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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Gristede's Foods, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
GRISTEDE'S FOODS, INC.
823 ELEVENTH AVENUE
NEW YORK, NEW YORK 10019-3535
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 31, 2003
------------------------
To the Stockholders:
The Annual Meeting of Stockholders of Gristede's Foods, Inc. (hereinafter
called the "Company") will be held at the offices of Anderson, Kill & Olick,
P.C., 1251 Avenue of the Americas, New York, NY 10020, on Friday, the 31st day
of January, 2003 at 11:00 A.M., local time, to consider and vote on the
following matters described in this Notice and Proxy Statement:
1. To elect seven Class 2 directors to serve for a one-year term expiring at
the next Annual Meeting of Stockholders.
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on January 3, 2003,
as the record date for determining stockholders entitled to notice of, and to
vote at, the meeting or any adjournment(s) thereof.
Whether or not you plan to be present at the meeting, you are requested to
complete, sign and return the enclosed proxy so that your shares will be
represented. In the event you decide to attend the meeting, you may, if you so
desire, revoke the proxy and vote the shares in person. Please return your
proxy promptly in the enclosed envelope which requires no postage if mailed
within the United States.
By Order of the Board of Directors
Kishore Lall
Secretary
New York, New York
January 10, 2003
GRISTEDE'S FOODS, INC.
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 31, 2003
This Proxy Statement is furnished to stockholders of Gristede's Foods, Inc.,
a Delaware corporation (the "Company"), in connection with the solicitation of
proxies on behalf of the Board of Directors of the Company to be voted at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be
held at the offices of Anderson, Kill & Olick, P.C., 1251 Avenue of the
Americas, New York, NY 10020 at 11:00 a.m., local time, on Friday, January 31,
2003 or any adjournments thereof, for the purposes set forth in the foregoing
Notice of Annual Meeting and more fully discussed below.
All proxies delivered pursuant to this solicitation are revocable at the
option of the persons executing them by giving written notice to the Secretary
of the Company at any time before such proxies are voted, by delivering a
later dated proxy or by voting in person at the Annual Meeting.
The mailing address of the principal executive offices of the Company is 823
Eleventh Avenue, New York, New York 10019, Attention: Secretary. The
approximate date on which this Proxy Statement and accompanying form of proxy
were first mailed to stockholders of the Company, entitled to notice of, and
to vote at, the Annual Meeting, is January 10, 2003.
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock issued and outstanding is necessary to constitute a
quorum at the meeting. Shares represented at the meeting in person or by proxy
but not voted will nevertheless be counted for purposes of determining the
presence of a quorum. Accordingly, abstentions and broker non-votes (i.e.,
shares as to which a broker or nominee has indicated that it does not have
discretionary authority to vote) on a particular matter, including the
election of directors, will be treated as shares that are present and entitled
to vote for purposes of determining the presence of a quorum but will be
treated as not voted for purposes of determining the decision of stockholders
with respect to such matter. Directors will be elected by a plurality of the
votes cast. Only votes cast for a nominee will be counted, except as set forth
below.
Proxies in the accompanying form which are properly executed, duly returned
to the Company and not revoked will be voted in accordance with the
instructions therein. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, SUCH
PROXIES WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF
DIRECTORS NAMED IN THE PROXY. No matter is expected to be considered at the
meeting other than the proposals referred to in the accompanying Notice of
Annual Meeting, but if any other matters are properly brought before the
meeting for action, it is intended that the persons named in the proxy and
acting thereunder will vote in accordance with their discretion on such
matters. The presence at the meeting of a stockholder who has given a proxy
will not revoke such proxy. However, a proxy may be revoked at any time before
it is voted by written notice to the Company, addressed to Kishore Lall,
Secretary, at the principal offices of the Company or by giving written notice
to the Company at the meeting; however, the revocation of a proxy shall not be
effective until written notice of such revocation has been received by the
Company and such revocation shall not affect a vote on any matter cast prior
to such receipt.
OUTSTANDING SHARES AND
VOTING RIGHTS
The Board of Directors has set the close of business on January 3, 2003 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting. On that date, the Company had outstanding
19,636,574 shares of Common Stock, par value $.02 per share ("Common Stock"),
each of which is entitled to one vote on each matter. No other class
securities other than Common Stock will be entitled to vote at the meeting.
There are no cumulative voting rights.
As of December 27, 2002, John A. Catsimatidis, the Chairman of the Board and
Chief Executive Officer of the Company, owned of record, directly or
indirectly, an aggregate of 18,150,150 shares of Common Stock, constituting
approximately 92.4% of the shares entitled to vote at the Annual Meeting.
Mr. Catsimatidis has informed the Company that he intends to vote all of the
shares owned directly or indirectly by him in favor of each of the Board of
Directors' nominees for directors listed below. Consequently, such elections
are expected to occur.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
Common Stock on December 27, 2002 by: (i) each stockholder known to the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each of the Company's directors and nominees for director; (iii)
each of the executive officers whose name appears in the Summary Compensation
Table on page 10; and (iv) all executive officers and directors of the Company
as a group. The address of each person is c/o Gristede's Foods, Inc., 823
Eleventh Avenue, New York, N.Y. 10019. The Company believes that ownership of
the shares by the persons named below is both of record and beneficial and
such persons have sole voting and investment power with respect to the shares
indicated.
Name and Address of Number of Approximate
Beneficial Owner Shares Percent of Class
----------------- ------ ----------------
John Catsimatidis ............................. 18,675,150(1) 92.1%
Martin Steinberg .............................. 127,642(2) *
Kishore Lall .................................. 70,000(3) *
Martin Bring .................................. 26,000(4) *
Frederick Selby ............................... 13,110(5) *
Edward Salzano ................................ 3,000 *
Andrew Maloney ................................ -0- *
Gary Pokrassa ................................. -0- *
All executive officers and directors as a
group (8 persons)............................ 18,914,902(1)(6) 93.3%
---------------
(1) Includes an aggregate of 12,573,974 shares held by corporations controlled
by Mr. Catsimatidis, 81,900 shares held by Mr. Catsimatidis as a custodian,
2,057 shares held by a profit sharing plan of which Mr. Catsimatidis is a
trustee, 605 shares held by Mr. Catsimatidis as a trustee of individual
retirement accounts and currently exercisable options to purchase an
aggregate of 525,000 shares of Common Stock.
(2) Includes an aggregate of 15,000 shares of Common Stock which may be
purchased upon exercise of currently exercisable stock options.
(3) Includes an aggregate of 55,000 shares of Common Stock which maybe
purchased upon exercise of currently exercisable stock options.
(4) Includes an aggregate of 26,000 shares of Common Stock which may be
purchased upon exercise of currently exercisable stock options.
(5) Includes an aggregate of 11,000 shares of Common Stock which maybe
purchased upon exercise of currently exercisable stock options.
(6) Includes an aggregate of 632,000 shares of Common Stock which may be
purchased upon the exercise of currently exercisable stock options.
ELECTION OF DIRECTORS
Board of Directors
Seven Class 2 directors shall be elected to serve for a one-year term
expiring at the next Annual Meeting and until his successor is elected and
qualified.
The Class 2 directors shall each be elected by the affirmative vote of a
plurality of the votes cast at the Annual Meeting. Directors are elected by a
plurality of the votes cast by the shares entitled to vote in the election
2
at a meeting at which a quorum is present. "Plurality" means that the
individuals who receive the largest number of votes are elected as directors.
Therefore, any shares not voted, whether by withheld authority, broker non-
vote or otherwise, have no effect in the election of directors. The Board of
Directors does not expect that any of the nominees will become unavailable to
serve for any reason. If that should occur before the meeting, another nominee
or nominees may be selected by the Board of Directors.
In accordance with the Company's By-Laws, any stockholder entitled to vote
for the election of directors at a meeting may nominate persons for election
as directors only if written notice of such stockholder's intent to make such
nomination is given, either by personal delivery or by U.S. mail, to the
Secretary of the Company at the main office of the Company not later than (i)
with respect to an election to be held at any annual meeting of stockholders,
20 days in advance of such meeting, and (ii) with respect to an election to be
held at a special meeting of stockholders for the election of directors, the
close of business on the seventh day following the date on which notice of
such meeting is first given to the stockholders. Each notice shall set forth:
(a) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that such
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between such stockholder and each nominee
and any other person or persons (naming such person(s)) pursuant to which the
nomination(s) are to be made by such stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been
required to be included in a proxy statement filed pursuant to the proxy rules
promulgated by the Commission had each nominee been nominated or intended to
be nominated by the Board of Directors; and (e) the consent of each nominee to
serve as a director of the Company if so elected. The Chairman of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing provisions.
Recommendations of the Board of Directors
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR EACH NOMINEE AS
A DIRECTOR TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS AND
UNTIL HIS SUCCESSOR IS ELECTED AND QUALIFIED. PROXIES RECEIVED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY ON THEIR PROXY A
CONTRARY CHOICE.
Nominees And Directors
The names of, and certain information with respect to, each of the persons
nominated for election as the Class 2 directors are as follows:
Director Principal Occupation
Name and Age Since for the Past Five Years
------------- ----- -----------------------
John A. Catsimatidis, 54.......................... 1988(1) Chairman of the Board, President and Chief Executive Officer of
the Company since July 28, 1988; Treasurer of the Company from
July 28, 1988 to March 17, 1998 and since November 15, 1999;
President and Chief Executive Officer of Red Apple Group, Inc.
(holding company) and Chairman of the Board and Chief Executive
Officer and Director of United Refining Company (a refiner and
retailer of petroleum products) for more than five years;
Director of News Communications Inc., a public company whose
stock is traded over-the-counter, since December 4, 1991.
3
Director Principal Occupation
Name and Age Since for the Past Five Years
------------- ----- -----------------------
Kishore Lall, 55.................................. 1997 Executive Vice President -- Finance and Administration and
Secretary of the Company since May 2002; Director of the
Company since October 1997; consultant to Red Apple Group, Inc.
from January 1997 to October 1997; Director of United Refining
Company since 1997; private investor from June 1994 to December
1996; Senior Vice President and Head of Commercial Banking of
ABN AMRO Bank, New York branch from January 1991 until May
1994.
Frederick Selby, 64............................... 1978 Chairman of Selby Capital Partners (acquisition and sale of
privately owned firms and divisions of public companies) for
more than five years; Managing Director and senior officer of
mergers and acquisitions division of Bankers Trust Company;
Senior Vice President of Corporate Finance of B.A.I.I. Banking
(Paris) and Director of Corporate Finance of Legg Mason Wood
Walker prior thereto.
Martin Bring, 60.................................. 1988 Stockholder in the law firm of Anderson Kill & Olick, P.C.,
since February 1, 2002; Partner in the law firm of Wolf, Block,
Schorr and Solis-Cohen LLP and predecessor firm for more than
five years prior thereto; Director of United Refining Company
since 1988.
Martin Steinberg, 69.............................. 1998 Independent consultant. Mr. Steinberg also served as a director
of the Company from May 1974 to January 1991.
Edward P. Salzano, 54.................................. 1999 Executive Vice President and director of Cantisano Foods, Inc.,
a privately held sauce and salsa manufacturing company, for
more than 15 years.
Andrew Maloney, 70..................................... 2002 Counsel to Kramer Levin Naftalis & Frankel LLP since April
1998, and a partner of Brown & Wood, LLP from December 1992
until April 1998; United States Attorney for the Eastern
District of New York from June 1986 until December 1992;
Director of United Refining Company since 1997.
---------------
(1) Mr. Catsimatidis also served as a director of the Company from November 4,
1986 to November 27, 1987.
4
Executive Officers Other Than Nominees and Directors
The names of, and certain information with respect to an executive officer
of the Company who is not a director is as follows:
Principal Occupation
Name and Age for the Past Five Years
------------- -----------------------
Gary Pokrassa, 55................................. Chief Financial Officer of the Company since August 14, 2000;
Chief Financial Officer of Syndata Technologies, Inc. from
February 1997 to July 2000; Vice President -- Finance of
Innovir Laboratories, Inc. from March 1993 to February 1997.
Meetings of Board of Directors and Committees
The Board of Directors met one time during the fiscal year ended December 2,
2001 ("Fiscal 2001") and acted three times by unanimous written consent of the
directors during Fiscal 2001. All incumbent directors attended the meetings.
The Board of Directors has a Compensation Committee and, a Stock Option
Committee. Frederick Selby and Martin Steinberg are the members of both of the
foregoing committees. The Compensation Committee and the Stock Option
Committee did not meet during Fiscal 2001. The Company does not have a
nominating committee of the Board of Directors or committee performing similar
functions.
During Fiscal 2001, the Audit Committee of the Board of Directors was
comprised of three directors: Frederick Selby, Martin Steinberg and Dennis
Berberich. In November, 2002, Edward Salzano was elected as a member of the
Audit Committee to succeed Mr. Berberich who had recently passed away. The
Audit Committee met one time during Fiscal 2001. All of the Audit Committee
members are independent as that term is defined in Section 121(A) of the
listing standards of the American Stock Exchange.
The Audit Committee assists the Board of Directors in fulfilling its
oversight responsibilities by reviewing the Company's consolidated financial
reports, its internal financial and accounting controls, and its auditing,
accounting and financial reporting processes generally. Effective June 14,
2000, the Board of Directors approved and adopted a written Audit Committee
Charter.
In discharging its oversight responsibilities regarding the audit process,
the Audit Committee reviewed and discussed the audited consolidated financial
statements of the Company as of and for the year ended December 2, 2001, with
Company management and BDO Seidman, LLP ("BDO"), the independent auditors. The
Audit Committee received the written disclosures and the letter from BDO
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with BDO any relationships which
might impair that firm's independence from management and the Company and
satisfied itself as to the auditors' independence. The Audit Committee
reviewed and discussed with BDO all communications required by generally
accepted auditing standards, including Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended.
Based upon these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the Company's audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 2, 2001 for filing with the Securities and Exchange
Commission (the "Commission").
/s/ Frederick Selby /s/ Martin Steinberg
5
The foregoing Audit Committee Report shall not be deemed "filed" with the
Commission or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended.
Principal Accounting Firm Fees
The following table sets forth the aggregate fees, including out-of-pocket
expenses, billed to the Company for the fiscal year ended December 2, 2001 by
the Company's principal accountants, BDO Seidman, LLP.
Audit Fees .......................................................... $134,750
Financial Information Systems Design and Implementation Fees ........ $0
All Other Fees ...................................................... $ 21,027(a)
---------------
(a) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountants' independence.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors and officers of the Company and persons
who own more than 10 percent of the Company's Common Stock to file changes in
ownership with the Commission. Directors, officers and more than 10 percent
stockholders are required by the Exchange Act to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during Fiscal 2001, all other Section 16(a) filings
applicable to its directors, officers and more than 10 percent beneficial
owners were timely filed.
6
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 2, 2001,
December 3, 2000 and November 28, 1999, certain information concerning the
compensation paid or accrued to certain executive officers of the Company
(collectively, the "Named Executive Officers"). The Company believes that the
aggregate amount of prerequisites and other personal benefits paid to each of
the Named Executive Officers did not exceed the lesser of (i) 10% of such
officer's total annual salary and bonus or (ii) $50,000. Thus, such amounts
are not reflected in the following table.
SUMMARY COMPENSATION TABLE
Long-term compensation
------------------------------------------
Annual Compensation Awards Payouts
--------------------------- --------------------- -------
Other
annual Restricted All
Name and compen- stock Options/ LTIP other
principal Fiscal Salary Bonus sation award(s) Sar's payouts compen-
position Year ($) ($) ($) ($) (#) ($) sation
------------------------------------------------------------------------------------------------------------------------------
John Catsimatidis, Chairman 2001 $100,000 $-- $-- $-- -- $-- $ --
of the Board, President 2000 101,923 -- -- -- -- -- --
and Chief Executive 1999 100,000 -- -- -- -- -- --
Officer
Gary Pokrassa, 2001 $150,000 -- -- -- -- -- $1,029(2)
Chief Financial Officer(1) 2000 46,154 -- -- -- -- -- 328(2)
1999 -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
---------------
(1) Mr. Pokrassa joined the Company on August 14, 2000 as Chief Financial
Officer.
(2) Represents the personal use of a Company vehicle.
Options Granted in Last Fiscal Year
The following table sets forth certain information concerning options
granted during Fiscal 2001 to the Named Executive Officers.
Potential
Realizable
Value At Assumed
Market Annual Rates of
Price of Stock
Number of Percentage of Common Price
Securities Total Options Stock on Appreciation for
Underlying Granted to Exercise Date of Option Term
Options Employees in Price Grant Expiration ----------------
Name Granted (#) Fiscal Year ($/Share) ($/Share) Date 5% ($) 10% ($)
-----------------------------------------------------------------------------------------------------------------------------------
John Catsimatidis........................ 0 __ __ __ __ __ __
Gary Pokrassa............................ 0 __ __ __ __ __ __
-----------------------------------------------------------------------------------------------------------------------------------
Aggregate Options Exercised in Last Fiscal Year and Fiscal Year End Option
Values
During Fiscal 2001, no stock options were exercised by any of the Named
Executive Officers. The following table sets forth the number and value of
options outstanding at December 2, 2001 held by the Named Executive Officers.
Number of Unexercised Value of Unexercised
Options Held on in-the-Money Options on
December 2, 2001 December 2, 2001
------------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------------------------------------------------------------
John Catsimatidis ..... 525,000/0 0/0
Gary Pokrassa ......... 0/0 0/0
--------------------------------------------------------------------------------
7
The closing sales price of the Common Stock on the American Stock Exchange
on November 30, 2001 (the last trading day before December 2, 2001) was $1.30.
On December 2, 2001 Mr. Catsimatidis held options to purchase 275,000 shares
of Common Stock at $3.75 per share and options to purchase 250,000 shares at
$2.875 per share. Mr. Pokrassa held no options.
Compensation of Directors
Non-officer directors receive a quarterly stipend of $1,500 and $500 for
each meeting attended. Directors who serve on committees receive $500 for each
meeting attended.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has a Compensation Committee consisting of Frederick
Selby and Martin Steinberg. During Fiscal 2001, none of the directors on the
Compensation Committee were employees or officers of the Company nor had a
relationship with the Company requiring disclosure under applicable Commission
disclosure rules.
8
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Philosophy. The Company's executive compensation philosophy is to provide
competitive levels of compensation, integrate management's pay with the
achievement of the Company's long-term performance goals, recognize individual
initiative and achievement, and assist the Company in attracting and retaining
qualified management. Executive compensation consists of base salary and long
term incentive compensation in the form of stock options. The compensation of
the Company's executive officers is reviewed and approved by the Compensation
Committee, which is composed entirely of non-employee directors. Management
compensation is intended to be set at levels that the Compensation committee
believes is consistent with others in the Company's industry.
In reviewing compensation levels of the Company's key executives, the
Compensation Committee considers, among other items, corporate profitability;
previous years' and competitors' profitability; revenues; and the quality of
the Company's services. No specific weight is accorded to any single factor.
Relative weights differ from executive to executive and change from time to
time as circumstances warrant.
Base Salaries. Base salaries for new management employees are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, and by reference to the competitive market place
for managerial talent. Salary adjustments are determined by evaluating the
performance of the executive and any increased responsibility assumed by the
executive, the competitive marketplace and the performance of the Company.
Equity Ownership. The Company established a stock option plan for its key
employees in October 1994 and in March 1998 the Board of Directors approved
the 1998 Option Plan for key employees, directors and consultants. In April
1999 the Board of Directors approved an amendment to the 1998 Option Plan to
increase the number of shares of stock reserved under the plan from 500,000 to
1,500,000, which amendment was approved by the stockholders of the Company in
August 1999. The Compensation Committee believes that equity ownership by
management is a means of aligning management's and stockholders' interests in
the enhancement of stockholder value.
Compensation of Chief Executive Officer. Mr. Catsimatidis is the principal
stockholder of the Company and from August 1991 to November 10, 1997 served
the Company without receiving a salary. Since November 10, 1997
Mr. Catsimatidis has been earning a salary at the rate of $100,000 per year.
9
COMPARATIVE PERFORMANCE BY THE COMPANY
The Commission requires the Company to present a chart comparing the
cumulative total stockholder return on its Common Stock with the cumulative
total stockholder return of (i) a broad equity market index and (ii) a
published industry index or "peer group." This chart compares for the period
from March 2, 1997 to December 2, 2001, the cumulative total stockholder
return on the Common Stock with (i) the American Stock Exchange Market Value
Index and (ii) the Media General Industry Group 734 Index -- Grocery Stores
(the "MG Industry Index"), and assumes an investment of $100 on March 2, 1997
in each of the Common Stock, the stocks comprising the American Stock Exchange
Market Value Index and the stocks comprising the MG Industry Index. The total
return for each of the Company's Common Stock, the American Stock Exchange
Market Value Index and the MG Industry Index assumes the reinvestment of all
dividends (although no dividends were declared on the Company's common Stock
during such period). Each index is adjusted for additions and deletions of
securities from the index.
[LINE CHART]
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GRISTEDE'S FOODS, INC.,
AMEX MARKET INDEX AND MG GROUP INDEX
2/28/97 11/30/97 11/29/98 11/28/99 12/03/00 12/02/01
GRISTEDE'S FOODS, INC. 100.00 73.47 75.51 77.55 34.71 42.45
GROCERY STORES 100.00 113.77 152.88 123.72 136.70 126.99
AMEX MARKET INDEX 100.00 112.08 110.72 138.34 132.99 129.71
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under a Management Agreement, dated November 10, 1997 (the "Management
Agreement"), Namdor Inc., a subsidiary of the Company, performs consulting and
managerial services for one supermarket owned by a corporation controlled by
John Catsimatidis. In consideration of such services, Namdor Inc. is entitled
to receive on a quarterly basis a cash payment of one and one-quarter (1.25%)
percent of all sales of inventory and merchandise made at, in or from the
managed supermarkets. During Fiscal 2001, fiscal 2000 and fiscal 1999,
management fee income was $47,222, $66,244 and $99,732 respectively.
The Company has entered into indemnification agreements with each of its
directors and officers. These indemnification agreements supplement the
indemnification provisions of the Company's By-laws and the Delaware General
Corporation Law. The stockholders of the Company authorized the Company to
enter into such agreements with each of its directors at the Annual Meeting of
Stockholders held on August 21, 1987. The Board of Directors has authorized
the Company to enter into such agreements with each of its officers.
The Company leases ten locations: a 25,000 square foot warehouse, its office
facilities and eight supermarket locations, from Red Apple Real Estate, Inc.,
a corporation wholly owned by John Catsimatidis. During Fiscal 2001 the
Company paid to Red Apple Real Estate, Inc. $1,610,000 for rent and real
estate taxes under such leases. The lease terms provide for an aggregate of
approximately $2,750,000 per year in lease payments. The leases are triple net
whereby the tenant pays all real estate taxes and maintenance.
Certain of the Company's supermarkets are covered by capital and operating
leases that have been entered into with Red Apple Lease Corporation ("RALC"),
a company wholly owned by John A. Catsimatidis. These leases are primarily for
store operating equipment. The Company's obligations under these leases at
December 2, 2001, December 3, 2000 and November 28, 1999 were $1,409,251,
$63,042 and $459,152, respectively. These leases require monthly payments to
RALC of $76,790 through March 2007. In February 2002, these leases were
amended, which resulted in additional capital lease availability of
$2,750,000. The monthly payments required by these leases have been extended
through March 2007 and together with lease payments under other capital
leases, will constitute the debt service on the new financing.
Certain of the Company's supermarkets are covered by capital leases that
have been entered into with United Acquisition Leasing Corp., a company wholly
owned by John A. Catsimatidis. These leases are primarily for store equipment.
The Company's obligations under these leases at December 2, 2001 was
$1,416,433. These leases require monthly payments to United Acquisition
Leasing Corp. of approximately $32,000 through November 2006.
Until Fiscal 2001, MCV Advertising Associates Inc., a company wholly owned
by John A. Catsimatidis, provided the Company with advertising services.
During fiscal 2000 and fiscal 1999, the Company incurred costs of $1,306,218
and $1,191,957, respectively, for advertising services provided by MCV.
Because the Company now buys its advertising directly, it no longer uses MCV.
Wolf, Block, Schorr and Solis-Cohen LLP, a law firm of which a director of
the Company was formerly a partner, charged the Company $65,906 in fees for
rendering legal services to the Company during Fiscal 2001.
In October 2002, the Company and an affiliate of the Company acquired the
fixtures, leasehold improvements and store leases of three stores from The
Great Atlantic & Pacific Tea Company for a total purchase price of $5,500,000.
The affiliate has leased the acquired fixed assets to the Company. Such stores
had been closed for more than six months prior to the transaction.
By virtue of his ownership of Company Stock and his position as Chairman of
the Board of the Company, John Catsimatidis may be deemed to be a "parent" of
the Company under rules promulgated by the Securities and Exchange Commission.
Amounts due to an affiliate, United Acquisition Corp., a corporation
indirectly wholly owned by John Catsimatidis, represent liabilities in
connection with the consummation of the 1997 merger of the Company with
certain corporations owned by Mr. Catsimatidis (the "Food Group Acquisition")
and additional advances made by the affiliate since the merger. The affiliate
has agreed not to demand payment of these liabilities in the next fiscal year.
Accordingly, the liability has been classified as noncurrent. As part of post-
closing adjustments in
11
connection with the Food Group Acquisition, approximately $3,600,000 that is
due from certain other affiliates has been offset against the amounts due to
United Acquisition Corp. The net amount due to the affiliate at December 2,
2001 and December 3, 2000 was $15,318,843 and $12,129,031, respectively; of
these amounts $12,800,000 and $9,000,000, respectively, were subordinated to
the Company's banks. The liability presently does not bear interest. However,
the Company's credit facility permits the Company to pay interest on such
subordinated debt provided the Company has positive net income.
An affiliate owes the Company for merchandise shipped from the Company's
subsidiary, City Produce Operating Corp., in the ordinary course of business
and for which payments are made to such subsidiary on a continuous basis, as
well as management fees receivable for administrative and managerial services
performed for the affiliated company. During Fiscal 2001 and fiscal 2000,
merchandise sales to affiliates were $1,792,174 and $636,562, respectively.
This affiliate purchased its merchandise from a third party prior to fiscal
2000.
On February 6, 1998, the Company agreed to purchase substantially all of the
assets and assumed certain of the liabilities of the supermarket located at
1644 York Avenue, New York City, that was owned by a corporation controlled by
John Catsimatidis. On March 1, 2000 the Company and the affiliate determined
to restructure the transaction by rescinding the purchase effective as of
February 6, 1998, and entering into an operating agreement which gives the
Company full control of the supermarket and the right to operate the
supermarket for the account of the Company. The operating agreement terminates
on December 1, 2003, but the term shall be extended for additional one year
periods unless either party shall give notice of termination not later than 90
days prior to the end of the then current term of the agreement. Under the
operating agreement, the Company shall pay to the affiliate $1.00 per annum,
plus such other consideration as may be approved by the Company's directors
(excluding John Catsimatidis). Pursuant to the operating agreement, the
Company or any designee of the Company, also has the option until December 31,
2005 to purchase the supermarket for $2,778,175, which price is the fair
market price of the supermarket established on October 11, 1999 by the
Company's directors (excluding John Catsimatidis).
In May 2000, another affiliate and the Company entered into a similar
operating agreement for a store owned by the affiliate. As consideration, the
affiliate receives the nominal amount of $1 per annum, plus such other
consideration as may be approved by the Company's directors (excluding John
Catsimatidis). The operating agreement presently terminates on May 10, 2003,
but the term shall be extended for additional one year periods unless either
party shall give notice of termination not later than 90 days prior to the end
of the then current term of the agreement. Pursuant to the operating
agreement, the Company, or any designee of the Company, also has the option
until December 31, 2005 to purchase the supermarket for the fair market price
of the supermarket as established by the Company's directors (excluding John
Catsimatidis) using a valuation criterion similar to that issued for valuing
the store at 1644 York Avenue, New York City. It is management's opinion that
the fair market value of this store is approximately $3 million.
The affiliates' intention in entering into these two operating agreements
where the Company enjoys full benefits of ownership for the nominal
consideration of $1 per annum per store was to effect post closing adjustments
in connection with the Food Group Acquisition. If the option to purchase the
supermarkets is exercised, the excess of the purchase price over the net book
value of the assets will be shown as a charge to equity.
In connection with the restructure of the transaction relating to the
supermarket located at 1644 York Avenue, $3,072,000 is included in "Due from
related parties -- other" on the Company's December 3, 2000 balance sheet.
This amount has been paid or offset against amounts due to affiliates during
Fiscal 2001.
12
OTHER MATTERS
Any stockholder intending to submit a proposal for presentation at the
company's next Annual Meeting of Stockholders must submit such proposal to the
Company at its executive offices by September 6, 2003.
A representative of BDO Seidman, LLP is expected to be present at the
meeting and will have the opportunity to make any desired statement and
respond to appropriate questions.
As of the mailing date of this Proxy Statement, the Board of Directors knows
of no other matters to be brought before this meeting. The expense of
preparing, assembling and mailing this Proxy Statement will be borne by the
Company. The Company will reimburse brokerage houses, banks and custodians for
their out-of-pocket expenses in forwarding the Notice of Annual Meeting and
Information Statement and the Company's Annual Report to Stockholders to the
beneficial owners of stock held of record.
A form of proxy is enclosed for your use. Please date, sign and return the
proxy at your earliest convenience in the enclosed envelope which requires no
postage if mailed in the United States.
By Order of the Board of Directors
John Catsimatidis
Chairman and Chief Executive Officer
New York, New York
January 10, 2003
The Company will provide to any stockholder of record at the close of
business on January 3, 2003, without charge, upon written request to its
Secretary, Kishore Lall, a copy of the Company's Annual Report on Form 10-K
for the fiscal year ended December 2, 2001.
13
PROXY
GRISTEDE'S FOODS, INC.
823 ELEVENTH AVENUE
NEW YORK, NEW YORK 10019
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Gristede's Foods, Inc. (the "Company") hereby
designates and appoints John A. Catsimatidis and Kishore Lall, and each of
them, with authority to act without the other, the true and lawful attorneys,
agents and proxies of the undersigned, each with full power of substitution,
to vote all of the shares of common stock, $.02 par value per share, of the
Company that the undersigned would be entitled, if personally present, to vote
at the annual meeting of stockholders of the Company to be held on January 31,
2003 at 11:00 a.m., local time, at the offices of Anderson, Kill & Olick,
P.C., 1251 Avenue of the Americas, New York, New York 10020, or any
adjournments thereof, such proxies being directed to vote as specified below
and in their discretion on any other business that may properly come before
the annual meeting.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE
(Continued, and to be dated and signed, on the other side)
/X/ Please mark your
votes as in this
example.
FOR
all
nominees
(1) Election of listed at WITHHOLD Nominees: Catsimatidis,
seven Class 2 right (except AUTHORITY Kishore Lall,
Directors to as marked to vote Frederick Selby,
serve until the to the for all Martin Bring,
next Annual contrary nominees Martin Steinberg,
Meeting below) listed at Edward P. Salzano,
right John Andrew Maloney
INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.
-----------------------------------------------------------------------------
In their discretion, the proxies are authorized to vote upon 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.
If no direction is made, this proxy will be voted for the election of John
Catsimatidis, Kishore Lall, Frederick Selby, Martin Bring, Martin Steinberg,
Edward P. Salzano, Andrew Maloney as the Class 2 Directors.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE EVEN IF YOU PLAN TO ATTEND THE MEETING.
----------------------------------------- -------------------------
Signature Date
-------------------------------------- ---------------------------------
Signature If Jointly Owned Print Name
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign name by authorized
person.