-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SAeLZ4iiOFdqBfeo/PipkLASUCHbaWu3Gsz0H44oQvmfnCrp/Fl2qohFL3WVb+Jo rc3KqRWHfvurC6pV3l7+xA== 0000037914-96-000006.txt : 19960911 0000037914-96-000006.hdr.sgml : 19960911 ACCESSION NUMBER: 0000037914-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960727 FILED AS OF DATE: 19960910 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOODARAMA SUPERMARKETS INC CENTRAL INDEX KEY: 0000037914 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 210717108 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05745 FILM NUMBER: 96627969 BUSINESS ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 BUSINESS PHONE: 908-462-4700 MAIL ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 10-Q 1 10Q - 3RD QTR 1996 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 July 27, 1996 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 #908-462-4700 (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 September 6, 1996 Common Stock 1,118,150 shares $1 par value FOODARAMA SUPERMARKETS, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Consolidated Balance Sheets July 27, 1996 and October 28, 1995 Unaudited Consolidated Statements of Operations for the thirteen weeks ended July 27, 1996 and July 29, 1995 Unaudited Consolidated Statements of Operations for the thirty nine weeks ended July 27, 1996 and July 29, 1995 Unaudited Consolidated Statements of Cash Flows for the thirty nine weeks ended July 27, 1996 and July 29, 1995 Notes to the unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Certain information included in this report and other Registrant filings (collectively, "SEC filings") under the Securities Act of 1993, as amended, and the Securities Exchange Act of 1934, as amended (as well as information communicated orally or in writing between the dates of such SEC filings) contain or may contain forward-looking information that is (i) based upon assumptions which, if changed, could produce significantly different results; or (ii) subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are matters related to national and local economic conditions, the effect of certain govermental regulations and programs on the Registrant and competitive conditions in the marketplace in which the Registrant operates. See "Management's Discussion and Analysis of Financial Condition and Results of Operation." PART I FINANCIAL INFORMATION FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands) July 27, October 28, 1996 1995 (Unaudited) (1) ASSETS Current assets: Cash and cash equivalents $ 3,768 $ 3,435 Merchandise inventories 30,248 27,669 Receivables and other current assets 3,299 2,916 Related party receivables - Wakefern 4,170 4,804 Related party receivables - other 425 508 Prepaid income taxes 360 - Total current assets 42,270 39,332 Property and equipment: Land 1,650 1,650 Buildings and improvements 1,867 1,867 Leaseholds and leasehold improvements 31,850 30,188 Equipment 51,466 45,679 Property and equipment under capital leases 18,805 14,064 105,638 93,448 Less accumulated depreciation and amortization 48,890 45,296 56,748 48,152 Other assets: Investments in related parties 9,215 8,315 Intangibles 5,570 6,038 Other 3,689 7,198 Related party receivables - Wakefern 1,306 871 Related party receivables - other 1,002 1,078 20,782 23,500 $ 119,800 $110,984 (continued) (1) Derived from the Audited Consolidated Financial Statements for the year ended October 28, 1995. See accompanying notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands - except share data) July 27, October 28, 1996 1995 (Unaudited) (1) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 3,747 $ 7,715 Current portion of long-term debt, related party 50 86 Current portion of obligations under capital leases (87) 303 Current income tax liability - 77 Deferred income tax liability 1,295 1,295 Accounts payable: Related party 23,990 20,239 Others 8,206 5,753 Accrued expenses 7,130 8,315 Total current liabilities 44,331 43,783 Long-term debt 22,299 20,349 Long-term debt, related party 770 - Obligations under capital leases 12,889 7,985 Deferred income taxes 2,716 2,716 Other long-term liabilities 5,724 5,779 Total long-term liabilities 44,398 36,829 Mandatory redeemable preferred stock $12.50 par; authorized 1,000,000 shares; issued 136,000 shares 1,700 1,700 Shareholders' equity: Common stock, $1.00 par; authorized 2,500,000 shares; issued 1,621,627 shares 1,622 1,622 Capital in excess of par 2,351 2,351 Retained earnings 32,826 32,127 Minimum pension liability adjustment (806) (806) 35,993 35,294 Less 503,477 shares, held in treasury, at cost 6,622 6,622 Total shareholders' equity 29,371 28,672 $ 119,800 $ 110,984 (1) Derived from the Audited Consolidated Financial Statements for the year ended October 28, 1995. See accompanying notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Operations - Unaudited (in thousands - except share data) 13 Weeks Ended July 27, July 29, 1996 1995 Sales $ 147,793 $ 147,145 Cost of merchandise sold 110,037 109,985 Gross profit 37,756 37,160 Store operating, general and administrative expenses 36,465 35,511 Income from operations 1,291 1,649 Other (expense) income: Loss on the sale of stores - ( 102) Interest expense (811) ( 982) Interest income 26 172 Income before taxes 506 737 Income tax provision 186 192 Net income $ 320 $ 545 Per Share Information: Net income per common share $ .25 $ .45 Weighted average common shares outstanding 1,118,150 1,118,150 Dividends per common share -0- -0- See accompanying notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Operations - Unaudited (in thousands - except share data) 39 Weeks Ended July 27, July 29, 1996 1995 Sales $ 434,911 $ 447,391 Cost of merchandise sold 325,090 335,701 Gross profit 109,821 111,690 Store operating, general and administrative expenses 105,618 107,896 Income from operations 4,203 3,794 Other (expense) income: Gain on the sale of stores - 468 Interest expense (2,414) (3,516) Interest income 98 198 Income before taxes, extraordinary item and cumulative effect of change in accounting 1,887 944 Income tax provision 697 246 Income before extraordinary item and cumulative effect of change in accounting 1,190 698 Extraordinary item: Early extinguishment of debt (net of taxes of $480) - (1,368) Cumulative effect of change in accounting (net of taxes of $61) - ( 175) Net income (loss) $ 1,190 $ ( 845) (continued) FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Operations - Unaudited (in thousands - except share data) (continued) 39 Weeks Ended July 27, July 29, 1996 1995 Per Share Information: Income before extraordinary item and cumulative effect of change in accounting $ .97 $ .53 Extraordinary item - (1.22) Cumulative effect of change in accounting - ( .16) Net income (loss) per common share $ .97 $ ( .85) Weighted average common shares outstanding 1,118,150 1,118,150 Dividends per common share -0- -0- See accompanying notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows - Unaudited (in thousands) 39 Weeks Ended July 27,1996 July 29,1995 Cash flows from operating activities: Net income (loss) $ 1,190 $ ( 845) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,953 6,489 Amortization, intangibles 468 1,392 Amortization, deferred financing costs 707 637 Amortization, escalation rents 242 430 Amortization, other assets - 96 Gain on sale of property - (468) Changes in assets and liabilities: (Increase) decrease in inventories (2,579) 3,394 (Increase) decrease in receivables and other current assets ( 743) 707 Decrease (increase) in other assets 643 (2,115) Decrease in related party receivables-Wakefern 634 3,971 Decrease in related party receivables-other 83 186 Increase (decrease) in accounts payable 6,204 (4,837) (Decrease) increase in other liabilities (1,559) 683 Net cash provided by operating activities 11,243 9,720 Cash flows from investing activities: Purchase of property and equipment (9,808) ( 993) Net proceeds from sale of property 0 4,764 Net cash (used in) provided by investing activities (9,808) 3,771 Cash flows from financing activities: Principal payments under long-term debt (6,730) (48,156) Principal payments under capital lease obligations ( 227) ( 1,312) Proceeds from issuance of debt 6,346 35,005 Preferred dividends paid ( 491) 0 Net cash used in financing activities (1,102) (14,463) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 333 ( 972) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,435 5,542 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,768 $ 4,570 See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 Basis of Presentation The unaudited Consolidated Financial Statements as of July 27, 1996, included herein, 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 October 28, 1995 has been derived from the audited financial statements at that date. In the opinion of the management of the Registrant, all adjustments (consisting only of normal recurring accruals) which the Registrant considers 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 Registrant's annual report on Form 10-K for the year ended October 28, 1995. 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 Accounting Standards Employee Benefit Plans Effective October 30, 1994, the Registrant adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires the accrual for postemployment benefits provided to former or inactive employees. The effect of this change resulted in a pre tax charge of $236,000 and an after tax charge of $175,000 or $.16 per common share in the quarter ended January 29, 1995. There was no material effect on earnings, in the quarter ended July 27, 1996, from the adoption of SFAS No. 112. Prior to this change, the Registrant charged these amounts to expense on a cash basis. Part I - Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition and Liquidity As of July 26, 1996, the Registrant and its lenders amended the Revolving Credit and Term Loan Agreement ( as amended, the "Agreement") dated February 15, 1995. The Agreement, which is secured by substantially all of the Registrant's assets, is with a consortium of banks and provides for a total commitment of $30,000,000. The Agreement contains certain affirmative and negative covenants which, among other matters will, (i) restrict capital expenditures, (ii) require the maintenance of certain levels of net worth and earnings before interest, taxes, depreciation and amortization, and maintenance of (iii) fixed charge coverage and total liabilities to net worth ratios. The Registrant was in compliance with such covenants through July 27, 1996. The amended Agreement (a) increases the total amount available to the Registrant under the working capital facility ("Revolving Note") portion of the Agreement to $17,500,000 from $15,000,000, subject to the borrowing base limitation of 60% of eligible inventory; (b) increases the Term Loan C portion of the borrowings by $1,825,000 to its original principal amount of $12,500,000; (c) revises the repayment schedule for Term Loan C to provide that the first quarterly payment becomes due on December 31, 1996, subsequent quarterly payments are reduced in amount and a balloon payment of $4,500,000 becomes due on February 15, 1999; (d) amends certain definitions; (e) changes certain borrowing limitations, including a provision which permits secured borrowing of up to $6,536,000 from third party lenders in fiscal 1996; (f) permits capital expenditures in fiscal 1996 and 1997 in a manner consistent with the projected timing of such expenditures; and (g) waives technical non-compliance by the Registrant with certain covenants of the Agreement. Other terms and conditions of the Agreement previously reported upon by the Registrant have not been modified. The Registrant has pursued an asset redeployment program since entering into the Agreement, utilizing the proceeds from the disposition of certain assets to repay indebtedness under the Agreement. The remaining components of the asset redeployment program consist of the sale of real estate partnership interests in a non-supermarket property located in Shrewsbury, New Jersey and a shopping center in West Long Branch, New Jersey in which the Registrant operates a supermarket and the sale/leaseback or mortgaging of buildings owned by the Registrant and located in Linden and Aberdeen, New Jersey. The amendment to the Agreement combined with the asset redeployment plan described above strengthen the Registrant's financial condition by increasing liquidity and providing increased working capital through the Revolving Note. The Registrant's compliance with the major financial covenants under the Agreement was as follows as of July 27, 1996. Actual Financial (As defined in the Covenant Agreement Agreement) Capital Expenditures Less than $8,332,000 $ 6,957,000 Net Worth Greater than $27,500,000 $32,163,000 Fixed Charge Coverage Ratio Greater than .8 to 1.00 1.07 to 1.00 Total Liabilities to Net Worth Ratio Less than 2.70 to 1.00 2.49 to 1.00 EBITDA Greater than $14,800,000 $15,472,000 As of March 29, 1996 the Registrant and Wakefern Food Corporation, the owner of the Registrant's Class A 8% Cumulative Convertible Preferred Stock (the "Preferred Stock"), amended certain provisions of the Preferred Stock to (a) extend the date after which Wakefern shall be entitled to convert the Preferred Stock to Common Stock from March 31, 1996 to March 31, 1997; and (b) defer the 2% increase in the dividend rate effective March 1996 to March 1997. On May 14, 1996 the Registrant paid dividends in arrears on the Preferred Stock of $456,980 as well as a quarterly dividend of $34,000 for the quarter ended April 30, 1996 and on July 31, 1996 paid the current quarterly dividend of $34,000. The Agreement provides that quarterly dividends on the Preferred Stock may be paid through January 31, 1997 and that the Preferred Stock may be redeemed only if the Registrant has met or exceeded its financial performance and debt reduction targets for the year ended November 2, 1996. No cash dividends have been paid on the Common Stock since 1979, and the Registrant has no present intentions or ability to pay any dividends in the near future on its Common Stock. The Agreement does not permit the payment of any cash dividends on the Registrant's Common Stock. Working Capital At July 27, 1996, the Registrant had a working capital deficiency of $2,061,000 compared to a deficiency of $4,451,000 at October 28, 1995 and a deficiency of $9,957,000 at July 29, 1995. The Registrant normally requires small amounts of working capital since inventory is generally sold prior to the time that payments to Wakefern and other suppliers are due. Working capital ratios were as follows: July 27, 1996 0.95 to 1.0 October 28, 1995 0.90 to 1.0 July 29, 1995 0.79 to 1.0 Cash flows (in millions) were as follows: 39 Weeks Ended 7/27/96 7/29/95 Operating activities... $11.2 $ 9.7 Investing activities... (9.8) 3.8 Financing activities... (1.1) (14.5) Totals $ 0.3 $(1.0) The Registrant had $3,218,000 of available credit, at July 27, 1996, under its revolving credit facility and believes that its capital resources are adequate to meet its operating needs, scheduled capital expenditures and its debt service in fiscal 1996. The increase in inventory, leasehold improvements, equipment, property under capital leases, investments in related parties and accounts payable relate primarily to the opening of two new locations in Marlboro and Montgomery, New Jersey in June and July, 1996 respectively. The decrease in other assets was due to the return to the Registrant of $1,230,000 of collateral and the exchange of an additional $2,000,000 of collateral for a letter of credit with the worker's compensation insurance carrier. The decrease in related party receivables-Wakefern was due to the receipt in December 1995 of $3,040,000 for the balance of the patronage dividend due for Wakefern's year ended September 30, 1995 offset by a receivable of $2,093,000 for the patronage dividend for Wakefern's current year. For the 39 weeks ended July 27, 1996 depreciation was $5,953,000 while capital expenditures totaled $9,808,000, compared to $6,489,000 and $993,000 respectively in the prior year period. Results of Operations (13 weeks ended July 27, 1996 compared to 13 weeks ended July 29, 1995) Sales: Same store sales from the eighteen stores in operation in both periods decreased .6% in the current year period versus the prior year period. Increased competitive activity in the Registrant's marketing area, as well as an overlap of the trading area of the new Marlboro location with two existing stores, contributed to this decrease. Sales for the current quarter totaled $147.8 million as compared to $147.1 million of sales in the prior year period. Sales for the current quarter included the operations of the new locations in Marlboro and Montgomery, New Jersey opened June 19, 1996 and July 13, 1996, respectively while the prior year period includes the sales of the two Pennsylvania stores sold in May 1995. Gross Profit: Gross profit on sales increased to 25.5% of sales in the current period compared to 25.3% in the prior year period. Patronage dividends, applied as a reduction of the cost of merchandise sold, were $1.2 million in the current period versus $1.1 million in the prior year period. The increase in gross profit was due to the reduced assessment charged by Wakefern on purchases for new store locations. The exclusion of results of the two Pennsylvania stores, from the prior year results, would not have had any material impact on gross profit percentages when comparing the current period to the prior year period. Operating Expenses: Store operating, general and administrative expenses as a percent of sales were 24.7% versus 24.1% in the prior year period. The increase in selling, general and administrative expenses was due to grand opening expenses for the two new locations, as well as increased promotional activity in the Registrant's marketing area and a decline in income generated from the sale of cardboard due to a drop in the cardboard market. As a percentage of sales, labor and related fringe benefit costs increased .28%, selling expense increased .22% and miscellaneous income declined .21%. These increases were partially offset by decreased supply costs of .15%. Interest Expense: Interest expense decreased to $811,000 from $982,000 while interest income was $26,000 compared to $172,000 for the prior period. The decline in interest expense for the current year period was due to a decrease in the interest rate paid on debt. Income Taxes: An income tax rate of 37% has been used in the current period based on the expected effective tax rate for fiscal 1996, while a rate of 26% was used in the prior year period. Net Income: Net income was $320,000 in the current year period as compared to $545,000 in the prior year period. Net income before taxes, as well as earnings before interest, taxes, depreciation and amortization ("EBITDA") for the thirteen weeks ended July 29, 1995 included a loss on the sale of property of $102,000 ($71,000 after taxes). EBITDA for the current period were $3,744,000 as compared to $5,230,000 in the prior year period. Net income per common share was $.25 in the current period compared to $.45 in the prior year period. Both period calculations are based on 1,118,150 shares outstanding and a provision of $34,000 for preferred stock dividends. Results of Operations (39 weeks ended July 27, 1996 compared to 39 weeks ended July 29, 1995) Sales: Same store sales from the eighteen stores in operation in both periods increased 3.0% in the current year period versus the prior year period. An increase in promotional activities in the current period, as well as improved inventory stocking levels, contributed to this increase. Sales for the stores in operation for the current year thirty nine week period totaled $434.9 million as compared to $447.4 million of sales from the stores operated in the prior year period. Sales for the thirty nine weeks ended July 27, 1996 include the operations of two new locations in Marlboro and Montgomery, New Jersey opened June 19, 1996 and July 13, 1996, respectively. The prior year period includes sales of the two Pennsylvania stores sold in May 1995. Gross profit: Gross profit on sales increased slightly to 25.3% of sales compared to 25.0% in the prior year period. Patronage dividends, applied as a reduction of the cost of merchandise sold, were $3.4 million in both periods. The two new locations did not have a material impact on the current period gross profit percentage. The exclusion of results of the two Pennsylvania stores, from the prior year results, would not have had any material impact on gross profit percentages when comparing the current period to the prior year period. Operating Expenses: Store operating, general and administrative expenses as a percent of sales were 24.3% compared to 24.1% in the prior year period. This increase was the result of grand opening expenses for the two new locations, as well as increased promotional activity in the Registrant's marketing area and a decrease in income generated from the sale of cardboard due to a drop in the cardboard market. As a percentage of sales, labor and related fringe benefit costs increased .05%, selling expense increased .04% and miscellaneous income declined .13%. These increases were partially offset by decreases in other store expenses of .06%. Interest Expense: Interest expense decreased to $2,414,000 from $3,516,000 while interest income was $98,000 compared to $198,000 for the prior period. The decline in interest expense for the current year period was due to a decrease in the average outstanding debt since July 29, 1995, as well as a decrease in the interest rate paid on debt. Income Taxes: An income tax rate of 37% has been used in the current period based on the expected effective tax rate for fiscal 1996, while a rate of 26% was used in the prior year period. Net Income: Net income was $1,190,000 in the current year period. This compares to $698,000 in the prior year period before an extraordinary item and the cumulative effect of a change in accounting and a loss of $845,000 in the prior year period after the extraordinary charge and the cumulative effect of a change in accounting. Net income in the prior year period includes an after tax gain of $351,000 on the sale of property. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the current period were $11,573,000 as compared to $12,838,000 in the prior year period before the gain on the sale of property. Net income per common share was $.97 in the current period compared to $.53 in the prior year period before the extraordinary charge and the cumulative effect of a change in accounting. Both period calculations are based on 1,118,150 shares outstanding and a provision of $102,000 for preferred stock dividends. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit (27) - Financial Data Schedule. Exhibit (99) - Waiver and Amendment of Revolving Credit and Term Loan Agreement - dated as of July 26, 1996. (b) No reports on Form 8-K were required to be filed for the 13 weeks ended July 27, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FOODARAMA SUPERMARKETS, INC. (Registrant) Date: September 10, 1996 /S/ Michael Shapiro (Signature) Michael Shapiro Senior Vice President Chief Financial Officer Date: September 10, 1996 /S/ Joseph C. Troilo (Signature) Joseph C. Troilo Senior Vice President Principal Accounting Officer EXHIBIT 99 WAIVER AND AMENDMENT OF REVOLVING CREDIT AND TERM LOAN AGREEMENT WAIVER AND AMENDMENT OF REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of July 26, 1996 among NEW LINDEN PRICE RITE, INC. ("New Linden"), SHOP RITE OF READING, INC.("Reading" and together with New Linden, each a "Borrower" and collectively, the "Borrowers"), FOODARAMA SUPERMARKETS, INC. (the "Parent"), the Guarantors signatory hereto, the lenders party to the Credit Agreement (as hereinafter defined)(collectively with their respective permitted successors and assigns, the "Lenders"), and FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), as agent for the Lenders (in such capacity together with any successor thereto in such capacity, the "Agent"). RECITALS WHEREAS, the Borrowers, the Guarantors, the Lenders and the Agent have entered into a Revolving Credit and Term Loan Agreement dated as of February 15, 1995, as amended by Amendment dated as of January 26, 1996 and by Letter Agreement dated as of May 10, 1996 (as the same may be further amended, restated, modified and supplemented, the "Credit Agreement"), pursuant to which the Borrowers (i) may borrow up to an amount of $15,000,000 on a revolving loan basis and (ii) have borrowed in an aggregate original principal amount of $23,000,000 on a term loan basis; and WHEREAS, the Borrowers, the Parent and the Guarantors have each requested, and the Agent and the Lenders have agreed, subject to the terms and conditions of this Waiver and Amendment, (a) to waive certain Events of Default in existence under the Credit Agreement arising out of the noncompliances (collectively, the "Noncompliances") with certain of the covenants contained in the Loan Agreement, such noncompliances being more particularly described on Schedule A to this Waiver and Amendment; and (b) to amend the Credit Agreement as hereinafter set forth to, among other things,(i) increase the Total Revolving Credit Commitment from $15,000,000 to $17,500,000; and (ii) reflect the advance of an additional term loan in the principal amount of $1,825,000, thereby increasing the outstanding principal amount of Term Loan C to $12,500,000 as of the date hereof. Terms used but not defined herein shall have the meaning assigned thereto in the Credit Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein, IT IS AGREED as follows: 1. Waiver of Events of Default. The Lenders hereby waive the Events of Default (the "Waived Events of Default") in existence on the date hereof resulting from the Noncompliances, provided, however, that the foregoing waiver shall not apply to any Events of Default other than the Waived Events of Default. 2. Amendment of Credit Agreement. The Credit Agreement shall be and is hereby amended, as of the Effective Date (as hereinafter defined), as follows: a. The preamble to the Credit Agreement shall be amended by deleting the reference to "$15,000,000" in the fifth line thereof, substituting therefor "$17,500,000". b. The definition of "Fixed Charge Coverage Ratio" in Article I of the Credit Agreement shall be amended to add "(other than amounts permitted to be paid by the Parent under clause (iv) of Section 7.04)" at the end of clause (C) thereof before the comma. c. The definition of "Net Worth" in Article I of the Credit Agreement shall be amended to (i) delete the parenthetical at the end of clause (i) thereof, substituting therefor "(which shall in any event exclude (A) amounts permitted to be paid by the Parent under clause (iv) of Section 7.04 and, without duplication, (B) treasury stock)" and (ii) add at the end of clause (ii) thereof, before the word ", less", the following: "and non-cash, non-extraordinary losses occasioned by compliance with Statement of Financial Accounting Standards No. 121, "Impairment of Assets"." d. The definition of "Required Lenders" in Article I of the Credit Agreement shall be amended by deleting such definition in its entirety and by substituting therefor the following: " Required Lenders' shall mean (a) in the event that there are more than two (2) Lenders, at least two (2) or more Lenders (each having a minimum $5,000,000 Commitment) having an aggregate of 51% of the aggregate Commitments of all Lenders and (b) in the event that there are fewer than three (3) Lenders, Lenders having 67% of the aggregate Commitments of all Lenders. For the purposes of this definition of "Required Lenders", the terms "Lender", "Lenders" and "all Lenders" shall exclude all Defaulting Lenders. e. The definition of "Responsible Officer" in Article I of the Credit Agreement shall be amended to add ", executive vice president" in the second line thereof after the words "senior vice president". f. Section 2.01(b)(iii) of the Credit Agreement shall be amended by adding the following parenthetical to the end thereof: "(including the $1,825,000 term loan advance made to the Borrowers on or about July __, 1996)". g. Section 2.04(b) of the Credit Agreement shall be amended by deleting therefrom the Term Note C amortization schedule, substituting therefor the following repayment schedule: Period Principal Installment December 31, 1996 $750,000 March 31, 1997 $750,000 June 30, 1997 $750,000 September 30, 1997 $750,000 December 31, 1997 $1,000,000 March 31, 1998 $1,000,000 June 30, 1998 $1,000,000 September 30, 1998 $1,000,000 December 31, 1998 $1,000,000 February 15, 1999 $4,500,000 h. Section 2.09(d)(ii) of the Credit Agreement shall be amended by adding the words "payments made to Parent or any of its subsidiaries with respect to any accounts receivable or notes receivable in existence on or before February 15, 1995 not created in the ordinary course of business," immediately after the words "arising out of the sale of Inventory in the ordinary course of business,". i. Section 2A.01 of the Credit Agreement shall be amended by deleting the amount "$2,500,000" set forth therein and by substituting therefor the amount "$4,500,000". j. Section 7.01(e) of the Credit Agreement shall be amended by deleting such Section 7.01(e) and by substituting therefor the following: "(e) Liens upon any equipment acquired through the purchase or lease by the Parent or any of its subsidiaries which Liens are created or incurred by the Parent or any of its subsidiaries (x) as a condition to the financing of such acquisition to secure or provide for the payment of any part of the purchase price of, or lease payments on, such equipment or (y) as a condition to the financing of a Capital Expenditure made in cash by the Parent or any of its subsidiaries in order to acquire such equipment, to the extent that such financing is consummated and Lien is granted within forty-five (45) days of the acquisition of such equipment (or, (i) with respect to the aggregate $536,000 in Capital Expenditures made for equipment acquired in October and November of 1995 (the "Point of Sale Capital Expenditures") with respect to the purchase of "point of sale" equipment for use in the Borrower's Edison, NJ store (#573) and Oak Tree Road Store (#513), to the extent such financing (the "Point of Sale Financing") is consummated and Lien is granted by September 15, 1996 and (ii) with respect to the aggregate $6,000,000 in Capital Expenditures made for equipment acquired in June and July of 1996 (the "Montgomery/Marlboro Capital Expenditures") with respect to the acquisition of certain equipment for use in the Borrower's Montgomery, NJ and Marlboro, NJ stores, to the extent such financing (the "Montgomery/Marlboro Equipment Financing") is consummated and Lien granted by November 2, 1996), in each of (x) and (y) above to secure or provide for the payment of any part of the purchase price of, or lease payments on, such equipment or to secure the repayment of such refinancing as described in clause (y) above (but no other amounts and not in excess of the purchase price or lease payments); provided, however, that any such Lien shall not apply to any other property of the Parent or any of its subsidiaries; and provided, further, that after giving effect to such purchase, lease or refinancing, compliance is maintained with Section 7.07 hereof;". k. Section 7.03 of the Credit Agreement shall be amended by (i) deleting clause 7.03(i)(b) thereof, substituting therefor "(b) $6,536,000 for fiscal year 1996;" and (ii) deleting clause 7.03(i)(c) thereof, substituting therefor "(c) $3,000,000 in Fiscal Year 1997; and". l. Section 7.07 of the Credit Agreement shall be amended by (i) deleting the sum "$5,900,000" in the table contained therein with respect to the Four Fiscal Quarters ending October, 1996 and by substituting therefor the sum "$6,500,000", (ii) deleting the sum "$8,900,000" in the table contained therein with respect to the Four Fiscal Quarters ending October, 1997 and by substituting therefor the sum "$6,500,000", and (iii) adding the following three full paragraphs therein: "In the event that the "Maximum Amount" of Capital Expenditures and other expenditures and payments (collectively, the "Covered Expenditures") covered by this Section 7.07 exceeds, for any Four consecutive Fiscal Quarter Periods, the actual Covered Expenditures for such Four consecutive Fiscal Quarter Periods (the amount of such excess, the "Covered Expenditures Shortfall"), then the amount of such Covered Expenditures Shortfall (to a maximum amount of $500,000) may be carried over and used during the immediately succeeding Four consecutive Fiscal Quarter Period; provided, however, that the carried over amount of Covered Expenditures Shortfall shall be applied against the last Covered Expenditures with respect to such immediately succeeding Four consecutive Fiscal Quarter Period and shall not be permitted to be carried over to any other Four consecutive Fiscal Quarter Period. The Borrowers have advised the Agent and the Lenders that the Borrowers intend to enter into a mortgage financing transaction (the "Proposed Mortgage Financing"), pursuant to which the Borrowers intend to grant a fee mortgage with respect to certain real property presently comprising the "Linden Commissary" of the Borrowers(collectively, the "Linden Commissary Buildings") . The Borrowers have advised the Agent and the Lenders that the Molotok Building (the "Leased Building") is presently leased by the Borrowers and that such Leased Building will be purchased by the Borrowers in connection with the Proposed Mortgage Financing. At the request of the Borrowers, the Agent and the Lenders hereby agree that the purchase price paid by the Borrowers with respect to the Leased Building (to a maximum of $650,000) concurrently with the Proposed Mortgage Financing shall not constitute "Covered Expenditures" under this Section 7.07. Nothing herein shall constitute the consent or approval by the Agent or any Lender with respect to the Proposed Mortgage Financing or shall affect the treatment of any expenditures made other than concurrently with the Proposed Mortgage Financing. The Parent and its subsidiaries have advised the Agent and the Lenders that they expect to finance (x) all or part of the Montgomery/Marlboro Capital Expenditures (as defined in this Section 7.07) pursuant to the Montgomery/Marlboro Equipment Financing permitted under Section 7.01(e) of this Agreement by no later than November 2, 1996 and (y) all or part of the Point of Sale Capital Expenditures (as defined in this Section 7.07) pursuant to the Point of Sale Financing permitted under Section 7.01(e) of this Agreement by no later than September 15, 1996. The parties hereto agree that the (i) Montgomery/Marlboro Capital Expenditures shall not constitute Covered Expenditures under this Section 7.07 until the earlier of (x) November 2, 1996 and (y) the day of the closing of the Montgomery/Marlboro Equipment Financing (the "Montgomery/Marlboro Determination Date") and (ii) Point of Sale Capital Expenditures shall not constitute Covered Expenditures under this Section 7.07 until the earlier of (x) September 15, 1996 and (y) the day of the closing of the Point of Sale Financing (the "Point of Sale Determination Date"). On and after the Montgomery/Marlboro Determination Date, the Montgomery/Marlboro Capital Expenditures (less the amount financed under the Montgomery/Marlboro Equipment Financing, if any) will constitute Covered Expenditures for the month of July, 1996. If the financial statements and certificates with respect to the fiscal quarter ending July, 1996 as described in Section 7.01(d) of this Agreement have been delivered prior to the Montgomery/Marlboro Determination Date, then the Borrowers shall furnish the Agent with revised certificates described in Section 7.01(d) with respect to the fiscal quarter ending July, 1996 no later than fifteen (15) days after the Montgomery/Marlboro Determination Date. On and after the Point of Sale Determination Date, the Point of Sale Capital Expenditures (less the amount financed under the Point of Sale Financing, if any) will constitute Covered Expenditures for the month of July, 1996. If the financial statements and certificates with respect to the fiscal quarter ending July, 1996 as described in Section 7.01(d) of this Agreement have been delivered prior to the Point of Sale Determination Date, then the Borrowers shall furnish the Agent with revised certificates described in Section 7.01(d) with respect to the fiscal quarter ending July, 1996 no later than fifteen (15) days after the Point of Sale Determination Date." m. Section 7.10(x) of the Credit Agreement shall be amended to add ", but excluding Capitalized Lease Obligations relating to the real property leased by the Parent in Montgomery Township, Somerset County, Skillman, New Jersey" in the first parenthetical thereof after the reference to "GAAP". n. Section 7.17(c) of the Credit Agreement shall be amended by deleting such section in its entirety, substituting therefor the following: "Directly or indirectly modify, amend or alter their certificates or articles of incorporation, preferred stock/certificates of designations or by-laws, other than the amendment dated April 4, 1996 to the certificate of incorporation of Parent and filed with the Secretary of State of New Jersey on May 20, 1996. o. Clause (m) of Article VIII of the Credit Agreement shall be amended to delete the word "first" in the third line thereof, substituting therefor the word "second". p. Section 11.01 of the Credit Agreement shall be amended by (i) deleting from clause (a) thereof the reference to "Rosenman & Colin, 575 Madison Avenue, New York, NY 10022, Attention: Arthur Borden, Esq.", substituting therefor "Giordano, Halleran & Ciesla, P.C., 125 Half Mile Road, Middletown, New Jersey 07748, Attention: John A. Aiello, Esq." and (ii) deleting clause (b) thereof, substituting therefor "(b) if to the Agent, at Fleet Bank, N.A. (formerly known as NatWest Bank N.A.), 175 Water Street, New York, New York 10038, Attention: Mr. Thomas Maiale; and". q. Schedule 2.01(a) and Schedule 2.01(b) of the Credit Agreement shall be deleted in their entireties, substituting therefor the schedules attached hereto as Annex A. r. Schedule A of the Credit Agreement shall be deleted in its entirety and Schedule A-1 hereto shall be substituted therefor. 2. Representations and Warranties. In order to induce the Lenders and the Agent to enter into this Waiver and Amendment, the Borrowers, the Parent and the Guarantors make the following representations and warranties (which representations and warranties shall survive the execution and delivery of this Waiver and Amendment) as of the date hereof and as of the Effective Date: a. The Borrowers, the Parent and the Guarantors restate and repeat (as of February 15, 1995, as of the date of each amendment referred to in the preamble to this Waiver and Amendment, as of the date hereof and as of the Effective Date) each of the representations and warranties contained in the Credit Agreement, with the same effect as though made on and as of such date (except insofar as such representations and warranties relate expressly to an earlier date (it being acknowledged by the parties hereto that references to "as of the date hereof" in the representations and warranties contained in the original Credit Agreement executed on February 15, 1995 shall be deemed to expressly relate to February 15, 1995)). b. Except for the Waived Events of Default, there has occurred and is continuing no Event of Default as defined in the Credit Agreement and there has occurred and is continuing no event which, with the giving of notice or the passage of time or both, would constitute an Event of Default. c. Each of the Borrowers, the Parent and the Guarantors has the corporate power to borrow and/or guaranty, as the case may be, and to execute, deliver and carry out the terms and provisions of this Waiver and Amendment and all instruments and documents delivered by each of them pursuant to this Waiver and Amendment and each of the Borrowers, the Parent and the Guarantors has taken or caused to be taken all necessary corporate action (including, but not limited to, the obtaining of any consent of stockholders required by law or by the Articles or Certificate of Incorporation or By-Laws of the Borrowers, the Parent or any Guarantor) to authorize the execution, delivery and performance of this Waiver and Amendment, the borrowings referred to herein and the execution, delivery and performance of the instruments and documents delivered by it pursuant to this Waiver and Amendment. d. None of the Borrowers, the Parent or any Guarantor is in default under any indenture, mortgage, deed of trust, agreement or other instrument to which it is a party or by which it may be bound. Neither the execution and delivery of this Waiver and Amendment or any of the instruments and documents to be delivered pursuant to this Waiver and Amendment, nor the consummation of the transactions herein and therein contemplated (including the borrowings thereunder), nor compliance with the provisions hereof or thereof will (i) violate any law or regulation, or (ii) result in or cause a violation by the Borrowers, the Parent or any Guarantor, of any order or decree of any court or governmental instrumentality, or (iii) conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, agreement or other instrument to which the Borrowers, the Parent or any Guarantor is a party or may be bound or (iv) result in the creation or imposition of any lien, charge or encumbrance upon any of the property of the Borrowers, the Parent or any Guarantor, or (v) violate any provision of the Articles or Certificate of Incorporation, By-Laws or any preferred stock provisions of the Borrowers, the Parent or any Guarantor. e. No action of, or filing with, any governmental or public body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Waiver and Amendment or any of the instruments or documents to be delivered by the Borrowers, the Parent or any Guarantor pursuant to this Waiver and Amendment, other than the filing of required periodic reporting with the Securities and Exchange Commission. f. This Waiver and Amendment, and all of the other instruments and documents to be delivered by the Borrowers, the Parent and/or the Guarantors pursuant to this Waiver and Amendment, constitutes a legal, valid and binding obligation of each of the Borrowers, the Parent and the Guarantors party thereto, enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency and similar laws and to moratorium laws fromtime to time in effect. 3. Effective Date. This Waiver and Amendment shall become effective upon the satisfaction of each of the following conditions precedent (the date of such satisfaction, the "Effective Date"): a. The Agent and the Lenders shall have received a counterpart of this Waiver and Amendment, duly executed and delivered by each of the Agent, the Borrowers, the Parent, the Guarantors and the Lenders. b. The Agent shall have received a certificate of each of the Borrowers, the Parent and the Guarantors, executed by a Responsible Officer of each of the Borrowers, the Parent and the Guarantors and dated the Effective Date, as to the truthfulness and accuracy of the representations and warranties made in this Waiver and Amendment and as to the absence of Events of Default under the Loan Documents or events which, with the giving of notice or the passage of time or both, would constitute an Event of Default. c. The Agent shall have received the favorable written opinion of counsel for each of the Borrowers, the Parent and each of the Guarantors, in form and substance satisfactory to the Agent and the Lenders dated the Effective Date and addressed to the Agent and Lenders. d. The Agent shall have received evidence of authorization of the Borrowers, the Parent and the Guarantors with respect to the execution, delivery and performance of this Waiver and Amendment and the transactions contemplated hereunder, such evidence to be in form and substance satisfactory to the Agent. e. Each Lender shall have received each of its Revolving Note and Term Note C, amended and restated as of the Effective Date, each duly executed by the Borrowers, payable to its order and otherwise complying with the provisions of Section 2.04 of the Credit Agreement. f. The Borrowers shall have paid a $35,000 amendment fee to the Agent (for application to the Lenders on a pro rata basis), together with the fees and disbursements of counsel to the Agent. g. The Borrowers shall delivered a true, correct and certified copy of the amendment dated April 4, 1996 to the certificate of incorporation of Parent, as filed with the Secretary of State of New Jersey on May 20, 1996. h. The Agent shall have been furnished with any other documents and agreements reasonably requested by Agent and UCC, tax and judgment lien and any other searches requested by the Agent. 4. $1,825,000 Term Loan. The parties hereto agree and confirm that on the Effective Date of this Waiver and Amendment, the Lenders have made an additional term loan advance to the Borrowers in the aggregate amount of $1,825,000 (the "New Term Loan C Advance"). The parties hereto agree and confirm that (i) the New Term Loan C Advance constitutes part of Term Loan C; (ii) giving effect to the New Term Loan C Advance, the outstanding principal balance of Term Loan C is $12,500,000; and (iii) the entire proceeds of the New Term Loan C Advance will be used to reduce outstanding Revolving Loans (but not in permanent reduction of the Revolving Commitment). 5. Counterparts; Telecopy. This Waiver and Amendment may be executed by the parties hereto individually or in any combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same amendment. The delivery of a signed signature page to this Waiver and Amendment by telecopy transmission shall constitute due execution and delivery of this Waiver and Amendment for all purposes. 6. Credit Agreement and All Other Loan Documents in Full Force and Effect; Confirmation of Collateral. Except as amended by this Waiver and Amendment, all of the provisions of the Credit Agreement and all of the provisions of each Loan Document shall remain in full force and effect from and after the date hereof. The undersigned hereby confirm and agree that all collateral security and guaranties granted by any of the undersigned in connection with the Credit Agreement and/or the Loan Documents remains in full force and effect after giving effect to this Waiver and Amendment and that the Revolving Loans and Term Loans (both before and after giving effect to this Waiver and Amendment) benefit fully from all such collateral security and guaranties. 7. References to Credit Agreement. From and after the Effective Date, (a) all references in the Credit Agreement to "this Agreement", "hereof", "herein", or similar terms and (b) all references to the Credit Agreement in each agreement, instrument and other document executed or delivered in connection with the Credit Agreement, shall mean and refer to the Credit Agreement, as amended by this Waiver and Amendment. 8. Further Assurances. The parties hereto agree to execute and deliver any and all further agreements, certificates and other documents reasonably necessary to implement the provisions of this Waiver and Amendment. IN WITNESS WHEREOF, the Agent, the Lenders, the Borrowers, the Parent and the Guarantors have caused this Waiver and Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. FOODARAMA SUPERMARKETS, INC., as Parent and as Guarantor By:______________________________ Name: Title: NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:______________________________ Name: Title: SHOP RITE OF READING, INC., as Borrower and as Guarantor By:______________________________ Name: Title: SHOP RITE OF MALVERNE, INC., as Guarantor By:_______________________________ Name: Title: FLEET BANK, N.A.(formerly known as NatWest Bank N.A.), as Agent By:_______________________________ Name: Title: FLEET BANK, N.A. (formerly known as NatWest Bank N.A.), as Lender By:_______________________________ Name: Title: IBJ SCHRODER BANK & TRUST COMPANY, as Lender By:_______________________________ Name: Title: THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), as Lender By:_______________________________ Name: Title: Annex A SCHEDULE 2.01(a) Revolving Loan Commitments Bank Commitment Percentage Fleet Bank, N.A. (formerly known as NatWest Bank N.A.) $10,011,470 57.2084 IBJ Schroder Bank & Trust Company $3,744,265 21.3958 The Chase Manhattan Bank $3,744,265 21.3958 SCHEDULE 2.01(b) Term Loan Commitments Bank Commitment Percentage Fleet Bank, N.A. (formerly known as NatWest Bank N.A.) $7,151,050 57.2084 IBJ Schroder Bank & Trust Company $2,674,475 21.3958 The Chase Manhattan Bank $2,674,475 21.3958 Schedule A Noncompliances 1. The Borrower's and/or the Parent's failure to timely provide the Agent with copies of Treasury Form 5500 with respect to any Plan, together with certified financial statements (if any) for the Plan and any actuarial statements on Schedule B to such Form 5500. The Borrower and the Parent advise that the foregoing has been delivered as of July 26, 1996; 2. The execution, delivery and filing of the Certificate of Amendment of Certificate of Incorporation of Foodarama Supermarkets, Inc. dated April 4, 1996 filed May 20, 1996; 3. The Breach of clause (m) of Article VIII of the Credit Agreement; and 4. The Borrower's and/or the Parent's failure to disclose the existence of its option to acquire (pursuant to the terms of its lease therefor) the third meat commissary building generally identified as 1911 Pennsylvania Avenue, Linden, New Jersey. The parties hereto agree that the representation and warranty set forth in Section 4.16(a)(vi) of the Credit Agreement is hereby modified to include a reference to the foregoing option. Schedule A-1 to Amendment See Attached Schedule A to Credit Agreement EX-27 2
5 1000 3-MOS NOV-02-1996 APR-28-1996 JUL-27-1996 3,768 0 9,193 (939) 30,248 0 105,638 (48,890) 119,800 44,331 0 1,700 0 1,622 27,749 119,800 147,793 147,793 110,037 0 36,465 0 785 506 186 320 0 0 0 320 .25 .25
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