exv10wq



 






Exhibit 10.q




POLARIS INDUSTRIES INC.

SENIOR EXECUTIVE

ANNUAL INCENTIVE COMPENSATION PLAN




     1. Purpose. The Polaris Industries Inc. Senior Executive Annual Incentive Compensation
Plan is intended to provide incentives for Eligible Senior Executives to attain and maintain the
highest standards of performance, to attract and retain key executives of outstanding competence
and ability, to stimulate the active interest of key executives in the development and financial
success of the Company, to further align the identity of interests of employees with those of the
Company’s shareholders generally and to reward executives for outstanding performance when certain
objectives are achieved.



     2. Definitions. As used herein, the terms set forth below shall have the following
respective meanings:



     (a) “Board” means the Board of Directors of the Company.



     (b) “Business Criteria” means the business criteria listed in Section 6 of this Plan.



     (c) “Code” means the Internal Revenue Code of 1986, as amended from time to time.



     (d) “Committee” means the Committee appointed by the Board to administer the Plan. The
Committee shall be constituted at all times so as to meet the outside director requirements of
Section 162(m) of the Code.



     (e) “Company” means Polaris Industries Inc. and its successors and assigns.



     (f) “Effective Date” means January 1, 2004.



     (g) “Eligible Senior Executive” means any senior executive employee of the Company designated
by the Committee as an Eligible Senior Executive.



     (h) “Incentive Compensation Award” means an incentive compensation award payable under this
Plan.



     (i) “Incentive Compensation Award Period” means, with respect to an Incentive Compensation
Award, as determined by the Committee, the calendar year beginning on or after the Effective Date
with respect to which such Incentive Compensation Award is to be determined. It is expressly
intended that any particular calendar year may be included in the Performance Period of multiple
Incentive Compensation Awards.



     (j) “Participant” means, with respect to an Incentive Compensation Award Period, the Eligible
Senior Executives selected by the Committee to be eligible to receive an Incentive Compensation
Award for such Incentive Compensation Award Period as provided in Section 5 of this Plan.



 









 





     (k) “Performance Objective” means the performance objective or objectives established pursuant
to Section 5 of the Plan.



     (l) “Plan” means the Polaris Industries Inc. Senior Executive Annual Incentive Compensation
Plan, as it may be amended from time to time.



     3. Administration. The Committee shall interpret the Plan, prescribe, amend, and
rescind rules relating to it, select eligible Participants, and take all other actions necessary
for its administration, which actions shall be final and binding upon all Participants. To the
extent permitted by law, all members of the Board of Directors, including the members of the
Committee, shall be indemnified and held harmless by the Company with respect to any loss, cost,
liability or expense that may be reasonably incurred in connection with any claim, action, suit or
proceeding which arises by reason of any act or omission under the Plan so long as such act or
omission is taken in good faith and within the scope of the authority delegated herein.



     4. Compliance with Section 162(m). The Plan shall be administered to comply with
Section 162(m) of the Code and regulations promulgated thereunder, and if any Plan provision is
found not to be in compliance with Section 162(m) of the Code, the provision shall be deemed
modified as necessary to meet the requirements of Section 162(m) of the Code.



     5. Selection of Participants and Performance Objective. Prior to the commencement of
each Incentive Compensation Award Period, or at such later time as permitted by Section 162(m) of
the Code and regulations thereunder, the Committee shall determine in writing (i) the Participants
who shall be eligible to receive an Incentive Compensation Award for such Incentive Compensation
Award Period, (ii) the Performance Objective, which shall consist of any one or more of the
Business Criteria, and (iii) the formula for computing the amount of the Incentive Compensation
Award payable to each Participant if the Performance Objective is achieved , which formula shall
comply with the requirements applicable to performance-based compensation plans under Section
162(m) of the Code. The amount of an Incentive Compensation Award may be denominated in cash
and/or in shares of the Company’s common stock, provided that all amounts paid under the Plan shall
be in cash.



     6. Business Criteria. The Business Criteria will include specified levels of one or
more of the following:



	 	 	 
	Operating Income

	 	Net Income
	Pre-Tax Income

	 	Customer Retention
	Cash Flow

	 	Return on Investment
	Return on Capital

	 	Revenue
	Return on Equity

	 	Revenue Growth
	Return on Assets

	 	Total Shareholder Return
	Return on Sales

	 	Stock Price
	Expense Targets

	 	Market Share
	Customer Satisfaction

	 	Productivity Targets
	Sales

	 	Earnings Per Share
	Sales Growth

	 	Earnings Per Share Growth
	 

	 	Economic Value Added






The above terms shall have the same meaning as in the Company’s financial statements, or if the
terms are not used in the Company’s financial statements, as applied pursuant to generally accepted
accounting principles, or as used in the Company’s industry, as applicable. As



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determined by the Committee, the Business Criteria shall be applied (i) in absolute terms or
relative to one or more other companies or indices and (ii) to a business unit, geographic region,
one or more separately incorporated entities, or the Company as a whole.



     7. Incentive Compensation Award Certification. The Committee shall certify in writing
prior to payment of the Incentive Compensation Award that the Performance Objective has been
attained and the Incentive Compensation Award is payable. With respect to Committee certification,
approved minutes of the meeting in which the certification is made shall be treated as written
certification.



     8. Maximum Incentive Compensation Award Payable. The maximum amount payable with
respect to an Incentive Compensation Award to any Participant is $2,500,000.



     9. Extraordinary or Unusual Events. The Committee may, in its discretion, disregard
the impact of any extraordinary or unusual event (in accordance with generally accepted accounting
procedures) in determining whether a Performance Objective has been obtained or may make
appropriate adjustments in any Performance Objective to reflect such extraordinary or unusual
event.



     10. Discretion to Reduce Awards. The Committee, in its sole and absolute discretion,
may reduce the amount of any award otherwise payable to a Participant.



     11. Active Employment Requirement. Except as provided below, an Incentive Compensation
Award shall be paid for an Incentive Compensation Award Period only to a Participant who is
actively employed by the Company (or on approved vacation or other approved leave of absence)
throughout the Incentive Compensation Award Period and who is employed by the Company on the date
the Incentive Compensation Award is paid. To the extent consistent with the deductibility of awards
under Section 162(m) of the Code and regulations thereunder, the Committee may in its sole
discretion grant an Incentive Compensation Award for the Incentive Compensation Award Period to a
Participant who is first employed or who is promoted to a position eligible to become a Participant
under this Plan during the Incentive Compensation Award Period, or whose employment is terminated
during the Incentive Compensation Award Period because of the Participant’s retirement under the
Company’s 401(k) plan, death, or because of disability as defined in Section 22(e)(3) of the Code.
In such cases of active employment for part of an Incentive Compensation Award Period, a pro rata
Incentive Compensation Award may be paid for the Incentive Compensation Award Period.



     12. Payment of Incentive Compensation Award. An Incentive Compensation Award shall be
paid to the Participant for the Incentive Compensation Award Period as provided in this Plan. The
Company shall pay the Incentive Compensation Award to the Participant in such form as the Committee
may determine and at such time as the Committee may determine after the Committee certifies that
the Incentive Compensation Award is payable as provided in Section 7. A Participant may defer
receipt of an Incentive Compensation Award in accordance with procedures established by the
Committee from time to time. In the event of the Participant’s incompetency, the Company in its
sole discretion may pay any Incentive Compensation Award to the Participant’s guardian or directly
to the Participant. In the event of the Participant’s death, any Incentive Compensation Award shall
be paid to the Participant’s spouse or, if there is no surviving spouse, the Participant’s estate.
Payments under this Section shall operate as a complete discharge of the Committee and the Company.
The Company shall deduct from any Incentive Compensation Award paid under the Plan the amount of
any taxes required to be withheld by the federal or any state or local government.



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     13. Shareholder Approval. No Incentive Compensation Award shall be payable under this
Plan unless the Plan is disclosed to and approved by the shareholders of the Company in accordance
with Section 162(m) of the Code and regulations thereunder.



     14. Limitation of Rights. Nothing in this Plan shall be construed to (a) give any
employee of the Company any right to be awarded any Incentive Compensation Award other than that
set forth herein, as determined by the Committee; (b) give a Participant any rights whatsoever with
respect to shares of common stock of the Company; (c) limit in any way the right of the Company to
terminate an employee’s employment with the Company at any time for any reason or no reason; (d)
give a Participant or any other person any interest in any fund or in any specific asset or assets
of the Company; or (e) be evidence of any agreement or understanding, express or implied, that the
Company will employ an employee in any particular position or at any particular rate of
remuneration.



     15. Non-Exclusive
Arrangement. The adoption and operation of this Plan shall not
preclude the Board or the Committee from approving other short-term incentive compensation
arrangements for the benefit of individuals who are Participants hereunder as the Board or
Committee, as the case may be, deems appropriate and in the best interests of the Company.



     16. Nonassignment. The right of a Participant to the payment of any Incentive
Compensation Award under the Plan may not be assigned, transferred, pledged, or encumbered, nor
shall such right or other interests be subject to attachment, garnishment, execution, or other
legal process.



     17. Amendment or Termination of the Plan. The Board may amend or terminate the Plan at
any time, except that no amendment or termination shall be made that would impair the rights of any
Participant to a Incentive Compensation Award that would be payable were the Participant to
terminate employment on the effective date of such amendment or termination, unless the Participant
consents to such amendment or termination. The Plan shall automatically terminate on January 1,
2009 unless sooner terminated by action of the Board or extended with the approval of the Board and
the Company’s shareholders.



     18. Governing Law. The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Minnesota, other than the conflict of
law provisions of such laws.




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