TONE PRODUCTS, INC.
2129 North 15th Avenue
Melrose Park, Illinois 60160
PROXY STATEMENT AND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 5, 1998
To the shareholders of Tone Products, Inc.:
The Annual Meeting of the shareholders of Tone Products, Inc. (the
"Company") will be held at the Company's executive offices, 2129 North 15th
Avenue, Melrose Park, Illinois 60160, at 6:00 P.M. on March 5, 1998, or at any
adjournment or postponement thereof, for the following purposes:
1. To elect six directors of the Company.
2. To transact such other business as may properly come before the meeting.
Details relating to the above matters are set forth in the attached Proxy
Statement. All shareholders of record of the Company as of the close of business
on January 23, 1998 will be entitled to notice of and to vote at such meeting or
at any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY. A REPLY CARD IS ENCLOSED FOR YOUR CONVENIENCE. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Timothy E. Evon
Chief Executive Officer
January 27, 1998
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PROXY STATEMENT
TONE PRODUCTS, INC.
2129 North 15th Avenue
Melrose Park, Illinois 60160
Telephone: (708) 681-3660
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 5, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Tone Products, Inc. (the "Company"), an
Arkansas Corporation, of $.10 par value Common Stock ("Common Stock") to be
voted at the Annual Meeting of Shareholders of the Company ("Annual Meeting") to
be held at 6:00 P.M. on March 5, 1998, or at any adjournment or postponement
thereof. The Company anticipates that this Proxy Statement and the accompanying
form of proxy will be first mailed or given to all shareholders of the Company
on or about January 27, 1998. The shares represented by all proxies that are
properly executed and submitted will be voted at the meeting in accordance with
the instructions indicated thereon. Unless otherwise directed, votes will be
cast for the election of the nominees for directors hereinafter named. The
holders of a majority of the shares represented at the Annual Meeting in person
or by proxy will be required to elect directors and approve any proposed
matters.
Any shareholders giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in person,
at the Annual Meeting, that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith and all costs of soliciting
proxies will be paid by the Company. In addition to the solicitation by mail,
proxies may be solicited by officers and regular employees of the Company by
telephone, telegraph or personal interview. Such persons will receive no
compensation for their services other than their regular salaries. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of the
shares held of record by such persons, and the Company may reimburse such
persons for reasonable out of pocket expenses incurred by them in so doing.
VOTING SHARES AND PRINCIPAL SHAREHOLDERS
The close of business on January 23, 1998 has been fixed by the Board of
Directors of the Company as the record date (the "record date") for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. On the record date, there were outstanding 3,692,102 shares of Common
Stock, each share of which entitles the holder thereof to one vote on each
matter which may come before the Annual Meeting. Cumulative voting for directors
is not permitted.
A majority of the issued and outstanding shares entitled to vote,
represented at the meeting in person or by proxy, constitutes a quorum at any
shareholders' meeting.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information concerning the holdings of
Common Stock by each person who, as of January 23, 1998, holds of record or is
known by the Company to hold beneficially or of record, more than 5% of the
Company's Common Stock, by each director, and by all directors and executive
officers as a group. All shares are owned beneficially and of record. The
address of all persons is in care of the Company at 2129 North 15th Avenue,
Melrose Park, Illinois 60160.
Number of
Shares of
Common
Stock Owned Percent of
of Record Common Stock
Name and Beneficially (1) Owned
---- -------------------- -----
Timothy E. Evon 738,166 18.8%
Michael W. Evon 738,166 18.8%
Thomas J. Evon 738,166 18.8%
Jack T. Cory 125,000 3.1%
Charles A. Ehemann 12,500 0.3%
Edward R. Jancauskas 1,000 0%
Cede & Co. 703,384 17.9%
All officers and directors 2,377,998 60.5%
as a group (7 persons)
- ----------
(1) Includes stock options exercisable within 60 days from the date hereof.
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect six directors of the
Company. Cumulative voting is not permitted for the election of directors. In
the absence of instructions to the contrary, the person named in the
accompanying proxy will vote in favor of the election of each of the persons
named below as the Company's nominees for directors of the Company. All of the
nominees are presently members of the Board of Directors. Each of the nominees
has consented to be named herein and to serve if elected. It is not anticipated
that any nominee will become unable or unwilling to accept nomination or
election, but if such should occur, the person named in the proxy intends to
vote for the election in his stead of such person as the Board of Directors of
the Company may recommend.
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<TABLE>
<CAPTION>
The following table sets forth certain information regarding each nominee
and each executive officer of the Company.
Officer or
Name Age Office Director Since(1)
---- --- ------ -----------------
<S> <C> <C> <C>
Timothy E. Evon 43 President, Chief Executive October, 1996
Officer, and Director
Michael W. Evon 37 Vice-President - Sales and October, 1996
Marketing, and Director
Thomas J. Evon 42 Vice-President - Special November, 1996
Accounts, and Director
William H. Hamen 37 Secretary, Treasurer, and Chief
Financial Officer November, 1996
Jack T. Cory 56 Director October, 1996
Charles A. Ehemann 45 Director October, 1996
Edward R. Jancauskas 56 Director November, 1997
(1) Reflects the date Tone Products, Inc. ("TPI") was acquired by the Company.
Messrs. Evon, Evon and Evon had been directors of TPI, the Company's
predecessor, from September 1978.
Directors hold office for a period of one year from their election at the
annual meeting of stockholders and until their successors are duly elected and
qualified. Officers of the Company are elected by, and serve at the discretion
of, the Board of Directors. Directors not employed by the Company do not receive
fees for attending Board of Directors' meetings but are reimbursed for
out-of-pocket expenses, and each is granted stock options to purchase 25,000
shares of the Company's Common Stock after one year of service. Timothy E. Evon,
Michael W. Evon and Thomas J. Evon are brothers.
Background
The following is a summary of the business experience of each executive
officer and director of the Company for at least the last five years:
Timothy E. Evon has been President of TPI, and subsequently the Company,
since 1989 and is responsible for the Company's overall operations, with
emphasis upon management of production facilities and sauce operations.
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<TABLE>
<CAPTION>
Michael W. Evon has been a Vice-President of TPI, and subsequently the
Company, since 1989 and its National Sales Manager since 1993.
Thomas J. Evon has been an executive officer of TPI, and subsequently the
Company, since 1989 with principal responsibility for marketing the Company's
products primarily to government agencies, including school districts, colleges
and prisons.
William H. Hamen has been the Company's controller since 1996 and was named
its Secretary, Treasurer and Chief Financial Officer in November 1997 with
principal responsibility for accounting and related functions. Previously, Mr.
Hamen was an independent systems consultant and a computer network engineer
since 1992.
Jack T. Cory founded Fun Foods, a California based popcorn and snack foods
manufacturer in 1967 and sold the company in 1982. In 1985 he founded and
subsequently managed Fun City Popcorn, Inc. ("FCP") until he sold FCP to the
Company in May 1996.
Charles A. Ehemann has been employed by Wixon/Fontarome, a spice,
seasoning, flavors, and food chemicals manufacturer since 1974 and has acted as
its Executive Vice President since 1991.
Edward R. Jancauskas has been employed by Coca-Cola Bottling Company of
Chicago since 1968 and has been its Director of Immediate Consumption since
1988. He is an elected trustee of Mokena, Illinois. Mr. Jancauskas earned a
Bachelor's Degree in Management form of St. Joseph Calumet College.
Executive Compensation
The following table sets forth certain information concerning compensation
paid to the Company's Chief Executive Officer for the years ended September 30,
1997 and 1996. Timothy E. Evon, Michael W. Evon and Thomas J. Evon currently
receive annual salaries of $92,300 each.
Summary Compensation Table
Annual Long-Term
Compensation Compensation
------------ ------------
Name and Other Annual Awards All Other
Principal Position Year Salary Bonus Compensation Options Compensation
- ------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Timothy E. Evon, 1996 $69,923 $10,000 $0 $0 $0
Chief Executive Officer
1997 92,300 500 0 0 0
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Stock Option Plan
In November 1997, the Company adopted its 1997 Stock Option Plan (the
"Plan"), which provides for the grant to employees, officers, directors and
consultants of options to purchase up to 350,000 shares of Common Stock,
consisting of both "incentive stock options" within the meaning of Section 422A
of the United States Internal Revenue Code of 1986 (the "Code") and
"non-qualified" options. Incentive stock options are issuable only to employees
of the Company, while non-qualified options may be issued to non-employee
directors, consultants and others, as well as to employees of the Company.
The Plan is administered by the Board of Directors, which determines those
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, vesting periods required for issuance of
options, the number of shares of Common Stock that may be purchased under each
option and the option price.
The per share exercise price of the Common Stock subject to an incentive
stock option may not be less than the fair market value of the Common Stock on
the date the option is granted. The per share exercise price of the Common Stock
subject to a non-qualified option is established by the Board of Directors. The
aggregate fair market value (determined as of the date the option is granted) of
the Common Stock that any employee may purchase in any calendar year pursuant to
the exercise of incentive stock options may not exceed $100,000. No person who
owns, directly or indirectly, at the time of the granting of an incentive stock
option to him, more than 10% of the total combined voting power of all classes
of stock of the Company is eligible to receive any incentive stock options under
the Plan unless the option price is at least 110% of the fair market value of
the Common Stock subject to the option, determined on the date of grant.
Non-qualified options are not subject to these limitations.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which he or she can exercise the
option. Upon termination of employment of an optionee by reason of death or
permanent total disability, his or her option remains exercisable for 12 months
thereafter to the extent it was exercisable on the date of such termination. No
similar limitation applies to non-qualified options.
Options under the Plan must be granted within ten years from the effective
date of the Plan. The incentive stock options granted under the Plan cannot be
exercised more than ten years from the date of grant except that incentive stock
options issued to 10% or greater stockholders are limited to five year terms.
All options granted under the Plan provide for the payment of the exercise price
in cash or by delivery to the Company of shares of Common Stock already owned by
the optionee having a fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods of payment.
Therefore, an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
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stock options with no additional investment other than his original shares. Any
unexercised options that expire or that terminate upon an optionee ceasing to be
an officer, director or an employee of the Company become available once again
for issuance.
As of the date hereof, options to purchase 235,000 shares have been granted
under the Plan, of which 200,000 options have been issued to the Company's
executive officers and directors. All options are exercisable at $1.75 per share
until November 2007, and none of such options have been exercised.
CERTAIN TRANSACTIONS
The Company believes that the transactions described below were fair,
reasonable and consistent with the terms of transactions which the Company could
have entered into with nonaffiliated third parties. All future transactions with
affiliates will be approved by a majority of the Company's disinterested
directors.
The Company leases 72,000 square feet of office, warehouse and
manufacturing space in Melrose Park, Illinois on a one year lease expiring
September 30, 1998 at a monthly rental of $33,235 or $5.54 per square foot. The
Company also leases 16,802 square feet of office and warehouse space in Las
Vegas, Nevada on a one year lease expiring May 31, 1998 at a monthly rental of
$8,544 or $6.10 per square foot. The Company leases its Melrose Park, Illinois
facility from three of its executive officers and directors and its Las Vegas,
Nevada facility from one of the directors. .
In December 1997 the Company agreed to purchase from Tone Juices, Inc.,
("TJ") an affiliated company owned by Timothy E. Evon, Thomas J. Evon, and
Michael W. Evon, the trade name "Balboa Bay" which was owned by TJ, but used by
the Company as the brand name for fruit juices sold by the Company to certain
Coca-Cola bottlers. The purchase price of $300,000 will be paid by the Company's
assumption of a promissory note in like amount payable to a commercial bank and
executed by Timothy E. Evon, Thomas J. Evon, and Michael W. Evon. Management of
the Company believes that it was in the Company's best interest to acquire the
trade name in order for the Company to continue sales of its fruit juice
products under the "Balboa Bay" label to the Coca-Cola bottlers.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Kelley & Company, Newport Beach, California, conducted the audit of the
Company's financial statements for the year ended September 30, 1997. It is the
Company's understanding that this firm is obligated to maintain audit
independence as prescribed by the accounting profession and certain requirements
of the Securities and Exchange Commission. As a result, the directors of the
Company do not specifically approve, in advance, non-audit services provided by
the firm, nor do they consider the effect, if any, of such services on audit
independence.
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PROPOSALS OF SHAREHOLDERS FOR PRESENTATION
AT NEXT ANNUAL MEETING OF SHAREHOLDERS
Any shareholders of record of the Company who desires to submit a proper
proposal for inclusion in the proxy materials relating to the next annual
meeting of shareholders must do so in writing and it must be received at the
Company's principal executive offices prior to the Company's fiscal year end.
The proponent must be a record or beneficial shareholder entitled to vote at the
next annual meeting of shareholders on the proposal and must continue to own the
securities through the date on which the meeting is held.
OTHER BUSINESS
Management of the Company is not aware of any other matters which are to be
presented to the Annual Meeting, nor has it been advised that other persons will
present any such matters. However, if other matters properly come before the
meeting, the individual named in the accompanying proxy shall vote on such
matters in accordance with his best judgment.
The above notice and Proxy Statement are sent by order of the Board of
Directors.
Timothy E. Evon
Chief Executive Officer
January 27, 1998
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
TONE PRODUCTS, INC.
TO BE HELD MARCH 5, 1998
The undersigned hereby appoints Timothy E. Evon as the lawful agent and Proxy of
the undersigned (with all the powers the undersigned would possess if personally
present, including full power of substitution), and hereby authorizes him to
represent and to vote, as designated below, all the shares of Common Stock of
Tone Products, Inc. held of record by the undersigned on January 23, 1998, at
the Annual Meeting of Shareholders to be held March 5, 1998, or any adjournment
or postponement thereof.
1. ELECTION OF DIRECTORS
_____ FOR the election as a director of all nominees listed below (except
as marked to the contrary below).
_____ WITHHOLD AUTHORITY to vote for all nominees listed below.
NOMINEES: Timothy E. Evon, Michael W. Evon, Thomas J. Evon, Jack T. Cory,
Charles A. Ehemann, Edward R. Jancauskas
INSTRUCTION: To withhold authority to vote for individual nominees, write their
names in the space provided below.
- --------------------------------------------------------------------------------
2. In his discretion, the Proxy is authorized to vote upon any matters
which may properly come before the Annual Meeting, or any adjournment or
postponement thereof.
It is understood that when properly executed, this proxy will be voted in
the manner directed herein by the undersigned shareholder. WHERE NO CHOICE IS
SPECIFIED BY THE SHAREHOLDER THE PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS NAMED IN ITEM 1 ABOVE.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and confirms all that said Proxy may do by virtue hereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
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If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated:
---------------------------- ---------------------------------------
Signature
PLEASE MARK, SIGN, DATE
AND RETURN THE PROXY
CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
---------------------------------------
Signature, if held jointly
PLEASE CHECK THIS BOX IF YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OF
SHAREHOLDERS. _____
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