<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
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
RACING CHAMPIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
Registrant
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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> 2
RACING CHAMPIONS CORPORATION
800 ROOSEVELT ROAD
BUILDING C, SUITE 320
[RACING CHAMPIONS LOGO] GLEN ELLYN, ILLINOIS 60137
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2000
The Annual Meeting of Stockholders of Racing Champions Corporation, a
Delaware corporation (hereinafter called the Corporation), will be held at Oak
Brook Hills, 3500 Midwest Road, Oak Brook, Illinois 60523 on Friday, May 12,
2000, at 11:00 a.m., local time, for the following purposes:
1. To elect seven directors to serve until the 2001 Annual Meeting of
Stockholders.
2. To ratify the appointment of Arthur Andersen LLP, independent
public accountants, as auditors of the Corporation for its fiscal year
ending December 31, 2000.
3. To take action with respect to any other matters that may be
properly brought before the meeting and that might be considered by the
stockholders of a Delaware corporation at their annual meeting.
By order of the Board of Directors
Glen Ellyn, Illinois
April 7, 2000
CURTIS W. STOELTING,
Secretary
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 24, 2000 ARE
ENTITLED TO VOTE AT THE MEETING. YOUR VOTE IS IMPORTANT TO ENSURE THAT A
MAJORITY OF THE STOCK IS REPRESENTED. PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. IF YOU LATER FIND THAT YOU MAY BE PRESENT AT THE
MEETING OR FOR ANY OTHER REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
RACING CHAMPIONS CORPORATION
800 ROOSEVELT ROAD,
BUILDING C, SUITE 320
[RACING CHAMPIONS LOGO] GLEN ELLYN, ILLINOIS 60137
PROXY STATEMENT FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Racing Champions Corporation of proxies, in the
accompanying form, to be used at the Annual Meeting of Stockholders of the
Corporation to be held at Oak Brook Hills, 3500 Midwest Road, Oak Brook,
Illinois 60523 on May 12, 2000 and any adjournments thereof. This proxy material
is being mailed on or about April 7, 2000 to stockholders of record at the close
of business on March 24, 2000.
The shares represented by each valid proxy received in time will be voted
at the meeting and, if a choice is specified on the proxy, it will be voted in
accordance with that specification. If no instructions are specified in a signed
proxy returned to the Corporation, the shares represented thereby will be voted
in FAVOR of the election of the directors listed in the enclosed proxy and in
FAVOR of the ratification of the appointment of Arthur Andersen LLP as the
Corporation's auditors for fiscal 2000.
Stockholders may revoke proxies at any time to the extent they have not
been exercised by giving written notice to the Corporation or by a later
executed proxy. Attendance at the Annual Meeting will not automatically revoke a
proxy, but a stockholder attending the Annual Meeting may request a ballot and
vote in person, thereby revoking a prior granted proxy. The cost of solicitation
of proxies will be borne by the Corporation. Solicitation will be made primarily
by use of the mails; however, some solicitation may be made by employees of the
Corporation, without additional compensation therefor, by telephone, by
facsimile, or in person. Only stockholders of record at the close of business on
March 24, 2000 will be entitled to notice of and to vote at the meeting. On the
record date, the Corporation had outstanding 15,469,708 shares of Common Stock
entitled to one vote per share.
A majority of the votes entitled to be cast with respect to each matter
submitted to the stockholders, represented either in person or by proxy, shall
constitute a quorum with respect to such matter. Approval of each matter
specified in the notice of the meeting requires the affirmative vote of a
majority, or in the case of the election of directors a plurality, of the shares
represented at the meeting. Abstentions and broker non-votes (i.e., shares held
by brokers in street name, voting on certain matters due to discretionary
authority or instructions from the beneficial owners but not voting on other
matters due to lack of authority to vote on such matters without instructions
from the beneficial owner) will count toward the quorum requirement and will not
count toward the determination of whether such matters are approved or directors
are elected. The Inspector of Election appointed by the Board of Directors will
count the votes and ballots.
ELECTION OF DIRECTORS
It is intended that shares represented by proxies in the enclosed form will
be voted for the election of the nominees named in the following table to serve
as directors for a term of one year and until their successors are elected,
unless contrary instructions are received. As indicated below, each person
nominated by the Board of Directors is an incumbent director. The Corporation
anticipates that the nominees listed in this Proxy Statement will be candidates
when the election is held. However, if an unexpected occurrence should make it
necessary, in the judgment of the proxy holders, to substitute some other person
for any of the nominees,
<PAGE> 4
proxies will be voted for a substitute nominee selected by the proxy holders
(except where a proxy withholds authority with respect to the election of
directors).
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND DIRECTORSHIPS AGE SINCE
- ---------------------------------------------------------------- --- --------
<S> <C> <C>
ROBERT E. DODS................................................ 51 1996
Chief Executive Officer of the Corporation and Chairman of the
Board of Directors since July 1998. President of the Corporation
from April 1996 to July 1998. Mr. Dods co-founded Racing
Champions, Inc. ("RCI") in 1989, and served as President of RCI
from inception to July 1998, at which time Mr. Dods was
appointed as Chief Executive Officer of RCI.
BOYD L. MEYER................................................. 58 1996
President of the Corporation since July 1998. Executive Vice
President of the Corporation from April 1996 to July 1998. Mr.
Meyer co-founded RCI in 1989, and served as Executive Vice
President of RCI from inception to July 1998, at which time Mr.
Meyer was appointed as President of RCI.
PETER K.K. CHUNG.............................................. 46 1996
President of Racing Champions Limited ("RCL") since April 1996.
Mr. Chung formed the predecessors to RCL in 1989 to handle the
overseas operating activities of RCI and served as President of
such predecessors from inception to April 1996.
AVY H. STEIN.................................................. 45 1996
A founder and Managing Director of Willis Stein & Partners, L.P.
Along with Mr. Willis, Mr. Stein is responsible for managing
Willis Stein. Prior to founding Willis Stein & Partners, L.P.,
Mr. Stein served as a Managing Director of Continental Illinois
Venture Corporation from 1989 through 1994. Mr. Stein is a
director of Tremont Corporation and CTN Media Group, Inc.
DANIEL M. GILL................................................ 36 1996
A founder and Managing Director of Willis Stein & Partners, L.P.
Prior to founding Willis Stein & Partners, L.P., Mr. Gill served
as a Managing Director of Continental Illinois Venture
Corporation from 1989 through 1994.
JOHN S. BAKALAR............................................... 52 1997
Mr. Bakalar is currently a private investor. From May 1993 to
November 1997, Mr. Bakalar was President and Chief Operating
Officer of Rand-McNally, Inc., a printing and publishing
company.
JOHN J. VOSICKY............................................... 51 1997
Executive Vice President and Chief Financial Officer of Comdisco
Inc., a technology services company, since July 1994. Senior
Vice President and Chief Financial Officer of Comdisco Inc. from
November 1985 to July 1994. Mr. Vosicky serves as a director of
Comdisco Inc.
</TABLE>
DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board of Directors held three meetings in 1999, and all directors attended
at least 75% of the meetings of the Board and the committees thereof of which
they were a member.
2
<PAGE> 5
The Board's Audit Committee is comprised of Messrs. Gill (Chairman),
Bakalar and Vosicky. The Audit Committee is responsible for recommending to the
Board the appointment of independent auditors, reviewing the scope of annual
audit activities of the auditors, approving the audit fee payable to the
auditors and reviewing audit results. The Audit Committee held two meetings in
1999 and all committee members were present at each meeting.
The Board's Compensation Committee is comprised of Messrs. Stein
(Chairman), Dods and Vosicky. The Compensation Committee, in addition to such
other duties as may be specified by the Board, reviews and recommends to the
Board the compensation structure for the Corporation's officers and other
managerial personnel, including salary rates, participation in incentive
compensation and benefit plans, fringe benefits, noncash perquisites and other
forms of compensation. The Compensation Committee also administers the
Corporation's 1996 Key Employees Stock Option Plan and the Racing Champions
Corporation Stock Incentive Plan (the "Incentive Plan"). The Compensation
Committee held one meeting in 1999 and all committee members were present at
such meeting.
COMPENSATION OF DIRECTORS
Directors who are employees of the Corporation or are affiliates of Willis
Stein & Partners, L.P. receive no compensation for services as members of either
the Board of Directors or committees thereof. Other directors receive an annual
retainer of $7,500, payable in cash, and receive a fee of $1,000 for each Board
meeting attended and $1,000 for each committee meeting attended. Such fees for
attendance at Board meetings and committee meetings may not exceed $1,000 per
day. In October 1999, the Corporation issued 8,000 stock options to Mr. Bakalar
and 5,000 stock options to Mr. Vosicky, the Company's outside directors, at an
exercise price of $5.00 per share. These options were issued in lieu of certain
retainer and meeting fees.
EXECUTIVE OFFICERS
The following table sets forth the name, age, current position and
principal occupation and employment during the past five years of the executive
officers of the Corporation who are not directors:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION OTHER POSITIONS
- ---- --- ---------------- ---------------
<S> <C> <C> <C>
Curtis W. Stoelting..... 40 Executive Vice Vice President -- Finance and Operations
President -- Finance and Secretary from April 1996 to July 1998
and Operations and and Vice President-Finance and Operations
Secretary since July of RCI from 1994 to July 1998, at which
1998 time Mr. Stoelting was appointed Executive
Vice President -- Finance and Operations of
RCI. Prior to joining RCI, Mr. Stoelting
was employed for 12 years by Arthur
Andersen LLP in Chicago, most recently as a
Senior Manager.
Peter J. Henseler....... 41 Executive Vice Senior Vice President-Sales and Marketing
President -- Sales and from July 1998 to March 1999. Vice
Marketing since March President -- Marketing from April 1996 to
1999 July 1998. Vice President -- Marketing of
RCI from March 1996 to July 1998. Senior
Vice President -- Sales and Marketing of
RCI from July 1998 to March 1999, and
Executive Vice President -- Sales and
Marketing of RCI from March 1999 to the
present. Prior to joining RCI, Mr. Henseler
was a director of marketing for McDonald's
Corporation since 1989.
M. Kevin Camp........... 42 Senior Vice Vice President -- Licensing and Assistant
President -- Licensing Secretary from April 1996 to March 1999.
since March 1999 Vice President-Licensing of RCI from 1994
to March 1999, at which time Mr. Camp was
appointed Senior Vice
President -- Licensing of RCI.
</TABLE>
3
<PAGE> 6
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of January 15, 2000 by (i) each director
and named executive officer (as defined below), (ii) all directors and executive
officers as a group, and (iii) each person or other entity known by the
Corporation to beneficially own more than 5% of the outstanding Common Stock.
The Company has determined beneficial ownership in accordance with the
rules of the Securities and Exchange Commission. Unless otherwise indicated, the
persons and entities included in the table have sole voting and investment power
with respect to all shares beneficially owned, subject to applicable community
property laws. Shares of common stock subject to options that are either
currently exercisable or exercisable within 60 days of January 15, 2000 are
treated as outstanding and beneficially owned by the option holder for the
purpose of computing the percentage ownership of the option holder. However,
these shares are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON COMMON
STOCK STOCK
BENEFICIALLY BENEFICIALLY
NAME OWNED OWNED
- ---- ------------ ------------
<S> <C> <C>
Robert E. Dods.............................................. 1,288,701 8.3%
Boyd L. Meyer(1)............................................ 1,348,700 8.6
Daniel M. Gill(2)........................................... 2,381,249 15.3
Peter K.K. Chung(3)......................................... 1,303,701 8.3
Avy H. Stein(4)............................................. 2,381,249 15.3
John S. Bakalar(5).......................................... 30,000 *
John J. Vosicky(6).......................................... 30,000 *
Curtis W. Stoelting(7)...................................... 189,890 1.2
Peter J. Henseler(8)........................................ 68,354 *
Willis Stein & Partners, L.P.(9)............................ 2,381,249 15.3
All directors and executive officers as a group (10
persons)(10).............................................. 6,708,949 42.4
</TABLE>
- ---------------
* Denotes less than 1%.
(1) Includes 353,798 shares of Common Stock held by the Meyer Family Limited
Partnership, for which Mr. Meyer serves as a general partner and shares
voting and investment power with members of his immediate family who are
the other general partners.
(2) Represents shares of Common Stock held by Willis Stein & Partners, L.P. Mr.
Gill may be deemed to beneficially own the shares of Common Stock owned by
Willis Stein by virtue of his status as a Founding Member of Willis Stein &
Partners, L.L.C., the general partner of Willis Stein & Partners, L.P.
(3) Represents shares of Common Stock held by a corporation controlled by Mr.
Chung.
(4) Represents shares of Common Stock held by Willis Stein & Partners, L.P. Mr.
Stein may be deemed to beneficially own the shares of Common Stock owned by
Willis Stein by virtue of his status as a Founding Member of Willis Stein &
Partners, L.L.C., the general partner of Willis Stein & Partners, L.P.
(5) Includes 10,000 shares of Common Stock subject to stock options.
(6) Includes 10,000 shares of Common Stock subject to stock options.
(7) Includes 81,325 shares of Common Stock subject to stock options.
(8) Includes 48,641 shares of Common Stock subject to stock options.
(9) The general partner of Willis Stein & Partners, L.P. is Willis Stein &
Partners, L.L.C., a Delaware limited liability company, of which John R.
Willis, Avy H. Stein, Daniel M. Gill, Beth F. Johnston, and Daniel H.
Blumenthal are the Founding Members. Each such person may, through Willis
Stein & Partners, L.L.C., be deemed to share the power to direct the voting
and disposition of all of the
4
<PAGE> 7
Common Stock held by Willis Stein & Partners, L.P. The address of Willis
Stein & Partners, L.P. is 227 West Monroe Street, Suite 4300, Chicago,
Illinois 60606.
(10) Includes (i) 353,798 shares of Common Stock held by the Meyer Family
Limited Partnership, for which Mr. Meyer serves as a general partner and
shares voting and investment power with members of his immediate family who
are the other general partners, (ii) 1,303,701 shares of Common Stock held
by a corporation controlled by Mr. Chung, (iii) 2,381,249 shares of Common
Stock for which Messrs. Gill and Stein share voting and investment power
(Messrs. Gill and Stein disclaim beneficial ownership in such shares of
Common Stock) and (iv) 198,607 shares of Common Stock subject to stock
options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and persons who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of beneficial ownership on Form 3 and reports of
changes in beneficial ownership of the Corporation's equity securities on Form 4
or 5. The rules promulgated by the Commission under section 16(a) of the
Exchange Act require those persons to furnish the Corporation with copies of all
reports filed with the Commission pursuant to section 16(a). Based solely upon a
review of such forms actually furnished to the Corporation, and written
representations of certain of the Corporation's directors and executive officers
that no forms were required to be filed, all directors, executive officers and
10% stockholders have filed with the Commission on a timely basis all reports
required to be filed under section 16(a) of the Exchange Act, except that Boyd
L. Meyer and John J. Vosicky each filed a Form 4 in December 1999 to report
transactions made at the end of October 1999.
5
<PAGE> 8
PERFORMANCE GRAPH
The chart below shows a comparison of the cumulative return since June 12,
1997 had $100 been invested at the close of business on June 11, 1997 in each of
the Common Stock, the Nasdaq Composite Index (all issuers), and a peer group
constructed by the Corporation comprised of the following publicly traded
producers and distributors of collectibles or die cast vehicle replicas: Action
Performance Companies, Inc., Department 56, Inc., Empire of Carolina, Enesco
Group, Inc., Hasbro, Inc., Marvel Enterprises Inc., Mattel Inc., Play by Play
Toys & Novelties Inc., Russ Berrie & Co. Inc., and Zindart Limited (the "Peer
Group").
CUMULATIVE TOTAL RETURN COMPARISON*
THE CORPORATION VERSUS PUBLISHED INDICES (NASDAQ COMPOSITE INDEX AND THE PEER
GROUP)
[GRAPH]
<TABLE>
<CAPTION>
6/11/97 12/31/97 12/31/98 12/31/99
------- -------- -------- --------
<S> <C> <C> <C> <C>
Racing Champions**....................................... 100 49 85 28
Nasdaq Composite Index................................... 100 112 158 287
The Peer Group........................................... 100 117 95 61
</TABLE>
- ---------------
* Total return assumes reinvestment of dividends.
** The closing price of the Common Stock on June 11, 1997 was $15.75, the
closing price on December 31, 1997 was $7.75, the closing price on December
31, 1998 was $13.38, and the closing price on December 31, 1999 was $4.44.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee, which is comprised of three
members of the Board of Directors, is responsible for considering and approving
compensation arrangements for the Corporation's senior management, including
executive officers. The objectives of the Compensation Committee in establishing
compensation arrangements for senior management are to: (i) attract and retain
key executives who are important to the continued success of the Corporation;
and (ii) provide strong financial incentives, at reasonable cost to the
stockholders, for senior management to enhance stockholder value.
The primary components of the Corporation's executive compensation program
are (i) base salary, (ii) incentive compensation bonuses and (iii) stock
options.
Base Salaries. The base salaries of the Corporation's executive officers
have been set by their respective employment agreements. Each of the employment
agreements provides that the Corporation may increase the executive officer's
base salary throughout the term or any renewal term of the agreement. During
1999, each executive officer received the minimum base salary set forth in their
respective employment agreements. In
6
<PAGE> 9
the future, the Compensation Committee will consider appropriate increases in
the base salaries of the Corporation's executive officers based on individual
performance and comparative industry compensation levels.
Incentive Bonuses. The Corporation grants annual bonuses to certain of its
executive officers and key employees. The purpose of the Corporation's bonus
program is to provide incentive compensation in a form which relates the
financial reward to an increase in the value of the Corporation to its
stockholders. The Corporation paid special bonuses to Messrs. Chung, Dods and
Meyer for their efforts relating to the Corporation's acquisition and subsequent
integration of The Ertl Company, Inc. into the Corporation and also paid bonuses
to its other executive officers after the first quarter of fiscal 1999 based on
the Corporation's first quarter fiscal 1999 performance. The Corporation did not
pay any other bonuses to its executive officers based on fiscal 1999
performance.
Stock Incentive Plan. In 1997, the Corporation established the Incentive
Plan. The Incentive Plan authorizes the Compensation Committee to grant stock
options to officers and other key employees. In March and October 1999, the
Compensation Committee granted options to purchase Common Stock to the named
executive officers as shown in the Summary Compensation Table.
Compensation of the Chief Executive Officer. During 1999, Mr. Dods
received a base salary as provided in his employment agreement. Mr. Dods does
not participate in the Corporation's bonus program, but he did receive a special
bonus as shown in the Summary Compensation Table for his efforts relating to the
Corporation's acquisition and subsequent integration of The Ertl Company, Inc.
into the Corporation. Mr. Dods was not awarded any stock options under the
Incentive Plan in 1999.
COMPENSATION COMMITTEE:
Avy H. Stein (Chairman)
Robert E. Dods
John J. Vosicky
7
<PAGE> 10
EXECUTIVE COMPENSATION
CASH COMPENSATION
The table which follows sets forth certain information for the years
indicated below concerning the compensation paid by the Corporation to the
Corporation's Chief Executive Officer and the four other most highly compensated
executive officers in fiscal 1999 (collectively, the "named executive
officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) OPTIONS(#) COMPENSATION
--------------------------- ------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert E. Dods, Chief Executive Officer
and Chairman of the Board of
Directors.............................. 1999 $500,000 $275,000 -- $--
1998 500,000 -- -- --
1997 500,000 -- -- --
Boyd L. Meyer, President................. 1999 500,000 275,000 -- --
1998 500,000 -- -- --
1997 500,000 -- -- --
Peter K.K. Chung, President of Racing
Champions Limited...................... 1999 500,000 275,000 -- --
1998 500,000 -- -- --
1997 500,000 -- -- --
Curtis W. Stoelting, Executive Vice
President -- Finance and Operations and
Secretary.............................. 1999 205,044 20,188 33,000 6,049(2)
1998 182,692 261,847 11,440 7,214(2)
1997 150,000 261,615 33,653 5,943(2)
Peter J. Henseler, Executive Vice
President -- Sales and Marketing....... 1999 159,018 20,188 33,000 6,242(3)
1998 141,349 226,934 8,580 8,213(3)
1997 125,000 183,957 25,338 7,963(3)
</TABLE>
- ---------------
(1) Consists of special bonuses paid to Messrs. Dods, Meyer and Chung in 1999
for their efforts relating to the Corporation's acquisition and subsequent
integration of The Ertl Company, Inc. into the Corporation and amounts paid
to Messrs. Stoelting and Henseler pursuant to the Corporation's bonus
program.
(2) For 1997, consists of $1,193 of premiums paid by the Corporation for term
life insurance under which Mr. Stoelting is the beneficiary and $4,750 of
matching contributions under the Racing Champions Savings Plan. For 1998,
consists of premiums of $2,214 paid by the Corporation for term life
insurance under which Mr. Stoelting is the beneficiary and $5,000 of
matching contributions under the Racing Champions Savings Plan. For 1999,
consists of premiums of $1,049 paid by the Corporation for term life
insurance under which Mr. Stoelting is the beneficiary and $5,000 of
matching contributions under the Racing Champions Savings Plan.
(3) For 1997, consists of $3,213 of premiums paid by the Corporation for term
life insurance under which Mr. Henseler is the beneficiary and $4,750 of
matching contributions under the Racing Champions Savings Plan. For 1998,
consists of $3,213 of premiums paid by the Corporation for term life
insurance under which Mr. Henseler is the beneficiary and $5,000 of matching
contributions under the Racing Champions Savings Plan. For 1999, consists of
$1,242 of premiums paid by the Corporation for term life insurance under
which Mr. Henseler is the beneficiary and $5,000 of matching contributions
under the Racing Champions Savings Plan.
8
<PAGE> 11
STOCK OPTIONS
The following table provides certain information regarding stock options
granted to the named executive officers of the Corporation during the year ended
December 31, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM($)(3)
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------ ------------ -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Curtis W.
Stoelting.......... 13,000(1) 3.81 10.94 March 24, 2009 89,441 226,662
20,000(2) 5.86 5.00 October 21, 2009 62,889 159,374
Peter J. Henseler.... 13,000(1) 3.81 10.94 March 24, 2009 89,441 226,662
20,000(2) 5.86 5.00 October 21, 2009 62,889 159,374
</TABLE>
- ---------------
(1) Options with respect to 20% of the underlying shares become exercisable on
March 24 of each year from 2000 to 2004.
(2) Options with respect to 20% of the underlying shares become exercisable on
October 21 of each year from 2000 to 2004.
(3) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Commission, and therefore are
not intended to forecast possible future appreciation, if any, in the Common
Stock.
FISCAL YEAR-END OPTION VALUES. The following table provides certain
information regarding the value of unexercised options held by the named
executive officers at December 31, 1999. No named executive officer exercised
any options during the year ended December 31, 1999.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE-MONEY
YEAR-END OPTIONS AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------------- ---------------------------------
<S> <C> <C>
Curtis W. Stoelting.................... 79,037/82,063 $214,655/143,105
Peter J. Henseler...................... 46,925/61,496 107,328/71,550
</TABLE>
- ---------------
(1) Calculated based on closing sale price of $4.44 per share on December 31,
1999.
EMPLOYMENT AGREEMENTS
On April 30, 1999 the Corporation entered into separate employment
agreements with Messrs. Dods and Meyer and Racing Champions Limited entered into
an employment agreement with Mr. Chung. The Employment Agreements with Messrs.
Dods, Meyer and Chung each have a term of three years. Pursuant to the
Employment Agreements, Messrs. Dods, Meyer and Chung each will receive base
salaries of $500,000. The Employment Agreements with Messrs. Dods, Meyer and
Chung also provide that the executive officer is eligible to participate in any
medical, health, dental, disability and life insurance policy that are in effect
for the other two most senior executives of the Corporation. Pursuant to the
Employment Agreements, each executive officer has agreed not to compete with the
Corporation during employment and for a period of two years following
termination of employment and has agreed to maintain the confidentiality of the
Corporation's proprietary information and trade secrets. The Employment
Agreements provide that if the executive officer's employment is terminated by
the Corporation without "cause" or by the executive officer for "good reason,"
9
<PAGE> 12
the executive officer will be entitled to continuation of his then effective
base salary for a period equal to the greater of (i) one year, or (ii) the
remaining term of the Employment Agreement.
The Corporation has entered into separate employment agreements with
Messrs. Stoelting and Henseler which terminate on April 30, 2001. Pursuant to
the Employment Agreements, Messrs. Stoelting and Henseler will each receive base
salaries of $200,000, and are entitled to participate in the Corporation's bonus
program and the Incentive Plan. The Employment Agreements with Messrs. Stoelting
and Henseler provide that the executive officer is eligible to participate in
any medical, health, dental, disability and life insurance policy that are in
effect for other senior management of the Corporation excluding Messrs. Dods,
Meyer and Chung. Pursuant to the Employment Agreements, each executive officer
has agreed not to compete with the Corporation during employment and for a
period of two years following termination of employment and has agreed to
maintain the confidentiality of the Corporation's proprietary information and
trade secrets. The Employment Agreements provide that if the executive officer's
employment is terminated by the Corporation without "cause" or by the executive
for "good reason," the executive officer will be entitled to continuation of his
then effective base salary for two years following the date of termination,
provided, however, that if such termination occurs with respect to Mr.
Stoelting's employment at any time after a "change in control" with respect to
the Corporation, Mr. Stoelting will be entitled to continuation of his then
effective base salary for three years following the date of termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation leased warehouse space from D. W. Realty, Inc., a
corporation wholly owned by William L. Dods, brother of Robert E. Dods, Chief
Executive Officer and Chairman of the Board of Directors of the Corporation. The
amount of the lease payments for the year ended December 31, 1999 was $95,640.
The Corporation believes that the terms of this lease were no less favorable to
the Corporation than could have been obtained from an unaffiliated third party.
The Corporation terminated this lease on January 31, 2000.
Eric Meyer, son of Boyd L. Meyer, President and a director of the
Corporation, is a principal of Reicher-Goerdt-Meyer Sales and Marketing, Inc.
("Reicher Goerdt"), one of the Corporation's external sales representative
organizations. For year ended December 31, 1999, Eric Meyer was allocated
approximately $166,882 of the sales commissions paid by the Corporation to
Reicher Goerdt. The Corporation pays sales commissions to Reicher Goerdt at the
same rate and on no more favorable terms than for the Corporation's other sales
representative organizations.
James Chung, brother of Peter K.K. Chung, President of Racing Champions
Limited and a director of the Corporation, owns 70% of one of the Corporation's
dedicated manufacturers. For the year ended December 31, 1999, the Corporation
paid $5.9 million to this manufacturer for the purchase of die cast vehicle
replicas. The Corporation expects to continue to make purchases from this
manufacturer during fiscal 2000. The Corporation believes that the terms for the
purchase of products from this manufacturer are no less favorable to the
Corporation then could have been obtained from an unaffiliated party.
AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Arthur Andersen LLP to be the Corporation's auditors for the 2000
fiscal year. Although this appointment is not required to be submitted to a vote
of stockholders, the Corporation believes it appropriate as a matter of policy
to request that the stockholders ratify the appointment. If stockholder
ratification is not received, the Board of Directors may reconsider the
appointment. It is expected that a representative of Arthur Andersen LLP will be
present at the Annual Meeting and will have the opportunity to make a statement
if he desires to do so and will be available to respond to appropriate
questions.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS FOR THE PURPOSE OF AUDITING THE FINANCIAL STATEMENTS OF THE
CORPORATION FOR FISCAL 2000.
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ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K
The Corporation is required to file an annual report, called a Form 10-K,
with the Commission. A copy of Form 10-K for the fiscal year ended December 31,
1999 will be made available, without charge, to any person entitled to vote at
the Annual Meeting. Written requests should be directed to Jody L. Taylor, Vice
President-Finance, Racing Champions Corporation, 800 Roosevelt Road, Building C,
Suite 320, Glen Ellyn, Illinois 60137.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the 2001 Annual Meeting
of Stockholders pursuant to Rule 14a-8 under the Exchange Act must be received
at the Corporation's principal offices in Glen Ellyn, Illinois no later than
December 8, 2000 for inclusion in the proxy material for that meeting. Proposals
submitted other than pursuant to Rule 14a-8 will be considered untimely if
received after February 10, 2001 and the Corporation will not be required to
present any such proposal at the 2001 Annual Meeting of Stockholders. If the
Board of Directors decides to present a proposal despite its untimeliness, the
people named in the proxies solicited by the Board of Directors for the 2001
Annual Meeting of Stockholders will have the right to exercise discretionary
voting power with respect to such proposal.
OTHER MATTERS
The Directors of the Corporation know of no other matters to be brought
before the meeting. If any other matters properly come before the meeting,
including any adjournment or adjournments thereof, it is intended that proxies
received in response to this solicitation will be voted on such matters in the
discretion of the person or persons named in the accompanying proxy form.
BY ORDER OF THE BOARD OF DIRECTORS
RACING CHAMPIONS CORPORATION
Curtis W. Stoelting, Secretary
Glen Ellyn, Illinois
April 7, 2000
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PROXY
RACING CHAMPIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert E. Dods and Curtis W. Stoelting,
or either one of them, each with full power of substitution and resubstitution,
as proxy or proxies of the undersigned to attend the Annual Meeting of
Stockholders of Racing Champions Corporation to be held on May 12, 2000 at 11:00
a.m., local time, at the Oak Brook Hills Resort, 3500 Midwest Road, Oak Brook,
IL 60523, and at any adjournment thereof, there to vote all shares of Common
Stock which the undersigned would be entitled to vote if personally present as
specified upon the following matters and in their discretion upon such other
matters as may properly come before the meeting.
1. ELECTION OF DIRECTORS (terms expiring at the 2001 Annual Meeting)
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
NOMINEES: (1) ROBERT E. DODS, (2) BOYD L. MEYER, (3) PETER K.K. CHUNG,
(4) AVY H. STEIN, (5) DANIEL M. GILL, (6) JOHN S. BAKALAR AND (7) JOHN
J. VOSICKY
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write the number of the nominee(s) on the space provided below.)
- ------------------------------------------------------------------------
2. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS FOR RACING
CHAMPIONS CORPORATION FOR THE YEAR ENDING DECEMBER 31, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(continued on reverse side)
<PAGE> 15
PROXY NO. NO. OF SHARES
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and accompanying Proxy Statement, ratifies all that said
proxies or their substitutes may lawfully do by virtue hereof, and revokes all
former proxies.
Please sign exactly as your name appears hereon, date and return this Proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY TO ELECT
THE NOMINEES AS DIRECTORS AND TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS AUDITORS. IF OTHER MATTERS COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED
IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES APPOINTED.
DATED:
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(SIGNATURE OF STOCKHOLDER)
------------------------------------
(SIGNATURE IF JOINTLY HELD)
If signing as attorney, executor,
administrator, trustee or guardian,
please add your full title as such. If
shares are held by two or more persons,
all holders must sign the Proxy.
2
