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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
ACTION PERFORMANCE COMPANIES, INC.
(Name of Registrant as Specified In Its Charter)
(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 (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:
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ACTION PERFORMANCE COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 2001
The Annual Meeting of Shareholders of Action Performance Companies,
Inc., an Arizona corporation, will be held at 9:00 a.m., on Monday, May 7, 2001,
at The Fiesta Inn, 2100 S. Priest Drive, Tempe, Arizona for the following
purposes:
1. To elect directors to serve until the next annual meeting of
shareholders and until their successors are elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as our independent
auditors for the fiscal year ending September 30, 2001.
3. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
These items of business are more fully described in the proxy statement
accompanying this notice.
Only shareholders of record at the close of business on March 23, 2001
are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, we urge to mark, sign,
date, and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. If you attend the meeting,
you may vote in person even if you previously have returned a proxy.
Sincerely,
/s/ R. David Martin
Phoenix, Arizona R. David Martin
April 5, 2001 Secretary
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ACTION PERFORMANCE COMPANIES, INC.
4707 EAST BASELINE ROAD
PHOENIX, ARIZONA 85040
PROXY STATEMENT
VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Action Performance
Companies, Inc., an Arizona corporation, by our Board of Directors for use at
our Annual Meeting of Shareholders to be held at 9:00 a.m. on Monday, May 7,
2001, or at any adjournment of the meeting, for the purposes set forth in this
proxy statement and in the accompanying notice of Annual Meeting of
Shareholders. The meeting will be held at The Fiesta Inn, 2100 S. Priest Drive,
Tempe, Arizona 85282.
These proxy solicitation materials are being first mailed on or about
April 5, 2001, to all shareholders entitled to vote at the meeting.
VOTING SECURITIES AND VOTING RIGHTS
Shareholders of record at the close of business on March 23, 2001 are
entitled to notice of and to vote at the meeting. On the record date, there were
outstanding 16,002,029 shares of our common stock. Each holder of common stock
voting at the meeting, either in person or by proxy, may cast one vote per share
of common stock held on all matters to be voted on at the meeting.
The presence, in person or by proxy, of the holders of a majority of
the total number of shares entitled to vote constitutes a quorum for the
transaction of business at the meeting. Assuming that a quorum is present, (a)
the affirmative vote of a plurality of the shares of our common stock present in
person or represented by proxy at the meeting and entitled to vote is required
for the election of directors; and (b) the affirmative vote of a majority of the
shares of our common stock present in person or represented by proxy at the
meeting and entitled to vote is required for the ratification of the appointment
of Arthur Andersen LLP as our independent auditors for the fiscal year ending
September 30, 2001.
Arizona law requires cumulative voting in elections for directors,
which means that each shareholder may cast that number of votes that is equal to
the number of shares held of record, multiplied by the number of directors to be
elected. Each shareholder may cast the whole number of votes for one candidate
or distribute such votes among two or more candidates. The enclosed proxy does
not seek discretionary authority to cumulate votes in the election of directors.
Votes cast by proxy or in person at the meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum, but as unvoted for purposes of determining the approval of any matter
submitted to the shareholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it
represents will be voted at the meeting as directed. If no specification is
indicated, the shares will be voted (1) "for" the election of nominees set forth
in this proxy statement and (2) "for" the ratification of the appointment of
Arthur Andersen LLP as our independent auditors for the fiscal year ending
September 30, 2001.
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REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its
use by
- delivering to us written notice of revocation,
- delivering to us a duly executed proxy bearing a later date,
or
- attending the meeting and voting in person.
SOLICITATION
We will pay for this solicitation. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of shares for
expenses incurred in forwarding solicitation materials to such beneficial
owners. Some of our directors or officers may solicit proxies, personally or by
telephone or e-mail, without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
Our 2000 Annual Report to Shareholders, which was mailed to
shareholders with or preceding this proxy statement, contains financial and
other information about our company, but is not incorporated into this proxy
statement and is not to be considered a part of these proxy soliciting materials
or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended. The information contained in the
"Compensation Committee Report on Executive Compensation," "Report of the Audit
Committee of the Board of Directors," and "Performance Graph" below shall not be
deemed "filed" with the Securities and Exchange Commission or subject to
Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act.
WE WILL PROVIDE UPON WRITTEN REQUEST, WITHOUT CHARGE TO EACH
SHAREHOLDER OF RECORD AS OF THE RECORD DATE, A COPY OF OUR ANNUAL REPORT ON FORM
10-K AS AMENDED BY FORM 10-K/A FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 AS
FILED WITH THE SEC. ANY EXHIBITS LISTED IN THE FORM 10-K REPORT ALSO WILL BE
FURNISHED UPON REQUEST AT THE ACTUAL EXPENSE INCURRED BY US IN FURNISHING SUCH
EXHIBITS. ANY SUCH REQUESTS SHOULD BE DIRECTED TO OUR COMPANY'S SECRETARY AT OUR
EXECUTIVE OFFICES SET FORTH IN THIS PROXY STATEMENT.
ELECTION OF DIRECTORS
NOMINEES
Our bylaws provide that the number of directors shall be fixed from
time to time by resolution of our board of directors. All directors are elected
at each annual meeting of our shareholders. Directors hold office until the next
annual meeting of shareholders or until their successors have been elected and
qualified.
A board of eight directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for each of the nominees named below. All of the nominees currently are
directors of our company. In the event that any such nominee is unable or
declines to serve as a director at the time of the meeting, the proxies will be
voted for any nominee designated by the current board of directors to fill the
vacancy. We do not expect that any nominee will be unable or will decline to
serve as a director.
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The following table sets forth certain information regarding the
nominees for directors.
NAME AGE POSITION HELD
---- --- -------------
Fred W. Wagenhals.............. 59 Chairman of the Board, President, and Chief
Executive Officer
R. David Martin................ 54 Chief Financial Officer and Director
Melodee L. Volosin............. 36 Executive Vice President - Sales and Director
John S. Bickford, Sr........... 55 Executive Vice President - Strategic Alliances and
Director
Jack M. Lloyd.................. 51 Director
Edward J. Bauman............... 76 Director
Herbert M. Baum................ 64 Director
Lowell L. Robertson............ 69 Director
Fred W. Wagenhals has served as our Chairman of the Board, President,
and Chief Executive Officer since November 1993 and served as Chairman of the
Board and Chief Executive Officer from May 1992 until September 1993 and as
President from July 1993 until September 1993.
R. David Martin has served as our Chief Financial Officer since August
2000, as Secretary since March 2001, and as a director since December 2000. Mr.
Martin joined Deloitte & Touche in June 1968 and served as a partner of that
firm from August 1978 until May 2000. Mr. Martin is a Certified Public
Accountant.
Melodee L. Volosin has served as our Executive Vice President - Sales
since December 1999 and as a director since January 1997. Ms. Volosin served as
our Vice President - Wholesale Division from September 1997 until December 1999.
Ms. Volosin served as the Director of our Wholesale Division from May 1992 to
September 1997. Ms. Volosin's duties include managing all of our wholesale
distribution of die-cast collectibles and other products, including advertising
programs and budgeting.
John S. Bickford, Sr. has served as our Executive Vice President -
Strategic Alliances since July 1997 and as a director of our company since
January 1997. Mr. Bickford served as a consultant to our company from January
1997 to June 1997. Since 1976, Mr. Bickford has served as President of MPD
Racing Products, Inc., which manufactures race car parts for distribution
through speed shops and high-performance engine shops. Mr. Bickford served as
President of Bickford Motorsports, Inc., which provided consulting and special
project coordination services to race car drivers, car owners, and other
businesses, from 1990 until 1997. Mr. Bickford also published Racing for Kids
magazine during 1996 and 1997. Mr. Bickford served as General Manager of Jeff
Gordon, Inc. from 1990 to 1995. Mr. Bickford currently serves as a director of
Equipoise Balancing, Inc., a privately held company.
Jack M. Lloyd has served as a director of our company since July 1995.
Mr. Lloyd is an investor. Mr. Lloyd served as the President and Chief Executive
Officer of Phoenix Restaurant Group, Inc. (formerly DenAmerica Corp.), a
publicly held corporation that owns and franchises Black-eyed Pea restaurants
and is the largest franchisee of Denny's restaurants in the United States, from
March 1996 until September 2000, and as Chairman of the Board of Phoenix
Restaurant Group, Inc. from July 1996 until September 2000. Mr. Lloyd served as
the Chairman of the Board and Chief Executive Officer of Denwest Restaurant
Corp., the second largest franchisee of Denny's restaurants in the United
States, from 1987 until its merger with Phoenix Restaurant Group, Inc. in March
1996. Mr. Lloyd also served as President of Denwest from 1987 until November
1994. Mr. Lloyd currently serves as a director of Star Buffet, Inc., a publicly
held company.
Edward J. Bauman has served as a director of our company since February
1998. Mr. Bauman has served as Chairman of the Board of Anderson Bauman
Tourtellot Vos & Co., a turnaround management consulting firm, since September
1989. Mr. Bauman is the former owner and director of Richmond International
Raceway. Mr. Bauman also served as Chairman of Draper Corporation, a textile
machinery company, from 1987 until 1995 and as the Senior Advisor of Mergers &
Acquisitions for Bankers Trust, New York from 1987 until 1992. Mr. Bauman served
in various capacities with Blue Bell, Inc., the manufacturer of Wranglers,
Jantzen, and other apparel from 1950 until 1987, most recently as Chairman,
President, and Chief Executive Officer. Mr. Bauman also serves as a director of
Elk River Development Corp. and First Union Corporation, both of which are
publicly traded companies,
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and Jay Garment Company, Precision Fabrics Group, Inc., and American Emergency
Vehicles, all of which are privately held companies.
Herbert M. Baum has served as a director of our company since March
2001 and previously served as a director of our company from February 2000 until
September 2000. Mr. Baum has served as Chairman, President, and Chief Executive
Officer of The Dial Corporation, a consumer goods company marketing a
diversified line of consumer products under various major brand names, since
August 2000. Mr. Baum served as President and Chief Operating Officer of Hasbro
Inc., a multi-billion dollar designer and manufacturer of toys, games, and
interactive software, from January 1999 until August 2000. From 1993 to 1999,
Mr. Baum was Chairman and Chief Executive Officer of Quaker State Corporation.
Mr. Baum spent the preceding 15 years at Campbell Soup Company in
upper-management positions. Before joining Campbell Soup, Mr. Baum worked at
Needham Harper & Steers advertising company. Mr. Baum serves on the board of
other public companies and has served as board chairman of various
organizations. He has received numerous awards and recognition from the American
Marketing Association and was elected to the Sales and Marketing Executives
International Hall of Fame in 1998.
Lowell L. Robertson has served as a director of our company since March
2001. Mr. Robertson is a retired senior partner with Deloitte & Touche and a
Certified Public Accountant with over 37 years of accounting and audit
experience. Mr. Robertson was Senior Vice President and Controller for The Dial
Corporation from 1996 through 1997, having managed Dial's spinoff from its
parent company during the second quarter of 1996. While at Deloitte & Touche,
Mr. Robertson was the senior audit partner for clients listed on the New York
Stock Exchange. He was also the managing partner for several Deloitte & Touche
offices.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors held three meetings during the fiscal year ended
September 30, 2000. Each of our directors attended at least 75% of the aggregate
of (i) the total number of meetings of our board of directors held during fiscal
2000, and (ii) the total number of meetings held by all committees of our board
of directors on which such person served during fiscal 2000.
Our bylaws authorize our board of directors to appoint among its
members one or more committees consisting of one or more directors. The Audit
Committee, which currently consists of Messrs. Lloyd and Bauman, non-employee
directors of our company, reviews the annual financial statements, any
significant accounting issues, and the scope of the audit with our independent
auditors and discusses with the auditors any other audit-related matters that
may arise during the year. The Compensation Committee, which consists of Messrs.
Lloyd and Baum, reviews and acts on matters relating to compensation levels and
benefit plans for key executives of our company. Mr. Robertson will become a
member of the Audit Committee and Compensation Committee during fiscal 2001. The
Senior Committee, which consists of Messrs. Lloyd, Robertson, and Baum,
administers the discretionary program of our 1993 and 2000 Stock Option Plans
with respect to grants of stock options and awards to officers of our company,
directors who are employees of our company, and persons who own more than 10% of
our issued and outstanding common stock. Messrs. Lloyd, Robertson, and Baum also
serve on the committee that administers our 1999 Employee Stock Purchase Plan.
Mr. Wagenhals administers our 1993 Stock Option Plan, our 1998 Stock Option
Plan, and our 2000 Stock Option Plan with respect to employees who are not
directors or officers of our company.
DIRECTOR COMPENSATION AND OTHER INFORMATION
Employees of our company do not receive compensation for serving as
members of our board of directors. Non-employee directors receive $2,500 for
each meeting attended in person. All directors are reimbursed for their expenses
in attending meetings of our board of directors. Directors who are not employees
of our company are eligible to receive automatic grants of stock options
pursuant to the 2000 Stock Option Plan. Non-employee directors also are eligible
to receive other grants of stock options or awards pursuant to the discretionary
program of the 2000 Stock Option Plan. See "Executive Compensation - 2000 Stock
Option Plan."
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth certain information concerning the
compensation for the fiscal years ended September 30, 1998, 1999, and 2000
earned by our Chief Executive Officer and by our other executive officers whose
cash salary and bonus exceeded $100,000 during fiscal 2000. The table also sets
forth certain information concerning the compensation for the fiscal years ended
1998, 1999, and 2000 earned by two of our former executive officers whose cash
salary and bonus exceeded $100,000 during fiscal 2000.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($)(2) BONUS($) OPTIONS(#)(3) ($)(4)
- ------------------------------ ---- ------------ -------- ---------------- -----------
Fred W. Wagenhals....................... 2000 $ 600,000 $ -- 50,000 $ 200
Chairman of the Board, President, 1999 591,731 250,000 50,000 3,200
and Chief Executive Officer 1998 459,616 100,000 60,000(5) 3,200
Melodee L. Volosin...................... 2000 $ 165,000 $ 30,000 40,000 $ 3,800
Executive Vice President - Sales and 1999 128,173 30,000 20,000 2,748
Director 1998 100,000 15,000 10,000 --
John S. Bickford, Sr.................... 2000 $ 194,125 $ 10,000 25,000 $ 1,407
Executive Vice President 1999 172,835 35,000 20,000 1,346
1998 150,000 11,000 10,000
Tod J. Wagenhals(6)..................... 2000 $ 195,250 $ 100,000 35,000 $ 1,100
Executive Vice President, Secretary, 1999 182,873 70,000 -- 2,875
and Director 1998 160,962 40,000 40,000(7) 3,200
Christopher S. Besing(6)................ 2000 $ 146,395 $ -- -- $ --
Vice President, Chief Financial 1999 220,373 60,000 20,000 3,988
Officer, Treasurer, and Director 1998 160,962 40,000 40,000(7) 3,200
- ----------
(1) We consider Messrs. Wagenhals, Martin, and Bickford and Ms. Volosin to
be our executive officers. Mr. Martin began his employment with us
during August 2000, and his cash compensation during fiscal 2000 did
not exceed $100,000.
(2) Messrs. Wagenhals, Wagenhals, and Besing and Ms. Volosin also received
certain perquisites, the value of which did not exceed 10% of their
salary and bonus during fiscal 2000.
(3) The exercise price of all stock options granted were equal to the fair
market value of our common stock on the date of grant.
(4) Amounts shown represent matching contributions we made to our 401(k)
Plan.
(5) Includes 30,000 options that were cancelled and reissued in June 1998.
(6) Mr. Besing resigned as an officer and director effective as of December
6, 1999. Mr. Tod Wagenhals resigned as an officer and director
effective as of August 1, 2000.
(7) Includes 20,000 options that were cancelled and reissued in June 1998.
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OPTION GRANTS
The following table provides information on stock options granted to
the officers listed during the fiscal year ended September 30, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM (1)
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ----------- ----------- ------ ---- -- ---
Fred W. Wagenhals....... 20,000(2) 4.2% $ 9.56 1/27/06 $ 65,000 $ 147,600
22,268(3) 4.7% $ 9.38 5/09/10 $ 131,381 $ 331,125
7,732(4) 1.6% $10.31 5/09/10 $ 50,258 $ 127,037
Melodee L. Volosin...... 10,000(2) 2.1% $ 9.56 1/27/06 $ 32,500 $ 73,800
30,000(2) 6.4% $ 9.38 5/09/10 $ 177,000 $ 448,500
John S. Bickford, Sr.... 5,000(2) 1.1% $ 9.56 1/27/06 $ 16,250 $ 36,900
20,000(2) 4.2% $ 9.38 5/09/10 $ 118,000 $ 299,000
Tod J. Wagenhals(5)..... 5,000(2)(5) 1.1% $ 9.56 1/27/06 $ 16,250 $ 36,900
30,000(6)(5) 6.4% $ 9.38 5/09/10 $ 177,000 $ 448,500
Christopher S. Besing(7) -- -- -- -- -- --
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(1) Potential gains are net of the exercise price, but before taxes
associated with the exercise. Amounts represent hypothetical gains that
could be achieved for the respective options if exercised at the end of
the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of the future price of our common stock. Actual gains, if
any, on stock option exercises will depend upon the future market
prices of our common stock.
(2) One-third of the options vest and become exercisable on each of the
first, second, and third anniversaries of the date of grant.
(3) Options to purchase 10,000 shares vest and become exercisable on the
first anniversary of the date of grant and options to purchase 6,134
shares vest and become exercisable on each of the second and third
anniversaries of the date of grant.
(4) Options to purchase 3,866 shares vest and become exercisable on each of
the second and third anniversaries of the date of grant.
(5) Mr. Tod Wagenhals resigned as an officer and director of our company
effective August 1, 2000. Pursuant to our separation agreement with Mr.
Tod Wagenhals, these options became immediately vested and exercisable
and will expire August 1, 2003. See "Executive Compensation -
Employment and Separation Agreements."
(6) All of the options vested and became exercisable on the date of grant.
(7) Mr. Besing resigned as an officer and director of our company effective
December 6, 1999.
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YEAR-END OPTION VALUES AND HOLDINGS
The following table provides information on options held by the
officers listed and the values of those options as of September 30, 2000. None
of these officers exercised options during fiscal 2000.
OPTION VALUES AND HOLDINGS AS OF SEPTEMBER 30, 2000
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE MONEY
YEAR-END OPTIONS AT FISCAL YEAR-END ($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Fred W. Wagenhals............. 142,666 93,334 $ 37,600 --
Melodee L. Volosin............ 23,725 120,001 -- --
John S. Bickford, Sr.......... 34,999 40,001 -- --
Tod J. Wagenhals(2)........... 144,700 -- $ 4,418 --
Christopher S. Besing(3)...... -- -- -- --
- ----------
(1) Calculated based upon the closing price of our common stock as reported
on the Nasdaq National Market on September 30, 2000 of $3.44 per share.
The exercise prices of certain of the options held by our executive
officers on September 30, 2000 were greater than $3.44 per share.
(2) Mr. Tod Wagenhals resigned as an officer and director effective as of
August 1, 2000. In connection with his resignation, all options held by
Mr. Wagenhals immediately became exercisable. See "Executive
Compensation - Employment and Separation Agreements."
(3) Mr. Besing resigned as an officer and director effective December 6,
1999. All options held by Mr. Besing subsequent to his resignation were
cancelled.
RECENT GRANTS OF STOCK OPTIONS
On March 2, 2001, our Board of Directors granted options to purchase
200,000, 100,000, 18,000, 24,000, 10,000, and 10,000 shares of common stock at
an exercise price of $5.43 per share to Messrs. Fred Wagenhals, Martin, Bauman,
Lloyd, Baum and Robertson, respectively.
EMPLOYMENT AND SEPARATION AGREEMENTS
We have no written employment contracts with any of our executive
officers or directors. We offer our employees, including officers, medical and
life insurance benefits. Our executive officers and other key personnel are
eligible to receive profit sharing distributions and discretionary bonuses and
to receive stock options under our stock option plans.
During August 2000, Mr. Tod Wagenhals resigned as our Executive Vice
President and as a director. Upon his resignation, we entered into a Separation
Agreement with Mr. Wagenhals pursuant to which he received (i) severance pay and
accrued vacation of $368,000; (ii) certain group health insurance benefits
through August 2001; and (iii) up to $40,000 of moving and travel expenses. In
conjunction with that agreement, the options to purchase 144,700 shares of
common stock held by Mr. Wagenhals vested immediately and became exercisable;
however, all options will expire upon the earlier of (a) their expiration date,
or (b) August 1, 2003. The agreement also provides that Mr. Wagenhals will not,
in any manner whatsoever, engage in the same or similar business as our company
in any geographical service area where we are engaged in business through August
2001. During his employment, Mr. Wagenhals lived in a home owned by our company.
We will pay the maintenance, insurance, and taxes on the home through June 2001.
During December 1999, Mr. Besing resigned as our Vice President and as
Chief Executive Officer of one of our subsidiaries. Upon his resignation, we
entered into a Separation Agreement with Mr. Besing pursuant to which he
received approximately $84,500 in salary and accrued vacation.
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During December 2000, David Husband resigned as our Chief Operating
Officer. Upon his resignation, we entered into a Settlement Agreement with Mr.
Husband pursuant to which Mr. Husband received a payment of $180,000 and certain
medical and dental benefits through July 2001.
401(k) PROFIT SHARING PLAN
In October 1994, we established a defined contribution plan that
qualifies as a cash or deferred profit sharing plan under Sections 401(a) and
401(k) of the Internal Revenue Code of 1986, as amended. Under the 401(k) plan,
participating employees may defer from 1% to 15% of their pre-tax compensation,
subject to the maximum allowed under the Internal Revenue Code. We will
contribute $.50 for each dollar contributed by the employee, up to a maximum
contribution of 2% of the employee's defined compensation. In addition, the
401(k) plan provides that we may make an employer profit sharing contribution in
such amounts as may be determined by our board of directors.
1993 STOCK OPTION PLAN
Our 1993 Stock Option Plan, as amended, provides for the granting of
options to acquire common stock as well as stock-based awards, as described
below. A total of 2,750,000 shares of common stock may be issued under the 1993
Plan. As of March 23, 2001, we have issued an aggregate of 2,062,338 shares of
common stock upon exercise of options granted pursuant to the plan; there were
outstanding options to acquire 686,443 shares of common stock; and an additional
1,219 shares remained available for grant. The plan will remain in effect until
September 24, 2001.
Options and awards may be granted only to persons who at the time of
grant are either (a) key personnel, including officers and directors of our
company or our subsidiaries, or (b) consultants and independent contractors who
provide valuable services to our company or to our subsidiaries. Options that
are incentive stock options may only be granted to employees of our company or
our subsidiaries. To the extent that granted options are incentive stock
options, the terms and conditions of those options must be consistent with the
qualification requirements set forth in the Internal Revenue Code. No employee
of our company may receive grants of options or awards representing more than
50% of the shares of common stock issuable under the plan.
The exercise prices, expiration dates, maximum number of shares
purchasable, and the other provisions of the options will be established at the
time of grant. The exercise prices of options that are not incentive stock
options may not be less than 85% of the fair market value of the common stock at
the time of the grant, and the exercise prices of incentive stock options may
not be less than 100% (110% if the option is granted to a shareholder who at the
time the option is granted owns stock possessing more than 10% of the total
combined voting power of all classes of stock of our company) of the fair market
value of the common stock at the time of the grant. Options may be granted for
terms of up to ten years and become exercisable in whole or in one or more
installments at such time as may be determined upon a grant of the options. To
exercise an option, the optionholder will be required to deliver to us full
payment of the exercise price of the shares as to which the option is being
exercised.
We also may grant awards to eligible persons under the plan. Stock
appreciation rights, or SARs, entitle the recipient to receive a payment equal
to the appreciation in market value of a stated number of shares of common stock
from the price stated in the award agreement to the market value of the common
stock on the date the SAR is first exercised or surrendered. Stock awards enable
us to make direct grants of common stock to recipients. Cash awards entitle the
recipient to receive direct payments of cash depending on the market value or
the appreciation of our common stock or other securities of our company.
1998 NON-QUALIFIED STOCK OPTION PLAN
Under our 1998 Non-Qualified Stock Option Plan, our board of directors
from time to time may grant to key employees of our company, other than
directors or executive officers, non-statutory options to purchase shares of our
common stock. The exercise price, term, vesting conditions, and other terms for
all options granted under the plan will be determined at the time of grant by
our board of directors or a board committee appointed to administer the plan. A
total of 500,000 shares of common stock may be issued pursuant to the plan. As
of March 23, 2001, we have issued an aggregate of 37,833 shares of common stock
upon exercise of options granted pursuant to the plan;
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there were outstanding options to acquire 251,832 shares of common stock; and an
additional 210,335 shares remained available for grant. The plan expires in
2008.
2000 STOCK OPTION PLAN
During 2000, our board of directors adopted and our shareholders
approved our 2000 Stock Option Plan. The plan is intended to attract, retain,
and motivate directors, employees, and independent contractors who provide
valuable services to our company by providing them with the opportunity to
acquire a proprietary interest in our company and to link their interests and
efforts to the long-term interests of our shareholders.
The plan authorizes the issuance of a number of shares equal to 7% of
our outstanding shares of common stock, up to a maximum of 2,000,000 shares. If
the number of shares of common stock increases in the future, the number of
shares authorized for issuance under the plan will automatically increase by 7%
of such increases. Pursuant to this calculation, as of March 23, 2001 there were
1,187,482 shares reserved for issuance under the plan. As of that date, we had
granted options to purchase 1,026,000 shares of common stock under the plan, and
no shares have been issued upon exercise of those options. As of March 23, 2001,
there were 161,482 shares available for grant under the plan. The maximum number
of shares covered by awards granted to any individual in any year may not exceed
25% of the total number of shares that may be issued under the plan.
Options granted under the plan may be either incentive stock options,
as defined under the Internal Revenue Code, or nonqualified options. The
expiration date, maximum number of shares purchasable, vesting provisions, and
any other provisions of options granted under the plan will be established at
the time of grant. The plan administrator will set the term of each option, but
no options may be granted for terms of greater than ten years. Options will vest
and become exercisable in whole or in one or more installments at such time as
may be determined by the plan administrator. Any unvested options will
automatically vest and become exercisable upon a change of control of our
company.
The plan includes an automatic grant program that automatically grants
options to our non-employee directors. Under the automatic grant program, each
non-employee serving on our board of directors on the date that the plan was
approved by our shareholders received options to acquire 8,000 shares of our
common stock. Each subsequent newly elected non-employee member of our board of
directors will receive an option to acquire 10,000 shares of common stock on the
date of his or her first appointment or election to our board of directors. In
addition, an option to acquire 8,000 shares of common stock will be granted to
each non-employee director at the meeting of our board of directors held
immediately after each annual meeting of shareholders in subsequent years. A
non-employee member of our board of directors will not be eligible to receive
this annual grant if the grant date of such annual grant would be within 90 days
of the date on which the non-employee member received his or her initial grant.
Each initial grant will vest and become exercisable immediately on the date of
grant.
EMPLOYEE STOCK PURCHASE PLAN
During 1999, our board of directors adopted and our shareholders
approved our 1999 Employee Stock Purchase Plan, or ESPP. The ESPP is intended to
provide an opportunity for our employees to acquire a proprietary interest in
our company by purchasing shares of our common stock through voluntary payroll
deductions. Under the ESPP, eligible employees may purchase shares of our common
stock at a purchase price per share equal to the lower of (a) 85% of the closing
price of our common stock on the offering commencement date, or (b) 85% of the
closing price of our common stock on the offering termination date. The purchase
price is to be paid through periodic payroll deductions not to exceed 15% of the
participant's earnings during each six-month offering period. An employee may
not participate in the ESPP if the purchase would cause him or her to own 5% or
more of our company's combined voting power or value of our common stock. Also,
no participant may purchase more than $25,000 worth of common stock annually.
The ESPP provides for successive six-month offering periods. In each of
the nine years beginning on February 1, 2000 and ending on January 31, 2009,
there will be two six-month offerings commencing on February 1 and August 1 of
each year and ending on the following July 31 or January 31, respectively.
We have reserved 200,000 shares of our common stock for issuance under
the ESPP. That number will automatically increase on the first day of each
fiscal year beginning with the fiscal year beginning on October 1,
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2001. The annual increase will be equal to the lesser of (a) 200,000 shares or
(b) 1% of our outstanding shares on the last day of our prior fiscal year. Our
board of directors may reduce the number of shares to be automatically added if
the directors determine that the automatic increase will be too large relative
to the anticipated number of share purchases under the ESPP. Under this formula,
a maximum of 1,800,000 shares of common stock may be issued under the ESPP.
The purchase right of a participant will terminate automatically in the
event the participant ceases to be an employee of our company or one of our
subsidiaries, and any payroll deductions collected from such individual during
the six-month period in which such termination occurs will be refunded. However,
in the event of the participant's disability or death, such payroll deductions
may be applied to the purchase of the common stock on the next purchase date.
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS
Our Articles of Incorporation eliminate the personal liability of any
director of our company to us or our shareholders for money damages for any
action taken or failure to take any action as a director of our company, to the
fullest extent allowed by the Arizona Business Corporation Act. Under the
Business Corporation Act, directors of our company will be liable to our company
or our shareholders only for (a) the amount of a financial benefit received by
the director to which the director is not entitled; (b) an intentional
infliction of harm on our company or our shareholders; (c) certain unlawful
distributions to shareholders; and (d) an intentional violation of criminal law.
The effect of these provisions in the articles is to eliminate the rights of our
company and our shareholders (through shareholders' derivative suits on behalf
of our company) to recover money damages from a director for all actions or
omissions as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the situations described in clauses (a) through
(d) above. These provisions do not limit or eliminate the rights of our company
or any shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care.
Our Articles of Incorporation require us to indemnify and advance
expenses to any person who incurs liability or expense by reason of such person
acting as a director of our company, to the fullest extent allowed by the
Business Corporation Act. This indemnification is mandatory with respect to
directors in all circumstances in which indemnification is permitted by the
Business Corporation Act, subject to the requirements of the Business
Corporation Act. In addition, we, in our sole discretion, may indemnify and
advance expenses, to the fullest extent allowed by the Business Corporation Act,
to any person who incurs liability or expense by reason of such person acting as
an officer, employee, or agent of our company, except where indemnification is
mandatory pursuant to the Business Corporation Act, in which case we are
required to indemnify such persons to the fullest extent required by the
Business Corporation Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of the last fiscal year, we paid fees of $37,500 to
Anderson Bauman Tourtelott Vos & Co. for consulting services. Edward J. Bauman,
a director of our company, is an officer and principal owner of that firm.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
Our board of directors has appointed a Compensation Committee,
consisting of non-employee members of our board of directors, which makes
decisions on the compensation of our executive officers. The Compensation
Committee makes every effort to ensure that the compensation plan is consistent
with our company's values and is aligned with our company's business strategy
and goals.
Our compensation program for executive officers consists primarily of
base salary, annual discretionary bonuses, and long-term incentives in the form
of stock options. Executives also participate in various other benefit plans,
including medical and retirement plans, that generally are available to all of
our employees.
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Our philosophy is to pay base salaries to executives at levels that
enable us to attract, motivate, and retain highly qualified executives. The
bonus program is designed to reward individuals for performance based on our
financial results as well as the achievement of personal and corporate
objectives that contribute to our long-term success in building shareholder
value. Stock option grants are intended to result in minimal or no rewards if
the price of our common stock does not appreciate, but may provide substantial
rewards to executives as our shareholders in general benefit from stock price
appreciation.
We follow a subjective and flexible approach rather than an objective
or formula approach to compensation. Various factors, as discussed below,
receive consideration without any particular weighting or emphasis on any one
factor. In establishing compensation for the fiscal year ended September 30,
2000, the Compensation Committee took into account, among other things, our
financial results, compensation paid in prior years, and compensation of
executive officers employed by companies of similar size in similar industries.
BASE SALARY
Base salaries for executive positions are established relative to our
financial performance and comparable positions in similarly sized companies.
From time to time, we may use competitive surveys and outside consultants to
help determine the relevant competitive pay levels. We target base pay at the
level required to attract and retain highly qualified executives. In determining
salaries, the Compensation Committee also takes into account individual
experience and performance, salary levels relative to other positions within our
company, and specific needs particular to our company.
The Compensation Committee reviews salaries recommended by our Chief
Executive Officer for executive officers other than the Chief Executive Officer.
In formulating these recommendations, the Chief Executive Officer considers our
overall performance and conducts an informal evaluation of individual officer
performance. Final decisions on any adjustments to the base salary for
executives other than the Chief Executive Officer are made by the Compensation
Committee in conjunction with the Chief Executive Officer. The Compensation
Committee's evaluation of the recommendations by the Chief Executive Officer
considers the same factors outlined above and is subjective, with no particular
weight assigned to any one factor. After reviewing the Chief Executive Officer's
recommendations, the Compensation Committee approved base salary increases for
our executive officers during fiscal 2000 as a result of increased
responsibilities of our executive officers.
ANNUAL DISCRETIONARY BONUSES
Annual discretionary bonuses are based on our financial performance and
the efforts of our executives. Performance is measured based on profitability
and revenue and the successful achievement of functional and personal goals. The
Compensation Committee reviews discretionary bonuses recommend by the Chief
Executive Officer for executive officers other than the Chief Executive Officer.
In formulating these recommendations, the Chief Executive Officer takes into
consideration our achievement of sales, net income, and other performance
criteria as well as individual responsibility, performance, and compensation
levels. The Compensation Committee reviews these recommendations with the Chief
Executive Officer and makes final adjustments to the discretionary bonus
amounts. The Compensation Committee's evaluation of the factors described above
is subjective, with no particular weight being assigned to any one factor.
During the first and second quarters of fiscal 2000, we paid incentive bonuses
to our executive officers for their performance during fiscal 1999.
STOCK OPTION GRANTS
We strongly believe in utilizing grants of stock options to tie
executive rewards directly to our long-term success and increases in shareholder
value. Stock option grants also will enable our executives to develop and
maintain a significant ownership position in our common stock. The amount of
options granted takes into account options previously granted to an individual.
During fiscal 2000, we granted options to acquire an aggregate of 215,000 shares
of common stock to certain key employees of our company. These option grants
included options to acquire 50,000, 100,000, 25,000, and 40,000 shares of common
stock to Messrs. Wagenhals, Martin, and Bickford and Ms. Volosin, respectively,
at exercise prices ranging from $5.43 to $10.31 per share.
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OTHER BENEFITS
Executive officers are eligible to participate in benefit programs
designed for all full-time employees of our company. These programs include
medical insurance, a qualified retirement program allowed under Section 401(k)
of the Internal Revenue Code, and life insurance coverage.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee considers the same factors as outlined above
with respect to our other executive officers in evaluating the base salary,
incentive bonus, and other compensation of Fred W. Wagenhals, our Chairman of
the Board, President, and Chief Executive Officer. The Compensation Committee's
evaluation of Mr. Wagenhals' base salary and incentive bonus is subjective, with
no particular weight assigned to any one factor. At his request, Mr. Wagenhals
did not receive a bonus for fiscal 2000.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1.0 million paid to
each of any publicly held corporation's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. We believe that our compensation arrangements with our executive officers
will not exceed the limits on deductibility during the current fiscal year.
This report has been furnished by the members of the Compensation
Committee of the Board of Directors of Action Performance Companies, Inc.
Jack M. Lloyd
Edward J. Bauman
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Our board of directors has appointed an Audit Committee, currently
consisting of two directors as of the date of this proxy statement. All of the
members of the committee are "independent" of our company and management, as
that term is defined in the Nasdaq listing standards.
The primary responsibility of the committee is to oversee our company's
financial reporting process on behalf of our board of directors. Management has
the primary responsibility for the financial statements and the reporting
process, including the systems of internal controls. The independent auditors
are responsible for auditing our financial statements and expressing an opinion
on the conformity of those audited financial statement with generally accepted
accounting principles in the United States.
In fulfilling its oversight responsibilities, the committee reviewed
the audited financial statements with management and the independent auditors.
The committee discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61. This included a discussion
of the auditors' judgments as to the quality, not just the acceptability, of the
company's accounting principles and such other matters as are required to be
discussed with the committee under generally accepted auditing standards. In
addition, the committee received from the independent auditors written
disclosures and the letter required by Independence Standards Board Standard No.
1. The committee also discussed with the independent auditors the auditors'
independence from management and the company, including the matters covered by
the written disclosures and letter provided by the independent auditors.
The committee discussed with the company's independent auditors the
overall scope and plans for their audits. The committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluation of the company, the internal
controls, and the overall quality of the financial reporting. The committee held
two meetings during fiscal 2000.
Based on the reviews and discussions referred to above, the committee
recommended to our board of directors, and our board approved, that the audited
financial statements be included in the Annual Report on Form
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10-K for the year ended September 30, 2000 for filing with the Securities and
Exchange Commission. The committee and our board of directors also have
recommended, subject to stockholder approval, the selection of the company's
independent auditors. See "Ratification of Appointment of Independent Auditors."
Our board of directors has adopted a written charter for the Audit
Committee. A copy of that charter is included as "Appendix A" to this proxy
statement.
April 5, 2001
Jack M. Lloyd
Edward J. Bauman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 2000, our Compensation
Committee consisted of Jack M. Lloyd, Edward J. Bauman, and a former director.
None of such individuals had any contractual or other relationships with our
company during such fiscal year except as directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, officers, and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Directors, officers, and greater than 10% shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file. Based solely upon our review of the copies of such forms that we
received during the fiscal year ended September 30, 2000, and written
representations that no other reports were required, we believe that each person
who at any time during such fiscal year was a director, officer, or beneficial
owner of more than 10% of our common stock complied with all Section 16(a)
filing requirements during such fiscal year except that (a) R. David Martin
filed a late Form 3 with respect to his election as an officer, and (b) Fred W.
Wagenhals filed a late Form 4 covering one transaction.
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PERFORMANCE GRAPH
The following line graph compares cumulative total shareholder returns
for (a) our common stock; (b) the Standard & Poor's SmallCap 600 Index; and (c)
the Russell 2000 Index. At this time, we do not believe we can reasonably
identify an industry peer group. We have instead selected the Russell 2000,
which includes companies with similar market capitalizations to ours, as a
comparative index for purposes of complying with certain requirements of the
SEC.
The graph assumes an investment of $100 in each of our common stock,
the SmallCap 600, and the Russell 2000 of $100 on September 30, 1995. The graph
covers the period from October 1, 1995 through the fiscal year ended September
30, 2000. The calculation of cumulative shareholder return for the SmallCap 600
and the Russell 2000 includes reinvestment of dividends. The calculation of
cumulative shareholder return on our common stock does not include reinvestment
of dividends because we did not pay dividends during the measurement period. The
performance shown is not necessarily indicative of future performance.
Cumulative Total Return
-------------------------------------------------------------------------
9/95 9/96 9/97 9/98 9/99 9/00
ACTION PERFORMANCE COMPANIES, INC. 100.00 151.47 342.65 317.65 247.79 40.45
S & P SMALLCAP 600 100.00 115.31 157.94 133.70 157.15 195.14
RUSSELL 2000 100.00 113.13 150.68 122.03 145.30 179.28
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SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS, DIRECTORS,
AND OFFICERS
The following table sets forth certain information regarding the shares
of our outstanding common stock beneficially owned as of March 23, 2001 by (i)
each director; (ii) the executive officers set forth in the Summary Compensation
Table under the section entitled "Executive Compensation;" (iii) all of our
directors and executive officers as a group; and (iv) each other person who is
known by us to beneficially own or to exercise voting or dispositive control
over more than 5% of our common stock.
NUMBER OF SHARES
NAME AND ADDRESS OF AND NATURE OF APPROXIMATE PERCENTAGE
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) OF OUTSTANDING SHARES(2)
- ------------------- ----------------------- ------------------------
DIRECTORS AND EXECUTIVE OFFICERS
Fred W. Wagenhals........................... 2,099,599(3) 13.0%
R. David Martin............................. 2,414(4) *
Melodee L. Volosin.......................... 46,225(5) *
John S. Bickford, Sr........................ 62,341(6) *
Jack M. Lloyd............................... 40,000(7) *
Edward J. Bauman............................ 28,000(8) *
Tod J. Wagenhals............................ 133,955(9) *
Christopher S. Besing....................... 2,500(10) *
Herbert M. Baum............................. 10,000(11) *
Lowell L. Robertson......................... - -
All directors and executive officers as a
group (consisting of eight current and two
previous directors and officers)......... 2,425,034 14.8%
NON-MANAGEMENT 5% SHAREHOLDERS
Lisa K. Wagenhals........................... 1,963,600(12) 12.3%
Strong Capital Management, Inc.(13)......... 2,347,089(13) 14.7%
Barrow, Hanley, Mewhinney & Strauss, Inc.(14) 1,514,150(14) 9.5%
- -------------------
* Less than 1%
(1) Each person named in the table has sole voting and investment power
with respect to all common stock beneficially owned by him or her,
subject to applicable community property law, except as otherwise
indicated. Except as otherwise indicated, each person may be reached at
4707 East Baseline Road, Phoenix, Arizona 85040.
(2) The percentages shown are calculated based upon 16,002,029 shares of
common stock outstanding on March 23, 2001. The numbers and percentages
shown include the shares of common stock actually owned as of March 23,
2001 and the shares of common stock that the identified person or group
had the right to acquire within 60 days of such date. In calculating
the percentage of ownership, all shares of common stock that the
identified person or group had the right to acquire within 60 days of
March 23, 2001 upon the exercise of options are deemed to be
outstanding for the purpose of computing the percentage of the shares
of common stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares
of common stock owned by any other person.
(3) Represents 1,963,600 shares of common stock and vested options to
acquire 135,999 shares of common stock. Mr. Wagenhals shares voting and
dispositive power with his spouse with respect to the 1,963,600 shares
of common stock. See footnote 12.
(4) Represents 2,000 shares of common stock and 414 shares of common stock
issuable upon conversion of subordinated notes.
(5) Represents 2,500 shares of common stock and vested options to acquire
43,725 shares of common stock.
(6) Represents 12,343 shares of common stock and vested options to acquire
49,998 shares of common stock.
(7) Represents vested options to acquire 40,000 shares of common stock.
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(8) Represents 2,000 shares of common stock and vested options to acquire
26,000 shares of common stock.
(9) Represents 3,956 shares of common stock and vested options to acquire
129,999 shares of common stock.
(10) Represents 2,500 shares of common stock.
(11) Represents vested options to acquire 10,000 shares of common stock.
(12) Represents 1,963,600 shares of common stock over which Ms. Wagenhals
shares voting and dispositive power with Fred W. Wagenhals. See
footnote 3.
(13) Represents 2,150,035 shares of common stock and 197,054 shares of
common stock issuable upon conversion of subordinated notes
beneficially owned by Strong Capital Management, Inc. and Richard S.
Strong, Chairman of the Board and principal shareholder of Strong
Capital. Strong Capital has discretionary dispositive power over its
clients' securities and in some instances has voting power over such
securities. Any and all discretionary authority which has been
delegated to Strong Capital may be revoked in whole or in part at any
time. The address of Strong Capital Management, Inc. is 100 Heritage
Reserve, Menomonee Falls, Wisconsin, 53051.
(14) Represents 1,514,150 shares beneficially owned by Barrow, Hanley,
Mewhinney & Strauss, Inc. Barrow has sole voting and dispositive power
over all such shares. The address of Barrow, Hanley, Mewhinney &
Strauss, Inc. is One McKinney Plaza, 3232 McKinney Avenue, 15th Floor,
Dallas, Texas 75204-2429.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Aggregate fees billed to our company for the fiscal year ended
September 30, 2000 by our principal accounting firm, Arthur Andersen LLP, are as
follows:
Audit Fees..................................................................... $ 402,325
Financial Information Systems Design and Implementation Fees................... $ --
All Other Fees................................................................. $ 260,558
Our board of directors has appointed Arthur Andersen LLP, independent
public accountants, to audit our consolidated financial statements for the
fiscal year ending September 30, 2001 and recommends that the shareholders vote
in favor of the ratification of such appointment. In the event of a negative
vote on such ratification, our board of directors will reconsider its selection.
We anticipate that representatives of Arthur Andersen LLP will be present at the
meeting. These representatives will have the opportunity to make a statement if
they desire and will be available to respond to appropriate questions.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented by such
shareholders at our annual meeting of shareholders to be held during calendar
2002 must be received by us no later than December 6, 2001, in order to be
included in the proxy statement and form of proxy relating to such meeting.
Pursuant to Rule 14a-4 under the Exchange Act, we intend to retain discretionary
authority to vote proxies with respect to shareholder proposals for which the
proponent does not seek to have us include the proposed matter in the proxy
statement for the annual meeting to be held during calendar 2002, except in
circumstances where (a) we receive notice of the proposed matter no later than
February 19, 2002, and (b) the proponent complies with the other requirements
set forth in Rule 14a-4.
OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
our Board of Directors may recommend.
Dated: April 5, 2001
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF
ACTION PERFORMANCE COMPANIES, INC.
PURPOSE AND SCOPE
This Charter governs the operations of the Audit Committee (the "Committee") of
the Board of Directors (the "Board") of Action Performance Companies, Inc., an
Arizona corporation (the "Company"). The purpose of the Committee is to assist
the Board in fulfilling its responsibilities to oversee:
- the financial reports and other financial information provided
by the Company to any governmental or regulatory body, the
public, or any other user of such financial statements;
- the Company's systems of internal accounting and financial
controls;
- the independence and performance of the Company's outside
auditors; and
- compliance by the Company with any legal compliance and ethics
programs as may be established by the Board and the Company's
management from time-to-time.
In fulfilling its obligations, the Committee shall maintain free and open
communications between the Committee and the Company's:
- independent auditors,
- internal accounting staff, and
- management.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company. The Committee is authorized to retain
outside or special counsel, auditors, accounting or other consultants, experts,
and professionals for this purpose.
The Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants or advisors to, the
Committee.
The Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board for approval. This Charter shall
be published as an appendix to the Company's Proxy Statement for the Company's
annual meeting of shareholders to the extent required by the rules and
regulations of the Securities and Exchange Commission.
MEMBERS OF THE COMMITTEE
The Committee shall be comprised of at least three members of the Board. The
members of the Committee shall meet all "independence" and qualification
requirements of the rules and regulations of the Nasdaq Stock Market, as such
rules and regulations may be amended or supplemented from time-to-time.
Accordingly, each member of the Committee must be a director who:
- has no relationship to the Company that may interfere with the
exercise of his or her independent judgment in carrying out
the responsibilities of a director; and
- is able to read and understand fundamental financial
statements, including a company's balance sheet, income
statement, and cash flow statement, or will become able to do
so within a reasonable period of time after appointment to the
Committee.
In addition, at least one member of the Committee must have past employment
experience in finance or accounting, professional certification in accounting,
or other comparable experience or background that results in such
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individual's financial sophistication including, but not limited to, being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial oversight responsibilities.
Under exceptional and limited circumstances, however, one director who is not
independent as defined in the rules and regulations of the Nasdaq Stock Market
and who is not a current employee or an immediate family member of an employee
of the Company may serve as a member of the Committee, provided that:
- the Board determines that membership by the individual on the
Committee is required by the best interests of the Company and
its shareholders, and
- the Company complies with all other requirements of the rules
and regulations of the Nasdaq Stock Market with respect to
non-independent members of the Committee, as such rules and
regulations may be amended or supplemented from time-to-time.
KEY RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and to report the results of
the Committee's activities to the Board. The Committee recognizes that
management shall be responsible for preparing the Company's financial statements
and the independent auditors shall be responsible for auditing those financial
statements. The functions set forth below shall be the principal recurring
activities of the Committee in carrying out its oversight function. In carrying
out its responsibilities, however, the Committee shall remain flexible in order
to best react to changing conditions and circumstances. The following functions
are set forth as a guide with the understanding that the Committee may deviate
from this guide and supplement these functions as the Committee deems
appropriate under the circumstances.
1. The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's shareholders. The Committee and the Board shall have the
ultimate authority and responsibility to select (or to nominate for
shareholder approval) the independent auditors, to approve the fees to
be paid to the independent auditors, to evaluate the performance of the
independent auditors, and, if appropriate, to replace the independent
auditors.
2. The Committee shall discuss with management and the independent
auditors the overall scope and plans for the audit, including the
adequacy of staffing and the compensation to be paid to the independent
auditors. The Committee also shall discuss with management and the
independent auditors the adequacy and effectiveness of the Company's
accounting and financial controls, including the Company's system to
monitor and manage business risk, as well as legal and ethical
compliance programs. To the extent the Committee deems it to be
necessary, the Committee shall meet separately with the internal
accounting staff and the independent auditors, with or without
management present, as well as the Company's Chief Financial Officer
and other management personnel, to discuss the results of the
Committee's examinations.
3. The Committee shall:
- ensure that the independent auditors submit annually a formal
written statement delineating all relationships between the
independent auditors and the Company, consistent with
Independence Standards Board Standard No. 1, as such standard
may be amended or supplemented from time to time;
- discuss with the independent auditors any such relationships
or services provided by the independent auditors and their
impact on the objectivity and independence of the independent
auditors; and
- recommend that the Board take appropriate action to oversee
the independence of the independent auditors.
4. If so requested by the independent auditors or the Company's
management, prior to the filing of the Company's Quarterly Report on
Form 10-Q the Committee (as a whole or acting through the Committee
chair) shall:
- review the interim financial statements with management and
the independent auditors, and
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- discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing
standards, including Statement of Auditing Standards ("SAS")
No. 71, as such may be amended or supplemented from time to
time.
5. The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the Annual Report to Shareholders if distributed prior
to the filing of the Form 10-K), including the auditors' judgment about
the quality, not just acceptability, of the Company's accounting
principles, the consistency of the Company's accounting policies and
their application, and the clarity and completeness of the Company's
financial statements and related disclosures. The Committee also shall
discuss the results of the annual audit and any other matters required
to be communicated to the Committee by the independent auditors under
generally accepted auditing standards, including SAS No. 61, as such
may be amended or supplemented.
6. The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's
Proxy Statement to be delivered to shareholders in connection with the
Company's annual meeting of shareholders.
7. The Committee shall review with the independent auditors any problems
or difficulties the auditors may have encountered and any management
letter provided by the independent auditors and the Company's response
to that letter. Such review should include:
- any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or
access to required information;
- any changes required in the planned scope of the audit; and
- any proposed material audit adjustments.
8. The Committee shall meet annually (or more frequently if requested to
do so by management) with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
9. The Committee shall review significant changes to the Company's
auditing and accounting principles and practices as suggested by the
independent auditors or management.
With respect to the foregoing responsibilities and processes, the Committee
recognizes that the Company's financial management, including its internal audit
staff, as well as the independent auditors, have more time, knowledge, and more
detailed information regarding the Company than do Committee members.
Consequently, in discharging its oversight responsibilities, the Committee will
not provide or be deemed to provide any expertise or special assurance as to the
Company's financial statements or any professional certification as to the
independent auditors' work. While the Committee has the responsibilities and
powers set forth in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditors. Nor is it the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditors,
or to assure compliance with laws and regulations and the Company's internal
policies and procedures.
Dated: June 12, 2000
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ACTION PERFORMANCE COMPANIES, INC.
2001 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of ACTION PERFORMANCE COMPANIES, INC., an
Arizona corporation (the "Company"), hereby acknowledges receipt of the Notice
of Annual Meeting of Shareholders and Proxy Statement of the Company, each dated
April 5, 2001, and hereby appoints Fred W. Wagenhals and R. David Martin, and
each of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 2001 Annual Meeting of Shareholders of ACTION PERFORMANCE
COMPANIES, INC., to be held on Monday, May 7, 2001, at 9:00 a.m., local time, at
The Fiesta Inn, 2100 S. Priest Drive, Tempe, Arizona 85282, and at any
adjournment or adjournments thereof, and to vote all shares of common stock that
the undersigned would be entitled to vote if then and there personally present
on the matters set forth on the reverse side of this proxy card.
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
WITHHOLD
FOR all nominees AUTHORITY
listed at right (except to vote for all nominees
as indicated) listed at right NOMINEES:
1. ELECTION
OF [ ] [ ] Fred W. Wagenhals
DIRECTORS: R. David Martin
Melodee L. Volosin
John S. Bickford, Sr.
Jack M. Lloyd
If you wish to withhold authority to vote for any Edward J. Bauman
individual nominee, strike a line through that nominee's Herbert M. Baum
name in the list at right. Lowell L. Robertson
2. Proposal to ratify the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending
September 30, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such matters that may properly come before the meeting or any
adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS; FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY;
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
A majority of such attorneys-in-fact or substitutes as shall be present and
shall act at said meeting or any adjournment or adjournments thereof (or if only
one shall be present and act, then that one) shall have and may exercise all of
the powers of said attorneys-in-fact hereunder.
SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature ___________________________ , ____________________________ Dated: ________________ , 2001
Signature if held jointly
NOTE: (THIS PROXY SHOULD BE DATED, SIGNED BY THE SHAREHOLDER(S) EXACTLY AS
HIS OR HER NAME APPEARS HEREON, AND RETURNED PROMPTLY IN THE ENCLOSED
ENVELOPE. PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE.
IF SHARES ARE HELD BY JOINT TENANTS OR AS COMMUNITY PROPERTY, BOTH
SHAREHOLDERS SHOULD SIGN.)