<PAGE>
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 Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CRAGAR INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (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:
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(4) Date Filed:
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<PAGE>
CRAGAR INDUSTRIES, INC.
4636 NORTH 43RD AVENUE
PHOENIX, ARIZONA 85031
------------------------
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1998
------------------------
To our Shareholders:
The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of Cragar
Industries, Inc. (the "Company") will be held at 10 a.m., Pacific Standard Time,
on Friday, May 15, 1998, at 4636 North 43rd Avenue, Phoenix, Arizona, for the
following purposes:
1. To elect four directors to the Board of Directors to serve for a
one-year term; and
2. 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 17, 1998 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
Michael L. Hartzmark
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Phoenix, Arizona
April 22, 1998
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>
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 15, 1998. The enclosed proxy is solicited by the Board of Directors
of the Company. The proxy materials were mailed on or about April 22, 1998 to
shareholders of record at the close of business on April 17, 1998.
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 17,
1998 will be entitled to vote at the Annual Meeting. At that date, there were
2,453,990 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, and McIntrye 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. Following the Annual Meeting, the Board seat currently held by Mr.
Faber, who will not seek re-election, will remain vacant. The Company is
currently evaluating prospective nominees and anticipates that a new director
will be appointed by a vote of the majority of the Board to serve until the
Company's next annual meeting.
2
<PAGE>
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.
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......... 42 President, Treasurer, Chief Executive Officer, and Director
Sidney Dworkin(1)(2)............... 76 Director
Mark Schwartz(1)(2)................ 47 Director
Donald E. McIntyre(1)(2)........... 73 Director
Edward E. Faber(1)(2)(3)........... 65 Director
Anthony W. Barrett................. 49 Vice President of Sales Operations
Michael R. Miller.................. 39 Secretary and Chief Operating Officer
Michael G. Burroughs............... 46 Executive Vice President
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Will not seek re-election
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.
3
<PAGE>
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 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., Salgene Corp., Cotelligent Systems, Inc., Great
American Backrub Stores, and Pnoenix 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 Form Rite 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.
MICHAEL G. BURROUGHS joined the Company in April 1997. He has over 20 years
of marketing experience in the automotive aftermarket. From 1996 to 1997 he
served as Vice President for Relco Corporation. Prior to that he was President
of Burroughts & Associates, a marketing and advertising firm specializing in the
automotive aftermarket. Mr. Burroughs earned his undergraduate degree at UCLA
and holds a Master of Business Administration from University of Southern
California.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1997, the Board of Directors of the
Company met or acted by written consent on eight occasions. Each of the
Company's directors attended more than 75% of the meetings of the Board of
Directors.
4
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors, which met four times during 1997, 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 met four times during 1997,
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 met several times
during 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
consisted of Mssrs. Hartzmark, Faber, and McIntrye.
5
<PAGE>
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 1997 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------
---------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
- ------------------------------------- --------- ---------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hartzmark................. 1997 $ 125,000 -- -- 20,000(2) --
President & Chief 1996 $ 110,000 -- -- 20,000(1) --
Executive Officer 1995 $ 96,000 -- -- -- --
Michael Miller....................... 1997 $ 99,999 $ 20,000 -- 17,000(2) --
1996 $ 99,999 8,000(1)
Michael Burroughs.................... 1997 $ 120,000 -- -- 25,000(2) --
</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.
(2) Each option is exercisable at $5.125 to purchase one share of Common Stock,
which was the fair market value on the date of grant.
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, 1997 to the Named Executive
Officers.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SECURITIES % OF TOTAL OPTIONS PRICE
UNDERLYING GRANTED TO EMPLOYEES IN (PER
NAME OPTIONS GRANTED FISCAL YEAR SHARE)(1) EXPIRATION DATE
- -------------------------------------- ------------------- ----------------------- ------------- ---------------
<S> <C> <C> <C> <C>
Michael L. Hartzmark.................. 20,000 16.6% $ 5.125 May 16, 2002
President & Chief
Executive Officer
Michael Miller........................ 17,000 14.1% $ 5.125 May 16, 2002
Michael Burroughs..................... 25,000 20.8% $ 5.125 May 16, 2002
Anthony Barrett....................... 17,000 14.1% $ 5.125 May 16, 2002
</TABLE>
- ------------------------
(1) All options were granted with an exercise price equal to the fair market
value on the date of grant.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AS OF DECEMBER
31, 1997
The following table sets forth information with respect to the exercise and
value of stock options issued during the fiscal year ended December 31, 1997, to
the Named Executive Officers.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END ($)
SHARES ACQUIRED ON -------------------------- -----------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------- --------------------- --------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Michael L. Hartzmark........... 0 20,000 20,000 0
President & Chief
Executive Officer
Michael Miller................. 0 2,667 22,333 0
Michael Burroughs.............. 0 5,000 20,000 0
Anthony Barrett................ 0 2,167 21,333 0
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------- -------------------
<S> <C>
Michael L. Hartzmark........... 0
President & Chief
Executive Officer
Michael Miller................. 0
Michael Burroughs.............. 0
Anthony Barrett................ 0
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements in place with respect to Michael
Miller, Michael Burroughs and Anthony Barrett. With respect to Mr. Burroughs,
the Company has terminated his employment effective April 23, 1998 and will pay
him severance over the next 12 months. No other severance arrangements exist
with the other Employment Agreements. Terms of the Employment Agreements relate
to non-competition, acceptable behavior and requirements of confidentiality.
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.
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, Sidney Dworkin, Edward Faber, Don McIntrye and Mark Schwartz were granted
options in May 1997 to purchase 5,300 shares each.
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.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, 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 OF SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) TOTAL(3)
- ------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Michael L. Hartzmark, Ph. D.(4).......................................... 100,468 4.09%
Mark Schwartz(5)......................................................... 149,070 6.07%
Sidney Dworkin(6)........................................................ 371,435 15.14%
Harry Schwartz(7)........................................................ 167,504 6.83%
Donald E. McIntrye....................................................... 5,300 0.02%
Ed Faber................................................................. 5,300 0.02%
Anthony Barrett(8)....................................................... 2,667 0.01%
Michael Miller(8)........................................................ 2,167 0.01%
Michael Burroughs(8)..................................................... 5,000 0.01%
All executive officers and directors as a group (nine persons)........... 808,911 32.96%
</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 2,453,990 shares outstanding on March 31, 1998.
(4) Includes 31,960 shares owned by MDA Financial, Inc. of which Mr. Hartzmark
is a beneficial owner; and 20,000 shares purchasable upon exercise of
options.
(5) Includes 8,100 shares purchasable upon exercise of options, and 22,222
shares purchasable upon exercise of Warrants from the Series A Preferred
Stock private placement. (Does not include 1,500 shares of Series A
Preferred Stock).
(6) Includes 7,400 shares purchasable upon exercise of options, 10,533 shares
owned by CN Partners of which Mr. Dworkin is a one-fifth beneficial owner,
and 44,444 shares purchasable upon exercise of Warrants from the Series A
Preferred Stock private placement. (Does not include 3,000 shares of Series
A Preferred Stock).
(7) Includes 10,533 shares owned by CN Partners of which Mr. Schwartz is a
one-fifth beneficial owner, and 22,222 shares purchasable upon exercise of
Warrants from the Series A Preferred Stock private placement. (Does not
include 1,500 shares of Series A Preferred Stock).
(8) Includes employee or director options which have vested or will vest by May
31, 1998.
7
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
On September 30, 1996, the Company agreed to convert a $350,000 promissory
note held by Sidney Dworkin 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.
From January to March 1998, the Company raised $2.25 million from a private
placement of 22,500 shares of Series A Convertible Preferred Stock ("Series A
Preferred Stock") and related Warrants. The private placement was made to a
group of accredited investors and included the conversion of $900,000 of
existing debt held by Mr. Lee Hartzmark, Mr. Mark Schwartz and Mr. Sidney
Dworkin into equity.
Holders of Series A Preferred Stock are entitled to receive cumulative
dividends equal to 7% per annum on the Stated Value of the Series A Preferred
Stock ($100 per share).
In connection with the issuance of the Series A Preferred Stock, the Company
also granted Warrants to the holders of the Series A Preferred Stock to acquire
up to 333,333 shares of the Company's Common Stock at an exercise price of $8.10
per share or 15 warrants per $100 investment. The Warrants may be exercised at
any time on or before January 23, 2001, three years after the date of issuance
of the Series A
8
<PAGE>
Preferred Stock. Officers, directors and family members who purchased Series A
Preferred Stock are listed below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------
<S> <C>
Sidney Dworkin............................................................. 3,000
Lee Hartzmark.............................................................. 3,000
Mark Schwartz.............................................................. 1,500
Harry Schwartz............................................................. 1,500
</TABLE>
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.
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,
1997.
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal year ended December 31, 1997 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, 1999 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.
Michael L. Hartzmark
PRESIDENT AND CHIEF EXECUTIVE OFFICER
April 22, 1998
9
<PAGE>
CRAGAR INDUSTRIES, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 15, 1998, 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 AND SIGNED, ON THE OTHER SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
CRAGAR INDUSTRIES, INC.
MAY 15, 1998
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<S><C>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------------------------------------------
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD NOMINEES:
1: Election of Michael L. Hartzmark Change of Address/
Directors / / / / Sidney Dworkin Comments on reverse side / /
Mark Schwartz
For: except vote withheld from the Donald E. McIntyre I plan to I do not plan
following nominee(s) attend to attend
the meeting / / the meeting / /
- --------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S) DATE
------------------------------------------- ------------------------------------ ------------
SIGNATURES 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.
</TABLE>
