<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<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, 2000
To our Shareholders:
The 2000 Annual Meeting of Shareholders (the "Annual Meeting") of Cragar
Industries, Inc. (the "Company") will be held at 10 a.m., Mountain Standard
Time, on Monday, May 15, 2000, at 4636 North 43rd Avenue, Phoenix, Arizona,
for the following purposes:
1. To elect five directors to the Board of Directors to serve until
the next Annual Meeting of Shareholders or until their successors
have been elected and qualified; and
2. To increase the number of authorized shares of the Company's
common stock from 5,000,000 to 10,000,000.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Each outstanding share of the Company's Common Stock entitles the holder
of record at the close of business on April 14, 2000 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 1999 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/ Michael L. Hartzmark
------------------------
Phoenix, Arizona Michael L. Hartzmark
April 17, 2000 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>
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, 2000. The enclosed proxy is solicited
by the Board of Directors of the Company. The proxy materials were mailed on
or about April 17, 2000 to shareholders of record at the close of business
on April 14, 2000.
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 Company's outstanding
Common Stock. 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
14, 2000 will be entitled to vote at the Annual Meeting. At that date, there
were 2,456,990 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 Michael R. Miller, all of who are incumbent directors, will
expire at the Annual Meeting. Messrs. Hartzmark, Dworkin, Schwartz,
McIntyre, and Miller 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 is 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.
2
<PAGE>
APPROVAL OF AMENDMENT TO THE COMPANY'S SECOND AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors recommends that the stockholders approve an
amendment to Article 4 of the Company's Second Amended and Restated
Certificate of Incorporation increasing the number of shares of the Company's
authorized Common Stock, $.01 par value per share, from 5,000,000 to
10,000,000. If adopted by the stockholders, the amendment will become
effective upon filing of an appropriate certificate with the Secretary of
State of Delaware.
PURPOSE AND EFFECTS OF PROPOSED AMENDMENT
The proposed amendment would increase the number of shares of Common
Stock which the Company is authorized to issue from 5,000,000 to 10,000,000.
The additional shares of Common Stock authorized by the proposed amendment
will have the same rights and privileges as the shares of Common Stock
currently authorized.
At March 31, 2000, 2,456,990 shares of Common Stock were issued and
outstanding. Currently, the Company needs to reserve at least an additional
2,867,384 shares of Common Stock to cover the Company's previously issued
warrants, options and Convertible Preferred Stock. This amount represents the
number of shares of Common Stock that the Company would be required to issue
if all outstanding warrants and options were exercised and all the Company's
Preferred Stock were converted into the Company's Common Stock as of March
31, 2000. The Board of Directors recommends increasing the number of
authorized shares of Common Stock because, under certain circumstances, the
Company will not be able to issue sufficient shares if all the Company's
outstanding warrants and options are exercised and all shares Preferred Stock
are converted. In addition, the Company might not, without the proposed
increase in authorized shares, be able to issue additional shares of Common
Stock if necessary for mergers or acquisitions, financing transactions, stock
splits or for other corporate purposes without first obtaining the approval
of its stockholders. The proposed increase in the number of authorized shares
of Common Stock affords the Company flexibility to take advantage of business
and financial opportunities without the delay and expense associated with
seeking stockholders approval for the authorization of additional shares of
Common Stock.
If this proposal is approved, all or any of the authorized shares of
Common Stock may be issued without further action by the stockholders, unless
such approval is required by applicable law or regulatory authorities, and
without first offering these shares to the stockholders for subscription. As
a result, the issuance of additional shares of Common Stock might dilute,
under certain circumstances, the ownership and voting rights of existing
stockholders.
Except for the possibility of issuing new shares of Common Stock upon
exercise of outstanding warrants and options and upon conversion of the
Preferred Stock and the exercise of additional options granted to the outside
board of directors the Company has no present arrangements, commitments,
understandings or pending negotiations to issue shares of newly authorized
Common Stock.
The Company has not proposed the increase in the authorized number of
shares of Common Stock with the intention of using the additional shares for
anti-takeover purposes, although the Company could theoretically use the
additional shares to make more difficult or to discourage an attempt to
acquire control of the Company. The Company is not aware of any pending or
threatened efforts to acquire control of the Company.
3
<PAGE>
REQUIRED VOTE
Approval of the proposal to increase the number of authorized shares of
Common Stock by amending the Company's Second Amended and Restated
Certificate of Incorporation requires the affirmative vote of at least a
majority of the shares outstanding on the Record Date. Votes may be cast FOR
or AGAINST the proposal, and stockholders may also ABSTAIN from voting on the
proposal. Abstentions and broker non-votes will be counted as present or
represented for purposes of determining the number of shares outstanding and
entitled to vote on any proposal. However, because shares represented by
abstentions or broker non-votes are considered outstanding, as a practical
matter, abstentions and broker non-votes will have the same affect as a vote
AGAINST the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT TO THE COMPANY'S SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK TO 10,000,0000 FROM 5,000,000.
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. 44 Treasurer, Chief Executive Officer,
and Director
Sidney Dworkin(1)(2) 78 Director
Mark Schwartz(1)(2) 49 Director
Donald E. McIntyre(1)(2) 75 Director
Michael R. Miller 41 President, Secretary, Chief Operating
Officer, and Director
Richard P. Franke 43 Chief Financial 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. He relinquished the
Presidency of the Company in November 1999. 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.
4
<PAGE>
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
1997, he was also interim CEO at Capital Electric Group, Inc.. 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
is also serving as Chairman of the Board, CEO and President of American
Business Finance Corp., a privately-held company engaged in the business of
factoring commercial accounts receivable. Mr. McIntyre holds a B.S. from Iowa
State University and attended post-graduate courses at Michigan State
University and Drake.
MICHAEL R. MILLER joined the Company as its Chief Operating Officer in
November 1996 after serving as a consultant to the Company for three months.
Mr. Miller was appointed President of the Company in November 1999. He has
over 17 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 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.
RICHARD P. FRANKE became the Company's Chief Financial Officer on
January 1, 1999 after serving as a consultant to the Company for the previous
three months. From 1994 to 1998, Mr. Franke was employed as Chief Operating
Officer/Chief Financial Officer for Infinity2, Inc., an international network
marketing company, Chief Operating Officer/Chief Financial Officer for
Capital Electric Group, Inc., an electrical wholesale distributor, and as a
consultant and Chief Financial Officer for Inter Pipe, Inc., a specialty
truck manufacturer. Prior to 1994, Mr. Franke was the Chief Financial
Officer at B&K Steel Fabrications, Inc., a regional steel fabricator located
in the southwestern United States. Mr. Franke holds a B.S. in Accounting from
Arizona State University and is licensed as a Certified Public Accountant in
Arizona.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1999, the Board of Directors of the
Company met or acted by written consent on four occasions. Each of the
Company's directors attended all of the meetings of the Board of Directors.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors, which met four times during 1999, 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 Messrs. Dworkin, Schwartz, and McIntyre.
5
<PAGE>
AUDIT COMMITTEE. The Audit Committee, which met four times during 1999,
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 Messrs. Dworkin,
Schwartz, and McIntyre.
EXECUTIVE COMMITTEE. The Executive Committee, which met several times
during 1999, 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 Messrs. Hartzmark, Miller, and McIntyre.
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 three fiscal years ended
December 31, 1999, 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 1999 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual
Compensation Long Term Compensation
------------------------------------------------------------
Securities
Name and Underlying
Principal Position Year Salary Bonus Stock Options
------------------ ----- ------ ----- --------------
<S> <C> <C> <C> <C>
Michael L. Hartzmark 1999 $113,300 --- 30,000
Chief Executive Officer 1998 $122,300 --- 40,000(1)
1997 $125,000 --- 20,000(2)
Michael R. Miller 1999 $108,300 --- 30,000
President, Secretary & 1998 $111,530 --- 25,000(1)
Chief Operating Officer 1997 $ 99,999 $20,000 17,000(2)
</TABLE>
(1) These figures represent the options originally granted in prior years
(See footnote (2) below). In accordance with Securities and Exchange
Commission rules, these options are reported as options granted during
fiscal year 1998 as a result of the repricing of these options on
November 12, 1998.
(2) Each option was originally exercisable at $5.125 to purchase one share
of Common Stock, which was the fair market value on the date of the
grant. These options were repriced in November 1998. See (1) above.
OPTION GRANTS IN LAST FISCAL YEAR
On May 21, 1999, the Company granted options to purchase 10,000 shares
of the Company's Common Stock at an exercise price of $3.75 per share, which
was the fair market price of the Company's Common Stock on the date of grant,
to both Messrs. Hartzmark and Miller. These options vest to the option holder
ratably over a three year period.
6
<PAGE>
On November 15, 1999, the Company granted options to purchase 20,000 shares
of the Company's Common Stock at an exercise price of $3.00 per share, which
was the fair market price of the Company's Common Stock on the date of grant,
to both Messrs. Hartzmark and Miller. These options vest to the option holder
ratably over a three year period.
The Company does not maintain an option or other stock-based plan that
provides for the grant of stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
The following table sets forth information concerning the value of each
Named Executive Officer's unexercised options at December 31, 1999. None of
the Named Executive Officers exercised any stock options in 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired December 31, 1999 (#) December 31, 1999 ($)
On Value ----------------------------- ------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----- ---------- --------- ------------ ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hartzmark
Chief Executive Officer - - 40,000 30,000 - $5,000
Michael R. Miller
President, Secretary & - - 25,000 30,000 - $5,000
Chief Operating Officer
</TABLE>
- ---------------------------
Options are considered "in the money" if the fair market value of the
underlying securities exceeds the exercise price of the options. At December
31, 1999, 20,000 of the options held by each of the Named Executive Officers
were in the money.
EMPLOYMENT AGREEMENTS
The Company has employment agreements in place with respect to Michael
Miller and Richard Franke. Terms of the Employment Agreements relate to
non-competition, acceptable behavior and requirements of confidentiality.
DIRECTOR COMPENSATION
In lieu of monetary compensation, the Company grants all non-employee
directors options to purchase 2,000 shares of the Company's Common Stock at
an exercise price equal to the Company's closing Common Stock price on the
day of grant for attendance at each of the Company's quarterly and annual
meetings of directors. 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, Don McIntyre, and Mark Schwartz were each
granted options in M ay 1999 to purchase 2,000 shares for a period of 10
years at an exercise price of $3.750 per share.
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
7
<PAGE>
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.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, 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 each of the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, has 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)(10) 127,133 5.10%
Michael R. Miller(10) 25,000 1.01%
Mark Schwartz(5)(10) 280,358 10.72%
Sidney Dworkin(6)(10) 658,760 23.58%
Donald McIntyre(10) 18,000 .73%
Harry Schwartz(7) 270,791 10.43%
Dolores Hartzmark(8) 147,098 5.91%
Lee Hartzmark(9) 293,553 10.73%
All executive officers and directors
as a group (six persons)(11) 1,114,919 36.16%
</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 day s 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 2,456,990 shares outstanding on March
31, 2000.
(4) Includes 33,333 shares purchasable upon exercise of options, and 31,960
shares owned by MDA Financial, Inc. of which Mr. Hartzmark is a
beneficial owner.
(5) Includes 20,100 shares purchasable upon exercise of options, 39,287
shares purchasable upon the exercise of various warrants, and 102,223
purchasable upon conversion of Series A Convertible Preferred Stock at
$2.80 per share.
(6) Includes 19,400 shares purchasable upon exercise of options, 10,533
shares owned by CN Partners of which Mr. Dworkin is a one-fifth
beneficial owner, 115,324 shares purchasable upon the exercise of
various warrants, and 204,446 shares purchasable upon conversion of
Series A Convertible Preferred Stock at $2.80 per share.
(7) Includes 10,533 shares owned by CN Partners of which Mr. Schwartz is a
one-fifth beneficial owner, 39,287 shares purchasable upon exercise of
various warrants, and 204,446 shares purchasable upon conversion of
Series A Convertible Preferred Stock at $2.80 per share.
(8) Includes 36,750 shares purchasable upon exercise of various warrants.
8
<PAGE>
(9) Includes 10,533 shares owned by CN Partners of which Mr. Hartzmark is a
one-fifth beneficial owner, 78,574 shares purchasable upon the exercise
of various warrants, and 169,393 shares purchasable upon conversion of
Series A Convertible Preferred Stock at $2.80 per share.
(10) Includes director and employee options currently owned that have vested
or will vest as of May 31, 2000.
(11) Includes Messrs. Dworkin, M. Schwartz, M. Hartzmark, McIntyre, Miller,
and Franke.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
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 Messrs. Lee Hartzmark, Mark Schwartz, Harry
Schwartz, and 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 Preferred Stock. Officers, directors and
family members who purchased or converted debt for Series A Preferred Stock
are listed below.
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
Sidney Dworkin 5,438
Lee Hartzmark 5,438
Mark Schwartz 2,719
Harry Schwartz 2,719
</TABLE>
During August 1998, the Company agreed to grant warrants to Messrs.
Dworkin, L. Hartzmark, and M. Schwartz as consideration for providing debt
financing to the Company in the aggregate principal amount of $900,000 during
December 1997 and January 1998. For each $100,000 loaned to the Company, the
Company agreed to grant warrants to purchase 1,500 shares of Common Stock at
an exercise price of $3.00 per share. The principal amounts of these loans
were subsequently converted into 9,000 shares of Series A Preferred Stock.
In addition, during 1998, the Company agreed to grant warrants to Mr.
Sidney Dworkin and Mrs. Dolores Hartzmark, each of whom pledged assets to
secure the Company's obligations under the Loan and Credit Agreement with
NationsCredit Commercial Funding. The Company agreed to grant warrants to
purchase 7,000 shares of Common Stock for each $100,000 in value of assets
pledged on an annual basis, which warrants will be exercisable at an exercise
price equal to the price of the Company's Common Stock on the date of grant.
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, 1999.
9
<PAGE>
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The Company changed its independent public accounting firm during 1999.
The Company terminated its relationship with KPMG and engaged the services of
Semple & Cooper, LLP, as its principal independent accounting firm (the
"Auditors"). A representative of the Auditors will be available during 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 2000 Annual Meeting must be
received by the Company no later than January 5, 2001 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
Chief Executive Officer
April 17, 2000
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