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Craig CARTing away $2.7M

Craig CARTing away $2.7M

By Daniel Kaplan, Staff Writer

Published

At least Andrew Craig can drive his free Mercedes Benz until the end of the year.

That's one of the perks the former CEO of Championship Auto Racing Teams Inc. enjoys following his June 16 resignation. Craig stepped aside after failing to negotiate a merger with the rival Indy Racing League and presiding over a slump in CART's stock.

CART will pay its former chief executive more than $2.7 million in severance benefits, the sanctioning body disclosed late last month in a public securities filing. The amount does not include the value of the company's Mercedes Benz, which Craig can drive until Dec. 31.

In return, Craig renounced all rights to his previous compensation and severance agreements and any right to sue the company or join a CART competitor until the end of the year. He surrendered his stock options and agreed not to criticize the sanctioning body publicly (see chart).

"That sounds like a pretty generous package," said Alan Johnson, managing director of Johnson Associates, an executive compensation firm in New York. "He probably knows where all the skeletons are buried, so they probably wanted him to leave on good terms."

The sanctioning body will continue to hold a $1 million life insurance policy on Craig and may add $500,000 to the policy, which expires at the end of the year.

Craig's good fortune took a toll on CART's earnings, though. The company's earnings in the second quarter were 39 cents a share, or 22 percent lower than the 50 cents a share the company would have earned had Craig not received his package.

Craig's stock options, however, could have cost the company even more. CART gave him 600,000 options in late 1997, when he was promoted to CEO, granting him the right to buy stock at the $19 IPO price.

But only 200,000 of those options were eligible to be used as of March 17, according to the CART proxy issued that day. Because the stock is today trading around $25 a share, those 200,000 options would now net him a $1.2 million profit, the same amount Craig was paid to forgo his options. He was also due a $600,000 salary this year.

And alas, while Craig gets to keep his Mercedes for the next 41ΒΌ2 months — assuming the CART sponsor doesn't ask for it back, in which case the sanctioning body would give him a comparable vehicle — the severance agreement provides that he will have to foot his own gasoline tab.

ANDREW CRAIG'S SEVERANCE PACKAGE
Amount
Purpose
$1.2 million
Compensation for cancellation of options package
$1.2 million
One-time severance payment
$323,076
Biweekly consulting fees
$3,585
Monthly consulting fees
$2.73 million
Total
Source: CART

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