<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / 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,
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,
Gale R. Mellum
SECRETARY
<PAGE>
Belle Plaine, Minnesota
June 27, 1998
------------------------
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.
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
2
<PAGE>
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, ever since learning to ride on the family farm. Mr. Hanlon
is a brother of David P. Hanlon.
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 30 years, ever since learning to ride on the family
farm. Mr. Hanlon is a brother of Daniel L. Hanlon.
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 motor sports
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
4
<PAGE>
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.
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 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
6
<PAGE>
situated companies and the recommendations of the Co-Chief Executive Officers
with respect to the 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 1996 75,865 - - -
Co-Chief Executive Officer 1995 65,000 - - -
David P. Hanlon, 1997 115,000 - - -
Co-Founder, Co-Chairman and 1996 75,865 - - -
Co-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 1996 69,420 - 66,667 24,800
Finance 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> <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 . 12,000 67,500 14,667 50,000 35,342 146,900
Rootness(2)
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
11
<PAGE>
Agreement, the Dealer is an authorized dealer of the Company for the sale and
service of the Company's products.
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. 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.
15
<PAGE>
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.
PURPOSE
The purpose of the 1995 Stock Plan is to motivate 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.
16
<PAGE>
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.
17
<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.
18
<PAGE>
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
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
19
<PAGE>
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.
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
20
<PAGE>
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.
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.
21
<PAGE>
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.
22
<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.
23
<PAGE>
The Company currently has approximately 95 employees who are eligible to
participate in the Purchase Plan.
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, (iii)
withdraws the administration of the Purchase Plan from the Committee, or (iv)
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.
24
<PAGE>
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 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.
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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,
Gale R. Mellum
SECRETARY
Dated: June 27, 1998
27
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EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
AMENDED AND RESTATED 1995 STOCK PLAN
1. AMENDMENT OF EXISTING PLAN; PURPOSE. This Excelsior-Henderson
Motorcycle Manufacturing Company Amended and Restated 1995 Stock Plan (the
"Plan") amends and restates in its entirety the Hanlon Manufacturing Company
1995 Stock Plan. The purpose of the Plan is to attract, motivate and retain
employees, directors, advisors and officers to produce a superior return to the
shareholders of Excelsior-Henderson Motorcycle Manufacturing Company by offering
such persons an opportunity to realize Stock appreciation, by facilitating Stock
ownership and by rewarding them for achieving a high level of corporate
financial performance. The Plan is also intended to facilitate recruiting and
retaining experienced and knowledgeable advisors and independent contractors by
permitting such persons to acquire a proprietary interest in the Company.
2. DEFINITIONS AND RULES OF CONSTRUCTION. The capitalized terms used in
this Plan have the meanings, and certain rules of construction are, set forth in
the list of defined terms attached to this Plan as EXHIBIT A.
3. ADMINISTRATION.
3.1 AUTHORITY OF COMMITTEE. The Committee shall administer the Plan.
The Committee shall have exclusive power to make Awards, to determine when
and to whom Awards will be granted, the form of each Award, the amount of
each Award, and any other terms or conditions of each Award. Each Award
shall be subject to an Agreement authorized by the Committee. The
Committee's interpretation of the Plan and of any Awards made under the
Plan shall be final and binding on all persons with an interest therein.
The Committee shall have the power to establish regulations to administer
the Plan and to change such regulations. Solely for purposes of
determining and administering Awards to Participants who are not then
subject to the reporting requirements of Section 16 of the Exchange Act,
the Committee may delegate all or any portion of its authority under the
Plan to persons who are not Non-Employee Directors.
3.2 AWARDS TO OUTSIDE DIRECTORS. Notwithstanding any contrary
provisions of the Plan, the granting, terms, conditions and eligibility
requirements of Awards granted to Outside Directors under Section 9.3 of
the Plan are governed solely by the provisions of the Plan pertaining
thereto, and the Committee shall have 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. Provided,
however, that the Committee may make Awards to Outside Directors in
addition to Awards granted under such Section 9.3 and such other Awards
need not be upon the same terms as Awards granted under such Section 9.3
<PAGE>
3.3 INDEMNIFICATION. To the full extent permitted by law, (i) no
member of the Committee or any person to whom the Committee delegates
authority under the Plan shall be liable for any action or determination
taken or made in good faith with respect to the Plan or any Award made
under the Plan, and (ii) the members of the Committee and each person to
whom the Committee delegates authority under the Plan shall be entitled to
indemnification by the Company with regard to such actions and
determinations.
4. SHARES AVAILABLE UNDER THE PLAN.
4.1 SHARES AVAILABLE. The number of Shares available for
distribution under the Plan shall not exceed 1,200,000* (subject to
adjustment pursuant to Section 15 hereof). Any Shares subject to the terms
and conditions of an Award under this Plan which are not used because the
terms and conditions of the Award are not met may again be used for an
Award under the Plan.
4.2 CONDITIONAL ISSUANCES. If the Plan is amended at any time
subject to shareholder approval, then the Committee may, in accordance with
the terms and conditions of the Plan, grant Awards on a conditional basis,
subject to such approval by the shareholders of the Company not later than
the next annual meeting of the shareholders of the Company following the
date of such conditional grant. Any Award granted on a conditional basis
shall not be exercisable unless and until the amendment to the Plan is
approved by the shareholders of the Company. If such an amendment is not
approved by the shareholders at the next annual meeting of shareholders of
the Company following the conditional grant, then the conditional grant
shall be canceled.
5. ELIGIBILITY. Except as otherwise provided in Section 9 hereof, the
granting of Awards to Participants is solely at the discretion of the Committee.
The Committee shall determine the Participants, and the form, amount and other
terms and conditions of each Award, taking into consideration such factors,
including any recommendations of officers of the Company, as it deems relevant
to select and motivate Participants to advance the interests of the Company.
Participants shall be persons determined by the Committee as having contributed
materially to the success of the Company or as being in a position to contribute
materially to the future success of the Company.
6. GENERAL TERMS OF AWARDS.
6.1 AMOUNT OF AWARD. Each Agreement shall set forth the number of
Shares of Restricted Stock or other Stock subject to such Agreement, or the
number of Shares to which the Option subject to such Agreement applies, as
the case may be. The Maximum Annual Employee Grant shall not exceed
300,000 Shares (subject to adjustment pursuant to Section 15 hereof).
6.2 TERM. Each Agreement, other than those relating solely to Awards
of Stock without restrictions, shall set forth the Term of the Option or
Restricted Stock, as the case
- - -------------------
* Reflects a 2 for 3 reverse split of the Company's Common Stock on May 21,
1997.
2
<PAGE>
may be. An Agreement may permit acceleration of the commencement of the
applicable Term and the expiration of any restrictions on exercisability
upon such terms and conditions as shall be set forth in the Agreement,
which may, but need not, include without limitation acceleration resulting
from the occurrence of an Event, Fundamental Change, the meeting of
performance objectives established by the Committee in an Agreement, or in
the event of the Participant's death or Retirement.
6.3 TRANSFERABILITY. During the lifetime of a Participant to whom
an Award is granted, only such Participant (or such Participant's legal
representative) may exercise an Option. No Award of Restricted Stock
(prior to the expiration of the restrictions) or Options may be sold,
assigned, transferred, exchanged or otherwise encumbered other than
pursuant to a qualified domestic relations order as defined in the Code
or Title 1 of the Employee Retirement Income Security Act ("ERISA") or
the rules thereunder, and any attempt to do so shall be of no effect.
Notwithstanding the immediately preceding sentence, an Agreement may
provide that (i) the Award subject to the Agreement shall be
transferable to a Successor in the event of a Participant's death or
(ii) a Non-Statutory Stock Option shall be transferable to any member of
a Participant's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of
such Participant's "immediate family" or partnerships in which such
family members are the only partners; provided, however, that (1) the
Agreement with respect to such Options, which must be approved by the
Committee, expressly so provides either at the time of initial grant or
by amendment to an outstanding Agreement, (2) the Participant receives
no consideration for the transfer and (3) such transferred Non-Statutory
Stock Option shall continue to be subject to the same terms and
conditions as were applicable to such Non-Statutory Stock Option
immediately prior to its transfer.
6.4 TERMINATION OF EMPLOYMENT. Except as otherwise provided in the
applicable Agreement with any Participant, for any Participant who is an
employee of the Company, no Option may be exercised by the Participant, and
all Restricted Stock held by the Participant shall be forfeited (i) after
the 45th day following the day the Participant's employment by the Company
ceases if such cessation of employment is for a reason other than death,
Retirement, or Total and Permanent Disability, or (ii) three months after
Participant's employment by the Company ceases if such cessation of
employment is because of death, Retirement, or Total and Permanent
Disability, or (iii) if applicable, the date of breach by a Participant of
any employment or confidentiality agreement by and between the Company and
Participant, except as, and to the extent, provided in the Agreement
applicable to that Award. An Award may be exercised by, or paid to, the
Successor of a Participant following the death of such Participant to the
extent, and during the period of time, if any, provided in the applicable
Agreement.
7. RESTRICTED STOCK AWARDS. An Award of Restricted Stock under the Plan
shall consist of Shares subject to restrictions on transfer and conditions of
forfeiture, which restrictions and conditions shall be included in the
applicable Agreement. Except as otherwise provided in the applicable Agreement,
each Stock certificate issued in respect to an Award of Restricted Stock shall
3
<PAGE>
either be deposited with the Company or its designee, together with an
assignment separate from such certificate, in blank, signed by the Participant,
or bear such legends with respect to the restricted nature of the Restricted
Stock evidenced thereby as shall be provided for in the applicable Agreement.
The Agreement shall describe the terms and conditions by which the restrictions
upon awarded Restricted Stock shall lapse. Upon the lapse of the restrictions,
stock certificates free of restrictive legends, if any, relating to such
restrictions shall be issued to the Participant or his Successor. The Agreement
shall also set forth any required payment for such Restricted Stock, if such
payment is required by the Committee, and any provisions regarding repurchase of
such Restricted Stock in the event of forfeiture. A Participant with a
Restricted Stock Award shall have all the other rights of a shareholder
including, but not limited to, the right to receive dividends and the right to
vote the Shares of Restricted Stock. Unless the issuance of shares pursuant to
a Restricted Stock Award is registered or exempt under federal or state
securities laws, the Participant shall be required to give an investment
representation at the time of the Award, and transfer of the shares shall be
appropriately restricted.
8. STOCK AWARDS. Awards of Stock without restrictions may be made by the
Committee to a Participant in furtherance of the Plan's purposes. A Participant
receiving a Stock Award shall be entitled to all of the rights and privileges in
the Common Stock awarded as of the date on which the Award is made. Unless the
issuance of shares pursuant to a Stock Award is registered or exempt under
federal or state securities laws, the Participant shall be required to give an
investment representation at the time of the Award, and transfer of the shares
shall be appropriately restricted.
9. STOCK OPTIONS.
9.1 TERMS OF ALL OPTIONS. An Option shall be granted pursuant to an
Agreement as either an Incentive Stock Option or a Non-Statutory Stock
Option. Only Non-Statutory Stock Options may be granted to Participants
who are not employees of the Company or an Affiliate. The purchase price
of each Share subject to an Option shall be determined by the Committee and
set forth in the Agreement, but shall not be less than 85% of the Fair
Market Value of a Share as of the date the Option is granted. The purchase
price of the Shares with respect to which an Option is exercised shall be
payable in full at the time of exercise, provided that to the extent
permitted by law, the Agreement may permit Participants to simultaneously
exercise Options and sell the Shares thereby acquired pursuant to a
brokerage or similar relationship and use the proceeds from such sale as
payment of the purchase price of such Shares or to engage in a Net
Exercise. The purchase price may be payable in cash, in Stock having a
Fair Market Value as of the date the Option is exercised equal to the
purchase price of the Stock being purchased pursuant to the Option, or a
combination thereof, as determined by the Committee and provided in the
Agreement; provided, however, that a person exercising an Option shall not
be permitted to pay any portion of the purchase price with Stock or through
a Net Exercise if, in the opinion of the Committee, payment in such manner
could have adverse financial accounting consequences for the Company. Each
Option shall be exercisable in whole or in part on the terms provided in
the Agreement. In no event shall any Option be exercisable at any time
after its expiration date. When an Option is no longer exercisable, it
shall be deemed to have lapsed
4
<PAGE>
or terminated. Unless the issuance of the shares upon the exercise of
an Option hereunder is subject to a registration or exemption under
applicable federal and state securities laws, the Participant shall be
required to give an investment representation at the time of exercise
and transfer of the shares shall be appropriately restricted.
9.2 INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the date
the Option is granted) of the Shares with respect to which Incentive
Stock Options held by an individual first become exercisable in any
calendar year (under this Plan and all other incentive stock option
plans of the Company and its Affiliates) shall not exceed $100,000 (or
such other limit as may be required by the Code) if such limitation is
necessary to qualify the Option as an Incentive Stock Option;
(ii) the purchase price of Shares covered by Incentive Stock
Options must not be less than 100% of the Fair Market Value of the
Shares on the date of grant;
(iii) an Incentive Stock Option shall not be exercisable more
than 10 years after the date of grant (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option;
(iv) unless otherwise specified by the Committee in the
Agreement, and except as otherwise provided in Section 6.4 or
Section 16, a Participant may exercise an Incentive Stock Option at
any time up to 10 years from the date of grant of the Option, in whole
or in part subject to any vesting schedule determined by the
Committee;
(v) if the Participant owns, or is deemed under Section 424(d)
of the Code to own, stock of the Company or of any Affiliate
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock therein at the time the Incentive Stock
Option is granted:
(a) the purchase price of the Shares covered by the
Incentive Stock Option must not be less than 110% of the Fair
Market Value of Shares on the date of grant; and
(b) the Term of the Incentive Stock Option must not be
greater than five years from the date of grant; and
(vi) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee determines
necessary to qualify such Option as an Incentive Stock Option.
5
<PAGE>
9.3 OUTSIDE DIRECTOR OPTIONS.
(i) During the term of this Plan, each person who is elected
to the Board of Directors and who is an Outside Director when elected
shall immediately be granted, by virtue of their election to the Board
of Directors, a Non-Statutory Stock Option. The date of such election
shall be the date of grant for options granted pursuant to this
subsection 9.3(i). The number of shares covered by each such option
shall be 10,000**(2) (subject to adjustment pursuant to Section 15
hereof). Any Shares subject to the terms and conditions of an Award
under this Plan which are not used because the terms and conditions of
the Award are not met may again be used for an Award under the Plan.
(ii) Beginning with the Annual Meeting of Shareholders to be
held during calendar year 1998 and for every Annual Meeting of
Shareholders thereafter during the term of this Plan, each person
serving as an Outside Director immediately following such Annual
Meeting shall be granted, by virtue of serving as an Outside Director,
a Non-Statutory Stock Option. The date of such Annual Meeting shall
be the date of grant for options granted pursuant to this
subsection 9.3(ii). The number of Shares covered by each such option
shall be 6,667* (subject to adjustment pursuant to Section 15 hereof).
Director Options granted pursuant to this subsection 9.3(ii) shall be
in addition to those granted pursuant to subsection 9.3(i).
Notwithstanding the foregoing, no Outside Director shall receive a
grant of options pursuant to this subsection 9.3(ii) prior to
completing a minimum of six months of service as an Outside Director.
(iii) Director Options granted pursuant to subsection 9.3(i)
shall vest and become exercisable one year following the date of
grant. Director Options granted pursuant to subsection 9.3(ii) shall
vest and become exercisable on the date of the Annual Meeting next
following the grant of Director Options. Notwithstanding the
foregoing, Director Options shall vest and become immediately
exercisable in full upon the occurrence of any Event or upon the death
of an Outside Director. Director Options shall expire at the 10-year
anniversary of the date of grant.
(iv) The purchase price of each Share subject to a Director
Option pursuant to this Section 9.3 shall be 100% of the Fair Market
Value of a Share as of the date of grant. Notwithstanding anything to
the contrary stated in this Plan, for purposes of this Section 9.3 and
the definition of Fair Market Value in Exhibit A attached hereto, each
Director Option shall be deemed conclusively to have been granted
prior to close of the applicable securities exchange or system on the
date of grant. An Outside Director may exercise a Director Option
using as payment any form of consideration provided for in Section
9.1.
(v) Director Options shall be evidenced by an agreement
signed on behalf of the Company by an officer thereof which only
incorporates by reference the terms of this Plan.
- - -------------------
* Reflects a 2 for 3 reverse split of the Company's Common Stock on May 21,
1997.
6
<PAGE>
(vi) Unless the Director Option shall have expired, in the
event of an Outside Director's death, the Director Option granted to
such Outside Director shall be transferable to the beneficiary, if
any, designated by the Outside Director in writing to the Company
prior to the Outside Director's death and such beneficiary shall
succeed to the rights of the Outside Director to the extent permitted
by law. If no such designation of a beneficiary has been made, the
Outside Director's legal representative shall succeed to the Director
Option, which shall be transferable by will or pursuant to the laws of
descent and distribution.
10. SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become Employees of the Company or a subsidiary of
the Company, or whose employer is about to become a subsidiary of the Company,
as the result of a merger or consolidation of the Company or a subsidiary of the
Company with another corporation, the acquisition by the Company or a subsidiary
of the Company of all or substantially all the assets of another corporation or
the acquisition by the Company or a subsidiary of the Company of at least 50% of
the issued and outstanding stock of another corporation. The terms and
conditions of the substitute Options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Board (or the Committee)
at the time of the grant may deem appropriate to conform, in whole or in part,
to the provisions of the stock options in substitution for which they are
granted, but with respect to stock options which are Incentive Stock Options, no
such variation shall be permitted which affects the status of any such
substitute Option as an "incentive stock option" under Section 422 of the Code.
11. EFFECTIVE DATE OF THE PLAN.
11.1 EFFECTIVE DATE. The Plan shall become effective as of December
15, 1995, provided that the Plan is approved and ratified by the
affirmative vote of the holders of a majority of the outstanding Shares of
Stock present or represented and entitled to vote in person or by proxy at
a meeting of the shareholders of the Company no later than June 30, 1996.
11.2 DURATION OF THE PLAN. The Plan shall remain in effect until all
Stock subject to it shall be distributed or until all Awards have expired
or lapsed, or the Plan is terminated pursuant to Section 14. No Award of
an Incentive Stock Option shall be made more than 10 years after the
Effective Date (or such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive Stock Option.
The date and time of approval by the Committee of the granting of an Award
shall be considered the date and time at which such Award is made or
granted.
12. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan shall confer upon
any Participant the right to continue in the employment of the Company or any
Affiliate or affect any right which the Company or any Affiliate may have to
terminate the employment of the Participant with or without cause.
7
<PAGE>
13. TAX WITHHOLDING. The Company shall have the right to withhold from
any cash payment under the Plan to a Participant or other person an amount
sufficient to cover any required withholding taxes. The Company shall have the
right to require a Participant or other person receiving Stock under the Plan to
pay the Company a cash amount sufficient to cover any required withholding
taxes. In lieu of all or any part of such a cash payment from a person
receiving Stock under the Plan, the Committee may permit the individual to elect
to cover all or any part of the required withholdings, and to cover any
additional withholdings up to the amount needed to cover the individual's full
FICA and Medicare, and federal, state and local income tax with respect to
income arising from payment of the Award, through a reduction of the number of
Shares delivered to him or a subsequent return to the Company of Shares held by
the Participant or other person, in each case valued in the same manner as used
in computing the withholding taxes under the applicable laws.
14. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may at
any time terminate, suspend or modify the Plan. Amendments are subject to
approval of the shareholders of the Company only if such approval is necessary
to maintain the Plan in compliance with the requirements of Exchange Act Rule
16b-3, Code Section 422, their successor provisions or any other applicable law
or regulation. No termination, suspension, or modification of the Plan may
materially and adversely affect any right acquired by any Participant (or his
legal representative) or any Successor under an Award granted before the date of
termination, suspension, or modification, unless otherwise agreed to by the
Participant in the Agreement or otherwise or required as a matter of law; but it
will be conclusively presumed that any adjustment for changes in capitalization
provided for in Section 15 does not adversely affect any right.
15. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate adjustments in
the aggregate number and type of Shares available for Awards under the Plan, in
the number and type of Shares subject to Options thereafter issued and in the
number and type of Shares subject to Awards then outstanding, and in the Option
price as to any outstanding Options, may be made by the Committee in its sole
discretion to give effect to adjustments made in the number or type of Shares of
the Company through a Fundamental Change (subject to Section 16),
recapitalization, reclassification, stock dividend, stock split, stock
combination or other relevant change, provided that fractional Shares shall be
rounded to the nearest whole share.
16. FUNDAMENTAL CHANGE. In the event of a proposed Fundamental Change,
the Committee may, but shall not be obligated to:
a. if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the protection of
the outstanding Options by the substitution of options and appropriate
voting common stock of the corporation surviving any merger or
consolidation or, if appropriate, the parent corporation of the Company or
such surviving corporation to be issuable upon the exercise of Options, in
lieu of options and capital stock of the Company; or
b. at least 30 days prior to the occurrence of the Fundamental
Change, declare, and provide written notice to each holder of an Option of
the declaration, that each
8
<PAGE>
outstanding Option, whether or not then exercisable, shall be canceled
at the time of, or immediately prior to the occurrence of the
Fundamental Change in exchange for payment to each holder of an Option,
within ten days after the Fundamental Change, of cash equal to, for each
Share covered by the canceled Option, the amount, if any, by which the
Fair Market Value (as hereinafter defined in this Section) per Share
exceeds the exercise price per Share covered by such Option. At the
time of the declaration provided for in the immediately preceding
sentence, each Option shall immediately become exercisable in full and
each person holding an Option shall have the right, during the period
preceding the time of cancellation of the Option, to exercise his Option
as to all or any part of the Shares covered thereby in whole or in part,
as the case may be. In the event of a declaration pursuant to this
Section 16(b), each outstanding Option granted pursuant to the Plan that
shall not have been exercised prior to the Fundamental Change shall be
canceled at the time of, or immediately prior to, the Fundamental
Change, as provided in the declaration. Notwithstanding the foregoing,
no person holding an Option shall be entitled to the payment provided
for in this Section 16(b) if such Option shall have expired pursuant to
the Agreement. For purposes of this Section only, "Fair Market Value"
per Share shall mean the cash plus the fair market value, as determined
in good faith by the Committee, of the non-cash consideration to be
received per Share by the shareholders of the Company upon the
occurrence of the Fundamental Change, notwithstanding anything to the
contrary provided in the Plan.
17. UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under the Plan.
18. OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other benefits
received by a Participant under an Award made pursuant to the Plan shall not be
deemed a part of a Participant's regular, recurring compensation for purposes of
the termination, indemnity or severance pay law of any country and shall not be
included in, nor have any effect on, the determination of benefits under any
other employee benefit plan, contract or similar arrangement provided by the
Company or an Affiliate unless expressly so provided by such other plan,
contract or arrangement, or unless the Committee expressly determines that an
Award or portion of an Award should be included to accurately reflect
competitive compensation practices or to recognize that an Award has been made
in lieu of a portion of competitive cash compensation.
19. BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the transfer
of a Participant's Award at his death is permitted under an Agreement, (i) a
Participant's Award shall be transferable at his death to the beneficiary, if
any, designated on forms prescribed by and filed with the Committee and
(ii) upon the death of the Participant, such beneficiary shall succeed to the
rights of the Participant to the extent permitted by law. If no such
designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards which shall be transferable by will
or pursuant to laws of descent and distribution to the extent permitted under an
Agreement.
20. GOVERNING LAW. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of Minnesota and construed accordingly.
9
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EXHIBIT A
EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
AMENDED AND RESTATED 1995 STOCK PLAN
DEFINED TERMS AND RULES OF CONSTRUCTION
1. DEFINITIONS.
Set forth below are the meanings of certain terms used in this Plan.
a. "AFFILIATE" means any corporation that is a "parent corporation"
or "subsidiary corporation" of the Company, as those terms are defined in
Section 424(e) and (f) of the Code, or any successor provision.
b. "AGREEMENT" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form and not inconsistent with this Plan as
the Committee shall approve from time to time, together with all amendments
thereto, which amendments may be unilaterally made by the Company (with the
approval of the Committee) unless such amendments are deemed by the
Committee to be materially adverse to the Participant and are not required
as a matter of law.
c. "AWARD" means a grant made under this Plan in the form of
Restricted Stock, Options or Stock.
d. "BOARD" means the Board of Directors of the Company.
e. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
f. "COMMITTEE" means such committee appointed by the Board from time
to time to administer the Plan or, if no such committee is appointed, the
Board itself; provided, however that the Board shall appoint a committee of
two or more Non-Employee Directors to determine and administer Awards to
any Participants who are then subject to the reporting requirements of
Section 16 of the Exchange Act.
g. "COMPANY" means Excelsior-Henderson Motorcycle Manufacturing
Company, a Minnesota corporation, or any successor to substantially all of
its businesses.
h. "DIRECTOR" means a director of the Company.
i. "DIRECTOR OPTION" means a Non-Statutory Stock Option granted to
an Outside Director under Section 9.3 hereof.
j. "EFFECTIVE DATE" means the effective date of the Plan specified
in Section 11.1 hereof.
<PAGE>
k. "EVENT" means any of the following; provided, however, that no
Event shall be deemed to have occurred unless and until a majority of the
directors constituting the Incumbent Board (as defined below) shall have
declared that an Event has occurred and further provided that an Event
shall not be deemed to occur prior to the date that the Stock becomes
registered under the Exchange Act:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Exchange Act Rule 13d-3)
of 20% (except for acquisitions by any individual, entity or group
that, prior to the effectiveness of this Plan, owns 20% or more of any
class of capital stock of the Company) or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of the Board (the "Outstanding Company
Voting Securities"); provided, however, that the following
acquisitions shall not constitute an Event:
(A) any acquisition of voting securities of the
Company directly from the Company,
(B) any acquisition of voting securities of the
Company by the Company or any of its wholly owned Subsidiaries,
(C) any acquisition of voting securities of the
Company by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its Subsidiaries, or
(D) any acquisition by any corporation with respect to
which, immediately following such acquisition, more than 60% of
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such acquisition in substantially
the same proportions as was their ownership, immediately prior to
such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be;
(2) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director of the Board subsequent to the Effective Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered a
member of the
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Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest which was (or, if threatened, would have
been) subject to Exchange Act Rule 14a-11;
(3) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or statutory exchange of
Outstanding Company Voting Securities, unless immediately following
such reorganization, merger, consolidation or exchange, all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger, consolidation or exchange beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger, consolidation or exchange
in substantially the same proportions as was their ownership,
immediately prior to such reorganization, merger, consolidation or
exchange, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be; or
(4) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation with respect to which,
immediately following such sale or other disposition, more than 60%
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as was their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be.
Notwithstanding the above, an Event shall not be deemed to occur with
respect to a recipient of an Award if the acquisition of the 20% or greater
interest referred to in paragraph (1) is by a group, acting in concert,
that includes that recipient or if at least 40% of the then outstanding
common stock or combined voting power of the then outstanding voting
securities (or voting equity interests) of the surviving corporation or of
any corporation (or other entity) acquiring all or substantially all of the
assets of the Company shall be beneficially owned, directly or indirectly,
immediately after a reorganization, merger, consolidation, statutory share
exchange or sale or other disposition of assets referred to in paragraphs
(3) or (4) by a group, acting in concert, that includes that recipient.
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l. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
m. "FAIR MARKET VALUE" as of any date means, unless otherwise
expressly provided in the Plan:
(i) the closing price of a Share on the date immediately
preceding that date or, if no sale of Shares shall have occurred on
that date, on the next preceding day on which a sale of Shares
occurred,
(A) on the composite tape for New York Stock Exchange
listed shares, or
(B) if the Shares are not quoted on the composite tape
for New York Stock Exchange listed shares, on the principal
United States Securities Exchange registered under the Exchange
Act on which the Shares are listed, or
(C) if the Shares are not listed on any such exchange,
on the Nasdaq National Market, or
(ii) if clause (i) is inapplicable, the mean between the closing
"bid" and the closing "asked" quotation of a Share on the date
immediately preceding that date, or, if no closing bid or asked
quotation is made on that date, on the next preceding day on which a
quotation is made, on any system maintained by the National
Association of Securities Dealers, Inc. or any system then in use, or
(iii) if clauses (i) and (ii) are inapplicable, what the
Committee determines in good faith to be 100% of the fair market value
of a Share on that date.
However, if the applicable securities exchange or system has closed for the
day at the time the event occurs that triggers a determination of Fair
Market Value, whether the grant of an Award, the exercise of an Option or
otherwise, all references in this paragraph to the "date immediately
preceding that date" shall be deemed to be references to "that date". In
the case of an Incentive Stock Option, if such determination of Fair Market
Value is not consistent with the then current regulations of the Secretary
of the Treasury, Fair Market Value shall be determined in accordance with
said regulations. The determination of Fair Market Value shall be subject
to adjustment as provided in Section 15.
n. "FUNDAMENTAL CHANGE" shall mean a dissolution or liquidation of
the Company, a sale of substantially all of the assets of the Company, a
merger or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, or a
statutory share exchange involving capital stock of the Company.
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o. "INCENTIVE STOCK OPTION" means any Option designated as such and
granted in accordance with the requirements of Code Section 422 or any
successor to said section.
p. "MAXIMUM ANNUAL EMPLOYEE GRANT" means the maximum number of
Shares subject to Options that may be awarded to any one employee of the
Company in any fiscal year.
q. "NET EXERCISE" means the right of a Participant (the "Conversion
Right") to convert an Option or any portion thereof into Shares as provided
in this paragraph at any time or from time to time prior to its expiration,
subject to the restrictions set forth in this Plan. Upon exercise of the
Conversion Right with respect to a particular number of Shares subject to
an Option (the "Converted Option Shares"), the Company shall deliver to the
holder of the Option, without payment by the holder of any exercise price
or any cash or other consideration, that number of Shares equal to the
quotient obtained by dividing the Net Value (as hereinafter defined) of the
Converted Option Shares by the Fair Market Value of a single Share,
determined in each case as of the close of business on the Conversion Date
(as hereinafter defined). The "Net Value" of the Converted Option Shares
shall be determined by subtracting the aggregate purchase price of the
Converted Option Shares from the aggregate Fair Market Value of the
Converted Option Shares. Notwithstanding anything in this paragraph to the
contrary, the Conversion Right cannot be exercised with respect to a number
of Converted Option Shares having a Net Value below $100. No fractional
shares shall be issuable upon exercise of the Conversion Right, and if the
number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall pay to the holder of the
Option an amount in cash equal to the Fair Market Value of the resulting
fractional share.
r. "NON-EMPLOYEE DIRECTOR" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act Rule
16b-3(i) or any successor definition.
s. "NON-STATUTORY STOCK OPTION" means an Option other than an
Incentive Stock Option.
t. "OPTION" means a right to purchase Stock, including both
Non-Statutory Stock Options and Incentive Stock Options.
u. "OUTSIDE DIRECTOR" means a Director who is not an employee of the
Company or any affiliate.
v. "PARTICIPANT" means any salaried employee, and any officer,
director (including any director who is not an employee of the Company),
contractor or advisor to or representative of the Company or any Affiliate
thereof, whether or not such person is an employee of the Company within
the meaning of the Code; PROVIDED, HOWEVER, that salaried employees of the
Company or its Affiliates within the meaning of the Code (including any
such employee who is also an officer or director of the Company or any
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Affiliate thereof) shall be the only persons eligible to receive Options
intended to constitute Incentive Stock Options.
w. "PLAN" means this Excelsior-Henderson Motorcycle Manufacturing
Company Amended and Restated 1995 Stock Plan, as amended from time to time.
x. "RESTRICTED STOCK" means Stock granted under Section 7 so long as
such Stock remains subject to such restrictions.
y. "RETIREMENT" as applied to a Participant, means (i) until such
time as the Company adopts an employee pension benefit plan (as that term
is defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974), termination of employment with the Company at any time upon or
after attaining age 65; or (ii) after adoption by the Company of an
employee pension benefit plan, termination of employment with the Company
at a time when the Participant is eligible for normal retirement under such
a plan, as amended from time to time, or any successor plan thereto.
z. "SHARE" means a share of Stock.
aa. "STOCK" means the Common Stock, $.01 par value per share (as such
par value may be adjusted from time to time), of the Company.
bb. "SUBSIDIARY" means a "subsidiary corporation", as that term is
defined in Code Section 424(f) or any successor provision.
cc. "SUCCESSOR" means the legal representative of the estate of a
deceased Participant or the person or persons who may, by bequest or
inheritance, or pursuant to the terms of an Award or of forms submitted by
the Participant to the Committee pursuant to Section 19, acquire the right
to exercise an Option or Stock Appreciation Right or to receive cash or
Shares issuable in satisfaction of an Award in the event of a Participant's
death.
dd. "TERM" means the period during which an Option may be exercised
or the period during which the restrictions placed on Restricted Stock are
in effect.
ee. "TOTAL AND PERMANENT DISABILITY" as applied to a Participant,
means total and permanent disability within the meaning of Section 22(e)(3)
of the Code or any successor provision.
2. GENDER AND NUMBER.
Except when otherwise indicated by context, reference to the masculine
gender shall include, when used, the feminine gender and any term used in
the singular shall also include the plural.
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EXCELSIOR-HENDERSON
TEAM STOCK PURCHASE PLAN
1. PURPOSE AND SCOPE OF PLAN. The purpose of this Excelsior-Henderson
Team Stock Purchase Plan (the "Plan") is to provide the employees of
Excelsior-Henderson Motorcycle Manufacturing Company (the "Company") and its
subsidiaries 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
Plan is intended to be an "employee stock purchase plan" within the meaning
of Section 423(b) of the Internal Revenue Code of 1986, as amended, and shall
be interpreted and administered in a manner consistent with such intent.
2. DEFINITIONS.
2.1. The terms defined in this section are used (and capitalized)
elsewhere in this Plan:
(a) "AFFILIATE" means each "subsidiary corporation" of the
Company, as defined in Section 424(f) of the Code or any successor
provision.
(b) "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "COMMITTEE" means two or more Disinterested Persons
designated by the Board of Directors to administer the Plan under
Section 13.
(e) "COMMON STOCK" means the common stock, par value $.01 per
share (as such par value may be adjusted from time to time), of the
Company.
(f) "COMPANY" means Excelsior-Henderson Motorcycle Manufacturing
Company.
(g) "COMPENSATION" means the base compensation, plus commissions
and overtime paid by the Company or any Affiliate to a Participant in
accordance with the terms of employment, but excluding any bonus
payments.
(h) "DISINTERESTED PERSONS" means a member of the Board of
Directors who is considered a disinterested person within the meaning
of Exchange Act Rule 16b-3 or any successor definition.
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(i) "ELIGIBLE EMPLOYEE" means any employee of the Company or an
Affiliate whose customary employment is at least 20 hours per week;
provided, however, that "Eligible Employee" shall not include any
person who would be deemed, for purposes of Section 423(b)(3) 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.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(k) "FAIR MARKET VALUE" of a share of Common Stock as of any
date means, if the Company's Common Stock is listed on a national
securities exchange or traded in the national market system, the
closing price for such Common Stock on such exchange or market on said
date, or, if no sale has been made on such exchange or market on said
date, on the last preceding day on which any sale shall have been
made. If such determination of Fair Market Value is not consistent
with the then current regulations of the Secretary of the Treasury
applicable to plans intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423(b) of the Code, however, Fair
Market Value shall be determined in accordance with such regulations.
The determination of Fair Market Value shall be subject to adjustment
as provided in Section 14.
(l) "PARTICIPANT" means an Eligible Employee who has elected to
participate in the Plan in the manner set forth in Section 4.
(m) "PLAN" means this Excelsior-Henderson Team Stock Purchase
Plan, as amended from time to time.
(n) "PURCHASE PERIOD" means the period from August 1, 1998,
through January 2, 1999, and thereafter each period from the first day
of the fiscal year of the Company through the last day of the 26th
week of the fiscal year of the Company, and each period from the first
day of the 27th week of the fiscal year of the Company through the
last day of the last week of the fiscal year of the Company.
(o) "RECORDKEEPING ACCOUNT" means the account maintained in the
books and records of the Company recording the amount withheld from
each Participant through payroll deductions made under the Plan.
3. SCOPE OF THE PLAN. Shares of Common Stock may be sold by the Company
to Eligible Employees commencing August 1, 1998, as hereinafter provided, but
not more than 300,000 shares of Common Stock (subject to adjustment as provided
in Section 14) shall be sold to Eligible Employees pursuant to this Plan. All
sales of Common Stock pursuant to this Plan shall be subject to the same terms,
conditions, rights and privileges. The shares of Common
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Stock delivered by the Company pursuant to this Plan may be acquired shares
having the status of any combination of authorized but unissued shares, newly
issued shares, or treasury shares.
4. ELIGIBILITY AND PARTICIPATION. To be eligible to participate in the
Plan for a given Purchase Period, an employee must be an Eligible Employee on
the first day of such Purchase Period. An Eligible Employee may elect to
participate in the Plan by filing an enrollment form with the Company before the
first day of such Purchase Period that authorizes regular payroll deductions
from Compensation beginning with the first payday in such Purchase Period and
continuing until the Eligible Employee withdraws from the Plan or ceases to be
an Eligible Employee, as hereinafter provided.
5. AMOUNT OF COMMON STOCK EACH ELIGIBLE EMPLOYEE MAY PURCHASE.
5.1. Subject to the provisions of this Plan, each Eligible Employee
shall be offered the right to purchase on the last day of the Purchase
Period the number of shares of Common Stock (excluding fractional shares)
that can be purchased at the price specified in Section 5.2 with the entire
credit balance in the Participant's Recordkeeping Account; provided,
however, that the Fair Market Value (determined on the first day of any
Purchase Period) of shares of Common Stock that may be purchased by a
Participant during such Purchase Period shall not exceed the excess, if
any, of (i) $25,000 over (ii) the Fair Market Value (determined on the
first day of the relevant Purchase Period) of shares of Common Stock
previously acquired by the Participant in any prior Purchase Period ending
during such calendar year. Notwithstanding the foregoing, no Eligible
Employee shall be granted an option to acquire shares of Common Stock under
this Plan which permits the Eligible Employee's rights to purchase shares
of Common Stock under this Plan and all employee stock purchase plans of
the Company and the Affiliates to accrue at a rate which exceeds $25,000 of
Fair Market Value (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time. If the
purchases by all Participants would otherwise cause the aggregate number of
shares of Common Stock to be sold under the Plan to exceed the number
specified in Section 3, however, each Participant shall be allocated at a
ratable portion of the maximum number of shares of Common Stock which may
be sold.
5.2. The purchase price of each share of Common Stock sold pursuant
to this Plan will be the lesser of (a) or (b) below:
(a) 85% of the Fair Market Value of such share on the first day of
the Purchase Period.
(b) 85% of the Fair Market Value of such share on the last day of
the Purchase Period.
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6. METHOD OF PARTICIPATION.
6.1. The Company shall give notice to each Eligible Employee of the
opportunity to purchase shares of Common Stock pursuant to this Plan and
the terms and conditions for such offering. Such notice is subject to
revision by the Company at any time prior to the date of purchase of such
shares. The Company contemplates that for tax purposes the first day of a
Purchase Period will be the date of the offering of such shares.
6.2. Each Eligible Employee who desires to participate in the Plan
for a Purchase Period shall signify his or her election to do so by signing
an election form developed by the Committee. An Eligible Employee may
elect to have any whole percent of Compensation withheld, but not exceeding
such percentage as may be established for the Purchase Period by the
Committee. An election to participate in the Plan and to authorize payroll
deductions as described herein must be made before the first day of the
Purchase Period to which it relates and shall remain in effect unless and
until such Participant withdraws from the Plan, or ceases to be an Eligible
Employee, as hereinafter provided.
6.3. Any Eligible Employee who does not make a timely election as
provided in Section 6.2, shall be deemed to have elected not to participate
in the Plan. Such election shall be irrevocable for such Purchase Period.
7. RECORDKEEPING ACCOUNT.
7.1. The Company shall maintain a Recordkeeping Account for each
Participant. Payroll deductions pursuant to Section 6 will be credited to
such Recordkeeping Accounts on each payday.
7.2. No interest will be credited to a Participant's Recordkeeping
Account.
7.3. The Recordkeeping Account is established solely for accounting
purposes, and all amounts credited to the Recordkeeping Account will remain
part of the general assets of the Company.
7.4. A Participant may not make any separate cash payment into the
Recordkeeping Account.
8. RIGHT TO ADJUST PARTICIPATION OR TO WITHDRAW.
8.1. At any time before the end of a Purchase Period, any Participant
may withdraw from the Plan. In such event, all future payroll deductions shall
cease and the entire credit balance in the Participant's Recordkeeping Account
will be paid to the Participant, without interest, as soon as administratively
practicable following the withdrawal. A Participant who withdraws from the Plan
will not be eligible to reenter the Plan until the next succeeding Purchase
Period.
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<PAGE>
8.2. Notification of a Participant's election to withdraw from the
Plan shall be made by filing an appropriate form with the Company.
9. DISCONTINUATION OF EMPLOYMENT. If the employment of a Participant is
discontinued for any reason, including death, disability or retirement during
any Purchase Period, the Company shall refund in cash all amounts credited to
his or her Recordkeeping Account as soon as administratively practicable
following discontinuation of employment.
10. PURCHASE OF SHARES.
10.1. As of the last day of the Purchase Period, the entire credit
balance in each Participant's Recordkeeping Account will be used to
purchase shares (excluding fractional shares) of Common Stock (subject to
the limitations of Section 5).
10.2. Certificates for the number of whole shares of Common Stock,
determined as aforesaid, purchased by each Participant shall be issued and
delivered to him or her as soon as administratively practicable after the
end of each Purchase Period. No Certificates for fractional shares will be
issued. Instead, Participants will receive a cash distribution
representing any fractional shares.
11. RIGHTS AS A STOCKHOLDER. A Participant shall not be entitled to any
of the rights or privileges of a stockholder of the Company with respect to such
shares, including the right to receive any dividends which may be declared by
the Company, until (i) he or she actually has paid the purchase price for such
shares and (ii) certificates have been issued to him or her, both as provided in
Section 10.
12. RIGHTS NOT TRANSFERABLE. A Participant's rights under this Plan are
exercisable only by the Participant during his or her lifetime, and may not be
sold, pledged, assigned or transferred in any manner other than by will or the
laws of descent and distribution. Any attempt to sell, pledge, assign or
transfer the same shall be null and void and without effect. The amounts
credited to a Recordkeeping Account may not be assigned, transferred, pledged or
hypothecated in any way, and any attempted assignment, transfer, pledge,
hypothecation or other disposition of such amounts will be null and void and
without effect.
13. ADMINISTRATION OF THE PLAN. This Plan shall be administered by the
Committee, which is authorized to make such uniform rules as may be necessary to
carry out its provisions. The Committee shall determine any questions arising
in the administration, interpretation and application of this Plan, and all such
determinations shall be conclusive and binding on all parties.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in the Common Stock of the Company by reason of stock dividends, split-ups,
corporate separations, recapitalizations, mergers, consolidations, combinations,
exchanges of shares and the like, the aggregate number and class of shares
available under this Plan and the number, class and
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<PAGE>
purchase price of shares available but not yet purchased under this Plan,
shall be adjusted appropriately by the Committee.
15. REGISTRATION OF CERTIFICATES. Stock certificates will be registered
in the name of the Participant, or jointly in the name of the Participant and
another person, as the Participant may direct on an appropriate form filed with
the Company.
16. AMENDMENT OF PLAN. The Board of Directors may at any time amend this
Plan in any respect which shall not adversely affect the rights of Participants
pursuant to shares previously acquired under the Plan, except that, without
stockholder approval on the same basis, no amendment shall be made (i) to
increase the number of shares to be reserved under this Plan, (ii) to decrease
the minimum purchase price, (iii) to withdraw the administration of this Plan
from the Committee, or (iv) to change the definition of employees eligible to
participate in the Plan.
17. EFFECTIVE DATE OF PLAN. The Plan shall be effective August 1, 1998,
for the offering commencing August 1, 1998, and ending January 2, 1999, and
continuing on a semi-annual basis thereafter. All rights of Participants in any
offering hereunder shall 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 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. Upon termination of this Plan,
shares of Common Stock shall be purchased and issued to Participants in
accordance with Section 10, and cash, if any, remaining in the Participants'
Recordkeeping Accounts shall be refunded to them, as if the Plan were terminated
at the end of a Purchase Period.
18. GOVERNMENTAL REGULATIONS AND LISTING. All rights granted or to be
granted to Eligible Employees under this Plan are expressly subject to all
applicable laws and regulations and to the approval of all governmental
authorities required in connection with the authorization, issuance, sale or
transfer of the shares of Common Stock reserved for this Plan, including,
without limitation, there being a current registration statement of the Company
under the Securities Act of 1933, as amended, covering the shares of Common
Stock purchasable on the last day of the Purchase Period applicable to such
shares, and if such a registration statement shall not then be effective, the
term of such Purchase Period shall be extended until the first business day
after the effective date of such a registration statement, or post-effective
amendment thereto. If applicable, all such rights hereunder are also similarly
subject to effectiveness of an appropriate listing application to a national
securities exchange or a national market system, covering the shares of Common
Stock under the Plan upon official notice of issuance.
19. MISCELLANEOUS.
19.1. This Plan has been approved by the stockholders of the Company
on July 25, 1998.
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19.2. This Plan shall not be deemed to constitute a contract of
employment between the Company and any Participant, nor shall it interfere
with the right of the Company to discontinue the employment of any
Participant and treat him or her without regard to the effect which such
treatment might have upon him or her under this Plan.
19.3. Wherever appropriate as used herein, the masculine gender may be
read as the feminine gender, the feminine gender may be read as the
masculine gender, the singular may be read as the plural and the plural may
be read as the singular.
19.4. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Minnesota.
19.5. Delivery of shares of Common Stock or of cash pursuant to the
Plan shall be subject to any required withholding taxes. A person entitled
to receive shares of Common Stock may, as a condition precedent to
receiving such shares, be required to pay the Company a cash amount equal
to the amount of any required withholdings.
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EXCELSIOR-HENDERSON MOTORCYCLE MANUFACTURING COMPANY
805 HANLON DRIVE
[EXCELSIOR-HENDERSON LOGO SUPERIMPOSED OVER A PICTURE OF THE
EXCELSIOR-HENDERSON SUPER X MOTORCYCLE AT THE BEACH.]
BELLE PLAINE, MINNESOTA 56011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 / / WITHHOLD AUTHORITY
LISTED ABOVE
(except as marked to the to vote for all nominees
contrary below) 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
<PAGE>
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.
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
