SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement. [ ] Confidential, For Use of the
Commission Only as permitted
[ ] Definitive Proxy Statement. by Rule 14a-6(e)(2))
[X ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to 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 the Registrant)
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April 19, 2002
Dear Fellow Shareholder:
We are enclosing a Supplement to the Foodarama Supermarkets, Inc. (the
"Company") Proxy Statement, which was mailed to shareholders on April 5, 2002.
The Supplement contains information regarding certain recent developments in the
Company, including the repurchase of certain shares subsequent to the record
date for the Annual Meeting of Shareholders scheduled for May 8, 2002, as well
as the filing of a shareholders derivative action against the Company, as
nominal defendant, and the members of the Board.
Please note that the time for the meeting has been changed to 2:00 p.m.,
local time. The date and place for the meeting remains the same.
As we approach the upcoming Annual Meeting of Shareholders, your Board of
Directors is very pleased with the financial and other achievements of the
Company. Our results from operations and financial condition in fiscal 2001
continued to improve for the fourth consecutive year. Sales for 2001 increased
9.1% to a record $945,301,000 from $866,363,000 in the prior year. Income from
operations as well as earnings before interest, taxes, depreciation and
amortization for 2001 improved over the prior fiscal year. In addition,
Foodarama stock proved to be one of the top performing securities listed on the
American Stock Exchange in 2001. Operating results in the first quarter of
fiscal 2002 remained favorable.
The Board of Directors is proud to stand behind its record of achievement
and its delivery of value to shareholders. If you have not already done so, we
urge you to support your Board of Directors and management by signing, dating
and returning the attached proxy card and voting your shares FOR the Board's
nominees, FOR the proposal to amend the Certificate of Incorporation to classify
the Board of Directors and FOR the proposal to amend the 2001 Stock Incentive
Plan.
We thank you for your support.
Very truly yours,
/S/ Richard J. Saker /S/ Joseph J. Saker
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RICHARD J. SAKER JOSEPH J. SAKER
President and Chief Operating Officer Chairman of the Board and
Chief Executive Officer
ANNUAL MEETING OF SHAREHOLDERS
OF
FOODARAMA SUPERMARKETS, INC.
May 8, 2002
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SUPPLEMENT TO PROXY STATEMENT
OF
FOODARAMA SUPERMARKETS, INC.
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To the Shareholders of Foodarama Supermarkets, Inc.:
The following information supplements and amends the Proxy Statement dated
April 5, 2002 (the "Proxy Statement") of Foodarama Supermarkets, Inc. (the
"Company") furnished in connection with the solicitation of proxies on behalf of
the Board of Directors of the Company (the "Board of Directors") to be voted at
the Annual Meeting of Shareholders of the Company to be held at the offices of
the Company, 922 Highway 33, Building 6, Suite 1, Howell, New Jersey 07731 on
May 8, 2002, and any adjournment or postponement thereof (the "Annual Meeting").
This Supplement should be read in conjunction with the Proxy Statement, which
remains in effect in all respects, except to the extent modified hereby. All
capitalized terms used and not otherwise defined herein have the meanings given
in the Proxy Statement.
Annual Meeting
The time of the Annual Meeting has been changed to 2:00 p.m. (local time).
The date and place for the Annual Meeting remain the same.
Recent Developments
Share Repurchases Subsequent to Record Date
According to the Proxy Statement, 1,071,233 shares of Common Stock were
outstanding as of March 26, 2002, the record date for the Annual Meeting (the
"Record Date"). Subsequent to the Record Date, the Company has engaged in
repurchases of shares of Common Stock, thereby effectively reducing the number
of shares of Common Stock to be voted at the Annual Meeting.
Pursuant to a Securities Purchase Agreement entered into on April 2, 2002
by and among the Company and several Company shareholders including Carl W.
Dinger III (the "Dinger Group"), the Company agreed to repurchase 78,466 shares,
representing a 7.3 percent stake in the Company, from the Dinger Group (the
"Dinger Shares") for an aggregate cash purchase price of $3,491,737, or $44.50
per share. As of the date of this Supplement, the Company has completed the
purchase of all but 4,500 of the Dinger Shares, and it expects to complete the
purchase of the remaining shares prior to the date of the Annual Meeting. In
addition, the Company repurchased 2,000 shares from Michael Shapiro, the Chief
Financial Officer of the Company, and his wife on April 3, 2002, at a per share
price of $45.20, and 5,400 shares from unaffiliated shareholders on April 4,
2002, at a per share price of $44.50 (such shares, together with the Dinger
Shares, are referred to in this Supplement as the "Shares").
As a result of these repurchases, the Company believes that the Shares are
now "owned or controlled" by the Company for purposes of the New Jersey Business
Corporation Act and, as such, can neither be counted in determining the total
number of shares outstanding, nor voted, at the Annual Meeting despite the fact
that the Shares were outstanding on the Record Date. Based upon discussions with
certain of the owners of Shares, the Company understands that the nominee
holders of a substantial number of the Shares will be instructed not to vote
such Shares at the Annual Meeting. In addition, the Company is currently
discussing arrangements with the transfer agent for the Common Stock to ensure
that the Shares are not voted at the Annual Meeting. If the Shares are not
considered outstanding or voted, the maximum number of shares of Common Stock
that will be eligible to be voted at the Annual Meeting will be reduced to
985,367.
In order to facilitate these purchases, on March 29, 2002, the Company and
its lenders amended the Company's Second Amended and Restated Revolving Credit
and Term Loan Agreement (the "Credit Agreement") to permit the Company to
repurchase shares of Common Stock for an aggregate purchase price not to exceed
$5,600,000, subject to certain conditions and limitations. Previously, the limit
under the Credit Agreement was $5,000,000.
Since June 27, 2001, the Company has repurchased a total of 131,923 shares
in open market and privately negotiated transactions, for an aggregate cash
purchase price of $5,591,597, or an average of $42.39 per share. Of these
shares, a total of 33,377 shares were purchased from related parties, including
2,000 shares purchased from the Company's Chief Financial Officer and his wife
(as described above), for an aggregate cash purchase price of $1,251,295, or an
average of $37.49 per share. As described in the preceding paragraph, the
Company's Credit Agreement limits the amount that the Company may expend to
repurchase shares of its Common Stock to $5,600,000.
Derivative Litigation
On March 27, 2002, Melvin Jules Bukiet, on behalf of himself and acting as
trustee for the benefit of minors Madeline Bukiet, Miles Bukiet and Louisa
Bukiet (together, the "Plaintiff"), commenced a shareholders derivative action
against the Company, as nominal defendant, and against all five members of the
Board of Directors, Joseph J. Saker, Richard J. Saker, Charles T. Parton, Albert
A. Zager and Robert H. Hutchins (together, the "Defendants"), in their
capacities as directors and/or officers of the Company. This lawsuit, which was
filed in the Superior Court of New Jersey, Middlesex County, Chancery Division
(the "Court"), alleges that the Defendants have breached their fiduciary duties
to the Company and its shareholders and sought to "enrich and entrench
themselves at the shareholders' expense" through their previous recommendation,
implementation and administration of the 2001 Stock Incentive Plan (the "2001
Plan") which was approved by the Company's shareholders on April 4, 2001, and by
proposing an amendment to the 2001 Plan to increase the number of shares of
Common Stock available for issuance by 65,000 shares and an amendment to the
Company's amended and restated certificate of incorporation (the "Certificate of
Incorporation") to create a classified Board of Directors consisting of five
classes of directors, with only one class standing for election in any year for
a five-year term. For further information with respect to the proposed
amendments to the 2001 Plan and the Certificate of Incorporation, please refer
to the sections of the Proxy Statement entitled "PROPOSAL 2: APPROVAL OF
AMENDMENT TO CERTIFICATE OF INCORPORATION TO CLASSIFY THE BOARD OF DIRECTORS"
and "PROPOSAL 3: APPROVAL OF AMENDMENT TO THE 2001 STOCK INCENTIVE PLAN".
Specifically, the Plaintiff alleges that the Defendants administered the
2001 Plan in a manner contrary to the stated purpose of the 2001 Plan, namely,
to attract and retain key employees and to provide an incentive, through stock
ownership, to enhance the value of the Common Stock. Instead, the Plaintiff
alleges that the Defendants have unjustly enriched themselves in their
administration of the 2001 Plan by granting options only to themselves and to
certain other senior officers at below-market prices. For further information
with respect to grants of stock options under the 2001 Plan during fiscal 2001,
please refer to the section of the Proxy Statement entitled "EXECUTIVE
COMPENSATION - Option Grants and Exercises During Fiscal Year Ended November 3,
2001". The Plaintiff contends that the 2001 Plan, as administered by the
Defendants, fails to motivate those individuals granted options to maximize
shareholder value because such individuals already possess a substantial
proprietary interest in the Company. The Plaintiff further asserts that the
annual compensation of the Defendants who are also officers of the Company, when
compared to their counterparts at comparable companies, is sufficient to retain
and motivate such Defendants to enhance shareholder value without additional
incentives from the 2001 Plan. In addition, the Plaintiff contends that the
proposed amendment to the 2001 Plan "will further dilute the outstanding shares
in the hands of Foodarama's public shareholders" and, assuming that the new
shares will be used largely for awards to the Defendants, "will further entrench
and enrich the Defendant Directors at the expense of Foodarama and its public
shareholders". Finally, the Plaintiff argues that the proposal to adopt a
classified Board of Directors is "designed to entrench the Board . . . so that
they may continue to . . . further enrich themselves".
To remedy the Defendants' alleged breaches of their fiduciary duties, the
Plaintiff has asked the Court, among other things, to (i) declare that the
Defendants have wasted corporate assets and breached their fiduciary duties to
the Company's shareholders, (ii) declare the 2001 Plan null and void, (iii)
rescind any grant of options to any of the Defendants and/or neutralize the
votes of any shares obtained upon exercise of options, (iv) compel the
Defendants to pay over any proceeds from any exercise of stock options under the
2001 Plan, (v) impose a constructive trust on all profits the Defendants obtain
as a result of the 2001 Plan, (vi) enjoin the Stock Option Committee of the
Company from granting any additional options to any Defendant under the 2001
Plan and (vii) enjoin the shareholder vote on the proposed amendments to the
2001 Plan and on the classified Board of Directors. The Plaintiff also has
indicated in the lawsuit that they will engage in a proxy solicitation of
shareholders of the Company to attempt to defeat the proposals to amend the 2001
Plan and the Certificate of Incorporation and, on April 11, 2002, made a request
that the Company deliver to them a list of shareholders for purposes of such
solicitation.
The Board of Directors believes that the Plaintiff has characterized the
actions taken by the Board of Directors in a negative light for purposes of the
lawsuit. The Defendants firmly believe that they have acted in good faith and in
accordance with their prudent business judgment in connection with the matters
addressed in the lawsuit and intend to defend themselves vigorously. Your Board
of Directors believes that there is other relevant information and
considerations that shareholders should take into account when assessing the
merits of the lawsuit, as follows:
2001 Stock Option Grants. With respect to the allegation that the
Defendants sought to enrich themselves through their implementation,
administration and proposed amendment of the 2001 Plan, reference is made to the
"Compensation Report of the Board of Directors" contained in the Proxy Statement
(the "Compensation Report"). According to the Compensation Report, the Stock
Option Committee of the Board of Directors, which consists of three outside
directors, determined to award stock options under the 2001 Plan during fiscal
2001 on the basis of its assessment of the organizational roles and past and
current contributions of the Company's key officers, particularly in light of
the fact that the Company has not awarded stock options or other equity
incentives to senior officers for a significant period of time. Accordingly, the
Stock Option Committee decided that option awards to the key officers were
justified in light of their past contributions, for which the officers did not
receive equity incentive compensation as their counterparts at comparable
companies might have received under similar circumstances, and in order to
incentivize them going forward. It should also be pointed out that the options
granted to the Company's Chief Executive Officer and Chief Operating Officer
vest quarterly over a five-year period (subject to the occurrence of certain
events that accelerate vesting, including death or disability or certain events
that could result in a change of control of the Company), so the recipients are
at risk with respect to most of their options if the market value of the Common
Stock declines and, by the same token, are encouraged to enhance the Company's
performance so that the value of their options increases. As such, the option
recipients have a commonality of interest with all of the Company's shareholders
in working to improve the Company's performance and results. Moreover, it should
be noted that awards have been made under the 2001 Plan to a number of key
employees, not just the two most senior officers. Specifically, stock options
were granted under the 2001 Plan to five other executive officers and three
independent directors of the Company, and stock performance units (phantom
stock) in respect of 10,500 shares were awarded to 18 management employees of
the Company who were not executive officers and to one executive officer. The
stock performance units had a base price of $19.60 and were exercisable only for
cash.
Senior Officer Compensation. With respect to the Plaintiff's allegation
that the Defendant's salaries are sufficient to provide incentive without any
additional compensation, the Compensation Report describes the methodology
employed by the Company's independent directors in determining the compensation
for the Company's two top officers. The independent directors determined, based
in part on information concerning compensation paid by competing companies to
their senior officers, that the combined salaries of the Company's Chief
Executive Officer and Chief Operating Officer, taking into account the increases
granted in 2001, are appropriate for these two officers in light of their
contributions and responsibilities to the Company. In addition, it should be
noted that the Company's Chief Executive Officer and Chief Operating Officer
each personally guarantees indebtedness for current charges incurred by the
Company in the ordinary course of business to Wakefern Food Corporation
("Wakefern"), the retailer-owned food distribution cooperative of which the
Company is a shareholder member. As of November 3, 2001, the Company was
indebted to Wakefern for such charges in the amount of approximately $36
million. The Company believes that this arrangement is unique to it as a member
of the Wakefern cooperative and would not be in effect for other publicly-traded
companies with which the Company competes. The independent directors of the
Company believe that it is appropriate and in the best interests of the Company
to recognize the potentially significant risk of these guarantees to these two
senior officers in evaluating their total compensation.
2001 Stock Option Plan Amendment. In light of the number of awards of
stock options and performance units granted under the 2001 Plan during fiscal
2001, the Board of Directors has determined that it is prudent and necessary to
replenish the shares available for the future grant of awards under the 2001
Plan for the reasons set forth in the Proxy Statement. Because this proposed
amendment will not be effective unless approved by the shareholders at the
Annual Meeting, it will be the shareholders of the Company, and not the Board of
Directors, who will control whether these additional equity incentives will be
made available to the Stock Option Committee to carry out the intent and purpose
of the 2001 Plan. See the section entitled "PROPOSAL 3: APPROVAL OF AMENDMENT TO
THE 2001 STOCK INCENTIVE PLAN" in the Proxy Statement.
Classified Board Amendment. As stated in the Proxy Statement, the Board of
Directors believes that the implementation of a classified board structure "is
advantageous to the Company and its shareholders" and will enhance "the
likelihood of continuity and stability in the leadership and the policies
formulated by the Board of Directors". The Board of Directors has determined
that the benefits of the classified board structure outweigh any disadvantages
that may result from the fact that potential acquirers of the Company may be
discouraged from launching hostile takeover bids. The Board of Directors is not
recommending this amendment to the Certificate of Incorporation as a result of
any such hostile activity, nor is the Board of Directors aware of any such
hostile activity. As is the case with the proposed amendment to the 2001 Plan,
the proposed amendment to the Certificate of Incorporation will not be effective
unless approved by the shareholders at the Annual Meeting, and it is therefore
the shareholders, and not the Board of Directors, who will control whether a
classified board structure is adopted for the Company. See the section entitled
"PROPOSAL 2: APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO CLASSIFY
THE BOARD OF DIRECTORS" in the Proxy Statement.
The Board of Directors continues to recommend that the shareholders vote
"FOR" the proposal to amend the 2001 Stock Incentive Plan to increase the number
of shares available for awards by 65,000 shares and "FOR" the proposal to amend
the Certificate of Incorporation to classify the Board of Directors into five
classes.
Additional Information
The Proxy Statement states in the section entitled "SHAREHOLDER PROPOSALS"
that a shareholder of the Company who wishes to present a proposal for action at
the Company's 2003 annual meeting of shareholders must submit such proposal to
the Company and such proposal must be received by the Company by November 4,
2002. This date is not correct and, in accordance with Rule 14a-8(e) promulgated
under the Securities Exchange Act of 1934, as amended, this date is December 6,
2002, and the Proxy Statement is hereby amended to so provide.
The Company has retained MacKenzie Partners, Inc. to assist it in
soliciting proxies for the Annual Meeting, for which services the Company will
pay a fee expected not to exceed $15,000, plus out-of-pocket expenses.
* * *
IMPORTANT INFORMATION
If you have already completed a proxy card and returned it to the Board of
Directors, we thank you for your support. However, if you have not already done
so, we urge you to support your Board of Directors and management by signing,
dating and returning the attached proxy card and voting your shares FOR the
Board's nominees, FOR the proposal to amend the Certificate of Incorporation to
classify the Board of Directors, and FOR the proposal to amend the 2001 Plan.
Remember, only your latest dated, properly executed proxy card will count at the
Annual Meeting.
FOODARAMA SUPERMARKETS, INC.
April 19, 2002