**Exhibit 10(k)**

** **

FORM OF

ARCTIC CAT INC.

 

DIRECTOR

NON-QUALIFIED

STOCK OPTION AGREEMENT

 

THIS OPTIONAGREEMENT is made as of the          day of           200    (the “Option Date”), between ARCTIC CAT INC., aMinnesota corporation (the “Company”), and                                         ,a non-employee member of the Board of Directors of the Company (the “Optionee”).

 

WHEREAS, the Company desires, by affording the Optionee an opportunityto purchase shares of its Common Stock, $.01 par value (the “Common Stock”), ashereinafter provided, to carry out the purpose of the 2002 Stock Plan of theCompany approved by its shareholders;

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafterset forth and for other good and valuable consideration, the parties heretohave agreed, and do hereby agree, as follows:

 

1.                                       Grantof Option.  The Company hereby grantsto the Optionee the right and Option (hereinafter called the “Option”) topurchase from the Company all or any part of an aggregate amount of              shares of the Common Stock of the Company on the terms and conditions hereinset forth.  This grant does not qualifyas an incentive stock option under Section 422 of the Internal RevenueCode of 1986, as amended.

 

2.                                       PurchasePrice.  The purchase price of theshares of the Common Stock covered by the Option shall be $        per share.

 

3.                                       Termof Option.  The term of the Optionshall be for a period expiring five (5) years following the termination ofthe Optionee’s service as a director of the Company.  In no event shall the Option be exercisableafter the expiration of the term of the Option.

 

4.                                       Exerciseof Option.  The Option may beexercised in whole or in part at any time from and after the Option Date until expiration of the term specified in paragraph 3.

 

5.                                       Non-Transferability.  The Option shall not be transferableotherwise than by will or the laws of descent and distribution, and the Optionmay be exercised, during the lifetime of the Optionee, only by the Optionee.  More particularly (but without limiting thegenerality of the foregoing), the Option may not be assigned, transferred(except as provided above), pledged, or hypothecated in any way; shall not beassignable by operation of law; and shall not be subject to execution, attachment,or similar process.  Any attemptedassignment, transfer, pledge, hypothecation, or other disposition of the Optioncontrary to the provisions hereof, and the levy of any execution, attachment,or similar process upon the Option, shall be null and void and without effect.

 

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6.                                       Methodof Exercising Option.  Subject to theterms and conditions of this Option Agreement, the Option may be exercised bywritten notice to the Chief Financial Officer of the Company at the principaloffice of the Company.  Such notice shallstate the election to exercise the Option and the number of shares in respectof which it is being exercised, and shall be signed by the person so exercisingthe Option.  Such notice shall beaccompanied by payment of the full purchase price of such shares which paymentshall be made in cash or by certified check or bank draft payable to theCompany, by any other form of legal consideration deemed sufficient by theCompany and consistent with the purpose of the 2002 Stock Plan and applicablelaw, or in the sole discretion of the Company, by delivery of shares ofunrestricted Common Stock of the Company with a fair market value equal to thepurchase price or by a combination of cash and such shares, whose fair marketvalue shall equal the purchase price. For purposes of this paragraph the “fair market value” of the CommonStock of the Company shall be established in the manner set forth in Section 1(h) ofthe 2002 Stock Plan.  The certificate orcertificates for the shares as to which the Option shall have been so exercisedshall be registered in the name of the person so exercising the Option, or ifthe Optionee so elects, in the name of the Optionee or one other person asjoint tenants, and shall be delivered as soon as practicable after the noticeshall have been received.  In the eventthe Option shall be exercised by any person other than the Optionee, suchnotice shall be accompanied by appropriate proof of the right of such person toexercise the Option.  All shares thatshall be purchased upon the exercise of the Option as provided herein shall befully paid and nonassessable.

 

7.                                       WithholdingRequirements.  Upon exercise of theOption by the Optionee and prior to the delivery of shares purchased pursuantto such exercise, the Company shall have the right to require the Optionee toremit to the Company cash in an amount sufficient to satisfy applicable federaland state tax withholding requirements. The Company shall inform the Optionee as to whether it will require theOptionee to remit cash for withholding taxes in accordance with the precedingsentence within two (2) business days after receiving from the Optioneenotice that such Optionee intends to exercise, or has exercised, all or aportion of the Option.

 

8.                                       StockPlan.  This Option is subject tocertain additional terms and conditions set forth in the 2002 Stock Planpursuant to which this Option has been issued. A copy of the 2002 Stock Plan is on file with the Chief FinancialOfficer of the Company and each Option holder by acceptance hereof agrees toand accepts this Option subject to the terms of the 2002 Stock Plan.

 

9.                                       General.  The Company shall at all times during theterm of the Option reserve and keep available such number of shares of CommonStock as will be sufficient to satisfy the requirements of this OptionAgreement, shall pay all original issue and transfer taxes with respect to theissue and transfer of shares pursuant hereto and all other fees and expensesnecessarily incurred by the Company in connection therewith, and will from timeto time use its best efforts to comply with all laws and regulations which, inthe opinion of counsel for the Company, shall be applicable thereto.

 

10.                                 InvestmentCertificate.  Prior to the receipt ofthe certificates pursuant to the exercise of the Option granted hereunder, theOptionee shall, if required in the Company’s discretion, demonstrate an intentto hold the shares acquired by exercise of the Option for investment and notwith a view to resale or distribution thereof to the public by delivering tothe Company an investment certificate or letter in such form as the Company mayrequire.

 

11.                                 Status.  Neither the Optionee nor the Optionee’sexecutor, administrator, heirs, or legatees shall be or have any rights orprivileges of a shareholder of the Company in respect of the sharestransferable upon exercise of the Option granted hereunder, unless and untilcertificates representing such shares shall be endorsed, transferred, anddelivered and the transferee has caused the Optionee’s name to be entered asthe shareholder of record on the books of the Company.

 

12.                                 CompanyAuthority.  The existence of theOption herein granted shall not affect in any way the right or power of theCompany or its stockholders to make or authorize any or all adjustments,recapitalizations, reorganizations or other changes in the Company’s capitalstructure or its business or any merger or consolidation of the Company, or anyissue of bonds, debentures, preferred

 

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or prior preference stock aheadof or affecting the Common Stock of the Company of the rights thereof, ordissolution or liquidation of the Company, or any sale or transfer of all orany part of its assets or business, or any other corporate act or proceeding,whether of a similar character or otherwise.

 

13.                                 Disputes.  As a condition of the granting of the Optionherein granted, the Optionee agrees, for the Optionee and the Optionee’spersonal representatives, that any dispute or disagreement which may ariseunder or as a result of or pursuant to this Option Agreement shall bedetermined by the Board of Directors of the Company, in its sole discretion,and that any interpretation by the Board of the terms of this agreement shallbe final, binding and conclusive.

 

14.                                 BindingEffect.  This Option Agreement shallbe binding upon the heirs, executors, administrators and successors of theparties hereto.

 

IN WITNESS WHEREOF, the Company has caused this Option Agreement to beduly executed by an officer thereunto duly authorized, and the Optionee hashereunto set his or her hand, all as of the day and year first above written.

 
|   | ARCTIC CAT INC. |
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|   |            | , Optionee |
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