<PAGE>
The Corporation will
have the same operating
management and will
be managed pursuant to
substantially the same
operating plan as the
Partnership.
TABLE OF CONTENTS
Introduction ........... 1
Risk Factors ........... 2
Reasons for Conversion.. 4
Questions and Answers
About the Conversion.... 6
How to Vote ............12
(Pictured from left) Kenneth D. Larson,
President, Chief Operating Officer and
Director; John H. (Jack) Grunewald,
Executive Vice President, Chief Financial
Officer and Secretary; and W. Hall
Wendel, Jr., Chairman, Chief Executive
Officer and Director
<PAGE>
DEAR FELLOW BAC HOLDER:
We are asking you to consider and vote on a proposal to convert the
Partnership into a publicly traded corporation to be listed on the American
Stock Exchange and the Pacific Stock Exchange.
The Conversion Proposal is described in detail in the accompanying Proxy
Statement/Prospectus, which were urge you to read carefully.
After you have reviewed this brochure and the Proxy Statement/Prospectus,
we urge you to vote "FOR" adoption of the Conversion Proposal by marking,
signing and dating the accompanying proxy card and returning it to us in
the enclosed postage-paid envelope. The Conversion Proposal is sponsored by
Senior Operating Managers of the Operating Partnership (the "Sponsors"), who
collectively own approximately 9.1% of the outstanding units of Beneficial
Assignment of Class A Limited Partnership Interests ("BACs") and who have no
economic interest in the General Partner. In making your decision, you should
know that the Sponsors have informed the Partnership that they will vote all
of their BACs "FOR" adoption of the Conversion Proposal.
In the pages that follow, we have described certain risks and benefits
associated with the Conversion Proposal and provided answers to questions you
may have about the Conversion.
The Special Meeting of BAC Holders will be held on Thursday, December 22,
1994. To assure that your vote on the Conversion Proposal is counted, please
return the enclosed proxy card as soon as practicable.
If you have additional questions or need assistance with the proper
completion and return of your proxy card, please call D.F. King & Co., Inc.,
the Information Agent for the Conversion, toll free at 1-800-488-8075.
Thank you for your prompt attention to this important matter.
Very truly yours,
W. Hall Wendel, Jr.,
Chief Executive Officer,
Polaris Industries Capital Corporation,
and Chairman of the Board and Chief
Executive Officer, Polaris Industries Inc.
Victor K. Atkins, Jr.,
President, EIP Capital Corporation,
Managing General Partner of EIP Associates
L.P., the General Partner
1
<PAGE>
RISK FACTORS
In evaluating the Conversion, BAC
Holders should take into account the
following risk factors, conflicts of interest and
other special considerations, which are dis-
cussed at greater length in the accompanying
Proxy Statement under "Risk Factors, Conflicts
of Interest and Other Considerations" and
"The Conversion."
-Under current law, the Partnership will be
treated as a corporation for
federal income tax
purposes after December
Under current law, the 31, 1997, unless the
Partnership takes action to
Partnership will be prevent trading in BACs
thereafter. Because of the
treated as a corporation Conversion, BAC Holders
will forego the potential
for federal income tax future tax benefits assoc-
iated with an investment in
purposes after December a partnership (i.e., no tax
paid at the Partnership
31, 1997, unless the level on its taxable income)
immediately, rather than
Partnership takes action beginning after December
31, 1997. The General
to prevent trading of Partner has participated in
efforts to have the
BACs thereafter. December 31, 1997 dead-
line extended or elimin-
ated. 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" in
the Proxy Statement.
-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 separate-
ly in establishing the terms of the
Conversion. Such independent representa-
tion might have caused the terms of the
Conversion to be different in material
respects from those described in the Proxy
Statement. 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" in the Proxy
Statement.
- -As more fully described in the Proxy
Statement under "Market Prices and
Distributions," the Sponsors intend to rec-
ommend that the Corporation's Board of
Directors establish an initial dividend rate of
$.15 per share per quarter and pay three spec-
cial cash distributions, each of $1.92 per
share, payable in each of the last three quar-
ters 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, $.15 per BAC). These dis-
tributions are referred to in the Proxy
Statement and hereinafter as the "Proposed
Distributions." 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 on, among
other things, the future after-tax earnings,
operations, capital requirements, borrowing
capacity and financial condition of the
Corporation and general business conditions,
factors which have also been considered by
the General Partner in connection with
Partnership distributions. There can be no
assurance that the foregoing dividends or dis-
tributions described in the Proxy Statement
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-No Assurance of
Future Distributions" in the Proxy
Statement.
- -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
2
<PAGE>
for such financing have currently been
obtained. Incurrence of indebtedness by the
Corporation could have important conse-
quences 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 opera-
tions 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 pay-
ment 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" in the Proxy Statement.
- -Prior to the Conversion, there will have been
no public market for the Common Stock.
The Common Stock may trade at prices sub-
stantially 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.
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" in the Proxy
Statement.
- -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" in the
Proxy Statement.
- -The fiduciary duties of a general partner to
limited partners may differ from those of cor-
porate directors to shareholders. Therefore,
situations may ocur 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" in the Proxy
Statement.
- -Transaction costs of approximately $9
million will be paid by the Partnership,
whether or not the Conversion is consum-
mated. 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" in the
Proxy Statement.
- -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 the Proxy Statement.
- -In addition to the factors noted above, an
investment in Polaris (whether in partnership
or corporate form) is subject to risks assoc-
iated with operating conditions, competitive
factors, economic conditions, weather condi-
tions, regulatory developments and equity
market conditions. See "Risk Factors,
Conflicts of Interest and Other
Considerations-Risks Related to the
Business" in the Proxy Statement.
3
<PAGE>
REASONS FOR THE CONVERSION
The General Partner and the Sponsors
believe that the following are the princi-
pal 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 Partner-
ship" in the Proxy
Statement. For the reasons
The General Partner and more fully set forth in the
Proxy Statement (see "The
the Sponsors believe that Conversion-Alternatives to
the Conversion"), the
the Conversion is fair to General Partner and the
Sponsors did not consider
BAC Holders and cessation of trading of
BACs or otherwise reducing
recommend that BAC the liquidity of the BACs
after 1997 an advantageous
Holders vote "FOR" way to preserve the tax sta-
tus of the Partnership. Nor
adoption of the did they believe that contin-
uing to operate as a partner-
Conversion Proposal. ship 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 favor-
able equity market conditions generally and
other factors set forth below. See "The
Conversion-Reasons for the Conversion" in
the Proxy Statement. 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 inabli-
ty to consummate such a transaction in an
orderly manner under favorable circumstances.
The Conversion is not expected to adverse-
ly affect the anticipated amount of cash distrib-
utions to be received by investors through
1997. After the Conversion, and subject to
legal and contractual limitations and the fina-
cial requirements of the business, the Sponsors
intend to 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 commercing 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
institutional investors that are expected to
invest in the Corporation. See "Market Prices
and Distributions" in the Proxy Statement.
The tax benefits to BAC Holders of the
Partnership continuing to operate in partner-
ship 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 does not cur-
rently intend to increase the present level of
cash distributions even if its taxable income
were to continue to increase, because Polaris'
continued growth could require reinvesting
significant amounts of cash in the business.
Accordingly, absent the Conversion, assuming
income growth continues in 1994 and subse-
quent years, BAC Holders will be required to
report and pay tax on their share of the
Partnership's taxable income without a corre-
4
<PAGE>
sponding 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" in the Proxy Statement.
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 limit-
ed partnerships because of tax considerations
and administrative burdens, and 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" in
the Proxy Statement.
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 busi-
ness in corporate form are demonstrated by
the fact that Polaris is one of the few remain-
ing 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" in the
Proxy Statement.
The Conversion will simplify Polaris' orga-
nizational structure and reduce significantly
the costs of tax reporting for Polaris and
investors in Polaris. See "The Conversion -
Reasons for the Conversion - Tax Reporting"
in the Proxy Statement.
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" in the Proxy Statement.
THE GENERAL PARTNER AND THE SPONSORS
BELIEVE THAT THE CONVERSION IS FAIR TO BAC
HOLDERS AND RECOMMEND THAT BAC HOLDERS
VOTE "FOR" ADOPTION OF THE CONVERSION
PROPOSAL.
5
<PAGE>
QUESTIONS & ANSWERS ABOUT THE CONVERSION
Q WHAT HAS BEEN PROPOSED FOR
APPROVAL BY HOLDERS OF BACS?
A You are being asked to consider and vote
on a proposal to convert the Partnership
into a publicly traded corporation (the
"Conversion"). Subsequent to 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 and pursuant to substantially
the same operating plan as the Partner-
ship, but without involvement by the
General Partner.
Q WHO IS SPONSORING THE CONVERSION?
A The Conversion is sponsored by the senior
operating managers of the Operating
Partnership (the "Sponsors"), who
collectively own approximately 9.1% of the
outstanding BACs and who have no economic
interest in the General Partner. The Con-
version also is recommended to you by the
General Partner.
W. Hall Wendel, Jr.
CHAIRMAN, CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Q WHAT IS REQUIRED TO APPROVE THE
CONVERSION PROPOSAL?
A Approval of the Conversion Proposal will
require the affirmative vote of both (i)
BAC Holders holding a majority of BACs on
the record date and (ii) unaffiliated BAC
Holders (BAC Holders other than the Sponsors
and affiliates of the General Partner)
holding a majority of BACs owned by such
persons on the record date.
Q IF THE CONVERSION OCCURS, WHAT WILL BE
EXCHANGED FOR EACH OF MY BACS?
A In the Conversion, each BAC will be
Kenneth D. Larson exchanged for one share of Common Stock
PRESIDENT, CHIEF OPERATING of the Corporation. BAC Holders and
OFFICER AND DIRECTOR holders of previously granted rights to
acquire BACs will own 88.6%, and affiliates
of the General Partner will own 11.4%, of
the Corporation's Common Stock to be out-
standing immediately following the
Conversion (assuming the exercise of such
rights).
6
<PAGE>
Q HOW WAS THE ALLOCATION OF COMMON STOCK
BETWEEN AFFILIATES OF THE GENERAL
PARTNER AND OWNERS OF BACS DETERMINED?
A The allocation was agreed to after
extended negotiations beginning in June
1994 between affiliates of the General
Partner on the one hand, and W. Hall
Wendel, Jr., the Chief Executive Officer
of Polaris, and certain other members of
senior operating management of Polaris,
on the other. It was determined with
reference to the existing economic
interests of the General Partner under
various provisions of the agreement
governing the Partnership described
below.
Q WILL THE CONVERSION CHANGE THE WAY THE
GENERAL PARTNER IS COMPENSATED?
A Yes. Pursuant to the agreement governing
the Partnership, the General Partner and
its affiliates are entitled to receive 20.8%
of Partnership distributions of available
cash flow from operations and an annual
management fee of $500,000 and are entitled
to reimbursement of certain expenses. Such
distributions and fees totaled approximately
$10.3 million in 1993 and will exceed $11
million in 1994. These arrangements and
payments will end upon consummation of the John H. (Jack) Grunewald
Conversion. EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
AND SECRETARY
Q HAVE ANY OPINIONS AS TO THE FAIRNESS OF
THE CONVERSION BEEN RECEIVED?
A Yes. Smith Barney Inc. ("Smith Barney") and
Dillon, Read & Co. Inc. ("Dillon Read"),
nationally recognized investment banking
firms, have reviewed the terms of the Con-
version and rendered fairness opinions,
which are described in the accompanying
Proxy Statement. Based upon the consider-
ations and subject to the assumptions and
limitations set forth in their opinions,
Smith Barney and Dillon Read have opined
separately that, each of the Exchange
Ratio of Common Stock between BAC Holders
and affiliates of the General Partner and
the consideration to be received by BAC Holders
in the Conversion is fair to BAC Holders,
from a financial point of view. See Annex B
of the Proxy Statement for the full text of Charles A. Baxter
the Smith Barney fairness opinion. Also, see VICE PRESIDENT-ENGINEERING
Annex C of the Proxy Statement for the full AND PRODUCT SAFETY
text of the Dillon Read fairness opinion.
Q WHAT WILL BE THE MARKET VALUE OF THE COMMON
STOCK I RECEIVE FOR EACH BAC?
A Neither Smith Barney nor Dillon Read has
expressed 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. However, in
preparing their fairness opinions, Smith
Barney and Dillon Read arrived at implied
ranges of values for the Common Stock based
on a number of factors and assumptions
described in the Proxy
7
<PAGE>
Statement, which BAC Holders are encouraged
to read. See "The Conversion - Fairness
Opinions" in the accompanying Proxy State-
ment. 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 in
the absence of a corresponding demand for
Common Stock from institutional and retail
investors. It should be noted, however, that
the market price of the BACs on November 17
was $44.50 compared to $36.00, the average
during the ten trading day period prior to
the date on which the Partnership announced
its plan to convert into a publicly traded
corporation.
Q WILL MY CASH DISTRIBUTIONS BE AFFECTED BY THE
CONVERSION?
A Assuming the Corporation makes the Proposed
Distributions (i.e. the initial cash dividend
rate of $.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, $.15 per BAC), the Con-
version will not adversely affect the aggregate
anticipated amount of cash distributions to be
received by investors through 1997. Assuming
the Corporation makes such distributions, each
BAC Holder who continues to hold Common Stock
received in the Conversion will receive from
the Partnership and the Corporation cash
distributions and dividends during the three-
year 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 Partner-
ship had the Conversion not occurred and the
Partnership maintained its existing distribution
policy. The Sponsors believe that such
distributions should ease the transition in the
Corporation's ownership between historically
primarily income-oriented investors in the
Partnership and the growth-oriented institutional
investors that are expected to invest in the
Corporation.
Q WHAT ARE THE PRINCIPAL REASONS TO CONSUMMATE THE
CONVERSION AT THIS TIME?
A In the limited space available in this brochure,
we can list only a few of the principal reasons to
consummate the Conversion at this time. Please see
"The Conversion - Reasons for the Conversion" in the
Proxy Statement for a more complete listing.
The Partnership currently is treated as a
partnership for federal income tax purposes under
a "grandfather" provision of the Internal Revenue
Code amendments enacted in 1987. Under this
provision, the Partnership's status will end, and
it will be treated as a corporation for federal
income tax purposes, if it continues to be publicly
traded, at such time as it engages in a substantially
new line of business, and, in any event, after
December 31, 1997. Thus, under
8
<PAGE>
current law, the principal advantage of conducting business as a
publicly traded partnership will cease for the Partnership as of
December 31, 1997, unless the Partnership takes action to
prevent trading in BACs thereafter or the applicable law is
changed. The General Partner and the Sponsors did not consider
cessation of trading of BACs or otherwise reducing the liquidity
of BACs after 1997 an advantageous way to preserve the tax status
of the Partnership. Nor did they consider that continuing to operate
as a partnership while being taxed as a corporation after 1997 to 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:
- -the Conversion will resolve uncertainty about the Partnership's
future tax and organizational status, which uncertainty would
otherwise increase as December 31, 1997 approaches;
- -the receipt of shares by all participants in the Conversion can be
effected on a tax-free basis under current law; and
- -the Conversion is facilitated by the Partnership's strong financial
performance, currently favorable equity market conditions generally
and other factors set forth below and in the Proxy Statement.
Accordingly, the General Partner and the sponsors believe that it
is advantageous for the Partnership to convert to corporate James C. Bruha
form at the present time rather than postpone such a VICE PRESIDENT-
transaction until 1997 and that any potential benefit MANUFACTURING
derived from maintaining the Partnership's current form is
outweighed by (i) the 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.
As previously noted, assuming the Corporation makes the Proposed
Distributions, the Conversion is not expected to adversely affect the
aggregate anticipated amount of cash distributions to be received by
investors through 1997. 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 three-year period commencing January 1, 1995, and ending
December 31, 1997, equal in amount to cash distributions Ed Skomoroh
($7.56 per BAC) that BAC Holders would have received VICE PRESIDENT-
from the Partnership had the Conversion not occurred SALES AND
and the Partnership maintained its existing distribution MARKETING
policy.
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 does not currently intend to increase its present level
of cash distributions, even if its taxable income were 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 distrib-
9
<PAGE>
utions will continue to increase for the foreseeable
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.
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 currently enjoys, 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
Michael W. Malone increased review and valuation by investment
VICE PRESIDENT research analysts. Although there can be no
AND TREASURER assurance in this regard, such factors should
result in greater activity and liquidity for
the Common Stock, as compared to the BACs.
Q WHAT ARE THE SIGNIFICANT TAX ASPECTS OF THE EXCHANGE
OF COMMON STOCK FOR BACS IN THE CONVERSION?
A Under current law, if the Conversion is
consummated, the exchange of Common Stock for
BACs will be tax-free. As a corporation, the
Corporation's net income, which will include the
Partnership's net income after that Conversion,
will be subject to federal and state corporation
income tax. Distributions to shareholders,
including the three special cash distributions,
if made, will be taxable as ordinary dividend
income to the extent of the Corporation's
earnings and profits for tax purposes and will
be classified as investment or portfolio income.
Hugh T. Ferguson Sales of shares of common stock of the corporation
GENERAL MANAGER, which are held as capital assets will produce
POLARIS CANADA capital gain or loss to the selling shareholder.
10
<PAGE>
Q. WILL DISSENTING BAC HOLDERS BE ENTITLED TO APPRAISAL RIGHTS?
A Yes. The agreement governing the conversion provides rights for
dissenting BAC Holders to have their respective BACs appraised or
redeemed which are similar to statutory rights of appraisal that
stockholders of a Delaware corporation possess under Section 262 of
the General Corporation Law of the State of Delaware. A BAC Holder
wising to exercise such rights must demand them on or before the
fifth day prior to the Special Meeting and must not vote in favor of
or consent in writing to the Conversion Proposal. In addition, the
other procedures set forth in the Proxy Statement must be followed.
If the Conversion Proposal is approved, BAC Holders who have demanded
appraisal rights will not be entitled to receive any portion of the
shares of Common Stock of the Corporation, to vote Jeff Bjorkman
such BACs for any purposes or to receive payment of PLANT MANAGER, ROSEAU
distributions on such BACs (other than those payable
to holders of record of BACs prior to the Conversion).
Q HOW SHOULD I VOTE ON THE CONVERSION PROPOSAL?
A You are urged to review the accompanying Proxy Statement
carefully and to consult with your personal financial and tax
advisor before voting on the Conversion Proposal. In making your
decision, you should consider that the General Partner and the
Sponsors urge you to vote "FOR" adoption of the Conversion
Proposal. The Sponsors collectively own approximately 9.1% of the
outstanding BACs and have no economic interest in Richard Sevence
the General Partner. In addition, you should know PLANT MANAGER, OSCEOLA
that the Sponsors have informed the Partnership that they
will vote all of their BACs "FOR" adoption of the
Conversion Proposal.
Charles Crone
PLANT MANAGER, SPIRIT LAKE
11
<PAGE>
THE VOTE OF EACH BAC HOLDER IS IMPORTANT.
YOU ARE URGED TO MARK, DATE AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON
AS POSSIBLE. BY RETURNING THE PROXY CARD
PROMPTLY, YOU WILL SAVE THE PARTNERSHIP ADDI-
TIONAL SOLICITATION EXPENSES.
You may vote either "FOR," "AGAINST,"
or "ABSTAIN" on the Conversion Proposal.
If you sign and return the Proxy card with-
out clearly indicating an "AGAINST" vote or
without clearly indicating that you
"ABSTAIN" from voting, you will be deemed
to have voted "FOR" adoption of the
Conversion Proposal.
If you "ABSTAIN" or otherwise refrain
from voting on the Conversion Proposal by
failing to return a proxy card or by not attend-
ing the Special Meeting and voting in person,
your actions will have the same effect as a vote
"AGAINST" the Conversion Proposal.
THE SPONSORS AND THE GENERAL PARTNER
URGE YOU TO VOTE "FOR" ADOPTION OF THE
CONVERSION PROPOSAL.
NOTE: IF YOUR BACS ARE HELD FOR YOU BY A
BROKER OR BANK, ONLY YOUR BROKER OR BANKER
CAN VOTE YOUR BACS AND ONLY AFTER RECEIVING
SPECIFIC VOTING INSTRUCTIONS FROM YOU. PLEASE
SIGN AND RETURN THE ACCOMPANYING VOTING
INSTRUCTION FORM IN THE ENCLOSED RETURN
ENVELOPE AS SOON AS POSSIBLE.
Additional detailed information about the
Conversion is set forth in the accompanying
Proxy Statement, which you are urged to read
carefully. If you have any questions or need
assistance in completing your proxy card,
please call D. F. King & Co., Inc., the
Information Agent for the Conversion, toll
free at 1-800-488-8075.
YOUR VOTE IS IMPORTANT. PLEASE ACT PROMPTLY.
IN JULY, 1994, MINNESOTA GOVERNOR ARNE CARLSON
JOINED POLARIS EXECUTIVES W. HALL WENDEL, JR., AND
KEN LARSON TO CELEBRATE POLARIS'
40TH ANNIVERSARY.
12
<PAGE>
LEFT TO RIGHT, BACK ROW: CHARLES A. BAXTER, VICE PRESIDENT-ENGINEERING AND
PRODUCT SAFETY; CHARLES CRONE, PLANT MANAGER, SPIRIT LAKE; ED SKOMOROH,
VICE PRESIDENT-SALES AND MARKETING; RICHARD STRENGE, PLANT MANAGER,
OSCEOLA; JEFF BJORKMAN, PLANT MANAGER, ROSEAU; JAMES BRUHA, VICE PRESIDENT,
MANUFATURING; HUGH FERGUSON, GENERAL MANAGER, POLARIS CANADA.
FRONT ROW: MICHAEL W. MALONE, VICE PRESIDENT AND TREASURER.
<PAGE>
P O L A R I S
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POLARIS INDUSTRIES PARTNERS L.P.
1225 NORTH HIGHWAY 169
MINNEAPOLIS, MN 55441
