<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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):
/ / 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
shares of Common Stock 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.
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<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 3,275,501(3) 15.8%
131 Woden Way, S.E.
Winter Haven, FL 33884
Kelley & Partners, Ltd. 1,773,882 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; 702,558 SHARES OWNED DIRECTLY BY
MR. KELLEY; 1,773,882 SHARES OWNED OF RECORD AND BENEFICIALLY BY KELLEY
& PARTNERS, LTD., A LIMITED PARTNERSHIP OF WHICH E. W. KELLEY IS A
MANAGING GENERAL PARTNER, AND 479,032 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 E. W. KELLEY.
-3-
<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 below, and (iii) all
directors and executive officers, as a group:
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- ------------------------ ------------------------ -----------------
S. Sue Aramian 2,259,658(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 203,583(8) *
E. W. Kelley 3,275,501(3)(4)(9) 15.8%
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) 5,934,711(15) 28.6%
* 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., OF WHICH MR. KELLEY AND MS. ARAMIAN ARE
MANAGING GENERAL PARTNERS AND MESSRS. BONDA AND WILLIAMSON ARE GENERAL
PARTNERS.
(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 1,210,087 SHARES OWNED OF RECORD
OR BENEFICIALLY BY MR. KELLEY AND HIS AFFILIATES, KELLEY, INC. AND
KAHM, INC.
-4-
<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.
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:
-5-
<PAGE>
<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 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.
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
-6-
<PAGE>
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 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
-7-
<PAGE>
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 $60,000 was made
to King Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms. Aramian are
officers, directors, and shareholders of King Cola, Inc.
The Board of Directors believes that the transactions described herein were
on terms no less favorable to the Company than would have been available in the
absence of the relationships described.
-8-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(the "Named Executive Officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- --------------------------------
FISCAL RESTRICTED STOCK STOCK ALL OTHER
YEAR SALARY ($) BONUS ($) AWARDS ($)(1) OPTIONS(#) COMPENSATION ($)(2)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Alan B. Gilman 1997 $311,500 $200,000 $173,750 24,750 $20,451
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 $24,433
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 $19,027
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 $15,314
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 $14,773
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. AS OF DECEMBER 10, 1997, THE NUMBER AND VALUE OF THE
AGGREGATE UNVESTED RESTRICTED STOCK HOLDINGS OF EACH OF THE NAMED
EXECUTIVE OFFICERS WERE 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 $50,000, AND (III) AMOUNTS OF ANNUAL CONTRIBUTIONS BY THE
COMPANY FOR THE ACCOUNT OF THE NAMED EXECUTIVE OFFICERS UNDER THE
COMPANY'S PROFIT SHARING PLAN.
(3) THE COMPANY HAS AGREED THAT IF MR. GILMAN LEAVES THE COMPANY'S
EMPLOYMENT FOR ANY REASON OTHER THAN RETIREMENT OR TERMINATION BY THE
COMPANY FOR CAUSE, HE WILL BE PAID AT HIS BASE COMPENSATION RATE ON THE
DATE OF TERMINATION FOR A PERIOD OF NINE MONTHS THEREAFTER.
-9-
<PAGE>
(4) MR. GILMAN'S 1997 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN
OPTION FOR 18,750 SHARES ON MAY 1, 1997 AND THE GRANT OF A RELOAD
OPTION FOR 6,000 SHARES ON JULY 28, 1997 PURSUANT TO THE TERMS OF THE
1995 EMPLOYEE STOCK OPTION PLAN. SEE FOOTNOTE 1 TO THE "OPTION/SAR
GRANTS IN LAST FISCAL YEAR" TABLE BELOW FOR MORE INFORMATION ON RELOAD
OPTIONS.
The following table presents certain information for the Named Executive
Officers relating to stock option grants during fiscal 1997 under the Company's
1995 Employee Stock Option Plan:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE OF VALUE AT ASSUMED
NUMBER TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE
OF GRANTED TO APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------------
NAME GRANTED FISCAL 1997 ($ 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.
-10-
<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 NUMBER OF SHARES UNDERLYING
UNEXERCISED OPTIONS AT UNEXERCISED 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 34,407 $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
<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 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
</TABLE>
(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.
-11-
<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. 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 also used as they are available and appropriate.
12
<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.
13
<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.
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 Index. 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 a member of 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 Index, 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.
14
<PAGE>
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 changes the plan
year from a calendar year to a twelve month period beginning on December 1st
and ending on November 30th; extends the term of the Plan to November 30, 2002,
and increases the number of shares of Common Stock that may be purchased under
the 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.
15
<PAGE>
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 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.
16
<PAGE>
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.
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.
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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.
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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, 1992, and as amended by the Board of
Directors on October 30, 1996, is hereby further amended as follows:
A. Section 2.01(k) is deleted and replaced with the following:
(k) "Offering Date" means the first business day in January
from January 1, 1993 through January 1, 1998, and the first
business day in December from December 1, 1998 through
December 1, 2001, during the Plan Term in which the
Corporation offers Common Shares for purchase hereunder.
B. Section 2.01(p) is deleted and replaced with the following:
(p) "Plan Term" means the period from January 1, 1993 to
and including November 30, 2002.
C. Section 2.01(q) is added to Section 2.01, as follows:
(q) "Plan Year" means (1) the calendar year for years 1993 through
1997; (2) an eleven month period from January 1, 1998
through November 30, 1998, and (3) each twelve month period
commencing December 1st and ending on November 30th for
Plan Years commencing December 1, 1998 and ending November
30, 2002.
D. In Articles III through IX of the Plan replace each occurrence
of the words "calendar year" with the words "Plan Year".
E. 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 Plan 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 Plan 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
Plan Year. The offerings hereunder shall be in annual increments in
each Plan 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.
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F. 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 Plan Year pursuant to the
terms of the Plan. The number of Common Shares offered
each Plan Year hereunder shall be increased by the
aggregate number of Common Shares, if any, which were
offered but not purchased during prior Plan Years, and
shall be subject to further adjustment in accordance with
Section 8.01 of the Plan.
G. 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 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
Plan 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.
H. 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 Plan Year.
I. 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) November 30, 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 November 30, 2002.
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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.
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(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 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.
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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.
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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.
