<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Polaris Industries Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[POLARIS LOGO]
POLARIS INDUSTRIES INC. 1225 Highway 169 North
Minneapolis, Minnesota 55441-5078
612-542-0500
Fax: 612-542-0599
March 30, 1998
Dear Fellow Shareholder:
The Board of Directors of Polaris Industries Inc. joins me in extending a
cordial invitation to attend our 1998 Annual Meeting of Shareholders which will
be held at the Radisson Hotel and Conference Center, 3131 Campus Drive,
Plymouth, Minnesota 55441, on Thursday, May 21, 1998 at 9:00 a.m. local time.
In addition to voting on the matters described in the accompanying Notice of
Annual Meeting and Proxy Statement, we will review Polaris' 1997 business and
discuss our direction for the coming years. There will also be an opportunity,
after conclusion of the formal business of the meeting, to discuss other matters
of interest to you as a shareholder.
It is important that your shares be represented at the meeting whether or
not you plan to attend in person. Therefore, please sign and return the enclosed
proxy in the envelope provided. If you do attend the meeting and desire to vote
in person, you may do so even though you have previously sent a proxy.
We hope that you will be able to attend the meeting, and we look forward to
seeing you.
Sincerely,
/s/ W. Hall Wendel, Jr.
W. Hall Wendel, Jr.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Enclosures
<PAGE>
POLARIS INDUSTRIES INC.
1225 HIGHWAY 169 NORTH
MINNEAPOLIS, MINNESOTA 55441-5078
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
------------------------
TO POLARIS SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders of Polaris Industries Inc. will be
held at the Radisson Hotel and Conference Center, 3131 Campus Drive, Plymouth,
Minnesota 55441, at 9:00 a.m. local time on Thursday, May 21, 1998 for the
following purposes:
1. To elect two directors for three-year terms ending in 2001 (Proposal 1);
2. To approve the proposal to amend the Polaris Industries Inc. 1995 Stock
Option Plan (Proposal 2);
3. To approve the proposal to amend the Polaris Industries Inc. 1996
Restricted Stock Plan (Proposal 3); and
4. To transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments thereof (Proposal 4).
Shareholders of record at the close of business on March 25, 1998 are
entitled to notice of and to vote at the Annual Meeting or any postponements or
adjournments thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT IN THE ACCOMPANYING ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU DECIDE TO ATTEND THE
MEETING.
By order of the Board of Directors
/s/ Michael W. Malone
Michael W. Malone
VICE PRESIDENT -- FINANCE, CHIEF
FINANCIAL OFFICER AND SECRETARY
Minneapolis, Minnesota
March 30, 1998
<PAGE>
POLARIS INDUSTRIES INC.
1225 HIGHWAY 169 NORTH
MINNEAPOLIS, MINNESOTA 55441
---------------------
PROXY STATEMENT
--------------------
PROXIES AND VOTING
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation by the Board of Directors and management of
Polaris Industries Inc., a Minnesota corporation (the "Company"), of proxies for
use at the Annual Meeting of Shareholders of the Company (the "Annual Meeting")
to be held at 9:00 a.m., local time, on May 21, 1998, at the Radisson Hotel and
Conference Center, 3131 Campus Drive, Plymouth, Minnesota 55441 for the purposes
set forth in the accompanying Notice of Meeting.
Each shareholder entitled to vote at the Annual Meeting who signs and
returns a proxy in the form enclosed with this Proxy Statement may revoke such
proxy at any time prior to its use by giving notice of such revocation to the
Company in writing or in open meeting. Unless so revoked, the proxy will be
voted in accordance with the instructions contained therein at the Annual
Meeting and any postponements or adjournments thereof. Presence at the Annual
Meeting of a shareholder will not, in itself, constitute revocation of a
previously granted proxy.
This Proxy Statement and the accompanying proxy were first mailed to
shareholders on or about March 30, 1998.
Only shareholders of record at the close of business on March 25, 1998 (the
"Record Date") will be entitled to notice of and to vote the shares of common
stock, $.01 par value per share, of the Company (the "Common Stock") held by
them on that date at the Annual Meeting or any postponements or adjournments
thereof. At the close of business on the Record Date, the Company had
outstanding 26,354,668 shares of Common Stock.
Holders of Common Stock of record at the close of business on the Record
Date will be entitled to one vote per share on the (1) election of directors,
(2) approval of the amendment of the Polaris Industries Inc. 1995 Stock Option
Plan, (3) approval of the amendment of the Polaris Industries Inc. 1996
Restricted Stock Plan, and (4) any other business to be transacted at the Annual
Meeting.
The quorum required to hold the meeting is a majority of the shares of
Common Stock entitled to vote at the meeting present in person or by proxy. If a
quorum is present, the affirmative vote, in person or by proxy, of a majority of
shares of Common Stock present and entitled to vote at the Annual Meeting, will
be necessary for the adoption of proposals 1, 2 and 3 listed in the Notice of
Meeting. If a broker, other record holder, or nominee indicates on a proxy that
it does not have authority to vote certain shares on a particular matter, those
shares will not be considered present and will not effect the outcome of the
vote. Abstentions are treated as being present and, because the affirmative vote
of a majority of the shares of Common Stock present and entitled to vote on a
particular proposal is necessary for adoption of such proposal, the effect of an
abstention is a vote against the proposal.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 3, 1998 by each
shareholder known to the Company who then beneficially owned more than 5% of the
outstanding shares of Common Stock, each director of the Company, each nominee
for director, each executive officer named in the Compensation Table set forth
later in this Proxy Statement and all such officers and directors as a group. As
of March 3, 1998, there were 26,234,550 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ---------------------------------------------------------------- ----------- ------------
<S> <C> <C>
The Capital Group Companies, Inc. (1) 1,792,800 6.8%
Trimark Financial Corporation (2) 2,138,900 8.2%
W. Hall Wendel, Jr. (3)(4)(5) 1,492,410 5.7%
Chairman of the Board of Directors
and Chief Executive Officer
Kenneth D. Larson (4)(5) 182,626 *
President, Chief Operating Officer and Director
Charles A. Baxter (4)(5) 360,130 1.4%
Vice President -- Engineering
and General Manager -- Engines
Jeffrey A. Bjorkman (4)(5) 28,198 *
Vice President, Manufacturing
Ed Skomoroh (4)(5) 98,145 *
Vice President -- Marketing
Andris A. Baltins (6) 12,325 *
Director
Raymond J. Biggs 2,000 *
Director
Beverly F. Dolan 9,500 *
Director
Robert S. Moe 294,000 1.1%
Director
Gregory R. Palen 4,000 *
Director
Stephen G. Shank 600 *
Director
All directors and executive 2,522,683 9.6%
officers as a group
(12 persons) (4)(5)
</TABLE>
- ------------------------
* Represents less than 1%.
2
<PAGE>
(1) The address of The Capital Group Companies, Inc. is 333 South Hope Street,
Los Angeles, California 90071. The information set forth herein is based on
the Schedule 13G dated February 10, 1998 filed with the Securities and
Exchange Commission.
(2) The address of Trimark Financial Corporation is One First Canadian Place,
Suite 5600, P.O. Box 487, Toronto, Ontario M5X 1E5. The information set
forth herein is based on the Schedule 13G dated February 11, 1998 filed with
the Securities and Exchange Commission.
(3) Mr. Wendel's address is 1225 Highway 169 North, Minneapolis, Minnesota
55441. Includes 150,000 shares held in the Wendel Foundation of which Mr.
Wendel is Vice President.
(4) Includes 18,060, 12,040, 5,115, 3,855 and 5,115 restricted shares of Common
Stock awarded to Messrs. Wendel, Larson, Baxter, Bjorkman and Skomoroh
respectively and 47,200 aggregate restricted shares of Common Stock awarded
to all executive officers as a group under Polaris' 1996 Restricted Stock
Plan. The restricted shares become freely tradeable only upon the Company
achieving certain compounded earnings growth targets within a four year
period.
(5) Includes 40,500, 27,000, 13,500, 7,500 and 12,000 shares subject to stock
options that were granted to Messrs. Wendel, Larson, Baxter, Bjorkman and
Skomoroh respectively and 105,000 aggregate shares subject to stock options
that were granted to all executive officers as a group under Polaris' Stock
Option Plan, which will vest and become exercisable on May 10, 1998.
(6) Includes 2,500 shares held in trust for Mr. Baltins' children and 3,000 held
in trust for one of Mr. Baltins' parents. Other members of the law firm of
Kaplan, Strangis and Kaplan, P.A., of which Mr. Baltins is a member and
which serves of counsel to the Company, beneficially own 52,900 shares.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Board of Directors of the Company consists of eight directors. The Board
is divided into three classes serving staggered three-year terms. Each of the
directors, with the exception of Mr. Wendel who has been a director since
September 1994 and Mr. Biggs who has been a director since May 1996, became a
director of the Company upon the conversion of Polaris Industries Partners L.P.
to corporate form in December 1994. The term of office of directors in Class I,
Messrs. Baltins and Larson, expires in 1998. The term of office of directors in
Class II, Messrs. Biggs, Dolan and Moe, expires in 1999 and the term of office
of directors in Class III, Messrs. Palen, Shank and Wendel expires in 2000.
There are no family relationships between or among any executive officers or
directors of the Company.
The Board of Directors proposes that the following nominees, all of whom are
currently serving as Class I directors, be elected as Class I directors for a
new term of three years and until their successors are duly elected and
qualified:
Andris A. Baltins
Kenneth D. Larson
Except where authority has been withheld by a shareholder, the enclosed
proxy will be voted for the election of the two nominees to the Company's Board
of Directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO ELECT THE NOMINEES AS CLASS I DIRECTORS OF THE COMPANY.
In the event any or all of the nominees shall become unavailable to serve as
a director before election, votes will be cast pursuant to authority granted by
the enclosed proxy for such person or persons as may be designated by the Board
of Directors.
3
<PAGE>
INFORMATION CONCERNING NOMINEES AND DIRECTORS
DIRECTORS STANDING FOR ELECTION -- CLASS I
ANDRIS A. BALTINS Director since 1994
[PHOTO] Mr. Baltins, 52, has been a member of the law firm of
Kaplan, Strangis and Kaplan, P.A. since 1979. He is a
director of Adams Outdoor Advertising, Inc., the managing
general partner of Adams Outdoor Advertising Limited
Partnership, an outdoor advertising company. Mr. Baltins is
also a director of various private and non-profit
corporations. Mr. Baltins serves on the Audit Committee and
the Compensation Committee of the Board of Directors of the
Company.
KENNETH D. LARSON Director since 1994
[PHOTO] Mr. Larson, 57, has been the President and Chief Operating
Officer of the Company since the conversion of Polaris
Industries Partners L.P. to corporate form in December 1994.
He was the President and Chief Operating Officer of Polaris
Industries Capital Corporation ("PICC"), the managing
general partner of Polaris Industries Associates L.P., which
was the operating general partner of Polaris Industries
L.P., from 1987 through the conversion of Polaris Industries
Partners L.P. to corporate form in 1994. Prior thereto, Mr.
Larson was Executive Vice President of The Toro Company,
responsible for its commercial, consumer and international
equipment business, and held a number of general management
positions after joining The Toro Company in 1975. Mr. Larson
serves as a director and a member of the audit and
compensation committees of Featherlite Trailers, a
manufacturer of stock and car trailers and as a director and
a member of the compensation committee of Destron Fearing
Corp., a manufacturer of animal identification devices. Mr.
Larson is also a director of various private corporations.
Mr. Larson serves on the Executive Committee of the Board of
Directors of the Company.
DIRECTORS CONTINUING IN OFFICE
CLASS II -- TERM EXPIRES AT THE 1999 ANNUAL MEETING
RAYMOND J. BIGGS Director since 1996
[PHOTO] Mr. Biggs, 60, was the Chairman of Huntington Bancshares of
Michigan, a financial institution, from 1990 through 1994.
From 1971 through 1990, Mr. Biggs was Chairman of a
predecessor of Huntington Bancshares. Since 1994, Mr. Biggs
has been a private investor and currently serves as a
director of Huntington Bancshares. Mr. Biggs is also a
director of the Michigan State University Business School
and various private and non-profit corporations. Mr. Biggs
is a member of the Stock Award Compensation Committee of the
Board of Directors of the Company.
4
<PAGE>
BEVERLY F. DOLAN Director since 1994
[PHOTO] Mr. Dolan, 70, 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, Mr. Dolan has
been a private investor and currently serves as a director
of First Union Corporation, a bank holding company; and FPL
Group, Inc., a Florida electrical power producer. Mr. Dolan
is Chairman of both the Compensation Committee and the Stock
Award Compensation Committee of the Board of Directors of
the Company.
ROBERT S. MOE Director since 1994
[PHOTO] Mr. Moe, 67, was Executive Vice President and Treasurer of
PICC from 1987 through 1992. From 1981 to 1987, Mr. Moe was
Executive Vice President and Treasurer of a predecessor of
the Company. Since 1992, Mr. Moe has been a private investor
and currently serves as a director and member of the audit
committee of Digi International Inc., a provider of data
communications hardware and software. Mr. Moe serves on the
Compensation Committee and the Executive Committee of the
Board of Directors of the Company.
DIRECTORS CONTINUING IN OFFICE
CLASS III -- TERM EXPIRES AT THE 2000 ANNUAL MEETING
GREGORY R. PALEN Director since 1994
[PHOTO] Mr. Palen, 42, has been 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 painting and coating
manufacturing company. Mr. Palen is also a director of
various private and non-profit corporations. Mr. Palen
serves on the Audit Committee of the Board of Directors of
the Company.
5
<PAGE>
STEPHEN G. SHANK Director since 1994
[PHOTO] Mr. Shank, 54, 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. Mr. Shank is
also a director of various private and non-profit
corporations. Mr. Shank is the Chairman of the Audit
Committee of the Board of Directors of the Company.
W. HALL WENDEL, JR. Director since 1994
[PHOTO] Mr. Wendel, 55, is the Chairman and Chief Executive Officer
of the Company and was Chief Executive Officer of PICC from
1987 to 1994. From 1981 to 1987, Mr. Wendel was Chief
Executive Officer of the predecessor of Polaris Industries
Partners L.P., which was formed to purchase the snowmobile
assets of the Polaris E-Z-GO Division of Textron Inc. 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. Mr. Wendel is Chairman of
the Board of Directors and Chairman of the Executive
Committee of the Board of Directors of the Company.
DIRECTORS' REMUNERATION
Directors who are also full-time employees of the Company receive no
additional compensation for service as directors. During fiscal year 1998, the
Company intends to pay each nonemployee director an annual director's fee of
$27,500, at least $5,000 of which will be payable in Common Stock Equivalents
(as described below).
The Company maintains a deferred compensation plan for directors, the
Polaris Industries Inc. Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), under which directors who are not officers or employees of
the Company ("Outside Directors") will receive annual awards of Common Stock
Equivalents and can elect to defer all or a portion of their cash directors'
fees and have the deferred amounts deemed invested in additional Common Stock
Equivalents. These "Common Stock Equivalents" are phantom stock units, i.e.,
each Common Stock Equivalent represents the economic equivalent of one share of
Common Stock. Dividends will be credited to Outside Directors as if the Common
Stock Equivalents were outstanding shares of Common Stock. Such dividends will
be converted into additional Common Stock Equivalents. The Deferred Compensation
Plan will remain effective until May 10, 2005, unless terminated earlier by the
Board of Directors.
As of each quarterly date on which retainer fees are payable to Outside
Directors, each Outside Director will automatically receive an award of Common
Stock Equivalents having a fair market value of $1,250.
An Outside Director can also defer all or a portion of the retainer and/or
meeting fees that would otherwise be paid to him or her in cash. Such deferred
amounts will be converted into additional Common Stock Equivalents based on the
then fair market value of the Common Stock.
As soon as practicable after an Outside Directors' Board service terminates,
he or she will receive a distribution of a number of shares of Common Stock
equal to the number of Common Stock Equivalents
6
<PAGE>
then credited to him or her under the Deferred Compensation Plan. Upon the death
of an Outside Director, the shares will be issued to his or her beneficiary.
Upon a change in control of the Company (as defined in the Deferred Compensation
Plan), however, each Outside Director will receive a cash payment equal to the
value of his or her accumulated Common Stock Equivalents.
A maximum of 75,000 shares of Common Stock will be available for issuance
under the Deferred Compensation Plan. The Deferred Compensation Plan may be
terminated or amended at any time.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of four meetings during
1997 and acted through one written action. All directors attended at least 75
percent of the meetings of the Board of Directors and any committee on which
such directors served during the period, except Mr. Baltins who attended all
meetings of the Board of Directors and one Audit Committee meeting.
The Board of Directors has designated four standing committees. The
Executive Committee, consisting of Messrs. Wendel, Moe and Larson, reviews and
makes recommendations to the Board of Directors regarding the strategic plans
and allocation of resources of the Company and exercises the authority of the
Board of Directors on specific matters as delegated to it from time to time. The
Executive Committee met once during 1997. The Audit Committee, consisting of
Messrs. Shank, Baltins and Palen, reviews and makes recommendations to the Board
of Directors with respect to the financial and legal posture of the Company,
recommends the appointment of independent public accountants, reviews the
reports and evaluations of the Company's independent public accountants and
monitors improvements of any financial reporting discrepancies, receives
internal audit reports and ensures corrections are made on any financial
reporting deficiencies, monitors adherence to established corporate policies and
practices including standards of business conduct and initiates and monitors any
special audits that it may deem appropriate. The Audit Committee held a total of
two meetings during 1997. The Compensation Committee, consisting of Messrs.
Dolan, Moe and Baltins, reviews and makes recommendations to the Board of
Directors regarding the compensation of officers of the Company, employee profit
sharing, and other benefit plans and also provides recommendations to the Board
of Directors regarding a management succession plan for the Company. The
Compensation Committee held a total of two meetings and acted through one
unanimous written action in 1997. The Stock Award Compensation Committee,
consisting of Messrs. Dolan and Biggs, makes recommendations to the Board of
Directors regarding stock-based incentives. The Stock Award Compensation
Committee met once during 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Polaris Industries Inc., a Delaware corporation wholly owned by the Company,
(the "Operating Subsidiary"), leases office and warehouse space in a suburb of
Minneapolis, Minnesota from 1225 North County Road 18 Limited Partnership (the
"1225 Partnership"). Mr. Baxter, Vice President -- Engineering and General
Manager -- Engines of the Company, Mr. Wendel and Mr. Moe are among the partners
in the 1225 Partnership. Under the lease, which was entered into in 1983 and
amended in 1990 and 1996, the Operating Subsidiary 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 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,
1997, 1996, and 1995 were $495,000, $482,000 and $469,000 respectively. The term
of the lease expires in 2002.
Andris A. Baltins, a member of the Board of Directors, is also a member of
the law firm of Kaplan, Strangis and Kaplan, P.A. which provided legal services
to the Company during 1997. It is anticipated that Kaplan, Strangis and Kaplan,
P.A. will provide certain legal services to the Company in 1998.
7
<PAGE>
VOTING ARRANGEMENTS
In connection with the conversion of Polaris Industries Partners L.P. to
corporate form, Mr. Wendel and Mr. Victor Atkins entered into an agreement dated
as of August 25, 1994 which provides, among other things, that for so long as
Mr. Atkins owns no less than 3% of the outstanding shares of the Common Stock,
he will vote such shares in favor of the Company's nominees for election to the
Board of Directors of the Company.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes of ownership of the Company's common stock with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of all Section 16(a) reports that
they file. To the Company's knowledge, based solely upon a review of the copies
of those reports furnished to the Company during 1997 and written
representations that no other reports were required, the Company believes that
during 1997, all filing requirements applicable to its directors, executive
officers and 10% beneficial owners, if any, were complied with.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1997, 1996 and 1995 of those persons who were, as of December
31, 1997, (i) the Chief Executive Officer and (ii) the four other most highly
paid executive officers whose total annual salary and bonus exceeded $100,000
during the fiscal year ended December 31, 1997 (the "Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------- --------
OTHER ANNUAL STOCK RESTRICTED OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) STOCK SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) (A) ($) (B) ($) (C) ($) (D) ($) (E) (#) (F) ($) ($) (G)
- ----------------------------- ---- -------- -------- ------------- ---------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
W. Hall Wendel, Jr. 1997 $240,000 $244,800 -- $ 0 $ 214,755 18,000 $ 0 $ 23,520
Chairman of the Board 1996 $240,000 $230,400 -- $ 0 $ 328,050 21,000 $ 0 $ 25,200
and Chief Executive Officer 1995 $240,000 $264,000 -- $ 391,500 $ 0 40,500 $ 0 $ 13,500
Kenneth D. Larson 1997 $190,000 $199,500 -- $ 0 $ 143,170 12,000 $ 0 $ 20,330
Chief Operating 1996 $190,000 $216,600 -- $ 0 $ 218,700 14,000 $ 0 $ 21,850
Officer and President 1995 $190,000 $247,000 -- $ 0 $ 0 27,000 $ 0 $ 12,250
Charles A. Baxter 1997 $150,000 $132,000 -- $ 0 $ 59,869 5,000 $ 0 $ 13,246
Vice President -- 1996 $150,000 $124,500 -- $ 0 $ 94,163 6,000 $ 0 $ 12,981
Engineering and 1995 $150,000 $127,500 -- $ 43,500 $ 0 13,500 $ 0 $ 11,142
General Manager -- Engines
Jeffrey A. Bjorkman 1997 $116,923 $116,923 -- $ 0 $ 51,371 4,300 $ 0 $ 10,356
Vice President -- 1996 $100,000 $ 90,000 -- $ 0 $ 62,775 4,000 $ 0 $ 9,038
Manufacturing 1995 $ 96,923 $ 82,385 -- $ 264,375 $ 0 7,500 $ 0 $ 7,500
Ed Skomoroh 1997 $140,000 $109,200 -- $ 0 $ 59,869 5,000 $ 0 $ 12,577
Vice President -- 1996 $140,000 $116,200 -- $ 0 $ 94,163 6,000 $ 0 $ 12,615
Marketing 1995 $135,516 $128,740 -- $ 0 $ 0 12,000 $ 0 $ 11,000
</TABLE>
- ----------------------------------
(A) Includes amounts deferred by the Executive Officers under the Company's
401(k) retirement savings plan and SERP.
(B) Bonus payments are reported for the year in which the related services were
performed.
(C) The Company provides health club memberships, club dues, financial planning
and tax preparation, Exec-U-Care coverage, as well as standard employee
medical, dental, and disability coverage to its Executive Officers. In 1997,
Mr. Bjorkman also received a one-time relocation payment. The value of all
such "Other Annual Compensation" is less than the minimum of $50,000 or 10%
of the total cash compensation for each person reported above.
(D) On March 1, 1994 an aggregate of 168,000 First Rights, similar to restricted
shares, were granted to Polaris employees pursuant to the 1987 Management
Ownership Plan, including 12,000, 15,000, 7,500, 3,000, and 7,500 for
Messrs. Wendel, Larson, Baxter, Bjorkman and Skomoroh. In addition, Mr.
Bjorkman was granted 9,000 First Rights in August, 1994. These First Rights
converted to stock on January 1, 1997 (50%) and January 1, 1998 (50%). In
January, 1995, Mr. Bjorkman was granted 9,000 First Rights which convert to
stock on January 1, 1998 (50%) and January 1, 1999 (50%) provided that Mr.
Bjorkman is employed by the Company at that time. Messrs. Wendel and Baxter
were given special grants of 13,500 and 1,500 First Rights, respectively, in
May, 1995 which immediately converted into common stock as a reward for the
successful conversion of the Company to a publicly held corporation. These
First Rights vested immediately. These are the total outstanding restricted
shares or stock units with respect to First Rights held by the Chief
Executive Officer and the other four highest paid executive officers as of
December 31, 1997. The share price at the close of business on December 31,
1997 was $30.5625; therefore, the value of the total outstanding restricted
shares for the Executive Officers at the end of the fiscal year was
$183,375, $229,219, $114,609, $458,438 and $114,609 respectively for Messrs.
Wendel, Larson, Baxter, Bjorkman and Skomoroh.
(E) The Company granted restricted stock awards to the named officers in 1996
and 1997. The restricted stock awards were approved by the Stock Award
Compensation Committee of the Board of Directors and in accordance with the
Restricted Stock Plan. The amounts shown in this column are the value of the
restricted shares as of the date of grant. The restricted shares become
freely tradeable only upon the Company achieving certain compounded earnings
growth targets within a four year period. The total number and value of
restricted stock holdings as of December 31, 1997 for the named officers are
as follows: Messrs. Wendel, 18,060, $551,959, Larson, 12,040, $367,973,
Baxter, 5,115, $156,327, Bjorkman, 3,855, $117,818 and Skomoroh, 5,115,
$156,327.
(F) The Company granted stock options to employees (including the Executive
Officers) in 1996 and 1997. The Stock Option grants were approved by the
Stock Award Compensation Committee of the Board of Directors and in
accordance with the 1995 Stock Option Plan.
(G) Consists of Company matching contributions to the 401(k) retirement savings
plan and SERP. The SERP plan began July 1, 1995 and is a nonqualified plan
which mirrors the 401(k) plan without the Internal Revenue Service
contribution limitations. The Executive Officers each received $8,000 in
matching contributions to the 401(k) plan. The SERP contributions were
$15,520, $12,330, $5,246, $2,356, and $4,577 respectively for Messrs.
Wendel, Larson, Baxter, Bjorkman and Skomoroh.
9
<PAGE>
The Company does not maintain any defined benefit or actuarial pension plan
under which benefits are determined primarily by final compensation and years of
service.
OPTION GRANTS FOR 1997 AND POTENTIAL REALIZABLE VALUES
The following table sets forth as to each of the named executive officers
information with respect to option grants during 1997 and the potential
realizable value of such option grants: (i) the number of shares of Common Stock
underlying options granted during 1997 (ii) the percentage that such option
represent of all options granted to employees during 1997, (iii) the exercise
price, (iv) the expiration date and (v) the potential realizable value, assuming
a 5% and 10% annual rate of appreciation, for all stockholders. The 5% and 10%
assumed rates of growth are for illustrative purposes only. They are not
intended to predict future stock prices, which will depend on market conditions
and other factors such as the Company's performance.
OPTION GRANTS DURING 1997 AND
ASSUMED POTENTIAL REALIZABLE VALUES
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
--------------------------- AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- ----------------------------------------------- ----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
W. Hall Wendel, Jr............................. 18,000 12.59% $ 25.75 03/11/07 $ 291,493 $ 738,700
Kenneth D. Larson.............................. 12,000 8.39% $ 25.75 03/11/07 $ 194,328 $ 492,466
Charles A. Baxter.............................. 5,000 3.50% $ 25.75 03/11/07 $ 80,970 $ 205,194
Jeffrey A. Bjorkman............................ 4,300 3.01% $ 25.75 03/11/07 $ 69,634 $ 176,467
Ed Skomoroh.................................... 5,000 3.50% $ 25.75 03/11/07 $ 80,970 $ 205,194
</TABLE>
OPTION EXERCISES AND VALUES FOR 1997
The following table sets forth as to each of the named executive officers
information with respect to option exercises during 1997 and the status of their
options on December 31, 1997: (i) the number of shares of Common Stock
underlying options exercised during 1997, (ii) the aggregate dollar value
realized upon the exercise of such options, (iii) the total number of
exercisable and non-exercisable stock options held on December 31, 1997 and (iv)
the aggregate dollar value of in-the-money exercisable options on December 31,
1997.
AGGREGATED OPTION EXERCISES DURING 1997 AND
OPTION VALUES ON DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE OF
IN-THE-MONEY
OUTSTANDING
SHARES COVERED BY OPTIONS
SHARES GAIN AT OUTSTANDING OPTIONS 12/31/97 (A)
COVERED EXERCISE ----------------------------- -------------
NAME BY EXERCISES DATE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
W. Hall Wendel, Jr......................... -- -- 0 79,500 --
Kenneth D. Larson.......................... -- -- 0 53,000 --
Charles A. Baxter.......................... -- -- 0 24,500 --
Jeffrey A. Bjorkman........................ -- -- 0 15,800 --
Ed Skomoroh................................ -- -- 0 23,000 --
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------------------- -------------
<S> <C>
W. Hall Wendel, Jr......................... $ 149,906
Kenneth D. Larson.......................... $ 99,938
Charles A. Baxter.......................... $ 45,156
Jeffrey A. Bjorkman........................ $ 32,413
Ed Skomoroh................................ $ 42,813
</TABLE>
- ------------------------
(A) Stock options were granted in 1995, 1996 and 1997. The exercise price for
the 1995 options is $29.00 per share; the exercise price for the 1996
options is $33.75 per share and the exercise price for the 1997 options is
$25.75. The closing Common Stock price reported for the New York Stock
Exchange Composite Transactions on December 31, 1997 (the last trading day
of calendar year 1997) was $30.5625.
10
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
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 Company 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
Company 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 Company will pay a total of $500,000 in monthly installments
over ten years commencing on Mr. Wendel's 65th birthday or, if later,
retirement. In the event of voluntary termination of employment by Mr. Wendel,
the Company 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.
The Company has employment agreements (the "Agreements") with the persons
named in the Summary Compensation Table which become effective only upon a
Change in Control (as defined in the Agreements). If upon or within 24 months
after a Change in Control, any of the persons named in the Summary Compensation
Table terminates his employment for Good Reason or such employee's employment is
terminated without Cause (as such terms are defined in the Agreements), he will
be entitled to all accrued but unpaid compensation and benefits and a lump-sum
cash payment equal to two times such employee's average annual cash compensation
(including cash bonuses, but excluding the award or exercise of stock options or
stock grants) for the three fiscal years (or lesser number of years if the
employee's employment has been of shorter duration) of the Company immediately
preceding such termination. If such termination occurs before a cash bonus for
any preceding fiscal year has been paid, the Company is required to pay to the
employee the amount of the employee's cash bonus for such preceding fiscal year
as soon as it is determinable and such amount is to be included in the
determination of the payment to be made pursuant to the Agreement. No cash bonus
shall be paid for any part of the fiscal year in which the termination occurs.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Beverly F.
Dolan, Robert S. Moe and Andris A. Baltins. Mr. Moe was Executive Vice President
and Treasurer of a predecessor of the Company from 1981 through 1992. Mr.
Baltins is a member of the law firm of Kaplan, Strangis and Kaplan, P.A., which
provided legal services to the Company during 1997. It is anticipated that
Kaplan, Strangis and Kaplan, P.A. will provide certain legal services to the
Company during 1998.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's executive total compensation program is tied closely to
Company performance and aimed at enabling the Company to attract and retain the
best possible executive talent, aligning the financial interests of the
Company's management with those of its shareholders and rewarding those
executives commensurably with their ability to drive increases in shareholder
value. The program consists of a combination of base salary, annual profit
sharing awards, stock options, restricted stock, group benefits and supplemental
perquisites.
1997 EXECUTIVE COMPENSATION
When taken as a whole, the goal of Polaris' executive total compensation
program is to significantly correlate the level of executive compensation with
the level of Company performance. This is accomplished through the use of a
combination of annual profit sharing and long-term stock-based compensation
programs in conjunction with the minimal guaranteed/fixed compensation.
There are no executives who received compensation in excess of $1 million
during 1997 as defined by Section 162(m) of the Internal Revenue Code.
Based upon a formal study of executive compensation of publicly-held peer
companies for comparable positions conducted in the spring of 1996, 1995
executive total cash compensation (sum of actual base salary and annual profit
sharing payouts) was approximately at the market 25th percentile. 1995 executive
total compensation (sum of total cash compensation, present value of long-term
incentive grants, and Company contributions for benefits and perquisites) was
approximately at the market median.
In fiscal year 1996 and fiscal year 1997, base salaries for executives
remained relatively constant; the three most highly compensated executives have
not received any base salary increases in the last three years. Annual bonuses
for 1997 were paid in accordance with the established Company profit sharing
plan. Stock options for 1997 were approved by the Stock Award Compensation
Committee of the Board of Directors and in accordance with the 1995 Stock Option
Plan. Restricted stock awards for 1997 were approved by the Stock Award
Compensation Committee of the Board of Directors and in accordance with the 1996
Restricted Stock Plan. The long-term incentive opportunity for executives was
divided approximately evenly between stock options and restricted stock.
1997 CHIEF EXECUTIVE OFFICER COMPENSATION
1997 CEO GUARANTEED COMPENSATION (BASE SALARY, BENEFITS AND PERQUISITES)
- Base salary remained at $240,000 for 1997, the same level as the previous
five years.
- Benefits and perquisites paid to Mr. Wendel during 1997 included club
memberships, club dues, financial planning and tax preparation,
Exec-U-care coverage, as well as standard employee medical, dental, and
401(k) retirement savings plan participation. In addition, the company
adopted a supplemental executive retirement program on July 1, 1995 to
mirror the 401(k) plan.
1997 CEO ANNUAL BONUS (PROFIT SHARING AWARD)
- In accordance with the established Company profit sharing plan, Mr. Wendel
received a profit sharing payout of $244,800 in March 1998 for his 1997
performance, an increase of $14,400 from the prior year profit sharing
payout. Company performance determines the amount of aggregate funding for
the profit sharing plan. The specific amount of Mr. Wendel's payout was
determined based on his individual contributions to the Company's success.
12
<PAGE>
1997 CEO STOCK OPTION AND RESTRICTED STOCK GRANTS
- On March 11, 1997, Mr. Wendel was granted 18,000 stock options and 8,340
restricted stock awards at $25.75/share. The options were granted in
accordance with the 1995 Stock Option Plan and vest on the third
anniversary of the date of grant. The restricted stock awards were granted
in accordance with the 1996 Restricted Stock Plan and the restricted
shares granted thereunder become freely tradeable only upon the Company
achieving certain compounded earnings growth targets within a four year
period.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
BEVERLY F. DOLAN ROBERT S. MOE ANDRIS A. BALTINS
Compensation Committee Compensation Committee Compensation Committee
13
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total investor return of the
Partnership and the Company with the Standard & Poor's 500 Composite Stock Index
and Media General's Sport Vehicles Industry Group Index. The graph assumes the
investment of $100 on January 1, 1992 in units of Beneficial Assignment of Class
A Limited Partnership Interests ("BACs") of Polaris Industries L.P. (the
"Partnership") and the two indexes mentioned above, the reinvestment of all
distributions and dividends, and the exchange of BACs for shares of Common Stock
of the Company on December 22, 1994. The returns of the Partnership, the Company
and each index have been weighted annually for their market capitalization on
December 31st of each year.
The investor return shown on the graph is not necessarily indicative of
future investor return. Additionally, some portion of the historical total
cumulative investor return of the Partnership, attributable to its structure as
a master limited partnership, may not be available in Polaris' present corporate
structure. As a partnership, Polaris and its investors were subject to a single
level of federal income taxation on partnership earnings at the investor level.
The Company is subject to corporate taxation on earnings. In addition, its
shareholders are subject to taxation on dividends to the extent of earnings and
profits. Furthermore, as a partnership, Polaris followed a policy of
distributing a substantial percentage of cash generated from operations to
investors. The Board of Directors of the Company will consider a number of
factors, including the after-tax earnings and the capital requirements of the
Company, in declaring dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL
RETURN
<S> <C> <C> <C>
of Polaris Industries Inc.,
S&P 500 Index, and Sport Vehicle Index
Polaris Sport Vehicle Index S&P 500 Index
1992 $100.00 $100.00 $100.00
1993 $160.49 $119.40 $110.08
1994 $262.56 $124.04 $111.54
1995 $256.35 $126.65 $153.45
1996 $211.95 $163.87 $188.69
1997 $279.16 $198.17 $251.64
Assumes $100 Invested on Jan. 1, 1992
Assumes Dividend Reinvested
Fiscal Year Ended Dec. 31, 1997
Source: Media General Financial Services
</TABLE>
14
<PAGE>
PROPOSAL 2 -- AMENDMENT OF THE POLARIS INDUSTRIES INC.
1995 STOCK OPTION PLAN
The Company's Board of Directors has unanimously approved an amendment to
the Polaris Industries Inc. 1995 Stock Option Plan (the "Stock Option Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
from 1,350,000 shares (after giving effect to a 50% share dividend declared and
paid by the Company in 1995) to 2,350,000 shares and has recommended such
amendment to the Company's shareholders.
As of the Record Date, of the 1,350,000 shares of Common Stock originally
reserved under the Stock Option Plan, 589,167 shares of Common Stock were
available for future grants under the Stock Option Plan. The Board of Directors
believes that the grant of stock options to officers and key employees of the
Company is a vital factor in attracting and retaining effective and capable
employees who contribute to the growth and success of the Company and in
establishing a direct link between the financial interests of such employees and
of the Company's shareholders and that it is prudent to increase the number of
shares of Common Stock available for future grants at this time.
The proposed amendment to the Stock Option Plan would revise the terms of
Section 4 of the Stock Option Plan to read as follows:
4. Shares Subject to the Plan
Options in respect of an aggregate of up to 2,350,000 shares
of the Common Stock of the Company, par value $.01 per share (the
"Common Stock"), shall be available for award under the Plan. In
any calendar year during the term of this Plan, no employee shall
be awarded Options in respect of more than 600,000 shares of
Common Stock. No more than 2,350,000 shares of Common Stock may be
issued pursuant to Incentive Stock Option awards. If any Option
shall cease to be exercisable in whole or in part for any reason,
the shares which were covered by such Option but as to which the
Option had not been exercised shall again be available under the
Plan. Shares issuable under the Plan shall be made available from
authorized and unissued shares or previously issued and
outstanding shares of Common Stock reacquired by the Company.
Other than the increase in the number of shares of Common Stock reserved for
issuance pursuant to options, no additional amendments to the Stock Option Plan
are contemplated at this time.
Set forth below is a summary of certain provisions of the Stock Option Plan
and the tax consequences to the Company and employees who receive stock options
thereunder.
GENERAL PROVISIONS
DURATION OF THE STOCK OPTION PLAN; SHARES TO BE ISSUED. The Stock Option
Plan became effective on March 15, 1995 and it will remain effective until March
15, 2005 unless terminated earlier by the Board of Directors.
The shares of Common Stock to be issued or delivered under the Stock Option
Plan will be authorized and unissued shares or previously issued and outstanding
shares of Common Stock reacquired by the Company. Shares of Common Stock covered
by any unexercised portions of terminated options and shares of Common Stock
subject to any awards which are otherwise surrendered by Stock Option Plan
participants without receiving any payment or other benefit with respect thereto
may again be subject to new awards under the Stock Option Plan.
On March 25, 1998, the closing price of the Common Stock on the New York
Stock Exchange was $37.00 per share.
STOCK OPTION PLAN ADMINISTRATION. The Stock Option Plan is administered by
the Stock Award Compensation Committee of the Board of Directors. The Stock
Award Compensation Committee is comprised solely of non-employee directors of
the Company who are not eligible to participate in the Stock Option Plan. The
Stock Award Compensation Committee determines the employees who will be eligible
for and granted awards, determines the amount and type of awards, establishes
rules and guidelines relating to the Stock Option Plan, establishes, modifies
and determines terms and conditions of awards and takes such other action as may
be necessary for the proper administration of the Stock Option Plan.
15
<PAGE>
STOCK OPTION PLAN PARTICIPANTS. Any employee of the Company may be selected
by the Stock Award Compensation Committee to receive an award under the Stock
Option Plan. Presently, there are approximately 3,300 employees eligible to
participate in the Stock Option Plan. It is not possible at this time to
determine the number or identity of all of the individuals who will actually
receive grants of stock options under the Stock Option Plan on or prior to March
15, 2005.
AWARDS AVAILABLE UNDER STOCK OPTION PLAN
Awards to employees under the Stock Option Plan may take the form of stock
options meeting the requirements of Section 422 of the Internal Revenue Code of
1986 ("Incentive Stock Options") and stock options which do not meet such
requirements ("Nonqualified Stock Options"). The duration of each option will be
determined by the Stock Award Compensation Committee, but no option will be
exercisable more than ten years after the date of grant. The exercise price for
stock options must be at least equal to 100% of the fair market value of the
Common Stock on the date of grant of such option. The exercise price will be
payable in cash or in such other form as the Stock Award Compensation Committee
may approve in the applicable award agreement, including, without limitation, by
a cashless exercise through a broker or the delivery to the Company of (i) a
promissory note equal to the exercise price (but the par value of the shares
must be paid in cash) or (ii) shares of Common Stock owned by the participant
for at least six months.
The options will be subject to restrictions on exercise, such as exercise in
periodic installments or upon attainment of specified performance criteria, as
determined by the Stock Award Compensation Committee. Stock options granted
under the Stock Option Plan will not be transferable except by will or the laws
of descent and distribution and may be exercised only by a participant during
his or her lifetime.
Unless otherwise determined by the Stock Award Compensation Committee and
provided in the applicable option agreement, options will be exercisable within
thirty days of any termination of employment other than termination due to
disability, death or normal retirement (but not later than the expiration date
of the option). The options will be exercisable within one year of a termination
of employment by reason of disability, death or normal retirement (but not later
than the expiration date of the option), but an Incentive Stock Option will not
be exercisable more than three months after retirement.
TERMINATION AND AMENDMENT
The Board may amend or terminate the Stock Option Plan at any time but,
without an optionee's consent, no such action will affect or in any way impair
the rights of such optionee under any award granted prior to such action, and no
amendment will be made without the approval of the Company's shareholders if
such approval is required to maintain the compliance of the Stock Option Plan
with Section 162(m) of the Internal Revenue Code of 1986.
ANTIDILUTION PROVISIONS
The amount of shares authorized to be issued under the Stock Option Plan,
and the terms of outstanding stock options, may be adjusted to prevent dilution
or enlargement of rights in the event of any stock dividend, reorganization,
reclassification, recapitalization, stock split, combination, merger,
consolidation or other capitalization change of similar effect.
WITHHOLDING OBLIGATIONS
The Company has the right to deduct from an optionee's salary, bonus or
other compensation any taxes required to be withheld with respect to options
granted under the Stock Option Plan. Alternatively, an optionee can satisfy his
or her withholding obligations under the Stock Option Plan by tendering shares
of Common Stock owned by such optionee or reducing the number of shares issuable
pursuant to the award.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of awards under the Stock Option Plan to United States citizens
based upon current federal income tax laws. The summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences. Changes in the law and the regulations may modify the
discussion, and, in some cases, changes may be retroactive. In addition, tax
consequences may vary depending upon the personal
16
<PAGE>
circumstances of individual holders of options and the tax requirements
applicable to residents of countries other than the United States.
An option holder will not recognize income upon the grant of an option under
the Stock Option Plan or at any other time prior to the exercise of the option.
Upon exercise of a Nonqualified Option, the option holder will recognize
compensation taxable as ordinary income in an amount equal to the excess of the
fair market value of the Common Stock on the date the option is exercised over
the exercise price of the option. This income is subject to withholding and
other employment taxes. The Company is entitled to a deduction in a like amount
for compensation income recognized by the option holder.
A subsequent taxable disposition of shares of Common Stock acquired upon
exercise of a Nonqualified Option and held as a capital asset will result in a
capital gain or loss measured by the difference between the fair market value of
the Common Stock on the date the option was exercised and the amount realized on
later disposition. The gain or loss will be long-term if the shares of Common
Stock are held for more than 18 months, mid-term if held for more than 12 months
but less than 18 months, and short-term if held for 12 months or less.
An option holder will not recognize income upon the grant or exercise of an
Incentive Stock Option under the Stock Option Plan. The difference between the
fair market value of the Common Stock on the date of exercise and the exercise
price, however, is an item of adjustment for purposes of the alternative minimum
tax.
If an option holder who has acquired shares of Common Stock by the exercise
of an Incentive Stock Option makes a taxable disposition of the stock at least
two years after the date the option was granted and at least one year after the
transfer of the stock to the option holder, the option holder generally will
recognize a long-term or mid-term capital gain or loss measured by the
difference between the exercise price and the selling price.
If an option holder who has acquired shares of Common Stock by the exercise
of an Incentive Stock Option makes a taxable disposition of the stock within two
years from the date the option was granted or within one year after the transfer
of the stock to the option holder, a disqualifying disposition occurs. In that
event, the option holder recognizes ordinary income equal to the lesser of the
actual gain or the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise. This income is subject to
withholding and other employment taxes. If a loss is sustained on such a
disposition, the loss will generally be treated as a capital loss. If the amount
received on the disqualifying disposition exceeds the fair market value of the
Common Stock on the date of exercise, the excess will generally be either a
long-term, mid-term, or short-term capital gain.
The deductibility by the Company of amounts recognized as ordinary income by
option holders upon the exercise of stock options may be limited under certain
provisions of the Internal Revenue Code, including the $1 million deduction
limit per executive under Section 162(m) and the limit with respect to certain
payments in connection with a change in control under Section 280G.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" AMENDMENT OF THE POLARIS INDUSTRIES INC. 1995 STOCK
OPTION PLAN.
17
<PAGE>
PROPOSAL 3 -- AMENDMENT OF THE POLARIS INDUSTRIES INC.
1996 RESTRICTED STOCK PLAN
The Company's Board of Directors has unanimously approved an amendment to
the Polaris Industries Inc. 1996 Restricted Stock Plan (as amended and restated,
the "Restricted Stock Plan") to increase the number of shares of Common Stock
reserved for issuance thereunder from 500,000 to 800,000 and has recommended
such amendment to the Company's shareholders.
As of the Record Date, of the 500,000 shares of Common Stock reserved for
issuance under the Restricted Stock Plan, 254,050 shares were available for
future awards under the plan. The Board of Directors believes that restricted
share awards, particularly performance-based awards, to officers and key
employees of the Company are a vital factor in attracting and retaining
effective and capable employees who contribute to the growth and success of the
Company and in establishing a direct link between the financial interests of
such employees and the performance of the Company and that it is prudent to
increase the number of shares of Common Stock available for future awards at
this time.
The proposed amendment to the Restricted Stock Plan would revise the terms
of Section 4.01 of the Restricted Stock Plan to read as follows:
4.01 NUMBER OF SHARES OF STOCK ISSUABLE. Subject to
adjustments as provided in Section 6.03, the maximum number of
shares of Stock available for issuance under the Plan shall be
800,000. The Stock to be offered under the Plan shall be
authorized and unissued Stock, or Stock which shall have been
reacquired by the Company and held in its treasury. In any
calendar year, no Participant shall receive awards in excess of
250,000 shares of Stock, subject to adjustments as provided in
Section 6.03.
Other than an increase in the number of shares of Common Stock reserved for
issuance as awards under the Restricted Stock Plan, no additional amendments to
the plan are contemplated at this time.
Set forth below is a summary of certain provisions of the Restricted Stock
Plan and the tax consequences to the Company and employees who receive
restricted share awards under the plan.
GENERAL PROVISIONS
DURATION; SHARE AUTHORIZATION. The Restricted Stock Plan became effective
on January 25, 1996 and will remain effective until January 25, 2006 unless
terminated earlier by the Board.
The shares of Common Stock issued or delivered under the Restricted Stock
Plan may be authorized and unissued shares, or issued shares which have been
reacquired by the Company and held in its treasury. Forfeited Restricted Shares
may again be subject to awards under the Restricted Stock Plan.
On March 25, 1998, the closing price of the Common Stock on the New York
Stock Exchange was $37.00 per share.
ADMINISTRATION. The Restricted Stock Plan is administered by the Stock
Award Compensation Committee of the Board of Directors or such other committee
as the Board may designate. The Stock Award Compensation Committee determines
the employees who will be eligible for and granted awards, determines the amount
of awards, establishes rules and guidelines relating to the Restricted Stock
Plan, establishes, modifies and determines terms and conditions of awards and
takes such other action as may be necessary for the proper administration of the
Restricted Stock Plan.
PARTICIPANTS. Any employee of the Company or its subsidiaries may be
selected by the Committee to receive an award under the Restricted Stock Plan.
At the present time, approximately 3,300 persons are eligible to participate in
the Restricted Stock Plan. It is not possible at this time to determine the
number or identity of all of the individuals who will actually receive awards of
Restricted Shares under the Restricted Stock Plan on or prior to January 25,
2006.
AWARDS UNDER RESTRICTED STOCK PLAN. The Stock Award Compensation Committee
may award to any participant Restricted Shares that are subject to terms and
conditions established by the Stock Award Compensation Committee. In general,
Restricted Shares will be non-transferable and subject to a risk of forfeiture
during a period of time set by the Committee. The Stock Award Compensation
Committee may provide for such transfer and forfeiture restrictions to lapse in
installments and/or upon the occurrence of specified events. The restrictions
may be based on performance goals, periods of service or other standards
established by the Stock Award Compensation Committee.
18
<PAGE>
The Restricted Stock Plan authorizes awards intended to qualify as
"performance-based" for purposes of Section 162(m) of the Internal Revenue Code
and awards that may not so qualify. Performance goals may include one or more of
the following: share price appreciation, earnings, cash flow, revenues and total
shareholder return.
If the participant's employment with the Company terminates during the
restriction period, his or her rights with respect to the Restricted Shares will
be forfeited. Except as provided in the applicable award agreement, all
forfeiture restrictions will lapse if the termination is a discharge without
cause (as defined) or is due to the participant's death, disability or
retirement. Forfeiture restrictions also lapse upon a change in control of the
Company (as defined) or in cases of special circumstances where the Stock Award
Compensation Committee deems a waiver of the restrictions to be appropriate.
TERMINATION AND AMENDMENT. The Board may amend or terminate the Restricted
Stock Plan but, without a participant's consent, no such action shall affect or
in any way impair the rights of such participant under any award granted prior
to such action.
WITHHOLDING OBLIGATIONS. The Company has the right to deduct from a
participant's salary, bonus or other compensation any taxes required to be
withheld with respect to awards made under the Restricted Stock Plan. In the
Stock Award Compensation Committee's discretion, a Participant may be permitted
to elect to have withheld from the shares otherwise issuable to the participant,
or to tender to the Company, the number of shares of Common Stock whose fair
market value equals the amount required to be withheld.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of the principal federal income tax consequences of awards under the Restricted
Stock Plan to United States citizens based upon current federal income tax laws.
The summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences. Changes in the law and the
regulations may modify the discussion, and, in some cases, changes may be
retroactive. In addition, tax consequences may vary depending upon the personal
circumstances of individual awardees and the tax requirements applicable to
residents of countries other than the United States.
Due to the presence of transfer and forfeiture restrictions, a grant of
Restricted Shares has generally no tax consequences for the Company or the
participant. Except as discussed below, the full fair market value of Common
Stock issued as Restricted Shares will be taxed as ordinary income to the
participant when the restrictions on the stock expire, with such value being
determined at the time of such expiration. The Company will receive a
corresponding tax deduction at the same time.
The participant may, under Section 83(b) of the Internal Revenue Code, elect
to report the current fair market value of Restricted Shares as ordinary income
as of the date of grant of the Restricted Shares, even though the shares of
Common Stock are subject to forfeiture restrictions. If a participant makes such
an election, the Company will receive an immediate tax deduction for such fair
market value of the shares in the year of grant, but will receive no deduction
for any subsequent appreciation during or after the restriction period.
In the case of Restricted Shares as to which no Section 83(b) election is
filed, the participant's tax basis in the shares of Common Stock received equals
the amount of ordinary income recognized by the participant upon the lapse of
the restrictions with respect to such shares plus any amount paid by the
participant for the shares. Upon a subsequent sale or exchange of the shares,
the amount realized by the participant in excess of his or her tax basis will be
short-term, mid-term or long-term capital gain or loss, depending on the period
of time the participant has held the shares after the restrictions lapse. The
Company will receive no additional deduction at the time of disposition of the
Common Stock by the participant.
In the case of Restricted Shares as to which a Section 83(b) election is
made, any appreciation in the value of the subject shares of Common Stock after
a date of grant will be recognized as capital gain by the participant at such
time as the participant disposes of the shares in a taxable transaction. Any
capital gain then realized will be long-term, mid-term or short-term, depending
upon how long the participant has held the shares from the date of grant.
The deductibility by the Company of amounts recognized as ordinary income by
participants with respect to Restricted Shares may be limited under certain
provisions of the Internal Revenue Code, including the $1 million deduction
limit per executive under Section 162(m) and the limit with respect to certain
payments in connection with a change in control under Section 280G.
19
<PAGE>
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE "FOR" AMENDMENT OF THE POLARIS INDUSTRIES INC. 1996 RESTRICTED
STOCK PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit Committee,
selected the firm of Arthur Andersen LLP as its independent public accountants
to examine the financial statements of the Company and its subsidiaries for the
fiscal year ended December 31, 1997. Representatives of Arthur Andersen LLP will
be present at the Annual Meeting, will have an opportunity to make a statement
if they so desire, and will be available to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented at the Company's 1999
Annual Meeting of Shareholders must be received by the Secretary of the Company,
for inclusion in the Company's proxy statement relating to the 1999 Annual
Meeting, by November 1, 1998.
OTHER MATTERS
The Board of Directors knows of no business that will be presented for
consideration at the Annual Meeting other than the proposals referred to above.
Proxies in the enclosed form will be voted in respect of any other business that
is properly brought before the Annual Meeting in accordance with the judgment of
the person or persons voting the proxies.
ADDITIONAL INFORMATION
A copy of the Annual Report of the Company for the year ended December 31,
1997, has also been mailed under this cover to each shareholder. Additional
copies of the Annual Report, the Notice of Annual Meeting, this Proxy Statement
and the accompanying proxy may be obtained from Michael W. Malone, the Vice
President -- Finance, Chief Financial Officer and Secretary of the Company.
The Polaris Industries Inc. Annual Report on Form 10-K, on file with the
Securities and Exchange Commission, may be obtained without charge, upon written
request to Polaris Industries Inc., 1225 Highway 169 North, Minneapolis,
Minnesota 55441, attention: Investor Relations. Copies of exhibits to Form 10-K
may be obtained upon payment to the Company of the reasonable expense incurred
in providing such exhibits.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting, the form of proxy and other material which may be sent
to the shareholders will be borne by the Company. The Company has retained D.F.
King & Co., Inc., 77 Water Street, New York, New York 10005, to aid in the
solicitation of proxies. For these services, the Company will pay D.F. King &
Co., Inc. a fee of $7,000 and reimbursement of its expenses. In addition,
directors, officers and regular employees of the Company, at no additional
compensation, may solicit proxies by telephone, facsimile, telegram or in
person. Upon request, the Company will reimburse brokers and other persons
holding shares of Common Stock for the benefit of others for their expenses in
forwarding proxies and accompanying material and in obtaining authorization from
beneficial owners of the Company's Common Stock to give proxies.
By order of the Board of Directors
/s/ Michael W. Malone
Michael W. Malone
VICE PRESIDENT -- FINANCE, CHIEF
FINANCIAL OFFICER
AND SECRETARY
March 30, 1998
20
<PAGE>
POLARIS INDUSTRIES INC.
1225 HIGHWAY 169 NORTH
MINNEAPOLIS, MINNESOTA 55441
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. Hall Wendel, Jr. and Michael W. Malone,
and each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes such Proxies to represent and to vote, as designated below,
all the shares of Common Stock, $.01 par value of Polaris Industries Inc. held
of record by the undersigned on March 25, 1998, at the Annual Meeting of
Shareholders to be held on May 21, 1998, or any postponements or adjournments
thereof.
1. ELECTION OF / / FOR all nominees listed / / WITHHOLD AUTHORITY to
DIRECTORS below (except as marked to vote for all nominees below
the contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW)
Nominees to serve for a term of three years expiring
at the 2001 Annual Meeting of Shareholders.
- ------------------------- -------------------------
Andris A. Baltins Kenneth D. Larson
2. PROPOSAL TO AMEND THE POLARIS INDUSTRIES INC. 1995 STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO AMEND THE POLARIS INDUSTRIES INC. 1996 RESTRICTED STOCK PLAN
/ / FOR / / AGAINST / / ABSTAIN
The Proxies are authorized to vote in their discretion with respect to other
matters which may come before the meeting.
(CONTINUED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should 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 President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
--------------------------------
Signature
--------------------------------
Signature if held jointly
Dated:
--------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
