<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 Section 240.14a-11(c) or Section
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):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CONSOLIDATED PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 11, 1998
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 11, 1998, 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 amendment of the Company's 1992 Employee Stock
Purchase Plan, as adopted by the Board of Directors.
3. To act upon the approval of the Company's 1998 Nonemployee
Director Stock Option Plan, as adopted by the Board of
Directors.
4. To act upon the amendment to the Articles of Incorporation
increasing the Company's authorized shares to 50,000,000
shares of Common Stock.
5. To act upon the approval of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30,
1998, as recommended by the Board of Directors.
6. 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,
1997, 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 22, 1997
Indianapolis, Indiana
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE
<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 11, 1998
This proxy statement is furnished to the shareholders of Consolidated
Products, Inc. (the "Company") in connection with the solicitation by 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 11,
1998, 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 22, 1997.
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, 1997. At the close of business on that date, the Company had
issued and outstanding and entitled to vote at the meeting 16,604,556 shares
of Common Stock, which does not include the five for four stock split
declared by the Board of Directors on December 3, 1997 to shareholders of
record on December 15, 1997. Unless otherwise stated, however, all
references herein to numbers and prices of shares of Common Stock, options
and capital appreciation shares of the Company have been adjusted
to reflect the five for four stock split.
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 amendment to the 1992 Employee Stock Purchase Plan, (iii)
FOR the approval of the 1998 Nonemployee Director Stock Option Plan, (iv) FOR
the approval of the amendment to the Articles of Incorporation of the Company
increasing the authorized shares of Common Stock to 50,000,000 shares and (v)
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 30, 1998.
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.
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for presentation at the Annual
Meeting of Shareholders in 1999 must be received by the Company by September
11, 1998.
OWNERSHIP OF COMMON STOCK
The following table shows the total number and percentage of outstanding
shares of Common Stock beneficially owned as of December 10, 1997 by 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 3,260,500(3) 15.7%
131 Woden Way, S.E.
Winter Haven, FL 33884
Kelley & Partners, Ltd. 1,773,882(4) 8.5%
36 South Pennsylvania Street, Suite 550
Indianapolis, IN 46204
T. Rowe Price & Associates, Inc. 1,343,000 6.5%
100 East Pratt Street
Baltimore, MD 21202
Capital Research & Management Co. 1,250,000 6.0%
1 Market Street
San Francisco, CA 94120
</TABLE>
(1) THIS TABLE IS BASED UPON INFORMATION SUPPLIED BY DIRECTORS AND
EXECUTIVE OFFICERS, SCHEDULES 13D AND 13G, IF ANY, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND INFORMATION SUPPLIED BY THE
COMPANIES LISTED ABOVE.
(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 1997 AND FISCAL
YEAR END OPTION VALUES."
(3) INCLUDES 49,311 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS; 693,808 SHARES OWNED DIRECTLY
BY MR. KELLEY; 1,773,882 SHARES OWNED OF RECORD AND BENEFICIALLY BY
KELLEY & PARTNERS, LTD., AND 472,782 SHARES, 242,220 SHARES,
AND 28,496 SHARES OWNED BY KELLEY, INC., KING COLA, INC. AND
KAHM, INC., EACH OF WHICH IS A CORPORATION CONTROLLED BY MR. KELLEY.
(4) MR. KELLEY AND MS. ARAMIAN ARE MANAGING GENERAL PARTNERS AND
MESSRS. BONDA AND WILLIAMSON ARE GENERAL PARTNERS OF KELLEY &
PARTNERS, LTD.
<PAGE>
The following table shows the total number of shares of Common Stock
beneficially owned as of December 10, 1997, 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, and (iii) all
directors and executive officers, as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- - ---------------------------------- --------------------------- ----------------
<S> <C> <C>
S. Sue Aramian 2,259,502(2)(3)(4) 10.9%
James W. Bear 419,548(5) 2.0%
Alva T. Bonda 2,179,682(3)(6) 10.5%
Neal Gilliatt 37,123(7) *
Alan B. Gilman 202,333(8) *
E. W. Kelley 3,260,500(3)(4)(9) 15.7%
Charles E. Lanham 324,918(10) 1.6%
Gary T. Reinwald 240,300(11) 1.2%
J. Fred Risk 129,420(12) *
John W. Ryan 5,775(13) *
James Williamson, Jr. 2,053,931(3)(14) 9.9%
All directors and executive
officers as a group (22 persons) 5,918,305(15) 28.5%
</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 39,449 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(3) INCLUDES 1,773,882 SHARES OWNED OF RECORD AND BENEFICIALLY BY
KELLEY & PARTNERS, LTD.
(4) INCLUDES 242,220 SHARES OWNED OF RECORD AND BENEFICIALLY BY KING
COLA, INC., OF WHICH MR. KELLEY AND MS. ARAMIAN ARE OFFICERS AND
DIRECTORS.
(5) INCLUDES 34,481 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 9,217 SHARES
OWNED OF RECORD AND BENEFICIALLY HELD BY MR. BEAR'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(6) INCLUDES 20,179 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 121,230 SHARES
HELD BY MR. BONDA AS EXECUTOR FOR THE ESTATE OF HIS WIFE.
(7) INCLUDES 12,859 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 3,660 SHARES
OWNED OF RECORD AND BENEFICIALLY BY MR. GILLIATT'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(8) INCLUDES 30,568 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(9) INCLUDES 49,311 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS AND 1,195,086 SHARES OWNED OF
RECORD OR BENEFICIALLY BY MR. KELLEY AND HIS AFFILIATES, KELLEY,
INC. AND KAHM, INC.
<PAGE>
(10) INCLUDES 20,179 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 7,948 SHARES
OWNED BY MR. LANHAM'S WIFE, WITH RESPECT TO WHICH HE DISCLAIMS
BENEFICIAL OWNERSHIP.
(11) INCLUDES 32,651 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 266 SHARES OWNED
OF RECORD AND BENEFICIALLY BY MR. REINWALD'S SON, WITH RESPECT TO
WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(12) INCLUDES 14,688 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 4,702 SHARES
OWNED BY MR. RISK'S WIFE, WITH RESPECT TO WHICH HE DISCLAIMS
BENEFICIAL OWNERSHIP.
(13) INCLUDES 1,650 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(14) INCLUDES 20,179 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 13,827 SHARES
OWNED OF RECORD AND BENEFICIALLY BY MR. WILLIAMSON'S WIFE, WITH
RESPECT TO WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(15) INCLUDES 363,126 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 10% 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 24, 1997.
MISCELLANEOUS
The entire cost of soliciting proxies will be paid by the Company. In
addition to the solicitation of proxies by use of the mails, certain
officers, directors and employees of the Company, none of whom will receive
additional compensation therefor, may solicit proxies by telephone,
facsimilie 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 and
each was elected at the Annual Meeting of Shareholders held February 12, 1997.
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.
<PAGE>
The name, age and 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:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE
- - ---- --- -------------- -------------------
<S> <C> <C> <C>
S. Sue Aramian 65 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 80 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 80 1991 Marketing consultant; former Chairman of Executive Committee and Director,
Interpublic Group of Companies, Inc.; Emeritus Director of Chemed
Corporation; member of the Board of Directors of Kubin-Nicholson
Corporation.
Alan B. Gilman 67 1992 President since July 13, 1992 and Chief Executive Officer of the Company
since October 1, 1992.
E. W. Kelley 80 1981 Chairman of the Company since 1984; Managing General Partner of Kelley &
Partners, Ltd. since 1974; member of the Board of Directors of Comstock
Strategy Fund, Inc. and Comstock Value Fund, Inc.
Charles E. Lanham 65 1971 Chairman, Klipsch Lanham Investments; Vice Chairman of the Board of
Directors of Overhead Door Company of Indianapolis, Inc.
J. Fred Risk 69 1971 Chairman of the Board of Directors of Sovereign Group, Inc..
John W. Ryan 68 1996 Chancellor for the State University System of New York; President of Indiana
University from January 1971 to September 1987.
James Williamson, Jr. 66 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.
</TABLE>
There is no family relationship among any of the nominees for director.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors, which held six meetings during fiscal 1997, has six
standing committees: an Executive Committee, a Personnel/Benefits Committee,
an Audit Committee, a Stock Option Committee, an Employee Stock Purchase
Committee and an Investment Committee.
The Executive Committee may exercise, when the Board of Directors is not in
session, all of the powers of the Board of Directors in the management of the
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
24, 1997, the Executive Committee met one time and acted several times by
written consent. Mr. Kelley serves as Chairman and Messrs. Gilman, Risk and
Williamson serve as members of the Executive Committee.
<PAGE>
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 24, 1997, the
Audit Committee met twice. 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. During fiscal year 1997, the Stock Option Committee acted on three
occasions by written consent. 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 and performs
such other functions with respect to personnel and benefit plan matters as
may be requested by the Board of Directors. The Personnel/Benefits Committee
met once during fiscal 1997. Ms. Aramian is Chairwoman of the Committee, and
Messrs. Bonda, Lanham and Gilliatt are members, together with Mr. James W.
Bear, Senior Vice President, Administration and Finance, and Treasurer 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.
The Investment Committee establishes investment guidelines for the
Company's Profit Sharing Plan and manages the investment of the assets of
that plan. Ms. Aramian and Messrs. Gilman 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.
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 24, 1997,
the total compensation paid to nonemployee directors was $138,600. 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 1994, 1995, 1996 and 1997 Nonemployee Director Stock Option
Plans (the "1994 Plan," "1995 Plan," "1996 Plan" and "1997 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 49,413 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 $5.40 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. On March 19, 1997, Mr. Gilliatt
exercised an option under the 1994 Plan with respect to 5,856 shares, and on
<PAGE>
March 20, 1997, Mr. Robert P. Cronin, a former director of a subsidiary
company, exercised an option under the 1994 Plan for 2,928 shares, each at an
option price of $6.74 (note that these exercises and the exercise prices do
not reflect adjustment for any stock dividend or stock splits declared
subsequent to the exercise date). No other options granted under this Plan
have been exercised. As of December 10, 1997, the members of the Board of
Directors of the Company holding unexercised options were Messrs. Bonda,
Lanham and Williamson, each of whom holds an option to purchase 9,151 shares,
Mr. Risk, who holds an option to purchase 3,661 shares, and Mr. Gilliatt, who
holds an option to purchase 1,831 shares.
Options for the purchase of an aggregate of 41,594 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, 1997, Messrs. Bonda, Gilliatt,
Lanham, Risk and Williamson each held options to purchase 8,319 shares at an
option price of $6.06 per share. No options granted under this Plan have been
exercised.
Options for the purchase of an aggregate of 22,689 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, 1997, Messrs. Bonda, Gilliatt,
Lanham, Risk and Williamson each held options to purchase 4,538 shares at an
option price of $10.58 per share. No options granted under this plan have
been exercised.
Options for the purchase of an aggregate of 24,750 shares of Common Stock
were issued pursuant to the 1997 Plan, which was approved by the shareholders
on February 12, 1997. As of December 10, 1997, Messrs. Bonda, Gilliatt,
Lanham, Risk and Williamson each held options to purchase 4,125 shares, at an
option price of $11.64 per share. Mr. Ryan held options to purchase 2,063
shares at an option price of $11.64 per share and an additional 2,063 shares
at an option price of $11.82 per share.
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 1997, the Company paid $120,000 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. The lease for this property
was extended during fiscal year 1997 to September 30, 2002, and the annual
rent paid by Steak n Shake to KPL was reduced from $75,000 to $39,000. 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 ten restaurants in Atlanta, Georgia and is
proceeding with the development of both markets. Kelley & Partners, Ltd. and
E. W. Kelley, together, own a controlling interest in Kelley Restaurants,
Inc. Mr. Kelley serves as an officer and a director. Mr. Williamson and Mr.
Gilman also serve as directors of Kelley Restaurants, Inc. Ms. Aramian
resigned as a director of Kelley Restaurants, Inc. in August, 1997.
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 1997, a payment of $60,000
was made to King Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms.
Aramian are officers, directors, and shareholders of King Cola, Inc.
The Board of Directors believes that the transactions described herein were
on terms no less favorable to the Company than would have been available in
the absence of the relationships described.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other four most highly compensated executive
officers (the "Named Executive Officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- - ---------------------------------------------------------------------------------------------------------
Restricted Stock
Stock Options All Other
Fiscal Salary ($) Bonus ($) Awards($)(1) (#) Compensation ($)
Year (2)
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 1997 $311,500 $200,000 $173,750 24,750 $18,225
President and Chief 1996 $280,000 $180,000 $137,250 16,500 $16,347
Executive Officer (3)(4) 1995 $253,460 $171,500 $180,625 18,150 $15,671
- - ---------------------------------------------------------------------------------------------------------
E. W. Kelley 1997 $110,000 $190,000 $ -- 15,625 $22,207
Chairman 1996 $110,000 $175,000 $ -- 13,750 $21,258
1995 $110,000 $170,000 $ -- 15,125 $20,384
- - ---------------------------------------------------------------------------------------------------------
S. Sue Aramian 1997 $109,380 $ 90,000 $121,625 12,500 $16,801
Vice Chairwoman 1996 $ 90,000 $ 80,000 $215,250 11,000 $15,501
and Secretary 1995 $ 78,750 $ 70,000 $ -- 12,000 $10,817
- - ---------------------------------------------------------------------------------------------------------
James W. Bear 1997 $166,020 $ 81,483 $112,938 9,375 $13,088
Senior Vice President 1996 $151,780 $ 79,420 $ 99,125 10,313 $12,018
and Treasurer 1995 $141,630 $ 63,360 $122,125 10,588 $10,076
- - ---------------------------------------------------------------------------------------------------------
Gary T. Reinwald 1997 $163,360 $ 78,217 $112,938 9,375 $12,547
Senior Vice President 1996 $141,130 $ 75,490 $ 99,125 10,313 $10,822
1995 $128,850 $ 44,780 $122,125 10,588 $10,045
- - ---------------------------------------------------------------------------------------------------------
</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. THE NUMBER AND VALUE OF THE AGGREGATE UNVESTED
RESTRICTED STOCK HOLDINGS OF EACH OF THE NAMED EXECUTIVE OFFICERS
ARE AS FOLLOWS: MS. ARAMIAN, 28,963 SHARES ($336,875); MR. GILMAN,
38,488 SHARES ($440,375); MR. BEAR, 26,138 SHARES ($298,313); AND
MR. REINWALD, 26,138 SHARES ($298,313). 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 $50,000, AND (III) AMOUNTS OF
ANNUAL CONTRIBUTIONS BY THE COMPANY FOR THE ACCOUNT OF THE NAMED
EXECUTIVE OFFICERS UNDER THE COMPANY'S PROFIT SHARING PLAN.
(3) THE COMPANY HAS AGREED THAT IF MR. GILMAN LEAVES THE COMPANY'S
EMPLOYMENT FOR ANY REASON OTHER THAN RETIREMENT OR TERMINATION BY
THE COMPANY FOR CAUSE, HE WILL BE PAID AT HIS BASE COMPENSATION
RATE ON THE DATE OF TERMINATION FOR A PERIOD OF NINE MONTHS
THEREAFTER.
<PAGE>
(4) MR. GILMAN'S 1997 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN
OPTION FOR 18,750 SHARES ON MAY 1, 1997 AND THE GRANT OF A RELOAD
OPTION FOR 6,000 SHARES ON JULY 28, 1997 PURSUANT TO THE TERMS OF
THE 1995 EMPLOYEE STOCK OPTION PLAN. SEE FOOTNOTE 1 TO THE
"OPTION/SAR GRANTS IN LAST FISCAL YEAR" TABLE BELOW FOR MORE
INFORMATION ON RELOAD OPTIONS.
The following table presents certain information for the Named Executive
Officers relating to stock option grants during fiscal 1997 under the
Company's 1995 Employee Stock Option Plan:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------
PERCENTAGE OF POTENTIAL REALIZABLE
TOTAL OPTIONS VALUE AT ASSUMED ANNUAL
NUMBER OF GRANTED TO RATES OF STOCK PRICE
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION APPRECIATION FOR OPTION TERM (2)
NAME GRANTED(1) FISCAL 1997 ($ PER SHARE)(1) DATE 5% ($) 10% ($)
- - ---- ---------- ------------ ---------------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 18,750 11.1% $11.50 5/1/02 $59,625 $131,625
Alan B. Gilman 6,000 3.6% 14.21 7/28/02 23,580 52,080
(reload)
E. W. Kelley 15,625 9.3% 12.65 5/1/02 31,719 91,719
S. Sue Aramian 12,500 7.4% 12.65 5/1/02 23,375 73,375
James W. Bear 9,375 5.6% 11.50 5/1/02 29,813 65,813
Gary T. Reinwald 9,375 5.6% 11.50 5/1/02 29,813 65,813
</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 OF THE
COMPANY'S COMMON STOCK ON THE NEW YORK STOCK EXCHANGE 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, WITH THE EXCEPTION OF RELOAD
OPTIONS, WHICH ARE FULLY EXERCISABLE ON THE DATE OF GRANT. OPTIONS
GRANTED UNDER THE COMPANY'S 1995 EMPLOYEE STOCK OPTION PLAN PROVIDE
FOR A RELOAD OPTION (THE "RELOAD OPTION") IN THE EVENT THE OPTIONEE
SURRENDERS OTHER SHARES OF THE COMPANY'S COMMON STOCK IN PAYMENT
FOR OPTION SHARES, IN WHOLE OR IN PART. 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 THE SHARES WERE SURRENDERED TO EXERCISE THE
OPTION. THERE IS NO RELOAD OPTION WITH RESPECT TO THE EXERCISE OF
A RELOAD OPTION.
(2) THE DOLLAR AMOUNTS UNDER THESE COLUMNS ARE THE RESULT OF
CALCULATIONS AT THE 5% AND 10% RATES SET BY THE SECURITIES AND
EXCHANGE COMMISSION AND, THEREFORE, ARE NOT INTENDED TO FORECAST
POSSIBLE FUTURE APPRECIATION, IF ANY, OF THE COMPANY'S STOCK PRICE.
THE COMPANY'S PER SHARE STOCK PRICE WOULD BE $14.68 AND $18.52 IF
INCREASED BY 5% AND 10%, RESPECTIVELY, COMPOUNDED ANNUALLY OVER THE
FIVE-YEAR OPTION TERM. THE SAME CALCULATION FOR THE RELOAD OPTION
WOULD BE $18.14 AND $22.89.
<PAGE>
The following table presents certain information for the Named Executive
Officers relating to exercises of stock options during fiscal 1997 under the
Company's Employee Stock Option Plans and, in addition, information relating
to the valuation of unexercised stock options:
AGGREGATED OPTION EXERCISES IN
FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF SHARES UNDERLYING
UNEXERCISABLE OPTIONS AT UNEXERCISABLE OPTIONS AT
NUMBER OF DOLLAR SEPTEMBER 24, 1997 SEPTEMBER 24, 1997 (1)
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 33,407 $304,536 30,568 35,487 $160,580 $185,396
E. W. Kelley 4,026 $36,752 49,311 30,128 $407,873 $128,989
S. Sue Aramian 3,422 $31,213 39,449 24,102 $326,301 $103,187
James W. Bear 27,177 $226,262 34,481 20,252 $308,300 $108,467
Gary T. Reinwald 22,748 $193,340 32,651 20,252 $287,255 $108,467
</TABLE>
(1) BASED ON THE NEW YORK STOCK EXCHANGE CLOSING PRICE OF THE COMPANY'S
COMMON STOCK ON SEPTEMBER 24, 1997, OF $15.60, AS ADJUSTED FOR THE
FIVE FOR FOUR STOCK SPLIT DECLARED BY THE BOARD OF DIRECTORS ON
DECEMBER 3, 1997.
The following table sets forth awards of restricted Common Stock made to
the Named Executive Officers in fiscal 1997 under the Company's Capital
Appreciation Plan:
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
---------------------------------------------------
PERFORMANCE OR
NUMBER OF OTHER PERIOD
SHARES, UNITS UNTIL MATURATION EXPIRATION OF
NAME OR OTHER RIGHTS (1) OR PAYMENT (1) FORFEITURE PERIOD
- - -------- ------------------- ---------------- -----------------
Alan B. Gilman 12,500 three years August 8, 2000
E. W. Kelley -- -- --
S. Sue Aramian 8,750 three years August 8, 2000
James W. Bear 8,125 three years August 8, 2000
Gary T. Reinwald 8,125 three years August 8, 2000
(1) AWARDS UNDER THE COMPANY'S 1997 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 1997 CAPITAL APPRECIATION PLAN EXPIRES ON
DECEMBER 31, 1999, AND NO AWARDS MAY BE MADE UNDER THIS PLAN
THEREAFTER.
<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 1997 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 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 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 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. Subject
to the discretion of the Board of Directors, the Company makes annual
contributions to a trust for the benefit of employees participating in the
Profit Sharing Plan.
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 also used as they are available and appropriate.
<PAGE>
For fiscal 1997, each of the executive officers, including Ms. Aramian
and Messrs. Kelley, Gilman, Bear and Reinwald received compensation pursuant
to the Company's annual incentive bonus plan. Each year the Board
establishes, in advance, a targeted profit growth goal. 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 modestly below the
target but escalates as high as 4 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 1997 based on independent evaluations by the Executive Committee (Mr.
Kelley did not participate in these evaluations). Their awards were based on
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 individuals to the Company's business operations,
innovative marketing programs, expansion goals, management selections and
capital accumulation and funding programs.
Mr. Kelley, the modern-day founder of the Company's food service concept,
has elected not to participate in the Capital Appreciation Plan.
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 to impact 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, with the exception of
Reload Options, which are fully exercisable on the date of the grant.
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.
<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 1997 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 $315,000 in fiscal 1997, and an incentive bonus of $200,000
for the fiscal year, representing 63% of his 1997 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 1997.
Mr. Gilman also received stock awards during 1997, including 18,750 shares
of Common Stock under the Company's Stock Option Plan. He also received
12,500 shares, along with related book units, on August 8, 1997, 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 1992 and 1997. The bankruptcy proceeding for the company identified
with Mr. Kelley was later changed to a Chapter 7 proceeding and was
discharged in 1996. The bankruptcy proceeding for the company identified
with Mr. Lanham was discharged in 1995, but refiled in 1996. The company
emerged from the Chapter 11 proceeding in January 1997, and is currently
operating on a profitable basis.
<PAGE>
COMPANY PERFORMANCE
The graph below compares for each of the last five fiscal years the
cumulative total return of the Company, the S&P 500, the S&P SmallCap 600 and
the S&P Restaurants Indices. The S&P SmallCap 600 replaces the NASDAQ
Non-Financial Group used in the graph in last year's Proxy Statement, since
the Company is no longer traded on the Nasdaq Exchange and is included in the
SmallCap 600, a major market index. The S&P Restaurants Index is also
included in the graph in order to provide a more direct comparison of the
Company's returns to those of other companies in the restaurant business.
The cumulative total returns displayed below have assumed $100 invested on
September 30, 1992 in the Company's Common Stock, the S&P 500, the S&P
SmallCap 600 and the S&P Restaurants Indices, and reinvestment of dividends
paid since September 30, 1992. This graph is not adjusted for the five for
four stock split declared by the Board of Directors on December 3, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
------------------------------------------------
SPECIFIC PLOT POINTS OF PERFORMANCE GRAPH
(IN DOLLARS)
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Consolidated Products, Inc. COP 100 133 195 307 355 482
Standard & Poors 500 1500 100 113 117 152 183 257
Standard & Poors SmallCap 600 1600 100 137 136 171 198 271
Standard & Poors Restaurants Index IRET 100 118 117 168 201 204
* $100 invested on 9/30/92 in stock or index, including reinvestment of
dividends. Assumes fiscal year ending September 30.
2. 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 is 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. On October 30, 1996, the Board of Directors
adopted an amendment to the Stock Purchase Plan to make the Plan more readily
available to employees by reducing the minimum waiting period for
participation in the Plan to six months. This amendment was approved by the
shareholders on February 12, 1997.
As originally adopted, 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 and Internal Revenue Service regulations) 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 terminates by its own terms
on December 31, 1997.
On October 29, 1997, the Board of Directors adopted an amendment to the
Stock Purchase Plan, subject to approval by the vote in favor of such
amendment by persons holding a majority of shares of Common Stock in
attendance and voting at the 1998 Annual Meeting of Shareholders. The
amendment extends the term of the Plan to December 31, 2002, and increases
the number of shares of Common Stock that may be purchased under the
<PAGE>
Plan to 700,000 shares (which includes the original 250,000 shares authorized
in 1992, but does not include an adjustment for the five for four stock split
declared by the Board of Directors on December 3, 1997). It is anticipated
that the additional 450,000 shares will be adequate to provide for both the
extended term and increased participation in the Plan by employees. 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 1998 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.
3. APPROVAL OF THE 1998 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 29, 1997,
the 1998 Nonemployee Director Stock Option Plan ("1998 Director Plan") for
nonemployee members of the Board of Directors under which non-discretionary
nonqualified stock options have been granted to nonemployee directors of the
Company to purchase an aggregate of 15,000 shares of the Company's Common
Stock (number of shares not adjusted to reflect the five for four stock split
declared by the Board of Directors on December 3, 1997). 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 were
conditionally granted effective October 29, 1997, at an option price of
$19.25, which is equal to the closing price of the Company's Common Stock on
the New York Stock Exchange on October 28, 1997, the day preceding the date
of grant on which a sale was transacted. Options are not transferable except
by will or the laws of descent and distribution.
The options were conditionally granted to each of the nonemployee
directors of the Company, being Messrs. Bonda, Gilliatt, Lanham, Risk, Ryan
and Williamson, for 2,500 shares, for a total of 15,000 shares, being all of
the shares authorized under the 1998 Director Plan. No further options will
be granted under the 1998 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 1998
Director Plan. A copy of the 1998 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 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
<PAGE>
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 1998 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 1998 Annual
Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE CONSOLIDATED PRODUCTS, INC. 1998 NONEMPLOYEE DIRECTOR STOCK
OPTION PLAN AS DESCRIBED ABOVE.
4. APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
On October 29, 1997, the Board of Directors approved an amendment to the
Company's Articles of Incorporation increasing the number of shares of Common
Stock which the Company has authority to issue from 25,000,000 shares to
50,000,000 shares, subject to shareholder approval at the 1998 Annual
Meeting. On December 10, 1997, the Company had 16,604,556 shares of Common
Stock outstanding, not including an aggregate of 1,506,394 shares reserved
for issuance as follows: 264,750 shares available for grants under the
Company's Capital Appreciation Plan; 1,148,751 shares available for grant or
exercise under the Company's Stock Option Plans, and 92,893 shares available
for purchase under the 1992 Employee Stock Purchase Plan. The numbers in
this paragraph have not been adjusted to reflect the five for four stock
split declared by the Board of Directors on December 3, 1997 to shareholders
of record as of December 15, 1997.
The Board of Directors believes that the proposed increase in the number
of authorized shares of Common Stock is desirable so that shares will be
available for issuance from time to time for general corporate purposes as
may be determined by the Board of Directors, without further action or
authorization by the shareholders, except as may be required by law. Such
general purposes include: availability of shares for the exercise of options
or for grant or purchase under the Company's stock option plans, the 1997
Capital Appreciation Plan and the 1992 Employee Stock Purchase Plan; the
declaration of future stock dividends or splits; increasing capital through
public offerings of the Common Stock or convertible equity or debt
securities; the acquisition of other companies; and other general corporate
purposes as authorized by the Articles of Incorporation of the Company and
applicable state and federal laws.
To the extent that any additional Common Stock or securities convertible
into Common Stock are issued on other than a pro rata basis to current
shareholders, the present ownership position of current shareholders would be
diluted. Holders of Common Stock do not have any preemptive rights to
subscribe for or purchase any additional Common Stock or convertible
securities that may be issued in the future.
VOTE REQUIRED
Shareholder approval of the Amendment to the Company's Articles of
Incorporation authorizing an increase in authorized shares to 50,000,000
shares of Common Stock will require the affirmative vote of the holders of a
majority of the Company's Common Stock present or represented and voting at
the 1998 Annual Meeting.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE PROPOSAL
TO APPROVE THE AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
AUTHORIZING AN INCREASE IN AUTHORIZED SHARES, AS DESCRIBED ABOVE.
<PAGE>
5. 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 30, 1998. 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 1997 audit and to make a statement if they desire to do so.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE "FOR" THE APPROVAL
OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 1998.
6. 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, the proxies will be voted in
accordance with the recommendations of the Board of Directors of the Company.
<PAGE>
APPENDIX
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, and as amended by the
Board of Directors on October 30, 1996, is hereby further amended as follows:
A. Section 2.01(p) is deleted and replaced with the following:
(p) "Plan Term" means the period from January 1, 1993 to and
including December 31, 2002.
B. Article IV is deleted in its entirety and replaced with the
following:
ARTICLE IV
COMMON SHARES
The shares subject to issuance under this Plan shall be Common Shares.
The total number of Common Shares which may be purchased under this Plan
shall not exceed in the aggregate Seven Hundred Thousand (700,000) Common
Shares, of which not more than Ninety Thousand (90,000) Common Shares shall
be issued in any one calendar year during the Plan Term, except as such numbers
of Common Shares shall be adjusted in accordance with Sections 5.01(a) and
8.01 of this Plan. In the event the aggregate number of Common Shares
issuable for any calendar year shall exceed Ninety Thousand (90,000) Common
Shares (adjusted pursuant to Sections 5.01(a) and 8.01 of the Plan), the
Committee shall reduce proportionately, disregarding fractions of Common
Shares, each Participant's purchase hereunder for the Plan Year to the extent
necessary so that the aggregate number of Common Shares will not exceed the
maximum authorized Common Shares for issuance during the calendar year. The
offerings hereunder shall be in annual increments in each calendar year during
the Plan Term. Common Shares required to satisfy purchases pursuant to the
Plan shall be provided out of the Corporation's authorized and unissued
shares.
C. Section 5.01(a) is deleted and replaced with the following:
ARTICLE V
PURCHASE OF COMMON SHARES
SECTION 5.01 THE OFFERING.
(a) On each Offering Date, the Corporation shall offer an aggregate of
Ninety Thousand (90,000) Common Shares for purchase by Participants
during the current calendar year pursuant to the terms of the Plan.
The number of Common Shares offered annually hereunder shall be
increased by the aggregate number of Common Shares, if any, which were
offered but not purchased during prior calendar years, and shall be
subject to further adjustment in accordance with Section 8.01 of the
Plan.
<PAGE>
D. Section 7.03 is deleted and replaced with the following:
SECTION 7.03 REGISTRATION OF SHARES; DIVIDENDS.
The Custodian shall maintain complete and accurate records of
the number of shares in each Participant's Account and shall
deliver certificates representing such shares to the Participant
annually upon receipt of a written request therefor from the
Committee. The Certificates for Common Shares to be delivered to
Participants under the Plan shall be registered in the name of the
Participant or, if the Participant so directs by written notice
delivered to the Committee at least ten (10) days prior to the end
of the calendar year, in the names of the Participant and one such
other person as may be designated by the Participant, as joint
tenants with rights of survivorship, to the extent permitted by
applicable law. The Committee shall timely notify the Custodian of
its receipt of any such written notice.
E. Section 7.06 is deleted and replaced with the following:
SECTION 7.06 ONLY EMPLOYEES ELIGIBLE TO PARTICIPATE.
Notwithstanding any other provision of the Plan, to be eligible
to purchase Common Shares hereunder, a Participant shall be an
employee at all times during the six (6) months prior to the
Offering Date, and must remain an employee at all times during the
calendar year of participation in the Plan.
F. Section 8.02(b) is deleted and replaced with the following:
(b) Unless earlier terminated by the Board of Directors pursuant to
paragraph (a) of this Section 8.02, this Plan will terminate on
the earlier of: (i) December 31, 2002, or (ii) the date on
which the authorized remaining Common Shares reserved for this
Plan are not sufficient to enable each Participant on such date
to purchase at least one share. No purchases of Common Shares
shall be made after the termination of the Plan except as
authorized by the Committee for the final Plan Year ending
December 31, 2002.
<PAGE>
CONSOLIDATED PRODUCTS, INC.
1998 NONEMPLOYEE DIRECTOR
STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Consolidated Products, Inc. 1998 Nonemployee Director
Stock Option Plan (the "Plan") is to provide those directors of Consolidated
Products, Inc. (the "Corporation"), who are not employees of the Corporation
or any of its subsidiaries (the "Nonemployee Directors"), a favorable
opportunity to acquire shares of Common Stock of the Corporation, with a
stated value of $.50 per share, ("Common Stock") thereby providing them with
an increased incentive to work for the success of the Corporation and better
enabling the Corporation to attract and retain directors.
2. ADMINISTRATION OF THE PLAN.
It is intended that the Plan be administered as a non-discretionary plan,
and no person shall have any discretion as to:
(a) the selection of Nonemployee Directors to whom stock options under
the Plan shall be granted; and
(b) the number of shares granted to each Nonemployee Director under the
Plan.
3. TAX STATUS.
Options granted under the Plan will not be entitled to special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended
("Code").
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 plan now
or hereafter sponsored by the Corporation.
5. STOCK SUBJECT TO THE PLAN.
There shall be reserved for issuance upon the exercise of options granted
under the Plan, 15,000 shares of Common Stock, 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 ("Board of Directors") or
the shareholders of the Corporation, each person serving as a Nonemployee
Director of the Corporation on the date this Plan is approved by the Board of
Directors shall automatically receive an option to purchase 2,500 shares of
Common Stock. Each option shall expire 5 years after the date of grant and
shall be subject to earlier termination as hereinafter provided.
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 Common Stock upon
the exercise of each option shall be the fair market value on the
date of the grant. As used herein, fair market value shall be the
closing sales price for the Common Stock on the date next preceding
the date of the 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 Common Stock
purchased upon exercise of an option shall be paid in full, in
cash, at the time of 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
<PAGE>
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 stock on
the New York Stock Exchange 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 her 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 exercising the option and shall be delivered to or upon the
order of that 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 or her shall forthwith
terminate. Leave of absence approved by the Board of Directors
shall not constitute cessation of 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 or her may be exercised by him or
her in whole or in part within one year after the date of
termination as a director by reason of such disability. In the
event of the death of an optionee while serving as a director, any
option granted to him or her may be exercised in whole or in part
at any time after the date of death by the executor or
administrator of his or her 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.
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 other than by will or the laws of descent and
distribution and, during the lifetime of the optionee, shall be
exercisable only by him or her.
(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 or herself and his or her legal representatives that
any option granted to him or her 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. Any shares issued
pursuant to an exercise of an option may bear a legend evidencing
these limitations on transfer.
8.ADJUSTMENT OF SHARES.
In the event of any change after the effective date of the Plan in the
outstanding shares of Common 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 Common Stock of the Corporation, the Corporation shall make a
corresponding adjustment in the number and kind of shares reserved under the
Plan, in the option price and in the number, kind and option price 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.
<PAGE>
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:
(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 Common 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 persons 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, as amended.
No amendment of the Plan may, without the consent of optionees, make any
changes in any outstanding options theretofore granted under the Plan that
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) at any time upon
determination by the Board of Directors. Any termination by the Board of
Directors shall not affect the validity of any option theretofore granted
under the Plan.
11. GOVERNING LAW.
The terms of any options granted hereunder and the rights and obligations
hereunder of the Corporation, the Nonemployee Directors and their respective
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
actions, 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.
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 1998 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 1998 Annual Meeting of Shareholders.
<PAGE>
PROXY
CONSOLIDATED PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 11, 1998
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 11, 1998, 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 AMENDMENT TO
THE COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' ADOPTION OF THE COMPANY'S
1998 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN:
/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDMENT TO THE ARTICLES OF INCORPORATION
INCREASING THE COMPANY'S AUTHORIZED SHARES TO 50,000,000 SHARES OF
COMMON STOCK:
/ / FOR / / AGAINST / / ABSTAIN
5. PROPOSAL TO APPROVE THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
6. 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 AND 5.
Your vote is important. If you do not expect to attend the Annual
Meeting or if you plan to attend but wish to vote by proxy, please
date, sign and mail this proxy. A return envelope is provided for
this purpose:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
DATE: _______________________________________, 1998
_____________________________________________
_____________________________________________
(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.
2