SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary information Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive information Statement
GRISTEDE'S SLOAN'S INC.
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(Name of Registrant as Specified In Its Charter)
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.
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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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
[_] Fee paid previously with preliminary materials:
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[_] 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 SLOAN'S, INC.
823 ELEVENTH AVENUE
NEW YORK, NEW YORK 10019-3535
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 12, 1999
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To the Stockholders:
The Annual Meeting of Stockholders of Gristede's Sloan's, Inc. (hereinafter
called the "Company") will be held at The New York Hilton and Towers Hotel, 1335
Avenue of the Americas, New York, New York 10019, on Thursday, the 12th day of
August, 1999 at 10:00 A.M., to consider and vote on the following matters
described in this Notice and Information Statement:
1. To elect two Class 1 directors to serve for a term expiring at the 2002
Annual Meeting of Stockholders.
2. To approve an amendment to the 1998 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance upon exercise of options
granted under the Plan from 500,000 to 1,500,000.
3. To approve an amendment to the Certificate of Incorporation of the
Company to change the name of the Company to Gristede's Foods, Inc.
4. To transact such other business as may properly come before the meeting
or adjournments thereof.
The Board of Directors has fixed the close of business on July 12, 1999 as
the record date for determining stockholders entitled to notice of, and to vote
at, the meeting.
By Order of the Board of Directors
Michael Seltzer
Vice President and Secretary
New York, New York
July 16, 1999
GRISTEDE'S SLOAN'S, INC.
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INFORMATION STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
AUGUST 12, 1999
This information statement is being furnished to stockholders beginning on
or about July 16, 1999 in connection with the Annual Meeting of Stockholders of
Gristede's Sloan's, Inc. (the "Company") to be held on August 12, 1999 or any
adjournments thereof, for the purposes set forth in the foregoing Notice of
Annual Meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. However, you may vote your shares of Common Stock at the Annual Meeting.
OUTSTANDING SHARES AND
VOTING RIGHTS
The Board of Directors has set the close of business on July 12, 1999 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting of Stockholders (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 of securities other than Common Stock will be entitled to
vote at the meeting. There are no cumulative voting rights.
As of July 1, 1999, John A. Catsimatidis, the Chairman of the Board and
Chief Executive Officer of the Company, owned of record, directly or indirectly,
an aggregate of 17,841,950 shares of Common Stock, constituting approximately
90.9% 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, for approval of the amendment to
the Company's 1998 Stock Option Plan (the "1998 Option Plan") and for approval
of the amendment to the Company's Certificate of Incorporation to change the
name of the Company to Gristede's Foods, Inc. Consequently, such elections and
approvals 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 July 1, 1999 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; and (iii) all
officers and directors of the Company as a group. The address of each person is
c/o Gristede's Sloan's, Inc., 823 Eleventh Avenue, New York, N.Y. 10019-3535.
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 Percent of
Beneficial Owner Shares Class
-------------- ---------- ----------
John Catsimatidis.............................................. 18,366,950(1) 91.1%
Martin Steinberg .............................................. 112,642 *
Dennis Berberich .............................................. 20,000(2) *
Kishore Lall................................................... 15,000 *
Frederick Selby................................................ 13,110(3) *
Martin Bring .................................................. 11,000(3) *
All officers and directors as a group (8 persons).............. 18,554,702(1)(2)(4) 91.9%
(Footnotes on next page)
1
- ----------
* Less than 1%.
(1) Includes an aggregate of 12,456,174 shares held by corporations controlled
by Mr. Catsimatidis, 60,200 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 14,000 shares of Common Stock owned by Mr. Berberich's wife, as to
which shares Mr. Berberich disclaims beneficial ownership.
(3) Includes for each of Messrs. Selby and Bring an aggregate of 11,000 shares
of Common Stock which may be purchased upon the exercise of currently
exercisable stock options.
(4) Includes an aggregate of 563,000 shares of Common Stock which may be
purchased upon the exercise of currently exercisable stock options.
ELECTION OF DIRECTORS
Two Class 1 directors to serve for a term expiring at the 2002 Annual
Meeting shall be elected.
The Class 1 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 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.
2
The names of, and certain information with respect to, each of the persons
nominated for election as the Class 1 directors are as follows:
Director Principal Occupation
Name and Age Since for the Past Five Years
------------ -------- -----------------------
Martin Steinberg, 66.......... 1998 Independent consultant. Mr. Steinberg
also served as a director of the Company
from May 1974 to January 1991.
Kishore Lall, 51.............. 1997 Director of the Company since October
1997; consultant to Red Apple Group,
Inc. from January 1997 to October 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.
OTHER DIRECTORS AND EXECUTIVE OFFICERS
The names of, and certain information with respect to, the two Class 2
directors (whose terms expire at the 2000 Annual Meeting) and the two Class 3
directors (whose terms expire at the 2001 Annual Meeting) are as follows:
Director Principal Occupation
Name and Age Since for the Past Five Years
---------- -------- -----------------------
Class 2
-----
Martin Bring, 56............... 1988 Partner in the law firm of Wolf, Block,
Schorr and Solis-Cohen LLP, New York,
New York and predecessor firm for more
than five years.
Frederick Selby, 61............ 1978 Chairman of Selby Capital Partners
(acquisition and sale of privately owned
firms and divisions of public companies)
for more than five years.
Director Principal Occupation
Name and Age Since for the Past Five Years
---------- -------- -----------------------
Class 3
-------
John A. Catsimatidis, 50....... 1988(1) Chairman of the Board, President and
Chief Executive Officer of the Company
since July 29, 1988; Treasurer of the
Company from July 28, 1988 to March 17,
1998; President and Chief Executive
Officer of Red Apple Group, Inc. (a
private diversified 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.
Dennis E. Berberich, 60....... 1998 Independent consultant. Prior to January
1999, President of Canada Dry Bottling
Company of New York, a privately held
soft drink distributor, for more than
ten years.
- ----------
(1) Mr. Catsimatidis also served as a director of the Company from November 4,
1986 to November 27, 1987.
3
The other executive officers of the Company are Stuart Spivak and Michael
Seltzer. Mr. Spivak, age 62, has been Executive Vice President and Chief
Financial Officer of the Company since March 1998 and was Chief Financial
Officer of various corporations which were acquired by the Company by merger in
November 1997 (the "Food Group") for more than ten years prior thereto. Mr.
Seltzer, age 49, has been Vice President and Secretary of the Company since
March 1998 and was Vice President and Controller of the Food Group for more than
ten years prior thereto.
Meetings of Board of Directors and Committees
The Board of Directors met two times during the fiscal year ended November
29, 1998 ("Fiscal 1998") and acted four times by unanimous written consent of
the directors during Fiscal 1998. All incumbent directors (other than Martin
Bring and Dennis Berberich, each of whom missed one meeting), attended all
meetings.
The Board of Directors has a Compensation Committee, a Stock Option
Committee and an Audit Committee. Frederick Selby, Martin Steinberg and Dennis
Berberich are the members of each of the foregoing committees. The Compensation
Committee and the Stock Option Committee did not meet during Fiscal 1998. The
Audit Committee met once during Fiscal 1998.
The function of the Audit Committee is to periodically review the conduct
and scope of the audit of the Company's financial statements by its independent
certified public accountants, to review the conduct of management of the Company
in connection with such audit, and at such time as in the opinion of the Audit
Committee, the scope of the business of the Company shall require it, to
establish an internal audit committee for the Company. The Company does not have
a nominating committee of the Board of Directors or committee performing similar
functions.
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 with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of the common stock. 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 1998, all Section 16(a) filings applicable
to its directors, officers and more than 10 percent beneficial owners were
timely filed.
4
EXECUTIVE COMPENSATION
The following table sets forth for Fiscal 1998, the nine month transition
period from March 3, 1997 to November 30, 1997 (the "Transition Period") and the
fiscal year ended March 2, 1997 certain information concerning the compensation
paid or accrued to the Chief Executive Officer of the Company. During these
periods, there were no persons serving as executive officers of the Company
whose total salary and bonus exceeded $100,000.
Long-term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------- ------------------ -------
Other All
annual Restricted other
Name and compen- stock Options LTIP compen-
principal Salary Bonus sation award(s) /Sar's payouts sation
position Year ($) ($) ($) ($) ($) (#) ($)
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John Catsimatidis, Chairman 1998 $100,000 $-- $-- $-- -- $-- $--
of the Board, President
and Chief Executive
Officer
Transition Period -- -- -- -- -- -- --
from March 3, 1997 to
November 30, 1997
1997 -- -- -- -- -- -- --
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Stock Options
No stock options were granted to or exercised by Mr. Catsimatidis during
Fiscal 1998. The following table sets forth certain information with respect to
options to purchase Common Stock held by John Catsimatidis on November 29, 1998.
Number of Unexercised Value of Unexercised
Options Held on in-the-Money Options on
November 29, 1998 November 29, 1998
------------------ ------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
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John Catsimatidis....................... 525,000/0 0/0
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The closing sales price of the Common Stock on the American Stock Exchange
on November 25, 1998 (the last trading day before November 29, 1998) was $2.31.
On November 29, 1998 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.
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. On April 15, 1999, subject to stockholder approval of the
amendment to the 1998 Option Plan at this Annual Meeting, certain non-officer
directors of the Company were granted options to purchase an aggregate of
100,000 shares at an exercise price of $1.875 per share. Such options shall
become exercisable in equal installments on the first, second and third
anniversaries of the date of grant.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has a Compensation Committee of which Frederick
Selby was the only member during Fiscal 1998 (Messrs. Martin Steinberg and
Dennis Berberich were appointed as members on April 15, 1999). Mr. Selby is not
and has never been an employee or officer of the Company. Since the beginning of
Fiscal 1998 Mr. Selby has had no relationship with the Company requiring
disclosure under applicable Commission disclosure rules.
5
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 annual and long-term performance goals, reward
above average corporate performance, 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 on
an absolute basis as well as relative to budget; 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 marketplace
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 is subject to stockholder approval at this Annual Meeting. 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. During the fiscal year ended March 2, 1997
and the period from March 3, 1997 to November 9, 1997, Mr. Catsimatidis received
no compensation from the Company. Since November 10, 1997 Mr.
Catsimatidis has been earning a salary at the rate of $100,000 per year.
6
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 February
28, 1994 to November 27, 1998, 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 511 Index -- Retail Trade -- Food Stores (the
"MG Industry Index"), and assumes an investment of $100 on February 28, 1994 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.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GRISTEDE'S SLOAN'S, INC.,
AMEX MARKET INDEX AND MG GROUP INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
Gristede's AMEX MG Group
Sloan's Inc. Market Index Index
------------ ------------ --------
February 28, 1994 100.00 100.00 100.00
February 24, 1995 65.67 91.73 97.50
March 1, 1996 52.30 111.07 120.76
February 28, 1997 44.18 118.34 156.08
November 28, 1997 32.46 132.64 177.57
November 27, 1998 33.36 131.03 238.61
ASSUMES $100 INVESTED ON FEB. 28, 1994
ASSUMES DIVIDENDS REINVESTED
7
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 three supermarkets owned by corporations 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 or from the managed
supermarkets. During Fiscal 1998 management fee income was $119,000.
On February 6, 1998 the Company purchased substantially all of the assets
and assumed certain of the liabilities of a supermarket located at 1644 York
Avenue, New York, New York owned by a corporation controlled by John
Catsimatidis. The purchase price is to be the value of the supermarket based
upon an appraisal to be conducted by a firm selected by a committee of
independent directors of the Company less the amount of certain liabilities
assumed by the Company. The appraisal will be based on, among other things, a
review of the operating statement of the supermarket for the period from
February 6, 1998 to a date no earlier than January 31, 1999. The purchase price
will be subject to adjustment to the extent that the acquired inventory is
greater or less than the sum of trade payables and liabilities for employee
vacation and sick pay that have been assumed by the Company. The purchase price
will be paid at such time and by such method as shall be recommended by a
committee of the independent directors of the Company and approved by the Board
of Directors of the Company, John Catsimatidis abstaining.
In consideration of accommodations extended to the Company by H.S. Realty
Corp. ("H.S. Realty"), a corporation wholly owned by John Catsimatidis which
enabled the Company to consummate the sale of assets of the Company's Howard H.
Sweet & Son Inc. subsidiary ("Sweet") to Tiffco Jewelry and Chain Crafts, Inc.
("Tiffco"), on January 23, 1990, the Company, among other things, advanced to
H.S. Realty approximately $204,000.
The $204,000 advance was originally to be repayable on the earlier of
January 23, 1991 or five days after the sale by H.S. Realty to Tiffco of certain
real property leased to Tiffco by H.S. Realty after the sale of assets. Since
January 23, 1991, the Board of Directors has extended the repayment date of the
advance on an annual basis, the most recent extension being until January 23,
1999 or five days after the sale by H.S. Realty to Tiffco of the Sweet Property.
Such indebtedness was fully repaid during Fiscal 1998.
Effective as of January 1, 1994, the Company entered into Indemnification
Agreements with each of its then directors and officers. The Company entered
into an Indemnification Agreement with Kishore Lall effective as of October 30,
1997, and also entered into Indemnification Agreements with each of Stuart
Spivak, and Michael Seltzer effective March 17, 1998, Martin Steinberg effective
July 21, 1998 and Dennis Berberich effective August 18, 1998. Said 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.
C & S Acquisition Corp. (formerly, Red Apple Leasing, Inc.,) a corporation
wholly owned by John Catsimatidis, leases equipment to the Company. Such leases
are primarily for store operating equipment. Obligations under capital leases at
November 29, 1998 were $821,305 and require monthly payments of $35,114 through
March 1, 2001. Obligations under operating leases were $41,676 per month during
Fiscal 1998.
Advertising services are provided to the Company by an affiliated company,
MCV Advertising Associates Inc. For Fiscal 1998 the costs incurred were
$1,072,544.
On March 1, 1999, John Catsimatidis issued a limited $1,000,000 guarantee
of the collection of accounts receivable assigned to the Company as a result of
the merger into subsidiaries of the Company on November 10, 1997 of four
corporations directly or indirectly owned by Mr. Catsimatidis (the "Merger"). In
order to cover his contingent liability, Mr. Catsimatidis agreed not to permit
the liabilities to Mr. Catsimatidis and certain of his affiliates which were
assumed by the Company in the Merger to fall below $1,000,000 prior to the
issuance of the Company's audited financial statements for the fiscal year
ending November 28, 1999. Mr. Catsimatidis also agreed not to require the
Company to repay all or any portion of the $4,000,000 in liabilities to Mr.
Catsimatidis or his affiliates which were assumed by the Company in the Merger
until November 30, 2003.
During the period from January 8, 1999 to June 3, 1999 corporations
controlled by Mr. Catsimatidis made non-interest bearing bridge loans to the
Company in the aggregate amount of $5,270,000. The loans are repayable on
demand.
8
By virtue of his ownership of Common 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 Commission.
The Company leases three locations from Red Apple Real Estate, Inc., a
company solely owned by John Catsimatidis. During Fiscal 1998 the Company paid
to Red Apple Real Estate, Inc. $605,373 for rent and real estate taxes under
such leases.
Wolf, Block, Schorr and Solis-Cohen LLP, a law firm in which Martin Bring,
a director of the Company, is a partner, received fees of approximately $219,035
for rendering legal services to the Company during Fiscal 1998.
PROPOSAL TO APPROVE THE
1998 OPTION PLAN
Summary Description of Amendment and 1998 Option Plan
On April 15, 1999, the Board of Directors adopted, subject to stockholder
approval, a resolution to amend the 1998 Option Plan to increase from 500,000 to
1,500,000 the aggregate number of shares of Common Stock which may be issued
upon exercise of all options under the 1998 Option Plan.
The 1998 Option Plan is designed to provide long-term incentive benefits by
the grant of stock options to key employees, officers, directors and other
persons who perform services for or on behalf of the Company. An aggregate of
500,000 shares are currently reserved for issuance upon exercise of options
which may be granted under the 1998 Option Plan. Currently there are
approximately 60 persons that are eligible to receive options under the 1998
Option Plan, of which 48 are Company employees, three are executive officers,
four provide services to the Company and five are non-employee directors.
The 1998 Option Plan authorizes the issuance of incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and stock options that do not qualify under that Code
section ("NSOs").
The 1998 Plan provides that it is to be administered by the Board of
Directors or by one or more committees composed solely of two or more
non-employee directors within the meaning of Rule 16b-3 promulgated under the
Exchange Act (the "Committee"). The Board of Directors or the Committee has
authority to administer and interpret the provisions of the 1998 Option Plan; to
determine when and to whom options will be granted; whether such options will be
ISOs or NSOs, and to prescribe the terms and conditions of the options
(including the number of shares of Common Stock subject to each option, the
exercise price of the option, the number of installments, if any, in which the
option may be exercised and the duration of the option), subject to the
provisions of the 1998 Option Plan.
Options granted under the 1998 Option Plan are not transferable other than
by will or the laws of descent and distribution. In the case of an ISO, the
exercise price of each option shall not be less than 100% of the fair market
value of the underlying Common Stock on the date the ISO is granted.
If the holder of an ISO ceases to be employed by the Company for any reason
other than such person's death or permanent disability, the ISO will immediately
become void upon such termination; provided, however, that the option may be
exercised within three months after the date the holder ceases to be employed,
but only to the extent the option was exercisable on the date of such cessation
of employment. Special provisions relating to the termination of the option
apply in the case of death or permanent disability of the holder of an ISO.
Termination of employment with the Company by the holder of an NSO (including as
a result of death or permanent disability) will have the effect specified in the
individual option agreement as determined by the Board of Directors or the
Committee.
The purchase price for options granted under the 1998 Option Plan must be
paid in full by any one or a combination of the following methods: (i) in cash
or by certified or cashier's check payable to the order of the Company, (ii) by
cancellation of indebtedness, (iii) through the delivery of other shares of
Common Stock having an aggregate fair market value equal to the total exercise
price of the option being exercised, (iv) with the approval of the Board of
Directors or the Committee, by a promissory note made by the optionee in favor
of the Company upon the terms and conditions to be determined by the Board of
Directors or the Committee and secured by the shares issuable upon exercise of
such option, (v) through any combination of the foregoing, or (vi) in such other
manner as the Board of Directors or the Committee may specify in order to
facilitate the exercise of options by the holders thereof.
9
The Board of Directors is authorized to suspend, terminate or amend the
1998 Option Plan at any time, provided that, without the consent of the
optionee, no amendment, suspension or termination shall be made that would
impair any rights or obligations of the optionee under any option theretofore
granted under the 1998 Option Plan. If stockholder approval is required pursuant
to Rule 16b-3 or any other rule or regulation under the Exchange Act, no
amendment shall be effective unless approved by the stockholders of the Company
if such amendment shall (i) increase the maximum number of shares which may be
acquired pursuant to options under the 1998 Option Plan, (ii) change the minimum
exercise price of any option which may be granted, (iii) increase the maximum
term of any option which may be granted or (iv) change the designation of
persons eligible to receive options under the 1998 Option Plan.
Federal Income Tax Consequences
Options granted under the 1998 Option Plan that qualify as ISOs under
Section 422 of the Code will be treated as follows:
No tax consequences will result to the optionee or the Company from the
grant of an ISO to, or the exercise of an ISO by, the optionee. Instead, the
optionee will recognize gain or loss when he sells or disposes of the shares
transferred to him upon exercise of the option. For the purposes of determining
such gain or loss, the optionee's basis in such shares will be his option price.
If the date of sale or disposition of such shares is at least two years after
the date of the grant of the ISO and at least one year after the transfer of the
shares to him upon exercise of the option, the optionee will be entitled to
long-term capital gain treatment upon the sale or disposition.
The Company generally will not be allowed a deduction with respect to an
ISO. However, if an optionee fails to meet the foregoing holding period
requirements, any gain recognized by the optionee upon sale or disposition of
the shares transferred to him upon exercise of an ISO will be treated in the
year of such sale or disposition as ordinary income, rather than capital gain,
to the extent of the excess, if any, of the fair market value of the shares at
the time of exercise (or, if less, in certain cases the amount realized on such
sale or disposition) over their option price, and in that case the Company will
be allowed a corresponding deduction.
The amount, if any, by which the fair market value of the shares
transferred to the optionee upon the exercise of an ISO exceeds the option price
will constitute an "item of adjustment" that increases the optionee's
"alternative minimum taxable income" subject in certain circumstances to the
"alternative minimum tax." Such item of tax adjustment will increase the
optionee's basis in his stock for purposes of the alternative minimum tax.
Options granted under the 1998 Option Plan which are NSOs will be treated
as follows:
There are no federal income tax consequences to an optionee or to the
Company upon the grant of an NSO under the 1998 Option Plan. Except as described
below, upon exercise of an NSO, the optionee will be treated as having received
ordinary income in an amount equal to the excess of the fair market value of the
Common Stock over the exercise price.
The ordinary income recognized by an optionee with respect to the exercise
of an option is subject to both wage withholding and employment taxes. The
Company will generally be entitled to a deduction for federal income tax
purposes of an amount equal to the ordinary income taxable to the optionee upon
exercise, provided that applicable income tax withholding requirements are
satisfied.
An optionee's tax basis in the Common Stock received on exercise of such
option is equal to the amount of any cash paid on exercise plus the amount of
ordinary income recognized as a result of the receipt of such shares. The
holding period for such Common Stock generally begins on the date of exercise
or, in the case of an officer, director or beneficial owner of more than 10% of
any class of equity securities of the Company, on the earlier of (i) six months
after acquisition, or (ii) the earliest date on which such person may sell such
shares of Common Stock at a profit without being subject to suit under Section
16(b) of the Exchange Act (unless the optionee elects to be taxed as of the date
of exercise).
If an optionee exercises an option by delivering Common Stock held by the
optionee, the optionee will recognize ordinary income (and the Company will be
entitled to an equivalent tax deduction) to the extent that the value of Common
Stock received exceeds the exercise price under the option; however, based upon
rulings issued by the Internal Revenue Service, in general, no gain or loss
should be recognized upon the transfer of such previously acquired Common Stock
to the Company upon exercise of the option. Provided the optionee receives a
separate identifiable stock certificate therefor, the optionee's tax basis in
that number of shares of Common Stock received
10
on such exercise which is equal to the number of shares exchanged therefor will
be equal to his tax basis in the shares of Common Stock surrendered. Common
Stock received by the optionee in excess of the number of previously acquired
shares of Common Stock surrendered upon exercise of the option will have a tax
basis equal to the amount of ordinary income recognized in connection with such
exercise. The holding period for such additional shares will commence on the
date ordinary income is recognized.
On the disposition of Common Stock received upon exercise of an option, the
difference between the amount realized and the tax basis of the Common Stock
will be a long-term or short-term capital gain or loss, depending on whether the
optionee held the Common Stock for the requisite holding period.
New Plan Benefits
The following table sets forth the benefits or amounts that have been
received or allocated to each of the following under the 1998 Option Plan.
Additional benefits or amounts that may be received by or allocated to potential
participants in the 1998 Option Plan are not determinable.
Shares of
Name and Position Dollar Value * Common Stock
----------------- -------------- ------------
John Catsimatidis ............................... 0 0
Chairman of the Board
and Chief Executive Officer
Executive Group ................................. 0 80,000
Non-Executive Director Group .................... 0 100,000
Non-Executive Officer Employee Group ............ 0 617,500
- ----------
* Based on a comparison of the closing sales price of the Common Stock on the
American Stock Exchange on July 7, 1999 ($1.875) and the exercise price for
the options granted to the person or group and assuming the options are
fully vested. On March 17, 1998, options to purchase an aggregate of
500,000 shares of Common Stock were granted under the 1998 Option Plan at
an exercise price of $2.625 per share to certain employees of the Company
and other persons. On April 15, 1999, subject to stockholder approval of
the 1998 Option Plan at this Annual Meeting, options to purchase an
aggregate of 197,500 shares of Common Stock were granted at an exercise
price of $2.625 per share to certain employees and executive officers of
the Company and options to purchase 100,000 shares of Common Stock were
granted at an exercise price of $1.875 per share to certain directors of
the Company.
Recommendation and Requisite Vote
The Board of Directors believes that the 1998 Option Plan has advanced the
interests of the Company by providing equity incentive to motivate and retain
key employees and directors of the Company and by further aligning the interests
of said persons with those of the Company's stockholders. As of July 7, 1999,
all of the 500,000 shares of Common Stock originally reserved under the 1998
Option Plan were subject to outstanding options granted under the 1998 Option
Plan and options to purchase an additional 297,500 shares of Common Stock had
been granted subject to stockholder approval of the amendment to the 1998 Option
Plan to be considered at this Annual Meeting. The Board of Directors believes
that in order for the 1998 Option Plan to continue to effectively achieve its
aforementioned purposes, it is necessary to increase the number of shares of
Common Stock reserved under the 1998 Option Plan.
The affirmative vote of the holders of a majority of shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting is
required to approve the amendment to the 1998 Option Plan to increase the number
of shares reserved under the 1998 Option Plan from 500,000 to 1,500,000.
11
PROPOSAL TO CHANGE
THE COMPANY'S NAME TO GRISTEDE'S FOODS, INC.
The Board of Directors has adopted a resolution to amend the Company's
Certificate of Incorporation in order to change the name of the Company to
Gristede's Foods, Inc. Because 31 of the Company's 41 supermarkets are currently
operated under the tradename "Gristede's," management believes that the proposed
name will be more descriptive of the business to be conducted by the Company
than its present name.
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon at the Annual Meeting (9,818,288 shares
based on 19,636,574 shares outstanding) with each share entitled to one vote, is
required for approval of the proposed amendment to the Certificate of
Incorporation.
The Board of Directors recommends a vote FOR the approval of the proposed
amendment to the Company's Certificate of Incorporation.
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 March 18, 2000.
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.
The Board of Directors knows of no other matters to be brought before this
meeting. The expense of preparing, assembling and mailing this information
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.
The Company will provide to any stockholder of record at the close of
business on July 12, 1999, without charge, upon written request to its
Secretary, Michael Seltzer, a copy of the Company's Annual Report on Form 10-K
for the fiscal year ended November 29, 1998.