<PAGE>
CONSOLIDATED PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 21, 1996
TO THE SHAREHOLDERS OF CONSOLIDATED PRODUCTS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Consolidated Products, Inc. will be held at the Company's Corporate Office, 400
Century Building, 36 South Pennsylvania Street, Indianapolis, Indiana 46204 on
Wednesday, February 21, 1996 at 1:30 p.m., Eastern Standard Time, for the
following purposes:
1. To elect eight directors to serve until the next Annual Meeting
of Shareholders and until their respective successors shall be
elected and qualified.
2. To act upon the approval of the Company's 1996 Nonemployee
Director Stock Option Plan, as adopted by the Board of Directors.
3. To act upon the approval of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 25,
1996, as recommended by the Board of Directors.
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on December 29,
1995, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting.
We urge you to date, sign and mail the enclosed proxy in the envelope
provided whether or not you expect to be present in person. You may revoke the
proxy at any time prior to the time the proxy is exercised by filing with the
Secretary of Consolidated Products, Inc. a properly executed instrument revoking
such proxy, or by filing a properly executed proxy bearing a later date, or by
attending the Annual Meeting and withdrawing your proxy and voting in person.
By Order Of The Board of Directors
S. Sue Aramian, Secretary
January 15, 1996
Indianapolis, Indiana
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE
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3
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CONSOLIDATED PRODUCTS, INC.
500 Century Building
36 South Pennsylvania Street
Indianapolis, Indiana 46204
(317) 633-4100
PROXY STATEMENT
For Annual Meeting of Shareholders
To be Held February 21, 1996
This proxy statement is furnished to the shareholders of Consolidated
Products, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of the Company of proxies to be voted at the Annual Meeting of
Shareholders to be held at the Company's Corporate Office, 400 Century Building,
36 South Pennsylvania Street, Indianapolis, Indiana 46204, on Wednesday,
February 21, 1996, at 1:30 p.m., Eastern Standard Time, and at any adjournment
thereof. This proxy statement and the accompanying form of proxy were first
mailed to shareholders on or about January 15, 1996.
Each properly executed proxy returned prior to the meeting will be voted in
accordance with the directions contained therein. The enclosed proxy may be
revoked by the person giving it at any time before it is voted by giving written
notice to the Secretary of the Company.
OUTSTANDING COMMON STOCK
The record date for shareholders entitled to vote at the Annual Meeting is
December 29, 1995. At the close of business on that date, the Company had
issued and outstanding and entitled to vote at the meeting _________ shares of
Common Stock, which includes the 10% stock dividend declared by the Board of
Directors on December 12, 1995, to shareholders of record on December 22, 1995.
Unless otherwise stated, all references herein to shares of Common Stock of the
Company have been adjusted to reflect the 10% stock dividend.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) FOR the election as directors of the Company of the
eight persons named under the caption "Election of Directors," (ii) FOR the
approval of the 1996 Nonemployee Director Stock Option Plan, (iii) FOR the
approval of the selection by the Board of Directors of the Company of the firm
of Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending September 25, 1996, and (iii) at the discretion of the proxy holders on
any other matter that may properly come before the meeting or any adjournment
thereof.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
annual meeting. In deciding all questions, a holder of Common Stock is entitled
to one vote, in person or by proxy, for each share registered in his/her name on
the record date. Directors of the Company are elected by a plurality of the
votes cast by the holders of the shares represented at the meeting.
Abstentions, broker non-votes and instructions on the enclosed form of proxy to
withhold authority to vote for one or more of the nominees will result in the
nominee receiving fewer votes; however, the number of votes received for
purposes of the quorum will not be reduced by such action. Other matters coming
before the shareholders will be approved if the number of shares voted in favor
of the proposal exceeds the number of shares voted against the proposal. Only
votes cast for or against the proposals will be counted.
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for presentation at the Annual
Meeting of Shareholders in 1997 must be received by the Company by September 13,
1996.
MISCELLANEOUS
The entire cost of soliciting proxies will be paid by the Company. In
addition to the solicitation of proxies by the use of mails, certain officers,
directors and employees of the Company, none of whom will receive additional
compensation therefor,
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may solicit proxies by telephone, telegraph or personal interview at the expense
of the Company. The Company will also request brokers, dealers, banks and
voting trustees, and their nominees, to forward this proxy statement and the
accompanying form of proxy to beneficial owners and will reimburse such record
holders for their reasonable expense in forwarding solicitation material.
1. ELECTION OF DIRECTORS
Eight directors will be elected to serve until the next Annual Meeting and
until their respective successors shall have been duly elected and qualified.
Each of the nominees named below is currently a director of the Company and each
was elected at the Annual Meeting of Shareholders held February 22, 1995.
At the time of the Annual Meeting, if any of the nominees named below is
not available to serve as a director (an event which the Board of Directors does
not now anticipate), the proxies will be voted for the election as directors of
such other person or persons as the Board of Directors may designate, unless the
Board of Directors, in its discretion, amends the Company's By-Laws to reduce
the number of directors.
The name, age, tenure as a director of this Company and business background
for at least the last five years of the nominees for election are set forth
below:
Served As
Name Age Director Since Business Experience
- ---- --- -------------- -------------------
S. Sue Aramian 63 1981 Vice Chairwoman of the Company
since 1990 and Secretary since
August 9, 1995; Vice President
of the Company from 1984 to 1990
and a Managing General Partner of
Kelley & Partners, Ltd. since
1974.
Alva T. Bonda 78 1982 Former member of the Ohio Board
of Regents; Former member of the
Board of Directors of MCI
Communications Corp; General
Partner of Kelley & Partners,
Ltd.
Neal Gilliatt 78 1991 Marketing consultant; Former
Chairman of Executive Committee
and Emeritus Director,
Interpublic Group of Companies,
Inc.; Member of the Boards of
Directors of Chemed Corporation,
National Sanitary Supply Company,
Roto-Rooter, Inc., and Kubin-
Nicholson Corporation.
Alan B. Gilman 65 1992 President since July 13, 1992 and
Chief Executive Officer of the
Company beginning October 1,
1992; Consultant to the Company
from February 3, 1992 to July 12,
1992; Private investor from 1985
to 1992.
E. W. Kelley 78 1981 Chairman of the Company since
1984; Since 1974, Managing
General Partner of Kelley &
Partners, Ltd.; Member of the
Board of Directors of Comstock
Strategy Fund, Inc.
Charles E. Lanham 63 1971 Chairman, Klipsch, Lanham &
Associates, Inc.; Vice Chairman
of the Board of Directors of
Overhead Door Company of
Indianapolis, Inc.; Member of the
Board of Directors of Capital
Industries, Inc.
J. Fred Risk 67 1971 Chairman of the Board of
Directors of Sovereign Group,
Inc. since 1980; Member of the
Board of Directors of Capital
Industries, Inc.
James Williamson, Jr. 64 1985 Former President and Chief
Executive Officer of the Company
from April 1985 to July 31,
1990; General Partner of Kelley &
Partners, Ltd. since April 1985.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors, which held six meetings during fiscal 1995, has
five standing committees: an Executive Committee, a Personnel/Benefits
Committee, an Audit Committee, a Stock Option Committee and an Employee Stock
Purchase Committee.
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The Executive Committee may exercise, when the Board of Directors is not in
session, substantially all of the powers of the Board of Directors in the
management and affairs of the Company to the extent permitted by law. The
Executive Committee also performs the functions of a compensation committee in
setting guidelines for the administration of salaries and making recommendations
for officers' salaries, administering incentive compensation plans, including
awards under the Company's Capital Appreciation Plan, and otherwise determining
compensation levels. See "Report of the Executive Committee" elsewhere in this
proxy statement. During the fiscal year ended September 27, 1995, the Executive
Committee met eleven times. Mr. Kelley serves as Chairman and Messrs. Risk and
Williamson serve as members of the Executive Committee.
The Audit Committee, among other duties, serves in an oversight role
intended to assure the integrity and objectivity of the Company's financial
reporting process. The Committee meets periodically with representatives of
management and the independent auditors to review matters of a material nature
related to auditing, financial reporting, internal accounting controls and audit
results. The Audit Committee is also responsible for making recommendations to
the Board of Directors covering the selection of the Company's independent
auditors. During the fiscal year ended September 27, 1995, the Audit Committee
met once. Mr. Bonda serves as Chairman of the Committee and Messrs. Lanham and
Williamson serve as members.
The Stock Option Committee directs the administration of the Company's
various employee stock option plans in accordance with the terms of the plans.
Mr. Risk serves as Chairman of the Committee and Messrs. Bonda and Gilliatt are
members of the Committee.
The Personnel/Benefits Committee recommends personnel policies and employee
benefit plans, administers the Company's profit sharing plan, including the
establishment of investment guidelines related thereto, and performs such other
functions with respect to personnel and benefit plan matters as may be requested
by the Board of Directors. The Personnel/Benefits Committee met once during
fiscal 1995. Ms. Aramian is Chairwoman of the Committee, and Messrs. Lanham,
Gilliatt and Gilman are members, together with Mr. Bear, Senior Vice President,
Administration and Finance, and Treasurer; Mr. Hawes, Vice President, Human
Resources and Ms. Boog, Assistant Vice President, Administration.
The Employee Stock Purchase Committee directs the administration of the
Company's Employee Stock Purchase Plan in accordance with the terms of the Plan.
Mr. Risk serves as Chairman of the Committee and Messrs. Bonda and Bear are
members of the Committee.
No director attended less than 80% of the aggregate of (1) the total
meetings of the Board of Directors, and (2) the total number of meetings held by
all committees of the Board on which he or she served.
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OWNERSHIP OF SECURITIES
The following table shows the total number of shares of Common Stock
beneficially owned as of December 29, 1995, and the percentage of Common Stock
so owned as of that date, with respect to each person who is known to be the
beneficial owner of more than 5% of the Common Stock of the Company.
Amount and
Nature Of
Beneficial Percent
Name & Address of Beneficial Owner Ownership (1)(2) Of Class
- ---------------------------------- --------- --------
E. W. Kelley . . . . . . . . . . . . . . . . . . . (3)
131 Woden Way, S.E.
Winter Haven, FL 33884
Kelley & Partners, Ltd.. . . . . . . . . . . . . .
36 South Pennsylvania Street, Suite 550
Indianapolis, IN 46204
Fidelity Management & Research . . . . . . . . . .
82 Devonshire Street
Boston, MA 02109
____________________
(1) This table is based upon information supplied by directors and executive
officers and Schedules 13D and 13G, if any, filed with the Securities and
Exchange Commission.
(2) Includes shares which may be acquired pursuant to stock options exercisable
within 60 days under the Company's stock option plans. See "Aggregated Stock
Option Exercises in Fiscal 1995 and Fiscal Year End Option Values."
(3) Includes 37,280 shares which may be acquired pursuant to stock options
exercisable within 60 days; 574,382 shares owned directly by Mr. Kelley;
1,326,002 shares owned of record and beneficially by Kelley & Partners, Ltd., a
limited partnership of which E. W. Kelley is a Managing General Partner; 432,345
shares owned of record and beneficially by Kelley, Inc., 176,162 shares owned of
record and beneficially by King Cola, Inc. of which Mr. Kelley is Chairman, and
16,412 shares owned of record and beneficially by KAHM, Inc., which is
controlled by E. W. Kelley.
The following table shows the total number of shares of Common Stock
beneficially owned as of December 29, 1995, and the percentage of Common Stock
so owned as of that date, with respect to (i) each director, (ii) each executive
officer named in the Summary Compensation Table below, and (iii) all directors
and executive officers as a group:
Amount and
Nature Of
Beneficial Percent
Name & Address of Beneficial Owner Ownership(1) Of Class
- ---------------------------------- --------- --------
S. Sue Aramian (2)(3)(4)
James W. Bear (5)
Alva T. Bonda (3)(6)
Neal Gilliatt (7)
Alan B. Gilman (8)
E. W. Kelley (3)(4)(9)
Charles E. Lanham (10)
Gary T. Reinwald (11)
J. Fred Risk (12)
James Williamson, Jr. (3)(13)
All directors and executive officers
as a group (19) (14)
* Less than 1%
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(1) Includes shares which may be acquired pursuant to stock options exercisable
within 60 days under the Company's stock option plans.
(2) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days.
(3) Includes ______ shares owned of record and beneficially by Kelley &
Partners, Ltd., of which Mr. Kelley and Ms. Aramian are Managing General
Partners and Messrs. Bonda and Williamson are General Partners.
(4) Includes ______ shares owned of record and beneficially by King Cola,
Inc., of which Mr. Kelley and Ms. Aramian are officers and directors.
(5) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes ______ shares owned of record
and beneficially held by Mr. Bear's wife, with respect to which he
disclaims beneficial ownership.
(6) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes ______ shares owned of record
and beneficially by Mr. Bonda's wife, with respect to which he disclaims
beneficial ownership.
(7) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes ______ shares owned of record
and beneficially by Mr. Gilliatt's wife, with respect to which he disclaims
beneficial ownership.
(8) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days.
(9) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days and ______ shares owned of record or
beneficially by Mr. Kelley and his affiliates, Kelley, Inc. and KAHM, Inc.
(10) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes ______ shares owned by Mr.
Lanham's wife, with respect to which he disclaims beneficial ownership.
(11) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days.
(12) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days.
(13) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days. Also includes ______ shares owned of record
and beneficially by Mr. Williamson's wife, with respect to which he
disclaims beneficial ownership.
(14) Includes ______ shares which may be acquired pursuant to stock options
exercisable within 60 days held by all directors and officers as a group.
Section 16(a) of the Securities Exchange Act of 1934 sets forth certain
filing requirements relating to securities ownership by directors, executive
officers and ten percent shareholders of a publicly held company. To the
Company's knowledge, based on written representations of its directors and
executive officers and copies of their respective reports filed with the
Securities and Exchange Commission, all filing requirements were satisfied by
each such person during the fiscal year ended September 27, 1995.
8
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors receive an annual fee of $14,000 plus $1,400 per board meeting
and $700 per committee meeting attended. Mr. Risk is paid an additional annual
fee of $3,500 for services as a member of the Executive Committee. Directors
who are officers of the Company are not paid for their services as directors.
In the fiscal year ended September 27, 1995, the total compensation paid to
nonemployee directors was $140,800. Ordinary and necessary expenses of members
of the Board of Directors incurred in attending board and committee meetings are
paid by the Company.
The Company's 1991, 1994 and 1995 Nonemployee Director Stock Option Plans,
(the "1991 Plan," "1994 Plan," and "1995 Plan" respectively), provide for the
non-discretionary grant of nonqualified stock options to nonemployee directors
of the Company and its subsidiaries at a price equal to the fair market value of
the Common Stock on the date of grant. Options outstanding under the Plans are
exercisable as to 20% on the date of grant and 20% on each anniversary of the
date of grant thereafter until fully exercisable. The options expire five years
from the date of grant. The following information regarding shares granted
under the 1991 Plan, the 1994 Plan and the 1995 Plan has been adjusted to
reflect stock dividends, including the dividend payable to shareholders of
record as of December 22, 1995.
Options for the purchase of an aggregate of 45,094 shares of Common Stock
were issued pursuant to the 1991 Plan, which was approved by the shareholders on
February 18, 1992. The current option price, after adjustment to reflect stock
dividends, for all of the unexercised options granted pursuant to the 1991 Plan
is $3.03 per share. As of December 31, 1995, the members of the Board of
Directors of the Company holding unexercised options were Messrs. Bonda and
Lanham, each of whom holds an option to purchase 8,053 shares; Mr. Cronin, who
holds an option to purchase 4,831 shares; and Messrs. Williamson, Risk and
Gilliatt each of whom holds options to purchase 3,220 shares. On December 14,
1992, Mr. Gilliatt exercised an option under the 1991 Plan with respect to 2,200
shares at an option price of $4.43 per share, and on January 10, 1994, he
exercised an option under this Plan with respect to 1,331 shares at an option
price of $3.66. On December 30, 1993, Mr. Williamson exercised an option under
the 1991 Plan for 3,630 shares at an option price of $4.03 per share; and on May
26, 1994, Mr. Risk exercised an option under the 1991 Plan with respect to 3,993
shares at an option price of $3.66 (Note that these exercise prices do not
reflect adjustment for any stock dividends declared subsequent to the exercise
date.) No other options granted under this Plan were exercised.
Options for the purchase of an aggregate of 35,937 shares of Common Stock
were issued pursuant to the 1994 Plan, which was approved by the shareholders on
February 23, 1994. As of December 31, 1995, Messrs. Bonda, Gilliatt, Lanham,
Risk and Williamson hold options to purchase 6,655 shares each, and Mr. Cronin,
nonemployee director of a subsidiary, holds an option to purchase 2,662 shares,
at an option price of $7.42 per share. No options granted under this Plan have
been exercised.
Options for the purchase of an aggregate of 30,250 shares of Common Stock
were issued pursuant to the 1995 Plan, which was approved by the shareholders on
February 22, 1995. As of December 31, 1995, Messrs. Bonda, Gilliatt, Lanham,
Risk and Williamson hold options to purchase 6,050 shares each at an option
price of $8.35 per share. No options granted under this plan have been
exercised.
The Company has consultant agreements with Messrs. Williamson and Gilliatt
for certain administrative and marketing services at an annual consultant fee of
$12,000 each, subject to termination by the Company at any time.
MANAGEMENT RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1995, the Company paid $180,000 to Kelley & Partners, Ltd.
("KPL") for management and administrative services and certain office expenses.
The Company purchased a restaurant property from KPL during the year for
$810,000. The property was formerly leased to Consolidated Specialty
Restaurants, a subsidiary of the Company. In addition, KPL leases one
restaurant property to the subsidiary company at an annual rental of $75,000 to
June 2000. Mr. E. W. Kelley, Chairman, and Ms. S. Sue Aramian, Vice Chairwoman,
of the Company, are Managing General Partners of KPL; Messrs. Bonda and
Williamson, directors of the Company, are General Partners; and Messrs. Lanham
and Risk, directors of the Company, are limited partners of KPL.
The Company granted exclusive franchise rights in 1991 to Kelley
Restaurants, Inc., formerly SNS South, Inc., for development of Steak n Shake
restaurants in the Atlanta, Georgia and Charlotte, North Carolina markets. The
franchisee currently operates eight restaurants in Atlanta, Georgia, with one
additional restaurant under construction, and is proceeding
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with development of both markets in accordance with the terms of the area
development agreements. Kelley & Partners, Ltd. and E. W. Kelley together own a
controlling interest in the parent corporation of Kelley Restaurants, Inc., and
Mr. Kelley and Ms. Aramian serve as officers and directors and Mr. Williamson
serves as a director of the parent corporation of the franchisee.
Steak n Shake, Inc., a subsidiary of the Company, receives certain annual
incentive and promotional fees from its soft drink supplier. Under a
termination agreement with a former distributor, King Cola, Inc., the Company
agreed to share a portion of the annual incentive fees not to exceed $60,000
with the former distributor. During fiscal 1995, a payment of $60,000 was made
to King Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms. Aramian are
officers and directors of King Cola, Inc.
The Board of Directors believes that the transactions described herein were
on terms no less favorable to the Company than would have been available in the
absence of the relationships described.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(the "Named Executive Officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- -----------------------------------------------------------------------------------------------------------------
Restricted All Other
Fiscal Salary($) Bonus ($) Stock Awards Stock Options Compensation
Year ($)(1) (#) ($)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 1995 $ 253,460 $ 171,500 $ 180,600 13,200 $ 15,671
President and Chief 1994 $ 239,100 $ 141,800 $ 46,500 12,100 $ 16,285
Executive Officer (3) 1993 $ 212,558 $ 69,638 $ 37,500 13,310 $ 6,302
- -----------------------------------------------------------------------------------------------------------------
E. W. Kelley 1995 $ 110,000 $ 170,000 - 11,000 $ 20,384
Chairman 1994 $ 110,765 $ 165,000 - 12,100 $ 35,559
1993 $ 110,445 $ 165,000 - 13,310 $ 21,728
- -----------------------------------------------------------------------------------------------------------------
S. Sue Aramian 1995 $ 78,750 $ 70,000 - 8,800 $ 10,817
Vice Chairwoman 1994 $ 76,420 $ 67,000 - 9,680 $ 9,105
1993 $ 66,728 $ 59,422 - 10,648 $ 6,650
- -----------------------------------------------------------------------------------------------------------------
James W. Bear 1995 $ 141,630 $ 63,360 $ 122,100 7,700 $ 10,076
Senior Vice President 1994 $ 128,400 $ 55,687 $ 31,000 8,470 $ 13,342
and Treasurer 1993 $ 119,667 $ 29,376 $ 30,000 9,317 $ 8,944
- -----------------------------------------------------------------------------------------------------------------
Gary T. Reinwald 1995 $ 128,850 $ 44,780 $ 122,100 7,700 $ 10,045
Vice President, 1994 $ 110,813 $ 47,034 $ 31,000 8,470 $ 9,158
Steak n Shake, Inc. 1993 $ 100,983 $ 23,419 $ 26,250 7,986 $ 7,630
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts shown in this column represent the market value of the
restricted stock awarded under the Company's Capital Appreciation Plan and
were calculated by multiplying the closing market price of the Company's
Common Stock on the date of award by the number of shares awarded. As of
December 29, 1995, the number and value of the aggregate unvested
restricted stock holdings of each of the Named Executive Officers were as
follows: Ms. Aramian, 7,700 shares (_________); Mr. Gilman, 30,591 shares
($264,600); Mr. Bear, 21,483 shares ($182,800); and Mr. Reinwald, 20,818
shares ($179,000). Mr. Kelley holds no unvested restricted stock and has
declined grants under the Capital Appreciation Plan since 1991. The shares
of Common Stock are issued at the time of the award; however, these shares
are restricted during a period of three years and are forfeited to the
Company if the grantee is not employed by the Company (except for reasons
of retirement, permanent disability or death) at the end of the period.
The amounts do not reflect the cash value of the book units awarded in
tandem with the restricted Common Stock, which represent the sum of the net
change in the book value per share of the Common Stock plus dividends paid
per share from the date of award to the date of vesting. The recipient of
the award is entitled to any dividends paid on outstanding Common Stock
subsequent to the date of the award.
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(2) Includes (i) amounts payable pursuant to the Company's executive medical
reimbursement plan which provides for payment of certain medical expenses,
as defined, up to $3,000 for each plan year ending October 31, (ii) amounts
paid by the Company for or on behalf of the executive with respect to term
life insurance premiums for coverage in excess of $50,000, and (iii)
amounts of annual contributions by the Company for the account of the Named
Executive Officers under the Company's Profit Sharing Plan.
(3) Mr. Gilman was appointed President of the Company on July 13, 1992 and
assumed the additional title of Chief Executive Officer as of October 1,
1992. The Company has agreed that if Mr. Gilman leaves the Company's
employment for any reason other than retirement or termination by the
Company for cause, he will be paid at his base compensation rate on the
date of termination for a period of nine months thereafter.
STOCK OPTION GRANTS IN FISCAL 1995
The following table presents certain information for the Named Executive
Officers relating to stock option grants, (adjusted for the 10% stock dividend
payable to holders of record as of December 22, 1995) during fiscal 1995 under
the Company's 1995 Employee Stock Option Plans.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------
Potential Realizable
Percentage Of Value at Assumed Annual
Total Options Rates of Stock Appreciation
Number of Granted To for Option Term(2)
Incentive Options Employees In Exercise Price Expiration ---------------
Name Granted(1) Fiscal 1995 ($ per share)(1) Date 5% ($) 10% ($)
- ---- ------- ----------- ------------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 13,200 10.7% $11.59 5/3/00 $42,240 $93,476
E. W. Kelley 11,000 8.9% 12.75 5/3/00 22,440 65,120
S. Sue Aramian 8,800 7.2% 12.75 5/3/00 17,952 52,096
James W. Bear 7,700 6.3% 11.59 5/3/00 24,640 54,516
Gary T. Reinwald 7,700 6.3% 11.59 5/3/00 24,640 54,516
</TABLE>
(1) Options granted under the Company's 1995 Employee Stock Option Plan may be
either nonqualified options or incentive options at the discretion of the
Committee, with a term of five years at an exercise price equal to the
closing price on the National Association of Securities Dealers - Automated
Quotation System ("Nasdaq") of the Company's Common Stock as of the day
preceding the date of grant upon which a sale is transacted, except in the
case of incentive options granted to holders of more than 10% of the total
voting power of the Company's Common Stock, in which case the option
exercise price shall be at least 110% of the fair market value. Options
become exercisable at the rate of 20% per year over the five-year period.
Options granted under the Company's 1995 Employee Stock Option Plan
further provide for a reload option (the "Reload Option") in the event the
optionee exercises the option, in whole or in part, by surrendering other
shares of the Company's Common Stock in accordance with the Plan. Any such
Reload Option (i) will be for a number of shares equal to the number of
shares so surrendered; (ii) will have an expiration date which is 5 years
from the Reload Option issuance date; and (iii) will have an exercise price
equal to the market price of the Company's Common Stock on the date of
exercise of the original option. There is no reload option on a Reload
Option.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price. The Company's per share stock price
would be $14.79 and $18.67 if increased 5% and 10%, respectively,
compounded annually over the five-year option term.
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AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1995
AND FISCAL YEAR END OPTION VALUES
The following table presents certain information for the Named Executive
Officers relating to exercises of stock options during fiscal 1995 under the
Company's Employee Stock Option Plans and, in addition, information relating to
the valuation of unexercised stock options. The following information has not
been adjusted for the stock dividend payable to shareholders of record as of
December 22, 1995.
<TABLE>
<CAPTION>
Number of Unexercised Dollar Value of Unexercised
Options Held At Options At
Number of Dollar September 27, 1995 September 27, 1995(1)
Shares Acquired Value ------------------ ------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman
E. W. Kelley
S. Sue Aramian
James W. Bear
Gary T. Reinwald
</TABLE>
(1) Based on the Nasdaq closing price of the Company's Common Stock on
September 27, 1995, of $14.63.
LONG TERM INCENTIVE PLAN -
AWARDS IN LAST FISCAL YEAR
The following table sets forth awards of Restricted Common Shares made to
the Named Executive Officers in fiscal 1995 under the Company's Capital
Appreciation Plan, as adjusted for the stock dividend payable to shareholders of
record as of December 22, 1995.
<TABLE>
<CAPTION>
Performance Or
Number Of Other Period
Shares, Units Until Maturation Expiration of
Name Or Other Rights(1) or Payment(1) Forfeiture Period
- ---- --------------- ---------- -----------------
<S> <C> <C> <C>
Alan B. Gilman 6,050 three years October 10, 1997
9,900 three years August 8, 1998
E. W. Kelley - - -
S. Sue Aramian - - -
James W. Bear 4,235 three years October 10, 1997
6,600 three years August 8, 1998
Gary T. Reinwald 4,235 three years October 10, 1997
6,600 three years August 8, 1998
</TABLE>
___________________
(1) Awards under the Company's 1994 Capital Appreciation Plan consist of
Restricted Common Stock and Book Units. The Restricted Common Stock cannot
be sold until it vests at the end of the forfeiture period, with vesting
contingent upon the grantee's continued employment with the Company. Book
Units awarded in tandem with the Restricted Common Stock are cash awards
paid to the grantee at the end of the forfeiture period and represent the
sum of the net change in the book value per share of the Common Stock plus
dividends paid per share from the date of award to the date of vesting.
The Company's 1994 Capital Appreciation Plan expires by its terms on
December 31, 1996.
12
<PAGE>
REPORT OF THE EXECUTIVE COMMITTEE
The compensation of the Company's executive officers, including awards
under the Company's Capital Appreciation and Stock Option Plans, is generally
determined by the Board of Directors upon recommendations of the Executive
Committee (the "Committee") in tandem with recommendations of the President of
the Company. See "Committee Interlocks and Insider Participation." The
following report with respect to certain cash and stock compensation paid or
awarded to the Company's executive officers, including the Named Executive
Officers, during fiscal 1995 is furnished by the directors who comprise the
Executive Committee.
GENERAL POLICIES
The Company's compensation programs are intended to enable the Company to
attract, motivate, reward and retain the management talent required to achieve
corporate objectives and thereby increase shareholder value. It is the
Company's policy to provide cash and stock incentives to its senior management
to achieve both short-term and long-term objectives and to reward exceptional
performance and contributions to the development of the Company's business. To
attain these objectives, the Company's executive compensation program includes a
competitive base salary, coupled with an added cash incentive component which is
"at risk" based on the performance of the Company's business, primarily as
reflected in the achievement of pre-determined financial and individual
objectives. In addition, awards are made under the Company's Capital
Appreciation Plan to a select group of management which includes certain of the
Named Executive Officers, and under the Company's Employee Stock Option Plan to
management employees, including the Named Executive Officers, based upon the
potential contributions of each in the long-term profitability and growth of the
Company's business. As a general matter, as an executive officer's level of
management responsibility in the Company increases, a greater portion of his or
her potential total compensation depends upon the Company's performance as
measured by the level of attainment of defined financial performance objectives
and accomplishment of the individual objectives of the executive established at
the beginning of the fiscal year. In addition, all eligible Company employees,
including its eligible executive officers, participate in a profit sharing plan.
Pursuant to the Profit Sharing Plan, the Company makes annual contributions,
which are subject to the discretion of the Board of Directors, to a trust for
the benefit of participating employees.
RELATIONSHIP OF COMPENSATION TO PERFORMANCE
The Executive Committee from time to time establishes, subject to the
approval of the Board of Directors, the salaries which will be paid to the
Company's executive officers. In setting base salaries, the Executive Committee
takes into account a number of factors, including competitive compensation data,
the extent to which an individual may participate in the incentive compensation
plans maintained by the Company, and qualitative factors bearing on an
individual's experience, responsibilities, management and leadership abilities,
and job performance.
The Committee also determines the terms of the Company's incentive bonus
plans in which the executive officers participate. In doing so, the Committee
reviews management's plans for the Company's growth and profitability,
determines the criteria for bonus awards, and fixes the levels of target and
maximum awards for participants and the level of attainment of financial
performance objectives necessary for awards to be made under the Plan.
In connection with the compensation determinations to be made, the Company
utilizes the Hay Guide Chart - Profile Method of Job Evaluations developed by
Hay Management Consultants, a nationally recognized compensation consulting
firm, to evaluate and rank executive and management positions within the
Company. This Guide Chart - Profile method of measuring job content, as updated
from time to time, together with the annual Towers Perrin's Annual Chain
Restaurant Compensation survey, serve as reference points for the Committee and
the Board of Directors in establishing compensation programs for the Company's
executive officers and other management which are competitive within the
industry and appropriate to the Company's objectives.
For fiscal 1995, each of the executive officers, including Messrs. Gilman,
Bear and Reinwald, received compensation pursuant to the Company's annual
incentive bonus plan. Each year the Board establishes in advance, a targeted
profit growth goal increase. Each executive job classification has a specific
bonus percentage level based on the job rating (as explained above). The
various bonuses are then increased or decreased uniformly based on performance
in relation to actual earnings results versus the targeted profit goal. The
system pays modestly below the target but escalates as high as 2 1/2 times the
bonus percentage level for increases substantially above goal. The bonus is
also divided into two parts with 70% being based on Company profit performance
for the year and the remainder being based on accomplishment against each
executive's specific near-term and long-term objectives.
13
<PAGE>
Mr. Kelley and Ms. Aramian also received incentive bonus awards for fiscal
1995 based on independent evaluations by the Executive Committee (Mr. Kelley did
not participate in these evaluations). Their awards were based on the year's
profit achievement, but also as to the high level of achievement of the planned
financial goals of the Company for the fiscal year and the value of the
leadership, direction and individual contributions of both to the Company's
business operations, innovative marketing programs, expansion goals, management
selections and capital accumulation and funding programs.
Mr. Kelley as modern day founder of the Company's food service concepts,
elected earlier to not participate in the Capital Appreciation Plan with more of
his compensation contingent on the Company's annual performance and growth.
STOCK OPTION AWARDS
Stock options are granted to key employees, including the Named Executive
Officers, by the Stock Option Committee under the Company's Stock Option Plans
(the "Plans"). The number of shares subject to options granted to each
individual generally depends upon his or her base salary and the level of
management responsibility. The largest grants are awarded to the most senior
employees, who, in the view of the Stock Option Committee, have the greatest
potential impact on the Company's profitability and growth. Options under the
Plans may be either incentive stock options or non-qualified stock options at
the discretion of the Committee, and with limited exceptions are granted at an
exercise price equal to 100% of the fair market value on the date of grant.
Incentive options granted to Mr. Kelley and Ms. Aramian are granted at an
exercise price equal to 110% of the fair market value on the date of the grant,
as required by Section 422A of the Internal Revenue Code. Options outstanding
under the Plans are exercisable as to 20% on the date of grant and 20% on each
anniversary of the date of grant thereafter until fully exercisable. The
options expire five years from the date of grant. Stock option awards to the
Named Executive Officers over the past three fiscal years are disclosed in the
Summary Compensation Table.
RESTRICTED STOCK AWARDS
Restricted stock awards under the Company's Capital Appreciation Plan are
granted on an irregular basis by the Board of Directors, on recommendations of
the Executive Committee, to executive officers and key employees of the Company.
The number of restricted shares and book units so awarded and the frequency
thereof serve as a retention vehicle and are based on the contributions of each
grantee in the long-term profitability and growth of the Company. The executive
holds all of the ownership rights to the stock from the date of grant, including
the right to receive dividends thereon if paid, except the right to transfer or
assign the stock. The shares of Common Stock are issued at the time of the
award; however, these shares are restricted during a period of three years and
are forfeited to the Company if the grantee is not employed by the Company
(except for reasons of retirement, permanent disability or death) at the end of
the period. Book units granted in conjunction with the Common Stock are paid in
cash at the end of the forfeiture period in an amount equal to the sum of the
net change in the book value per share of the Common Stock plus dividends per
share paid from the date of grant to the end of the three-year forfeiture
period. Mr. Kelley has declined grants of Restricted Stock Awards under the
Plan since 1991. Restricted Stock Awards to the Named Executive Officers over
the past three fiscal years are disclosed in the Summary Compensation Table.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Alan B. Gilman was appointed to his present position as President on July
13, 1992 and he assumed the added title of Chief Executive Officer on October 1,
1992. The total compensation, including base salary, incentive compensation and
stock awards, paid to Mr. Gilman during 1995 was determined by the Board of
Directors in accordance with the criteria described in the "Relationship of
Compensation to Performance", "Stock Option Awards" and "Restricted Stock
Awards" sections in this report. He received an increase in his base
compensation to $280,000 as of August 16, 1995, and an incentive bonus of
$171,500 for the year, representing 68% of his 1995 base salary, which reflect
the Board's assessment of his very favorable performance and his broad
involvement in the successful operations of the Company in fiscal 1995.
Mr. Gilman also received stock awards during 1995, including 13,200 shares
of Common Stock under the Company's Stock Option Plan. He also received 6,050
and 9,900 shares, along with related book units, on October 10, 1994 and August
8, 1995, respectively, under the Company's Capital Appreciation Plan. The
Stock Option Committee and the Board of Directors determined that Mr. Gilman had
more than met his performance objectives for the year and continues to make
substantial executive contributions to the progress and growth of the Company's
businesses. Additional details of Mr. Gilman's total cash and stock
compensation over the past three fiscal years are disclosed in the Summary
Compensation Table.
The foregoing report is hereby submitted by the members of the Executive
Committee.
14
<PAGE>
EXECUTIVE COMMITTEE
E. W. Kelley J. Fred Risk James Williamson, Jr.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kelley, Chairman of the Company, also serves as Chairman of the
Executive Committee but does not participate in deliberations or recommendations
of that Committee as to his compensation. Mr. Williamson, the former President
and Chief Executive Officer of the Company until July 31, 1990, is a member of
the Executive Committee. Mr. Risk, a member of the Executive Committee, is not
an employee of the Company or any of its affiliates.
OTHER MATTERS
There is no family relationship among any of the nominees for directors.
Mr. Kelley was Chairman of the managing member of a limited liability
company and Mr. Lanham was director of an unrelated corporation, each which
filed for protection under Chapter 11 of the federal bankruptcy laws between
1991 and 1995. The bankruptcy proceeding for the company identified with Mr.
Kelley is pending. The bankruptcy proceeding for the company identified with
Mr. Lanham has since been discharged.
COMPANY PERFORMANCE
The graph below compares for each of the last five fiscal years the
cumulative total return of the Company, S&P 500, Nasdaq Non-Financial Group and
the S&P Restaurant Index. The S&P Restaurants Index has been included in the
graph in order to provide a more direct comparison of the Company's returns to
those of companies in the restaurant business. The cumulative total returns
displayed below have assumed $100 invested on October 1, 1990 in the Company's
Common Stock, the S&P 500, the Nasdaq Non-Financial Group and the S&P
Restaurants Index, and reinvestment of dividends, including the special dividend
paid by the Company on November 27, 1990.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SPECIFIC PLOT POINTS OF PERFORMANCE GRAPH
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Products, Inc. 100 291 416 555 814 1279
- ----------------------------------------------------------------------------------------------
Standard & Poors 500 100 131 146 165 171 221
- ----------------------------------------------------------------------------------------------
Nasdaq Non-Financial Group 100 137 166 216 215 294
- ----------------------------------------------------------------------------------------------
Standard & Poors Index 100 131 174 205 204 292
- ----------------------------------------------------------------------------------------------
</TABLE>
(In dollars)
15
<PAGE>
2. APPROVAL OF THE 1996 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN
Subject to approval by the vote in favor of adoption of the Plan by persons
holding a majority of the shares of Common Stock in attendance and voting at the
Annual Meeting of Shareholders, the Board of Directors of the Company, with
nonemployee directors abstaining, approved on December 8, 1995, the 1996
Nonemployee Director Stock Option Plan ("1996 Director Plan") for nonemployee
members of the Board of Directors under which non-discretionary nonqualified
stock options have been granted to nonemployee directors of the Company to
purchase an aggregate of 15,000 shares of the Company's Common Stock (number of
shares not adjusted to reflect the dividend payable to shareholders of record on
December 22, 1995). The options have a term of five years from the date of
grant and are exercisable in annual increments of 20% commencing from the date
of grant at an option price of $16.00, which is equal to the closing price of
the Company's Common stock reported on the National Association of Securities
Dealers, Inc., Automated Quotation System ("Nasdaq") on December 7, 1995, the
day preceding the date of grant on which a sale was transacted. Options are not
transferable except by will or the laws of descent and distribution.
The options were conditionally granted to each of the nonemployee directors
of the Company, being Messrs. Bonda, Gilliatt, Lanham, Risk and Williamson, for
3,000 shares, for a total of 15,000 shares, being all of the shares authorized
under the 1996 Director Plan. No further options will be granted under the 1996
Director Plan and if any outstanding options shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares shall not
become eligible for other options under the 1996 Director Plan. A copy of the
1996 Director Plan has been included as an Appendix to this proxy statement.
FEDERAL INCOME TAX CONSEQUENCES OF NONQUALIFIED STOCK OPTIONS
An optionee will not be subject to tax at the time a nonqualified option is
granted; however, an employee who exercises a nonqualified option will include
in income as of the date of exercise the difference between (a) the amount paid
for Common Stock upon exercise of the option and (b) the fair market value of
the Common Stock. The recognized income may be subject to withholding for
federal, state and local income and other payroll taxes. The optionee's federal
income tax cost basis for the Common Stock will be the amount paid for the
Common Stock plus the income recognized. If an optionee uses Common Stock in
full or partial payment of the exercise price of a nonqualified option, then the
exchange should not affect the federal income tax treatment of the exercise.
The optionee will realize no gain or loss with respect to the Common Stock so
used. The net additional shares of Common Stock received upon such exercise by
the optionee will have a federal income tax cost basis equal to the ordinary
income recognized as a result of the option exercise (plus the amount of any
cash used in the option exercise) and a holding period commencing upon the date
such income is recognized. Subsequent sale of such Common Stock will result in
a capital gain or loss equal to the difference between the optionee's federal
income tax cost basis for the Common Stock and the sale price.
The Company will be entitled to a federal income tax deduction, as of the
date the optionee recognizes ordinary income, in the amount of the ordinary
income recognized by the optionee.
VOTE REQUIRED
Shareholder approval of the 1996 Nonemployee Director Stock Option Plan
will require the affirmative vote of the holders of a majority of the Company's
Common Stock present or represented and voting at the 1996 Annual Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO APPROVE THE CONSOLIDATED PRODUCTS, INC. 1996 NONEMPLOYEE DIRECTOR STOCK
OPTION PLAN AS DESCRIBED ABOVE. Proxies solicited by the Board of Directors
will be so voted unless the shareholders specify in their proxies a contrary
choice.
3. APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
Subject to approval by the shareholders, the Board of Directors has
selected Ernst & Young LLP as independent auditors of the Company for the fiscal
year ending September 25, 1996. The Company has been advised by such firm that
neither it nor any of its associates has any direct or material indirect
financial interest in the Company. This selection has been recommended by the
Audit Committee and the Board of Directors of the Company.
16
<PAGE>
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions
concerning the 1995 audit and to make a statement if they desire to do so.
4. OTHER MATTERS
As of the date of this proxy statement, the Board of Directors of the
Company has no knowledge of any matters to be presented for consideration at the
Annual Meeting other than those referred to above. If (a) any matters not
within the knowledge of the Board of Directors as of the date of this proxy
statement should properly come before the meeting; (b) a person not named herein
is nominated at the meeting for election as a director because a nominee named
herein is unable to serve or for good cause will not serve; (c) any proposals
properly omitted from this proxy statement and the form of proxy should come
before this meeting; or (d) any matters should arise incident to the conduct of
the meeting, then the proxies will be voted in accordance with the
recommendations of the Board of Directors of the Company.
17
<PAGE>
APPENDIX
OMITTED GRAPHIC MATERIAL
The section of the Preliminary Proxy Statement entitled "Company Performance"
refers to graph comparing the five year cumulative return of the Company, S&P
500, Nasdaq Non-financial Group and S&P Restaurants Index. For purposes of
electronic submission of this document, the substantive information contained in
the omitted graphic material has been provided in chart form in the "Company
Performance" section.
CONSOLIDATED PRODUCTS, INC.
1996 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Consolidated Products, Inc. Nonemployee Director Stock
Option Plan (the "Plan") is to provide to certain nonemployee directors of
Consolidated Products, Inc. (the "Corporation") who are materially responsible
for the overall direction of the business of the Corporation, a favorable
opportunity to acquire shares of Common Stock of the Corporation, thereby
providing them with an increased incentive to work for the success of the
Corporation and better enabling such entity to attract and retain capable
directors.
2. ADMINISTRATION OF THE PLAN.
It is intended that the Plan be administered as a non-discretionary plan.
The Plan does not permit any discretion to be exercised as to:
(a) the selection of nonemployee directors to whom stock options
under the Plan may be granted, and
(b) the number of shares granted to individual nonemployee directors
under the Plan.
3. AWARDS.
Awards under the Plan shall consist of Nonqualified Stock Options.
4. ELIGIBILITY.
Options may be granted only to nonemployee directors of the Corporation who
are not eligible to participate in any other employee stock option plans now or
hereafter sponsored by the Corporation ("Optionees").
5. STOCK SUBJECT TO THE PLAN.
There shall be reserved for issuance upon the exercise of options granted
under the Plan, 15,000 shares of Common Stock of the Corporation, with a stated
value of $.50 per share, which may be authorized but unissued shares or treasury
shares of the Corporation. Subject to Section 8 hereof, the shares for which
options may be granted under the Plan shall not exceed that number. If any
option shall expire or terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall not become available for
other options under the Plan.
6. OPTION GRANTS AND OPTION PERIOD.
Without further action by the Board of Directors or the Shareholders of the
Corporation, each Optionee in the Plan serving as a nonemployee director of the
Corporation shall receive a single grant to purchase 3,000 shares of Common
Stock. Each option shall be exercisable in annual increments of 20% commencing
from the date of grant and shall expire 5 years after date of grant. Each
option shall be subject to earlier termination as hereinafter provided.
18
<PAGE>
7. TERMS OF OPTION.
Each option granted under the Plan shall be evidenced by a Stock Option
Agreement between the Corporation and the Optionee and shall be subject to the
following terms and conditions:
(a) OPTION PRICE - the price to be paid for shares of stock upon the
exercise of each option shall be the fair market value on the
date of grant. As used herein, fair market value shall be the
last reported sales price of the Common Stock of the Corporation,
on the date next preceding the date of grant on which a sale is
transacted.
(b) PERIOD FOR EXERCISE OF OPTION - an option shall not be
exercisable after five (5) years from the date on which such
option is granted.
(c) PURCHASE OF SHARES - the option price of each share of stock
purchased upon exercise of an option shall be paid in full, in
cash, at the time of such exercise; provided, however, that an
Optionee may exercise an option in whole or in part by tendering
to the Corporation whole shares of the Corporation's Common Stock
owned by him, and cash, having fair market value equal to the
cash exercise price of the shares with respect to which the
option is being exercised. For this purpose, any shares so
tendered by an Optionee shall be deemed to have a fair market
value equal to the average of the closing sales price for the
shares on any national securities exchange on which such shares
are listed (or, if listed on more than one such exchange, then on
the one located in New York City) or, if not so listed, the
closing price reported on the National Association of Securities
Dealers, Inc. Automated Quotations Systems (Nasdaq), for the five
trading days preceding the date of exercise of the option. An
option may be exercised at any time and from time to time during
the term of the option as to any or all whole shares which have
become subject to purchase pursuant to the terms of the option or
the Plan, but not at any time as to fewer than 100 shares unless
the remaining shares which have become subject to purchase are
fewer than 100 shares. An option may be exercised only by
written notice to the Corporation, mailed to the attention of the
Secretary of the Corporation, signed by the Optionee (or such
other persons as shall demonstrate to the Corporation his or
their right to exercise the option), specifying the number of
shares in respect of which it is being exercised, and accompanied
by payment of the option price for such shares. The certificate
or certificates for the shares as to which the option is
exercised shall be registered in the name of the person or
persons so exercising the option and shall be delivered to or
upon the order of such person or persons as soon as practicable
after such written notice is received by the Corporation. An
Optionee shall not have any rights of a shareholder in respect of
the shares subject to an option until a certificate representing
such shares has been issued.
(d) TERMINATION OF OPTION - if an Optionee ceases to be a director of
the Corporation for any reason other than permanent and total
disability (within the meaning of Section 105(d)(4) of the Code),
or death, any option granted to him shall forthwith terminate.
Leave of absence approved by the Board of Directors shall not
constitute cessation of such directorship. If an Optionee ceases
to be a director of the Corporation by reason of permanent or
total disability (within the meaning of Section 105(d)(4) of the
Code), any option granted to him may be exercised by him in whole
or in part within 1 year after the date of termination as a
director by reason of such disability whether or not the option
was otherwise exercisable at the date of such termination of his
director services. In the event of death of an Optionee while
serving as a director, any option granted to him may be exercised
in whole or in part at any time after date of such death by the
executor or administrator of his estate or by the person or
persons entitled to the option by will or by applicable laws of
descent and distribution until the expiration of the option term,
whether or not the option was otherwise exercisable at the date
of death. Notwithstanding the foregoing provisions of this
subsection (d), no option shall, in any event, be exercisable
after the expiration of the period set out in subsection (b)
above.
(e) NONTRANSFERABILITY OF OPTION - An option may not be transferred
by the Optionee otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Optionee shall be
exercisable only by him.
(f) INVESTMENT REPRESENTATIONS - unless the shares subject to an
option are registered under the applicable federal and state
securities laws, each Optionee by accepting an option shall be
deemed to agree for himself and his legal representatives that
any option granted to him and any and all shares of Common Stock
purchased upon the exercise of option shall be acquired for
investment and not with a view to, or for the sale in connection
with, any distribution thereof, and each notice of the exercise
of any portion of an option shall be accompanied by a
representation in writing, signed by the Optionee or his legal
representatives, as the case may be, that the shares of Common
Stock are being acquired in good faith for investment and not
with a view to, or for the sale in connection with, any
distribution
19
<PAGE>
thereof (except in case of the Optionee's legal representatives
for distribution, but not for sale, to his legal heirs, legatees
and other testamentary beneficiaries). Any shares issued
pursuant to an exercise of an option may bear a legend evidencing
such representation and limitations.
8. ADJUSTMENT OF SHARES.
In the event of any change after the effective date of the Plan in the
outstanding stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend, combination of shares, exchange
of shares, merger or consolidation, liquidation, or any other change after the
effective date of the Plan in the nature of the shares of stock of the
Corporation, the Corporation shall make a corresponding adjustment in the number
and kind of shares reserved under the Plan, and in the option price and the
number and kind of shares covered by outstanding options granted under the Plan
as determined by the Board of Directors. Any determination by the Board of
Directors hereunder shall be conclusive.
9. AMENDMENT.
The Board of Directors of the Corporation may amend the plan from time to
time and, with the consent of the Optionee, the terms and provisions of an
option, except that without the approval of the holders of at least a majority
of the outstanding shares of the Corporation entitled to vote:
(a) the number of shares of stock which may be reserved for issuance
under the Plan may not be increased except as provided in Section
8 hereof;
(b) the option price under any option may not be reduced to less than
the fair market value of the stock on the date such option is
granted except as provided in Section 8 hereof;
(c) the number of shares subject to options granted to any
nonemployee director, the date of such grants and the period
during which an option may be exercised may not be modified
except as provided in Section 8 hereof;
(d) the class of Optionees to whom options may be granted under the
Plan may not be modified; and
(e) the benefits accruing to Optionees under the Plan shall not be
increased materially within the meaning of Reg. 16b-
3(a)(2)(ii)(A) promulgated under the Securities Exchange Act of
1934.
No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options theretofore granted under
the Plan which would adversely affect the rights of such Optionees.
10. TERMINATION.
The Plan shall terminate upon the earlier to occur of (a) the date on which
all shares available for issuance under the Plan have been issued pursuant to
the exercise of options granted hereunder; or (b) the determination of the Board
of Directors that the Plan shall terminate; or (c) upon the tenth anniversary of
the date of approval of the Plan by the shareholders of the Corporation. Any
termination by the Board of Directors shall not affect the validity of any
option theretofore granted under the Plan.
11. GOVERNING LAW.
The terms of any options granted hereunder and the rights and obligations
hereunder of the Corporation, the Optionees and their successors in interest
shall, except to the extent governed by federal law, be governed by Indiana law.
12. GOVERNMENT AND OTHER REGULATIONS.
The obligations of the Corporation to issue or transfer and deliver shares
under the options granted under the Plan shall be subject to compliance with all
applicable laws, governmental rules and regulations, and administrative action,
and the options granted pursuant to the Plan may not be exercised until all
applicable Federal and State securities requirements pertaining to the offer and
sale of securities issued pursuant to the Plan have been met and the Corporation
has been advised by counsel that all applicable legal requirements have been
met.
20
<PAGE>
13. EFFECTIVE DATE.
The Plan shall become effective when it shall have been approved by the
Corporation's Board of Directors; provided, however, that the effectiveness of
any grant of options pursuant to the Plan prior to the 1996 Annual Meeting of
Shareholders shall be conditional upon the approval of the Plan by the holders
of at least a majority of the outstanding shares of the Corporation's stock
entitled to vote thereon at the 1996 Annual Meeting of Shareholders.
21
<PAGE>
PROXY
CONSOLIDATED PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 21, 1996
The undersigned appoints E. W. Kelley, J. Fred Risk and S. Sue Aramian and each
of them, the proxies of the undersigned with full power of substitution, to vote
all shares of Common Stock of Consolidated Products, Inc., which the undersigned
is entitled to vote at the Annual Meeting of Shareholders to be held February
21, 1996, or at any adjournment there, as follows:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below (except as marked to the contrary) / /
WITHHOLD AUTHORITY to vote for all nominees listed below / /
S. SUE ARAMIAN, ALVA T. BONDA, E. W. KELLEY, NEAL GILLIATT, ALAN B. GILMAN,
CHARLES E. LANHAM, J. FRED RISK AND JAMES WILLIAMSON, JR.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' ADOPTION OF THE COMPANY'S 1996
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN:
FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE SELECTION OF ERNST & YOUNG AS THE COMPANY'S
INDEPENDENT AUDITORS:
FOR / / AGAINST / / ABSTAIN
4. The proxies are authorized to vote, in their discretion, on matters which
may properly come before the Annual Meeting to the extent set forth in the
Proxy Statement.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Your vote is important. If you do not expect to attend the Annual Meeting
or if you plan to attend but wish to vote by proxy, please date, sign and
mail this proxy. A return envelope is provided for this purpose:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
DATE: , 1996
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(Signatures)
Please date this proxy. If shares are held jointly, both joint owners
should sign. If signing as attorney, executor, administrator, guardian or
in any other capacity please give your full title as such.
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