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 Under 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 3, 2000
------------------
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 3, 2000 at 4:00 p.m. for the
following purposes:
1. To elect two directors to serve a three-year term.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 15, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Since it is important that your shares be
represented at the Annual 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 Annual 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
June 30, 2000
--------------------------------------------------------------------------------
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL 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 3, 2000
------------------
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 3, 2000 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 June 30, 2000.
The Company's Annual Report for the fiscal year ended March 31, 2000,
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 15, 2000 consists of 17,162,975 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 15, 2000
will be entitled to vote at the Annual Meeting.
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 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.
The presence in person or by proxy of a majority of the voting power of
shares entitled to vote at the Annual Meeting will constitute a quorum for the
transaction of business. An item of business will be approved if it receives the
affirmative vote of the holders of a majority of the shares present and entitled
to vote on that item of business. Abstentions will be treated as shares present
and entitled to vote for purposes of determining the presence of a quorum and in
tabulating votes cast on proposals presented to shareholders. Consequently,
abstentions (or "withhold authority" as to directors) will have the same effect
as a negative vote. If a broker indicates on a proxy that it does not have
authority to vote on an
1
<PAGE>
item of business, the shares represented by the proxy will not be considered
present and entitled to vote and, therefore, will have no effect on the outcome
of the vote.
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. 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 (Central Standard Time) on
Wednesday, August 2, 2000. After that time, telephone and Internet voting will
not be permitted and a shareholder wishing to vote, or revoke an earlier proxy
after such time 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 two
directors: William G. Ness and Gregg A. Ostrander, incumbent directors whose
terms expire this year. If elected, Messrs. Ness' and Ostrander's terms will
expire in 2003.
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.
2
<PAGE>
DIRECTOR
NAME, AGE AND PRINCIPAL OCCUPATION SINCE
---------------------------------- --------
NOMINATED FOR A TERM ENDING IN 2003:
[PHOTO] WILLIAM G. NESS, 62, Chairman of the Board of Directors of 1983
the Company; Director of Northern Woodwork (a specialty
furniture manufacturer), Thief River Falls, MN; Director of
Northern State Bank, Thief River Falls, MN, Itasca Bemidji,
Inc., Bemidji, MN, and May Corporation, Minneapolis, MN.
[PHOTO] GREGG A. OSTRANDER, 47, 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;
Chairman of the Board of Directors of Michael Foods, Inc.
and Director of The Hain-Celestial Group, Inc.
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERM EXPIRES IN 2001:
[PHOTO] JOHN C. HEINMILLER, 46, Chief Financial Officer and Chief 1999
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.
[PHOTO] CHRISTOPHER A. TWOMEY, 52, President and Chief Executive 1987
Officer of the Company since January 1986; executive officer
of the Company in various capacities since 1983; Director of
The Toro Company since 1997.
3
<PAGE>
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE
ANNUAL MEETING AND WHOSE TERMS EXPIRE IN 2002:
[PHOTO] ROBERT J. DONDELINGER, 64, Co-owner and Chairman of the 1983
Board of Northern Motors (a General Motors dealership),
Thief River Falls, MN.
[PHOTO] WILLIAM I. HAGEN, 62, Retired; Co-owner and Vice President 1983
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, 58, Professor of Marketing and Pillsbury 1996
Company -- Paul S. Gerot Chair in Marketing in the Carlson
School of Management at the University of Minnesota since
1981; Director of Sheldahl, Inc. and Transport Corporation
of America, Inc.
DIRECTOR ELECTED BY CLASS B COMMON STOCK:
[PHOTO] TAKEKAZU KAITO, 53, General Manager of Overseas Motorcycle 1999
Marketing Department I, Motorcycle Division, Suzuki Motor
Corporation, Japan, since April 1997; Director of Suzuki
Motorcycle Pakistan Ltd. from 1992 to April 1997.
4
<PAGE>
VOTE REQUIRED. The affirmative vote of a majority of the shares of Common
Stock represented at the Annual 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 in 1998.
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 2000, 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, except Mr. Kaito who attended one meeting
during fiscal 2000.
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 six times during fiscal 2000. 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,
Hagen and Heinmiller met two times 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
5
<PAGE>
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 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.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal years 2000, 1999 and 1998, 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 2000 $292,000 $233,880 80,000 $5,368
President and Chief 1999 225,000 180,000 70,000 4,800
Executive Officer 1998 210,000 190,000 -- 4,800
Mark E. Blackwell 2000 $157,000 $ 77,030 35,000 $4,987
Vice President -- 1999 130,000 89,300 45,000 4,500
Marketing 1998 120,000 94,000 -- 4,800
Timothy C. Delmore 2000 $159,000 $ 78,012 35,000 $5,001
Chief Financial Officer 1999 130,000 89,300 45,000 4,500
and Secretary 1998 120,000 94,000 -- 4,800
Ronald G. Ray 2000 $150,000 $ 81,072 25,000 $4,938
Vice President -- 1999 130,000 89,300 45,000 4,500
Manufacturing 1998 120,000 94,000 -- 4,800
Ole E. Tweet 2000 $140,000 $ 76,267 25,000 $4,938
Vice President -- 1999 120,000 85,000 45,000 4,431
New Product Development 1998 112,000 88,000 -- 4,800
</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 2000 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
7
<PAGE>
exercise of stock options: Mr. Twomey, $1,231,000; Mr. Blackwell, $619,000; Mr.
Delmore, $620,000; Mr. Ray, $615,000; and Mr. Tweet, $567,000.
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 $140,000, 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, $495,000; Mr. Blackwell,
$135,667; Mr. Delmore, $136,333; Mr. Ray, $133,333; and Mr. Tweet, $124,000.
STOCK OPTIONS
The following table contains information concerning individual grants of
stock options during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
PERCENT OF TOTAL MARKET
OPTIONS OPTIONS GRANTED TO PRICE GRANT DATE
GRANTED EMPLOYEES IN EXERCISE ON GRANT EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR PRICE($) DATE($) DATE ($)(2)
---- ------- ------------------ -------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Christopher A. Twomey 80,000 28% 9.38 9.38 8/5/09 300,248
Mark E. Blackwell 35,000 12% 9.38 9.38 8/5/09 131,359
Timothy C. Delmore 35,000 12% 9.38 9.38 8/5/09 131,359
Ronald G. Ray 25,000 9% 9.38 9.38 8/5/09 93,828
Ole E. Tweet 25,000 9% 9.38 9.38 8/5/09 93,828
</TABLE>
---------------------
(1) Becomes exercisable with respect to one-third of the shares of Common Stock
subject to the option on August 5, 2001, 2002 and 2003.
(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%.
8
<PAGE>
The following table contains information concerning the exercise of options
during fiscal 2000 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.
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 -- -- 249,064 171,667 $375,929 $132,284
Mark E. Blackwell -- -- 110,557 65,000 $ 56,145 $ 49,050
Timothy C. Delmore -- -- 108,757 65,000 $ 75,900 $ 49,050
Ronald G. Ray -- -- 108,307 55,000 $107,738 $ 40,350
Ole E. Tweet -- -- 102,907 55,000 $ 51,038 $ 40,350
</TABLE>
---------------------
(1) Based on a market price of $10.25 per share of Common Stock on March 31,
2000.
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 2000 and will in fiscal 2001 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
2000 as they affected Mr. Twomey and Messrs. Blackwell, Delmore, Ray and Tweet,
the four executive officers other than Mr. Twomey who, for fiscal 2000, 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 Company has three basic objectives for its
executive compensation program: 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 the shareholders. To
assure accomplishment of these objectives, during 1999 the Company engaged
Towers Perrin, a nationally recognized compensation advisory firm, to evaluate
the Company's executive compensation programs and to recommend changes. Based on
the report of Towers Perrin and the Company's objectives, the Board of Directors
decided to change the Company's executive compensation programs to a more
standardized target-based performance incentive plan to enhance the linkage
between pay and performance.
BASE PAY. In order to assure the Company's ability to attract and retain
qualified executives, the Compensation Committee believes that base pay must be
in the 40-50th percentile range compared to national market data. The analysis
by Towers Perrin indicated the Company's base pay for executives was in all
cases below the 25th percentile. In order to correct this disparity, the Company
has initiated a plan to raise base pay, but not necessarily total compensation,
for executives over a three-year period
9
<PAGE>
of time to a level between the 40th and 50th percentile. Base salaries for the
Named Executives were increased in fiscal 2000 in accordance with this planned
three-year adjustment.
ANNUAL INCENTIVE AWARDS. Each executive is eligible to receive annual cash
incentive awards based on corporate and individual performance. In accordance
with the recommendations of Towers Perrin, the Compensation Committee determined
to reduce the portion of the executive's total compensation attributable to
incentive compensation at target so that when combined with the increase in base
pay, total annual cash compensation in year three will be in the 50-percentile
range compared to national market data. The annual incentive program awards each
Named Executive a percentage of base salary with 80% of the award tied to the
Company's earnings and 20% tied to the individual's performance. With regard to
the portion of the annual incentive tied to the Company's earnings, the Board of
Directors annually establishes an earnings target, a minimum earnings threshold
below which an annual incentive will not be paid, and a maximum incentive level.
In addition, measurable individual performance goals are established annually
for each executive and incentive awards are paid based on individual
accomplishments. The Compensation Committee believed that placing a meaningful
portion of an executive's overall compensation at total risk, based on the
Company's earnings and the individual's performance, is the best way to focus
attention on the short and intermediate-term goals of the Company and encourage
high levels of performance from each executive. By focusing on corporate, as
well as individual goals, teamwork is encouraged.
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, in amounts tied to salary
levels, are awarded annually, 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 2000 COMPENSATION. Mr. Twomey's total compensation for
fiscal 2000, which was determined on the same basis as the other Named
Executives, was below the 25th percentile compared to national market data. His
base pay of $292,000, which was also below the 25th percentile level, will be
increased through fiscal 2002 to the 40th percentile level in order to gradually
meet the established target level established for each of the Names Executives.
Mr. Twomey's annual incentive award of $233,880 was determined in accordance
with annual incentive plan in the same manner as the other Named Executives.
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, Mr. Dondelinger, a director and member of the
Compensation Committee of the Board, has a relationship with an entity which
engages 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 $120,505,000
for engines, parts and tooling. 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 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 $3,000,000 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 $204,000 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 $73,000 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"). The graph compares on an annual basis the cumulative
total shareholder return on $100 invested on March 31, 1995, 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]
MARCH 31,
---------------------------------------------------------
1995 1996 1997 1998 1999 2000
---------------------------------------------------------
Arctic Cat Inc. ..... $100.00 $ 67.13 $ 68.74 $ 66.36 $ 72.68 $ 76.86
Peer Group Index .... 100.00 116.24 108.38 190.12 232.21 286.06
S&P 500 Index ....... 100.00 132.11 158.30 234.27 277.52 327.32
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 15, 2000 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>
CAPITAL STOCK PERCENT OF PERCENT OF
BENEFICIALLY OUTSTANDING SHARES OUTSTANDING SHARES
BENEFICIAL OWNERS OWNED(1) OF COMMON STOCK OF CAPITAL STOCK
----------------- ------------- ------------------ ------------------
<S> <C> <C> <C>
Suzuki Motor Corporation .............. 7,560,000 0% 30.6%
Hamamatsu-Nishi
P.O. Box 1, 432-91
Hamamatsu, Japan
Artisan Partners LP, et al ............ 1,306,200(2) 7.6% 5.3%
1000 North Water Street
Milwaukee, WI 53202
Capital Group International, Inc. ..... 1,630,000(3) 9.5% 6.6%
11100 Santa Monica Blvd.
Los Angeles, CA 90025
William G. Ness ....................... 160,033(4) * *
Christopher A. Twomey ................. 491,517(4) 2.8% 2.0%
Robert J. Dondelinger ................. 204,712(4) 1.2% *
William I. Hagen ...................... 343,741(4) 2.0% 1.4%
Takekazu Kaito ........................ 0(5) 0 0
Gregg A. Ostrander .................... 31,000(4) * *
Kenneth J. Roering .................... 25,000(4) * *
John C. Heinmiller .................... 12,000(4) * *
Mark E. Blackwell ..................... 146,691(4) * *
Timothy C. Delmore .................... 167,065(4) * *
Ronald G. Ray ......................... 139,590(4) * *
Ole E. Tweet .......................... 263,965(4) 1.5% *
All Directors and Officers
as a Group (13 persons) .............. 2,270,877(4)(5) 12.4% 8.8%
</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, Artisan Partners LP, Artisan Investment
Corporation, Andrew A. Ziegler and Carlene Murphy Ziegler share voting and
dispositive power with respect to 1,306,200 shares. Artisan Partners LP
serves as investment advisor to Artisan Funds, Inc. Artisan Investment
Corporation is the general partner of Artisan Partners LP. Mr. and Ms.
Ziegler are principal stockholders of Artisan Investment Corporation.
(3) Based on information included in a Schedule 13G filed with the Securities
and Exchange Commission, Capital Group International, Inc. is the parent
holding company of a group of investment management companies that hold
investment power, and in some cases, voting power over the securities.
Capital Group International, Inc. reports having sole voting power with
respect to 1,141,000 shares and sole dispositive power with respect to
1,630,000 shares. Capital Guardian Trust Company reports sole voting power
with respect to 861,000 shares and sole dispositive power with respect to
1,350,000 shares as a result of its serving as the investment manager of
various institutional accounts.
13
<PAGE>
(4) 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, 41,556; Mr. Twomey,
327,277; Mr. Dondelinger, 47,721; Mr. Hagen, 47,721; Mr. Ostrander, 30,000
shares; Mr. Roering, 24,000 shares; Mr. Heinmiller, 12,000 shares; Mr.
Blackwell, 137,224; Mr. Delmore, 126,536; Mr. Ray, 131,640; Mr. Tweet,
126,240; and all directors and officers as a group, 1,229,276. Also, Mr.
Hagen's shares include 11,037 shares owned by Mr. Hagen's wife, the
beneficial ownership of which he disclaims.
(5) Excludes shares held by Suzuki Motor Corporation.
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, 2000, except that Messrs. Twomey, Delmore,
Ray, Blackwell, Tweet, Blount, Skime, Ness and Ostrander filed late Forms 5 for
options granted to them during fiscal 2000.
AUDITORS
Grant Thornton LLP, independent public accountants, were the auditors for
the Company for fiscal 2000. 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 2001 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, 2001 is expected to be held on or about August 2, 2001 and proxy
materials in connection with that meeting are expected to be mailed on or about
June 26, 2001. Shareholder proposals prepared in accordance with the proxy rules
must be received by the Company on or before March 3, 2001. In addition, if the
Company receives notice of a separate shareholder proposal before May 7, 2001 or
after June 6, 2001, 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 2001 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
14
<PAGE>
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 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, 2000. 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 3, 2000
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 3, 2000 OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
The shares of stock of Arctic Cat Inc. you hold will be voted as you specify
on the reverse side.
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, until 12:00 p.m. on August 2, 2000.
* 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, until
12:00 p.m. on August 2, 2000.
* 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 William G. Ness [ ] Vote FOR [ ] Vote WITHHELD
02 Gregg A. Ostrander all nominees from all nominees
(except as marked)
_________________________________________
(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 PROPOSAL
ONE AND, IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
Address Change? Mark Box [ ] Date ___________________________, 2000
Indicate changes below:
_________________________________________
| |
| |
|_________________________________________|
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>
