**Exhibit 10(i)**

 

FORM OF

ARCTIC CAT INC.

 

INCENTIVE

STOCK OPTION AGREEMENT

 

THIS OPTION AGREEMENT is made as of the              day of               ,200    (the “Option Date”),between ARCTIC CAT INC., a Minnesota corporation (the “Company”), and                                 ,an employee of the Company or one or more of its subsidiaries (the “Optionee”).

 

WHEREAS, theCompany desires, by affording the Optionee an opportunity to purchase shares ofits Common Stock, $.01 par value (the “Common Stock”), as hereinafter provided,to carry out the purpose of the 2002 Stock Plan of the Company approved by itsshareholders;

 

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.  It is intended that theOption shall constitute an incentive stock option, as defined in Section 422Aof the Internal Revenue Code of 1986, as amended.

 

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

 

3.                                       Termof Option.  The term of the Optionshall be for a period of             (      ) years from the Option Date, subject to earliertermination as hereinafter provided.

 

4.                                       Exerciseof Option.  During the first year theOption is outstanding it may not be exercised with respect to any of the sharescovered thereby.  Subject to theprovisions of paragraphs 6 and 7 hereof, the Option may thereafter be exercisedduring the term specified in Paragraph 3 as follows:

 

(a)                                  fromand after 12 months from the Option Date, the Option may be exercised as to               shares.

 

(b)                                 fromand after 24 months from the Option Date, the Option may be exercised as to anadditional                 shares

 

(c)                                  fromand after 36 months from the Option Dale, the Option may be exercised as to anadditional               shares.

 

5.                                       Non-Transferability.  The Option shall not be transferable otherwisethan by will or the laws of descent and distribution, and the Option may beexercised, 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.  Anyattempted assignment, transfer, pledge, hypothecation, or other disposition ofthe Option

 

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contrary to the provisionshereof, and the levy of any execution, attachment, or similar process upon theOption, shall be null and void and without effect.

 

6.                                       Terminationof Employment.  In the event theemployment of the Optionee shall be terminated for any reason whatsoever, theOption may be exercised (to the extent the Optionee shall have been entitled todo so at the date of his or her termination of employment) by the Optionee atany time (i) within three (3) months after such termination ofemployment if such termination was by reason of Retirement (as defined in the2002 Stock Plan), (ii) within one (1) month after such termination ifsuch termination was for any reason other than Retirement, Cause (as defined inthe 2002 Stock Plan) or as provided in paragraph 7 hereof, and (iii) nolater than the date of termination if such termination was for Cause (asdefined in the 2002 Stock Plan), but in no event may the Option be exercisedlater than the expiration of the term specified in paragraph 3.  So long as the Optionee shall continue to bean employee of the Company or one or more of its subsidiaries, the Option shallnot be affected by any change of duties or position.  Nothing in this Option Agreement shall conferupon the Optionee any right to continue in the employ of the Company or of anyof its subsidiaries or interfere in any way with the right of the Company orany such subsidiary to terminate the employment of the Optionee at any time.

 

7.                                       Deathor Permanent Disability of Optionee. If the Optionee shall die while still employed by the Company or one ormore of its subsidiaries, or shall become permanently and totally disabledwhile still employed by the Company or one or more of its subsidiaries, theOption may be exercised (to the extent that the Optionee shall have beenentitled to do so at the date of his or her death or termination by reason ofpermanent and total disability) by the Optionee, his or her legalrepresentative or the person to whom the Option is transferred by will or theapplicable laws of descent and distribution, at any time within twelve (12)months after the Optionee’s death or termination by reason of permanent andtotal disability, but in no event later than the expiration of the term specifiedin paragraph 3 hereof.

 

8.                                       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 of CommonStock of the Company with a fair market value equal to the purchase price or bya combination of cash and such shares, whose fair market value shall equal thepurchase price.  For purposes of thisparagraph the “fair market value” of the Common Stock of the Company shall beestablished in the manner set forth in Section 1(i) of the 2002 StockPlan.  The certificate or certificatesfor the shares as to which the Option shall have been so exercised shall beregistered in the name of the person so exercising the Option, or if theOptionee so elects, in the name of the Optionee or one other person as jointtenants, and shall be delivered as soon as practicable after the notice shallhave been received.  In the event theOption shall be exercised by any person other than the Optionee, such noticeshall 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.

 

9.                                       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

 

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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.

 

10.                                 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.

 

11.                                 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.

 

12.                                 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.

 

13.                                 Subsidiary.  As used herein, the term “subsidiary” shallmean any current or future corporation which would be a “subsidiary corporation”of the Company, as that term is defined in Section 425 of the InternalRevenue Code of 1986, as amended.

 

14.                                 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.

 

15.                                 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, orany issue of bonds, debentures, preferred or prior preference stock ahead of oraffecting the Common Stock of the Company or the rights thereof, or dissolutionor liquidation of the Company, or any sale or transfer of all or any part ofits assets or business, or any other corporate act or proceeding, whether of asimilar character or otherwise.

 

16.                                 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 Option Agreementshall be final, binding and conclusive.

 

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17.                                 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.

 
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