Merger.  Ordinary interest income  (or
capital  loss)  should be  recognized by  such  BAC Holder  upon the  receipt of
payment pursuant to the  exercise of such BAC  Holder's Appraisal Rights to  the
extent  such payment exceeds (or  is less than) the  amount realized by such BAC
Holder at the time of the Merger, as described above. BAC Holders should consult
their tax advisors to determine the amount of gain or loss they would  recognize
on their exercise of Appraisal Rights.

    CHARACTER  OF GAIN OR LOSS.   A portion of any gain  realized at the time of
the Merger as a result of the exercise of Appraisal Rights (as described  above)
will  be taxed as ordinary income pursuant to  Section 751(a) of the Code to the
extent  that  such  gain  is  attributable  to  a  BAC  Holder's  share  of  the
Partnership's  Section 751 assets. The Corporation intends to provide former BAC
Holders with information to assist them in determining the portion of their gain
attributable to the Partnership's Section 751 assets.

    Under certain circumstances,  a BAC Holder  that exercises Appraisal  Rights
may  be taxed on ordinary income attributable to Section 751 assets in excess of
the amount of gain  otherwise recognized by reason  of the Conversion; in  which
case  such BAC Holder would also have a capital loss equal to the amount of such
excess ordinary income.  Alternatively, such ordinary  income may be  recognized
even if a BAC Holder incurs a net taxable loss by reason of the Conversion.

    CAPITAL  GAINS AND LOSSES.  In the case of individuals, there is currently a
maximum tax  rate  differential  of 11.6  percentage  points  between  long-term
capital  gains and ordinary income. That  is, ordinary income generally is taxed
at a maximum rate of 39.6%, whereas  net long-term capital gains are taxed at  a
maximum  rate of 28%. Under present law, gain recognized on a capital asset held
for more  than one  year on  the date  of disposition  is treated  as  long-term
capital  gain. Net capital losses of individuals are deductible against ordinary
income only to the extent of $3,000  per year, but are fully deductible  against
other capital gains of the taxpayer.

TAX CONSEQUENCES TO THE CORPORATION AND THE PARTNERSHIP

    The  following discussion  assumes that  the Merger  and issuance  of Common
Stock will be treated  for federal income tax  purposes in the manner  described
above  under "--  General Tax  Treatment of  the Merger  and Issuance  of Common
Stock." In counsel's opinion, the acquisition by the Corporation of the  various
partnership  interests (including the  BACs) and other interests  as a result of
the Merger and issuance of Common  Stock and related transactions will not  give
rise  to the recognition of gain or  loss by the Corporation or the Partnership,
and the basis of the BACs received by the Corporation in exchange for shares  of
Common Stock will be determined by reference to the tax basis of the BACs in the
hands of the exchanging BAC Holders immediately prior to the Conversion.

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<PAGE>
   
    The  acquisition of  BACs by the  Corporation will result  in a constructive
termination of the Partnership for federal income tax purposes under Section 708
of the Code. This section provides that  a "sale or exchange" (which includes  a
transfer  in connection with  a Section 351  transaction) of 50%  or more of the
total interest in a partnership's capital  and profits within a 12-month  period
terminates  a partnership  for tax purposes.  Upon such termination,  there is a
hypothetical liquidation and  distribution of  the partnership's  assets to  the
transferees  of  the partnership  interests and  the  remaining partners,  and a
hypothetical contribution  of  the assets  to  the partnership,  which  for  tax
purposes  is considered a  new partnership. The  constructive termination of the
Partnership under Section 708 of the Code will result in the loss of substantial
depreciation deductions for  the year in  which the Conversion  occurs, and  may
result  in the deferral of certain depreciation deductions for subsequent years,
but is not expected  to produce other material  adverse tax consequences to  the
Corporation or the Partnership.
    

    As part of the Conversion, the Operating Partnership will be merged with the
Partnership.  The merger  of the Operating  Partnership and the  transfer of its
assets to the Partnership will not result in the recognition of gain or loss  to
the Partnership or the Operating Partnership.

    The  computation  of  the Partnership's  adjusted  tax basis  in  its assets
subsequent to the  Conversion and  constructive termination  of the  Partnership
should  be determined  by reference  to the Corporation's  basis in  the BACs it
acquires  in  the  Conversion.   Such  computation  will   depend  in  part   on
determinations  of the adjusted tax basis and the relative fair market values of
the assets held by the Partnership prior to the Merger and the effect of Section
743 of the  Code on  the adjusted  tax basis  of the  Partnership's assets.  The
technical  rules  governing  these matters  are  complex,  and there  can  be no
assurance  that  the  Service  will  not  challenge  the  manner  in  which  the
Partnership  computes the adjusted tax basis of its assets, and depreciation and
amortization with respect thereto.

   
POST-CONVERSION TREATMENT OF THE CORPORATION AND ITS SHAREHOLDERS
    

    TAXATION OF THE CORPORATION'S  INCOME AND LOSSES.   The Corporation will  be
the  common  parent  corporation of  an  affiliated group  of  corporations (the
"Group") (which  will include  EIPCC), which  will file  a consolidated  federal
income  tax return. The group's net income, which will include the Partnership's
net income,  will be  subject  to federal  corporate  income and  state  income,
franchise and other taxes.

    DISTRIBUTIONS  BY  THE  CORPORATION.   In  general,  any  money  or property
distributed by  the Corporation  to  its shareholders,  other than  in  complete
liquidation  of  the  Corporation  or  redemption  of  all  or  a  portion  of a
shareholder's interest in the Corporation (if certain tests contained in Section
302(b) of the Code are satisfied), will be taxable as ordinary dividend  income,
classified as investment or portfolio income, to the extent of the Corporation's
accumulated  or  current  earnings  and  profits for  the  taxable  year  of the
distribution. If  such  distribution  exceeds  the  Corporation's  earnings  and
profits, the excess will be treated as a non-taxable return of capital, reducing
the  shareholder's adjusted basis in the Common  Stock (but not below zero); any
remaining portion of  the distribution  will be  taxable to  the shareholder  as
capital  gain if the  Common Stock is  held as a  capital asset. The Corporation
will have no accumulated earnings and profits as it begins operations  following
consummation of the Conversion.

   
    In  counsel's opinion,  the three  anticipated special  distributions should
constitute corporate distributions rather  than additional consideration to  BAC
Holders  in exchange for their BACs. The right to these additional distributions
belongs solely to the holders of the underlying shares on the applicable  record
date. In this sense, the right to the distributions is an attribute of the stock
and  not personal to the BAC  Holders participating in the Conversion. Counsel's
characterization  of  the  anticipated  additional  distributions  as  corporate
distributions  is supported by a published  ruling of the Service, which treated
additional dividend rights on  shares issued by the  acquiring corporation in  a
tax-free  reorganization in a similar manner. There can be no assurance that the
Service will not
    

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<PAGE>
   
assert, or  will  not be  successful  in  asserting, that  any  such  additional
distributions constitute additional consideration to BAC Holders in exchange for
their  BACs (i.e., boot). For the treatment  of boot in a transaction qualifying
under Section 351 of the  Code, see "-- Certain  Tax Consequences of the  Merger
and  Issuance of Common Stock to BAC  Holders -- Nonrecognition of Gain or Loss"
above.
    

    Dividends received  by domestic  corporate  shareholders generally  will  be
eligible  for a 70% dividends received deduction  under Section 243 of the Code;
such deduction is increased to 80% in the case of a holder of 20% or more of the
Corporation's stock. BAC  Holders receiving  distributions on  Common Stock  may
also  be affected by the taxable income limitations set forth in Section 246(b),
the holding period requirements of  Section 246(c), the debt-financed  portfolio
stock  limitations of Section 246(a), and  the "extraordinary dividend" rules of
Section 1059 of the Code.

    Distributions  made  by  the  Corporation  in  connection  with  a  complete
liquidation  of  the  Corporation or  a  redemption of  all  or a  portion  of a
shareholder's interest in the  Corporation will be  treated as amounts  received
from  the sale or exchange of the Common Stock, unless the redemption is treated
as a dividend under Section 302 of the Code.

    GAIN OR LOSS ON SALE OR EXCHANGE OF COMMON STOCK.  Any gain or loss from the
sale or exchange of the  Common Stock will be  characterized as capital gain  or
loss  provided the Common  Stock is held  as a capital  asset, unless the Common
Stock is disposed of in a redemption treated as a dividend under Section 302  of
the Code or in another reorganization transaction treated as a dividend. Gain or
loss  will be  measured by  the difference between  the amount  realized and the
former BAC Holder's adjusted  tax basis in the  Common Stock sold or  exchanged,
and  will be a long-term capital gain or loss if the former BAC Holder's holding
period for  the Common  Stock  sold or  exchanged is  more  than one  year,  and
otherwise  will  be a  short-term  capital gain  or  loss. See  "--  Exercise of
Appraisal Rights -- Capital Gains and Losses" above.

UNRELATED BUSINESS TAXABLE INCOME

    Certain persons otherwise generally exempt  from federal income taxes  (such
as  pension plans and other exempt organizations) are taxed under Section 511 of
the Code  on unrelated  business taxable  income. Currently,  substantially  all
taxable  income generated  by the  Partnership is  considered unrelated business
taxable income  for  tax-exempt  organizations.  Dividends  distributed  by  the
Corporation,  and gain from  the sale or  exchange of Common  Stock, will not be
taxed under Section 511 of the Code, except to the extent that the Common  Stock
is debt-financed property as that term is defined in Section 514 of the Code.

OTHER TAX ASPECTS

    STATE  AND  LOCAL INCOME,  INHERITANCE  AND ESTATE  TAXES.   In  addition to
federal income taxes, BAC Holders may be  subject to other taxes, such as  state
or  local income taxes, that may be  imposed by various jurisdictions and may be
required to file tax returns through the  date of the Merger in those states  in
which  the Partnership or  the Operating Partnership carries  on business, or in
which properties owned by either are located. BAC Holders may also be subject to
income, intangible property,  estate and  inheritance taxes in  their states  of
domicile.  Counsel has  expressed no opinion  on these matters,  and BAC Holders
should consult their advisors with regard to their liability for state and local
income, inheritance,  estate and  other taxes,  as a  result of  the Merger  and
issuance of Common Stock or otherwise.

    REPORTING  OF THE EXCHANGE.  Under Treasury regulations, each BAC Holder who
receives  shares  of  Common  Stock  in  the  Conversion  must  provide  certain
information  concerning the exchange with its  federal income tax return for the
year in which  the Conversion  occurs. A  BAC Holder  also will  be required  to
attach  to such income tax return  a statement setting forth certain information
with respect  to such  BAC Holder's  share  of Section  751 assets  and  related
matters.  The Corporation intends to provide former BAC Holders with information
that will assist them in meeting these requirements.

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<PAGE>
    BACK-UP WITHHOLDING.   Under  the  back-up withholding  rules of  the  Code,
holders of Common Stock may be subject to back-up withholding at the rate of 31%
with  respect to dividends  paid by the  Corporation on the  Common Stock unless
such holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact  or (ii) provides a correct  taxpayer
identification  number and certifies under penalty  of perjury that the taxpayer
identification number is correct and that  the holder is not subject to  back-up
withholding  because of a  failure to report all  dividends and interest income.
Any amount withheld  under these  rules will  be credited  against the  holder's
federal  income tax  liability. The  Corporation may  require holders  of Common
Stock to establish an exemption from back-up withholding or to make arrangements
satisfactory  to  the  Corporation  with  respect  to  the  payment  of  back-up
withholding.

PROPOSED LEGISLATION

    Legislation has been proposed as a part of the implementation of the Uruguay
Round  of the  General Agreement  on Tariffs and  Trade which  would tax certain
distributions of marketable securities by a partnership. The legislation in  its
proposed  form  would not  change  the tax  treatment  to BAC  Holders  upon the
exchange of their  BACs for Company  Common Stock, as  described above.  Counsel
cannot predict whether such legislation will be enacted and, if so, in what form
and  whether if  such legislation  is enacted,  such legislation  will adversely
affect the tax treatment  to BAC Holders and  affiliates of the General  Partner
transferring interests in the Conversion.

                     ACCOUNTING TREATMENT OF THE CONVERSION

   
    The  Corporation will  account for  the transaction  as a  reorganization of
affiliated entities, with the assets and liabilities of the Partnership recorded
at their historical  cost basis, except  that it will  also record deferred  tax
assets  in accordance with Statement of  Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES, relating  to the temporary differences for  certain
assets  and liabilities at the  date of conversion as  discussed in Note 1 under
the paragraph "Income Taxes." The costs  of the Conversion, estimated to be  $11
million,  will be accounted for as an  expense in the statement of operations at
the time  of  the  Conversion.  Additionally, the  Corporation  will  receive  a
significant step-up in the tax basis of the assets and liabilities acquired from
the  Partnership and, as a result, will record additional deferred tax assets at
the Effective  Time.  The ultimate  determination  of the  deferred  tax  assets
discussed  in this  paragraph will be  calculated based on  the actual temporary
differences existing at  the Effective  Time. See "Selected  Historical and  Pro
Forma Financial Information."
    

                          VOTING AND PROXY INFORMATION

VOTING PROCEDURES

   
    Under  the  Partnership  Agreement,  Polaris  Industries  Holdings  Inc.,  a
Delaware corporation (the  "Initial Limited  Partner"), will vote  for the  sole
benefit of, and in accordance with the written instructions of, BAC Holders with
respect  to their BACs held as of the  record date for the Special Meeting, with
each BAC  Holder being  entitled  to direct  the vote  of  one Class  A  Limited
Partnership  Interest of  the Partnership  in respect of  each BAC  so held. The
General Partner has set the  close of business on  Monday, November 21, 1994  as
the Record Date for the determination of BAC Holders
entitled  to vote at the  Special Meeting on Thursday,  December 22, 1994 and at
any adjournment or postponement thereof.
    

VOTE REQUIRED; QUORUM

    Approval of the Conversion Proposal will require the affirmative vote of (i)
BAC Holders holding a majority of BACs on the Record Date and (ii)  Unaffiliated
BAC  Holders (BAC  Holders other  than the  Sponsors and  the affiliates  of the
General Partner)  holding a  majority of  the  BACs held  by such  persons.  The
presence,  in person or  by proxy, of  BAC Holders holding  an aggregate of more
than 50%  of the  outstanding BACs  (8,005,221) (including  the Initial  Limited
Partner acting for and at the direction of BAC Holders) will constitute a quorum
at    the    Special   Meeting.    If   no    choice    is   specified    on   a

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signed proxy delivered to the Partnership,  the BAC Holder returning such  proxy
will  be deemed to have  consented to the Conversion  Proposal. As of the Record
Date, there were 16,010,441 BACs outstanding. The Sponsors and the affiliates of
the  General  Partner  owning,  in  the  aggregate,  approximately  14%  of  the
outstanding  BACs, have advised the Partnership that  they will vote in favor of
the Conversion Proposal.  For further  information concerning  the ownership  of
BACs  by  management  and  affiliates  of  the  General  Partner,  see "Security
Ownership of Certain Beneficial Owners and Management."

PROXIES

    The accompanying form  of Proxy  is designed to  permit each  BAC Holder  to
approve, disapprove or to abstain from approving the Conversion Proposal. When a
BAC Holder's Proxy is marked to abstain with respect to the Conversion Proposal,
the  BACs represented  by the  Proxy will  be deemed  by the  General Partner to
constitute disapproval of the Conversion Proposal. Failure to forward a Proxy or
to vote at the Special Meeting will have the same effect as if a BAC Holder  had
specified on the Proxy disapproval of the Conversion Proposal.

    BAC  Holders are  urged to  promptly return  the enclosed  Proxy, signed and
dated, in the enclosed postage prepaid  envelope to the address set forth  below
or by hand delivery to the location indicated below:

               Polaris Industries Partners L.P.
               c/o Corporate Election Services
               P.O. Box 1150
               Pittsburgh, PA 15230-9954

    To be effective, Proxies must be properly completed, executed, and delivered
to  the Partnership  as described  above on  or before  the date  of the Special
Meeting, unless extended by  the General Partner in  its sole discretion for  as
long  as the General Partner deems necessary.  The laws of the State of Delaware
pertaining to the validity and use of corporate proxies will govern the validity
and use of  Proxies given by  BAC Holders, except  to the extent  such laws  are
inconsistent with the Partnership Agreement.

REVOCATION OF PROXIES

    BAC  Holders will  be permitted to  revoke their  Proxies at any  time on or
before the date of  the Special Meeting.  A BAC Holder who  returns a Proxy  may
revoke the Proxy at any time on or before that date by (i) giving written notice
to  Polaris Industries Partners L.P., c/o  Corporate Election Services, P.O. Box
1150,  Pittsburgh,  PA  15230-9954,  of  that  revocation,  (ii)  delivering   a
later-dated  Proxy  to the  Partnership at  the address  listed above,  or (iii)
voting in person at the Special Meeting.

    Delivery of a written notice of revocation may be made in person or by mail.
Any written notice of revocation must specify  the name of the BAC Holder as  it
appears  on the Proxy, must  include the number of BACs  to which it relates and
must be properly executed.

SOLICITATION OF PROXIES

    This solicitation is  being made  by the General  Partner on  behalf of  the
Partnership.  The Partnership will  pay the cost of  soliciting Proxies and will
reimburse brokerage houses and other  nominees for their reasonable expenses  of
forwarding  proxy materials  to beneficial owners  of BACs.  The Partnership has
retained D.F. King & Co., Inc. to  act as Information Agent with respect to  the
Conversion.  The Information Agent will solicit  Proxies from holders of BACs by
mail, telephone, telegram, personal  interview or other  means and will  provide
copies  of this Proxy Statement and related  proxy materials to holders of BACs.
In connection with such engagement, the Information Agent will receive a fee  of
$55,000  and will be reimbursed by  the Partnership for reasonable out-of-pocket
expenses, but none  of the compensation  paid to the  Information Agent will  be
contingent  on the  outcome of  the solicitation  efforts or  the result  of the
solicitation with respect  to the  Conversion Proposal  or based  on the  number

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of  affirmative  votes  received.  In  addition,  the  Partnership  and  certain
directors, officers and regular employees or representatives of the Partnership,
the Corporation  and  the General  Partner  may solicit  Proxies  by  telephone,
telegram  or personal  interview, as  will persons  employed by  the Information
Agent. In addition, representatives of  Polaris may meet with brokers,  research
analysts   and  other  members  of  the  investment  community  to  discuss  the
Conversion. Representatives of Polaris may also contact BAC Holders in person or
by telephone, or arrange meetings with BAC Holders to discuss the Conversion.

INFORMATION AGENT

   
    D.F. King  &  Co.,  Inc. has  agreed  to  provide certain  services  as  the
Information  Agent  for a  fee  of $55,000  and  reimbursement of  its expenses.
Requests for  assistance regarding  the  Conversion and  for copies  of  related
documents  should  be  made  directly  to  the  Information  Agent  by  calling,
toll-free, 1-800-488-8075.
    

INDEPENDENT AUDITORS

    Representatives  of  McGladrey  &  Pullen,  the  Partnership's   independent
auditors,  are expected to  be present at  the Special Meeting  and will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.

                                APPRAISAL RIGHTS

    Although neither  the  Partnership Agreement  nor  federal or  Delaware  law
provides  any rights  for dissenting BAC  Holders to have  their respective BACs
appraised or redeemed in  connection with the  Conversion, the Merger  Agreement
provides  that BAC  Holders who satisfy  the conditions described  below will be
entitled to the  rights of appraisal  that are  provided in Article  VII of  the
Merger  Agreement ("Appraisal  Rights") and are  similar to  statutory rights of
appraisal that stockholders of a Delaware corporation possess under Section  262
("Section  262") of the  General Corporation Law  of the State  of Delaware (the
"DGCL"). However, it is a condition  to the Corporation's obligations under  the
Merger  Agreement  (which can  be waived  by the  Corporation) that  BAC Holders
owning more than 5% of the outstanding BACs shall have not notified the  General
Partner  of their  intention to exercise  their contractual  rights of appraisal
under the  Merger Agreement  in connection  with the  Conversion. The  following
summary of the provisions of Article VII of the Merger Agreement is not intended
to  be a complete statement  of the relevant provisions  of the Merger Agreement
and is qualified in its entirety by  reference to the Merger Agreement which  is
annexed to this Proxy Statement as Annex D.

    If  a BAC Holder elects to exercise  Appraisal Rights in accordance with the
Merger Agreement, such BAC Holder must satisfy all of the following conditions:

        (a) on or  before the  fifth day  prior to  the Meeting  Date, such  BAC
    Holder must deliver to the Partnership a written objection to the Conversion
    and  a notice that, if  the Conversion is consummated,  such BAC Holder will
    exercise Appraisal Rights  with respect to  all BACs owned  by such  person,
    which  objection and notice should reasonably  inform the Partnership of the
    identity of the BAC Holder and that such BAC Holder demands Appraisal Rights
    with respect to the BACs owned by such holder; and

        (b) such BAC Holder must not vote in favor of the Conversion (a  failure
    to  vote will satisfy this condition, but voting in favor of or delivering a
    Proxy in  favor of  the Conversion  or an  unmarked proxy  will, in  and  of
    itself, constitute a waiver of such BAC Holder's right to appraisal and will
    nullify any previously filed written demand for appraisal); and

        (c)  such BAC Holder must hold the BACs for which appraisal is sought on
    the Record Date and continuously  through the Effective Time, and  otherwise
    comply  with the  provisions of the  Merger Agreement  relating to Appraisal
    Rights.

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<PAGE>
    The written demand referred to  in clause (a) above  must be in addition  to
and  separate from any Proxy  abstaining from or voting  against the approval of
the Conversion Proposal.  Neither voting  against, abstaining  from voting,  nor
failing to vote on the Conversion, will constitute a demand for appraisal within
the meaning of the Merger Agreement.

   
    Within  ten days  after the Effective  Time, the Corporation  will notify by
mail each BAC Holder who has complied  with clauses (a), (b) and (c) above  that
the Merger has been effected (including the date thereof).
    

    Any  BAC  Holder  who  has  complied with  the  requirements  of  the Merger
Agreement which  are described  above  shall be  entitled  to receive  from  the
Corporation,  upon a  written request made  within 120 days  after the Effective
Time, a statement setting forth the aggregate number of BACs not voted in  favor
of  the Conversion  and with  respect to which  demands for  appraisal have been
received, and the aggregate number of  holders thereof. Such statement shall  be
mailed  to such  BAC Holder  within ten days  after the  later of  the date such
request is received and the expiration of the period for delivery of demands for
appraisal.

    Within 120 days after the Effective Time, the Corporation or any BAC  Holder
who  has qualified for an  appraisal of BACs under  the provisions of the Merger
Agreement may file a petition in  the Delaware Court of Chancery (the  "Delaware
Court") asking for a finding and determination of the Fair Value (as defined) of
the  BACs of all holders of BACs who have perfected Appraisal Rights pursuant to
the Merger Agreement. Notwithstanding the foregoing, any BAC Holder may withdraw
a demand for appraisal  within 30 days after  the Effective Time (or  thereafter
with the Corporation's written approval), provided that no payment for such BACs
has  been made, and receive the shares of  Common Stock to be issued pursuant to
the Conversion.

   
    Upon the filing  of any such  petition by a  BAC Holder, service  of a  copy
thereof  shall be made  upon the Corporation,  which shall within  20 days after
such service file  in the office  of the  Register in Chancery  of the  Delaware
Court  in which  such petition  was filed  (the "Register  in Chancery")  a duly
verified list containing  the names and  addresses of all  BAC Holders who  have
demanded  appraisal of their  BACs in accordance  with clause (a)  above and not
withdrawn such demand. If such petition  shall be filed by the Corporation,  the
petition  shall be  accompanied by  such a duly  verified list.  The Register in
Chancery, if so ordered by the Delaware Court, shall give notice of the time and
place fixed for the hearing of such petition by certified or registered mail  to
the  Corporation  and  BAC Holders  on  such  list (at  the  addresses contained
thereon). Such notice shall also be given  by one or more publications at  least
one  week before the day of the hearing in a newspaper of general circulation in
the City of Wilmington, Delaware or such other publication as the Delaware Court
deems advisable. The forms of  the notices by mail  and by publication shall  be
approved  by the  Delaware Court  and the  costs thereof  shall be  borne by the
Corporation.
    

    If a  petition  for  appraisal is  timely  filed,  at the  hearing  on  such
petition, the Delaware Court will determine BAC Holders who have become entitled
to  Appraisal  Rights and  will appraise  the  BACs owned  by such  BAC Holders,
determining their Fair Value, together with a fair rate of interest, if any,  to
be  paid upon the amount determined to be  the Fair Value (which interest may be
simple or compound, as the Delaware Court may direct). In determining such  Fair
Value  and fair rate of interest, the  Delaware Court will take into account all
relevant factors. Upon application by the Corporation or any BAC Holder entitled
to participate  in the  appraisal  proceeding, the  Delaware  Court may  in  its
discretion  permit discovery or  other pre-trial proceedings  and may proceed to
trial upon  the  appraisal prior  to  the  final determination  of  BAC  Holders
entitled to an appraisal. Any BAC Holder whose name appears on the duly verified
list  filed by the Corporation with the Delaware Court pursuant to the preceding
paragraph  may  participate  fully  in  all  proceedings  until  it  is  finally
determined  that he or she  is not entitled to  Appraisal Rights pursuant to the
Merger Agreement as described herein.

                                       68
<PAGE>
    The Delaware Court  shall direct payment  of the Fair  Value, together  with
interest,  if any, by the  Corporation to BAC Holders  entitled thereto, and the
Corporation shall make such payment forthwith. The Delaware Court's decree shall
be enforceable  as other  decrees in  the Delaware  Court. Upon  payment of  the
judgment,  the dissenting BAC Holders shall cease  to have any interest in their
BACs or the Corporation.

    BAC Holders considering seeking appraisal of their BACs should bear in  mind
that  dissenting BAC Holders have no right to receive any shares of Common Stock
with respect to such BACs, and that the Fair Value of the BACs determined  under
the  Merger Agreement could be more than, the same as, or less than the value of
the Common Stock which they would have  received in the Conversion had they  not
sought  appraisal of their  BACs. The costs  of the appraisal  proceeding may be
determined by  the  Delaware Court  and  assessed  against the  parties  to  the
proceeding  as the  Delaware Court  deems equitable  in the  circumstances. Upon
application of a BAC Holder,  the Delaware Court may order  all or a portion  of
the  expenses  incurred  by any  BAC  Holder  in connection  with  the appraisal
proceeding (including, without  limitation, reasonable attorneys'  fees and  the
fees  and expenses of experts)  to be charged pro rata  against the value of all
the BACs entitled to  an appraisal. In  the absence of  such a determination  or
assessment, each party bears its own expenses.

    In  the event that  the foregoing procedures cannot  be followed, the Merger
Agreement provides that the  Corporation shall implement alternative  procedures
designed  to  produce  results  substantially similar  to  those  that  would be
effected if Section 262 of the DGCL applied to the Merger. The Merger  Agreement
provides  that if the  Delaware Court shall  refuse to recognize  the rights and
procedures in  accordance with  Section 262  set forth  herein with  respect  to
dissenting  BAC Holders or  shall otherwise refuse to  follow the procedures set
forth in the Merger Agreement to be followed by it, then the Corporation, within
45 days  after  learning of  such  refusal by  the  Delaware Court,  shall  make
application  to the American Arbitation  Association, Inc., Philadelphia Branch,
to select an independent  appraiser (the "Special  Appraiser") to determine  the
Fair  Value of the BACs held by all  such dissenting BAC Holders. Within 30 days
after the Corporation is notified of the selection of the Special Appraiser, the
Company shall deliver  or mail to  each dissenting BAC  Holder a written  notice
stating  that a Special Appraiser has been selected and identifying such Special
Appraiser. From and after the delivery or mailing of such notice, all petitions,
lists and other  documents that would  have been filed  with the Delaware  Court
pursuant  to the Merger Agreement shall be  filed with the Special Appraiser and
the Special Appraiser shall retain,  maintain and make available such  documents
to  the Corporation and the dissenting BAC  Holders. If any such documents shall
have already  been  filed with  the  Delaware  Court, the  Corporation,  at  its
expense,  shall obtain copies  of such documents for  the Special Appraiser. The
Special Appraiser shall  give any  notices that would  have been  given by,  and
perform  the functions and take  the actions that would  have been performed and
taken by, the Delaware Court pursuant  the procedures set forth above. The  Fair
Value  finally determined  by the Special  Appraiser shall be  final and binding
upon all dissenting BAC Holders and  the Corporation, and the provisions of  the
Merger  Agreement  with respect  to the  effect of  such determination  shall be
applicable as nearly as practicable.

    From and  after the  Effective Time,  no BAC  Holder who  has duly  demanded
Appraisal  Rights in compliance  with the Merger Agreement  shall be entitled to
receive any portion of the  shares of Common Stock  of the Corporation, to  vote
such  BACs for any purposes, to exercise any other rights of a BAC Holder, or to
receive payment  of distributions  on such  BACs (other  than those  payable  to
holders  of record of BACs as of a  date prior to the Effective Time); provided,
that if no petition for  an appraisal is filed within  the time provided by  the
Merger  Agreement, or  if a  BAC Holder  delivers to  the Corporation  a written
withdrawal of  demand  for  an  appraisal and  an  approval  of  the  Conversion
Proposal,  either within 30 days after the Effective Time or thereafter with the
written approval of the  Corporation, then the  right of such  BAC Holder to  an
appraisal  will cease. Notwithstanding the foregoing, no appraisal proceeding in
the Delaware Court shall be dismissed with respect to any dissenting BAC  Holder
without  the  approval  of  the  Delaware  Court,  and  such  dismissal  may  be
conditioned on such terms as the Delaware Court deems just.

                                       69
<PAGE>
    Failure to  take  any required  step  in  connection with  the  exercise  of
Appraisal  Rights may result in the termination or waiver of such rights. If any
BAC Holder  who demands  Appraisal Rights  with  respect to  the BACs  fails  to
perfect,  or effectively withdraws or loses, its right to appraisal, each BAC of
such BAC Holder will be converted into shares of Common Stock in accordance with
the Merger Agreement. A  BAC Holder will fail  to perfect, or effectively  lose,
its  right to appraisal if no petition  for appraisal is filed with the Delaware
Court within 120 days of the Effective  Time, or if such BAC Holder delivers  to
the  Corporation a written withdrawal of its demand for appraisal and acceptance
of the Conversion (except that  any such attempt to  withdraw made more than  30
days  after  the  Effective  Time  will  require  the  written  approval  of the
Corporation), or if, after the hearing of a petition for appraisal, the Delaware
Court shall  determine  that such  BAC  Holder is  not  entitled to  the  relief
provided  by the Merger  Agreement. In any  such case, such  BAC Holder shall be
bound by the Conversion  and receive shares of  Common Stock in accordance  with
the terms of the Merger Agreement.

   
    In  the absence of fraud  or unfair dealing, the  remedy of Appraisal Rights
provided in the Merger Agreement to a BAC Holder objecting to the Conversion  is
the  exclusive remedy  for the recovery  of the  value of such  holder's BACs or
money damages to such BAC Holder with respect to the Conversion.
    

                                       70
<PAGE>
                                    BUSINESS

    Polaris designs, engineers and manufactures snowmobiles, four-and  six-wheel
all  terrain recreational and utility vehicles ("ATVs"), and personal watercraft
("PWC") and  markets  them,  together with  related  accessories,  clothing  and
replacement  parts through dealers  and distributors principally  located in the
United  States,  Canada  and  Europe.  Snowmobiles,  ATVs,  PWC  and   clothing,
accessories  and parts, accounted  for the following  approximate percentages of
Polaris' sales for the periods indicated.

<TABLE>
<CAPTION>
                                                       CLOTHING,
YEAR ENDED                                            ACCESSORIES
DECEMBER 31,          SNOWMOBILES    ATVS     PWC      AND PARTS
- --------------------  ------------   -----   ------   ------------
<S>                   <C>            <C>     <C>      <C>
1993................       50%         26%      9%         15%
1992................       54          25       7          14
1991................       60          25       0          15
</TABLE>

INDUSTRY BACKGROUND

    SNOWMOBILES.  In the early 1950s,  a predecessor to Polaris produced a  "gas
powered sled" which became the forerunner of the Polaris snowmobile. Snowmobiles
have been manufactured under the Polaris name since 1954.

    Originally  conceived as a utility vehicle for northern, rural environments,
the snowmobile gained popularity as  a recreational vehicle. From the  mid-1950s
through  the late  1960s, over 100  producers entered the  snowmobile market and
snowmobile sales reached  a peak  of approximately  495,000 units  in 1971.  The
Polaris  product survived  the industry decline  in which  snowmobile unit sales
fell to a  low point of  approximately 87,000 units  in 1983 and  the number  of
snowmobile  manufacturers serving  the North  American market  declined to four:
Yamaha, Bombardier, Arctco and Polaris. Polaris estimates that industry sales of
snowmobiles on a world wide basis was approximately 171,000 units for the season
ended March 31, 1994.

    ALL TERRAIN  VEHICLES.   ATVs  are four-wheel  and six-wheel  vehicles  with
balloon  style tires  designed for  off road  use and  traversing rough terrain,
swamps and marshland. ATVs  are used for recreation,  in such sports as  fishing
and  hunting, as well as for utility purposes on farms, ranches and construction
sites.

   
    ATVs were introduced to the North American market in 1971 by Honda. By 1980,
the number of  ATV units  sold in  the North  American market  had increased  to
approximately  140,000 units.  Other Japanese  motorcycle manufacturers, Yamaha,
Kawasaki and Suzuki,  entered the North  American market in  the late 1970s  and
early 1980s, and in August 1994, Arctco announced its intention to enter the ATV
market commencing in 1995. In 1985, the number of three-and four-wheel ATVs sold
in  North America peaked at approximately  650,000 units. Polaris estimates that
since declining from that  level the industry has  stabilized and begun  growing
slowly with approximately 247,000 ATVs sold worldwide during calendar year 1993.
    

    PERSONAL  WATERCRAFT.  PWC are sit-down  versions of water scooter vehicles,
and designed for use on lakes, rivers,  oceans and bays. PWC are used  primarily
for  recreational purposes  and are designed  for one, two  or three passengers.
Polaris entered the  PWC market in  1992. Polaris estimates  that the  worldwide
market  for  PWC  was  approximately  122,000 units  in  1993.  Other  major PWC
manufacturers are Yamaha, Bombardier, Kawasaki and Arctco.

PRODUCTS

    SNOWMOBILES.  Polaris  produces a  full line of  snowmobiles, consisting  of
twenty-six  models, ranging from  utility and economy  models to performance and
competition models, with 1994 suggested retail prices ranging from approximately
$2,450 to $8,150. Polaris snowmobiles are sold principally in the United States,
Canada and Europe.  Polaris has the  largest share of  the worldwide  snowmobile
market.

                                       71
<PAGE>
    Polaris  believes that the Polaris snowmobile has a long-standing reputation
for quality, dependability  and performance.  Polaris believes that  it and  its
predecessors  were the first  to develop several features  for commercial use in
snowmobiles, including  independent  front  suspension,  variable  transmission,
hydraulic  disc  brakes,  liquid cooled  engines  and brakes,  a  three cylinder
engine, and  electronic fuel  injection. Polaris  also markets  a full  line  of
snowmobile  accessories, such as luggage, tow hitches, hand warmers, specialized
instrumentation, reverse  gear, special  traction products,  cargo racks,  oils,
lubricants, paints and parts.

    For   the  year   ended  December   31,  1993,   snowmobiles  accounted  for
approximately 50% of Polaris' sales.

    ALL TERRAIN VEHICLES.  Polaris entered the ATV market in the spring of  1985
with  both a  three-wheel and a  four-wheel product.  Polaris initially produced
1,700 three-wheel  ATVs, but  discontinued its  manufacture of  the  three-wheel
model to concentrate exclusively on the four-wheel and six-wheel products, which
provide  more stability for the rider. Polaris'  line of ATVs, consisting of ten
models, includes general  purpose, sport  and four-and  six-wheel drive  utility
models,  with 1994 suggested retail prices  ranging from approximately $2,900 to
$6,200.

    Polaris' ATV features  the totally automatic  Polaris variable  transmission
which requires no manual shifting and a MacPherson strut front suspension, which
Polaris  believes enhances control and stability.  Polaris' ATV is also the only
ATV in its class  that uses a  two cycle engine and  chain drive, which  Polaris
believes improves performance and efficiency.

    Prior  to  1989, the  ATV industry  experienced  some softness  arising from
publicity  surrounding  safety-related  and  environmental  concerns.   However,
management  believes that this market has stabilized somewhat since 1989 and has
begun to resume modest growth.

    For the year ended December 31,  1993, ATVs accounted for approximately  26%
of Polaris' sales.

    PERSONAL   WATERCRAFT.    Polaris'  most   significant  recent  new  product
development  was  the  introduction  in  1992  of  the  Polaris  SL650  personal
watercraft,  Polaris' first entry into this  expanding product category. In 1993
the Polaris SL750 was added for even  more power and performance. The SL650  and
SL750  have the  industry's first three-cylinder  engines developed specifically
for PWC.  The  introduction of  the  PWC capitalized  on  Polaris'  engineering,
production  and distribution strengths, and  also reduced Polaris' dependence on
any single  product line  for  overall sales  and  profitability. In  late  1993
Polaris  introduced a  new, three  passenger PWC,  the Polaris  SLT750. The 1994
suggested retail  prices for  Polaris' PWC  range from  approximately $5,500  to
$6,300.  Management believes  Polaris is  well positioned  to take  advantage of
opportunities in this  growing market through  its network of  nearly 1,200  PWC
dealers.

    For  the year ended December 31, 1993, PWC accounted for approximately 9% of
Polaris' sales.

    CLOTHING, ACCESSORIES AND REPLACEMENT PARTS.  Polaris produces or supplies a
variety of replacement parts and accessories for its snowmobiles, ATVs and  PWC.
Polaris also markets a full line of recreational clothing, which includes suits,
helmets,  gloves, boots, hats, sweaters and  jackets for its snowmobile, ATV and
PWC lines. The clothing is  designed to Polaris' specifications, purchased  from
independent  vendors and  sold by Polaris  through its  dealers and distributors
under the  Polaris  brand  name.  Replacement parts  and  accessories  are  also
marketed by Polaris.

    For  the  year  ended December  31,  1993, clothing,  accessories  and parts
accounted for approximately 15% of Polaris' sales.

MANUFACTURING OPERATIONS

    Polaris' products are  assembled at  its manufacturing  facility at  Roseau,
Minnesota.  Since  snowmobiles,  ATVs and  PWC  incorporate  similar technology,
substantially the same equipment and personnel are employed in their production.
Polaris emphasizes  vertical integration  in  its manufacturing  process,  which
includes  machining, stamping, welding, clutch assembly and balancing, painting,

                                       72
<PAGE>
cutting and sewing, and  manufacture of foam seats.  Engines, fuel tanks,  hoods
and  hulls, tracks, tires and instruments, and certain other component parts are
purchased from  third party  vendors.  Polaris manufactures  a number  of  other
components  for its snowmobiles,  ATVs and PWC. Raw  materials or standard parts
are readily available from multiple  sources for the components manufactured  by
Polaris. Polaris' work force is familiar with the use, operation and maintenance
of the product, since many employees own snowmobiles, ATVs and PWC. In August of
1991,   Polaris  acquired  an  additional  manufacturing  facility  in  Osceola,
Wisconsin in  order to  bring more  component parts  manufacturing in-house.  In
August 1994, Polaris signed a one-year lease agreement for a 223,000 square foot
assembly  facility located on 24 acres of land in Spirit Lake, Iowa. Polaris has
an option to purchase  the facility for  $1.85 million at the  end of the  lease
term.  Polaris anticipates  utilizing the facility  to assemble  its PWC product
line, and potentially certain snowmobile and ATV models in the future.

    Pursuant to informal agreements between Polaris and Fuji, Fuji has been  the
exclusive  manufacturer of the Polaris  two-cycle snowmobile engines since 1968.
Fuji has manufactured engines for Polaris' ATV products since their introduction
in the  spring of  1985 and  also supplies  engines for  the PWC  product.  Such
engines  are developed by Fuji  to the specific requirements  of Polaris. In the
fall of 1987 Fuji became an investor in the Partnership.

    Polaris believes its relationship  with Fuji to  be excellent. If,  however,
its informal relationship were terminated by Fuji, interruption in the supply of
engines  would adversely affect Polaris' production pending the establishment of
substitute  supply  arrangements.  Currently,  Polaris  is  in  the  process  of
investigating  manufacturing alternatives for its engines  to reduce the risk of
dependence on  a single  supplier and  to minimize  the effect  of Japanese  yen
currency  fluctuations.  Polaris  anticipates  no  significant  difficulties  in
obtaining substitute supply arrangements for  other raw materials or  components
for which it relies upon limited sources of supply.

    Polaris'  products  are  shipped  from  its  manufacturing  facilities  by a
contract carrier.

PRODUCTION SCHEDULING

    Since snowmobiles are used principally in the northern United States, Canada
and northern  Europe  in what  is  referred to  as  the "snow  belt,"  sales  of
snowmobiles  to  consumers begin  in  the fall  and  continue during  the winter
season. Orders  for each  year's production  of snowmobiles  are placed  in  the
spring and orders for ATVs and PWC are placed in fall and winter, after meetings
with  dealers  and distributors,  and units  are  built to  order each  year. In
addition, non-refundable deposits made by consumers to dealers in the spring for
snowmobiles assist in production  planning. The budgeted volume  of units to  be
produced  each year  is sold  to dealers  and distributors  prior to production.
Sales activity at the dealer level is  monitored on a monthly basis for each  of
snowmobiles, ATVs and PWC.

    Manufacture  of snowmobiles  commences in  the spring  and continues through
late autumn or  early winter.  Polaris manufactures  PWC during  the winter  and
spring  months. Since May 1993, Polaris has the ability to manufacture ATVs year
round. Generally, Polaris commences ATV production in late autumn and  continues
through  early autumn of the following year. For the past several years, Polaris
has had virtually no carryover inventory  at the dealer level of its  production
of snowmobiles, ATVs and PWC.

SALES AND MARKETING

    With  the  exception  of  Illinois, upper  Michigan,  eastern  Wisconsin and
offshore markets,  where  Polaris  sells  its  snowmobiles  through  independent
distributors,  Polaris sells its snowmobiles directly to dealers in the snowbelt
regions of the United States. Over the past several years, Polaris has placed an
increasing emphasis on dealer-direct as opposed to distributor sales. Snowmobile
sales in  Europe  are handled  through  distributors. See  Note  7 of  Notes  to
Financial  Statements  for discussion  of  foreign and  domestic  operations and
export sales.

    Most  dealers  and  distributors  of  Polaris  snowmobiles  also  distribute
Polaris'  ATVs  and PWC.  In the  southern  region of  the United  States, where
snowmobiles are not used, Polaris has established a

                                       73
<PAGE>
direct dealer  network.  Since  the  beginning of  1986,  Polaris  has  arranged
approximately  500  dealerships  in  the  southern  United  States.  Unlike  its
competitors,  which  market  their   ATV  products  principally  through   their
affiliated  motorcycle dealers, Polaris also sells its ATVs and PWC through lawn
and garden, boat and marine, and farm implement dealers.

    Dealers  and   distributors  sell   Polaris'  products   under   contractual
arrangements pursuant to which the dealer or distributor is authorized to market
specified  products,  required to  carry certain  replacement parts  and perform
certain warranty and other services. The dealer and distributor contracts may be
canceled  by  either  party  on   specified  notice.  Changes  in  dealers   and
distributors  take place from  time to time. Polaris  believes that a sufficient
number of  qualified dealers  and distributors  exists in  all areas  to  permit
orderly transition whenever necessary.

    Polaris  has arrangements with  Transamerica Commercial Finance Corporation,
The Bank of Nova Scotia and ITT Commercial Finance, a division of ITT Industries
of Canada, to  provide floor plan  financing for its  dealers and  distributors.
Substantially  all of Polaris'  sales of snowmobiles, ATVs  and PWC are financed
under arrangements in which Polaris is paid within a few days of shipment of its
product. Polaris participates in  the cost of  dealer and distributor  financing
and  is required to repurchase products from the finance companies under certain
circumstances and subject to certain  limitations. Polaris has not  historically
recorded a sales return allowance because it has not been required to repurchase
a  significant number of units  in the past. However,  there can be no assurance
that this will  continue to be  the case.  If necessary, Polaris  will record  a
sales return allowance at the time of sale should management anticipate material
repurchases of units financed through the finance companies. See Note 4 of Notes
to Financial Statements.

    Polaris  does not directly finance the purchase of Polaris snowmobiles, ATVs
or PWC by consumers. However, retail  financing plans are offered by certain  of
the dealers and Polaris has programs to make consumer financing available to its
dealers through unaffiliated third parties.

    Polaris'   marketing  activities  are  designed  primarily  to  promote  and
communicate directly with consumers  and secondarily to  assist the selling  and
marketing  efforts of  its dealers and  distributors. From time  to time Polaris
makes available discount or rebate programs or other incentives for its  dealers
and distributors to remain price competitive in order to accelerate reduction of
retail  inventories.  Polaris  advertises  its  products  directly  using  print
advertising in the industry press and in user group publications, on billboards,
and, less  extensively, on  television and  radio. Polaris  also provides  media
advertising  and partially underwrites dealer  and distributor media advertising
to a degree  and on  terms which vary  by product  and from year  to year.  Most
dealer  and distributor  advertising appears  in newspapers  and on  radio. Each
season Polaris produces  a promotional film  for its snowmobiles,  ATVs and  PWC
which  is available to dealers for use in the showroom or at special promotions.
Polaris also provides  product brochures, leaflets,  posters, dealer signs,  and
miscellaneous other promotional items for use by dealers.

ENGINEERING, RESEARCH AND DEVELOPMENT

    Polaris employs approximately 180 persons who are engaged in the development
and  testing of existing  products and research and  development of new products
and improved  production  techniques.  Polaris believes  that  Polaris  and  its
predecessors  were the first  to develop, for  commercial use, independent front
end suspension for snowmobiles, the long travel rear suspension for snowmobiles,
direct drive of the  snowmobile track, the use  of liquid cooling in  snowmobile
engines  and  brakes, the  use  of hydraulic  brakes  in snowmobiles,  the three
cylinder engine in snowmobiles and PWC, the use of electronic fuel injection  in
snowmobile  engines, the adaptation of the MacPherson strut front suspension and
"on demand" four-wheel drive systems  for use in ATVs  and the application of  a
forced air cooled variable power transmission system to ATVs.

    Polaris utilizes internal combustion engine testing facilities to design and
optimize  engine configurations  for its products.  Polaris utilizes specialized
facilities for matching engine, exhaust system and clutch performance parameters
in  its   products  to   achieve  desired   fuel  consumption,   power   output,

                                       74
<PAGE>
noise  level and other objectives. Polaris' engineering shop is equipped to make
small quantities of new product prototypes for testing by Polaris' testing teams
and  for  the  planning  of  manufacturing  procedures.  In  addition,  Polaris'
manufacturing  facility in northern Minnesota has a proving ground where each of
the products is extensively tested under actual use conditions.

    Polaris expended for research and development approximately $4.8 million for
1991, $6.3  million for  1992 and  $9.6  million for  1993, which  amounts  were
included as a component of the cost of sales in the period incurred.

COMPETITION

    The  snowmobile, ATV  and PWC  markets in the  United States  and Canada are
highly competitive.  Competition in  such  markets is  based  upon a  number  of
factors,  including price,  quality, reliability, styling,  product features and
warranties. At the  dealer level, competition  is based on  a number of  factors
including   sales  and  marketing  support   programs  (such  as  financing  and
cooperative advertising). Certain of  Polaris' competitors are more  diversified
and  have financial and marketing resources which are substantially greater than
those of Polaris. See "-- Industry Background."

    Polaris snowmobiles, ATVs  and PWC are  competitively priced and  management
believes   Polaris'  sales  and  marketing  support  programs  for  dealers  are
substantially the same as those  provided by its competitors. Polaris'  products
compete  with many other recreational products for the discretionary spending of
consumers, and, to  a lesser extent,  with other vehicles  designed for  utility
applications.

PRODUCT SAFETY AND REGULATION

    Snowmobiles,  ATVs and PWC  are motorized machines which  may be operated at
high speeds and in a careless  or reckless manner. Accidents involving  property
damage,  personal injuries and deaths occur in  the use of snowmobiles, ATVs and
PWC.

    Laws and regulations have been promulgated  or are under consideration in  a
number  of states relating to the use or  manner of use of snowmobiles, ATVs and
PWC. State approved  trails and recreational  areas for snowmobile  and ATV  use
have  been developed in  response to environmental  and safety concerns. Polaris
has supported laws and regulations pertaining to safety and noise abatement  and
believes that its products would be no more adversely affected than those of its
competitors by the adoption of any pending laws or regulations.

    In  September 1986,  the staff  of the  Consumer Products  Safety Commission
("CPSC") ATV Task Force issued a report on regulatory options for ATVs. The Task
Force found,  among other  things, that:  children  under 12  years of  age  are
typically  unable  to operate  any  size ATV  safely;  the dynamic  stability of
four-wheel ATVs is better than that of three-wheel ATVs; the risk of accident is
less on a four-wheel  ATV (although the  risk of death  and serious injuries  is
equal  for three-and  four-wheel ATVs  once an  accident has  occurred); and the
number of  fatal head  injuries could  be substantially  reduced by  the use  of
proper  helmets. Based on its findings, the  Task Force recommended that the ATV
industry voluntarily cease marketing ATVs intended for use by children under  12
years of age. It proposed that warning labels be placed on ATVs intended for use
by  children under age 14 stating that these ATVs are not recommended for use by
children under  12, and  on adult-sized  ATVs stating  that these  ATVs are  not
recommended  for  use by  children  under the  age  of 16.  Warning  labels were
recommended for use on all ATVs  stating that operator training is necessary  to
reduce risk of injury or death. The Task Force further recommended that the CPSC
disseminate  to  the  public  information  regarding  ATVs,  including  findings
describing the relative safety among ATV models. The CPSC staff was directed  to
carry  out further technical work  addressing the performance characteristics of
adult-size ATVs,  and to  intervene  in the  development  of the  ATV  voluntary
regulatory standard.

    In  addition, based upon its findings that most states have not enacted laws
regulating ATVs, the  Task Force  recommended that  the CPSC  work closely  with
states   and  other  federal  agencies   to  develop  practical,  uniform  state
legislation.  Topics   to   be   addressed   included   minimum   operator   age
recommendations,   licensing  or  certification   standards  requiring  operator
training, helmet  requirements,  and prohibitions  on  the use  of  alcohol  and
controlled-substances while operating ATVs.

                                       75
<PAGE>
    In  December 1986, in a follow-up measure to the Task Force Report, the CPSC
voted unanimously  to  continue efforts  with  the  ATV industry  to  develop  a
voluntary  standard regarding the dynamic stability characteristics of ATVs. The
staff was directed to develop an extensive notice program that expands upon  the
warning  label recommendations proposed by the Task Force. In addition, the CPSC
voted to ask  a federal court  to declare  three-wheel ATVs to  be an  "imminent
danger".  In  February  1987,  the  CPSC  formally  requested  that  the Justice
Department initiate an  enforcement action  against the ATV  industry seeking  a
voluntary  recall  of all  three-wheel ATVs  and four-wheel  ATVs sold  with the
intention that they be used by children under 16, as well as a requirement  that
ATV  purchasers receive  "hands-on" training.  The requested  enforcement action
also would call for "direct notice and wide-spread public notice" of the recall.
In May 1987, the CPSC issued a safety alert advising consumers of the  potential
risks associated with three-and four-wheel ATVs, and recommending certain safety
measures, including proper training and the use of helmets.

    Except for 1,700 three-wheel models initially produced, Polaris manufactures
only  four-wheel and six-wheel ATVs. Polaris has always placed warning labels on
its ATVs stating that they are designed for use only by persons aged 16 or older
(which warning was  revised in  1987 to  provide that  only adults  over age  18
should  operate the  vehicle), that operators  should always  wear proper safety
helmets and that riders  should complete proper training  prior to operating  an
ATV. In May 1987, Polaris responded to the CPSC's proposed enforcement action by
letter,  indicating  its  willingness  to adopt  additional  warning  labels and
notices to consumers  and its  support of  various actions  designed to  enhance
vehicle and user safety.

    On  December 30, 1987, Polaris reached  an agreement with the CPSC regarding
ATV safety. The  agreement called  for the  repurchase of  all three-wheel  ATVs
remaining  in  the  hands of  its  distributors  and dealers,  the  provision of
additional safety  oriented  point-of-purchase  materials  in  all  Polaris  ATV
dealerships,  and the  addition of  a mandatory  "hands on"  consumer and dealer
safety training program designed to give  all Polaris ATV dealers and  consumers
maximum exposure to safe riding techniques, as outlined by the Specialty Vehicle
Institute  of  America. Polaris  conditions its  ATV warranties  described below
under "-- Product Liability" on completion of the mandatory "hands on"  consumer
training program.

    Pursuant to the agreement with the CPSC, Polaris has procedures in place for
ascertaining  dealer compliance with the provisions  of the CPSC consent decree,
including random  "undercover"  on-site  inspections of  dealerships  to  ensure
compliance  with  the  age restriction.  In  June  1989, the  CPSC  conducted an
"undercover" survey of 227 ATV dealers selected randomly from a national listing
of dealers representing the five major manufacturers of ATVs, including Polaris.
The study allegedly demonstrated varying degrees of consistency in adherence  to
the provisions of the consent decrees regarding not recommending adult-size ATVs
for  use by  children. The study  allegedly demonstrated that  some dealers were
ignoring  the  age  restriction  completely.  The  CPSC  survey  also  allegedly
demonstrated non-compliance among certain dealers with point-of-sale information
provisions  in the  consent decree.  Such provisions  require the  attachment of
safety hang tags to all ATVs and the display of safety posters.

    Based on the survey  results, the degree of  compliance of Polaris'  dealers
with  the provisions of the consent decree  was better than the industry average
in some areas and worse in  others. Polaris continually attempts to assure  that
its  dealers are in compliance  with the provisions of  the CPSC consent decree.
Polaris has notified its dealers that it will terminate any dealer it determines
to have violated  the provisions of  the CPSC  consent decree. To  date, it  has
terminated five dealers for such reason.

    The Partnership does not believe that the agreement with the CPSC has had or
will have a material adverse effect on the Partnership or Polaris. Nevertheless,
there  can be no assurance that  future recommendations or regulatory actions by
the CPSC, the Justice Department or individual states would not have an  adverse
effect   on  the   Partnership  or  Polaris.   Certain  state  attorneys-general

                                       76
<PAGE>
have asserted that the CPSC agreement is inadequate and have indicated that they
will seek stricter  ATV regulation.  The Partnership  is unable  to predict  the
outcome of such action or the possible effect on its ATV business.

   
    Certain  states,  notably California  and  New York,  have  proposed certain
legislation involving more stringent emissions standards for two-cycle  engines.
Such  engines are used  on Polaris' snowmobiles, ATVs  and PWC. However, Polaris
has developed  and  currently sells  a  four-cycle  engine for  its  ATVs  which
produces  lower-emissions. Polaris currently  is unable to  predict whether such
legislation will be enacted and, if so,  the ultimate impact on Polaris and  its
operations.  Finally, local ordinances  have been and  may from time  to time be
considered and adopted  which restrict  the use of  PWC to  specified hours  and
locations.
    

PRODUCT LIABILITY

    Product  liability claims are made against  Polaris from time to time. Since
its inception in 1981 through September 30, 1994, Polaris has paid an  aggregate
of  less than  $1.4 million  in product  liability claims  and had  accrued $4.4
million at  September 30,  1994  for the  possible  payment of  pending  claims.
Polaris  believes such accruals are adequate.  Polaris does not believe that the
outcome of any pending product liability litigation will have a material adverse
effect on the operations of Polaris. However, no assurance can be given that its
historical claims record, which did not include ATVs prior to 1985, or PWC prior
to 1992,  will not  change or  that material  product liability  claims  against
Polaris will not be made in the future.

    Polaris'   product  liability  insurance  limits  and  coverages  have  been
adversely affected  by the  general  decline in  the availability  of  liability
insurance.  As  a result  of  the high  cost  of premiums,  and  in view  of the
historically  small  amount  of  claims  paid  by  Polaris,  Polaris  has   been
self-insured   since  June  1985.  Adverse  determination  of  material  product
liability claims made against  Polaris would have a  material adverse effect  on
Polaris' financial condition. See Note 8 of Notes to Financial Statements.

    Polaris  warrants its snowmobiles,  ATVs and PWC  under a "limited warranty"
for a period of one year, six months, and one year, respectively. For certain of
its products, Polaris also offers for sale to its consumers an extended warranty
contract for an  additional one  year period. Although  Polaris employs  quality
control  procedures, a  product is sometimes  distributed which  needs repair or
replacement.  Historically,  product  recalls  have  been  administered  through
Polaris' dealers and distributors and have not had a material effect on Polaris'
business.

EFFECTS OF WEATHER

    Lack  of snowfall in any year in  any particular region of the United States
or Canada may adversely affect snowmobile  retail sales in that region.  Polaris
seeks  to minimize this potential effect  by stressing pre-season sales (see "--
Production Scheduling") and  shifting dealer  inventories from  one location  to
another. However, there is no assurance that weather conditions would not have a
material effect on Polaris' sales of snowmobiles, ATVs or PWC.

EMPLOYMENT

    Polaris employs a total of approximately 2,650 persons. Approximately 525 of
its  employees are salaried. Polaris considers  its relations with its personnel
to be excellent.

    Historically,  Polaris'  snowmobile  business  was  seasonal,  resulting  in
significant  differences  in employment  levels  during the  year.  Despite such
variations in  employment  levels, employee  turnover  was not  high.  With  the
introduction  of the  ATV line in  1985, Polaris' employment  levels have become
more stable. Polaris' employees have not been represented by a union since  July
1982.

PROPERTIES

    Polaris  owns its principal manufacturing facility in Roseau, Minnesota. The
facility consists of  approximately 456,000 square  feet of manufacturing  space
located on approximately 100 acres. In

                                       77
<PAGE>
August  of 1991,  Polaris acquired,  for $8  million, a  fabricating facility in
order to  bring  more  component parts  manufacturing  in-house.  This  facility
consists  of a 190,000 square foot plant situated  on 38 acres and is located in
Osceola, Wisconsin. Polaris makes ongoing capital investments in its facilities.
These investments have increased production  capacity for ATVs, snowmobiles  and
PWC.  The  Partnership  believes  that  Polaris'  manufacturing  facilities  are
adequate in size and suitability for its present manufacturing needs.

    Polaris  owns   all  tooling   and  machinery   (including  heavy   presses,
conventional  and computer-controlled welding facilities for steel and aluminum,
assembly lines, paint lines,  and sewing lines) used  in the manufacture of  its
products.  Although Polaris holds  numerous patents and  uses various registered
trademarks and names, it believes that the loss of any of them would not have  a
material effect on its business.

    Polaris  leases its headquarters and  warehousing facilities in Minneapolis,
Minnesota and in Winnipeg, Manitoba. The Minneapolis facilities are leased  from
related parties pursuant to a lease that will terminate in 1997. See "Management
- --  Certain Relationships and Related Transactions." Polaris does not anticipate
any difficulty  in  securing  alternate  facilities  on  competitive  terms,  if
necessary, upon the termination of either lease.

    In  August 1994,  Polaris signed  a one-year  lease agreement  for a 223,000
square foot assembly facility located on 24 acres of land in Spirit Lake,  Iowa.
Polaris  has an option to purchase the facility  for $1.85 million at the end of
the lease term. Polaris anticipates utilizing  the facility to assemble its  PWC
product line, and potentially certain snowmobile and ATV models in the future.

LEGAL PROCEEDINGS

    Polaris  is involved  in a  number of  legal proceedings,  none of  which is
expected to have a material effect on the financial condition or the business of
Polaris.

   
    Injection Research  Specialists commenced  an action  in June  1990  against
Polaris  in  Colorado  federal  court alleging  various  claims  arising  out of
Polaris' advertisement  and  sale  of  electronic  fuel  injection  snowmobiles.
Injection Research Specialists seeks compensatory and punitive damages, its fees
and  costs, and injunctive  relief. Fuji and  UNISIA Japanese Electronic Control
Systems also are parties to the action. Polaris has filed counterclaims in  that
action  and  has  instructed  its  counsel  to  contest  the  matter vigorously.
Management does not believe that any judgment rendered against it in this matter
would have a material adverse effect on the financial condition of Polaris.
    

   
    In 1990, the Canadian income  tax authorities proposed certain  adjustments,
principally  relating to the original purchase  price allocation to the Canadian
subsidiary and transfer pricing matters  for additional income taxes payable  by
Polaris' Canadian subsidiary for 1987 and 1988. The resolution of these proposed
adjustments  may also affect  the Partnership's Canadian  income tax expense for
years subsequent to  1988. The  Partnership has  been informed  of the  Canadian
income  tax  authorities' intent  to initiate  an  audit of  the tax  years 1989
through 1992. Management intends to  vigorously contest a substantial amount  of
the  proposed  adjustments,  and  the  ultimate  liability,  if  any,  cannot be
reasonably estimated.  Management does  not  believe that  the outcome  of  this
matter  will  have a  materially  adverse impact  on  the financial  position or
continuing operations of Polaris. See Note 8 of Notes to Financial Statements.
    

                                       78
<PAGE>
                                 CAPITALIZATION

   
    The  following  table  sets  forth  the  historical  capitalization  of  the
Partnership  and  the  pro  forma  current  maturities  of  long-term  debt  and
capitalization  of  the  Corporation  as  if  the  Conversion  and   anticipated
distributions  and dividends for the year following the Conversion took place on
September 30, 1994.
    

   
<TABLE>
<CAPTION>
                                                                        POLARIS
                                                         POLARIS       INDUSTRIES
                                                       INDUSTRIES        INC.
                                                      PARTNERS L.P.    PRO FORMA
                                                       HISTORICAL         (1)
                                                      -------------    ---------
                                                            (IN THOUSANDS)
<S>                                                   <C>              <C>
Current maturities of long-term debt (2)...........                    $ 35,000
                                                                       ---------
                                                                       ---------
Long-term debt, less current maturities (2)........                    $ 35,000
                                                                       ---------
                                                                       ---------
Partners' Capital:
  General Partner (deficit)........................   $   (4,817)
  Limited Partners.................................       97,016
  First rights assigned capital value..............        8,779
                                                      -------------
                                                         100,978
                                                      -------------
Stockholders' Equity:
  Preferred stock $.01 par value, authorized
   20,000,000 shares; no issued and outstanding
   shares..........................................
  Common stock $.01 par value, authorized
   80,000,000 shares; issued and outstanding
   18,110,684 shares...............................                         181
  Additional paid-in capital.......................                     100,797
  Retained earnings (deficit) (3)..................                     (84,802 )
                                                                       ---------
                                                                         16,176
                                                                       ---------
    Total capitalization...........................   $  100,978       $ 51,176
                                                      -------------    ---------
                                                      -------------    ---------
<FN>
- ------------------------
(1)  See the unaudited pro forma financial statements and notes thereto included
     in  the  Partnership  financial   statements  for  additional   information
     regarding pro forma adjustments.

(2)  Represents  the expected borrowings in connection with the proposed special
     cash distributions.
(3)  Represents the  effect on  Stockholders'  Equity of  recording  anticipated
     distributions  and  dividends on  Polaris Industries  Inc. common  stock of
     $115.8 million  for the  year  following the  Conversion and  deferred  tax
     assets  of $42  million at the  date of the  transaction, less transaction-
     related expenses of $11 million.
</TABLE>
    

                                       79
<PAGE>
            SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

    The following table sets  forth selected financial  data of the  Partnership
and  should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements  and
notes  thereto included elsewhere in this Prospectus. The selected statements of
operations data, cash flow data and balance sheet data as of and for each of the
fiscal years in the five-year period ended December 31, 1993, have been  derived
from  the financial  statements of  the Partnership  which have  been audited by
McGladrey & Pullen, independent public  accountants. The selected statements  of
operations  data, cash flow data  and balance sheet data as  of and for the nine
months  ended  September  30,  1993  and  1994,  have  been  derived  from   the
Partnership's   unaudited  financial   statements  which,  in   the  opinion  of
management, include  all  adjustments,  consisting solely  of  normal  recurring
adjustments,  necessary for a fair presentation of results for these periods and
as of these dates. Results for interim periods are not necessarily indicative of
the results that may be expected for the entire fiscal year or for other interim
periods. The following unaudited pro forma data have been prepared based on  the
historical financial statements of Polaris Industries Partners L.P. adjusted for
the transactions described in Note 10 of the Notes to Financial Statements.

          (IN THOUSANDS, EXCEPT PER BAC AND PRO FORMA PER SHARE DATA)

   
<TABLE>
<CAPTION>
                                                                                                                 NINE MONTHS ENDED
                                                                       YEARS ENDED DECEMBER 31,                    SEPTEMBER 30,
                                                         ----------------------------------------------------   -------------------
                                                           1989       1990       1991       1992       1993       1993       1994
                                                         --------   --------   --------   --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
STATEMENTS OF OPERATIONS DATA
  Sales...............................................   $242,618   $296,147   $297,677   $383,818   $528,011   $385,153   $584,725
                                                         --------   --------   --------   --------   --------   --------   --------
  Income before provision for income taxes............     26,865     33,010     33,430     39,681     53,270     35,988     56,618
  Provision for income taxes..........................        675      1,647      1,968      4,980      7,457      4,546      6,007
                                                         --------   --------   --------   --------   --------   --------   --------
  Net income..........................................   $ 26,190   $ 31,363   $ 31,462   $ 34,701   $ 45,813   $ 31,442   $ 50,611
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
  Net income applicable to limited partners (1).......   $ 24,701   $ 24,840   $ 24,918   $ 27,483   $ 36,284   $ 24,902   $ 40,084
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
  Net income per BAC..................................   $   1.65   $   1.65   $   1.65   $   1.73   $   2.25   $   1.54   $   2.46
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
UNAUDITED PRO FORMA INFORMATION (2)
  Income before provision for income taxes............   $ 26,865   $ 33,010   $ 33,430   $ 39,681   $ 51,539   $ 35,619   $ 53,646
  Provision for income taxes..........................      9,670     11,885     12,035     14,285     18,555     12,825     19,313
                                                         --------   --------   --------   --------   --------   --------   --------
  Net income..........................................   $ 17,195   $ 21,125   $ 21,395   $ 25,396   $ 32,984   $ 22,794   $ 34,333
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
  Net income per share................................       1.01       1.23       1.25       1.41   $   1.81   $   1.25   $   1.86
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
  Weighted average number of common and common
   equivalent shares outstanding (3)..................     17,088     17,136     17,162     17,968     18,215     18,225     18,415
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
CASH FLOW DATA
  Cash flow from operating activities.................   $ 44,447   $ 54,782   $ 46,642   $ 55,316   $ 79,323   $ 43,116   $ 77,801
  Cash purchases of property and equipment............      7,065      7,158     15,988     12,295     18,126     13,055     20,544
  Cash distributions to partners......................     32,514     42,582     42,581     44,025     46,493     34,641     37,322
  Cash distributions per BAC..........................       2.27       2.50       2.50       2.50       2.51       1.88       1.89
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
UNAUDITED PRO FORMA INFORMATION (2 and 4)
  Dividends...........................................                                                 10,925      8,193      8,193
  Dividends per share.................................                                                   0.60       0.45       0.45
  Special cash distributions..........................                                                104,877     69,918
  Special cash distributions per share................                                                   5.76       3.84
                                                         --------   --------   --------   --------   --------   --------   --------
                                                         --------   --------   --------   --------   --------   --------   --------
</TABLE>
    

                                       80
<PAGE>

   
<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                                      YEARS ENDED DECEMBER 31,                 ------------------------------------
                                        ----------------------------------------------------                              1994
                                          1989       1990       1991       1992       1993       1993       1994      PRO FORMA(5)
                                        --------   --------   --------   --------   --------   --------   --------   --------------
<S>                                     <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA
  Cash and cash equivalents..........   $ 27,886   $ 32,025   $ 20,098   $ 19,094   $ 33,798   $ 14,514   $ 53,733   $     7,931
  Net increase (decrease) in cash and
   cash equivalents..................     12,287      4,139    (11,927)    (1,004)    14,704     (4,580)    19,935       (25,867)
  Current assets.....................     60,344     66,893     59,200     74,999    109,748    110,705    178,443       144,641
  Total assets.......................    137,628    138,704    135,509    146,681    180,548    181,030    250,377       246,575
  Total liabilities..................     38,875     46,602     52,646     69,054     98,055    102,327    149,399       230,399
  General Partner's capital
   (deficit).........................       (419)    (2,753)    (5,066)    (7,105)    (7,397)    (7,921)    (4,817)      --
  Limited Partners' capital..........     99,172     94,855     87,929     84,732     89,890     86,624    105,795       --
  Stockholders' equity (6)...........      --         --         --         --         --         --         --           16,176
  Net book value per weighted average
   BAC and BAC equivalents...........       6.59       6.13       5.50       4.89       5.12       4.88       6.19       --
  Net book value per share (3
   and 6)............................      --         --         --         --         --         --         --             0.88
<FN>
- ------------------------------
(1)  Represents  net  income  to BAC  Holders  after allocation  to  the General
     Partner and its affiliates and therefore does not represent all of the  net
     income of the Partnership.
(2)  The  unaudited pro forma data are  derived from the financial statements of
     the Partnership as if  the Conversion had occurred  on January 1, 1993  for
     the  statements of operations  and cash flows data.  Such periods have been
     adjusted to eliminate the General Partner's annual fee of $500,000. The pro
     forma statements  of operations  and  cash flows  exclude the  $11  million
     estimated  costs of the Conversion, which will be recognized at the time of
     the Conversion. Adjustments have been made  to the pro forma statements  of
     operations  and cash  flows to  provide for  interest expense  on long-term
     borrowings of approximately $70 million  anticipated to be incurred in  the
     third  and fourth quarters of 1993, the  year of the special pro forma cash
     distributions. Further, the  pro forma  statements of  operations and  cash
     flows  assume  the additional  debt  will be  repaid  at $8.75  million per
     quarter, commencing  in 1994,  the  year following  the pro  forma  special
     distributions.  All periods have  been adjusted to  reflect a provision for
     income taxes calculated  at a rate  of 36%. Such  rate reflects a  combined
     federal  and state statutory rate, net  of related research and development
     credits and anticipated foreign sales corporation benefits. See Note 10  of
     Notes  to Financial Statements for additional information regarding the pro
     forma adjustments.
(3)  Pro forma weighted average  number of common  and common equivalent  shares
     outstanding  and the number of shares of common stock utilized to calculate
     the unaudited  pro forma  net book  value per  share include  shares to  be
     issued  to BAC  Holders, to  the affiliates of  the General  Partner and to
     employees in connection with First Rights granted but not yet converted  to
     BACs.
(4)  Pro forma stockholder dividends, special cash distributions and the related
     per  share  amounts  reflect the  Sponsors'  intent to  recommend  that the
     Corporation's Board  of Directors  establish an  initial dividend  rate  of
     $0.15  per  share  per quarter,  and  pay three  special  nonrecurring cash
     distributions, each of  $1.92 per share,  payable during each  of the  last
     three  quarters of 1995.  The Corporation is under  no legal or contractual
     obligation to make  such distributions  and dividends, and  the timing  and
     amount  of future distributions and dividends  will be at the discretion of
     the Board of Directors and will  depend, among other things, on the  future
     after  tax earnings, operations,  capital requirements, borrowing capacity,
     and financial condition of the Corporation and general business conditions.
     There can be  no assurance that  such distributions and  dividends will  be
     adopted or maintained by the Corporation.
(5)  The  unaudited pro forma balance sheet  data are derived from the financial
     statements of the  Partnership as  if the Conversion  and anticipated  cash
     distributions  and dividends for the year following the Conversion occurred
     on September 30,  1994. Estimated  deferred tax assets  resulting from  the
     Conversion  transaction  of  $42 million  have  been recorded  and  will be
     recalculated  when  the  Conversion  is  completed  and  actual   temporary
     differences  can be determined. The change  in deferred tax assets could be
     material. The $11 million estimated  costs of the Conversion were  recorded
     at  the  balance  sheet  date  as  an  accrued  expense.  Anticipated  cash
     distributions and  dividends on  Polaris Industries  Inc. common  stock  of
     $115.8  million for the year following  the Conversion were recorded at the
     balance sheet date, resulting in a  deficit in retained earnings, on a  pro
     forma  basis. See footnote (4). The  approximate $70 million expected to be
     borrowed in connection  with the  proposed special  cash distributions  has
     also been recorded at the balance sheet date.
(6)  Pro  forma stockholders' equity  includes estimated amounts  related to the
     recording of  anticipated  cash  distributions  and  dividends  on  Polaris
     Industries  Inc. common stock of $115.8  million for the year following the
     Conversion, expenses for  the transaction  and deferred  tax assets,  which
     will  be recalculated when the Conversion is completed and actual temporary
     differences can be determined. The change  in deferred tax assets could  be
     material.  Pro forma net book value per  share is adjusted for shares to be
     issued to affiliates of the General Partner and for shares to be issued for
     First Rights granted but  not yet converted to  BACs. For purposes of  this
     transaction, assets and liabilities will be recorded at historical cost.
</TABLE>
    

                                       81
<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                           (HISTORICAL AND PRO FORMA)

    The following discussion pertains to the results of operations and financial
position of the Partnership for each of the three years ended December 31, 1991,
1992 and 1993, and the nine-month periods ended September 30, 1993 and 1994, and
should  be read in conjunction with  the financial statements included elsewhere
herein. Due to the seasonal nature of the snowmobile, all terrain vehicle  (ATV)
and  personal watercraft (PWC)  businesses in which  the Partnership is engaged,
and to certain  changes in production  and shipping cycles,  results of  interim
periods  are not necessarily  indicative of the  results to be  expected for the
complete year.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1994

    Sales for the  nine months  ended September  30, 1994,  increased to  $584.7
million,  representing a 52% increase  over the $385.2 million  of sales for the
same period in  1993. Total finished  goods shipments for  the 1994 period  have
increased  43% over the same period in 1993. The Partnership's increase in sales
in the 1994  period is  primarily attributable to  the broadening  of the  three
product  lines and the continued popularity  of all Polaris products. Additional
factors include the growth  of the worldwide  snowmobile market, the  continuing
favorable U.S. economy and an aggressive pricing strategy.

    Snowmobile unit sales volume increased 16% during the 1994 period, primarily
because  of continued growth  in sales of the  high performance, lightweight XLT
model.

    ATV unit  sales  volume increased  45%  during the  1994  period,  primarily
because  of the continued growth in  the utility and sports-enthusiasts' markets
and  the  addition  of  a  dedicated  ATV  production  line  with  corresponding
improvement in product availability at the dealer level.

    PWC  unit  sales volume  increased 160%  during  the 1994  period, primarily
because of the  fast growth in  the PWC market  and due to  the introduction  of
models aimed at both the family and sports rider market segments.

    The  average  sales  per  unit  in  the  1994  period  increased  by  3% for
snowmobiles, 11% for ATVs and 3%  for PWC, principally through the  introduction
and  sale of more high-performance models that  have a higher selling price than
economy models.

    The gross  margin percentage  decreased to  24% for  the nine  months  ended
September  30, 1994,  compared to  27% for the  comparable period  in 1993. This
decrease in percentage is primarily a result  of: (a) the change in product  mix
towards  a greater percentage  of sales from  ATVs and PWC  which generate lower
gross margins than snowmobiles; (b) continued increases in raw material purchase
prices for certain component parts because  of the weakening of the U.S.  dollar
in  relation to the  Japanese yen; and  (c) strengthening of  the U.S. dollar in
relation to the Canadian  dollar which results in  lower gross margins from  the
Partnership's Canadian subsidiary operation.

    Operating  expenses increased $19.9 million  (30%) for the nine-month period
ended September 30,  1994 as a  result of the  sales volume increase,  but as  a
percentage  of  sales,  decreased  to  14.7%  for  the  nine-month  period ended
September 30, 1994,  compared to 17.1%  for the comparable  period of 1993.  The
percentage  decrease is due primarily to the Partnership's ability to support an
increasing level  of sales  without a  ratable increase  in operating  expenses,
principally personnel.

    The  change in non-operating expense (income) for the 1994 nine-month period
is primarily attributable to investment income generated by higher cash and cash
equivalent balances during the 1994 period compared to the 1993 period.

                                       82
<PAGE>
    Income tax expense  increased $1.5  million for the  1994 nine-month  period
compared to the same period for 1993. This increase is attributable primarily to
additional  reserves established relating to the Canadian income tax examination
in process.

YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993

    Sales for 1993 were $528.0  million, an increase of  38% over 1992 sales  of
$383.8 million. Sales for 1992 increased 29% over 1991 sales of $297.7 million.

    Management  believes its success in the snowmobile market is attributable to
its product  superiority, aggressive  consumer promotional  programs and  strong
dealer  network. The 1993  sales increase resulted from  the introduction of new
models and the  continued success  of other  popular models,  including the  XLT
Special.  Snowmobile unit sales volume  increased over the prior  year by 13% in
1992 and 26% in 1993.

   
    In 1993, the  Partnership's ATV  product line sales  grew by  41% over  1992
sales  as retail sales rose to the highest  level in its history. ATV unit sales
volume increased by 24% in 1992 over the prior year. Management believes it  has
been  successful by targeting the all-purpose segment of the ATV market with new
and improved products. The  Partnership introduced several  new models in  1993,
including the Sportsman 4x4.
    

    Manufacturing  and sales of PWC commenced in  the first quarter of 1992 with
the introduction of the SL650 model. In 1993 the Partnership added the SL750 and
the three-passenger SLT750 models designed  for families and sports riders.  PWC
unit  sales  volume increased  62% in  1993  over the  initial shipments  of PWC
product in 1992.

    Except in 1993, when snowmobile sales per unit remained the same due to  the
dilutive  effect of the Canadian currency exchange rates, average sales per unit
have increased for each Polaris product line in each of the years 1991, 1992 and
1993. In  each  such  year,  the  Partnership  introduced  and  sold  more  high
performance  models. The  average snowmobile sales  per unit  increased over the
prior year by 4%  in 1991 and 1992  and remained flat in  1993. The average  ATV
sales per unit increased over the prior year by 3% in 1991, 4% in 1992 and 5% in
1993. The average PWC sales per unit increased 11% in 1993 over the prior year.

    The gross profit percentage decreased from 32% in 1991 to 30% in 1992 and to
27%  in 1993  primarily due  to an aggressive  pricing strategy,  changes in the
product mix  and foreign  exchange rates.  The growing  ATV and  PWC  businesses
provide  a lower gross profit percentage  than does the snowmobile business. Raw
material purchase prices have increased  since 1991 for certain component  parts
because  of the weakening  of the U.S.  dollar in relation  to the Japanese yen.
Strengthening of the U.S. dollar in  relation to the Canadian dollar  throughout
1993  has caused gross  margin erosion of  the Partnership's Canadian subsidiary
operation. Additionally, warranty expenses have increased during the past  three
years  as a result of the  emphasis on technological innovation and introduction
of new high-performance models.

    The Partnership continually invests in new product development, particularly
in the areas of innovation and product diversification. New product  development
and research costs are recorded as cost of sales in the statement of operations.
Research  and development expenses, and the  related percent to sales, were $4.8
million (1.6%) in 1991, $6.3 million (1.7%)  in 1992 and $9.6 million (1.8%)  in
1993.  The Partnership  incurred tooling expenditures  for new  products of $5.2
million in 1991, $7.1 million in 1992, and $9.3 million in 1993.

    Operating expenses as  a percentage of  sales were 21.5%  in 1991, 19.3%  in
1992  and  17.2% in  1993.  Operating expenses  as  a percentage  of  sales have
decreased because  the  Partnership has  been  able to  increase  sales  without
incurring  a ratable amount of general and administrative expenses. In addition,
because of  the strong  demand  and competitive  pricing for  the  Partnership's
products,   sales  and  marketing  program  expenses  have  remained  relatively
constant.

    The provision for  income taxes  is increasing at  a rate  greater than  the
growth  in income from the Canadian subsidiary because the Partnership continues
to accrue for certain of the proposed Canadian income tax adjustments.

                                       83
<PAGE>
CASH DISTRIBUTIONS

    Since its  inception, the  Partnership has  paid or  declared the  following
quarterly cash distributions per BAC to the BAC holders (restated to reflect the
two-for-one split effective August 1993):

   
<TABLE>
<CAPTION>
                                                                            QUARTER
YEAR                                                           1          2          3          4        TOTAL
- ---------------------------------------------------------  ---------  ---------  ---------  ---------  ---------
<S>                                                        <C>        <C>        <C>        <C>        <C>
1987.....................................................                        $    .073  $    .30   $ .373
1988.....................................................  $    .30   $    .30        .30        .30         1.20
1989.....................................................       .77        .375       .375       .75         2.27
1990.....................................................       .625       .625       .625       .625        2.50
1991.....................................................       .625       .625       .625       .625        2.50
1992.....................................................       .625       .625       .625       .625        2.50
1993.....................................................       .625       .625       .63        .63         2.51
1994.....................................................       .63        .63        .63           *        1.89
                                                                                                       ---------
Total....................................................                                              $    15.74
</TABLE>
    

   
* Not announced
    

    Cumulative  cash  distributions have  exceeded a  15%  annual return  on the
original $10 per BAC investment (as adjusted for the two-for-one split effective
August, 1993). Accordingly as  provided for in  the Partnership Agreement,  cash
distributions  have been,  and will continue  to be, allocated  79.2% to Limited
Partners and  20.8%  to  the  General Partner  as  long  as  such  distributions
cumulatively exceed a 15% annual return.

   
    The  Partnership has no  present intention of  increasing cash distributions
even if its taxable  income increases. As  in prior years,  BAC Holders will  be
required  to report  and pay  tax on  their share  of the  Partnership's taxable
income. In view of the Partnership's  recent growth in book income, its  taxable
income  currently is  expected to  exceed, by a  substantial amount  at least in
1994, the amount of cash distributions.  Increases in taxable income are  likely
to  correspond to  increases in  book income of  the Partnership  which, for the
nine-month period ended September  30, 1994, increased by  over 50% compared  to
the  same  period  in  1993.  The  disparity  between  taxable  income  and cash
distributions is expected to  increase for the foreseeable  future, and will  be
greater for those BAC Holders that have held BACs for longer periods of time and
purchased their BACs at lower prices.
    

   
LIQUIDITY AND CAPITAL RESOURCES
    

    The  Partnership's  primary  sources of  funds  have been  cash  provided by
operating activities, a seasonal line of  credit and a dealer financing  program
provided by third parties. The Partnership's primary uses of funds have been for
distributions to partners, capital investments and for new product development.

    During  the nine months ended September  30, 1994, the Partnership generated
net cash from operating activities of $77.8 million, which was utilized to  fund
distributions  of $37.3 million and cash  capital expenditures of $20.5 million.
In 1993, the Partnership generated net  cash from operating activities of  $79.3
million,  which was  utilized to  fund distributions  of $46.5  million and cash
capital expenditures of  $18.1 million.  At September  30, 1994,  cash and  cash
equivalents  totaled $53.7 million,  an increase of  $19.9 million from December
31, 1993.  Working capital  totaled  $29.0 million  at  September 30,  1994,  an
increase of $17.3 million from December 31, 1993.

    The   seasonality  of  production  and   shipments  causes  working  capital
requirements to fluctuate during the year.  The Operating Partnership has a  $40
million  unsecured bank  line of  credit arrangement  expiring May  1, 1995 with
interest charged at the prime interest  rate, CD-based or LIBOR-based rates.  In
connection  with  this  arrangement,  the Operating  Partnership  has  agreed to
certain limitations  on  distributions from  the  Operating Partnership  to  the
Partnership  in  certain circumstances.  At  September 30,  1994,  the Operating
Partnership had no short-term  debt under this line  of credit and had  utilized
its  bank line to the  extent of letters of  credit outstanding of $17.5 million
related to purchase obligations for raw materials.

                                       84
<PAGE>
    The Partnership has arrangements with unrelated finance companies to provide
floor plan  financing  for  its distributors  and  dealers.  These  arrangements
provide  liquidity by financing distributor and dealer purchases of snowmobiles,
ATVs and PWC without the use of working capital. Substantially all of the  sales
of  snowmobiles, ATVs and PWC are  financed under these arrangements whereby the
Partnership receives payment within a few  days of shipment of the product.  The
amount financed by distributors and dealers under these arrangements at December
31,  1993, and  September 30, 1994,  was approximately $64.9  million and $203.9
million, respectively. The Partnership  participates in the  cost of dealer  and
distributor  financing  up  to certain  limits.  The Partnership  has  agreed to
repurchase products repossessed by the finance companies to an annual maximum of
15% of  the average  amount  outstanding during  the  prior calendar  year.  The
Partnership's  financial  exposure  under  these agreements  is  limited  to the
difference between  the amount  paid to  the finance  companies and  the  amount
received  on the resale of the repossessed product. No material losses have been
incurred under these agreements. However, an adverse change in the economy could
cause this situation to change and thereby require the Partnership to repurchase
financed units. Management intends to record  a sales allowance when it  becomes
probable that returns under this program will be material.

    The Partnership has made capital investments to increase production capacity
and  efficiency and  for new  product development.  Over the  past several years
these investments have included  the introduction of the  PWC product line,  the
introduction  of new snowmobile  and ATV models to  broaden those product lines,
the expansion of  manufacturing capacity, the  purchase of enhanced  fabrication
and  assembly equipment,  and the  continuing development  and implementation of
systems and programs  to improve  quality and  efficiency and  to reduce  costs.
Improvements  in manufacturing capacity  include the $8.0  million purchase of a
component parts fabrication facility in 1991,  the addition of an assembly  line
dedicated  to  year-round  production of  ATVs  in 1993,  improvements  in plant
lay-out and  the  expansion to  a  new leased  assembly  facility in  1994.  The
Partnership  anticipates that capital expenditures for 1994 will approximate $36
million.

    Revenue  Canada,  the   Canadian  income  tax   authorities,  has   proposed
adjustments  to  the  1987 and  1988  income  tax returns  of  the Partnership's
Canadian subsidiary.  The  resolution of  these  proposed adjustments  may  also
affect  the Partnership's  Canadian income tax  returns for  years subsequent to
1988. The Partnership has been informed  of Revenue Canada's intent to  initiate
audits  of  the tax  years 1989  through 1992.  The proposed  adjustments relate
primarily to the original purchase  price allocation of the Canadian  subsidiary
and certain transfer pricing matters. Management intends to vigorously contest a
substantial  amount  of the  proposed  adjustments and  the  ultimate additional
liability cannot  be  reasonably determined.  Management  does not  believe  the
outcome  of this matter will  have a materially adverse  impact on the financial
position or continuing operations of the Partnership. At September 30, 1994, the
Partnership had accrued $10.2 million for income taxes.

    The proposed conversion of the Partnership will significantly impact  future
liquidity  and capital resources, as  a result of (a)  the proposed plan to make
special distributions aggregating approximately $104.9 million ($5.76 per share)
to be paid in three equal installments during each of the last three quarters of
1995, (b) the  proposed plan  to pay regular  quarterly dividends  of $0.15  per
share, or approximately $10.9 million per year, (c) the Partnership's incurrence
of  approximately  $11  million  in expenses  in  connection  with  the proposed
conversion, and (d) the  Corporation's payment of  corporate federal, state  and
certain  foreign income  taxes on  current earnings,  which are  estimated to be
approximately 36% of  pre-tax income. The  Sponsors anticipate that  a total  of
approximately  $70 million  in debt  will be  incurred in  the third  and fourth
quarters of  1995  to  finance  the special  distributions.  As  a  result,  the
Corporation   will  be  required   to  obtain  financing   in  addition  to  the
Partnership's current bank line of  credit. The Sponsors believe that  requisite
financing can be obtained on acceptable terms.

    At this time, management is not aware of any other factors that would have a
materially adverse impact on cash flows beyond 1994.

                                       85
<PAGE>
INFLATION AND EXCHANGE RATES

    The Partnership does not believe that inflation has had a material impact on
the  results of its  operations. However, the changing  relationship of the U.S.
Dollar to the Canadian dollar  and Japanese yen has  had a material impact  from
time-to-time.

    The  principal competitors  in ATVs  are Japanese  companies and  one of the
significant snowmobile and PWC competitors is a Japanese company. Over the  past
several  years, weakening of the U.S. dollar in relation to the yen has resulted
in higher raw material purchase prices. On average, in 1993 approximately 32% of
the standard cost of each snowmobile, 24% of the standard cost of each ATV,  and
44% of the standard cost of each PWC consist of material purchased from Japanese
suppliers.

    The  Partnership operates in Canada through a wholly-owned subsidiary. Sales
of the  Canadian  subsidiary comprised  20%  of  total Polaris  sales  in  1993.
Strengthening  of the U.S. dollar in  relation to the Canadian dollar throughout
1993 has caused  unfavorable foreign  currency fluctuations  from prior  periods
resulting in lower gross margin levels.

    In  the past,  the Partnership has  been a party  to, and in  the future may
enter into, foreign exchange hedging contracts for both the Japanese yen and the
Canadian dollar to minimize the impact of exchange rate fluctuations within each
year. To date, such contracts have not had a material impact on earnings.

                                       86
<PAGE>
                        MARKET PRICES AND DISTRIBUTIONS

   
    The BACs are  listed on the  American Stock Exchange  and the Pacific  Stock
Exchange  under the symbol "SNO". At November 18, 1994, there were approximately
18,500 holders of record of  the BACs. The following  table sets forth the  high
and  low sale prices per BAC as reflected  on the composite tape for the periods
indicated, all as adjusted  to reflect the two-for-one  unit split which  became
effective on August 18, 1993:
    

   
<TABLE>
<CAPTION>
                                                                             HIGH          LOW
                                                                           ---------    ---------
<S>                                                                        <C>          <C>
1992
- ------------------------------------------------------------------------
First Quarter...........................................................   $20          $18 1/16
Second Quarter..........................................................    22 1/2       19
Third Quarter...........................................................    24 1/2       21 1/8
Fourth Quarter..........................................................    23 3/4       21 1/16

1993
- ------------------------------------------------------------------------
First Quarter...........................................................    26 9/16      21 13/16
Second Quarter..........................................................    30 15/16     25 13/16
Third Quarter...........................................................    36           27 15/16
Fourth Quarter..........................................................    38 1/2       32 1/4

1994
- ------------------------------------------------------------------------
First Quarter...........................................................    37 3/8       29 1/8
Second Quarter..........................................................    35 7/8       30 1/8
Third Quarter...........................................................    39           32 1/8
Fourth Quarter (through November 18)....................................    46 7/8       37 5/8
</TABLE>
    

   
    The  closing sale price as  reflected on the composite  tape on November 18,
1994, the last trading  day prior to  the mailing of  this Proxy Statement,  was
44  1/4. The average closing price during the ten trading days ending August 24,
1994, the last trading day before the Partnership publicly announced the planned
Conversion, was $36.
    

    The Partnership paid  the following  distributions per unit  to BAC  Holders
during  the years  ended December  31, on or  about the  15th day  of the months
indicated, all as adjusted for the two-for-one unit split which became effective
on August 18, 1993:

   
<TABLE>
<CAPTION>
                                                        1994       1993       1992       1991
                                                      ---------  ---------  ---------  ---------
<S>                                                   <C>        <C>        <C>        <C>
February............................................  $   0.630  $   0.625  $   0.625  $   0.625
May.................................................      0.630      0.625      0.625      0.625
August..............................................      0.630      0.625      0.625      0.625
November............................................      0.630      0.630      0.625      0.625
</TABLE>
    

   
    On  December  1,  1993,  the   Partnership  declared  a  regular   quarterly
distribution  of $0.63 per BAC  to holders of record  on December 15, 1993. This
distribution was paid  on February 15,  1994. On March  1, 1994 the  Partnership
declared  a first quarter 1994  distribution of $0.63 per  BAC which was paid on
May 16, 1994 to  holders of record as  of March 15, 1994.  On May 23, 1994,  the
Partnership  declared a second  quarter distribution of $0.63  per BAC which was
paid on August 15, 1994 to holders of record as of June 15, 1994. On August  25,
1994  the Partnership  declared a  third quarter  distribution of  $0.63 per BAC
which was paid on  November 15, 1994  to holders of record  as of September  15,
1994.  If the Partnership declares a  regular quarterly distribution on or about
December 1, 1994  in accordance  with past practice,  as is  expected, a  fourth
quarter  distribution of $0.63  per BAC would  be paid on  or about February 15,
1995 to holders of record on or about December 15, 1994.
    

    If the  Conversion is  completed between  the  date of  a declaration  of  a
distribution to the General Partner, its affiliates and the BAC Holders, and the
date of payment of such distribution, the Merger Agreement provides that persons
who  were BAC Holders on the record  date for the distribution will receive such
distribution and  that  the Transferors  transferring  interests in  EIPCC,  the
General

                                       87
<PAGE>
   
Partner  and the Operating General Partner will receive their pro rata shares of
the distribution  otherwise payable  to the  General Partner  and the  Operating
General Partner. In addition, if the Conversion is completed in a fiscal quarter
before  declaration  of  the  regular  quarterly  distribution,  the Partnership
intends to pay a cash distribution to BAC Holders of record on the closing  date
of  the  Merger equal  to the  pro rata  portion of  $0.63 corresponding  to the
portion of  the  Partnership's fiscal  quarter  ending on  the  Effective  Date.
Assuming  the Conversion Proposal is approved by  the BAC Holders at the Special
Meeting and, as expected,  the Conversion is consummated  by December 31,  1994,
there  will be no further distributions by  the Partnership after payment of the
fourth quarter  distribution referred  to  above. The  Transferors  transferring
interests  in EIPCC, the General Partner  and the Operating General Partner will
receive their  pro  rata shares  of  such special  cash  distribution  otherwise
payable to the General Partner and the Operating General Partner.
    

    The Corporation, which was formed solely for the purpose of facilitating the
Conversion,  has no  independent assets or  operations. Hence  no dividends have
been paid on the Common Stock. The  Sponsors, who will be the senior  management
of  the Corporation following the Conversion,  have determined to recommend that
the Corporation's Board of Directors adopt a cash dividend distribution  policy,
a  principal purpose of which  will be to provide that  the total amount of cash
distributions made by  the Partnership per  BAC and cash  dividends paid by  the
Corporation  per share of  Common Stock during the  period commencing January 1,
1995 and ending December 31, 1997, will  be equal to the amount ($7.56 per  BAC)
which BAC Holders would have received in cash distributions from the Partnership
with  respect to such period if the Conversion had not taken place. The Sponsors
believe that such a policy would  help facilitate the orderly transition in  the
capital  markets  during  the  months following  the  Conversion  from primarily
income-oriented  investors  to   primarily  growth-oriented  and   institutional
investors expected to invest in the Corporation.

   
    Accordingly,  the Sponsors intend to  recommend that the Corporation's Board
of Directors pay the Proposed Distributions (i.e. an initial cash dividend  rate
of  $0.15 per share  of Common Stock  per quarter and,  in addition, pay special
cash distributions for each of the last three quarters of 1995 in an amount  per
share  equal  to  one-third of  (a)  $5.76 less  (b)  if the  Conversion  is not
consummated in 1994, the amount per  BAC of any cash distributions declared  and
paid  by  the  Partnership  on or  after  January  1, 1995  to  the  extent such
distributions exceed $0.15 per BAC).
    

    The payment of dividends and distributions by the Corporation will be at the
discretion of its Board of Directors,  will be subject to legal and  contractual
limitations,  and will  depend upon  the future  earnings, operations, financial
condition and capital and other requirements of the Corporation. There can be no
assurance that the foregoing dividend and distribution policy will be adopted or
that dividends and distributions in the amounts set forth above will in fact  be
paid.  However, the  General Partner and  the Sponsors,  after consultation with
their financial and legal  advisors, believe that the  Corporation will be in  a
position  to pay dividends and distributions in the amounts set forth above. See
"Risk  Factors,  Conflicts  of  Interest  and  Other  Considerations  --  Risks,
Conflicts  of Interest and Considerations Related to the Conversion -- Change in
Distribution Policy."

                                       88
<PAGE>
                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF EIPCC

    The General Partner, or  an affiliate, manages the  overall business of  the
Partnership  and the  Operating Partnership. The  General Partner  is managed by
EIPCC, its managing general partner. EIPCC also acts as the management agent for
the Partnership. The directors and executive officers of EIPCC are:

<TABLE>
<CAPTION>
        NAME            AGE                       POSITION
- ---------------------   ---  --------------------------------------------------
<S>                     <C>  <C>
Paul Bagley             51   Chairman and Director
Victor K. Atkins, Jr.   49   President, Secretary, Treasurer and Director
</TABLE>

    Paul Bagley has been Chairman of EIPCC since April 1987. He is Chairman  and
Chief  Executive  Officer  of  FCM Fiduciary  Capital  Management,  a registered
investment advisor,  and a  Managing Partner  of Stone  Pine Capital,  Inc.  Mr.
Bagley  is also  the Chairman and  Chief Executive Officer  of American National
Security, Inc. ("ANS"). He is a director of America First Financial Fund  1987A,
and  a director and member of the  executive committee of Eureka Bank, a federal
savings bank. Mr. Bagley also  serves as Chairman of  the Board of Directors  of
Silver Screen Management, Inc., International Film Investors, Inc. and Franchise
Finance  Corporation of America II.  Prior to October 1988,  Mr. Bagley was with
Shearson Lehman Hutton Inc., or its predecessor firm, E.F. Hutton & Company Inc.
("Hutton") since 1968,  most recently as  a Managing Director.  Mr. Bagley is  a
graduate  of the University  of California at Berkeley  and the Harvard Business
School.

    Victor K. Atkins, Jr.  has been President of  EIPCC and Chairman of  Polaris
Industries Capital Corporation ("PICC") since April 1987. Mr. Atkins also served
as Chairman and director of Houston Biotechnology Inc. between May 1992 and June
1994,  and has been President and a director of ANS since April 1991. Mr. Atkins
is a graduate of Harvard College and the Harvard Business School.

    EIPCC, Victor K. Atkins, Jr. and Paul Bagley were among the defendants in  a
lawsuit  filed on March  5, 1993 by  EIP Holdings L.P.,  a shareholder of EIPCC,
Lehman Brothers  Inc. and  others, which  sought the  replacement of  these  two
directors  and monetary damages  of unspecified amounts  from the defendants. On
March 8, 1993, certain of the defendants  in the above action brought an  action
against  one of  the plaintiffs  in the above  action and  others seeking, among
other things, a determination that the two defendant directors had been properly
elected as directors of EIPCC. On August 25, 1994, all the parties to the  March
5, 1993 action entered into a settlement agreement. The March 8, 1993 action has
been  dismissed  as  moot.  In connection  with  the  settlement  agreement, EIP
Holdings L.P. is no  longer a shareholder in  EIPCC and cancelled the  agreement
pursuant  to which  it was  entitled to  elect one  of the  EIPCC board members.
Accordingly, such member has  resigned as a director  of EIPCC. Pursuant to  the
settlement  agreement, the litigation was subsequently dismissed with prejudice.
The settlement does not  effect the operations of  the Operating Partnership  or
distributions to BAC Holders.

    The  day-to-day administration and operation of the Operating Partnership is
managed by  the Operating  General  Partner. The  Operating General  Partner  is
managed  by its  managing general  partner, PICC,  a wholly-owned  subsidiary of
EIPCC.

                                       89
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF PICC

    The directors and executive officers of PICC are:

<TABLE>
<CAPTION>
        NAME            AGE                       POSITION
- ---------------------   ---  --------------------------------------------------
<S>                     <C>  <C>
Victor K. Atkins, Jr.   49   Chairman, Secretary and Director
W. Hall Wendel, Jr.     51   Chief Executive Officer and Director
Paul Bagley             51   Director
Kenneth D. Larson       54   President, Chief Operating Officer
John H. Grunewald       58   Executive Vice President, Finance and
                              Administration
James Bruha             54   Vice President - Manufacturing
Charles A. Baxter       46   Vice President - Engineering and Product Safety
Ed Skomoroh             56   Vice President - Sales and Marketing
Michael W. Malone       36   Chief Financial Officer and Treasurer
</TABLE>

    W. Hall  Wendel, Jr.  has served  as Chief  Executive Officer  of PICC,  the
Managing  General Partner  of Polaris Industries  Associates L.P.,  which is the
Operating General Partner of Polaris Industries  L.P., since 1987. From 1981  to
1987,  Mr. Wendel  was Chief  Executive Officer  of the  predecessor of Polaris,
which was  formed  to purchase  the  snowmobile  assets of  the  Polaris  E-Z-Go
Division  of Textron. Before that time, Mr.  Wendel was President of the Polaris
E-Z-Go Division for  two years and  prior thereto, held  marketing positions  as
Vice President of Sales and Marketing and National Sales Manager since 1974.

    Kenneth  D. Larson  has been President  and Chief Operating  Officer of PICC
since October 1988. Prior  thereto, Mr. Larson was  Executive Vice President  of
the  Toro  Company responsible  for its  commercial, consumer  and international
equipment businesses,  and had  held a  number of  general management  positions
since joining Toro Company in 1975.

    John   H.  Grunewald  has   been  Executive  Vice   President,  Finance  and
Administration of  PICC since  September  1993. Prior  to joining  Polaris,  Mr.
Grunewald was employed for 16 years by Pentair, Inc., a diversified manufacturer
of  industrial  products,  most  recently  as  Executive  Vice  President, Chief
Financial Officer and Secretary.

    James Bruha has been Vice President, Manufacturing since October 1989. Prior
to joining Polaris  in February  1989, Mr. Bruha  held a  variety of  management
positions  with the Toro Company for  the previous 17 years, including materials
and operations management responsibilities for three different Toro divisions.

    Charles A. Baxter  has been Vice  President - Engineering  of Polaris  since
June 1981 and prior thereto, since 1970, was employed as Director of Engineering
of the Polaris Division of Textron.

    Ed Skomoroh was elected Vice President, Sales and Marketing in October 1988.
Prior thereto he was Vice President, Polaris Canada and President, Secretary and
Director  of Polaris Industries Inc., an  Ontario corporation and a wholly-owned
subsidiary of the Partnership.  Mr. Skomoroh joined Polaris  in 1982 as  General
Manager,  Canada, and  was, for  more than one  year prior  thereto, the General
Manager for the Canadian  operations of Arctic  Enterprises, Inc., a  snowmobile
manufacturer.

    Michael  W. Malone has been Chief Financial Officer and Treasurer of Polaris
since January 1993. Prior  thereto he was Assistant  Treasurer of the PICC.  Mr.
Malone joined Polaris in 1984 after four years with Arthur Andersen & Co.

    The  Board of Directors  of PICC currently has  two standing committees, the
Compensation Committee and the Audit Committee.  Victor K. Atkins, Jr. and  Paul
Bagley are the members of each such Committee.

                                       90
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION AFTER THE CONVERSION

    The  individuals  listed below  will be  the directors  and officers  of the
Corporation immediately upon completion of the Conversion:

<TABLE>
<CAPTION>
       NAME           AGE                        POSITION
- -------------------   ---   --------------------------------------------------
<S>                   <C>   <C>
W. Hall Wendel, Jr.   51    Chairman and Chief Executive Officer, Director
Beverly F. Dolan      67    Director(1)
Robert S. Moe         63    Director(1)
Kenneth D. Larson     54    President and Chief Operating Officer, Director(1)
Stephen G. Shank      50    Director(1)
Gregory R. Palen      39    Director(1)
Andris A. Baltins     49    Director(1)
John H. Grunewald     58    Executive Vice President, Chief Financial Officer
                             and Secretary
James Bruha           54    Vice President-Manufacturing
Charles A. Baxter     46    Vice President-Engineering and Product Safety
Ed Skomoroh           56    Vice President-Sales and Marketing
Michael W. Malone     36    Vice President and Treasurer
<FN>
- ------------------------
(1)  Messrs. Dolan,  Moe, Larson,  Shank, Palen  and Baltins  have consented  to
     serve as directors of the Corporation upon completion of the Conversion.
</TABLE>

    The Board of Directors of the Corporation will be divided into three classes
serving  staggered three-year  terms. The term  of office of  Messrs. Larson and
Baltins is to expire in 1995; the term of office of Messrs. Moe and Dolan is  to
expire  in 1996; and the term of office of Messrs. Wendel, Palen and Shank is to
expire in 1997.

    Beverly F. Dolan was  the Chairman and Chief  Executive Officer of  Textron,
Inc.,   a  multi-industry  company  with  operations  in  aerospace  technology,
commercial products and financial services, from 1986 through 1992. Since  1992,
he  has been an investor. Mr. Dolan is  a director of Textron, Inc.; First Union
Corporation, a  bank  holding  company; Ruddick  Corporation,  a  multi-industry
company  with operations in  retail grocery, thread  manufacturing and printing;
and FPL Group, Inc.,  a Florida electrical power  producer. Mr. Dolan served  on
President  Bush's Export Council and was elected Vice Chairman of the council in
November 1990.

    Robert S. Moe was Executive Vice President and Treasurer of PICC or  Polaris
from 1981 through 1992. Since 1992, he has been an investor.

    Stephen  G.  Shank has  been the  President and  Chief Executive  Officer of
Learning Ventures, Inc., a provider of education programs, since September 1991.
Prior thereto, from 1988, he was  Chairman and Chief Executive Officer of  Tonka
Corporation,  a marketer and manufacturer of toy and game products. Mr. Shank is
a director of National Computer Systems, Inc., an information services  company,
and  Advance  Circuits,  Inc.,  a manufacturer  of  printed  circuit  boards and
electronic interconnect devices. In addition, Mr. Shank is a director of various
private and non-profit corporations.

    Gregory R.  Palen has  been  the Chairman  and  Chief Executive  Officer  of
Spectro Alloys, an aluminum manufacturing company since 1989 and Chief Executive
Officer  of Palen/Kimball Company, a heating and air conditioning company, since
1980.  He  is  a  director  of   Valspar  Corporation,  a  paint  and   coatings
manufacturing  company. In addition, Mr. Palen  is a director of various private
and non-profit corporations.

    Andris A. Baltins has been  a member of the law  firm of Kaplan, Strangis  &
Kaplan,  P.A.  since  1978.  He  is  a  director  of  Affinity  Group,  Inc.,  a
membership-based marketing company. In  addition, Mr. Baltins  is a director  of
various private and non-profit corporations.

                                       91
<PAGE>
EXECUTIVE COMPENSATION

    The  following  table sets  forth the  aggregate  cash compensation  paid by
Polaris Industries L.P. to each of the chief executive officer and the four most
highly compensated  executive  officers, each  of  whom will  continue  in  such
positions  with the Corporation  if the Conversion Proposal  is approved and the
Conversion is consummated, for services rendered in all capacities for the  year
ended December 31, 1993:

   
                           SUMMARY COMPENSATION TABLE
    

   
<TABLE>
<CAPTION>
                                                                                       LONG-TERM COMPENSATION
                                                                                  --------------------------------
                                                                                        AWARDS           PAYOUTS
                                            ANNUAL COMPENSATION                   -------------------  -----------
                                          ------------------------  OTHER ANNUAL  RESTRICTED  OPTIONS     LTIP         ALL OTHER
       NAME & PRINCIPAL POSITION          YEAR   SALARY   BONUS(1)  COMPENSATION   STOCK(2)    /SARS   PAYOUTS(3)   COMPENSATION(4)
- ----------------------------------------  ----  --------  --------  ------------  ----------  -------  -----------  ---------------
<S>                                       <C>   <C>       <C>       <C>           <C>         <C>      <C>          <C>
W. Hall Wendel, Jr.                       1993  $240,000  $328,800                                     $  -0-       $     7,075
  Chief Executive Officer                 1992   240,000   249,600                                     3,736,049          6,866
                                          1991   240,000   144,000                                     1,457,861          6,667
Kenneth D. Larson                         1993   185,433   278,149                                       744,002          7,075
  Chief Operating Officer                 1992   183,750   199,920                                       858,297          6,866
  and President                           1991   183,750   115,763                                       765,000          6,667
Charles A. Baxter                         1993   150,000   144,000                                        -0-             7,075
  Vice President--                        1992   150,000   118,500                                     1,245,335          6,866
  Engineering and Product                 1991   150,000    85,500                                       485,966          6,667
  Safety
Ed Skomoroh                               1993   129,402   121,636                                       248,045          7,075
  Vice President--Sales                   1992   129,402   102,228                                       286,069          6,866
  and Marketing                           1991   129,402    73,759                                       765,000          6,667
James Bruha                               1993   121,346   120,133                                       248,045          7,075
  Vice President--                        1992   120,000   102,000                                       597,414          6,866
  Manufacturing                           1991   120,000    78,000                                       121,482          6,667
<FN>
- ------------------------------
(1)  Bonus payments are reported for the year in which the related services were
     performed.

(2)  In  1994 an  additional 127,500 First  Rights were granted  pursuant to the
     Management Plan,  including  8,000, 10,000,  5,000,  5,000, and  15,000  to
     Messrs.  Wendel, Larson,  Baxter, Skomoroh  and Bruha,  respectively. These
     First Rights will  convert to  shares of Common  Stock on  January 1,  1997
     (50%)  and the remainder convert on January 1, 1998 (50%) if the Conversion
     is consummated.

(3)  These payments are First  Rights which converted on  December 28, 1993  for
     1993, December 28, 1992 for 1992 and January 1, 1992 for 1991.

(4)  Includes   Operating  Partnership  matching  contributions  to  the  401(k)
     retirement savings plan.
</TABLE>
    

    In addition, EIPCC,  the managing  general partner of  the General  Partner,
acts  as management agent (the "Management Agent") in the performance of certain
administrative services  on behalf  of the  Partnership and  receives an  annual
management fee in the amount of $500,000 pursuant to a Management Agreement (the
"Fee").  The Fee is applied towards salaries, overhead and other expenses of the
Management Agent in connection  with the administration  of the Partnership.  If
the  Merger  is  approved  and the  Conversion  is  consummated,  the Management
Agreement will be terminated and the Fee will no longer be paid.

DEATH AND DISABILITY BENEFITS AND DEFERRED COMPENSATION

    An agreement  with Mr.  Wendel  provides benefits  in  the event  of  death,
disability,  retirement or severance. If, during the term of his employment, Mr.
Wendel becomes  totally disabled,  the Operating  Partnership will  pay  monthly
disability  payments of $4,167 during his lifetime until age 65. In the event of
the death of  Mr. Wendel  during his  employment or  while receiving  disability
payments, the Operating Partnership will pay Mr. Wendel's designated beneficiary
a  total  of  $500,000 in  monthly  payments over  ten  years. In  the  event of
termination of  employment without  cause, the  Operating Partnership  will  pay
$500,000,  in monthly  installments over  ten years  commencing on  Mr. Wendel's

                                       92
<PAGE>
65th birthday or, if later, retirement. In the event of voluntary termination of
employment by Mr. Wendel,  the Operating Partnership will  pay $50,000 for  each
full  year of service (including the period during which disability payments are
received) after September 14, 1982, up to $500,000 in monthly installments  over
ten years commencing on Mr. Wendel's 65th birthday or, if later, retirement.

LONG-TERM INCENTIVE COMPENSATION

    MANAGEMENT AND EMPLOYMENT PLANS.  The Partnership Agreement provides for the
issuance  of up to  2,400,000 First Rights  to acquire BACs  as an incentive for
operating management and employees of  the Operating Partnership. Of such  First
Rights,  900,000 were reserved  for issuance to  non-management employees of the
Operating Partnership  (the "Employee  Plan") and  1,500,000 were  reserved  for
issuance  to middle management and senior management (the "Management Plan"). As
described below, as  of the  date hereof,  1,865,497 First  Rights have  already
automatically converted into BACs, and the Partnership has already satisfied the
criteria for automatic conversion of the remaining First Rights into BACs.

    The  Employee and the Management Plans  are administered by a committee (the
"Bonus Committee") consisting of Victor K. Atkins, Jr., W. Hall Wendel, Jr.  and
John H. Grunewald. Any actions taken by the Bonus Committee (with respect to the
Employee  and  the  Management Plans)  must  be consistent  with  the respective
members' fiduciary  obligations to  the Partnership.  Any actions  of the  Bonus
Committee  (with respect to the Employee  and the Management Plans) are reviewed
by the Board of Directors  of PICC and shall  be deemed appropriate unless  such
Board   establishes  otherwise.  In  addition  to  being  President,  Secretary,
Treasurer and  Director of  EIPCC  and the  individual  general partner  of  the
General  Partner, Mr. Atkins is also Chairman of PICC and the individual general
partner of the Operating General Partner and  a director of PICC. Mr. Wendel  is
Chief Executive Officer of the Operating Partnership and a director of PICC. Mr.
Grunewald  is  Executive  Vice  President--Finance  and  Administration  of  the
Operating Partnership. Mr.  Wendel and  Mr. Grunewald are  participants in,  and
have  been granted significant First Rights under, the Management Plan. No First
Rights have been or will be granted to Mr. Atkins.

    As of  the date  hereof, 2,177,997  First Rights  have been  issued. Of  the
amount,  (i)  1,670,641  First  Rights  were  converted  into  BACs  and  remain
outstanding, (ii) 194,856 First Rights were  canceled pursuant to a program  (no
longer  in  effect) adopted  to  assist First  Rights  plan participants  in the
payment of personal income tax in exchange for the cancellation of First  Rights
that  were scheduled  to convert  to BACs, and  (iii) 312,500  First Rights will
convert into BACs on  various dates in the  future. 222,003 First Rights  remain
available  for  future  issuance at  the  times  and subject  to  the conditions
specified by the Committee, in its discretion. The existing First Rights will be
assumed by the Corporation, with only  such changes as are necessary to  reflect
conversion to corporate form.

    No  First Rights may be  granted under either plan  after December 31, 1999,
and the First Rights expire January 1, 2003.

    If any employee who has been  issued First Rights under the Management  Plan
ceases to be an employee for any reason other than death, before all of the BACs
relating  to First Rights granted to such  employee have been issued, such First
Rights relating to unissued BACs shall terminate and no additional BACs shall be
issued to him or her under the Management Plan.

    If a non-management  employee who  has been  issued First  Rights under  the
Employee Plan is terminated for any reason other than for cause, he or she shall
be  entitled to receive all or a portion (depending on years of service with the
Operating Partnership) of the BACs issuable with respect to First Rights granted
to him, at such times and under such conditions as are set forth in the Employee
Plan and such First Rights.

                                       93
<PAGE>
    The following table  sets forth the  numbers of First  Rights granted  since
inception  of the  Management Plan  to the  following officers  of the Operating
Partnership, as well as those First  Rights which have converted as of  December
31, 1993:

<TABLE>
<CAPTION>
                                                                            REMAINING RIGHTS
                                          RIGHTS     RIGHTS     REMAINING   VALUE AT DECEMBER
                                          GRANTED   CONVERTED    RIGHTS         31, 1993
                                         ---------  ---------  -----------  -----------------
<S>                                      <C>        <C>        <C>          <C>
W. Hall Wendel, Jr.....................    248,000    240,000       8,000      $   270,000
Kenneth D. Larson......................    110,000    100,000      10,000          337,500
Charles A. Baxter......................     85,000     80,000       5,000          168,750
Ed Skomoroh............................     65,000     60,000       5,000          168,750
James Bruha............................     55,000     40,000      15,000          506,250
</TABLE>

    BONUS  AND  PROFIT SHARING  PLANS.   In  addition to  the issuance  of First
Rights, bonus and profit sharing plans  have been established for employees  who
meet  minimum service requirements and will  be assumed by the Corporation, with
only such changes  as are  necessary to  reflect conversion  to corporate  form.
Bonuses  and profit sharing awards  will be paid to  the employees determined by
the Bonus Committee in amounts determined by it. All actions taken by the  Bonus
Committee   are  to  be  consistent   with  the  respective  members'  fiduciary
obligations to the Partnership. The actions of the Bonus Committee are  reviewed
by  the  Board of  Directors of  PICC  and deemed  appropriate unless  the Board
establishes otherwise. Bonus  awards are  granted each year,  based on  "Pre-Tax
Distributable  Cash Flow," which means for any year, the pre-tax earnings of the
Operating Partnership, without  regard to  any amounts payable  pursuant to  the
bonus  pool, as adjusted to (a) add the sum of (1) depreciation and amortization
of fixed assets,  tooling, inventory  valuation step-up,  intangible assets  and
goodwill  and (2)  compensation expense  recorded in  connection with  the First
Rights employee  benefit plans,  and to  (b)  subtract the  sum of  (1)  capital
expenditures  of  the Operating  Partnership,  and (2)  permitted administrative
expenses of both the Operating Partnership and the Partnership (exclusive of the
annual management fee payable by the Partnership to the Management Agent), up to
a maximum of the following:

<TABLE>
<CAPTION>
                                                                                     PERCENTAGE
                                                                                    PARTICIPATION
PRE-TAX DISTRIBUTABLE CASH FLOW                                                     IN INCREMENT
- --------------------------------------------------------------------------------  -----------------
<S>                                                                               <C>
        $0 -- $12,000,000.......................................................              0%
$12,000,001 -- $15,000,000......................................................              5%
$15,000,001 -- $20,000,000......................................................             10%
$20,000,001 -- $25,000,000......................................................             15%
$25,000,001 -- $30,000,000......................................................             20%
$30,000,001 or more.............................................................             25%
</TABLE>

    In general, the Bonus Committee will  consider factors such as the  previous
year's  bonus,  base  compensation,  responsibilities  and  performance  of  the
individual employee and performance of the  Operating Partnership as a whole  in
determining bonus awards.

    In  addition  to the  above  computation, the  Bonus  Committee may,  in its
discretion, grant a  certain amount of  profits to be  distributed to  employees
relating  to an historical profit sharing plan. In the event with respect to any
year the Bonus Committee does not grant awards in an amount equal to the maximum
amount for such year,  the difference between the  maximum and actual amount  of
the  award may, at the  discretion of the Bonus Committee,  be carried over to a
subsequent year and added to the maximum amount with respect to which awards may
be granted in such subsequent year. Awards will be paid in cash, in a lump  sum,
not  later than 30 days following the  completion of the Partnership's audit for
such year. An employee  designated by the Bonus  Committee shall be eligible  to
receive  an award if he or she is  employed to the last day of the Partnership's
fiscal year.  It is  intended that  the  bonus and  profit sharing  plans  shall
continue indefinitely; provided, however, that since

                                       94
<PAGE>
January 1, 1993, the Board of PICC has had the power to terminate the plans. The
allocations  to the bonus and profit sharing  plans for the years ended December
31, 1993,  1992,  and  1991,  were  $16,236,000,  $11,411,000,  and  $9,475,000,
respectively.

RETIREMENT SAVINGS PLAN

    Effective  June 1,  1985, Northwestern,  the predecessor  company, adopted a
Retirement Savings Plan (the "Plan") for all employees who meet minimum  service
requirements.  Such Plan  was adopted by  the Operating Partnership  and will be
assumed by the Corporation, with only  such changes as are necessary to  reflect
conversion  to corporate form. The  Plan is intended to  qualify as a retirement
plan under Sections 401(a) and 401(k) of  the Internal Revenue Code of 1986,  as
amended.  Under the Plan, employees  may save up to  15% of their income through
payroll deductions.  The Operating  Partnership  may, if  it elects,  also  make
contributions  which match the employee contributions up to 4% of the employee's
income. The Operating Partnership's  matching contribution immediately vests  in
the  employee's account.  Amounts in  a participant's  account are distributable
upon termination of employment.

    The Board of  Directors of PICC  may, at  any time, amend  or terminate  the
Plan.  As  of December  31, 1993,  substantially all  of the  eligible employees
participated in the Plan through  payroll deductions. The Operating  Partnership
contributed  matching contributions  of approximately $1,099,000  under the plan
for the year ended December 31, 1993,  $898,000 for the year ended December  31,
1992,  and $766,000  for the year  ended December  31, 1991. For  the year ended
December 31, 1993 the Partnership made matching contributions to Messrs. Wendel,
Larson, Baxter, Skomoroh and Bruha of approximately $7,075 each.

PURCHASE OF BACS

    The Operating  General Partner  may,  in its  sole discretion,  implement  a
program  to enable employees  of the Operating Partnership  to purchase BACs. To
date, no such program has been implemented.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Prior to 1994, levels  of base compensation and  participation in the  bonus
and  profit sharing pool were established  by senior management of the Operating
Partnership, including Messrs. Wendel, Grunewald and Larson, and were subject to
approval by the Board of Directors of  PICC. At December 31, 1993, the Board  of
Directors  of PICC consisted of Messrs. Wendel, Atkins and Bagley. Late in 1993,
the Board  of  Directors  established a  Compensation  Committee  consisting  of
Messrs.  Atkins  and  Bagley  to  establish  levels  of  base  compensation  and
participation in the bonus and profit sharing pool for officers of the Operating
Partnership for  subsequent  fiscal years.  Messrs.  Bagley and  Atkins  do  not
participate in the bonus and profit sharing pool.

DIRECTOR COMPENSATION

   
    After  consummation  of  the  Conversion,  the  Corporation  intends  to pay
directors who are  not also employees  (Messrs. Baltins, Dolan,  Moe, Palen  and
Shank)  an annual director's fee of $27,500, at least $5,000 of which is payable
in restricted stock of the Corporation.  Fees are proposed to be paid  quarterly
and  restrictions on  restricted stock are  proposed to lapse  upon cessation of
board membership.
    

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   
    The Operating Partnership leases offices and warehouse space in a suburb  of
Minneapolis, Minnesota from 1225 North County Road 18 Limited Partnership ("1225
Partnership").  The partners of the 1225  Partnership are former stockholders of
Northwestern, including  W. Hall  Wendel,  Jr., Robert  S.  Moe and  Charles  A.
Baxter,  who own (either directly or through their immediate families) 1,687,200
BACs. On  October 27,  1988, Northwestern  was liquidated  and its  assets  were
distributed  to  its stockholders.  Under the  lease entered  into in  1983, and
amended in  1990,  the  Operating  Partnership  leases  60,127  square  feet  of
warehouse   space  and  31,733  square  feet  of  office  space  from  the  1225
Partnership. The lease is on a "triple  net" basis and provides for annual  rent
of $2.50 per square foot
    

                                       95
<PAGE>
of  warehouse space and  $5.50 per square  foot of office  space and is adjusted
annually by increases in the consumer price index, not to exceed 3.5%  annually.
Total lease payments for the years ended December 31, 1993, 1992, and 1991, were
$443,000, $429,000, and $415,000, respectively. The term of the lease expires in
1997.

    The  Operating Partnership has assumed the liabilities of Northwestern under
such lease  agreement and  has  succeeded to  the  rights of  Northwestern  with
respect  to  the  1225  Partnership.  Any  future  transactions  with  the  1225
Partnership or  any  other related  party  will  be on  terms  which  management
believes  are no less favorable to  the Operating Partnership or the Corporation
than those  which  could reasonably  be  obtained from  an  unaffiliated  party.
Management  does  not  believe  that  any  of  the  arrangements  with  the 1225
Partnership will have any material impact on operating results.

    Andris A.  Baltins,  who  has  consented  to serve  as  a  director  of  the
Corporation  upon completion of the  Conversion, is a member  of the law firm of
Kaplan, Strangis  and  Kaplan,  P.A.,  which  provides  legal  services  to  the
Corporation  and  has  provided  legal  services  to  the  Partnership  and  its
subsidiaries. Of the $11 million in  fees and expenses estimated to be  incurred
in  connection with  the Conversion, it  is estimated that  Kaplan, Strangis and
Kaplan, P.A. will receive fees of approximately $1 million.

                                       96
<PAGE>
         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   
    The following table sets forth, as of November 18, 1994, the number of BACs,
and, upon completion  of the Conversion,  the number of  shares of Common  Stock
beneficially  owned by (i) each person who is  a director of EIPCC or PICC, (ii)
each person who has been nominated as a director of the Corporation, (iii)  each
of  the chief executive  officer and the four  most highly compensated executive
officers other than the  chief executive officer  of the Operating  Partnership,
(iv)  all directors of PICC, EIPCC and executive officers of PICC as a group (in
the case  of  BACs)  and  all directors,  nominees  for  director  and  proposed
executive  officers of  the Corporation  as a  group (in  the case  of shares of
Common Stock), and (v) those persons  known to the Partnership who  beneficially
own  more than 5%  of any class of  voting securities. For  a description of the
relationships among the  General Partner, Mr.  Atkins, Lehman Brothers  Holdings
Inc.  ("LBHI") and  certain other  affiliates of  the General  Partner, see "The
Conversion -- Background of the Conversion."
    

   
<TABLE>
<CAPTION>
                                                                                     BENEFICIAL OWNERSHIP (1)
                                                                         ------------------------------------------------
                                                                                  BACS             SHARES OF COMMON STOCK
                                                                         ----------------------    ----------------------
                           BENEFICIAL OWNER                               NUMBER        PERCENT     NUMBER        PERCENT
- ----------------------------------------------------------------------   ---------      -------    ---------      -------
<S>                                                                      <C>            <C>        <C>            <C>
Victor K. Atkins, Jr. (2)                                                  425,132        2.66%    1,408,665        7.78%
 President, Secretary, Treasurer and Director of EIPCC and Chairman
 and Director of PICC
Paul Bagley (3)                                                             18,475         *          18,475         *
 Chairman and Director of EIPCC and Director of PICC
W. Hall Wendel, Jr. (4)                                                    988,800        6.18%      988,800        5.46%
 Chief Executive Officer of the Operating Partnership and Director of
 PICC
Kenneth D. Larson (5)                                                      105,376         *         105,376         *
 President and Chief Operating Officer of PICC, Director (6)
Charles A. Baxter                                                          280,000        1.75%      280,000        1.55%
 Vice President--Engineering and Product Safety of PICC
Ed Skomoroh                                                                 49,020         *          49,020         *
 Vice President--Sales and Marketing of PICC
James Bruha                                                                  7,460         *           7,460         *
 Vice President--Manufacturing of PICC
Beverly F. Dolan                                                               -0-      -0-              -0-      -0-
 Director (6)
Stephen G. Shank                                                               -0-      -0-              -0-      -0-
 Director (6)
Gregory R. Palen                                                               -0-      -0-              -0-      -0-
 Director (6)
Andris A. Baltins (7)                                                        4,550         *           4,550         *
 Director (6)
Robert S. Moe (8)                                                          418,400        2.61%      418,400        2.31%
 Director (6)
Lehman Brothers Holdings Inc. (9)                                          325,507        2.03%    1,375,628(10)    7.60%
All directors and executive officers as a group                          1,897,086       11.85%    1,876,429       10.36%
<FN>
- ------------------------------
 * Represents less than 1%.

 (1) Unless otherwise indicated, beneficial ownership disclosed consists of sole
     voting and investment power.
</TABLE>
    

                                       97
<PAGE>
   
<TABLE>
<S>  <C>
 (2) Includes certain shares which  may be received by  LBHI. See footnote  (10)
     below.

 (3) Includes  11,475 BACs (shares)  held indirectly by Mr.  Bagley by virtue of
     his 12% ownership  of the outstanding  stock of Boker  Orr Corporation  (of
     which he is President), a 12.5% limited partner of EIP I L.P. Also includes
     800  BACs (shares) held in trusts for Mr. Bagley's children, as to which he
     disclaims any beneficial interest. Also includes 6,200 BACs (shares)  owned
     by Mr. Bagley and his spouse in several joint accounts. Mr. Bagley also has
     an  interest in an indeterminate number of shares pursuant to a partnership
     agreement among  a  subsidiary  of  LBHI and  Boker  Orr  Corporation.  See
     footnote (10) below.

 (4) Includes 128,000 BACs (shares) held in a trust for Mr. Wendel's daughter as
     to which he disclaims any beneficial interest.

 (5) Includes  100 BACs  (shares) held  in a  trust for  Mr. Larson's  child and
     10,200 BACs (shares) owned by Mr. Larson's spouse, as to which he disclaims
     any beneficial interest.

 (6) Has agreed to serve as a director upon completion of the Conversion.

 (7) Other members of  the law  firm of Kaplan,  Strangis and  Kaplan, P.A.,  of
     which  Mr.  Baltins  is  a  member and  which  serves  as  counsel  for the
     Corporation, beneficially own 39,750 BACs (shares).

 (8) Includes 222,400 BACs (shares) held in  a trust for Mr. Moe's children,  as
     to which he disclaims any beneficial interest.

 (9) Includes BACs owned by certain wholly owned subsidiaries of LBHI.
(10) Does  not include shares which may be  received by LBHI, subject to certain
     conditions not in the control of LBHI, pursuant to the preferred return set
     forth in the partnership agreement of the General Partner. Includes  shares
     that  may  be beneficially  owned  by Boker  Orr  Corporation and  not LBHI
     pursuant to a partnership  agreement among a subsidiary  of LBHI and  Boker
     Orr Corporation. See footnotes (2) and (3) above.
</TABLE>
    

    The  business address for  Mr. Atkins is 33  Flying Point Road, Southampton,
    New York 11968.

    The business address for Mr. Bagley is c/o Stone Pine Capital Ltd., 410 17th
    Street, Suite 400, Denver, Colorado 80202.

    The business address for Messrs. Wendel, Larson, Baxter, Skomoroh and  Bruha
    is 1225 Highway 169 North, Minneapolis, Minnesota 55441.

    The address for LBHI is 3 World Financial Center, New York, New York 10285.

    In connection with the Conversion, Mr. Wendel and Mr. Atkins entered into an
agreement dated as of August 25, 1994 (the "Agreement"). The Agreement provides,
among  other things, that for so long as Mr.  Atkins owns no less than 3% of the
outstanding voting securities,  he will  vote such  securities in  favor of  the
Corporation's   nominees  for  election  to  the   Board  of  Directors  of  the
Corporation. It is understood that  Mr. Atkins does not  desire to and will  not
serve as an officer or director of the Corporation or its subsidiaries following
consummation of the Conversion.

                                       98
<PAGE>
                         SUMMARY OF CERTAIN PROVISIONS
                          OF THE PARTNERSHIP AGREEMENT

    The  Partnership Agreement is the governing instrument which establishes the
Partnership's right under the laws of the State of Delaware to operate under its
name as a limited partnership and contains the rules under which the Partnership
will be operated. Many of the principal provisions of the Partnership  Agreement
have  been summarized elsewhere in this  Proxy Statement under various headings,
in particular under  "Comparative Rights of  BAC Holders and  Holders of  Common
Stock," and certain other provisions of the Partnership Agreement are summarized
below.  For complete information, however, reference  is made to the Partnership
Agreement.

    The following statements and other statements in this Prospectus  concerning
the  Partnership  Agreement and  related matters  are merely  a summary,  do not
purport to be complete and in no way modify or amend the Partnership Agreement.

MANAGEMENT OF THE PARTNERSHIP

    The General Partner, whose express duties and responsibilities are set forth
in the Partnership  Agreement, has  full, complete and  exclusive discretion  to
manage  and  control  the Partnership.  The  BAC  Holders have  no  authority to
participate in or  have any control  over the Partnership  business and have  no
authority or right to act for or bind the Partnership.

LIABILITY OF THE GENERAL PARTNER AND BAC HOLDERS TO THIRD PARTIES

    The General Partner is liable for all general obligations of the Partnership
to  the extent not paid by the Partnership.  All decisions made for or on behalf
of the Partnership by the General Partner are binding upon the Partnership.  The
General   Partner  is  not  liable  for   the  nonrecourse  obligations  of  the
Partnership.

    No BAC Holder is personally liable for the debts, liabilities, contracts  or
any  other obligations of the  Partnership and shall only  be liable to make the
payments of its Capital Contribution to the Partnership as and when due, unless,
in addition to the exercise of its rights and powers as a BAC Holder, he or  she
takes part in the control of the business of the Partnership.

    The  Delaware Revised  Uniform Limited  Partnership Act  and the Partnership
Agreement provide that, in certain circumstances, the BAC Holders may be  liable
to return amounts previously distributed to them.

DISSOLUTION AND LIQUIDATION

    The  Partnership shall continue in full  force and effect until December 31,
2037, unless terminated earlier as a result of:

        (1) the bankruptcy of the Partnership;

        (2)  the   retirement  (including   resignation  or   removal),   death,
    dissolution,  legal  disability  or  the  passage  of  120  days  after  the
    bankruptcy of a General Partner,  unless the remaining general partners  (or
    in  the case  of a  General Partner  who is  at that  time the  sole General
    Partner), all  of the  BAC Holders  agree to  continue the  business of  the
    Partnership within 90 days of the occurrence of such an event;

        (3)  the sale or  other disposition of  all or substantially  all of the
    assets of the Partnership or of the Operating Partnership;

        (4) an election to dissolve the Partnership by two-thirds in interest of
    the BAC Holders; or

        (5) the occurrence  of any other  event causing the  dissolution of  the
    Partnership under the laws of the State of Delaware.

    Upon  dissolution  of  the  Partnership, the  Partnership's  assets  will be
liquidated and the  proceeds of liquidation  will be applied  to the payment  of
obligations of the Partnership to third parties and the

                                       99
<PAGE>
setting  up of any reserves for contingencies that the General Partner considers
necessary. All remaining net assets will  then be distributed among the  General
Partner and the BAC Holders in proportion to their respective Capital Accounts.

VOTING RIGHTS OF BAC HOLDERS

    The  BAC Holders do not  have the right to  participate in the management or
control of  the  Partnership's  business. The  Partnership  Agreement  provides,
however,  that the Initial  Limited Partner will  vote its Class  A Interests as
directed by the BAC Holders. Accordingly, the Initial Limited Partner voting  at
the  direction of the BAC Holders by vote of two-thirds in interest thereof may,
among other matters:

        (a) amend the  Partnership Agreement, provided  that the concurrence  of
    the  General  Partner  is  required for  any  amendment  which  modifies the
    compensation or distributions to which the General Partner or its Affiliates
    are entitled, or which affects the duties of the General Partner or modifies
    the First Rights;

        (b) approve or disapprove  the sale of all  or substantially all of  the
    Partnership's   assets  in  one  transaction  or  in  a  related  series  of
    transactions, except in  connection with the  Partnership's dissolution  and
    liquidation,   in  which  case  the  General  Partner  will  have  exclusive
    authority;

        (c) dissolve the Partnership; or

        (d) remove  any  General Partner  and  consent  to the  admission  of  a
    replacement therefor.

    The  General Partner may  at any time call  a meeting of  BAC Holders and is
required to give notice of such a meeting within 10 days of receipt of a written
request therefor signed by ten percent or more in interest of the BAC Holders.

REMOVAL OF THE GENERAL PARTNER

    The BAC Holders may, by vote of  two-thirds in interest, vote to remove  any
General  Partner from the Partnership  with or without cause  and consent to the
appointment of a replacement therefor.

WITHDRAWAL OF THE GENERAL PARTNER

    The General Partner  may not  withdraw voluntarily from  the Partnership  or
sell,  transfer or assign all or any portion of its interest in the Partnership,
unless a substitute  general partner has  been admitted in  accordance with  the
terms  of  the  Partnership  Agreement.  Among  other  things,  the  Partnership
Agreement requires that the Partnership's accountants render an opinion that the
net worth of the substitute general partner is sufficient to maintain the status
of the Partnership as a partnership for Federal income tax purposes.

ADDITIONAL GENERAL PARTNERS

    With the consent of two-thirds in  interest of the BAC Holders, the  General
Partner  may at  any time  designate one or  more persons  as additional general
partners, provided  that  the interests  of  the  BAC Holders  are  not  reduced
thereby.  The designation  must meet the  conditions set out  in the Partnership
Agreement and comply with the provisions of the Delaware Revised Uniform Limited
Partnership Act with respect to admission  of an additional general partner.  In
addition  to the  requirement that  the admission  of a  person as  successor or
additional general partner have the consent of the two-thirds in interest of the
BAC Holders, the Partnership  Agreement requires, among  other things, that  (i)
such  person agrees to and executes  the Partnership Agreement, and (ii) counsel
for the  Partnership renders  an  opinion that  such  person's admission  is  in
accordance with the Delaware Revised Uniform Limited Partnership Act.

EFFECT OF REMOVAL, BANKRUPTCY, DEATH, DISSOLUTION, INCOMPETENCY OR WITHDRAWAL OF
THE GENERAL PARTNER

    In  the event of a removal,  bankruptcy, death, dissolution, incompetency or
withdrawal of  the General  Partner, the  General  Partner will  cease to  be  a
general  partner of the  Partnership and (except for  removal without cause) its
interest in  the Partnership  will be  assigned to  any remaining  or  successor
general  partners so that  the remaining or successor  general partners have not
less than a

                                      100
<PAGE>
1% interest  in the  Partnership. Any  such  interest not  so assigned  will  be
retained  by  the  General  Partner,  but  will  be  converted  into  a  limited
partnership interest. The  General Partner  will remain  liable for  Partnership
obligations  arising  prior  to such  removal,  bankruptcy,  death, dissolution,
incompetency or withdrawal.  In the event  that the General  Partner is  removed
without  cause, the successor general partner  has the obligation to acquire the
interest of the  General Partner in  the Partnership at  its fair market  value,
unless  the General Partner elects  to have its interest  converted to a limited
partnership interest. The fair market value will be the sum of the present value
of the general partnership interest of the General Partner over the life of  the
Partnership  plus the present value  of the Management Fee  over the life of the
Partnership. If the General  Partner is removed for  cause, the removed  General
Partner  shall transfer, for no  consideration, its general partnership interest
to any successor General Partner  chosen by BAC Holders,  but the rights of  the
General  Partner as a Rights Holder will not be affected. Any disputes as to the
fair market value of the General  Partner's interest in the Partnership will  be
settled through arbitration.

REIMBURSEMENT OF GENERAL PARTNER EXPENSES

    The  Partnership  will  reimburse the  General  Partner for  certain  of its
expenses. Such reimbursements may include reimbursement for actual out-of-pocket
expenses  incurred  on  Partnership  business,  direct  out-of-pocket  fees  and
expenses  and  charges for  rendering  legal, consulting,  auditing, accounting,
bookkeeping and  computer  services.  The Partnership  will  not  reimburse  the
General  Partner for any salaries or  fringe benefits of its officers, directors
or employees, whether or not they are providing services to the Partnership,  or
for  any  items of  general  overhead, such  as rent,  utilities  or the  use of
computer or office equipment.

AMENDMENTS

    In addition  to amendments  adopted by  two-thirds in  interest of  the  BAC
Holders,  the  Partnership  Agreement may  be  amended by  the  General Partner,
without the consent  of the  BAC Holders, in  certain limited  respects if  such
amendments  are for the  benefit of or not  adverse to the  interests of the BAC
Holders. Also,  the power  of attorney  contained in  the Partnership  Agreement
empowers  the  General  Partner  to amend  the  Partnership  Agreement  to admit
additional or substitute BAC Holders into  the Partnership if such admission  is
effected in accordance with the terms of the Partnership Agreement.

DESIGNATION OF TAX MATTERS PARTNER

    Pursuant  to Section 6231 of the Code and the Regulations thereunder and the
Partnership Agreement,  the  General  Partner is  designated  the  "tax  matters
partner"  for purposes of Federal income tax audits of Partnership income, gain,
loss, deduction or credit.

REORGANIZATION OF THE PARTNERSHIP

    If legislation is  passed, or if  effective Treasury Department  Regulations
are  adopted, which would have the effect of reclassifying the Partnership as an
association taxable as a corporation for Federal income tax purposes, or if  for
any  other reason  the Partnership  is treated  as an  association taxable  as a
corporation for Federal  income tax purposes,  the General Partner  may, at  its
sole  discretion and without the consent or  approval of any other partner, take
whatever action it  deems necessary in  the best interests  of the  Partnership,
including  the dissolution  or reorganization  of the  Partnership into  a newly
organized corporation or other legal entity formed for such purpose, in whatever
manner and  by  whatever method  the  General  Partner determines  in  its  sole
discretion. The General Partner shall effectuate such reorganization so that, to
the  extent  possible  and  legally  permissible  under  the  circumstances, the
respective interests of the  BAC Holders and General  Partner in the assets  and
income  of the  successor entity  immediately following  such reorganization are
substantially equivalent  to  such  interests  immediately  prior  thereto.  The
General  Partner shall appoint two independent appraisers to determine the value
of the  foregoing interests.  If such  appraisers  are unable  to agree  on  any
valuation, the value shall be the average of the two determinations.

                                      101
<PAGE>
APPLICABLE LAW

    The Partnership Agreement shall be construed and enforced in accordance with
the laws of the State of Delaware.

BOOKS AND RECORDS

    The  fiscal year of the Partnership will be the year ending December 31. The
books and records of the  Partnership shall be maintained  at the office of  the
Partnership.  Such books and records shall be available there for examination by
any BAC Holder, or any duly  authorized representative of such BAC Holder,  upon
reasonable notice. Any BAC Holder, or any duly authorized representative of such
BAC Holder, shall, upon paying the costs of collection, duplication and mailing,
be entitled to a copy of the list of the names and addresses of the BAC Holders.

TRANSFERABILITY OF THE BACS

    A transfer or assignment of 50% or more of the capital and profits interests
of  the Partnership within a 12-month  period will terminate the Partnership for
Federal income tax  purposes, which may  result in adverse  tax consequences  to
holders of BACs. In order to protect against such a termination, the Partnership
Agreement  permits the General Partner to  defer any transfers or assignments of
BACs as a group  at any time  after the General Partner  determines that such  a
transfer  or assignment may result in the termination of the Partnership for tax
purposes,  provided  that  the  General  Partner  believes  that  the  resulting
termination  of the Partnership  for tax purposes would  have a material adverse
effect on  the financial  interests of  the holders  of BACs.  The  transferring
holders of BACs will be notified of such deferral, and any deferred transfers or
assignments  will be effected (in chronological order to the extent practicable)
as of the first day of the next succeeding period as of which such transfers  or
assignments  can be effected  without either termination  of the Partnership for
tax purposes or any adverse effects from  such termination, as the case may  be.
In  addition, any transfer  of BACs which  would result in  a termination of the
Partnership for Federal income tax purposes will  be void and have no effect  to
the full extent permitted by law. The Partnership may also restrict or terminate
transferability to preserve the tax status of the Partnership as a partnership.

                          DESCRIPTION OF CAPITAL STOCK

    Upon  consummation of  the Conversion, the  authorized capital  stock of the
Corporation will consist of  80,000,000 shares of Common  Stock, par value  $.01
per share, and 20,000,000 shares of preferred stock, issuable in series. Of such
authorized  shares,  18,110,684  shares  of  Common  Stock  will  be  issued and
outstanding immediately following the Conversion. All such outstanding shares of
Common Stock will be fully paid and nonassessable.

COMMON STOCK

    Holders of Common Stock have no  preemptive rights to purchase or  subscribe
for  securities of the  Corporation and the  Common Stock is  not convertible or
subject to redemption by the Corporation.

    Subject to  the rights  of holders  of any  class of  capital stock  of  the
Corporation  having any  preference or priority  over the Common  Stock, none of
which will be outstanding  upon consummation of the  Conversion, the holders  of
the Common Stock are entitled to dividends in such amounts as may be declared by
the Board of Directors of the Corporation from time to time out of funds legally
available  for such payments and, in the  event of liquidation, to share ratably
in any  assets  of  the Corporation  remaining  after  payment in  full  of  all
creditors  and  provisions for  any liquidation  preferences on  any outstanding
preferred stock ranking prior to the Common Stock.

PREFERRED STOCK

    The Board  of Directors,  without  further action  by the  shareholders,  is
authorized  to issue up to  20,000,000 shares of preferred  stock in one or more
series and to fix  and determine as  to any series all  the relative rights  and
preferences   of  shares   in  such   series,  including,   without  limitation,
preferences,

                                      102
<PAGE>
limitations or relative rights with respect to redemption rights, if any, voting
rights, if any, dividend rights and preferences on liquidation. The  Corporation
has  no present intention to issue any  preferred stock, but may determine to do
so in the future.

VOTING

    Holders of Common Stock are entitled to  cast one vote per share on  matters
submitted  to a vote of shareholders. No holder of Common Stock will be entitled
to  any  cumulative  voting  rights.   Approval  of  any  matter  submitted   to
shareholders  requires the affirmative vote of the  greater of (a) a majority of
the voting power  of the shares  present and entitled  to vote on  that item  of
business  or (b) a majority of the voting  power of the minimum number of shares
entitled to vote that would constitute a quorum for the transaction of  business
at  a duly held meeting of  shareholders; except that the Corporation's Articles
of Incorporation provide that the affirmative vote of holders of at least 75% of
the voting power of all outstanding shares entitled to vote is required for  the
removal  of a director, with  or without cause, from  office. If the Corporation
has more than one class of stock outstanding in the future, class voting will be
required on certain  matters that generally  have a material  adverse effect  on
shares of a class.

BOARD OF DIRECTORS

    The  Corporation's Articles of  Incorporation provide that  the business and
affairs of the Corporation shall be managed by or under the direction of a Board
of Directors consisting of not less than one (not less than three after there is
more  than  one  shareholder)  nor  more  than  15  persons,  who  need  not  be
shareholders.  The number of  directors may be increased  by shareholders or the
Board of Directors or decreased by the shareholders from the number of directors
on the  Board  of Directors  immediately  prior to  the  effective date  of  the
Articles  of Incorporation, provided, however, that  any change in the number of
directors on the Board of Directors shall be approved by the affirmative vote of
not less than  75% of the  voting power  of all outstanding  shares entitled  to
vote,  entitled to be cast by the holders of the then outstanding voting shares,
voting together as a single class,  unless such change shall have been  approved
by  a majority of the  entire Board of Directors.  The directors will be divided
into three classes, designated Class I, Class II and Class III. The term of  the
initial Class I directors shall terminate on the date of the 1995 annual meeting
of  shareholders, the term of the initial  Class II directors shall terminate on
the date of the 1996 annual meeting of shareholders, and the term of the initial
Class III directors shall terminate  on the date of  the 1997 annual meeting  of
shareholders.  At each  succeeding meeting  of annual  shareholders beginning in
1995, successors to  the class of  directors whose term  expires at that  annual
meeting  shall be  elected for  a three-year  term. Removal  of a  director from
office, with or without  cause, requires the affirmative  vote of not less  than
75%  of the  voting power  of all  outstanding shares  entitled to  vote, voting
together as a single class.

ANTI-TAKEOVER PROVISIONS

    Certain provisions  of  the  Corporation's  Articles  of  Incorporation  and
By-laws  and  the  Minnesota Business  Corporation  Act ("MBCA")  could  have an
anti-takeover effect. These provisions are intended to enhance the likelihood of
continuity and  stability  in the  composition  of the  Corporation's  Board  of
Directors  and  management  and  in  the policies  formulated  by  the  Board of
Directors and to discourage  an unsolicited takeover of  the Corporation if  the
Board of Directors determines that such takeover is not in the best interests of
the  Corporation and its shareholders. However,  these provisions could have the
effect of discouraging  certain attempts  to acquire the  Corporation or  remove
incumbent management even if some, or a majority of, shareholders deemed such an
attempt to be in their best interests.

    ARTICLES  OF  INCORPORATION  PROVISIONS.    Pursuant  to  the  Corporation's
Articles of Incorporation, at such time that the Board of Directors consists  of
three  or  more persons,  the Board  of  Directors of  the Corporation  shall be
divided into three  classes serving  staggered three-year  terms. In  accordance
with the MBCA, Directors can be removed from office, with or without cause, only
by  the affirmative vote of holders of 75% of the outstanding shares entitled to
vote.

                                      103
<PAGE>
    BY-LAW PROVISIONS.    The  By-laws  provide  that  any  action  required  or
permitted  to be taken  by the shareholders  of the Corporation  may be effected
only at a regular or special  meeting of shareholders and prohibits  shareholder
action  by less  than unanimous  written consent in  lieu of  a meeting. Special
meetings of shareholders may be called by a shareholder or shareholders  holding
10%  of the voting power  of all shares entitled to  vote; except that a special
meeting for the  purpose of  considering any  action to  directly or  indirectly
facilitate  or effect a business combination,  including any action to change or
otherwise affect the  composition of the  Board of Directors  for that  purpose,
must  be called by  25% or more  of the voting  power of all  shares entitled to
vote.

    MINNESOTA CONTROL SHARE/FAIR PRICE  LAW.  Section 671  of the MBCA  provides
that, generally, a person who becomes the beneficial owner of 20% or more of the
voting  power of the shares of the  Corporation in the election of directors may
exercise only  an aggregate  of 20%  of the  voting power  of the  Corporation's
shares  in the absence of special shareholders' approval. That approval can only
be obtained by resolution adopted by (i) the affirmative vote of the holders  of
the  majority of the voting power of  all shares entitled to vote, including all
shares held by the acquiring person, and (2) the affirmative vote of the holders
of the majority of the  voting power of all  shares entitled to vote,  excluding
all "interested shares" (shares held by the acquiring person, any officer of the
Corporation  or any director  of the Corporation  who is also  an officer of the
Corporation). If  the  shareholders  approve  a  share  acquisition  that  would
increase  the acquiring  person's beneficial interest  to 20% or  more, but less
than 33  1/3%,  of the  voting  power of  the  Corporation's shares,  a  similar
shareholder  vote is required to permit  the acquiring person to exercise voting
power with respect to 33  1/3% or more of  the outstanding shares upon  becoming
beneficial owner of shares otherwise entitled to one-third or more of the voting
power  of  the Corporation's  shares. A  similar  shareholder vote  generally is
necessary to permit  the acquiring  person to  exercise the  majority of  voting
power following acquisition of shares otherwise entitled to the majority of such
voting power.

    Section  673 of the MBCA restricts transactions with a shareholder acquiring
10% or more of  the voting power  of the shares of  the Corporation entitled  to
vote  unless the share acquisition  or the transaction has  been approved by the
Board of Directors prior to the acquisition of the 10% interest. For four  years
after  the  10%  threshold  is  exceeded  (absent  prior  board  approval),  the
Corporation cannot have a sale of substantial assets, merger, loan,  substantial
issuance  of  stock,  plan  of  liquidation  or  reincorporation  involving such
shareholder or its affiliates.

    Section 675  of  the  MBCA  generally  provides  that,  in  the  absence  of
disinterested  director  approval,  an offeror  may  not acquire  shares  of the
Corporation from a  shareholder within  two years following  the offeror's  last
purchase  of shares of the  same class pursuant to  a takeover offer, unless the
shareholder is afforded a reasonable opportunity at that time to dispose of  the
shares  to the  offeror on  terms substantially equivalent  to the  terms of the
earlier takeover offer.

LIMITATION OF LIABILITY

    As permitted by Minnesota law,  the Corporation's Articles of  Incorporation
provide  that directors of the Corporation shall not be personally liable to the
Corporation or its  shareholders for  monetary damages for  breach of  fiduciary
duty  as a director, except  for liability (i) for  any breach of the director's
duty of  loyalty  to the  Corporation  or its  shareholders,  (ii) for  acts  or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) relating to prohibited dividends or distributions or the
repurchase  or redemption of stock,  or (iv) for any  transaction from which the
director derives an improper personal benefit.

TRANSFER AGENT AND REGISTRAR

   
    The Transfer  Agent and  Registrar  for the  Common  Stock is  Norwest  Bank
Minnesota, N.A.
    

                                      104
<PAGE>
                             RESALE OF COMMON STOCK

    Shares  of  Common  Stock  received  by persons  who  may  be  deemed  to be
"affiliates" of  the  Partnership may  be  sold by  those  persons only  (i)  in
accordance  with  the provisions  of  Rule 145  under  the Securities  Act, (ii)
pursuant to an  effective registration  statement under the  Securities Act,  or
(iii)  in transactions  that are exempt  from registration  under the Securities
Act. Rule 145 provides,  in general, that  those shares of  Common Stock may  be
sold  by such persons  during the two  years following the  date the shares were
acquired from the Corporation if (a) there is available adequate current  public
information  with respect  to the  Corporation and (b)  the number  of shares of
Common Stock sold within any three-month  period does not exceed the greater  of
1%  of the  total number of  outstanding shares  of Common Stock  or the average
weekly trading  volume  of the  Common  Stock  during the  four  calendar  weeks
immediately preceding the date on which notice of the sale is filed with the SEC
and  (c) the  shares of Common  Stock are  sold in transactions  directly with a
"market maker" or  in "brokers'  transactions" within  the meaning  of Rule  144
under  the Securities Act. Rule 145 further  provides that during the third year
following the date the  shares were acquired from  the Corporation such  persons
may  sell such shares if they are not affiliates of the Corporation and there is
available adequate  public  information with  respect  to the  Corporation,  and
thereafter  such persons  may sell such  shares without restriction  if they are
not, and have not been for at least three months, affiliates of the Corporation.
The Corporation has  entered into an  agreement with affiliates  of the  General
Partner  affording them certain registration rights. See also "The Conversion --
Description of the Merger Agreement -- Registration Rights."

                                 LEGAL MATTERS

    The validity of the shares of  Common Stock under Minnesota law and  certain
legal matters in connection with the offering of the Common Stock hereby will be
passed upon for the Corporation by Kaplan, Strangis & Kaplan, P.A., Minneapolis,
Minnesota.  Certain legal matters in connection  with the offering of the Common
Stock hereby  will be  passed upon  for  the Partnership  by Simpson  Thacher  &
Bartlett (a partnership which includes professional corporations), New York, New
York,  and Stroock & Stroock & Lavan, New York, New York. Certain federal income
tax matters set forth under "Certain Federal Income Tax Considerations," will be
passed upon by Stroock & Stroock & Lavan.

                                    EXPERTS

    The financial statements of Polaris Industries Partners L.P. as of  December
31,  1993 and 1992 and for each of  the three years in the period ended December
31, 1993, and the balance sheet of  Polaris Industries Inc. as of September  23,
1994,  included in this Proxy Statement  and the Registration Statement of which
this Proxy Statement  forms a  part, have been  audited by  McGladrey &  Pullen,
independent  auditors, as set forth in their reports appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of  such
firm as experts in accounting and auditing.

                                      105
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

   
<TABLE>
<CAPTION>
CONTENTS                                                                                                      PAGE
- ----------------------------------------------------------------------------------------------------------  ---------
<S>                                                                                                         <C>
POLARIS INDUSTRIES PARTNERS L.P.

Independent Auditor's Report on the Financial Statements..................................................        F-2
Financial Statements
  Balance Sheets as of December 31, 1992 and 1993, and September 30, 1994 (unaudited).....................        F-3
  Statements of Operations for the years ended December 31, 1991, 1992 and 1993, and the nine-month
   periods ended September 30, 1993 and 1994 (unaudited)..................................................        F-4
  Statements of Partners' Capital for the years ended December 31, 1991, 1992 and 1993, and the nine-month
   period ended September 30, 1994 (unaudited)............................................................        F-5
  Statements of Cash Flows for the years ended December 31, 1991, 1992 and 1993, and the nine-month
   periods ended September 30, 1993 and 1994 (unaudited)..................................................        F-6
  Notes to Financial Statements for the years ended December 31, 1991, 1992 and 1993, and the nine-month
   periods ended September 30, 1993 and 1994 (unaudited)..................................................        F-7

POLARIS INDUSTRIES INC.

Independent Auditor's Report on the Balance Sheet.........................................................       F-16
Balance Sheet and Note to Financial Statement as of September 23, 1994....................................       F-17
</TABLE>
    

                                      F-1
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

To the Partners
Polaris Industries Partners L.P.

    We  have  audited  the  accompanying balance  sheets  of  POLARIS INDUSTRIES
PARTNERS L.P. (a Delaware limited partnership) as of December 31, 1992 and 1993,
and the related statements of operations,  partners' capital and cash flows  for
each  of the three years in the  period ended December 31, 1993. These financial
statements  are  the  responsibility   of  the  Partnership's  management.   Our
responsibility  is to express an opinion  on these financial statements based on
our audits.

    We conducted  our  audits in  accordance  with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence  supporting
the  amounts and disclosures in the financial statements. An audit also includes
assessing the  accounting  principles used  and  significant estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial  statements referred to above present  fairly,
in  all material respects, the financial position of Polaris Industries Partners
L.P. as of December 31, 1992 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.

                                          McGLADREY & PULLEN

Minneapolis, Minnesota
February 11, 1994, except for Notes 9 and 10
 as to which the date is October 14, 1994

                                      F-2
<PAGE>
   
                        POLARIS INDUSTRIES PARTNERS L.P.
                                 BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
    

   
<TABLE>
<CAPTION>
                                                       ASSETS
                                                                          DECEMBER 31,         SEPTEMBER 30, 1994
                                                                      --------------------  ------------------------
                                                                        1992       1993     HISTORICAL    PRO FORMA
                                                                      ---------  ---------  -----------  -----------
                                                                                                  (UNAUDITED)
<S>                                                                   <C>        <C>        <C>          <C>
Current Assets
  Cash and cash equivalents.........................................  $  19,094  $  33,798   $  53,733    $   7,931
  Trade receivables.................................................     16,875     21,340      42,114       42,114
  Inventories (Note 3)..............................................     37,576     52,057      78,645       78,645
  Prepaid expenses and other........................................      1,454      2,553       3,951        3,951
  Deferred tax assets (Note 10).....................................                                         12,000
                                                                      ---------  ---------  -----------  -----------
      Total current assets..........................................     74,999    109,748     178,443      144,641
                                                                      ---------  ---------  -----------  -----------
Deferred Tax Assets (Note 10).......................................                                         30,000
                                                                      ---------  ---------  -----------  -----------
Property and Equipment
  Land, buildings and improvements..................................      9,558     10,737      13,165       13,165
  Equipment and tooling.............................................     43,580     56,480      70,508       70,508
                                                                      ---------  ---------  -----------  -----------
                                                                         53,138     67,217      83,673       83,673
  Less accumulated depreciation.....................................     19,691     27,486      37,970       37,970
                                                                      ---------  ---------  -----------  -----------
                                                                         33,447     39,731      45,703       45,703
                                                                      ---------  ---------  -----------  -----------
Intangibles
  Cost in excess of net assets of business acquired, net of
   amortization of $4,199 1992; $4,968 1993 and $5,534 1994.........     26,479     25,710      25,144       25,144
  Dealer network, net of amortization of $33,523 1992; $39,811 1993
   and $44,000 1994.................................................     10,477      4,189
  Other, net of amortization of $2,202 1992; $2,311 1993 and $2,394
   1994.............................................................      1,279      1,170       1,087        1,087
                                                                      ---------  ---------  -----------  -----------
                                                                         38,235     31,069      26,231       26,231
                                                                      ---------  ---------  -----------  -----------
                                                                      $ 146,681  $ 180,548   $ 250,377    $ 246,575
                                                                      ---------  ---------  -----------  -----------
                                                                      ---------  ---------  -----------  -----------
                                         LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
  Current maturities of long-term debt..............................  $          $           $            $  35,000
  Accounts payable..................................................     24,946     36,122      65,500       65,500
  Distributions payable (Notes 2 and 10)............................     11,127     11,851      12,735       12,735
  Accrued expenses:
    Compensation (Note 5)...........................................     14,404     20,060      23,865       23,865
    Sales promotion programs........................................      2,749      3,691      12,539       12,539
    Warranties......................................................      5,705     11,412      13,013       13,013
    Other...........................................................      6,493      7,165      11,590       22,590
  Income taxes payable (Note 8).....................................      3,630      7,754      10,157       10,157
                                                                      ---------  ---------  -----------  -----------
      Total current liabilities.....................................     69,054     98,055     149,399      195,399
                                                                      ---------  ---------  -----------  -----------
Long-term debt, less current maturities (Note 10)...................                                         35,000
                                                                                                         -----------
Commitments and Contingencies (Notes 4, 5, 6, 8, and 10)
Partners' Capital (Notes 2, 4, and 5)
  General Partner...................................................     (7,105)    (7,397)     (4,817)
  Limited Partners:
    BACs (issued and outstanding, 14,504 units 1992, 14,936 units
     1993 and 16,010 units 1994)....................................     76,139     81,069      97,016
    First Rights:
      Assigned capital value........................................      9,102      8,821       8,779
      Deferred compensation.........................................       (509)
Stockholders' Equity (Note 10)
  Preferred stock $0.01 par value, authorized 20,000 shares, no
   issued and outstanding shares....................................
  Common stock $0.01 par value, authorized 80,000 shares, issued and
   outstanding 18,111 shares........................................                                            181
  Additional paid-in capital........................................                                        100,797
  Retained earnings (deficit).......................................                                        (84,802)
                                                                      ---------  ---------  -----------  -----------
                                                                         77,627     82,493     100,978       16,176
                                                                      ---------  ---------  -----------  -----------
                                                                      $ 146,681  $ 180,548   $ 250,377    $ 246,575
                                                                      ---------  ---------  -----------  -----------
                                                                      ---------  ---------  -----------  -----------
Pro Forma Net Book Value Per Share (Note 10)                                                              $    0.88
                                                                                                         -----------
                                                                                                         -----------
</TABLE>
    

                       See Notes to Financial Statements.

                                      F-3
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                            STATEMENTS OF OPERATIONS
          (IN THOUSANDS, EXCEPT PER UNIT AND PRO FORMA PER SHARE DATA)

   
<TABLE>
<CAPTION>
                                                                                                     UNAUDITED PRO FORMA
                                                                                              ----------------------------------
                                                                        FOR THE NINE MONTHS
                                                                                                FOR THE     FOR THE NINE MONTHS
                                        FOR THE YEARS ENDED DECEMBER    ENDED SEPTEMBER 30,    YEAR ENDED
                                                     31,                                      DECEMBER 31,  ENDED SEPTEMBER 30,
                                       -------------------------------  --------------------  ------------  --------------------
                                         1991       1992       1993       1993       1994         1993        1993       1994
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
                                                                              (UNAUDITED)

<S>                                    <C>        <C>        <C>        <C>        <C>        <C>           <C>        <C>
Sales................................  $ 297,677  $ 383,818  $ 528,011  $ 385,153  $ 584,725   $  528,011   $ 385,153  $ 584,725
Cost of Sales........................    201,883    269,199    383,916    282,420    443,093      383,916     282,420    443,093
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
    Gross profit.....................     95,794    114,619    144,095    102,733    141,632      144,095     102,733    141,632
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
Operating Expenses
  Selling, general and
   administrative....................     50,968     61,931     77,402     55,460     74,808       76,902      55,085     74,433
  First Rights compensation..........      5,548      4,570      6,300      5,029      6,140        6,300       5,029      6,140
  Amortization of intangibles........      7,560      7,427      7,166      5,378      4,838        7,166       5,378      4,838
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
    Total operating expenses.........     64,076     73,928     90,868     65,867     85,786       90,368      65,492     85,411
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
    Operating income.................     31,718     40,691     53,227     36,866     55,846       53,727      37,241     56,221
Nonoperating Expense (Income), net...     (1,712)     1,010        (43)       878       (772)         (43)        878       (772)
Interest Expense (Note 10)...........     --         --         --         --         --            2,231         744      3,347
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
    Income before income taxes.......     33,430     39,681     53,270     35,988     56,618       51,539      35,619     53,646
Provision for Income Taxes (Notes 8
 and 10).............................      1,968      4,980      7,457      4,546      6,007       18,555      12,825     19,313
                                       ---------  ---------  ---------  ---------  ---------  ------------  ---------  ---------
    Net Income.......................  $  31,462  $  34,701  $  45,813  $  31,442  $  50,611   $   32,984   $  22,794  $  34,333
                                                                                              ------------  ---------  ---------
                                                                                              ------------  ---------  ---------
Allocation of Net Income to General
 Partner (Note 2)....................      6,544      7,218      9,529      6,540     10,527
                                       ---------  ---------  ---------  ---------  ---------
    Net income applicable to Limited
     Partners........................  $  24,918  $  27,483  $  36,284  $  24,902  $  40,084
                                       ---------  ---------  ---------  ---------  ---------
                                       ---------  ---------  ---------  ---------  ---------
    Net income per unit..............  $    1.65  $    1.73  $    2.25  $    1.54  $    2.46
                                       ---------  ---------  ---------  ---------  ---------
                                       ---------  ---------  ---------  ---------  ---------
    Net income per share.............                                                          $     1.81   $    1.25  $    1.86
                                                                                              ------------  ---------  ---------
                                                                                              ------------  ---------  ---------
Weighted Average Number of BACs and
 BAC Equivalents Outstanding.........     15,062     15,868     16,115     16,125     16,315
                                       ---------  ---------  ---------  ---------  ---------
                                       ---------  ---------  ---------  ---------  ---------
Weighted Average Number of Common and
 Common Equivalent Shares
 Outstanding.........................                                                              18,215      18,225     18,415
                                                                                              ------------  ---------  ---------
                                                                                              ------------  ---------  ---------
</TABLE>
    

                       See Notes to Financial Statements.

                                      F-4
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                        STATEMENTS OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     LIMITED PARTNERS' INTEREST
                                                           ----------------------------------------------
                                                                            FIRST RIGHTS
                                                                      ------------------------    TOTAL
                                                GENERAL               ASSIGNED                   LIMITED
                                               PARTNER'S               CAPITAL     DEFERRED     PARTNERS'
                                               INTEREST      BACS       VALUE    COMPENSATION   INTEREST     TOTAL
                                              -----------  ---------  ---------  -------------  ---------  ---------
<S>                                           <C>          <C>        <C>        <C>            <C>        <C>
Balance, December 31, 1990..................   $  (2,753)  $  81,624  $  21,154    $  (7,923)   $  94,855  $  92,102
  First Rights grants and amortization......      --          --            309        5,239        5,548      5,548
  Cancellation of 192 First Rights..........      --          (1,319)    (2,349)      --           (3,668)    (3,668)
  Net income for the year...................       6,544      24,918     --           --           24,918     31,462
  Cash distributions declared...............      (8,857)    (33,724)    --           --          (33,724)   (42,581)
                                              -----------  ---------  ---------  -------------  ---------  ---------
Balance, December 31, 1991..................      (5,066)     71,499     19,114       (2,684)      87,929     82,863
  First Rights conversion to BACs...........      --          12,407    (12,407)      --           --         --
  First Rights grants and amortization......      --          --          2,395        2,175        4,570      4,570
  Net income for the year...................       7,218      27,483     --           --           27,483     34,701
  Cash distributions declared...............      (9,257)    (35,250)    --           --          (35,250)   (44,507)
                                              -----------  ---------  ---------  -------------  ---------  ---------
Balance, December 31, 1992..................      (7,105)     76,139      9,102         (509)      84,732     77,627
  First Rights conversion to BACs...........      --           6,042     (6,072)      --              (30)       (30)
  First Rights grants and amortization......      --          --          5,791          509        6,300      6,300
  Net income for the year...................       9,529      36,284     --           --           36,284     45,813
  Cash distributions declared...............      (9,821)    (37,396)    --           --          (37,396)   (47,217)
                                              -----------  ---------  ---------  -------------  ---------  ---------
Balance, December 31, 1993..................      (7,397)     81,069      8,821       --           89,890     82,493
  First Rights conversion to BACs
   (unaudited)..............................      --           6,122     (6,182)      --              (60)       (60)
  First Rights grants and amortization
   (unaudited)..............................      --          --          6,140       --            6,140      6,140
  Net income for the nine months
   (unaudited)..............................      10,527      40,084     --           --           40,084     50,611
  Cash distributions declared (unaudited)...      (7,947)    (30,259)    --           --          (30,259)   (38,206)
                                              -----------  ---------  ---------  -------------  ---------  ---------
Balance, September 30, 1994 (unaudited).....   $  (4,817)  $  97,016  $   8,779    $  --        $ 105,795  $ 100,978
                                              -----------  ---------  ---------  -------------             ---------
                                              -----------  ---------  ---------  -------------             ---------
  Less general partner's negative capital
   account balance (unaudited)..............                                                       (4,817)
                                                                                                ---------
  Amount available to the limited partner
   interest assuming a liquidation at net
   book value at September 30, 1994
   (unaudited)..............................                                                    $ 100,978
                                                                                                ---------
                                                                                                ---------
</TABLE>

                       See Notes to Financial Statements

                                      F-5
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            FOR THE NINE MONTHS
                                                            FOR THE YEARS ENDED DECEMBER    ENDED SEPTEMBER 30,
                                                                         31,
                                                           -------------------------------  --------------------
                                                             1991       1992       1993       1993       1994
                                                           ---------  ---------  ---------  ---------  ---------
                                                                                                (UNAUDITED)
<S>                                                        <C>        <C>        <C>        <C>        <C>
Cash Flows From Operating Activities
  Net income.............................................  $  31,462  $  34,701  $  45,813  $  31,442  $  50,611
  Adjustments to reconcile net income to cash flow from
   operating activities
    Depreciation.........................................      6,270      9,830     12,446      9,034     14,572
    Amortization.........................................      7,560      7,427      7,166      5,378      4,838
    First Rights compensation............................      5,548      4,570      6,300      5,029      6,140
    Changes in current operating items
      Trade receivables..................................     (1,350)    (6,372)    (4,465)   (17,307)   (20,774)
      Inventories........................................     (4,584)   (10,528)   (14,481)   (21,986)   (26,588)
      Accounts payable...................................      2,711     11,605     11,176     20,289     29,378
      Other..............................................       (975)     4,083     15,368     11,237     19,624
                                                           ---------  ---------  ---------  ---------  ---------
        Net cash provided by operating activities........     46,642     55,316     79,323     43,116     77,801
Cash Flows From Investing Activities
  Purchase of property and equipment.....................    (15,988)   (12,295)   (18,126)   (13,055)   (20,544)
                                                           ---------  ---------  ---------  ---------  ---------
    Distributable cash...................................     30,654     43,021     61,197     30,061     57,257
Cash Distributions to Partners...........................    (42,581)   (44,025)   (46,493)   (34,641)   (37,322)
                                                           ---------  ---------  ---------  ---------  ---------
  Increase (decrease) in cash and cash equivalents.......    (11,927)    (1,004)    14,704     (4,580)    19,935
Cash and Cash Equivalents
  Beginning..............................................     32,025     20,098     19,094     19,094     33,798
                                                           ---------  ---------  ---------  ---------  ---------
  Ending.................................................  $  20,098  $  19,094  $  33,798  $  14,514  $  53,733
                                                           ---------  ---------  ---------  ---------  ---------
                                                           ---------  ---------  ---------  ---------  ---------
Supplemental Schedule of Noncash Investing and Financing
 Activities
  BAC repurchase liability...............................      3,668
  Asset purchase note payable............................      1,500
  Capital lease obligation...............................        840
                                                           ---------
                                                           ---------
</TABLE>

   
<TABLE>
<CAPTION>
                                                                                     UNAUDITED PRO FORMA
                                                                              ----------------------------------
                                                                              FOR THE YEAR
                                                                                 ENDED      FOR THE NINE MONTHS
                                                                              DECEMBER 31,  ENDED SEPTEMBER 30,
                                                                              ------------  --------------------
                                                                                  1993        1993       1994
                                                                              ------------  ---------  ---------
<S>                                                                           <C>           <C>        <C>
Cash Flows From Operating Activities
  Net income................................................................   $   32,984   $  22,794  $  34,333
  Adjustments to reconcile net income to cash flow from operating activities
    Depreciation............................................................       12,446       9,034     14,572
    Amortization............................................................        7,166       5,378      4,838
    First Rights compensation...............................................        6,300       5,029      6,140
    Deferred income taxes...................................................        3,231       2,423      2,423
    Changes in current operating items
      Trade receivables.....................................................       (4,465)    (17,307)   (20,774)
      Inventories...........................................................      (14,481)    (21,986)   (26,588)
      Accounts payable......................................................       11,176      20,289     29,378
      Other.................................................................       15,368      11,237     19,624
                                                                              ------------  ---------  ---------
        Net cash provided by operating activities...........................       69,725      36,891     63,946
                                                                              ------------  ---------  ---------
Cash Flows From Investing Activities
  Purchase of property and equipment........................................      (18,126)    (13,055)   (20,544)
                                                                              ------------  ---------  ---------
Cash Flows From Financing Activities
  Proceeds from long-term borrowings........................................       70,000      35,000     --
  Payments on long-term borrowings..........................................       --          --        (26,250)
  Stockholder dividends.....................................................      (10,925)     (8,193)    (8,193)
  Stockholder special cash distributions....................................     (104,877)    (69,918)    --
                                                                              ------------  ---------  ---------
      Net cash used in financing activities.................................      (45,802)    (43,111)   (34,443)
                                                                              ------------  ---------  ---------
      Increase (decrease) in cash and cash equivalents......................        5,797     (19,275)     8,959
Cash and Cash Equivalents
  Beginning.................................................................       19,094      19,094     33,798
                                                                              ------------  ---------  ---------
  Ending (deficit)..........................................................   $   24,891   $    (181) $  42,757
                                                                              ------------  ---------  ---------
                                                                              ------------  ---------  ---------
Supplemental Schedule of Noncash Investing and Financing Activities
    Pro forma payments for income taxes.....................................   $   11,098   $   8,279  $  13,306
                                                                              ------------  ---------  ---------
                                                                              ------------  ---------  ---------
</TABLE>
    

                       See Notes to Financial Statements.

                                      F-6
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                         NOTES TO FINANCIAL STATEMENTS
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 1.  PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

    ORGANIZATION:   Polaris  Industries Partners  L.P. (Partners)  is a Delaware
limited partnership. Operations  are conducted through  Polaris Industries  L.P.
(the   Operating  Partnership),   a  Delaware   limited  partnership,   and  its
wholly-owned Canadian subsidiary. Partners  is the sole  limited partner of  the
Operating Partnership. The Operating Partnership is engaged in a single industry
segment  consisting of the  design, engineering and  manufacture of recreational
and  utility  vehicles  and  markets  them  together  with  related  parts   and
accessories  through  a  network  of  dealers,  distributors  and  its  Canadian
subsidiary. The combined  activities of Partners  and the Operating  Partnership
(including  the Canadian subsidiary) are referred to herein as activities of the
Partnership.

    The general  partner  of  Partners  is  EIP  Associates  L.P.  (the  General
Partner),  a Delaware limited  partnership. The managing  general partner of the
General Partner is EIP Capital  Corporation (the Managing General Partner).  The
Managing General Partner, through a series of affiliates, is the general partner
of  the Operating Partnership. The Managing General Partner, directly or through
its affiliates,  receives  a) an  annual  management  fee of  $500,000  for  the
performance  of certain administrative services on behalf of the Partnership, b)
a 1 percent  general partner  interest in the  Operating Partnership,  and c)  a
right to cash distributions from the Partnership (see Note 2).

    PARTNERSHIP AGREEMENT:  The Partnership Agreement of Partners authorizes the
issuance  of a total of 40,000,000 BACs. One BAC represents one Assigned Class A
Beneficial Limited Partnership Interest.

    See  Note  2  regarding  the  distribution  of  Partnership  funds  and  the
allocation of Partnership profits and losses.

    BASIS  OF PRESENTATION:  The financial statements of the Partnership include
the accounts  of  Partners  and  the  Operating  Partnership  and  its  Canadian
subsidiary.  All significant  inter-company transactions and  balances have been
eliminated in the combination.

    REVENUE RECOGNITION:  Revenues are recognized at the time of delivery to the
dealer or distributor customer. The Partnership has not historically recorded an
allowance for product returns because such returns, whether in the normal course
of business or resulting from repossession under its customer financing  program
(see  Note 4), have not  been material. However, management  intends to record a
return allowance when  it becomes probable  such returns will  be material.  The
Partnership  provides for estimated sales promotion expenses at the time of sale
to the dealer or distributor customer.

    CASH EQUIVALENTS:  Cash in excess of daily requirements is invested in money
market funds  of  quality financial  institutions  in amounts  which  frequently
exceed  federally insured limits. The Partnership has not experienced any losses
on these funds. Such investments have  maturities of less than three months  and
are deemed to be cash equivalents for purposes of the statements of cash flows.

    INVENTORIES:    Inventories  are  stated at  the  lower  of  cost (first-in,
first-out method) or market.

    DEPRECIATION AND AMORTIZATION:   Depreciation and amortization are  provided
using  the straight-line method based on the estimated useful life of individual
assets over the following periods:

<TABLE>
<CAPTION>
                                            YEARS
                                          ----------
<S>                                       <C>
Buildings and improvements..............     10 - 20
Equipment and tooling...................      3 -  7
Cost in excess of net assets of business
 acquired...............................          40
Dealer network..........................           7
Other intangibles.......................      5 - 17
</TABLE>

                                      F-7
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 1.  PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
    Fully depreciated tooling  is eliminated from  the Partnership's  accounting
records annually.

   
    The  Partnership reviews  its intangibles  quarterly to  determine potential
impairment by  comparing the  carrying value  of the  intangibles with  expected
future  net cash flows provided by  operating activities of the business. Should
the sum of the expected future net  cash flows be less than the carrying  value,
the Partnership would determine whether an impairment loss should be recognized.
An  impairment  loss would  be measured  by  comparing the  amount by  which the
carrying value exceeds  the fair  value of the  intangible. Fair  value will  be
determined  based on appraised market value.  To date, management has determined
that no impairment of intangibles exists.
    

    PRODUCT WARRANTIES:    The Partnership  provides  for estimated  normal  and
extended  warranty costs at the time of sale to distributors and dealers and for
other costs  associated with  specific items  at the  time their  existence  and
amounts are determinable.

    INCOME  TAXES:  The Partnership is not  a taxpaying entity for United States
federal and state income tax purposes. As a result, the taxable income or  loss,
which  may vary  significantly from the  financial reporting income  or loss, is
includable in tax returns of the individual BAC holders.

    The Partnership's Canadian subsidiary is  a corporation which is subject  to
Canadian  federal and provincial  income taxes, at  a current combined effective
rate of  44  percent. Income  tax  expense  on the  accompanying  statements  of
operations  includes a provision for income taxes  on the annual earnings of the
Canadian subsidiary. There are no significant temporary differences relating  to
the  financial reporting  and the  tax bases  of assets  and liabilities  of the
Canadian subsidiary.

    Publicly traded partnerships are scheduled to become taxable entities in the
United States  for  years  beginning  after  December  31,  1997.  However,  the
Partnership  would become a taxable entity prior  to January 1, 1998, if it were
to add a substantial new line of business.

    Statement of Financial Accounting Standards  No. 109, ACCOUNTING FOR  INCOME
TAXES,  requires public enterprises not subject  to income taxes to disclose the
net  differences  between  the  tax  bases  and  the  reported  amounts  of  the
enterprise's assets and liabilities. The principal temporary differences related
to elements of the Partnership's United States partnership income tax return and
its financial statement were as follows (in thousands):

<TABLE>
<CAPTION>
                                                TAX BASIS IN EXCESS
                                                   OF (LESS THAN)
                                                  REPORTED AMOUNTS
                                                --------------------
                                                    DECEMBER 31,
                                                        1993
                                                --------------------
      <S>                                       <C>
      Inventories.............................        $ 4,077
      Property and equipment..................         (6,924)
      Accrued expenses........................         26,858
      First Rights compensation...............          8,821
                                                     --------
                                                      $32,832
                                                     --------
                                                     --------
</TABLE>

    FOREIGN CURRENCY:  The Partnership's Canadian subsidiary maintains its books
of  record  using  Canadian currency  and  uses  United States  currency  as the
functional currency.  Canadian  assets and  liabilities  are translated  at  the
foreign  exchange  rates  in effect  at  the  balance sheet  date.  Revenues and
expenses are  translated  at  the  average  foreign  exchange  rate  in  effect.
Translation and exchange gains and losses are reflected in earnings.

                                      F-8
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 1.  PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
    RESEARCH  AND DEVELOPMENT COSTS:  Research and development costs are charged
to operations as incurred and totaled $4,761,000, $6,345,000 and $9,554,000  for
1991,  1992  and  1993,  respectively  and  $6,813,000  and  $7,579,000  for the
nine-month periods ended September 30, 1993  and 1994. These costs are  included
as a component of cost of sales on the accompanying statements of operations.

    INTERIM  FINANCIAL INFORMATION  (UNAUDITED):   The financial  statements and
notes related thereto as of September  30, 1994, and for the nine-month  periods
ended  September  30, 1993  and  1994, are  unaudited,  but, in  the  opinion of
management,  reflect  all  adjustments,  consisting  only  of  normal  recurring
adjustments,  necessary for  a fair presentation  of the  financial position and
results of operations.  The operating results  for the interim  periods are  not
necessarily indicative of the operating results to be expected for a full fiscal
year or for other interim periods.

NOTE 2.  CASH DISTRIBUTIONS AND THE ALLOCATION OF PROFITS AND LOSSES

    CASH  DISTRIBUTIONS FROM OPERATIONS:  Cash distributions from operations are
determined at  the discretion  of the  General Partner  and are  allocated  79.2
percent to the limited partners and 20.8 percent to the General Partner.

    CASH  DISTRIBUTIONS ON SALE  OR REFINANCING:  Cash  distributions on sale or
refinancing of  the  Partnership  would  be allocated  in  accordance  with  the
Partnership agreement.

    ALLOCATION  OF PROFITS AND LOSSES:   Net income is  allocated to the general
and limited partners in proportion to the cash distributions to them. Since cash
distributions have  exceeded  net income,  this  method results  in  a  negative
capital balance for the General Partner. Captions are presented on the statement
of  partners' capital to emphasize that in  a current liquidation at book value,
the amount available to limited partners cannot be expected to exceed the  total
net assets of the Partnership.

    NET  INCOME  PER UNIT:   Net  income  per unit  (which differs  from taxable
income) is  calculated based  on the  weighted average  number of  BACs and  BAC
equivalents outstanding during each period. BAC equivalents represent the number
of  BACs issuable upon conversion of  the First Rights outstanding. Beginning in
1992, 850,000 Second  Rights have been  included as BAC  equivalents in the  net
income  per unit  calculation. If  the Second  Rights had  been included  as BAC
equivalents in prior periods, net income per unit would have been $1.57 in 1991.

NOTE 3.  INVENTORIES
    The major components of inventories are as follows (in thousands):

<TABLE>
<CAPTION>
                                        DECEMBER 31,    SEPTEMBER
                                      ----------------    30,
                                       1992     1993     1994
                                      -------  -------  -------
      <S>                             <C>      <C>      <C>
      Raw materials.................  $15,214  $21,571  $26,648
      Service parts.................   19,616   23,379  28,319
      Finished goods................    2,746    7,107  23,678
                                      -------  -------  -------
                                      $37,576  $52,057  $78,645
                                      -------  -------  -------
                                      -------  -------  -------
</TABLE>

NOTE 4.  FINANCING

    BANK FINANCING:   The Operating Partnership  has an unsecured  bank line  of
credit  arrangement to meet  seasonal short-term financing  needs with a maximum
available of  $40,000,000.  Interest is  charged  at the  prime  interest  rate,
C.D.-based  or LIBOR-based rates, and the  agreement is scheduled for renewal on
May 1, 1995. The Operating Partnership holds substantially all net assets of the
Partnership and has agreed to certain limitations on distributions to Partners.

                                      F-9
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 4.  FINANCING (CONTINUED)
    CUSTOMER FINANCING PROGRAM:  Unrelated finance companies provide floor  plan
financing  to  distributors and  dealers on  the  purchase of  the Partnership's
products.  The  amount  financed  by   distributors  and  dealers  under   these
arrangements  at December  31, 1993, and  September 30,  1994, was approximately
$64,855,000 and  $203,895,000,  respectively.  The  Partnership  has  agreed  to
repurchase products repossessed by the finance companies to an annual maximum of
15  percent of the  average amounts outstanding during  the prior calendar year.
The Partnership's financial exposure under these arrangements is limited to  the
difference  between  the amount  paid to  the finance  companies and  the amount
received on the resale of the repossessed product. No material losses have  been
incurred under these agreements during the periods presented.

    As  a part of its marketing program,  the Partnership will from time to time
pay a  specified portion  of the  floor  plan interest  expense payable  by  its
distributors and dealers.

NOTE 5.  EMPLOYEE BENEFIT PLANS
    The  Partnership  has  various  employee benefit  plans  for  management and
employees of the  Operating Partnership. Cash  and noncash compensation  expense
recorded  under  these plans  was $14,197,000,  $15,969,000 and  $22,538,000 for
1991, 1992  and 1993,  respectively,  and $16,117,000  and $24,777,000  for  the
nine-month  periods  ended September  30, 1993  and 1994,  respectively. Accrued
compensation includes approximately $11,411,000  and $16,236,000 for certain  of
these  plans at  December 31,  1992 and  1993, respectively,  and $19,001,000 at
September 30, 1994. A summary of these plans follows:

    FIRST RIGHTS  TO  ACQUIRE  BACS:   The  Partnership  Agreement  of  Partners
provides  for the issuance of up to 2,400,000 First Rights to acquire BACs as an
incentive for management  and employees  of the Operating  Partnership. Of  such
First Rights, 900,000 have been reserved for issuance to employees (the Employee
Plan)  and 1,500,000  have been reserved  for issuance to  middle management and
senior management (the Management Plan). First Rights will not be granted  after
December 31, 1999, and expire January 1, 2003.

    First  Rights under the Employee Plan  are vested when granted. First Rights
under the  Management  Plan  contain  no vesting  provisions  and  terminate  if
employment ceases prior to the issuance of the related BACs.

    The  First  Rights require  no  cash payments  by  the recipients  and began
converting to  BACs  beginning  January  1, 1992.  At  December  31,  1993,  the
Partnership  has  achieved  cash  distribution  levels  which  provide  for  the
conversion of all 2,400,000 First Rights to BACs.

    As of December 31, 1993, and  September 30, 1994, 135,060 and 215,500  First
Rights  under the Management Plan and 183,200  and 97,000 First Rights under the
Employee Plan, respectively, are outstanding as summarized below:

<TABLE>
<CAPTION>
                                                                                      OUTSTANDING
                                                                                       AT END OF
                                                 GRANTED    CONVERTED   FORFEITED        YEAR
                                                ---------   ----------  ----------   -------------
      <S>                                       <C>         <C>         <C>          <C>
      1991....................................    135,300       --        --             1,680,806
      1992....................................    105,000   (1,205,784)   --               580,022
      1993....................................    171,594     (433,356)   --               318,260
                                                ---------   ----------      ---      -------------
                                                ---------   ----------      ---      -------------
      September 30, 1994......................    220,597     (226,357)   --               312,500
                                                ---------   ----------      ---      -------------
                                                ---------   ----------      ---      -------------
</TABLE>

                                      F-10
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 5.  EMPLOYEE BENEFIT PLANS (CONTINUED)
    Prior to 1993,  the Partnership  recorded these  rights at  the fair  market
value  of a BAC  on the date of  grant, with a  corresponding charge to deferred
compensation for certain portions  of the management plan  which is included  in
partners' capital accounts.

    Effective  in 1993, the  Partnership recognizes compensation  expense in the
year of grant, since the cash distribution criteria have been achieved.

    BONUS AND  PROFIT SHARING  PLANS:   A bonus  pool has  been established  for
employees  with amounts determined  annually at the  discretion of a Partnership
management committee. In  addition, the  Partnership has a  profit sharing  plan
covering substantially all employees and an employee retirement savings plan.

NOTE 6.  LEASES
    The  Partnership  leases  warehouse  and  office  space  from  a partnership
controlled by certain BAC holders  (certain executive officers of the  Operating
Partnership)  under an  operating lease  agreement expiring  in April  1997. The
lease requires payments  of $458,000 annually  plus taxes, utilities,  insurance
and  other operating costs. In addition,  the Partnership leases other buildings
and equipment from unrelated parties under noncancelable operating leases. Total
rent  expense  under  all  lease  agreements  was  $1,301,000,  $1,564,000   and
$1,643,000  for 1991, 1992 and 1993, respectively, and $1,183,000 and $1,345,000
for the nine-month periods ended September 30, 1993 and 1994, respectively.

    Future  minimum  payments,   exclusive  of  other   costs,  required   under
noncancelable operating leases at December 31, 1993, are (in thousands):

<TABLE>
      <S>                                       <C>
      Years ending December 31:
        1994..................................  $912
        1995..................................   908
        1996..................................   570
        1997..................................   272
        1998..................................    41
</TABLE>

    In  August 1994, the Partnership signed a one-year lease for a manufacturing
facility in  Spirit Lake,  Iowa.  Lease payments  are  $10,000 monthly  and  the
Partnership  has an option to purchase the facility for $1,850,000 at the end of
the lease term.

NOTE 7.  FOREIGN OPERATIONS
    United States operations  include export sales  of $18,563,000,  $21,091,000
and  $27,179,000 for  1991, 1992,  and 1993,  respectively, and  $19,005,000 and
$28,959,000 for  the  nine-month periods  ended  September 30,  1993  and  1994,
respectively.

    The  following data relates  to Canadian operations  (in thousands of United
States dollars):

<TABLE>
<CAPTION>
                                                                        FOR THE NINE
                                             FOR THE YEARS ENDED        MONTHS ENDED
                                                 DECEMBER 31,          SEPTEMBER 30,
                                          --------------------------  ----------------
                                           1991     1992      1993     1993     1994
                                          -------  -------  --------  -------  -------
<S>                                       <C>      <C>      <C>       <C>      <C>
Sales...................................  $75,477  $99,286  $106,664  $79,218  $88,329
Operating income........................    4,851    6,541     6,887    4,856    5,961
Identifiable assets.....................   14,679   16,639    15,248   21,836   25,481
</TABLE>

                                      F-11
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 8.  COMMITMENTS AND CONTINGENCIES

    MAJOR SUPPLIER:  During 1991, 1992 and 1993, purchases totaling 24  percent,
26  percent  and  26 percent,  respectively,  and  31 percent  for  each  of the
nine-month periods  ended September  30,  1993 and  1994, respectively,  of  the
Partnership's cost of sales were from a single supplier.

    PRODUCT  LIABILITY:  The Partnership is  subject to product liability claims
in the normal  course of  business and  has elected  not to  insure for  product
liability  losses. The costs resulting from  any losses are charged to operating
expenses when it is probable a loss has been incurred and the amount of the loss
is determinable. At  December 31,  1992 and 1993,  and September  30, 1994,  the
Partnership  has accrued $2,458,000, $3,513,000 and $4,380,000, respectively, in
connection with product liability claims.

    WORKERS'  COMPENSATION:    The  Partnership  is  self-insured  for  workers'
compensation  losses. The costs resulting from any losses are charged to expense
when it is  probable a  loss has been  incurred and  the amount of  the loss  is
determinable.

    HEALTH  BENEFITS:    The  Partnership is  self-insured  for  employee health
benefits. The costs resulting from any losses are charged to expense when it  is
probable a loss has been incurred and the amount of the loss is determinable.

    CANADIAN   INCOME  TAX  LITIGATION:    In  1990,  the  Canadian  income  tax
authorities proposed certain adjustments,  principally relating to the  original
purchase  price  allocation  to  the Canadian  subsidiary  and  transfer pricing
matters, for  additional  income taxes  payable  by the  Partnership's  Canadian
subsidiary  for 1987 and 1988. The  resolution of these proposed adjustments may
also affect the Partnership's Canadian  income tax expense for years  subsequent
to  1988.  The Partnership  was  recently informed  of  the Canadian  income tax
authorities' intent to  initiate an audit  of the tax  years 1989 through  1992.
Management  intends to vigorously  contest a substantial  amount of the proposed
adjustments, and the ultimate liability, if any, cannot be reasonably estimated.
Management does  not  believe  that the  outcome  of  this matter  will  have  a
materially  adverse impact on the financial position or continuing operations of
the Partnership. Income tax expense reflected on the accompanying statements  of
operations  includes a  provision related  to certain  of the  proposed Canadian
income tax adjustments.

    LITIGATION:   The Partnership  is a  defendant in  lawsuits and  subject  to
claims  arising in the  normal course of  business. While it  is not feasible to
predict or determine the  outcome of any  of these cases, it  is the opinion  of
management  that their outcomes will  not have a material  adverse effect on the
financial position or operations of the Partnership.

    LETTERS OF  CREDIT:   At December  31,  1993, and  September 30,  1994,  the
Partnership  has open letters  of credit totaling  approximately $11,822,000 and
$17,503,000.  The  amounts  outstanding  are  reduced  as  inventory   purchases
pertaining to the contracts are received.

NOTE 9.  SUBSEQUENT EVENTS
    In  August 1994, EIP Capital Corporation (the Managing General Partner), its
president, and  two of  its directors  settled  a lawsuit  filed by  a  minority
shareholder  of the  Managing General Partner,  with no resulting  impact on the
Partnership's financial statements.

                                      F-12
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 10.  PROPOSED CONVERSION FROM PARTNERSHIP TO CORPORATE STRUCTURE AND PRO
          FORMA FINANCIAL INFORMATION
    On August 25,  1994, the  Partnership announced  plans to  convert from  its
current  limited partnership structure to a taxable C corporation structure. The
proposed conversion must be approved  by the Partnership's Limited Partners  and
will  be effected through the formation of a new corporation (Polaris Industries
Inc.).

    Polaris Industries  Inc. will  issue 16,010,441  shares of  $0.01 par  value
common stock to the Partnership's Limited Partners in exchange for their limited
partner  interests, 2,100,243 shares  of such common stock  to affiliates of the
General Partner in  exchange for  the entire general  partnership interests  and
rights  and ultimately  312,500 shares  of such common  stock to  the holders of
312,500 First Rights that are issued and outstanding at September 30, 1994. This
conversion will  be  a  tax-free  transaction  for  the  Limited  Partners,  the
affiliates  of the  General Partner and  the Partnership.  This transaction will
include the merger  of certain  affiliates of  the Managing  General Partner  as
described  in  Note 1,  which  are individually  and  jointly immaterial  to the
Partnership's financial statements.

   
    Management of Polaris Industries Inc. has expressed its intent to  establish
an initial annual cash dividend of $0.15 per share per quarter in the year after
the successful completion of the Conversion transaction. In addition, subject to
the  approval of the  Board of Directors, management  of Polaris Industries Inc.
has expressed its  intent to declare  a special cash  distribution of $5.76  per
share  payable in three equal installments of $1.92 each during each of the last
three quarters of 1995  (reduced to the extent  that any distributions  declared
and  paid by the Partnership after January 1, 1995 exceed, on a quarterly basis,
$0.15 per  BAC).  Management  expects to  incur  indebtedness  of  approximately
$70,000,000 in connection with the payment of the special distribution.
    

    Polaris Industries Inc. will account for the transaction as a reorganization
of  affiliated  entities, with  the assets  and  liabilities of  the Partnership
recorded at  their  historical cost  basis,  except  that it  will  also  record
deferred  tax  assets  in  accordance  with  Statement  of  Financial Accounting
Standards No.  109,  ACCOUNTING FOR  INCOME  TAXES, relating  to  the  temporary
differences  for certain  assets and  liabilities at  the date  of conversion as
discussed in  Note  1 under  the  paragraph "Income  Taxes."  The costs  of  the
conversion,  estimated to be $11,000,000, will be accounted for as an expense in
the statement of operations at the time of the Conversion. Additionally, Polaris
Industries Inc.  will receive  a significant  step-up in  the tax  basis of  the
assets  and liabilities  acquired from  the Partnership  and, as  a result, will
record additional deferred tax  assets at the  Conversion transaction date.  The
ultimate  determination of the  deferred tax assets  discussed in this paragraph
will be calculated  based on the  actual temporary differences  existing at  the
Conversion transaction date. Polaris Industries Inc. will record a provision for
U.S. federal, Canadian and state income taxes on its earnings.

    The unaudited pro forma financial information has been prepared based on the
historical  financial  statements  of  the  Partnership  as  if  the  conversion
transaction had  occurred at  the beginning  of the  earliest pro  forma  period
presented  for the statements  of operations and  cash flows and  as of the date
presented for the balance sheet.

    A summary  of the  unaudited  pro forma  adjustments  to the  statements  of
operations  and cash  flows for the  year ended  December 31, 1993,  and for the
nine-month periods ended September 30, 1993 and 1994, follows:

        1)  Selling, general and  administrative expenses have been reduced  for
    the $500,000 annual management fee paid to the Managing General Partner.

                                      F-13
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 10.  PROPOSED CONVERSION FROM PARTNERSHIP TO CORPORATE STRUCTURE AND PRO
          FORMA FINANCIAL INFORMATION (CONTINUED)
        2)   A provision  for income taxes has  been calculated at  a rate of 36
    percent. Such rate reflects a combined federal and state statutory rate, net
    of related research  and development credits  and foreign sales  corporation
    benefits.

   
        3)   Special  distributions on Polaris  Industries Inc.  common stock of
    $5.76 per share  payable in three  equal installments of  $1.92 each  during
    each  of the last three quarters of the earliest pro forma period presented,
    and future regular dividends estimated at  $0.15 per share per quarter  were
    recorded in the pro forma financial statements.
    

        4)   In connection with the proposed special cash distribution, interest
    expense has  been recorded  at 8.5  percent on  the approximate  $70,000,000
    expected  to be borrowed during the  third and fourth quarters subsequent to
    the Conversion. The  debt is expected  to be repaid  over a two-year  period
    following the fourth quarter subsequent to the Conversion.

    A  summary of the unaudited pro forma  adjustments to the September 30, 1994
balance sheet follows:

        1)  Deferred tax assets of  $12,000,000 were recorded for the  temporary
    differences  that existed  at December 31,  1993, between the  tax bases and
    reported amounts of assets and liabilities as discussed in Note 1.

        2)   Deferred tax  assets  of $30,000,000  have  been recorded  for  the
    estimated  step-up in the tax bases of the assets and liabilities of Polaris
    Industries  Inc.  resulting  from  the  Conversion  transaction.   Estimated
    temporary  differences as  of December 31,  1993, were used  for purposes of
    this calculation. Deferred taxes resulting from the step-up in basis will be
    recalculated when  the  Conversion is  completed  and the  actual  temporary
    differences  can be determined.  The change in deferred  tax assets could be
    material.

        3)    Expenses  of  the  Conversion  transaction  are  estimated  to  be
    $11,000,000  and  were recorded  at  the balance  sheet  date as  an accrued
    expense. These  expenses  are excluded  from  the pro  forma  statements  of
    operations and cash flows.

   
        4)   Anticipated cash distributions  and dividends on Polaris Industries
    Inc. common stock of $115,802,000 for the year following the Conversion were
    recorded at  the balance  sheet date,  resulting in  a deficit  in  retained
    earnings, on a pro forma basis. Polaris Industries Inc. is under no legal or
    contractual  obligation to  make such  distributions and  dividends, and the
    timing and  amount of  future distributions  and dividends  will be  at  the
    discretion of the Board of Directors and will depend, among other things, on
    the  future after tax earnings,  operations, capital requirements, borrowing
    capacity, and financial  condition of  Polaris Industries  Inc. and  general
    business  conditions. There can be no  assurance that such distributions and
    dividends will  be adopted  or  maintained by  Polaris Industries  Inc.  The
    approximate  $70,000,000  expected to  be  borrowed in  connection  with the
    proposed special cash  distribution has  also been recorded  at the  balance
    sheet date.
    

                                      F-14
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
            (INFORMATION PERTAINING TO THE NINE-MONTH PERIODS ENDED
                   SEPTEMBER 30, 1993 AND 1994 IS UNAUDITED.)

NOTE 11.  QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT
          DATA)

<TABLE>
<CAPTION>
                                                                              NET
                                                                            INCOME
                                                      GROSS       NET      PER UNIT
                                           SALES      PROFIT     INCOME    (NOTE 2)
                                          --------   --------   --------   ---------
<S>                                       <C>        <C>        <C>        <C>
1992:
  First Quarter.........................  $ 70,227   $ 16,788    $ 2,133     $  .11
  Second Quarter........................    85,467     24,288      6,181        .31
  Third Quarter.........................   121,548     40,211     15,850        .78
  Fourth Quarter........................   106,576     33,332     10,537        .52
                                          --------   --------   --------
    Totals..............................  $383,818   $114,619    $34,701     $ 1.73
                                          --------   --------   --------   ---------
                                          --------   --------   --------   ---------
1993:
  First Quarter.........................  $107,115   $ 25,748    $ 6,138     $  .30
  Second Quarter........................   111,235     28,389      6,542        .32
  Third Quarter.........................   166,803     48,596     18,762        .92
  Fourth Quarter........................   142,858     41,362     14,371        .71
                                          --------   --------   --------
    Totals..............................  $528,011   $144,095    $45,813     $ 2.25
                                          --------   --------   --------   ---------
                                          --------   --------   --------   ---------
1994:
  First Quarter.........................  $145,471   $ 31,260    $ 8,566     $  .42
  Second Quarter........................   180,884     36,994     10,542        .51
  Third Quarter.........................   258,370     73,378     31,503       1.53
                                          --------   --------   --------
    Totals..............................  $584,725   $141,632    $50,611     $ 2.46
                                          --------   --------   --------   ---------
                                          --------   --------   --------   ---------
</TABLE>

                                      F-15
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

To the Stockholder
Polaris Industries Inc.

We  have audited  the accompanying balance  sheet of POLARIS  INDUSTRIES INC. (a
Minnesota corporation) as of September 23, 1994. This financial statement is the
responsibility of the Company's management. Our responsibility is to express  an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those  standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet  is free of material misstatement.  An
audit  includes examining, on a test  basis, evidence supporting the amounts and
disclosures  in  the  balance  sheet.  An  audit  also  includes  assessing  the
accounting principles used and significant estimates made by management, as well
as  evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.

In our opinion,  the balance  sheet referred to  above presents  fairly, in  all
material  respects,  the financial  position of  Polaris  Industries Inc.  as of
September 23, 1994, in conformity with generally accepted accounting principles.

                                          McGLADREY & PULLEN

Minneapolis, Minnesota
September 23, 1994

                                      F-16
<PAGE>
                            POLARIS INDUSTRIES INC.
                                 BALANCE SHEET
                               SEPTEMBER 23, 1994

                                     ASSETS

<TABLE>
<S>                                                 <C>
Investment in Polaris Industries Partners L.P.
 (3,000 BACs at $22.50)...........................  $ 67,500
                                                    --------
                                                    --------
</TABLE>

                               STOCKHOLDER EQUITY

<TABLE>
<S>                                                 <C>
Preferred stock $.01 par value, authorized
 20,000,000 shares, no issued and outstanding
 shares...........................................  $     --

Common stock $.01 par value, authorized 80,000,000
 shares, issued and outstanding 3,000 shares......        30

Additional paid-in capital........................    67,470
                                                    --------

      Total stockholder equity....................  $ 67,500
                                                    --------
                                                    --------
</TABLE>

NOTE 1.  THE CORPORATION

    Polaris Industries  Inc.  (Polaris) is  a  Minnesota corporation  formed  on
September  23, 1994,  as the successor  business of  Polaris Industries Partners
L.P. (Partners) in a proposed transaction that would result in the Conversion of
the limited  partnership  to corporate  form.  Partners is  a  Delaware  limited
partnership  whose operations are conducted through Polaris Industries L.P. (the
Operating  Partnership),   also  a   Delaware  limited   partnership,  and   its
wholly-owned  Canadian subsidiary. Partners  is the sole  limited partner of the
Operating Partnership. The Operating Partnership is engaged in a single industry
segment consisting of the design,  engineering, and manufacture of  recreational
and  utility  vehicles,  and  markets  them,  together  with  related  parts and
accessories, through a  network of  dealers and distributors,  and its  Canadian
subsidiary. Polaris will continue the operations of the Operating Partnership.

    At September 23, 1994, there were no operations of Polaris.

    The  stockholder transferred 3,000  BACs of Partners  to capitalize Polaris.
The BACs are recorded at the historical cost basis of the stockholder.

                                      F-17
<PAGE>
                                                                         ANNEX A

                           GLOSSARY OF DEFINED TERMS

   
<TABLE>
<S>                    <C>
1987 Code              Amendments  to the Code adopted in 1987 and a transition
 Amendments.........   rule  adopted   thereunder,   pursuant  to   which   the
                       Partnership will be treated as a corporation for federal
                       income  tax purposes subsequent to  December 31, 1997 if
                       the BACs continue to be publicly traded.

Agreement...........   An Agreement dated as of  August 25, 1994, entered  into
                       by  Mr.  Wendel and  Mr. Atkins  in connection  with the
                       Conversion, which  provides, among  other matters,  that
                       Mr.  Atkins, for as long as he  owns not less than 3% of
                       the outstanding Common  Stock, will vote  his shares  of
                       Common  Stock in favor of  the Corporation's nominees to
                       the Board of Directors.

Appraisal Rights....   The rights of  appraisal which are  provided in  Article
                       VII of the Merger Agreement.

ATVs................   All terrain recreational and utility vehicles.

BAC Holders.........   The holders of BACs.

BACs................   Units  of  Beneficial  Assignment  of  Class  A  Limited
                       Partnership Interests.

Bonus Committee.....   A committee consisting of Victor K. Atkins, Jr., W. Hall
                       Wendel, Jr. and John  H. Grunewald which determines  the
                       amount  of bonuses and profit  sharing awards which will
                       be paid to  the employees of  the Operating  Partnership
                       and  which administers the  Employee Plan and Management
                       Plan.

Closing.............   The date of the  Special Meeting or  such other date  as
                       the  Corporation and the Partnership  may agree on which
                       the  closings   shall   be  held   to   consummate   the
                       Transactions.

Code................   The Internal Revenue Code of 1986, as amended.

Common Stock........   Common   stock,  par  value  $.01   per  share,  of  the
                       Corporation.

Control                The  assumption  that  (i)  the  Transferors  will  own,
 Assumption.........   immediately  after such transfers, more  than 80% of the
                       only class of stock of the Corporation and (ii) that not
                       more than 20% of the shares of Common Stock  transferred
                       to  the Transferors  pursuant to the  Conversion will be
                       subsequently disposed of pursuant to contracts or  other
                       formal  or informal agreements entered into prior to the
                       Conversion.

Conversion..........   The conversion of the Partnership to corporate form.

Conversion             The proposal  to be  voted upon  by BAC  Holders at  the
 Proposal...........   Special Meeting.

Corporation.........   Polaris Industries Inc., a Minnesota corporation.

CPSC................   The Consumer Products Safety Commission.

Delaware Court......   The Delaware Court of Chancery.

DGCL................   The General Corporation Law of the State of Delaware.

Dillon Read.........   Dillon, Read & Co. Inc., a Connecticut corporation.

Effective Time......   The date on which the Conversion will become effective.

EIPCC...............   EIP  Capital Corporation, a  Delaware corporation, which
                       is managing general partner of the General Partner.
</TABLE>
    

                                      A-1
<PAGE>

   
<TABLE>
<S>                    <C>
Employee Plan.......   Reservation of 900,000 First Rights to acquire BACs  for
                       issuance  to non-management  employees of  the Operating
                       Partnership.

Exchange Act........   The Securities Exchange Act of 1934, as amended.

Exchange Ratio......   The percentage of Common Stock of the Corporation to  be
                       received  by (i)  BAC Holders and  holders of previously
                       received First  Rights in  exchange for  their BACs  and
                       upon  exercise of such First Rights, as the case may be,
                       and (ii) affiliates of  the General Partner in  exchange
                       for  their  interests  in the  General  Partner  and its
                       affiliates. In  the Conversion,  BAC Holders  (including
                       affiliates  of  the  General  Partner)  and  holders  of
                       previously received First Rights  will receive 88.6%  of
                       the  Common Stock and affiliates  of the General Partner
                       will receive  11.4% of  the Common  Stock, after  giving
                       effect to the exercise of such First Rights.

Fair Value..........   The  value  of  the  BACs  as  of  the  day  immediately
                       preceding the Effective Time, excluding any appreciation
                       or  depreciation  in   such  value   arising  from   the
                       accomplishment  or  expectation  of  the  Conversion, as
                       determined by the Delaware Court of Chancery.

Fee.................   An annual  management  fee  in the  amount  of  $500,000
                       received  by EIPCC, pursuant  to a Management Agreement,
                       in return for acting as Management Agent.

First Rights........   Rights to acquire BACs pursuant to the Employee Plan and
                       the Management Plan.
General Partner.....   EIP Associates  L.P.,  a Delaware  limited  partnership,
                       which is the general partner of the Partnership.

Group...............   An  affiliated group of corporations (which will include
                       EIPCC) which has, as the common parent corporation,  the
                       Corporation.

Information Agent...   D.F. King & Co., Inc., a Delaware corporation.

Initial Limited        Polaris    Industries   Holdings    Inc.,   a   Delaware
 Partner............   corporation.

Justice
 Department.........   The United States Department of Justice.

Lehman Brothers.....   Lehman Brothers Inc., a Delaware corporation.

Management Agent....   EIPCC, the  managing  general  partner  of  the  General
                       Partner,  acting as management  agent in the performance
                       of certain  administrative  services on  behalf  of  the
                       Partnership.

Management Plan.....   The  reservation  of 1,500,000  First Rights  to acquire
                       BACs  for  issuance  to  middle  management  and  senior
                       management of the Operating Partnership.

MBCA................   The Minnesota Business Corporation Act.

Meeting Date........   Thursday,  December 22,  1994, the  date of  the Special
                       Meeting of BAC Holders in Minneapolis, Minnesota. At the
                       Special Meeting, the holders of BACs will vote upon  the
                       Conversion Proposal.

Merger..............   The  merger of the Transitory  Partnership with and into
                       the  Partnership,   with  the   Partnership   surviving,
                       pursuant  to which, among other matters, each BAC (other
                       than BACs held by  persons who have exercised  Appraisal
                       Rights) will automatically be exchanged for one share of
                       Common  Stock,  and  each outstanding  First  Right will
                       automatically be converted into the right to receive one
                       share of Common Stock.
</TABLE>
    

                                      A-2
<PAGE>

   
<TABLE>
<S>                    <C>
Merger Agreement....   The Agreement  and  Plan  of  Conversion,  dated  as  of
                       September   29,   1994,  among   the   Corporation,  the
                       Partnership,  the   General   Partner,   the   Operating
                       Partnership, EIPCC and the other parties thereto, as may
                       be amended, modified or supplemented from time to time.
Northwestern........   Northwestern    Equipment   Manufacturing   Company,   a
                       Minnesota corporation, formerly Polaris Industries Inc.,
                       the predecessor of the Partnership.

Operating              Polaris Industries L.P., a Delaware limited partnership;
 Partnership........   and  the  collective  reference  to  PICC  and   Polaris
                       Industries L.P.
Operating General      Polaris  Industries Associates L.P., the general partner
 Partner............   of the Operating Partnership.

Partnership.........   Polaris Industries  Partners  L.P., a  Delaware  limited
                       partnership.

Partnership            The amended and restated partnership agreement governing
 Agreement..........   the Partnership.

PICC................   Polaris   Industries  Capital  Corporation,  a  Delaware
                       corporation.

Plan................   A Retirement Savings Plan adopted by Polaris Industries,
                       Inc, the predecessor Company, for all employees who meet
                       minimum service requirements.  The Plan  was adopted  by
                       the Operating Partnership.

Polaris.............   The   business   and   operations   of   the   Operating
                       Partnership.

Proposed               The initial cash dividend rate of $0.15 per quarter  and
 Distributions......   three  special  cash  distributions, each  of  $1.92 per
                       share (reduced, if the Conversion is not consummated  in
                       1994, to the extent that any cash distributions declared
                       and  paid  by  the  Partnership  after  January  1, 1995
                       exceed, on a  quarterly basis, $0.15  per BAC),  payable
                       during  each of the  last three quarters  of 1995, which
                       the Sponsors intend  to recommend  to the  Corporation's
                       Board of Directors.

Proxy...............   A proxy to be voted at the Special Meeting.

PWC.................   Personal watercraft.

Record Date.........   November 21, 1994, the date set for the determination of
                       BAC Holders entitled to vote at the Special Meeting.

Register in            The  office of the Register  in Chancery of the Delaware
 Chancery...........   Court in  which  a  BAC  Holder  has  filed  a  petition
                       demanding  a determination of the Fair Value of the BACs
                       of all  holders of  BACs  who have  perfected  Appraisal
                       Rights pursuant to the Merger Agreement.

SEC.................   The Securities and Exchange Commission.

Section 751            Partnership    unrealized   receivables,   substantially
 assets.............   appreciated inventory and certain other items  including
                       depreciation recapture.

Securities Act......   The Securities Act of 1933, as amended.

Service.............   The Internal Revenue Service.

Smith Barney........   Smith Barney Inc., a Delaware corporation.

SNO.................   The symbol under which the Partnership's BACs are listed
                       on  the American  Stock Exchange  and the  Pacific Stock
                       Exchange.
</TABLE>
    

                                      A-3
<PAGE>
   
<TABLE>
<S>                    <C>
Special Appraiser...   An  independent  appraiser  selected  by  the   American
                       Arbitration  Association,  Inc.  to  determine  the Fair
                       Value of the BACs held by dissenting BAC Holders.

Special Meeting.....   The special meeting of BAC Holders to be held at Holiday
                       Inn West, Highway  394, Minneapolis,  Minnesota, on  the
                       Meeting Date to vote upon the proposed Conversion.

Sponsors............   The  following officers of the Operating Partnership: W.
                       Hall Wendel, Jr.,  Chief Executive  Officer, Kenneth  D.
                       Larson,  President and Chief  Operating Officer, John H.
                       Grunewald,  Executive   Vice  President,   Finance   and
                       Administration, James Bruha, Vice
                       President--Manufacturing,   Charles   A.   Baxter,  Vice
                       President--Engineering and Product Safety, Ed  Skomoroh,
                       Vice  President--Sales and Marketing  and Michael W. Ma-
                       lone, Chief Financial Officer and Treasurer.

Transactions........   The  Merger  and  certain  other  related   transactions
                       contemplated by the Merger Agreement.

Transferors.........   Affiliates  of  the General  Partner  transferring their
                       interests in the General  Partner and its affiliates  to
                       the  Corporation as steps  in the integrated transaction
                       consisting of the  Merger and issuance  of Common  Stock
                       and related transactions.

Transitory             A  newly formed Delaware  subsidiary limited partnership
 Partnership........   of the Corporation  to be merged  into the  Partnership,
                       with  the Partnership surviving, in which Merger all BAC
                       Holders  and  holders  of  currently  outstanding  First
                       Rights  will  receive  one  share  of  Common  Stock  in
                       exchange for each BAC held by them.

Unaffiliated BAC       BAC Holders on the Record  Date other than the  Sponsors
 Holders............   and affiliates of the General Partner.
</TABLE>
    

                                      A-4
<PAGE>
   
                                                                         ANNEX B
    

   
Polaris Industries Partners L.P.                               November 21, 1994
1225 Highway 169 North
Minneapolis, Minnesota  55441
Attention:  General Partner
Gentlemen:
    

   
    In  connection with the  proposed conversion of  Polaris Industries Partners
L.P.  (the  "Partnership")  to  corporate  form  (the  "Conversion"),  you  have
requested  our opinion as  to the fairness,  from a financial  point of view, to
holders of  Units  of  Beneficial  Assignment of  Class  A  Limited  Partnership
Interests  ("BACs") of  the Partnership of  the consideration to  be received by
holders of BACs and  the Exchange Ratio (as  defined herein) in the  Conversion.
The  Conversion is subject to the conditions set forth in the Agreement and Plan
of Conversion dated as of September 29, 1994 (the "Conversion Agreement") by and
among Polaris  Industries Inc.  (the  "Corporation"), the  Partnership,  Polaris
Industries  L.P. (the "Operating Partnership" or "Polaris"), EIP Associates L.P.
(the "General Partner"), Polaris Industries Associates L.P., Polaris  Industries
Capital  Corporation,  EIP  Capital  Corporation, and  the  other  parties named
therein. The  Conversion Agreement  provides for,  among other  things, (i)  the
merger  of  a  newly formed  transitory  partnership, wholly  owned  directly or
indirectly by the Corporation with and into the Partnership (the "Merger"), with
the Partnership as the surviving entity,  whereby the holders of BACs  (together
with  the holders of  the previously granted first  rights (the "First Rights"))
will receive, in exchange  therefor, 88.6% of the  common stock, par value  $.01
per  share,  of the  Corporation ("Common  Stock"), after  giving effect  to the
exercise of  such First  Rights, and  (ii) the  transfers by  affiliates of  the
General  Partner of their interests in the General Partner and its affiliates in
exchange for 11.4% of the Common Stock  (after giving effect to the exercise  of
such  First Rights). The 88.6% of the Common Stock to be received by BAC holders
(and holder of  such First Rights  upon exercise)  and the 11.4%  of the  Common
Stock  (after giving effect to the exercise of such First Rights) to be received
by affiliates of  the General Partner  are referred to  herein as the  "Exchange
Ratio."
    

   
    In  arriving at our  opinion, we have reviewed  the Conversion Agreement and
certain related agreements,  the proxy  statement of the  Partnership dated  the
date  hereof (the "Proxy Statement"), and  the limited partnership agreements of
the Partnership and the Operating Partnership, and held discussions with certain
senior operating  management of  the  Operating Partnership  ("Management")  and
representatives  and  advisors  of  the  Partnership  to  discuss  the business,
operations and  prospects  of Polaris  and  the Partnership.  We  have  examined
certain  publicly available business  and financial information  relating to the
Partnership as  well  as  internal financial  statements,  forecasts  and  other
financial  and operating data concerning the Partnership prepared by Management.
We have reviewed  the financial  terms of  the Conversion  as set  forth in  the
Conversion  Agreement in relation to, among other things: current and historical
market prices and trading volumes of the BACs; historical and projected earnings
and  operating  data  of  the  Partnership;  the  capitalization  and  financial
condition  of the Partnership;  and the pro  forma effect of  the Conversion. We
also considered,  to  the extent  publicly  available, the  financial  terms  of
certain  other  similar  transactions  which  we  considered  comparable  to the
Conversion and  analyzed  certain financial,  stock  market and  other  publicly
available  information  relating  to  the businesses  of  other  companies whose
operations we considered comparable to those of the Partnership. In addition  to
the  foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market  criteria as we deemed appropriate  in
arriving at our opinion.
    

                                      B-1
<PAGE>
   
    In  rendering our opinion,  we have assumed  and relied, without independent
verification, upon  the accuracy  and completeness  of all  financial and  other
information  publicly  available or  furnished to  or  otherwise reviewed  by or
discussed with us.  With respect  to financial forecasts  and other  information
furnished to or otherwise reviewed by or discussed with us, we assumed that such
forecasts and other information were reasonably prepared on bases reflecting the
best  currently  available  estimates  and judgments  of  Management  as  to the
expected future financial performance of the Partnership. We have also  assumed,
with  your  consent,  that no  material  change  has occurred  in  the business,
operations, financial condition  or prospects  of Polaris  as set  forth in  the
Proxy Statement.
    

    We  are not expressing any opinion as to  what the value of the Common Stock
actually will be  when issued  to holders  of BACs or  the prices  at which  the
Common  Stock will trade subsequent to the  Conversion. We have not made or been
provided  with  an  independent  evaluation  or  appraisal  of  the  assets   or
liabilities (contingent or otherwise) of the Partnership. We have not been asked
to express an opinion as to the relative merits of the Conversion as compared to
any  alternative business strategies that might exist for the Partnership or the
effect of any other transaction in  which the Partnership might engage. We  were
not asked to solicit third-party indications of interest in acquiring all or any
part  of the Partnership. Our opinion is necessarily based upon financial, stock
market and other conditions and circumstances existing and disclosed to us as of
the date hereof.

    Smith Barney has been engaged to  render financial advisory services to  the
Partnership  in connection with  the Conversion and  will receive a  fee for our
services, a portion of which is contingent upon consummation of the  Conversion.
We  also will receive  a fee for the  delivery of this  opinion. In the ordinary
course of business, we and  our affiliates may actively  trade the BACs for  our
own  account or for  the account of  our customers and,  accordingly, may at any
time hold a position in such securities.

   
    It is understood that this opinion is for the information of the Partnership
only and may not be  used for any other  purpose without prior written  consent,
except  that  we hereby  consent to  the reference  of this  letter in,  and its
inclusion as an attachment or exhibit to, the Registration Statement on Form S-4
which has  been  filed by  the  Corporation  with the  Securities  and  Exchange
Commission  in connection with the Proxy  Statement contained therein which will
be mailed to the BAC holders.
    

    Based upon  and  subject to  the  foregoing, our  experience  as  investment
bankers  and other factors we deemed relevant, we are of the opinion that, as of
the date hereof, each of the consideration to be received by the holders of BACs
and the Exchange  Ratio in the  Conversion is  fair, from a  financial point  of
view, to the holders of BACs.

                                          Very truly yours,
                                          SMITH BARNEY INC.

                                      B-2
<PAGE>
   
                                                                         ANNEX C
    

   
                                                               November 21, 1994
    

Polaris Industries Partners L.P.
1225 Highway 169 North
Minneapolis, Minnesota  55441

Gentlemen:

   
    You have requested our opinion as to the fairness, from a financial point of
view,  to the holders ("BAC Holders") of units of Beneficial Assignment of Class
A Limited Partnership Interests ("BACs") in Polaris Industries Partners L.P.,  a
Delaware  Limited  Partnership (the  "Partnership"), of  the Exchange  Ratio (as
defined below) and the  consideration to be  received by such  BAC Holders in  a
proposed  conversion (the "Conversion") of the Partnership to corporate form. We
understand that  the  Conversion  will  be  effected  through  the  merger  (the
"Merger")   of  an  indirect  wholly-owned  subsidiary  partnership  of  Polaris
Industries Inc., a newly formed  Minnesota corporation (the "Corporation")  into
the  Partnership,  pursuant to  which  (i) the  BAC  Holders (together  with the
holders of  the  previously granted  first  rights (the  "First  Rights"))  will
receive,  in exchange therefor,  88.6% of the  Common Stock, par  value $.01 per
share, of  the Corporation  (the  "Common Stock")  after  giving effect  to  the
exercise  of such First Rights  and (ii) affiliates of  EIP Associates L.P., the
general partner of  the Partnership  (the "General Partner"),  will receive,  in
exchange  for their  interests in  the General  Partner and  its affiliates, the
remaining 11.4% of the Common Stock (after giving effect to the exercise of such
First Rights) (the "Exchange  Ratio"), as described  in the Partnership's  Proxy
Statement dated the date hereof (the "Proxy Statement").
    

    Dillon,  Read  & Co.  Inc.  has, in  the  past, performed  general financial
advisory services for, and received  compensation from, the Partnership. In  the
ordinary  course of our business  we may trade the BACs  for our own account and
for the accounts of customers and, accordingly,  may at any time hold a long  or
short position in such securities.

   
    In connection with our opinion, we have reviewed the Proxy Statement and the
Agreement  and Plan  of Conversion  dated as  of September  29, 1994  as well as
financial and other information that was  publicly available or furnished to  us
by  the  Partnership,  including information  provided  during  discussions with
management of the Partnership. In  addition, we have compared certain  financial
and operating data of the Partnership with that of various other publicly traded
corporations  whose  operations we  believed to  be comparable  to those  of the
Partnership, reviewed market prices and  trading volumes for the BACs,  reviewed
the    cash    distributions   that    have   been    paid   to    BAC   Holders
    

                                      C-1
<PAGE>
and the General Partner and the  prospects for future cash distributions to  the
BAC  Holders and the General Partner, reviewed the terms of selected partnership
conversions which we believed to be  comparable to the Conversion and  conducted
such   other  financial  studies,  analyses  and  investigations  as  we  deemed
appropriate for purposes of the opinion.

   
    In our review and analysis,  and in arriving at  our opinion, we have,  with
your  consent,  assumed and  relied upon  the accuracy  and completeness  in all
material respects of the information contained in the Proxy Statement, including
the description of the tax consequences  to the Partnership and the BAC  Holders
of  the Conversion, and all financial information that was publicly available or
furnished or  otherwise communicated  to  us by  the  Partnership and  have  not
attempted to verify independently any of such information. We have also assumed,
with  your  consent,  that no  material  change  has occurred  in  the business,
operations, financial condition or prospects of the Partnership as set forth  in
the  Proxy Statement. We have not made an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Partnership, nor have
we been furnished with any such  evaluation or appraisal. We are not  expressing
any  opinion as  to what  the value of  the Common  Stock actually  will be when
issued to  BAC Holders  or  the prices  at which  the  Common Stock  will  trade
subsequent  to the Conversion. Our opinion  is based upon economic, monetary and
market conditions existing  on the  date hereof. You  have not  requested us  to
express,  and we are not expressing, any opinion with respect to the decision to
effect the  Conversion or  as to  whether any  alternative transactions  to  the
Conversion  may be more or less favorable to  the BAC Holders. We were not asked
to solicit third-party indications of interest  in acquiring all or any part  of
the Partnership.
    

   
    It is understood that this opinion is for the information of the Partnership
only  and  may not  be  used for  any other  purpose  without our  prior written
consent, except that we hereby consent to  the reference of this letter in,  and
its inclusion as an attachment or exhibit to, the Registration Statement on Form
S-4  which has been  filed by the  Corporation with the  Securities and Exchange
Commission in connection with the  Proxy Statement contained therein which  will
be mailed to the BAC Holders.
    

    Based upon, and subject to, the foregoing, it is our opinion that, as of the
date  hereof, each of the Exchange Ratio and the consideration to be received by
the BAC Holders in the  Conversion is fair, from a  financial point of view,  to
the BAC Holders.

                                          Very truly yours,

                                          Dillon, Read & Co. Inc.

                                      C-2
<PAGE>
                                                                         ANNEX D

                            POLARIS INDUSTRIES INC.
                        POLARIS INDUSTRIES PARTNERS L.P.

                               ------------------

                        AGREEMENT AND PLAN OF CONVERSION

                            ------------------------

                                  DATED AS OF
                               SEPTEMBER 29, 1994

                            ------------------------

                                      D-1
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                  ---------
<S>                <C>        <C>                                                                                 <C>
AGREEMENT AND PLAN OF CONVERSION
ARTICLE I -- THE PICC MERGER....................................................................................        D-6
      Section           1.1   The PICC Merger...................................................................        D-6
      Section           1.2   Effects of the PICC Merger........................................................        D-6
ARTICLE II -- THE EIPCC STOCK EXCHANGE..........................................................................        D-6
      Section           2.1   The EIPCC Stock Exchange..........................................................        D-6
ARTICLE III -- THE PARTNERSHIP GP EXCHANGE......................................................................        D-7
      Section           3.1   The Partnership GP Exchange.......................................................        D-7
ARTICLE IV -- THE OPERATING PARTNERSHIP GP EXCHANGE.............................................................        D-7
      Section           4.1   The Operating Partnership GP Exchange.............................................        D-7
ARTICLE V -- THE MERGER.........................................................................................        D-7
      Section           5.1   Formation of PTP..................................................................        D-7
      Section           5.2   The Merger........................................................................        D-7
      Section           5.3   Effects of the Merger.............................................................        D-8
ARTICLE VI -- THE OPERATING PARTNERSHIP MERGER..................................................................        D-8
      Section           6.1   The Operating Partnership Merger..................................................        D-8
      Section           6.2   Effects of the Operating Partnership Merger.......................................        D-8
ARTICLE VII -- CONVERSION OF UNITS IN THE MERGER................................................................        D-9
      Section           7.1   Conversion of Units...............................................................        D-9
      Section           7.2   Exchange of Certificates..........................................................        D-9
      Section           7.3   Procedures for Dissent by Record Holders of Units.................................       D-10
      Section           7.4   Provisions Affecting Remedies of Dissenting Unitholders...........................       D-13
ARTICLE VIII -- THE CLOSINGS....................................................................................       D-14
      Section           8.1   The Closings......................................................................       D-14
      Section           8.2   Deliveries at the First Closing...................................................       D-14
      Section           8.3   Deliveries at the Second Closing..................................................       D-14
      Section           8.4   Deliveries at the Third Closing...................................................       D-15
      Section           8.5   Deliveries at the Fourth Closing..................................................       D-15
      Section           8.6   Deliveries at the Fifth Closing...................................................       D-16
      Section           8.7   Deliveries at the Sixth Closing...................................................       D-16
ARTICLE IX -- JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF CERTAIN PARTNERSHIP ENTITIES..................
                                                                                                                       D-16
      Section           9.1   Organization......................................................................       D-16
      Section           9.2   Capitalization....................................................................       D-16
      Section           9.3   Authority.........................................................................       D-17
ARTICLE X -- SEVERAL REPRESENTATIONS AND WARRANTIES OF CERTAIN PARTNERSHIP ENTITIES.............................
                                                                                                                       D-17
      Section          10.1   Representations and Warranties of the EIPCC Stockholders..........................       D-17
      Section          10.2   Representations and Warranties of the Partnership GP Partners.....................       D-19
      Section          10.3   Representations and Warranties of the Operating Partnership GP Partners...........       D-21
ARTICLE XI -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................................       D-22
      Section          11.1   Organization......................................................................       D-22
</TABLE>

                                      D-2
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                  ---------
<S>                <C>        <C>                                                                                 <C>
      Section          11.2   Capitalization....................................................................       D-23
      Section          11.3   Authority.........................................................................       D-23
      Section          11.4   No Activity.......................................................................       D-23
ARTICLE XII -- COVENANTS........................................................................................       D-23
      Section          12.1   Conduct of Business of Certain Partnership Entities...............................       D-23
      Section          12.2   Conduct of Business of the Company................................................       D-25
      Section          12.3   Reasonable Best Efforts...........................................................       D-25
      Section          12.4   Letter of the Partnership's Accountants...........................................       D-25
      Section          12.5   Access to Information.............................................................       D-25
      Section          12.6   Unitholders Meeting...............................................................       D-26
      Section          12.7   Legal Conditions to Merger........................................................       D-26
      Section          12.8   Affiliates........................................................................       D-26
      Section          12.9   Stock Exchange Listing............................................................       D-26
      Section          12.10  Employee Benefit Plans............................................................       D-26
      Section          12.11  Partnership Plans.................................................................       D-26
      Section          12.12  Fees and Expenses.................................................................       D-27
      Section          12.13  Brokers or Finders................................................................       D-27
      Section          12.14  Indemnification...................................................................       D-27
      Section          12.15  Indemnification of The Transferors, The Partnership GP, The Operating Partnership
                               GP, EIPCC, PICC and Agents.......................................................       D-28
      Section          12.16  Preservation of Partnership, Partnership GP and EIPCC.............................       D-30
      Section          12.17  Notification of Certain Matters...................................................       D-30
      Section          12.18  Publicity.........................................................................       D-31
      Section          12.19  Certain Tax Matters...............................................................       D-31
      Section          12.20  Registration Rights...............................................................       D-33
      Section          12.21  Delivery of Documents.............................................................       D-33
      Section          12.22  Partnership Distributions.........................................................       D-33
ARTICLE XIII -- CONDITIONS......................................................................................       D-34
      Section          13.1   Conditions to Each Party's Obligation To Effect the Transactions Contemplated
                               Hereby...........................................................................       D-34
      Section          13.2   Conditions to Obligations of The Company..........................................       D-34
      Section          13.3   Conditions to Obligations of the Partnership Entities.............................       D-35
ARTICLE XIV -- INDEMNITIES......................................................................................       D-36
      Section          14.1   EIPCC Stockholders Indemnity......................................................       D-36
      Section          14.2   Partnership GP Partners Indemnity.................................................       D-36
      Section          14.3   Operating Partnership GP Partners Indemnity.......................................       D-37
      Section          14.4   General Tax Indemnity.............................................................       D-37
      Section          14.5   Exception to Certain Indemnities..................................................       D-37
      Section          14.6   Indemnification of W. Hall Wendel, Jr. and the Company............................       D-37
      Section          14.7   Procedures for Indemnification....................................................       D-38
ARTICLE XV -- TERMINATION AND AMENDMENT.........................................................................       D-39
      Section          15.1   Termination.......................................................................       D-39
      Section          15.2   Effect of Termination.............................................................       D-39
      Section          15.3   Amendment.........................................................................       D-39
ARTICLE XVI -- MISCELLANEOUS....................................................................................       D-39
      Section          16.1   Fiduciary Duties..................................................................       D-39
      Section          16.2   Nonsurvival of Representations and Warranties.....................................       D-39
</TABLE>

                                      D-3
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                  ---------
<S>                <C>        <C>                                                                                 <C>
      Section          16.3   Notices...........................................................................       D-39
      Section          16.4   Interpretation....................................................................       D-40
      Section          16.5   Counterparts......................................................................       D-40
      Section          16.6   Entire Agreement; No Third Party Beneficiaries....................................       D-40
      Section          16.7   Governing Law.....................................................................       D-40
      Section          16.8   Specific Performance..............................................................       D-40
      Section          16.9   Assignment; Successors............................................................       D-41

ANNEX I -- List of Partnership GP Partners
ANNEX II -- List of Operating Partnership GP Partners
ANNEX III -- List of EIPCC Stockholders
</TABLE>

                                      D-4
<PAGE>
                        AGREEMENT AND PLAN OF CONVERSION

    AGREEMENT  AND PLAN OF  CONVERSION, dated as  of September 29,  1994, by and
among Polaris Industries Inc., a Minnesota corporation (the "Company");  Polaris
Industries  Partners L.P.,  a Delaware limited  partnership (the "Partnership");
Polaris Industries L.P., a Delaware limited partnership owned by the Partnership
(the  "Operating  Partnership");  EIP   Associates  L.P.,  a  Delaware   limited
partnership  and the general partner of  the Partnership (the "Partnership GP");
Polaris Industries  Associates  L.P., a  Delaware  limited partnership  and  the
general  partner of the Operating  Partnership (the "Operating Partnership GP");
EIP Capital Corporation, a Delaware corporation and the managing general partner
of the  Partnership  GP ("EIPCC");  Polaris  Industries Capital  Corporation,  a
Delaware  corporation wholly owned by EIPCC  and the managing general partner of
the Operating Partnership GP ("PICC"); the partners of the Partnership GP  named
on  Annex I attached hereto (the "Partnership GP Partners"); the partners of the
Operating Partnership GP named on Annex II hereto (the "Operating Partnership GP
Partners"); and the stockholders of EIPCC named on Annex III hereto (the  "EIPCC
Stockholders").  The Partnership, the Operating Partnership, the Partnership GP,
the Operating  Partnership GP,  PICC, EIPCC,  the Partnership  GP Partners,  the
Operating  Partnership GP Partners  and the EIPCC  Stockholders are collectively
referred to herein as the  "Partnership Entities". The Partnership GP  Partners,
the   Operating  Partnership  GP   Partners  and  the   EIPCC  Stockholders  are
collectively referred to herein as the "Transferors."

    WHEREAS,  the  parties  hereto  desire  to  convert  the  structure  of  the
Partnership  from that of a master limited  partnership to that of a corporation
(the  "Conversion")   through  consummation   of  the   following   transactions
(collectively, the "Transactions"):

        (i)  First, PICC shall be merged with  and into EIPCC, with EIPCC as the
    surviving  corporation  (the   "PICC  Merger");  (ii)   Second,  the   EIPCC
    Stockholders,  owning all the issued and outstanding capital stock of EIPCC,
    shall transfer such capital stock to  the Company in exchange for shares  of
    Company  Common Stock (as hereinafter defined) (the "EIPCC Stock Exchange");
    (iii) Third,  the  Partnership  GP  Partners,  owning  all  the  issued  and
    outstanding  partnership interests of the Partnership GP not presently owned
    by EIPCC,  shall  transfer such  partnership  interests to  the  Company  in
    exchange for shares of Company Common Stock (the "Partnership GP Exchange");
    (iv)  Fourth, the Operating  Partnership GP Partners,  owning all the issued
    and outstanding partnership  interests of the  Operating Partnership GP  not
    presently  owned by PICC,  shall transfer such  partnership interests to the
    Company in  exchange for  shares  of Company  Common Stock  (the  "Operating
    Partnership GP Exchange"); (v) Fifth, the Company and EIPCC shall form a new
    Delaware  limited  partnership named  PTP  LP, or  such  other name  as they
    determine ("PTP"), with the Company as PTP's sole limited partner and  EIPCC
    as PTP's sole general partner; (vi) Sixth, PTP shall be merged with and into
    the  Partnership  (the  "Merger"), in  which  the Partnership  shall  be the
    surviving partnership with the Partnership  GP as the Partnership's  general
    partner  and the Company and EIPCC as the Partnership's limited partners and
    the  outstanding  Units  of  Beneficial   Assignment  of  Class  A   Limited
    Partnership  Interests of the  Partnership (the "Units")  shall be converted
    into shares  of  Company Common  Stock;  and (vii)  Seventh,  the  Operating
    Partnership  and the Operating Partnership GP  shall be merged with and into
    the  Partnership  (the  "Operating   Partnership  Merger"),  in  which   the
    Partnership  shall be the surviving partnership  with the Partnership GP and
    the Company as the Partnership's general partners, and the Company and EIPCC
    as the Partnership's limited partners;

    WHEREAS, pursuant  to the  Merger, each  Unit then  outstanding (other  than
Units  to be cancelled pursuant  to Section 7.1(a) hereof  and Units as to which
the holders thereof shall  have exercised appraisal  rights pursuant to  Section
7.3 hereof, if any) shall be converted into one share of common stock, par value
$.01 per share of the Company ("Company Common Stock");

    WHEREAS,  pursuant to the EIPCC Stock  Exchange, the Partnership GP Exchange
and the Operating  Partnership GP Exchange,  the Transferors shall  collectively
receive  in  the  aggregate  2,100,243  shares  of  Company  Common  Stock  (the
"Transferors' Number");

                                      D-5
<PAGE>
    WHEREAS, as a result of the Transactions, EIPCC will be wholly owned by  the
Company;  the Partnership GP will  be wholly owned by  the Company (as a general
partner and  limited  partner) and  EIPCC  (as managing  general  partner);  the
Partnership  will be  wholly owned by  the Company  (as a general  partner and a
limited partner), the  Partnership GP (as  a general partner),  and EIPCC (as  a
limited  partner); the Partnership  Entities (other than  EIPCC, the Partnership
GP,  the  Partnership  and  the  Transferors)  will  cease  to  exist;  and  the
Transferors  (other than in  their capacities as Unitholders)  will own 11.4% of
Company Common Stock  to be issued  and outstanding after  giving effect to  the
exercise  of  previously  granted  First  Rights  (as  defined  herein)  and the
Unitholders together with holders of outstanding First Rights (upon exercise  of
such  First Rights) will own in the  aggregate 88.6% of the Company Common Stock
to be issued and outstanding after giving  effect to the exercise of such  First
Rights;

    NOW,  THEREFORE,  in  consideration  of  the  foregoing  and  the respective
representations, warranties,  covenants and  agreements  set forth  herein,  the
parties hereto agree as follows:

                                   ARTICLE I
                                THE PICC MERGER

   
    Section  1.1  THE PICC MERGER.  Upon the terms and subject to the conditions
hereof, at the First Closing (as  hereinafter defined), a certificate of  merger
(the  "PICC  Certificate  of  Merger")  shall  be  duly  prepared,  executed and
acknowledged by  EIPCC,  the  surviving  corporation in  the  PICC  Merger,  and
thereafter  delivered to the  Secretary of State  of the State  of Delaware, for
filing, as provided in  the Delaware General Corporation  Law (the "DGCL").  The
PICC  Merger shall become effective  at the date and time  set forth in the PICC
Certificate of Merger filed with the Secretary of State of the State of Delaware
(the "PICC Effective Time").
    

    Section 1.2  EFFECTS  OF THE PICC  MERGER.  The PICC  Merger shall have  the
effects set forth in the DGCL. Without limiting the generality of the foregoing,
and  subject thereto,  at the PICC  Effective Time, all  the properties, rights,
privileges, powers and franchises of PICC shall vest in EIPCC, as the  surviving
corporation  in the PICC Merger,  and all debts, liabilities  and duties of PICC
shall become the debts, liabilities and  duties of EIPCC. In addition, from  and
after  the PICC  Effective Time,  all outstanding  shares of  PICC capital stock
shall be cancelled without consideration and cease to exist.

                                   ARTICLE II
                            THE EIPCC STOCK EXCHANGE

    Section 2.1  THE EIPCC STOCK EXCHANGE.

    (a) Upon  the terms  and subject  to the  conditions hereof,  at the  Second
Closing  (as hereinafter  defined), the Company  shall acquire from  each of the
EIPCC Stockholders and each  of the EIPCC  Stockholders shall assign,  transfer,
convey  and deliver to the Company, the  shares of common stock, par value $1.00
per share, of EIPCC owned by such EIPCC Stockholders, as set forth opposite  the
EIPCC  Stockholders' names  on Annex III  hereto, together  constituting all the
issued and  outstanding shares  of capital  stock of  EIPCC (the  "EIPCC  Common
Stock"),  free and  clear of  all liens,  charges, pledges,  security interests,
claims and encumbrances whatsoever (collectively, "Liens").

    (b) As payment in full for the EIPCC Common Stock being acquired by it  from
the  EIPCC Stockholders hereunder, and against delivery thereof as aforesaid, at
the Second Closing, the Company shall issue to each of the EIPCC Stockholders  a
number  of  shares of  Company  Common Stock  equal  to the  Transferors' Number
multiplied by the fraction set forth  opposite such EIPCC Stockholder's name  on
Annex III hereto.

                                      D-6
<PAGE>
                                  ARTICLE III
                          THE PARTNERSHIP GP EXCHANGE

    Section 3.1  THE PARTNERSHIP GP EXCHANGE.

    (a)  Upon  the terms  and subject  to  the conditions  hereof, at  the Third
Closing (as  defined  herein),  the  Company shall  acquire  from  each  of  the
Partnership  GP Partners, and each of such Partnership GP Partners shall assign,
transfer, convey and deliver  to the Company, the  partnership interests in  the
Partnership  GP owned by such Partnership GP Partners, as set forth opposite the
Partnership  GP  Partners'  names  on  Annex  I  hereto  (the  "Partnership   GP
Interests"), constituting (together with EIPCC's interest in the Partnership GP)
all the issued and outstanding partnership interests of the Partnership GP, free
and clear of all Liens.

    (b) As payment in full for the Partnership GP Interests being acquired by it
from  the Partnership  GP Partners  hereunder, and  against delivery  thereof as
aforesaid, at  the  Third  Closing, the  Company  shall  issue to  each  of  the
Partnership  GP Partners a number of shares of Company Common Stock equal to the
Transferors'  Number  multiplied  by  the  fraction  set  forth  opposite   such
Partnership GP Partner's name on Annex I hereto.

                                   ARTICLE IV
                     THE OPERATING PARTNERSHIP GP EXCHANGE

    Section 4.1  THE OPERATING PARTNERSHIP GP EXCHANGE.

    (a)  Upon the  terms and  subject to  the conditions  hereof, at  the Fourth
Closing (as hereinafter  defined), the Company  shall acquire from  each of  the
Operating  Partnership GP  Partners, and each  of such  Operating Partnership GP
Partners shall  assign,  transfer,  convey  and  deliver  to  the  Company,  the
partnership  interests in  the Operating Partnership  GP owned  by the Operating
Partnership GP  Partners, as  set forth  opposite the  Operating Partnership  GP
Partners'  names on Annex II hereto  (the "Operating Partnership GP Interests"),
constituting (together with  EIPCC's interest in  the Operating Partnership  GP)
all   the  issued  and  outstanding   partnership  interests  of  the  Operating
Partnership GP, free and clear of all Liens.

    (b) As payment  in full  for the  Operating Partnership  GP Interests  being
acquired by it from the Operating Partnership GP Partners hereunder, and against
delivery thereof as aforesaid, at the Fourth Closing, the Company shall issue to
each  of the  Operating Partnership  GP Partners a  number of  shares of Company
Common Stock equal  to the Transferors'  Number multiplied by  the fraction  set
forth opposite such Operating Partnership GP Partners' name on Annex II hereto.

                                   ARTICLE V
                                   THE MERGER

    Section 5.1  FORMATION OF PTP.  Upon the terms and subject to the conditions
hereof,  at the Fifth Closing (as hereinafter defined), a certificate of limited
partnership (the  "PTP  Certificate  of  Limited  Partnership")  shall  be  duly
prepared,  executed and acknowledged  by EIPCC, the general  partner of PTP, and
delivered to the Secretary  of State of  the State of  Delaware, for filing,  as
provided in the Delaware Revised Uniform Limited Partnership Act (the "DRULPA").
PTP  shall  be  formed  upon  the  filing  of  the  PTP  Certificate  of Limited
Partnership with the Secretary of State of  the State of Delaware. PTP shall  be
formed  by EIPCC,  as general  partner, and the  Company as  limited partner and
shall be capitalized  with $100 in  capital, with $90  being contributed by  the
Company  and $10 being contributed by EIPCC.  PTP shall qualify as a partnership
for federal income tax purposes.

    Section 5.2   THE MERGER.   Upon  the terms  and subject  to the  conditions
hereof,  at the  Fifth Closing,  immediately following  the consummation  of the
transactions set forth in Section 5.1 hereof a

                                      D-7
<PAGE>
   
certificate of  merger (the  "Certificate of  Merger") shall  be duly  prepared,
executed  and acknowledged by the Partnership,  the surviving partnership in the
Merger, and delivered to the  Secretary of State of  the State of Delaware,  for
filing, as provided in the DRULPA. The Merger shall become effective at the date
and  time set  forth in the  Certificate of  Merger filed with  the Secretary of
State of the State of Delaware (the "Effective Time"). The partnership agreement
of the Partnership, as in effect  immediately prior to the Effective Time  shall
be  the Partnership  Agreement of the  Partnership following  the Effective Time
unless and until  amended in accordance  with the terms  thereof and  applicable
law.
    

    Section  5.3  EFFECTS OF THE MERGER.   The Merger shall have the effects set
forth in  the DRULPA.  Without limiting  the generality  of the  foregoing,  and
subject  thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises  of PTP  shall vest in  the Partnership  as the  surviving
Partnership  in the Merger, and  all debts, liabilities and  duties of PTP shall
become the debts, liabilities and duties of the Partnership. In addition, at the
Effective Time, all outstanding Units (other than Units to be cancelled pursuant
to Section 7.1(a) hereof, and other than  Units as to which the holders  thereof
shall  have exercised appraisal  rights pursuant to Section  7.3 hereof, if any)
will be converted into shares of Company Common Stock as provided in Article VII
hereof; at the Effective Time, EIPCC's general partnership interest in PTP shall
be converted into a limited partnership  interest of 0.0001% in the  Partnership
and  EIPCC's capital contribution to PTP shall be returned; and at the Effective
Time, the Company's limited partnership interest in PTP shall be converted  into
a  limited partnership  interest in  the Partnership  and the  Company's capital
contribution to  PTP  shall  be  returned.  The  partnership  interests  of  the
Partnership  GP in the Partnership and  the partnership interests of the Company
and EIPCC in the Partnership GP shall not be affected by the Merger.

                                   ARTICLE VI
                        THE OPERATING PARTNERSHIP MERGER

   
    Section 6.1  THE OPERATING PARTNERSHIP  MERGER.  Upon the terms and  subject
to  the  conditions hereof,  at the  Sixth Closing  (as hereinafter  defined), a
certificate of merger (the "Operating Partnership Certificate of Merger")  shall
be  duly prepared, executed  and acknowledged by  the Partnership, the surviving
partnership in the Operating Partnership Merger, and delivered to the  Secretary
of  State of the State  of Delaware, for filing, as  provided in the DRULPA. The
Operating Partnership Merger  shall become effective  at the date  and time  set
forth  in  the  Operating  Partnership  Certificate  of  Merger  filed  with the
Secretary of  State  of  the  State  of  Delaware  (the  "Operating  Partnership
Effective  Time"). The  partnership agreement of  the Partnership,  as in effect
immediately prior  to the  Operating Partnership  Effective Time,  shall be  the
Partnership  Agreement of  the Partnership  following the  Operating Partnership
Effective Time unless and until amended in accordance with the terms thereof and
applicable law.
    

    Section 6.2   EFFECTS OF THE  OPERATING PARTNERSHIP MERGER.   The  Operating
Partnership  Merger  shall have  the effects  set forth  in the  DRULPA. Without
limiting the generality of the foregoing, and subject thereto, at the  Operating
Partnership  Effective Time, all the  properties, rights, privileges, powers and
franchises of the Operating Partnership  and the Operating Partnership GP  shall
vest  in  the  Partnership,  as  the  surviving  partnership  in  the  Operating
Partnership Merger,  and all  debts,  liabilities and  duties of  the  Operating
Partnership and the Operating Partnership GP shall become the debts, liabilities
and  duties  of  the Partnership.  In  addition,  from and  after  the Operating
Partnership  Effective  Time,  all   outstanding  interests  in  the   Operating
Partnership  shall be cancelled without consideration and cease to exist; and at
the Operating Partnership Effective Time, (i) the Company's general  partnership
interest  and limited partnership interest in the Operating Partnership GP shall
be converted  into a  general  partnership interest  and a  limited  partnership
interest  in the Partnership;  and (ii) EIPCC's  general partnership interest in
the Operating  Partnership GP  shall  be converted  into a  limited  partnership
interest in the Partnership.

                                      D-8
<PAGE>
                                  ARTICLE VII
                       CONVERSION OF UNITS IN THE MERGER

    Section  7.1  CONVERSION OF  UNITS.  As of the  Effective Time, by virtue of
the Merger and without any action on the part of the holder of any Units (each a
"Unitholder"):

    (a) CANCELLATION OF UNITS HELD BY THE COMPANY.  All Units that are owned  by
the  Company or any Subsidiary (as hereinafter  defined) of the Company shall be
cancelled and retired  and shall  cease to  exist and  no capital  stock of  the
Company  or other consideration shall be delivered in exchange therefor. As used
in this Agreement, the word "Subsidiary"  means, with respect to any party,  any
corporation  or other  organization, whether incorporated  or unincorporated, of
which at least a majority of the  securities or other interests having by  their
terms  ordinary  voting power  to elect  or remove  a majority  of the  Board of
Directors  or  others  performing  similar   functions  with  respect  to   such
corporation  or other organization is directly or indirectly owned or controlled
by such party together with its Subsidiaries.

    (b) EXCHANGE  RATIO FOR  UNITS.   Each Unit  issued and  outstanding at  the
Effective  Time (other  than Units  to be  cancelled in  accordance with Section
7.1(a) and other than Units as to which the holders thereof shall have exercised
appraisal rights pursuant to Section 7.3 hereof, if any) shall be converted into
one (1) (the "Conversion Number") fully paid and nonassessable share of  Company
Common Stock (the "Conversion Consideration"). At the Effective Time, such Units
shall  no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate representing any such
Units shall cease to have any rights  with respect thereto, except the right  to
receive   a  certificate  representing  shares   of  Company  Common  Stock  and
Distributions (as defined in Section 12.22 hereof).

    Section 7.2  EXCHANGE OF CERTIFICATES.

    (a) EXCHANGE AGENT.   As of  the Effective Time,  the Company shall  deposit
with  Norwest Bank, Minnesota,  N.A. (the "Exchange Agent"),  for the benefit of
the holders of Units, for exchange in accordance with this Article VII,  through
the Exchange Agent, certificates representing the shares of Company Common Stock
(such   shares  of  Company  Common  Stock,   together  with  any  dividends  or
distributions with  respect  thereto,  being  hereinafter  referred  to  as  the
"Exchange  Fund") issuable pursuant to Section  7.1 in exchange for certificates
which immediately prior to the Effective Time represented outstanding Units.

    (b) EXCHANGE PROCEDURES.  As soon  as practicable after the Effective  Time,
the Company shall cause the Exchange Agent to mail to each holder of record of a
certificate  or  certificates  which  immediately prior  to  the  Effective Time
represented outstanding Units  (the "Certificates") whose  Units were  converted
pursuant  to Section  7.1 into shares  of Company  Common Stock (i)  a letter of
transmittal (which shall be in such form and have such provisions as the Company
and the Partnership GP may reasonably specify) and (ii) instructions for use  in
effecting  the  surrender  of  the  Certificates  in  exchange  for certificates
representing shares of Company Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent  or to such other agent  or agents as may  be
appointed  by  the  Company,  together with  such  letter  of  transmittal, duly
executed, the  holder  of such  Certificate  shall  be entitled  to  receive  in
exchange  therefor a certificate  representing that number  of shares of Company
Common Stock  which  such  holder has  the  right  to receive  pursuant  to  the
provisions  of  this  Article  VII, and  the  Certificate  so  surrendered shall
forthwith be cancelled. In the event of  a transfer of ownership of Units  which
is  not registered  in the  transfer records  of the  Partnership, a certificate
representing the proper number of shares  of Company Common Stock may be  issued
to  a  transferee  if  the  Certificate  is  presented  to  the  Exchange Agent,
accompanied by all documents required to  evidence and effect such transfer  and
by evidence that any applicable transfer taxes have been paid. Until surrendered
as  contemplated by this  Section 7.2, each  Certificate shall be  deemed at any
time after the Effective Time to represent  only the right to receive upon  such
surrender a certificate representing shares of Company Common Stock.

                                      D-9
<PAGE>
    (c)  DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED UNITS.  No dividends or other
distributions declared or made after the Effective Time with respect to  Company
Common  Stock with a record  date after the Effective Time  shall be paid to the
holder of any unsurrendered  Certificate with respect to  the shares of  Company
Common Stock which such holder is entitled to receive upon the surrender thereof
in  accordance  with  this  Section  7.2 until  the  holder  of  record  of such
Certificate shall  so  surrender such  Certificate.  Subject to  the  effect  of
applicable  laws, following  surrender of any  such Certificate,  there shall be
paid to the  record holder of  the certificates representing  shares of  Company
Common  Stock issued in exchange therefor, without  interest, (i) at the time of
such surrender, the  amount of dividends  or other distributions  with a  record
date  after the Effective Time  theretofore paid with respect  to such shares of
Company Common Stock, and  (ii) at the appropriate  payment date, the amount  of
dividends or other distributions with a record date after the Effective Time but
prior  to such surrender and a payment date subsequent to surrender payable with
respect to such shares of Company Common Stock.

    (d) NO FURTHER  OWNERSHIP RIGHTS  IN UNITS.   All certificates  representing
shares  of  Company  Common Stock  issued  upon  the surrender  for  exchange of
Certificates in accordance with  the terms hereof shall  be deemed to have  been
issued  in full satisfaction of all rights  pertaining to such Units (except the
right  to  receive  previously  declared  but  unpaid  distributions  from   the
Partnership),  and there  shall be no  further registration of  transfers on the
transfer  books  of  the  Partnership  of  the  Units  which  were   outstanding
immediately  prior  to  the  Effective  Time.  If,  after  the  Effective  Time,
Certificates are presented  to the Partnership  or the Company  for any  reason,
they shall be cancelled and exchanged as provided in this Article VII.

    (e)  TERMINATION OF EXCHANGE FUND.   Any portion of  the Exchange Fund which
remains undistributed  to  the  Certificate  holders  for  one  year  after  the
Effective  Time  shall  be  delivered  to  the  Company,  upon  demand,  and any
Certificate holders  who have  not theretofore  complied with  this Article  VII
shall  thereafter  look only  to  the Company  for  payment of  their  claim for
certificates representing shares of  Company Common Stock  and any dividends  or
distributions with respect to Company Common Stock.

    (f)  NO LIABILITY.  None of the  Company, the Partnership or any Partnership
Entity shall be liable  to any holder of  Units, Certificates or Company  Common
Stock,  as the case may  be, for such securities  (or dividends or distributions
with respect thereto) delivered to a public official pursuant to any  applicable
abandoned property, escheat or similar law.

    Section 7.3  PROCEDURES FOR DISSENT BY RECORD HOLDERS OF UNITS.

    (a)  Notwithstanding anything in this Agreement  to the contrary, Units that
are outstanding  immediately  prior  to  the Effective  Time  and  are  held  by
Unitholders  who did not vote for the Merger and who shall have delivered to the
Executive Vice President, Finance and  Administration, of the Company a  written
objection  in accordance with  clause (i) of Section  7.3(b) (each a "Dissenting
Unitholder") shall not  be deemed converted  into the Conversion  Consideration,
but  the Unitholders thereof shall be entitled  to payment of the Fair Value (as
defined below) of such Units in  accordance with the provisions of Sections  7.3
and 7.4 hereof ("Appraisal Rights"); PROVIDED, HOWEVER, that if the right of any
Dissenting  Unitholder to be paid the Fair Value of his or her Units shall cease
in accordance with clause (iii) of Section 7.3(b) or otherwise, such Units shall
be deemed to have  been exchanged as  of the Effective  Time for the  Conversion
Consideration  without interest thereon. Any Unitholder seeking Appraisal Rights
must (A) hold his or her Units for which appraisal is sought on the Record Date,
(B) continuously hold such Units through  the Effective Time, and (C)  otherwise
comply  with the following provisions of this  Section 7.3. "Fair Value" as used
herein shall mean, with respect  to the Units, the value  thereof as of the  day
immediately   preceding  the  Effective  Time,  excluding  any  appreciation  or
depreciation in such value arising from the accomplishment or expectation of the
Merger or the Transactions.

    (b) (i) A Unitholder who desires to exercise his or her right to dissent  to
the Merger (and thereby his Appraisal Rights) must be a holder of record on, and
have filed with the Partnership on or before,

                                      D-10
<PAGE>
the  fifth day  prior to  the date  of the  Unitholders' meeting  referred to in
Section 12.6 hereof (the "Meeting Date"), a written objection to the Merger  and
a notice stating that the Unitholder's right to dissent will be exercised if the
Merger is effected and giving the Unitholder's address, to which notice shall be
delivered  or mailed  in that  event. Such  objection and  notice must  have (A)
reasonably informed the Partnership of the  identity of the Unitholder and  that
such  Unitholder demands Appraisal Rights  with respect to his  or her Units and
(B) be separate from any proxy relating to the Merger.

    (ii) If the Merger is effected, the Company shall, within 10 days after  the
Merger  is effected, mail to each Unitholder of record at the Effective Time who
filed an objection and notice pursuant to clause (i) of this Section 7.3(b)  and
did  not vote  in favor of  the Merger written  notice that the  Merger has been
effected (including the date thereof).

   (iii) Any Unitholder  who (A) voted  in favor  of the Merger  or delivered  a
proxy in favor of the Conversion or an unmarked proxy, or (B) failed to make the
written  objection  and notice  in accordance  with clause  (i) of  this Section
7.3(b), shall not be entitled to  Appraisal Rights but shall otherwise be  bound
by  the Merger. Neither  voting against, abstaining from  voting, nor failing to
vote on  the  Merger  by  any  Unitholder, will  constitute  a  demand  by  such
Unitholder  for Appraisal Rights within the  meaning of Section 7.3(a) hereof or
this Section 7.3(b).

    (c) At any  time within 120  days after the  Effective Time, any  Dissenting
Unitholder who has complied with the requirements of Section 7.3(b) hereof, upon
written  request,  shall be  entitled to  receive from  the Company  a statement
setting forth the aggregate number of Units not voted in favor of the Merger and
with respect to which  demands for Appraisal Rights  have been received and  the
aggregate  number of  Unitholders who  hold such  Units. Such  written statement
shall be mailed to the requesting Dissenting Unitholder within 10 days after the
later of his written request for such a statement is received by the Company and
the expiration of the period for delivery of demands for appraisal.

    (d) At any time within the period of 120 days after the Effective Time,  any
Dissenting  Unitholder or the Company may file  a petition in the Delaware Court
of Chancery (the "Chancery Court") asking for a finding and determination of the
Fair Value of  the Dissenting Unitholder's  Units. Upon the  filing of any  such
petition  by the Dissenting Unitholder, service of  a copy thereof shall be made
upon the Company, which shall, within 20 days after service, file in the  office
of  the Register in  Chancery of the  Chancery Court in  which such petition was
filed (the "Register in Chancery") a duly verified list containing the names and
addresses of all Unitholders who have  demanded payment for their Units and  not
withdrawn  such demand in accordance with Section 7.3(b) hereof. If the petition
shall be filed by the Company, the petition shall be accompanied by such a  duly
verified  list. The Register in  Chancery, if so ordered  by the Chancery Court,
shall give notice of the time and place fixed for the hearing of the petition by
certified or registered mail to the Company and to the Unitholders named on  the
list  at the addresses therein stated. Such notice shall also be given by one or
more publications, at least one week prior to the scheduled date of the hearing,
in a newspaper  of general circulation  in the City  of Wilmington, Delaware  or
such  other publication as the Chancery Court  deems advisable. The forms of the
notices by mail and by publication shall be approved by the Chancery Court,  and
the costs thereof shall be borne by the Company. All Dissenting Unitholders thus
notified  and the Company shall thereafter be bound by the final judgment of the
Chancery Court.

    (e) At the hearing on the  petition, the Chancery Court shall determine  the
Dissenting Unitholders who have complied with the provisions of this Section 7.3
and  have become entitled to the valuation of and payment for their Units. After
determining the Unitholders  entitled to  Appraisal Rights,  the Chancery  Court
shall  appraise the  Units, determining their  Fair Value, together  with a fair
rate of interest, if any, to be paid  upon the amount determined to be the  Fair
Value.  In  determining such  Fair  Value, the  Chancery  Court shall  take into
account all relevant  factors. In  determining the  fair rate  of interest,  the
Chancery Court may consider all relevant factors, including the rate of interest
which  the Company would have had to pay  to borrow money during the pendency of
the

                                      D-11
<PAGE>
proceeding. The Chancery Court shall have power to examine any of the books  and
records  of the Company.  Upon application by  the Company or  by any Unitholder
entitled to  participate in  the  proceeding, the  Chancery  Court may,  in  its
discretion,  permit discovery or  other pretrial proceedings  and may proceed to
trial upon the  appraisal prior to  the final determination  of the  Unitholders
entitled  to an appraisal.  Any Dissenting Unitholder whose  name appears on the
list filed by the  Company pursuant to Section  7.3(d) may participate fully  in
all proceedings until it is finally determined that he or she is not entitled to
Appraisal Rights under Section 7.3 and 7.4 hereof.

    (f) The Chancery Court shall by its judgment determine the Fair Value of the
Units  of the  Dissenting Unitholders  entitled to  payment for  their Units and
shall direct the  payment of that  Fair Value, together  with interest, if  any,
thereon,  by  the Company  to the  Dissenting  Unitholders entitled  to payment.
Interest may  be simple  or compound,  as  the Chancery  Court may  direct.  The
Chancery  Court's  judgment  shall  be enforceable  as  other  judgments  in the
Chancery Court. Upon payment of  the judgment, the Dissenting Unitholders  shall
cease  to have  any interest  in their Units  or the  Company. The  costs of the
proceeding shall be allotted between the parties in the manner that the Chancery
Court determines to be equitable under the circumstances. Upon application of  a
Dissenting  Unitholder, the  Chancery Court  may order all  or a  portion of the
expenses  incurred  by  any  Dissenting   Unitholder  in  connection  with   the
proceeding,  including, without  limitation, reasonable attorney's  fees and the
fees and expenses of experts,  to be charged pro rata  against the value of  all
the  Units whose  Fair Value  is determined pursuant  to the  proceeding. In the
absence of such a determination of assessment by the Chancery Court, each  party
shall bear his, her or its own expenses.

    (g)  Each  Unit acquired  by  the Company  pursuant  to the  payment  of the
judgment entered for the Fair  Value of the Units,  as provided in this  Section
7.3, shall be cancelled and of no force or effect.

    (h)  The  remedy provided  by this  Section 7.3  to a  Dissenting Unitholder
objecting to the Merger is the exclusive remedy for the recovery of the value of
his or her Units or money damages to the Unitholder with respect to the  Merger.
If  the  Company  complies  with  the  requirements  of  this  Section  7.3, any
Dissenting Unitholder who fails to comply with the requirements of this  Section
7.3  shall not be entitled to bring suit for the recovery of the value of his or
her Units or  money damages  to the Dissenting  Unitholder with  respect to  the
Merger.

    (i)  Without limitation of  the generality of Section  7.3(c) hereof, if the
Chancery Court shall refuse to recognize the rights and procedures set forth  in
Sections  7.3 and  7.4 hereof with  respect to Dissenting  Unitholders, or shall
otherwise refuse to follow the  procedures set forth in  this Section 7.3 to  be
followed  by it, then the Company within  45 days after learning of such refusal
by the  Chancery  Court, shall  make  application to  the  American  Arbitration
Association  ("AAA"), Philadelphia  Branch, to  select an  independent appraiser
(the "Special Appraiser") to determine the Fair  Value of the Units held by  all
such Dissenting Unitholders. Within 30 days after the Company is notified of the
selection  of the Special Appraiser,  the Company shall deliver  or mail to each
Dissenting Unitholder a written notice stating that a Special Appraiser has been
selected in accordance  with this  Section 7.3(i)  and specifying  the name  and
address of the Special Appraiser. From and after the delivery or mailing of such
notice,  all petitions,  lists and  other documents  that would  have been filed
under Section  7.3(d)  or (e)  hereof  with the  Register  in Chancery  and  the
Chancery  Court shall be  filed instead with the  Special Appraiser. The Special
Appraiser shall retain all such documents filed with him in clearly-identifiable
files, shall maintain an index  or log listing all  such documents and the  time
and  date on which they were filed, and  shall make all such documents and files
available to the Company and any Dissenting Unitholders during the same business
hours as those that are maintained by  the clerks of the Chancery Court. If  any
such  documents shall have already been filed  with the Register in Chancery and
the Chancery Court,  the Company, at  its expense, shall  obtain copies of  such
documents  from the applicable clerk  of the Chancery Court  and shall file such
copies with the Special Appraiser. The Special Appraiser shall give any  notices
that  would  have been  given by  the Chancery  Court or  its clerk  pursuant to
Sections 7.3(d), (e)  and (f) hereof.  The Special Appraiser  shall perform  the
functions and

                                      D-12
<PAGE>
take  the actions that would have been performed and taken by the Chancery Court
under Sections 7.3(d), (e)  and (f) hereof. In  doing so, the Special  Appraiser
shall follow the procedures set forth in such Sections as nearly as practicable.
The  Fair Value finally determined  by the Special Appraiser  shall be final and
binding upon all  such Dissenting  Unitholders and  the Company,  and the  other
provisions  of Sections 7.3  and 7.4 hereof  with respect to  the effect of such
determination and  the  rights  of Dissenting  Unitholders  (including,  without
limitation,  pursuant to Section 7.3(h) hereof) shall be applicable as nearly as
practicable. Should the Special Appraiser die  or become unable or unwilling  to
serve, the Company shall promptly make application to the AAA for selection of a
substitute  Special Appraiser, who shall have the  same powers and duties as the
original Special  Appraiser  and who  shall  obtain from  the  original  Special
Appraiser (or his estate) all documents and files pertaining to the Merger.

    Section 7.4  PROVISIONS AFFECTING REMEDIES OF DISSENTING UNITHOLDERS.

    (a)  Subject to  the right  of a  Dissenting Unitholder  pursuant to Section
7.4(b) hereof to  withdraw his or  her demand  for payment, from  and after  the
Effective  Time, any Dissenting  Unitholder who has demanded  payment for his or
her Units in  accordance with Section  7.3 shall not  thereafter be entitled  to
vote,  to exercise any other rights of a Unitholder or to receive payment of any
distributions with respect thereto, except the right to receive payment for  his
or  her Units  pursuant to the  provisions of  Section 7.3 hereof,  the right to
receive distributions payable to the Dissenting  Unitholders on or prior to  the
Effective  Date and the right to maintain an appropriate action to obtain relief
on the grounds that  the Merger would  be or was fraudulent  or unfair, and  the
respective  Units for  which payment has  been demanded shall  not thereafter be
considered outstanding for the purposes of any subsequent vote of Unitholders.

    (b) Any Dissenting Unitholder who has demanded payment for his or her  Units
in  accordance with Section 7.3 hereof may withdraw such demand by delivering to
the Company a written  notice of such  withdrawal and a  consent to the  Merger;
PROVIDED  that (i) no such demand may be  withdrawn after payment for his or her
Units and (ii) any such notice of withdrawal delivered later than 30 days  after
the  Effective Time shall not  be effective without the  consent of the Company;
PROVIDED, FURTHER, that if any such notice of withdrawal is delivered after  any
petition  has been filed pursuant to Section 7.3 hereof asking for a finding and
determination of  the Fair  Value  of such  Units,  dismissal of  the  appraisal
proceeding  with  respect to  such Units  shall  be subject  to approval  by the
Chancery Court  or, if  applicable,  the Special  Appraiser. If,  however,  such
demand shall be withdrawn as hereinbefore provided, or if no petition asking for
a  finding and determination of  Fair Value of such  Units by the Chancery Court
shall have been  filed within the  time provided  in Section 7.3  hereof, or  if
after  the  hearing of  a petition  filed  pursuant to  Section 7.3  hereof, the
Chancery Court  shall determine  that such  Unitholder is  not entitled  to  the
relief  provided by Section 7.3 hereof, then,  in any such case, such Unitholder
and all persons  claiming under  him or  her shall be  bound by  the Merger  and
entitled  to receive the Conversion Consideration,  the right of such Unitholder
to be paid the Fair Value of his or her Units shall cease, and his or her status
as a  Unitholder of  Units exchanged  in the  Merger shall  be restored  without
prejudice  to any proceedings that may have been taken by the Company during the
interim, and such Unitholder shall be entitled to receive any distributions made
with respect to such Conversion Consideration in the interim.

    (c) The provisions of Sections 7.3 and 7.4 hereof relating to the procedures
to be followed to determine  the Fair Value of the  Units shall be conformed  as
nearly  as practicable  to the procedure  required to be  followed in connection
with the exercise of dissenters' rights by a stockholder of a corporation formed
under the DGCL as set forth in Section  262 of the DGCL. In the event that  such
procedures  cannot  be followed,  then the  Company shall  implement alternative
procedures designed to produce results substantially similar to those that would
be effected if Section 262 of the DGCL applied to the Merger.

                                      D-13
<PAGE>
                                  ARTICLE VIII
                                  THE CLOSINGS

    Section 8.1  THE CLOSINGS.   Each of the  Transactions set forth herein  and
each  of the  closings of  such Transactions as  set forth  below are contingent
upon, and shall  not be consummated  unless, all of  the Transactions set  forth
herein  and all  of the  closings of  such Transactions  as set  forth below are
consummated as provided herein.

    (a) Upon the terms  and conditions hereof, the  closing of the  transactions
contemplated  by Article I hereof (the "First  Closing") shall take place at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY  10017
(the "Place of Closing") at 10:00 a.m., New York City time, on the Meeting Date,
or  at such  other date, time  and place as  the Company and  the Partnership GP
shall agree (the "Closing Date").

    (b) The closing of the transactions  contemplated by Article II hereof  (the
"Second  Closing") shall take place at the  Place of Closing on the Closing Date
promptly following consummation of the First Closing.

    (c) The closing of the transactions contemplated by Article III hereof  (the
"Third  Closing") shall take place  at the Place of  Closing on the Closing Date
promptly following consummation of the Second Closing.

    (d) The closing of the transactions  contemplated by Article IV hereof  (the
"Fourth  Closing") shall take place at the  Place of Closing on the Closing Date
promptly following consummation of the Third Closing.

    (e) The closing of  the transactions contemplated by  Article V hereof  (the
"Fifth  Closing") shall take place  at the Place of  Closing on the Closing Date
promptly following consummation of the Fourth Closing.

    (f) The closing of the transactions  contemplated by Article VI hereof  (the
"Sixth  Closing") shall take place  at the Place of  Closing on the Closing Date
promptly following consummation of the Fifth Closing.

    Section 8.2  DELIVERIES AT THE FIRST  CLOSING.  At the First Closing,  EIPCC
shall  cause the PICC Merger  to become effective pursuant  to Article I hereof,
and shall execute,  deliver and  file, or cause  to be  executed, delivered  and
filed,  all such other documents, instruments or writings required to effect the
PICC Merger, required to  be delivered pursuant to  this Agreement or  otherwise
required in connection herewith.

    Section 8.3  DELIVERIES AT THE SECOND CLOSING.

    (a)  At the Second Closing, the EIPCC Stockholders shall deliver or cause to
be delivered (unless previously delivered) the following to the Company:

        (i) stock certificates representing  the EIPCC Common Stock  accompanied
    by  stock  powers duly  endorsed in  blank or  accompanied by  duly executed
    instruments of transfer, with all  necessary transfer tax and other  revenue
    stamps affixed thereto;

        (ii)  the stock books, stock ledgers, minute books and corporate seal of
    EIPCC and PICC;

       (iii) written resignations  of all  directors and officers  of EIPCC  and
    PICC; and

       (iv)  all  other  documents,  instruments  and  writings  required  to be
    delivered by  the  EIPCC  Stockholders  to  the  Company  pursuant  to  this
    Agreement or otherwise required in connection herewith.

                                      D-14
<PAGE>
    (b)  At  the  Second Closing,  the  Company  shall deliver  or  cause  to be
delivered (unless previously delivered) the following to the EIPCC Stockholders:

        (i)  one  or  more  unlegended  certificates,  in  definitive  form  and
    registered  in  the  names of  the  EIPCC Stockholders  or  their assignees,
    representing the shares  of the Company  Common Stock to  be issued to  them
    pursuant to Section 2.1(b) hereof; PROVIDED, that, in the event any transfer
    or  other taxes become payable by reason  of the issuance of any certificate
    representing Company Common  Stock in any  name other than  that of a  EIPCC
    Stockholder,  such  assignee  must  pay  such tax  to  the  Company  or must
    establish to the satisfaction of the Company that such tax has been paid  or
    is not payable; and

        (ii)  all  other  documents,  instruments and  writings  required  to be
    delivered by  the  Company  to  the  EIPCC  Stockholders  pursuant  to  this
    Agreement or otherwise required in connection herewith.

    Section 8.4  DELIVERIES AT THE THIRD CLOSING.

    (a) At the Third Closing, the Partnership GP Partners shall deliver or cause
to  be  delivered (unless  previously delivered)  to  the Company  duly executed
assignments of the  Partnership GP  Interests; and  EIPCC shall  deliver to  the
Company,  (i)  written  resignations  of  all  directors  and  officers  of  the
Partnership GP  (or of  the individuals  holding similar  offices or  performing
comparable  functions  at the  Partnership GP);  and  (ii) all  other documents,
instruments and writings required to be delivered by the Partnership GP Partners
to the Company pursuant  to this Agreement or  otherwise required in  connection
herewith.

    (b) At the Third Closing, the Company shall deliver or cause to be delivered
(unless previously delivered) the following to the Partnership GP Partners:

        (i)  one  or  more  unlegended  certificates,  in  definitive  form  and
    registered in the names of the  Partnership GP Partners or their  assignees,
    representing  the  shares  of Company  Common  Stock  to be  issued  to them
    pursuant to Section 3.1(b) hereof; PROVIDED, that, in the event any transfer
    or other taxes become payable by  reason of the issuance of any  certificate
    representing  Company  Common  Stock  in  any  name  other  than  that  of a
    Partnership GP Partner, such  assignee must pay such  tax to the Company  or
    must  establish to the  satisfaction of the  Company that such  tax has been
    paid or is not payable; and

        (ii) all  other  documents,  instruments and  writings  required  to  be
    delivered  by the Company,  to the Partnership GP  Partners pursuant to this
    Agreement or otherwise required in connection herewith.

    Section 8.5  DELIVERIES AT THE FOURTH CLOSING.

    (a) At  the Fourth  Closing,  the Operating  Partnership GP  Partners  shall
deliver  or cause to  be delivered (unless previously  delivered) to the Company
duly executed assignments of the  Operating Partnership GP Interests; and  EIPCC
shall  deliver  to the  Company (i)  written resignations  of all  directors and
officers of the Operating Partnership GP (or of the individuals holding  similar
offices or performing comparable functions at the Operating Partnership GP); and
(ii)  all other documents, instruments and  writings required to be delivered by
the Operating Partnership GP Partners to the Company pursuant to this  Agreement
or otherwise required in connection herewith.

    (b)  At  the  Fourth Closing,  the  Company  shall deliver  or  cause  to be
delivered  (unless  previously  delivered)   the  following  to  the   Operating
Partnership GP Partners:

        (i)  one  or  more  unlegended  certificates,  in  definitive  form  and
    registered in the names  of the Operating Partnership  GP Partners or  their
    assignees,  representing the shares of Company  Common Stock to be issued to
    them pursuant  to  Section  4.1(b)  hereof; PROVIDED,  that,  in  the  event

                                      D-15
<PAGE>
    any  transfer or other taxes become payable by reason of the issuance of any
    certificate representing Company Common Stock in any name other than that of
    a Operating Partnership GP Partner, such  assignee must pay such tax to  the
    Company  or must establish to the satisfaction  of the Company that such tax
    has been paid or is not payable; and

        (ii) all  other  documents,  instruments and  writings  required  to  be
    delivered  by the Company, to the Operating Partnership GP Partners pursuant
    to this Agreement or otherwise required in connection herewith.

    Section 8.6  DELIVERIES AT THE FIFTH CLOSING.

    (a) At the Fifth Closing, the  Company and EIPCC shall execute, deliver  and
file,  or  cause  to  be  executed, delivered  and  filed,  all  such documents,
instruments or writings required to effect the formation of PTP as set forth  in
Section  5.1  hereof, required  to be  delivered pursuant  to this  Agreement or
otherwise required in connection herewith.

    (b)  At  the  Fifth  Closing,  immediately  following  consummation  of  the
deliveries set forth in clause (a) above, the Partnership shall cause the Merger
to become effective pursuant to Article V hereof, and shall execute, deliver and
file,  or cause to be  executed, delivered and filed,  all such other documents,
instruments or writings required to effect the Merger, required to be  delivered
pursuant  to this  Agreement or otherwise  required in  connection herewith, and
shall return the Company's and EIPCC's capital contributions in PTP.

    Section 8.7  DELIVERIES  AT THE SIXTH  CLOSING.  At  the Sixth Closing,  the
Partnership  shall cause  the Operating  Partnership Merger  to become effective
pursuant to Article VI hereof, and shall execute, deliver and file, or cause  to
be  executed,  delivered and  filed, all  such  other documents,  instruments or
writings required to  effect the  Operating Partnership Merger,  required to  be
delivered  pursuant  to  this  Agreement  or  otherwise  required  in connection
herewith.

                                   ARTICLE IX

                               JOINT AND SEVERAL
                       REPRESENTATIONS AND WARRANTIES OF
                          CERTAIN PARTNERSHIP ENTITIES

    The  Partnership,  the  Operating  Partnership,  the  Partnership  GP,   the
Operating  Partnership GP,  PICC, EIPCC  and Victor  K. Atkins,  Jr., as general
partner of the  Partnership GP  and the  Operating Partnership  GP, jointly  and
severally represent and warrant to the Company as follows:

    Section  9.1   ORGANIZATION.    Each of  the  Partnership and  the Operating
Partnership is a  limited partnership  duly organized, validly  existing and  in
good  standing under  the limited  partnership laws  of the  jurisdiction of its
organization and has all requisite partnership power and authority to own, lease
and operate its properties and to carry on its business as now being  conducted,
except where the failure to be so organized, existing and in good standing or to
have  such power and authority  would not have a  material adverse effect on the
Partnership and the  Operating Partnership  taken as a  whole. As  used in  this
Agreement, any reference to any event, change or effect being material or having
a  material adverse effect on or with respect to an entity (or group of entities
taken as a whole) means  such event, change or  effect is materially adverse  to
the  business, properties, assets, results of operations, financial condition or
prospects of such entity  (or such group  of entities taken as  a whole) or  the
ability  of such  entity (or such  group of  entities) to consummate  any of the
Transactions in accordance with this Agreement.

    Section 9.2  CAPITALIZATION.  As of the date hereof, (a)(i) 16,010,441 Units
are issued  and outstanding  and (ii)  the Partnership  GP is  the sole  general
partner  in the Partnership and (b)(i)  all the limited partnership interests in
the Operating Partnership are validly issued  and owned by the Partnership  free
and clear of all Liens and (ii) the Operating Partnership GP is the sole general
partner  in the Operating Partnership. As of  the date hereof 534,503 Units were
reserved for issuance

                                      D-16
<PAGE>
upon  the  exercise  of  rights  ("First  Rights")  pursuant  to  the  Operating
Partnership's  1987  Employee  Ownership  Plan (the  "Employee  Plan")  and 1987
Management Ownership Plan (the "Management Plan" and together with the  Employee
Plan, the "Partnership Plans") and First Rights in respect of 312,500 Units have
been  granted and are outstanding. As of  the date hereof, no bonds, debentures,
notes or  other indebtedness  having  the right  to  vote (or  convertible  into
securities  having the right to vote) ("Voting  Debt") of the Partnership or the
Operating Partnership  are issued  or outstanding.  Except as  set forth  above,
there are no existing options, warrants, calls, subscriptions or other rights or
other  agreements  or commitments  of any  character relating  to the  issued or
unissued Units or other partnership interests or Voting Debt of the  Partnership
or  the Operating  Partnership or  obligating the  Partnership or  the Operating
Partnership to issue,  transfer or sell  or cause to  be issued, transferred  or
sold any Units or other partnership interests or Voting Debt of, or other equity
interests  in,  the  Partnership  or  the  Operating  Partnership  or securities
convertible into or exchangeable for  such Units or other partnership  interests
or  equity interests or obligating the  Partnership or the Operating Partnership
to grant, extend or enter into  any such option, warrant, call, subscription  or
other  right,  agreement or  commitment.  There are  no  outstanding contractual
obligations of  the  Partnership or  the  Operating Partnership  to  repurchase,
redeem  or otherwise  acquire any  Units or  other partnership  interests of the
Partnership or the Operating Partnership.

    Section 9.3    AUTHORITY.    Each  of  the  Partnership  and  the  Operating
Partnership  has the  requisite partnership power  and authority  to execute and
deliver this Agreement  and to consummate  the Transactions contemplated  hereby
(other  than,  with respect  to the  Merger,  the approval  and adoption  of the
proposal to effect the  Conversion (the "Conversion  Proposal") by the  required
vote  of  the  Unitholders). The  execution,  delivery and  performance  of this
Agreement by  each of  the Partnership  and the  Operating Partnership  and  the
consummation   by  the  Partnership   and  the  Operating   Partnership  of  the
Transactions contemplated  hereby have  been duly  authorized by  all  necessary
partnership  action on the part of the Partnership and the Operating Partnership
and no other partnership action on the part of the Partnership or the  Operating
Partnership  is  necessary  to authorize  this  Agreement or  to  consummate the
Transactions so  contemplated  (other than,  with  respect to  the  Merger,  the
approval  and adoption of  the Conversion Proposal  by the required  vote of the
Unitholders). This  Agreement  has  been  duly executed  and  delivered  by  the
Partnership and the Operating Partnership.

                                   ARTICLE X
                          SEVERAL REPRESENTATIONS AND
                   WARRANTIES OF CERTAIN PARTNERSHIP ENTITIES

    Section 10.1  REPRESENTATIONS AND WARRANTIES OF THE EIPCC STOCKHOLDERS.  Mr.
Atkins  represents and warrants to the Company with respect to clauses (a), (b),
(c)(ii), (d) (to the extent  applicable to EIPCC or PICC),  (e) and (g) of  this
Section  10.1  and each  of  the EIPCC  Stockholders  severally and  not jointly
represents and warrants to the Company  with respect to clauses (c)(i), (d)  (to
the  extent applicable to the EIPCC stockholders)  and (f) of this Section 10.1,
as follows:

    (a) ORGANIZATION.  Each of EIPCC  and PICC is a corporation duly  organized,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,  lease
and  operate its properties and to carry  on its business as now being conducted
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not have a material adverse effect on  EIPCC
and  PICC. The EIPCC Stockholders will provide the Company with true and correct
copies of  the Certificate  of  Incorporation and  By-laws  of EIPCC  and  PICC,
together with all amendments thereto.

    (b)  CAPITALIZATION.  As of the date  hereof, (i) the issued and outstanding
capital stock of EIPCC consists of 70 shares of EIPCC Common Stock, and (ii) all
of the issued and outstanding capital stock of PICC (the "PICC Common Stock") is
owned beneficially and of record  by EIPCC. No Voting Debt  of EIPCC or PICC  is
issued  or  outstanding.  Except  for  this  Agreement,  there  are  no options,
warrants,  calls,  subscriptions  or  other   rights  or  other  agreements   or
commitments of any character relating to

                                      D-17
<PAGE>
the  issued  or  unissued capital  stock  or Voting  Debt  of EIPCC  or  PICC or
obligating EIPCC or  PICC to  issue, transfer  or sell  or cause  to be  issued,
transferred  or sold  any shares of  capital stock  or Voting Debt  of, or other
equity  or  partnership  interests  in,  EIPCC  or  PICC  or  of  any  of  their
Subsidiaries  or securities convertible into or  exchangeable for such shares or
equity interests or obligating EIPCC or PICC to grant, extend or enter into  any
such   option,  warrant,  call,  subscription   or  other  right,  agreement  or
commitment.

    (c) AUTHORITY.   (i)  Such EIPCC  Stockholder has  the requisite  power  and
authority and full legal capacity to execute, deliver and perform this Agreement
and  to consummate the Transactions contemplated hereby. This Agreement has been
duly executed  and  delivered  by  such  EIPCC  Stockholder  and  assuming  this
Agreement constitutes a valid and binding obligation of the Company, constitutes
a  valid and  binding obligation of  such EIPCC  Stockholder enforceable against
such person in accordance with its terms.

        (ii) Each of EIPCC and PICC has requisite corporate power and  authority
    to  execute and  deliver this Agreement  and to  consummate the transactions
    contemplated  hereby.  The  execution,  delivery  and  performance  of  this
    Agreement  by each of EIPCC  and PICC and the  consummation by each of EIPCC
    and PICC of the Transactions  contemplated hereby have been duly  authorized
    by  all necessary corporate action on the part of each of EIPCC and PICC and
    no other corporate proceedings on the part of EIPCC or PICC is necessary  to
    authorize  this Agreement or to consummate the transactions so contemplated.
    This Agreement has  been duly executed  and delivered by  each of EIPCC  and
    PICC  and assuming this Agreement constitutes a valid and binding obligation
    of the Company, constitutes a valid and binding obligation of each of  EIPCC
    and PICC enforceable against it in accordance with its terms.

    (d)  CONSENTS AND  APPROVALS; NO VIOLATIONS.   Except  for filings, permits,
authorizations, consents  and approvals  as  may be  required under,  and  other
applicable  requirements  of,  the  Exchange  Act,  the  Securities  Act,  state
securities or blue  sky laws, the  HSR Act, the  DGCL, the DRULPA,  the laws  of
other states in which EIPCC is qualified to do or is doing business, neither the
execution,  delivery or performance of this  Agreement by such EIPCC Stockholder
nor the consummation by such EIPCC Stockholder of the transactions  contemplated
hereby  nor  compliance by  such EIPCC  Stockholder with  any of  the provisions
hereof will (i) conflict with  or result in any breach  of any provision of  the
certificate  of incorporation or by-laws of EIPCC, (ii) require any filing with,
or permit,  authorization,  consent  or approval  of,  any  Governmental  Entity
(except  where the failure  to obtain such  permits, authorizations, consents or
approvals or to make such  filings would not have  a material adverse effect  on
such  EIPCC Stockholder, EIPCC or  PICC), (iii) result in  a violation or breach
of, or  constitute (with  or without  due notice  or lapse  of time  or both)  a
default (or give rise to any right of termination, cancellation or acceleration)
under,  any of the terms, conditions or  provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other instrument or obligation
to which such EIPCC  Stockholder, EIPCC or PICC  is a party or  by which any  of
them  or any  of their  properties or assets  may be  bound or  (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to  such
EIPCC  Stockholder, EIPCC or PICC, except, in the case of clauses (iii) or (iv),
for violations, breaches  or defaults which  would not, individually  or in  the
aggregate,  have a material  adverse effect on such  EIPCC Stockholder, EIPCC or
PICC; provided, however, the representations in  this clause (d) shall apply  to
the EIPCC Stockholders in their individual capacity only and shall not be deemed
to apply to such EIPCC Stockholders in any other capacity.

    (e) SUBSIDIARIES; UNITS.  (i) Other than PICC, the Operating Partnership GP,
the  Operating  Partnership  and  wholly  owned  Subsidiaries  of  the Operating
Partnership, EIPCC  has no  Subsidiaries.  EIPCC owns  its direct  and  indirect
interests  in PICC, the  Operating Partnership GP  and the Operating Partnership
free and clear  of any  and all  Liens. EIPCC  does not  own, and  prior to  the
Effective Time will not acquire, any Units.

                                      D-18
<PAGE>
        (ii)   Other  than  the  Operating  Partnership  GP  and  the  Operating
    Partnership and wholly owned Subsidiaries of the Operating Partnership, PICC
    has no  Subsidiaries. PICC  owns  its general  partnership interest  in  the
    Operating  Partnership GP free and clear of any and all Liens. PICC does not
    own, and prior to the Effective Time will not acquire, any Units.

    (f) OWNERSHIP OF  SHARES; TITLE.   Such EIPCC  Stockholder is  the owner  of
record  and beneficially of the shares of  EIPCC Common Stock set forth opposite
such EIPCC Stockholder's name  on Annex III hereto.  Such EIPCC Stockholder  has
not  received any notice of any adverse claim to the ownership of any such EIPCC
Common Stock and does not have any reason to know of any such adverse claim that
may be justified. On  the Closing Date, such  EIPCC Stockholder shall have  good
and  transferable title to the EIPCC Common  Stock set forth opposite such EIPCC
Stockholder's name  on  Annex III  hereto,  free and  clear  of all  Liens.  The
delivery  of  certificates  for  the  EIPCC Common  Stock  owned  by  such EIPCC
Stockholder to  the Company  pursuant to  this Agreement  will transfer  to  the
Company good and transferable title to the EIPCC Common Stock set forth opposite
such EIPCC Stockholder's name on Annex III hereto free and clear of all Liens.

    (g)  NO LIABILITIES.  (i) EIPCC has  not engaged in any business or activity
of any kind, or  entered into any  agreement or arrangement  with any person  or
entity,  except, in each case,  in connection with its  ownership of 100% of the
capital stock of PICC and serving as managing general partner of the Partnership
GP.  EIPCC  has  not  incurred,  directly  or  indirectly,  any  liabilities  or
obligations,  except for liabilities or obligations  incurred by EIPCC acting in
its capacity as managing general partner of the Partnership GP (such liabilities
being referred to as "Partnership GP Liabilities").

        (ii) PICC has not engaged  in any business or  activity of any kind,  or
    entered  into any agreement or arrangement with any person or entity except,
    in each  case,  in connection  with  serving as  a  general partner  of  the
    Operating Partnership GP. PICC has not incurred, directly or indirectly, any
    liabilities  or obligations, except for  liabilities or obligations incurred
    by PICC  acting  in  its  capacity  as  general  partner  of  the  Operating
    Partnership  GP  (such liabilities  being herein  referred to  as "Operating
    Partnership GP Liabilities").

    Section  10.2    REPRESENTATIONS  AND  WARRANTIES  OF  THE  PARTNERSHIP   GP
PARTNERS.   Mr. Atkins  represents and warrants  to the Company  with respect to
clauses (a), (b), (d) (to the extent applicable to the Partnership GP), (e)  and
(g)  of this Section 10.2 and each  of the Partnership GP Partners severally and
not jointly represents and warrants to the Company with respect to clauses  (c),
(d)  (to the extent applicable  to such Partnership GP  Partner) and (f) of this
Section 10.2, as follows:

    (a) ORGANIZATION.    The  Partnership  GP  is  a  limited  partnership  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization  and has all requisite  power and authority  to
own,  lease and operate its properties and to carry on its business as now being
conducted except where  the failure  to be so  organized, existing  and in  good
standing  or to have such power and  authority would not have a material adverse
effect on  the Partnership  GP. The  Partnership GP  Partners will  provide  the
Company   with  true  and  correct  copies  of  the  partnership  agreement  and
certificate of  limited partnership  of the  Partnership GP,  together with  all
amendments thereto.

    (b)  CAPITALIZATION.   Annex  I  hereto sets  forth  all of  the outstanding
Partnership GP Interests.  No Voting  Debt of the  Partnership GP  is issued  or
outstanding.  Except for this Agreement, there  are no options, warrants, calls,
subscriptions or  other  rights  or  other  agreements  or  commitments  of  any
character  relating to  the issued or  unissued partnership  interests or Voting
Debt of the Partnership GP or  obligating the Partnership GP to issue,  transfer
or  sell or cause to be issued, transferred or sold any partnership interests or
Voting Debt of, or other  equity interests in, the Partnership  GP or of any  of
its  Subsidiaries  or  securities  convertible  into  or  exchangeable  for such
partnership interests or equity  interests or obligating  the Partnership GP  to
grant,  extend or  enter into  any such  option, warrant,  call, subscription or
other right, agreement or commitment.

    (c) AUTHORITY.   Such Partnership  GP Partner  has the  requisite power  and
authority  to execute, deliver and perform  this Agreement and to consummate the
Transactions contemplated hereby. The

                                      D-19
<PAGE>
execution, delivery and  performance of  this Agreement by  such Partnership  GP
Partner  and the consummation of the Transactions contemplated hereby, have been
duly authorized  by all  necessary action  on the  part of  such Partnership  GP
Partner,  as applicable, and no other action  on the part of such Partnership GP
Partner  is  necessary  to  authorize  this  Agreement  or  to  consummate   the
transactions  so  contemplated.  This  Agreement  has  been  duly  executed  and
delivered by such Partnership GP Partner and assuming this Agreement constitutes
a valid and binding obligation of  the Company, constitutes a valid and  binding
obligation  of such Partnership GP Partner  enforceable against it in accordance
with its terms.

   
    (d) CONSENTS AND  APPROVALS; NO  VIOLATIONS.  Except  for filings,  permits,
authorizations,  consents  and approvals  as may  be  required under,  and other
applicable  requirements  of,  the  Exchange  Act,  the  Securities  Act,  state
securities  or blue  sky laws, the  HSR Act, the  DGCL, the DRULPA,  the laws of
other states  in  which the  Partnership  GP is  qualified  to do  or  is  doing
business,  neither the execution,  delivery or performance  of this Agreement by
such Partnership GP Partner nor the consummation by such Partnership GP  Partner
of  the transactions contemplated  hereby nor compliance  by such Partnership GP
Partner with any of the  provisions hereof will (i)  conflict with or result  in
any  breach of any provision of the  partnership agreement of the Partnership GP
or  such  Partnership  GP  Partner,   as  applicable,  or  the  certificate   of
incorporation  or by-laws  of such Partnership  GP Partner,  as applicable, (ii)
require any filing with, or permit,  authorization, consent or approval of,  any
Governmental   Entity  (except  where  the   failure  to  obtain  such  permits,
authorizations, consents or approvals or to  make such filings would not have  a
material  adverse effect on such Partnership  GP Partner or the Partnership GP),
(iii) result in a  violation or breach  of, or constitute  (with or without  due
notice  or  lapse of  time or  both) a  default (or  give rise  to any  right of
termination, cancellation or acceleration) under,  any of the terms,  conditions
or  provisions of any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which such Partnership GP Partner
or the  Partnership GP  is a  party or  by which  any of  them or  any of  their
properties  or assets may be bound or  (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to such Partnership GP Partner or
the Partnership  GP,  except,  in  the  case  of  clauses  (iii)  or  (iv),  for
violations,  breaches  or  defaults  which would  not,  individually  or  in the
aggregate, have a material adverse effect on such Partnership GP Partner or  the
Partnership  GP; provided, however, the representations in this clause (d) shall
apply to the Partnership GP Partners in their individual capacity only and shall
not be deemed to apply to such Partnership GP Partners in any other capacity.
    

    (e)  SUBSIDIARIES;  UNITS.    Other  than  the  Partnership,  the  Operating
Partnership  and  wholly owned  Subsidiaries of  the Operating  Partnership, the
Partnership GP  has no  Subsidiaries. The  Partnership GP  owns its  partnership
interest in the Partnership free and clear of any and all Liens. The Partnership
GP does not own, and prior to the Effective Time will not acquire, any Units.

    (f)  OWNERSHIP OF PARTNERSHIP INTERESTS; TITLE.  Such Partnership GP Partner
is the owner  of record  and beneficially of  the Partnership  GP Interests  set
forth  opposite  such Partnership  GP  Partner's name  on  Annex I  hereto. Such
Partnership GP Partner has not received any  notice of any adverse claim to  the
ownership  of any such Partnership GP Interests  and does not have any reason to
know of any such adverse claim that may be justified. On the Closing Date,  such
Partnership GP Partner shall have good and transferable title to the Partnership
GP  Interests set forth opposite  such Partnership GP Partner's  name on Annex I
hereto, free  and  clear of  all  Liens. The  delivery  of assignments  for  the
Partnership  GP Interests owned  by such Partnership GP  Partners to the Company
pursuant to this Agreement  will transfer to the  Company good and  transferable
title  to the  Partnership GP Interests  set forth opposite  such Partnership GP
Partner's name on Annex I hereto free and clear of all Liens.

    (g) NO LIABILITIES.  The Partnership GP  has not engaged in any business  or
activity  of any  kind, or  entered into any  agreement or  arrangement with any
person or entity, except in each case in connection with serving as the  general
partner of the Partnership. The Partnership GP has not

                                      D-20
<PAGE>
incurred,  directly or  indirectly, any  liabilities or  obligations, except for
liabilities or obligations incurred by the Partnership GP acting in its capacity
as general partner of the Partnership (such liabilities being herein referred to
as "Partnership Liabilities").

    Section 10.3  REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP GP
PARTNERS. Mr. Atkins  represents and  warrants to  the Company  with respect  to
clauses (a), (b), (d) (to the extent applicable the to the Operating Partnership
GP),  (e) and (g) of this Section 10.3  and each of the Operating Partnership GP
Partners severally and not jointly represents  and warrants to the Company  with
respect  to  clauses  (c),  (d)  (to the  extent  applicable  to  such Operating
Partnership GP Partner) and (f) of this Section 10.3, as follows:

    (a) ORGANIZATION.   The Operating  Partnership GP is  a limited  partnership
duly  organized, validly  existing and  in good standing  under the  laws of the
jurisdiction of its organization  and has all requisite  power and authority  to
own,  lease and operate its properties and to carry on its business as now being
conducted except where  the failure  to be so  organized, existing  and in  good
standing  or to have such power and  authority would not have a material adverse
effect on the Operating  Partnership GP. The  Operating Partnership GP  Partners
will  provide  the  Company with  true  and  correct copies  of  the partnership
agreement and certificate  of limited partnership  of the Operating  Partnership
GP, together with all amendments thereto.

    (b)  CAPITALIZATION.   Annex  II hereto  sets forth  all of  the outstanding
Operating Partnership GP Interests. No Voting Debt of the Operating  Partnership
GP  is issued or outstanding.  Except for this Agreement,  there are no existing
options, warrants, calls, subscriptions or  other rights or other agreements  or
commitments  of any  character relating  to the  issued or  unissued partnership
interests or  Voting Debt  of the  Operating Partnership  GP or  obligating  the
Operating  Partnership GP  to issue,  transfer or  sell or  cause to  be issued,
transferred or sold any partnership interests or Voting Debt of, or other equity
interests in, the  Operating Partnership  GP or of  any of  its Subsidiaries  or
securities  convertible into or  exchangeable for such  partnership interests or
equity interests or obligating the Operating Partnership GP to grant, extend  or
enter  into  any  such  option,  warrant,  call,  subscription  or  other right,
agreement or commitment.

    (c) AUTHORITY.   Such  Operating Partnership  GP Partner  has the  requisite
power  and  authority to  execute,  deliver and  perform  this Agreement  and to
consummate the  Transactions contemplated  hereby. The  execution, delivery  and
performance  of this Agreement by such  Operating Partnership GP Partner and the
consummation of the Transactions contemplated hereby, have been duly  authorized
by all necessary action on the part of such Operating Partnership GP Partner, as
applicable,  and no other  action on the  part of such  Operating Partnership GP
Partner  is  necessary  to  authorize  this  Agreement  or  to  consummate   the
transactions  so  contemplated.  This  Agreement  has  been  duly  executed  and
delivered by such Operating Partnership  GP Partner and assuming this  Agreement
constitutes  a valid and binding obligation  of the Company, constitutes a valid
and binding  obligation of  such Operating  Partnership GP  Partner  enforceable
against it in accordance with its terms.

    (d)  CONSENTS AND  APPROVALS; NO VIOLATIONS.   Except  for filings, permits,
authorizations, consents  and approvals  as  may be  required under,  and  other
applicable  requirements  of,  the  Exchange  Act,  the  Securities  Act,  state
securities or blue  sky laws, the  HSR Act, the  DGCL, the DRULPA,  the laws  of
other  states in  which the Operating  Partnership GP  is qualified to  do or is
doing business, neither the execution, delivery or performance of this Agreement
by such Operating Partnership GP Partner nor the consummation by such  Operating
Partnership GP Partner of the transactions contemplated hereby nor compliance by
the  Operating Partnership GP Partner with any of the provisions hereof will (i)
conflict with  or result  in any  breach  of any  provision of  the  partnership
agreement

                                      D-21
<PAGE>
of  the Operating Partnership GP, or the certificate of incorporation or by-laws
of such Operating Partnership GP Partner, as applicable, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental  Entity
(except  where the failure  to obtain such  permits, authorizations, consents or
approvals or to make such  filings would not have  a material adverse effect  on
such  Operating Partnership GP  Partner or the  Operating Partnership GP), (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time  or both) a  default (or give  rise to any  right of  termination,
cancellation  or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage,  indenture, license, lease, contract, agreement  or
other instrument or obligation to which such Operating Partnership GP Partner or
the  Operating Partnership GP is a party or by which any of them or any of their
properties or assets may be bound  or (iv) violate any order, writ,  injunction,
decree,  statute, rule or regulation applicable to such Operating Partnership GP
Partner or the Operating Partnership GP, except, in the case of clauses (iii) or
(iv), for violations, breaches or defaults  which would not, individually or  in
the  aggregate, have a material adverse  effect on such Operating Partnership GP
Partner or the Operating Partnership GP; provided, however, the  representations
in this clause (d) shall apply to the Operating Partnership GP Partners in their
individual  capacity only  and shall  not be deemed  to apply  to such Operating
Partnership GP Partners in any other capacity.

    (e) SUBSIDIARIES; UNITS.   Other than the  Operating Partnership and  wholly
owned  Subsidiaries of the  Operating Partnership, the  Operating Partnership GP
has no Subsidiaries. The Operating  Partnership GP owns its general  partnership
interest  in the Operating Partnership free and  clear of any and all Liens. The
Operating Partnership GP does not own, and prior to the Effective Time will  not
acquire, any Units.

    (f)  OWNERSHIP OF PARTNERSHIP INTERESTS;  TITLE.  Such Operating Partnership
GP Partner is the owner of record and beneficially of the Operating  Partnership
GP  Interests set forth opposite such Operating Partnership GP Partner's name on
Annex II hereto.  Such Operating  Partnership GP  Partner has  not received  any
notice  of any adverse claim to the  ownership of any such Operating Partnership
GP Interests and does not have any reason to know of any such adverse claim that
may be justified.  On the Closing  Date, such Operating  Partnership GP  Partner
shall have good and transferable title to the Operating Partnership GP Interests
set  forth opposite  such Operating  Partnership GP  Partner's name  on Annex II
hereto, free  and  clear of  all  Liens. The  delivery  of assignments  for  the
Operating  Partnership  GP  Interests  owned by  such  Operating  Partnership GP
Partner to the Company pursuant to  this Agreement will transfer to the  Company
good  and transferable title to the  Operating Partnership GP Interest set forth
opposite such Operating Partnership GP Partner's  name on Annex II hereto,  free
and clear of all Liens.

    (g)  NO LIABILITIES.   The Operating Partnership  GP has not  engaged in any
business or activity of any kind,  or entered into any agreement or  arrangement
with  any person or entity, except, in  each case, in connection with serving as
the general partner of the  Operating Partnership. The Operating Partnership  GP
has not incurred, directly or indirectly, any liabilities or obligations, except
for  liabilities or obligations incurred by  the Operating Partnership GP acting
in  its  capacity  as  general  partner  of  the  Operating  Partnership   (such
liabilities being herein referred to as "Operating Partnership Liabilities").

                                   ARTICLE XI
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

    The Company represents and warrants to the Partnership Entities as follows:

    Section  11.1  ORGANIZATION.   The Company is  a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of  its
incorporation  and has all requisite corporate power and authority to own, lease
and  operate  its  properties  and  to  carry  on  its  business  as  now  being

                                      D-22
<PAGE>
conducted  and as contemplated to be  conducted following the Conversion, except
where the failure to be so organized,  existing and in good standing or to  have
such  power  and authority  would  not have  a  material adverse  effect  on the
Company.

    Section 11.2  CAPITALIZATION.  As of the date hereof, the authorized capital
stock of the Company consists of: (i) 80,000,000 shares of Company Common Stock,
of which 3,000 shares were issued and outstanding and none of which were held in
treasury; and (ii)  20,000,000 shares  of preferred  stock, par  value $.01  per
share,  none of which are issued and  outstanding. All the outstanding shares of
the Company's capital stock  are, and all shares  of Company Common Stock  which
are  to  be  issued to  Unitholders  pursuant to  the  Merger or  issued  to the
Transferors pursuant to the Transactions set  forth in this Agreement, or  which
may  be issued pursuant to the Partnership  Plans after the Merger will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully  paid and  non-assessable and  free of  any preemptive  rights  in
respect  thereto. No Voting Debt of the Company is issued or outstanding. Except
as set forth above  and except for  shares of Company Common  Stock that may  be
issued  pursuant to the  Partnership Plans and except  for this Agreement, there
are no existing options, warrants, calls, subscriptions or other rights or other
agreements or commitments of  any character relating to  the issued or  unissued
capital  stock or Voting Debt of the Company or obligating the Company to issue,
transfer or  sell or  cause to  be issued,  transferred or  sold any  shares  of
capital  stock or Voting Debt  of, or other equity  interests in, the Company or
securities convertible into or exchangeable for such shares or equity  interests
or  obligating  the Company  to grant,  extend  or enter  into any  such option,
warrant, call, subscription or other right, agreement or commitment.

    Section 11.3  AUTHORITY.  The Company has the requisite corporate power  and
authority   to  execute  and  deliver  this  Agreement  and  to  consummate  the
transactions contemplated  hereby. The  execution, delivery  and performance  of
this  Agreement by the Company and the consummation by the Company of the Merger
and the other Transactions contemplated hereby have been duly authorized by  all
necessary  corporate action on  the part of  the Company and  no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been  duly
executed  and delivered by the Company and assuming this Agreement constitutes a
valid and binding obligation  of the Partnership  Entities, constitutes a  valid
and  binding obligation of the Company enforceable against it in accordance with
its terms.

    Section 11.4  NO ACTIVITY.  The  Company has not engaged in any business  or
activity  of any  kind, or  entered into any  agreement or  arrangement with any
person or entity or incurred,  directly or indirectly, any material  liabilities
or  obligations, except in connection with its incorporation and capitalization,
the Merger and the other Transactions and the negotiation of this Agreement. The
Company owns at least 3,000 Units.

                                  ARTICLE XII
                                   COVENANTS

    Section 12.1  CONDUCT OF BUSINESS OF CERTAIN PARTNERSHIP ENTITIES.

    (a)     CONDUCT  OF   BUSINESS  OF   THE  OPERATING   PARTNERSHIP  AND   THE
PARTNERSHIP.   Except  as contemplated  by this  Agreement and  the transactions
contemplated hereby,  or with  the prior  written consent  of the  Company,  and
subject  to the provisions  of Section 16.1  hereof, during the  period from the
date of this Agreement to the Effective Time, the Operating Partnership and  the
Partnership  each will  conduct its  operations only  in the  ordinary and usual
course of business consistent  with past practice and  not take any action  that
would  or  is  reasonably likely  to  result in  any  of the  conditions  to the
Transactions set forth in Article XIII  not being satisfied or would  materially
impair  the  ability of  such party  to  consummate any  of the  Transactions in
accordance with the terms hereof or materially delay such consummation.

                                      D-23
<PAGE>
    (b)  CONDUCT OF BUSINESS OF PICC AND EIPCC.  Except as contemplated by  this
Agreement  and the transactions  contemplated hereby, or  with the prior written
consent of the Company, during the period from the date of this Agreement to the
Effective Time, the EIPCC Stockholders  will not, directly or indirectly,  sell,
transfer,  pledge or otherwise convey all or any part of their interest in EIPCC
or PICC, or take any action that would or is reasonably likely to result in  any
of  the  conditions to  the Transactions  set  forth in  Article XIII  not being
satisfied or would materially impair the ability of such party to consummate any
of the Transactions in accordance with the terms hereof or materially delay such
consummation. Except as otherwise expressly  provided in this Agreement and  the
transactions  contemplated hereby, EIPCC and PICC,  prior to the Effective Time,
without the prior written consent of the Company, will not:

        (i) adopt any amendment to its certificate of incorporation or by-laws;

        (ii) issue, reissue, sell, deliver or pledge or authorize or propose the
    issuance, reissuance,  sale,  delivery or  pledge  of additional  shares  of
    capital  stock of any class or  securities convertible into capital stock of
    any class,  or  any  rights, warrants  or  options  to acquire  any  of  the
    foregoing;

       (iii)  adjust, split, combine, subdivide,  reclassify or redeem, purchase
    or otherwise acquire, or propose to redeem or purchase or otherwise acquire,
    any shares of its capital stock or any of its other securities; or

       (iv) sell, lease, transfer, pledge or dispose of EIPCC's interest in PICC
    or PICC's interest in the Operating Partnership GP.

    (c)  CONDUCT OF BUSINESS OF THE  PARTNERSHIP GP.  Except as contemplated  by
this  Agreement  and the  transactions contemplated  hereby,  or with  the prior
written consent  of  the  Company, during  the  period  from the  date  of  this
Agreement  to the Effective Time, the Partnership GP Partners will not, directly
or indirectly, sell,  transfer, pledge or  otherwise convey all  or any part  of
their  interest  in the  Partnership GP,  or take  any action  that would  or is
reasonably likely to  result in any  of the conditions  to the Transactions  set
forth in Article XIII not being satisfied or would materially impair the ability
of such party to consummate any of the Transactions in accordance with the terms
hereof  or  materially delay  such consummation.  Except as  otherwise expressly
provided in  this  Agreement  and  the  transactions  contemplated  hereby,  the
Partnership  GP, prior to the Effective  Time, without the prior written consent
of the Company, will not:

        (i) adopt any amendment to its partnership agreement;

        (ii) issue, reissue, sell, deliver or pledge or authorize or propose the
    issuance, reissuance, sale, delivery or pledge of additional Units or  other
    partnership  interests,  or  securities  convertible  into  Units  or  other
    partnership interests, or any rights, warrants or options to acquire any  of
    the foregoing;

       (iii)  adjust, split, combine, subdivide,  reclassify or redeem, purchase
    or otherwise acquire, or propose to redeem or purchase or otherwise acquire,
    any Units or other partnership interests or any of its other securities; or

       (iv) sell, lease,  transfer, pledge  or dispose of  the Partnership  GP's
    interest in the Partnership.

    (d)    CONDUCT OF  BUSINESS  OF THE  OPERATING  PARTNERSHIP GP.    Except as
contemplated by this Agreement and the transactions contemplated hereby, or with
the prior written consent  of the Company,  during the period  from the date  of
this Agreement to the Effective Time, the Operating Partnership GP Partners will
not,  directly or indirectly, sell, transfer,  pledge or otherwise convey all or
any part of their interest in the  Operating Partnership GP, or take any  action
that  would or is  reasonably likely to result  in any of  the conditions to the
Transactions set forth in Article XIII not

                                      D-24
<PAGE>
being satisfied  or  would  materially  impair the  ability  of  such  party  to
consummate  any  of the  Transactions  in accordance  with  the terms  hereof or
materially delay such  consummation. Except as  otherwise expressly provided  in
this   Agreement  and  the  transactions   contemplated  hereby,  the  Operating
Partnership GP, prior to the Effective  Time, without the prior written  consent
of the Company, will not:

        (i) adopt any amendment to its partnership agreement;

        (ii) issue, reissue, sell, deliver or pledge or authorize or propose the
    issuance,  reissuance, sale, delivery or pledge of additional Units or other
    partnership  interests,  or  securities  convertible  into  Units  or  other
    partnership  interests, or any rights, warrants or options to acquire any of
    the foregoing;

       (iii) adjust, split, combine,  subdivide, reclassify or redeem,  purchase
    or otherwise acquire, or propose to redeem or purchase or otherwise acquire,
    any Units or other partnership interests or any of its other securities; or

       (iv)  sell, lease,  transfer, pledge  or dispose  of its  interest in the
    Operating Partnership.

    Section 12.2  CONDUCT OF  BUSINESS OF THE COMPANY.   Prior to the  Effective
Time,  the Company shall  not engage in  any business or  activity other than in
connection with, or in furtherance  of, its capitalization, the consummation  of
the Transactions contemplated hereby and the Conversion generally.

    Section  12.3  REASONABLE BEST EFFORTS.  Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use its reasonable  best
efforts  to take, or cause to  be taken, all actions, and  to do, or cause to be
done, all  things  necessary, proper  or  advisable under  applicable  laws  and
regulations  to consummate and  make effective the  transactions contemplated by
this Agreement including,  without limitation,  (i) the  prompt preparation  and
filing with the SEC of the S-4 and the Proxy Statement, (ii) such actions as may
be  required to have the S-4 declared  effective under the Securities Act and to
have the  Proxy Statement  cleared  by the  SEC, in  each  case as  promptly  as
practicable,  including  by consulting  with each  other  as to,  and responding
promptly to, any SEC  comments with respect thereto,  and (iii) such actions  as
may  be required to be taken under  applicable state securities or Blue Sky laws
in connection with the issuance of  shares of Company Common Stock  contemplated
hereby.  Each  party shall  promptly  consult with  the  other with  respect to,
provide any necessary information with respect to and provide the other (or  its
counsel)  copies of, all filings made by such party with any Governmental Entity
in connection with this Agreement  and the transactions contemplated hereby.  In
addition,  if at any time prior to the Effective Time any event or circumstances
relating to any  of the  parties hereto, or  any of  their respective  officers,
directors,  or general partners,  should be discovered by  the party hereto, and
which should be set forth in an amendment or supplement to the S-4 or the  Proxy
Statement, the discovering party shall promptly inform the other parties of such
event or circumstance.

    Section  12.4   LETTER OF  THE PARTNERSHIP'S  ACCOUNTANTS.   The Partnership
shall use  its  reasonable  best  efforts  to  cause  to  be  delivered  to  the
Partnership  and the Company  a letter of McGladrey  & Pullen, the Partnership's
independent auditors, dated a date within  two business days before the date  on
which  the S-4 shall become  effective and addressed to  the Partnership and the
Company, in form and  substance reasonably satisfactory  to the Partnership  and
the  Company  and customary  in  scope and  substance  for letters  delivered by
independent  public  accountants  in  connection  with  registration  statements
similar to the S-4, which letter shall be brought down to the Effective Time.

    Section  12.5  ACCESS TO INFORMATION.  Upon reasonable notice, the Operating
Partnership, the Partnership, the Partnership GP, the Operating Partnership  GP,
PICC, and EIPCC, on the one hand, and the Company, on the other hand, shall each
afford   to   the   officers,   employees,   accountants,   counsel   and  other
representatives of the other,  access, during normal  business hours during  the
period  prior to  the Effective Time,  to all its  properties, books, contracts,
commitments and records and, during such

                                      D-25
<PAGE>
period, each of the Operating Partnership, the Partnership, the Partnership  GP,
the  Operating Partnership  GP, PICC,  and EIPCC  and the  Company shall furnish
promptly to  the  other  (a)  a copy  of  each  report,  schedule,  registration
statement and other document filed or received by it during such period pursuant
to  the requirements  of federal securities  laws and (b)  all other information
concerning its  business,  properties and  personnel  as such  other  party  may
reasonably  request. Unless otherwise required by law, the parties will hold any
such information  which is  nonpublic  in confidence  until  such time  as  such
information  otherwise  becomes publicly  available through  no wrongful  act of
either party, and in the event of  termination of this Agreement for any  reason
each party shall promptly return all nonpublic documents obtained from any other
party, and any copies made of such documents, to such other party.

    Section  12.6  UNITHOLDERS MEETING.  The Partnership GP shall call a meeting
of Unitholders to be held as promptly  as practicable for the purpose of  voting
upon  the Conversion Proposal and related  matters. Subject to the provisions of
Section 16.1 hereof the Partnership GP will recommend to Unitholders approval of
such matters.

    Section 12.7  LEGAL CONDITIONS TO MERGER.   Each of the parties hereto  will
take  all  reasonable  actions  necessary  to  comply  promptly  with  all legal
requirements which may be imposed on itself  with respect to the Merger and  the
other  Transactions (which actions shall include, without limitation, furnishing
all information required under the HSR  Act and in connection with approvals  of
or  filings with  any Governmental Entity  and will promptly  cooperate with and
furnish information  to each  other  in connection  with any  such  requirements
imposed  upon  any  of  them  in  connection  with  the  Merger  and  the  other
Transactions). Each  of the  parties  hereto will  take all  reasonable  actions
necessary  to  obtain (and  will  cooperate with  each  other in  obtaining) any
consent,  authorization,  order  or  approval  of,  or  any  exemption  by,  any
Governmental  Entity  or other  public or  private third  party, required  to be
obtained or made by any party hereto in connection with the Merger or the  other
Transactions  or  the  taking of  any  action  contemplated thereby  or  by this
Agreement.

    Section 12.8   AFFILIATES.   Prior to the  Closing Date  the Partnership  GP
shall  deliver to the Company  a letter identifying all  persons who are, at the
time this  Agreement  is  submitted  for approval  to  the  Unitholders  of  the
Partnership,  "affiliates" of the Partnership for purposes of Rule 145 under the
Securities Act. The  Partnership GP  shall use  its reasonable  best efforts  to
cause each such person to deliver to the Company on or prior to the Closing Date
executed affiliates' letters in customary form.

    Section  12.9  STOCK EXCHANGE LISTING.  The Company shall use its reasonable
best efforts to cause  the shares of  Company Common Stock to  be issued in  the
Merger to be approved for listing on the American Stock Exchange (the "ASE") and
the Pacific Stock Exchange ("PSE") and any other national securities exchange on
which  shares of  Company Common Stock  may at  such time be  listed, subject to
official notice  of issuance,  prior to  the  Closing Date.  The Units  will  be
delisted at or immediately after the Effective Time.

    Section  12.10  EMPLOYEE BENEFIT PLANS.   The benefit plans of the Operating
Partnership in  effect  at the  date  of this  Agreement  shall, to  the  extent
practicable,  remain in  effect until  otherwise determined  after the Effective
Time. The Company shall take only such  action necessary to adapt such plans  to
the  Company's corporate form. In the case  of benefit plans which are continued
and under which the employees' interests  are based upon Units, the Company  and
the Partnership agree that such interests shall be based on Company Common Stock
in an equitable manner (and in the case of any such interests outstanding at the
Effective Time, on the basis of the Conversion Number).

    Section  12.11  PARTNERSHIP PLANS.   (a) At the  Effective Time, each of the
outstanding First  Rights  representing  the  right to  receive  Units  under  a
Partnership  Plan, whether vested or unvested, shall be deemed to constitute the
right to receive, on the same terms and conditions as were applicable under such
First Rights, the same number of shares of Company Common Stock as the holder of
such

                                      D-26
<PAGE>
First Rights would have been entitled to receive pursuant to the Merger had such
holder been  distributed Units  in exchange  for such  First Rights  immediately
prior  to the Effective Time (not taking  into account whether or not such First
Rights were in fact convertible).

    (b) As  soon as  practicable after  the Effective  Time, the  Company  shall
deliver to the participants in the Partnership Plans appropriate notices setting
forth  such  participants'  rights pursuant  thereto  and the  grants  or awards
pursuant to  the  Partnership  Plans  shall continue  in  effect  following  the
Effective  Time on  the same  terms and  conditions (subject  to the adjustments
required by this Section 12.11 after giving effect to the Merger).

    (c) The Company  shall take all  corporate action necessary  to reserve  for
issuance  a sufficient  number of  shares of  Company Common  Stock for delivery
under the Partnership Plans assumed in accordance with this Section 12.11.

    Section 12.12   FEES  AND EXPENSES.   Whether  or not  the Transactions  are
consummated, all costs and expenses incurred by the parties hereto in connection
with  this Agreement and  the transactions contemplated hereby  shall be paid by
the Partnership.

    Section 12.13  BROKERS OR  FINDERS.  Each of the  Company, on the one  hand,
and  the  Partnership,  on  the  other  hand,  represents,  as  to  itself,  its
subsidiaries, if  any, and  its affiliates,  that no  agent, broker,  investment
banker,  financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee  or any other commission  or similar fee in  connection
with  any of the transactions contemplated by this Agreement except Smith Barney
Inc. and Dillon, Read & Co., Inc., each of whose fees and expenses will be  paid
by  the Partnership  in accordance with  the Partnership's  agreements with such
firms, and each of  the Company, on  the one hand, and  the Partnership, on  the
other  hand, agree to indemnify and hold the other harmless from and against any
and all  claims, liabilities  or obligations  with respect  to any  other  fees,
commissions  or  expenses asserted  by any  person on  the basis  of any  act or
statement alleged to have been made by such party or its affiliate.

    Section 12.14  INDEMNIFICATION.

    (a) The  Partnership shall,  and  from and  after  the Effective  Time,  the
Company  shall, indemnify, defend and  hold harmless each person  who is now, or
has been at any time prior to the date of this Agreement or who becomes prior to
the Effective Time, an  officer, director, employee,  shareholder or partner  of
EIPCC,   PICC,  the  Partnership,  the   Operating  Partnership,  the  Operating
Partnership GP,  the Partnership  GP or  the Company  or an  employee, agent  or
affiliate of such person (the "Indemnified Parties") against all losses, claims,
damages,  costs, expenses, liabilities or judgments, or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) of,  or in connection with,  any claim, action,  suit,
proceeding  or investigation based in whole or in part on or arising in whole or
in part  out of  the fact  that  such person  is or  was an  officer,  director,
employee,  shareholder or partner of EIPCC, PICC, the Partnership, the Operating
Partnership, the Operating Partnership GP, the Partnership GP or the Company  or
an employee, agent or affiliate of such person, whether pertaining to any matter
existing  or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities")
in each case to the full extent a partnership is permitted under Delaware law to
indemnify such persons  or entities  and a  corporation is  permitted under  the
Minnesota  Business Corporation Act  (the "Minnesota BCA")  to indemnify its own
directors, officers, employees, agents, and affiliates,  as the case may be  and
the Partnership (and after the Effective Time, the Company) will pay expenses in
advance  of  the final  disposition of  any  such action  or proceeding  to each
Indemnified Party  to the  full extent  permitted  by law  upon receipt  of  any
undertaking  to repay such expenses if and when requested to do so by applicable
law. Without limiting the foregoing, in the event any such claim, action,  suit,
proceeding  or investigation is  brought against any  Indemnified Party (whether
arising before or  after the Effective  Time), (i) the  Indemnified Parties  may
retain counsel satisfactory to them and the Partnership (and after the Effective
Time, them and the Company), (ii) the Partnership (and after the Effective Time,
the  Company) shall pay all reasonable fees and expenses of such counsel for the
Indemnified   Parties   promptly   as   statements   therefor   are    received,

                                      D-27
<PAGE>
   
and  (iii) the Partnership (and after the  Effective Time, the Company) will use
all reasonable efforts  to assist in  the vigorous defense  of any such  matter,
provided  that neither the Partnership  nor the Company shall  be liable for any
settlement of any  claim effected  without its written  consent, which  consent,
however,  shall not be  unreasonably withheld. Any  Indemnified Party wishing to
claim indemnification under this Section 12.14, upon learning of any such claim,
action, suit, proceeding  or investigation,  shall notify  the Partnership  (and
after  the  Effective Time,  the  Company) (but  the  failure so  to  notify the
Partnership or  the  Company,  as  the  case  may  be,  shall  not  relieve  the
Partnership  or the Company, as the case may be, from any liability which it may
have under this Section 12.14 except to the extent such failure prejudices  such
party),  and shall deliver to the Partnership (and after the Effective Time, the
Company) the undertaking referred to above.  The Indemnified Parties as a  group
may  retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a  conflict
on  any significant issue between  the positions of any  two or more Indemnified
Parties.
    

    (b) The provisions of this Section 12.14 are intended to be for the  benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.

    Section  12.15  INDEMNIFICATION OF THE  TRANSFERORS, THE PARTNERSHIP GP, THE
OPERATING PARTNERSHIP GP, EIPCC, PICC AND AGENTS.

    (a)  DEFINITIONS.   For purposes of this  Section 12.15 only, the  following
terms shall have the following meanings:

   
        (i) "Agent" means any person who is or was a partner, director, officer,
    employee,  consultant  or  other  agent of  the  Partnership,  the Operating
    Partnership, the Partnership GP, EIPCC,  the Operating Partnership GP,  PICC
    or  the Company, or any of their  predecessor entities, or is or was serving
    at the request of, for the convenience of, or to represent the interests of,
    the Partnership GP, EIPCC, the Operating Partnership GP, PICC or the Company
    or any of their predecessor entities.
    

        (ii)  "Enforcement  Proceeding"  means  any  Proceeding  in  which   the
    Indemnitee  is a party  concerning the interpretation  or enforcement of the
    rights of the Indemnitee under this Section 12.15.

       (iii) "Expenses" includes all  direct and indirect costs  of any type  or
    nature  whatsoever (including,  without limitation, all  attorneys' fees and
    related disbursements, claims, damages,  judgments, losses, and  liabilities
    of any type or nature whatsoever or amounts that are paid in settlement, and
    other   out-of-pocket  costs)  actually  and   reasonably  incurred  by  the
    Indemnitee  either   in   connection  with   the   investigation,   defense,
    adjudication,  settlement or  appeal of a  Proceeding or  in connection with
    establishing or enforcing a right to indemnification under this Agreement, a
    partnership agreement, applicable law or otherwise.

       (iv) "Indemnitee" means individually or collectively, as the case may be,
    the Transferors and their  affiliates (including their respective  officers,
    directors,  employees and  partners), the  Partnership GP,  EIPCC, PICC, the
    Operating Partnership GP, an Agent, or any of them.

        (v) "Proceeding"  means any  threatened,  pending or  completed  action,
    suit,   investigation   or   other  proceeding   whether   civil,  criminal,
    administrative, investigative or any other type whatsoever.

   
    (b)  INDEMNIFICATION.   The Partnership  (and from and  after the  Effective
Time,  the Partnership and the Company, as a separate and independent obligation
of each) shall, to  the maximum extent permitted  by each under applicable  law,
indemnify,  defend and hold harmless the  Indemnitee against all Expenses if the
Indemnitee was  or is  a  party or  is threatened  to  be made  a party  to  any
Proceeding based (in whole or in part) on, arising (in whole or in part) out of,
or pertaining to this Agreement, the Merger or any other Transactions.
    

                                      D-28
<PAGE>
    (c)    ADVANCEMENT  OF  EXPENSES.   Prior  to  the  final  disposition  of a
Proceeding, the  Partnership  (and  from  and  after  the  Effective  Time,  the
Partnership  and the Company, as a  separate and independent obligation of each)
shall, not later than  seven (7) calendar  days after a  written request by  the
Indemnitee  is sent, advance to the  Indemnitee, all Expenses incurred, accrued,
or reasonably expected by the Indemnitee, in its sole discretion, to be incurred
within sixty  (60)  calendar  days  from such  request,  by  the  Indemnitee  in
connection  with the investigation, defense,  adjudication, settlement or appeal
of any such Proceeding based (in whole or  in part) on, arising (in whole or  in
part)  out  of,  or  pertaining  to this  Agreement,  the  Merger  or  any other
Transactions; PROVIDED, HOWEVER, that the Indemnitee gives a written undertaking
to repay such Expenses advanced if, and only to the extent that, a court  having
jurisdiction  pursuant to Section 12.15(i)(1)  hereof shall ultimately determine
that the Indemnitee is  not entitled to be  indemnified by the Partnership  (and
from  and after the  Effective Time, the  Company) for such  Expenses. All funds
requested hereunder by the  Indemnitee shall be deemed  to be reasonable  unless
and  until the Partnership (and from and  after the Effective Time, the Company)
shall prove, by clear  and convincing evidence, in  a court having  jurisdiction
pursuant  to Section 12.15(i)(1),  that the funds  requested are not reasonable.
Further, if the Partnership (and from and after the Effective Time, the Company)
shall not advance the funds requested  by the Indemnitee within the time  period
set  forth herein, the Partnership  (and from and after  the Effective Time, the
Company) shall  pay to  the Indemnitee,  in addition  to the  amount  requested,
interest  on the amount requested, from the  time of the request, at the highest
rate permitted under the law of the State of Delaware until said amount is  paid
in full.

   
    (d)    PROCEEDINGS  INVOLVING  THIS AGREEMENT.    Notwithstanding  any other
provision in this Agreement to the contrary, the Partnership (and from and after
the Effective  Time,  the  Partnership  and  the  Company,  as  a  separate  and
independent  obligation of each) shall, to  the maximum extent permitted by each
under applicable law, indemnify, defend and hold harmless the Indemnitee against
all Expenses  incurred by  the  Indemnitee in  connection with  any  Enforcement
Proceeding  unless a court  having jurisdiction pursuant  to Section 12.15(i)(1)
hereof finds that each of  the claims and/or defenses  of the Indemnitee in  any
such  Enforcement Proceeding was  frivolous or made  in bad faith.  Prior to the
final disposition of an  Enforcement Proceeding, the  Partnership (and from  and
after  the Effective Time, the Company) shall, not later than seven (7) calendar
days after  a  written  request  by  the Indemnitee  is  sent,  advance  to  the
Indemnitee  all  Expenses  incurred,  accrued,  or  reasonably  expected  by the
Indemnitee, in its sole  discretion, to be incurred  within sixty (60)  calendar
days  from  such  request,  by  the  Indemnitee  in  connection  with  any  such
Enforcement Proceeding; provided, however, that  the Indemnitee gives a  written
undertaking  of the kind referred to in  the proviso to Section 12.15(c) hereof.
All funds requested hereunder by the Indemnitee shall be deemed to be reasonable
unless and until  the Partnership (and  from and after  the Effective Time,  the
Company)  shall  prove, by  clear  and convincing  evidence,  in a  court having
jurisdiction pursuant to Section 12.15(i)(1),  that the funds requested are  not
reasonable.  Further, if the Partnership (and from and after the Effective Time,
the Company) shall not advance the funds requested by the Indemnitee within  the
time  period set forth herein, the Partnership (and from and after the Effective
Time, the  Company), shall  pay to  the Indemnitee,  in addition  to the  amount
requested,  interest on the amount  requested, from the time  of the request, at
the highest rate permitted  under the law  of the State  of Delaware until  said
amount is paid in full.
    

    (e)  NOTICE OF PROCEEDINGS AND DEFENSE.

        (i)  NOTICE.  Promptly after receipt by  the Indemnitee of notice of the
    commencement or the threat of commencement of any Proceeding with respect to
    which the  Indemnitee  believes  that  the Indemnitee  may  be  entitled  to
    Indemnification  or the  advancement of  Expenses under  this Agreement, the
    Indemnitee shall notify in writing the  Partnership (and from and after  the
    Effective   Time,  the  Company)  of  the  commencement  or  the  threat  of
    commencement thereof; PROVIDED, HOWEVER, that  the failure so to notify  the
    Partnership (and from and after the Effective

                                      D-29
<PAGE>
    Time, the Company) shall not relieve the Partnership (and from and after the
    Effective Time, the Company) from any liability which it may have under this
    Section 12.15 except to the extent such failure prejudices such party.

        (ii)  DEFENSE.   In  the  event any  Proceeding  is brought  against the
    Indemnitee, the Indemnitee  may retain  counsel satisfactory to  it and  the
    Partnership and the Company will use all reasonable efforts to assist in the
    vigorous defense of any such matter.

    (f)   NON-EXCLUSIVITY.   The  benefits provided  the Indemnitees  under this
Agreement shall not be deemed exclusive of any other rights which the Indemnitee
may have under any  law, other agreements  or otherwise and  shall inure to  the
benefit of the heirs, executors and administrators of the Indemnitee.

    (g)   INTERPRETATION.   The parties hereto  intend for this  Agreement to be
interpreted and enforced  so as  to provide indemnification  and advancement  of
Expenses  to the Indemnitee to the fullest  extent now or hereafter permitted by
applicable law and, in the event  that the validity, legality or  enforceability
of  any provision  of this  Agreement is  in question,  such provision  shall be
interpreted in  a  manner such  that  the provision  will  be valid,  legal  and
enforceable.

    (h)   PARTIAL  INDEMNIFICATION.   If the  Indemnitee is  entitled under this
Agreement to indemnification  by the Partnership  or the Company  for some or  a
portion  of any Expenses incurred  in connection with any  Proceeding but is not
entitled to indemnification for  the full amount  thereof, the Partnership  (and
from  and after the Effective Time,  the Company) shall indemnify the Indemnitee
for such full amount thereof  less the portion thereof  to which a court  having
jurisdiction pursuant to Section 12.15(i)(1) hereof determines the Indemnitee is
not entitled.

    (i)  CONSENT TO JURISDICTION AND ENFORCEMENT.

    (1)  The Partnership, the Company and the Indemnitee each hereby irrevocably
consent to  the  jurisdiction  of the  courts  of  the States  of  Delaware  and
Minnesota  for all purposes in connection with any dispute, action or proceeding
which arises out of or relates to  this Section 12.15 and agree that any  action
instituted under this Section 12.15 shall be brought only in the state courts of
the States of Delaware or Minnesota.

    (2)  In the event of any dispute of any type whatsoever under this Agreement
involving the obligations  of the  Partnership or  the Company  to indemnify  or
advance  Expenses to the Indemnitee, the Partnership or the Company, as the case
may be, shall have the burden of  proving by clear and convincing evidence  that
the  Partnership or  the Company,  as the case  may be,  is not  so obligated to
indemnify or advance Expenses to the Indemnitee.

    (j)   NO  OBLIGATIONS  TO  MITIGATE.    Under  no  circumstances  shall  the
Indemnitee  be  required or  obligated to  seek recovery  from third  parties or
otherwise mitigate  its  losses  in  order  to  maintain  a  claim  against  the
Partnership  or  the Company.  The Partnership  and the  Company agree  that the
failure to pursue  such recovery  or mitigate  loss will  in no  way reduce  the
amounts recoverable by Indemnitee from the Partnership or the Company.

    Section 12.16  PRESERVATION OF PARTNERSHIP, PARTNERSHIP GP AND EIPCC.  For a
period  of two years  after the Effective  Time, the Company  will not dissolve,
liquidate, merge, or  transfer all or  substantially all the  assets out of,  or
otherwise  cause the discontinuance of the  existence of, EIPCC, the Partnership
or the Partnership GP or cause the  Partnership and the Partnership GP to  cease
being treated as partnerships for federal income tax purposes.

    Section  12.17   NOTIFICATION OF  CERTAIN MATTERS.   The  Company shall give
prompt notice to  the Partnership GP,  and the Partnership  Entities shall  give
prompt  notice to the Company, of (a)  the occurrence, or non-occurrence, of any
known event the occurrence, or non-occurrence, of which would be likely to cause
(i) any representation or warranty contained  in this Agreement to be untrue  or
inaccurate  or  (ii)  any covenant,  condition  or agreement  contained  in this
Agreement not to be complied with or satisfied and (b) any known failure of  the
Company or any of the Partnership

                                      D-30
<PAGE>
Entities,  as the case may be, to comply with or satisfy any covenant, condition
or agreement  to  be complied  with  or  satisfied by  it  hereunder;  provided,
however,  that the delivery of  any notice pursuant to  this Section 12.17 shall
not limit or  otherwise affect  the remedies  available hereunder  to the  party
receiving such notice.

    Section  12.18  PUBLICITY.  Except as otherwise required by law or the rules
of the ASE and  PSE, for so  long as this  Agreement is in  effect, none of  the
parties  hereto shall, or  shall permit any of  their subsidiaries or affiliates
to, issue  or  cause  the publication  of  any  press release  or  other  public
announcement  with respect  to the  transactions contemplated  by this Agreement
without the written consent of the Company and the Partnership GP, which consent
shall not be unreasonably withheld.

    Section 12.19  CERTAIN TAX MATTERS.

    (a) The Company  and Victor K.  Atkins, Jr. (or  his designee,  collectively
"Atkins")  agree that Atkins will duly and  timely prepare and file all federal,
state and local tax returns and information reports required to be filed by  the
Partnership,  the Operating  Partnership, the  Partnership GP  and the Operating
Partnership GP, including without limitation the federal Form 1065 and Schedules
K-1, required for any taxable year of  any of such entities ending on or  before
the  Closing Date. The parties hereto acknowledge that a termination for federal
income  tax  purposes  pursuant   to  Section  708(b)(1)(B)   of  the  Code   (a
"Termination")  will  occur  with  respect  to  the  Partnership,  the Operating
Partnership, the Partnership GP and the Operating Partnership GP on the  Closing
Date, and that as a consequence of such Termination, the taxable year of each of
such entities will end on such date. Atkins agrees to prepare and file the above
mentioned  returns  consistent  with past  practice.  Atkins will  not  make any
election related to  taxes or  change any method  of accounting  for taxes  with
respect  to such  returns or  reports without the  prior written  consent of the
Company except  that  Atkins  may  make  an election  to  adjust  the  basis  of
partnership assets under section 754 of the Code for any of such partnerships if
such  election has not already been made.  At least ten (10) business days prior
to their respective due dates, Atkins will forward a copy to the Company of  all
proposed  income  tax  returns required  to  be  filed by  the  Partnership, the
Operating Partnership, the Partnership GP  and the Operating Partnership GP  for
the  taxable year  ending on  the Closing  Date (each  a "Final  Year Income Tax
Return"), and, absent prior written notice  from the Company, Atkins agrees  not
to  file any Final  Year Income Tax Return  for at least  ten (10) business days
following the Company's receipt of such Final Year Income Tax Return;  provided,
however, the filing of any such Final Year Income Tax Return shall be within the
sole discretion of Atkins.

    (b)  In the event any tax return or report of the Partnership, the Operating
Partnership, the Partnership GP  and the Operating  Partnership GP, relating  to
any  taxable year of any of such entities ending on or prior to the Closing Date
is examined by the Internal Revenue  Service or any other taxing authority,  the
Company,  upon receipt of actual notice of such  examination by it or any of its
Subsidiaries, shall give Atkins  prompt written notice  thereof and keep  Atkins
fully  informed as  to the  conduct of  any such  tax audits  and any subsequent
administrative or judicial proceedings  relating thereto. Subject to  applicable
Treasury  Regulations,  Atkins shall  be permitted  to act  as the  "Tax Matters
Partner" within  the meaning  of Section  6231(a)(7)  of the  Code (and  in  any
similar capacity under applicable state or local tax law) as to the Partnership,
the  Operating Partnership, the Partnership GP  and the Operating Partnership GP
with respect to the taxable years of any of such entities ending on or prior  to
the Closing Date. In the event Atkins is not permitted to act as the Tax Matters
Partner of the Partnership, the Operating Partnership, the Partnership GP or the
Operating  Partnership  GP in  accordance with  the  preceding sentence  for any
reason, but the Company (or  any of its affiliates) is  permitted to act as  the
Tax  Matters Partner of  any of such  entities, the Company  (or such affiliate)
shall act in  such capacity  for such  entity at  the direction  and control  of
Atkins  to the fullest extent  permitted by law. Each  of Atkins and the Company
shall keep the  other party  fully informed, through  written communications  or
otherwise,  of any examination, audit,  or administrative or judicial proceeding
referred to above. Atkins agrees not to settle or otherwise compromise any issue
in any examination, audit, or administrative or judicial proceeding referred  to
above without the prior

                                      D-31
<PAGE>
written consent of the Company, such consent not to be unreasonably withheld, if
Atkins  receives  a written  statement from  the  Company's auditors  or counsel
stating that such settlement or compromise  of such issue will adversely  affect
the Company to a material extent.

    (c)  From and after the Closing Date, the Company shall afford to Atkins and
his attorneys, accountants, and other authorized representatives, free and  full
access  to the books and records  of the Partnership, the Operating Partnership,
the Partnership GP and the Operating  Partnership GP in connection with (i)  any
examination  or  audit  by the  Internal  Revenue  Service or  any  other taxing
authority of any tax return  or report of any of  such entities relating to  any
taxable  year of any of such entities ending  on or prior to the Closing Date or
(ii) the preparation by Atkins of any  federal, state and local tax returns  and
information  reports  required to  be filed  by  the Partnership,  the Operating
Partnership, the Partnership GP and the Operating Partnership GP for any taxable
year of any of such  entities ending on or prior  to the Closing Date,  provided
that  the access  of Atkins  to the  books and  records of  the Partnership, the
Operating Partnership, the Partnership GP and the Operating Partnership GP shall
not unreasonably interfere  with the  operations of  any of  such entities.  The
Company  shall cause the Partnership, the Operating Partnership, the Partnership
GP and the Operating Partnership GP to make available, as reasonably  requested,
their  personnel (including technical), agents and other representatives who are
responsible  for  preparing  or   maintaining  information,  records  or   other
documents, or who may have particular knowledge with respect to any such matter.
The  books  and  records  of the  Partnership,  the  Operating  Partnership, the
Partnership GP  and the  Operating  Partnership GP  shall  be preserved  by  the
Company  for a period of five years after the Closing Date or such longer period
as shall reasonably be requested, in writing, by Atkins to permit the completion
of any  audit of  taxes  or subsequent  administrative or  judicial  proceedings
relating  thereto for  any period ending  on or  prior to the  Closing Date, and
Atkins shall have the right to make copies thereof.

    (d) The  Company will  indemnify  and reimburse  Atkins for  all  reasonable
expenses,  including, without limitation, legal  and accounting fees, travel and
telephone  expenses,  claims,  liabilities,  losses  and  damages  incurred   in
connection  with performing the  duties described above  including his duties in
connection with any audit or administrative or judicial proceeding with  respect
to  the tax liability of the Partnership or the Operating Partnership, PROVIDED,
HOWEVER, that the Company shall not indemnify or otherwise reimburse Atkins  for
any  such expenses,  claims, liabilities, losses  or damages to  the extent they
were incurred  as a  result of  the gross  negligence or  willful misconduct  of
Atkins.  The Company will pay  any such expenses to  Atkins not later than seven
days after written request by  him, and in advance  of the final disposition  of
any such action, audit or proceeding.

    (e)  The Company  and each  of the EIPCC  Stockholders agree  that the EIPCC
Stockholders (or their  designee) shall  duly and  timely prepare  and file  any
federal,  state and  local tax  returns and  information reports  required to be
filed by EIPCC and PICC for any taxable  year of any of such entities ending  on
or  before or including  the Closing Date. The  EIPCC Stockholders shall provide
the Company with a copy of all such tax returns and reports promptly after their
filing.

    (f) In the event any tax return or  report of EIPCC or PICC relating to  any
taxable  year  of any  of such  entities ending  on or  before or  including the
Closing Date is  examined by the  Internal Revenue Service  or any other  taxing
authority,  the Company, upon receipt of actual notice of such examination by it
or any of  its Subsidiaries, shall  give the EIPCC  Stockholders prompt  written
notice  thereof and keep the EIPCC Stockholders fully informed as to the conduct
of any such tax audits and any subsequent administrative or judicial proceedings
relating thereto. The EIPCC Stockholders (or their designee) shall have the sole
right to control any such audit or proceeding, refund claims and litigation, and
to contest, resolve  and defend any  assessment, notice of  deficiency or  other
adjustment  or proposed adjustment  relating to any  and all taxes  for any such
taxable years. In the event the EIPCC  Stockholders are not permitted to act  in
the  capacity described  above for  any reason  but the  Company (or  any of its
affiliates) is  permitted  to  act  in  such  capacity,  the  Company  (or  such
affiliate) shall act in

                                      D-32
<PAGE>
such  capacity at the direction and control  of the EIPCC Stockholders (or their
designee) to the fullest extent possible.  The EIPCC Stockholders agree to  keep
the  Company fully  informed as  to the  conduct and  status of  any such audit,
proceeding, refund claim or litigation.

    (g) From and after the Closing Date,  the Company shall afford to the  EIPCC
Stockholders   and   their   attorneys,   accountants,   and   other  authorized
representatives, free and full access to the books and records of EIPCC and PICC
in connection with (i) any examination or audit by the Internal Revenue  Service
or  any  other taxing  authority of  any tax  return  or report  of any  of such
entities relating to  any taxable  year of  any of  such entities  ending on  or
before  or  including the  Closing Date  or  (ii) the  preparation by  the EIPCC
Stockholders (or their designee) of any federal, state and local tax returns and
information reports required to be filed by  EIPCC or PICC for any taxable  year
of  any of  such entities  ending on  or before  or including  the Closing Date,
provided that the access  of the EIPCC Stockholders  (or their designee) to  the
books  and records of  EIPCC or PICC  shall not unreasonably  interfere with the
operations of any of  such entities. The  Company shall cause  EIPCC or PICC  to
make  available, as reasonably requested, their personnel (including technical),
agents  and  other  representatives  who   are  responsible  for  preparing   or
maintaining  information, records or other documents, or who may have particular
knowledge with respect to any  such matter. The books  and records of EIPCC  and
PICC  shall be  preserved by the  Company for a  period of five  years after the
Closing Date or such longer period as shall reasonably be requested, in writing,
by the EIPCC  Stockholders to permit  the completion  of any audit  of taxes  or
subsequent  administrative  or  judicial proceedings  relating  thereto  for any
period ending  on or  prior to  or including  the Closing  Date, and  the  EIPCC
Stockholders shall have the right to make copies thereof.

    Section  12.20  REGISTRATION RIGHTS.   At or prior  to the Closing Date, the
Company and the  Transferors shall  enter into a  registration rights  agreement
substantially in the form attached hereto as Exhibit A.

    Section  12.21   DELIVERY  OF  DOCUMENTS.   At  the request  of  the Company
following the Closing, and  at the Company's expense,  the Partnership GP  shall
deliver or cause to be delivered (if not previously delivered) to the Company at
its  business  address all  documents,  files and  records  of EIPCC,  PICC, the
Partnership GP and the Operating Partnership GP.

    Section 12.22  PARTNERSHIP DISTRIBUTIONS.

   
    (a) For each full calendar quarter prior to the Effective Time and,  subject
to  Section 12.22(b), the  calendar quarter in which  the Effective Time occurs,
the Partnership  shall  continue  to  pay  regular  quarterly  distributions  to
Unitholders,  on the one hand, and  the Partnership GP and Operating Partnership
GP, on  the other  hand, in  the  same amounts  as the  quarterly  distributions
heretofore  paid  to such  persons in  1994 and  otherwise consistent  with past
practice ("Regular Distributions").
    

   
    (b) If the  Effective Time occurs  prior to the  declaration of any  regular
quarterly distribution in respect of the calendar quarter in which the Effective
Time  occurs, the Partnership shall make  a final regular quarterly distribution
(as described in (a)  above) to Unitholders of  record immediately prior to  the
Effective  Time,  on the  one hand,  and  the Partnership  GP and  the Operating
Partnership GP,  on  the  other  hand;  PROVIDED,  HOWEVER,  that  such  regular
quarterly  distribution shall be pro rated for  the period from the beginning of
the calendar quarter  during which the  Effective Time occurs  to the  Effective
Time  (the "Final  Distribution," and  together with  Regular Distributions, the
"Distributions"). The Final  Distribution shall be  paid no later  than 60  days
after the Effective Time.
    

    (c)  Notwithstanding the foregoing,  the Transferors will  receive their pro
rata share of all distributions otherwise payable to the Partnership GP and  the
Operating Partnership GP which are not paid until after the Closing.

                                      D-33
<PAGE>
                                  ARTICLE XIII
                                   CONDITIONS

    Section   13.1    CONDITIONS  TO  EACH  PARTY'S  OBLIGATION  TO  EFFECT  THE
TRANSACTIONS CONTEMPLATED HEREBY.  The respective obligations of the parties  to
effect   the  Transactions   contemplated  hereby   shall  be   subject  to  the
satisfaction, on or prior to the Closing Date, of the following conditions:

        (a)  UNITHOLDER APPROVAL.  This  Agreement shall have been approved  and
    adopted by the affirmative vote of (x) the holders of more than 50% of Units
    (excluding  Units held by the Partnership  GP, affiliates of the Partnership
    GP and senior operating management of the Operating Partnership) and (y) the
    holders of Units entitled to cast more than 50% of the total number of votes
    entitled to be cast.

        (b)   STOCK  EXCHANGE LISTING.    The  shares of  Company  Common  Stock
    issuable  to  the Unitholders  pursuant to  this  Agreement shall  have been
    authorized for listing on the ASE and the PSE, subject to official notice of
    issuance.

        (c)  OTHER APPROVALS.  All authorizations, consents, orders or approvals
    of, or  declarations or  filings  with, or  expirations of  waiting  periods
    imposed by, any Governmental Entity the failure to obtain which would have a
    material  adverse effect on the Company or the Partnership and the Operating
    Partnership, taken  as a  whole, shall  have been  filed, occurred  or  been
    obtained. The Company shall have received all state securities or "Blue Sky"
    permits and other authorizations necessary to issue the Company Common Stock
    pursuant to this Agreement.

        (d)   REGISTRATION STATEMENT.  The S-4 shall have become effective under
    the Securities  Act and  shall  not be  the subject  of  any stop  order  or
    proceeding seeking a stop order.

        (e)   NO  INJUNCTIONS OR  RESTRAINTS.   No temporary  restraining order,
    preliminary or permanent injunction  or other order issued  by any court  of
    competent  jurisdiction or  other legal restraint  or prohibition preventing
    the consummation of the  Merger shall be in  effect (each party agreeing  to
    use  all reasonable  efforts to have  any such order  reversed or injunction
    lifted).

        (f)  HSR  APPROVAL.   Any applicable waiting  period under  the HSR  Act
    shall have expired or been terminated.

        (g)   FAIRNESS OPINIONS.  Neither  of the fairness opinions delivered to
    the Partnership by Smith Barney Inc. and Dillon, Read & Co. Inc. shall  have
    been rescinded prior to the Effective Time.

    Section  13.2  CONDITIONS TO OBLIGATIONS OF THE COMPANY.  The obligations of
the Company to effect the Merger and the other transactions contemplated  hereby
are  subject  to the  satisfaction,  on or  prior to  the  Closing Date,  of the
following conditions unless waived by Company:

        (a)  REPRESENTATIONS AND  WARRANTIES.  (i) The  aggregate effect of  all
    inaccuracies  in  the  representations  and  warranties  of  the Partnership
    Entities set forth in this Agreement does  not and will not have a  material
    adverse  effect on the Partnership and  the Operating Partnership taken as a
    whole and  (ii)  the  representations  and  warranties  of  the  Partnership
    Entities  contained  in this  Agreement  shall be  true  and correct  in all
    material respects as  of the date  hereof, and,  as of the  Closing Date  as
    though  made on and as of the Closing Date, except as otherwise contemplated
    by this Agreement, and the Company shall have received a certificate of each
    of the  Partnership Entities  signed by  the general  partner or  the  chief
    executive  officer,  or individually,  as appropriate,  to such  effect with
    respect to  the  representations and  warranties  made by  such  Partnership
    Entity.

        (b)    PERFORMANCE  OF OBLIGATIONS  OF  THE PARTNERSHIP  ENTITIES.   The
    Partnership Entities  shall  have performed  in  all material  respects  all
    obligations required to be performed by them under

                                      D-34
<PAGE>
    this  Agreement at or prior to the  Closing Date, and the Company shall have
    received certificates  of each  of the  Partnership Entities  signed by  the
    general partner or chief executive officer, or individually, as appropriate,
    to such effect.

        (c)    TAX OPINION.    The Company  shall  have received  an  opinion of
    Skadden, Arps, Slate, Meagher & Flom, special tax counsel to the Company, in
    form and substance reasonably acceptable to the Company substantially to the
    effect that on the basis of facts, representations and assumptions set forth
    in such  opinion, and  in accompanying  certificates signed  by  appropriate
    officers  of the Company and the Partnership or Operating Partnership, which
    are consistent with the state of facts then existing, for federal income tax
    purposes (i) the formation  and existence of PTP  and its subsequent  merger
    with  and into  the Partnership will  be disregarded; (ii)  the transfers of
    Units by Unitholders and other property described herein by the  Transferors
    to  the  Company  in  exchange  for Company  Common  Stock  pursuant  to the
    Transactions shall, in the aggregate, constitute a transaction described  in
    Section  351(a) of the Code; and (iii) Unitholders should not recognize gain
    or loss as a result of the exchange of their Units for Company Common  Stock
    pursuant  to the  Transactions. Insofar as  relevant, such  opinion will not
    address the tax results to  certain types of taxpayers, including  taxpayers
    who  are not United States persons (as defined in Section 7701(a)(30) of the
    Code), insurance  companies, financial  institutions and  taxpayers  holding
    their Units in the capacity as dealers in securities.

        (d)   MATERIAL CONSENTS.   All third party  consents necessary to effect
    the Transactions shall  have been  obtained, to  the extent  the failure  to
    obtain  such consents would (i) materially adversely affect the Company's or
    the Partnership  Entities'  ability  to consummate  the  Transactions,  (ii)
    impose material liability on the Company or the Partnership or the Operating
    Partnership,  or  have a  material adverse  effect on  the Company's  or the
    Partnership's or the Operating Partnership's assets and properties, or (iii)
    materially detract from the Company's or the Partnership's or the  Operating
    Partnership's assets and Properties.

        (e)   DISSENTING UNITHOLDERS.  No more  than 5% of the outstanding Units
    shall be held by Dissenting Unitholders.

    Section 13.3  CONDITIONS  TO OBLIGATIONS OF THE  PARTNERSHIP ENTITIES.   The
obligation  of the Partnership Entities  to effect the Transactions contemplated
hereby is subject to the satisfaction  of the following conditions, on or  prior
to the Closing Date, unless waived by the Partnership GP:

        (a)   REPRESENTATIONS AND  WARRANTIES.  (i) The  aggregate effect of all
    inaccuracies in the representations and warranties of the Company set  forth
    in  this Agreement does not  and will not have  a material adverse effect on
    the Company  and (ii)  the  representations and  warranties of  the  Company
    contained  in Sections 11.1, 11.2 and 11.3  shall be true and correct in all
    material respects as  of the date  hereof, and,  as of the  Closing Date  as
    though  made on and as of the Closing Date, except as otherwise contemplated
    by this Agreement,  and the  Partnership shall have  received a  certificate
    signed  on behalf  of the  Company by  its chief  executive officer  to such
    effect.

        (b)  PERFORMANCE  OF OBLIGATIONS  OF THE  COMPANY.   Company shall  have
    performed  in all material respects all obligations required to be performed
    by them  under this  Agreement at  or prior  to the  Closing Date,  and  the
    Partnership  shall  have  received a  certificate  signed on  behalf  of the
    Company by its chief executive officer of the Company to such effect.

        (c)  TAX  OPINION.  The  Partnership shall have  received an opinion  of
    Stroock  & Stroock & Lavan, special counsel  to the Partnership, in form and
    substance reasonably  acceptable to  the Partnership,  substantially to  the
    effect that on the basis of facts, representations and assumptions set forth
    in  such  opinion, and  in accompanying  certificates signed  by appropriate
    officers of the Company and the Partnership or Operating Partnership,  which
    are consistent with the state of facts then existing, for federal income tax
    purposes  (i) the formation  and existence of PTP  and its subsequent merger
    with and into  the Partnership will  be disregarded; (ii)  the transfers  of
    Units   by  Unitholders  and  other   property  (described  herein)  by  the
    Transferors to the Company in

                                      D-35
<PAGE>
    exchange for Company Common Stock pursuant to the Transactions shall, in the
    aggregate, constitute a transaction described in Section 351(a) of the Code;
    (iii) Unitholders  should not  recognize gain  or loss  as a  result of  the
    exchange   of  their  Units  for  Company   Common  Stock  pursuant  to  the
    Transactions; and (iv) the Transferors should not recognize gain or loss  as
    a  result of exchanging their partnership interests in the Partnership GP or
    the Operating Partnership  GP, or shares  of common stock  of EIPCC, as  the
    case may be, for shares of Company Common Stock pursuant to the Transactions
    except  to the  extent any  Transferor recognizes  gain pursuant  to Section
    357(c) of the Code. Insofar as  relevant, such opinion will not address  the
    tax  results to certain types of  taxpayers, including taxpayers who are not
    United States  persons (as  defined  in Section  7701(a)(30) of  the  Code),
    insurance  companies,  financial  institutions and  taxpayers  holding their
    Units in the capacity as dealers in securities.

        (d)  MATERIAL CONSENTS.   All third party  consents necessary to  effect
    the  Transactions shall  have been  obtained, to  the extent  the failure to
    obtain such consents would (i) materially adversely affect the Company's  or
    the  Partnership  Entities ability  to  consummate the  Transactions  in the
    aggregate, or (ii) impose material liability on the Partnership Entities  in
    the aggregate.

                                  ARTICLE XIV
                                  INDEMNITIES

    Section 14.1  EIPCC STOCKHOLDERS INDEMNITY.

    (a) Mr. Atkins agrees to indemnify the Partnership and the Company and their
respective  successors  and  assigns from  and  against (i)  all  debts, claims,
liabilities and obligations of  EIPCC that are  not Partnership GP  Liabilities,
(ii)  all  debts,  claims, liabilities  and  obligations  of PICC  that  are not
Operating  Partnership   GP   Liabilities,  and   (iii)   any  breach   of   the
representations   and  warranties  set  forth   in  Sections  10.1(a),  10.1(b),
10.1(c)(ii), 10.1(d) (to the  extent applicable to EIPCC  or PICC), 10.1(e)  and
10.1(g),  and to pay all costs and expenses (including fees and disbursements of
counsel) incurred  by  the Partnership  and  the Company  and  their  respective
successors and assigns in connection therewith.

    (b) Each EIPCC Stockholder severally and not jointly agrees to indemnify the
Partnership and the Company and their respective successors and assigns from and
against  any  breach  of any  of  such EIPCC  Stockholder's  representations and
warranties set forth in Sections  10.1(c)(i), 10.1(d) (to the extent  applicable
to  such  EIPCC stockholder)  and 10.1(f),  and  to pay  all costs  and expenses
(including fees and disbursements  of counsel) incurred  by the Partnership  and
the Company and their respective successors and assigns in connection therewith.

    Section 14.2  PARTNERSHIP GP PARTNERS INDEMNITY.

    (a) Mr. Atkins agrees to indemnify the Partnership and the Company and their
respective  successors  and  assigns from  and  against (i)  all  debts, claims,
liabilities and  obligations of  the  Partnership GP  that are  not  Partnership
Liabilities and (ii) any breach of any of the representations and warranties set
forth  in Sections  10.2(a), 10.2(b), 10.2(d)  (to the extent  applicable to the
Partnership GP),  10.2(e)  and  10.2(g),  and to  pay  all  costs  and  expenses
(including  fees and disbursements  of counsel) incurred  by the Partnership and
the Company and their respective successors and assigns in connection therewith.

    (b) Each  Partnership  GP  Partner  severally  and  not  jointly  agrees  to
indemnify  the Partnership and  the Company and  their respective successors and
assigns  from  and  against  any   breach  of  such  Partnership  GP   Partner's
representations  and warranties set  forth in Sections  10.2(c), 10.2(d) (to the
extent applicable to  such Partnership GP  Partner) and 10.2(f)  and to pay  all
costs and expenses (including fees and disbursements of counsel) incurred by the
Partnership  and  the Company  and their  respective  successors and  assigns in
connection therewith.

                                      D-36
<PAGE>
    Section 14.3  OPERATING PARTNERSHIP GP PARTNERS INDEMNITY.

    (a) Mr. Atkins agrees to indemnify the Partnership and the Company and their
respective successors and assigns against (i) all debts, claims, liabilities and
obligations of the Operating Partnership  GP that are not Operating  Partnership
Liabilities and (ii) any breach of any of the representations and warranties set
forth  in Sections  10.3(a), 10.3(b), 10.3(d)  (to the extent  applicable to the
Operating Partnership  GP),  10.3(e) and  10.3(g),  and  to pay  all  costs  and
expenses   (including  fees  and  disbursements  of  counsel)  incurred  by  the
Partnership and the Company in connection therewith.

    (b) Each Operating Partnership GP  Partner severally and not jointly  agrees
to  indemnify the Partnership and the Company  against any breach of any of such
Operating Partnership GP Partner's representations  and warranties set forth  in
Sections   10.3(c),  10.3(d)  (to  the   extent  applicable  to  such  Operating
Partnership GP  Partner)  and  10.3(f),  and  to  pay  all  costs  and  expenses
(including  fees and disbursements  of counsel) incurred  by the Partnership and
the Company and their respective successors and assigns in connection therewith.

    Section 14.4  GENERAL TAX INDEMNITY.

    (a) Mr. Atkins shall indemnify and hold the Partnership and the Company  and
their   respective  successors  and  assigns   harmless  from  and  against  all
liabilities for  all  taxes  actually  imposed  on  and  paid  by  each  of  the
Partnership  GP, the  Operating Partnership GP,  PICC and  EIPCC (the "Indemnity
Entities") for all  tax periods or  portions thereof of  the Indemnity  Entities
ending  on or before the Closing Date, excluding all tax liabilities incurred by
any of the Indemnity Entities resulting from any of the Transactions;  provided,
however,  that Mr. Atkins'  obligation to indemnify and  hold harmless the above
parties shall be  reduced to  the extent  EIP I  L.P. and  LB I  Group Inc.  are
obligated to indemnify the above parties pursuant to paragraph (b) below.

    (b) EIP I L.P. and LB I Group Inc. jointly and severally shall indemnify and
hold  harmless the Partnership  and the Company  and their respective successors
and  assigns  from  and  against  50%  of  all  liabilities  (Mr.  Atkins  being
responsible for the remaining 50% pursuant to paragraph (a) above) for all taxes
actually  imposed on and  paid by each  of the Partnership  GP and the Operating
Partnership GP (the  "Partnership Indemnity  Entities") for all  tax periods  or
portions  thereof of the Partnership Indemnity  Entities ending on or before the
Closing Date excluding all  tax liabilities incurred by  any of the  Partnership
Indemnity  Entities resulting from  any of the  Transactions; provided, however,
that EIP  I  L.P. and  LB  I Group  Inc.  shall not  bear  any portion  of  such
liabilities of the Partnership Indemnity Entities that resulted from Mr. Atkins'
own  actual  fraud,  gross  negligence,  willful  or  wanton  misconduct  or, if
applicable, breach of fiduciary duty to the Partnership Indemnity Entities  (any
act  or omission done in reliance upon  the opinion of independent legal counsel
or public accountants or other consultants selected with reasonable care will be
conclusively presumed to  have been done  or omitted  in good faith  and not  to
constitute  gross  negligence or  willful or  wanton misconduct),  and provided,
further, however, that the maximum liability of  EIP I L.P. and LB I Group  Inc.
under  this paragraph shall not  exceed the liability of  Mr. Atkins pursuant to
paragraph (a) above and, in any event, shall not exceed $1,000,000.

    Section 14.5    EXCEPTION  TO  CERTAIN  INDEMNITIES.    Notwithstanding  the
provisions  of Sections 14.1,  14.2 and 14.3 above  requiring certain persons to
indemnify the Partnership and Corporation,  and their respective successors  and
assigns  for  certain  liabilities, to  the  extent such  persons  are otherwise
entitled  to  be  indemnified  by  the  Partnership  or  the  Company  for  such
liabilities  pursuant to Sections 12.14 and 12.15 hereof or otherwise, then such
persons shall not be required to make the indemnifications to the Partnership or
the  Company  pursuant  to  Sections  14.1,  14.2  and  14.3  hereof  for   such
liabilities.  Notwithstanding  anything in  this Agreement  to the  contrary, no
Transferor shall have any liability in respect of a Partnership Liability or  an
Operating Partnership Liability.

    Section  14.6  INDEMNIFICATION OF W. HALL  WENDEL, JR. AND THE COMPANY.  If,
after the Company has been  incorporated, the Transactions contemplated by  this
Agreement  are  not  consummated for  any  reason and  the  Company subsequently
liquidates and distributes any Units to its shareholders, the Partnership  shall
indemnify and hold harmless, on an after-tax basis without reduction for any tax

                                      D-37
<PAGE>
benefit that may be realized due to a step-up in basis or otherwise, each of the
Company  and W. Hall Wendel Jr. ("Wendel")  for all taxes payable by the Company
and Wendel  as a  result of  the distribution  of any  Units by  the Company  to
Wendel.

    Section 14.7  PROCEDURES FOR INDEMNIFICATION.

    (a)  In order for  the party from  whom indemnity may  be sought pursuant to
this Article XIV (the "Indemnitor") to be fully informed at all times concerning
its possible obligations  to give indemnity  to the claimant  thereof under  the
provisions  thereof (the "Indemnitee")  and to permit the  amounts thereof to be
minimized, if the Indemnitee suffers or  is threatened with or incurs any  loss,
damage  or  expense  for which  it  would  be entitled  to  be  indemnified, the
Indemnitee shall  promptly give  written notice  to Indemnitor  after  obtaining
knowledge  of any claim and,  if such indemnity shall arise  from the claim of a
third party, shall permit Indemnitor to assume the defense of any such claim  or
any  Proceeding  (as  defined  in  Section  12.15)  resulting  from  such claim.
Notwithstanding the foregoing notice  requirement, the right to  indemnification
shall  not be affected by  any failure of Indemnitee to  give such notice or any
delay by Indemnitee in giving  such notice unless, and  then only to the  extent
that,  the rights  and remedies  of indemnitor shall  have been  prejudiced as a
result of the  failure to  give, or  delay in  giving, such  notice. Failure  by
Indemnitor  to notify the Indemnitee of its election to defend any such claim or
Proceeding by a third party, within  fourteen days after written notice  thereof
shall  have been given to Indemnitor, shall  be deemed a waiver by Indemnitor of
its right to defend such claim or action.

    (b) If Indemnitor assumes the defense of such claim or Proceeding by a third
party, the obligations of  Indemnitor hereunder as to  such claim or  Proceeding
shall  include taking all steps  necessary in the defense  or settlement of such
claim or proceeding, including the retention of counsel reasonably  satisfactory
to  the Indemnitee, and holding the Indemnitee harmless from and against any and
all claims caused by or arising out of any settlement approved by Indemnitor  or
any  judgment in  connection with  such claim  or Proceeding.  Without the prior
written consent of  Indemnitee, Indemnitor  shall not,  in the  defense of  such
claim  or Proceeding,  consent to the  entry of  any judgment or  enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnitee of a release, in form reasonably
satisfactory to the Indemnitee, from all  liability in respect of such claim  or
Proceeding.  Notwithstanding the foregoing,  the Indemnitee will  be entitled to
participate at its expense in  the defense of such  claim or Proceeding. If  the
defendants in any such Proceeding include both the Indemnitee and Indemnitor and
the  Indemnitee shall have reasonably concluded that there may be legal defenses
available to it which are different from or additional to those available to the
Indemnitor, the Indemnitee shall  have the right to  select separate counsel  to
assume  such legal defenses and to otherwise  participate in the defense of such
Proceeding on behalf of such Indemnitee and at the expense of the Indemnitor.

    (c) If  Indemnitor  does  not  assume  the defense  of  any  such  claim  or
Proceeding  by a third  party, the Indemnitee  may defend against  such claim or
Proceeding in such manner as it  deems appropriate and, unless Indemnitor  shall
deposit  with Indemnitee a sum  equivalent to the total  amount demanded in such
claim or Proceeding plus the Indemnitee's estimate of the cost of defending  the
same,  the Indemnitee may  settle such claim  or Proceeding on  such terms as it
deems appropriate and Indemnitor shall, in accordance with the provisions hereof
promptly reimburse the Indemnitee for the amount of such settlement and for  all
losses  and  expenses  incurred by  Indemnitee  in connection  with  the defense
against or  settlement  of  such  claim  or  Proceeding.  Indemnitor  agrees  to
cooperate  fully with the Indemnitee  in the conduct of  any defense against any
claim or Proceeding.

    (d) Each  of Indemnitor  and Indemnitee  will cooperate  with the  other  in
resolving  or attempting to  resolve any claim  and will permit  the other party
access to all books and records which  might be useful for such purpose,  during
normal  business hours and at  the place where the  same are normally kept, with
full right to  make copies  thereof or  extracts therefrom  at the  cost of  the
copying party.

   
    (e)  The provisions of  this Section 14.7  are subject to  the provisions of
Section 12.19.
    

                                      D-38
<PAGE>
                                   ARTICLE XV
                           TERMINATION AND AMENDMENT

    Section 15.1   TERMINATION.  This  Agreement may be  terminated at any  time
prior  to the Effective Time, whether before or after approval of the Conversion
Proposal by the Unitholders of the Partnership or the Company:

        (a) by mutual consent of the Company and the Partnership GP;

        (b) by either  the Company  or the  Partnership GP  if the  Transactions
    shall not have been consummated before April 15, 1995 (unless the failure to
    so  consummate the Transactions before such date  shall be due to the wilful
    action or failure to  act of the party  seeking to terminate this  Agreement
    which action or failure to act constitutes a breach of this Agreement); and

        (c)  by the Partnership GP in  accordance with the provisions of Section
    16.1 hereof.

    Section 15.2  EFFECT OF TERMINATION.  In the event of a termination of  this
Agreement  by either the  Partnership GP or  the Company as  provided in Section
15.1, this Agreement shall forthwith become void and there shall be no liability
or obligation on the part  of the Company or  the Partnership Entities or  their
respective  officers or directors, other than  the provisions of Sections 12.12,
12.13, 12.14,  12.15, and  12.18; provided,  however that  any such  termination
shall  not relieve  any party from  liability for  willful breach of  any of its
covenants or agreements set forth in this Agreement.

    Section 15.3   AMENDMENT.   This  Agreement may  be amended  by the  parties
hereto, by action taken or authorized by their respective Boards of Directors or
general  partners, at any time before or after approval of the matters presented
in connection with the Merger  by the Unitholders of  the Partnership or of  the
Company,  but, after any such approval, no  amendment shall be made which by law
requires further approval  by such  Unitholders without  such further  approval.
This  Agreement may not be amended except  by an instrument in writing signed on
behalf of each of the parties hereto.

                                  ARTICLE XVI
                                 MISCELLANEOUS

    Section 16.1  FIDUCIARY DUTIES.   Nothing contained in this Agreement  shall
be  deemed to alter  the Partnership GP's fiduciary  duties to Unitholders under
the Partnership's  partnership  agreement  or the  DRULPA,  including,  but  not
limited  to, the  right to  terminate this Agreement  if the  Partnership GP, as
advised by counsel, determines  that as a result  of any developments  occurring
after the date of this Agreement, such termination is necessary to discharge its
fiduciary duties.

    Section   16.2    NONSURVIVAL  OF   REPRESENTATIONS  AND  WARRANTIES.    The
representations and warranties set forth in Articles X and XI shall survive  the
Effective  Time in perpetuity. All other  representations and warranties in this
Agreement shall not survive the Effective Time.

    Section 16.3  NOTICES.  All notices and other communications hereunder shall
be in writing  and shall  be deemed  given if  delivered personally,  telecopied
(which  is confirmed) or mailed by  registered or certified mail (return receipt
requested) to the parties at the  following addresses (or at such other  address
for a party as shall be specified by like notice):

    (a) if to the Company, to
                       Polaris Industries Inc.
                       1225 North Highway 169
                       Minneapolis, Minnesota 55441
                       Attention: John H. Grunewald,
                                  Executive Vice President,
   
                                  Chief Financial Officer and Secretary
    

                                      D-39
<PAGE>
with a copy to

                       Kaplan, Strangis and Kaplan, P.A.
                       90 South 7th Street
                       Minneapolis, Minnesota 55402
                       Attention: Andris A. Baltins, Esq.

and

    (b) if to any of the Partnership Entities (other than the Transferors), to

                       EIP Capital Corporation
                       33 Flying Point Road
                       Southampton, New York 11963
                       Attention: Victor K. Atkins, Jr.

with a copy to

                       Stroock & Stroock & Lavan
                       7 Hanover Square
                       New York, New York 10004
                       Attention: Hillel M. Bennett, Esq.

and

                       Simpson Thacher & Bartlett
                       425 Lexington Avenue
                       New York, New York 10017
                       Attention: George R. Krouse, Jr., Esq.

and

    (c)  if to any of the Transferors, to the addresses set forth on Annex I, II
or III, respectively.

    Section 16.4  INTERPRETATION.  When a reference is made in this Agreement to
Sections, such  reference  shall  be  to a  Section  of  this  Agreement  unless
otherwise  indicated.  The  table of  contents  and headings  contained  in this
Agreement are for reference purposes  only and shall not  affect in any way  the
meaning  or  interpretation of  this  Agreement. Whenever  the  words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to  be
followed  by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party  to whom such  information is to  be made available.  The
phrases  "the date of  this Agreement," "the  date hereof" and  terms of similar
import, unless  the context  otherwise requires,  shall be  deemed to  refer  to
September 29, 1994.

    Section  16.5  COUNTERPARTS.  This Agreement  may be executed in two or more
counterparts, all of which  shall be considered one  and the same agreement  and
shall become effective when two or more counterparts have been signed by each of
the  parties and delivered  to the other  parties, it being  understood that all
parties need not sign the same counterpart.

    Section 16.6    ENTIRE  AGREEMENT;  NO  THIRD  PARTY  BENEFICIARIES.    This
Agreement  (including the documents and the instruments referred to herein), (a)
constitutes the  entire  agreement  and  supersedes  all  prior  agreements  and
understandings,  both written  and oral, among  the parties with  respect to the
subject matter hereof,  and (b) except  as provided in  Section 12.14, 12.15  or
14.6 is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.

    Section 16.7  GOVERNING LAW.  This Agreement shall be governed and construed
in  accordance with  the laws  of the  State of  Delaware without  regard to any
applicable conflicts of law.

    Section 16.8  SPECIFIC PERFORMANCE.  The parties hereto agree that if any of
the provisions of  this Agreement were  not performed in  accordance with  their
specific terms or were otherwise breached,

                                      D-40
<PAGE>
irreparable  damage  would occur,  no  adequate remedy  at  law would  exist and
damages would be difficult to determine, and that the parties shall be  entitled
to  specific performance of the terms hereof, in addition to any other remedy at
law or equity.

    Section 16.9  ASSIGNMENT; SUCCESSORS.  Neither this Agreement nor any of the
rights, interests  or obligations  hereunder shall  be assigned  by any  of  the
parties  hereto (whether  by operation  of law  or otherwise)  without the prior
written consent of the  other parties. Subject to  the preceding sentence,  this
Agreement  will be binding upon,  inure to the benefit  of and be enforceable by
and against the parties and  their respective heirs, executors,  administrators,
successors and permitted assigns.

    IN  WITNESS WHEREOF,  the parties  hereto have  caused this  Agreement to be
executed as of the date first written above.

                                      POLARIS INDUSTRIES INC.

                                      By: /s/ W. HALL WENDEL, JR.

                                          --------------------------------------
                                          Name: W. Hall Wendel, Jr.
                                          Title: CHAIRMAN AND CHIEF EXECUTIVE
                                          OFFICER

                                      POLARIS INDUSTRIES PARTNERS L.P.

                                      By: EIP Associates L.P.
                                          Its General Partner

                                      By: EIP Capital Corporation
                                          Its General Partner

                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: PRESIDENT

                                      POLARIS INDUSTRIES L.P.

                                      By: Polaris Industries Associates L.P.
                                          Its General Partner

                                      By: Polaris Industries Capital Corporation
                                          Its General Partner

                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: CHAIRMAN

                                      D-41
<PAGE>
                                      EIP ASSOCIATES L.P.

                                      By: EIP Capital Corporation
                                          Its General Partner

                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: PRESIDENT

                                      POLARIS INDUSTRIES ASSOCIATES L.P.
                                      By: POLARIS INDUSTRIES CAPITAL
                                           CORPORATION
                                          Its General Partner

                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: CHAIRMAN

                                      POLARIS  INDUSTRIES  CAPITAL   CORPORATION
                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: CHAIRMAN

                                      EIP CAPITAL CORPORATION

                                      By: /s/ VICTOR K. ATKINS, JR.

                                          --------------------------------------
                                          Name: Victor K. Atkins, Jr.
                                          Title: PRESIDENT

                                      D-42
<PAGE>
                                      THE PARTNERSHIP GP PARTNERS
                                      (as set forth on Annex I hereto)

                                      /s/ VICTOR K. ATKINS, JR.

                                      ------------------------------------------
                                      Victor K. Atkins, Jr., the general partner

                                      EIP I, L.P., a limited partner

                                      By: EIP I, Inc.
                                          Its General Partner

                                      By: /s/ RON HIRAM

                                          --------------------------------------
                                          Name: Ron Hiram
                                          Title: PRESIDENT

                                      LB I GROUP INC., a limited partner

                                      By: /s/ RON HIRAM

                                          --------------------------------------
                                          Name: Ron Hiram
                                          Title: VICE PRESIDENT

                                      THE OPERATING PARTNERSHIP GP PARTNERS
                                      (as set forth on Annex II hereto)

                                      LB I GROUP INC., a limited partner

                                      By: /s/ RON HIRAM

                                          --------------------------------------
                                          Name: Ron Hiram
                                          Title: VICE PRESIDENT

                                      /s/ VICTOR K. ATKINS, JR.

                                      ------------------------------------------
                                      VICTOR K. ATKINS, JR., a general partner

                                      /s/ G. A. MYLES

                                      ------------------------------------------
                                      G.A. Myles, a limited partner

                                      D-43
<PAGE>
                                      THE EIPCC STOCKHOLDERS
                                      (as set forth on Annex III hereto)

                                      /s/ VICTOR K. ATKINS, JR.

                                      ------------------------------------------
                                      Victor K. Atkins, Jr.

                                      /s/ NANCY FLAHERTY

                                      ------------------------------------------
                                      Nancy Flaherty

                                      /s/ WALTER D. O'HEARN

                                      ------------------------------------------
                                      Walter D. O'Hearn

                                      /s/ ANN ROGERS EGAN

                                      ------------------------------------------
                                      Ann Rogers Egan

                                      D-44
<PAGE>
                                                                         ANNEX I

                            PARTNERSHIP GP PARTNERS

<TABLE>
<CAPTION>
                                                                                   PERCENTAGE
                                                                                       OF
                                                               PARTNERSHIP         TRANSFERORS'
PARTNERSHIP GP PARTNER                                         GP INTERESTS        NUMBER
- --------------------------------------------------        ----------------------   ----------
<S>                                                       <C>                      <C>
EIP I L.P.........................................              45% ltd. partner     41.0526%
  c/o Lehman Brothers Holdings, Inc.
    3 World Financial Ctr.
    New York, NY 10285

Victor K. Atkins, Jr..............................             40% gen'l partner     36.4912%
  (LESS PRIORITY DISTRIBUTION TO LB I GROUP, INC.,
  PURSUANT TO THE PARTNERSHIP GP PARTNERSHIP AGREEMENT)
  c/o EIP Capital Corporation
    33 Flying Point Road
    Southampton, NY 11968

LB I Group Inc....................................               5% ltd. partner      4.5614%
  (PLUS PRIORITY DISTRIBUTION FROM VICTOR K. ATKINS, JR.,
  PURSUANT TO THE PARTNERSHIP GP PARTNERSHIP AGREEMENT)
  c/o Lehman Brothers Holdings Inc.
    3 World Financial Ctr.
    New York, NY 10285
                                                                   --
                                                                                   ----------
        TOTAL.....................................                 90%               82.1052%
                                                                   --
                                                                   --
                                                                                   ----------
                                                                                   ----------
</TABLE>

                                      D-45
<PAGE>
                                                                        ANNEX II

                       OPERATING PARTNERSHIP GP PARTNERS

<TABLE>
<CAPTION>
                                                                                   PERCENTAGE
                                                                                       OF
                                                          OPERATING PARTNERSHIP    TRANSFERORS'
OPERATING PARTNERSHIP GP PARTNER                               GP INTERESTS        NUMBER
- --------------------------------------------------        ----------------------   ----------
<S>                                                       <C>                      <C>
LB I Group Inc....................................              50% ltd. partner      4.3860%
  c/o Lehman Brothers Holdings, Inc.
    3 World Financial Ctr.
    New York, NY 10285

Victor K. Atkins, Jr..............................             40% gen'l partner      3.5087%
    c/o EIP Capital Corporation
    33 Flying Point Road
    Southampton, NY 11968

G.A. Myles........................................               5% ltd. partner       .4386%
  c/o EIP Capital Corporation
    33 Flying Point Road
    Southampton, NY 11968
                                                                   --
                                                                                   ----------
        TOTAL.....................................                 95%                8.3333%
                                                                   --
                                                                   --
                                                                                   ----------
                                                                                   ----------
</TABLE>

                                      D-46
<PAGE>
                                                                       ANNEX III

                               EIPCC STOCKHOLDERS

<TABLE>
<CAPTION>
                                                                                   PERCENTAGE
                                                                                       OF
                                                                  NUMBER           TRANSFERORS'
EIPCC STOCKHOLDER                                               OF SHARES          NUMBER
- --------------------------------------------------              ----------         ----------
<S>                                                       <C>                      <C>
Victor K. Atkins, Jr..............................                 50                 6.8296%
  c/o EIP Capital Corporation
    33 Flying Point Road
    Southampton, NY 11968

Walter D. O'Hearn, Jr.............................                 10                 1.3659%
  c/o Keane Securities Co., Inc.
    50 Broadway, 13th Floor
    New York, NY 10004

Ann Rogers Egan...................................                  5                  .6830%
  c/o EIP Capital Corporation
    33 Flying Point Road
    Southampton, NY 11968

Nancy A. Flaherty.................................                  5                  .6830%
    167 Nancy Lane
    Wyckoff, NJ 07481
                                                                   --
                                                                                   ----------
        TOTAL.....................................                 70                 9.5615%
                                                                   --
                                                                   --
                                                                                   ----------
                                                                                   ----------
</TABLE>

                                      D-47
<PAGE>
                        POLARIS INDUSTRIES PARTNERS L.P.

                  PROXY FOR MEETING OF BAC HOLDERS TO BE HELD
                 DECEMBER 22, 1994 AND ANY ADJOURNMENT THEREOF

    The undersigned BAC Holder hereby instructs the Initial Limited Partner to
vote all Class A Limited Partnership Interests of the Partnership which the
undersigned is entitled to direct the voting of (PLEASE CHECK ONE):
                      / / FOR    / / AGAINST    / / ABSTAIN

a  proposal (the  "Conversion Proposal")  to approve  the Agreement  and Plan of
Conversion, dated as  of September  29, 1994,  by and  among Polaris  Industries
Partners  L.P. (the "Partnership"), Polaris Industries Inc. (the "Corporation"),
EIP Associates L.P., Polaris  Industries L.P., EIP  Capital Corporation and  the
other  persons named  therein, pursuant to  which, among other  matters, a newly
formed subsidiary partnership of  the Corporation will be  merged with and  into
the Partnership, with the Partnership as the surviving entity, and each BAC then
outstanding will be exchanged for one share of Common Stock of the Corporation.

    Capitalized  terms used but  not defined herein shall  have the meanings set
forth in the Proxy Statement/ Prospectus distributed by order of EIP  Associates
L.P.,  the general  partner of  the Partnership  (the "General  Partner"), on or
about November  21, 1994.  THIS PROXY  IS  SOLICITED ON  BEHALF OF  THE  GENERAL
PARTNER.

    THE  GENERAL PARTNER AND THE SPONSORS  RECOMMEND THAT BAC HOLDERS VOTE "FOR"
THE CONVERSION PROPOSAL.
<PAGE>
    This Proxy Card, when properly  executed, constitutes an instruction to  the
Initial  Limited Partner to vote for, against  or to abstain with respect to the
Conversion Proposal as  directed herein  by the  undersigned BAC  Holder. IF  NO
DIRECTION  IS MADE, THIS PROXY CARD,  WHEN SIGNED AND DELIVERED, WILL CONSTITUTE
AN INSTRUCTION TO  VOTE FOR THE  CONVERSION PROPOSAL. ABSTENTION  OR FAILURE  TO
FORWARD  A PROXY OR TO VOTE AT THE  SPECIAL MEETING WILL HAVE THE SAME EFFECT AS
IF A BAC HOLDER HAD VOTED "AGAINST" THE CONVERSION PROPOSAL.
    Please sign  exactly as  name appears  below. When  BACs are  held by  joint
tenants,  both  must sign.  When signing  as attorney,  executor, administrator,
trustee or guardian, please  give full title as  such. If a corporation,  please
sign  in full corporate name by the  President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

                                                  Signature(s):

                                                  ------------------------------
                                                  Title (if any):

                                                  ------------------------------
                                                  Title (if any):
                                                  DATED: _________________, 1994

PLEASE MARK, SIGN, DATE  AND RETURN THE PROXY  CARD PROMPTLY USING THE  ENCLOSED
ENVELOPE.


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