Frequently Asked Questions (FAQs) from Managers ...

1 Corporate compensation January 2015 Frequently Asked Questions (FAQs) from Managers : compensation plannning and total compensation Discussions 1 Intended for management use only. Part 1: Merit Increase Planning What is a Merit Increase & who is eligible to receive annual merit increases? All Salaried Exempt & Salaried Non-Exempt employees will have a performance review and will be eligible for annual merit increases (if hired before 12/31 of the plan year). Merit increases are performance-driven, annual increases that are planned for during compensation Planning and are intended to reward employees for their performance during the last year. These differ from our annual structure increases for hourly employees. Hourly employees receive an annual increase (structure increase) at the end of the calendar year and this is reflected on their first paycheck of the new year. Performance is not factored into structure increases.

2 Merit increases also differ from market adjustments, which are more market-driven than performance based. When do merit increases go into effect? The focal date for annual merit increases is April 1*. *This may not apply to select global locations. What does focal date refer to? The focal date refers to the effective date of the merit increases; all merit increases for domestic Exempt & Non-Exempt employees will be effective on 4/1 of the plan year, no matter hire date, anniversary date, etc. What s new for Merit Planning in 2015? Most processes will remain the same from merit planning in the past. We are making minor modifications to our proration process (see below for details) in order to align our performance periods for compensation Planning. As detailed below, this will only affect employees that have not worked the entire 2014 calendar year. Additionally, we have global planning capabilities that accommodate merit planning for our international employees (see Workday Comp Planning FAQs for more details).

3 Will my employees have their merit increase prorated? Proration will be based on days worked within the previous calendar year. For example, anyone who has worked the full 1/1/ to 12/31 period will have no proration. They will receive 365/365 days of merit increase. If you are new or have a new hire on your team who, for example, was hired on March 1, 2014, they will get approximately 306/365 days proration and so on. After the initial hire year they will get a full merit, as will any non-new hire employee. The proration suggestion in compensation Planning is merely guidance and Managers will continue to have discretion to allocate merit awards based on their employee and group needs. For more details, please refer to slide #8 in the PMComp Leader Training slide deck found on Sharepoint. Corporate compensation January 2015 Frequently Asked Questions (FAQs) from Managers : compensation plannning and total compensation Discussions 2 Intended for management use only.

4 Part 2: Bonus Planning What is Profit Sharing/Bonus Planning? Profit Sharing is the annual and Canada bonus plan. Likewise, annual bonus plans have been designed for each of our International locations. All of these plans can be described as discretionary bonus payouts based on some or all of the following criteria: Company Performance Employment Grade ( D, C2, C1, etc.) Individual performance Eligible wages Local goals/metrics (for International locations only) What is new for Bonus Planning in 2015? Most processes will remain the same; Corporate compensation will still provide planning guidelines for Merit Planning, Bonus Planning, and Stock Option Planning via handouts. Additionally, Workday now has capabilities to accommodate bonus planning for our international employees. For more details, please refer to Workday Comp Planning FAQsor PMComp Leader Training.

5 Am I able to plan outside of the provided guidelines? Yes, but please remember these guidelines are provided to help ensure consistency and fairness across the organization in how performance impacts pay. Please also note that during the roll-up process, changes may be made to the amount you planned for various reasons, including to help calibrate awards based on performance. Do we plan for hourly and non-exempt bonuses? No, these are calculated from a formula based on length of service and eligible wages. When is Profit Sharing Day (US)? In the US, Profit Sharing Day will be on March 6th, 2015. When are bonuses paid at our international locations? This varies by subsidiary but may follow the location s fiscal year end or align closely with US Polaris Profit Sharing Day in March. Corporate compensation January 2015 Frequently Asked Questions (FAQs) from Managers : compensation plannning and total compensation Discussions 3 Intended for management use only.

6 Part 3: Stock Option Planning What is new for Stock Option Planning in 2015? One key change for Stock Option Planning this year will be the focus on value-based awards; that is, in the past, we have provided guidance and stock option pools based on a targeted number of options (ex. a pool of 500 Stock Options). Going forward, we will be providing value-based stock option guidance and stock option pools (ex. a pool of $10,000). There are a variety of advantages of moving to value-based awards. Provides more consistency year-over-year Accommodates fluctuations in the stock price Provides more clarity for employees on the estimated value of their stock options (at grant) Who is eligible for stock option grants? A1, A2, B1, B2, GM, C1, C2, D, and ES Grade employees are eligible to receive stock option grants annually. Participation targets and target awards range by Grade and are provided in the Stock Option Planning Guidelines located on SharePoint (International Managers can reach out to your HR Business Partner for guideline & planning information).

7 Who should receive stock option grants? There are a variety of things to consider when granting stock. It is especially important to consider participation targets (ex. maximum participation of 40% of the D-grade population should receive stock). Additionally, the following can help you determine how to allocate your pool: 9 Block Potential Rating Loss Impact Risk Assessment Past equity awards & vesting schedules Additional guidance & examples can be referenced in Stock Planning Examples found on Sharepoint (International Managers can reach out to your HR Business Partner). Who plans for Stock Options? All planners with direct reports will participate in Stock Option Planning (if their direct reports are eligible for stock options see above). Corporate compensation January 2015 Frequently Asked Questions (FAQs) from Managers : compensation plannning and total compensation Discussions 4 Intended for management use only.

8 Part 4: Long Term Incentive Plan (LTIP/PRSU) How do I opt my Managers in or out of LTIP this year? As we highlighted during our Performance Management/ compensation Planning training, we will not be planning for LTIP in the compensation Planning system (Workday) this year. All Managers will be automatically opted in to LTIP unless you tell us/your HRBP otherwise. The open window for you to opt your Managers (C2 employees or above) out of LTIP will be the same compensation Planning window (January 15 February 2). Please contact Corporate compensation or your HR Business Partner should you want to opt one of your direct reports out of LTIP or if you have any Questions . Who is eligible for LTIP? C-grade employees and above are eligible. What is a PRSU? Performance-Based Restricted Stock Units (PRSUs) are the units that are awarded to participants in LTIP. These units are awarded at maximum plan performance level and in accordance with plan targets (based on an employee s grade).

9 For detailed information, please refer to the LTIP Plan & At-A-Glance documents found on Polaris Benefits. How is Participation determined each year by leadership? Participation is determined by the manager and, ultimately, by the VP/GM leaders. Participation is based on: Performance Leadership ability Long-term potential Retention How does LTIP/PRSU vesting work? At the end of the 3-year plan cycle, company performance measured against pre-determined annual goals will determine how many of the originally granted PRSUs will vest. Each year there is an award matrix that illustrates the target goals and payout potential. Upon vesting, employees can elect whether they would like to sell/hold their PRSUs. How do I track LTIP performance throughout the performance cycle? Each LTIP/PRSU cycle has a performance matrix with that year s performance metrics. These & additional information/instructions can be accessed via Corporate compensation January 2015 Frequently Asked Questions (FAQs) from Managers : compensation plannning and total compensation Discussions 5 Intended for management use only.

10 Part 5: Performance Management and total compensation discussion Overview When do I need to have the Performance Management/ total compensation discussion with my direct report(s)? You must conduct a performance review discussion and compensation summary conversation with your direct report(s) between February 25th and March 6th. compensation Planning will be finalized on February 23rd; you will want to schedule your meeting(s) with your direct report(s) to ensure these meetings can happen during this window. What should I discuss in the Performance Management/ total compensation meeting with my employee(s)? You will cover: 1. Performance Review 2014 Performance Review Core Values Key Strengths Development Needs and Actions 2015 Performance Goals 2. 9-Block rating and Potential Rating 3. Career discussion 4. compensation summary Where applicable: 1. Merit increase 2.