<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant []
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) OR Rule 14a-12
</TABLE>
CRAGAR INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------
5) Total fee paid:
--------------------------
[ ] 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
CRAGAR INDUSTRIES, INC.
4636 North 43rd Avenue
Phoenix, Arizona 85031
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 1997
To our Shareholders:
The 1997 Annual Meeting of Shareholders (the "Annual Meeting") of
Cragar Industries, Inc. (the "Company") will be held at 10 a.m., Mountain
Standard Time, on Friday, May 16, 1997, at 4636 North 43rd Avenue, Phoenix,
Arizona, for the following purposes:
1. To elect five directors to the Board of Directors to serve
for a one-year term;
2. To consider and vote upon a proposal to amend the 1996 Cragar
Non-Employee Directors' Stock Option Plan;
3. To consider and vote upon a proposal to amend the 1996 Cragar
Stock Option and Restricted Stock Plan; and
4. To transact such other business as may properly come before
the Annual Meeting.
Each outstanding share of the Company's Common Stock entitles the
holder of record at the close of business on April 15, 1997 to vote at the
Annual Meeting or any adjournment thereof. Shares can be voted at the Annual
Meeting only if the holder is present or represented by proxy. So far as
management is aware, the matters described in this Proxy Statement will be the
only ones to be acted upon at the meeting. If any other matters properly come
before the meeting or any adjournment thereof, the proxy committee named in the
enclosed proxy will vote on those matters in accordance with its judgment. A
copy of the Company's 1997 Annual Report to Shareholders, which includes
certified financial statements, is enclosed. Management cordially invites you to
attend the Annual Meeting.
By Order of the Board of Directors
/S/ Micahel L. Hartzmark
--------------------
Phoenix, Arizona Michael L. Hartzmark
April 16, 1997 President and Chief Executive Officer
IMPORTANT
SHAREHOLDERS ARE EARNESTLY REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED
PROXY. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED STATES.
<PAGE> 3
CRAGAR INDUSTRIES, INC.
4636 North 43rd Avenue
Phoenix, Arizona 85031
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Cragar
Industries, Inc. (the "Company") in connection with the solicitation of proxies
to be used in voting at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on May 16, 1997. THE ENCLOSED PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY. The proxy materials were mailed on or about
April 16, 1997 to shareholders of record at the close of business on April 15,
1997.
A person giving the enclosed proxy has the power to revoke it at any
time before it is exercised by either: (i) attending the Annual Meeting and
voting in person; (ii) duly executing and delivering a proxy bearing a later
date; or (iii) sending written notice of revocation to the Secretary of the
Company at 4636 North 43rd Avenue, Phoenix, Arizona 85031.
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of the outstanding Common Stock of
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone or telegraph.
VOTING SECURITIES OUTSTANDING
Only holders of record of Common Stock at the close of business on
April 15, 1997 will be entitled to vote at the Annual Meeting. At that date,
there were 2,210,305 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters on which shareholders may vote.
There is no cumulative voting on any matters.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the meeting and will
determine whether or not a quorum is present. The inspectors of election 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.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five members.
Directors hold office until the next annual meeting of the stockholders of the
Company or until their successors have been elected and qualified. The present
terms of Michael L. Hartzmark, Sidney Dworkin, Mark Schwartz, Donald E.
McIntyre, and Edward E. Faber, all of whom are incumbent directors, will expire
at the Annual Meeting. Messrs. Hartzmark, Dworkin, Schwartz, McIntrye, and Faber
have been nominated for re-election as directors of the Company and, unless
otherwise instructed, the proxy holders will vote the proxies received by them
for their re-election. The nominees receiving the highest number of votes cast
at the Annual Meeting will be elected.
If any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director.
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<PAGE> 4
INFORMATION CONCERNING DIRECTORS AND OFFICERS
Information concerning the names, ages, terms, positions with the
Company and business experience of the Company's current directors and executive
officers is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael L. Hartzmark, Ph.D. 41 President, Treasurer, Chief Executive
Officer, and Director
Sidney Dworkin(1)(2) 75 Director
Mark Schwartz(1)(2) 46 Director
Donald E. McIntyre(1)(2) 72 Director
Edward E. Faber(1)(2) 64 Director
Anthony W. Barrett 48 Vice President of Sales Operations
Michael R. Miller 38 Secretary and Chief Operating Officer
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MICHAEL L. HARTZMARK joined the Company as a full-time employee in May
1993 and has served as its President and Chief Executive Officer since June 4,
1993, and as a director since January 1, 1993. Prior to joining the Company, Dr.
Hartzmark was an economic consultant (as President of EconOhio Corporation) and
a financial consultant (as President of MDA Financial, Inc.). EconOhio wrote
business plans for and provided advice to a variety of companies. MDA provided
financial consulting services to small and medium-size companies, as well as
assistance to oil and gas and real estate limited partnerships. From 1987 to
1989, Dr. Hartzmark was Senior Economist at Lexecon, Inc., a Chicago-based
economics and law consulting firm. Dr. Hartzmark was the John M. Olin Visiting
Scholar at the University of Chicago and an Assistant Professor at the
University of Michigan. He has also worked for the Treasury Department and the
Commodity Futures Trading Commission. Dr. Hartzmark earned his M.A. and Ph.D.
degrees in economics at the University of Chicago. He holds a B.A. in economics
from the University of Michigan.
SIDNEY DWORKIN has served as a director of the Company since December
1994. Mr. Dworkin served as President and Chairman of the Board of Revco
Drugstore Company, Inc. until October 1987. Mr. Dworkin currently serves as a
member of the Board of Directors of Comtrex Systems, Inc., Northern
International Technologies, Inc., and CCA Industries, Inc. He is also owner and
Chairman of the Board of Advanced Modular Systems, Inc., a privately-held
manufacturer of modular buildings. His experiences range across a multitude of
industries including, among others, pharmaceuticals, computer hardware and
software, modular housing, and consumer products.
MARK SCHWARTZ has served as a director of the Company since January
1993. Mr. Schwartz is President of G&S Metal Products, Inc., one of the largest
producers of consumer metal products in the United States. The company's
headquarters in Cleveland, Ohio include a major manufacturing facility. G&S
Metal Products sells its products to major retailers (e.g., K-Mart, Target, and
WalMart), many through private label programs. Mr. Schwartz is also President of
G&S Machine Tools, Inc. and Vice President of Porcelen, Inc. Mr. Schwartz has
extensive export and import experience.
DONALD E. MCINTYRE has served as a director of the Company since June
1996. Mr. McIntyre is currently active nationally in merger and acquisition work
in association with Chapman Associates. Until its sale in February
3
<PAGE> 5
1997, he was also interim CEO at Capital Electric Group. From 1964 to 1981, he
was Chairman of the Board, President, and CEO of Custom Products Corporation, a
multi-plant manufacturing and distribution company. Mr. McIntyre currently
serves as a member of the Board of Directors of Capital Electric Group, the
Joray Corporation, and Watkins Shepard Inc. Mr. McIntyre holds a B.S. from Iowa
State University and attended post-graduate courses at Michigan State University
and Drake.
EDWARD E. FABER has served as a director of the Company since November
1996. Mr. Faber is currently President and C.E.O. of Faber Consulting, Inc.,
which consults with small, emerging companies on a variety of corporate matters,
including turnaround strategies. From 1991 to 1992, he served as President and
Chief Executive Officer of SuperCuts, Inc., where he was responsible for
organizing and executing a successful initial public stock offering. From 1990
until the company was sold in 1991, Mr. Faber served as Vice Chairman and Chief
Executive Officer of Dataphaz. In 1976, Mr. Faber was the founding President of
Computerland Corporation. He retired from Computerland Corporation in 1983, but
was brought back in 1985 to serve as Chairman and Chief Executive Officer until
1987 when the company was sold. He remained as Vice Chairman until 1990. Mr.
Faber currently serves as a member of the Board of Directors of Integrated
Circuits Engineering Corp., Saigene Corp., Cotelligent Systems, Inc., Great
American Backrub Stores, and Phoenix Receivables. Mr. Faber holds a degree in
Industrial and Labor Relations from Cornell University and was an officer in the
United States Marine Corps.
ANTHONY W. BARRETT joined the Company in August 1995. In addition to
serving as Vice President of Sales Operations, Mr. Barrett also serves as the
Company's principal financial and accounting officer. He has over 25 years of
experience in manufacturing. He has had extensive experience in finance and
accounting, operations, sales, marketing and production. From 1980 to 1993, Mr.
Barrett served as Vice President - Finance, Vice President - Retail Operations
and Vice President - Canadian Operations at F.E. Myers, a manufacturer and
assembler of pumps. His responsibilities included overseeing finance,
production, operations, and sales. Prior to 1980, Mr. Barrett worked for 10
years at ITT. Mr. Barrett holds a B.A. from Malone College.
MICHAEL R. MILLER joined the Company as a full-time employee in
November 1996 after serving as a consultant to the Company for three months. He
has over 16 years of experience with manufacturing companies working either as a
senior executive or consultant. From 1992 to 1996, Mr. Miller was employed at
Form Rite, a $110 million supplier of fluid handling systems to Ford, GM,
Chrysler, Mercedes, Nissan, and TRW. He assisted with the sale of the company to
Siebe plc., a large British firm. Prior to the sale, he had worldwide
responsibility for sales and engineering efforts. Mr. Miller was Vice President
of Operations for Mr. Gasket Company, Inc. and had operating responsibility for
CRAGAR from 1988 to 1992. He joined Mr. Gasket from the consulting practice of
Deloitte & Touche after completing a restructuring project at CRAGAR Industries.
Mr. Miller has a B.S. in Business Administration from the University at Albany
and a Master of Business Administration from Rochester Institute of Technology.
4
<PAGE> 6
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1996, the Board of Directors of the
Company met or acted by written consent on 15 occasions. Each of the Company's
directors attended more than 75% of the meetings of the Board of Directors.
Compensation Committee. The Compensation Committee of the Board of
Directors, which did not meet during 1996, reviews all aspects of compensation
of officers of the Company and determines or makes recommendations on such
matters to the full Board of Directors. The Compensation Committee consists of
Mssrs. Dworkin, Schwartz, McIntyre, and Faber.
Audit Committee. The Audit Committee, which did not meet during 1996,
represents the Board of Directors in evaluating the quality of the Company's
financial reporting process and internal financial controls through
consultations with the independent auditors, internal management and the Board
of Directors. The Audit Committee consists of Mssrs. Dworkin, Schwartz,
McIntyre, and Faber.
Executive Committee. The Executive Committee, which was established in
April 1997, has all the powers and authority of the Board of Directors in the
management of the business and affairs of the Company, except those powers that,
by law, cannot be delegated by the Board of Directors. The Executive Committee
consists of Mssrs. Hartzmark, Faber, and McIntrye.
Other Committees. The Company does not maintain a standing nominating
committee or other committees performing similar functions. Nominations of
persons to be directors are considered by the full Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth for each of the last three fiscal years
the total compensation awarded to, earned by, or paid to (i) the Company's Chief
Executive Officer, and (ii) each of the Company's other executive officers whose
annual salary and bonus exceeded $100,000 during fiscal 1996 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------ ---------------------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Stock Options Compensation
------------------ ---- -------- ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hartzmark 1996 $110,000 -- -- 20,000(1) --
President & Chief 1995 $ 96,000 -- -- -- --
Executive Officer 1994 $ 96,000 -- -- -- --
</TABLE>
- ----------
(1) Each option is exercisable at $5.60 to purchase one share of Common
Stock, which was the fair market value on the date of grant.
5
<PAGE> 7
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock
options granted during the fiscal year ended December 31, 1996 to the Named
Executive Officers.
<TABLE>
<CAPTION>
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted Year (per share)(1) Date
- ---- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Michael L. Hartzmark 20,000(2) 37.38% $5.60 11/9/2006
President & Chief
Executive Officer
</TABLE>
- ----------
(1) All options were granted with an exercise price equal to the fair
market value on the date of grant.
(2) One-third of the options become exercisable on each of the first three
anniversaries of the grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AS OF DECEMBER
31, 1996
The following table sets forth information with respect to the exercise
and value of stock options issued during the fiscal year ended December 31,
1996, to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired ----------------------------- -------------------------------
On Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hartzmark 0 $0 0 20,000 $0 $0
President & Chief
Executive Officer
</TABLE>
EMPLOYMENT AGREEMENTS
The Company does not have employment agreements in place with respect
to any of the Named Executive Officers.
DIRECTOR COMPENSATION
The Company pays all non-employee directors $1,500 for attendance at
the Company's quarterly and annual meetings of directors, $500 per month for
serving on the Executive Committee meetings and attending related meetings, and
$250 for any other committee meetings attended. In addition, directors may be
reimbursed for certain expenses in connection with attendance at board and
committee meetings.
6
<PAGE> 8
Directors who are not employees of the Company receive nonqualified
stock options pursuant to a formula grant provision of the 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). Pursuant to the Directors'
Plan, on June 10, 1996, Messrs. Dworkin, McIntyre, and Schwartz were granted
options to purchase 2,100,700, and 2,800 shares, respectively. All options were
granted with an exercise price of $5.14 and vested immediately with the
exception of Mr. McIntyre's options which will vest one year from the date of
grant. On November 9, 1996, pursuant to the Directors' Plan, Mr. Faber was
granted options to purchase 700 shares. The option grants to Mr. Faber vest one
year from the date of grant and have an exercise price of $5.60.
The shareholders are being asked at the annual meeting to approve
amendments to the Directors' Plan. See "Proposal to Amend the Cragar
Non-Employee Director's Stock Option Plan."
CHANGE OF CONTROL PROVISIONS
Each outstanding option granted under the Directors' Plan becomes
immediately fully exercisable if (i) there occurs any transaction that has the
result that stockholders of the Company immediately before such transaction
cease to own at least 51% of the voting stock of the Company, (ii) the
stockholders of the Company approve a plan of merger, consolidation,
reorganization, liquidation or dissolution in which the Company does not
survive, or (iii) the stockholders of the Company approve a plan for the sale,
lease, exchange, transfer, assignment or other disposition of all or
substantially all the property and assets of the Company.
7
<PAGE> 9
PROPOSAL TO APPROVE AN AMENDMENT TO THE CRAGAR
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
On April 11, 1997, the Board of Directors unanimously approved, subject
to approval by the Company's shareholders, an amendment to the 1996 Cragar
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). As discussed
below, the proposed amendment would (i) provide for an initial grant of 2,000
options to each non-employee director on the date that such individual first
becomes a non-employee director; (ii) increase the number of options granted to
non-employee directors at the date of each annual meeting of shareholders 700 to
2,000; (iii) modify the provisions of the Directors' Plan relating to
termination of the options when the optionee ceases to be a director; (iv)
provide for a one time grant of 3,300 options to the Company's four current
non-employee directors; and (v) increase the shares of Common Stock authorized
for issuance under the Directors' Plan from 35,000 to 70,000.
The purpose of the Directors' Plan is to assist the Company in
attracting and retaining competent outside directors, to provide motivation for
superior performance, and to strengthen the desire of such outside directors to
remain with the Company. In order that the Directors' Plan may continue to serve
its intended purpose, the Board of Directors believes that the approval of the
proposed amendment to the Directors' Plan is essential to further the long-term
stability and financial success of the Company by attracting, motivating, and
retaining qualified non-employee directors through the use of stock incentives.
SUMMARY DESCRIPTION OF THE DIRECTORS' PLAN
The material features of the Directors' Plan, without giving effect to
the proposed amendment, are described below.
General. The Director's Plan currently authorizes 35,000 shares of
Common Stock for issuance or subject to issuance upon exercise of outstanding
grants under the Directors' Plan. Common Shares issued pursuant to the Plan may
either be treasury shares or newly issued shares. If there is a stock split,
stock dividend, recapitalization, or other relevant change affecting the
Company's Common Stock, appropriate adjustments would be made in the number of
Common Shares that could be issued in the future and in the number of Common
Shares and price under all outstanding grants made before the event.
Grants Under the Directors' Plan. Options under the Directors' Plan are
awarded pursuant to a formula: each non-employee director is granted an option
to purchase 700 shares of Common Stock upon his or her initial election and on
subsequent re-election as a non-employee director. Each option granted pursuant
to the Directors' Plan is exercisable to purchase one share of Common Stock at a
price equal to the fair market value of the Common Stock on the date of grant.
Each option becomes exercisable in full on the first anniversary of the option's
grant, provided the grantee remains a non-employee director of the Company on
such anniversary.
Special Exercisability Feature of Options. Each outstanding option
shall become immediately fully exercisable if (i) there occurs any transaction
that has the result that stockholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of the Company, (ii)
the stockholders of the Company approve a plan of merger, consolidation,
reorganization, liquidation or dissolution in which the Company does not
survive, or (iii) the stockholders of the Company approve a plan for the sale,
lease, exchange, transfer, assignment or other disposition of all or
substantially all the property and assets of the Company.
Termination of Option Period. The unexercised portion of any option
automatically terminates on the earliest to occur of: (i) one year after the
death of grantee; (ii) six month after the date on which the grantee ceases to
be a director for any reason other than death; or (iii) after the expiration of
10 years from the date of grant of the option.
Amendment and Discontinuation of the Plan. The Board may from time to
time amend the Directors' Plan except that no such amendment may, without
approval by the stockholders of the Company, (i) materially increase the
benefits accruing to participants under the Directors' Plan, (ii) materially
increase the number of securities which may be issued under the Directors' Plan,
or (iii) materially modify the requirements as to eligibility for participation
in the Directors' Plan.
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<PAGE> 10
Federal Income Tax Aspects. With respect to the non-qualified stock
options to be granted pursuant to the Directors' Plan: (i) no income is realized
by the participant at the time the option is granted; (ii) generally upon
exercise of the option, the participant realizes ordinary income in an amount
equal to the difference between the option price paid for the shares and the
fair market value of the shares on the date of exercise, and the Company will be
entitled to a tax deduction of the same amount; and (iii) at disposition, any
appreciation (or depreciation) after date of exercise is treated as either
short-term or long-term capital gain or loss, depending upon the length of time
that the participant has held the shares.
SUMMARY DESCRIPTION OF THE DIRECTORS' PLAN AMENDMENT
The full text of the Directors' Plan, as amended by the proposed
amendment, is set forth as Appendix A hereto, and readers are urged to refer to
it for a complete description. The following is a summary of the provisions
which will be amended by approval of the proposed amendment to the Directors'
Plan.
General. The Director's Plan will authorize 70,000 shares of Common
Stock for issuance or subject to issuance upon exercise of outstanding grants
under the Directors' Plan.
Grants Under the Directors' Plan. The formula pursuant to which options
under the Directors' Plan are awarded would be amended to provide as follows:
each non-employee director is granted, on the date that he or she first becomes
a non-employee director, an immediately exercisable option to purchase 2,000
shares of Common Stock. The per share exercise price of the option subject to
this initial grant is equal to the fair market value of the Common Stock on the
date of grant. In addition, each non-employee director is granted, on the date
of his or her initial election or subsequent re-election by the Company's
shareholders as a non-employee director, an option to purchase 2,000 shares of
Common Stock, which option becomes exercisable in full on the first anniversary
of the option's grant, provided he or she remains a director on such
anniversary. The per share exercise price of this annual grant is equal to the
fair market value of the Common Stock on the date of grant.
Termination of Option Period. The unexercised portion of any option
will automatically terminate on the earliest to occur of: (i) two years after
the date on which the grantee ceases to be a director for any reason including
death; or (ii) after the expiration of 10 years from the date of grant of the
option.
One Time Grant. The Company's current non-employee directors, Edward
Faber, Donald McIntyre, Mark Schwartz, and Sidney Dworkin, each will be granted
an option to purchase 3,300 shares of Common Stock, which option will become
exercisable in full on May 16, 1997, provided the grantee remains a non-employee
director on such date. The per share exercise price of the option subject to
this one-time grant will be equal to the fair market value of the Common Stock
on the date of grant.
CONCLUSION AND RECOMMENDATION
The Board of Directors believes it is in the best interests of the
Company and its shareholders to approve the proposed amendment to the Directors'
Plan in order to attract and retain the highest quality of experienced persons
as directors and to encourage greater stock ownership by directors to align the
interests of the directors of the Company more closely with the interests of the
Company's shareholders. To be approved, the proposed amendment requires the
affirmative vote of the holders of a majority of the Common Shares present in
person or represented by proxy at the Annual Meeting and entitled to vote
thereon. Abstentions from voting on this proposal (including broker non-votes)
will have the effect of votes against this proposal. If not otherwise specified,
properly executed proxies will be voted in favor of the proposal.
The Board of Directors recommends that shareholders vote FOR approval
of the amendment to the Cragar Non-Employee Directors' Stock Option Plan.
9
<PAGE> 11
PROPOSAL TO APPROVE AN AMENDMENT TO THE CRAGAR
STOCK OPTION AND RESTRICTED STOCK PLAN
On April 11, 1997, the Board of Directors unanimously approved, subject
to approval by the Company's shareholders, an amendment to the 1996 Cragar Stock
Option and Restricted Stock Plan (the "Employee Option Plan") to limit the
maximum number of the Company's Common Shares that may be awarded as stock
options to any single participant to 125,000 Common Shares. This amendment will
assure that any additional stock options granted will continue to qualify as
"other performance-based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The proposed amendment would also
increase the number of shares of Common Stock available for issuance under the
Employee Option Plan from 210,000 to 300,000.
Under Section 162(m) of the Code, no deduction is allowed in any
taxable year of the Corporation for compensation in excess of $1 million paid to
each of its chief executive officer and its four most highly paid other
executive officers who are serving in such capacities as of the last day of such
taxable year. An exception to this rule applies to certain performance based
compensation as to which the shareholders have approved the performance criteria
and the maximum amount payable to any given individual in a specified period.
Stock options are inherently performance based, since they provide value to
employees only if the stock price appreciates.
The full text of the Employee Option Plan, as amended by the proposed
amendment, is set forth as Appendix B hereto, and readers are urged to refer to
it for a complete description. The following is a summary of the material terms
of the Employee Option Plan, as amended by the proposed amendment, and is
qualified in its entirety by such reference.
GENERAL INFORMATION REGARDING THE EMPLOYEE OPTION PLAN
The Employee Option Plan is administered by the Company's Board of
Directors or, at the discretion of the Board, by a committee (the "Committee")
of not less than two members of the Board each of whom shall qualify as a
"Non-employee Director" as defined in Rule 16b-3(b)(3) of the Securities
Exchange Act of 1934, as amended. The Committee is authorized to grant stock
options, stock appreciation rights and restricted stock grants to officers and
other key executive and management employees of the Corporation and its
subsidiaries. While the number of grantees will vary from year to year, in 1996,
eight employees, including three officers, received awards under the Employee
Option Plan.
The maximum number of the Corporation's Common Shares that may be
issued under the Employee Option Plan is 300,000. If Common Shares under a grant
are not issued, those Common Shares will again be available for inclusion in
future grants. Common Shares issued pursuant to the Plan may either be treasury
shares or newly issued shares. If there is a stock split, stock dividend,
recapitalization, or other relevant change affecting the Company's Common Stock,
appropriate adjustments would be made in the number of Common Shares that could
be issued in the future and in the number of Common Shares and price under all
outstanding grants made before the event.
GRANTS UNDER THE EMPLOYEE OPTION PLAN
Stock Options. The Committee may grant nonqualified options and options
qualifying as incentive stock options under the Code. The option price of any
incentive stock option must be at least equal to the fair market value of a
Common Share on the date of grant. The exercise price of grants of non-qualified
options will be determined by the Committee but in no event will be less than
85% of the fair market value of a Common Share on the date of grant. The term of
each option is fixed by the Committee but may not exceed ten years from the date
of grant. The Committee determines the time or times at which each option may be
exercised. Options may be made exercisable in installments. Subject to the per
person limit described above, the Committee has the discretion to determine the
number of Common Shares to be awarded to each participant.
Stock Appreciation Rights. The Committee may grant SARs that entitle
the grantee to receive an amount equal to the excess of the then fair market
value of the Common Shares with respect to which the SAR is being exercised over
the price fixed by the Committee at the time the SAR was granted. Payment is
made in cash, in Common Shares, or a combination of the two as the Committee
determines. If an SAR is exercised, the right under any related option would
terminate. If any related stock option is exercised, any SAR related to the
Common Shares purchased would terminate. The Committee will determine the time
or times at which an SAR may be exercised.
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<PAGE> 12
Restricted Stock Grants. The Committee may also issue Common Shares
under a restricted stock grant, subject to the satisfaction of any applicable
conditions thereon, such as continued employment for a specified period or the
attainment of stated performance objectives. The grant would set forth a
restriction period (including a period related to the attainment of goals)
during which the shares of restricted stock granted would remain subject to
forfeiture. The grantee of an award of restricted stock generally may not
dispose of the shares prior to the expiration of the restriction period. During
this period, a grantee of restricted stock would generally have all the rights
of a stockholder, including the right to vote the Common Shares and receive
dividends.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. The grant of an incentive stock option or a nonqualified
stock option would not result in income for the grantee or in a deduction for
the Corporation.
The exercise of a nonqualified stock option generally would result in
ordinary income for the grantee and a deduction for the Corporation measured by
the difference between the fair market value of the Common Shares received at
the time of exercise and the option price.
The exercise of an incentive stock option would not result in ordinary
income for the grantee if the grantee (i) does not dispose of the Common Shares
within two years after the date of grant or one year after the transfer of
Common Shares upon exercised, and (ii) is an employee of the Corporation or a
subsidiary of the Corporation from the date of grant until three months before
the exercise date. If these requirements are met, the grantee's basis in the
Common Shares upon later disposition would be the option price. Any gain would
be taxed to the grantee as long term capital gain, and the Corporation would not
be entitled to a deduction. The excess of the market value on the exercise date
over the option price is considered as income for purposes of the alternative
minimum tax; therefore, a grantee is potentially subject to the minimum tax on
the excess of the market value of the Common Shares purchased over option price
as a result of exercise.
If the grantee disposes of the incentive stock option Common Shares
prior to the expiration of either of the holding periods described above, the
grantee would recognize ordinary income, and the Corporation would be entitled
to a deduction, equal to the lesser of the fair market value of the Common
Shares on the exercise date minus the option price or the amount realized on
disposition minus the option price. Any gain in excess of this amount would be
treated as long term or short term capital gain, depending on whether the Common
Shares are held for the requisite holding period.
SARs. The grant of an SAR would not result in income for the grantee or
in a deduction for the Corporation. Upon the exercise of an SAR, the grantee
would recognize ordinary income and the Corporation would be entitled to a
deduction measured by the fair market value of the Common Shares plus any cash
received.
Restricted Stock Grant. The grant of restricted stock will not result
in income for the grantee or in a deduction for the Corporation for federal
income tax purposes, unless the recipient timely elects to have income
recognized at the time of the grant. Absent such election, dividends paid while
the stock remains subject to such restrictions would be taxable to the recipient
and deductible by the Corporation as compensation for federal income tax
purposes. At the time the restrictions lapse, the grantee would recognize
ordinary income, and the Corporation would be entitled to a deduction, measured
by the fair market value of the Common Shares at the time of lapse.
CONCLUSION AND RECOMMENDATION
To be approved, the proposed amendment requires the affirmative vote of
the holders of a majority of the Common Shares present in person or represented
by proxy at the Annual Meeting and entitled to vote thereon. Abstentions from
voting on this proposal (including broker non-votes) will have the effect of
votes against this proposal. If not otherwise specified, properly executed
proxies will be voted in favor of the proposal.
The Board of Directors recommends that shareholders vote "FOR" approval
of the amendment to the Employee Option Plan.
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<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, the number and
percentage of outstanding shares of Common Stock beneficially owned by (i) each
person known by the Company to beneficially own more than 5% of such stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers, and
(iv) all directors and officers of the Company as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Number
Shares Beneficially Percent of
Name and Address of Beneficial Owner(1) Owned(2) Total(3)
- --------------------------------------- ------------------- ----------
<S> <C> <C>
Michael L. Hartzmark, Ph. D.(4) 87,135 3.93%
Mark Schwartz(5) 121,548 5.44%
Sidney Dworkin(6) 321,691 14.31%
Harry Schwartz(7) 145,282 6.51%
All executive officers and directors
as a group (seven persons) 532,374 23.35%
</TABLE>
- --------------
(1) Unless otherwise noted, the address of each of the listed stockholders
is c/o Cragar Industries, Inc. 4636 N. 43rd Avenue, Phoenix, Arizona
85031.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the
exercise of any option or warrant.
(3) In calculating percentage ownership, all shares of Common Stock that
the named stockholder has the right to acquire within 60 days upon
exercise of any option or warrant are deemed to be outstanding for the
purpose of computing the percentage of Common Stock owned by such
stockholder, but are not deemed outstanding for the purpose of
computing the percentage of Common Stock owned by any other
stockholder. Shares and percentages beneficially owned are based upon
2,210,305 shares outstanding on March 31, 1996.
(4) Includes 6,563 shares purchasable upon exercise of Class A Warrants,
and 31,960 shares owned by MDA Financial, Inc. of which Mr. Hartzmark
is a beneficial owner.
(5) Includes 13,125 shares purchasable upon exercise of Class A Warrants,
8,400 shares purchasable upon exercise of Class C warrants, and 2,800
shares purchasable upon exercise of options.
(6) Interest includes 11,813 shares purchasable upon exercise of Class A
warrants, 24,500 shares purchasable upon exercise of Class B warrants,
2,100 shares purchasable upon exercise of options, and 10,533 shares
owned by CN Partners of which Mr. Dworkin is a one-fifth beneficial
owner.
(7) Interest includes 13,125 shares purchasable upon exercise of Class A
Warrants, 8,400 shares purchasable upon exercise of Class C Warrants,
and 10,533 shares owned by CN Partners of which Mr. Schwartz is a
one-fifth beneficial owner.
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<PAGE> 14
CERTAIN TRANSACTIONS AND RELATIONSHIPS
On December 15, 1994, Sidney Dworkin invested $500,000 in the Company
in order to, among other things, fund the Company's $360,000 installment due
under a promissory note to Performance Industries, Inc. (formerly Mr. Gasket)
("Performance"). This payment related to debt owed by the Company to Mr. Gasket
as a result of the Company's acquisition of the CRAGAR brand name and certain
other assets from Mr. Gasket. Of Mr. Dworkin's $500,000 investment, $150,000 was
made as a contribution to capital, and the remaining $350,000 was made as a loan
to the Company. In consideration of the $150,000 capital contribution, Mr.
Dworkin received (i) 29,167 shares of Common Stock, (ii) 3,937 Class A Warrants,
each warrant entitling the holder to purchase one share of Common Stock at
$1.43, and (iii) a promissory note in the principal amount of $108,333, which
was subsequently contributed to the capital of the Company. In consideration of
the $350,000 loan to the Company, Mr. Dworkin received (i) 24,500 Class B
Warrants, each warrant entitling the holder to purchase one share of Common
Stock at $0.36 per share, and (ii) a promissory note in the principal amount of
$350,000 (the "$350,000 Note"). Pursuant to an amendment executed by the parties
on September 30, 1996, the $350,000 Note automatically converted into 68,056
shares of Common Stock upon the completion of the Company's initial public
offering.
On September 30, 1995, the Company entered into a First Note Amendment
with the holders of the Company's "1993 Junior Notes." Pursuant to this
Amendment, the Company agreed to increase the interest rate on the 1993 Junior
Notes from 6% to 8% per annum. Also pursuant to this Amendment, the Company
agreed to issue shares of its Common Stock to holders of the 1993 Junior Notes,
and the holders of the 1993 Junior Notes agreed to accept such Common Stock, in
lieu of interest that had accrued on the 1993 Junior Notes. Pursuant to this
agreement, holders of the 1993 Junior Notes received 2,153 shares of the
Company's Common Stock for every $100,000 of interest payable. Among the holders
of 1993 Junior Notes included Sidney Dworkin and CN Partners in which Lee
Hartzmark, father of Michael L. Hartzmark, Harry Schwartz, father of Mark
Schwartz, and Sidney Dworkin each have a one-fifth beneficial interest. On
September 30, 1996, the Company entered into a Second Note Amendment with the
holders of the 1993 Junior Notes. Pursuant to this Amendment, the outstanding
principal and interest under the 1993 Junior Notes automatically converted into
291,666 shares of the Company's Common Stock (19,444 shares per $100,000
principal amount) upon the closing of the Company's initial public offering.
On July 1, 1996, the Company obtained bridge financing totaling
$1,500,000 (the "Bridge Financing"). Each lender that participated in the Bridge
Financing (collectively, the "Lenders") received from the Company, as
consideration, (i) the Company's promissory note in the principal amount of the
Lender's investment (the "Bridge Note"), and (ii) 8,400 Class C Warrants for
each $100,000 the Lender invested in connection with the Bridge Financing. Each
Class C Warrant entitles the holder to purchase one share of the Company's
Common Stock at an exercise price of $3.25 per share. In December 1996, the
Company repurchased the Bridge Notes. Among the individuals that participated in
the Bridge Financing (with amount invested in parenthesis ) included Mark
Schwartz ($100,000), and Harry Schwartz ($100,000).
Lee Hartzmark, the father of Michael L. Hartzmark, is a Senior Vice
President with Fahnestock & Co., Inc., which served as a selected dealer in
connection the Company's initial public offering. On June 20, 1996, Mr.
Hartzmark entered into an agreement with Performance Industries, Inc.
("Performance," and formerly Mr. Gasket Company, Inc., the seller of the Cragar
assets) whereby he was assigned the rights to an unsecured promissory note and a
non-compete agreement between Performance and the Company. The unsecured
promissory note and non-compete agreement had outstanding principal balances of
$1,066,098 and $44,118, respectively, at June 20, 1996. Mr. Hartzmark paid
Performance $700,000 in consideration of the assignment. On July 1, 1996, the
Company completed a bridge financing totaling $1,500,000. A portion of the
bridge proceeds were used to pay the unsecured promissory note and non-compete
agreement obligations held by Mr. Hartzmark for $700,000, plus $79,727 for
interest and service charges related to the assignment.
The Company believes that all transactions it has entered into with
affiliates are at arm's length and on terms equivalent or similar to terms under
which the Company would conduct business with unaffiliated third parties.
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<PAGE> 15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose any failure to file by
these dates. Based upon a review of such reports furnished to the Company, or
written representations that no reports were required, the Company believes that
all of these filing requirements were satisfied during the year ended December
31, 1996.
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the
Company during the fiscal year ended December 31, 1996 was KPMG Peat Marwick,
LLP, independent certified public accountants (the "Auditors"). It is presently
contemplated that the Auditors will be retained as the principal accounting firm
to be utilized by the Company during the current fiscal year. A representative
of the Auditors will attend the Annual Meeting for the purpose of responding to
appropriate questions and will be afforded an opportunity to make a statement if
the Auditors so desire.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1998 Annual Meeting must be
received by the Company no later than January 6, 1998 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting. Proposals should be addressed to the Secretary of the Company at
4636 North 43rd Avenue, Phoenix, Arizona 85031.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Cragar Industries, Inc.
/S/ Michael L. Hartzmark
--------------------
Michael L. Hartzmark
President and Chief Executive Officer
April 16, 1997
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<PAGE> 16
APPENDIX A
CRAGAR INDUSTRIES, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(As restated April 11, 1997)
1. Purpose. The purpose of this Plan is to advance the interests
of Cragar Industries, Inc., a Delaware corporation (the "Company"), by providing
additional incentive to attract and retain qualified non-employee Directors,
whose efforts and judgment contribute significantly to the success of the
Company, by encouraging such persons to own stock in the Company.
2. Shares and Options. Options may be granted under this Plan
from time to time to purchase an aggregate of up to 70,000 Shares, from Shares
held in the Company's treasury or from authorized and unissued Shares. The
number of authorized Shares in the immediately preceding sentence takes into
consideration the 7 for 1 stock split approved by the Company's Board of
Directors on September 7, 1996; therefore, no further adjustment shall be made
under Section 8 for such stock split. If any Option granted under the Plan shall
terminate, expire, or be canceled or surrendered as to any Shares, new Options
may thereafter be granted covering such Shares. Each Option granted hereunder
shall be a Nonstatutory Stock Option.
3. Conditions for Grant of Options. Each Option shall be
evidenced by a written instrument granting an Option with such terms as are not
inconsistent with this Plan. Any person who files with the Committee, in a form
satisfactory to the Committee, a written waiver of eligibility to receive any
Option under this Plan shall not be eligible to receive any Option under this
Plan for the duration of such waiver.
4. Option Grants.
a. One-Time Grant. Each person who is a non-employee
Director on April 9, 1997 shall be granted on option to purchase 3,300 Shares,
which Option will become exercisable in full on May 16, 1997, provided the
grantee is a non-employee Director on May 16, 1997. The per share exercise price
of the Option subject to this one-time grant will be equal to the Fair Market
Value of the Shares underlying such Options on May 16, 1997.
b. Initial Grant. Each non-employee Director shall be
granted, on the date that he or she first becomes a non-employee Director, an
Option to purchase 2,000 Shares, which Option will become exercisable in full
immediately. The per share exercise price of the Option subject to this initial
grant will be equal to the Fair Market Value of the Shares underlying such
Option on the date such Option is granted.
c. Annual Grant. Each non-employee Director shall be
granted, on the date of his or her initial election or subsequent re-election by
the Company's shareholders as a nonemployee Director, an Option to purchase
2,000 Shares, which Option will become exercisable in full on the first
anniversary of the Option's grant, provided he or she remains a Director on such
anniversary. The per share exercise price of this annual grant will be equal to
the Fair Market Value of the Shares underlying such Option on the date such
Option is granted. If an individual first becomes a non-Employee Director
through election by the Company's shareholders, such individual shall be
entitled to both the Initial Grant Option and the Annual Grant Option.
5. Exercise of Options. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, and (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made. The option price of
any Shares purchased shall be paid in cash, by certified or official bank check,
by money order, with Shares or by a combination of the above, provided, however,
that the Committee in its sole discretion may accept a personal check in full or
partial payment of any Shares. If the exercise price is paid in whole or in part
with Shares, the value of the Shares surrendered shall be their Fair Market
Value on the date the Option is exercised. No Optionee shall be deemed to be a
holder of any Shares subject to an Option unless and until a stock certificate
or certificates for such Shares are issued to such person(s) under the terms of
this Plan. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 8 hereof.
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<PAGE> 17
6. Exercisability of Options. Each outstanding Option shall
become immediately fully exercisable if:
(a) there occurs any transaction (which shall include a
series of transactions occurring within 60 days or occurring pursuant to a
plan), that has the result that stockholders of the Company immediately before
such transaction cease to own at least 51% of the voting stock of the Company or
of any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
(b) the stockholders of the Company approve a plan of
merger, consolidation, reorganization, liquidation or dissolution in which the
Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(c) the stockholders of the Company approve a plan for
the sale, lease, exchange, transfer, assignment or other disposition of all or
substantially all the property and assets of the Company (unless such plan is
subsequently abandoned).
7. Termination of Option Period. The unexercised portion of any
Option shall automatically and without notice terminate and become null and void
on the earliest to occur of: (i) two years after the date on which the Optionee
ceases to be a Director for any reason including death; or (ii) after the
expiration of 10 years from the date of grant of the Option.
8. Adjustment of Shares.
(a) f at any time while the Plan is in effect and
unexercised Options are outstanding, there shall be any increase or decrease in
the number of issued and outstanding Shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price
(b) Subject to the specific terms of any Option, the
Committee shall make appropriate adjustment in the terms of Options outstanding
under this Plan, with respect to the option price or the number of Shares
subject to the Options, or both, when such adjustments become appropriate by
reason of a corporate transaction described in Subsections 6(b) or (c) hereof.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of Shares then subject to outstanding Options granted under the
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
said, lease, exchange, transfer, assignment or other disposition of all or any
part of the assets or business of the Company; or (vi) any other corporate act
or proceeding, whether of a similar character or otherwise.
9. Transferability of Options. No Option shall be transferable
by the Optionee other than by will or the laws of descent and distribution and
each Option shall be exercisable during the Optionee's lifetime only by the
Optionee.
10. Administration of the Plan.
16
<PAGE> 18
(a) The Plan shall be administered by the Committee,
which shall consist of not less than two Directors, each of whom shall be a
Nonemployee Director, provided that the Committee shall not have any discretion
with respect to the grant of Options to pursuant to this Plan. The Committee
shall have all of the powers of the Board with respect to the Plan. The Board
may change the membership of the Committee at any time and fill any vacancy
occurring in the membership of the Committee by appointment.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision of the
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the
Committee shall be made either (i) by a majority vote of the members of the
Committee at a meeting, or (ii) without a meeting by the unanimous written
consent of the members of the Committee.
11. Interpretation.
(a) This Plan shall be governed by the internal
substantive laws of the State of Delaware.
(b) Headings contained in this Plan are for convenience
only and shall in no manner be construed as part of this Plan.
(c) Any reference to the masculine, feminine, or neuter
gender shall be a reference to such other gender as is appropriate.
12. Amendment and Discontinuation of the Plan. Either the Board or
the Committee may from time to time amend the Plan or any Option; provided,
however, that, except to the extent provided in Section 8, no such amendment
may, without approval by the stockholders of the Company, (i) materially
increase the benefits accruing to participants under the Plan, (ii) materially
increase the number of securities which may be issued under the Plan, or (iii)
materially modify the requirements as to eligibility for participation in the
Plan; and provided further, that, no amendment or suspension of the Plan or any
Option issued hereunder shall substantially impair any Option previously granted
to any Optionee without the consent of such Optionee.
13. Effective Date and Termination Date. Subject to
approval of the Plan by the holders of a majority of the shares of Common Stock
present at a duly called stockholders' meeting at which a quorum is present, the
Plan shall be effective upon the Effective Date and shall terminate on the tenth
anniversary of the Effective Date. If the Plan is not approved by the holders of
a majority of the outstanding shares of Common Stock, the Plan shall be null and
void.
14. Definitions. As used herein, the following terms shall have
the meanings indicated:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Committee" shall mean the stock option committee
described in Section 10 hereof.
(d) "Common Stock" shall mean the Company's Common Stock,
par value $0.01 per share.
(e) "Director" shall mean a member of the Board.
(f) "Effective Date" shall mean May 31, 1996.
(g) The "Fair Market Value" of corporate stock shall
mean:
(i) If the stock is then Publicly Traded: The
closing price of stock of that class as of the day in question (or, if such day
is not a trading day in the principal securities market or markets for such
stock, on the nearest
17
<PAGE> 19
preceding trading day), as reported with respect to the market (or the composite
of markets, if more than one) in which shares of such stock are then traded, or,
if no such closing prices are reported, on the basis of the mean between the
high bid and low asked prices that day on the principal market or quotation
system on which shares of such stock are then quoted, or, if not so quoted, as
furnished by a professional securities dealer making a market in such stock
selected by the Board of the Committee.
(ii) If the stock is then not Publicly Traded: The
price at which one could reasonably expect such stock to be sold in an arm's
length transaction, for cash, other than on an installment basis, to a person
not employed by, controlled by, in control of or under common control with the
issuer of such stock. Such Fair Market Value shall be that which has currently
or most recently been determined for this purpose by the Board, or at the
discretion of the Board by an independent appraiser or appraisers selected by
the Board, in either case giving due consideration to recent transactions
involving shares of such stock, if any, the issuer's net worth, prospective
earning power and dividend-paying capacity, the goodwill of the issuer's
business, the issuer's industry position and its management, that industry's
economic outlook, the values of securities of issuers whose stock is Publicly
Traded and which are engaged in similar businesses, the effect of transfer
restrictions to which such stock may be subject under law and under the
applicable terms of any contract governing such stock, the absence of a public
market for such stock and such other matters as the Board or its appraiser or
appraisers deem pertinent. The determination by the Board or its appraiser or
appraisers of the Fair Market Value shall, if not unreasonable, be conclusive
and binding notwithstanding the possibility that other persons might make a
different, and also reasonable, determination. If the Fair Market Value to be
used was thus fixed more than sixteen months prior the day as of which Fair
Market Value is being determined, it shall in any event be no less than the book
value of the stock being valued at the end of the most recent period for which
financial statements of the issuer are available.
(h) "Nonemployee Director" shall mean a member of the
Board who qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3)
of the Securities Exchange Act or any successor definition adopted by the Board.
(i) "Non-Statutory Stock Option" shall mean an Option
which is not an incentive stock option as defined in Section 422 of the Code.
(j) "Option" (when capitalized) shall mean any option
granted under this Plan.
(k) "Optionee" shall mean a person to whom an Option is
granted under this Plan or any person who succeeds to the rights of such person
under the Plan by reason of the death of such person.
(l) "Plan" shall mean this Directors' Stock Option Plan
for the Company.
(m) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(n) "Share(s)" shall mean a share or shares of the Common
Stock.
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<PAGE> 20
APPENDIX B
CRAGAR INDUSTRIES, INC.
1996 STOCK OPTION AND RESTRICTED STOCK PLAN
(As restated April 11, 1997)
1. Purpose of the Plan. Under this 1996 Stock Option and
Restricted Stock Plan (the "Plan") of CRAGAR INDUSTRIES, INC. (the "Company")
options may be granted to eligible employees to purchase shares of the Company's
capital stock and restricted stock may be granted to eligible employees. The
Plan is designed to enable the Company and its subsidiaries to attract, retain
and motivate employees of the Company and its subsidiaries. The Plan provides
for the grant of options which qualify as incentive stock options ("Incentive
Options") under Section 422 of the Internal Revenue Code of 1986, as amended, as
well as options which do not so qualify and for the grant of restricted stock.
2. Stock Subject to Plan. The maximum number of shares of stock
subject to this Plan shall be 300,000 shares of the Company's Common Stock, $.01
par value, subject to the adjustments provided in Sections 6 and 14. Shares of
stock subject to the unexercised portion of any options granted under this Plan
which expire or terminate or are canceled may again be subject to options under
the Plan. However, if stock appreciation rights are granted with respect to any
options under this Plan, the total number of shares of stock for which options
granted under this Plan may thereafter be exercised shall be irrevocably reduced
not only when there is an exercise of an option granted under the Plan, but also
when such option is surrendered upon an exercise of a stock appreciation right
granted under this Plan, in either case by the number of shares covered by the
portion of such option which is exercised or surrendered. When the exercise
price for an option granted under this Plan is paid with previously outstanding
shares or with shares as to which the option is being exercised, as permitted in
Section 9, the total number of shares of stock for which options granted under
this Plan may thereafter be exercised shall be irrevocably reduced by the total
number of shares for which such option is thus exercised, without regard to the
number of shares received or retained by the Company in connection with the
exercise.
3. Eligible Employees. The employees eligible to be considered
for the grant of options hereunder are any persons regularly employed by the
Company or its subsidiaries in a managerial, professional or technical capacity
on a full-time, salaried basis.
4. Exercise Price. The exercise price for each option granted
hereunder as an Incentive Option shall be not less than 100% of the Fair Market
Value (defined hereinbelow) of the stock being optioned at the date of the grant
of the option; provided, however that the exercise price of any Incentive Option
granted to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of Common
Stock of the Company shall be granted at a price that is not less than 110% of
Fair Market Value on the date of grant . The exercise price for an option that
is not an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 85% of the Fair Market Value of the stock
subject to the option.
5. Nontransferability. Except as otherwise permitted by the
Committee, any option granted under this Plan shall by its terms be
nontransferable by the optionee other than by will or the laws of descent and
distribution and shall be exercisable during the optionee's lifetime only by the
optionee or by the optionee's guardian or legal representative
6. Adjustments. If the outstanding shares of stock of the class
then subject to this Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities or other forms
of property (including cash) or rights, as a result of one or more
reorganizations, recapitalizations, spin-offs, stock splits, reverse stock
splits, stock dividends or the like, appropriate adjustments shall be made in
the number and/or kind of shares or securities or other forms of property
(including cash) or rights for which options may thereafter be granted under
this Plan and for which options then outstanding under this Plan may thereafter
be exercised. Any such adjustment in outstanding options shall be made without
changing the aggregate exercise price applicable to the unexercised portions of
such options.
In connection with any reorganization, recapitalization,
spin-off or other transaction in which the outstanding shares of stock of the
class then subject to options outstanding under this Plan are changed into or
exchanged for property (including cash), rights and/or securities other than, or
in addition to, stock of the Company, an outstanding option may under this
Section entitled "Adjustments" be adjusted to become exercisable for either: (a)
the property (including cash), rights and/or securities receivable in that
transaction by a holder of the number and kind of outstanding shares of stock
subject to the option immediately prior to the transaction; or (b) stock of the
Company or of a successor employer corporation, or
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<PAGE> 21
a parent or subsidiary thereof, provided, that (i) such adjustment may preserve
but may not increase any amount by which the Fair Market Value of the stock
subject to the option exceeds the option exercise price, comparing such excess
immediately before and immediately after the transaction, and (ii) such
adjustment may preserve but may not reduce the ratio of the option exercise
price to the Fair Market Value of the stock subject to the option, comparing
such ratio immediately before and immediately after the transaction.
7. Maximum Option Term. No option granted under this Plan may be
exercised in whole or in part more than ten years after its date of grant;
provided, however that no Incentive Option granted to any individual who, at the
date of grant, owns stock possessing more than ten percent of the total combined
voting power of all classes of Common Stock of the Company may be exercised in
whole or part more than five years after its date of grant.
8. Plan Duration. Options may not be granted under this Plan
after May 31, 2006.
9. Payment. Payment for stock purchased upon any exercise of an
option granted under this Plan shall be made in full in cash (including payment
by check) concurrently with such exercise, except that, if and to the extent the
instrument evidencing the option so provides and the Company is not then
prohibited from purchasing or acquiring shares of such stock, such payment may
be made in whole or in part with shares of the same class of stock as that then
subject to the option, delivered in lieu of cash concurrently with such
exercise, the shares so delivered to be valued on the basis of the Fair Market
Value of such class of stock on the date of exercise. If and while payment with
stock is permitted for the exercise of an option granted under this Plan in
accordance with the foregoing provision, the instrument evidencing the option
may also permit the person then entitled to exercise that option, in lieu of
using previously outstanding shares therefor, to use some of the shares as to
which the option is then being exercised.
10. Administration. The Plan shall be administered by the
Company's board of directors (the "Board") or, at the discretion of the Board,
by a committee (the "Committee") of not less than two members of the Board each
of whom shall qualify as a "Non-employee Director" as defined in Rule
16b-3(b)(3) of the Securities Exchange Act of 1934, as amended, or any successor
definition adopted by the Board..
The interpretation and construction by the Committee of any
term or provision of the Plan or of any option granted under it, including
without limitation any determination of adjustments required pursuant to Section
6 hereof, shall be conclusive, unless otherwise determined by the Board in which
event such action by the Board shall be conclusive, and such interpretation and
construction shall be binding upon all those who hold or are eligible to receive
options under the Plan and upon all persons claiming under them. The Board or
Committee may from time to time adopt rules and regulations for carrying out
this Plan and, subject to the provisions of this Plan, may prescribe the form or
forms of the instruments evidencing any option granted under this Plan.
Subject to the provisions of this Plan, the Board or, by
delegation from the Board, the Committee, shall have full and final authority in
its discretion to select the employees to be granted options, to authorize
granting such options and to determine the number of shares to be subject
thereto, the exercise prices, the terms of exercise, expiration dates and other
pertinent provisions thereof.
11. Other Option Provisions. Options granted under this Plan
shall contain such other terms and provisions which are not inconsistent with
this Plan as the Board or Committee may authorize, including but not limited to
(a) vesting schedules governing the exercisability of such options, (b)
provisions for acceleration of such vesting schedules in certain events, (c)
arrangements whereby the Company may fulfill any tax withholding obligations it
may have in connection with the exercise of such options, (d) provisions
imposing restrictions upon the transferability of stock acquired on exercise of
such options, whether required by this Plan or applicable securities laws or
imposed for other reasons, and (e) provisions regarding the termination or
survival of any such option upon the optionee's death, retirement or other
termination of employment and the extent, if any, to which any such options may
be exercised after such event Incentive Options shall contain the terms and
provisions required of them under the Internal Revenue Code. Subject to the
adjustment provision in Section 6, the maximum number of shares subject to
options that may be granted to any one optionee shall be 125,000. Additionally,
subject to the
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<PAGE> 22
adjustment provision in Section 6, the maximum number of shares of Common Stock
that may be granted as Incentive Options shall be 300,000.
12. Stock Appreciation Rights. If the instrument evidencing an
option granted under this Plan so provides, such option may include a stock
appreciation right, entitling the optionee, in lieu of exercising the option or
any portion thereof, to surrender such option in whole or in part in exchange
for a payment equal to the amount by which the Fair Market Value of the stock
subject to that option or portion thereof then exceeds the option exercise price
thereof, which payment may be made, at the Company's discretion, either in cash
or in stock valued at its then current Fair Market Value, or any combination of
such cash and stock; provided, however, no such stock appreciation right may be
exercised unless the stock subject to the option is then Publicly Traded
(defined hereinbelow).
13. Restricted Stock. The Committee may make grants of shares as
restricted stock with such terms and conditions as may be determined in the sole
discretion of the Committee. Shares of restricted stock shall be issued and
delivered at the time of the grant or as otherwise determined by the Committee,
but shall be subject to forfeiture until provided otherwise in the applicable
instrument evidencing the grant or the Plan. Each certificate representing
shares of restricted stock shall bear a legend referring to the Plan and the
risk of forfeiture of the shares and stating that such shares are
nontransferable until all restrictions have been satisfied and the legend has
been removed. At the discretion of the Committee, the grantee may or may not be
entitled to full voting and dividend rights with respect to all shares of
restricted stock from the date of grant. The Committee may (but is not obligated
to) require that any dividends on such shares be automatically deferred and
reinvested in additional restricted stock subject to the same restrictions as
the underlying stock.
Grants of shares of restricted stock shall be made at such
cost as the Committee shall determine and may be issued for no monetary
consideration, subject to applicable state law. Shares of restricted stock shall
not be transferable until after the removal of the legend with respect to such
shares.
14. Corporate Reorganizations. Upon the dissolution or liquidation
of the Company, or upon a reorganization, merger or consolidation of the Company
as a result of which the outstanding securities of the class then subject to
options hereunder are changed into or exchanged for property (including cash),
rights or securities other than the Company, or any combination thereof, or upon
a sale of substantially all the property of the Company to, or the acquisition
of stock representing more than eighty percent (80%) of the voting power of the
stock of the Company then outstanding by, another corporation or person, the
Plan shall terminate, and all options theretofore granted shall terminate,
unless provision be made in writing in connection with such transaction for the
continuance of the Plan and/or for the assumption of options theretofore
granted, or the substitution for such options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments in accordance with Section 6 hereof as to the number and
kind of shares optioned and their exercise prices, in which event the Plan and
options theretofore granted shall continue in the manner and under the terms so
provided. The instrument evidencing any option may also provide for the
acceleration of otherwise unexercisable portions of the option (a) if the option
shall terminate pursuant to the foregoing sentence, such acceleration to become
effective at such time prior to the consummation of the transaction causing such
termination as the Company shall designate, and (b) upon other specified events
or occurrences, such as involuntary terminations of the option holder's
employment following certain changes in the control of the Company.
15. Financial Assistance. The Company is vested with authority
under this Plan to assist any employee to whom an option is granted hereunder
(including any director or officer of the Company or any of its subsidiaries who
is also an employee) in the payment of the purchase price payable on exercise of
that option, by lending the amount of such purchase price to such employee on
such terms and at such rates of interest and upon such security (or unsecured)
as shall have been authorized by or under authority of the Board.
16. Limitations of Rights of Participants.
(a) A person to whom an option is granted under this Plan
shall not have any interest in the optioned shares or in any dividends paid
thereon and shall not have any of the rights or privileges of a stockholder with
respect to such shares, until the certificates therefor have been issued and
delivered to him or her.
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<PAGE> 23
(b) No shares of stock issuable under the Plan shall be
issued and no certificate therefor delivered unless and until, in the opinion of
legal counsel for the Company, such securities may be issued and delivered
without causing the Company to be in violation of or to incur any liability
under any federal, state or other securities law, or any other requirement of
law or of any regulatory body having jurisdiction over the Company.
(c) The receipt of an option does not give the optionee
any right to continued employment by the Company or a subsidiary for any period,
nor shall the granting of the option or the issuance of shares on exercise
thereof give the Company or any subsidiary any right to the continued services
of the optionee for any period.
(d) Nothing contained in this Plan shall constitute the
granting of an option hereunder, which shall occur only pursuant to express
authorization by the Board or the Committee.
17. Amendment and Termination. The Board may alter, amend, suspend
or terminate this Plan, provided that no such action shall deprive an optionee
who has not consented thereto of any option granted to the optionee pursuant to
this Plan or of any of the optionee's rights under such option.
18. Certain Definitions. The terms "Board," "Committee," and
"Incentive Options" have been defined hereinabove. In addition, as used in this
Plan, the following terms shall have the following meanings:
The "Fair Market Value" of corporate stock shall mean:
(1) If the stock is then Publicly Traded: The
closing price of stock of that class as of the day in question (or, if such day
is not a trading day in the principal securities market or markets for such
stock, on the nearest preceding trading days as reported with respect to the
market (or the composite of markets, if more than one) in which shares of such
stock are then traded, or, if no such closing prices are reported, on the basis
of the mean between the high bid and low asked prices that day on the principal
market or quotation system on which shares of such stock are then quoted, or, if
not so quoted, as furnished by a professional securities dealer making a market
in such stock selected by the Board of the Committee.
(2) If the stock is then not Publicly Traded: The
price at which one could reasonably expect such stock to be sold in an arm's
length transaction, for cash, other than on an installment basis, to a person
not employed by, controlled by, in control of or under common control with the
issuer of such stock. Such Fair Market Value shall be that which has currently
or most recently been determined for this purpose by the Board, or at the
discretion of the Board by an independent appraiser or appraisers selected by
the Board, in either case giving due consideration to recent transactions
involving shares of such stock, if any, the issuer's net worth, prospective
earning power and dividend-paying capacity, the goodwill of the issuer's
business, the issuer's industry position and its management, that industry's
economic outlook, the values of securities of issuers whose stock is Publicly
Traded and which are engaged in similar businesses, the effect of transfer
restrictions to which such stock may be subject under law and under the
applicable terms of any contract governing such stock, the absence of a public
market for such bock and such other matters as the Board or its appraiser or
appraisers deems pertinent. The determination by the Board or its appraiser or
appraisers of the Fair Market Value shall, if not unreasonable, be conclusive
and binding notwithstanding the possibility that other persons might make a
different, and also reasonable, determination. If the Fair Market Value to be
used was thus fixed more than sixteen months prior to the day as of which Fair
Market Value is being determined, it shall in any event be no less than the book
value of the stock being valued at the end of the most recent period for which
financial statements of the issuer are available.
Corporate stock is "Publicly Traded" if stock of that class is listed
or admitted to unlisted trading privileges on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. ("NASD") or if
sales or bid and offer quotations are reported for that class of stock in the
automated quotation system (NASDAQ") operated by the NASD.
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<PAGE> 24
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CRAGAR INDUSTRIES, INC.
MAY 16, 1997
A [ X ] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD NOMINEES: Michael L. Hartzmark
1. Election of [ ] [ ] Sidney Dworkin
Directors Mark Schwartz
Donald E. McIntyre
Edward E. Faber
FOR AGAINST ABSTAIN
2. Approval of an amendment to the [ ] [ ] [ ]
Company's Directors' Option Plan.
3. Approval of an amendment to the [ ] [ ] [ ]
Employee Option Plan.
For, except vote withheld from the following nominee(s):
___________________________________________________________
The Board of Directors recommends a vote FOR the nominees,
FOR Proposal 2 and FOR Proposal 3.
CHANGE OF ADDRESS/ [ ]
COMMENTS ON REVERSE SIDE
I PLAN TO [ ] I DO NOT [ ]
ATTEND THE PLAN TO
MEETING ATTEND THE
MEETING
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S)________________________________________________DATE___________
SIGNATURE IF HELD JOINTLY
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 25
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CRAGAR INDUSTRIES, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Michael L. Hartzmark and Michael R. Miller,
or any one of them acting in the absence of the other with full powers of
substitution, the true and lawful attorneys and proxies for the undersigned and
to vote, as designated on the reverse, all shares of Common Stock of CRAGAR
INDUSTRIES, INC. (the "Company") that the undersigned is entitled to vote at
the Annual Meeting of Shareholders (the "Meeting") to be held on Friday, May
16, 1997, at 10:00 a.m., Mountain Standard Time, at 4636 North 43rd Avenue,
Phoenix, Arizona, and at any and all adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote, if then
and there personally present, on the matters set forth on the reverse.
(CONTINUED AND TO BE MARKED, DATED SIGNED, ON THE OTHER SIDE.)
