<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
The Sled Dogs Company
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14-a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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:
- - --------------------------------------------------------------------------------
- - ---------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
1452053
<PAGE> 2
THE SLED DOGS COMPANY
212 Third Avenue North, Suite 420
Minneapolis, Minnesota 55401
(612) 359-9020
_________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 7, 1996
_________________________
To the Shareholders of The Sled Dogs Company:
Notice is hereby given that the Annual Meeting of the Shareholders of The Sled
Dogs Company (the "Company") will be held on Thursday, November 7, 1996, at
3:30 p.m., local time, at the Hendrickson Photography Umland Studio, 212 Third
Avenue North, Suite 305, Minneapolis, Minnesota, for the following purposes:
1. To elect a Board of Directors to serve until the next annual
meeting of shareholders and until their successors are duly elected
and qualified.
2. To approve an amendment to the Company's 1994 Stock Option
Plan to increase the number of shares reserved from 1,660,000 to
2,160,000.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors for the Company for the nine month period ending March 31,
1997.
4. To consider and take action on any other matters that may
properly be presented at the meeting.
The Board of Directors has fixed the close of business on September 9,
1996 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN
TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU LATER
DECIDE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors
John Sundet, President
Dated: October 7, 1996
<PAGE> 3
THE SLED DOGS COMPANY
212 THIRD AVENUE NORTH, SUITE 420
MINNEAPOLIS, MINNESOTA 55401
(612) 359-9020
________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 7, 1996
________________________
GENERAL MATTERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of The Sled Dogs Company (the "Company") from holders of
Common Stock of proxies in the accompanying form to be voted at the Annual
Meeting of Shareholders on Thursday, November 7, 1996 at 3:30 p.m. local time,
and at all adjournments thereof. This Proxy Statement is first being sent to
shareholders on or about October 7, 1996.
The cost of soliciting proxies, including the preparation, assembly, and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of stock, will be borne by
the Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular compensation, solicit proxies
personally or by telephone.
Any shareholder giving a proxy will have the right to revoke it by written
notice to the Secretary of the Company or by filing with the Secretary another
proxy bearing a later date at any time before it is voted at the meeting. A
shareholder wishing to vote in person after giving his or her proxy must first
give written notice of revocation to the Secretary. All shares represented by
valid, unrevoked proxies will be voted at the meeting and any adjournment
thereof.
The presence at the Annual Meeting in person or by proxy of the holders of
a majority of the outstanding shares of the Company's Common Stock entitled to
vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on such
matter, then the shares covered by such non-vote shall be deemed present at the
meeting for purposes of determining a quorum but shall not be deemed to be
represented at the meeting for purposes of calculating the vote with respect to
such matter. If a shareholder abstains from voting as to any matter, then the
shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to such matter, but shall not be deemed to have been voted in favor of
such matter. Proxies which are signed but which lack any specification will be
voted in favor of the proposals set forth in the Notice of Meeting and in favor
of the slate of directors proposed by the Board of Directors and listed herein.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed September 9, 1996 as the
record date for determining shareholders entitled to vote at the 1996 Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the 1996 Annual Meeting. At the close of business on September 9,
1996, 13,513,212 shares of Common Stock, $.01 par value, were issued and
outstanding. As provided in the Articles of Incorporation of the Company,
holders of Common Stock are not entitled to cumulative voting rights.
<PAGE> 4
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table provides information as of September 9, 1996
concerning the beneficial ownership of the Company's Common Stock by (i) each
director and nominee for director of the Company, (ii) the executive officers
named in the Summary Compensation Table, (iii) any holder known by the Company
to be the beneficial owner of more than 5% of the outstanding shares of Common
Stock, and (iv) all directors and executive officers as a group. Except as
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock owned by them.
<TABLE>
<CAPTION>
Name and Address or Identity Number of Shares Percent of
of Group Beneficially Owned (1) Class (1)
- - ---------------------------- ----------------------------- ----------
<S> <C> <C>
John Sundet
212 Third Avenue North, Suite 420
Minneapolis, MN 55401 723,000(2) 5.08%
David N. Braus
HAIFinance Corp.
Fairfax Square Tower II, Suite 760
8075 Leesburg Pike
Vienna, VA 22182 1,125,000(3) 7.69%
Hope S. Taitz
Catalyst Partners, L.P.
900 Third Avenue
New York, NY 10022 24,167(4) *
Thomas F. Votel
1410 Energy Park Drive, Suite 1
Saint Paul, MN 55108 17,500(4) *
HAIFinance Corp.
Fairfax Square Tower II
Suite 760
8075 Leesburg Pike
Vienna, VA 22182 1,125,000(3) 7.69%
Rudy A. Slucker
66 Duffield Drive
South Orange, NJ 07029 1,000,000(5) 6.89%
All Directors and Executive
Officers as a Group (7 persons) 3,220,332(2)(3)(4)(5)(6) 19.24%
</TABLE>
* Less than one percent (1%)
- - --------------
(1) Under the rules of the Securities and Exchange Commission ("SEC"), shares
not actually outstanding are deemed to be beneficially owned by a person if
such person has the right to acquire the shares within 60 days of the record
date. Pursuant to such SEC Rules, shares deemed beneficially owned by virtue
of a person's right to acquire them are also treated as outstanding when
calculating the percent of the class owned by such person and when determining
the percent owned by any group in which the person is included.
(2) Includes options and warrants to purchase 135,000 shares of Common Stock.
(3) Includes 750,000 shares owned by HAIFinance Corp. ("HAI"), of which Mr.
Braus is an officer and director, and 375,000 shares which may be purchased by
HAI upon exercise of currently exercisable warrants.
(4) Includes options to purchase 17,500 shares of Common Stock held by each of
Hope S. Taitz and Thomas F. Votel.
2
<PAGE> 5
(5) Includes warrants to purchase 500,000 shares of Common Stock.
(6) Includes options and warrants to purchase 1,354,165 shares of Common
Stock.
ELECTION OF DIRECTORS
(PROPOSAL #1)
The Bylaws of the Company provide that the number of directors shall be no
less than three (3) and no more than seven (7). Subject to approval by
shareholders, five (5) directors will be elected at the Annual Meeting, each
person to serve until the next annual meeting of shareholders and until a
successor has been elected and qualified.
Mr. John Sundet, Ms. Mary Horwath, Mr. David N. Braus, Ms. Hope S. Taitz,
Mr. Thomas F. Votel and Mr. Rudy A. Slucker are currently directors of the
Company and each has consented to being named as a nominee. It is intended
that proxies will be voted for such nominees. The Company believes that each
nominee will be able to serve, but should any of the nominees be unable to
serve as a director, the persons named in the proxies have advised the Company
that they will vote for the election of such substitute nominee as the Board of
Directors may propose. Nominees to the Board of Directors are elected by a
majority of the votes cast in person or by proxy at the Annual Meeting.
BOARD OF DIRECTORS
The names, ages and positions with the Company of each nominee are set
forth below.
<TABLE>
<CAPTION>
Position with Director
Name Age the Company Since
- - ---- --- ----------- --------
<S> <C> <C> <C>
John Sundet 48 Chief Executive Officer, President and Director 1994
Mary Horwath 38 Chief Operating Officer and Director 1996
David N. Braus 38 Director 1992
Hope S. Taitz 32 Director 1994
Thomas F. Votel 38 Director 1994
Rudy A. Slucker 47 Director 1996
</TABLE>
BUSINESS EXPERIENCE
John Sundet has served as President and Chief Executive Officer of the
Company since July 1993. He has also served as a director since January 1994.
From June 1992 to June 1993, Mr. Sundet provided consulting services to various
companies, including the Company, from April 1993 to June 1993. Mr. Sundet
served as President and Chief Executive Officer of Rollerblade Inc., a
Minnesota based manufacturer of in-line skates, from September 1987 to June
1992 and as Vice President, Chief Financial Officer of Rollerblade Inc. from
September 1986 to September 1987. Prior to 1986, Mr. Sundet held various
financial management positions with The Pillsbury Company, Ralston Purina, Land
O'Lakes and Tonka Corporation.
Mary Horwath has served as Chief Operating Officer of the Company since
February 1996, as Executive Vice President, Marketing and Sales since June 1994
and as Assistant Secretary since February 1994. Ms. Horwath has also served as
a director since February 1996. Ms. Horwath joined the Company as Vice
President of Marketing in January 1994. Ms. Horwath was a marketing consultant
from August 1993 to December 1993. From September 1986 to August 1993, Ms.
Horwath served as Vice President of Marketing of Rollerblade Inc. From 1980 to
1985, Ms. Horwath served as Program Director for freestyle skiing under the U.S.
Ski Association.
David N. Braus has been a director of the Company since August 1992.
Mr. Braus has served as General Counsel, Corporate Secretary and a director of
HAIFinance Corp., a venture capital firm, since
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<PAGE> 6
1989. Mr. Braus has served as President of David N. Braus, Chartered, a law
firm specializing in venture capital law and international business law. Mr.
Braus also serves as a director of numerous companies in various types of
business and in some cases also serves as general counsel and/or corporate
secretary.
Hope S. Taitz has been a director of the Company since May 1994. Ms.
Taitz currently serves as Managing Partner of Catalyst Partners, L.P., a money
management firm. From March 1992 through July 1995, she was Senior Vice
President of Crystal Asset Management, also a money management firm. From
March 1990 through March 1992, Ms. Taitz served as a Vice President of The
Argosy Group, an investment banking firm. Prior to that, she was an associate
at Drexel Burnham Lambert from August 1986 to March 1990.
Thomas F. Votel has served as a director of the Company since May 1994.
Mr. Votel has been the President and Chief Executive Officer of Ergodyne
Corporation, an ergonomic products and accessories firm, for more than the last
five years.
Rudy A. Slucker has served as a director of the Company since February
1996. Since August 1990, Mr. Slucker has been engaged in investing for his own
account. Mr. Slucker is the designee of GKN Securities Corp. ("GKN").
Pursuant to the Agency Agreement, dated October 12, 1995, between the Company
and GKN relating to the private placement of 8,000,000 units, the Company
agreed that for a five-year period commencing on the closing of such private
placement, GKN has the right to designate a nominee to the Company's Board of
Directors, reasonably acceptable to the Company.
BOARD AND COMMITTEE MEETINGS
During fiscal 1996, the Board of Directors held four formal meetings and
took action in writing four times. Each director attended at least 75 percent
of the meetings of the Board of Directors and Committees of which he or she was
a member. The Compensation/Stock Option Committee is comprised of Rudy A.
Slucker, Hope S. Taitz and Thomas F. Votel and did not meet during fiscal 1996.
The Audit Committee is comprised of David N. Braus, Hope S. Taitz and Thomas
F. Votel and did not meet during fiscal 1996. The Compensation/Stock Option
Committee recommends the compensation for the Company's executive officers,
reviews the compensation of all Company officers and has responsibility for
approval of all material terms of options granted to employees and directors.
The Audit Committee recommends to the Board of Directors the selection of
independent accountants and reviews the activities and reports of the
independent accountants.
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Company's
Executive Officers, together with all positions and offices held with the
Company by each such Executive Officer. Officers are appointed to serve until
their successors have been elected and have qualified.
<TABLE>
<CAPTION>
Name Age Offices
--------------- --- --------------------------------------------------------
<S> <C> <C>
John Sundet 48 Chief Executive Officer, President and
Director
Mary Horwath 38 Chief Operating Officer Assistant Secretary and Director
Michael P. Wise 39 Chief Financial Officer, Treasurer and Secretary
</TABLE>
Michael Wise has served as Chief Financial Officer of the Company since
November 1995. Mr. Wise joined the Company in June 1994 as the Controller after
serving as a consultant to the Company since April 1994. In September 1994, he
was elected to serve as Treasurer and Secretary. Prior to joining the Company,
Mr. Wise was employed by National Computer Systems, Inc., Education Systems
Division, a
4
<PAGE> 7
developer and marketer of information systems and services for education,
serving as the Complementary Channels Manager from April 1992 to March 1994, as
Division Controller from November 1989 to May 1992 and as Manager of Finance and
Administration from April 1986 to October 1989. From March 1982 to March 1986,
Mr. Wise held various financial positions with Jostens, Inc., a scholastic,
sportswear and recognition products company. From September 1979 to February
1982, Mr. Wise was employed by Arthur Andersen & Co., a big six public
accounting firm.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or to be paid by
the Company, as well as certain other compensation paid or accrued, during
fiscal years 1996, 1995 and 1994 to the Chief Executive Officer. No executive
officer received annual salary and bonus in excess of $100,000 for the last
fiscal year.
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation
-------------------------------------- ------------ ------------
Name and
Principal Fiscal Salary Bonus Other
Position Year ($) ($) ($) Options ($)
- - -------- ------ ---------- ---------- -------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John Sundet
President and
Chief 1996 90,000 -- 6,000(1) 250,000 --
Executive 1995 90,900 -- 6,000(1) -- --
Officer 1994 70,000 -- -- 165,000 --
</TABLE>
(1) Consists of a monthly car allowance.
OPTION GRANTS DURING FISCAL YEAR 1996
The following table provides information regarding stock options granted
during fiscal 1996 to the executive officer named in the Summary Compensation
Table. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Percent of Total Exercise or
Options Options Granted Base Price
Name Granted in Fiscal Year Per Share Expiration Date
- - ----------- ------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
John Sundet 250,000 27% $1.00 November 2, 2005
</TABLE>
5
<PAGE> 8
OPTION EXERCISES DURING FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION VALUES
The named executive officer in the Summary Compensation Table did not
exercise any options during fiscal 1996. The Company has no outstanding stock
appreciation rights.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired June 30, 1996 June 30, 1996
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
- - ---- -------- -------- --------------------- ---------------------
<S> <C> <C> <C> <C>
110,000 exercisable $6,875 exercisable
John Sundet -- -- 305,000 unexercisable $19,063 unexercisable
</TABLE>
(1) Value is calculated on the basis of the difference between the option
exercise price and the average of the bid and asked prices for the
Company's Common Stock at June 30, 1996 as quoted on the Nasdaq SmallCap
Market, multiplied by the number of shares of Common Stock underlying the
option.
COMPENSATION OF DIRECTORS
DIRECTORS' FEES. The Company pays an attendance fee of $1,000 per Board
of Directors and $500 per committee meeting attended by each director who is
not an employee of the Company and is not subject to any right of designation
("Independent Director"), as well as expenses to all directors.
STOCK OPTION GRANTS. Pursuant to the Company's 1994 Stock Option Plan
adopted on June 1, 1994, each Independent Director receives, upon initial
election to the Board after June 1, 1994, or on June 1, 1994 if elected prior
to June 1, 1994, a nonqualified option to purchase 10,000 shares of the
Company's Common Stock. In addition, each Independent Director received on
February 15, 1995 or, if such director is elected to the Board after February
15, 1995, the next following February 15, a nonqualified option to purchase
5,000 shares of the Company's Common Stock and each Independent Director
received, on November 2, 1995, an option to purchase 15,000 shares of the
Company's Common Stock. The exercise price of all such options is equal to
100% of the fair market value of the Common Stock on the date of grant. The
options are immediately exercisable to the extent of one-fourth of the shares
subject to the option and to the extent of an additional one-fourth of the
shares on each of the first, second and third anniversaries of the date of
grant. The options expire on the earlier of (i) twelve (12) months after the
optionee ceases to be a director for any reason and (ii) ten (10) years after
the date of grant.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has entered into an employment agreement with each of John
Sundet, Mary Horwath and Michael Wise, which, in addition to a base salary
(currently set at $90,000, $90,000 and $75,000, respectively) determined on a
calendar year basis and a bonus determined in the sole discretion of the Board
of Directors, provides for compensation in the event the person's employment
with the Company is terminated under certain circumstances. The agreement
provides for termination of employment upon thirty days' advance written
notice, subject to the Company's obligation to pay Sundet and Horwath severance
of 12 months and Wise severance of six months' base salary in the event of
termination without cause by the Company. In the agreement, each of the
employees agrees not to compete with the Company during the term of his or her
employment and for a period of twelve months thereafter, and also agrees that
he or she will not attempt to hire employees of the Company for twelve months
after he or she leaves the Company's employment. The agreements also obligate
each employee to maintain confidentiality of the Company's confidential
information and trade secrets and not to remove any files, documents or other
property or information of the Company upon termination of employment.
6
<PAGE> 9
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, the Company believes that, during the period from July 1, 1995
through June 30, 1996, all filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with.
CERTAIN TRANSACTIONS
The Company issued an aggregate of 1,125,000 shares of Series A Preferred
Stock to HAIFinance Corp., a Virginia corporation ("HAI"), between July 1992
and January 1993 for aggregate consideration of $1,125,000. HAI is an
independent venture capital company. Prior to its preferred stock investment,
it had no relationship with the Company or any of its affiliates. The
1,125,000 shares of Series A Preferred Stock were converted automatically into
750,000 shares of the Company's Common Stock upon the effective date of the
Company's initial public offering in March 1994.
In July 1993 and January 1994, the Company concluded bridge financing
arrangements with HAI for a total of $1,382,000 plus a letter of credit
accommodation from HAI in the amount of $201,900. The bridge financing was
evidenced by promissory notes bearing interest at 12% per annum, and the letter
of credit accommodation is subject to a letter of credit fee of 4% per quarter.
The Company repaid the promissory notes, as well as any amounts drawn on the
letter of credit, from the proceeds of the initial public offering. In July
1993, the Company issued HAI five-year warrants to purchase 250,000 shares of
the Company's Common Stock at a price of $.30 per share in connection with
HAI's commitment for $525,000 of the bridge financing. In January 1994, the
Company issued HAI five-year warrants to purchase 125,000 shares of the
Company's Common Stock at a price of $1.50 per share in connection with HAI's
commitment for the balance of the bridge financing, with a value of $81,000
assigned to such warrants as an additional cost of such financing.
In January 1994, the Company, John Sundet, HAI and four other shareholders
(collectively, the "Shareholders") entered into an Amended and Restated
Shareholders Agreement (the "Shareholder Agreement"). The Shareholder
Agreement prohibits transfers by any of the Shareholders to third parties
unless the offering Shareholder first offers the stock to the other
Shareholders under the Shareholder Agreement.
In February 1994, the Company and HAI entered into an agreement under
which HAI, upon the closing of the initial public offering, converted $637,500
of debt owed to it by the Company into 150,000 shares of the Company's Common
Stock at $4.25 per share. Under the agreement, the Company also permitted HAI
to sell 150,000 shares of the Company's Common Stock in the offering as a
selling shareholder.
APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES
RESERVED UNDER THE COMPANY'S 1994 STOCK OPTION PLAN
(PROPOSAL #2)
As of September 9, 1996, the Company had outstanding incentive and
nonqualified options for the purchase of an aggregate of 1,448,059 shares of
the Company's Common Stock with a weighted average exercise price of $1.15 per
share, all of which were granted under the Company's Stock Option Plan adopted
on January 13, 1994 (the "1994 Plan"). A total of 1,660,000 shares have been
reserved for issuance under the 1994 Plan. No options granted under the 1994
Plan have been exercised through September 9, 1996. In order to provide
sufficient shares for options granted and for future options, the Board of
Directors proposes
7
<PAGE> 10
that the number of shares reserved under the 1994 Plan be increased from
1,660,000 to 2,160,000 shares. The Board believes that granting fairly-priced
stock options to employees and directors is an effective means to promote the
future growth and development of the Company. Such options, among other
things, increase employees' and directors' proprietary interest in the
Company's success and enable the Company to attract and retain qualified
personnel.
The Board therefore recommends that all shareholders vote in favor of the
amendment increasing the number of shares reserved under the 1994 Plan from
1,660,000 to 2,160,000.
A general description of the basic features of the 1994 Plan is presented
below, but this description is qualified in its entirety by reference to the
full text of the 1994 Plan, a copy of which may be obtained without charge upon
written request to Michael Wise, the Company's Chief Financial Officer.
1. Purpose. The purpose of the 1994 Plan is to provide for the granting
of stock options, reload options and stock appreciation rights in order to
promote the success of the Company by facilitating the motivation, attraction
and retention of competent personnel by furnishing incentives to officers,
directors and other employees whose judgment, initiative and continued efforts
are expected to contribute to the success of the Company's business and to
furnish incentives to other parties which promote the Company in the same
manner.
2. Term. Incentive stock options may be granted pursuant to the 1994 Plan
until ten years from the date the 1994 Plan was adopted by the Board.
Nonqualified stock options may be granted pursuant to the 1994 Plan until the
1994 Plan is discontinued or terminated by the Board of Directors. The 1994
Plan terminates upon the effective date of certain transactions, unless prior
to the effective date of the transaction the Board elects, in its sole
discretion, to continue the 1994 Plan. Such transactions include (i)
dissolution or liquidation of the Company, (ii) any reorganization, merger or
consolidation of the Company with one or more corporations where (A) the
Company is the surviving corporation and Company shareholders own less than
fifty percent of the Common Stock after the transaction or (B) the Company is
not the surviving corporation, (iii) the sale of substantially all of the
assets of the Company, or (iv) the sale of Common Stock to another person or
entity with the result that such person or entity owns more than fifty percent
of the issued and outstanding Common Stock immediately after such sale.
3. Administration. The 1994 Plan is administered by the
Compensation/Stock Option Committee, a committee of at least two disinterested
members of the Board of Directors. The 1994 Plan gives broad powers to the
Committee to administer and interpret the 1994 Plan, including the authority to
select the individuals to be granted options and to prescribe the particular
form and conditions of each option granted.
4. Eligibility. All key employees of the Company or any subsidiary are
eligible to receive incentive stock options and nonqualified stock options
pursuant to the 1994 Plan. Consultants to the Company or any subsidiary may
also be granted nonqualified options under the 1994 Plan. As of September 9,
1996, the Company had approximately 20 employees, officers and directors.
5. Terms and Conditions of Incentive Stock Options. When an incentive
stock option is granted under the 1994 Plan, the Committee, at its discretion,
specifies the option price and the number of shares of Common Stock which may
be purchased upon exercise of the option. The option price set by the
Committee may not be less than 100% of the fair market value of the Company's
Common Stock on the date of grant. The term during which the option may be
exercised and whether the option will be exercisable immediately, in stages, or
otherwise, are set by the Committee, but in no event may the option be
exercisable more than ten years from the date of grant. Options granted under
the 1994 Plan may be exercised without regard to whether the optionee holds any
previously issued options. The aggregate fair market value of the stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year shall not exceed $100,000. Optionees may
pay for shares upon the exercise of options with
8
<PAGE> 11
cash, certified check, or Common Stock of the Company valued at the stock's
then "fair market value." Each option granted under the 1994 Plan is
nontransferable during the lifetime of the optionee.
6. Terms and Conditions of Nonqualified Stock Options. When a
nonqualified stock option is granted under the 1994 Plan, the Committee, at its
discretion, specifies the option price and the number of shares of Common Stock
which may be purchased upon exercise of the option. If the Committee so
determines, the option price may be less than 100% of the fair market value of
the Company's Common Stock on the date of grant. The term during which the
option may be exercised and whether the option will be exercisable immediately,
in stages, or otherwise, are set by the Committee. Optionees may pay for
shares upon exercise of options with cash, certified check, or Common Stock of
the Company valued at the stock's then "fair market value." Each option
granted under the 1994 Plan is nontransferable during the lifetime of the
optionee.
7. Terms and Conditions of Reload Options. Concurrently with the award of
stock options to an optionee, the Committee may authorize reload options to
purchase, for cash or shares of Common Stock, a number of shares of Common
Stock equal to (i) the number of shares of Common Stock used to exercise the
underlying stock options, and (ii) to the extent authorized by the Committee,
the number of shares of Common Stock used to satisfy any tax withholding
requirement incident to the exercise of the options. A reload option is fully
exercisable six months from the effective date of the grant and the term is
equal to that of the underlying option.
8. Terms and Conditions of Stock Appreciation Rights. The Committee may
grant stock appreciation rights (SARs) for up to the number of shares
purchasable under stock options held by an optionee. The Committee may, in its
sole discretion, specify the terms and conditions of such rights. Such rights
must expire no later than the time the related stock option is exercised,
expires or terminates. In lieu of purchasing shares of Common Stock upon the
exercise of a stock option held by an optionee, such person may elect to
exercise SARs he holds and receive payment of the redemption value (fair market
value less option exercise price) of all, or any portion, of the number of
shares of Common Stock subject to the underlying stock options. If an optionee
elects to exercise SARs, the Committee may, in its absolute discretion, elect
to pay any part or all of the redemption value of the shares in (i) cash, (ii)
shares of Common Stock, or (iii) any combination of cash and shares of Common
Stock.
9. Termination of Employment of Optionees. Under the form of option
agreement which the Committee currently uses for options granted under the 1994
Plan, if the optionee's employment with the Company is terminated before
expiration of the option for reasons other than death or disability, the
optionee has a right to exercise the option for three months after termination
of the optionee's employment or until the option's original expiration date,
whichever is earlier. If the optionee's employment is terminated due to death
or disability or the optionee dies within three months after the termination of
employment, the option is exercisable until the earlier of its original
expiration date or the twelve-month anniversary of the optionee's death or
termination due to disability, but is exercisable only to the extent the option
was exercisable at the time of death or termination due to disability. The
Committee may impose additional or alternative conditions and restrictions on
the options granted under the 1994 Plan. However, each option agreement
governing incentive stock options must contain such limitations and
restrictions upon the exercise of the options as are necessary to ensure that
the option will be an incentive stock option as defined under the Internal
Revenue Code.
10. Protection Against Dilution. The Board of Directors will equitably
adjust the maximum number of shares of Common Stock reserved for issuance under
the 1994 Plan, the number of shares covered by each outstanding option and the
option price per share in the event of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in corporate
structure.
11. Automatic Grants to Independent Directors. Each Independent Director
shall receive as of June 1, 1994, or upon initial election to the Board after
June 1, 1994, a nonqualified stock option to purchase 10,000 shares of the
Company's Common Stock at an exercise price equal to 100% of the fair market
value
9
<PAGE> 12
of the Common Stock on the date of grant. Each Independent Director shall also
receive on February 15, 1995 or, if such director is elected to the Board after
February 15, the next following February 15, a nonqualified option to purchase
5,000 shares of the Company's Common Stock. The options are immediately
exercisable to the extent of one-fourth of the shares subject to the option and
to the extent of an additional one-fourth of the shares on each of the first,
second and third anniversaries of the date of grant. The options expire on the
earlier of (i) twelve (12) months after the optionee ceases to be a director
for any reason and (ii) ten (10) years after the date of grant.
12. Amendment. The Board of Directors may from time to time suspend or
discontinue the 1994 Plan or revise or amend it in any respect; provided,
however, that no such revision or amendment may impair the terms and conditions
of any outstanding option to the material detriment of current optionees. No
such revision or amendment may, without the approval of the Company's
shareholders, (i) increase the maximum number of shares subject to the 1994
Plan except as provided in the case of stock splits, consolidations, stock
dividends, or similar events; (ii) materially increase the benefits accruing to
optionees under the 1994 Plan; or (iii) materially modify the requirements as
to eligibility for participation in the 1994 Plan. Furthermore, the 1994 Plan
may not, without the approval of the Company's shareholders, be amended in any
manner which will cause the incentive stock options to fail to meet the
requirements of incentive stock options as defined under the Internal Revenue
Code. In addition, the provisions of the 1994 Plan regarding the automatic
grants to Independent Directors may not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
13. Federal Income Tax Consequences of Incentive Stock Options. Incentive
stock options granted pursuant to the 1994 Plan are intended to qualify for
favorable tax treatment to the optionee under Section 422 of the Internal
Revenue Code. Under Section 422, an employee realizes no taxable income when
the option is granted. If the employee has at all times from the date of grant
until three months before the date of exercise been an employee of the Company,
the employee will realize no taxable income when the option is exercised. If
the employee does not dispose of shares acquired upon exercise for a period of
two years from the date of grant of the option and one year after receipt of
the shares, the employee may sell the shares and report any gain as capital
gain, which may be taxed more favorably than ordinary income. No deduction is
allowable to the Company for federal income tax purposes in connection with
either the grant or exercise of an incentive stock option. If the employee
should dispose of the shares prior to the expiration of the two or one-year
periods described above, the employee will be deemed to have received
compensation taxable as ordinary income in the year of the early sale in an
amount equal to the lesser of (i) the difference between the fair market value
of the shares on the date of exercise and the option price of the shares or
(ii) the difference between the sale price of the shares and the option price
of the shares. In the event of such an early sale, the Company will be
entitled to a tax deduction equal to the amount recognized by the employee as
ordinary income.
14. Federal Income Tax Consequences of Nonqualified Stock Options.
Optionees who receive nonqualified stock options under the 1994 Plan generally
will be deemed to have received taxable ordinary income in the year in which
the option is exercised. The amount includable in the optionee's income will
be the difference between the fair market value of the shares on the date of
exercise and the option price of the shares. Upon exercise by the optionee,
the Company will be entitled to a deduction in an amount equal to the amount
recognized as income by the optionee assuming compliance with applicable
withholding requirements. Any gain recognized by the optionee upon the sale of
shares acquired upon exercise of a nonqualified option granted pursuant to the
1994 Plan will be taxed as capital gain, which may be taxed more favorably than
ordinary income.
15. Plan Benefits. Because fiscal grants of stock options are subject to
the discretion of the Board or the Committee, the future benefits under the
1994 Plan cannot be determined at this time, except for the formula grants to
Independent Directors as set forth above. The table below shows the total
number of stock options that have been granted, as of September 9, 1996, to the
named executive officer and certain groups under the Plans:
10
<PAGE> 13
<TABLE>
<CAPTION>
Name and Position/Group Options Received
- - ----------------------- ---------------------
<S> <C>
John Sundet
President and Chief Executive Officer 415,000
Current Executive Officers
as a Group (3 persons) 1,100,000(1)
Current Directors who are not
Executive Officers as a Group
(3 persons) 60,000(2)
Current Employees who are not
Executive Officers as a
Group (8 persons) 233,059
</TABLE>
- - ------------------
(1) Includes option granted to John Sundet who is a named executive officer.
(2) Options granted under the formula plan.
Approval Required. The Board of Directors recommends that the
shareholders of the Company approve the amendment increasing the number of
shares reserved under the 1994 Plan to 2,660,000 shares. The affirmative vote
of the holders of a majority of the voting shares represented in person or by
proxy at the meeting is required for approval of the amendment.
11
<PAGE> 14
RATIFICATION OF APPOINTMENT OF AUDITORS
(PROPOSAL #3)
The Board of Directors recommends that the shareholders ratify the
appointment of the firm of Ernst & Young LLP as independent auditors for the
Company for the fiscal year ending March 31, 1997. The Company's Board of
Directors has elected to change the Company's fiscal year end to March 31
beginning in 1997 to more appropriately reflect its true business cycle and
winter seasonality. Ernst & Young LLP has served as independent auditors for
the Company since 1993. Ernst & Young LLP provided services in connection with
the audit of the financial statements of the Company for the year ended June
30, 1996,
12
<PAGE> 15
assistance with the Company's Annual Report submitted to the Securities and
Exchange Commission on Form 10-KSB and quarterly reports filed with the
Securities and Exchange Commission, and consultation on matters relating to
accounting and financial reporting.
Representatives of Ernst & Young LLP are expected to be present at this
year's annual meeting, will have an opportunity to make a statement, if
desired, and will be available to answer appropriate questions.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1996, containing financial statements of the Company for the
fiscal year then ended, accompanies this Notice of Annual Meeting and proxy
solicitation material.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
The proxy rules of the SEC permit shareholders, after timely notice to
issuers, to present proposals for shareholder action in issuer proxy statements
where such proposals are consistent with applicable law, pertain to matters
appropriate for shareholder action and are not properly omitted by issuer
action in accordance with the proxy rules. The Company's annual meeting for
1997 is expected to be held on or about August 7, 1997 and proxy materials in
connection with that meeting are expected to be mailed on or about June 30,
1997. Except as indicated below, shareholder proposals prepared in accordance
with the proxy rules must be received by the Company on or before March 2,
1997.
The Bylaws of the Company establish an advance notice procedure with
regard to (i) certain business to be brought before an annual meeting of
shareholders of the Company and (ii) the nomination by shareholders of
candidates for election as directors.
FORM 10-KSB
A copy of the Company's Form 10-KSB for the fiscal year ended June 30,
1996 is available without charge to all shareholders of the Company. To
request a copy, please write: Secretary, The Sled Dogs Company, 212 Third
Avenue North, Suite 420, Minneapolis, Minnesota 55401.
OTHER BUSINESS
The management of the Company does not know of any other business to be
presented at the Annual Meeting of Shareholders. If any matter properly comes
before the meeting, however, it is intended that the persons named in the
enclosed form of proxy will vote said proxy in accordance with their best
judgment.
ALL PROXIES PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
SHAREHOLDERS. IF NO DIRECTION IS MADE, PROXIES WILL BE VOTED "FOR" THE
ELECTION OF MANAGEMENT'S NOMINEES FOR DIRECTORS, "FOR" THE AMENDMENT TO THE
1994 STOCK OPTION PLAN, "FOR" THE ADOPTION OF THE SLED DOGS COMPANY ANNUAL
STOCK OPTION PERFORMANCE PLAN AND "FOR" THE RATIFICATION OF ERNST & YOUNG LLP
AS AUDITORS.
BY ORDER OF THE BOARD OF DIRECTORS
John Sundet, President & Chief Executive Officer
Dated: October 7, 1996
13
<PAGE> 16
THE SLED DOGS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
NOVEMBER 7, 1996
The undersigned hereby appoints Michael Wise and Mark Weitz,
and each of them, with full power of substitution, as proxies to
represent and vote, as designated below, all shares of Common Stock
of The Sled Dogs Company registered in the name of the undersigned
at the Annual Meeting of Shareholders of the Company to be held at
Hendrickson Photography Umland Studio, 212 Third Avenue North,
Suite 305, Minneapolis, Minnesota at 3:30 p.m. (Minneapolis time)
on November 7, 1996, and at any adjournment thereof, and the
undersigned hereby revokes all proxies previously given with
respect to the meeting.
The Board of Directors recommends that you vote for each
proposal below.
<TABLE>
<S><C>
1. Elect Directors: [Nominees: John Sundet, Mary Horwath, David N. Braus, Hope S. Taitz, Thomas F. Votel,
Rudy A. Slucker]
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote all
(except those whose names have been written in below). nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE WRITE THAT NOMINEE'S NAME ON THE LINE
BELOW.)
-------------------------------------------------------------------------------------------------------
2. Approve the amendment to the 1994 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratify the selection of Ernst & Young LLP as the company's independent auditors for the 1997 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the
Meeting.
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR,
IF NO DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED
FOR SUCH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: , 1996
-------------------
------------------------------
Signature
------------------------------
Signature
PLEASE DATE AND SIGN ABOVE
exactly as name appears at the
left, indicating, where
appropriate, office position
or representative capacity.
For stock held in joint
tenancy, each joint owner
should sign.
