SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Foodarama Supermarkets, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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[ ] Fee computed on table below per Exchange Act Rules 14(a)(6)(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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____ 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: Foodarama Supermarkets, Inc.
4) Date Filed:__________________________________
PLEASE CONTACT COUNSEL TO THE REGISTRANT WITH COMMENTS OR REQUESTS FOR
ADDITIONAL INFORMATION:
John A. Aiello
Gregory Banacki, Jr.
Giordano, Halleran & Ciesla, PC
125 Half Mile Road, P.O. Box 190
Middletown, NJ 07748
Tel. (732) 741-3900
Fax (732) 224-6599
FOODARAMA SUPERMARKETS, INC.
922 Highway 33
Building 6, Suite 1
Howell, New Jersey 07731
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Wednesday, April 30, 2003
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The Annual Meeting of Shareholders (the "Annual Meeting") of Foodarama
Supermarkets, Inc. (the "Company") will be held at the offices of the Company,
922 Highway 33, Building 6, Suite 1, Howell, New Jersey 07731, on Wednesday,
April 30, 2003 at 2:00 P.M. (local time), for the following purposes:
1. To elect Robert H. Hutchins as a member of Class I of the Board of
Directors of the Company;
2. To consider and act upon a proposed amendment to the Company's Restated
Certificate of Incorporation, as amended, to provide for the elimination of the
classified board of directors of the Company, subject to the satisfaction of
certain conditions; and
3. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
The Board of Directors has fixed the close of business on March 21, 2003
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting or any postponement or adjournment thereof. A list of
shareholders as of the record date will be available to shareholders at the
Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE ANNUAL MEETING ARE REQUESTED TO COMPLETE AND RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE
ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU WILL BE PRESENT AT THE ANNUAL MEETING.
By Order of the Board of Directors,
/S/
Howell, New Jersey Richard J. Saker,
March 31, 2003 Secretary
FOODARAMA SUPERMARKETS, INC.
922 Highway 33
Building 6, Suite 1
Howell, New Jersey 07731
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy are being mailed
to the shareholders of Foodarama Supermarkets, Inc. ("Foodarama" or the
"Company") in connection with the solicitation, by and on behalf of the
management of the Company, of proxies to be voted at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the offices of the Company,
922 Highway 33, Building 6, Suite 1, Howell, New Jersey, on Wednesday, April 30,
2003 at 2:00 P.M. (local time) and at all postponements or adjournments thereof.
The securities entitled to vote at the Annual Meeting consist of shares of
Common Stock of the Company with each share of Common Stock entitling its owner
to one vote on an equal basis. The number of outstanding shares of Common Stock
on March 21, 2003 was [xxx,xxx]. Only shareholders of record on the books of the
Company at the close of business on that date will be entitled to vote at the
meeting. The holders of a majority of the outstanding shares of Common Stock,
present in person or by proxy and entitled to vote, will constitute a quorum at
the meeting. The affirmative vote of a plurality of the shares present in person
or represented by proxy and entitled to vote is required for the election of Mr.
Hutchins as a Director of the Company and the affirmative vote of the holders of
not less than sixty-six and two-thirds percent (66-2/3%) of the combined voting
power of the then-outstanding shares of stock of the Company entitled to vote
generally in the election of directors, voting together as a single class
present in person or represented by proxy and entitled to vote is required for
the amendment of the Company's Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"). The proxy card provides space for a
shareholder to withhold votes for the nominee for the Board of Directors (the
"Board of Directors" or the "Board"). All votes will be tabulated by the
inspector of election appointed for the Annual Meeting who will separately
tabulate affirmative votes, authority withheld for the nominee for Director and
any abstentions or broker non-votes. Authority withheld will be counted toward
the tabulation of total votes cast in the election of the Director and will have
the same effect as a negative vote. Any proxy submitted and containing an
abstention or a broker non-vote is not counted as a vote cast on any matter to
which it relates and will only be counted for purposes of determining whether a
quorum is present at the Annual Meeting.
All shares of Common Stock represented by properly executed proxies will
be voted at the Annual Meeting, unless such proxies have previously been
revoked. Unless otherwise instructed, the shares of Common Stock represented by
such proxies will be voted "for" the election of management's nominee for
Director and the proposed amendment to the Company's Certificate of
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Incorporation to provide for the elimination of the classified Board,
subject to the satisfaction of certain conditions. Management does not know of
any other matter to be brought before the Annual Meeting, but it is intended
that, as to any such other matter, votes may be cast pursuant to the proxies in
accordance with the judgment of the person or persons acting thereunder unless
otherwise directed by the shareholders.
The Company's mailing address is 922 Highway 33, Building 6, Suite 1,
Freehold, New Jersey, 07728 and its telephone number is (732) 462-4700. The
notice, proxy statement and enclosed form of proxy are being mailed to
shareholders on or about March 31, 2003.
Any shareholder who executes and delivers a proxy may revoke it at any
time prior to its use by (a) delivering written notice of such revocation to the
Secretary of the Company at its offices; (b) delivering to the Secretary of the
Company a duly executed proxy bearing a later date; or (c) appearing at the
Annual Meeting and requesting the return of his or her proxy.
YOU ARE REQUESTED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
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PRINCIPAL SHAREHOLDERS
The following table shows, as of March 21, 2003, the persons known to the
Company who owned directly or beneficially more than 5% of the outstanding
Common Stock of the Company:
Amount Beneficially Percent of
Name of Beneficial Owner Owned Class
---------------------------------- ----- -----
Joseph J. Saker (1) (2) (3) (4) 187,076 18.6
Estate of Mary Saker (1) (3) 55,798 5.7
Saker Family Corporation (1)(5) 85,000 8.6
Richard J. Saker (1) (4) (5) (6) 196,803 19.6
Joseph J. Saker, Jr. (1) (5) (7) 107,695 10.9
Thomas A. Saker (1) (5) 114,641 11.6
Dimensional Fund Advisors, Inc. (8) 81,400 8.2
Arthur N. Abbey (9) 116,400 11.8
Trellus Management Company, LLC (10) 51,300 5.2
(1) The address of the foregoing person is c/o Foodarama Supermarkets, Inc.,
922 Highway 33, Building 6, Suite 1, Freehold, New Jersey 07728.
(2) Includes 13,378 shares held by the wife of Joseph J. Saker and 31,399
shares willed to him by Mary Saker.
(3) Mary Saker, deceased, was the mother of Joseph J. Saker. 31,399 of her
shares have been willed to Joseph J. Saker.
(4) Includes 17,500 shares subject to currently exercisable options or options
exercisable within sixty days of March 21, 2003 granted pursuant to the
Company's 2001 Stock Incentive Plan (the "2001 Plan"). See "Proposal 2:
Approval of Amendment to Certificate of Incorporation to Eliminate the
Classified Board of Directors."
(5) Includes 85,000 shares held by the Joseph Saker Family Partnership, L.P.,
a Delaware limited partnership (the "Partnership"). The Saker Family
Corporation is the sole general partner (the "General Partner") of the
Partnership. Richard J. Saker owns 40% of the outstanding capital stock of
the General Partner, and each of Joseph J. Saker, Jr. and Thomas A. Saker
owns 30% of the outstanding capital stock of the General Partner. The
General Partner owns a 1% interest in the Partnership and has the sole
power to sell, transfer or otherwise dispose of the shares of the
Company's Common Stock only upon the unanimous consent of all shareholders
of the General Partner. On other matters not involving the sale, transfer
or other disposition of such shares, the shares of the Company's Common
Stock held by the Partnership are voted as directed by the individual
shareholders of the General Partner in accordance with their
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respective ownership interests in the General Partner. Accordingly, the
General Partner votes 34,000 shares as directed by Richard J. Saker,
25,500 shares as directed by Joseph J. Saker, Jr., and 25,500 shares as
directed by Thomas A. Saker on such other matters.
In addition to their ownership interests in the General Partner, Richard
J. Saker, Joseph J. Saker, Jr. and Thomas A. Saker are the beneficiaries
of the trust which owns a 99% interest in the Partnership (the "Limited
Partner"). Thus, each of Richard J. Saker, Joseph J. Saker, Jr. and Thomas
A. Saker also has an indirect interest in the Company's Common Stock held
by the Partnership by reason of their respective beneficial interests in
the Limited Partner. Their beneficial interests in the Limited Partner are
in identical proportion to their ownership interests in the General
Partner. Richard J. Saker, Joseph J. Saker, Jr. and Thomas A. Saker each
disclaim beneficial ownership of shares held by the Partnership in excess
of their respective pecuniary interests.
(6) Includes 1,760 shares held by Richard J. Saker's wife and 1,377 shares
which are held in a trust for Mr. Saker's son, of which Mr. Saker is the
trustee. Mr. Saker disclaims beneficial ownership of the shares described
in the preceding sentence.
(7) Includes 2,754 shares which are held in two trusts for the benefit of Mr.
Saker's sons, of which Mr. Saker is the trustee. Mr. Saker disclaims
beneficial ownership of the shares described in the preceding sentence.
(8) The address of Dimensional Fund Advisors, Inc. ("Dimensional") is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401. Dimensional, an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940, and serves as
investment manager for certain other investment vehicles, including
commingled group trusts. These investment companies and investment
vehicles are referred to collectively herein as the "Portfolios." In its
role as investment advisor and investment manager, Dimensional possesses
both voting and investment power over 81,400 shares of the Company's
Common Stock based upon a copy of Schedule 13G dated January 30, 2002. The
Portfolios own all securities reported in the table, and Dimensional
disclaims beneficial ownership of such securities.
(9) The address of Arthur N. Abbey is 212 East 39th Street, New York, New York
10016. Based upon a copy of Schedule 13D dated October 9, 2002, Mr. Abbey
has sole voting power with respect to these shares.
(10) The address of Trellus Management Company, LLC ("Trellus") is 350 Madison
Avenue, Ninth Floor, New York, New York 10017. Trellus is a Delaware
limited liability company and is a Delaware registered investment advisor
to domestic and offshore hedge funds. Adam Usdan is President of Trellus.
Based upon a copy of Schedule 13G dated August 12, 2002, Adam Usdan and
Trellus have shared voting power with respect to these shares.
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SECURITIES OWNED BY MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 21, 2003 by each director
and nominee for director of the Company, the executive officers of the Company
on such date and the executive officers, nominees for director and directors as
a Group. Except as set forth in the footnotes to this table, the shareholders
have sole voting and investment power over such shares.
Amount Beneficially Percent of
Name of Beneficial Owner Owned Class
------------------------ ----- -----
Joseph J. Saker (1)(2)(3) 187,076 18.6
Richard J. Saker (1)(2)(4)(5) 196,803 19.6
Joseph J. Saker, Jr. (1)(4)(6) 107,695 10.9
Charles T. Parton (1)(7) 2,900 *
Albert A. Zager (1)(7) 2,000 *
Robert H. Hutchins (1) 500 *
Michael Shapiro (1)(8) 500 *
Emory A. Altobelli (1)(7) 525 *
Carl L. Montanaro (1)(9) 515 *
Robert V. Spires (1)(7) 500 *
Joseph C. Troilo (1)(9) 250 *
Directors, Nominees for Director and Executive
Officers as a Group (11 persons)
(2)(3)(4)(5)(6)(7)(8)(9)(10)(11) 414,264 40.4
(*) Less than one percent.
(1) The address of the foregoing person is c/o Foodarama Supermarkets, Inc., 922
Highway 33, Building 6, Suite 1, Freehold, New Jersey 07728.
(2) Includes 17,500 shares subject to currently exercisable options or options
exercisable within sixty days of March 21, 2003 granted pursuant to the 2001
Plan . See "Proposal 2: Approval of Amendment to Certificate of
Incorporation to Eliminate the Classified Board of Directors."
(3) Includes 13,378 shares held by the wife of Joseph J. Saker and 31,399 shares
willed to him by Mary Saker, deceased, the mother of Joseph J. Saker.
(4) Includes 85,000 shares held by the Joseph Saker Family Partnership, L.P., a
Delaware limited partnership (the "Partnership"). The Saker Family
Corporation is the sole general partner (the "General Partner") of the
Partnership. Richard J. Saker owns 40% of the outstanding capital stock of
the General Partner, and each of Joseph J. Saker, Jr. and Thomas A. Saker
owns 30% of the outstanding capital stock of the General Partner.The General
Partner owns a 1% interest in the Partnership and has the sole power to
sell, transfer or otherwise dispose of the shares of the Company's Common
Stock only upon the unanimous consent of all shareholders of the General
Partner.
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On other matters not involving the sale, transfer or other disposition of
such shares, the shares of the Company's Common Stock held by the
Partnership are voted as directed by the individual shareholders of the
General Partner in accordance with their respective ownership interests in
the General Partner. Accordingly, the General Partner votes 34,000 shares as
directed by Richard J. Saker, 25,500 shares as directed by Joseph J. Saker,
Jr. and 25,500 shares as directed by Thomas A. Saker on such other matters.
In addition to their respective ownership interests in the General
Partner, Richard J. Saker, Joseph J. Saker, Jr. and Thomas A. Saker are
beneficiaries of the trust which owns a 99% interest in the Partnership
(the "Limited Partner"). Thus, each of Richard J. Saker, Joseph J. Saker,
Jr. and Thomas A. Saker also has an indirect interest in the Company's
Common Stock held by the Partnership by reason of their respective
beneficial interests in the Limited Partner. Their beneficial interests in
the Limited Partner are in identical proportion to their ownership
interests in the General Partner. Richard J. Saker, Joseph J. Saker, Jr.
and Thomas A. Saker each disclaim beneficial ownership of shares held by
the Partnership in excess of their respective pecuniary interests. See
note (5) under the table captioned "Principal Shareholders."
(5) Includes 1,760 shares held by Richard J. Saker's wife and 1,377 shares which
are held in a trust for the benefit of Mr. Saker's son, of which Mr. Saker
is the trustee. Mr. Saker disclaims beneficial ownership of the shares
described in the preceding sentence.
(6) Includes 2,754 shares which are held in two trusts for the benefit of Mr.
Saker's sons, of which trusts Mr. Saker is the trustee. Mr. Saker disclaims
beneficial ownership of the shares described in the preceding sentence.
(7) Includes 500 shares subject to currently exercisable options granted
pursuant to the 2001 Plan.
(8) Owned jointly with Mr. Shapiro's wife.
(9) Includes 250 shares subject to currently exercisable options granted
pursuant to the 2001 Plan.
(10)Of the 414,264 shares, directors of the Company own or have rights to
acquire 389,279 shares.
(11)Includes 85,000 shares held by the Joseph Saker Family Partnership, L.P.,
the total number of which shares is also included both in the total number
of shares attributed to ownership by Richard J. Saker, and the total number
of shares attributed to ownership by Joseph J. Saker, Jr.
The Company's Third Amended and Restated Revolving Credit and Term Loan
Agreement provides that an event of default shall occur if Messrs. Joseph J.
Saker and Richard J. Saker together, do not own, beneficially, all voting rights
with respect to at least 27% of all of the issued and outstanding Common Stock
of the Company.
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NOMINEE AS A DIRECTOR OF THE COMPANY
It is the intention of the persons named in the accompanying proxy to
vote, unless otherwise instructed, in favor of the election of Robert H.
Hutchins as a Class I director for a term expiring at the annual meeting in 2008
or until such time as his successor has been duly elected and qualified. If for
any reason the said nominee should be unable or unwilling to serve, which is not
now anticipated, the proxies will be voted for a substitute nominee who will be
designated by the Board .
If the proposal to amend the Company's Certificate of Incorporation is
approved at the Annual Meeting, and the Certificate of Incorporation is
subsequently amended, Robert H. Hutchins' term shall expire at the annual
meeting of shareholders in 2004 or at such time as his successor has been duly
elected and qualified. If the proposal to amend the Company's Certificate of
Incorporation is not approved, Mr. Hutchin's term shall expire at the annual
meeting of shareholders in 2008. See discussion under "Proposal 2: Approval of
Amendment to Certificate of Incorporation to Eliminate the Classified Board of
Directors."
The following table sets forth certain information relating to the nominee
and directors whose terms of office will continue after this Annual Meeting:
Year
First
Elected a
Name and Age Principal Occupation Director
------------ ------------------------------------ ---------
Joseph J. Saker (74) Chairman of the Board of the Company 1958
Richard J. Saker (51) President and Secretary of the 1987
Company
Charles T. Parton (61) Chairman of the Board - Two River 1995
Community Bank, a commercial bank
Albert A. Zager (54) Member - Carton, Arvanitis, 1995
McGreevy, Argeris, Zager &
Aikins, L.L.C., Attorneys at Law
Robert H. Hutchins (51) President and Managing Director - 2001
Hutchins, Farrell, Meyer &
Allison, P.A., Certified Public
Accountants
Mr. Joseph J. Saker has served as President of the Company since its
incorporation in 1958 until October 3, 2000 and as Chairman since 1971. In
addition to his responsibilities with the Company, he is active in other
community affairs.
Mr. Richard J. Saker, a graduate of St. Joseph's University, has been employed
by the Company since 1969 and served as Senior Vice President-Operations from
1984 until 1995, at which time he assumed the position of Executive Vice
President-Operations. On October 3, 2000, he was elected President of the
Company. He is a member of the Board of Directors of Wakefern Food Corporation
("Wakefern"), a retailer-owned food distribution corporation which provides
purchasing, warehousing and distribution services to the Company as well as
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other shareholder members, and a member of its Finance Committee. Richard J.
Saker is the son of Joseph J. Saker.
Mr. Parton is Chairman of the Board of Two River Community Bank (the "Bank") and
has served in that position since May 1, 2000. Prior to assuming that position,
he served as President and Chief Executive Officer of the Bank from February 1,
2000 to April 30, 2000. In addition, on March 1, 1999, Mr. Parton began serving
and continues to serve as a managing member of TRB, LLC, a financial holding
company formed in connection with the incorporation of the Bank. He formerly
served as the President of Concord Science and Technology Co., Inc. from May
1997 until February 1999. He has been a financial executive, consultant and
Certified Financial Planner for the last nine years and is Executive Vice
President and Treasurer of The Parton Corporation. He is also a Director of
Kuehne Chemical Co., Inc. (chlorine and caustic soda products).
Mr. Zager has been a member of Carton, Arvanitis, McGreevy, Argeris, Zager &
Aikins, L.L.C. Attorneys at Law and its predecessors since 1977. He is the
Chairman of its Executive and Management Committees. He is President of the
Board of Directors of the Center for Holocaust Studies of Brookdale Community
College, a founding member of the Board of Directors of the Eastern Monmouth
Area Chamber of Commerce Educational Foundation, Inc., and outside General
Counsel for Meridian Health System, Inc.
Mr. Hutchins, CPA, has been the President and Managing Director of Hutchins,
Farrell, Meyer & Allison, P.A., a certified public accounting firm, since he
founded the firm in 1984. In addition, Mr. Hutchins has been active in community
affairs. He is a founder and Chairman of the Board of Trustees of Ocean Housing
Alliance, Inc., and has served as an elected Board Member of the Toms River
Regional School District and as an appointed member of the Ocean County Mental
Health Advisory Board. He is past Chairman of the American Cancer Society-Ocean
Unit, Co-chairperson of the American Cancer Society Eastern Region Excalibur and
a member of the National American Cancer Society Excalibur Advisory Committee.
DIRECTORS MEETINGS AND COMMITTEES
The Company held twelve meetings of its Board (including two telephonic
meetings) during the fiscal year ended November 2, 2002. No incumbent Director
attended fewer than 75% of the total number of meetings held by the Board and
Committees of the Board on which he served.
The Board has appointed Executive, Audit and Stock Option Committees. The
Company does not have a compensation committee of the Board. Instead, the full
Board acts on matters of compensation. The Executive Committee, which consists
of Messrs. Joseph J. Saker and Richard J. Saker, holds periodic meetings as
required by the circumstances. The Audit and Stock Option Committees each
consist of Messrs. Parton, Zager and Hutchins. During the fiscal year ended
November 2, 2002, the Audit Committee held five meetings and there were two
meetings of the Stock Option Committee.
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Report of the Audit Committee of the Board of Directors
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that might incorporate this Proxy Statement or future filings
with the Securities and Exchange Commission ("SEC"), in whole or in part, the
following report shall not be deemed to be incorporated by reference into any
such filing.
Membership and Role of Audit Committee
The Audit Committee (the "Committee") consists of the following members of the
Company's Board: Charles T. Parton, Albert A. Zager and Robert H. Hutchins. Each
of the members of the Committee is independent, as that term is defined in the
Sarbanes-Oxley Act of 2002 and the American Stock Exchange listing standards.
The rules of the American Stock Exchange require that the Committee be comprised
of three independent directors. The Committee operates under a written charter
adopted by the Board (see below).
The primary function of the Committee is to provide advice with respect to the
Company's financial matters and to assist the Board in fulfilling its oversight
responsibilities regarding finance, accounting, tax and legal compliance. The
Committee's primary duties and responsibilities are to: 1) serve as an
independent and objective party to monitor the Company's financial reporting
process and internal control system; 2) engage a firm of independent auditors
for the Company each year, as well as review and appraise the audit efforts of
the Company's independent accountants and internal audit department; 3) evaluate
the Company's quarterly financial performance as well as its compliance with
laws and regulations; 4) oversee management's establishment and enforcement of
financial policies and business practices; and 5) provide an open avenue of
communication among the independent accountants, financial and senior
management, counsel, the internal audit department and the Board.
Audit Committee Charter
The Committee developed an Audit Committee Charter (the "Charter") in
consultation with the Company's accounting and finance department, its internal
auditor, the Company's independent public accountants and outside general
counsel. The Board adopted the Charter on June 7, 2000. The Charter was filed
with the SEC on February 26, 2001 as Appendix "A" to the Company's proxy
statement delivered in connection with the 2001 annual meeting of shareholders.
The 2001 proxy statement can be viewed on the SEC's website at www.sec.gov.
Review of the Company's Audited Financial Statements for the Fiscal Year ended
November 2, 2002
The Committee has reviewed and discussed the audited financial statements of the
Company for the fiscal year ended November 2, 2002 with the Company's
management. The Committee has discussed with Amper, Politziner & Mattia, P.C.,
the Company's independent public accountants, those matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
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The Committee has also received the written disclosures and the letter from
Amper, Politziner & Mattia, P.C. required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees), and the
Committee has discussed the independence of Amper, Politziner & Mattia, P.C.
with that firm.
Based on the Committee's review and discussions noted above, the Committee
recommended to the Board that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
November 2, 2002 for filing with the SEC.
Audit Fees
The Company paid a total of $143,000 in fiscal year 2002 and $131,000 in fiscal
year 2001 to Amper, Politziner & Mattia, P.C. for audit services, which included
work related to the annual audit and quarterly reviews rendered in fiscal years
2002 and 2001, respectively.
Audit Related Fees
During the last two fiscal years, Amper, Politziner & Mattia, P.C. rendered
professional services in connection with a review and analysis of the Company's
information systems and sundry accounting consultation projects. The Company
paid a total of $31,000 for these services rendered during fiscal year 2002 and
a total of $37,000 for these services during fiscal year 2001.
Tax Fees
The Company paid a total of $34,000 in fiscal year 2002 and $20,000 in fiscal
year 2001 to Amper, Politziner & Mattia, P.C. for income tax consultation,
including income tax compliance, tax advice and tax planning.
All Other Fees
Amper, Politziner & Mattia, P.C. did not bill the Company for any other
services during fiscal years 2002 or 2001.
The Committee has considered whether the non-audit services provided by Amper,
Politziner & Mattia, P.A., including the services rendered in connection with
income tax consultation, were compatible with maintaining its independence and
has determined that the nature and substance of the limited non-audit services
did not impair the status of Amper, Politziner & Mattia, P.C. as the Company's
independent auditors.
Submitted by: Charles T. Parton
Albert A. Zager
Robert H. Hutchins
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as set forth below:
Name Age Capacities in Which Served
--------------------------- --- ---------------------------------------------
Joseph J. Saker (1) 74 Chairman of the Board
Richard J. Saker (1) 51 President and Secretary
Michael Shapiro (2) 61 Senior Vice President, Chief Financial
Officer and Treasurer
Emory A. Altobelli (3) 62 Senior Vice President - Corporate
Subsidiaries and Services
Carl L. Montanaro (4) 61 Senior Vice President - Sales and
Merchandising
Joseph J. Saker, Jr. (5) 42 Senior Vice President - Marketing and
Advertising
Robert V. Spires (6) 49 Senior Vice President -- Human Resources and
Labor Relations
Joseph C. Troilo (7) 69 Senior Vice President - Financial
Administration, Assistant Secretary and
Assistant Treasurer
(1) See "Nominee as a Director of the Company."
(2) Mr. Shapiro joined the Company on August 15, 1994 as Senior Vice President,
Chief Financial Officer and Treasurer.
(3) Mr. Altobelli has served as Senior Vice President, Corporate Subsidiaries
and Services, since June 21, 1995. Prior to that date he served as Senior
Vice President, Administration, commencing in June 1990.
(4) Mr. Montanaro has served as Senior Vice President, Sales and Merchandising,
since June 21, 1995. From March 1988 to June 1995 he served as Vice
President of Sales and Merchandising.
(5) Mr. Joseph J. Saker, Jr. has served as Senior Vice President, Marketing and
Advertising since March 1, 2002. From October 2001 to February 28, 2002 he
served as a Vice President of Operations. From May 1990 to September 2001,
he served as a Director of Operations. Joseph J. Saker, Jr. is the son of
Joseph J. Saker.
(6) Mr. Spires has served as Senior Vice President, Human Resources and Labor
Relations, since June 21, 1995. From August 1991 to June 1995, he served as
Vice President of Human Resources and Labor Relations.
12
(7) Mr. Troilo has served as Senior Vice President, Financial Administration,
since August 1994. From 1974 to August 1994, he served as Senior Vice
President, Finance.
EXECUTIVE COMPENSATION
The aggregate compensation paid or accrued by the Company during the last three
fiscal years ended October 28, 2000, November 3, 2001 and November 2, 2002 to
the Chief Executive Officer of the Company and to the four most highly
compensated executive officers (other than the Chief Executive Officer) whose
compensation in salary and bonus exceeded $100,000 in the last fiscal year (the
"Named Officers") is set forth in the following table:
Summary Compensation Table
Annual Compensation All Other Compensation
------------------------- ------------------------
Shares
Underlying
Options/
Name and Principal Position Year Salary Bonus (1) SERP(2) 401(k)(3) SARS(4)
--------------------------- ---- ------ -------- ------- ------- -------
Joseph J. Saker 2002 $413,200 $74,732 $150,100 $3,400
Chairman and 2001 395,553 122,176 128,500 3,400 50,000
Chief Executive Officer 2000 361,201 69,893 134,400 3,400
Richard J. Saker 2002 $504,250 $90,611 $523,000 $3,400
President, Chief Operating 2001 437,118 132,188 345,000 3,400 50,000
Officer and Secretary 2000 374,475 76,742 298,000 3,400
Michael Shapiro 2002 $203,857 $28,164 $102,400 $6,150
Senior Vice President, 2001 189,351 39,430 88,400 5,421 1,000
Chief Financial Officer 2000 185,827 25,934 91,700 6,023
and Treasurer
Carl L. Montanaro 2002 $173,758 $22,692 $60,200 $6,006
Senior Vice President, 2001 169,367 31,769 53,200 5,321 1,000
Sales and Merchandising 2000 153,106 20,896 27,400 5,608
Joseph J. Saker, Jr. 2002 $161,561 $21,920 - $5,856
Senior Vice President, 2001 146,555 23,700 - 5,180
Marketing and Advertising 2000 121,713 12,178 - 4,260
(1) Incentive compensation paid or accrued pursuant to the Company's Incentive
Compensation Plans (the "Incentive Plans"). The Incentive Plans were
adopted by the Board for each of the fiscal years presented in the table
to attract, retain and motivate non-union salaried employees by providing
incentive compensation awards in cash. The Board administers the Incentive
Plans, which includes designating non-union salaried employees eligible to
participate in the Incentive Plans and awarding incentive compensation to
the eligible employees, subject to the Company achieving certain specified
levels of pre-tax profit. In administering the Incentive Plans, the Board
took into account the recommendations of the Company's executive officers,
except that determinations made with respect to the Company's Chief
Executive Officer and Chief Operating Officer were made solely by the
Company's independent directors.
(2) These amounts represent the projected annual benefit at retirement as of
the end of each fiscal year for the applicable named executive officer
under the
13
Company's Supplemental Executive Retirement Plan (the "SERP"), which was
approved by the Board on January 17, 1989. Amounts payable at retirement
under the SERP range from 40% to 50% of the employee's highest average
compensation over a five-year period less primary Social Security, pension
plan benefits and 401(k) benefits and are payable until death, but for a
minimum of 120 months. This Plan covers seven executive officers and other
key employees and is intended to supplement the Company's retirement
benefits. Such amounts are not payable until the earlier of the death,
disability or retirement of the covered employee. The Company anticipates
paying for benefits as they become due out of current operating income.
The SERP provides for a pre-retirement death benefit of one-half the
amount payable upon retirement, actuarially computed, payable to the
employee's beneficiary over 120 months. If the employee dies after
retirement, such employee's beneficiary will receive the same benefit the
employee would have received if the employee had lived for 120 months.
During fiscal 2002, the Company recorded $475,000 of deferred compensation
expense with respect to the SERP.
(3) Represents amounts contributed by the Company under its 401(k) Plan (the
"401(k) Plan"). The Company maintains a 401(k) Plan for all qualified
non-union employees. Employees are eligible to participate in the 401(k)
Plan after completing one year of service (1,000 hours) and attaining age
21. Employee contributions are discretionary to a maximum of 30% of
compensation but may not exceed $11,000 per year. The Company has elected
to match 25% of the employee's contributions up to 6% of employee eligible
compensation not exceeding $200,000. The Company may make additional
discretionary contributions. These discretionary contributions amounted to
2% of eligible compensation for the three calendar years ending December
31, 2002.
(4) Represents options to purchase shares of the Company's Common Stock,
granted pursuant to the Company's 2001 Plan, described more particularly
in Notes 1 and 2 in the table below captioned "Aggregated Option Exercises
in the Fiscal Year Ended November 2, 2002 and Year-End Option Values." See
"Proposal 2: Approval of Amendment to Certificate of Incorporation to
Eliminate the Classified Board of Directors."
14
Option Grants and Exercises During Fiscal Year Ended November 2, 2002
No options were granted in the Fiscal Year Ended November 2, 2002.
Aggregated Option Exercises in the Fiscal Year Ended November 2, 2002 and
Year-End Option Values are presented below:
Total Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at November 2, 2002 at November 2, 2002 (1)
---------------- -----------------------
--------------------------------------------------------------------------------
Name (2) Shares
Acquired on Value Unexer- Unexer-
Exercise Realized Exercisable cisable Exercisable cisable
--------------------------------------------------------------------------------
Joseph J. Saker - - 10,000 40,000 $74,000 $296,000
--------------------------------------------------------------------------------
Richard J. Saker - - 10,000 40,000 $74,000 $296,000
--------------------------------------------------------------------------------
Michael Shapiro 500 $6,575 - 500 - $3,700
--------------------------------------------------------------------------------
Carl L. Montanaro 250 $5,213 250 500 $1,850 $3,700
--------------------------------------------------------------------------------
Joseph J. Saker, Jr. - - - - - -
--------------------------------------------------------------------------------
(1) This represents the difference between the closing price of the Company's
Common Stock on November 1, 2002, the last trading day in Fiscal 2002
($27.00), and the exercise price of the options.
(2) All stock options were granted on August 8, 2001 (the "Grant Date") in
accordance with the Company's 2001 Plan. The stock options granted to
Messrs. Joseph J. Saker and Richard J. Saker are assignable to any of
their respective children or grandchildren who are employed by the Company
at the store manager or higher level. The options granted to Messrs.
Joseph J. Saker and Richard J. Saker, which include 10,000 shares subject
to currently exercisable options, vest quarterly from the Grant Date over
a five year period. All other stock options granted vest, per individual,
250 shares on the Grant Date and 250 shares on each anniversary of the
Grant Date thereafter for the next three years. See "Proposal 2: Approval
of Amendment to Certificate of Incorporation to Eliminate the Classified
Board of Directors."
15
PENSION PLAN
The Company maintains a defined benefit pension plan for eligible employees.
Full vesting occurs after five years of service. Benefits upon retirement prior
to age 65 are reduced actuarially. Benefits under the plan are determined by a
formula equal to .6% times the highest five consecutive year average of a
participant's compensation from the commencement of employment through September
30, 1997, times the total years of service at September 30, 1997. The plan also
provides for lump sum payments, which are payable under certain circumstances.
The table set forth below specifies the estimated annual benefits payable upon
normal retirement at age 65. Pursuant to a resolution adopted by the Board on
September 24, 1997, years of service and benefit accruals for participants in
the plan were frozen effective September 30, 1997. In lieu of contributions to
the defined benefit pension plan for the three calendar years ended December 31,
2002, the Board has approved contributions to the 401(k) Plan in an amount equal
to the sum of (a) two percent (2%) of the eligible compensation of 401(k) Plan
participants; and (b) $.25 for every $1.00 contributed to the 401(k) Plan by the
participants for up to 6% of the participant's eligible compensation. The
Company did not make any contributions to the 401(k) Plan prior to freezing
benefit accruals under the defined benefit pension plan.
Years of Service at September 30, 1997
-----------------------------------------------------
Remuneration 15 20 25 30 35
------------------------- --------- --------- -------- --------- ----------
$100,000 $ 7,500 $10,000 $12,500 $15,000 $17,500
125,000 9,375 12,500 15,625 18,750 21,875
150,000 11,250 15,000 18,750 22,500 26,250
175,000 13,125 17,500 21,875 26,250 30,625
200,000 15,000 20,000 25,000 30,000 35,000
225,000 16,875 22,500 28,125 33,750 39,375
250,000 18,750 25,000 31,250 37,500 43,750
275,000 20,625 27,500 34,375 41,250 48,125
300,000 22,500 30,000 37,500 45,000 52,500
For purposes of vesting benefits under the pension plan, the Company has
credited Richard J. Saker with 23 years of service; Michael Shapiro with 3 years
of service; Joseph J. Saker, Jr. with 23 years of service; and Carl L. Montanaro
with 35 years of service. The highest five consecutive year average, or
pro-rated portion thereof, of compensation through September 30, 1997 for each
of the Company's Named Officers, after giving effect to applicable limitations
under the Internal Revenue Code of 1986, as amended, is as follows: Richard J.
Saker - $150,000; Michael Shapiro - $150,000, Carl L. Montanaro - $119,000, and
Joseph J. Saker, Jr. - $99,000.
Mr. Joseph J. Saker received a lump sum distribution of $403,878 in January
1995, representing the amount of his vested interest in the pension plan.
16
DIRECTORS' COMPENSATION
All non-employee directors receive, in addition to reimbursement for their
reasonable expenses associated with attendance at meetings of the Board, an
annual retainer fee of $15,000 payable quarterly in advance (prior to June of
2002 the annual retainer fee was $12,000), and a participation fee of $1,000 for
each meeting of the Board attended. All non-employee members of the Audit
Committee receive, in addition to reimbursement for their reasonable expenses
associated with attendance at Audit Committee meetings, a fee of $1,000 for each
Audit Committee meeting attended if held on a day other than a day on which a
Board meeting is held, and a fee of $500 for each Audit Committee meeting
attended if held on the same day as a meeting of the Board. All non-employee
members of the Stock Option Committee receive, in addition to reimbursement for
their reasonable expenses associated with attendance at Stock Option Committee
meetings, a fee of $500 for each Stock Option Committee meeting attended if held
on a day other than a day on which a Board meeting is held.
The Company paid a total of $68,250 during the fiscal year ended November 2,
2002 to directors who are not employees of the Company.
COMPLIANCE WITH REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes of
ownership on Forms 3, 4 and 5 with the SEC. Executive officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that, during the fiscal year ended November 2,
2002, all of its executive officers, directors and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to reports required to be filed by Section 16(a) of the Exchange Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
For the fiscal year ended November 2, 2002, the full Board performed the
functions of a board compensation committee. Executive officers who served on
the Board were Mr. Joseph J. Saker, Chairman of the Board and Chief Executive
Officer, and Mr. Richard J. Saker, President, Chief Operating Officer, and
Secretary. The Board acted on matters of compensation for the Chief Executive
Officer and the Chief Operating Officer, with each of such officers abstaining
from any compensation decisions relating specifically to them.
17
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
The Company's independent directors are responsible for determining the
compensation of the Company's Chief Executive Officer and its Chief Operating
Officer. These two officers do not limit their functions to the distinct
parameters typically associated with their respective titles. Instead, they
actively share the responsibilities attendant to both of these offices in their
management of the business. Accordingly, a comparative assessment of the
compensation paid for their respective positions is impracticable, because a
comparison of compensation based on mutually-exclusive job titles would not
yield results commensurate with the combined contributions of these officers.
In order to arrive at an appropriate level of compensation for the Company's
Chief Executive Officer and Chief Operating Officer for the fiscal year ended
November 2, 2002, the independent directors considered a variety of factors
presented in this report. The Company's independent directors not only reviewed
market compensation levels for chief executive officers and chief operating
officers of similarly-sized grocery retailing organizations throughout the
country, but they also considered a "management service fee" approach to this
determination. The management service fee concept uses competitive data to
evaluate appropriate relative compensation levels between a corporation's chief
executive officer and chief operating officer in circumstances where the duties
of these offices overlap. This concept more accurately recognizes the value to
the Company of the shared efforts of its senior management and the importance of
such efforts in achieving seamless management succession.
The Company's financial performance and other achievements during the fiscal
year ended November 3, 2001 were considered by the Company's independent
directors in determining compensation levels for the Company's Chief Executive
Officer and Chief Operating Officer for fiscal 2002. Sales, income from
operations, EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) and net income increased substantially in fiscal 2001 despite
difficult market conditions. In addition, the Company's stock proved to be one
of the top performing securities listed on the American Stock Exchange in 2001.
In addition, during the fiscal year ended November 3, 2001, the Company's Chief
Operating Officer assumed the duties and responsibilities associated with
representing the Company with Wakefern, including serving as a member of the
Wakefern Board of Directors. These responsibilities had previously been
undertaken by the Company's Chief Executive Officer. The independent directors
took this shift of responsibility into consideration when making compensation
decisions. In addition, the independent directors considered the fact that both
the Chief Executive Officer and the Chief Operating Officer of the Company have
personally guaranteed significant amounts of indebtedness owed by the Company to
Wakefern.
After careful consideration of the various factors, including, among others, the
facts referenced above, the independent directors determined that the base
salaries for both the Chief Executive Officer and Chief Operating Officer should
be increased for the fiscal year ended November 2, 2002. See "Executive
Compensation - Summary Compensation Table."
The Company's Chief Executive Officer and Chief Operating Officer make
determinations with respect to cash compensation paid to other executive
18
officers of the Company. In addition to considering market comparisons, salaries
paid to executive officers are based on the executive's level of responsibility,
experience in his role, and overall performance and condition of the Company and
the economy at large.
The Company's Board is responsible for administration of the Company's 2002
Incentive Compensation Plan. Pursuant to the 2002 Incentive Compensation Plan,
the Company has undertaken to pay incentive compensation to designated employees
if it achieved certain adjusted pre-tax profit levels. The terms of the
Company's 2002 Incentive Compensation Plan are generally consistent with the
terms of incentive compensation plans adopted and approved by the Company for
prior fiscal years. Pursuant to the Company's 2002 Incentive Compensation Plan,
the Board awarded cash incentive compensation to certain non-union salaried
employees of the Company, including Mr. Joseph J. Saker and Mr. Richard J.
Saker.See "Executive Compensation - Summary Compensation Table."
The Stock Option Committee of the Board, which consists of its outside
directors, administers the Company's 2001 Plan. The 2001 Plan enables the
Company to grant stock-based and other forms of incentives, including stock
options, stock appreciation rights, phantom stock, and restricted stock, among
others. The Stock Option Committee may select from among these types of awards,
and may combine different types of awards within individual grants, to establish
individual grants affording long-term incentives, for the purpose of better
aligning the interests of the Company's management with those of its
shareholders. The Stock Option Committee did not grant any awards to the
Company's key executives and directors during the fiscal year ended November 2,
2002.
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 (per
person) on the amount of compensation that may be deducted by a public company
in any year for compensation paid to each of a corporation's Named Officers .
Qualifying performance based compensation is not subject to the deduction limit
if certain requirements are satisfied. The grant of options to the Named
Officers in 2001 under the 2001 Plan does not qualify as performance based
compensation. The exercise of these options could result in deductible
compensation in excess of the limit imposed by Section 162(m). The Board may
award compensation that may be non-deductible under Section 162(m) when, in the
exercise of its business judgment, such award would be in the best interests of
the Company. The Section 162(m) limitation has not yet had any effect upon the
Company and its ability to deduct, for tax purposes, compensation paid to its
Named Officers.
The Company's independent directors believe that the best interests of the
Company and its shareholders are served by the Company's current compensation
programs. The Board members will continue to review the Company's compensation
plans periodically to determine what changes, if any, should be implemented to
their structure, taking into account the Company's financial condition and
performance.
Submitted by: Charles T. Parton
Albert A. Zager
Robert H. Hutchins
19
PERFORMANCE ANALYSIS
Set forth below is a line graph comparing the cumulative total return of the
Company, the AMEX Wholesale & Retail Trade Index, the Standard & Poor's 500
Composite Stock Price Index and the AMEX Composite Index for the five years
commencing November 1, 1997 and ended November 2, 2002.
FOODARAMA SUPERMARKETS, INC.
PRICE PERFORMANCE GRAPH
[THE FOLLOWING TABLES ARE REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]
AMEX COMPOSITE
1997 1998 1999 2000 2001 2002
--- --- --- --- --- ---
675.75 645.41 800.80 909.30 824.20 828.99
1.00 0.96 1.19 1.35 1.22 1.23
100.00 95.51 118.51 134.56 121.97 122.68
INDUSTRY (AMEX)
1997 1998 1999 2000 2001 2002
--- --- --- --- --- ---
245.86 233.07 247.94 165.20 127.19 132.11
1.00 0.95 1.01 0.67 0.52 0.54
100.00 94.80 100.85 67.19 51.73 53.73
FSM
1997 1998 1999 2000 2001 2002
--- --- --- --- --- ---
18.50 32.00 28.63 18.38 40.75 27.00
1.00 1.73 1.55 0.99 2.20 1.46
100.00 172.97 154.73 99.32 220.27 145.95
S&P 500
1997 1998 1999 2000 2001 2002
--- --- --- --- --- ---
914.62 1098.67 1362.93 1429.40 1059.78 900.96
1.00 1.20 1.49 1.56 1.16 0.99
100.00 120.12 149.02 156.28 115.87 98.51
20
CERTAIN TRANSACTIONS
(a) Transactions with Management and Certain Business Relationships
As required by the By-Laws of Wakefern, the obligations owed by the Company to
Wakefern are personally guaranteed by Joseph J. Saker, Richard J. Saker and
Thomas A. Saker. As of November 2, 2002 the Company was indebted to Wakefern in
the amount of approximately $31,935,000 for current charges in the ordinary
course of business. Wakefern presently requires each of its shareholders to
invest up to $550,000 in Wakefern's non-voting capital stock for each store
operated by it, computed in accordance with a formula based on the volume of
such store's purchases from Wakefern. As of November 2, 2002, the Company had a
15.6% investment in Wakefern of $11,805,000. As a shareholder member of
Wakefern, the Company earns a share of any annual Wakefern patronage dividend.
The dividend is based on the distribution of operating profits on a pro rata
basis in proportion to the dollar volume of business transacted by each member
with Wakefern during each fiscal year. As of November 2, 2002, the Company was
indebted in connection with an investment in Wakefern. The debt of $1,315,000
was non-interest bearing and payable in scheduled installments over a period of
up to six years. Additional information with respect to the Company's
relationship with Wakefern is contained in the Company's 2002 Annual Report on
Form 10-K and in the notes to the Company's 2002 financial statements.
The Company also has an investment in Insure-Rite, Ltd., another company
affiliated with Wakefern, of $953,000 as of November 2, 2002. Insure-Rite, Ltd.
provides the Company with a portion of its liability insurance coverage with the
balance paid through Wakefern to a private carrier. The Company paid $4,364,000
for such insurance coverage in fiscal 2002 and believes that such amount is
comparable to the amount that would be charged by a similarly situated
unaffiliated general liability and property insurer.
The Company leases from Joseph J. Saker, the Chairman of the Company, and his
wife, doing business as Saker Enterprises, a 57,000 square foot supermarket in
Freehold, New Jersey, under a lease expiring December 31, 2018, and provides for
four five year extension options. The Company also leases from Saker Enterprises
a 5,200 square foot garden center building and 5,000 square feet of yard area
under a lease expiring December 31, 2003 and 9,000 square feet of space for its
liquor store under a lease expiring December 31, 2003, both of which are located
in the same shopping center as the supermarket. During the fiscal year ended
November 2, 2002, an aggregate amount for rent (including taxes and insurance)
of $891,000 was paid by the Company to Saker Enterprises for the supermarket,
garden center and liquor store.
The Company subleases from Wakefern a supermarket in East Windsor, New Jersey
under a sublease expiring in 2008. The Company also subleases from Wakefern a
supermarket in Marlboro, New Jersey under a sublease expiring in 2006. During
the fiscal year ended November 2, 2002, aggregate amounts for rent of $1,090,000
and $837,000 were paid by the Company to Wakefern for the East Windsor
supermarket and the Marlboro supermarket, respectively. Upon expiration of these
subleases, the underlying leases will be assigned to and assumed by the Company
provided that certain conditions, which include the absence of defaults by the
Company in its obligations to Wakefern and the Company's lenders, and the
21
maintenance of a specified level of net worth, are satisfied. The term of the
leases for the East Windsor and Marlboro supermarkets expire in 2018 and 2021,
respectively.
During the fiscal year ended November 2, 2002, in connection with the stock
repurchase program announced by the Company on June 8, 2001, the Company
repurchased a total of 102,853 shares of which 101,553 shares were repurchased
in privately negotiated transactions. 6,377 of these shares were owned by a
member of the family of Joseph J. Saker, the Company's Chairman, and were
purchased for an average price per share of $39.52.
The Company believes that the terms of the foregoing transactions are comparable
to those available from non-affiliated persons under similar circumstances.
(b) Indebtedness of Management
None.
PROPOSAL 2:
APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION TO ELIMINATE THE CLASSIFIED
BOARD OF DIRECTORS
Background Information
The Company's Restated Certificate of Incorporation dated May 15, 1970, as
amended by Certificates of Amendment dated October 17, 1986, May 12, 1987,
February 16, 1993, May 20, 1996 and May 14, 2002 (collectively, the "Certificate
of Incorporation"), currently provides for a classified board of directors with
each director serving a five-year term. Historically, the Company's board had
not been classified. However, in proxy materials circulated prior to the 2002
Annual Meeting of Shareholders, the Company's Board proposed to its shareholders
the adoption of a classified board, for various reasons that the Board believes
were in the best interests of the Company. Chief among these reasons was the
likelihood that continuity and stability in leadership and the policies
formulated by the board would be enhanced by providing that each director would
serve a five-year term rather than a one-year term, with only approximately
one-fifth of the directors subject to election each year.
Following the Company's distribution of its proxy materials, and prior to
the 2002 Annual Meeting of Shareholders, the directors and certain executive
officers of the Company were named as defendants in a shareholder derivative
action alleging, among other things, that the proposal to classify the Company's
board was injurious to the Company's shareholders. Notwithstanding the pending
claims, at the 2002 Annual Meeting of Shareholders, the Company's proposal to
adopt a classified board of directors was approved by two-thirds of its voting
shareholders, and the Company's Certificate of Incorporation was amended to
implement the action of the shareholders.
Recently, the Company has engaged in settlement discussions with the
shareholders who initiated the legal action against the Company's directors and
22
executive officers. The parties to the litigation have tentatively agreed on a
settlement proposal, subject to, among other things, approval by the Superior
Court of New Jersey, Middlesex County, the court in which the derivative action
is pending (the "Court"), and by the Company's directors and officers liability
insurance carrier. Pursuant to the terms of the proposed settlement, 1) the
Company's five-year classified board will be eliminated and the defendants will
agree not to submit any proposal to the shareholders of the Company in
connection with the implementation of a classified board for five years from the
date of final approval of the settlement; 2) the 2001 Plan will be amended so
that the maximum number of shares that can be awarded to any individual
thereunder shall be 50,000; and 3) the 2001 Plan will be amended to require that
the exercise price of any options or other stock based compensation granted
thereunder, following the date of final approval of the settlement, shall be
equal to the closing market price of the Company's stock on the date of grant.
In addition, Joseph J. Saker, Chairman and Chief Executive Officer of the
Company, will return to the Company 10,000 stock options previously awarded to
him under the 2001 Plan. The Plaintiffs have also informed the Defendants that
they intend to seek an award of attorneys fees, however, it is not possible to
predict the amount of the fees that may be awarded.
The Company remains convinced that its directors acted in the best
interests of the shareholders by proposing the adoption of the classified board.
However, the Company does not believe that its shareholders' interests are best
served by diverting the Company's financial and managerial assets in a
protracted defense of the shareholder derivative claims against its directors
and officers. Accordingly, the Company and its directors have tentatively agreed
upon the settlement proposal described above. Because the plaintiffs' claims
were initiated as a shareholder derivative action, the proposed settlement
cannot be implemented without a formal written settlement agreement being
entered into, notice of the settlement terms and an opportunity to object to the
terms being given to the Company's shareholders and Court approval of the
settlement.
Additionally, the Board of Governors of the American Stock Exchange, the
exchange on which the Company's shares are currently traded, recently has
approved corporate governance proposals which are pending review and approval by
the SEC. The proposed rules, if approved by the SEC, would prohibit the Company
from having a classified board consisting of more than three classes of
directors and directors' terms of more than three years. Accordingly, under the
proposed rules, in order to maintain its listing on the American Stock Exchange,
the Company would have to amend its Certificate of Incorporation to eliminate
the classified board of directors as it currently exists.
If the proposed settlement is approved by the Court and the Company's
directors and officers liability insurance carrier, the provision of the
settlement proposal requiring the elimination of the classified board cannot be
implemented without an amendment to the Company's Certificate of Incorporation
approved by shareholders. Accordingly, the Company has proposed that its
Certificate of Incorporation be amended to eliminate the classified board;
provided, that no such amendment shall be made unless and until a final, binding
and non-appealable order approving the terms of the settlement, including a term
requiring the elimination of the classified board, has been entered by the
Court.
The provisions of the Certificate of Incorporation establishing the
classified board may only be amended, altered or repealed by the affirmative
23
vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the combined voting power of the outstanding shares of stock of the Company
entitled to vote generally in the election of directors, voting together as a
single class.
Description of Proposed Amendment
Approval of this proposal would authorize the Company to amend subsection
(a) of Article Sixth of the Certificate of Incorporation, subject to the
condition of Court approval of the settlement described above, to eliminate the
classified board. Article Sixth currently divides the board into five separate
classes of directors as nearly equal in number as possible. The directors serve
for staggered terms of five years and until their respective successors are duly
elected and qualified (except in cases where no successor is elected due to a
reduction in the size of the board), or until their earlier resignation,
removal, death or incapacity. Because the board is classified, shareholders
elect only one-fifth (or, if one of the classes has more than one director,
approximately one-fifth) of the directors at each annual meeting. Except for Mr.
Joseph Saker, terms of directors elected at the Company's 2002 annual meeting
are currently for less than five years since the classified board was
implemented in 2002 and the term of one class of directors expires at each
annual meeting of the Company's shareholders. Specifically, subsection (a) of
Article Sixth currently provides as follows:
The number of directors of the Corporation shall be the number, not less
than three (3) nor more than eleven (11), fixed from time to time by the
Board of Directors. The Board of Directors shall be divided into five
classes, designated Class I, Class II, Class III, Class IV and Class V, as
nearly equal in number as possible, and the term of office of directors of
one class shall expire at each annual meeting of shareholders, and in all
cases as to each director until his successor shall be elected and
shall qualify (except in cases where no successor is elected due to a
reduction in the size of the Board of Directors) or until his earlier
resignation, removal from office, death or incapacity. The initial
term of office of directors of Class I shall expire at the annual meeting
of shareholders in 2003; that of Class II shall expire at the annual
meeting of shareholders in 2004; that of Class III shall expire at the
annual meeting of shareholders in 2005; that of Class IV shall expire
at the annual meeting of shareholders in 2006; and that of Class V
shall expire at the annual meeting in 2007; and in all cases as to
each director until his successor shall be elected and shall qualify
(except in cases where no successor is elected due to a reduction in
the size of the Board of Directors) or until his earlier resignation,
removal from office, death or incapacity. At each annual meeting of
shareholders after 2002, the number of directors equal to the number of
directors of the class whose term expires at the time of such meeting (or,
if less, the number of directors properly nominated and qualified for
election) shall be elected by a plurality vote of the shareholders to hold
office until the fifth succeeding annual meeting of shareholders after
their election and until their successors are elected and qualify.
Additional directorships resulting from an increase in the number of
directors shall be apportioned among the classes as equally as possible.
Vacancies, including vacancies created by an increase in the size of the
Board of Directors, shall be filled by the affirmative vote of a majority
of the remaining Board of Directors, though less than a quorum, but any
24
such director so elected shall hold office until the next succeeding
annual meeting of shareholders. At such annual meeting, such director or a
successor to such director shall be elected and qualified in the class to
which such director is assigned to hold office for the term or remainder
of the term of such class. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of
Directors. Any election or removal of a director by the Corporation's
shareholders shall be undertaken by a vote of the shareholders at a
meeting thereof and shall not be effected by written consent. The
directors need not be residents of the State of New Jersey and the
directors need not be shareholders of the Corporation. This subsection (a)
of this Article Sixth shall not be amended, altered or repealed except by
the affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the combined voting power of the
then-outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
If this proposal is approved, the Company will amend its Certificate of
Incorporation to eliminate the classified board of directors; provided, that a
final, binding and non-appealable order approving the terms of the settlement,
including a term requiring the elimination of the classified board, has been
entered by the Court. If the Certificate of Incorporation is so amended, all of
the Company's directors would be elected at each annual meeting of shareholders
for terms which expire at the next annual meeting of shareholders and until
their successors are duly elected and qualified. Subsection (a) of Article
Sixth, if amended, would read as follows:
The number of directors of the Corporation shall be the number, not less
than three (3) nor more than eleven (11), fixed from time to time by the
Board of Directors. The term of office of directors shall expire at each
annual meeting of shareholders, and in all cases as to each director until
his successor shall be elected and shall qualify (except in cases where no
successor is elected due to a reduction in the size of the Board of
Directors) or until his earlier resignation, removal from office, death or
incapacity. Vacancies, including vacancies created by an increase in the
size of the Board of Directors, shall be filled by the affirmative vote of
a majority of the remaining Board of Directors, though less than a quorum,
and any such director so elected shall hold office until the next
succeeding annual meeting of shareholders. A majority of the directors
shall constitute a quorum for the transaction of business, unless the
bylaws shall provide that a different number shall constitute a quorum,
which in no case shall be less than one-third of the total number of
directors, nor less than two directors. Any election or removal of a
director by the Corporation's shareholders shall be undertaken by a vote
of the shareholders at a meeting thereof and shall not be effected by
written consent. No director may be removed by the shareholders except for
cause. The directors need not be residents of the State of New Jersey and
the directors need not be shareholders of the Corporation. This subsection
(a) of this Article Sixth shall not be amended, altered or repealed except
by the affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66-2/3%) of the combined voting power of the
25
then-outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
Discussion of Proposed Amendment
Approval of the proposed amendment requires the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the combined
voting power of the outstanding shares of stock of the Company entitled to vote
generally in the election of directors, voting together as a single class. If
the amendment to the Company's Certificate of Incorporation is not approved by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the combined voting power of the outstanding shares of stock of the
Company entitled to vote generally in the election of directors, voting together
as a single class, then the Certificate of Incorporation may not be amended. If
the amendment of the Certificate of Incorporation is not approved, then the
settlement of the derivative litigation cannot be implemented on the terms
proposed. It is not clear at this time what consequences with regard to the
proposed settlement would result if the amendment to the Certificate of
Incorporation was not approved.
If the shareholders approve the proposed amendment to the Company's
Certificate of Incorporation by the required shareholder vote, then if and only
if the elimination of the classified board of directors remains as a term of a
final and binding settlement agreement between the Company and the plaintiff
shareholders, and a final, binding and non-appealable order approving the terms
of the settlement has been entered by the Court, the Company shall file the
amendment with the New Jersey Department of Treasury, Division of Revenue and
the amendment shall become effective. In addition to eliminating the classified
board, the proposed amendment also provides that the shareholders may remove a
director only for cause. Previously, this restriction on removal applied to the
Company because of a statute which prevents removal without cause of directors
who are part of a classified board. Because the Company's classified board will
be eliminated, the Company's Certificate of Incorporation must expressly
prohibit removal of directors without cause in order for this restriction to
continue to apply.
The proposed amendment to eliminate the classified board may reduce the
time required to effect a change in control of the board. With a classified
board of directors, one director per class, it would take at least three annual
meetings for a majority of the shareholders to effect a change in control of the
board, because only a minority of the directors would be elected at each annual
meeting. Without a classified board of directors, a change in control of the
board can be made by shareholders holding a majority of the Company's shares at
a single annual meeting. The adoption of the proposal to allow the Company to
amend the Certificate of Incorporation to eliminate the classified board may
make removal of management easier, even if such removal would not be beneficial
to shareholders generally. The Board presently has no plans, arrangements,
commitments or undertakings with respect to increasing or decreasing the size of
the board.
If the proposed amendment to the Company's Certificate of Incorporation is
authorized and becomes effective, it will determine the manner in which the
director is to be elected in connection with Proposal No. 1. If the proposed
amendment is approved and becomes effective, the Class I director, Robert H.
Hutchins, whose term expires in 2003, will be elected for a one-year term. In
26
addition, if the proposed amendment becomes effective, all of the Company's
directors will be elected at the 2004 Annual Meeting of Shareholders to serve
until the 2005 Annual Meeting. If the proposed amendment is not approved, or
does not become effective, then the Class I director will be elected this year
for a term of five years, and the directors representing Classes II through V
will be elected in turn at the next four Annual Meetings. For information
regarding the nominee for election to the board at the 2003 Annual Meeting and
incumbent directors of the Company, see "Election of Directors."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO ELIMINATE THE
CLASSIFIED BOARD OF DIRECTORS.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Amper, Politziner & Mattia, P.C., Independent Certified Public
Accountants, was retained as auditors to the Company for the year ended November
2, 2002 by the Audit Committee of the Board of Directors. A representative of
Amper, Politziner & Mattia, P.C. will be present at the Annual Meeting to make a
statement, if desired, and to respond to appropriate questions.
ANNUAL REPORT
The Company's Annual Report to shareholders for the fiscal year ended November
2, 2002, including financial statements, which Annual Report is not part of this
proxy solicitation material, is being mailed to shareholders with the proxy
solicitation.
OTHER BUSINESS
Management is not aware at this time of any other matters to be presented for
action. If, however, any other matters properly come before the Annual Meeting,
unless otherwise directed, the persons named in the proxy intend to vote in
accordance with their judgment on the matters presented.
PROXY SOLICITATION
The cost of solicitation of proxies will be borne by the Company. Such
solicitation will be made by mail and may also be made by the Company's
directors, officers, or regular employees personally or by telephone or
telegraph. Brokerage houses, nominees, fiduciaries and other custodians will be
requested to forward soliciting materials to beneficial owners of shares and
will be reimbursed by the Company for their reasonable expenses. The Company
does not expect to pay any compensation to third parties for the solicitation of
proxies unless such solicitation has been requested by the Company.
27
SHAREHOLDER PROPOSALS
A shareholder of the Company who wishes to present a proposal for action at the
Company's 2004 annual meeting of shareholders must submit such proposal to the
Company and such proposal must be received by the Company by December 2, 2003.
ANNUAL REPORT ON FORM 10-K
On written request, the Company will provide without charge to each record or
beneficial holder of the Company's Common Stock, a copy of the Company's Annual
Report on Form 10-K as filed with the SEC for the fiscal year ended November 2,
2002. Requests should be addressed to Mr. Joseph C. Troilo, Senior Vice
President - Financial Administration, Foodarama Supermarkets, Inc., 922 Highway
33, Building 6, Suite 1, Freehold, New Jersey 07728.
By Order of the Board of Directors,
/S/
Howell, New Jersey Richard J. Saker,
March 31, 2003 Secretary
28
Appendix
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For Shares of Common Stock
FOODARAMA SUPERMARKETS, INC.
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors
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The undersigned hereby constitutes and appoints Joseph J. Saker and
Richard J. Saker and each of them, the attorneys and proxies of the undersigned
with full power of substitution to appear and to vote all of the shares of
Common Stock of FOODARAMA SUPERMARKETS, INC. registered in the name of the
undersigned at the close of business on March 21, 2003, at the 2003 Annual
Meeting of Shareholders of said Company which will be held on Wednesday, April
30, 2003 at 922 Highway 33, Building 6, Suite 1, Howell, New Jersey at 2:00
p.m., local time, or any postponements or adjournments thereof, for the purposes
more fully described in the accompanying Proxy Statement, and in their
discretion, on other matters which properly come before the meeting. The Board
of Directors recommends a vote "FOR" the election of Robert H. Hutchins as a
member of Class I of the Board of Directors of the Company. The Board of
Directors also recommends a vote "FOR" the proposed amendment to the Company's
Restated Certificate of Incorporation, as amended, to provide for the
elimination of the classified board of directors of the Company subject to the
satisfaction of certain conditions.
(Continued and to be Signed on the Reverse Side)
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
FOODARAMA SUPERMARKETS, INC.
April 30, 2003
Please Detach and Mail in the Envelope Provided
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Please mark your
[X] votes as in this
example
FOR WITHHELD
1.Election [ ] [ ] Nominee: Robert H. Hutchins
of Director
FOR AGAINST ABSTAIN
2. Approval of the proposed amendment to the [ ] [ ] [ ]
Foodarama Supermarkets, Inc. Restated Certificate
of Incorporation, as amended, to provide for the
elimination of the classified board of directors
of the Company subject to the satisfaction of
certain conditions.
FOR AGAINST ABSTAIN
3. The Proxy is authorized to act upon matters [ ] [ ] [ ]
which are incident to the conduct of the meeting
and to transact such other business as may
properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. Unless otherwise indicated above or
unless this Proxy is revoked, the shares represented by this Proxy will be voted
for the nominee for Director, Robert H. Hutchins, for approval of the proposed
amendment to the Foodarama Supermarkets, Inc. Restated Certificate of
Incorporation, as amended, to provide for the elimination of the classified
board of directors of the Company subject to the satisfaction of certain
conditions, and in the discretion of said Proxy, on any other matter which may
properly come before the meeting or any postponements or adjournments thereof.
I will attend [ ] I will not attend [ ]
the Annual the Annual
Meeting Meeting
SIGNATURE _________________ DATE _________ SIGNATURE _____________ DATE _______
IMPORTANT: Please sign your name exactly as your name appears on the label
attached hereto, and when signing as attorney, executor, administrator, trustee
or guardian, please give the full title as such. If the signatory is a
corporation, sign the full corporate name by a duly authorized officer, or if a
partnership, sign in partnership name by an authorized person.
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