<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CHAMPIONSHIP AUTO RACING TEAMS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CHAMPIONSHIP AUTO RACING TEAMS, INC.
755 WEST BIG BEAVER ROAD, SUITE 800
TROY, MICHIGAN 48084
To our Stockholders:
I am pleased to invite you to attend the annual meeting of stockholders of
Championship Auto Racing Teams, Inc. to be held on Tuesday, May 11, 1999 at 9:00
a.m. at the Intercontinental Hotel located at 111 East 48th Street, New York,
New York 10017-1297.
Details regarding the business to be conducted at the meeting are more fully
described in the accompanying Notice of Annual Meeting and Proxy Statement.
Your vote is important. Whether or not you plan to attend the annual meeting, I
hope that you will vote as soon as possible. You may vote over the Internet, as
well as by telephone or by mailing a traditional proxy card. Voting over the
Internet, by phone or by written proxy will ensure your representation at the
annual meeting if you do not attend in person. Please review the instructions on
the proxy card regarding each of these voting options.
Thank you for your ongoing support of and continued interest in Championship
Auto Racing Teams, Inc.
Sincerely,
/s/ Andrew Craig
Andrew Craig
Chairman of the Board
Championship Auto Racing Teams, Inc.
March 26, 1999
<PAGE> 3
1999 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
Notice of Annual Meeting of Stockholders.................... 1
Why am I receiving these materials?..................... 2
What information is contained in these materials?....... 2
What proposals will be voted on at the meeting?......... 2
What shares owned by me can be voted?................... 2
What is the difference between holding shares as a
stockholder of record and as a beneficial owner?...... 2
Stockholder of Record.............................. 2
Beneficial Owner................................... 2
How can I vote my shares in person at the meeting?...... 2
How can I vote my shares without attending the
meeting?.............................................. 2
Can I change my vote?................................... 3
How are votes counted?.................................. 3
What is the voting requirement to approve each of the
proposals?............................................ 3
What does it mean if I receive more than one proxy or
voting instruction card?.............................. 3
Where can I find the voting results of the meeting?..... 3
STOCK OWNERSHIP
Who are the largest owners of CART's stock?............. 4
How much stock do CART's directors and executive
officers own?......................................... 5
Section 16(a) Beneficial Ownership Reporting
Compliance......................................... 6
BOARD STRUCTURE AND COMPENSATION............................ 6
DIRECTOR COMPENSATION ARRANGEMENTS.......................... 7
PROPOSAL NO. 1.............................................. 8
ELECTION OF DIRECTORS....................................... 8
PROPOSAL NO. 2.............................................. 10
RATIFICATION OF INDEPENDENT ACCOUNTANTS..................... 10
PROPOSAL NO. 3.............................................. 10
APPROVAL OF THE CHAMPIONSHIP AUTO RACING TEAMS, INC. ....... 10
1997 STOCK OPTION PLAN...................................... 10
EXECUTIVE OFFICERS AND KEY EMPLOYEES........................ 13
EXECUTIVE COMPENSATION...................................... 15
Summary Compensation Table.................................. 15
Option Grants In Last Fiscal Year........................... 16
Aggregate Option Exercises In Last Fiscal Year And.......... 16
Fiscal Year-End Option Values............................... 16
REPORT OF THE COMPENSATION COMMITTEE........................ 17
STOCK PERFORMANCE GRAPH..................................... 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 20
ADDITIONAL QUESTIONS AND INFORMATION REGARDING THE ANNUAL
MEETING AND STOCKHOLDER PROPOSALS......................... 22
What happens if additional proposals are presented at
the meeting?.......................................... 22
What class of shares are entitled to be voted?.......... 22
What is the quorum requirement for the meeting?......... 22
Who will count the vote?................................ 22
Is my vote confidential?................................ 22
Who will bear the cost of soliciting votes for the
meeting?.............................................. 22
May I propose actions for consideration at next year's
annual meeting of stockholders or nominate individuals
to serve as directors?................................ 22
</TABLE>
<PAGE> 4
CHAMPIONSHIP AUTO RACING TEAMS, INC.
755 WEST BIG BEAVER ROAD, SUITE 800
TROY, MICHIGAN 48084
(248) 362-8800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C>
TIME 9:00 a.m. on Tuesday, May 11, 1999
PLACE Intercontinental Hotel
111 East 48th Street
New York, New York 10017-1297
ITEMS OF BUSINESS (1) To elect directors
(2) To ratify the appointment of independent
accountants
(3) To approve the 1997 Stock Option Plan
(4) To consider such other business as may
properly come before the meeting
RECORD DATE You are entitled to vote if you were a
stockholder at the close of business on
Friday, March 26, 1999.
VOTING BY PROXY Please submit the proxy as soon as possible so
that your shares can be voted at the meeting
in accordance with your instructions. You may
submit your proxy (1) over the Internet, (2)
by telephone, or (3) by mail. For specific
instructions, please refer to the Questions
and Answers beginning on page 2 of this proxy
statement and the instructions on the proxy
card.
</TABLE>
By Order of the Board of Directors
/s/ Andrew Craig
Andrew Craig
Chairman of the Board
This proxy statement and accompanying proxy card are being distributed on or
about April 8, 1999.
<PAGE> 5
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors of Championship Auto Racing Teams, Inc. ("CART") is
providing these proxy materials for you in connection with CART's annual
meeting of stockholders which will take place on May 11, 1999. You are
invited to attend the meeting and are requested to vote on the proposals
described in this proxy statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to the proposals
to be voted on at the meeting, the voting process, the compensation of
directors and our most highly paid officers, and certain other required
information. Our 1998 Annual Report to Shareholders is also enclosed.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are three proposals scheduled to be voted on at the meeting:
- The election of directors
- The ratification of independent accountants
- The approval of the 1997 Stock Option Plan
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of March 26, 1999, the record date, may be voted
by you. These shares include those (1) held directly in your name as a
stockholder of record and (2) held for you as the beneficial owner through
a stockbroker, bank or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD
AND AS A BENEFICIAL OWNER?
A: Many CART stockholders hold their shares through a stockbroker, bank or
other nominee rather than directly in their own name. As summarized below,
there are some distinctions between shares held of record and those owned
beneficially.
STOCKHOLDER OF RECORD
If your shares are registered directly in your name with CART's Transfer
Agent, Norwest Bank, you are considered, with respect to those shares, the
stockholder of record and these proxy materials are being sent directly to
you by CART. As a stockholder of record, you have the right to grant your
voting proxy directly to CART or to vote in person at the meeting. CART has
enclosed a proxy card for your use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of the shares held in
street name and these proxy materials are being forwarded to you by your
broker or nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the right to
direct your broker on how to vote and are also invited to attend the
meeting. However, since you are not the stockholder of record, you may not
vote these shares in person at the meeting. Your broker or nominee has
enclosed a voting instruction card for your use.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the stockholder of record may be voted
in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card or proof of identification.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT YOU ALSO
SUBMIT YOUR PROXY AS DESCRIBED BELOW SO THAT YOUR VOTE WILL BE COUNTED IF
YOU LATER DECIDE NOT TO ATTEND THE MEETING.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: Whether you hold shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without attending the
meeting. You may vote by granting a proxy or, for shares held in street
2
<PAGE> 6
name, by submitting voting instructions to your broker or nominee. In most
instances, you will be able to do this over the Internet, by telephone or
mail. Please refer to the summary instructions below and those included on
your proxy card or, for shares held in street name, the voting instruction
card included by your broker or nominee.
BY INTERNET -- If you have Internet access, you may submit your proxy from
any location in the world by following the "Vote by Internet" instructions
on the proxy card.
BY TELEPHONE -- If you live in the United States or Canada, you may submit
your proxy by following the "Vote by Telephone" instructions on the proxy
card,
BY MAIL -- You may do this by signing your proxy card or, for shares held
in street name, the voting instruction card included by your broker or
nominee and mailing it in the enclosed, postage prepaid and addressed
envelope. If you provide specific voting instructions, your shares will be
voted as you instruct. If you sign but do not provide instructions, your
shares will be voted as described below in "HOW ARE VOTES COUNTED?".
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote at the
annual meeting. For shares held directly in your name, you may accomplish
this by granting a new proxy or by attending the annual meeting and voting
in person. Attendance at the meeting will not cause your previously granted
proxy to be revoked unless you specifically so request. For shares held
beneficially by you, you may accomplish this by submitting new voting
instructions to your broker or nominee.
Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the nominees.
For the other proposals, you may vote "FOR," "AGAINST" or "ABSTAIN." If you
"ABSTAIN," it has the same effect as a vote "AGAINST." If you sign your
proxy card or broker instruction card with no further instructions, your
shares will be voted in accordance with the recommendations of the Board.
Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
A: In the election of directors, the 10 persons receiving the highest number
of "FOR" votes will be elected. All other proposals require the affirmative
"FOR" vote of a majority of those shares present, in person or by proxy,
and entitled to vote. If you are the beneficial owner and do not provide
the stockholder of record with voting instructions, your shares may
constitute broker non-votes, as described in "WHAT IS THE QUORUM
REQUIREMENT FOR THE MEETING?" on page 22. In tabulating the voting results
for any particular proposal, shares which constitute broker non-votes are
not considered entitled to vote.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting and publish
final results in our quarterly report on Form 10-Q for the second quarter
of 1999.
Additional Q&A information regarding the annual meeting and stockholder
proposals may be found on pages 22 and 23 below.
3
<PAGE> 7
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF CART'S STOCK?
The following table shows the amount of CART common stock beneficially
owned by any person or group that is the beneficial owner of more than 5% of
CART's common stock as of March 26, 1999.
<TABLE>
<CAPTION>
AGGREGATE NUMBER PERCENT OF
OF SHARES SHARES
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
---------------- ------------------ -----------
<S> <C> <C>
Newman/Haas Racing 800,000 5.3%
500 Tower Parkway
Lincolnshire, IL 60069
PacWest Racing Group 800,000 5.3%
4601 Methanol Lane
Indianapolis, IN 46268
Patrick Racing, Inc. 800,000 5.3%
8431 Georgetown Road
Indianapolis, IN 46268
Team Rahal, Inc. 800,000 5.3%
4601 Lyman Drive
Hilliard, OH 43026
Penske Racing, Inc. 800,000 5.3%
366 Penske Plaza
Reading, PA 19603
Tasman Motorsports Group 800,000 5.3%
4192 Weaver Court
Hilliard, OH 43026
</TABLE>
4
<PAGE> 8
HOW MUCH STOCK DO CART'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of common stock of CART beneficially
owned (unless otherwise indicated) by CART's directors, the executive officers
of CART named in the Summary Compensation Table below and the directors and
executive officers of CART as a group. Except as otherwise indicated, all
information is as of March 26, 1999.
The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has the sole or shared voting power or investment power and
also any shares which the individual has the right to acquire as of May 25, 1999
(60 days after the record date of March 26, 1999) through the exercise of stock
options or other rights. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with his spouse) with respect
to the shares set forth in the following table.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES
NAME BENEFICIAL OWNERSHIP (1) OUTSTANDING
---- ------------------------ -----------
<S> <C> <C> <C>
Andrew H. Craig.................................... 1,800 Direct 1.3%
200,000 Vested Options
Gerald R. Forsythe................................. 400,000 Indirect (3) 2.6%
Chip Ganassi....................................... 720,000 Indirect (4) 4.7%
Carl A. Haas....................................... 800,500 Indirect (5) 5.3%
James F. Hardymon.................................. 10,000 Vested Options *
Bruce R. McCaw..................................... 800,000 Indirect (6) 5.3%
Don Ohlmeyer, Jr................................... 10,000 Vested Options *
U.E. Patrick....................................... 100 Direct 5.3%
800,000 Indirect (7)
7,585 Vested Options
Robert W. Rahal.................................... 800,000 Indirect (8) 5.3%
Derrick Walker..................................... 360,000 Indirect (9) 2.4%
Randy K. Dzierzawski............................... 5,000 Direct *
100,000 Vested Options
Carl Cohen......................................... 100 Direct *
3,333 Vested Options
Roger Bailey....................................... 1,000 Direct *
29,450 Vested Options
Robert Hollander................................... 0 --
All current directors and executive officers as a 8,000 Direct 32.4%
group (13) persons............................... 4,680,500 Indirect
360,368 Vested Options
</TABLE>
- ---------
* Represents less than 1% of the Company's outstanding common stock.
(1) "Vested Options" are stock options which may be exercised as of May 25,
1999.
(2) Percentages are based upon 15,208,829 shares of common stock outstanding on
March 26, 1999.
(3) The shares are held of record by Forsythe Racing, Inc.
(4) The shares are held of record by Chip Ganassi Racing Teams, Inc.
(5) The shares are held of record by Newman/Haas Racing.
(6) The shares are held of record by PacWest Racing Group.
(7) The shares are held of record by Patrick Racing, Inc.
5
<PAGE> 9
(8) The shares are held of record by Team Rahal, Inc.
(9) The shares are held of record by Derrick Walker Racing, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the Securities and Exchange Commission reports regarding their
ownership and changes in ownership of our stock. CART believes that during
fiscal 1998, its officers, directors and 10% stockholders complied with all
Section 16(a) filing requirements. In making this statement, CART has relied
upon the written representations of its directors and officers.
BOARD STRUCTURE AND COMPENSATION
Our Board has 10 directors and the following 3 committees: (1) Audit, (2)
Compensation, and (3) Nominating. The membership during fiscal 1998 and the
function of each committee are described below. During 1998, the Board held four
meetings and four telephonic meetings. Each director attended at least 75% of
all Board and applicable committee meetings.(1)
<TABLE>
<CAPTION>
NAME OF DIRECTOR AUDIT COMPENSATION NOMINATING
- ---------------- ----- ------------ ----------
<S> <C> <C> <C>
Non-Employee Directors:
Gerald R. Forsythe.................. X
Chip Ganassi........................
Carl A. Haas........................ X
James F. Hardymon................... X* X*
Bruce R. McCaw...................... X
Don Ohlmeyer, Jr.................... X
U.E. Patrick........................ X* X
Robert W. Rahal.....................
Derrick Walker......................
Employee Directors:
Andrew H. Craig.....................
Number of Meetings in Fiscal 1998... 0 5 2
</TABLE>
------------------
X = Committee member
* = Chair
(1) Other than James F. Hardymon, who was elected to the Board on April
4, 1998, and Don Ohlmeyer, who was elected to the Board on January
14, 1999, all directors served on the Board for the entire fiscal
1998.
6
<PAGE> 10
THE AUDIT COMMITTEE
The Audit Committee reviews our auditing, accounting, financial reporting
and internal control functions and makes recommendations to the Board for the
selection of independent accountants. In discharging its duties, the committee:
- reviews and approves the scope of the annual audit and the independent
accountant's fees;
- meets independently with our internal auditing staff, our independent
accountants and our senior management; and
- reviews the general scope of our accounting, financial reporting, annual
audit and internal audit program, matters relating to internal control
systems as well as the results of the annual audit.
The Audit Committee has held two meetings during 1999.
THE COMPENSATION COMMITTEE
The Compensation Committee determines, approves and reports to the Board on
all elements of compensation for our elected executive officers.
THE NOMINATING COMMITTEE
The Nominating Committee proposes a slate of directors for election by our
stockholders at each annual meeting and candidates to fill any vacancies on the
Board. It is also responsible for approving management succession plans and
addressing Board organizational and governance issues.
DIRECTOR COMPENSATION ARRANGEMENTS
The following table provides information on CART's compensation and
reimbursement practices during 1998 for directors who are not CART officers and
who are not affiliated with teams participating in CART events (Messrs. Hardymon
and Ohlmeyer). CART employees and those directors who are affiliated with teams
participating in CART events do not receive any compensation for their Board
activities, but are reimbursed for expenses attendant to Board membership.
In addition to the cash compensation discussed below, members of the Board
of Directors who are not CART officers and who are not affiliated with teams
participating in CART events (Messrs. Hardymon and Ohlmeyer) receive options to
purchase 10,000 shares of common stock when first elected and options to
purchase 5,000 shares upon each re-election.
COMPENSATION TABLE FOR 1998
<TABLE>
<S> <C>
Annual Director Retainer $ 0
Board Meeting Attendance Fees (per meeting) $1,000
Board Telephonic Meeting Fees (per meeting) $ 250
Committee Meeting Attendance Fees (per meeting) $ 250
Reimbursement for Expenses Attendant to Board Membership Yes
</TABLE>
7
<PAGE> 11
PROPOSAL NO. 1
ELECTION OF DIRECTORS
There are 10 nominees for election to our Board this year. All of the
nominees have served as directors since the last annual meeting, except for
James F. Hardymon, who was elected a director by our Board on April 4, 1998, and
Don Ohlmeyer, who was elected a director by our Board on January 14, 1999.
Information regarding the business experience of each nominee is provided below.
All directors are elected annually to serve until the next annual meeting and
until their respective successor is elected.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
EACH OF THE FOLLOWING NOMINEES.
<TABLE>
<S> <C>
ANDREW H. CRAIG Mr. Craig was first elected President, Chief Executive Officer
Director since December 1997 and Chairman of the Board of CART in December 1997 and has served
Age 49 as the President and Chief Executive Officer of CART's operating
subsidiary since January 1994. From 1983 to 1994, Mr. Craig was
employed by ISL Marketing, AG, an international sports marketing
firm located in Switzerland. For the four years prior to his
employment with CART, Mr. Craig served as deputy chief executive
officer and executive vice president of ISL Marketing, AG. Mr.
Craig currently serves as a Vice President and Director of the
Automobile Competition Committee for the United States FIA, Inc.
GERALD R. FORSYTHE Mr. Forsythe currently serves as President of Forsythe Racing,
Director since December 1997 Inc. and a director and President of Player's/Forsythe Racing
Age 58 Team, Ltd. Since 1963, Mr. Forsythe has been employed in various
positions with and currently serves as Chairman and Chief
Executive Officer of INDECK Power Equipment Company, its
subsidiaries and affiliates. INDECK Power Equipment Company is
North America's largest emergency and back-up steam generating
source. The company also designs and fabricates water treatment
equipment and rents generator sets, chillers and compressors.
CHIP GANASSI Since 1987, Mr. Ganassi has served as President and owner of Chip
Director since December 1997 Ganassi Racing Teams, Inc., which won the CART Championship in
Age 40 1996, 1997 and 1998. Mr. Ganassi currently holds executive
positions with Chicago Motor Speedway, a racing facility; Premier
Marine, a barge towing company; and Tessa One Incorporated, a
holding company.
CARL A. HAAS Since 1960, Mr. Haas has served as Chief Executive Officer of
Director since December 1997 Carl A. Haas Auto Imports, a company specializing in the
Age 69 distribution of race cars and parts. Since 1982, Mr. Haas has
also served as the Managing Partner of Newman Haas Racing. Since
1992, he has served as President of Carl A. Haas Racing Teams,
Ltd. and, since 1996, as the Managing Member of Texaco Grand Prix
of Houston, LLC. Both Carl A. Haas Racing Teams, Ltd. and Texaco
Grand Prix of Houston, LLC are race promotion organizations. In
addition, Mr. Haas also holds positions with various companies,
including, but not limited to, Carl A. Haas Enterprises, Inc.,
Team Haas USA Ltd., Road America, SCCA Pro Racing, Inc. and
Milwaukee Mile, Inc., all of which are racing related businesses.
</TABLE>
8
<PAGE> 12
<TABLE>
<S> <C>
JAMES F. HARDYMON Mr. Hardymon retired as Chairman and chief executive officer of
Director since April 1998 Textron, Inc. in January 1999. Textron, Inc. is a public company,
Age 64 supplying aerospace and industrial components. He joined Textron
in 1989 as President and chief operating officer, became chief
executive officer in 1992, assumed the additional title of
Chairman in 1993 and relinquished the title of President in 1994.
Prior to joining Textron, Mr. Hardymon was President, chief
operating officer and a director of Emerson Electric Co., a
global manufacturer of electrical and electronic products and
systems. Mr. Hardymon is a director of Air Products and
Chemicals, Inc., Fleet Financial Group, Inc., Groupe Schneider
SA, Lexmark International and Circuit City Stores, Inc. He is a
trustee of the University of Kentucky.
BRUCE R. MCCAW Mr. McCaw currently serves as the president of RaceSport
Director since December 1997 Management Company, which he founded in 1993, PacWest Racing
Age 52 Group, LLC and PacWest Lights, each of which is involved in
various types of auto racing. Mr. McCaw was a founder and
director of McCaw Cellular Communications (now AT&T Wireless), as
well as director and originator of Claircom Communications
(AT&T's air-to-ground telephone network). Mr. McCaw is also
involved in various other ventures in the areas of
communications, real estate and aviation and holds a variety of
positions in entities involved in these businesses.
DON OHLMEYER, JR. Mr. Ohlmeyer has served as President, NBC West Coast since
Director since January 1999 February 1993. He oversees the activities of all of the company's
Age 54 entertainment-related businesses, including NBC Entertainment,
NBC Studios and NBC Enterprises. Mr. Ohlmeyer originally joined
NBC as executive producer of sports in 1977, from ABC where he
had served as producer and director of three Olympic broadcasts,
produced ABC Monday Night Football and worked extensively on ABC
Wide World of Sports. He left NBC Sports in 1982 to form Ohlmeyer
Communications Company, a full-service advertising agency and
marketing firm, as well as a television consulting operation.
U.E. PATRICK Mr. Patrick was a founding member of CART in November 1978 and
Director since December 1997 served as its first President and Chief Executive Officer. Mr.
Age 70 Patrick currently serves as President of Patrick Racing, and
Patrick Properties. He holds the position of Chairman of the
Board for Patrick Exploration, Inc., an oil and gas exploration
company; and a director of Turbo-Mac Software, a company
specializing in software sales.
</TABLE>
9
<PAGE> 13
<TABLE>
<S> <C>
ROBERT W. RAHAL Mr. Rahal is the co-owner of Team Rahal, Inc. He has an
Director since December 1997 accomplished career as a CART competitor, winning the PPG CART
Age 45 World Series title three times in his 15-year CART career.
Additionally, Mr. Rahal won the Indianapolis 500 in 1986. Mr.
Rahal also owns Honda, Toyota, Lexus and Mercedes-Benz
dealerships in Pennsylvania. He is a member of the Board of
Directors of The Huntington National Bank.
DERRICK WALKER Mr. Walker is currently the President and owner of Derrick Walker
Director since December 1997 Racing, Inc., which was formed in 1990. In 1988, he joined Al
Age 53 Holbert's Porsche Indy car project and assumed control of the
program upon the death of Al Holbert. From 1980 to 1988, he was
responsible for Penske Racing, Inc.'s Indy car program.
</TABLE>
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP as CART's independent accountants to audit CART's consolidated
financial statements for the year ended December 31, 1999. During 1998, Deloitte
& Touche LLP, served as CART's independent accountants and provided certain tax
and consulting services. Representatives of Deloitte & Touche LLP are expected
to attend the meeting where they will be available to respond to questions and,
if they desire, to make a statement.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS CART'S INDEPENDENT ACCOUNTANTS FOR 1999.
If the appointment is not ratified, our Board will select other independent
accountants.
PROPOSAL NO. 3
APPROVAL OF THE CHAMPIONSHIP AUTO RACING TEAMS, INC.
1997 STOCK OPTION PLAN
We are asking for your approval of the Championship Auto Racing Teams, Inc.
1997 Stock Option Plan (the "1997 Plan"). This Plan provides to officers and
employees of CART and its subsidiaries incentives directly linked to the
profitability of CART's businesses and increases in shareholder value. The 1997
Plan is CART's current stock-option plan for management.
REASON FOR SEEKING STOCKHOLDER APPROVAL
The sole purpose for seeking stockholder approval of the 1997 Plan is to
secure for CART certain tax deductions. Section 162(m) of the Internal Revenue
Code (the "Code") imposes a limitation on the tax deductibility by a corporation
of compensation in excess of $1,000,000 paid to any of the executive officers of
a publicly traded company whose compensation is required to be disclosed in the
Summary Compensation Table of the company's proxy statement. The limitation does
not apply to performance-based compensation if certain conditions are met. One
of these conditions is stockholder approval. CART's stockholders approved the
1997 Plan before CART became a public company, and the Plan became effective in
December 1997. However, Section 162(m) requires that we submit the 1997 Plan for
approval by our public stockholders in order to qualify stock options and
certain other awards under the Plan as performance based. Your Board of
Directors believes that it is important for CART to take all steps reasonably
necessary to ensure that CART will be able to take all available tax deductions
with respect to compensation resulting from awards under the 1997 Plan.
MATERIAL FEATURES OF THE 1997 PLAN
Certain key provisions of the 1997 Plan are summarized below. Because this
is a summary, it may not contain all the information that is important to you.
The 1997 Plan was filed as an exhibit to CART's Registration
10
<PAGE> 14
Statement on Form S-1 filed in 1998, registration number 333-43141. In order to
save costs, the Plan is not included as an appendix to this proxy statement. We
will provide you with a copy of the 1997 Plan without charge if you call us at
(248) 362-8800 or write to us at Championship Auto Racing Teams, Inc., 755 West
Big Beaver Road, Suite 800, Troy, Michigan 48084. Copies will also be available
at the annual meeting.
AUTHORIZED SHARES. The 1997 Plan authorizes up to 2,000,000 shares of CART
common stock for grants of non-qualified and incentive stock options. The number
of shares authorized may be adjusted for stock dividends, stock splits,
reorganizations, recapitalizations, and other similar transactions. Shares
subject to awards that are forfeited or terminated will be available again for
issuance pursuant to other awards. Shares used may be either newly issued shares
or treasury shares or both. As of March 26, 1999, approximately 912,500 shares
of CART common stock remained available for grants under the 1997 Plan.
ADMINISTRATION. The Compensation Committee of the Board of Directors
administers the 1997 Plan. The members of the Compensation Committee are
non-employee directors of CART. The Compensation Committee may delegate the
administration of the 1997 Plan except as it relates to those officers subject
to the reporting requirements of Section 16(a) of the Securities Exchange Act of
1934. With certain exceptions, the full Board of Directors may also exercise
authority granted to the Compensation Committee.
ELIGIBLE EMPLOYEES. The Compensation Committee may grant awards under the
1997 Plan to any employee of CART or its subsidiaries or associated companies
who is responsible for, or contributes to, the growth and profitability of CART,
a subsidiary or an associated company. As of March 26, 1999, approximately 70
employees had received awards.
GRANTS IN 1998. During 1998, incentive stock options were granted under the
1997 Plan as follows: Mr. Craig, 600,000 shares; Mr. Dzierzawski, 300,000
shares; Mr. Cohen, 10,000 shares; Mr. Bailey, 0 shares; Mr. Hollander, 0 shares;
all current executive officers as a group, 910,000 shares; and all employees,
1,087,500 shares. The options become exercisable in thirds, one-third on each of
the first three anniversaries of the option grant date.
STOCK OPTIONS. The Compensation Committee establishes the terms and
conditions of the stock options granted under the 1997 Plan, subject to certain
limitations set forth in the Plan. Under the 1997 Plan, the exercise price of a
stock option granted must be no less than the fair market value of CART's common
stock on the grant date.
The 1997 Plan provides that the term of any stock option granted under the
Plan may not exceed ten years and, additionally, may not exceed 12 months
following the termination of employment unless the termination is the result of
retirement, death, or disability.
Options granted under the 1997 Plan are not transferable except by will or
the laws of descent and distribution. Options may be exercised during the
participant's lifetime only by the participant or the participant's guardian or
legal representative.
Incentive stock options and non-qualified stock options may be granted
under the 1997 Plan if they meet the requirements of the Code.
U.S. TAX CONSEQUENCES OF STOCK OPTIONS. No taxable income is realized by
the participant upon the grant of an incentive or non-qualified stock option,
and no tax deduction is then available to CART. Upon exercise of the option, the
excess of the fair market value of the shares on the date of exercise over the
option price will be taxable to the participant and deductible by CART. The tax
basis of shares acquired will be the fair market value on the date of exercise.
Depending upon whether the shares are held for 12 months or less, more than 12
months but less than or equal to 18 months, or more than 18 months, various tax
rates will apply to the individual upon the eventual sale of the shares. The
most favorable capital gains rates apply to shares held for more than 18 months.
No taxable income is realized by a participant, and no tax deduction is
available to CART, upon either the grant or exercise of an incentive stock
option. If a participant holds the shares acquired upon the exercise of an
incentive stock option for more than one year after the stock option exercise
and more than two years after the date of the option grant (the "holding
period"), the difference between the option price and the amount realized
11
<PAGE> 15
upon the sale of the shares will be treated as long-term capital gain or loss
and no deduction will be available to CART. If the shares are transferred before
the expiration of the holding period, the participant will realize ordinary
income, and CART will be entitled to a deduction on a portion of the gain, if
any, equal to the difference between the option price and the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition. Any further gain or loss will be taxable as long-term or short-term
capital gain or loss depending upon the holding period before disposition.
If stockholders approve the 1997 Plan, CART believes that compensation
received by participants on the exercise of non-qualified options, or the
disposition of shares acquired upon the exercise of any incentive stock options,
will be considered performance-based compensation and thus not subject to the
$1,000,000 limit on deductibility of compensation under Section 162(m) of the
Code.
Participants are responsible for the payment of all withholding taxes due
in connection with the exercise or disposition of a stock option. Participants
may direct CART to withhold shares to be issued on an option exercise to satisfy
the withholding obligation.
CHANGE OF CONTROL. Upon a change in control (as defined in the 1997 Plan),
any stock option that is not then exercisable will become fully exercisable.
During the 60-day period following a change in control, a participant will have
the right, in lieu of paying the exercise price for the shares of common stock
under an option, to elect to surrender all or part of the option to CART and to
receive cash, or in certain circumstances shares of common stock, in an amount
equal to the amount by which the change in control price (as defined in the 1997
Plan) exceeds the exercise price per share of the common stock underlying the
option.
AMENDMENTS. The Board of Directors may amend or discontinue the 1997 Plan
at any time. However, the Board may not make any amendment without the approval
of CART's stockholders to the extent any law or agreement requires stockholder
approval. In addition, no amendment or termination of the Plan may, without the
participants' consent, adversely affect any awards already made to participants
under the Plan unless the amendment is required to cause the Plan to qualify for
any exemption provided by Rule 16b-3 promulgated under the Exchange Act.
ADDITIONAL INFORMATION
The closing price of CART's common stock on March 25, 1999, as reported by
the New York Stock Exchange, was $26.50.
The affirmative vote of the majority of the shares present in person or
represented by proxy at the annual meeting is required for approval of the 1997
Plan. If you do not approve the 1997 Plan, the Compensation Committee will
investigate the reasons for your rejection and consider an alternate stock-based
incentive plan. Outstanding awards under the 1997 Plan are not conditioned upon
approval by stockholders and will not be affected by failure to approve the
Plan.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
CHAMPIONSHIP AUTO RACING TEAMS, INC. 1997 STOCK OPTION PLAN.
12
<PAGE> 16
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table provides information regarding each of CART's executive
officers and certain key employers. Messrs. Craig, Dzierzawski, Bailey, Mayer
and Cohen have entered into employment agreements pursuant to which they hold
their current positions. All other officers are elected by the Board of
Directors to serve one year terms.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Andrew H. Craig (1) 50 President, Chief Executive Officer and Chairman of the Board
Randy K. Dzierzawski 36 Executive Vice President and Chief Financial Officer
Carl L. Cohen 39 Executive Vice President of Marketing of CART, Inc.
Jonathan T. Frank 33 President of CART Licensed Products
Vicki O'Conner 53 President of Pro-Motion Agency, Ltd. (Kool Toyota Atlantic
Series)
Roger Bailey 57 President of American Racing Series, Inc. (PPG-Dayton Indy
Lights Series)
Timothy A. Mayer 33 Senior Vice President of Racing Operations of CART, Inc.
J. Kirk Russell 55 Vice President of Competition of CART, Inc.
Dennis Swan 52 Vice President of Logistics of CART, Inc.
Keith Allo 33 Vice President of Broadcasting of CART, Inc.
Rena Shanaman 47 Vice President of Client Relations of CART, Inc.
Ron Richards 47 Vice President of Communications of CART, Inc.
Thomas L. Carter 43 Vice President of Finance and Administration of CART, Inc.
Jeff H. Horton 38 Vice President of Electronic Systems of CART, Inc.
Wally Dallenbach 62 Chief Steward of CART, Inc.
Michael J. Mills 48 Secretary and General Counsel
</TABLE>
- ---------------
(1) See Mr. Craig's biography on page 8.
Randy K. Dzierzawski was first elected Executive Vice President and Chief
Financial Officer of the Company in December 1997 and has served as Executive
Vice President and Chief Financial Officer of CART, Inc. since October 1996.
From December 1990 until his appointment as Executive Vice President of the
CART, Inc. in 1996, Mr. Dzierzawski served in various positions with CART, Inc.,
including Director of Administration, Treasurer, Vice President and Senior Vice
President. From 1988 to 1990, Mr. Dzierzawski served as a Senior Analyst in the
Financial and Reporting Division of General Motors Corporation and as the
president of his own financial consulting company. Prior to 1988, Mr.
Dzierzawski, a certified public accountant, was employed by Arthur Andersen and
Company as a Senior Tax Consultant.
Carl L. Cohen was first named Executive Vice President of Series Marketing
for CART in May 1997. From 1995 to 1997, Mr. Cohen was the director of marketing
for Ryder System. Prior to his position with Ryder System, Mr. Cohen served in
marketing positions with Philip Morris Companies. He has also held brand
management positions with Airwick Industries and Colgate-Palmolive.
Jonathan T. Frank was first named President of CART Licensed Products in
January, 1999. From 1996 to 1998, Mr. Frank served as Vice President, Sales and
Marketing for CART Licensed Products. From 1994 to 1996, Mr. Frank served in
various positions at Grey Advertising. From 1991 to 1994, Mr. Frank served as an
account executive with Time Warner Sports Merchandising, where he helped develop
the licensing programs for the National Hockey League and World Cup USA '94.
From 1988 to 1989, Mr. Frank served as a director of Major League Baseball,
where he planned and implemented the first ever world-wide minor league
licensing program.
Vicki O'Connor is the founder, and has served as President, of Pro-Motion
Agency, Ltd., which has administered the Atlantic Championship Series since
1985. From 1983 through 1984, Pro-Motion also organized the Pro Sports 2000
Series.
13
<PAGE> 17
Roger Bailey has served as President of American Racing Series, Inc. since
1989. American Racing Series, Inc. sanctions the PPG-Dayton Indy Lights
Championship Series. Prior to joining American Racing Series, Mr. Bailey served
in various capacities in motor sports.
Timothy A. Mayer was named Senior Vice President of Racing Operations of
CART, Inc. in December, 1998. Previously he was President of G3 Communications,
Inc., a motorsports consulting and operations firm. G3 helped organize the
Rio400 in Brazil. Mr. Mayer was General Manager of G3 in 1998, and assisted with
logistics for other international events. Mr. Mayer was also the Executive
Producer for SBT Brazilian Television's coverage of the FedEx Championship
Series, Indy Lights and the Kool Toyota Atlantic Series. Tim has produced the
television coverage for Brazilian television of these series since 1993.
Previously Tim was in charge of Special Projects for Fittipaldi USA, and Sports
World Communications.
J. Kirk Russell was first named Vice President of Competition of CART, Inc.
in November 1996 after serving as Vice President of Operations of CART, Inc. for
two year. Mr. Russell joined CART on a full-time basis in 1980 as director of
operations and technical director. In 1986, Mr. Russell received the
Championship Drivers Association's highest honor, the "Carl Horton Safety
Award." In addition, Mr. Russell has served on the Board of Directors of the
Automobile Competition Committee of the United States since 1988.
Dennis Swan was first named Vice President of Logistics of CART, Inc. in
November 1994. Prior to joining CART, Mr. Swan spent two years as test team
manager for the Honda engine program at Rahal-Hogan Racing. From 1989 to 1992,
Mr. Swan served as test team manager and then team manager for Truesports. Mr.
Swan has been involved in racing since 1964, and has worked with drivers such as
Al Unser, Jr., Danny Sullivan and Raul Boesel.
Keith Allo was first named Vice President of Broadcasting for CART, Inc. in
June 1997. Prior to his employment with CART, Mr. Allo was an executive for PASS
Sports beginning in 1994. While with PASS Sports, Mr. Allo served as executive
producer of programming for the Detroit Redwings, Pistons, Tigers and Lions, and
the University of Michigan and Michigan State University. From 1988 to 1993, Mr.
Allo worked as a producer and director for SportsChannel Florida and the
University of Florida Athletic Association, as well as producing programs for
Jefferson Pilot Teleproductions and Host Creative.
Rena Shanaman was first named Vice President of Client Relations for CART,
Inc. in July 1996 after serving as the General Manager of CART's inaugural U.S.
500 on a contractual basis. Ms. Shanaman has been involved in motorsports for
more than 16 years, including the Detroit Grand Prix, Molson Indy Vancouver and
the Arrivederci, Mario tour for racing legend Mario Andretti.
Ron Richards was first named Vice President of Communications of CART, Inc.
in November 1996. From 1989 to 1996, Mr. Richards worked for Miller Brewing
Company in several positions including manager and director of employee
communications, including the management of all sports marketing public
relations. From 1982 to 1984 and from 1987 to 1989, Mr. Richard worked with the
Sports Car Club of America as both director of marketing and public relations
manager. During this time, he also served as the motorsports public relations
manager for Coors-sponsored racing programs.
Thomas L. Carter was first named Vice President of Finance and
Administration of CART, Inc. in March, 1998 after serving as Director of Finance
since February 1997. From 1995 to 1996, Mr. Carter was employed by Rehman
Robinson as a senior tax manager. From 1990 to 1995, Mr. Carter was employed by
Deloitte & Touche as a senior tax consultant. From 1973 to 1989, Mr. Carter
worked in various positions with the Michigan Department of Treasury. Mr. Carter
is a certified public accountant.
Jeff H. Horton was first named Vice President of Electronic Systems of
CART, Inc. in June 1998. Mr. Horton has been involved in the CART family for
more than 13 years. While at General Motors in the Motorsports group, Mr. Horton
served as both a project engineer and program manager for the American Racing
Series, Buick Indy V6, and Chevrolet Indy V8 programs. Prior to joining CART,
Mr. Horton was also involved with the Mercedes CART program as a project
engineer and Manager of Engine Electronics for the PPG Dayton Indy Lights
Series. From 1996 to 1998, Mr. Horton was employed by American Racing Series as
manager engine electronics Dayton Indy Lights Program. In 1996, Mr. Horton was
project engineer Oldsmobile Aurora IRL Program through GM Motorsports. From 1994
to 1996, Mr. Horton was employed by Ilmor Engineering, as
14
<PAGE> 18
project engineer Mercedes CART program. From 1986 to 1994, Mr. Horton was
employed by GM Motorsports as program manager Chevy Indy V8 program.
Wally Dallenbach was first appointed Chief Steward of CART, Inc. in 1981.
Mr. Dallenbach joined CART as Competition Director in 1979 after retiring as a
driver. Mr. Dallenbach's distinguished racing career spanned fourteen years and
included five wins. He was a fixture at the Indianapolis 500, starting thirteen
times. In 1995, Mr. Dallenbach received the Championship Drivers Association's
highest honor, the "Carl Horton Safety Award."
Michael J. Mills was appointed general corporate counsel and corporate
secretary to CART in 1990. From 1978 to 1989, Mr. Mills served as CART's
associate counsel. In addition to his positions with CART, Mr. Mills currently
serves in an "of counsel" position with the law firm of Monaghan, LoPrete,
McDonald, Yakima & Grenke. From 1989 to 1996, Mr. Mills was the managing partner
of Tripp and Mills. Prior to that time, he was a partner with Frasco, Hackett &
Mills. Mr. Mills' law practice focuses on corporate and pension law, business
and commercial transactions, labor/management relations and general litigation.
EXECUTIVE COMPENSATION
The following table discloses compensation received by CART's Chief
Executive Officer and its four other most highly paid executive officers for the
fiscal year ending December 31, 1998 as well as their compensation for the
fiscal year ending December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
-------------------------------
ANNUAL COMPENSATION OTHER ANNUAL SECURITIES ALL OTHER
---------------------- COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS/SARS (#) ($)
--------------------------- ---- ---------- --------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Andrew H. Craig, 1998 $517,308 $200,000 (1) 600,000 $6,308(2)
President and CEO 1997 439,465 160,000 0 5,912
Randy K. Dzierzawski, 1998 $232,692 $100,000 (1) 300,000 $2,632(2)
Executive Vice President 1997 199,412 35,000 0 2,375
Carl L. Cohen, 1998 $200,769 $ 40,000 (1) 10,000 $2,632(2)
Executive Vice President of 1997(3) 113,846 0 0 54
Marketing
Roger Bailey (4) 1998 $193,846 $120,000 (1) 0 $1,788(2)
President of American Racing
Series
Robert E. Hollander (5) 1998 $217,692 $ 8,276 (1) 0 $ 0
President of CART Licensed 1997 175,492 0 0 0
Products
</TABLE>
- ---------------
(1) The aggregate amount of perquisite compensation to be reported herein is
less than the lesser of $50,000 or 10% of the total annual salary and bonus
reported for the named executive officer. No other annual compensation was
paid or payable to the named executive officers in the years indicated.
(2) Includes the payment of term life insurance premiums on behalf of the named
executive officer, as follows: Mr. Craig -- $3,808; Mr. Dzierzawski -- $132;
Mr. Cohen -- $132, and; Mr. Bailey -- $1,088; and contributions to defined
benefit plans on behalf of the named officers as follows: Mr.
Craig -- $2,500; Mr. Dzierzawski -- $2,500; Mr. Cohen -- $2,500, and; Mr.
Bailey -- $700.
(3) Mr. Cohen was first elected an officer of CART in May 1997 and therefore his
1997 compensation reflects only the salary and bonus paid for a partial year
with CART.
15
<PAGE> 19
(4) Mr. Bailey became an executive officer of CART upon CART's acquisition of
American Racing Series in March 1998. Therefore, the salary information is
only provided from the date of such acquisition. Mr. Bailey has entered into
an employment agreement pursuant to which he is paid an annual salary of
$240,000.
(5) Mr. Hollander resigned in January 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in 1998 to each
of the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS GRANTED TO GRANT DATE
SECURITIES UNDERLYING EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME OPTIONS GRANTED (1) FISCAL YEAR (2) ($/SHARE) DATE VALUE ($)(3)
---- --------------------- ------------------ -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Andrew H. Craig 600,000 55% $16.00 3/5/03 $3,438,000
Randy K. Dzierzawski 300,000 28% 16.00 3/5/03 1,717,000
Carl L. Cohen 10,000 1% 16.00 3/5/03 57,300
Roger Bailey 29,450(4) (4) 16.00 3/5/03 168,749
Robert E. Hollander 0 -- -- -- --
</TABLE>
- ---------------
(1) The options granted in 1998 are exercisable 33% after the first year, 66%
after the second year and 100% after the third year.
(2) CART granted options representing 1,088,100 shares to employees in 1998.
(3) CART used a Black-Scholes model of option valuation to determine grant date
present value. CART does not advocate or necessarily agree that the
Black-Scholes model can properly determine the value of an option.
Calculations for the named officers are based on a five-year option term.
Other assumptions used for the valuations are: interest rate of 5%; annual
dividend yield of 0%; and volatility of 30%.
(4) Mr. Bailey received options to purchase 29,450 shares of common stock in
connection with and as partial consideration for CART's acquisition of
American Racing Series, Inc. Mr. Bailey did not receive option grants during
1998 in connection with his services as an executive officer of CART.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in 1998 by
each of the named executive officers and the values of each of such officer's
unexercised options at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew H. Craig 0 0 0 600,000 $0 $7,893,750
Randy K. Dzierzawski 0 0 0 300,000 0 3,846,875
Carl L. Cohen 0 0 0 10,000 0 131,563
Roger Bailey 0 0 0 29,450 0 387,452
Robert E. Hollander 0 0 0 0 0 0
</TABLE>
- ---------------
(1) The value of unexercised options is based upon the difference between the
exercise price and the average of the high and low market prices on December
31, 1998 of $29.156.
16
<PAGE> 20
REPORT OF THE COMPENSATION COMMITTEE
CART's executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"). The
Compensation Committee, which is comprised of non-employee directors, is
responsible for approving and reporting to the Board on all elements of
compensation for certain elected corporate officers. The Compensation Committee
has furnished the following report on executive compensation.
The following Report of the Compensation Committee does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other CART filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that CART specifically incorporates
this report.
WHAT IS CART'S PHILOSOPHY OF EXECUTIVE COMPENSATION?
CART's Compensation Program consists of three key elements:
- Base Salary;
- Performance-Based Annual Bonus; and
- Periodic Grants of Stock Options.
The Compensation Committee believes that this three part approach best
serves the interests of CART and its stockholders. It enables CART to meet the
requirements of the highly competitive environment in which CART operates, while
insuring that executive officers are compensated in a way that advances both the
short and long-term interests of the stockholders. The variable annual bonus and
stock options relate to an evaluation of the contribution made by the officer of
CART to his performance, and with respect to the stock options, long-term
remuneration related directly to the stock appreciation realized by all CART
stockholders.
BASE SALARY. Base salaries of CART's executive officers, as well as changes
in such salaries take into account such factors as competitive industry
salaries; a subjective assessment of the nature of the position; the
contribution and experience of the officer; negotiated terms of any applicable
employment contracts; and the length of the officer's service. In the future,
salaries of all employees earning in excess of $150,000 per annum will be
reviewed and approved by the Compensation Committee.
ANNUAL BONUS. Annual bonuses for employees, other than Mr. Craig and Mr.
Dzierzawski are based upon the recommendation of the Chief Executive Officer and
are reviewed and approved by the Compensation Committee. Bonuses are based on a
number of factors, including achieving CART's financial and operational goals
and overall performance by the employee.
STOCK OPTIONS. The Compensation Committee's policy with respect to Stock
Options is to grant options reflecting the participant's position and ability to
influence CART's overall performance. The Stock Option Plan is intended to
provide participants with an increased incentive to make contributions to the
long-term performance and growth of CART, to attract and retain qualified
employees. CART's approach has been to grant options to a significant number of
its employees at all levels in order to align all employees with the
shareholders in seeking shareholder value.
HOW IS CART'S CHIEF EXECUTIVE OFFICER COMPENSATED?
As Chief Executive Officer, Mr. Craig is compensated pursuant to an
employment agreement entered into in 1997. The agreement terminates in December
2000 and provides for an annual base salary of $500,000 for 1998. In addition,
Mr. Craig is entitled to receive annual bonuses as determined by the
Compensation Committee. The Compensation Committee has done its own analysis,
and has employed compensation consultants to establish performance criteria to
provide incentives for Mr. Craig and to align his compensation with CART's goals
and objectives. During 1998, the Compensation Committee met on several occasions
to discuss the establishment of bonus criteria, and determined that Mr. Craig's
bonus for the year ended December 31, 1998 would be $200,000. The Compensation
Committee considered CART's performance in gross revenues, net income, race team
participation, and television ratings, but no specific quantitative measures
were formally adopted or applied in computing Mr. Craig's bonus. However, the
Committee gave greater emphasis to gross revenues and net income.
17
<PAGE> 21
We anticipate that more specific criteria will be established in 1999 based upon
subjective factors established by the committee with the assistance of
compensation consultants.
Prior to CART's initial public offering, Mr. Craig was granted options to
purchase 600,000 shares of CART's stock at the initial public offering price.
These options vest equally over the three years of his Employment Agreement.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. The Committee intends to comply
with the requirements of Section 162(m) of the Internal Revenue Code with
respect to the stock options granted to employees in order to avoid losing the
tax deduction for compensation in excess of $1-million paid to one or more of
the executive officers named in the summary of compensation table. It is for
this reason that the 1997 Stock Option Plan has been submitted for shareholder
approval at the 1999 annual meeting.
Compensation Committee:
U.E. Patrick, Chairman
Gerald Forsythe
Carl A. Haas
Derrick Walker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Board's Compensation Committee is or has been an
officer or employee of CART.
18
<PAGE> 22
STOCK PERFORMANCE GRAPH
The graph below shows the cumulative total shareholder return from the date
of CART's initial public offering assuming the investment of $100 on March 10,
1998 in each of CART's common stock, the S&P 500 Index and the Company's peer
group. For purposes of this stock performance graph, CART has selected all of
the auto racing industry public companies as its peer group. The peer group is
comprised of Dover Downs Entertainment, International Speedway Corporation,
Penske Motorsports and Speedway Motorsports.
<TABLE>
<CAPTION>
CART S&P 500 PEER GROUP
---- ------- ----------
<S> <C> <C> <C>
'1997 100.00 100.00 100.00
'1998 155.92 118.62 115.62
</TABLE>
Assumes that the value of the investment in CART stock and each index was
$100 at March 10, 1998 and that all dividends were reinvested.
19
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CART has entered into, and the Company will continue to enter into,
transactions with entities that are affiliated with the Company's directors and
with affiliates of its race teams. Race teams that participate in the CART
Championship receive purse distributions on a per race basis and from the year
end point fund which amounts have been paid based solely upon their performance
in specific races. The following tables provides information with respect to
payments made during 1998 by CART to race teams that are affiliated with
directors and/or 5% stockholders of CART:
<TABLE>
<CAPTION>
PURSE ROYALTY
RACE TEAM/AFFILIATED DIRECTOR DISTRIBUTIONS DISTRIBUTIONS
- ----------------------------- ------------- -------------
<S> <C> <C>
PacWest Racing Group/Bruce R. McCaw $ 848,050 $79,696
Patrick Racing, Inc./U.E. Patrick 1,403,250 --
Forsythe Racing, Inc./Gerald R. Forsythe 1,177,150 --
Team Rahal, Inc./Robert W. Rahal 871,450 91,395
Derrick Walker Racing, Inc./Derrick Walker 318,250 --
Newman/Haas Racing/Carl A. Haas 897,000 --
Chip Ganassi Racing Teams, Inc./Chip Ganassi 4,293,500 82,428
Penske Racing, Inc. 451,250 --
Tasman Motorsports Group 476,500 --
</TABLE>
Penske Motorsports, Inc., a public company controlled indirectly by Roger
S. Penske, a race team owner and 5% stockholder, has entered into Promoter
Agreements with CART with respect to PMI's race tracks in Brooklyn, Michigan,
Nazareth, Pennsylvania, and Fontana, California. Pursuant to the terms thereof,
and subject to such agreement's extension or renewal, a CART Championship race
will be held at the Brooklyn and Nazareth facilities through 2001, and at the
Fontana facilities in each year through 1999. The sanction fees payable to CART
pursuant to these agreements vary from year to year and track to track and are
similar to sanction fees paid by independent third parties. Pursuant to existing
Promoter Agreements, PMI has paid or will pay sanction fees to CART in the
aggregate amount of $3.4 million and $3.7 million in 1998 and 1999,
respectively. In 1997, PMI also acquired a 40% interest in the race track at
Homestead, Florida. Pursuant to the Promoter Agreement for Homestead, CART will
sanction a race through 2000 and will be paid a sanction fee in the amount of
$1.3 million, $1.37 million and $1.43 million in 1998, 1999 and 2000,
respectively. In addition, CART paid a total of $800,000 in sales costs to PMI
during 1998.
Carl A. Haas, a director of the Company and a race team owner and 5%
stockholder, is a principal owner of Carl Haas Racing Teams, Ltd. and Texaco
Houston Grand Prix L.L.C., each of which have entered into Promoter Agreements
with respect to CART Championship races at the Wisconsin State Park Speedway in
West Allis, Wisconsin and at a temporary road course in Houston, Texas. Pursuant
to the terms thereof, a CART Championship race will be held in West Allis
through 2001, and in Houston through 2003. The sanction fees payable to CART
under these agreements are similar to those paid by independent race promoters.
Pursuant to existing Promoter Agreements, entities affiliated with Mr. Haas have
paid or will pay sanction fees to CART in the aggregate amount of $2.0 million,
$1.4 million, $1.9 million, $2.4 million, $2.7 million and $2.7 million in 1998,
1999, 2000, 2001, 2002 and 2003, respectively. In addition, CART paid a total of
$200,000 in sales costs to these entities during 1998.
In March 1998, CART purchased all of the stock of American Racing Series,
Inc. and certain assets of BP Automotive, Inc. for a total purchase price of
$10.0 million and options to purchase 100,000 shares of stock, with an exercise
price of $16.00 per share. ARS, the organizer of the PPG Dayton Indy Lights
Championship, was controlled by U.E. Patrick, a director and 5% stockholder of
CART, and Roger Bailey, who became an executive officer of CART upon
consummation of the ARS acquisition. In connection with the ARS and BP
acquisitions, during 1998 Mr. Patrick and members of his family received
$4,813,725 and options to purchase 70,550 shares. Mr. Bailey received $2,009,804
and options to purchase 29,450 shares.
In addition to the payments described above, CART receives revenues from
its race teams, including those affiliated with CART directors, for entry fees,
equipment leases and other payments based solely on participation
20
<PAGE> 24
in CART events. During 1998, race teams affiliated with CART directors made such
payments to CART as follows:
<TABLE>
<S> <C>
PacWest Racing Group/Bruce R. McCaw $238,622*
Patrick Racing, Inc./U.E. Patrick 73,150
Forsythe Racing, Inc./Gerald R. Forsythe 115,800
Team Rahal, Inc./Robert W. Rahal 203,105*
Derrick Walker Racing, Inc./Derrick Walker
Newman/Haas Racing/Carl A. Haas 68,000
Chip Ganassi Racing Teams, Inc./Chip Ganassi 120,500
Penske Racing, Inc. 68,100
Tasman Motorsports Group 203,791*
</TABLE>
- ------------------------
* Includes engine lease, rebuilds and wheels payments related to
entries in the Indy Lights Series.
With the exception of Messrs. Craig, Hardymon and Ohlmeyer, each of the
current directors is affiliated with entities engaged in various levels of
business activity with CART. These and other transactions with officers,
directors, employees, principal stockholders or affiliates have been or will be
(1) made in the ordinary course of business, (2) on substantially the same terms
as those prevailing at the time for comparable transactions with unrelated
persons, and (3) such that did not or do not involve more than normal levels of
risk or present other unfavorable features. In order to avoid conflicts of
interest, directors of CART who are affiliated with an entity that is entering
into a transaction with CART will not vote on any matter related to such
transaction, and may, in certain circumstances, refrain from participating in
any discussions related to such transaction.
21
<PAGE> 25
ADDITIONAL QUESTIONS AND INFORMATION REGARDING
THE ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: Other than the 3 proposals described in this proxy statement, we do not
expect any matters to be presented for a vote at the annual meeting. If you
grant a proxy, the persons named as proxy holders, Andrew H. Craig and
Randy K. Dzierzawski, will have the discretion to vote your shares on any
additional matters properly presented for a vote at the meeting. If for any
unforeseen reason any of our nominees is not available as a candidate for
director, the persons named as proxy holders will vote your proxy for such
other candidate or candidates as may be nominated by the Board of
Directors.
Q: WHAT CLASS OF SHARES ARE ENTITLED TO BE VOTED?
A: Each share of our common stock outstanding as of the close of business on
March 26, 1999, the record date, is entitled to one vote at the annual
meeting. On the record date, we had 15,208,829 shares of common stock
issued and outstanding, held of record by approximately 310 holders.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and transacting business is
a majority of the outstanding shares entitled to be voted. The shares may
be present in person or represented by proxy at the meeting. Both
abstentions and broker non-votes are counted as present for the purpose of
determining the presence of a quorum. Generally, broker non-votes occur
when shares held by a broker for a beneficial owner are not voted with
respect to a particular proposal because (1) the broker has not received
voting instructions from the beneficial owner and (2) the broker lacks
discretionary voting power to vote such shares.
Q: WHO WILL COUNT THE VOTE?
A: A representative of Norwest Bank, CART's transfer agent, will tabulate the
votes and act as the inspector of election.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting tabulations that identify individual
stockholders are handled in a manner that protects your voting privacy.
Your vote will not be disclosed either within CART or to third parties
except (1) as necessary to meet applicable legal requirements, (2) to allow
for the tabulation of votes and certification of the vote, or (3) to
facilitate a successful proxy solicitation by our Board. Occasionally,
stockholders provide written comments on their proxy card which are then
forwarded to CART management.
Q: WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?
A: CART will pay the entire cost of preparing, assembling, printing, mailing
and distributing these proxy materials, except that certain expenses for
Internet access will be incurred by you if you choose to access the proxy
materials and/or vote over the Internet. In addition to the mailing of
these proxy materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by our directors,
officers, and employees, who will not receive any additional compensation
for such solicitation activities. We will reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation materials to
stockholders.
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF
STOCKHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may submit proposals for consideration at future stockholder meetings,
including director nominations.
STOCKHOLDER PROPOSALS: In order for a stockholder proposal to be considered
for inclusion in CART's proxy statement for next year's annual meeting, the
written proposal must be received by CART no later than January 12, 2000.
Such proposals also will need to comply with Securities and Exchange
Commission
22
<PAGE> 26
regulations regarding the inclusion of stockholder proposals in company
sponsored proxy materials. Similarly, in order for a stockholder proposal to be
raised from the floor during next year's annual meeting, written notice must be
received by CART no later than March 12, 2000 and shall contain such
information as required under our Bylaws.
COPY OF BYLAW PROVISIONS: You may contact the CART Corporate Secretary at our
Company headquarters for a copy of the relevant Bylaw provisions regarding the
requirements for making stockholder proposals and nominating director
candidates.
By Order of the Board of Directors
/s/ Andrew Craig
Andrew Craig
Chairman of the Board
March 26, 1999
23
<PAGE> 27
CHAMPIONSHIP AUTO RACING TEAMS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 11, 1999
9:00 a.m.
INTERCONTINENTAL HOTEL
111 EAST 48TH STREET
NEW YORK, NEW YORK 10017
- --------------------------------------------------------------------------------
CHAMPIONSHIP AUTO RACING TEAMS, INC.
755 WEST BIG BEAVER ROAD, SUITE 200
TROY, MICHIGAN 48084 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 11, 1999.
The shares of stock you hold in your account will be voted as you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3.
By signing the proxy, you revoke all prior proxies and appoint Andrew H. Craig
and Randy K. Dzierzawski, and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE> 28
--------------------
COMPANY #
CONTROL #
--------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - http://www.eproxy.com/mph/ - QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Championship Auto Racing Teams, Inc.,
c/o Shareowner Services(TM), P.O. Box 64873, St. Paul, MN 55164-0837.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Elections of directors: 01 Andrew H. Craig 06 Bruce R. McCaw
02 Gerald R. Forsythe 07 Don Ohlmeyer Jr.
03 Chip Ganassi 08 U.E. Patrick
04 Carl A. Haas 09 Robert W. Rahal
05 James F. Hardymon 10 Derrick Walker
[_] Vote FOR [_] Vote WITHHELD
all nominees from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. To ratify the appointment of Deloitte & Touche LLP as the independent
accountants of the year ended December 31, 1999.
[_] For [_] Against [_] Abstain
3. To approve the Championship Auto Racing Teams, Inc. 1997 Stock Option Plan.
[_] For [_] Against [_] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
---
Address Change? Mark Box [_]
Indicate changes below: Date
--------------------------
-----------------------------------
-----------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full
name or corporation and title of
authorized officer signing the
proxy.
