<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 9, 2000
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 9, 2000, 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 27, 2000, 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 6, 1999,
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
Mary E. Ham, Secretary
December 20, 1999
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 9, 2000
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 9, 2000, 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 20, 1999.
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 6, 1999. At the close of business on that date, the Company had issued
and outstanding 26,727,283 shares of Common Stock entitled to vote at the
meeting, which does not include shares issued as a result of the 10% stock
dividend declared by the Board of Directors on December 15, 1999 to shareholders
of record on December 29, 1999. 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 10% stock
dividend.
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 27, 2000.
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 2001 must be received by the Company by
September 8, 2000.
OWNERSHIP OF COMMON STOCK
The following table shows the total number and percentage of outstanding
shares of Common Stock beneficially owned as of December 6, 1999 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 3,978,166(3) 13.5%
131 Woden Way, S.E.
Winter Haven, FL 33884
Kelley & Partners, Ltd. 2,030,805(4) 6.9%
36 South Pennsylvania Street, Suite 550
Indianapolis, IN 46204
T. Rowe Price Associates, Inc. 1,607,456 5.5%
100 East Pratt Street
Baltimore, MD 21202
Capital Research & Management Co. 1,718,750 5.8%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, CA 90071
</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 1999 AND FISCAL YEAR END
OPTION VALUES."
(3) INCLUDES 68,612 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS; 565,644 SHARES OWNED DIRECTLY BY
MR. KELLEY; 2,030,805 SHARES OWNED OF RECORD AND BENEFICIALLY BY
KELLEY & PARTNERS, LTD.; 601,948 SHARES, 294,344 SHARES, AND 43,044
SHARES OWNED BY KELLEY, INC., KING COLA, INC. AND KAHM, INC.,
RESPECTIVELY, EACH OF WHICH IS A CORPORATION CONTROLLED BY MR.
KELLEY, AND 373,769 SHARES OWNED BY ARAMIAN, KELLEY & CONSOLIDATED,
LTD., AN INDIANA LIMITED PARTNERSHIP OF WHICH MR. KELLEY IS MANAGING
GENERAL PARTNER.
(4) MR. KELLEY AND MS. ARAMIAN ARE MANAGING GENERAL PARTNERS AND MR.
WILLIAMSON IS A GENERAL PARTNER OF KELLEY & PARTNERS, LTD.
3
<PAGE>
The following table shows the total number of shares of Common Stock
beneficially owned as of December 6, 1999, 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 2,659,368(2)(3)(4) 9.0%
James W. Bear 505,912(5) 1.7%
Neal Gilliatt 61,867(6) *
Alan B. Gilman 361,762(7) 1.2%
Stephen Goldsmith 1,540(8) *
E. W. Kelley 3,978,166(3)(4)(9) 13.5%
Charles E. Lanham 437,721(10) 1.5%
Gary T. Reinwald 353,228(11) 1.2%
J. Fred Risk 175,660(12) *
John W. Ryan 13,963(13) *
James Williamson, Jr. 2,282,085(3)(14) 7.8%
All directors and executive officers
as a group (21 persons) 7,059,893(15) 24.0%
</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 61,924 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(3) INCLUDES 2,030,805 SHARES OWNED OF RECORD AND BENEFICIALLY BY KELLEY
& PARTNERS, LTD.
(4) INCLUDES 294,344 SHARES OWNED OF RECORD AND BENEFICIALLY BY KING
COLA, INC., OF WHICH MR. KELLEY AND MS. ARAMIAN ARE OFFICERS AND
DIRECTORS.
(5) INCLUDES 43,175 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 72,371 SHARES OWNED
OF RECORD AND BENEFICIALLY BY MR. BEAR'S WIFE, WITH RESPECT TO WHICH
HE DISCLAIMS BENEFICIAL OWNERSHIP.
(6) INCLUDES 15,665 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 5,032 SHARES OWNED
OF RECORD AND BENEFICIALLY BY MR. GILLIATT'S WIFE, WITH RESPECT TO
WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(7) INCLUDES 79,750 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(8) INCLUDES 660 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(9) INCLUDES 68,612 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS AND 1,584,405 SHARES OWNED OF
RECORD AND BENEFICIALLY BY MR. KELLEY AND HIS AFFILIATES, KELLEY,
INC., KAHM, INC. AND ARAMIAN, KELLEY AND CONSOLIDATED, LTD.
(10) INCLUDES 15,665 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 10,928 SHARES OWNED
OF RECORD AND BENEFICIALLY BY MR. LANHAM'S WIFE, WITH RESPECT TO
WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
4
<PAGE>
(11) INCLUDES 50,078 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS.
(12) INCLUDES 7,269 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 7,726 SHARES OWNED OF
RECORD AND BENEFICIALLY BY MR. RISK'S WIFE, WITH RESPECT TO WHICH HE
DISCLAIMS BENEFICIAL OWNERSHIP.
(13) INCLUDES 6,598 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK OPTIONS
EXERCISABLE WITHIN 60 DAYS.
(14) INCLUDES 15,665 SHARES WHICH MAY BE ACQUIRED PURSUANT TO STOCK
OPTIONS EXERCISABLE WITHIN 60 DAYS. ALSO INCLUDES 19,011 SHARES OWNED
OF RECORD AND BENEFICIALLY BY MR. WILLIAMSON'S WIFE, WITH RESPECT TO
WHICH HE DISCLAIMS BENEFICIAL OWNERSHIP.
(15) INCLUDES 534,981 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 29, 1999.
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. Seven
were elected at the Annual Meeting of Shareholders held February 10, 1999.
Stephen Goldsmith was appointed to the Board of Directors on September 28, 1999.
Neal Gilliatt, a director of the Company since 1991, has advised the Board
of Directors that he will not seek re-election. Mr. Gilliatt will remain a
director of the Company until the Annual Meeting, at which time he will become a
Director Emeritus.
Alva T. Bonda, a director of the Company from 1982 until February 10, 1999,
now serves as Director Emeritus. In that capacity, he attends Board meetings,
but does not vote.
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.
5
<PAGE>
The nominees for the Board of Directors of the Company are listed below,
along with the age, tenure as director and business background for at least the
last five years for each:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE
---- --- -------------- -------------------
<S> <C> <C> <C>
S. Sue Aramian 67 1981 Vice Chairwoman of the Company since 1990 and Secretary
from 1995 to November 1999; Managing General Partner of
Kelley & Partners, Ltd. since 1974.
Alan B. Gilman 69 1992 President and Chief Executive Officer of the Company since
1992.
Stephen Goldsmith 53 1999 Mayor of Indianapolis, Indiana since 1992; member of the
Boards of Directors of The Finish Line, Inc. and MAXIMUS;
Chairman of the Manhattan Institute's Center for Civic
Innovation; academic appointments with Harvard University
and University of Pennsylvania.
E. W. Kelley 82 1981 Chairman of the Company since 1984; Managing General
Partner of Kelley & Partners, Ltd. since 1974.
Charles E. Lanham 67 1971 Chairman of the Board of Directors of Overhead Door Company
of Indianapolis, Inc.; Vice Chairman of Klipsch Lanham
Investments.
J. Fred Risk 71 1971 Chairman of the Board of Directors of Sovereign Group, Inc.
John W. Ryan 70 1996 Chancellor for the State University of New York System
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. 68 1985 Former President and Chief Executive Officer of the Company
from April 1985 to July 1990; General Partner of Kelley &
Partners, Ltd. since 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 and acted three times by
written consent during fiscal 1999, 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 salaries and 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 29, 1999, the Executive Committee met two 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.
6
<PAGE>
The Audit Committee, among other duties, serves in an oversight role
intended to ensure the integrity and objectivity of the Company's financial
reporting process. The Committee meets with representatives of management and
the independent auditors to review matters of a material nature related to
auditing, financial reporting, internal accounting controls and audit
results. The Audit Committee is also responsible for making recommendations
to the Board of Directors concerning the selection of the Company's
independent auditors. During the fiscal year ended September 29, 1999, the
Audit Committee met twice. Mr. Risk serves as Chairman of the Committee and
Messrs. Gilliatt, Goldsmith, 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 1999, the Stock Option Committee acted on two occasions by written
consent. Dr. Ryan serves as Chairman of the Committee and Messrs. Lanham 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 matters
as may be requested by the Board of Directors. The Personnel/Benefits
Committee met two times during fiscal 1999. Ms. Aramian is Chairwoman of the
Committee and Messrs. Lanham and Gilliatt are members, together with Mr.
James W. Bear, Senior Vice President and Treasurer, Mr. Robert L. Grimm, Vice
President, Human Resources, and Ms. B. 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. Lanham 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 1999, 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 $16,000 plus $1,600 per board meeting
and $800 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 29, 1999, the total
compensation paid to nonemployee directors was $155,200. 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 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.
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 25,776 shares of Common
Stock were issued pursuant to the 1998 Plan, which was approved by the
shareholders on February 11, 1998. As of December 6, 1999, Messrs. Bonda,
Gilliatt, Lanham, Risk, Ryan and Williamson each held options to purchase
4,296 shares at an option price of $11.20 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 by Consent Action 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 6, 1999, Messrs. Bonda,
Gilliatt, Lanham, Risk, Ryan and Williamson each held options to purchase
4,125 shares at an option price of $12.09 per share. No options granted under
this Plan have been exercised.
Options for the purchase of an aggregate of 19,800 shares of Common
Stock were issued by resolution of the Board of Directors of the Company on
November 10, 1999, with each non-employee director abstaining, constituting
all approvals necessary for the 2000 Plan under current laws and regulations.
As of December 6, 1999, Messrs. Gilliatt, Goldsmith, Lanham, Risk, Ryan and
Williamson each held options to purchase 3,300 shares at an option price of
$11.08 per share. No options granted under this Plan have been exercised.
MANAGEMENT RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1999, the Company paid $159,400 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; Mr Williamson, a director of the Company, is a General
Partner of KPL, and Mr. Lanham, also a director of the Company, is a Limited
Partner of KPL. Mr. Wayne L. Kelley, a General Partner of KPL and son of Mr.
E. W. Kelley, is a director of Steak n Shake, Inc., a subsidiary of the
Company.
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 twelve restaurants in Atlanta, Georgia and one in
Charlotte, North Carolina. Kelley & Partners, Ltd. and Mr. E. W. Kelley,
together, own a controlling interest in Kelley Restaurants, Inc. Mr. E. W.
Kelley, Mr. Wayne L. Kelley and Ms. S. Sue Aramian serve as officers and
directors. 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 1999, a payment of $60,000
was made to King Cola, Inc. pursuant to this agreement. Mr. Kelley and Ms.
Aramian are officers, directors, and shareholders of King Cola, Inc.
The Board of Directors believes that the transactions described herein
were on terms no less favorable to the Company than would have been available
in the absence of the relationships described.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid to the Company's Chief
Executive Officer and its other four most highly compensated executive
officers (the "Named Executive Officers") for the last three fiscal years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long-Term Compensation
------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Restricted Stock Stock Options All Other
Fiscal Salary ($) Bonus ($) Awards ($) (1) (#) (2) Compensation
Year ($) (3)
-----------------------------------------------------------------------------------------
Alan B. Gilman 1999 $ 376,835 $ 150,000 $ 172,600 44,440 $ 16,791
President and Chief 1998 $ 346,365 $ 200,000 $ 198,650 35,200 $ 17,391
Executive Officer (4) 1997 $ 311,500 $ 200,000 $ 173,800 34,031 $ 18,225
- --------------------------------------------------------------------------------------------------------------------
E.W. Kelley 1999 $ 110,000 $ 200,000 $ -- 37,125 $ 21,316
Chairman 1998 $ 110,000 $ 190,000 $ -- 24,750 $ 24,975
1997 $ 110,000 $ 190,000 $ -- 21,484 $ 22,207
- --------------------------------------------------------------------------------------------------------------------
S. Sue Aramian 1999 $ 125,000 $ 80,000 $ 124,300 31,014 $ 16,587
Vice Chairwoman 1998 $ 112,500 $ 90,000 $ 144,500 20,787 $ 17,298
and Secretary 1997 $ 109,380 $ 90,000 $ 121,600 17,187 $ 16,801
- ---------------------------------------------------------------------------------------------------------------------
James W. Bear 1999 $ 190,000 $ 37,422 $ 110,500 20,751 $ 12,074
Senior Vice President 1998 $ 179,690 $ 58,140 $ 126,400 15,485 $ 11,944
and Treasurer 1997 $ 166,020 $ 81,483 $ 112,900 12,889 $ 13,088
- ---------------------------------------------------------------------------------------------------------------------
Gary T. Reinwald 1999 $ 190,000 $ 37,123 $ 110,500 20,715 $ 12,361
Senior Vice President 1998 $ 179,690 $ 57,006 $ 126,400 14,425 $ 12,941
1997 $ 163,360 $ 78,217 $ 112,900 12,889 $ 12,547
- ---------------------------------------------------------------------------------------------------------------------
</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, 32,931 SHARES ($390,400); MR. GILMAN, 46,062
SHARES ($545,050); MR. BEAR, 29,596 SHARES ($349,800); AND MR.
REINWALD, 29,596 SHARES ($349,800). 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) 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; (iii) WILL BE FULLY EXERCISABLE ON
THE DATE OF GRANT; AND (iv) 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 25,781 SHARES
ON MAY 1, 1997 AND THE GRANT OF A RELOAD OPTION FOR 8,250 SHARES ON
JULY 28, 1997 PURSUANT TO THE TERMS OF THE 1995 EMPLOYEE STOCK OPTION
PLAN. HIS 1998 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN OPTION FOR
27,500 SHARES ON APRIL 29, 1998, AND THE GRANT OF A RELOAD OPTION FOR
7,700 SHARES ON APRIL 14, 1998. MS. ARAMIAN'S 1998 STOCK OPTION
GRANTS INCLUDE THE GRANT OF AN OPTION FOR 16,500 SHARES ON APRIL 29,
1998, AND THE GRANT OF A RELOAD OPTION FOR 4,287 SHARES ON JUNE 26,
1998. MR. BEAR'S 1998 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN
OPTION FOR 11,000 SHARES ON APRIL 29, 1998, AND THE GRANT OF A
RELOAD OPTION FOR 4,485 SHARES ON DECEMBER 26, 1997. MR. REINWALD'S
9
<PAGE>
1998 STOCK OPTION GRANTS INCLUDE THE GRANT OF AN OPTION FOR 11,000
SHARES ON APRIL 29, 1998, AND THE GRANT OF RELOAD OPTIONS FOR 1,769
SHARES AND 1,656 SHARES ON DECEMBER 29, 1997 AND JUNE 9, 1998,
RESPECTIVELY. INFORMATION REGARDING THE 1999 STOCK OPTION GRANTS
TO THE NAMED EXECUTIVE OFFICERS IS SET FORTH IN THE OPTION/SAR
GRANTS IN LAST FISCAL YEAR TABLE, WHICH FOLLOWS.
(3) 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 $50,000, AND (iii) AMOUNTS OF
ANNUAL CONTRIBUTIONS BY THE COMPANY FOR THE ACCOUNT OF THE NAMED
EXECUTIVE OFFICERS UNDER THE COMPANY'S PROFIT SHARING PLAN.
(4) THE COMPANY HAS AGREED THAT IF MR. GILMAN LEAVES THE COMPANY'S
EMPLOYMENT FOR ANY REASON OTHER THAN RETIREMENT OR TERMINATION BY
THE COMPANY FOR CAUSE, HE WILL BE PAID AT HIS BASE COMPENSATION
RATE ON THE DATE OF TERMINATION FOR A PERIOD OF NINE MONTHS
THEREAFTER.
The following table presents certain information for the Named Executive
Officers relating to stock option grants during fiscal 1999 under the
Company's Employee Stock Option Plans:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE OF VALUE AT ASSUMED ANNUAL
TOTAL OPTIONS RATES OF STOCK PRICE
NUMBER OF GRANTED TO APPRECIATION FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------------
NAME GRANTED (1) FISCAL 1999 ($ PER SHARE) (1) DATE 5% ($) 10% ($)
- ---- ------- ----------- -------------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 13,750 3.9% $ 12.09 10/16/03 $ 45,925 $101,475
27,500 7.8% 16.25 5/6/04 123,475 272,800
(reload options) 3,190 0.9% 15.52 4/2/04 13,685 30,240
E.W. Kelley 12,375 3.5% 13.30 10/16/03 26,360 76,355
24,750 7.0% 17.88 5/6/04 70,785 205,175
S. Sue Aramian 8,250 2.3% 13.30 10/16/03 17,570 50,900
17,600 5.0% 17.88 5/6/04 50,335 145,905
(reload options) 5,164 1.5% 16.40 5/13/04 23,390 51,690
James W. Bear 5,500 1.6% 12.09 10/16/03 18,370 40,590
11,000 3.1% 16.25 5/6/04 49,390 109,120
(reload options) 2,781 0.8% 15.61 12/9/03 11,985 26,500
(reload options) 1,470 0.4% 16.32 6/7/04 6,630 14,640
Gary T. Reinwald 5,500 1.6% 12.09 10/16/03 18,370 40,590
11,000 3.1% 16.25 5/6/04 49,390 109,120
(reload options) 4,215 1.2% 15.99 1/27/04 18,630 41,140
</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
10
<PAGE>
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.
(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
$15.43 AND $19.47 IF INCREASED BY 5% AND 10%, RESPECTIVELY,
COMPOUNDED ANNUALLY OVER A FIVE-YEAR OPTION TERM ON A GRANT PRICE
OF $12.09.
The following table presents certain information for the Named Executive
Officers relating to exercises of stock options during fiscal 1999 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 1999 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 29, 1999 SEPTEMBER 29, 1999 (1)
SHARES ACQUIRED VALUE ------------------ ------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Gilman 9,567 $38,263 77,000 64,351 $41,747 $12,021
E. W. Kelley 22,876 $104,816 66,137 56,926 $51,290 nil
S. Sue Aramian 18,301 $83,855 60,274 40,480 $41,033 nil
James W. Bear 16,013 $80,069 50,075 27,792 $59,582 $6,430
Gary T. Reinwald 16,013 $80,069 48,978 27,792 $59,582 $6,430
</TABLE>
(1) BASED ON THE NEW YORK STOCK EXCHANGE CLOSING PRICE OF THE
COMPANY'S COMMON STOCK ON SEPTEMBER 29, 1999, OF $9.20, AS
ADJUSTED FOR THE 10% STOCK DIVIDEND DECLARED BY THE BOARD OF
DIRECTORS ON DECEMBER 15, 1999.
The following table sets forth awards of restricted Common Stock made to
the Named Executive Officers in fiscal 1999 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 6, 2002
E. W. Kelley -- -- --
S. Sue Aramian 9,900 three years August 6, 2002
James W. Bear 8,800 three years August 6, 2002
Gary T. Reinwald 8,800 three years August 6, 2002
</TABLE>
11
<PAGE>
(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 TERM OF THE COMPANY'S 1997 CAPITAL APPRECIATION
PLAN WAS EXTENDED TO DECEMBER 31, 2001 BY ACTION OF THE COMPANY'S
BOARD OF DIRECTORS ON NOVEMBER 10, 1999.
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 1999 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 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 the 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 Plan 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.
12
<PAGE>
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.
For fiscal 1999, each of the executive officers, including Messrs.
Gilman, Bear and Reinwald received compensation pursuant to the Company's
annual Incentive Bonus Plan. Each year the Board establishes, in advance, a
targeted profit growth goal. 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 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 1999 based on independent evaluations by the Executive Committee (Mr.
Kelley did not participate in these evaluations). Their awards were based on
the level of achievement of the planned financial goals of the Company for
the fiscal year and the value of the leadership, direction and individual
contribution of each individual to the Company's business operations,
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, except as described below, 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 awarded 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
13
<PAGE>
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.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Alan B. Gilman was appointed to his position as President on July 13,
1992, and he assumed the additional 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 1999 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 $376,835 in fiscal 1999, and an incentive bonus of $150,000
for the fiscal year, representing 39.8% of his 1999 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 1999.
Mr. Gilman received stock awards during fiscal 1999, including 41,250
shares of Common Stock under the Company's Stock Option Plan. He also
received 13,750 shares, along with related book units, on August 6, 1999,
under the Company's Capital Appreciation Plan. The Board of Directors has
determined that Mr. Gilman met his performance objectives for the year and
continues to make substantial executive contributions to the progress and
growth of the Company's business. 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 1994 and 1999. 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 was operating on a
profitable basis when it was sold to an unrelated party in 1998.
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, 1994 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, 1994. This graph is not adjusted for the 10% stock
dividend declared by the Board of Directors on December 15, 1999.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
SPECIFIC PLOT POINTS OF PERFORMANCE GRAPH
(IN DOLLARS)
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------
9/94 9/95 9/96 9/97 9/98 9/99
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Products, Inc. COP 100 157 182 246 278 193
Standard & Poors 500 1500 100 130 156 219 239 306
Standard & Poors SmallCap 600 1600 100 126 146 199 169 198
Standard & Poors Restaurant Index IRET 100 143 171 174 218 300
</TABLE>
* $100 invested on 9/30/94 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 27, 2000. 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 1999 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 27, 2000.
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 9, 2000
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 9, 2000, 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, E. W. KELLEY, ALAN B. GILMAN, STEPHEN GOLDSMITH,
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 FISCAL YEAR 2000:
/ / 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.
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.
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.
