<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Consolidated Products, 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):
/ / 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:
------------------------------------------------------------------------
/X/ 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>
CONSOLIDATED PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 12, 1997
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, 4th
Floor, Century Building, 36 South Pennsylvania Street, Indianapolis, Indiana
46204, on Wednesday, February 12, 1997, at 1:30 p.m., Eastern Standard Time, for
the following purposes:
1. To elect nine 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 1997 Employee
Stock Option Plan, as adopted by the Board of
Directors.
3. To act upon the approval of the Company's 1997 Capital
Appreciation Plan, as adopted by the Board of
Directors.
4. To act upon the amendment of the Company's 1992
Employee Stock Purchase Plan, as adopted by the Board
of Directors.
5. To act upon the approval of the Company's 1997
Nonemployee Director Stock Option Plan, as adopted by
the Board of Directors.
6. To act upon the approval of Ernst & Young LLP as the
Company's independent auditors for the fiscal year
ending September 24, 1997, as recommended by the Board
of Directors.
7. 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 10,
1996, 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
December 24, 1996
Indianapolis, Indiana
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE
4
<PAGE>
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 12, 1997
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, 4th Floor, Century
Building, 36 South Pennsylvania Street, Indianapolis, Indiana 46204, on
Wednesday, February 12, 1997, 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 December 24, 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 10, 1996. At the close of business on that date, the Company had
issued and outstanding and entitled to vote at the meeting 13,973,749 shares of
Common Stock. Unless otherwise stated, all references herein to shares of
Common Stock of the Company have been adjusted to reflect all stock dividends
declared prior to December 10, 1996.
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
nine persons named under the caption "Election of Directors," (ii) FOR the
approval of the 1997 Employee Stock Option Plan, (iii) FOR the approval of the
1997 Capital Appreciation Plan, (iv) FOR the approval of the amendment to the
1992 Employee Stock Purchase Plan, (v) FOR the approval of the 1997 Nonemployee
Director Stock Option Plan, and (vi) 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 24, 1997.
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 shares present for
purposes of determining a 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.
5
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for presentation at the Annual
Meeting of Shareholders in 1998 must be received by the Company by September 12,
1997.
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, 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
Nine 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. Eight
were elected at the Annual Meeting of Shareholders held February 21, 1996. On
September 11, 1996, the Board of Directors amended the Bylaws of the Company to
increase the number of directors to nine and elected Dr. John W. Ryan as a
director of the Company.
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 Bylaws 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 64 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 79 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.
since 1982.
Neal Gilliatt 79 1991 Marketing consultant; Former
Chairman of Executive Committee
and Director, Interpublic Group of
Companies, Inc.; Emeritus Director
of Chemed Corporation; Member of
the Boards of Directors of
National Sanitary Supply Company
and Kubin-Nicholson Corporation.
Alan B. Gilman 66 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.
6
<PAGE>
E. W. Kelley 79 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. and Comstock Value
Fund, Inc.
Charles E. Lanham 64 1971 Chairman, Klipsch, Lanham &
Associates, Inc.; Vice Chairman of
the Board of Directors of Overhead
Door Company of Indianapolis, Inc.
J. Fred Risk 68 1971 Chairman of the Board of Directors
of Sovereign Group, Inc.
John W. Ryan 67 1996 Interim Chancellor for the State
University System of New York;
President of Indiana University
from January 1971 to September
1987; Member of the Board of
Directors, National Association of
State Universities and Land Grant
Colleges.
James Williamson, Jr. 65 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.
There is no family relationship among any of the nominees for directors.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors, which held six meetings during fiscal 1996, has
five standing committees: an Executive Committee, a Personnel/Benefits
Committee, an Audit Committee, a Stock Option Committee and an Employee Stock
Purchase Committee.
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 25, 1996, the Executive
Committee met three times. Mr. Kelley serves as Chairman and Messrs. Gilman,
Risk and Williamson serve as members of the Executive Committee.
The Audit Committee, among other duties, serves in an oversight role
intended to ensure the integrity and objectivity of the Company's financial
reporting process. The Committee meets 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 concerning the selection of the Company's independent auditors.
During the fiscal year ended September 25, 1996, the Audit Committee met once.
Mr. Risk serves as Chairman of the Committee and Messrs. Gilliatt, Lanham and
Ryan 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. Bonda serves as Chairman of the Committee and Messrs. Ryan and Williamson
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 twice during
fiscal 1996. Ms. Aramian is Chairwoman of the
7
<PAGE>
Committee, and Messrs. Bonda, Lanham and Gilliatt are members, together with Mr.
James W. Bear, Senior Vice President, Administration and Finance, and Treasurer;
Mr. John P. Hawes, Vice President, Human Resources, and Ms. Charlene Boog,
Assistant Vice President, Administration. Mr. Kelley and Mr. Gilman are ex
officio members of the Committee.
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.
OWNERSHIP OF SECURITIES
The following table shows the total number of shares of Common Stock
beneficially owned as of December 10, 1996, 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME & ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) PERCENT OF CLASS
---------------------------------- --------------------------- ----------------
<S> <C> <C>
E. W. Kelley 2,432,767 (3) 17.4%
131 Woden Way, S.E.
Winter Haven, FL 33884
Kelley & Partners, Ltd. 1,294,542 9.3%
36 South Pennsylvania Street, Suite 550
Indianapolis, IN 46204
T. Rowe Price & Associates, Inc. 724,989 5.2%
100 East Pratt Street
Baltimore, MD 21202
</TABLE>
(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 1996 AND
FISCAL YEAR END OPTION VALUES."
(3) INCLUDES 27,236 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS; 541,573 SHARES OWNED DIRECTLY
BY MR. KELLEY; 1,294,542 SHARES OWNED OF RECORD AND BENEFICIALLY
BY KELLEY & PARTNERS, LTD., A LIMITED PARTNERSHIP OF WHICH E. W.
KELLEY IS A MANAGING GENERAL PARTNER; 376,843 SHARES OWNED OF
RECORD AND BENEFICIALLY BY KELLEY, INC.; 176,161 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.
8
<PAGE>
The following table shows the total number of shares of Common Stock
beneficially owned as of December 10, 1996, 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:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME & ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
---------------------------------- ------------------------ ----------------
<S> <C> <C>
S. Sue Aramian 1,632,814(2)(3)(4) 11.7%
James W. Bear 321,175(5) 2.3%
Alva T. Bonda 1,592,368(3)(6) 11.4%
Neal Gilliatt 19,397(7) *
Alan B. Gilman 130,262(8) *
E. W. Kelley 2,432,767(3)(4)(9) 17.4%
Charles E. Lanham 258,703(10) 1.9%
Gary T. Reinwald 191,119(11) 1.4%
J. Fred Risk 86,523(12) *
John W. Ryan 3,000 *
James Williamson, Jr. 1,490,612(3)(13) 10.7%
Victor F. Yeandel 7,780(14) *
All directors and executive officers as a group (22) 4,878,175(15) 34.9%
</TABLE>
* LESS THAN 1%.
(1) INCLUDES SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS UNDER THE COMPANY'S STOCK OPTION
PLANS.
(2) INCLUDES 21,935 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(3) INCLUDES 1,294,542 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 176,161 SHARES OWNED OF RECORD AND BENEFICIALLY BY KING
COLA, INC., OF WHICH MR. KELLEY AND MS. ARAMIAN ARE OFFICERS AND
DIRECTORS.
(5) INCLUDES 36,882 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 6,704 SHARES
OWNED OF RECORD AND BENEFICIALLY HELD BY MR. BEAR'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(6) INCLUDES 7,073 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 98,468 SHARES
HELD BY MR. BONDA AS EXECUTOR FOR THE ESTATE OF HIS WIFE.
(7) INCLUDES 7,073 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 2,662 SHARES
OWNED OF RECORD AND BENEFICIALLY BY MR. GILLIATT'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(8) INCLUDES 29,314 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(9) INCLUDES 27,236 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS AND 934,828 SHARES OWNED OF
RECORD OR BENEFICIALLY BY MR. KELLEY AND HIS AFFILIATES, KELLEY,
INC. AND KAHM, INC.
(10) INCLUDES 7,073 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 5,781 SHARES
OWNED BY MR. LANHAM'S WIFE, WITH RESPECT TO WHICH HE DISCLAIMS
BENEFICIAL OWNERSHIP.
9
<PAGE>
(11) INCLUDES 32,596 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 194 SHARES
OWNED OF RECORD AND BENEFICIALLY BY MR. REINWALD'S SON, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(12) INCLUDES 3,080 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 3,420 SHARES
OWNED BY MR. RISK'S WIFE, WITH RESPECT TO WHICH HE DISCLAIMS
BENEFICIAL OWNERSHIP.
(13) INCLUDES 7,073 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 10,057 SHARES
OWNED OF RECORD AND BENEFICIALLY BY MR. WILLIAMSON'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(14) INCLUDES 3,580 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(15) INCLUDES 228,752 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 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 25, 1996.
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. Mr.
Williamson's compensation for services as a member of the Executive Committee is
included in his consultant fee for administrative services as discussed below.
Directors who are officers of the Company are not paid for their services as
directors. In the fiscal year ended September 25, 1996, the total compensation
paid to nonemployee directors was $151,300. 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, 1995 and 1996 Nonemployee Director Stock Option
Plans (the "1991 Plan," "1994 Plan," "1995 Plan," and "1996 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 until fully exercisable. The
options expire five years from the date of grant.
Options for the purchase of an aggregate of 45,095 shares of Common Stock
were issued pursuant to the 1991 Plan, which was approved by the shareholders on
February 18, 1992. All options under the 1991 Plan have been exercised. At the
time of the final exercise of options under the 1991 Plan, the option price was
$3.03 per share. On June 4, 1996, Mr. Bonda exercised an option under the 1991
Plan with respect to 8,053 shares at an option price of $3.03 per share. On May
20, 1996, Mr. Robert P. Cronin, director of a subsidiary of the Company,
exercised an option under the 1991 Plan with respect to 4,832 shares at an
option price of $3.03 per share. 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; on January 10, 1994, he exercised an option under this Plan
with respect to 1,331 shares at an option price of $3.66 per share, and on July
11, 1996, he exercised an option under the Plan with respect to 3,221 shares at
an option price of $3.03 per share. On June 18, 1996, Mr. Lanham exercised an
option under the 1991 Plan with respect to 8,053 shares at an option price of
$3.03 per share. On May 26, 1994, Mr. Risk exercised an option under
10
<PAGE>
the 1991 Plan with respect to 3,993 shares at an option price of $3.66 per
share, and on May 2, 1996, he exercised an option under the Plan with respect to
3,221 shares at an option price of $3.03 per share. 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 July 12, 1996, he exercised an option under the
Plan with respect to 3,221 shares at an option price of $3.03 per share. (The
data set forth above has not been adjusted for any stock dividends declared
subsequent to the exercise date.)
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. The current option price for all of the unexercised options
granted pursuant to the 1994 Plan is $7.42 per share. On May 2, 1996, Mr. Risk
exercised an option under the 1994 Plan with respect to 3,993 shares at an
option price of $7.42. No other options granted under this Plan have been
exercised. As of December 10, 1996, the members of the Board of Directors of
the Company holding unexercised options were Messrs. Bonda, Gilliatt, Lanham and
Williamson, each of whom holds an option to purchase 6,655 shares; and Messrs.
Cronin and Risk, each of whom holds an option to purchase 2,662 shares.
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 10, 1996, Messrs. Bonda, Gilliatt, Lanham,
Risk and Williamson held 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.
Options for the purchase of an aggregate of 16,500 shares of Common Stock
were issued pursuant to the 1996 Plan, which was approved by the shareholders on
February 21, 1996. As of December 10, 1996, Messrs. Bonda, Gilliatt, Lanham,
Risk and Williamson held options to purchase 3,300 shares each at an option
price of $14.55 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 fee of $12,000
each, subject to termination by the Company at any time.
MANAGEMENT RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, the Company paid $145,000 to Kelley & Partners, Ltd.
("KPL") for management and administrative services and certain office expenses.
Consolidated Specialty Restaurants, Inc., a subsidiary of the Company, leases
one restaurant property from KPL 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 of KPL; 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 nine restaurants in Atlanta, Georgia and is
proceeding with development of both markets in accordance with the terms of area
development agreements with the Company. Kelley & Partners, Ltd. and E. W.
Kelley together own a controlling interest in Kelley Restaurants, Inc. Mr.
Kelley and Ms. Aramian serve as officers and directors, and Mr. Williamson
serves as a director of Kelley Restaurants, Inc.
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 incentive fees not to exceed $60,000 per year
with the former distributor. During fiscal 1996, a payment of $60,000 was made
to King Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms. Aramian are
officers, directors, and shareholders of King Cola, Inc.
The Board of Directors believes that the transactions described herein were
on terms no less favorable to the Company than would have been available in the
absence of the relationships described.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other five most highly compensated executive officers
(the "Named Executive Officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- ----------------------------------------------------------------------------------------------------------------------------------
Restricted Stock Stock Options All Other
Fiscal Salary($) Bonus($) Awards($)(1) (#) Compensation($2)
Year (2)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 1996 $ 280,000 $ 180,000 $ 137,250 12,000 $ 16,347
President and Chief 1995 $ 253,460 $ 171,500 $ 180,625 13,200 $ 15,671
Executive Officer (3) 1994 $ 239,100 $ 141,800 $ 46,500 12,100 $ 16,285
- ----------------------------------------------------------------------------------------------------------------------------------
E. W. Kelley 1996 $ 110,000 $ 175,000 $ -- 10,000 $ 21,258
Chairman 1995 $ 110,000 $ 170,000 $ -- 11,000 $ 20,384
1994 $ 110,765 $ 165,000 $ -- 12,100 $ 35,559
- ----------------------------------------------------------------------------------------------------------------------------------
S. Sue Aramian 1996 $ 90,000 $ 80,000 $ 215,250 8,000 $ 15,501
Vice Chairwoman 1995 $ 78,750 $ 70,000 $ -- 8,800 $ 10,817
and Secretary 1994 $ 76,420 $ 67,000 $ -- 9,680 $ 9,105
- ----------------------------------------------------------------------------------------------------------------------------------
James W. Bear 1996 $ 151,780 $ 79,420 $ 99,125 7,500 $ 12,018
Senior Vice President 1995 $ 141,630 $ 63,360 $ 122,125 7,700 $ 10,076
and Treasurer 1994 $ 128,400 $ 55,687 $ 31,000 8,470 $ 13,342
- ----------------------------------------------------------------------------------------------------------------------------------
Gary T. Reinwald 1996 $ 141,130 $ 75,490 $ 99,125 7,500 $ 10,822
Vice President 1995 $ 128,850 $ 44,780 $ 122,125 7,700 $ 10,045
1994 $ 110,813 $ 47,034 $ 31,000 8,470 $ 9,158
- ----------------------------------------------------------------------------------------------------------------------------------
Victor F. Yeandel 1996 $ 125,000 $ 55,140 $ 30,500 2,500 $ 3,963
Vice President (4) 1995 $ 61,540 $ 27,175 $ 28,755 7,700 988
1994 $ -- $ -- $ -- -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
</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 10, 1996, THE
NUMBER AND VALUE OF THE AGGREGATE UNVESTED RESTRICTED STOCK
HOLDINGS OF EACH OF THE NAMED EXECUTIVE OFFICERS WERE AS FOLLOWS:
MS. ARAMIAN, 14,700 SHARES ($215,250); MR. GILMAN, 24,950 SHARES
($317,875); MR. BEAR, 17,335 SHARES ($221,250); MR. REINWALD,
17,335 SHARES ($221,250), AND MR. YEANDEL, 4,200 SHARES
($59,255). 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 MAY NOT BE TRANSFERRED DURING A PERIOD OF
THREE YEARS THEREAFTER 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 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.
(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 GROUP LIFE INSURANCE
PREMIUMS FOR COVERAGE IN EXCESS OF $50,000, AND (III) AMOUNTS OF
ANNUAL CONTRIBUTIONS BY THE COMPANY FOR THE ACCOUNT OF THE NAMED
EXECUTIVE OFFICERS UNDER THE COMPANY'S PROFIT SHARING PLAN.
(3) MR. GILMAN WAS APPOINTED PRESIDENT OF THE COMPANY ON JULY 13,
1992 AND ASSUMED THE ADDITIONAL TITLE OF CHIEF EXECUTIVE OFFICER
AS OF OCTOBER 1, 1992. THE COMPANY HAS AGREED THAT IF MR. GILMAN
LEAVES THE COMPANY'S EMPLOYMENT FOR ANY REASON OTHER THAN
RETIREMENT OR TERMINATION BY THE COMPANY FOR CAUSE, HE WILL BE
PAID AT HIS BASE COMPENSATION RATE ON THE DATE OF TERMINATION FOR
A PERIOD OF NINE MONTHS THEREAFTER.
(4) MR. YEANDEL WAS APPOINTED VICE PRESIDENT OF THE COMPANY ON APRIL
3, 1995.
12
<PAGE>
STOCK OPTION GRANTS IN FISCAL 1996
The following table presents certain information for the Named Executive
Officers relating to stock option grants during fiscal 1996 under the Company's
1995 Employee Stock Option Plan:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE OF VALUE AT ASSUMED ANNUAL
TOTAL OPTIONS RATES OF STOCK PRICE
NUMBER OF GRANTED TO APPRECIATION FOR OPTION TERM (2)
INCENTIVE OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------------
NAME GRANTED (1) FISCAL 1996 ($ PER SHARE)(1) DATE 5% ($) 10% ($)
- ---- ------- ----------- ------------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 12,000 11.9% $16.00 5/7/01 $53,040 $117,240
E. W. Kelley 10,000 9.9% 17.60 5/7/01 28,200 81,700
S. Sue Aramian 8,000 7.9% 17.60 5/7/01 22,560 65,360
James W. Bear 7,500 7.4% 16.00 5/7/01 33,150 73,275
Gary T. Reinwald 7,500 7.4% 16.00 5/7/01 33,150 73,275
Victor F. Yeandel 2,500 2.5% 16.00 5/7/01 11,050 24,425
</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, AND HAVE BEEN GRANTED 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 IS REQUIRED TO BE AT LEAST 110% OF THE FAIR MARKET
VALUE. OPTIONS ARE EXERCISABLE AS TO 20% ON THE DATE OF GRANT AND 20%
ON EACH ANNIVERSARY OF THE DATE OF GRANT UNTIL FULLY EXERCISABLE.
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 $20.42 AND $25.77 IF INCREASED BY 5% AND
10%, RESPECTIVELY, COMPOUNDED ANNUALLY OVER THE FIVE-YEAR OPTION TERM.
13
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN
FISCAL 1996 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 1996 under the
Company's Employee Stock Option Plans and, in addition, information relating to
the valuation of unexercised stock options:
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF SHARES UNDERLYING
UNEXERCISED OPTIONS AT UNEXERCISED OPTIONS AT
NUMBER OF DOLLAR SEPTEMBER 25, 1996 SEPTEMBER 25, 1996 (1)
SHARES ACQUIRED VALUE ------------------ ------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 7,260 $74,778 29,314 25,022 $234,513 $97,612
E. W. Kelley 42,459 $440,423 27,236 22,102 $197,828 $79,102
S. Sue Aramian 23,133 $256,794 21,935 17,682 $159,867 $63,286
James W. Bear -- -- 36,882 15,871 $339,169 $64,481
Gary T. Reinwald 13,176 $186,704 32,596 15,605 $293,765 $61,791
Victor F. Yeandel -- -- 3,580 6,620 $ 14,414 $21,622
</TABLE>
(1) BASED ON THE NASDAQ CLOSING PRICE OF THE COMPANY'S COMMON STOCK ON
SEPTEMBER 25, 1996, OF $15.75.
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table sets forth awards of restricted Common Stock made to
the Named Executive Officers in fiscal 1996 under the Company's Capital
Appreciation Plan:
<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 9,000 three years August 6, 1999
E. W. Kelley -- -- --
S. Sue Aramian 7,700 three years November 13, 1998
7,000 three years August 6, 1999
James W. Bear 6,500 three years August 6, 1999
Gary T. Reinwald 6,500 three years August 6, 1999
Victor F. Yeandel 2,000 three years August 6, 1999
</TABLE>
(1) AWARDS UNDER THE COMPANY'S 1994 CAPITAL APPRECIATION PLAN CONSIST OF
RESTRICTED COMMON STOCK AND BOOK UNITS. THE SHARES OF COMMON STOCK ARE
ISSUED AT THE TIME OF THE AWARD; HOWEVER, THESE SHARES MAY NOT BE
TRANSFERRED DURING A PERIOD OF THREE YEARS THEREAFTER AND ARE FORFEITED TO
THE COMPANY IF THE GRANTEE IS NOT EMPLOYED BY THE COMPANY (EXCEPT FOR
REASON OF RETIREMENT, PERMANENT DISABILITY OR DEATH) AT THE END OF THE
PERIOD. 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 ON
DECEMBER 31, 1996, AND NO AWARDS MAY BE MADE UNDER THIS PLAN THEREAFTER.
14
<PAGE>
REPORT OF THE EXECUTIVE COMMITTEE
The compensation of the Company's executive officers, including awards
under the Company's Capital Appreciation Plan and Stock Option Plans, is
determined by the Board of Directors, generally upon recommendation of the
Executive Committee (the "Committee"). 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 1996 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 high level management talent required
to achieve the 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 and achievement of
the Company's business. To attain these objectives, the Company's executive
compensation program includes a high quartile 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 predetermined financial and individual operational 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 a broader group of 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 and/or operational 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
From time to time, the Executive Committee 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, with the approval of the Board of Directors,
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 recommends to the Board 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 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. Other studies are used as they are available and
appropriate.
15
<PAGE>
For fiscal 1996, each of the executive officers, including Ms. Aramian and
Messrs. Kelley, Gilman, Bear, Reinwald and Yeandel 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 as
compared to the targeted profit goal. The system pays no bonus below the target
but escalates as high as four 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 individual's operational objectives.
Mr. Kelley and Ms. Aramian also received incentive bonus awards for fiscal
1996 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,
has elected not to 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 nonqualified 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. The Stock Option
Committee has discretion, as limited by the Plans, as to the duration of the
option exercise period and the vesting of the right to exercise within that
period. Options currently 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. Current 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 by the Board of Directors, upon recommendation 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 are
intended to serve as a retention vehicle and are based on the contributions of
each grantee to 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, but may not transfer
or assign the stock during a period of three years following the date of the
grant. These shares 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 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.
16
<PAGE>
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 1996 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 a base compensation of $280,000 in
fiscal 1996, and an incentive bonus of $180,000 for the fiscal year,
representing 64% of his 1996 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 1996.
Mr. Gilman also received stock awards during 1996, including 12,000 shares
of Common Stock under the Company's Stock Option Plan. He also received 9,000
shares, along with related book units, on August 6, 1996, under the Company's
Capital Appreciation Plan. The Board of Directors has determined that Mr.
Gilman 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.
EXECUTIVE COMMITTEE
E. W. Kelley Alan B. Gilman J. Fred Risk James Williamson, Jr.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kelley, Chairman of the Company, serves as Chairman of the Executive
Committee but does not participate in deliberations or recommendations of that
Committee as to his compensation. Mr. Gilman, President and Chief Executive
Officer of the Company, is a member of the Executive Committee, but does not
participate in deliberations or recommendations of that committee as to his
compensation. Mr. Williamson, President and Chief Executive Officer of the
Company until his retirement on July 31, 1990, and Mr. Risk are members of the
Executive Committee, but are not employees of the Company or any of its
affiliates.
OTHER MATTERS
Mr. Kelley was chairman of the managing member of a limited liability
company and Mr. Lanham was director of an unrelated corporation, each of which
filed for protection under Chapter 11 of the federal bankruptcy laws between
1991 and 1996. The bankruptcy proceeding for the company identified with Mr.
Kelley was later changed to a Chapter 7 proceeding and is pending. The
bankruptcy proceeding for the company identified with Mr. Lanham was discharged
in 1995, but refiled in 1996, and is pending.
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 Restaurants 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 September 30, 1991 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 paid since September 30, 1991.
17
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SPECIFIC PLOT POINTS OF PERFORMANCE GRAPH
(IN DOLLARS)
1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------
Consolidated Products, Inc. 100 143 191 280 439 507
- --------------------------------------------------------------------------------
Standard & Poors 500 100 111 125 130 169 203
- --------------------------------------------------------------------------------
Nasdaq Non-Financial Group 100 106 138 137 191 223
- --------------------------------------------------------------------------------
Standard & Poors Restaurants Index 100 126 149 148 212 253
- --------------------------------------------------------------------------------
* $100 invested on 9/30/91 in stock or index, including reinvestment of
dividends. Assumes fiscal year ending September 30.
2. APPROVAL OF THE 1997 EMPLOYEE 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
employee directors abstaining, approved on October 30, 1996, the 1997 Employee
Stock Option Plan ("1997 Employee Plan") which provides for the discretionary
grant of incentive stock options (as defined in Section 422 of the Internal
Revenue Code, as amended) or nonqualified stock options to key employees of the
Company and its subsidiaries to purchase an aggregate of 500,000 shares of the
Company's Common Stock. The Stock Option Committee has discretion, as limited
by the 1997 Employee Plan, to define the duration of the option exercise period
and the vesting of the right to exercise options within that period.
Historically, options have been granted with a term of five years from the date
of grant, exercisable in annual increments of 20% commencing on the date of
grant at an option price equal to the closing price of the Company's Common
Stock on the day preceding the date of grant, except in the case of incentive
options granted to holders of more than 10% of the total voting power of the
Company's stock, in which case the option exercise price is required by law to
be at least 110% of the fair market value. Options are not transferable except
by will or the laws of descent and distribution.
The Stock Option Committee, consisting of at least two independent members
of the Board of Directors, will administer the 1997 Employee Plan, and no member
of the Committee will be eligible to receive grants of options thereunder.
Approximately 60 key employees are eligible to participate in the 1997 Employee
Plan. A copy of the 1997 Employee Plan has been included as an Appendix to this
proxy statement, and the foregoing discussion is qualified in its entirety by
reference to that Appendix.
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is not intended to be a complete statement of
applicable law and is based upon the federal income tax laws in effect on the
date of this proxy statement. Since tax law is subject to change and since the
application of tax law may vary depending upon the facts applicable to the
taxpayer, each optionee will be advised to consult with his own tax advisor
before taking action with respect to options under the Plan.
The 1997 Employee Plan provides for issuance of both options qualified as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code and options which are not so qualified ("nonqualified stock
options"). The federal income tax consequences to Consolidated Products, Inc.
and the optionee arising out of the grant and exercise of these options and out
of the subsequent sale of the stock are significantly different.
INCENTIVE STOCK OPTIONS
No regular income tax consequences will result when an optionee is granted
or exercises an incentive stock option pursuant to the 1997 Employee Plan,
except that the exercise of an option may result in the optionee being subject
to the alternative minimum tax. A subsequent sale of the underlying Common
Stock by the optionee may qualify for capital gain treatment if the holding
period requirements are met, but a disqualifying disposition of the Common Stock
will result in ordinary income to the optionee. The Company is not allowed a
business expense deduction at any time except for a disqualifying disposition of
the Common Stock by the optionee, in which case the Company may take a deduction
in the disposition year equal to the amount of compensation taxable to the
optionee. If the optionee uses previously owned Common Stock in full or partial
payment of the exercise price of an employee stock option, the exchange should
not affect the federal income tax treatment discussed above.
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, the
exchange should not affect the federal income tax treatment of the exercise as
discussed above. The optionee will realize no gain or loss with respect to the
Common Stock so used. The incremental number of Common Shares 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 1997 Employee 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 1997 Annual Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE CONSOLIDATED PRODUCTS, INC. 1997 EMPLOYEE STOCK OPTION PLAN AS
DESCRIBED ABOVE.
19
<PAGE>
3. APPROVAL OF THE 1997 CAPITAL APPRECIATION 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 has
approved the 1997 Capital Appreciation Plan (the "Capital Appreciation Plan")
which provides for tandem awards of up to 300,000 shares of Common Stock
(restricted shares) and up to 300,000 book units over a three-year period ending
December 31, 1999. The shares of Common Stock are issued at the time of the
award; however, the transfer of these shares is restricted during a period of
three years and the shares 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 stock is valued at 100% of market value
at the date of award, and the book units, which are granted in an equal number
to the stock awards, provide for a cash payment at the end of the three-year
period equal to the sum of the net change in book value per share and the Common
Stock dividends paid per share during the period. Eligibility for grants under
the Capital Appreciation Plan is limited to those key executive employees of the
Company or any subsidiary, whether or not such employees are officers or
directors, selected by the Board of Directors from among those who, in the
opinion of the Board of Directors, are in a position to contribute materially to
the success of the Company and who have significant opportunities to influence
its long-term profitability and growth. Approximately 20 senior executives are
expected to participate in the Capital Appreciation Plan, a copy of which has
been included as an Appendix to this proxy statement. The foregoing discussion
is qualified in its entirety by reference to that Appendix.
VOTE REQUIRED
Shareholder approval of the 1997 Capital Appreciation 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 1997 Annual Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE CONSOLIDATED PRODUCTS, INC. 1997 CAPITAL APPRECIATION PLAN AS
DESCRIBED ABOVE.
4. APPROVAL OF THE AMENDMENT TO THE
1992 EMPLOYEE STOCK PURCHASE PLAN
On December 10, 1992, the Board of Directors of the Company adopted the
1992 Employee Stock Purchase Plan (the "Stock Purchase Plan"), which was
subsequently approved by persons holding a majority of the shares of the Common
Stock in attendance and voting at the Annual Meeting of Shareholders held on
February 16, 1993. The purpose of the Stock Purchase Plan was to offer an
inducement to eligible employees to remain with the Company by providing a form
of additional compensation through the purchase of Common Stock at a discounted
rate. The Stock Purchase Plan authorized the issuance and sale of 250,000
shares (not adjusted for stock dividends) of Common Stock to non-highly
compensated employees of the Company (as determined by the Board of Directors)
at a purchase price based upon the lesser of 85% of the market price on the
first or last trading day of each plan year. The Stock Purchase Plan, as
adopted in 1992, required employees to be continuously employed with the Company
for at least one year prior to September 30 in order to be eligible to
participate in the Stock Purchase Plan beginning the following January 1st.
Pursuant to that standard, an employee had to be continuously employed with the
Company at least 15 months prior to being eligible to participate in the Stock
Purchase Plan.
On October 30, 1996, the Board of Directors of the Company adopted an
amendment to the Stock Purchase Plan, subject to the approval by the vote in
favor of such amendment by persons holding a majority of the shares of Common
Stock in attendance and voting at the 1997 Annual Meeting of Shareholders. The
purpose of the amendment was to enhance the Plan to enable the Company to
attract qualified employees and to provide an additional incentive for current
employees to remain with the Company by making the Stock Purchase Plan more
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readily available to such employees. The amendment permits an employee who is
continuously employed for at least six months prior to January 1st to
participate in the Stock Purchase Plan, which effectively reduces the minimum
waiting period for participation by nine months. A copy of the amendment to the
Stock Purchase Plan has been included as an Appendix to this proxy statement,
and the foregoing discussion is qualified in its entirety by reference to that
Appendix.
VOTE REQUIRED
Shareholder approval of the amendment to the 1992 Employee Stock Purchase
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 1997 Annual
Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE AMENDMENT TO CONSOLIDATED PRODUCTS, INC. 1992 EMPLOYEE STOCK
PURCHASE PLAN AS DESCRIBED ABOVE.
5. APPROVAL OF THE 1997 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 October 30, 1996, the 1997
Nonemployee Director Stock Option Plan ("1997 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 18,000 shares of the Company's Common Stock. The
options have a term of five years from the date of grant and are exercisable in
annual increments of 20% commencing on the date of grant. All options, except
for options on 1,500 shares of Common Stock, were conditionally granted
effective October 30, 1996 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 October
29, 1996, the day preceding the date of a grant on which a sale was transacted.
Fifteen hundred shares were conditionally granted to Director John W. Ryan
effective September 11, 1996, in recognition of his appointment to the Board on
that date. These shares were granted at an option price of $16.25, which was
the closing price of the Company's Common Stock on September 10, 1996. 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, Ryan and
Williamson, for 3,000 shares, for a total of 18,000 shares, being all of the
shares authorized under the 1997 Director Plan. No further options will be
granted under the 1997 Director Plan and, if any outstanding options shall
expire or terminate for any reason without having been exercised in full, the
forfeited options shall not become eligible for further grant under the 1997
Director Plan. A copy of the 1997 Director Plan has been included as an
Appendix to this proxy statement, and the foregoing discussion is qualified in
its entirety by reference to that Appendix.
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, a director who exercises a nonqualified option must 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
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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 1997 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 1997 Annual Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE CONSOLIDATED PRODUCTS, INC. 1997 NONEMPLOYEE DIRECTOR STOCK
OPTION PLAN AS DESCRIBED ABOVE.
6. 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 24, 1997. 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.
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 1996 audit and to make a statement if they desire to do so.
7. 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.
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APPENDIX
CONSOLIDATED PRODUCTS, INC.
1997 EMPLOYEE STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Consolidated Products, Inc. 1997 Employee Stock Option
Plan (the "Plan") is to provide certain officers (including officers who are
members of the Board of Directors) and other key employees of Consolidated
Products, Inc. (the "Corporation") and any majority-owned or wholly-owned
subsidiary (individually a "Subsidiary" and collectively the "Subsidiaries") who
are materially responsible for the management or operation of the business of
the Corporation or a Subsidiary, a favorable opportunity to acquire shares of
Common Stock of the Corporation and the Subsidiaries and better enable each such
entity to attract and retain capable executive personnel.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered and interpreted by the Consolidated
Products, Inc. Stock Option Committee (the "Committee"), consisting of at least
two members of the Board of Directors of the Corporation, who shall be
designated from time to time by the Board of Directors of the Corporation. No
member of the Committee shall be eligible at any time when he or she is such a
member or within one year prior to his or her appointment to the Committee, to
be granted an option under the Plan. The decision of a majority of the members
of the Committee shall constitute the decision of the Committee, and the
Committee may act either at a meeting at which a majority of the members of the
Committee is present or by a written consent signed by all members of the
Committee. The Committee shall have the sole, final and conclusive authority to
determine, consistent with and subject to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or successive options
shall be granted under the Plan;
(b) the time when options shall be granted hereunder;
(c) the type of options to be granted hereunder;
(d) the number of shares of stock of the Corporation to be covered under each
option;
(e) the option price to be paid upon exercise of each option;
(f) the period within which each option may be exercised; and
(g) the terms and conditions of the respective option agreements by which
options granted shall be evidenced. The Committee shall also have
authority to prescribe, amend and rescind rules and regulations relating to
the Plan, and to make all other determinations necessary or advisable in
the administration of the Plan.
3. AWARDS.
Awards under the Plan shall consist of Incentive Stock Options (an option
within the meaning of Section 422A of the Internal Revenue Code) and/or
Nonqualified Stock Options. All awards shall be subject to the terms and
conditions of the Plan and to such other terms and conditions consistent with
the Plan as the Committee deems appropriate. Awards under a particular section
of the Plan need not be uniform and awards under two sections may be combined in
one agreement. Any combination of awards may be granted at one time and on more
than one occasion to the same Optionee.
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4. ELIGIBILITY.
Options may be granted only to officers (including officers who are members
of the Board of Directors) and other key employees of the Corporation or of a
Subsidiary who in the opinion of the Committee are from time to time materially
responsible for the management or operation of the business of the Corporation
or of a Subsidiary; provided, however, that in no event may any employee who
owns [after application of the ownership rules in Section 422(c) of the Internal
Revenue Code of 1954, as amended (the "Code")] shares of stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Corporation or any of its Subsidiaries, be granted an Incentive Stock Option
hereunder, unless at the time such option is granted the option price is at
least 110% of the fair market value of the stock subject to the option, and such
option by its terms, is not exercisable after the expiration of 5 years from the
date such option is granted. Subject to the provisions of Section 4 hereof, an
individual who has been granted an option under the Plan, if he is otherwise
eligible, may be granted an additional option or options if the Committee shall
so determine.
5. STOCK SUBJECT TO THE PLAN.
There shall be reserved for issuance upon the exercise of options granted
under the Plan, 500,000 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. Subject to Section 9 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 become available for other options,
except when the Plan shall have terminated, in which case they shall be
unavailable.
6. AWARD OF STOCK OPTIONS.
The Committee may, from time to time, subject to provisions of the Plan,
and such terms and conditions as the Committee may prescribe, award Incentive
Stock Options and/or Nonqualified Stock Options to any key employee. Such
awards shall be separate and not in tandem.
7. TERMS OF OPTIONS.
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 and to such other terms and conditions not
inconsistent therewith as the Committee may deem appropriate in each case:
(a) OPTION PRICE - The price to be paid for shares of stock upon the
exercise of each option shall be determined by the Committee at the
time such option is granted, but such price in no event shall be less
than the fair market value as determined by the Committee.
(b) PERIOD FOR EXERCISE OF OPTION - An option shall not be exercisable
after the expiration of such period as shall be fixed by the Committee
at the time such option is granted, but such period in no event shall
exceed 10 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, with the
approval of the Committee, exercise an option in whole or in part by
tendering to the Corporation whole shares of the Corporation's Common
Stock owned by him or her, and cash, having a 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 average of the closing price reported on the
National Association of Securities Dealers,
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Inc., Automated Quotations System (Nasdaq), for the five trading days
preceding the date of exercise of the option. Upon the date of
exercise of an option by tendering shares hereunder, the Committee
shall thereupon award to the Optionee so tendering, a new option
effective on the date of exercise, to purchase that number of shares
equal to the shares so tendered at the then current fair market value
as determined by the Committee.
(d) An option may be exercised at any 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 one hundred (100) shares unless the remaining shares
which have become subject to purchase are fewer than one hundred (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, her 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 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.
(e) TERMINATION OF OPTION - If an Optionee ceases to be an employee of the
Corporation and/or the Subsidiaries for any reason other than
retirement, permanent and total disability (as determined by competent
medical authority acceptable to the Committee), or death, any option
granted to him shall forthwith terminate. Leave of absence approved
by the Committee shall not constitute cessation of employment. If an
Optionee ceases to be an employee of the Corporation and the
Subsidiaries by reason of retirement, any option granted to him or her
may be exercised in whole or in part within 3 months after the date of
retirement whether or not the option was otherwise exercisable at the
date of retirement. (The term "retirement" as used herein means such
termination of employment of the Optionee resulting from the
retirement upon or after Optionee's normal retirement date or other
authorized retirement date under any profit sharing or pension plan of
the Corporation and/or its Subsidiaries). If an Optionee ceases to be
an employee of the Corporation by reason of permanent or total
disability (as determined by competent medical authority acceptable to
the Committee), any option granted to him may be exercised by him in
whole or in part within one (1) year after the date of termination of
employment by reason of such disability whether or not the option was
otherwise exercisable at the date of such termination of employment.
In the event of the death of an Optionee while in the employ of the
Corporation or a Subsidiary or within three (3) months after the date
of his retirement, or within one (1) year after the termination of his
employment by reason of permanent or total disability (as determined
by competent medical authority acceptable to the Committee), 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 as fixed by the Committee, whether or not the option
was otherwise exercisable at the date of death. Notwithstanding the
foregoing provisions of this subsection (e), no option shall, in any
event, be exercisable after the expiration of the period fixed by the
Committee in accordance with subsection (b) above.
(f) 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.
(g) INVESTMENT REPRESENTATIONS - Unless the shares subject to an option
are registered under 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
the 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 exercise of any portion of
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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 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 any exercise of an option may bear a legend
evidencing such representations and limitations.
8. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
The aggregate fair market value of stock for which Incentive Stock Options
are exercisable by the employee, cannot exceed $100,000 during any calendar
year. For this purpose, the fair market value of such shares shall be
determined as of the date the option is granted and shall be computed in such
manner as shall be determined by the Committee, consistent with the requirements
of Section 422(d) of the Code.
9. 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 Board of Directors shall determine what changes, if any, are
appropriate 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. Any determination of the Board of Directors hereunder
shall be conclusive.
10. 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 9 hereof;
(b) the option price under any option may not be reduced to less than the
fair market value, as determined by the Committee, of the stock on the
date such option is granted except as provided in Section 9 hereof;
(c) the period during which an option may be exercised may not be extended
beyond ten (10) years from the date on which such option was granted;
(d) the class of employees to whom options may be granted under the Plan
may not be materially 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)
promulgated under the Securities Exchange Act of 1934.
No amendment of the Plan, however, may without the consent of the
Optionees, make any change in any outstanding options theretofore granted under
the Plan which would adversely affect the rights of such Optionees.
11. TERMINATION.
The Board of Directors of the Corporation may terminate the Plan at any
time and no option shall be granted thereafter. Such termination, however,
shall not affect the validity of any option theretofore granted under the Plan.
In any event, no option may be granted under the Plan after February 12, 2007.
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12. 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.
13. 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.
14. EFFECTIVE DATE.
The Plan shall become effective when it has been approved by the holders of
at least a majority of the outstanding shares of the Corporation's stock
entitled to vote thereon at the 1997 Annual Meeting of Shareholders.
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CONSOLIDATED PRODUCTS, INC.
1997 CAPITAL APPRECIATION PLAN
1. PURPOSE.
The purpose of the 1997 Capital Appreciation Plan (the "Plan") is to foster
and enhance the long-term profitability of Consolidated Products, Inc. and its
Subsidiaries (the "Company") for the benefit of its shareholders by offering the
incentive of long-term rewards to those corporate officers and key executives
who have principal responsibility for long-term profitability.
2. ELIGIBILITY.
Eligibility for grants under the Plan shall be limited to those key
executive employees, whether or not such employees are officers or directors of
the Company, selected by the Board of Directors from among those, who, in the
opinion of the Board of Directors, are in a position to contribute materially to
the success of the Company and who have significant opportunities to influence
long-term profit performance. Subject to such selection, these would normally
include key employees in executive, administrative, professional, operating or
technical positions. The Board of Directors may, in its discretion, also make
an award to any other employee who has made an unusual contribution outside the
ordinary course of their duties.
3. RESTRICTED STOCK GRANTS.
(a) The Board of Directors may grant shares of the Common Stock of
Consolidated Products, Inc. ("Restricted Shares") to participating
employees ("Participants") pursuant to the Plan over a three-year
period ending December 31, 1999. The number of Restricted Shares, if
any, granted hereunder to Participants shall be within the discretion
of the Board of Directors; provided, however, that the number of
Restricted Shares which may be granted shall not exceed an aggregate
of 300,000 shares. Restricted Shares which are forfeited or canceled
under 3(d) or (e) hereof shall be available for further grants. In
making grants, the Board of Directors shall take into account such
factors as the Participant's level of responsibility, previous
performance, rate of compensation and the potential value of the
grant.
(b) Grants made by the Board of Directors may consist in whole or in part
of authorized but unissued or treasury shares, and shall be subject to
the provisions of the Plan and to such other terms and conditions, not
inconsistent with the Plan, as the Board of Directors may determine.
(c) Subject to the provisions contained in 3(d) and (e) hereof, the
Restricted Shares granted hereunder shall be conditionally owned by
the Participant as of the grant date, and such Participant shall be
entitled to the receipt of dividends and voting rights with respect
thereto.
(d) In the event of termination of Participant's employment with the
Company for any reason other than death, retirement under the normal
or disability provisions of a retirement plan of the Company, or
retirement under the early retirement provisions of such retirement
plan with the consent of the Company, during a period of three (3)
years following the grant date ("Forfeiture Period"), the Restricted
Shares so granted shall be thereupon forfeited by Participant and
transferred to the Company as of the date of termination. The
Restricted Shares granted hereunder may not be sold, transferred or
pledged by the Participant during the Forfeiture Period.
(e) If a Participant's employment has terminated because of death,
disability or retirement under a retirement plan of the Company as set
out in 3(d) above prior to the end of the Forfeiture Period, the
number of Restricted Shares such Participant or such Participant's
beneficiary or estate would be entitled to retain shall be the number
of Restricted Shares determined as though such Participant's
employment had not been terminated, multiplied by a fraction, the
numerator of which is the number of months such
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Participant was employed during the Forfeiture Period (including the
month during which employment terminated) and the denominator of which
is the number of months in the Forfeiture Period. The balance of
Restricted Shares shall be transferred to the Company as of the
termination date.
4. BOOK UNIT GRANTS.
(a) In conjunction with the Restricted Share grants, the Board of
Directors shall simultaneously grant each Participant an equivalent
number of book value units ("Book Units") which are equal to the book
value per share of the Common Stock of the Company. The aggregate
number of Book Units granted hereunder shall not exceed 300,000 units.
Units forfeited or canceled under paragraphs 4(c) or (d) hereof shall
be thereafter available for further grants.
(b) Book Units shall be valued on the basis of book value of the Common
Stock of Consolidated Products, Inc., as determined in accordance with
5(c) hereof on the last day of the fiscal quarter next preceding the
date of grant ("Value Date") and again on the third anniversary of the
Value Date, said three (3) year period hereafter referred to as the
"Accumulation Period". The increase, if any in book value during the
Accumulation Period plus an amount equal to the dividends paid during
the Accumulation Period on an equal number of shares of Common Stock
of Consolidated Products, Inc., shall be paid to such Participant in
cash within ninety (90) days following the expiration of the
Accumulation Period; provided, however, the Book Units have not been
forfeited under paragraph 4(c) hereof.
(c) In the event of termination of Participant's employment with the
Company for any reason other than death, retirement under the normal
or disability provisions of a retirement plan of the Company, or
retirement under the early retirement provisions of such retirement
plan with the consent of the Company during the Accumulation Period,
the appreciation and dividend equivalents shall be forfeited by the
Participant.
(d) If a Participant's employment has terminated because of death,
disability or retirement under a retirement plan of the Company as set
out in 4(c) above prior to the end of the Accumulation Period, the
number of Book Units such Participant or such Participant's
beneficiary or estate shall be entitled to receive shall be the number
of Book Units determined as though such Participant's employment had
not terminated, multiplied by a fraction, the numerator of which is
the number of months such Participant was employed during the
Accumulation Period (including the month during which employment
terminated) and the denominator of which is the number of months in
the Accumulation Period. In such event, the Board of Directors shall
determine the book value as of the last day of the quarter next
preceding the date of termination.
(e) Any payment made with respect to a Participant who has died shall be
paid to the beneficiary designated by the Participant to receive the
proceeds of any group life insurance coverage provided for the
Participant by the Company. A Participant who has not designated such
beneficiary, or who desires to designate a different beneficiary, may
file with the Secretary of the Company a written designation of a
beneficiary under the Book Unit plan, which designation may be changed
or revoked only by the participant. If no designation of a
beneficiary has been made under such life insurance coverage or filed
with the Secretary of the Company, distribution shall be made to the
Participant's spouse, if surviving, and if not, to the Participant's
estate.
5. ADJUSTMENTS.
(a) In the event that there are changes in the capitalization of
Consolidated Products, Inc. affecting in any manner the number or kind
of outstanding shares of Common Stock, whether such changes have been
occasioned by declaration of stock dividends, stock split,
reclassification or recapitalization, or because Consolidated
Products, Inc. has merged or consolidated with another corporation, or
for any reason whatsoever, then the number and kind of shares then
subject to Restricted Share grants and thereafter to become subject to
such grants, and the Book Unit values, shall be proportionally
adjusted by the Board of Directors of Consolidated Products, Inc. to
whatever extent the Board of Directors determines, in its sole and
absolute discretion, that any such change equitably requires an
adjustment.
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(b) If Consolidated Products, Inc. at any time should elect to dissolve,
undergo a reorganization or split-up its stock or merge or consolidate
with any other corporation and Consolidated Products, Inc. is not the
surviving corporation, then (unless in the case of a reorganization,
stock split, merger or consolidation, one or more of the surviving
corporations assumes the obligations to Participants hereunder or
replaces this Plan with a reasonably equivalent plan in all respects),
the Board of Directors may thereupon accelerate grants of Restricted
Shares and Book Units hereunder, reduce the applicable Forfeiture
Periods and Accumulation Periods, or take such other action as the
Board of Directors, in its sole and absolute discretion deems
equitable.
(c) The Board of Directors shall determine book value of the Common Stock
under 4 above based on generally accepted accounting principles, and
shall have the right, in its sole and absolute discretion, to
proportionally adjust such book values for sales or purchases by
Consolidated Products, Inc. of Common Stock, acquisitions or
divestitures, accounting changes or other actions of Consolidated
Products, Inc., taken during the Accumulation Period affecting book
value, to whatever extent the Board of Directors determines that any
such action equitably requires an adjustment.
6. AMENDMENT AND TERMINATION.
The Board of Directors shall have the power to amend, suspend or terminate
the Plan at any time except that, subject to the conditions of 5 above, (i) no
such action shall cancel, reduce or adversely affect any grant theretofore made
without the consent of the Participant or the Participant's beneficiary or
estate; or (ii) without the approval of the shareholders of Consolidated
Products, Inc., the Board of Directors may not increase the aggregate number of
Restricted Shares and Book Units to be granted.
7. RESTRICTED SHARE AND BOOK UNIT AGREEMENT.
Each grant of Restricted Shares and Book Units under the Plan shall be
evidenced by a written agreement executed by the Company and accepted by the
Participant, and shall contain such terms and conditions as the Board of
Directors may deem desirable which are not inconsistent with the Plan.
8. FINALITY OF DETERMINATION.
The Board of Directors shall have the power to interpret the Plan, and all
interpretations, determinations and actions by the Board of Directors shall be
final, conclusive and binding upon all parties.
9. TERMINATION OF EMPLOYMENT.
Nothing in the Plan or any grant made under the Plan, shall confer upon any
Participant any right to continue in the employ of the Company or affect in any
way the right of the Company to terminate the Participant's employment at any
time.
10. EFFECTIVE DATE.
This Plan shall become effective on December 31, 1996; provided, however,
that the effectiveness of any grants under the Plan prior to the 1997 Annual
Meeting of Shareholders shall be conditional upon approval of the Plan by the
holders of a majority of the shares of Common Stock of Consolidated Products,
Inc. which are represented in person or by proxy at such Annual Meeting of
Shareholders.
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AMENDMENT TO CONSOLIDATED PRODUCTS, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
The 1992 Employee Stock Purchase Plan (the "Plan") of Consolidated
Products, Inc. (the "Corporation"), as set forth in its entirety in the
Corporation's Proxy Statement issued January 12, 1993, is hereby amended as
follows:
A. Section 2.01(i) is deleted and replaced with the following:
(i) "Eligible Employee" means any person employed by the Corporation
or any of its subsidiaries during the Plan Term except for:
(1) Certain highly compensated employees of the Corporation or
any of its Subsidiaries as determined by the Board of
Directors;
(2) Employees who have been continuously employed for less than
six (6) months; or
(3) Employees whose customary employment averages less than
twenty (20) hours per week.
B. Section 2.01(j) is deleted and replaced with the following:
(j) "Fair Market Value" means the closing sale price of a Common Share
as reported on any national securities exchange on which the 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 System (Nasdaq).
C. Section 3.01 is deleted and replaced with the following:
SECTION 3.01 PARTICIPATION Any person who is an Eligible Employee as
of any Offering Date under the Plan may become a Participant in the
Plan for that calendar year by completing and delivering to the
Committee such forms as the Committee shall require to authorize
payroll deductions and to request participation in the Plan, within
the time period established by the Committee.
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CONSOLIDATED PRODUCTS, INC.
1997 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, 18,000 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 grant to purchase at total of 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.
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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.
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(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 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.
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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.
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 1997 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 1997 Annual Meeting of Shareholders.
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<PAGE>
PROXY
CONSOLIDATED PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 12, 1997
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 12, 1997, or at any adjournment thereof,
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, JOHN W. RYAN 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 1997
EMPLOYEE STOCK OPTION PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' ADOPTION OF THE COMPANY'S 1997
CAPITAL APPRECIATION PLAN:
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' ADOPTION OF THE AMENDMENT TO
THE COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
5. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' ADOPTION OF THE COMPANY'S 1997
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN:
/ / FOR / / AGAINST / / ABSTAIN
6. PROPOSAL TO APPROVE THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
7. 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, 3, 4, 5 AND 6.
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:
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
DATE: _______________________________, 1997
_______________________________
_______________________________
(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.
3
