<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 10, 1999
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 10, 1999, at 1:30 p.m., Eastern Standard Time, for
the following purposes:
1. To elect eight directors to serve until the next Annual Meeting of
Shareholders and until their respective successors shall be elected
and qualified.
2. To act upon the approval of Ernst &Young LLP as the Company's
independent auditors for the fiscal year ending September 29, 1999, as
recommended by the Board of Directors.
3. 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 7, 1998,
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 21, 1998
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 10, 1999
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 (the
"Annual Meeting") to be held at the Company's Corporate Office, 4th Floor,
Century Building, 36 South Pennsylvania Street, Indianapolis, Indiana 46204, on
Wednesday, February 10, 1999, 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 21, 1998.
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 was
December 7, 1998. At the close of business on that date, the Company had issued
and outstanding 21,068,433 shares of Common Stock entitled to vote at the
meeting, which did not include shares issued as a result of the five for four
stock split declared by the Board of Directors on December 1, 1998 to
shareholders of record on December 14, 1998. 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
Unless the shareholder otherwise specifies in the proxy, the accompanying
proxy will be voted (i) FOR the election, as directors of the Company, of the
eight persons named under the caption "Election of Directors," and (ii) 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 29, 1999.
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.
2
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for presentation at the Annual
Meeting of Shareholders in fiscal 2000 must be received by the Company by
September 10, 1999.
OWNERSHIP OF COMMON STOCK
The following table shows the total number and percentage of outstanding
shares of Common Stock beneficially owned as of December 7, 1998 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 3,952,387(3) 15.0%
131 Woden Way, S.E
Winter Haven, FL 33884
Kelley & Partners, Ltd. 2,140,833(4) 8.1%
36 South Pennsylvania Street, Suite 550
Indianapolis, IN 46204
T. Rowe Price Associates, Inc. 1,590,312 6.0%
100 East Pratt Street
Baltimore, MD 21202
Capital Research & Management Co. 1,562,500 5.9%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, CA 90071
FMR Corp 1,331,531 5.1%
82 Devonshire Street
Boston, MA 02109
</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 OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR END OPTION
VALUES."
(3) INCLUDES 60,799 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS; 851,625 SHARES OWNED DIRECTLY BY MR.
KELLEY; 2,140,833 SHARES OWNED OF RECORD AND BENEFICIALLY BY KELLEY &
PARTNERS, LTD., AND 557,226 SHARES, 302,773 SHARES, AND 39,131 SHARES
OWNED BY KELLEY, INC., KING COLA, INC. AND KAHM, INC., RESPECTIVELY,
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.
3
<PAGE>
The following table shows the total number of shares of Common Stock
beneficially owned as of December 7, 1998, 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 2,731,052(2)(3)(4) 10.4%
James W. Bear 463,849(5) 1.8%
Alva T. Bonda 2,530,510(3)(6) 9.6%
Neal Gilliatt 52,963(7) *
Alan B. Gilman 290,524(8) 1.1%
E. W. Kelley 3,952,387(3)(4)(9) 15.0%
Charles E. Lanham 362,705(10) 1.4%
Gary T. Reinwald 301,550(11) 1.1%
J. Fred Risk 164,852(12) *
John W. Ryan 10,563(13) *
James Williamson, Jr 2,370,824(3)(14) 9.0%
All directors and executive
officers as a group (22 persons) 6,992,603(15) 26.6%
</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 51,636 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(3) INCLUDES 2,140,833 SHARES OWNED OF RECORD AND BENEFICIALLY BY KELLEY &
PARTNERS, LTD.
(4) INCLUDES 302,773 SHARES OWNED OF RECORD AND BENEFICIALLY BY KING COLA,
INC., OF WHICH MR. KELLEY AND MS. ARAMIAN ARE OFFICERS AND DIRECTORS.
(5) INCLUDES 44,647 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 57,792 SHARES OWNED OF
RECORD AND BENEFICIALLY BY MR. BEAR'S WIFE, WITH RESPECT TO WHICH HE
DISCLAIMS BENEFICIAL OWNERSHIP.
(6) INCLUDES 20,343 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 78,507 SHARES HELD BY MR.
BONDA AS EXECUTOR FOR THE ESTATE OF HIS WIFE.
(7) INCLUDES 17,218 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 4,575 SHARES OWNED OF RECORD
AND BENEFICIALLY BY MR. GILLIATT'S WIFE, WITH RESPECT TO WHICH HE
DISCLAIMS BENEFICIAL OWNERSHIP
(8) INCLUDES 52,448 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(9) INCLUDES 60,799 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS AND 1,447,982 SHARES OWNED OF RECORD AND
BENEFICIALLY BY MR. KELLEY AND HIS AFFILIATES, KELLEY, INC. AND KAHM,
INC.
4
<PAGE>
(10) INCLUDES 20,343 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 9,935 SHARES OWNED OF RECORD
AND BENEFICIALLY BY MR. LANHAM'S WIFE, WITH RESPECT TO WHICH HE
DISCLAIMS BENEFICIAL OWNERSHIP.
(11) INCLUDES 43,684 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(12) INCLUDES 20,343 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 5,877 SHARES OWNED OF RECORD
AND BENEFICIALLY BY MR. RISK'S WIFE, WITH RESPECT TO WHICH HE
DISCLAIMS BENEFICIAL OWNERSHIP.
(13) INCLUDES 5,407 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(14) INCLUDES 31,781 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 17,283 SHARES OWNED OF
RECORD AND BENEFICIALLY BY MR. WILLIAMSON'S WIFE, WITH RESPECT TO
WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(15) INCLUDES 490,121 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 30, 1998, except Alva T. Bonda, a director, who
failed to file required reports on distributions from his wife's estate, for
which he is executor, and on certain charitable transfers and one sale of stock
from his individual account on the assumption that his broker was making such
filings for him.
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, facsimile or personal
interview at the expense of the Company. The Company will also request brokers,
dealers, banks and voting trustees, and their nominees, to forward this proxy
statement and the accompanying form of proxy to beneficial owners and will
reimburse such record holders for their reasonable expense in forwarding
solicitation material.
1. ELECTION OF DIRECTORS
Eight directors will be elected to serve until the next Annual Meeting and
until their respective successors shall have been duly elected and qualified.
Each of the nominees named below is currently a director of the Company and each
was elected at the Annual Meeting of Shareholders held February 11, 1998.
Alva T. Bonda, a director of the Company since 1982, has advised the Board
of Directors that he will not seek re-election. Mr. Bonda will remain a director
of the Company until the Annual Meeting, at which time he will become a Director
Emeritus.
5
<PAGE>
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:
<TABLE>
<CAPTION>
Served As
Name Age Director Since Business Experience
- ---- --- -------------- -------------------
<S> <C> <C> <C>
S. Sue Aramian 66 1981 Vice Chairwoman of the Company since
1990 and Secretary since August 1995;
Vice President of the Company from 1984
to 1990; Managing General Partner of
Kelley & Partners, Ltd. since 1974.
Neal Gilliatt 81 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 68 1992 President and Chief Executive Officer of
the Company since 1992.
E. W. Kelley 81 1981 Chairman of the Company since 1984;
Managing General Partner of Kelley &
Partners, Ltd. since 1974.
Charles E. Lanham 66 1971 Chairman of the Board of Directors of
Overhead Door Company of Indianapolis,
Inc.; Vice Chairman of Klipsch Lanham
Investments.
J. Fred Risk 70 1971 Chairman of the Board of Directors of
Sovereign Group, Inc.
John W. Ryan 69 1996 Chancellor for the State University
System of New York since July, 1996;
formerly Interim President of the
University of Maryland at Baltimore and
Florida Atlantic University; President
of Indiana University from January 1971
to September 1987.
James Williamson, Jr. 67 1985 Former President and Chief Executive
Officer of the Company from April 1985
to July 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 five meetings and acted one time by
written consent during fiscal 1998, 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.
When the Board of Directors is not in session, the Executive Committee may
exercise 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
6
<PAGE>
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". During the
fiscal year ended September 30, 1998, the Executive Committee met three times
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 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 30, 1998, 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
employee stock option plans in accordance with the terms of the plans. During
fiscal 1998, 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 three
times during fiscal 1998. 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, Robert L. Grimm, Vice
President, Human Resources, and Ms. Charlene Boog, Associate 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. During fiscal 1998, the Investment Committee met one time. Ms. Aramian and
Messrs. Gilman and Bear are members of the Committee.
No director attended less than 80% of the aggregate of (i) the total
meetings of the Board of Directors, and (ii) 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 30, 1998, the total compensation
paid to nonemployee directors was $130,400. In addition, the 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 also believes
in compensating its directors partly on the basis of the Company's success in
increasing the value of its stock. Consequently, an important part of director's
compensation is from stock options and the increase in their value.
7
<PAGE>
The Company has had nonemployee director stock option plans (the "Plans")
in place since 1990, which 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 23,436 shares of Common Stock
were issued pursuant to the 1998 Plan, which was approved by the shareholders on
February 11, 1998. As of December 7, 1998, Messrs. Bonda, Gilliatt, Lanham,
Risk, Ryan and Williamson each held options to purchase 3,906 shares at an
option price of $12.32 per share. No options granted under this Plan have been
exercised.
Options for the purchase of an aggregate of 22,500 shares of Common Stock
were issued by resolution of the Board of Directors of the Company on October
16, 1998, with each non-employee director abstaining as to the grant to himself,
constituting all approvals necessary for the 1999 Plan under current laws and
regulations. As of December 7, 1998, Messrs. Bonda, Gilliatt, Lanham, Risk, Ryan
and Williamson each held options to purchase 3,750 shares at an option price of
$13.30 per share. No options granted under this Plan have been exercised.
The Company has consultant agreements with Messrs. Williamson and Gilliatt
for certain administrative and marketing services, respectively, at an annual
fee of $12,000 each, subject to termination by the Company at any time.
MANAGEMENT RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998, the Company paid $135,000 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 term of this lease extends to September
30, 2002, and the annual rent paid by Consolidated Specialty Restaurants, Inc.
to KPL is $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 Mr.
Lanham, a director of the Company, is a Limited Partner of KPL.
The Company granted exclusive franchise rights in 1991 to Kelley
Restaurants, Inc., for development of Steak n Shake restaurants in the Atlanta,
Georgia and Charlotte, North Carolina markets. The franchisee currently operates
eleven restaurants in Atlanta, Georgia and has an additional restaurant under
construction. The franchisee will open its first Steak n Shake restaurant in
Charlotte, North Carolina in January 1999. 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.
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 1998, a payment of $60,000 was made to King
Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms. Aramian are officers,
directors, and shareholders of King Cola, Inc.
The Board of Directors believes that the transactions described herein were
on terms no less favorable to the Company than would have been available in the
absence of the relationships described.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(the "Named Executive Officers") for the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation --------------------------------- All Other
Fiscal --------------------------- Restricted Stock Stock Options Compensation
Year Salary ($) Bonus ($) Awards ($)(1) (#)(4) ($)(2)
------ ---------- --------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 1998 $346,365 $200,000 $198,650 32,000 $ 17,391
President and Chief 1997 $311,500 $200,000 $173,800 30,937 $ 18,225
Executive Officer (3) 1996 $280,000 $180,000 $137,250 20,625 $ 16,347
E.W. Kelley 1998 $110,000 $190,000 $ -- 22,500 $ 24,975
Chairman 1997 $110,000 $190,000 $ -- 19,531 $ 22,207
1996 $110,000 $175,000 $ -- 17,188 $ 21,258
S. Sue Aramian 1998 $112,500 $ 90,000 $144,500 18,897 $ 17,298
Vice Chairwoman 1997 $109,380 $ 90,000 $121,600 15,625 $ 16,801
and Secretary 1996 $ 90,000 $ 80,000 $106,750 13,750 $ 15,501
James W. Bear 1998 $179,690 $ 58,140 $126,400 14,077 $ 11,944
Senior Vice President 1997 $166,020 $ 81,483 $112,900 11,718 $ 13,088
and Treasurer 1996 $151,780 $ 79,420 $ 99,100 12,890 $ 12,018
Gary T. Reinwald 1998 $179,690 $ 57,006 $126,400 13,114 $ 12,941
Senior Vice President 1997 $163,360 $ 78,217 $112,900 11,718 $ 12,547
1996 $141,130 $ 75,490 $ 99,100 12,890 $ 10,822
</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, 32,968 SHARES ($372,850); MR. GILMAN, 44,843 SHARES
($509,700); MR. BEAR, 30,077 SHARES ($338,400); AND MR. REINWALD,
30,077 SHARES ($338,400). 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 NET CHANGE IN THE BOOK
VALUE PER SHARE OF THE COMMON STOCK AS ADJUSTED FOR STOCK DIVIDENDS
AND SPLITS 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 $3,500 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) OPTIONS GRANTED UNDER THE EMPLOYEE STOCK OPTION PLANS 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. MR. GILMAN'S 1997
STOCK OPTION GRANTS INCLUDE THE GRANT OF AN OPTION FOR 23,437 SHARES
ON MAY 1, 1997 AND THE GRANT OF A RELOAD OPTION FOR 7,500 SHARES ON
JULY 28, 1997 PURSUANT TO THE TERMS OF THE 1995 EMPLOYEE STOCK OPTION
PLAN. HIS 1998 STOCK OPTION GRANT INCLUDES THE GRANT OF AN OPTION FOR
25,000 SHARES ON APRIL 29, 1998, AND THE GRANT OF A RELOAD OPTION FOR
7,000 SHARES ON APRIL 14, 1998. MS. ARAMIAN'S 1998 STOCK OPTION GRANTS
INCLUDE THE GRANT OF AN OPTION FOR 15,000 SHARES ON APRIL 29, 1998,
AND THE GRANT OF A RELOAD OPTION FOR 3,897 ON JUNE 26, 1998. MR.
BEAR'S 1998 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN OPTION FOR
10,000 SHARES ON APRIL 29, 1998, AND THE GRANT OF A RELOAD OPTION FOR
4,077 SHARES ON DECEMBER 26, 1997. MR. REINWALD'S 1998 STOCK OPTION
GRANTS INCLUDE THE GRANT OF AN OPTION FOR 10,000 SHARES ON APRIL 29,
1998, AND THE GRANT OF RELOAD OPTIONS OF 1,608 SHARES AND 1,506 SHARES
ON DECEMBER 29, 1997 AND JUNE 9, 1998, RESPECTIVELY.
The following table presents certain information for the Named Executive
Officers relating to stock option grants during fiscal 1998 under the Company's
Employee Stock Option Plans:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Percentage Of Value at Assumed Annual
Total Options Rates of Stock Price
Number of Granted To Appreciation for Option Term (2)
Options Employees In Exercise Price Expiration --------------------------------
Name Granted (1) Fiscal 1998 ($ per share)(1) Date 5% ($) 10% ($)
- ---- ----------- ------------- ---------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 25,000 13.3% $ 15.55 4/29/03 $107,500 $237,250
7,000 3.7% 15.86 4/14/03 30,660 67,760
(reload)
E.W. Kelley 22,500 12.0% 17.11 4/29/03 61,650 178,425
S. Sue Aramian 15,000 8.0% 17.11 4/29/03 41,100 118,950
3,897 2.0% 16.94 6/26/03 18,238 40,295
(reload)
James W. Bear 10,000 5.3% 15.55 4/29/03 43,000 94,900
4,077 2.2% 12.88 12/26/02 14,514 32,045
(reload)
Gary T. Reinwald 10,000 5.3% 15.55 4/29/03 43,000 94,900
1,608 0.9% 12.92 12/29/02 5,741 12,687
(reload)
1,506 0.8% 16.08 6/9/03 6,687 14,789
(reload)
</TABLE>
(1) OPTIONS GRANTED UNDER THE COMPANY'S EMPLOYEE STOCK OPTION PLANS 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 DATE OF GRANT, EXCEPT
IN THE CASE OF INCENTIVE OPTIONS GRANTED TO HOLDERS OF MORE THAN 10%
OF THE TOTAL VOTING POWER OF THE COMPANY'S 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.
10
<PAGE>
(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. FOR EXAMPLE, THE
COMPANY'S PER SHARE STOCK PRICE WOULD BE $19.85 AND $25.04 IF
INCREASED BY 5% AND 10%, RESPECTIVELY, COMPOUNDED ANNUALLY OVER THE
FIVE-YEAR OPTION TERM ON A GRANT PRICE OF $15.55.
The following table presents certain information for the Named Executive
Officers relating to exercises of stock options during fiscal 1998 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 1998 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Shares Underlying
Unexercised Options At Unexercised Options At
Number of Dollar September 30, 1998 September 30, 1998 (1)
Shares Acquired Value ---------------------------- ---------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 17,771 $138,584 52,448 56,850 $198,460 $147,976
E. W. Kelley 22,876 $238,828 60,799 49,374 $356,626 $ 97,314
S. Sue Aramian 18,301 $191,065 51,636 35,900 $285,294 $ 77,854
James W. Bear 16,015 $172,449 44,647 26,834 $279,456 $ 80,889
Gary T. Reinwald 13,725 $147,804 43,684 26,834 $276,503 $ 80,889
</TABLE>
(1) BASED ON THE NEW YORK STOCK EXCHANGE CLOSING PRICE OF THE COMPANY'S
COMMON STOCK ON SEPTEMBER 30, 1998, OF $14.05, AS ADJUSTED FOR THE
FIVE FOR FOUR STOCK SPLIT DECLARED BY THE BOARD OF DIRECTORS ON
DECEMBER 1, 1998.
The following table sets forth awards of restricted Common Stock made to
the Named Executive Officers in fiscal 1998 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 13,750 three years August 10, 2001
E. W. Kelley -- -- --
S. Sue Aramian 10,000 three years August 10, 2001
James W. Bear 8,750 three years August 10, 2001
Gary T. Reinwald 8,750 three years August 10, 2001
</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 NET CHANGE IN THE BOOK
VALUE PER SHARE OF THE COMMON STOCK AS ADJUSTED FOR STOCK DIVIDENDS
AND SPLITS FROM THE DATE OF AWARD TO THE DATE OF VESTING. THE
COMPANY'S 1997 CAPITAL APPRECIATION PLAN EXPIRES ON DECEMBER 31, 1999.
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 1998 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 success 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 to 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.
12
<PAGE>
For fiscal 1998, 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).
Bonuses are determined 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 the targeted profit 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 of each individual's
operational objectives.
Mr. Kelley and Ms. Aramian also received incentive bonus awards for fiscal
1998 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.
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 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 net change in the book value per share of the Common Stock, as adjusted for
stock dividends and splits 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 1998 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 $346,365 in
fiscal 1998, and an incentive bonus of $200,000 for the fiscal year,
representing 57.7% of his 1998 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 1998.
Mr. Gilman received stock awards during fiscal 1998, including 25,000
shares of Common Stock under the Company's Stock Option Plan. He also received
13,750 shares, along with related book units, on August 10, 1998, 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 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
1993 and 1998. 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.
14
<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 Company is included in the companies comprising
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, 1993 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, 1993. This graph is not adjusted for the five for four stock split declared
by the Board of Directors on December 1, 1998.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
SPECIFIC PLOT POINTS OF PERFORMANCE GRAPH
(IN DOLLARS)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Products, Inc. COP 100.00 146.67 230.48 266.20 361.38 408.15
Standard & Poors 500 1500 100.00 103.69 134.53 161.89 227.37 247.93
Standard & Poors SmallCap 600 1600 100.00 99.42 125.45 144.66 198.14 167.73
Standard & Poors Restaurant Index IRET 100.00 99.56 142.78 170.28 173.36 216.63
</TABLE>
* $100 invested on 9/30/93 in stock or index, including reinvestment of
dividends. Assumes fiscal year ending September 30.
2. 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 29, 1999. 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 1998 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 29, 1999.
3. 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.
15
<PAGE>
PROXY
CONSOLIDATED PRODUCTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 10, 1999
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
10, 1999, or at any adjournment thereof, as follows:
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 AND 2.
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, 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 SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
3. 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.
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:
------------------ -----------------------------------
(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.
