RYMER FOODS INC.
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
Notice of Annual Meeting of Stockholders
to be held April 7, 1998
TO THE HOLDERS OF COMMON STOCK OF RYMER FOODS INC.:
The Annual Meeting of Stockholders of Rymer Foods Inc. (the
"Company") will be held at 11:00 a.m., local time, on Tuesday, April 7,
1998, at the Company's Corporate Headquarters, 4600 S. Packers Ave.,
Chicago, IL 60609, for the following purposes:
(1) To elect two Class 2 Directors to the Company's Board of
Directors.
(2) To ratify the appointment by the Board of Directors of Grant
Thornton LLP as auditors of the Company for fiscal 1998.
(3) To transact any other business that may properly be brought
before the Meeting or any adjournments thereof.
Only holders of record of Common Stock at the close of business on
February 27, 1998 (the "Record Date"), will be entitled to notice of and
to vote at the Meeting or any adjournments thereof.
Stockholders are cordially invited to attend the meeting in person.
IF YOU WILL NOT BE ABLE TO ATTEND THE MEETING IN PERSON, PLEASE
INDICATE YOUR VOTE ON THE MATTERS TO BE VOTED UPON, SIGN AND DATE THE
ENCLOSED PROXY, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of
Directors
BARBARA McNICHOLAS
February 28, 1998 Secretary
<PAGE>
RYMER FOODS INC.
4600 South Packers Avenue
Suite 400
Chicago, Illinois 60609
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS - APRIL 7, 1998
This Proxy Statement (the "Proxy Statement") is furnished in
connection with the SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS of
Rymer Foods Inc. (the "Company") from the holders of shares of its
common stock, $0.04 par value (the "Common Stock"), to be voted at THE
ANNUAL MEETING OF STOCKHOLDERS, which will be held at 11:00 a.m., local
time, on Tuesday, April 7, 1998, at the Company's Corporate
Headquarters, 4600 South Packers Avenue, Chicago, Illinois 60609, and at
any adjournments thereof (the "Meeting").
The purposes of the Meeting are:
(1) To elect two Class 2 Directors to the Company's Board of
Directors.
(2) To ratify the appointment by the Board of Directors of Grant
Thornton LLP as auditors of the Company for fiscal 1998.
(3) To transact any other business that may properly be brought
before the Meeting or any adjournments thereof.
This Proxy Statement and a form of proxy are first being mailed by
the Company to its stockholders on or about February 28, 1998.
The cost of solicitation of proxies will be borne by the Company.
The solicitation of proxies generally will be by mail. Such
solicitation may also be made in person or by telephone, facsimile or
other means by directors, officers, agents and employees of the Company.
Arrangements have been made with brokers and other custodians, nominees
and fiduciaries to send copies of this Proxy Statement, proxies and
other proxy solicitation materials to their principals, and the Company
will reimburse them for reasonable out-of-pocket and clerical expenses
in so doing.
STOCKHOLDERS ENTITLED TO VOTE
The Company's Board of Directors (the "Board of Directors" or the
"Board") has fixed the close of business on February 27, 1998 as the
record date (the "Record Date") for the Meeting.
Holders of record of the Company's outstanding Common Stock at the
close of business on the Record Date (consisting of 4,300,000 shares)
are entitled to notice of and to vote at the Meeting. For a quorum to
be present, the holders of at least 50% of the shares entitled to vote
at the Meeting must be present in person or represented by proxy.
<PAGE>
Stockholders have cumulative voting rights for the election of
directors and one vote per share for all other purposes. Cumulative
voting means that each stockholder is entitled to as many votes as are
equal to the number of shares owned multiplied by the number of
directors to be elected and that the stockholder may cast all of such
votes for a single director or may distribute them among the number to
be voted for, as the stockholder may see fit. Each share of Common
Stock (par value $0.04) is entitled to one vote with respect to the
ratification of Grant Thornton LLP as auditors for fiscal 1998, and any
other matters that may be properly brought before the Meeting.
Elections are determined by a plurality vote, assuming that a
quorum is present. Other matters are determined by vote of the holders
of a majority of the shares present or represented at the Meeting and
voting on such matters. Therefore, the affirmative vote of the holders
of not less than a majority of the shares of Common Stock present at the
Meeting in person or by proxy is required to ratify the appointment of
Grant Thornton LLP as auditors for fiscal 1998. With regard to the election
of the Class 2 Directors, votes may be cast in favor of or withheld from
the nominees therefore votes that are withheld will be excluded entirely
from the vote and will have no effect, except for quorum purposes.
Abstention may be specified on the proposal to rafify the appointment
of Grant Thornton LLP as auditors for fiscal 1998 and will be counted as
present for purposes of determining the existence of a quorum regarding
the proposal on which the abstention is noted. Because ratification of
Grant Thornton LLP as auditors for fiscal 1998 requires the affirmative
vote of a majority of shares present in person or by proxy and entitled
to vote, an abstention on either of such proposals will have the same
effect as a negative vote.
Under the rules of the New York and American Stock Exchanges,
brokers who hold shares in street name may have the authority to vote on
certain items when they have not received instructions from beneficial
owners. Brokers that do not receive instructions generally are entitled
to vote on the election of directors and the ratification of the
appointment of auditors. Under applicable Delaware law, a broker non-
vote will have no effect on the outcome of the election of the Class 2
Directors.
The proxies hereby solicited vest in the proxy holders' cumulative
voting rights (discussed above) with respect to the election of
directors (unless the stockholder marks the proxy so as to withhold such
authority) and all other voting rights of the stockholders signing such
proxies. The shares represented by each duly executed proxy will be
voted and, where a choice is specified by the stockholder on the proxy,
the proxy will be voted in accordance with the specification so made.
Any proxy given by a stockholder pursuant to this solicitation may
be revoked by the stockholder by written notice delivered to the
Secretary of the Company at any time prior to exercise of the proxy.
All valid proxies on file with the Secretary of the Company, unless
revoked, will be voted in accordance with the instructions of the
stockholder or, in the absence of such instructions, in accordance with
the recommendations of the Board of Directors.
A list of stockholders of the Company will be available at the
Company's offices during ordinary business hours for the ten days
preceding the Meeting for examination by stockholders for any purpose
germane to the Meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 11, 1998, the
beneficial ownership of the Common Stock by each of the directors, the
nominees for director and each of the executive officers of the Company
listed in the Summary Compensation Table below and of all directors, the
nominees for director and executive officers of the Company as a group,
and by each person who is known by the Company to beneficially own 5% or
more of the Common Stock. The Common Stock is the only outstanding
class of equity securities of the Company.
Percentage
of
Number of Shares Outstanding
Name Title of Security Beneficially Owned Shares
P. E. Schenk ............Common Stock 258,000 6%
Edward M. Hebert ........Common Stock 172,150 4%
Michael Bowen ...........Common Stock 1,927,938(1) (2) 45%
c/o Riverside Capital Advisors Inc.
1650 S.E. 17th St. Causeway
Suite 204
Fort Lauderdale, FL 33316-1735
Riverside Capital Common Stock 1,927,928(2) (3) 45%
Advisors Inc.
1650 S.E. 17th St. Causeway
Suite 204
Fort Lauderdale, FL 33316-1735
All directors, the nominees for
director, and executive officers as
a group (9 persons) ....Common Stock 2,363,854 55%
1) The beneficial ownership of these shares of Common Stock derives from
accounts managed by Riverside Capital Advisors Inc. Michael Bowen is
Vice-President and Portfolio Manager of Riverside Capital Advisors Inc.
and is in a position to directly and indirectly determine the investment
and voting decisions made by Riverside Capital Advisors Inc. and,
therefore, is deemed to beneficially own all of the shares that
Riverside Capital Advisors Inc. has in its portfolios. Mr. Bowen
disclaims beneficial ownership of these shares.
2) The beneficial ownership of these shares of Common Stock includes
multiple beneficial ownership of the same shares.
3) The beneficial ownership of these shares of Common Stock derives from
accounts managed by Riverside Capital Advisors Inc. Riverside Capital
Advisors Inc. is in a position to directly and indirectly determine
investment and voting decisions and, therefore, is deemed to
beneficially own all of the shares that it has in its portfolios.
<PAGE>
ELECTION OF DIRECTORS
[Item (1) on Proxy Card]
ITEM 1
Pursuant to its Certificate of Incorporation, the Board of
Directors is comprised of three classes, consisting of six Directors in
total. Class 2 consists of two Directors whose terms expire when their
successors are elected at this Meeting. Class 3 consists of two
Directors whose terms expire in 2000. Class 1 consists of two Directors
whose terms expire in 1999.<PAGE>
At the Meeting, two Class 2 Directors will be elected for a term of
3 years. Messrs. Michael Brinati and John Elting, management's nominees
for Class 2 Directors, are now serving as Class 2 Directors.
Unless otherwise indicated on a proxy, the proxy holders intend to
vote the shares of Common Stock for which they hold proxies "FOR" the
election of Michael Brinati and John Elting as Class 2 Directors without
cumulation. Each of such persons has consented to being named as a
nominee in this Proxy Statement and to serve as a Class 2 Director if
elected.
The affirmative vote of a plurality of the shares of the Common
Stock, present or represented by proxy and voted at the Meeting, is
required for the election of Directors, assuming that a quorum is
present. See "Stockholders Entitled to Vote" above.
The Board has no nominating committee. The nominees for Class 2
Directors were selected by the entire Board of Directors. At the
Meeting, stockholders may make nominations for Class 2 Directors.
The votes applicable to the shares represented by proxies in the
accompanying form will be cast in favor of Messrs. Brinati and Elting as
nominees. While it is not anticipated that such nominees will be unable
to serve, if any of them should be unable to serve, the proxy holders
reserve the right to substitute any other person.
Nominees for Class 2 Directors (Term of Office Expiring in 2001)
MICHAEL BRINATI (age 38; Director since 1997). Mr. Brinati is
President, Chief Executive Officer and a principal shareholder of Iowa
Grain Company, a Chicago-based Futures Commission Merchant clearing
member. Mr. Brinati is also a full member of the Chicago Board of Trade
("CBOT") and has been a member of the CBOT since 1984. He is an active
floor broker and proprietary trader in the soybean quadrant on the CBOT
trading floor. Mr. Brinati is currently a governor of the Board of
Trade Clearing Corporation, a term expiring in February 1998.
JOHN ELTING (age 54; Director since 1997). Mr. Elting is the
manager of a private equity fund since 1991. Prior to such date, Mr.
Elting founded Elting Enterprises, a broadcast group of radio stations,
and was founder and Executive Vice President and Director of Shipboard
Satellite Networks and President of the Board of Directors of Intouch
Networks, Inc.
Class 1 Directors (Term of Office Expiring in 1999)
<PAGE>
P. E. SCHENK (age 60; Director since November 1995). Mr. Schenk
was named to the Board of Directors of the Company on November 8, 1995
as a Class 1 Director to fill a vacancy therein created by a
resignation. Mr. Schenk has served as President and Chief Executive
Officer of the Company since November 1995. In 1994 and 1995, Mr.
Schenk operated Schenk & Associates, Inc., a consulting practice. Mr.
Schenk was Executive Vice President of Lykes Processed Meats Group from
December 1993 to November 1994, and from August 1993 to December 1993
he served as Senior Vice President of Sales & Marketing. From 1986 to
1993, Mr. Schenk was employed by Smithfield Foods, Inc. as President and
Chief Operating Officer of various meat processing subsidiaries.
BARRY SPECTOR (age 55; Director since 1997). Mr. Spector is the
Managing Director of Bengur, Bryan & Co., Inc. since March 1997. Prior
to such date, Mr. Spector was President and Chief Executive Officer of
Acme Foods Co., a national snack meat company.
Class 3 Directors (Term of Office Expiring in 2000)
MICHAEL BOWEN (age 56; Director since 1997). Mr. Bowen is the Vice
President of Riverside Capital Advisors since January 1997. Prior to
such date, Mr. Bowen was a Vice President of Goldman, Sachs & Co. and a
Director of Kleinworth Benson Ltd., a UK Merchant Bank.
EDWARD M. HEBERT (age 47; Director since 1997). Mr. Hebert was
named to the Board of Directors as part of the Restructuring in 1997.
Mr. Hebert was appointed Chief Financial Officer on October 6, 1995.
Mr. Hebert has been Senior Vice President Finance of the Company since
January 1990 and Treasurer of the Company since January 1993. Prior
thereto, Mr. Hebert was Controller of the Company since December 1988.
Prior to that time, Mr. Hebert was employed by Arco Metals Company in
various financial positions.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
During fiscal 1997, there were 5 meetings of the Board. Each
director then in office attended more than 75% of the combined meetings
of the Board of Directors and the Committees on which he served held
during the year while he served as Director.
The Executive Committee, consisting of Messrs. P. E. Schenk,
Michael Bowen and John Elting, did not meet in fiscal 1997. Except for
certain matters, the duties of the Executive Committee include the
exercise of all of the powers and authority of the Board of Directors
and the management of the business and affairs of the Company, except
for any powers and authority granted to another Committee. The
authority of the Executive Committee is generally limited to
acquisitions and dispositions of assets and negotiations to accomplish
the same; personnel matters; guidance to senior management on policy
matters; negotiations, review and analysis of financial needs;
litigation matters; and public or private stock placement or other
equity or debt offerings.
The Audit Committee, consisting of Messrs. Michael Brinati and
Barry Spector did not meet during fiscal 1997. The Audit Committee
reviews the proposed scope of audit and non-audit services to be
performed by the Company's independent public accountants; reviews and
reports on audits and the Company's accounting policies and controls;
and annually recommends independent public accountants for selection as
auditors of the Company. The Audit Committee also monitors the
administration of the Company's business ethics and conflicts of
interest policies.
<PAGE>
The Compensation Committee, consisting of Messrs. Michael Bowen and
John Elting, did not meet during fiscal 1997. The Compensation
Committee reviews the compensation policies of the Company, determines
compensation of the Company's executive officers, determines general
compensation and benefit levels for all officers, and recommends to the
full Board future compensation of executive officers. The Compensation
Committee administers the Company's employee benefit plans presently in
effect.
REMUNERATION OF DIRECTORS
Directors who are not officers of the Company or its subsidiaries
are not compensated in cash, however, they are eligible to receive stock
options. Directors who are also officers of the Company or its
subsidiaries do not receive additional compensation for attending board
meetings. Directors are reimbursed only for out-of-pocket expenses
incurred in attending Board or Committee meetings.
Incentive Compensation Program
The Incentive Compensation Program provides opportunities for
executives to receive incentive compensation if specific performance
goals, proposed by management and approved by the Board, are met.
Stock Options
In fiscal 1997, under the Stock Option Plan, there were no options
granted to acquire shares of the Common Stock. See "Security Ownership
of Certain Beneficial Owners and Management."
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Annual Restricted Securities All Other
Com- Stock Underlying LTIP Compen-
Salary Bonus pensation Award(s) Options Payouts sation
Principal Position Year1 ($) ($) ($)2 ($) (#)4 ($) ($)3
P.E.Schenk 1997 223,908 - 6,600 - - - 265,500
Chairman and Chief 1996 197,808 - 6,050 - 750,000** - -
Executive Officer 1995 - - - - - - -
Edward M. Hebert 1997 141,031 - 6,000 - - - 178,909
Senior V.P., CFO 1996 135,665 - 6,000 - 50,000 6,587
and Treasurer 1995 120,975 - 6,400 - 7,000 - 7,500
Jose Muguerza 1997 96,625 2,500 6,000 - - - 5,669
Executive V.P. 1996 88,130 - 6,000 - - - -
Chief Operating Officer
</TABLE>
<PAGE>
1. For fiscal year ended on the last Saturday of October in each year.
2. Reimbursement allowance for automobile use and maintenance.2
3. Represents vested amount from the Company's 401k Plan and also
includes a one-time stock grant under the terms of the Company's
prepackaged plan of reorganization to Mr. Schenk and Mr. Hebert of
$258,000 and $172,000 respectively.
4. In conjunction with the 1997 Restructuring, all prior warrants and4
stock options were cancelled. They are shown here for historical
purposes only.
** Mr. Schenk was issued a warrant to acquire 750,000 shares of
Common Stock for $1.00 per share. See "Certain Transactions
and Related Transactions - Employment and Consulting Agreements and
Other Arrangements."
REMUNERATION OF EXECUTIVE OFFICERS
Compensation Committee Report
In fiscal 1997, the Company's philosophy on executive compensation
was to attempt to provide a compensation package competitive with
comparable companies in the food industry and which linked the amount of
compensation provided to the achievement of business objectives while
recognizing the economic factors then affecting the Company. In this
regard, individual base salaries were established for the Chief
Executive Officer and others based generally on the Board of Directors'
perception of competitive, industry-wide salaries, the executive's
experience and seniority, as well as his or her performance, while
considering the overall level of spending which the Board deemed
appropriate for officers' salaries in light of these economic factors.
In fiscal 1997, there were two programs of direct executive officer
compensation: the Base Salary Program and the Incentive Compensation
Program. Subsequent to fiscal 1997, executives have been awarded stock
options as part of their compensation package.
Base Salary Program
Base salary for 1997 for the executive officers named in the
Summary Compensation Table was determined based on their respective
employment agreements. See "Certain Transactions and Related
Transactions."
OPTION GRANTS IN 1997 FISCAL YEAR
None
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG RYMER FOODS INC., THE RUSSELL 2,000 INDEX AND THE S&P FOODS INDEX
(The folowing table was represented
by a line chart in the printed material)
Cumulative Total Return*
10/92 10/93 10/94 10/95 10/96 10/97
Rymer Foods Inc. ....100 164 291 91 41 73
Russell 2,000 .......100 132 132 156 182 236
S&P Foods ...........100 95 101 123 151 201
* $100 invested on October 31, 1992 in stock or index -- including
reinvestment of dividends. Fiscal year ending October 31.
<PAGE>
EXECUTIVE OFFICERS
The following is a list of the names and ages of the current
executive officers of the Company, the period during which each has
served as such and their respective positions:
Name and Age Position(s)
P. E. Schenk (60) ..................... Chairman, President and Chief
Executive Officer (since November 95)
Edward M. Hebert (47) ..................Senior Vice President (since 1990),
Treasurer and Chief Financial Officer
Barbara McNicholas (62) ................Secretary (since 1988)
Jose Muguerza (35) .....................Executive Vice President and
Chief Operating Officer of
Rymer Meat Inc. (since October 95)
John H. Bormann (46) ...................Vice President, Sales & Marketing of
Rymer Meat Inc. (since July 97)
P. E. Schenk. Mr. Schenk was named to the Board of Directors of
the Company on November 8, 1995 as a Class 1 Director to fill a vacancy
therein created by a resignation. Mr. Schenk has served as President
and Chief Executive Officer of the Company since November 1995. In 1994
and 1995, Mr. Schenk operated Schenk & Associates, Inc., a consulting
practice. Mr. Schenk was Executive Vice President of Lykes Processed
Meats Group from December 1993 to November 1994, and from August 1993 to
December 1993 he served as Senior Vice President of Sales & Marketing.
From 1986 to 1993, Mr. Schenk was employed by Smithfield Foods, Inc. as
President and Chief Operating Officer of various meat processing
subsidiaries.
Edward M. Hebert. Mr. Hebert was appointed Chief Financial Officer
on October 6, 1995. Mr. Hebert has been Senior Vice President, Finance
of the Company since January 1990 and Treasurer of the Company since
January 1993. Prior thereto, Mr. Hebert was Controller of the Company
since December 1988. Prior to that time, Mr. Hebert was employed by
Arco Metals Company in various financial positions.
Barbara McNicholas. Ms. McNicholas was elected Secretary in 1988
and has been employed by the Company since 1953 in various office staff
capacities.
Jose Muguerza. Mr. Muguerza was appointed Executive Vice President
and Chief Operating Officer in September 1997. Prior to that time, Mr.
Muguerza was Vice President of Operations and Technical Services since
October 1995. Prior to such election, Mr. Muguerza was Vice President-
Technical Services of a subsidiary of the Company. Prior to joining the
Company, Mr. Muguerza was with several foodservice companies in the meat
production and cooked products industries.
<PAGE>
John H. Bormann. Mr. Bormann was appointed Vice President Sales &
Marketing in July 1997. Mr. Bormann has over sixteen years' experience
in the foodservice industry. He has held various positions in sales and
marketing with several foodservice companies, the most recent being as
Vice President of Sales & Marketing for the Bruss Meat Company.
All of the executive officers are citizens of the United States of
America. Edward M. Hebert and Barbara McNicholas served as either
executive officers and/or directors of the Company during its 1993
Restructuring.
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
Stock Purchase Agreements and Certain Additional Compensation
Upon the completion of the Company's prepackaged plan of
reorganization, Mr. Schenk and Mr. Hebert were granted 258,000 and
172,000 fully-vested shares, respectively, of the Company's Common
Stock. Under the terms of their employment agreements, the Company will
provide a loan to the executives to assist with the tax consequences of
the grant of such stock. Mr. Schenk and Mr. Hebert will also be
eligible to receive stock option grants consistent with those grants
made to other executives in 1998 and subsequent years.
The value of the stock grants issued to Mr. Schenk and Mr. Hebert
is reflected in the Summary Compensation Table as shown on page six of
this report.
Employment and Consulting Agreements and Other Arrangements
P.E. Schenk. On November 8, 1995, Mr. Schenk entered into a two
year employment agreement with the Company providing for annual
compensation of $200,000, subject to mandatory annual escalation in the
event of an increase in the regional Consumer Price Index equivalent to
the percentage increase of such index. Pursuant to the employment
agreement, Mr. Schenk was also issued a warrant to acquire 750,000
shares of Common Stock for an exercise price of $1.00 per share for a
period of three years commencing November 8, 1996.
Warrants previously issued to Mr. Schenk were cancelled as a result
of the Company's recent Senior Note restructuring. Also, in conjunction
with the Company's restructuring, on August 21, 1997, Mr. Schenk entered
into a new employment agreement with the Company. The new agreement
provides annual compensation of $250,000. Under the agreement, Mr.
Schenk is entitled to an automobile allowance of $550 per month, as well
as other normal executive benefits. The agreement term is for an
initial period of two years, commencing August 21, 1997 and continuing
through August 20, 1999. Beginning on August 21, 1999, the term of
employment shall be renewed annually for a period of 12 months unless
Mr. Schenk provides the Board of Directors with written notice to the
contrary at least ninety days prior to any annual renewal date.
Mr. Schenk is entitled to annual increases in salary equal to the
percentage increase in the Consumer Price Index for all Urban Consumers
for the Chicago Metropolitan area.
On December 26, 1997, Mr. Schenk voluntarily reduced his annual
salary to $200,000 as part of a cost savings initiative program.
<PAGE>
Edward M. Hebert. The Company entered into an employment agreement
with Edward M. Hebert, the Company's Senior Vice President, Treasurer
and Chief Financial Officer, on June 1, 1991. The agreement's original
one-year term that began on June 1, 1991, automatically extends
thereafter for successive one-year periods unless either the Company or
Mr. Hebert notifies the other not later than May 1 of any year that the
agreement is to be terminated on June 1 of such year. Mr. Hebert was
entitled in the first year of the agreement to a salary of $100,000 per
year with an increase in subsequent years based on increases in the
Consumer Price Index limited to 6% of the amount in effect for the prior
year. In connection with the 1993 Restructuring, Mr. Hebert's salary
was set at $112,200.
In conjunction with the Company's restructuring, on August 21,
1997, Mr. Hebert entered into a new employment agreement with the
Company. The new agreement provides annual compensation of $140,000.
Under the agreement, Mr. Hebert is entitled to an automobile allowance
of $500 per month, as well as other normal executive benefits. The
agreement term is for an initial period of two years, commencing August
21, 1997 and continuing through August 20, 1999. Beginning on August
21, 1999, the term of employment shall be renewed annually for a period
of 12 months unless Mr. Hebert provides the Board of Directors with
written notice to the contrary at least ninety days prior to any annual
renewal date.
Mr. Hebert is entitled to annual increases in salary equal to the
percentage increase in the Consumer Price Index for all Urban Consumers
for the Chicago Metropolitan area.
On December 26, 1997, Mr. Hebert voluntarily reduced his annual
salary to $128,600 as part of a cost savings initiative program.
General. Executive Officers of the Company and its subsidiaries
("Subsidiaries") generally receive participation in benefit plans, split
dollar life insurance programs, an automobile expense reimbursement
allowance or use of an automobile, bonuses at the discretion of the
Board of Directors, reimbursement of business-related expenses and
certain fringe benefits.
<PAGE>
APPOINTMENT OF AUDITORS
[Item (2) on Proxy Card]
ITEM 2
It is intended that the shares represented by the proxy holders
will be voted for approval of the appointment of Grant Thornton LLP
(unless otherwise indicated on the proxy) as independent public
accountants (auditors) to report to the stockholders on the financial
statements of the Company for the fiscal year ending October 31, 1998.
Each professional service performed by Grant Thornton LLP during fiscal
1997 was approved in advance or was subsequently approved, and the
possible effect on the auditors' independence was considered, by the
Audit Committee. The Audit Committee has recommended, and the Board of
Directors has approved, the appointment of Grant Thornton LLP subject to
the approval of the stockholders at the Meeting. Although submission of
the appointment of independent public accountants to stockholders is not
required by law, the Board of Directors, consistent with its past
policy, considers it appropriate to submit the selection of auditors for
stockholder approval. Representatives of Grant Thornton LLP are
expected to be present at the Meeting with the opportunity to make a
statement if they desire to do so and to be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares of
Common Stock of the Company present, or represented by proxy, and voted
at the Meeting is required for the approval of this Item. The Board has
not determined what action it would take if the stockholders do not
approve the selection of Grant Thornton LLP, but would reconsider its
selection in light of the stockholders' action.
As previously reported on form 8-K, Coopers & Lybrand L.L.P.
resigned as the Company's certifying accountants on October 21, 1997.
Grant Thornton LLP has been engaged as certifying accountants as of
October 28, 1997.
The resignation of Coopers & Lybrand L.L.P. was not recommended nor
approved by the Company's Board of Directors or its Audit Committee as
it was the decision of Coopers & Lybrand L.L.P. not to continue as the
Company's auditors.
During the Company's two most recent fiscal years ending October
26, 1996 and October 28, 1995, and the interim period through October
21, 1997, there were no disagreements or reportable events with the
former accountants. Coopers & Lybrand's report on the Company's
financial statements for the years ended October 26, 1996 and October
28, 1995, contained an explanatory paragraph regarding the uncertainty
of the Company's ability to continue as a going concern.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPOINTMENT OF GRANT THORNTON LLP
EXPENSES
<PAGE>
The Company will bear all costs of this solicitation. In addition,
the Company will reimburse banks, custodians, fiduciaries, nominees,
securities dealers, trust companies and other persons for their
reasonable expenses in forwarding this Proxy Statement, proxies and
other related materials to the beneficial owners of shares of Common
Stock.
OTHER MATTERS
Management knows of no other business that will be presented for
action at the Meeting. If any other matters properly come before the
Meeting, the persons named in the enclosed proxy will vote or refrain
from voting such proxy in accordance with their best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report for the 1997 fiscal year (the
"Annual Report") has been mailed to its stockholders. The sections
entitled "Security Ownership of Certain Beneficial Owners and
Management," "Election of Directors," "Information about the Board and
Its Committees," "Remuneration of Directors," "Remuneration of Executive
Officers," "Executive Officers" and "Certain Transactions and Related
Transactions" in this Proxy Statement are incorporated by reference in
the Annual Report. The Annual Report is furnished to stockholders for
information only and no part of it is incorporated by reference in this
Proxy Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy
statements, and other information with the Securities and Exchange
Commission (the "Commission"). The public may inspect and copy at
prescribed rates such reports, proxy statements, and other information
that the Company has filed with the Commission, at the public reference
facilities that the Commission maintains at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located
at 500 West Madison Street, Chicago, Illinois 60661 and Seven World
Trade Center, New York, New York 10048. In addition, the public may
obtain such reports, proxy statements and other information concerning
the Company from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates.
