<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(1):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[Excelsior-Henderson Logo]
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
805 HANLON DRIVE
BELLE PLAINE, MINNESOTA 56011
(612) 873-7000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held at the offices of the Company, 805 Hanlon Drive, Belle Plaine,
Minnesota, at 10:30 a.m., Central Daylight Time, on Saturday, July 25, 1998.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you. Please mark, date and sign the enclosed proxy and return
it in the accompanying envelope as quickly as possible, even if you plan to
attend the Annual Meeting. You may revoke the proxy and vote in person at that
time if you so desire.
Sincerely,
/s/ /s/
Daniel L. Hanlon David P. Hanlon
CO-FOUNDERS, CO-CHAIRMEN AND CO-CHIEF EXECUTIVE OFFICERS
June 27, 1998
<PAGE>
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 25, 1998
____________________________
The Annual Meeting of Shareholders of Excelsior-Henderson Motorcycle
Manufacturing Company will be held at the offices of the Company, 805 Hanlon
Drive, Belle Plaine, Minnesota, at 10:30 a.m., Central Daylight Time, on
Saturday, July 25, 1998 for the following purposes:
1. To elect five directors for a one-year term.
2. To approve an amendment to the Company's Articles of
Incorporation increasing the Company's authorized capital stock
from 23,333,332 shares to 32,000,000 shares of which 7,000,000
would be classified as Preferred Stock and 25,000,000 would be
classified as Common Stock.
3. To approve the Excelsior-Henderson Motorcycle Manufacturing
Company Amended and Restated 1995 Stock Plan, which includes
reserving 533,333 additional shares of Common Stock for future
awards and setting at 300,000 the maximum number of shares
covered by options that may be awarded to an employee in any
fiscal year.
4. To approve the Excelsior-Henderson Team Stock Purchase Plan,
which provides eligible employees of the Company the opportunity
to purchase Common Stock.
5. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending January 2,
1999.
6. To transact such other business as may properly be brought before
the meeting.
The Board of Directors has fixed May 26, 1998 as the record date for the
meeting, and only shareholders of record at the close of business on that date
are entitled to receive notice of and vote at the meeting.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF YOU OWN
ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING
POSTAGE-PAID REPLY ENVELOPE AS QUICKLY AS POSSIBLE. YOU MAY REVOKE YOUR PROXY
AT ANY TIME PRIOR TO ITS EXERCISE AND RETURNING YOUR PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE THE PROXY.
By Order of the Board of Directors,
/s/
Gale R. Mellum
SECRETARY
Belle Plaine, Minnesota
June 27, 1998
<PAGE>
________________________
PROXY STATEMENT
________________________
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors of
Excelsior-Henderson Motorcycle Manufacturing Company, a Minnesota corporation
(the "Company"), for use in connection with the Annual Meeting of
Shareholders to be held on Saturday, July 25, 1998 at the offices of the
Company, 805 Hanlon Drive, Belle Plaine, Minnesota, at 10:30 a.m., Central
Daylight Time, and at any adjournments thereof. Only shareholders of record
at the close of business on May 26, 1998 will be entitled to vote at such
meeting or adjournment. Proxies in the accompanying form which are properly
signed, duly returned to the Company and not revoked will be voted in the
manner specified. A shareholder executing a proxy retains the right to
revoke it at any time before it is exercised by notice in writing to the
Secretary of the Company of termination of the proxy's authority or a
properly signed and duly returned proxy bearing a later date.
The address of the principal executive office of the Company is 805
Hanlon Drive, Belle Plaine, Minnesota 56011 and the telephone number is (612)
873-7000. The mailing of this Proxy Statement and the Board of Directors'
form of proxy to shareholders will commence on or about June 27, 1998.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by the use of the mails, certain directors,
officers and employees of the Company may solicit proxies by telephone, telegram
or personal contact, and have requested brokerage firms and custodians, nominees
and other record holders to forward soliciting materials to the beneficial
owners of stock of the Company and will reimburse them for their reasonable
out-of-pocket expenses in so forwarding such materials.
The Common Stock of the Company, par value $.01 per share, is the only
authorized and issued voting security of the Company. At the close of business
on May 26, 1998 there were 13,028,897 shares of Common Stock issued and
outstanding, each of which is entitled to one vote. Holders of Common Stock are
not entitled to cumulate their votes for the election of directors.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy at the meeting and
entitled to vote is required for approval of each proposal presented in this
Proxy Statement. A shareholder voting through a proxy who abstains with respect
to any matter is considered to be present and entitled to vote on such matter at
the meeting and is in effect a negative vote. However, a shareholder (including
a broker) who does not give authority to vote, or withholds authority to vote,
on any proposal shall not be considered present and entitled to vote on such
proposal.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of May 7, 1998, the number of shares of
Common Stock beneficially owned by each person who is a beneficial owner of more
than 5% of the Common Stock issued and outstanding, by each executive officer
named in the Summary Compensation Table, by each director, and by all officers
and directors as a group. All persons have sole voting and dispositive power
over such shares unless otherwise indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER PERCENTAGE OF
OF BENEFICIAL OWNER: OF SHARES OUTSTANDING SHARES
- ------------------------------------- --------------- -----------------------
<S> <C> <C>
Directors and executive officers
Daniel L. Hanlon(1) 1,791,998(2) 13.8%
David P. Hanlon(1) 1,468,000(3) 11.3
Allan C. Hurd 43,334(4) *
Thomas M. Rootness 61,734(5) *
David L. Auringer 13,333(6) *
John B. Donahue 27,801(7) *
Wayne M. Fortun 23,267(7) *
David R. Pomije 245,044(8) 1.9
Directors and Officers, as
a group (8 persons) 3,674,511(9) 27.9
</TABLE>
__________________
* Less than one percent.
(1) The address of Daniel and David Hanlon is 805 Hanlon Drive, Belle Plaine,
MN 56011.
(2) Includes 30,665 shares of Common Stock held in trusts for which
Mr. Hanlon's spouse acts as custodian.
(3) Includes 1,333 shares of Common Stock owned by Mr. Hanlon's son.
(4) Includes options to purchase 43,334 shares of Common Stock exercisable
within 60 days of May 7, 1998.
(5) Includes options to purchase 31,334 shares of Common Stock exercisable
within 60 days of May 7, 1998.
(6) Includes options to purchase 13,333 shares of Common Stock exercisable
within 60 days of May 7, 1998. Mr. Auringer was an executive officer of
the Company during fiscal 1997 but is no longer an executive officer or
employee of the Company.
(7) Includes options to purchase 16,667 shares of Common Stock exercisable
within 60 days of May 7, 1998.
(8) Includes options to purchase 10,000 shares of Common Stock exercisable
within 60 days of May 7, 1998.
(9) Includes options to purchase up to 131,335 shares of Common Stock
exercisable within 60 days of May 7, 1998.
ELECTION OF DIRECTORS
The business of the Company is managed under the direction of a Board of
Directors, with the number of directors fixed from time to time by the Board of
Directors. The Board of Directors has fixed at five the number of directors to
be elected to the Board at the 1998 Annual Meeting of Shareholders and has
nominated the five persons named below for election as directors, each to serve
for a one-year term. Proxies solicited by the Board of Directors will, unless
otherwise directed, be voted to elect the five nominees named below.
2
<PAGE>
Each of the nominees is a current director of the Company and each has
indicated a willingness to serve as a director for the one-year term. In case
any nominee is not a candidate for any reason, the proxies named in the enclosed
form of proxy may vote for a substitute nominee in their discretion.
Following is certain information regarding the nominees for the office of
director:
DANIEL L. HANLON, AGE 41
Mr. Hanlon, a Co-Founder of the Company, is Co-Chief Executive Officer and
Co-Chairman of the Board of the Company. Immediately prior to founding the
Company in 1993, Mr. Hanlon worked as founder, President and Chief Executive
Officer of EverGreen Solutions Inc., a manufacturer of degradable packaging
materials, from 1990 to December 1993. Prior to 1990, Mr. Hanlon served as
Controller of Midwest Importers, in sales branch management positions with
Knutson Mortgage and Marquette banks, and in various accounting and strategic
planning positions with EcoLab Inc. and Honeywell Inc. Mr. Hanlon received his
B.A. and M.B.A. degrees from the University of St. Thomas, St. Paul, Minnesota.
Mr. Hanlon has been riding motorcycles for over 28 years.
DAVID P. HANLON, AGE 45
Mr. Hanlon, a Co-Founder of the Company, is Co-Chief Executive Officer and
Co-Chairman of the Board of the Company. From 1984 to November 1993, Mr. Hanlon
was the General Manager of the Michigan District for Rollins Leasing
Corporation, a truck leasing company. Prior to 1984, Mr. Hanlon worked for
three years as the District Manager of Gelco Truck Leasing in the Memphis,
Tennessee district. Mr. Hanlon attended the University of St. Thomas, St. Paul,
Minnesota and studied Business Administration. Mr. Hanlon has been riding
motorcycles for over 30 years.
JOHN B. DONAHUE, AGE 54
Mr. Donahue was elected as a director of the Company in April 1997. Mr.
Donahue is an owner and President of Donahue Harley-Davidson and Delano Sports
Center, a motorcycle and recreational product dealership in suburban
Minneapolis, Minnesota. In 1995, Mr. Donahue was President of the
Harley-Davidson Dealers Council, and has been on the Harley-Davidson Dealer
Advisory Council since 1992. In addition, Mr. Donahue was on the Arctic Cat
Advisory Board from 1984 to 1993 and the Kawasaki National Dealer Advisory Board
from 1975 to 1980. Mr. Donahue has been involved with motorcycles since 1956.
WAYNE M. FORTUN, AGE 49
Mr. Fortun was elected as a director of the Company in April 1997.
Mr. Fortun has been the Chief Executive Officer of Hutchinson Technology
Incorporated since May 1996, President, Chief Operating Officer and a director
since 1983. Hutchinson Technology, a publicly traded company, is the world's
leading supplier of suspension assemblies for rigid magnetic disk drives.
Mr. Fortun is also a director of G&K Services, Inc., a publicly held company,
which provides and maintains commercial, institutional and industrial garments
and other textile products for a variety of businesses and institutions.
Mr. Fortun has been riding motorcycles for over 30 years.
3
<PAGE>
DAVID R. POMIJE, AGE 41
Mr. Pomije was elected as a director of the Company in April 1997. Since
April 1995, Mr. Pomije has been the Chairman of the Board and Chief Executive
Officer of Funco, Inc., which he founded in 1988. From 1988 to April 1995,
Mr. Pomije also served as President, Chief Financial Officer and Secretary.
Funco, a publicly traded company, is a specialty retailer of interactive
entertainment products. Mr. Pomije has been a motorsports enthusiast for over
25 years.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met five times during fiscal 1997. All incumbent
directors attended at least 75% of the meetings of the Board and of the
committees on which they served held during the periods for which they served as
a director. The Company currently has an Audit Committee and a Compensation
Committee. Following is a description of the functions performed by each of the
Committees:
AUDIT COMMITTEE
The Company's Audit Committee presently consists of Messrs. Fortun
(Chairman) and Donahue. The Audit Committee makes recommendations concerning
the selection and appointment of independent auditors, reviews the scope and
findings of the completed audit, and reviews the adequacy and effectiveness of
the Company's accounting policies and system of internal accounting controls.
The Audit Committee met once during fiscal 1997.
COMPENSATION COMMITTEE
The Company's Compensation Committee presently consists of Messrs.
Pomije (Chairman) and Fortun. The Compensation Committee annually reviews
and acts upon the compensation package for the Co-Chief Executive Officers
and sets compensation policy for the other employees of the Company. In
addition, the Compensation Committee acts upon management recommendations
concerning employee stock options, bonuses and other compensation and benefit
plans. The Compensation Committee also administers the Excelsior-Henderson
Motorcycle Manufacturing Company 1995 Stock Plan and, subject to shareholder
approval, the Excelsior-Henderson Team Stock Purchase Plan, both of which are
discussed below. The Compensation Committee met once during fiscal 1997.
DIRECTOR COMPENSATION
The Company's 1995 Stock Plan provides that a new outside director of the
Company will be issued an option to purchase 10,000 shares of Common Stock upon
joining the Board of Directors, with an exercise price equal to the fair market
value of a share on the date of grant. Such options will vest one year from the
date of grant and expire ten years from the date of grant. In addition, outside
directors who have been in office more than six months receive an option to
purchase 6,667 shares of Common Stock at each annual meeting of the Company's
shareholders with an exercise price equal to the fair market value of a share on
the date of grant. Such options vest at the next annual meeting of shareholders
and expire ten years from the date of grant.
4
<PAGE>
EXECUTIVE OFFICERS
Following is certain information regarding the current executive officers
of the Company other than Daniel L. Hanlon and David P. Hanlon:
ALLAN C. HURD, AGE 50
Mr. Hurd has been Senior Vice President of Engineering and Manufacturing
since May 1997 and was Vice President of Manufacturing and Operations from
May 1996 to May 1997. From 1987 through May 1996, Mr. Hurd was employed by
Triumph Motorcycles, LTD ("Triumph"), a motorcycle manufacturer located in
England. At Triumph, Mr. Hurd was part of the management team responsible for
establishing and operating all aspects of motorcycle production, including
motorcycle design and development, factory development and layout, manufacturing
equipment specification and acquisition and motorcycle production. From
March 1991 to May 1996, Mr. Hurd was Production Engineering Manager, from
July 1989 to February 1991, he was Design and Production Coordinating Manager
and from May 1987 to July 1989, he was Chief Production Engineer. Mr. Hurd has
a degree in Engineering from Kingston-upon-Hull College of Technology and is a
member of the Institute of Electrical Engineers (Manufacturing Section) and the
Institute of Management. Mr. Hurd has been riding motorcycles for over 35
years.
THOMAS M. ROOTNESS, AGE 50
Mr. Rootness has been Senior Vice President of Finance and Administration
since May 1997, has been Chief Financial Officer since March 1996 and was Vice
President of Finance from March 1996 to May 1997. From September 1993 to
March 1996, Mr. Rootness was Chief Financial Officer, Treasurer and Executive
Vice President of Luigino's Inc., a large, multi-national manufacturer of frozen
food entrees. From January 1992 to August 1993, Mr. Rootness was General/Plant
Manager of the LaBounty Manufacturing division of The Stanley Works after The
Stanley Works purchased LaBounty Manufacturing, Inc., a heavy construction
equipment manufacturer and was the Chief Financial Officer of LaBounty
Manufacturing from August 1990 until such purchase. Prior to 1990, Mr. Rootness
served as President and Chief Financial Officer of National Screenprint, Inc.,
President, Chief Executive Officer and a director of The Barbers Hairstyling for
Men and Women, Inc., a publicly traded company, and as President, Chief
Operating Officer and a director of Dahlberg, Inc., at the time a publicly
traded company. Mr. Rootness is a Certified Public Accountant and received a
Bachelor of Arts in Accounting from the University of Minnesota-Duluth in 1969.
Mr. Rootness has been riding motorcycles for over 25 years.
5
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board is composed entirely of outside
directors. The members of the Compensation Committee are Messrs. Pomije and
Fortun. The Compensation Committee annually reviews and acts upon the
compensation package for the Co-Chief Executive Officers and sets
compensation policy for the other employees of the Company. In addition, the
Compensation Committee acts upon management recommendations concerning
employee stock options, bonuses and other compensation and benefit plans.
The Compensation Committee also administers the Excelsior-Henderson
Motorcycle Manufacturing Company 1995 Stock Plan and, subject to shareholder
approval, the Excelsior-Henderson Team Stock Purchase Plan, both of which are
discussed below. The objectives of the Company's executive compensation
program are:
- to attract, retain, motivate and reward high caliber executives;
- to foster teamwork and support the achievement of the Company's
financial and strategic goals through performance based financial
incentives; and
- to align the executive officers' interests with the success of the
Company and shareholders' interests through stock-based compensation.
The Company's executive compensation program strives to be competitive with
the compensation provided by comparable companies. The Compensation Committee
periodically conducts a review of its executive compensation program. The
purpose of this review is to ensure that the Company's executive compensation
program is meeting the objectives listed above. In its review, the Compensation
Committee considers data submitted by management and data and analysis provided
by an independent consultant engaged by the Company to provide comparative
information regarding the compensation provided by similarly situated companies.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The key components of the Company's executive officer compensation program
are base salary, annual incentive bonus and stock options. These elements are
described below. In determining compensation, the Committee considers all
elements of an executive's compensation package. The Company does not currently
have a policy with respect to the limit under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") on the deductibility of the
qualifying compensation paid to its executives as it is likely that all such
compensation will be deductible by the Company.
BASE SALARY. The Compensation Committee annually reviews the base salary
of the Co-Chief Executive Officers and the other executive officers. In
determining appropriate salary levels, the Compensation Committee considers
individual performance, level of responsibility, scope and complexity of the
position, internal equity and salary levels for comparable positions at
similarly situated companies and the recommendations of the Co-Chief Executive
Officers with respect to the
6
<PAGE>
other executives. In determining base salary increases, the Compensation
Committee also considers strategic planning, team building and operating
results.
ANNUAL INCENTIVE BONUS. The purpose of the Company's annual incentive
bonus is to provide a direct financial incentive in the form of an annual cash
bonus to the executive officers who achieve performance goals established by the
Compensation Committee. The Compensation Committee determines the annual
incentive bonus of the Co-Chief Executive Officers and, in conjunction with the
Co-Chief Executive Officers, the annual incentive bonus of the other executives.
Executives are eligible for target awards under the annual incentive
program with maximum payouts currently ranging from 12% to 18% of base salary.
The size of the maximum award is determined by the executive's position and
competitive data for comparable positions at the similarly situated companies.
The awards paid by the Company decrease or increase based on actual employee
performance in achieving individual and Company goals. For 1997, the
performance of executives other than the Co-Chief Executive Officers was
assessed against target measures set by the Board prior to the formation of the
Compensation Committee. The target measures focused on success in maintaining
the Company's development plan, team building and budget management. Incentive
bonus awards to executive officers in fiscal 1997 were the maximum amount of
their targets, ranging from 9% to 15% of then current base salaries. The
Co-Chief Executive Officers were not eligible to receive an incentive bonus
award in fiscal 1997, however, the Compensation Committee has determined that
they will be eligible for incentive bonuses equal to 12% of their respective
base salaries in fiscal 1998.
STOCK OPTIONS. Long-term performance incentives are provided to executives
through the Company's 1995 Stock Plan. The 1995 Stock Plan is administered by
the Compensation Committee, which is authorized to award stock options to
employees of the Company, non-employee directors of the Company and certain
advisors and consultants to the Company. At least annually, the Compensation
Committee considers whether awards will be made to executive officers under the
1995 Stock Plan. Such awards are based on the scope and complexity of the
position and competitive compensation data. The Compensation Committee has
broad discretion to select the optionees and to establish the terms and
conditions for the grant, vesting and exercise of each option. The executive
officers other than the Co-Chief Executive Officers have all received options
with performance-based vesting criteria that allow the vesting of such options
to be accelerated based on a determination by the Compensation Committee that
the applicable performance criteria have been met by the executive. The vesting
of certain portions of these options were accelerated in fiscal 1997.
The Co-Chief Executive Officers have not been granted options or other
awards under the 1995 Stock Plan due to their substantial equity positions in
the Company which align their interests with those of the other shareholders.
The Compensation Committee may grant options or other awards to the Co-Chief
Executive Officers in the future.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, comprised entirely of independent, outside
directors, is responsible for establishing and administering the Company's
policies involving the compensation of executive officers. No employee of the
Company serves on the Committee. During fiscal 1997, the members of the
Committee were (and are currently) David R. Pomije and Wayne M. Fortun. The
Committee members have no interlocking relationship as defined by the Securities
and Exchange Commission.
COMPENSATION COMMITTEE
David R. Pomije, Chairman
Wayne M. Fortun
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
for the fiscal years ended January 3, 1998 and December 31, 1996 and 1995
provided to the Co-Chief Executive Officers of the Company and the other three
individuals who were serving as executive officers at the end of the most recent
fiscal year and who received remuneration exceeding $100,000 for such fiscal
year (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -----------------
COMPENSATION SHARES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS(2) COMPENSATION(3)
- -------------------------------------- ---- --------- ----- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Daniel L. Hanlon, 1997 $115,000 - - -
Co-Founder, Co-Chairman and Co- 1996 75,865 - - -
Chief Executive Officer 1995 65,000 - - -
David P. Hanlon, 1997 115,000 - - -
Co-Founder, Co-Chairman and Co- 1996 75,865 - - -
Chief Executive Officer 1995 65,000 - - -
Allan C. Hurd, 1997 110,000 10,000 30,000 152
Senior Vice President of 1996 50,080 - 66,667 10,000
Engineering and Manufacturing
Thomas M. Rootness, 1997 110,000 10,000 30,000 460
Senior Vice President of Finance 1996 69,420 - 66,667 24,800
and Administration and Chief
Financial Officer
David L. Auringer 1997 92,981 15,000 53,333 547
Vice President of Sales
</TABLE>
_________________
(1) Mr. Auringer was not employed for all of 1997. If he had been employed for
the full year, his salary would have been $98,462. Mr. Auringer is no
longer an executive officer or an employee of the Company. Messrs. Hurd
and Rootness were not employed for all of 1996. If they had been employed
for the full year, their respective salaries would have been $93,000 and
$95,000.
(2) Represents options to purchase Common Stock granted under the Company's
1995 Stock Plan.
(3) Amounts reported for 1997 represent the Company match on the Company's
401(k) plan in the following amounts: Mr. Hurd, $152; Mr. Rootness, $460;
and Mr. Auringer, $547. Amounts reported for 1996 represent payments made
to Messrs. Hurd and Rootness for reimbursement of moving and temporary
living expenses.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes option grants made during fiscal 1997 to the
Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OPTIONS OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED(2) FISCAL YEAR SHARE DATE 5% 10%
- ------------------------ ---------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C>
Allan C. Hurd 30,000 9.6% $3.75 12/31/06 $ 70,751 $179,296
Thomas M. Rootness 30,000 9.6% 3.75 12/31/06 70,751 179,296
David L. Auringer 26,666 8.6% 7.00 08/29/07 117,391 297,491
26,667 8.6% 3.75 01/12/07 62,888 159,370
</TABLE>
___________
(1) The potential realizable value is based on a 10-year term of each option at
the time of grant. Assumed stock price appreciation of 5% and 10% is
mandated by rules of the Securities and Exchange Commission and is not
intended to forecast actual future financial performance or possible future
appreciation. The potential realizable value is calculated by assuming
that the fair market value of the Company's Common Stock on the date of
grant appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price.
(2) Options granted pursuant to the Company's 1995 Stock Plan are exercisable
at an exercise price equal to the fair market value on the date of grant.
The 30,000 share options granted to Messrs. Hurd and Rootness and the
26,666 share option granted to Mr. Auringer vest in three equal increments
on the day prior to the eighth, ninth and tenth anniversaries of the date
of grant, subject to accelerated vesting in such amounts and on such dates
as the Compensation Committee of the Board of Directors determines that an
individual's performance criteria for the applicable period have been met.
The 26,667 share option granted to Mr. Auringer vests as to 3,333 shares on
each of January 13, 1998, 1999 and 2000, as to 6,666 shares on January 11,
2005, and as to 5,000 shares on each of January 11, 2006 and 2007;
provided, however, that the portions scheduled to vest in 2005, 2006 and
2007 are subject to the accelerated vesting described in the previous
sentence. Each option has a maximum term of 10 years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. In December 1997, the Compensation Committee vested 10,000 shares
each of the 30,000 share options granted to Messrs. Hurd and Rootness and
the 26,667 share option granted to Mr. Auringer based on a determination
that such individuals had met the performance criteria for the applicable
period.
10
<PAGE>
AGGREGATE OPTION
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The purpose of the following table is to report exercise of stock options
by the Named Executive Officers during fiscal 1997 and the value of their
unexercised stock options as of January 3, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
-------------------------- ---------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allan C. Hurd - $ - 26,667 70,000 $79,598 $220,660
Thomas M. Rootness(2) 12,000 67,500 14,667 50,000 35,342 146,900
David L. Auringer - - 10,000 43,333 18,130 30,217
</TABLE>
___________
(1) Value is based on the per share closing price of the Company's Common Stock
on January 2, 1998, which was $5.563.
(2) Mr. Rootness exercised an option to purchase 12,000 shares of Common Stock
on August 14, 1997 by using 3,000 shares of Common Stock held in excess of
six months to pay the exercise price and receiving a net of 9,000 shares.
The exercise price of such option was $1.875 per share, the fair market
value of a share of Common Stock on the date of grant, as determined by the
Board of Directors. Value Realized is based on the per share closing price
of the Company's Common Stock on August 13, 1997, which was $7.50.
EMPLOYMENT CONTRACTS; TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company does not have any employment or non-competition agreements with
any members of its executive management team but has entered into
confidentiality and non-solicitation agreements with such persons. Such
agreements provide that the executive will not solicit any other employee of the
Company to leave the Company during the executive's employment with the Company
and for one year following such employment, will not compete with the Company
during the executive's employment and will protect the proprietary information
of the Company during and following such executive's employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John B. Donahue, a director of the Company, is the owner of Donahue
Harley-Davidson and Delano Sports Center (the "Dealer"), which executed the
Company's standard form Authorized Dealership Agreement (the "Dealership
Agreement") on May 16, 1997. Pursuant to the Dealership Agreement, the Dealer is
an authorized dealer of the Company for the sale and service of the Company's
products.
11
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's directors, executive officers and
persons who own more than ten percent of the Company's Common Stock to file
initial reports of ownership of the Company's Common Stock and changes in such
ownership with the Securities and Exchange Commission. To the Company's
knowledge based solely on a review of copies of forms submitted to the Company
during and with respect to fiscal 1997 and on written representations from the
Company's directors and executive officers, all required reports were filed on a
timely basis during fiscal 1997.
12
<PAGE>
PERFORMANCE EVALUATION
The graph below compares total cumulative shareholders' return on the
Common Stock for the period from the close of the NASDAQ Stock Market - U.S.
Companies on the date of the Company's initial public offering of Common Stock
(July 24, 1997) to December 31, 1997, with the total cumulative return on the
CRSP Total Return Index for the NASDAQ Stock Market - U.S. Companies (the "CRSP
Index") and the Russell 2000 Index over the same period. The Russell 2000 Index
measures the performance of the 2,000 smallest companies in the Russell 3000
Index (comprised of the 3,000 largest U.S. companies based on total market
capitalization). The Russell 2000 Index was used because the Company believes
that no published industry or line-of-business index is available for comparison
purposes and the Company does not believe that it can reasonably identify an
industry peer group due to its unique characteristics. The index level for the
graph and table was set to 100 on July 24, 1997 for the Common Stock, the CRSP
Index and the Russell 2000 Index and assumes the reinvestment of all dividends.
[Performance graph]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Total Cumulative Return
-------------------------------------------------------
7/24/97 7/97 8/97 9/97 10/97 11/97 12/97
------- ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
The Company 100 104 81 86 73 89 74
CRSP Index 100 111 110 117 111 111 110
Russell 2000 Index 100 105 107 115 110 109 111
</TABLE>
13
<PAGE>
PROPOSAL TO APPROVE AN
AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board of Directors, subject to shareholder approval, has approved an
amendment to the Company's Articles of Incorporation (the "Articles")
increasing the Company's authorized capital stock to a total of 32,000,000
shares of which 7,000,000 are to be classified as Preferred Stock and
25,000,000 are to be classified as Common Stock. The current Articles
authorize a total of 23,333,332 shares of which 6,666,666 are classified as
Preferred Stock and 16,666,666 are classified as Common Stock.
Approval of this proposal would amend Article V of the Articles to read
in its entirety as follows:
"ARTICLE 5
CAPITAL
The total authorized number of shares of the Corporation is
32,000,000. The shares are classified into two classes, consisting of
7,000,000 shares of undesignated Preferred Stock, of the par value of
$.01 per share, and 25,000,000 shares of Common Stock, of the par
value of $.01 per share.
The Board of Directors is authorized to establish one or more
series of Preferred Stock by resolution adopted and filed in the
manner provided by law, setting forth the designation of each such
series, and fixing the relative rights and preferences of each such
series, including, but not limited to, fixing the relative voting
rights, if any, of each such series of Preferred Stock to the full
extent permitted by law."
The Board of Directors approved the increase in the Company's authorized
capital stock in order to make shares available for anticipated financing
needs as the Company moves towards and begins production. In addition, the
Board of Directors considers it desirable to have additional shares of
capital stock available to the Company for possible future stock offerings,
acquisitions, stock options, stock dividends or stock splits and for other
general corporate purposes. The Board of Directors has not authorized the
issuance of any additional shares, and there are no present agreements or
commitments with respect to the issuance of any additional shares. If the
increase in the authorized capital stock is approved by the shareholders, the
additional shares may be issued at such times and on such terms and
conditions as the Board of Directors may determine without further approval
by the shareholders. Shareholders do not have preemptive rights with respect
to the current authorized capital stock.
Shareholders should be aware that the increase in the Company's
authorized capital stock could have an antitakeover effect since new shares
could be issued to dilute the stock ownership of a person attempting to
acquire control of the Company. The proposed increase has not, however, been
proposed for an antitakeover-related purpose, and the Board of Directors has
no current knowledge of any current efforts by a third party to effect a
change in control of the Company.
14
<PAGE>
A vote for Proposal Two is a vote to approve the amendment to the
Articles increasing the Company's authorized capital stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION INCREASING THE COMPANY'S
AUTHORIZED CAPITAL STOCK.
PROPOSAL TO APPROVE THE
AMENDED AND RESTATED 1995 STOCK PLAN
PROPOSED AMENDMENTS REQUIRING SHAREHOLDER APPROVAL
The Board of Directors, subject to shareholder approval, has approved an
amendment to the Excelsior-Henderson Motorcycle Manufacturing Company 1995
Stock Plan (the "1995 Stock Plan") to increase by 533,333 (from 666,667 to
1,200,000) the number of shares of Common Stock available for issuance under
the 1995 Stock Plan. The purpose of this amendment is to ensure that the
Company has flexibility to meet its foreseeable future needs for awards to be
granted under the 1995 Stock Plan.
In addition, the Board of Directors, subject to shareholder approval,
has approved an amendment to the 1995 Stock Plan which sets at 300,000 the
maximum number of shares covered by options to purchase the Company's Common
Stock that may be awarded to any one employee in any fiscal year. The
purpose of this amendment is to allow option grants under the 1995 Stock Plan
to comply with Section 162(m) of the Code. Certain provisions of Section
162(m) are described below in this proposal under "Board of Directors'
Recommendation."
The Board of Directors has directed that the 1995 Stock Plan, as amended
and restated, be submitted to the shareholders in its entirety for approval.
If shareholders approve the 1995 Stock Plan, as amended and restated, an
aggregate of 543,393 shares of Common Stock would be available for future
awards under the 1995 Stock Plan.
DESCRIPTION OF 1995 STOCK PLAN
GENERAL
In December 1995, the Board of Directors of the Company adopted the
Company's 1995 Stock Plan, which was approved by the Company's shareholders
in March 1996.
As of May 7, 1998, an aggregate of 50,667 shares had been issued under
the 1995 Stock Plan and options to purchase 605,940 shares were outstanding
and held by employees, executive officers and directors of the Company. On
such date, an aggregate of 10,060 shares of Common Stock were available for
future grants of awards under the 1995 Stock Plan. Options outstanding at
May 7, 1998 have per share exercise prices ranging from $1.875 to $7.00, or a
weighted average exercise price of $3.95, and expire from four years and five
months to ten years from the date of grant of the option on dates ranging
between June 30, 2000 and April 22, 2008, unless exercised prior to that
time. Approximately 95 employees are currently eligible to participate in
the 1995 Stock Plan.
15
<PAGE>
PURPOSE
The purpose of the 1995 Stock Plan is to attract, motivate and retain
key personnel, including non-employee directors, to produce a superior return
to the shareholders of the Company by offering such personnel an opportunity
to realize stock appreciation, by facilitating stock ownership, and by
rewarding them for achieving a high level of corporate financial performance.
ADMINISTRATION
The 1995 Stock Plan is administered by a committee (the "Committee") of
two or more directors who are "non-employee directors" within the meaning of
Rule 16b-3 under the Exchange Act. The Compensation Committee of the Board
of Directors currently serves as the Committee that administers the 1995
Stock Plan, of which both members are "non-employee directors" for purposes
of Exchange Act Rule 16b-3 and "outside directors" for purposes of Section
162(m) of the Code. Subject to the provisions of the 1995 Stock Plan, the
Committee has the exclusive power to make awards under the 1995 Stock Plan,
to determine when and to whom awards will be granted, and the form, amount
and other terms and conditions of each award. The Committee has the
authority to interpret the 1995 Stock Plan and any award or agreement made
under the 1995 Stock Plan, to establish, amend, waive and rescind any rules
and regulations relating to the administration of the 1995 Stock Plan, to
determine the terms and provisions of any agreements entered into under the
1995 Stock Plan (not inconsistent with the 1995 Stock Plan), and to make all
other determinations necessary or advisable for the administration of the
1995 Stock Plan. The Committee may delegate all or part of its
responsibilities under the 1995 Stock Plan to persons who are not
"non-employee directors" within the meaning of Exchange Act Rule 16b-3 for
purposes of determining and administering awards solely to employees who are
not then subject to the reporting requirements of Section 16 of the Exchange
Act.
Notwithstanding the foregoing, the granting, terms, conditions and
eligibility requirements of Director Options (as defined in the 1995 Stock
Plan) are governed solely by the provisions of the 1995 Stock Plan pertaining
thereto, and the Committee has no discretion with respect to the granting of
such awards or to alter or amend any terms, conditions or eligibility
requirements of such awards to outside directors. The provisions for
automatic stock option grants to outside directors are non-exclusive.
NUMBER OF SHARES AND ELIGIBILITY
The total number of shares of Company Common Stock available for
distribution under the 1995 Stock Plan is presently 666,667 (1,200,000 as the
1995 Stock Plan is proposed to be amended), subject to adjustment for future
stock splits, stock dividends and similar changes in the capitalization of
the Company. As proposed to be amended, the 1995 Stock Plan would provide
that no participant could receive, in any fiscal year, options to purchase
more than 300,000 shares of Common Stock under the 1995 Stock Plan.
All employees of the Company and its affiliates are eligible to receive
awards under the 1995 Stock Plan at the discretion of the Committee. Outside
directors automatically receive grants of non-statutory options as set forth
under "Types of Awards -- Director Options". Awards other than incentive
stock options also may be awarded by the Committee to individuals who are not
employees or outside directors but who provide services to the Company or its
affiliates in the capacity of an independent contractor.
16
<PAGE>
TYPES OF AWARDS
The types of awards that may be granted under the 1995 Stock Plan
include incentive and non-statutory stock options and restricted and
unrestricted stock. Subject to certain restrictions applicable to outside
director options and incentive stock options, awards will be exercisable by
the recipients at such times as are determined by the Committee.
In addition to the general characteristics of all of the awards
described in this Proxy Statement, the basic characteristics of awards that
may be granted under the 1995 Stock Plan are as follows:
INCENTIVE AND NON-STATUTORY STOCK OPTIONS. Options may be granted to
recipients at such exercise prices as the Committee may determine but not
less than 85% of their fair market value (as defined in the 1995 Stock Plan)
as of the date the option is granted. Stock options may be granted and
exercised at such times as the Committee may determine, except that, unless
applicable federal tax laws are modified, (1) no incentive stock option may
be granted at less than fair market value, (2) no incentive stock options may
be granted more than ten years after the effective date of the 1995 Stock
Plan, (3) an incentive stock option shall not be exercisable more than ten
years after the date of grant, and (4) the aggregate fair market value of the
shares of the Company's Common Stock subject to incentive stock options that
may become exercisable in any calendar year for any employee may not exceed
$100,000 under the 1995 Stock Plan or any other plan of the Company.
The purchase price payable upon exercise of options may be payable in
cash, or through a reduction of the number of shares of Common Stock
delivered to the participant upon exercise of the option or by delivering
stock already owned by the participant (where the fair market value of the
shares of Common Stock withheld or delivered on the date of exercise is equal
to the option price of the stock being purchased), or in a combination of
cash and such stock, unless otherwise provided in the applicable award
agreement. To the extent permitted by law, the participants may
simultaneously exercise options and sell the stock purchased upon such
exercise pursuant to brokerage or similar relationships and use the sale
proceeds to pay the purchase price. The ability of a participant to pay any
portion of the purchase price in shares of Common Stock or through a
reduction in the number of shares received is subject to the discretion of
the Committee to prohibit such method of payment if it could have adverse
financial accounting consequences for the Company.
DIRECTOR OPTIONS. Each outside director receives, when elected, an
option to purchase 10,000 shares of Common Stock at a price equal to the fair
market value of a share of Common Stock on the date of grant, vesting in one
year. In addition, beginning with the 1998 Annual Meeting of Shareholders,
and for each subsequent Annual Meeting of Shareholders, each outside director
is granted an option to purchase 6,667 shares of Common Stock at the
conclusion of each such Annual Meeting at a price equal to the fair market
value of a share of Common Stock on the date of grant, such options to vest
on the date of the next Annual Meeting of Shareholders subsequent to the
grant. Notwithstanding the foregoing, outside directors are not eligible to
receive the 6,667 share annual option grant prior to completing six months of
service as an outside director.
RESTRICTED STOCK AND STOCK AWARDS. The Committee may grant Common Stock
to recipients containing such restrictions as the Committee may determine,
including provisions requiring forfeiture and imposing restrictions upon
stock transfer. A participant with a restricted stock award shall have all
17
<PAGE>
the other rights of a shareholder including the right to receive dividends
and the right to vote. The Committee may also grant awards of unrestricted
stock.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS
The Committee may accelerate vesting requirements and the expiration of
the applicable term or restrictions upon such terms and conditions as are set
forth in the participant's agreement, or otherwise in the Committee's
discretion, including acceleration resulting from a change in control,
fundamental change (as such term is defined in the 1995 Stock Plan), the
meeting of performance objectives set by the Committee, or the participant's
death, disability or retirement.
DURATION, ADJUSTMENTS, MODIFICATIONS, TERMINATION
The 1995 Stock Plan will remain in effect until all Common Stock subject
to it is distributed or all awards have expired or lapsed, whichever occurs
later, or the 1995 Stock Plan is terminated as described below.
In the event of a fundamental change, recapitalization,
reclassification, stock dividend, stock split, stock combination or other
relevant change, the Committee has the discretion to adjust the number and
type of shares of Common Stock available for awards or the number and type of
shares of Common Stock subject to outstanding awards, and the exercise price
of outstanding options. Under the 1995 Stock Plan, the Committee may cancel
outstanding options generally in exchange for cash payments to the recipients
upon the occurrence of a fundamental change.
The 1995 Stock Plan also gives the Board the right to terminate, suspend
or modify the 1995 Stock Plan, except that amendments to the 1995 Stock Plan
are subject to shareholder approval if needed to comply with Exchange Act
Rule 16b-3, the incentive stock option provisions of the Code, their
successor provisions, or any other applicable law or regulation.
SUMMARY OF FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the
1995 Stock Plan generally will result in the following tax events for United
States citizens under current United States federal income tax laws.
INCENTIVE STOCK OPTIONS
A recipient will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time an incentive stock option is
granted under the 1995 Stock Plan. If certain statutory employment and
holding period conditions are satisfied before the recipient disposes of
shares of Common Stock acquired pursuant to the exercise of such an option,
then no taxable income will result upon the exercise of such option and the
Company will not be entitled to any deduction in connection with such
exercise. Upon disposition of the shares of Common Stock after expiration of
the statutory holding periods, any gain or loss realized by a recipient will
be a capital gain or loss. The Company will not be entitled to a deduction
with respect to a disposition of the shares of Common Stock by a recipient
after the expiration of the statutory holding periods.
18
<PAGE>
Except in the event of death, if shares of Common Stock acquired by a
recipient upon the exercise of an incentive stock option are disposed of
before the expiration of the statutory holding periods (a "disqualifying
disposition"), the recipient will be considered to have realized as
compensation, taxable as ordinary income in the year of disposition, an
amount, not exceeding the gain realized on such disposition, equal to the
difference between the exercise price and the fair market value of the shares
of Common Stock on the date of exercise of the option. The Company will be
entitled to a deduction at the same time and in the same amount as the
recipient is deemed to have realized ordinary income. Any gain realized on
the disposition in excess of the amount treated as compensation or any loss
realized on the disposition will constitute capital gain or loss,
respectively. If the recipient pays the option price with shares of Common
Stock that were originally acquired pursuant to the exercise of an incentive
stock option and the statutory holding periods for such shares of Common
Stock have not been met, the recipient will be treated as having made a
disqualifying disposition of such shares of Common Stock, and the tax
consequences of such disqualifying disposition will be as described above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated
as if it were a non-statutory stock option, the tax consequences of which are
discussed below.
NON-STATUTORY STOCK OPTIONS
A recipient will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time a non-statutory stock option
is granted under the 1995 Stock Plan. At the time of exercise of a
non-statutory stock option, the recipient will realize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares of Common Stock on the date of exercise over the
option price. Upon disposition of the shares of Common Stock, any additional
gain or loss realized by the recipient will be taxed as a capital gain or
loss.
RESTRICTED AND UNRESTRICTED STOCK
Unless the recipient files an election to be taxed under Section 83(b)
of the Code, (1) the recipient will not realize income upon the grant of
restricted stock, (2) the recipient will realize ordinary income, and the
Company will be entitled to a corresponding deduction, when the restrictions
have been removed or expire, and (3) the amount of such ordinary income and
deduction will be the fair market value of the restricted stock on the date
the restrictions are removed or expire. If the recipient files an election
to be taxed under Section 83(b) of the Code, the tax consequences to the
recipient and the Company will be determined as of the date of the grant of
the restricted stock rather than as of the date of the removal or expiration
of the restrictions.
With respect to awards of unrestricted stock, (1) the recipient will
realize ordinary income and the Company will be entitled to a corresponding
deduction upon the grant of the unrestricted stock, and (2) the amount of
such ordinary income and deduction will be the fair market value of such
unrestricted stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair
market value of such shares of Common Stock on the date the recipient
realizes ordinary income will be treated as a capital gain or loss.
19
<PAGE>
WITHHOLDING
The 1995 Stock Plan permits the Company to withhold from awards an
amount sufficient to cover any required withholding taxes. If permitted by
the Committee, in lieu of cash, a participant may elect to cover withholding
obligations through a reduction in the number of shares of Common Stock to be
delivered to the participant or by delivery of shares of Common Stock already
owned by the participant.
BOARD OF DIRECTORS' RECOMMENDATION
On December 4, 1997, the Board of Directors, subject to obtaining
shareholder approval, approved amendments to the 1995 Stock Plan to increase
the total number of shares of Common Stock available for issuance under the
1995 Stock Plan from 666,667 to 1,200,000, and to set at 300,000 the maximum
number of shares of the Company's Common Stock subject to options that may be
awarded to any one employee in any given fiscal year, and determined to
restate the 1995 Stock Plan in its entirety. The Board directed that the
1995 Stock Plan, as amended and restated, be submitted in its entirety to the
shareholders for approval. The changes described above are the only
substantive changes to the 1995 Stock Plan as described herein.
The submission of the entire 1995 Stock Plan, as amended and restated,
for approval by the shareholders is necessary for the Company to comply with
the requirements of Section 162(m) of the Code. Generally, Section 162(m)
prohibits a publicly traded corporation from deducting compensation in excess
of $1 million per taxable year paid to any person who, on the last day of the
taxable year, is the chief executive officer or one of the four most highly
compensated executive officers other than the chief executive officer. Under
Section 162(m), compensation that qualifies as "performance-based
compensation" is not counted for purposes of the $1 million limit. In
addition to other requirements, Section 162(m) provides that to qualify for
this exclusion, "performance-based compensation" must be paid pursuant to a
compensation plan that has been approved by the shareholders of a
corporation. Currently, the Company does not pay compensation to any person
that would be affected by the limitations of Section 162(m). The Board of
Directors, however, believes it to be in the best interests of the long-term
growth and performance of the Company to maintain flexibility with respect to
compensation, and, therefore, to comply with Section 162(m).
A vote for Proposal Three is a vote to approve the Excelsior-Henderson
Motorcycle Manufacturing Company Amended and Restated 1995 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY AMENDED AND RESTATED 1995
STOCK PLAN DISCUSSED IN THIS PROXY STATEMENT.
20
<PAGE>
PROPOSAL TO APPROVE THE EXCELSIOR-HENDERSON
TEAM STOCK PURCHASE PLAN
ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN BY THE BOARD
On June 1, 1998, the Board of Directors adopted the Excelsior-Henderson
Team Stock Purchase Plan (the "Purchase Plan") and directed that the Purchase
Plan be submitted to a vote of the shareholders at the meeting. If approved
by the shareholders, the Purchase Plan will become effective August 1, 1998.
PURPOSE
The purpose of the Purchase Plan is to provide eligible employees with
an opportunity to acquire a proprietary interest in the Company through the
purchase of its Common Stock and, thus, to develop a stronger incentive to
work for the continued success of the Company. The Purchase Plan is an
employee stock purchase plan under Section 423 of the Code.
ADMINISTRATION
The Purchase Plan will be administered by a committee of the Board of
Directors (the "Committee"). The Compensation Committee of the Board of
Directors has been designated as the Committee to administer the Purchase
Plan. Subject to the provisions of the Purchase Plan, the Committee is
authorized to determine any questions arising in the administration,
interpretation and application of the Purchase Plan, and to make such uniform
rules as may be necessary to carry out its provisions.
ELIGIBILITY AND NUMBER OF SHARES
Up to 300,000 shares of Common Stock of the Company are available for
distribution under the Purchase Plan, subject to appropriate adjustments by
the Committee in the event of certain changes in the outstanding shares of
Common Stock by reason of stock dividends, stock splits, corporate
separations, recapitalizations, mergers, consolidations, combinations,
exchanges of shares or similar transactions. Shares of Common Stock
delivered pursuant to the Purchase Plan will be newly issued shares of the
Company.
Any employee of the Company or, subject to approval by the Board of
Directors, a parent or subsidiary corporation of the Company (including
officers and any directors who are also employees) will be eligible to
participate in the Purchase Plan for any Purchase Period (as defined in the
Purchase Plan) so long as, on the first day of such Purchase Period, the
employee is customarily employed at least 20 hours per week.
No employee may participate in the Purchase Plan if such employee would
be deemed for purposes of the Code to own stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company.
The Company currently has approximately 95 employees who are eligible to
participate in the Purchase Plan.
21
<PAGE>
PARTICIPATION
An eligible employee who elects to participate in the Purchase Plan will
authorize the Company to make payroll deductions of a specified whole
percentage of the employee's base compensation plus commissions and
overtime. The specified whole percentage may be from 1% up to a maximum
percentage to be set by the Committee prior to the applicable Purchase Period.
PURCHASE OF STOCK
Amounts withheld for a participant in the Purchase Plan will be used to
purchase Common Stock of the Company as of the last day of the Purchase
Period at a price equal to the 85% of the lesser of the Fair Market Value (as
defined in the Purchase Plan) of a share of Common Stock on either the first
or last day of the Purchase Period.
A participant will not be entitled to any of the rights or privileges of
a shareholder of the Company, including the right to vote and the right to
receive any dividends, until he or she has actually paid the purchase price
and been issued a certificate for the shares.
AMENDMENT OR MODIFICATION
The Board of Directors may at any time amend the Purchase Plan in any
respect, so long as such amendment does not adversely affect the rights of
participants with respect to shares of Common Stock previously acquired under
the Purchase Plan. In addition, approval by the shareholders of the Company
is required for any amendment that (i) increases the number of shares of
Common Stock to be reserved under the Purchase Plan (except for adjustments
by reason of stock dividends, stock splits, corporate separations,
recapitalizations, mergers, consolidations, combinations, exchanges of shares
or similar transactions), (ii) decreases the minimum purchase price, or (iii)
changes the definition of employees eligible to participate in the Purchase
Plan.
TERMINATION
All rights of participants in any offering under the Purchase Plan will
terminate at the earlier of (i) the day that participants become entitled to
purchase a number of shares of Common Stock equal to or greater than the
number of shares of Common Stock remaining available for purchase or (ii) at
any time, at the discretion of the Board of Directors, after 30-days' notice
has been given to all participants.
FEDERAL TAX CONSIDERATIONS
Payroll deductions under the Purchase Plan will be made after taxes.
Participants will not recognize any additional income as a result of
participation in the Purchase Plan until the disposal of shares of Common
Stock acquired under the Purchase Plan or the death of the participant.
Participants who hold their shares of Common Stock for more than 24 months
after the first day of the Purchase Period or die while holding their shares
of Common Stock will recognize ordinary income in the year of disposition or
death equal to the lesser of (i) the excess of the fair market value of the
shares of Common Stock on the date of disposition or death over the purchase
price paid by the participant or (ii) the excess of the fair market value of
the shares of Common Stock on the first day of the Purchase
22
<PAGE>
Period over the purchase price paid by the participant. If the 24-month
holding period has been satisfied when the participant sells the shares of
Common Stock or if the participant dies while holding the shares of Common
Stock, the Company will not be entitled to any deduction in connection with
the disposition of such shares by the participant.
Participants who dispose of their shares of Common Stock within 24
months after the first day of the Purchase Period will be considered to have
realized ordinary income in the year of disposition in an amount equal to the
excess of the fair market value of the shares of Common Stock on the date
they were purchased by the participant over the purchase price paid by the
participant. If such dispositions occur, the Company generally will be
entitled to a deduction at the same time and in the same amount as the
participants who make those dispositions are deemed to have realized ordinary
income.
Participants will have a basis in their shares of Common Stock equal to
the purchase price of their shares of Common Stock plus any amount that must
be treated as ordinary income at the time of disposition of the shares of
Common Stock, as explained above. Any additional gain or loss realized on
the disposition of shares of Common Stock acquired under the Purchase Plan
will be capital gain or loss.
A vote for Proposal Four is a vote to approve the Excelsior-Henderson
Team Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
EXCELSIOR-HENDERSON TEAM STOCK PURCHASE PLAN DISCUSSED IN THIS PROXY
STATEMENT.
RELATIONSHIP WITH AND APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP has been the auditors for the Company
since the Company's inception in December 1993. The Board of Directors again
has selected Arthur Andersen LLP to serve as the Company's independent
auditors for the fiscal year ending January 2, 1999, subject to ratification
by the shareholders. While it is not required to do so, the Board of
Directors is submitting the selection of that firm for ratification to
ascertain the view of the shareholders. If the selection is not ratified,
the Board of Directors will reconsider its selection. Proxies solicited by
the Board of Directors will, unless otherwise directed, be voted to ratify
the appointment of Arthur Andersen LLP as independent auditors for the
Company for the fiscal year ending January 2, 1999.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Shareholders and will be afforded an opportunity to make a
statement if such representative so desires and will be available to respond
to appropriate questions during the meeting.
23
<PAGE>
ADDITIONAL MATTERS
The Annual Report of the Company for the year ended January 3, 1998,
including financial statements, is being mailed with this Proxy Statement.
Shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at its principal
executive office no later than February 27, 1999 for inclusion in the Proxy
Statement for that meeting.
As of the date of this Proxy Statement, management knows of no matters
that will be presented for determination at the meeting other than those
referred to herein. If any other matters properly come before the Annual
Meeting calling for a vote of shareholders, it is intended that the shares of
Common Stock represented by the proxies solicited by the Board of Directors
will be voted by the persons named therein in accordance with their best
judgment.
By Order of the Board of Directors,
/s/
Gale R. Mellum
SECRETARY
Dated: June 27, 1998
24
<PAGE>
[LOGO] EXCELSIOR-HENDERSON MOTORCYCLE THIS PROXY IS SOLICITED ON BEHALF
MANUFACTURING COMPANY OF THE BOARD OF DIRECTORS
805 Hanlon Drive
Belle Plaine, Minnesota 56011
The undersigned hereby appoints
Daniel L. Hanlon and David P.
Hanlon, and each of them, as
Proxies, each with the power to
appoint his substitute, and
hereby authorizes such Proxies
to represent and to vote, as
designated below, all the shares
of Common Stock of Excelsior-
Henderson Motorcycle
Manufacturing Company held of
record by the undersigned on
May 26, 1998, at the Annual
Meeting of Shareholders to be
held on July 25, 1998, or any
adjournment thereof.
PROXY
1. ELECTION OF DIRECTORS. Nominees to the Board of Directors are Daniel L.
Hanlon, David P. Hanlon, John B. Donahue, Wayne M. Fortun and David R. Pomije,
all for a one-year term.
/ / FOR ALL NOMINEES LISTED ABOVE / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
________________________________________________________________________________
2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED CAPITAL STOCK TO 32,000,000 SHARES
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF THE EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
AMENDED AND RESTATED 1995 STOCK PLAN
/ / FOR / / AGAINST / / ABSTAIN
4. APPROVAL OF THE EXCELSIOR-HENDERSON TEAM STOCK PURCHASE PLAN
/ / FOR / / AGAINST / / ABSTAIN
5. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP as independent
public accountants of the Company for the 1998 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5. THE PROXIES ARE AUTHORIZED TO VOTE IN
THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE MEETING.
<PAGE>
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
____________________________________________
Signature
____________________________________________
Signature if held jointly
Dated: ______________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
