10-Q 1 p10q102.txt 10Q 1ST QTR 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly period ended February 2, 2002 Commission file number 1-5745-1 FOODARAMA SUPERMARKETS, INC. ------------------------------------------------- (Exact name of Registrant as specified in its charter) New Jersey 21-0717108 ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 922 Highway 33, Freehold, N.J. 07728 ----------------------------------------- (Address of principal executive offices) Telephone #732-462-4700 --------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. OUTSTANDING AT CLASS March 8, 2002 ------------ --------------- Common Stock 1,073,927 shares $1 par value 1 FOODARAMA SUPERMARKETS, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Consolidated Condensed Balance Sheets February 2, 2002 and November 3, 2001 Unaudited Consolidated Condensed Statements of Operations for the thirteen weeks ended February 2, 2002 and January 27, 2001 Unaudited Consolidated Condensed Statements of Cash Flows for the thirteen weeks ended February 2, 2002 and January 27, 2001 Notes to the Unaudited Consolidated Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Disclosure Concerning Forward-Looking Statements All statements, other than statements of historical fact, included in this Form 10-Q, including without limitation the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations", are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements involve assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Foodarama Supermarkets, Inc. (the "Company", which may be referred to as we, us or our) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements contained in this Form 10-Q. Such potential risks and uncertainties, include without limitation, competitive pressures from other supermarket operators and warehouse club stores, economic conditions in the Company's primary markets, consumer spending patterns, availability of capital, cost of labor, cost of goods sold including increased costs from the Company's cooperative supplier, Wakefern Food Corporation ("Wakefern"), and other risk factors detailed herein and in other of the Company's Securities and Exchange Commission filings. The forward-looking statements are made as of the date of this Form 10-Q and the Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those projected in such forward-looking statements. 2 PART I FINANCIAL INFORMATION FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (in thousands) February 2, November 3, 2002 2001 (Unaudited) (1) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 5,714 $ 4,219 Merchandise inventories 45,626 42,827 Receivables and other current assets 6,762 5,466 Prepaid income taxes 113 -- Related party receivables - Wakefern 4,549 8,970 Related party receivables - other 8 7 -------- -------- 62,772 61,489 -------- -------- Property and equipment: Land 308 308 Buildings and improvements 1,220 1,220 Leasehold improvements 40,853 39,589 Equipment 110,177 103,394 Property under capital leases 69,867 59,909 Construction in progress 2,463 6,787 -------- -------- 224,888 211,207 Less accumulated depreciation and amortization 101,615 98,218 -------- -------- 123,273 112,989 -------- -------- Other assets: Investments in related parties 12,758 12,758 Intangibles 3,048 3,136 Other 2,918 2,550 Related party receivables - Wakefern 1,632 1,593 Related party receivables - other 11 11 -------- -------- 20,367 20,048 -------- -------- $206,412 $194,526 ======== ======== (continued) (1) Derived from the Audited Consolidated Financial Statements for the year ended November 3, 2001. See accompanying notes to the consolidated condensed financial statements. 3 FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (in thousands except share data) February 2, November 3, 2002 2001 (Unaudited) (1) ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 5,869 $ 5,390 Current portion of long-term debt, related party 831 902 Current portion of obligations under capital leases 1,033 899 Current income taxes payable - 704 Deferred income taxes 1,079 1,079 Accounts payable: Related party-Wakefern 40,123 35,988 Others 8,073 8,780 Accrued expenses 12,716 14,654 --------- --------- 69,724 68,396 ---------- ---------- Long-term debt 19,359 19,294 Long-term debt, related party 1,129 1,310 Obligations under capital leases 64,475 54,949 Deferred income taxes 1,401 1,201 Other long-term liabilities 10,913 10,883 ---------- ---------- 97,277 87,637 ---------- ---------- Shareholders' equity: Common stock, $1.00 par; authorized 2,500,000 shares; issued 1,621,767 shares; outstanding 1,077,810 shares February 2, 2002; 1,088,220 shares November 3, 2001 1,622 1,622 Capital in excess of par 4,168 4,168 Deferred Compensation (1,603) (1,696) Retained earnings 45,283 44,016 Accumulated other comprehensive income: Minimum pension liability (1,920) (1,920) ---------- ---------- 47,550 46,190 Less 543,957 shares February 2, 2002; 533,547 shares November 3, 2001, held in treasury, at cost 8,139 7,697 ---------- ---------- 39,411 38,493 ---------- ---------- $ 206,412 $ 194,526 ========== ========== (1) Derived from the Audited Consolidated Financial Statements for the year ended November 3, 2001. See accompanying notes to the consolidated condensed financial statements. 4 FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations - Unaudited (in thousands - except share data) 13 Weeks Ended ---------------------------- February 2, January 27, 2002 2001 ------------- ------------- Sales $ 252,027 $ 238,594 Cost of goods sold 188,635 180,765 ----------- ----------- Gross profit 63,392 57,829 Selling, general and administrative expenses 59,412 53,877 ----------- ----------- Earnings from operations 3,980 3,952 ----------- ----------- Other income (expense): Interest expense (1,907) (2,083) Interest income 40 79 ------------ ----------- (1,867) (2,004) ------------ ----------- Earnings before income tax provision 2,113 1,948 Income tax provision (846) (780) ----------- ----------- Net income $ 1,267 $ 1,168 =========== =========== Per share information: Net income per common share: Basic $ 1.17 $ 1.05 =========== =========== Diluted $ 1.12 $ 1.05 =========== =========== Weighted average shares outstanding: Basic 1,079,675 1,117,290 =========== =========== Diluted 1,133,528 1,117,290 =========== =========== Dividends per common share -0- -0- =========== =========== See accompanying notes to the consolidated condensed financial statements. 5 FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows - Unaudited (in thousands) 13 Weeks Ended ------------------------------- February 2, January 27, 2002 2001 ---------------------------------- Cash flows from operating activities: Net income $ 1,267 $ 1,168 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,405 3,056 Amortization, intangibles 88 88 Amortization, deferred financing costs 75 64 Amortization, deferred rent escalation (58) (15) Provision to value inventory at LIFO 100 142 Deferred income taxes 200 182 Amortization of deferred compensation 81 - (Increase) decrease in Merchandise inventories (2,899) (999) Receivables and other current assets (1,296) (516) Prepaid income taxes (113) 398 Other assets (443) 213 Related party receivables-Wakefern 4,382 3,143 Increase (decrease) in Accounts payable 3,428 5,418 Income taxes payable (704) 181 Other liabilities (1,838) (695) ---------- -------- 5,675 11,828 ---------- -------- Cash flows from investing activities: Cash paid for the purchase of property and equipment (3,470) (1,284) Cash paid for construction in progress (261) (106) Increase in related party receivables-other (1) (43) ----------- -------- (3,732) (1,433) ----------- -------- Cash flows from financing activities: Proceeds from issuance of debt 4,000 - Principal payments under long-term debt (3,456) (4,318) Principal payments under capital lease obligations (298) (157) Principal payments under long-term debt, related party (252) (214) Repurchase of common stock (442) - ---------- -------- (448) (4,689) ---------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS 1,495 5,706 CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 4,219 3,977 ---------- -------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 5,714 $ 9,683 ========== ======== See accompanying notes to the consolidated condensed financial statements. 6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 Basis of Presentation The unaudited Consolidated Condensed Financial Statements as of or for the period ending February 2, 2002, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and rule 10-01. The balance sheet at November 3, 2001 has been taken from the audited financial statements at that date. In the opinion of the management of the Company, all adjustments (consisting only of normal recurring accruals) which are considered necessary for a fair presentation of the results of operations for the period have been made. Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The reader is referred to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended November 3, 2001. At both February 2, 2002 and November 3, 2001, approximately 83% of merchandise inventories are valued by the Last-In-First-Out ("LIFO") method of inventory valuation while the balance of inventories are valued by the First-In-First-Out ("FIFO") method. If the FIFO method had been used for the entire inventory, inventories would have been $1,723,000 and $1,623,000 higher than reported at February 2, 2002 and November 3, 2001, respectively. Certain reclassifications have been made to prior year financial statements in order to conform to the current year presentation. These results are not necessarily indicative of the results for the entire fiscal year. Note 2 Adoption of New Accounting Standards Accounting for the Impairment or Disposal of Long-Lived Assets Effective November 4, 2001 the Company adopted Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 requires, among other things, the application of one accounting model for long-lived assets that are impaired or to be disposed of by sale. There was no significant impact from the adopting of SFAS 144 in the quarter ended February 2, 2002. Accounting for Goodwill and Other Intangible Assets In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Accounting for Goodwill and Other Intangible Assets" which is effective for fiscal years beginning after December 15, 2001. SFAS 142 discontinues the practice of amortizing goodwill and indefinite lived intangible assets and initiates an annual review for impairment. Impairment would be examined more frequently if certain indicators are encountered. Intangible assets with a determinable useful life will continue to be amortized over that period. The Company is currently assessing, but has 7 not yet determined, the impact of SFAS 142 on its financial position and results of operations. The Company plans to adopt SFAS 142 in the first quarter of fiscal year 2003. Part I - Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition and Liquidity The Company is a party to a Second Amended and Restated Revolving Credit and Term Loan Agreement (the "Credit Agreement") with three financial institutions. The Credit Agreement is secured by substantially all of the Company's assets and provided for a total commitment of up to $58,000,000, including a revolving credit facility (the "Revolving Note") of up to $28,000,000, a term loan ("the Term Loan") in the amount of $10,000,000 and a capital expenditures facility (the "Capex Facility") of up to $20,000,000. As of January 30, 2002, the Company and its lenders amended the Credit Agreement to increase the number of shares of common stock which the Company could repurchase from related parties from 25,000 shares to 35,000 shares. Other terms and conditions of the Credit Agreement previously reported upon by the Company have not been modified. As of February 2, 2002 the Company owed $6,000,000 on the Term Loan and $11,306,772 under the Capex Facility. The Term Loan is to be paid in quarterly principal payments of $500,000 through December 31, 2004. The revolving credit facility also matures December 31, 2004 and the Capex Facility provides for the payment of interest only on its outstanding balance, an unused facility fee of .50% for the first 30 months of this loan and fixed quarterly principal payments thereafter based on a seven year amortization schedule with a balloon payment due December 31, 2004. Interest rates float on the revolving credit facility, Term Loan and Capex Facility at the Base Rate (defined below) plus .50%, .75% and .75%, respectively. The Base Rate is the rate which is the greater of (i) the bank prime loan rate as published by the Board of Governors of the Federal Reserve System, or (ii) the Federal Funds rate, plus .50%. Additionally, the Company has the ability to use the London Interbank Offered Rate ("LIBOR") plus 2.50% to determine the interest rate on the revolving credit facility and LIBOR plus 2.75% to determine the interest rate on the Term Loan and Capex Facility. The Credit Agreement contains certain affirmative and negative covenants which, among other matters, will (i) restrict capital expenditures and the amount ofadditional indebtedness that the Company may incur, (ii) require the maintenance of certain levels of earnings before interest, taxes, depreciation and amortization less rent payments for capitalized lease locations and changes in the LIFO reserve ("Adjusted EBITDA") and (iii) require debt service coverage and leverage ratios to be maintained. The Company's compliance with the major financial covenants under the Credit Agreement was as follows as of February 2, 2002: Actual Financial Credit (As defined in the Covenant Agreement Credit Agreement) --------- --------- --------------------- Adjusted EBITDA (1) Greater than $16,000,000 $ 22,012,000 Leverage Ratio (1) Less than 3.2 to 1.00 1.24 to 1.00 Debt Service Coverage Ratio Greater than 1.00 to 1.00 1.84 to 1.00 Adjusted Capex (2) Less than $5,600,000 (3) $ 1,126,000 (4) Store Project Capex Less than $4,500,000 (3) $ 2,605,000 (4) 8 (1) Excludes obligations under capitalized leases, interest expense and depreciation expense attributable to capitalized leases and changes in the LIFO reserve. (2) Adjusted Capex is all capital expenditures other than New/Replacement Store Project Capex. (3) Represents limitations on capital expenditures for fiscal 2002. (4) Represents capital expenditures for the quarter ended February 2, 2002. No cash dividends have been paid on the Common Stock since 1979, and the Company has no present intentions or ability to pay any dividends in the near future on its Common Stock. The Credit Agreement does not permit the payment of any cash dividends on our Common Stock. Working Capital At February 2, 2002, the Company had a working capital deficiency of $6,952,000 compared to deficiencies of $6,907,000 at November 3, 2001 and $2,257,000 at January 27, 2001. Since the end of fiscal 2001 cash and cash equivalents improved as the result of timing differences in cash deposits; increases in inventory as the result of the inventory for the new Middletown store and promotional buy-ins; related party receivables from Wakefern decreased due to the collection of the fiscal 2001 patronage dividend receivable; and related party accounts payable to Wakefern increased as the result of increased sales, the inventory for the new Middletown store and the deferral of payment for Wakefern promotional programs. The Company normally requires small amounts of working capital since inventory is generally sold at approximately the same time that payments to Wakefern and other suppliers are due and most sales are for cash or cash equivalents. Working capital ratios were as follows: February 2, 2002 .90 to 1.0 November 3, 2001 .90 to 1.0 January 27, 2000 .97 to 1.0 Cash flows (in millions) were as follows: Thirteen Weeks Ended 2/2/02 1/27/01 ------ ------- Operating activities... $ 5.7 $ 11.8 Investing activities... (3.7) (1.4) Financing activities... ( .5) (4.7) ------ ----- Totals $ 1.5 $ 5.7 ====== ====== The Company had $22,100,000 of available credit, at February 2, 2002, under its revolving credit facility. The amounts available under the Credit Agreement will adequately meet our operating needs, scheduled capital expenditures and debt service for fiscal 2002. For the 13 weeks ended February 2, 2002 depreciation was $3,405,000 while capital expenditures totaled $3,731,000, compared to $3,056,000 and $1,390,000, respectively, in the prior year period. The increase in depreciation was the result of the purchase of equipment and leasehold improvements for the three locations remodeled in fiscal 2001, the new location opened in Middletown, New 9 Jersey in November 2001, as well as one additional capitalized real estate lease. The increase in capital expenditures was due to the acquisition of equipment and leasehold improvements for the location opened in the first quarter of fiscal 2002 with no comparable expenditures in fiscal 2001. During the quarter ended February 2, 2002, the Company repurchased a total of 10,410 shares of Common Stock under the stock repurchase program announced on June 8, 2001. 9,310 of these shares were purchased in privately negotiated transactions. $441,903, or an average of $42.45 per share, was expended for the purchase of the 10,410 shares. Since the announcement of the stock repurchase program, the Company has repurchased 43,363 shares for $1,650,624 or an average of $38.07 per share. Results of Operations (13 weeks ended February 2, 2002 compared to 13 weeks ended January 27, 2001) Sales: Sales for the current period totaled $252.0 million as compared to $238.6 million in the prior year period. Same store sales from the twenty one stores in operation in both periods increased 3.6%. Sales for the current quarter included the operations of the new location opened in November 2001 in Middletown, New Jersey which replaced an older, smaller store in the same shopping center. Gross Profit: Gross profit as a percent of sales increased to 25.2% of sales compared to 24.2% in the prior year period. Patronage dividends, applied as a reduction of the cost of merchandise sold, were $1.7 million in the current year period compared to $1.6 million in the prior year period. Gross profit as a percentage of sales increased primarily as a result of improved product mix, a reduction in product loss through improved shrink control and the contribution of the new location. Operating Expenses: Selling, general and administrative expenses as a percent of sales were 23.6% versus 22.6% in the prior year period. The increase in selling, general and administrative expenses as a percent of sales was primarily due to increases in certain expense categories as a percentage of sales. As a percentage of sales, labor and related fringe benefits increased .83%, other store expenses, which included Wakefern support services and debit/credit card fees, increased .07%, supplies increased .05%, depreciation, including depreciation on capitalized leases, increased .07%, administrative expense increased .13% and pre-opening costs increased .08%. These increases were partially offset by a decrease in occupancy expense of .20%. The increase in labor and related fringe benefits was the result of additional personnel for the new Middletown store, increased sales in service intensive departments and contractual increases in fringe benefits. Pre-opening costs were for the new Middletown store opened in November 2001. Interest Expense: Interest expense decreased to $1,907,000 from $2,083,000, while interest income was $40,000 compared to $79,000 for the prior year period. The decrease in interest expense for the current year period was due to a net decrease in 10 average outstanding debt, including capitalized lease obligations, and a decrease in the average interest rate paid on debt. Income Taxes: An income tax rate of 40% has been used in both the current and prior year periods based on the expected effective tax rates. Net Income: Net income was $1,267,000 in the current year period compared to $1,168,000 in the prior year period. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the current period were $7,490,000 as compared to $7,145,000 in the prior year period. Net income per common share on a diluted basis was $1.12 in the current period compared to $1.05 in the prior year period. Per share calculations are based on 1,133,528 shares outstanding in the current year period and 1,117,290 shares outstanding in the prior year period . 11 PART II OTHER INFORMATION Item 5. Other Information As previously reported, another member of Wakefern Food Corporation ("Wakefern"), Big V Supermarkets, Inc. ("Big V"), filed for reorganization under Chapter 11 and indicated its intent to depart from Wakefern. The Company owns a 12.3% interest in Wakefern, which provides purchasing, warehousing and distribution services on a cooperative basis to its shareholder members, all of which are operators of ShopRite supermarkets. Big V, which is similar in sales volume to the Company, was unsuccessful in challenging provisions in its agreements with Wakefern which require that withdrawing members make a payment to Wakefern to make up for the resulting loss of volume to the cooperative. On November 16, 2001 Big V reported that it had entered into a term sheet, and has subsequently entered into definitive agreements, to sell substantially all of its assets to Wakefern. On February 22, 2002 the Bankruptcy Court Judge ruled that a competing offer submitted by a competitor, Stop & Shop, and supported by agreements with several creditor groups, could also be presented to the Court. Following this approval, Pathmark Stores, Inc. reported that it entered into an agreement with Stop & Shop whereby Pathmark agreed to purchase nine Big V stores from Stop & Shop for $71 million. These transactions are subject to bankruptcy court review and approval. It is not possible to predict at this time what effect the reported transactions will have on our Company or Wakefern. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (99) - (a) Letter Amendment to Second Amended and Restated Revolving Credit and Term Loan Agreement (b) Letter Amendment to Second Amended and Restated Revolving Credit and Term Loan Agreement (b) Reports on Form 8-K December 6, 2001 - Foodarama Supermarkets, Inc. issued a press release discussing the potential sale of Big V Supermarkets, Inc., a member of Wakefern Food Corporation - press release dated November 30, 2001 filed as an exhibit 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FOODARAMA SUPERMARKETS, INC. (Registrant) Date: March 15, 2002 /S/ MICHAEL SHAPIRO ----------------------------- (Signature) Michael Shapiro Senior Vice President Chief Financial Officer Date: March 15, 2002 /S/ THOMAS H. FLYNN ---------------------------- (Signature) Thomas H. Flynn Director of Accounting Principal Accounting Officer 13 GMAC BUSINESS CREDIT, LLC 461 FIFTH AVENUE, 21ST FLOOR NEW YORK, NEW YORK 10117 January __, 2002 NEW LINDEN PRICE RITE, INC. SHOP RITE OF READING, INC. SHOP RITE OF MALVERNE, INC. FOODARAMA SUPERMARKETS, INC. 922 Highway 33, Building 6, Suite 1 Freehold, New Jersey 07728 Ladies and Gentlemen: Reference is made to that certain Second Amended and Restated Revolving Credit and Term Loan Agreement dated as of January 7, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "Loan Agreement"), by and among GMAC BUSINESS CREDIT, LLC. ("GMAC"), NEW LINDEN PRICE RITE, INC., a New Jersey corporation ("New Linden"), FOODARAMA SUPERMARKETS, INC., a New Jersey corporation ("Parent") (New Linden and Parent, each a "Borrower" and jointly "Borrowers"), the Guarantors signatory hereto, the lenders set forth on the signature pages hereto (collectively with their respective permitted successors and assigns, each a "Lender" and collectively, "Lenders") and GMAC as agent for Lenders (in such capacity together with any successor thereto in such capacity, the "Agent"). All capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. Subject to Agent's receipt of (i) this letter amendment ("Letter Amendment") duly acknowledged and agreed to by the Borrowers, the Guarantors and the Required Lenders; (ii) a UCC fixture filing to be filed, registered or recorded in order to create, in favor of Agent, a first priority perfected security interest in or lien upon the fixtures located on the 1361 Route 35, Middletown, New Jersey 07748 location ("New Middletown Location") of Borrowers; and (iii) a landlord waiver and consent, satisfactory to Agent, with respect to the New Middletown Location, Borrowers and Agent, on behalf of Lenders, hereby agree as follows: 1. Schedule 5.01(A) of the Loan Agreement is deleted in its entirety and replaced with Schedule 5.01(A) to this Letter Amendment. Borrowers shall make best efforts to deliver to Agent a leasehold mortgage and related documents on the New Middletown Location (in each case, in form and substance satisfactory to Agent) within one (1) year from the execution of this Letter Amendment by the Borrowers and Guarantors. Except as expressly provided herein, the execution, delivery and effectiveness of this Letter Amendment shall not operate as a waiver of any of 14 our rights, powers or remedies, nor constitute a waiver of any provision of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered thereunder or in connection therewith and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. Each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Loan Agreement as amended hereby. This Letter Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same Letter Amendment. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto. Very truly yours, GMAC BUSINESS CREDIT, LLC, as a Lender and as Agent By:___________________________ Its:___________________________ AGREED AND ACCEPTED: NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:______________________ Title: FOODARAMA SUPERMARKETS, INC., as Borrower and as Guarantor By:_________________________ Title: GMAC BUSINESS CREDIT, LLC, as Agent and Lender By: _________________________ Title: 15 JP MORGAN CHASE BANK, (formerly known as THE CHASE MANHATTAN BANK) as Lender By: __________________________ Title: CITIZENS BUSINESS CREDIT COMPANY, as Lender By: __________________________ Title: CONSENTED AND AGREED TO: SHOP RITE OF READING, INC., as Guarantor By: ________________________ Title: SHOP RITE OF MALVERNE, INC., as Guarantor By: __________________________ Title: 16 Schedule 5.01(A) Capital Expenditure Loans Store #628 Location: Middletown *Note: items listed below are not subject to 180 day limitation as detailed in Section 5.01(A)(b). Invoice Invoice Billed Vendor Date Amount Description A & J Fixtures 1077 3/7/99 $30,836 Penthouse and racks A & J Fixtures 19004 12/16/99 $277,526 Penthouse and racks Adelco 42731 3/28/00 $70,100 Condensers Atlantic Food Bars 16141 3/8/00 $7,996 Salad bar Atlantic Food Bars 16439 7/20/00 $46,430 Salad/grain bar Atlantic Food Bars 16179 3/22/00 $17,224 Hen houses, bar Atlantic Food Bars 15572 6/23/99 $29,740 Deposit for bars Beroc, Inc. 5571 6/21/99 $5,250 Cleveland Tilting Kettle Corbo Hotel & Restaurant 41984 1/31/00 $4,000 Bread slicer John Weldon 1 6/26/96 $6,500 Bakers Pride Pizza Oven Liberty Safes of NJ 11906 1/26/99 $2,505 Washington safe & shelf interiors Mosler J013363 5/20/00 $3,758 Safe Mosler J006703 2/29/00 $3,758 Safe Sun Coast Sales & Service 3481 1/1/00 $31,021 Grinder, tenderier, saw Vaporlux 5452 6/18/99 $1,230 Cleaning systems ------------------------------------------------------------------------------ Total Requested $537,874 ------------------------------------------------------------------------------ 17 Schedule 5.01(A) Capital Expenditure Loans Store #524 Location: North Brunswick* *Note: items listed below are not subject to 45 day limitation as detailed in Section 5.01(A)(b). With regard to any items purchased for the North Brunswick location, the 45 day limitation will commence upon installation. Invoice Invoice Billed Vendor Date Amount Description ------ ---- ------ ----------- CMP Refrigeration 2085 9/13/99 $15,762 Meat case Engo Co. 12523 5/21/99 $500 CRC desk Sun Coast 1576 7/30/99 $4,500 Rebuilt patty machine ------------------------------------------------------------------------------ Total Requested $20,762 ------------------------------------------------------------------------------ 18 GMAC BUSINESS CREDIT, LLC 461 FIFTH AVENUE, 21ST FLOOR NEW YORK, NEW YORK 10117 January __, 2002 NEW LINDEN PRICE RITE, INC. SHOP RITE OF READING, INC. SHOP RITE OF MALVERNE, INC. FOODARAMA SUPERMARKETS, INC. 922 Highway 33, Building 6, Suite 1 Freehold, New Jersey 07728 Ladies and Gentlemen: Reference is made to that certain Second Amended and Restated Revolving Credit and Term Loan Agreement dated as of January 7, 2000 (as amended, supplemented, restated or otherwise modified from time to time, the "Loan Agreement"), by and among GMAC BUSINESS CREDIT, LLC. ("GMAC"), NEW LINDEN PRICE RITE, INC., a New Jersey corporation ("New Linden"), FOODARAMA SUPERMARKETS, INC., a New Jersey corporation ("Parent") (New Linden and Parent, each a "Borrower" and jointly "Borrowers"), the Guarantors signatory hereto, the lenders set forth on the signature pages hereto (collectively with their respective permitted successors and assigns, each a "Lender" and collectively, "Lenders") and GMAC as agent for Lenders (in such capacity together with any successor thereto in such capacity, the "Agent"). All capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. Subject to Agent's receipt of this letter amendment ("Letter Amendment") duly acknowledged and agreed to by the Borrowers, the Guarantors and the Required Lenders, Borrowers and Agent, on behalf of Lenders, hereby agree as follows: 1. Subsection (c) of Section 7.04 of the Loan Agreement is hereby amended by deleting the reference to "25,000" and inserting "35,000" in its place and stead. Except as expressly provided herein, the execution, delivery and effectiveness of this Letter Amendment shall not operate as a waiver of any of our rights, powers or remedies, nor constitute a waiver of any provision of the Loan Agreement, or any other documents, instruments or agreements executed and/or delivered thereunder or in connection therewith and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. Each reference in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Loan Agreement as amended hereby. 19 This Letter Amendment may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same Letter Amendment. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto. Very truly yours, GMAC BUSINESS CREDIT, LLC, as a Lender and as Agent By:___________________________ Its:___________________________ AGREED AND ACCEPTED: NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:______________________ Title: FOODARAMA SUPERMARKETS, INC., as Borrower and as Guarantor By:_________________________ Title: GMAC BUSINESS CREDIT, LLC, as Agent and Lender By: _________________________ Title: 20 JP MORGAN CHASE BANK (formerly known as THE CHASE MANHATTAN BANK), as Lender By: __________________________ Title: CITIZENS BUSINESS CREDIT COMPANY, as Lender By: __________________________ Title: CONSENTED AND AGREED TO: SHOP RITE OF READING, INC., as Guarantor By: ________________________ Title: SHOP RITE OF MALVERNE, INC., as Guarantor By: __________________________ Title: 21