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
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ARCTIC CAT INC.
(Name of Registrant as Specified in Its Charter)
N/A
(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 transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(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>
ARCTIC CAT INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 6, 1998
------------------
Notice is hereby given that the Annual Meeting of Shareholders of Arctic
Cat Inc. (the "Company") will be held at Northland Community and Technical
College (Theater), at 1101 Highway 1 East, Thief River Falls, Minnesota 56701,
on Thursday, August 6, 1998 at 4:00 p.m. for the following purposes:
1. To elect one director to serve a three-year term.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 23, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Directors,
/s/ Timothy C. Delmore,
Timothy C. Delmore,
SECRETARY
Thief River Falls, Minnesota
July 1, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY SO DESIRE.
<PAGE>
ARCTIC CAT INC.
601 BROOKS AVENUE SOUTH
THIEF RIVER FALLS, MN 56701
------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 6, 1998
------------------
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Arctic Cat Inc., a Minnesota corporation
(the "Company"), of proxies for the Annual Meeting of Shareholders of the
Company to be held at Northland Community and Technical College (Theater), at
1101 Highway 1 East, Thief River Falls, MN 56701, on Thursday, August 6, 1998 at
4:00 p.m. Central Daylight Time, or any adjournment or adjournments thereof.
This Proxy Statement and the enclosed proxy card are being mailed to
shareholders on or about July 1, 1998.
The Company's Annual Report for the fiscal year ended March 31, 1998,
including audited financial statements, is being mailed to shareholders
concurrently with this Proxy Statement.
The total number of shares outstanding and entitled to vote at the meeting
as of June 23, 1998 consists of 20,630,289 shares of $.01 par value Common Stock
(excluding 7,560,000 shares of Class B Common Stock which do not vote with the
Common Stock in the general election of directors; see "Election of Directors").
Each share of Common Stock is entitled to one vote and there is no cumulative
voting. Only shareholders of record at the close of business on June 23, 1998
will be entitled to vote at the Annual Meeting. The presence in person or by
proxy of holders of a majority of the shares of stock entitled to vote at the
Annual Meeting of Shareholders constitutes a quorum for the transaction of
business.
Shares represented by proxies properly signed, dated and returned will be
voted at the Annual Meeting in accordance with the instructions set forth
therein. If a proxy is properly signed but contains no such instructions, the
shares represented thereby will be voted for the director nominee and at the
discretion of proxy holders as to any other matters which may properly come
before the Annual Meeting.
Abstentions will be treated as shares that are present and entitled to vote
for purposes of determining the presence of a quorum and in tabulating votes
cast on proposals presented to shareholders, but as unvoted for purposes of
determining the approval of the matter. Consequently, an abstention will have
the same effect as a negative vote. If a broker indicates on the proxy that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
Each proxy may be revoked at any time before it is voted by executing and
returning a proxy bearing a later date, by giving written notice of revocation
to the Secretary of the Company or by attending the Annual Meeting and voting
person.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Articles of Incorporation, the Board of
Directors is divided into three classes of directors, each director serving a
three-year term. Each year only one class of directors is subject to a
shareholder vote, and, generally, one-third of the directors belong to each
class. This year, the Board of Directors is seeking shareholder election of one
director whose term expires this year, Mr. Christopher A. Twomey. Mr. Lowell T.
Swenson, a director since 1983, is a current member of the class being reelected
this year. However, Mr. Swenson has declined to stand for reelection and will
instead continue as a Director Emeritus after the Annual Meeting. The term of
the director elected this year will expire in the year 2001.
In addition, in accordance with a Stock Purchase Agreement dated July 18,
1988 between Suzuki Motor Corporation ("Suzuki") and the Company pursuant to
which Suzuki purchased 7,560,000 shares (as adjusted for subsequent stock
splits) of the Company's Class B Common Stock (constituting all outstanding
shares of Class B Common Stock), Suzuki is entitled to elect one member of the
Board of Directors.
The Board of Directors has nominated for election the person named below.
It is intended that proxies will be voted for such nominee. The Company believes
that the nominee named below will be able to serve; but should he be unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute nominee as the Board may propose.
The name and age of the nominee and the other directors and their principal
occupations are set forth below, based upon information furnished to the Company
by the nominee and directors. Unless otherwise indicated, each of the directors
has held their respective identified positions for more than the past five
years.
DIRECTOR
NAME, AGE AND PRINCIPAL OCCUPATION SINCE
---------------------------------- -----
NOMINATED FOR A TERM ENDING IN 2001:
[PHOTO] CHRISTOPHER A. TWOMEY, 50, President and Chief 1987
Executive Officer of the Company since January 1986;
executive officer of the Company in various capacities
since 1983. Director of Toro Company since 1997.
Community Board Member, Norwest Bank Minnesota West,
N.A.
<PAGE>
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 2000:
[PHOTO] WILLIAM G. NESS, 60, Chairman of the Board of Directors 1983
of the Company; Director of Northern Woodwork
(specialty furniture manufacturing), Thief River Falls,
MN. Director of Northern State Bank, Thief River Falls,
MN.
[PHOTO] GREGG A. OSTRANDER, 45, President and Chief Executive 1995
Officer of Michael Foods, Inc. (a food processing
manufacturer) since 1993; President of Swift-Eckrich
Prepared Foods Co. (a food manufacturer) from 1985 to
1993. Director of Michael Foods, Inc.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 1999:
[PHOTO] ROBERT J. DONDELINGER, 62, Co-owner and Chairman of the 1983
Board of Northern Motors (a General Motors dealership),
Thief River Falls, MN.
[PHOTO] WILLIAM I. HAGEN, 60, Co-owner and Vice President of 1983
North Star Transport, Inc. (a nationwide trucking
company), Eagan, MN; owner and operator of a farm in
northern Minnesota.
<PAGE>
[PHOTO] KENNETH J. ROERING, 56, Professor of Marketing and 1996
Pillsbury Company -- Paul S. Gerot Chair in Marketing
in the Carlson School of Management at the University
of Minnesota since 1981; Director of Sheldahl, Inc.,
TSI, Inc., Transport Corporation of America, Inc. and
IPI, Inc.
DIRECTOR ELECTED BY CLASS B COMMON STOCK:
[PHOTO] TAKESHI NATORI, 59, Senior Adviser of Overseas Marine & 1992
Power Products Marketing Department, Suzuki Motor
Corporation (vehicle and related manufacturing
operations), Hamamatsu, Japan; prior to June 1991,
President of Suzuki France S.A.
VOTE REQUIRED. The affirmative vote of a majority of the shares of Common
Stock represented at the meeting in person or by proxy is required for the
election of the two nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES.
------------------
DIRECTOR EMERITUS. Mr. Lowell T. Swenson declined to stand for re-election
this year and will retire as a director as of the Annual Meeting. Recognizing
Mr. Swenson's long-standing contributions to the Company and exemplary service
throughout his term as a director since 1983, as well as his service in the
snowmobile industry for more than thirty years, the Board of Directors
determined that the Company would benefit from a continued association with Mr.
Swenson. Upon his retirement at the Annual Meeting, Mr. Swenson will become a
Director Emeritus. As a Director Emeritus, Mr. Swenson will be extended an open
invitation to attend all Board meetings, but he will not be entitled to vote at
such meetings or have responsibility for the Board's actions. He will also not
be entitled to compensation paid to outside directors of the Company but will be
reimbursed out-of-pocket expenses incurred in attending Board meetings and will
be entitled to indemnification in his role as a Director Emeritus.
MEETINGS. During fiscal 1998, the Board of Directors met eight times. Each
director attended more than 75% of the meetings of the Board of Directors and
any committee on which he served.
BOARD COMMITTEES. The Board has appointed a Compensation Committee, an
Audit Committee and a Nominating Committee. The Compensation Committee, which
currently consists of Messrs. Dondelinger (Chair), Hagen, Ostrander and Roering,
met twice during fiscal 1998. The Compensation Committee assists in defining the
Company's compensation policies and administering its compensation plans,
reviews management's recommendations and makes its own recommendations to the
Board with respect to officers' and key employees' salaries, bonuses and stock
option grants, reviews and approves
<PAGE>
the Company's retirement plans and employee benefits and reviews management
succession plans. The Board of Directors has established a Stock Grant
Subcommittee of the Compensation Committee, currently composed of Messrs.
Ostrander and Roering, for the purpose of granting awards under the Company's
1989 Stock Option Plan and the 1995 Stock Plan. The Audit Committee, which
currently consists of Messrs. Roering (Chair), Dondelinger, Hagen and Swenson,
met once during the last fiscal year. The Audit Committee reviews and recommends
to the Board the independent auditors to be selected, meets with the Company's
independent auditors and representatives of management to review the internal
and external financial reporting of the Company, reviews the scope of the
independent auditors' examination and audit procedures to be utilized, considers
comments by the auditors regarding internal controls and accounting procedures
and management's response to those comments and approves any material non-audit
services to be provided by the Company's independent auditors.
The Nominating Committee, which currently consists of Messrs. Ostrander
(Chair), Ness, Roering and Twomey, met once during the last fiscal year. The
primary functions of the Nominating Committee are to review and make
recommendations to the Board with respect to the size, composition, retention,
tenure and retirement policies of the Board of Directors; determine and
recommend to the Board the criteria to be used in evaluating the qualifications
of Director candidates; approve the selection process that produces qualified
Director candidates; review the qualifications of candidates for Board
membership and approve and recommend to the Board of Directors the slate of
Director candidates to be proposed for election to the Board of Directors;
establish and implement a process for annually evaluating the performance of the
Board and provide feed-back to the Board on its performance; review developments
in corporate governance pertaining to Board membership and advise the Board on
such matters; and establish and maintain a training program for new Directors
and programs for improving current Director performance. Upon recommendation of
the Nominating Committee, the Board of Directors has established a policy that a
Director shall retire as of the Annual Meeting of Shareholders following such
Director's 72nd birthday.
Shareholders wishing to recommend candidates for Board membership should
submit the recommendations in writing to the Secretary of the Company at least
ninety (90) days prior to the meeting date corresponding to the previous year's
Annual Meeting, with the submitting shareholder's name and address and pertinent
information about the proposed nominee similar to that set forth for the
nominees named herein. The Nominating Committee will consider candidates
recommended by shareholders in light of the Committee's established criteria for
Director candidates. A shareholder intending to nominate an individual as a
Director at an Annual Meeting, rather than recommend the individual to the
Company for consideration as a nominee, must comply with the advance notice
requirements set forth in the Company's Bylaws. The Company's Bylaws provide
that any shareholder entitled to vote generally in the election of Directors may
nominate one or more persons for election as Directors provided that such
shareholder has provided written notice of such intention to the Secretary of
the Company. Such notice must be given not less than sixty (60) days nor more
than ninety (90) days prior to the meeting date corresponding to the previous
year's Annual Meeting. Shareholders intending to nominate a Director should
contact the Company' Secretary for a copy of the relevant procedure.
REMUNERATION OF DIRECTORS. All non-employee directors other than the
representative of Class B Common Stock currently receive $3,750 per quarter,
$1,000 per meeting attended in person, $500 per meeting attended telephonically
and $500 per committee meeting ($1,000 for committee chair) attended on a date
when no regular Board meeting is held, in addition to out-of-pocket expenses
incurred on behalf of the Company. In addition, pursuant to the Company's 1995
Stock Plan, each non-employee director automatically receives on the date of
election or re-election as a director, or appointment as a director by action of
the Board during the period between shareholder meetings, and on the date of
each
<PAGE>
subsequent annual or special shareholder meeting at which action is taken to
elect any director if the non-employee director's term is not up for election
that year and the non-employee director is serving an unexpired term (provided
that the non-employee director has served for at least six months), an option to
purchase 6,000 shares of the Company's Common Stock at an option price equal to
the fair market value of the Company's Common Stock on the date the option is
granted. These options, as recently amended, will have terms expiring five years
following termination of service as a director and will be exercisable at any
time following the date of grant. The 1989 Stock Option Plan and the 1995 Stock
Plan also permit granting of additional or alternative options to directors at
the discretion of the Board. The director elected by the holder of Class B
Common Stock is reimbursed for out-of-pocket expenses incurred on behalf of the
Company and does not receive the fees described above.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal years 1998, 1997 and 1996, the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for those years, to Christopher A. Twomey, the Company's Chief Executive
Officer, and to each of the four other most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
-------------------- ---------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS(#) COMPENSATION(1)
- --------------------------- ---- -------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Christopher A. Twomey 1998 $210,000 $190,000 -- $4,800
President and Chief 1997 165,000 180,000 45,000 4,500
Executive Officer 1996 165,000 112,500 60,000 3,400
Mark E. Blackwell 1998 $120,000 $ 94,000 -- $4,800
Vice President -- 1997 106,000 90,000 22,500 4,500
Marketing 1996 106,000 65,000 30,000 4,500
Timothy C. Delmore 1998 $120,000 $ 94,000 -- $4,800
Chief Financial Officer 1997 106,000 90,000 22,500 4,500
and Secretary 1996 106,000 65,000 30,000 4,500
Ronald G. Ray 1998 $120,000 $ 94,000 -- $4,800
Vice President -- 1997 106,000 90,000 22,500 4,500
Manufacturing 1996 106,000 62,000 30,000 4,500
Ole E. Tweet 1998 $112,000 $ 88,000 -- $4,800
Vice President -- 1997 103,000 78,000 22,500 4,500
New Product Development 1996 103,000 49,000 30,000 4,500
</TABLE>
- ------------------
(1) Represents amount contributed by the Company to the individual's 401(k)
retirement plan account.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its
executive officers which provide, among other things, for a lump-sum cash
severance payment to each such executive equal to approximately three times the
executive's average annual compensation over the preceding five years plus
certain fringe benefits under certain circumstances following a "change in
control" of the Company.
<PAGE>
In general, a "change in control" would occur when there has been any change in
the controlling persons reported in the Company's proxy statement, when 20% or
more of the Company's outstanding voting stock is acquired by any person, when
current members of the Board of Directors or their successors elected or
nominated by such members cease to constitute at least 75% of the Board of
Directors, when the Company merges or consolidates with or sells substantially
all its assets to any person or entity, or when the Company's shareholders
approve a plan of liquidation or dissolution of the Company. The employment
agreements also prohibit disclosure of confidential information concerning the
Company and require disclosure and assignment of inventions, discoveries and
other works relating to the executive's employment. If a "change in control" had
occurred at the end of fiscal 1998 and the executive's employment was
terminated, the following executive officers would have received the amounts
indicated, which includes deemed compensation during the preceding five years
from the exercise of stock options: Mr. Twomey, $1,313,000; Mr. Blackwell,
$744,000; Mr. Delmore, $593,000; Mr. Ray, $816,000; and Mr. Tweet, $573,000.
The Company has also entered into employment agreements with each of its
executive officers pursuant to which they will receive upon termination of
employment, other than by the Company for "cause," for a twelve-month period,
(i) with respect to Mr. Twomey, an amount equal to his average annual cash
compensation over the five-year period immediately preceding the date of
termination plus $105,000, and with respect to the other executive officers, an
amount equal to their average annual salary over the three-year period
immediately preceding the date of termination, and (ii) the employee benefits
received prior to termination. The employment agreements also restrict each
executive officer from certain competitive employment following termination and
prohibit disclosure of confidential information concerning the Company. If the
named executive officers had been terminated at the end of the last fiscal year
for a reason other than cause, they would have received the following amounts
pursuant to the employment agreements: Mr. Twomey, $465,500; Mr. Blackwell,
$111,000; Mr. Delmore; $111,000; Mr. Ray, $111,000; and Mr. Tweet, $106,000.
STOCK OPTIONS
No options were granted to the named individuals in fiscal 1998. The
Company extended the terms of all of its non-qualified employee options to ten
(10) years in fiscal 1998, including the non-qualified options held by Messrs.
Twomey, Blackwell, Delmore, Ray and Tweet.
The following table contains information concerning the exercise of options
during fiscal 1998 and the value of options previously granted under the
Company's Stock Option Plans which were held by the named individuals at the end
of the last fiscal year.
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END (#) OPTIONS AT FY-END(1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher A. Twomey -- -- 135,000 195,000 $446,850 --
Mark E. Blackwell(2) 23,375 $ 91,747 78,500 32,500 17,280 --
Timothy C. Delmore 33,300 129,038 85,700 32,500 38,727 --
Ronald G. Ray(2) 15,750 63,000 76,250 32,500 70,988 --
Ole E. Tweet 13,650 52,894 70,850 32,500 19,364 --
</TABLE>
- ------------------
(1) Based on a market price of $9.313 per share of Common Stock on March 31,
1998.
(2) See "Certain Transactions" for further discussion on option exercises by
Messrs. Blackwell and Ray.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are generally made by
the four-member Compensation Committee of the Board consisting of Messrs.
Dondelinger, Hagen, Ostrander and Roering. All decisions by the Compensation
Committee relating to the compensation of the Company's executive officers were
during fiscal 1998 and will in fiscal 1999 be reviewed by the full Board.
Pursuant to SEC rules designed to enhance disclosure of companies' policies with
regard to executive compensation, set forth below is a report submitted by the
Compensation Committee addressing the Company's compensation policies for fiscal
1998 as they affect Mr. Twomey and Messrs. Blackwell, Delmore, Ray and Tweet,
the four executive officers other than Mr. Twomey who, for fiscal 1998, were the
Company's most highly paid executive officers whose compensation exceeded
$100,000 (collectively with Mr. Twomey, the "Named Executives"). The following
report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 (the "1933 Act") or the Securities Exchange Act of 1934
(the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the 1933 Act or the 1934 Act.
COMPENSATION PHILOSOPHY. The Compensation Committee's executive
compensation policies are designed to reflect three basic objectives: payment
for performance; attraction and retention of executives who contribute to the
long-term success of the Company; and alignment of the interests of management
with those of shareholders.
BASE PAY. The Compensation Committee annually reviews each officer's
salary, including those of the Named Executives. In determining appropriate base
salary levels, the Compensation Committee considers levels of responsibility,
experience, internal equity, and external pay practices. With respect to
external pay practices, the Compensation Committee compares the base salary paid
by the Company to national surveys of manufacturing companies, which include a
strong representative sample of Midwestern companies, and to compensation paid
by companies manufacturing similar products in the same geographic location. The
Company attempts to maintain base salary levels at approximately the 50th
percentile according to the national surveys, a level which it believes allows
it to attract and retain strong executive talent and still emphasizes corporate
and individual performance which it recognizes through annual incentive awards.
Base salaries for the Named Executives were increased in fiscal 1998 to better
align base salary levels with the base salary level paid executives of
comparable companies, while retaining the Compensation Committee's philosophy of
emphasizing incentive compensation.
<PAGE>
ANNUAL INCENTIVE AWARDS. Each executive is eligible to receive annual cash
incentive awards based on corporate and individual performance. It is the
Compensation Committee's belief that placing a potentially large portion of an
executive's total compensation at risk, based on corporate and individual
performance, is the best way to focus attention on the short and long-term goals
of the Company and encourage high levels of performance from each executive. By
focusing on both corporate and individual goals, team work is encouraged.
Individual incentive awards for all executives are based on the Compensation
Committee's assessment of overall Company performance and each individual's
contribution. Compensation comparisons are made with peer-company executives
through national surveys and individual incentive awards are made such that when
added to base salary, total cash compensation reflects corporate and individual
performance and is within the range of total cash compensation according to the
national surveys. Incentive payments for fiscal 1998 reflected the Company's
policy on incentive compensation and the Company's relatively strong financial
performance in fiscal 1998 as well as the increases in base salary levels and an
assessment of appropriate aggregate compensation for each of the Named
Executives.
LONG-TERM INCENTIVES. Aligning the interests of management with those of
shareholders is accomplished through longer term incentives directly related to
the improvement in long-term shareholder value. The Compensation Committee
believes this is accomplished with the award of stock options to the Named
Executives and other key personnel. Stock options are awarded periodically
consistent with the Company's objective to include in total compensation a
long-term equity interest for executive officers, with greater opportunity for
reward if long-term performance is sustained. Stock options have value for the
executive officers only if the price of the Company's stock appreciates in value
from the date of grant. Shareholders also benefit from such stock price
appreciation. The Compensation Committee believes that stock options encourage
and reward effective management which, in turn, results in the long-term
corporate financial success as measured by stock price appreciation.
OTHER COMPENSATION PROGRAMS. The Company maintains certain broad based
employee benefit plans in which its executive officers, including the Named
Executives, have been permitted to participate, including retirement, life, and
health insurance plans. The Company's retirement plan is a 401(k) plan which
allows all eligible employees to make pre-tax contributions and in which the
Company matches employee contributions in an amount equal to the employee's
contribution up to a maximum of 3% of the employee's base salary.
MR. TWOMEY'S FISCAL 1998 COMPENSATION. Mr. Twomey's base pay for fiscal
1998, which was determined on the same basis as the other Named Executives, was
$210,000 which is at the low end of the target range for base pay set by the
Compensation Committee. In evaluating the Company's overall performance in order
to determine Mr. Twomey's annual incentive award, the Compensation Committee
considered the Company's financial performance for fiscal 1998 and Mr. Twomey's
individual contribution. The Compensation Committee paid Mr. Twomey $190,000 as
an incentive award, reflecting the Compensation Committee's review of the
Company's relatively strong financial performance in fiscal 1998, Mr. Twomey's
aggregate compensation and competitive compensation practices.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Robert J. Dondelinger William I. Hagen
Gregg A. Ostrander Kenneth J. Roering
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described below, Messrs. Dondelinger and Hagen, directors and members
of the Compensation Committee of the Board, have important relationships with
entities which engage in certain transactions with the Company which require
disclosure. See "Certain Transactions."
CERTAIN TRANSACTIONS
Since the Company first began production in August 1983, it has purchased
all engines for its products from Suzuki pursuant to contracts which are renewed
annually and which stipulate price and general terms of delivery of engines.
During the last fiscal year, the Company paid Suzuki approximately $94,955,000
for engines. Terms of the agreement were, and renewal rates are, the subject of
arms-length negotiation on terms no less favorable to the Company than the
Company could otherwise obtain.
During the last fiscal year, the Company has engaged North Star Transport,
Inc., a corporation for which Mr. Hagen, a director of the Company, is a
director, executive officer and principal shareholder, for freight hauling
services for which it paid North Star Transport, Inc. approximately $2,606,000.
The rates charged were, and will continue to be, the subject of arms-length
negotiation on terms no less favorable to the Company than the Company could
otherwise obtain.
During the last fiscal year, the Company purchased wiring harnesses from
Itasca Bemidji, Inc. ("IBI"), a company in which Mr. Ness, a director of the
Company, owns approximately 15% of the outstanding stock. During the last fiscal
year, the Company paid IBI approximately $2,346,000 for harnesses. The prices
paid by the Company were, and will continue to be, the subject of arms-length
negotiation on terms no less favorable to the Company than the Company could
otherwise obtain.
During the last fiscal year, the Company purchased certain vehicles from
Northern Motors, a General Motors dealership in which Mr. Dondelinger, a
director of the Company, is Co-Owner and Chairman of the Board. During the last
fiscal year, the Company paid Northern Motors approximately $96,045 for
vehicles. The prices paid by the Company were, and will continue to be, the
subject of arms-length negotiation on terms no less favorable to the Company
than the Company could otherwise obtain.
During the last fiscal year, the Board of Directors authorized a loan and
stock redemption for two executive officers of the Company in order to
facilitate the exercise of stock options on an effective "net issue" basis at a
time when the officers were prohibited by the Company's Insider Trading Policy
from selling shares in the open market. Rather than exercise options through a
broker and immediately selling sufficient shares to the public to cover the
exercise price, the Company loaned Messrs. Blackwell and Ray an aggregate
$139,080 and $15,000, respectively, to exercise options to purchase an aggregate
23,375 and 2,500 shares, respectively, granted under the Company's 1989 Stock
Option Plan. The loans were on terms which required repayment at the demand of
the Company. Immediately following exercise of the options, the Company redeemed
from Messrs. Blackwell and Ray an aggregate 13,908 and 1,500 shares,
respectively, of Common Stock at a per share price of $10.00, the closing price
of the Common Stock of the Company on the date of redemption for an aggregate
$139,080 and $15,000, respectively. Messrs. Blackwell and Ray then applied the
proceeds of the redemption to repay in full the Company loans. The Board of
Directors believes the terms of the transaction were fair to the Company and the
totality of the transactions were substantially equivalent to alternative stock
option methods permitted under the Company's 1995 Stock Plan as approved by the
shareholders.
<PAGE>
PERFORMANCE GRAPH
In accordance with the rules of the Securities and Exchange Commission, the
following performance graph compares performance of the Company's Common Stock
on the Nasdaq National Market to the S&P 500 Index and to the Recreational and
Luxury Product Index (indicated below as the "Peer Group Index") prepared by
Media General Financial Services. The graph compares on an annual basis the
cumulative total shareholder return on $100 invested on March 31, 1993, and
assumes reinvestment of all dividends and has been adjusted to reflect stock
splits. The performance graph is not necessarily indicative of future investment
performance.
[PLOT POINTS GRAPH]
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Arctic Cat Inc. .......... $ 100.00 $ 151.59 $ 139.30 $ 93.51 $ 95.75 $ 92.44
Peer Group Index ......... 100.00 115.23 118.76 139.25 138.06 186.86
S&P 500 Index ............ 100.00 101.48 117.27 154.92 185.64 274.74
</TABLE>
The performance graph above shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the 1933 Act or the 1934 Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the 1933 Act or the 1934 Act.
<PAGE>
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
The following table presents information provided to the Company as to the
beneficial ownership of the Company's capital stock as of June 12, 1998 by (i)
the only shareholders known to the Company to hold 5% or more of such stock,
(ii) each of the directors and Named Executives of the Company and (iii) all
directors and officers as a group. Unless otherwise indicated, all shares
represent sole voting and investment power.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
CAPITAL STOCK OUTSTANDING SHARES OUTSTANDING SHARES
BENEFICIAL OWNERS BENEFICIALLY OWNED(1) OF COMMON STOCK OF CAPITAL STOCK
- ----------------- --------------------- ------------------ ------------------
<S> <C> <C> <C>
Suzuki Motor Corporation ............... 7,560,000 0% 26.8%
Hamamatsu-Nishi
P.O. Box 1, 432-91
Hamamatsu, Japan
State of Wisconsin Investment Board .... 2,552,000(2) 12.4 9.1
P.O. Box 7842
Madison, WI 53707
William G. Ness ........................ 197,227(3) * *
Christopher A. Twomey .................. 369,030(3) 1.8 1.3
Robert J. Dondelinger .................. 207,912(3) 1.0 *
William I. Hagen ....................... 349,805(3) 1.7 1.2
Takeshi Natori ......................... 0(4) 0 0
Lowell T. Swenson ...................... 402,261(3) 1.9 1.4
Gregg A. Ostrander ..................... 19,000(3) * *
Kenneth J. Roering ..................... 13,000(3) * *
Mark E. Blackwell ...................... 121,294(3) * *
Timothy C. Delmore ..................... 173,929(3) * *
Ronald G. Ray .......................... 123,000(3) * *
Ole E. Tweet ........................... 241,285(3) 1.2 *
All Directors and Officers
as a Group (14 persons) ............... 2,463,295(3) 11.4 8.5
</TABLE>
- ------------------
* Less than 1%.
(1) All outstanding shares of capital stock are Common Stock except shares held
by Suzuki which are all Class B Common Stock. See "Election of Directors."
(2) Based on information included in a Schedule 13G filed with the Securities
and Exchange Commission.
(3) Includes the following number of shares purchasable by the indicated
individuals and group within 60 days from the date hereof pursuant to the
exercise of outstanding stock options: Mr. Ness, 63,000; Mr. Twomey,
190,050; Mr. Dondelinger, 35,721; Mr. Hagen, 35,721; Mr. Swenson, 35,721;
Mr. Ostrander, 18,000 shares; Mr. Roering, 12,000 shares; Mr. Blackwell,
111,000; Mr. Delmore, 109,200; Mr. Ray, 108,750; Mr. Tweet, 103,350; and
all directors and officers as a group, 939,863. Also, Mr. Hagen's shares
include 11,037 shares owned by Mr. Hagen's wife, the beneficial ownership
of which he disclaims.
(4) Excludes shares held by Suzuki Motor Corporation.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon its review of Forms 3, 4 and 5 and any amendments thereto
furnished to the Company pursuant to Section 16 of the 1934 Act, the Company
believes all of such forms were filed on a timely basis by reporting persons
during fiscal year ended March 31, 1998, except Messrs. Delmore, Ray, Blackwell,
Tweet and Skime, officers of the Company, each of whom filed a late Form 4 in
fiscal 1998, and except Messrs. Hagen, Ness, Ostrander, Roering and Swenson,
directors of the Company, each of whom filed a late Form 5 for fiscal 1998.
AUDITORS
Grant Thornton LLP, independent public accountants, were the auditors for
the Company for fiscal 1998. A representative of Grant Thornton LLP is expected
to be present at the Annual Meeting of Shareholders and will be available to
respond to appropriate questions. As of the date hereof, no auditing firm has
been formally selected for fiscal 1999 since the Board of Directors has
historically made such formal selection in conjunction with the Annual Meeting
of Shareholders.
SHAREHOLDER PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to a company, to present proposals for
shareholder action in a company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by corporate action in accordance with the
proxy rules. The Company's Annual Meeting of Shareholders for the fiscal year
ended March 31, 1999 is expected to be held on or about August 5, 1999 and proxy
materials in connection with that meeting are expected to be mailed on or about
June 30, 1999. Shareholder proposals prepared in accordance with the proxy rules
must be received by the Company on or before March 2, 1999.
METHOD OF PROXY SOLICITATION
The entire cost of preparing, assembling, printing and mailing the Notice
of Annual Meeting of Shareholders, this Proxy Statement, the proxy itself, and
the cost of soliciting proxies relating to the meeting will be borne by the
Company. In addition to use of the mail, proxies may be solicited by officers,
directors and other regular employees of the Company by telephone, telegraph or
personal solicitation, and no additional compensation will be paid to such
individuals. The Company will, if requested, reimburse banks, brokerage houses
and other custodians, nominees and certain fiduciaries for their reasonable
expenses incurred in mailing proxy material to their principals.
OTHER MATTERS
The Company's Bylaws provide that certain requirements be met in order that
business may properly come before the shareholders at the Annual Meeting. Among
other things, shareholders intending to bring business before the Annual Meeting
must provide written notice of such intent to the Secretary of the Company. Such
notice must be given not less than 60 days nor more than 90 days prior to the
meeting date corresponding with the previously year's Annual Meeting.
Shareholders desiring to bring matters for action at an Annual Meeting should
contact the Company's Secretary for a copy of the
<PAGE>
relevant procedure. Since no such notice was received with respect to this
year's Annual Meeting, no shareholders may bring additional business before the
meeting for action.
The Annual Report of the Company for the past fiscal year is enclosed
herewith and contains the Company's financial statements for the fiscal year
ended March 31, 1998. A copy of Form 10-K, the Annual Report filed by the
Company with the Securities and Exchange Commission will be furnished without
charge to any shareholder who requests it in writing from the Company, at the
address noted on the first page of this Proxy Statement.
The Board of Directors knows of no business other than that described
herein that will be presented for consideration at the Annual Meeting. If,
however, other business shall properly come before the meeting, the persons in
the enclosed form of proxy intend to vote the shares represented by said proxies
on such matters in accordance with their judgment in the best interest of the
Company.
By Order of the Board of Directors,
/s/ Timothy C. Delmore
Timothy C. Delmore
SECRETARY
<PAGE>
ARCTIC CAT INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 6, 1998
The undersigned hereby appoints William G. Ness and Robert J. Dondelinger,
or either of them, as proxies with full power of substitution to vote all shares
of stock of Arctic Cat Inc. of record in the name of the undersigned at the
close of business on June 23, 1998 at the Annual Meeting of Shareholders to be
held in Thief River Falls, Minnesota on August 6, 1998, or any adjournment or
adjournments, hereby revoking all former proxies.
1. ELECTION OF DIRECTORS:
[ ] FOR the nominee listed below [ ] WITHHOLD AUTHORITY
to vote for the nominee listed
below
CHRISTOPHER A. TWOMEY
2. In their discretion, the proxies are authorized to vote upon any other
matters coming before the meeting.
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THE SHARE(S) REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSAL (1) IN
ACCORDANCE WITH THE SPECIFICATION MADE AND "FOR" SUCH PROPOSAL IF THERE IS NO
SPECIFICATION.
Dated: , 1998
------------------------
------------------------------------
Signature
------------------------------------
Signature if held jointly
Please sign exactly as name(s) are
shown at left. When signing as
executor, administrator, trustee, or
guardian, give full title as such;
when shares have been issued in
names of two or more persons, all
should sign.
