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 5, 1999
------------------
Notice is hereby given that the Annual Meeting of Shareholders of Arctic
Cat Inc. (the "Company") will be held at 601 Brooks Avenue South, Thief River
Falls, Minnesota 56701, on Thursday, August 5, 1999 at 4:00 p.m. for the
following purposes:
1. To elect three directors to serve a three-year term and one director
to serve a two-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 21, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting. Since it is important that your shares be represented at
the meeting, whether or not you personally plan to attend, you are requested to
sign, date and return your proxy card promptly in the enclosed envelope. If you
are a record holder, you may also submit your proxy by telephone or through the
Internet by following the instructions on the proxy card. If you own shares in
"street name" (i.e., through a broker), you should follow the instructions
provided by the broker. Returning your signed proxy or submitting your proxy by
telephone or through the Internet will not prevent you from voting in person at
the meeting, should you desire to do so.
By Order of the Board of Directors,
/s/ Timothy C. Delmore
Timothy C. Delmore,
SECRETARY
Thief River Falls, Minnesota
July 2, 1999
- --------------------------------------------------------------------------------
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 5, 1999
------------------
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 601 Brooks Avenue South, Thief River Falls, MN 56701, on
Thursday, August 5, 1999 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 2, 1999.
The Company's Annual Report for the fiscal year ended March 31, 1999,
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 21, 1999 consists of 18,362,775 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 21, 1999
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.
This year, proxies may be sent to the Company using the enclosed proxy
card, or by record holders by submitting a proxy by telephone or through the
Internet, as permitted by Minnesota law. Shares represented by proxies properly
signed, dated and returned, or submitted by telephone or through the Internet,
will be voted at the Annual Meeting of Shareholders in accordance with the
instructions set forth therein. If a proxy is properly signed, or submitted by
telephone or through the Internet, but contains no instructions, the shares
represented thereby will be voted FOR the director nominees and at the
discretion of the proxyholders as to any other matters which may properly come
before the Annual Meeting of Shareholders.
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
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<PAGE>
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 in
person. To revoke a proxy previously submitted by telephone or through the
Internet, the shareholder could also simply vote again at a later date using the
same procedures in which case the later vote will be recorded and the earlier
vote revoked. Record holders wishing to vote by telephone or through the
Internet should note that they must do so before noon on Wednesday, August 4,
1999. After that time, telephone and Internet voting will not be permitted and a
shareholder wishing to vote, or revoke an earlier proxy, must submit a signed
proxy card or vote in person.
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 four
directors: Mr. John C. Heinmiller, who was appointed to the Board on January 1,
1999, and Messrs. Robert J. Dondelinger, William I. Hagen and Kenneth J.
Roering, incumbent directors whose terms expire this year. If elected, Mr.
Heinmiller's term will expire in 2001 and Messrs. Dondelinger's, Hagen's and
Roering's terms will expire in 2002.
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 persons named below.
It is intended that proxies will be voted for such nominees. The Company
believes that the nominees named below will be able to serve; but should any of
them 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 nominees and the other directors and their
principal occupations are set forth below, based upon information furnished to
the Company by the nominees and directors. Unless otherwise indicated, each of
the directors has held their respective identified positions for more than the
past five years.
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<PAGE>
DIRECTOR
NAME, AGE AND PRINCIPAL OCCUPATION SINCE
---------------------------------- -----
NOMINATED FOR A TERM ENDING IN 2001:
[PHOTO] JOHN C. HEINMILLER, 45, Chief Financial Officer and 1999
Chief Information Officer of St. Jude Medical, Inc.
(a medical products company) since 1998; President of
F3 Corporation (an asset management company) from
June 1997 to April 1998; Vice President-Finance of
Daig Corporation (a medical products company) from
March 1995 to May 1997; Vice President-Finance of
Lifecore Biomedical, Inc. (a medical products
company) from October 1991 to February 1995; Director
of Lifecore Biomedical, Inc.
NOMINATED FOR A TERM ENDING IN 2002:
[PHOTO] ROBERT J. DONDELINGER, 63, Co-owner and Chairman of 1983
the Board of Northern Motors (a General Motors
dealership), Thief River Falls, MN.
[PHOTO] WILLIAM I. HAGEN, 61, Retired; Co-owner and Vice 1983
President of North Star Transport, Inc. (a nationwide
trucking company), Eagan, MN, from its inception to
June 1998; owner and operator of a farm in northern
Minnesota.
[PHOTO] KENNETH J. ROERING, 57, 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.
3
<PAGE>
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 2000:
[PHOTO] WILLIAM G. NESS, 61, Chairman of the Board of 1983
Directors of the Company; Director of Northern
Woodwork (a specialty furniture manufacturer), Thief
River Falls, MN; Director of Northern State Bank,
Thief River Falls, MN.
[PHOTO] GREGG A. OSTRANDER, 46, 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. and Celestial
Seasonings Inc.
DIRECTOR WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERM EXPIRES IN 2001:
[PHOTO] CHRISTOPHER A. TWOMEY, 51, President and Chief 1987
Executive Officer of the Company since January 1986;
executive officer of the Company in various
capacities since 1983; Director of The Toro Company
since 1997.
DIRECTOR ELECTED BY CLASS B COMMON STOCK:
[PHOTO] TAKEKAZU KAITO, 52, General Manager of Overseas 1999
Motorcycle Marketing Department I, Motorcycle
Division, Suzuki Motor Corporation, Japan, since
April 1997; Director of Suzuki Motorcycle Pakistan
Ltd. from 1992 to April 1997.
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<PAGE>
VOTE REQUIRED. The affirmative vote of a majority of the shares of Common
Stock represented at the meeting in person or by proxy and entitled to vote is
required for the election of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES.
------------------
DIRECTOR EMERITUS. Mr. Lowell T. Swenson retired as a director as of last
year's Annual Meeting. Recognizing Mr. Swenson's long-standing contributions to
the Company and exemplary service throughout his 15-year term as a director, 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 and appointed him a Director Emeritus upon his
retirement. As a Director Emeritus, Mr. Swenson is invited to attend all Board
meetings, but he is not entitled to vote at such meetings and does not have
responsibility for the Board's actions. He is also not entitled to compensation
paid to outside directors of the Company but is reimbursed out-of-pocket
expenses incurred in attending Board meetings and is entitled to indemnification
in his role as a Director Emeritus.
MEETINGS. During fiscal 1999, the Board of Directors met six times and
acted once by written action. 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 four times and acted once by written action during fiscal 1999. 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 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 and Hagen, met twice
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 four times 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
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<PAGE>
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's 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 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 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.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal years 1999, 1998 and 1997, 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 1999 $225,000 $180,000 70,000 $4,800
President and Chief 1998 210,000 190,000 -- 4,800
Executive Officer 1997 165,000 180,000 45,000 4,500
Mark E. Blackwell 1999 $130,000 $ 89,300 45,000 $4,500
Vice President -- 1998 120,000 94,000 -- 4,800
Marketing 1997 106,000 90,000 22,500 4,500
Timothy C. Delmore 1999 $130,000 $ 89,300 45,000 $4,500
Chief Financial Officer 1998 120,000 94,000 -- 4,800
and Secretary 1997 106,000 90,000 22,500 4,500
Ronald G. Ray 1999 $130,000 $ 89,300 45,000 $4,500
Vice President -- 1998 120,000 94,000 -- 4,800
Manufacturing 1997 106,000 90,000 22,500 4,500
Ole E. Tweet 1999 $120,000 $ 85,000 45,000 $4,431
Vice President -- 1998 112,000 88,000 -- 4,800
New Product Development 1997 103,000 78,000 22,500 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. 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 1999 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
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exercise of stock options: Mr. Twomey, $1,150,000; Mr. Blackwell, $600,000; Mr.
Delmore, $601,000; Mr. Ray, $596,000; and Mr. Tweet, $467,000.
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, $432,500; Mr. Blackwell,
$119,000; Mr. Delmore; $119,000; Mr. Ray, $119,000; and Mr. Tweet, $112,000.
STOCK OPTIONS
The following table contains information concerning individual grants of
stock options during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
PERCENT OF TOTAL MARKET
OPTIONS OPTIONS GRANTED TO PRICE GRANT DATE
GRANTED EMPLOYEES IN EXERCISE ON GRANT EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR PRICE($) DATE($) DATE ($)(2)
- ---- ------- ------------------ -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher A. Twomey 70,000 21% 9.63 9.63 8/6/08 278,873
Mark E. Blackwell 45,000 14% 9.63 9.63 8/6/08 179,276
Timothy C. Delmore 45,000 14% 9.63 9.63 8/6/08 179,276
Ronald G. Ray 45,000 14% 9.63 9.63 8/6/08 179,276
Ole E. Tweet 45,000 14% 9.63 9.63 8/6/08 179,276
</TABLE>
- ------------------
(1) Becomes exercisable with respect to one-third of the shares of Common Stock
subject to the option on August 6, 2000, 2001 and 2002.
(2) Based upon the Black-Scholes valuation method. Assumptions used include an
expected term of eight years, risk-free interest rate of 6.2%, dividend
yield of 2% and historical volatility of 35%.
The following table contains information concerning the exercise of options
during fiscal 1999 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.
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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 49,950 199,800 225,731 115,000 $335,097 $41,500
Mark E. Blackwell -- -- 101,678 45,000 $ 35,685 $13,950
Timothy C. Delmore -- -- 92,378 52,500 $ 52,698 $17,250
Ronald G. Ray -- -- 99,428 45,000 $ 87,975 $13,950
Ole E. Tweet -- -- 94,028 45,000 $ 32,949 $13,950
</TABLE>
- ------------------
(1) Based on a market price of $9.94 per share of Common Stock on March 31,
1999.
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 1999 and will in fiscal 2000 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
1999 as they affect Mr. Twomey and Messrs. Blackwell, Delmore, Ray and Tweet,
the four executive officers other than Mr. Twomey who, for fiscal 1999, 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 1999 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.
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
9
<PAGE>
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 consistent
with the total cash compensation according to the national surveys. Incentive
payments for fiscal 1999 reflected the Company's policy on incentive
compensation and the Company's financial performance in fiscal 1999.
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 1999 COMPENSATION. Mr. Twomey's base pay for fiscal
1999, which was determined on the same basis as the other Named Executives, was
$225,000 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 1999 and
Mr. Twomey's individual contribution. The Compensation Committee paid Mr.
Twomey $180,000 as an incentive award, reflecting the Compensation Committee's
review of the Company's financial performance in fiscal 1999, 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
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described below, Messrs. Dondelinger and Hagen, directors and members
of the Compensation Committee of the Board, had relationships in fiscal 1999
with entities which engaged 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 $91,724,000
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 engaged North Star Transport, Inc.
("North Star"), a corporation for which Mr. Hagen, a director of the Company,
was a director, executive officer and principal shareholder until July 1, 1998,
for freight hauling services. As of that date, North Star was acquired by
Transport Corporation of America, Inc. ("Transport America"), in Eagan, MN. Mr.
Roering, a director of the Company, is also a director of Transport America. Mr.
Hagen owns approximately 6.7% of Transport America's outstanding common stock.
During fiscal 1999, the Company paid North Star and Transport America
approximately $4,782,000. 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 $2,463,000 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 also purchased
components from May Corporation, a company in which Mr. Ness is a director, and
paid approximately $304,000 for such components.
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 $211,000 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.
11
<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 Automotive Index
(indicated below as the "Peer Group Index") prepared by Media General Financial
Services ("Media General"). Media General advised the Company that as a result
of an internal restructuring of its industry group classification system in
1998, Media General no longer supports the peer group index prepared for the
Company in prior years (the Recreational and Luxury Product Index), and that
figures for that index are no longer available. The Company is now categorized
in a similar industry group -- Automotive. The graph compares on an annual basis
the cumulative total shareholder return on $100 invested on March 31, 1994, 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 CHART]
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Arctic Cat Inc. .......... $ 100.00 $ 91.90 $ 61.69 $ 63.17 $ 60.98 $ 66.79
Peer Group Index ......... 100.00 96.24 115.12 124.55 163.58 179.12
S&P 500 Index ............ 100.00 115.57 152.67 182.94 270.74 320.72
</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.
12
<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 11, 1999 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% 29.2%
Hamamatsu-Nishi
P.O. Box 1, 432-91
Hamamatsu, Japan
State of Wisconsin Investment Board ...... 2,552,000(2) 13.9% 9.8%
P.O. Box 7842
Madison, WI 53707
William G. Ness .......................... 165,900(3) * *
Christopher A. Twomey .................... 425,913(3) 2.3% 1.6%
Robert J. Dondelinger .................... 204,912(3) 1.1% *
William I. Hagen ......................... 340,991(3) 1.9% 1.3%
Takekazu Kaito ........................... 0(4) 0 0
Gregg A. Ostrander ....................... 25,000(3) * *
Kenneth J. Roering ....................... 19,000(3) * *
John C. Heinmiller ....................... 6,000(3) * *
Mark E. Blackwell ........................ 126,145(3) * *
Timothy C. Delmore ....................... 149,286(3) * *
Ronald G. Ray ............................ 122,378(3) * *
Ole E. Tweet ............................. 246,863(3) 1.3% *
All Directors and Officers 2,099,618(3)(4) 10.8% 7.8%
as a Group (13 persons) ................
</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, 41,678; Mr. Twomey,
249,064; Mr. Dondelinger, 41,721; Mr. Hagen, 41,721; Mr. Ostrander, 24,000
shares; Mr. Roering, 18,000 shares; Mr. Heinmiller, 6,000 shares; Mr.
Blackwell, 116,678; Mr. Delmore, 108,757; Mr. Ray, 114,428; Mr. Tweet,
109,028; and all directors and officers as a group, 1,030,103. 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.
13
<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, 1999, except that Messrs. Ness, Hagen,
Dondelinger, Ostrander and Roering filed a late Form 5 for automatic director
grants.
AUDITORS
Grant Thornton LLP, independent public accountants, were the auditors for
the Company for fiscal 1999. 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 2000 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, 2000 is expected to be held on or about August 3, 2000 and proxy
materials in connection with that meeting are expected to be mailed on or about
June 26, 2000. Shareholder proposals prepared in accordance with the proxy rules
must be received by the Company on or before March 1, 2000. In addition, if the
Company receives notice of a separate shareholder proposal before May 7, 2000 or
after June 6, 2000, such proposal will be considered untimely pursuant to the
Company's Bylaws and Rules 14a-4 and 14a-5(e), and the persons to be named as
proxies solicited by the Board of Directors of the Company for its 2000 Annual
Meeting of Shareholders may exercise discretionary voting power with respect to
such proposal. See also "Other Matters" below.
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
14
<PAGE>
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 previous
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 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, 1999. 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
15
<PAGE>
ARCTIC CAT INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, AUGUST 5, 1999 4:00 P.M.
ARCTIC CAT INC.
601 BROOKS AVENUE SOUTH
THIEF RIVER FALLS, MN 56701
ARCTIC CAT INC.
601 BROOKS AVENUE SOUTH
THIEF RIVER FALLS, MN 56701 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON AUGUST 5, 1999 OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
The shares of stock of Arctic Cat Inc. you hold will be voted as you specify
below.
By signing the proxy, you revoke all prior proxies and appoint William G. Ness
and Christopher A. Twomey as proxies (each with the power to act alone and with
the power of substitution and revocation) to vote your shares as you designate
on the matters shown on the reverse side and any other matters which may come
before the Annual Meeting and all adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
--------------------
COMPANY #
CONTROL #
--------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
TELEPHONE AND INTERNET VOTING ARE PERMITTED UNDER MINNESOTA LAW.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
* Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
* Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- http://www.eproxy.com/acat/ -- QUICK *** EASY *** IMMEDIATE
* Use the Internet to vote your proxy 24 hours a day, 7 days a week.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Arctic Cat Inc., c/o Shareowner Services(SM),
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
<TABLE>
<S> <C>
1. Election of directors: 01 John C. Heinmiller 03 William I. Hagen
02 Robert J. Dondelinger 04 Kenneth J. Roering
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
_________________________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY | |
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) |_________________________________________|
IN THE BOX PROVIDED TO THE RIGHT.)
2. The proxies are authorized to vote in their discretion upon such other business as may properly
come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
FOR EACH PROPOSAL AND, IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE MEETING.
Address Change? Mark Box [ ]
Indicate changes below:
Date _____________________________, 1999
_________________________________________
| |
|_________________________________________|
Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees,
administrators, etc., should include title
and authority. Corporations should provide
full name of corporation and title of
authorized officer signing the proxy.
</TABLE>
