Document:

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                                                                  EXHIBIT (4)(h)

         NEITHER THIS AGREEMENT NOR THE OPTION HAS BEEN REGISTERED UNDER THE
    SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
    NEITHER THIS AGREEMENT NOR THE OPTION MAY BE SOLD OR OFFERED FOR SALE IN THE
    ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER
    SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION
    REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION OF COUNSEL
    SATISFACTORY TO THE GENERAL PARTNER OF THE GRANTOR THAT SUCH REGISTRATION IS
    NOT REQUIRED.

                       OPTION AGREEMENT/OPTION CERTIFICATE

         THIS OPTION AGREEMENT/OPTION CERTIFICATE (this "Agreement"), dated as
    of December 29, 1999 by and between JAMES CABLE PARTNERS, L.P., a Delaware
    limited partnership ("Grantor"), and JAMES COMMUNICATIONS PARTNERS, a
    Michigan general partnership ("Purchaser"),

                                   WITNESSETH:

         WHEREAS, the Grantor desires to grant to the Purchaser, and the
    Purchaser desires to acquire from the Grantor, an option to purchase a Class
    A Limited Partner Interest from the Grantor upon and subject to the terms of
    this Agreement (the "Option").

         NOW, THEREFORE, in consideration of the foregoing, and the payment by
    the Purchaser to the Grantor of the Option Consideration, and of the
    covenants and agreements contained in this Agreement, as well as for other
    good and valuable consideration (the receipt and sufficiency of which are
    hereby acknowledged), the Grantor and the Purchaser agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

         All capitalized terms not otherwise defined in this Agreement shall be
    defined in this Agreement as in the Partnership Agreement. The meanings of
    all capitalized terms

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    are applicable to the singular as well as to the plural forms of such terms
    as well as to the feminine and neuter genders of such terms.

         "Dollars" or "$" means the coin or currency of the United States of
    America as at the time of payment is legal tender for the payment of public
    and private debts.

         "Equity Value" shall mean the aggregate fair market value, in Dollars,
    of all Class A Limited Partner Interests outstanding on the date immediately
    preceding the Exercise Date which aggregate fair market value shall be
    determined in accordance with the provisions of Section 4.1 of this
    Agreement.

         "Exercise Price" means an amount, in Dollars, equal to .625% of the
    Equity Value.

         "Indenture" means the Indenture dated as of August 15, 1997 among James
    Cable Partners, L.P. and James Cable Finance Corp., as issuers, and United
    States Trust Company of New York, as trustee.

         "Net Exercise Price" means an amount equal to $1.

         "Net Option Equity Value" means an amount, in Dollars, equal to the
    product of (i) Equity Value and (ii) 2.5%.

         "Option Consideration" means (i) the sum of $25,000 paid by the
    Purchaser to the Grantor concurrently with the execution and delivery of
    this Agreement, (ii) the Purchaser's consent, in its capacity as General
    Partner, to the transactions contemplated by the Sale Agreement, (iii) the
    Purchaser's consent to the transactions contemplated by, and its execution
    of, in each case in its capacity as General Partner and in its capacity as a
    Limited Partner, of the Partnership Agreement; and (iv) the covenants and
    agreements of Purchaser contained in this Agreement.

         "Option Equity Value" means an amount, in Dollars, equal to the product
    of (i) Equity Value and (ii) 3.125%.

         "Option Period" means the period beginning on the date first above
    written and ending at 5:00 p.m. (Detroit, Michigan time) on that date that
    is the first to occur of the date of dissolution the Grantor and December
    31, 2010.

         "Partnership Agreement" means the Second Amended and Restated Agreement
    of Limited Partnership of James Cable Partners, L.P., a Delaware limited
    partnership, dated December 29, 1999 (including, without limitation,
    Schedule A, B, and C thereto), as the same may be amended from time to time.

                                      -2-

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         "Payment Date" means that date that is 30 days after the Exercise Date.

         "Sale Agreement" means the Limited Partnership Interest Purchase
    Agreement dated December 29, 1999 among SCP James Acquisition LLC, a
    Delaware limited liability company, Grantor and the sellers listed on
    Schedule 1 thereto.

                                    ARTICLE 2

                                  OPTION TERMS

         2.1 Grant and Purchase of the Option. For the Option Consideration, the
    receipt and payment of which are hereby acknowledged by the Grantor and the
    Purchaser, the Grantor hereby grants and sells to the Purchaser, and the
    Purchaser hereby acquires and purchases from the Grantor, the Option. The
    Option entitles the Purchaser, pursuant and subject to the terms of this
    Agreement, to purchase from Grantor a Class A Limited Partner Interest
    having a Percentage Interest determined in accordance with the terms of this
    Agreement.

         The Option was granted and sold to the Purchaser solely in
    consideration of the payment of the Option Consideration. The Option was not
    granted or sold for any services performed, or to be performed, by the
    Purchaser or any other person or entity.

         2.2 Exercise of Option.

              (a) The Option is exercisable by the Purchaser only in whole, and
         not in part, and only during the Option Period. The Purchaser shall
         exercise the Option by surrendering this Agreement and a completed and
         duly executed Notice of Exercise (in the form attached hereto as Annex
         A) to the Grantor at the principal executive office of the Grantor.
         Concurrently with such surrender of this Agreement and such Notice of
         Exercise to the Grantor, the Purchaser shall deliver a copy of the same
         to the Grantor's Partnership Advisory Board pursuant to Section 4.2
         hereof. The Exercise Price or the Net Exercise Price, as applicable,
         shall be payable on the Payment Date (i) in cash or by check or wire
         transfer acceptable to the Grantor, (ii) by cancellation by the
         Purchaser of indebtedness or other obligations of the Grantor to the
         Purchaser, or (iii) by a combination of the consideration described in
         clauses (i) and (ii) of this sentence.

              (b) This Option shall be deemed to have been exercised immediately
         as of 5:00 p.m. (Detroit, Michigan time) on the date (the "Exercise
         Date") on which this Agreement and a Notice Of Exercise are surrendered
         to the Grantor in a manner contemplated by this Agreement. Provided
         that the Purchaser pays the Exercise Price, or the Net Exercise Price,
         on the Payment Date, the Purchaser shall be treated for all purposes as
         the owner of the Class A Limited Partner Interest

                                      -3-

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         issuable upon exercise of the Option as of 5:00 p.m. (Detroit, Michigan
         time) on the Payment Date.

              (c) Notwithstanding any provisions herein to the contrary: When
         the Purchaser exercises the Option, it shall be obligated to pay the
         Exercise Price on the Payment Date; provided, however, that if the
         Partnership Advisory Board, in the exercise of its discretion,
         determines, prior to 11:00 a.m. (Detroit, Michigan time) on the Payment
         Date, that the Purchaser is to pay the Net Exercise Price, then the
         Purchaser shall be obligated to pay the Net Exercise Price on the
         Payment Date. If the Purchaser pays the Exercise Price, then the
         Purchaser shall receive a Class A Limited Partner Interest having a
         Percentage Interest equal to 3.125%. If the Purchaser pays the Net
         Exercise Price, then the Purchaser shall receive a Class A Limited
         Partnership Interest equal to 2.5%. Upon payment of the Exercise Price
         or the Net Exercise Price, as applicable, (i) the Purchaser shall be
         deemed to have made a capital contribution to the Partnership for such
         Class A Limited Partner Interest that is equal in amount to the Option
         Equity Value or the Net Option Equity Value, as applicable, (ii) the
         Class A Limited Partnership Interest issuable upon exercise of the
         Option shall be issued to the Purchaser, (iii) the Purchaser shall be
         admitted as a Class A Limited Partnership with respect to such Class A
         Limited Partnership Interest, and (iv) the Grantor shall, or shall
         cause its General Partner to, adjust the Percentage Interests and the
         Capital Accounts of the Grantor's Class A Limited Partners in an
         appropriate manner to reflect the issuance of such Class A Limited
         Partner Interest to the Purchaser pursuant to the Option.

         2.3 Replacement of Option. On receipt of evidence reasonably
    satisfactory to the Grantor of the loss, theft, destruction or mutilation of
    this Agreement and the Option and, in the case of loss, theft or
    destruction, on delivery of an indemnity agreement reasonably satisfactory
    in form and substance to the Grantor or, in the case of mutilation, on
    surrender and cancellation of this Agreement, the Grantor at its expense
    shall execute and deliver to the Purchaser, in lieu of this Agreement and
    the Option, a new instrument of like tenor and amount.

         2.4 Transfer of Option.

              (a) This Agreement and the Option may only be transferred or
         assigned by the Purchaser only in whole and not in part. Any such
         transfer or assignment shall be made by endorsement (by the Purchaser
         executing the Assignment Form annexed hereto as Annex B) and delivery
         in the same manner as a negotiable instrument transferable by
         endorsement and delivery; provided, however, that no such transfer or
         assignment shall be permitted without compliance with all applicable
         federal and state securities laws by the transferor and the transferee.

                                     -4-

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              (b) On surrender of this Option for transfer and assignment,
         accompanied by a properly endorsed Assignment Form, the Grantor at its
         expense shall issue to or on the order of the Purchaser a new
         instrument of like tenor, in the name of the Purchaser or as the
         Purchaser (on payment by the Purchaser of any applicable transfer
         taxes) may direct.

              (c) The Purchaser acknowledges that this Agreement, the Option and
         the Class A Limited Partner Interest issuable upon exercise of the
         Option are being acquired solely for the Purchaser's own account and
         not as a nominee for any other party, and for investment, and that the
         Purchaser will not offer, sell or otherwise dispose of this Agreement,
         the Option or any Class A Limited Partner Interest issuable upon
         exercise of the Option, except under circumstances that will not result
         in a violation of the Securities Act of 1933, as amended, or any state
         securities laws. Upon exercise of the Option, the Purchaser shall, if
         requested by the Grantor, confirm in writing, in a form satisfactory to
         the Grantor, that the Interest so purchased is being acquired solely
         for the Purchaser's own account and not as a nominee for any other
         party, for investment, and not with a view toward distribution or
         resale.

                                    ARTICLE 3

                                    COVENANTS

         3.1 Covenants of the Grantor.

              (a) The Grantor covenants that at all times during the Option
         Period the Grantor will reserve a sufficient Interest to provide for
         the issuance of the Class A Limited Partner Interest issuable upon the
         exercise of the Option and, from time to time, will take all steps
         necessary to issue and evidence the issuance of, the Class A Limited
         Partner Interest issuable upon exercise of the Option. The Grantor
         agrees that its issuance of this Agreement and the Option shall
         constitute full authority to its officers to execute and issue all
         certificates, documents and instruments necessary to issue, or to
         evidence the issuance of, the Class A Limited Partner Interest issuable
         upon the exercise of this Option. The Grantor will not, by any
         voluntary action, avoid or seek to avoid the observance or performance
         of any of the terms to be observed or performed hereunder by the
         Grantor, but will at all times in good faith assist in the carrying out
         of all of the provisions of this Agreement and in the taking of all
         such action as may be necessary or appropriate in order to protect the
         rights of the Purchaser hereunder against impairment.

              (b) Upon the occurrence and during the continuance of any breach
         or threatened breach of this Agreement, the Purchaser shall have the
         right forthwith, its election, to exercise any and all rights and
         remedies available to the Purchaser

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         at law or in equity, and, in addition, the Purchaser shall have the
         specific rights, and remedies, which rights and remedies shall be
         cumulative and not exclusive The Grantor recognizes that the remedies
         of the Purchaser at law for a breach of the provisions of this
         Agreement would be inadequate, and hereby consents to the exercise of
         equitable jurisdiction and to the entry of equitable remedies,
         including without limitation the remedies of injunction and specific
         performance, to remedy any such breach, and waives the right to object
         to any such jurisdiction or remedies on the ground of the adequacy of
         the Purchaser' remedies at law.

         3.2 Covenant of the Purchaser. The Purchaser agrees that until it is
    removed as the General Partner pursuant to the Partnership Agreement, it
    shall be and remain the General Partner so long as any indebtedness is
    outstanding under the Indenture. The Purchaser agrees to be bound by and to
    comply with all of the terms of the Partnership Agreement with respect to
    the Class A Limited Partner Interest that is issuable upon exercise of the
    Option.

                                    ARTICLE 4
                                  MISCELLANEOUS

         4.1 Determination of Equity Value.

              (a) For all purposes of this Agreement, the calculation of Equity
         Value shall initially be made by the General Partner, who shall supply
         the Partnership Advisory Board with all such information and data as
         shall be requested to enable the Partnership Advisory Board to reach an
         informed judgment with respect thereto. In the event the Partnership
         Advisory Board shall disagree with any determination of Equity Value
         made by the General Partner and the General Partner shall not accept
         the determination of Equity Value proposed by the Partnership Advisory
         Board, the matter shall be settled by appraisal as provided in this
         Section 4.1. Any determination of Equity Value made in accordance with
         the provisions of Section 4.1 shall be made in writing and a copy
         thereof given to each Limited Partner. In determining Equity Value the
         following principles shall apply: (i) the Partnership will be valued on
         a going concern basis, in conformity with standard appraisal
         techniques, applying the market factors then relevant, and other assets
         and other securities not subject to valuation as described below, shall
         be valued similarly; (ii) securities which are freely tradable and the
         principal market for which (measured by the average daily volume over
         the preceding four trading weeks) is either the New York Stock Exchange
         or the American Stock Exchange or which are quoted on the National
         Market System of the National Association of Securities Dealers, Inc.
         shall be valued at their last reported closing sale price, prior to the
         date of determination on such exchange, or, if no sales occurred on
         such day, at the mean between the closing "bid" and "asked" prices on
         such day; and (iii) securities which are freely tradable and the
         principal market for which is

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         some other national securities exchange or the over-the-counter market
         (but which are not quoted on the National Market System) shall be
         valued at their last reported closing sale price, regular way, prior to
         the date of determination on the principal national securities exchange
         on which they are traded, or, if no sales occurred on such day, at the
         mean between the closing "bid" and "asked" prices on such day, or, if
         the principal market for such securities is, or is deemed to be, in the
         over-the-counter market, at their average closing "bid" price as
         published by the National Association of Securities Dealers Automated
         Quotation System, or if such price is not so published, at the mean
         between their closing "bid" and "asked" prices, if available, which
         prices may be obtained from any reputable broker or dealer. For all
         purposes of this Agreement, Equity Value shall be determined after
         considering all factors which might reasonably affect the sales price
         of Class A Limited Partner Interests or the value of the assets or
         securities of the Partnership, including, without limitation, if and as
         appropriate, the anticipated impact on current market prices of
         immediate sale, the lack of a market for such Interests or assets of
         securities and the impact on present value of, among others, the length
         of time before any such sales may become possible and the cost and
         complexity of any such sales. For all purposes of this Section 4.1, all
         determinations of Equity Value which have been determined in accordance
         with the terms of this Section 4.1 shall be final and conclusive on the
         Grantor, all Partners, and their respective successors and assigns. In
         determining the value of assets in accordance with the provisions of
         this Section 4.1, the General Partner and the Partnership Advisory
         Board may obtain and rely on information provided by any source or
         sources reasonably believed to be accurate.

              (b) Any controversy arising out of a determination of Equity Value
         which shall be submitted to appraisal as provided for by this Section
         4.1 shall be settled in New York, New York by an appraisal undertaken
         by two independent nationally recognized experts in the cable
         television field (the "Initial Appraisers"), to determine the Equity
         Value. One such appraiser shall be appointed by the General Partner,
         and the other by the Partnership Advisory Board, and the deliberations
         of the appraisers shall commence forthwith following their appointment.
         If the disparity between the Equity Values determined by each of the
         Initial Appraisers is less than or equal to 5% of the higher of the two
         Equity Values, the final Equity Value shall be the average of such two
         Equity Values. If such disparity is greater than 5%, then the Initial
         Appraisers shall select a third appraiser possessing similar
         qualifications. If the Initial Appraisers cannot agree upon a third
         appraiser within 25 days of the commencement of their original
         deliberations to determine Equity Value, the third appraiser shall be
         selected by the American Arbitration Association, and such third
         appraiser, within 20 days of appointment, shall make its determination
         of Equity Value. The final Equity Value shall be whichever Equity Value
         of the two Initial Appraisers is closest to the Equity Value determined
         by the third appraiser so long as the disparity

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         between the third Equity Value and the earlier Equity Value to which it
         is closest is less than or equal to 20% of such earlier Equity Value.
         If the disparity is greater than 20%, then the Equity Value shall be
         the average of the two Equity Values that are closest. The valuation
         decision of such appraisers shall be final and conclusive on the
         Grantor, all Partners and their respective successors and assigns. The
         cost of any such appraisals shall be borne equally by the Partnership
         (as a Partnership expense) and the General Partner.

         4.2 Notices. All notices and other communications required or permitted
    under this Agreement shall be deemed to have been duly given and made if in
    writing and if served by personal delivery to the party for whom intended
    (which shall include delivery by Federal Express or any other nationally
    recognized overnight delivery service), bearing the address shown in this
    Agreement for, or such other address as may be designated in writing
    hereinafter by, such party:

         If to the Grantor:         James Cable Partners, L.P.
                                    710 North Woodward Avenue, Suite 180
                                    Bloomfield Hills, Michigan  48304

         with copies to:            Miller, Canfield, Paddock and Stone, P.L.C.
                                    840 West Long Lake Road, Suite 200
                                    Troy, Michigan  48098-6358
                                    Attention:  Brad B. Arbuckle, Esq.

                                    and

                                    Dow, Lohnes & Albertson, PLLC
                                    Suite 800
                                    1200 New Hampshire Avenue, N.W.
                                    Washington, D.C.  20036
                                    Attention:  Edward J. O'Connell, Esq.

         If to the Grantor's
           Partnership
           Advisory Board:          James Cable Partners, L.P.
                                    710 North Woodward Avenue, Suite 180
                                    Bloomfield Hills, Michigan  48304

                                    and

                                      -8-

<PAGE>   9

                                    c/o Sandler Capital Management
                                    767 Fifth Avenue
                                    45th Floor
                                    New York, New York  10153
                                    Attention:  Douglas E. Schimmel

         with copies to:            Miller, Canfield, Paddock and Stone, P.L.C.
                                    840 West Long Lake Road, Suite 200
                                    Troy, Michigan  48098-6358
                                    Attention:  Brad B. Arbuckle, Esq.

                                    and

                                    Dow, Lohnes & Albertson, PLLC
                                    Suite 800
                                    1200 New Hampshire Avenue, N.W.
                                    Washington, D.C.  20036
                                    Attention:  Edward J. O'Connell, Esq.

         If to the Purchaser:       James Communications Partners
                                    710 North Woodward Avenue, Suite 180
                                    Bloomfield Hills, Michigan  48304

         with copies to:            Miller, Canfield, Paddock and Stone, P.L.C.
                                    840 West Long Lake Road, Suite 200
                                    Troy, Michigan  48098-6358
                                    Attention:  Brad B. Arbuckle, Esq.

                                    and

                                    Dow, Lohnes & Albertson, PLLC
                                    Suite 800
                                    1200 New Hampshire Avenue, N.W.
                                    Washington, D.C.  20036
                                    Attention:  Edward J. O'Connell, Esq.

         Section 4.3 Entire Agreement. This Agreement embodies the entire
    agreement and understanding of the parties hereto with respect to the
    subject matter hereof, and supersedes all prior and contemporaneous
    agreements and understandings, oral or written, relative to said subject
    matter.

         Section 4.4 Binding Effect; Assignment. This Agreement shall bind, and
    the benefits hereof shall inure to, the Grantor and the Purchaser, and their
    respective

                                      -9-

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    successors and assigns; provided, however, that the Grantor may not transfer
    or assign (by operation of law or otherwise) any or all of its rights or
    delegate the performance of all or any part of its obligations hereunder
    without the prior written consent of the Purchaser.

         Section 4.5 Expenses of Transaction. Each party to this Agreement shall
    bear its own expenses, including attorneys' fees, in respect of this
    Agreement and the transactions contemplated hereby, whether or not such
    transactions are consummated.

         Section 4.6 Amendment; Waiver; Consent. This Agreement may not be
    changed, amended, terminated, augmented, rescinded or discharged (other than
    by performance), in whole or in part, except by a writing executed by each
    of the parties hereto, and no waiver of any of the provisions or conditions
    of this Agreement or any of the rights of a party hereto shall be effective
    or binding unless such waiver shall be in writing and signed by the party
    claimed to have given a consent thereto. Except to the extent that a party
    hereto may have otherwise agreed to in writing, no wavier by that party of
    any condition of this Agreement or breach by the other party of any of its
    obligations, representations or warranties hereunder shall be deemed to be a
    waiver of any other condition or subsequent or prior breach of the same or
    any other obligation or representation or warranty by such other party, nor
    shall any forbearance by the first party to seek a remedy for any
    noncompliance or breach by such other party be deemed to be a waiver by the
    first party of its rights and remedies with respect to such noncompliance or
    breach.

         Section 4.7 Counterparts. This Agreement may be executed in multiple
    counterparts, each of which shall be deemed an original, but all of which
    taken together shall constitute one and the same instrument. In the event
    one or more of the provisions of this Agreement should, for any reason, be
    held to be invalid, illegal or unenforceable in any respect, such
    invalidity, illegality, or unenforceability shall not affect any other
    provisions of this Agreement, and this Agreement shall be construed as if
    such invalid, illegal or unenforceable provision had never been contained
    herein. Headings in this Agreement are for purposes of reference only and
    shall not limit or affect the meaning thereof.

         Section 4.8 Governing Law; Consent to Jurisdiction.

              (a) This Agreement shall in all respects be construed in
         accordance with, and governed by, the laws of the State of Delaware,
         without regard to the principles of conflicts of law thereof.

              (b) Each of the parties hereto hereby irrevocably submits to the
         non-exclusive jurisdiction of the New York Supreme Court, New York
         County, or the United States District Court for the Southern District
         of New York and any

                                      -10-

<PAGE>   11

         appellate court thereof in any action or proceeding arising out of or
         relating to this Agreement and the transactions contemplated hereby and
         each of the parties hereto hereby irrevocably agrees that all claims in
         respect of such action or proceeding shall be heard and determined in
         such New York state or Federal court. Each of the parties hereto hereby
         irrevocably and unconditionally waives, to the fullest extent any of
         them may legally and effectively do so, any objection that any of them
         may now or hereafter have to the laying of venue of any suit, action or
         proceeding arising out of or relating to this Agreement or any of the
         transactions contemplated hereby in the New York Supreme Court, New
         York County, or the United States District Court for the Southern
         District of New York. Each of the parties hereto hereby irrevocably
         waives, to the fullest extent possible, the defense of any inconvenient
         forum to the maintenance of such action or proceeding.

         Section 4.9 Further Assurances. Each of the parties hereto shall take
    such other and further actions and shall execute and deliver such other and
    further documents and instruments as shall be necessary or desirable to
    effectuate the intent and provisions of this Agreement. All covenants,
    agreements, representations and warranties made in this Agreement, or in the
    certificates delivered in connection herewith, shall be deemed to have been
    material and to have been relied upon by the Purchasers, notwithstanding any
    investigation made by them or on their behalf, and shall survive the
    execution and delivery of this Agreement, and shall continue in full force
    and effect until the Option shall be exercised or shall lapse.

                                      -11-

<PAGE>   12

         IN WITNESS WHEREOF, this Agreement has been duly executed on behalf of
each of the parties hereto as of the day and year first above written.

                           GRANTOR:

                           JAMES CABLE PARTNERS, L.P., a Delaware limited
                           partnership

                           By: James Communications Partners, a Michigan general
                               partnership and its general partner

                               By: Jamesco, Inc., a Michigan corporation and a
                                   general partner of James Communications
                                   Partners

                                   By:
                                      -----------------------------------
                                           Name:    William R. James
                                           Title:   President

                           PURCHASER:

                           JAMES COMMUNICATIONS PARTNERS, a Michigan
                           general partnership

                           By: Jamesco, Inc., a Michigan corporation and a
                               general partner of James Communications Partners

                               By:
                                  ---------------------------------------
                                           Name:    William R. James
                                           Title:   President

                                      -12-

<PAGE>   13

                                     ANNEX A

                           FORM OF NOTICE OF EXERCISE

To:     James Cable Partners, L.P.
        710 North Woodward Avenue
        Suite 180
        Bloomfield Hills, Michigan 48304

         (1) The undersigned hereby (A) exercises the Option granted the
undersigned pursuant to the attached Option Agreement/Option Certificate
pursuant to the terms thereof, (B) will pay the Exercise Price on the Payment
Date, unless the Partnership Advisory Board determines that the undersigned is
to pay the Net Exercise Price, in which case the undersigned will pay the Net
Exercise Price on the Payment Date, and (C) will tender payment of the Exercise
Price or Net Exercise Price, as applicable, on the Payment Date. The Class A
Limited Partner Interest to be issued to the undersigned pursuant to this
exercise of the Option shall have a Percentage Interest equal to either 3.125%,
if the undersigned pays the Exercise Price, on the Payment Date, or 2.5%, if the
undersigned pays the Net Exercise Price on the Payment Date.

         (2) In exercising the Option, the undersigned hereby confirms and
acknowledges that the Class A Limited Partner Interest to be issued pursuant to
this exercise of the Option is being acquired solely for the account of the
undersigned and not as a nominee for any other party, and for investment, and
the undersigned will not offer, sell or otherwise dispose of such Interest
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any applicable state securities laws.

         (3) Please issue the Class A Limited Partnership Interest issuable to
the undersigned pursuant to this exercise of the Option in the name of the
undersigned or in such other name as is specified below:

                                           -------------------------------------
                                           (Name)

                                           -------------------------------------
                                           (Name)

                                      A-1

<PAGE>   14

                                     ANNEX B

                                 ASSIGNMENT FORM

         FOR VALUE RECEIVED, the undersigned owner of this Option (the
"Purchaser") does hereby (i) sell, assign and transfer unto the assignee named
below (the "Assignee") all of the rights of the Purchaser under the within
Option, and (ii) irrevocably constitute and appoints
                                                         as its Attorney to make
such transfer on the books of the Grantor, maintained for the purpose, with full
power of substitution in the premises.

         The Purchaser and the Assignee also represent that, by assignment
hereof, the Assignee acknowledges (i) that this Agreement, the Option, and the
Class A Limited Partner Interest to be issued upon exercise of the Option, is
being acquired for investment and that the Assignee will not offer, sell or
otherwise dispose of this Agreement, the Option or any such Interest to be
issued upon exercise of the Option, except under circumstances which will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws, and (ii) that upon exercise of the Option, the Assignee shall,
if requested by the Grantor, confirm in writing, in a form satisfactory to the
Grantor, that the Class A Limited Partner Interest so purchased is being
acquired for investment and not with a view toward distribution or resale. The
Assignee hereby agrees to be bound by and to comply with all of the terms of the
Partnership Agreement with respect to the Class A Limited Partner Interest that
is issuable upon the exercise of the Option.

Dated:
      -------------------------------       ------------------------------------
                                            Signature of Purchaser

Dated:
      -------------------------------       ------------------------------------
                                            Signature of Assignee

                                      B-1<PAGE>   1
                                                                   EXHIBIT 10(d)

                             POLARIS INDUSTRIES INC.

                          EMPLOYEE STOCK OWNERSHIP PLAN

                            EFFECTIVE JANUARY 1, 1997

                            (as Amended and Restated
                            Effective January 1, 1999)

<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>                                                                                                              <C>
ARTICLE I.........................................................................................................1

INTRODUCTION......................................................................................................1

ARTICLE II........................................................................................................1

DEFINITIONS.......................................................................................................1

         2.01 Account.............................................................................................1
         2.02 Affiliated Company..................................................................................1
         2.03 Anniversary Date....................................................................................2
         2.04 Annual Addition.....................................................................................2
         2.05 Beneficiary.........................................................................................2
         2.06 Board of Directors..................................................................................2
         2.07 Break in Continuous Service.........................................................................2
         2.08 Capital Accumulation................................................................................2
         2.09 Code................................................................................................2
         2.10 Committee...........................................................................................2
         2.11 Company.............................................................................................2
         2.12 Company Stock.......................................................................................2
         2.13 Company Stock Account...............................................................................2
         2.14 Compensation........................................................................................3
         2.15 Continuous Service..................................................................................3
         2.16 Direct Rollover.....................................................................................3
         2.17 Distributee.........................................................................................3
         2.18 Election Period.....................................................................................3
         2.19 Eligible Diversification Amount.....................................................................3
         2.20 Eligible Retirement Plan............................................................................4
         2.21 Eligible Rollover Distribution......................................................................4
         2.22 Employee............................................................................................4
         2.23 Employer............................................................................................4
         2.24 Employer Contributions..............................................................................4
         2.25 Employer Securities.................................................................................4
         2.26 Enrollment Date.....................................................................................4
         2.27 ERISA...............................................................................................5
         2.28 Highly Compensated Employee.........................................................................5
         2.29 Hour of Service.....................................................................................6
         2.30 Loan................................................................................................6
         2.31 Non-Highly Compensated Employee.....................................................................6
         2.32 Other Investments Account...........................................................................7
         2.33 Participant.........................................................................................7
         2.34 Plan................................................................................................7
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         2.35 Plan Year...........................................................................................7
         2.36 Qualified Participant...............................................................................7
         2.37 Retirement..........................................................................................7
         2.38 Section 414(s) Compensation.........................................................................7
         2.39 Suspense Account....................................................................................7
         2.40 Total Distribution..................................................................................7
         2.41 Trust...............................................................................................7
         2.42 Trust Agreement.....................................................................................8
         2.43 Trust Assets........................................................................................8
         2.44 Trustee.............................................................................................8
         2.45 Year of Eligibility Service.........................................................................8

ARTICLE III.......................................................................................................8

ELIGIBILITY AND PARTICIPATION.....................................................................................8

         3.01 Eligibility for Participation.......................................................................8
         3.02 Reemployment of Participant.........................................................................9

ARTICLE IV........................................................................................................9

EMPLOYEE CONTRIBUTIONS............................................................................................9

ARTICLE V.........................................................................................................9

EMPLOYER CONTRIBUTIONS............................................................................................9

         5.01 Employer Contributions..............................................................................9

ARTICLE VI.......................................................................................................10

INVESTMENT OF TRUST ASSETS.......................................................................................10

         6.01 Investment of Trust Assets.........................................................................10
         6.02 Diversification....................................................................................10
         6.03 Exempt Loan........................................................................................11

ARTICLE VII......................................................................................................14

ALLOCATIONS......................................................................................................14

         7.01 Allocations to Participants' Accounts..............................................................14
         7.02 Allocable Shares...................................................................................15
         7.03 Allocation Limitations.............................................................................15
         7.04 Allocation of Net Income (or Loss) of the Trust....................................................16
         7.05 Accounting for Allocations.........................................................................16
         7.06 Nonallocation......................................................................................17

ARTICLE VIII.....................................................................................................17

EXPENSES OF THE PLAN AND TRUST...................................................................................17
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ARTICLE IX.......................................................................................................17

VOTING COMPANY STOCK AND EXERCISE OF OTHER RIGHTS................................................................17

         9.01 Voting and Tender or Exchange Rights...............................................................17

ARTICLE X........................................................................................................21

CAPITAL ACCUMULATION.............................................................................................21

ARTICLE XI.......................................................................................................21

DISTRIBUTIONS....................................................................................................21

         11.01 Time of Distribution to Participants..............................................................21
         11.02 Benefit Forms for Participants....................................................................22
         11.03 Benefit Form on a Participant's Death.............................................................22
         11.04 Distribution in Company Stock.....................................................................22
         11.05 Delay in Benefit Determination....................................................................23
         11.06 Designated Beneficiaries..........................................................................23
         11.07 Additional Distribution Requirements..............................................................23
         11.08 Distributions Pursuant to Qualified Domestic Relations Orders.....................................24

ARTICLE XII......................................................................................................27

DETERMINATION OF SERVICE.........................................................................................27

         12.01 Continuous Service................................................................................27
         12.02 Break in Continuous Service.......................................................................28
         12.03 Affiliated Companies..............................................................................29

ARTICLE XIII.....................................................................................................29

PLAN ADMINISTRATION..............................................................................................29

         13.01 Named Fiduciaries.................................................................................29
         13.02 Fiduciary Limitations.............................................................................29
         13.03 Company Responsibilities..........................................................................29
         13.04 Trustee Responsibilities..........................................................................30
         13.05 Appointment of Committee..........................................................................30
         13.06 Organization and Powers of the Committee..........................................................30
         13.07 Indemnification...................................................................................31

ARTICLE XIV......................................................................................................32

AMENDMENT AND TERMINATION........................................................................................32

         14.01 Company's Right to Amend..........................................................................32
         14.02 Mandatory Amendments..............................................................................32
         14.03 Termination.......................................................................................33
         14.04 Employee Nonforfeitable Rights....................................................................33
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<TABLE>

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         14.05 Distribution upon Termination.....................................................................33

ARTICLE XV.......................................................................................................33

GENERAL PROVISIONS...............................................................................................33

         15.01 Participants'Rights...............................................................................33
         15.02 Spendthrift Clause................................................................................34
         15.03 Company's Liability...............................................................................34
         15.04 Merger or Consolidation...........................................................................34
         15.05 Governing Law.....................................................................................34
         15.06 Legal Action......................................................................................34
         15.07 Binding on All Parties............................................................................35
         15.08 Headings..........................................................................................35
         15.09 Severability of Provisions........................................................................35
         15.10 Service of Process................................................................................35
         15.11 USERRA............................................................................................35
         15.12 Earned Income Limitation..........................................................................35

ARTICLE XVI......................................................................................................35

TOP-HEAVY COMPLIANCE PROVISIONS..................................................................................35

         16.01 Purpose...........................................................................................35
         16.02 Definitions.......................................................................................36
         16.03 Determination of Whether Plan is "Top-Heavy.".....................................................37
         16.04 Aggregation Group of Employer Plans...............................................................37
         16.05 Special Minimum Contribution Becoming Operative in the Event the Plan
         Becomes "Top-Heavy".....................................................................................37
         16.06 Pre-"Top-Heavy"Plan Terminated Participant........................................................38
         16.07 Special "Top-Heavy"Reduction in Combined Benefit and Contribution
         Limitation..............................................................................................38
         16.08 Termination of "Top-Heavy"Status..................................................................38
         16.09 Multiple "Top-Heavy"Plans.........................................................................38
         16.10 Effect of the Plan Becoming "Super Top-Heavy".....................................................38

ARTICLE XVII.....................................................................................................39

DIRECT ROLLOVER AND ELIGIBLE ROLLOVER DISTRIBUTIONS..............................................................39

         17.01 Purpose...........................................................................................39
         17.02 Definitions.......................................................................................39

ARTICLE XVIII....................................................................................................40

EXECUTION........................................................................................................40
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                                       iv
<PAGE>   6

                                    ARTICLE I

                                  INTRODUCTION

                  The purposes of the Plan are to enable participating Employees
to share in the growth and prosperity of the Company and to provide Participants
with an opportunity to accumulate capital for their future economic security.
Accordingly, Plan assets will be invested primarily in Employer Securities and
up to one hundred (100) percent of the Plan assets may be invested in Company
Stock.

                  The Plan is intended to be a stock bonus plan qualified under
Section 401(a) of the Code, which constitutes an employee stock ownership plan
within the meaning of Section 4975(e)(7) of the Code and Section 407(d)(6) of
ERISA.

                  All Trust Assets acquired under the Plan as a result of
Employer Contributions and other additions to the Trust will be administered,
distributed, and otherwise governed by the provisions of the Plan. All such
assets will be held in the Trust by the Trustee in accordance with the
provisions of the Trust Agreement. The Plan shall be administered by the
Committee for the exclusive benefit of Participants and their Beneficiaries.

                                   ARTICLE II

                                   DEFINITIONS

                  In the Plan, whenever the context so requires, the singular or
plural and the masculine, feminine or neuter gender shall each be deemed to
include the others; the terms "he," "his" and "him" shall refer to an Employee
or a Participant; references to a section of the Code, the Treasury Regulations,
the Labor Regulations or ERISA shall include any subsequent amendments to such
section; and capitalized terms shall have the following meanings:

                  2.01 Account. One of the bookkeeping accounts maintained to
record the allocated interest of each Participant in the Plan. Such Accounts
shall include Company Stock Accounts and Other Investments Accounts.

                  2.02 Affiliated Company. Any corporation that is, along with
the Company, a member of a controlled group of corporations (within the meaning
of Section 414(b) of the Code) or any other trade or business (whether or not
incorporated) which is under common control with the Company (as defined in
Section 414(c) of the Code) or any member of an "affiliated service group" (as
such term is defined in Section 414(m) of the Code) of which the Company is also
a member or as may be provided in regulations under Section 414(o) of the Code.
For purposes of Section 7.03, the preceding references to Sections 414(b) and
414(c) of the Code shall be modified by Section 415(h) of the Code.

                  2.03 Anniversary Date. The last day of each Plan Year and such
interim dates as the Committee shall determine from time to time.

<PAGE>   7

                  2.04 Annual Addition. For any Plan Year, the (a) Employer
Contributions, if any, allocated to a Participant's Accounts under the Plan and
(b) employer contributions and forfeitures allocated to a Participant's accounts
under all other defined contribution plans maintained by the Company or an
Affiliated Company. Notwithstanding the foregoing, if no more than one-third
(1/3) of Employer Contributions for a Plan Year are allocated to the group of
Highly Compensated Employees, Annual Additions shall not include Employer
Contributions applied to the repayment of interest on a Loan of Employer
Securities acquired with the proceeds of a Loan.

                  2.05 Beneficiary. The person (or persons) designated under
Section 11.06 as entitled to receive any benefits under the Plan in the event of
a Participant's death.

                  2.06 Board of Directors.  The Board of Directors of the
Company.

                  2.07 Break in Continuous Service.  A Break in Continuous
Service determined pursuant to Section 12.02.

                  2.08 Capital Accumulation.  A Participant's vested
(nonforfeitable) interest in his Accounts under the Plan as described in
 Article X.

                  2.09 Code. The Internal Revenue Code of 1986, as amended from
time to time.

                  2.10 Committee. The Committee consisting of such persons
appointed by the Board of Directors to administer the Plan and to give
instructions to the Trustee.

                  2.11 Company.  Polaris Industries Inc. and any corporation
 which shall be its successor.

                  2.12 Company Stock. Any qualifying employer security within
the meaning of Section 407(d)(5) of ERISA and regulations thereunder including
any share of stock, common or preferred, issued by the Company or an Affiliated
Company.

                  2.13 Company Stock Account. An Account of a Participant which
is credited with his allocable share of Company Stock purchased and paid for by
the Trust or contributed or transferred to the Trust.

                  2.14 Compensation. The total amount of compensation that is
paid by the Employer to an Employee for services rendered in the course of
employment and that is includable in such Employee's gross income for the Plan
Year to the extent provided by Treasury Regulation ss. 1.414(s)-1(c)(3) and
Treasury Regulation ss. 1.414(s)-1(c)(4). Compensation shall include salary
reduction contributions to a Cafeteria plan or cash or deferred 401(k) plan
sponsored by an Employer. The maximum amount of Compensation that may be taken
into account for any Plan Year shall not exceed $150,000 (or such greater amount
as shall be provided pursuant to Section 401(a)(17) of the Code).

                                       2
<PAGE>   8

                  2.15 Continuous Service.  Continuous Service determined
 pursuant to Article XII.

                  2.16 Direct Rollover.  A payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.

                  2.17 Distributee. An Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the Alternate Payee under a
Qualified Domestic Relations Order, as such terms are defined in Section 414(p)
of the Code and Section 11.08(c) of the Plan, are Distributees with regard to
the interest of the spouse or former spouse.

                  2.18 Election Period. A Qualified Participant's Election
Period shall be the six (6) Plan Year period beginning with the Plan Year in
which the Participant attains age fifty-five (55); provided, however, that if
the Participant has not completed ten (10) years of Plan participation by the
Plan Year in which age fifty-five (55) is attained, the Election Period with
respect to such Participant shall be the six (6) Plan Year period beginning with
the Plan Year in which the Participant completes ten (10) years of Plan
participation.

                  2.19 Eligible Diversification Amount. For any Plan Year during
the Election Period of a Qualified Participant, that portion of the Qualified
Participant's Accounts equal to the product of (a), (b), (c) and (d):

                  (a)  the number of shares of Company Stock allocated to
such Qualified Participant's Accounts as of the Anniversary Date of the
immediately preceding Plan Year;

                  (b)  plus the number of shares of Company Stock, if any,
previously elected to be diversified pursuant to Section 6.02;

                  (c)  such sum multiplied by .25 or, in the case of the
last year in such Qualified Participant's Election Period, .50; and

                  (d)  less the number of shares of Company Stock, if any,
previously elected to be diversified pursuant to Section 6.02.

                  2.20 Eligible Retirement Plan. An individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code or a qualified trust described in Section 401(a) of
the Code that accepts the Distributee's Eligible Rollover Distribution;
provided, however, that in the case of an Eligible Rollover Distribution to a
surviving spouse, an Eligible Retirement Plan only means an individual
retirement plan or individual retirement annuity.

                  2.21 Eligible Rollover Distribution. Any distribution of all
or any portion of the balance of a Participant's Accounts to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially

                                       3
<PAGE>   9

equal periodic payments (made not less frequently than annually) made for the
life (or life expectancy) of such Distributee or the joint lives (or joint life
expectancies) of such Distributee and such Distributee's designated Beneficiary
or for a specified period of ten (10) years or more; any distribution to the
extent such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized appreciation with
respect to Employer Securities).

                  2.22 Employee. Any person who is employed by the Employer on
an employer-employee basis. "Employee" shall also include any "leased employee"
within the meaning of Section 414(n)(2) or 414(o)(2) of the Code, unless such
leased employee is covered by a plan described in Section 414(n)(5) of the Code
and all such leased employees do not constitute more than twenty (20) percent of
the combined non-highly compensated workforce (within the meaning of Section
414(n)(5)(C)(ii) of the Code) of the Company and Affiliated Companies.

                  2.23 Employer. The Company or any Affiliated Company which has
adopted the Plan and which has agreed to be bound by the terms of the Plan and
Trust Agreement. Except where the context clearly provides otherwise, any
reference in the Plan to the term "Company" shall also mean any Employer with
respect to its Employees only, as though the term "Employer" was substituted for
the term "Company."

                  2.24 Employer Contributions.  Employer Contributions made
to the Trust pursuant to Section 5.01.

                  2.25 Employer Securities.  Shares of Company Stock which
meet the requirements of Section 409(l) of the Code.

                  2.26 Enrollment Date.  January 1 of the Plan Year.

                  2.27 ERISA. The Employee Retirement Income Security Act of
1974, as amended from time to time.

                  2.28 Highly Compensated Employee.

                  (a)  Effective for Plan Years beginning prior to January 1,
1997, any individual who with respect to a Plan Year:

                  (1)  was a five-percent owner (as defined by Section 416(i)(1)
                       of the Code) at any time during such Plan Year or the
                       preceding Plan Year; or

                  (2)  for the Plan Year preceding such Plan Year:

                       (A)  had Section 414(s) Compensation from the Company in
                            excess of $80,000 (as such amount may be adjusted
                            from time to time pursuant to Sections 414(q) and
                            415(d) of the Code), and

                                       4
<PAGE>   10

                       (B)  to the extent elected by the Company with respect to
                            such preceding Plan Year was in the top-paid group
                            of Employees for such preceding Plan Year.

For purposes of this Section 2.28, the "top-paid group of Employees" for a Plan
Year shall be the group consisting of the top twenty percent of the Company's
Employees when ranked on the basis of Section 414(s) Compensation paid during
such Plan Year; provided, however, that the following Employees shall be
excluded from the top-paid group of Employees: (i) Employees who have not
completed six months of Continuous Service; (ii) Employees who normally work
less than 17-1/2 hours per week; (iii) Employees who normally work during not
more than six months during any Plan Year, (iv) Employees who have not attained
age 21, and (v) except to the extent otherwise provided by regulations of the
Secretary of the Treasury, Employees covered by a collective bargaining
agreement between Employee representatives and the Employer, as determined by
the Secretary of Labor.

                  A former Employee shall be treated as a Highly Compensated
Employee if (i) such Employee was a Highly Compensated Employee when such
Employer separated from service or (ii) such Employee was a Highly Compensated
Employee at any time after attaining age 55.

                  For purposes of this Section 2.28, an Employee who is a
nonresident alien and who receives no earned income (within the meaning of Code
Section 911(d)(2)) from the Company which constitutes income from sources within
the United States (within the meaning of Code Section 861(a)(3) shall not be
treated as an Employee.

                  (b)  Effective for Plan Years beginning on or after January 1,
1997, "Highly Compensated Employee" means any Employee who (i) was a Five
Percent Owner (as that term is defined in Section 416(i)(1) of the Code) at any
time during the year or the preceding year, or (ii) for the preceding year, (A)
had Compensation from the Employer in excess of $80,000 (or such other amount as
may be in effect under Section 414(q) of the Code from time to time), and (ii)
if the Employer elects for such preceding year, was in the Top-Paid Group of
Employees. For purposes of this Section 2.28(b), the term "Top-Paid Group of
Employees" means the group consisting of the top 20 percent of Employees when
ranked on the basis of Compensation paid for such preceding year, but excluding
(i) Employees who have not completed 6 months of service, (ii) Employees who
normally work less than 17-1/2 hours per week, (iii) Employees who normally work
during not more than six months during any year, (iv) Employees who have not
attained age 21, and (v) except to the provided in Treasury Department
Regulations, Employees who are included in a unit of Employees covered by an
agreement that the Secretary of Labor finds to be a collective bargaining
agreement between Employee representatives and the Employer. Solely for purposes
of this Section 2.28(b), the term "Compensation" shall mean compensation within
the meaning of Section 415(c)(3) of the Code, without regard to Sections 125,
402(e)(3) and 402(h)(1)(B) of the Code and, in the case of employer
contributions made pursuant to a salary reduction agreement, without regard to
Section 403(b) of the Code. A former Employee shall be treated as a Highly
Compensated Employee if (i) such former Employee was a Highly Compensated
Employee when such Employee separated from service, or

                                       5
<PAGE>   11

(ii) such Employee was a Highly Compensated Employee at any time after attaining
age 55. Employees who are nonresident aliens and who receive no earned income
(within the meaning of Section 911(d)(2) of the Code) from the Employer which
constitutes income from sources within the United States (within the meaning of
Section 861(a)(3) of the Code) shall not be treated as Employees.

                  2.29 Hour of Service. Each hour for which an Employee is
directly or indirectly compensated or entitled to compensation, by the Employer
for the performance of duties during the applicable computation period,
including hours for which back pay, irrespective of mitigation of damages, has
been either awarded or agreed to by an Employer, and further including hours for
which an Employee is either directly or indirectly compensated, or entitled to
compensation, by the Employer, for reasons (such as vacation, sickness or
disability) other than the performance of duties during the applicable
computation period. Hours during which an Employee would have worked during an
Employer-approved leave of absence shall also be credited. The method of
determining the number of Hours of Service to be credited and the method of
crediting such Hours to computation periods shall conform to the requirements
set forth in Section 2530.200b-2(b) & (c) of the Department of Labor
Regulations.

                  2.30 Loan. Any loan to the Trustee made or guaranteed by a
disqualified person (within the meaning of Section 4975(e)(2) of the Code),
including, but not limited to, a direct loan of cash, a purchase-money
transaction, an assumption of an obligation of the Trustee, an unsecured
guarantee or the use of assets of a disqualified person (within the meaning of
Section 4975(e)(2) of the Code) as collateral for a loan.

                  2.31 Non-Highly Compensated Employee.  Any eligible
Employee who is not a Highly Compensated Employee.

                  2.32 Other Investments Account. An Account of a Participant
which is credited with his share of the net income (or loss) of the Trust and
Employer Contributions in other than Company Stock and which is debited with
payments made to pay for Company Stock.

                  2.33 Participant. Any Employee who has met the eligibility
requirements set forth in Article III and is participating in the Plan.

                  2.34 Plan. This Polaris Industries Inc. Employee Stock
Ownership Plan, as hereafter amended from time to time.

                  2.35 Plan Year. The twelve (12) month period beginning on
January 1 and ending on December 31. The Plan Year is also the limitation year
for purposes of Section 415 of the Code.

                  2.36 Qualified Participant.  Any Participant who has completed
at least ten (10) years of Plan participation and attained age fifty-five (55).

                  2.37 Retirement. Termination of a Participant's employment
with the Company or a subsidiary after he has attained age fifty-nine and
one-half (59-1/2).

                                       6
<PAGE>   12

                  2.38 Section 414(s) Compensation. Compensation as described
under Section 415(c)(3) of the Code and the regulations thereunder, including
all amounts currently not included in an Employee's gross income by reason of
Sections 125 and 402(a)(8) of the Code. Notwithstanding the foregoing, effective
for limitation years beginning on or after January 1, 1998, the term "Section
415 Compensation" shall include (i) any elective deferral (as defined in Section
402(g)(3) of the Code), and (ii) any amount which is contributed or deferred by
the Employer at the election of the Participant and which is not includible in
the gross income of the Employee by reason of Section 125 or 457.

                  2.39 Suspense Account. The account maintained by the Trustee
to record unallocated Employer Securities used as collateral on a Loan pursuant
to Section 6.03.

                  2.40 Total Distribution. A distribution to a Participant or
Beneficiary, within a single taxable year of such Participant or Beneficiary, of
the entire balance credited to such Participant's or Beneficiary's Accounts.

                  2.41 Trust. The trust created by the Trust Agreement entered
into pursuant to the Plan between the Company and the Trustee.

                  2.42 Trust Agreement.  The agreement between the Company and
the Trustee (or any successor Trustee) establishing the Trust and specifying the
duties of the Trustee.

                  2.43 Trust Assets. All cash, Company Stock and other property
held in the Trust for the exclusive benefit of Participants and their
Beneficiaries.

                  2.44 Trustee. The Trustee or Trustees (and any successor
Trustee) designated by the Company's Board of Directors which agrees to serve by
executing the Trust Agreement.

                  2.45 Year of Eligibility Service. An Employee will be deemed
to have completed a Year of Eligibility Service if he completes one thousand
(1,000) or more Hours of Service during the twelve (12)-month period beginning
on the date he first completes an Hour of Service for the Employer. If the
Employee does not complete at least one thousand (1,000) Hours of Service during
the first twelve (12) months of his employment, he will be deemed to have
completed a Year of Eligibility Service in the first Plan Year during which he
is credited with at least one thousand (1,000) Hours of Service.

                                   ARTICLE III

                          ELIGIBILITY AND PARTICIPATION

                  3.01  Eligibility for Participation.

                  (a)   Each Employee, except those described in Sections 3.01
(b) and 3.01(c) below, shall become eligible to participate in the Plan as
follows:

                                       7
<PAGE>   13

                  (1)   Each salaried Employee, except those described in clause
                        (3) below, shall become a Participant in the Plan as of
                        the Enrollment Date within the first Plan Year during
                        which he completes at least one month of Continuous
                        Service.

                  (2)   Each hourly paid Employee, except those described in
                        clause (3) below, shall become a Participant in the Plan
                        as of the Enrollment Date within the first Plan Year
                        during which such Employee completes 480 or more Hours
                        of Service.

                  (3)   Each part-time Employee and each seasonal Employee shall
                        become a Participant in the Plan as of the Enrollment
                        Date within the first Plan Year during which such
                        Employee completes 1,000 Hours of Service provided that
                        the Employee completes at least one month of Continuous
                        Service during such Plan Year.

                  (b)   Employees covered by a collective bargaining agreement
(as defined by the United States Secretary of Labor) between Employees'
representatives and an Employer are not eligible to participate in the Plan if
retirement benefits were the subject of good faith bargaining between such
Employees' representatives and the Employer and such collective bargaining
agreement does not provide for participation in the Plan. No Employee shall
participate in the Plan while he is actually employed by a leasing organization
rather than the Employer. In addition, Employees (i) who are non-resident
aliens, and (ii) whose primary place of employment is not located in the United
States, are not eligible to participate in the Plan.

                  (c)   Any Employee who is a temporary Employee, a student
Employee or an officer shall not be eligible to participate in the Plan.

                  (d)   Notwithstanding the requirements of Section 3.01(a)(3)
and Section 3.01(c), a regular part-time, seasonal or temporary Employee shall
become a Participant no later than the Enrollment Date within the first Plan
Year during which such Employee completes one Year of Eligibility Service.

                   3.02 Reemployment of Participant. A Participant who
terminates employment and is subsequently reemployed by the Company shall be
reinstated as a Participant as of his reemployment date.

                                   ARTICLE IV

                             EMPLOYEE CONTRIBUTIONS

                  Contributions by Employees to the Plan are not required or
permitted.

                                       8
<PAGE>   14
                                    ARTICLE V

                             EMPLOYER CONTRIBUTIONS

                  5.01     Employer Contributions.

                  (a) For each Plan Year, Employer Contributions may be paid to
the Trustee in such amounts (or under such formula) as may be determined by the
Board of Directors not later than the due date for filing the Company's federal
income tax return, including any extensions of such due date; provided, however,
that such Employer Contributions shall not be paid to the Trust in amounts which
would permit the limitation described in Section 7.03 to be exceeded.

                  (b) Employer Contributions may be paid to the Trust in cash or
in shares of Company Stock, as determined by the Board of Directors; provided,
however, that Employer Contributions shall be paid in cash in such amounts and
at such times as needed to provide the Trust with funds sufficient to pay in
full when due any principal and interest payments required by a Loan incurred by
the Trustee pursuant to Article VI to finance the acquisition of Company Stock,
except to the extent such principal and interest payments have been satisfied by
the Trustee from cash dividends paid to it with respect to Employer Securities
(whether allocated or unallocated) acquired with the proceeds of such Loan or
from the proceeds of sale of Employer Securities.

                  (c) Employer Contributions may be returned to the Employer if
(i) made in excess of the amount deductible by the Employer for its taxable year
(all such Employer Contributions being automatically conditioned upon such
deductibility), or (ii) made because of a reasonable mistake as to the facts and
circumstances existing at the time the contribution was fixed; provided,
however, that such return is limited, respectively, to (i) that portion in
excess of the amount deductible for the Employer's taxable year which is not
necessary to enable the Trustee to make Loan payments, or (ii) that portion of
the contribution attributable to a reasonable mistake of fact, and provided,
further, that any such return must be made within one (1) year of the date the
deduction was disallowed or the mistaken contribution was made.

                                   ARTICLE VI

                           INVESTMENT OF TRUST ASSETS

                  6.01 Investment of Trust Assets. Trust Assets will be invested
primarily in Employer Securities. Employer Contributions and cash dividends paid
on Company Stock may be used to acquire shares of Company Stock from Company
shareholders (including former Participants) or from the Company, except that
any Company Stock acquired with the proceeds of a Loan shall be limited to
Employer Securities. Except as otherwise provided in Section 6.02, Trust Assets
not acquired with the proceeds of a Loan and not invested in Company Stock shall
be invested by the Trustee in accordance with the Trust Agreement. All
investments in Company Stock will be made by the Trustee only upon the direction
of the Committee. The Committee may direct that all Trust Assets be invested and
held in Company Stock. All purchases of

                                       9

<PAGE>   15

Company Stock by the Trust will be made at a price or at prices which, in the
judgment of the Committee, do not exceed the fair market value of such Company
Stock at the time of purchase. The Committee may direct the Trustee to sell or
resell shares of Company Stock to any person, including the Company; provided,
however, that any such sale to any disqualified person (as defined by Section
4975(e)(2) of the Code), including the Company, shall be made at not less than
the fair market value of such shares of Company Stock. Any such sale shall be
made in conformance with Section 408(e) of ERISA. Notwithstanding any other
provision of the Plan, the dividends paid with respect to Company Stock may be
(i) paid directly to Participants, (ii) paid to the Trustee and then distributed
to Participants within 90 days thereafter, or (iii) allocated to the Accounts of
Participants, as determined by the Committee in its sole discretion.

                  6.02 Diversification. Each Qualified Participant may, by
applying to the Committee within ninety (90) days after the close of each Plan
Year during such Qualified Participant's Election Period, elect to have his
Eligible Diversification Amount transferred to the Polaris Industries Inc.
401(k) Retirement Savings Plan and invested in accordance with the provisions of
such Plan. Such transfer shall be completed by the Committee no later than one
hundred eighty (180) days after the first day of the Plan Year in which such
application is made. The Committee may, in a manner consistent with the
applicable requirements of the Code and regulations issued pursuant thereto,
limit or prohibit diversification by Qualified Participants of de minimis
amounts.

                  6.03     Exempt Loan.

                  (a) The Committee may direct the Trustee to obtain Loans. Any
such Loan shall meet all requirements necessary to constitute an "exempt loan"
within the meaning of Treasury Regulation Section 54.4975-7(b)(1)(iii) and shall
be used primarily for the benefit of Participants (and their Beneficiaries). The
proceeds of any such Loan shall be used, within a reasonable time after the Loan
is obtained, only to purchase Employer Securities, repay the Loan or repay any
prior Loan. Any such Loan shall provide for no more than a reasonable rate of
interest, as determined under Treasury Regulation Section 54.4975-7(b)(7), and
must be without recourse against the Plan. The number of years to maturity under
the Loan must be definitely ascertainable at all times. The only assets of the
Plan that may be given as collateral for a Loan are shares of Employer
Securities acquired with the proceeds of the Loan and shares of Employer
Securities that were used as collateral on a prior Loan repaid with the proceeds
of the current Loan. Such Employer Securities so pledged shall be placed in a
Suspense Account. No person entitled to payment under a Loan shall have recourse
against Trust Assets other than such collateral, Employer Contributions that are
available under the Plan to meet obligations under the Loan and earnings
attributable to such collateral and the investment of such Employer
Contributions.

                  All Employer Contributions paid during the Plan Year in which
a Loan is made (whether before or after the date the proceeds of the Loan are
received), all Employer Contributions paid thereafter until the Loan has been
repaid in full and all earnings from investment of such Employer Contributions,
without regard to whether any such Employer Contributions and earnings have been
allocated to Participants' Other Investments Accounts,

                                       10

<PAGE>   16

shall be available to meet obligations under the Loan, unless otherwise provided
by the Company at the time any such Employer Contribution is made. Any pledge of
Employer Securities must provide for the release of an appropriate number of
shares so pledged, as provided below, upon the payment of any portion of the
Loan. For each Plan Year during the duration of the Loan, the number of shares
of Employer Securities released from such pledge must equal the number of
encumbered securities held immediately before release for the current Plan Year
multiplied by a fraction, the numerator of which is the amount of principal paid
for the year and the denominator of which is the sum of the numerator plus the
principal to be paid for all future years. Such years will be determined without
taking into account any possible extension or renewal periods. The Loan shall
(i) provide for annual payments of principal and interest at a cumulative rate
that is not less rapid at any time than level annual payment of such amount for
ten (10) years, (ii) provide that interest included in any payment is
disregarded for the purpose of the release from pledge only to the extent that
it would be determined to be interest under standard loan amortization tables
and (iii) provide that the duration of the Loan including renewal extension, or
refinancing, shall not exceed ten (10) years. Notwithstanding the foregoing, the
Committee may elect, in its sole discretion, to provide for the release of
Employer Securities from the Suspense Account on the basis of both principal and
interest paid during the Plan Year. If the Committee elects to apply this
method, it shall be applied throughout the period of such Loan, and the
limitations set forth in clauses (i), (ii) and (iii) above shall not apply to
the Loan. In the event such interest is variable, the interest to be paid in
future years must be computed by using the interest rate applicable as of the
end of the Plan Year. If the collateral includes more than one class of Employer
Securities, the number of shares of each class to be released for a Plan Year
must be determined by applying the same fraction to each class.

                  (b) Payments of principal and interest on a Loan during a Plan
Year shall be made by the Trustee (as directed by the Committee) only from (i)
Employer Contributions to the Trust made to meet the Plan's obligation under
such Loan, earnings from such Employer Contributions and any earnings
attributable to Employer Securities held as collateral for such Loan (both
received during or prior to the Plan Year), less such payments in prior years;
(ii) the proceeds of a subsequent Loan made to repay such prior Loan; and (iii)
the proceeds of the sale of any Employer Securities held as collateral for such
Loan. Such Employer Contributions and earnings must be accounted for separately
by the Plan until the Loan is repaid.

                  (c) Employer Securities released by reason of the payment of
principal or interest on a Loan from amounts allocated to Participants' Other
Investments Accounts shall immediately upon payment be credited pro rata to the
corresponding Participants' Company Stock Accounts. In the event that cash
dividends paid on Employer Securities allocated to Participants' Accounts are
used to repay a Loan, before determining Participants' allocable shares of
Employer Securities released from the Suspense Account for any Plan Year
pursuant to Section 7.02, there shall first be allocated to the Company Stock
Accounts of Participants to whose Accounts such cash dividends would have been
allocated but for such Loan repayment a number of Employer Securities having a
fair market value not less than the amount of the cash dividends so applied.
Only that number of Employer Securities released from the Suspense Account which
is in excess of the number allocated pursuant to the immediately preceding
sentence shall be available for allocation pursuant to Section 7.02(a).

                                       11

<PAGE>   17

                  (d) The Employer shall contribute to the Trust amounts
sufficient, after taking into account cash dividends on Employer Securities
(whether allocated or unallocated) and the proceeds of sale, if any, of Employer
Securities acquired with the proceeds of a Loan available for such purpose, to
enable the Trust to pay principal and interest on any such Loan as they are due;
provided, however, that no such Employer Contribution shall exceed the
limitations in Section 7.03. In the event that such Employer Contributions are
insufficient by reason of the limitations in Section 7.03 to enable the Trust to
pay the principal of and interest on such Loan as they are due, then, at the
election of the Committee, the Employer shall:

                  (1)      Make a Loan to the Trust, as described in Treasury
                           Regulation Section 54.4975-7(b)(4)(iii), in an amount
                           sufficient to meet such principal and interest
                           payments. Such new Loan shall also meet all
                           requirements of an "exempt loan" within the meaning
                           of Treasury Regulation Section 54.4975-7(b)(1)(iii).
                           Employer Securities released from the pledge of the
                           prior Loan shall be pledged as collateral to secure
                           the new Loan. Such Employer Securities will be
                           released from this new pledge and allocated to the
                           Accounts of the Participants in accordance with the
                           applicable provisions of the Plan; or

                  (2)      Purchase any Employer Securities pledged as
                           collateral in an amount necessary to provide the
                           Trustee with funds sufficient to make the principal
                           and interest payments. Any such sale by the Plan
                           shall meet the requirements of Section 408(3) of
                           ERISA; or

                  (3)      Do any combination of the foregoing.

However, the Employer shall not, pursuant to the provisions of this Section
6.03(d), do, fail to do, cause to be done or cause to be not done any act or
thing which would result in a disqualification of the Plan as a leveraged
employee stock ownership plan under the Code.

                  (e) Put Option. Shares of Employer Securities acquired with
the proceeds of a Loan by the Trust shall be subject to a "put" option at the
time of distribution; provided, however, that at such time the shares of
Employer Securities are not publicly traded within the meaning of Treasury
Regulation Section 54.4975-7(b)(1)(iv) or, if publicly traded, are subject to a
trading limitation (a "trading limitation" on a security is a restriction under
any federal or state securities law, any regulation thereunder or an agreement
affecting the security which would make the security not as freely tradeable as
one not subject to such restriction). The "put" option shall be exercisable by
the Participant or Beneficiary, by the donees of either or by a person
(including an estate or its distributee) to whom the Employer Securities pass by
reason of the Participant's or Beneficiary's death. This "put" option provides
that, for a period of at least sixty (60) consecutive days immediately following
the date shares are distributed to the holder of the option and for another
sixty (60) consecutive day period during the Plan Year next following the Plan
Year in which shares were distributed, the holder of the option shall have the
right to cause the Company, by notifying it in writing, to purchase such shares
at their fair market value, as determined by the Committee. The Committee may,
with the consent of the Trustee, direct the

                                       12

<PAGE>   18

Trustee to assume the rights and obligations of the Company at the time a "put"
option is exercised, insofar as the repurchase of Employer Securities is
concerned. The period during which a "put" option is exercisable shall not
include any period during which the holder is unable to exercise such "put"
option because the Company is prohibited from honoring it by federal or state
law. The terms of payment for the purchase of such shares of Employer Securities
shall be as set forth in the "put" and:

                  (1)      If the distribution constitutes a Total Distribution,
                           payment of the fair market value of the Employer
                           Securities shall be made in five (5) substantially
                           equal annual payments. The first such installment
                           shall be paid no later than thirty (30) days after
                           exercise of the "put" option. The Company or the
                           Plan, as the case may be, shall pay a reasonable rate
                           of interest and provide adequate security on amounts
                           not paid after thirty (30) days.

                  (2)      If the distribution does not constitute a Total
                           Distribution, the Company or the Plan, as the case
                           may be, shall pay the Participant or Beneficiary an
                           amount equal to the fair market value of the Employer
                           Securities repurchased no later than thirty (30) days
                           after the "put" option is exercised.

The "put" option provided for by this Section 6.03(e) shall continue to apply to
shares of Employer Securities purchased by the Trustee with the proceeds of a
Loan as described herein, notwithstanding any amendment to or termination of the
Plan which causes the Plan to cease to be a leveraged employee stock ownership
plan within the meaning of Section 4975(e)(7) of the Code.

                  (f) Nonterminable Protections and Rights. No Employer
Securities acquired with the proceeds of a Loan shall be subject to any put,
call or other option, or buy-sell or similar arrangement while held by and when
distributed from the Plan, other than those described in Section 6.03(e) or as
otherwise required by applicable law. These protections and rights are
nonterminable.

                                   ARTICLE VII

                                   ALLOCATIONS

                  7.01     Allocations to Participants' Accounts.

                  (a) Separate Company Stock Accounts and Other Investments
Accounts will be established to reflect Participants' interests under the Plan.
Records shall be kept by the Committee from which can be determined the portion
of each Other Investments Account which at any time is available to meet Loan
obligations and the portion which is not so available as determined pursuant to
Section 6.03.

                                       13

<PAGE>   19

                  (b) As of each Anniversary Date, the Company Stock Account
maintained for each Participant under the Plan will be credited with his
allocable shares of Company Stock (including fractional shares) purchased and
paid for by the Trust or contributed in kind to the Trust with Employer
Contributions and any stock dividends on Company Stock allocable to his Company
Stock Account. Employer Securities acquired by the Trust with the proceeds of a
Loan obtained pursuant to Section 6.03 shall be allocated to the Company Stock
Accounts of Participants as the Employer Securities are released from the
Suspense Account as provided for in Section 6.03.

                  (c) As of each Anniversary Date, each Other Investments
Account maintained for each Participant under the Plan will be credited (or
debited) with its share of the net income (or loss) of the Trust, with any cash
dividends on Company Stock allocable to his Company Stock Account and with
Employer Contributions in cash. Each such Other Investments Account will be
debited with its share of any cash payments for the acquisition of Company Stock
for the benefit of Company Stock Accounts or for any payment of principal of and
interest on any Loan or other debt chargeable to Participants' Company Stock
Accounts; provided, however, that only the portion of each Other Investments
Account which is available to meet obligations under Loans as determined
pursuant to the provisions of Section 6.03(a) shall be used to pay principal or
interest on a Loan.

                  7.02     Allocable Shares.

                  (a) Each Plan Year, Employer Contributions not applied to pay
principal of or interest on a Loan and, subject to Section 6.03(c), Employer
Securities released from the Suspense Account for a Plan Year shall be allocated
to the Company Stock Accounts of each Participant by multiplying the aggregate
of the amounts to be allocated by a fraction, the numerator of which is such
Participant's Compensation for such Plan Year and the denominator of which is
the sum of the Compensation of each Participant entitled to an allocation for
such Plan Year.

                  (b) A Participant must be actively employed by the Employer on
the Anniversary Date of any Plan Year in order to share in the allocation of any
Employer Contributions for such Plan Year made pursuant to Section 7.02(a)
except in the case of the Participant's death during such Plan Year.

                  7.03     Allocation Limitations.

                  (a) For each Plan Year, the Annual Addition to the Accounts of
a Participant under the Plan and to the accounts of such Participant under all
other defined contribution plans maintained by the Company or any Affiliated
Company, may not exceed the lesser of:

                  (1)      twenty-five (25) percent of his Section 414(s)
                           Compensation; or

                  (2)      $30,000 or, for Plan Years beginning before January
                           1, 1995 if greater, one-fourth (1/4) of the defined
                           benefit dollar limitation set forth in Section
                           415(b)(1) of the Code as in effect for such Plan
                           Year.

                                       14

<PAGE>   20

                  If this limitation would be exceeded as to any Participant,
the allocation of Employer Contributions shall be reduced with respect to such
Participant, with a reallocation made to other Participants according to the
allocable share of each as determined under Section 7.02 (to the extent not
exceeding the limitation as to each). In the event the Plan is terminated and
there are amounts which cannot be allocated to Participants' Accounts due to
this limitation, such amounts will be returned to the Employer.

                  If a Participant is, or was, covered under a defined benefit
plan and a defined contribution plan maintained by the Employer, the sum of such
Participant's defined benefit plan fraction and defined contribution plan
fraction (both calculated as provided below) may not exceed one (1.0) in any
Plan Year beginning before January 1, 2000.

                  A defined benefit plan fraction is a fraction, the numerator
of which is the sum of a Participant's projected annual benefits (as defined
below) under all defined benefit plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of (i) one and
one-quarter (1.25) times the dollar limitation of Section 415(b)(1)(A) of the
Code in effect for a Plan Year and (ii) one and four-tenths (1.4) times such
Participant's average Section 414(s) Compensation for the three (3) consecutive
years that produce the highest average.

                  A defined contribution plan fraction is a fraction, the
numerator of which is the sum of the Annual Additions to a Participant's
accounts under all defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior limitation years, and
the denominator of which is the sum of the lesser of the following amounts
determined for such year and for each prior year of Service with the Employer:
(i) one and one-quarter (1.25) times the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for each such year and (ii) one and four-tenths
(1.4) times the amount which may be taken into account under Section
415(c)(1)(B) of the Code.

                  Projected annual benefit means the annual benefit to which a
Participant would be entitled under the terms of the applicable defined benefit
plan, if such Participant continued employment until normal retirement age (or
current age, if later) and such Participant's compensation for the limitation
year and all other relevant factors used to determine such benefit remained
constant until normal retirement age (or current age, if later).

                  If, in any Plan Year, the sum of a Participant's defined
benefit plan fraction and defined contribution plan fraction would exceed one
(1.0), such Participant's Annual Addition under the Plan will be limited to the
extent necessary to comply with Section 415 of the Code.

                  7.04 Allocation of Net Income (or Loss) of the Trust. The net
income (or loss) attributable to Trust Assets for each Plan Year will be
determined as of each Anniversary Date. Each Participant's allocable share of
the net income (or loss) will be allocated to his Other Investments Account in
the ratio in which the credit balance of each such Account on the preceding
Anniversary Date (reduced by the amount of any distribution of Capital
Accumulation from such Account) bears to the sum of such balances for all
Participants as of that date. The net income (or loss) includes the increase (or
decrease) in the fair market value of Trust Assets (other

                                       15

<PAGE>   21

than Company Stock), interest income, dividends and other income (or loss)
attributable to Trust Assets (other than allocated Company Stock) since the
preceding Anniversary Date. For purposes of computing net income (or loss),
interest paid on any Loan or installment sales contract for the acquisition of
Employer Securities by the Trustee shall be disregarded.

                  7.05 Accounting for Allocations. The Committee shall adopt
accounting procedures for the purpose of making the allocations, valuations and
adjustments to Participants' Accounts provided for in this Article VII. Except
as provided in Treasury Regulation Section 54.4975-11, Company Stock acquired by
the Plan shall be accounted for as provided under Treasury Regulation Section
1.402(a)-1(b)(2)(ii), allocations of Company Stock shall be made separately for
each class of stock and the Committee shall maintain adequate records of the
cost basis of all shares of Company Stock allocated to each Participant's
Company Stock Account. From time to time, the Committee may modify the
accounting procedures for the purpose of achieving equitable and
nondiscriminatory allocations among the Accounts of Participants in accordance
with the general concepts of the Plan and the provisions of this Section. Annual
valuations of Trust Assets shall be made at fair market value. All valuations of
shares of Company Stock which are not readily tradeable on an established
securities market shall be made by an independent appraiser meeting requirements
similar to those contained in Treasury Regulations under Section 170(a)(1) of
the Code.

                  7.06 Nonallocation. Notwithstanding any provision in this Plan
to the contrary, in accordance with Section 409(n) of the Code, if shares of
Company Stock are sold to the Plan by a shareholder of the Company in a
transaction for which special tax treatment is elected pursuant to Section 1042
of the Code by such shareholder, no assets attributable to such Company Stock
may be allocated during the period beginning on the date of the sale of such
shares of Company Stock to the Trust and ending on the later of the tenth (10th)
year anniversary of the date of sale or the date of the allocation attributable
to the final payment on the Loan incurred with respect to the sale to the
Accounts of such shareholder, any person who is related to such shareholder
(within the meaning of Section 267(b) of the Code, but excluding lineal
descendants of such shareholder as long as no more than five (5) percent of the
aggregate amount of all shares of Company Stock sold by such shareholder in a
transaction to which Section 1042 of the Code applies is allocated to lineal
descendants of such shareholder) or any other person who owns (after application
of Section 318(a) of the Code) more than twenty-five (25) percent in value of
the outstanding securities of the Employer. Further, no allocation of
contributions may be made to the Accounts of such persons unless additional
allocations are made to other Participants, in compliance with the provisions of
Sections 401(a)(4) and 410 of the Code, computed without regard to the
allocation of any stock acquired by the Plan in a transaction to which Section
1042 applied.

                                  ARTICLE VIII

                         EXPENSES OF THE PLAN AND TRUST

                  All expenses of administering the Plan shall be paid by the
Trust to the extent such are not paid by the Company. The Company may, but shall
not be required to, pay such

                                       16

<PAGE>   22

expenses from time to time. Each Employer, other than the Company, shall
reimburse the Company for that portion of costs and expenses paid by the Company
for any Plan Year as the amount of Employer Contributions from each such
Employer for such Plan Year bears to the aggregate Employer Contributions from
all Employers for that Plan Year.

                                   ARTICLE IX

                VOTING COMPANY STOCK AND EXERCISE OF OTHER RIGHTS

                  9.01 Voting and Tender or Exchange Rights. If the Company or
any Affiliated Company has a registration-type class of securities (as defined
in Section 409(e)(4) of the Code), then, all shares of Company Stock allocated
to Company Stock Accounts or the Suspense Account and entitled to vote shall be
voted only in accordance with the provisions of Sections 9.01(a), (b), (d) and
(e) applicable to voting. If neither the Company nor any Affiliated Company has
a registration-type class of securities (as defined in Section 409(e)(4) of the
Code), then, only with respect to any corporate matter which involves the voting
of Company Stock allocated to Company Stock Accounts or the Suspense Account
with respect to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business or such other similar
transaction that Treasury Regulations require, all shares of such Company Stock
shall be voted only in accordance with the provisions of Sections 9.01(a), (b),
(d) and (e) applicable to voting. In all cases in which a "tender offer" (as
defined in Section 9.01(a)) is made for Company Stock, the provisions of
Sections 9.01(a), (c), (d) and (e) applicable to a tender offer (as so defined)
shall apply. Where the Trustee is not required to solicit voting instructions
under the second sentence of this paragraph or where the Committee is explicitly
given discretion under Section 9.01(a), (b) or (c), the Trustee shall vote and
take action, as applicable, only as the Committee directs in the Committee's
sole discretion, after the Committee determines such action to be in the best
interests of Participants and Beneficiaries. If any action of holders of Company
Stock is sought to be taken by means of a written consent of such holders in
lieu of a meeting of such holders, the giving of such consent is a vote in favor
of such action and the provisions of this Section 9.01 applicable to voting
shall apply.

                  (a) To the extent provided under the foregoing paragraph, the
Trustee shall vote the shares of Company Stock allocated to any Participant's or
Beneficiary's Accounts (including fractional as well as whole shares) in
accordance with timely directions of such Participant or Beneficiary,
respectively; provided, however, that if a Participant or Beneficiary fails to
give such timely direction the shares allocated to such Participant's or
Beneficiary's Accounts shall be voted in the manner directed by the Committee.
The Trustee shall, with respect to the shares of Company Stock allocated to any
Participant's or Beneficiary's Accounts (including fractional as well as whole
shares), act in response to any tender offer or exchange offer for shares of
Company Stock commenced by any person or group of persons, including, but not
limited to, a tender offer or exchange offer within the meaning of the
Securities Exchange Act of 1934, as amended from time to time (any such tender
or exchange offer being a "tender offer"), in accordance with timely directions
of such Participant or Beneficiary; provided, however, that if a Participant or
Beneficiary fails to give such timely direction the manner in

                                       17

<PAGE>   23

which the Trustee is to act in response to a tender offer with respect to the
shares of Company Stock allocated to such Participant's or Beneficiary's
Accounts shall be directed by the Committee. For purposes of determining the
number of shares of Company Stock to be voted in any particular manner or to be
the subject of any particular response to a tender offer, the Trustee shall use
the nearest practicable date as determined by the Trustee.

                  (b) The Trustee's functions and responsibilities with respect
to shares of Company Stock, including shares of Company Stock in the Suspense
Account, with respect to voting, shall be exercised as follows:

                  (1)      Each Participant: (i) is hereby designated as a named
                           fiduciary for purposes of ERISA with respect to the
                           voting of shares of Company Stock allocated to the
                           applicable Accounts, and with respect to the voting
                           of the applicable portion (as determined under
                           Section 9.01(b)(3)) of the shares of Company Stock
                           held in the Suspense Account, and (ii) shall have the
                           right to direct the Trustee with respect to the
                           voting of such shares of Company Stock on each matter
                           brought before any meeting of the stockholders of the
                           Company and on which such shares are entitled to
                           vote.

                  (2)      Before each such meeting of shareholders, the Trustee
                           shall cause to be furnished to each Participant and
                           Beneficiary a copy of the proxy solicitation or
                           information materials as shall have been furnished to
                           the Trustee by the issuer of the Company Stock to be
                           voted at such meeting or, in the case of a proxy
                           solicitation by any person or group of persons other
                           than the board of directors of such issuer, such
                           person or group, together with a form requesting
                           confidential directions for the Trustee on how the
                           whole and fractional shares of Company Stock which
                           are allocated to such Participant's or Beneficiary's
                           Accounts (or with respect to which such Participant
                           or Beneficiary otherwise has control under Section
                           9.01(b)(3)) shall be voted on each such matter. The
                           Company and the Committee shall cooperate with the
                           Trustee in an attempt to ensure that Participants and
                           Beneficiaries receive the requisite information in a
                           timely manner. Upon timely receipt of such
                           directions, the Trustee shall on each such matter
                           vote as directed the number of shares (including
                           fractional shares of Company Stock) allocated to such
                           Participant's or Beneficiary's Accounts. The
                           instructions received by the Trustee from
                           Participants and Beneficiaries shall be held by the
                           Trustee in confidence and shall not be divulged or
                           released to any person, including the Committee or
                           the officers or Employees of the Company or any
                           Affiliated Company.

                  (3)      The Trustee shall vote all shares of Company Stock in
                           the Suspense Account in the same proportion as the
                           allocated shares of Company Stock for which
                           affirmative directions from Participants to vote for
                           or against

                                       18

<PAGE>   24

                           each proposal are voted. The Committee may establish
                           procedures, which shall be followed by the Trustee
                           upon and after its receipt of notice thereof, by
                           which Participants may provide separate sets of
                           instructions with respect to shares of Company Stock
                           allocated to their Accounts and the pro rata amount
                           of unallocated shares of Company Stock over which
                           they have voting control. If a vote is taken at a
                           time when there are no allocated shares of Company
                           Stock, the Trustee shall vote the shares of Company
                           Stock in the Suspense Account as directed by the
                           Committee in the Committee's discretion.

                  (c)      The Trustee's functions and responsibilities with
respect to shares of Company Stock, including shares of Company Stock in the
Suspense Account, with respect to all decisions made in response to a tender
offer, shall be exercised as follows:

                  (1)      In the event a tender offer is commenced, the
                           Committee, promptly after receiving notice of the
                           commencement of any such tender offer, shall transfer
                           certain of the Plan's record-keeping functions to an
                           independent record-keeper (which, if the Committee
                           consents in writing, may be the Trustee). The
                           functions so transferred shall be those necessary to
                           preserve the confidentiality of any directions given
                           by Participants and Beneficiaries in connection with
                           the tender offer. Such record-keeper shall use its
                           best efforts to distribute or cause to be distributed
                           on a timely basis to each Participant and Beneficiary
                           such information as is being distributed to other
                           shareholders of the Company in connection with any
                           such tender offer. The Company and the Committee
                           shall cooperate with such record-keeper in an attempt
                           to ensure that Participants and Beneficiaries receive
                           the requisite information in a timely manner. The
                           independent record-keeper shall solicit
                           confidentially from each Participant and Beneficiary
                           the directions described below as to the action to be
                           taken with respect to shares of Company Stock held
                           under the Plan in response to a tender offer. The
                           independent record-keeper, if different from the
                           Trustee, shall instruct the Trustee as to all
                           required action, including an identification of the
                           amount of shares of Company Stock covered by any
                           particular required action, in accordance with the
                           following provisions.

                  (2)      Each Participant: (i) is hereby designated as a named
                           fiduciary for purposes of ERISA with respect to all
                           decisions made in response to a tender offer
                           regarding shares of Company Stock allocated to the
                           applicable Accounts, and with respect to all such
                           decisions regarding the applicable portion (as
                           determined under Section 9.01(c)(4)) of the shares of
                           Company Stock held in the Suspense Account, and (ii)
                           shall have the right to direct the Trustee with
                           respect to all such decisions.

                                       19

<PAGE>   25

                  (3)      Upon timely receipt of such directions, the Trustee
                           shall on each such matter act as directed (including,
                           without limitation, to engage in selling, exchanging,
                           tendering or retaining) with respect to the number of
                           shares of Company Stock (including fractional shares
                           of Company Stock) allocated to such Participant's
                           Accounts. The instructions received by the Trustee
                           from Participants shall be held by the Trustee in
                           confidence and shall not be divulged or released to
                           any person, including the Committee or the officers
                           or Employees of the Company or any Affiliated
                           Company.

                  (4)      The Trustee shall act as directed (including, without
                           limitation, to engage in selling, exchanging,
                           tendering or retaining) with respect to the number of
                           shares of Company Stock (including fractional shares)
                           in the Suspense Account in the same proportion as it
                           acts regarding shares of Company Stock allocated to
                           the Accounts of Participants. The Committee may
                           establish procedures, which shall be followed by the
                           Trustee upon and after its receipt of notice thereof,
                           by which Participants may provide separate sets of
                           instructions with respect to shares of Company Stock
                           allocated to their Accounts and the pro rata amount
                           of unallocated shares of Company Stock over which
                           they have control regarding tender offers. If a
                           tender offer occurs at a time when there are no
                           allocated shares of Company Stock, the Trustee shall
                           act in response to the tender offer with respect to
                           shares of Company Stock in the Suspense Account as
                           directed by the Committee in the Committee's
                           discretion.

                  (d)      Nothing contained in this Section 9.01 shall confer
upon Participants, Beneficiaries, the Committee or the Trustee any additional
voting rights in respect of shares of Company Stock held under the Plan other
than the rights set forth in the certificate of incorporation of the Company and
under state and federal law.

                  Nothing contained in this Section 9.01 shall confer upon
Participants, Beneficiaries, the Committee or the Trustee any additional rights
in respect of a tender offer, merger or consolidation relating to the shares of
Company Stock held under the Plan other than the rights set forth in the
certificate of incorporation of the Company and under state and federal law.

                  (e)      Any individual who has an interest under the Plan in
the nature of the interest of a Participant or Beneficiary but who is not
technically a Participant or Beneficiary shall be treated as a Beneficiary for
purposes of the foregoing provisions of this Section.

                                    ARTICLE X

                              CAPITAL ACCUMULATION

                  Each Participant shall at all times have a 100% fully vested
interest in his Accounts.

                                       20
<PAGE>   26
                                   ARTICLE XI

                                  DISTRIBUTIONS

                  11.01    Time of Distribution to Participants.

                  (a)      Any Participant whose employment ends by reason of
his Retirement, death or Disability shall receive the vested balance in his
Accounts as soon as is administratively practicable after the end of the Plan
Year in which his employment ends, unless such Participant, or such
Participant's Beneficiary in the event of the Participant's death, elects to
defer payment until a later date.

                  (b)      Any Participant whose employment ends for any reason
other than those specified in Section 11.01(a) shall receive the vested balance
in his Accounts as soon as is administratively practicable after the end of the
fifth Plan Year following the Plan Year in which his employment ends, unless
such Participant elects to defer payment until a later date.

                  (c)      Notwithstanding any other provision of this Plan,
distribution of the benefits of any Participant who reaches age seventy and
one-half (70-1/2) shall commence no later than the later of (i) the April 1st
next following the end of the calendar year in which he reaches age seventy and
one-half (70-1/2) or (ii) the date on which such Participant's employment with
the Company terminates, regardless of whether any Loan has been repaid.
Notwithstanding the foregoing, in the case of a Participant who is a
five-percent owner (as defined in Code Section 416(i)), distribution of such
Participant's benefits shall commence no later than the April 1 next following
the end of the calendar year in which he reaches age seventy and one-half
(70-1/2). Effective for Plan Years beginning on or after January 1, 1997,
distributions shall commence no later than a Participant's required beginning
date. In the case of a Participant who is a Five Percent Owner (as that term is
defined in Section 416(i) of the Code), "required beginning date" shall mean
April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2. In the case of a Participant who is not a Five
Percent Owner, "required beginning date" shall mean April 1 of the calendar year
following the later of (A) the calendar year in which the Participant retires,
or (B) the calendar year in which the Participant attains age 70-1/2; provided,
however, that for Plan Years beginning before January 1, 2000, if a Participant
attains age 70-1/2 before he retires, such Participant may elect to commence
receiving distributions pursuant this Section 11.01(c) on April 1 of the
calendar year following the calendar year in which the Participant attains age
70-1/2.

                  11.02    Benefit Forms for Participants. A Participant's
Capital Accumulation shall, at the election of such Participant, be paid to him
in either a single distribution or a number of annual installments not to exceed
five (5). In the case of an installment distribution, each installment shall be
equal to (i) the number of shares of Company Stock credited to such
Participant's Company Stock Account and the balance credited to such
Participant's Other Investments Account, each divided by (ii) the number of
installments which remain to be paid (including the current installment being
computed).

                                       21
<PAGE>   27

                  11.03    Benefit Form on a Participant's Death. If a
Participant's employment is ended by death, or if a terminated Participant has a
Capital Accumulation which has not been fully distributed at the time of his
death, such Participant's remaining Capital Accumulation shall be paid to his
Beneficiary in a single lump sum, within one (1) year after the end of the Plan
Year in which such Participant died.

                  11.04    Distribution in Company Stock. A Participant's
benefits shall be paid in the form of Company Stock; provided, however, that the
value of any fractional shares of Company Stock shall be paid in cash.

                  11.05    Delay in Benefit Determination. If the Committee is
unable to determine the benefits payable to a Participant or Beneficiary on or
before the latest date prescribed for payment, the benefits shall be paid within
sixty (60) days after the date they can first be determined, with whatever
makeup payments may be appropriate in view of the delay.

                  11.06    Designated Beneficiaries.

                  (a)      Any person who may become entitled to receive a
distribution under this Article XI may appoint any other person or persons
(including a trust or trusts) as his Beneficiary or Beneficiaries for receipt of
such distribution in the event of his death by filing an appointment with the
Committee on forms provided by it. In the absence of such appointment, a
person's Beneficiary or Beneficiaries will be deemed to be the Beneficiary or
Beneficiaries designated by such person under the Polaris Industries Inc. 401(k)
Retirement Savings Plan, if any, or, if none, the Beneficiary or Beneficiaries
designated by such Plan. Notwithstanding the foregoing, in the case of a
Participant who is legally married at the date of his death, his Beneficiary
shall be deemed to be the person to whom he was so married, notwithstanding and
disregarding any failure by such Participant to appoint a Beneficiary, or his
appointment of a trust or any other person as his Beneficiary, unless such
Participant had obtained, on forms provided by the Committee, the consent of the
person to whom he was so married to his appointment of a trust or other person
or to his appointment of no Beneficiary. The spouse's consent to payment to a
designated Beneficiary other than the spouse must be in writing on such forms,
must designate a Beneficiary which may not be changed without spousal consent
(unless the consent of the spouse expressly permits designations by the
Participant without any requirement of further consent by the spouse), must
acknowledge the effect of such election and must be witnessed by a notary
public.

                  (b)      Subject to the provisions of Section 11.06(a), a
Beneficiary appointment may be revoked or changed by the appointing person's
filing with the Committee, on forms provided by it, a notice of revocation or
change, with a change of Beneficiary being considered a revocation and the
naming of a new Beneficiary.

                  (c)      An appointment shall not be effective if the
Beneficiary named therein fails to survive the appointing person.

                  11.07    Additional Distribution Requirements. All benefit
distributions shall be subject to the following additional requirements:

                                       22
<PAGE>   28

                  (a)      Duration of Benefit Payments. The distribution of
benefit payments to each Participant shall be made in accordance with
regulations prescribed by the Secretary of the Treasury over a period not
extending beyond the life expectancy of such Participant or the joint life
expectancy of such Participant and a designated Beneficiary, except that in no
event shall the period of distribution exceed that otherwise permitted under the
Plan.

                  (b)      Death of Participant Before Benefits Commence. In the
event that a Participant dies before the commencement of benefits hereunder, the
entire interest of such Participant under the Plan (if any) shall be distributed
not later than the last day of the calendar year in which occurs the fifth (5th)
anniversary of the death of such Participant or, where any portion of such
Participant's benefit is to be paid to (or for the benefit of) such
Participant's surviving spouse or other designated Beneficiary, such benefit
must commence not later than the last day of the calendar year following the
calendar year in which such Participant's death occurred and be paid over a
period not exceeding the life (of life expectancy) of the surviving spouse or
designated Beneficiary, except that where the Beneficiary is such Participant's
surviving spouse, payments to the surviving spouse need not begin before the
date on which such Participant would have attained age seventy and one-half
(70-1/2). However, in no event shall the commencement date or period of
distribution exceed that otherwise permitted under the Plan.

                  (c)      Death After Commencement of Benefits. If the
distribution of benefits hereunder has commenced and a Participant dies before
his entire interest has been distributed to him, the remaining part of such
interest will be distributed to the surviving payee no less rapidly than under
the method of distribution which was in effect on the date of such Participant's
death.

                  (d)      "Incidental" Benefits and Effect of Requirements. In
the event that any payment hereunder is to be made to someone other than a
Participant or jointly to such Participant and his spouse or other payee, such
payments must conform to the "incidental benefit" rules of Section 401(a)(9)(G)
of the Code and Treasury Regulation Section 1.401(a)(9)-2. In addition, all
distributions from the Plan must conform to the rules of this Section, Section
401(a)(9) of the Code and the regulations promulgated thereunder to the extent
not in conflict with any other provision of the Code.

                  (e)      Lump Sum Payment. If a Participant's Capital
Accumulation is more than $3,500 )$5,000 effective January 1, 1998), such
Participant shall be given written notice of his right to defer the date of
distribution of his benefit, and if he does not elect a current distribution by
giving his consent in writing within sixty (60) days of such notice, the Capital
Accumulation shall be retained in the Trust until the earlier of the date on
which such Participant dies, requests distribution in writing or the date such
Participant attains his normal retirement age (59-1/2).

                  (f)      Required Distributions. Notwithstanding any other
provision of this Plan to the contrary, payment of a Participant's Capital
Accumulation will begin not later than the 60th day after the close of the plan
year in which the latest of the following events occurs: (i) the attainment by
the Participant of age 59-1/2, (ii) the tenth (10th) anniversary of the date on
which the Participant commenced participation in the Plan, or (iii) the
termination of the Participant's service with the Employer.

                                       23
<PAGE>   29

                  11.08    Distributions Pursuant to Qualified Domestic
Relations Orders.

                  (a)      Payments to an Alternate Payee Under a Qualified
Domestic Relations Order. The Committee shall pay benefits to the Alternate
Payee(s) (as defined below) in accordance with the terms of this Section 11.08,
any government regulations adopted under Section 206 of ERISA and the applicable
provisions of any Qualified Domestic Relations Order (as defined below) entered
by a court of competent jurisdiction on or after January 1, 1985. In the case of
a Domestic Relations Order (defined below) entered by a court of competent
jurisdiction before January 1, 1985, the Committee may, in its discretion, treat
any such order as a Qualified Domestic Relations Order under this Section 11.08
even if such order does not meet the requirements therefor.

                  (b)      Plan Procedures Relative to Qualified Domestic
Relations Orders.

                  (1)      Notification. Following its receipt of any Domestic
                           Relations Order, the Committee shall promptly notify
                           in writing the affected Participant or former
                           Participant and Alternate Payee(s) of its receipt of
                           the order, and shall furnish such persons a copy of
                           the order and of these Plan procedures (and any other
                           procedures which may have been adopted by the
                           Committee) for determining whether the order is a
                           Qualified Domestic Relations Order. Such notice and
                           all other notices pursuant to this Section 11.08 will
                           be sent to the address included in the Domestic
                           Relations Order (or to such other address as is known
                           to the Committee or as may thereafter be specified in
                           writing by the addressee). Any Alternate Payee shall
                           be permitted to designate a representative for
                           receipt of copies of notices that are to be sent to
                           the Alternate Payee. Such notice shall set a time and
                           date no less than fifteen (15) days after the date of
                           such notice on which the Committee will meet to
                           determine whether the order is a Qualified Domestic
                           Relations Order and shall inform the Participant and
                           Alternate Payee that they may present written or oral
                           comments at that time with regard to such
                           determination.

                  (2)      Determination of Committee. On the date specified in
                           the above described notice, the Committee shall
                           examine the Domestic Relations Order in light of any
                           comments received and in light of applicable law and
                           regulations, and shall make one of three
                           determinations: (i) that the order is a Qualified
                           Domestic Relations Order; (ii) that the order is not
                           a Qualified Domestic Relations Order; or (iii) that
                           the determination of whether the order is a Qualified
                           Domestic Relations Order should be submitted to and
                           made by a court of competent jurisdiction. If, within
                           eighteen (18) months from the date on which the first
                           payment of benefits would be required to be made
                           under such order, it is determined by the Committee
                           or a court of competent jurisdiction that the order
                           (or modification thereof) is a Qualified Domestic
                           Relations Order, then the Committee shall pay any
                           separately allocated amounts (plus income or other
                           allocated interest or

                                       24
<PAGE>   30

                           earnings thereon) to the specified Alternate Payee,
                           and thereafter shall pay the Alternate Payee the
                           amount specified by the Qualified Domestic Relations
                           Order. If, within the aforesaid eighteen (18) month
                           period, it is determined by the Committee or a court
                           of competent jurisdiction that the order is not a
                           Qualified Domestic Relations Order, or the question
                           of whether the order is a Qualified Domestic
                           Relations Order is not determined by the Committee or
                           a court of competent jurisdiction, then the Committee
                           shall pay any amounts (plus any income or other
                           allocated interest or earnings thereon) separately
                           accounted for as described below to the applicable
                           Participant, former Participant or other person or
                           persons who would have been entitled thereto if there
                           had been no Domestic Relations Order. Any
                           determination after the close of the aforesaid
                           eighteen (18) month period shall be applied
                           prospectively only.

                  (3)      Separate Accounting of Participant's and Alternate
                           Payee's Benefits. During any period in which a
                           Participant otherwise would have had a right to
                           payment of Plan benefits and in which the issue of
                           whether an order is a Qualified Domestic Relations
                           Order is being determined, the Committee shall
                           separately account for the amounts as to which the
                           Participant or former Participant otherwise would
                           have had a right to payment during such period and
                           the amounts which would have been payable to the
                           Alternate Payee during such period if the order had
                           been determined to be payable to such Alternate Payee
                           in accordance with a Qualified Domestic Relations
                           Order shall not be considered to be part of such
                           Participant's Accounts with respect to any other
                           spouse or Beneficiary of such Participant.

                  (c)      Definitions.

                  (1)      Alternate Payee. Any spouse, former spouse, child or
                           other dependent of a Participant or former
                           Participant who is recognized by a Domestic Relations
                           Order as having a right to receive all, or a portion,
                           of the benefits payable under the Plan with respect
                           to such Participant or former Participant.

                  (2)      Domestic Relations Order. Any judgment, decree or
                           order (including approval of a property settlement
                           agreement) which relates to the provision of child
                           support, alimony payments or marital property rights
                           to a spouse, former spouse, child or other dependent
                           of a Participant, and is made pursuant to a state's
                           domestic relations law or community property law.

                  (3)      Qualified Domestic Relations Order.  A Domestic
                           Relations Order which:

                           (A)   Creates or recognizes the existence of an
                                 Alternate Payee's right to, or assigns to an
                                 Alternate Payee the right to, receive all or a

                                       25
<PAGE>   31

                                    portion of the Plan benefits payable with
                                    respect to a Participant or former
                                    Participant; and

                           (B)      In the order clearly specifies (w) the name
                                    and last known mailing address (if any) of
                                    such Participant or former Participant, and
                                    of each Alternate Payee covered by the
                                    order, (x) the amount or percentage of such
                                    Participant's or former Participant's
                                    benefits to be paid by the Plan to each
                                    Alternate Payee, or the manner in which such
                                    amount or percentage is to be determined,
                                    (y) the number of payments or period to
                                    which such order applies and (z) each plan
                                    to which such order applies; and

                           (C)      Does not require the Plan to provide any
                                    type or form of benefit, or any option, not
                                    otherwise provided by the Plan; and

                           (D)      Does not require the Plan to provide
                                    increased benefits, determined on the basis
                                    of actuarial value; and

                           (E)      Does not require the payment of benefits to
                                    an Alternate Payee under another order
                                    previously determined to be a Qualified
                                    Domestic Relations Order; and

                           (F)      In the case of any payment before such
                                    Participant has separated from Service, does
                                    not require payment to the Alternate Payee
                                    before the earlier of (x) the date such
                                    Participant or former Participant attains
                                    age fifty (50), or (y) the earliest date on
                                    which he could begin receiving benefits if
                                    he separated from Service; and

                           (G)      Requires payment in a form provided by the
                                    Plan. In no event may payment be in the form
                                    of a joint and survivor annuity with respect
                                    to an Alternate Payee and his subsequent
                                    spouse.

                                   ARTICLE XII

                            DETERMINATION OF SERVICE

                  12.01    Continuous Service. The term "Continuous Service" as
used in the Plan means service with the Company or any Affiliated Company,
including service prior to the adoption of the Plan, whether on a salaried or
hourly basis, calculated from the Employee's most recent employment commencement
date (which means, in the case of a Break in Continuous Service, that Continuous
Service shall be calculated from his reemployment commencement date following
the last unremoved Break in Continuous Service) to his Break in Continuous
Service in accordance with the following provisions:

                                       26
<PAGE>   32

                  (a)      An Employee's employment commencement date shall be
the first date on which he performs an Hour of Service for the Company.

                  (b)      An Employee shall incur a 1-year Break in Continuous
Service upon the completion of a 12-consecutive month period beginning on the
date on which he incurs a Break in Continuous Service as provided in Section
12.02, during which period the Employee did not perform an Hour of Service.

                  (c)      There shall be no deduction for any time lost which
does not constitute a Break in Continuous Service.

                  12.02    Break in Continuous Service.

                  (a)      An employee shall incur a Break in Continuous Service
                           upon:

                  (1)      Retirement or death;

                  (2)      quit, discharge or other termination of employment by
                           action of the Company; or

                  (3)      failure to return to work upon expiration of an
                           approved leave of absence.

                  (b)      Continuous Service shall not be considered broken for
any Employee who (i) has entered the military, naval or merchant marine service
of the United States if such Employee complies with the requirements of
reemployment laws applicable to him and is reemployed; (ii) is on an approved
leave of absence; or (iii) is receiving benefits under an Employer's long-term
disability policy.

                  (c)      In the case of an Employee who is absent from work
for maternity or paternity reasons, the twelve (12) consecutive month period
beginning on the first anniversary of the first date of such absence shall not
constitute a one (1) year Break in Continuous Service. For purposes of the
previous sentence, an absence from work for maternity or paternity reasons means
an absence (i) by reason of the pregnancy of the Employee, (ii) by reason of the
birth of a child of the Employee, (iii) by reason of the placement of the child
with the Employee in connection with the adoption of such child by such
Employee, or (iv) for purposes of caring for such child for a period beginning
immediately following such birth or placement.

                  (d)      Notwithstanding any other provision in subsection (a)
of this Section 12.02, an Employee shall not be deemed to incur a Break in
Continuous Service until the expiration of the twelve (12) consecutive month
period following the date the Employee was first absent from work for any reason
other than retirement, quit or discharge, during which he did not perform an
Hour of Service for the Company or Affiliated Company.

                  (e)      An Employee who incurs a Break in Continuous Service
on account of Retirement, quit or discharge and who thereafter performs an Hour
of Service with the Company

                                       27
<PAGE>   33

within the twelve (12) consecutive month period of severance between the break
and performance of an Hour of Service for the purpose of vesting under the Plan.

                  (f)      In the case of a reemployed Employee who was not a
Participant in the Plan during his prior period of employment or in the case of
a Participant whose prior employment terminated without a Capital Accumulation,
any Continuous Service attributable to his prior period of employment will be
restored only if such aggregate number of years of Continuous Service prior to
such termination equals or exceeds the greater of (i) five (5) years or (ii) the
Employee's prior period of severance.

                  12.03    Affiliated Companies. Notwithstanding any provisions
in Sections 12.01 and 12.02, and solely for the purposes of vesting under the
Plan, Continuous Service shall include service in the employ of any Affiliated
Company which has adopted the Plan.

                                  ARTICLE XIII

                               PLAN ADMINISTRATION

                  13.01    Named Fiduciaries. The Committee and the Company
shall each be a "named fiduciary" within the meaning of Section 402 of ERISA,
but each such party's role as a named fiduciary shall be limited solely to the
exercise of its own authority and discretion, as defined under the terms of the
Plan, to control and manage the operation and administration of the Plan (other
than authority and discretion assigned under this Plan, or delegated pursuant
thereto, to the Trustee). A named fiduciary may designate other persons who are
not named fiduciaries to carry out its fiduciary responsibilities hereunder, and
any such person shall become a fiduciary under the Plan with respect to such
delegated responsibilities. In the event of such a designation, the named
fiduciary shall not be liable for an act or omission of the designee in carrying
out responsibilities delegated to him except to the extent provided in Section
405 of ERISA. Article IX describes circumstances under which Participants shall
be named fiduciaries for certain purposes under the Plan.

                  13.02    Fiduciary Limitations. Named fiduciaries under the
Plan, as well as the Trustee and any other person who may be a fiduciary by
virtue of Section 3(21) of ERISA, shall exercise and discharge their respective
powers and duties in the following manner:

                  (a)      By acting solely in the interest of the Participants
and their Beneficiaries;

                  (b)      By acting for the exclusive purpose of providing
benefits to Participants and their Beneficiaries and defraying reasonable
expenses of administering the Trust Assets and Plan;

                  (c)      By acting with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and

                                       28
<PAGE>   34

                  (d)      By otherwise acting in accordance with the Plan and
Trust Agreement to the extent consistent with Title I of ERISA.

                  13.03    Company Responsibilities. The Company, acting through
the Board of Directors, shall have the authority to amend or terminate the Plan
pursuant to the provisions of Article XIV, to determine the amount of Employer
Contributions to the Plan pursuant to Article V, to appoint a Trustee and
Committee, to approve the adoption of the Plan by any other Employer and to act
as agent for any Affiliated Company which has adopted the Plan. Whenever the
Company is permitted or required to do or perform any act under the terms of
this Plan, it shall be done and performed by any officer duly authorized by the
Board of Directors. To enable the Committee to perform its duties, the Company
shall supply completely and timely all information which the Committee may from
time to time require.

                  13.04    Trustee Responsibilities. The Trustee shall have, to
the extent set forth in the Trust Agreement, authority and discretion to
receive, hold and distribute Trust Assets, fiduciary responsibilities in
connection with the exercise of such authority and discretion and a duty to
issue reports and otherwise to account to the Company and the Committee. All
contributions under the Plan shall be paid over to the Trustee and, together
with accretions thereto, shall be invested by the Trustee in accordance with the
directions permitted under the Plan and Trust Agreement.

                  13.05    Appointment of Committee. The Plan will be
administered by a Committee composed of individuals appointed by the Board of
Directors of the Company to serve at its pleasure. A member of the Committee may
be removed by the Board of Directors at any time with or without cause upon
written notice from the Board of Directors, and any member of the Committee may
resign by delivering his written resignation to the Board of Directors.

                  13.06    Organization and Powers of the Committee.

                  (a)      A majority of the members of the Committee at the
time in office may do any act which the Plan authorizes or requires the full
Committee to do, and the action of such majority of the members expressed from
time to time by a vote at a meeting, or in writing without a meeting, shall
constitute the action of the Committee and shall have the same effect for all
purposes as if assented to by all the members in office at the time. A member of
the Committee who is also a Participant in the Plan shall not vote or act on any
matter relating solely to himself. Any one member of the Committee may advise
the Trustee in writing with respect to any action taken by the Committee.

                  The Committee, as Plan administrator, shall have complete
control of the administration of the Plan with all powers necessary to enable it
properly to carry out its duties in that respect.

                  A benefit administrator may be appointed by the Committee. The
duties of the benefit administrator may include, but shall not be limited to,
the day-to-day supervision of the Plan, handling written requests of
Participants or Beneficiaries regarding the Plan and performing any duties with
respect to claims for benefits specified by the Committee.

                                       29
<PAGE>   35

                  The Committee and its delegates shall have sole and complete
discretion in the administration and operation of the Plan. The determination of
the Committee as to any question involving the general administration of the
Plan, including, but not limited to, determinations regarding eligibility for
participation, entitlement to benefit distributions, calculation of benefits and
the timing and form of payment of distributions, shall be conclusive, final and
binding on all parties, including the Employer, the Trustee and Participants and
Beneficiaries.

                  The Committee may appoint counsel or Plan consultants and hire
or retain agents and such clerical, medical and accounting services as it may
require in carrying out the provisions of the Plan.

                  (b)      Duties. The Company shall administer the Plan through
the Committee as Plan administrator. As such, the Committee provides for the
necessary reporting and disclosure and appoints the Plan consultants and
certified public accountant. In addition, the Committee considers appeals and
provides for general administration of the Plan as elsewhere herein provided.

                  Upon the request of the Board of Directors, the Committee
shall cause to be presented to the Board of Directors a report for the past
calendar year (or applicable period thereof) on the status of the Plan and its
operation.

                  (c)      Reimbursement of Committee. The members of the
Committee shall serve without compensation for services as such. The Company,
upon an equitable basis, shall pay or reimburse the members of the Committee for
all expenses reasonably incurred by them in or about Committee business.

                  (d)      Claims Procedure. Any claim by a Participant or
Beneficiary shall be filed in writing with the Committee. Any decision by the
Committee denying a claim by a Participant or a Beneficiary for benefits under
the Plan shall be communicated in writing to the Participant or Beneficiary,
setting forth the specific reasons for such denial. Any such Participant or
Beneficiary whose claim has been denied, or his duly authorized representative,
may (i) appeal to the Committee in writing within sixty (60) days after receipt
of the notice of denial for a full review of the decision by the Committee; (ii)
review pertinent documents; and (iii) submit issues and comments in writing. The
decision by the Committee following such review shall be made no later than
sixty (60) days after the date of receipt by the Committee of the request for
review, and shall be conclusive as to all persons affected thereby. Such
decision shall be in writing and shall include both specific reasons for the
decision, written in a manner calculated to be understood by the claimant, and
specific references to the pertinent Plan provisions on which the decision is
based.

                  13.07    Indemnification. The officers, directors and
employees of the Company, and the members of the Committee, shall be entitled to
indemnification by the Company to the extent permitted under the laws of the
State of Minnesota and ERISA with regard to any fiduciary liability they or any
one or more of them may incur as a named fiduciary to or in connection with the
Plan to the extent permitted under the Company's by-laws or provided in any
applicable insurance contract(s) which may be maintained by the Company, except
to the

                                       30
<PAGE>   36

extent that such person shall be determined to be liable by a court of competent
jurisdiction for his own willful misconduct. In addition, they each shall be
entitled to rely upon all tables, certificates and reports made by a certified
public accountant for the Plan and upon all written opinions given by any legal
counsel, to the extent it is prudent to so rely, and shall be fully protected
with respect to any action prudently taken or suffered by them in good faith
based on such reliance. The foregoing rights of indemnification shall be in
addition to such other rights as the above persons may enjoy as a matter of law
or by reason of insurance coverage of any kind.

                  To the extent permitted by law, except as limited by any
written agreement between the Company and the Committee, the Company shall
indemnify and save the Committee, as Plan administrator, the benefit
administrator and members of the Committee harmless against expenses, claims and
liability arising out of being the Plan administrator, the benefit administrator
or a Committee member. The Company shall maintain insurance against acts or
omissions of the Plan administrator, the benefit administrator and the Committee
members.

                                   ARTICLE XIV

                            AMENDMENT AND TERMINATION

                  14.01    Company's Right to Amend. Subject to the provisions
hereinafter set forth, the Company reserves the right, at any time or from time
to time, by action of the Board of Directors, to amend in whole or in part any
or all of the provisions of this Plan; provided, however, that no such amendment
shall be made which:

                  (a)      Will deprive any Participant of any benefit to which
he has a nonforfeitable right under Article X of this Plan; or

                  (b)      Shall make it possible for any part of the Trust
Assets or its income to be used for, or diverted to, purposes other than for the
exclusive benefit of the Participants. No such amendment which affects the
rights, duties or responsibilities of the Trustee may be made without the
Trustee's written consent.

                  No amendment to the Plan shall decrease a Participant's
Account balances or eliminate an optional form of distribution. Notwithstanding
the preceding sentence, a Participant's Account balances may be reduced to the
extent permitted under Section 412(c)(8) of the Code. Furthermore, no amendment
to the Plan shall have the effect of decreasing a Participant's Capital
Accumulation determined without regard to such amendment as of the later of the
date such amendment is adopted or the date it becomes effective. If the Plan's
vesting schedule is amended, or the Plan is amended in any way that directly or
indirectly affects the computation of any Participant's nonforfeitable
percentage, or if the Plan is deemed amended by an automatic change to or from a
"top-heavy" vesting schedule, each Participant with at least five (5) years of
Service with the Employer may elect, within a reasonable period after the
adoption of the amendment or change, to have his nonforfeitable percentage
computed under the Plan without regard to such amendment or change.

                                       31
<PAGE>   37

                  14.02    Mandatory Amendments. Notwithstanding the provisions
of this Article XIV, or of any other provision of this Plan, any amendment may
be made, retroactively if necessary, which the Company deems necessary or
appropriate to conform the Plan to, or to satisfy the conditions of, any law,
government regulation or ruling, and to permit the Plan to meet the requirements
for qualification under Sections 4975(e)(7) and 401(a) of the Code, and to
permit the Trust to meet the requirements for tax-exempt status under Section
501 of the Code. In the event that an initial favorable determination letter
from the Internal Revenue Service is denied with respect to the adoption of this
Plan, then this Plan shall at the option of the Board of Directors be declared
null and void.

                  14.03    Termination. The Company shall have the right at any
time to terminate the Plan and the Trust created concurrently herewith by
delivering to the Committee written notice of such termination and by further
informing the Trustee by written notice of such termination. Each Employer
reserves the right to terminate the participation of its Employees under the
Plan. Upon any such termination, such action shall be taken as to render it
impossible for any part of the corpus of the Trust or income of the Plan to be
at any time used for, or diverted to, purposes other than for the exclusive
benefit of Participants and their Beneficiaries.

                  14.04    Employee Nonforfeitable Rights. Upon termination (or
partial termination) of the Plan within the meaning of Section 411(d)(3) of the
Code or a complete discontinuance of Employer Contributions hereunder, each
Participant (or in the case of a partial termination, each Participant affected)
shall continue to have a nonforfeitable right to one hundred (100) percent of
the balance in each of his Accounts as of the date of termination, partial
termination or complete discontinuance; provided, however, that replacement of
this Plan with a comparable plan qualified under Section 401(a) of the Code
shall not be a termination for purposes of this Section 14.04.

                  14.05    Distribution upon Termination. In the event of
termination of the Plan pursuant to Section 14.03, the assets then held in Trust
under the Plan shall be distributed to the Participants in accordance with
Article XI as if a Break in Service occurred as of the date the Plan terminated.

                                   ARTICLE XV

                               GENERAL PROVISIONS

                  15.01    Participants' Rights. Neither the establishment of
the Plan, nor any modification hereof, nor the creation of any fund or account,
nor the payment of any benefits, shall be construed as giving to any Participant
or other person any legal or equitable right against the Company or an
Affiliated Company, or any officer or Employee thereof, or the Trustee, or the
Committee, except as herein provided. The adoption and maintenance of the Plan
shall not be deemed to constitute a contract of employment or otherwise between
an Employer and any Employee, or to be a consideration for, or an inducement or
condition of, any employment. Nothing contained herein shall be deemed to give
an Employee the right to be retained in the

                                       32
<PAGE>   38

service of an Employer or otherwise interfere with the right of an Employer to
discharge, with or without cause, any Employee at any time.

                  15.02    Spendthrift Clause. No benefit which shall be payable
out of the Trust Assets to any Participant and/or his Beneficiary shall be
subject in any manner to any voluntary or involuntary anticipation, alienation,
sale, transfer, assignment, garnishment, pledge, encumbrance or charge, and any
attempt to anticipate any such benefit shall be void; and no such benefit shall
in any manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any such Participant and/or his Beneficiary nor shall it
be subject to attachment or legal process for or against such person, and the
same will not be recognized by the Trustee except to such an extent as may be
required by law. The limitations contained in this Section 15.02 shall apply to
the creation, assignment or recognition of a right to any benefit payable with
respect to a Participant pursuant to a Domestic Relations Order unless such
order is determined to be a Qualified Domestic Relations Order as defined in
Section 414(p) of the Code, and as defined in Section 11.08(c)(3). Effective
December 2, 1997, this Section 15.02 shall not apply to any offset of a
Participant's benefits against an amount that the Participant is ordered or
required to pay under or pursuant to any judgment, order, decree, or settlement
agreement described in Section 401(a)(13) of the Code.

                  15.03    Company's Liability. All Capital Accumulations will
be paid only from the Trust Assets, and neither the Company nor any Employer nor
the Committee nor the Trustee shall have any duty or liability to furnish the
Trust with any funds, securities or other assets, except as expressly provided
in the Plan.

                  15.04    Merger or Consolidation. In the event of a merger or
consolidation of the Plan with, or transfer in whole or in part of the Trust
Assets or liabilities to, another trust fund held under any other plan of
deferred compensation maintained or to be established for the benefit of all or
some of the Participants, Trust Assets or liabilities shall be transferred to
the other trust fund only if each Participant or Beneficiary would be entitled
to a benefit immediately after the merger, consolidation or transfer (assuming
the other plan and trust had then terminated) which is equal to or greater than
the benefit to which he would have been entitled to receive immediately before
the merger, consolidation or transfer (as if the Plan had then terminated).

                  15.05    Governing Law. This Plan shall be construed according
to the laws of the State of Minnesota and all provisions hereof shall be
administered according to, and its validity shall be determined under, the laws
of such State, except to the extent that such laws have been specifically
preempted by ERISA or other federal legislation.

                  15.06    Legal Action. In any action or proceeding involving
the Trust, or any property constituting part or all thereof, or the
administration thereof, Employees or former Employees of the Company or an
Affiliated Company or the Beneficiaries or any other person having or claiming
to have an interest in the Trust Assets or under the Plan shall not be necessary
parties nor entitled to any notice of process.

                  15.07    Binding on All Parties. Any applicable final judgment
which is not appealed or appealable that may be entered in any legal action or
proceeding shall be binding and

                                       33
<PAGE>   39

conclusive on the Committee and all persons having or claiming to have an
interest in the Trust Assets or under the Plan.

                  15.08    Headings. The headings of the Plan are inserted for
convenience of reference only and are not to be considered in the construction
or the interpretation of the Plan.

                  15.09    Severability of Provisions. If any provision of the
Plan is held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision, and the Plan shall be construed and
enforced as if such provision had not been included.

                  15.10    Service of Process. The Committee is the designated
agent of the Plan for the service of process in connection with all matters
affecting the Plan.

                  15.11    USERRA. Notwithstanding any provision of this Plan to
the contrary, effective December 12, 1994, contributions, benefits and service
credit with respect to qualified military service will be provided in accordance
with Section 414(u) of the Code.

                  15.12    Earned Income Limitation. Effective for Plan Years
beginning on or after January 1, 1997, any contributions to this Plan on behalf
of any owner-employee (as that term is defined in Section 401(c)(3) of the Code)
may be made only with respect to the earned income of the owner-employee that is
derived from the trade or business with respect to which the Plan is
established.

                                   ARTICLE XVI

                         TOP-HEAVY COMPLIANCE PROVISIONS

                  16.01    Purpose. The purpose of this Article XVI of the Plan
is to comply with the special rules applicable to "top-heavy" plans contained in
Section 416 of the Code, as added by Section 240 of the Tax Equity and Fiscal
Responsibility Act of 1982, and the appropriate Regulations of the Internal
Revenue Service thereunder, including Treasury Regulation Section 1.416-1 and
successor Regulations. The rules set forth in this Article XVI shall be
operative if the Plan is, or becomes, "top-heavy" within the meaning of Section
416 of the Code and the Regulations thereunder. In the event that by statutory
repeal or amendment, or regulatory change or ruling by the Internal Revenue
Service, any of the limitations or restrictions of this Article XVI are no
longer necessary in order for the Plan to meet the requirements of Section 416
of the Code or other applicable provisions of the Code then in effect, such
limitations or restrictions shall immediately become null and void and shall no
longer apply without the necessity of further amendment to the Plan.

                  16.02    Definitions. For purposes of this Article XVI only,
the following terms shall have the meanings set forth below:

                  (a)      "Determination Date" means, as to any Plan Year, the
last day of any preceding Plan Year or, in the case of the first Plan Year, the
last day of such Plan Year.

                                       34
<PAGE>   40

                  (b)      "Key Employee" means any Employee, or former
Employee, or Beneficiary of either, who at any time during the Plan Year or the
four (4) preceding Plan Years, is:

                  (1)      an officer of an Employer having an annual Section
                           414(s) Compensation greater than the amount
                           determined by multiplying one hundred fifty (150)
                           percent of the dollar limitation under Section
                           415(c)(1)(A) of the Code;

                  (2)      one of the 10 (ten) Employees owning the largest
                           interests in an Employer having an annual Section
                           414(s) Compensation at least equal to the dollar
                           limitation under Section 415(c)(1)(A) of the Code;

                  (3)      a five (5) percent owner of an Employer; or

                  (4)      a one (1) percent owner of an Employer having
                           aggregate annual Section 414(s) Compensation of
                           $50,000 or more from the Employer and all entities
                           required to be aggregated with the Employer under
                           Sections 414(b), (c) and (m) of the Code.

                  For purposes of subparagraphs (2), (3) and (4) above, owners
of an Employer shall include those considered as owners within the meaning of
Section 318 of the Code. In identifying the top ten (10) Employee owners under
Section 16.02(b)(2), only owners of greater than a one-half (1/2) percent
interest will be considered, and if several Employees have equal ownership
interests, those Employees with higher Section 414(s) Compensation shall be
treated as having a greater ownership interest.

                  The determination of who is a Key Employee shall be made in
accordance with Section 416(i) of the Code and the Regulations thereunder, the
provisions of which are incorporated herein by reference.

                  As used herein, the term non-Key Employee shall mean any
employee who is not a Key Employee and any former Key Employer (for all purposes
other than Section 16.03).

                  (c)      "Valuation Date" means the most recent Valuation Date
occurring within the twelve (12) month period ending on the Determination Date.

                  16.03 Determination of Whether Plan is "Top-Heavy." The Plan
will be deemed to be "top-heavy" in any Plan Year if, as of the Determination
Date, the sum of the present value of accrued benefits of Key Employees exceeds
sixty (60) percent of the sum of the present value of accrued benefits of all
Participants, excluding former Key Employees. As used in this Section 16.03, the
present value of accrued benefits includes the amounts attributable to Employer
Contributions allocated to the individual accounts of Participants and former
Participants. The determination of whether the Plan is "top-heavy" and the
extent to which distributions, rollovers and transfers are taken into account in
such calculation shall be made in accordance with Section 416 of the Code and
the regulations thereunder which are herein incorporated by reference.
Furthermore, a former Participant's Account balances are to be

                                       35
<PAGE>   41

disregarded in determining whether the Plan is "top-heavy" unless the
Participant performed any services for an Employer within the five (5) year
period ending on the Determination Date.

                  16.04    Aggregation Group of Employer Plans. All corporations
and businesses that are aggregated under Sections 414(b), (c) and (m) of the
Code with the Employer must be considered with the Employer for the purposes of
determining whether the Plan is "top-heavy." All plans of the Employer in which
a Key Employee participates, and each other stock bonus, pension or profit
sharing plan, if any, of the Employer which enables any plan in which a Key
Employee participates to meet the requirements of Section 401(a)(4) or Section
410 of the Code, will be aggregated as a required aggregation group within the
meaning of Section 416(g) of the Code. Each plan in the required aggregation
group will be "top-heavy" if the group is "top-heavy," and no plan in the group
will be top-heavy if the group is not "top-heavy."

                  In addition, the Employer may elect to include as part of the
permissive aggregation group under Section 416(g) of the Code any plans that are
not part of a required aggregation group but that satisfy the requirements of
Sections 401(a)(4) and 410 of the Code when considered together with the plans
constituting the required aggregation group. If the permissive aggregation group
is "top-heavy," only those plans which are part of the required aggregation
group will be subject to the additional requirements applicable to "top-heavy"
plans as herein provided.

                  16.05    Special Minimum Contribution Becoming Operative in
the Event the Plan Becomes "Top-Heavy." In the event that the Plan shall be
determined to be "top-heavy" as to any Plan Year, the Employer Contributions
allocated to the Accounts under the Plan of a non-Key Employee for each Plan
Year in which the Plan is "top-heavy" shall equal the lesser of (a) three (3)
percent of Section 414(s) Compensation for such Plan Year and (b) the largest
percentage of Section 414(s) Compensation, subject to the Compensation
Limitation, allocated to the Accounts of a Key Employee under the Plan for that
Plan Year.

                  All Participants who have not terminated employment as of the
last day of the Plan Year must receive the minimum contribution. Employees who
(a) failed to complete one thousand (1,000) Hours of Service during the Plan
Year, (b) declined to make mandatory contributions to the Plan or (c) would have
been excluded from the Plan because their Compensation is less than a stated
amount, must nevertheless be considered Participants for purposes of the minimum
contribution in this Section 16.05 if such Employees are required to satisfy the
coverage requirements of Section 410(b) of the Code in accordance with Section
401(a)(5) of the Code. The minimum contribution is determined without regard to
any Social Security contribution.

                  16.06    Pre-"Top-Heavy" Plan Terminated Participant.  This
Article XVI shall not apply to any Participant who does not complete an Hour of
Service after the Plan becomes "top-heavy."

                  16.07    Special "Top-Heavy" Reduction in Combined Benefit and
Contribution Limitation. In the event that the Plan shall be determined to be
"top-heavy" in any Plan Year beginning before January 1, 2000, the multiple
applicable to the dollar limitation in the

                                       36
<PAGE>   42

denominator of the defined benefit fraction described in Section 7.03 of the
Plan and the multiple applicable to the dollar limitation in the denominator of
the defined contribution fraction described in Section 7.03 of the Plan shall be
one (1) rather than one and one-quarter (1.25); provided, however, that this
Section 16.07 shall not apply in the event that the Plan is not a "super
top-heavy" plan as defined in Section 16.10(a) and each Participant who is a
non-Key Employee shall receive the minimum contribution set forth in Section
16.05, except that the multiple in clause (a) of Section 16.05 shall be four (4)
percent rather than three (3) percent.

                  16.08    Termination of "Top-Heavy" Status. In the event that
the Plan shall be "top-heavy" within the meaning of Section 416 of the Code for
any Plan Year, and in a subsequent Plan Year the Plan shall cease to be
"top-heavy," the special "top-heavy" minimum contribution and Compensation
Limitation Rules shall cease to apply with respect to any Plan Year for which
the Plan is not "top-heavy"; provided, however, that in no event shall a
reduction in a Participant's nonforfeitable percentage occur by reason of a
change in the Plan's status.

                  16.09    Multiple "Top-Heavy" Plans. In the event that a
Participant in the Plan is also participating in a defined benefit plan
maintained by an Employer or an affiliated employer during a Plan Year in which
both the Plan and such defined benefit plan are "top-heavy," the Participant
shall receive the minimum accrued benefit under the defined benefit plan rather
than the minimum contribution provided for in this Plan.

                  16.10    Effect of the Plan Becoming "Super Top-Heavy".

                  (a)      The Plan shall be deemed to be "super top-heavy" if,
as of the most recent Valuation Date, the sum of the present value of accrued
benefits for Key Employees is more than ninety (90) percent of the sum of the
present value of accrued benefits for all Employees, excluding former Key
Employees.

                  (b)      In the event that the Plan shall be determined to be
"super top-heavy" in any Plan Year, the multiple applicable to the dollar
limitation in the denominator of the defined benefit fraction described in
Section 7.03 of the Plan and the multiple applicable to the dollar limitation in
the denominator of the defined contribution fraction described in Section 7.03
of the Plan shall be one (1) rather than one and one-quarter (1.25).

                                  ARTICLE XVII

               DIRECT ROLLOVER AND ELIGIBLE ROLLOVER DISTRIBUTIONS

                  17.01    Purpose. This Section applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.

                                       37
<PAGE>   43

                  17.02    Definitions.

                  (a)      Eligible Rollover Distribution.  An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include:

                  (1)      Any distribution that is one of a series of
                           substantially equal periodic payments (not less
                           frequently than annually) made for the life (or life
                           expectancy) of the distributee or the joint lives (or
                           joint life expectancies) of the distributee and the
                           distributee's designated beneficiary, or for a
                           specified period of ten years or more;

                  (2)      Any distribution to the extent such distribution is
                           required under Section 401(a)(9) of the Code; and

                  (3)      The portion of any distribution that is not
                           includible in gross income (determined without regard
                           to the exclusion for net unrealized appreciation with
                           respect to employer securities).

                  (4)      Effective for distributions occurring on or after
                           January 1, 2000 (or such other time beginning no
                           earlier than January 1, 1999, as the Plan
                           Administrator shall determine) the portion of any
                           distribution that is a hardship distribution
                           described in Section 401(k)(2)(B)(IV) of the Code.

                  (b)      Eligible Retirement Plan. An eligible retirement plan
is an individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.

                  (c)      Distributee. A distributee includes an employee or
former employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.

                  (d)      Direct Rollover.  A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the distributee.

                                       38
<PAGE>   44

                                  ARTICLE XVIII

                                    EXECUTION

                  To record the adoption of the Plan, the Employer has caused
its proper officer to set his hand as of the      day of                 , 1999.

                                           POLARIS INDUSTRIES INC.

                                           By:    /s/ Michael W. Malone
                                                 ----------------------------
                                           Title: Vice President -- Finance
                                                  and Chief Financial Officer
                                                 ----------------------------

                                       39

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