-----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, RfrQCXhZSDqftz4mWflqB4pn9kES5/WioDRxsejZUMlgG0rMDh2tkYmUueXdrkx2 TRFk5GUHgFhV4mEruyZ+xA== 0000037914-98-000003.txt : 19980202 0000037914-98-000003.hdr.sgml : 19980202 ACCESSION NUMBER: 0000037914-98-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971101 FILED AS OF DATE: 19980130 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-K SEC ACT: SEC FILE NUMBER: 001-05745 FILM NUMBER: 98518143 BUSINESS ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 BUSINESS PHONE: 732-462-4700 MAIL ADDRESS: STREET 1: 922 HIGHWAY 33 STREET 2: BLDG 6 CITY: FREEHOLD STATE: NJ ZIP: 07728 10-K 1 10K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended Commission file number November 1, 1997 1-5745 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.) Building 6, Suite 1, 922 Hwy. 33, Freehold, New Jersey 07728 (Address of principal executive offices) Registrant's telephone number, including area code: (732) 462-4700 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock American Stock Exchange Par Value $1.00 per share Securities registered pursuant to Section 12(g) of the Act: NONE (Title of Class) 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 such filing requirements for the past 90 days. Yes x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $10,601,000. Computation is based on the closing sales price of $23.50 per share of such stock on the American Stock Exchange on January 16, 1998. As of January 16, 1998, the number of shares outstanding of Registrant's Common Stock was 1,117,150. DOCUMENTS INCORPORATED BY REFERENCE Information contained in the 1998 definitive Proxy Statement to be filed with the Commission and to be delivered to security holders in connection with the Annual Meeting is incorporated by reference into this Form 10-K at Part III. PART I Disclosure Concerning Forward-Looking Statements All statements, other than statements of historical fact, included in this Form 10-K, including without limitation the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business", 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 the Registrant to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements contained in this Form 10-K. Such potential risks and uncertainties, include without limitation, competitive pressures from other supermarket operators and warehouse club stores, economic conditions in the Registrant's primary markets, consumer spending patterns, availability of capital, cost of labor, cost of goods sold, year 2000 issues relating to computer applications, and other risk factors detailed herein and in other of the Registrant's Securities and Exchange Commission filings. The forward-looking statements are made as of the date of this Form 10-K and the Registrant 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. Item 1. Business General The Registrant, a New Jersey corporation formed in 1958, operates a chain of twenty supermarkets located in Central New Jersey, as well as two liquor stores and two garden centers, all licensed as ShopRite. The Registrant also operates a central food processing facility to supply its stores with meat, various prepared salads, prepared foods and other items, and a central baking facility which supplies its stores with bakery products. The Registrant is a member of Wakefern Food Corporation ("Wakefern"), the largest retailer owned food cooperative warehouse in the United States and owner of the ShopRite name. The Registrant has incorporated the concept of "World Class" supermarkets into its operations. "World Class" supermarkets are significantly larger than conventional supermarkets and feature fresh fish-on-ice, prime meat service butcher departments, in-store bakeries, international cheese cases, salad bars, snack bars, bulk foods and pharmacies. The Registrant has also introduced many of these features into its conventionally sized supermarkets through extensive renovations; these stores are considered "Mini-World Class" supermarkets. Currently, fourteen of the Registrant's stores are "World Class", four are "Mini-World Class" and two are conventional supermarkets. The following table sets forth certain data relating to the Registrant's business for the periods indicated: Fiscal Year Ended November 1, November 2, October 28, October 29, October 30, 1997 1996* 1995 1994 1993** Average annual sales per store (in millions) $31.8 $31.8 $30.9 $30.2 $27.4 Same store sales increase (decrease) from prior year ......... 1.67% 2.63% 1.62% 0.84% (3.66%) Total store area in square feet (in thousands) 1,080 1,080 954 1,072 1,106 Total store selling area in square feet (thousands) 808 807 710 789 823 Average total square feet per store (in thousands) 54 54 53 54 53 Average square feet of selling area / store(thousands)40 40 39 39 39 Annual sales per square foot of selling area. $788 $789 $784 $766 $698 Number of stores: Stores remodeled (over $500,000) 0 1 0 0 0 New stores opened. 0 1 0 0 0 Replaced/expanded. 0 1 0 0 3 Closed/divested.. 0 0 2 1 6 Number of stores by size (total store area): 30,000-39,000 sq.ft4 4 4 4 5 40,000-49,900 sq.ft4 4 4 4 4 Over 50,000 sq.ft.12 12 10 12 12 Total stores open at period end.. 20 20 18 20 21 * Calculated on a 53 week basis. A like 52 week comparison would be $31.2 million in average sales per store and $781 in annual sales per square foot of selling area. ** A strike by the New Jersey retail clerks union severely impacted sales of fifteen stores. Store Expansion and Remodeling The Registrant believes that significant capital investment is critical to its operating strategy and is continuing its program to upgrade its existing stores, replace outdated locations and open new "World Class" supermarkets within its core market area of Central New Jersey. During fiscal year 1996, one new and one replacement location were opened in Marlboro and Montgomery, New Jersey, respectively. Over the next three years the Registrant plans to open two new and four replacement stores and expand three existing locations. One replacement and one new store are presently under construction in East Windsor and Bound Brook, New Jersey. Technology Automation and computerization are important to the Registrant's operations and competitive position. All stores utilize IBM 4690 software for the scanning checkout systems. These systems improve pricing accuracy, enhance productivity and reduce checkout time for customers. Additionally, all stores have IBM RS/6000 processors and satellite communications. The use of these systems allows the Registrant to offer its customers debit and credit card payment options as well as participation in Price Plus, ShopRite's preferred customer program, and the ShopRite co-branded Master Card. By presenting the scannable Price Plus card or the ShopRite co-branded card, customers can receive electronic discounts, the value of ShopRite in-ad Clip Less coupons and cash personal checks. Additionally, customers receive a 1% future rebate when paying with the ShopRite Master Card. The Registrant is also using other in store computer systems. Computer generated ordering is installed in all stores. This system is designed to reduce inventory levels and out of stock positions, enhance shelf space utilization and reduce labor costs. In all stores, meat, seafood and delicatessen prices are maintained on department computers for automatic weighing and pricing. Additionally, all stores have new computerized time and attendance systems which are used for, among other things, automated labor scheduling and most have computerized energy management systems. The Registrant also utilizes a direct store delivery receiving and pricing system for most items not purchased through Wakefern in order to provide cost and retail price control over these products, and computerized pharmacy systems which provide customer profiles, retail price control and third-party billing. The direct store delivery receiving systems are presently being replaced. In addition, all field merchandisers and operations supervisors are equipped with laptop personal computers. This provides field personnel with current labor and product information to facilitate making accurate and timely decisions. Both the Registrant and Wakefern have undertaken projects to address any year 2000 issues in computer applications. At this time the Registrant does not anticipate any material costs or adverse consequences relative to year 2000 issues. Industry Segment and Principal Products The Registrant is engaged in one industry segment. For the last three fiscal years, the Registrant's sales were divided approximately among the categories listed below: Fiscal Year Ended Product Categories 11/01/97 11/02/96 10/28/95 Groceries 40.6% 41.7% 42.6% Dairy & Frozen 16.4 16.1 15.9 Meats, Seafood & Poultry 11.1 11.2 11.3 Non-Foods 9.9 9.7 9.7 Produce 8.3 8.3 8.3 Appetizers & Prepared Foods 5.8 5.5 5.0 Pharmacy 3.8 3.4 3.3 Bakery 2.2 2.2 2.1 Liquor, Floral & Garden Centers 1.9 1.9 1.8 100.0% 100.0% 100.0% Gross profit derived by the Registrant from each product category is not necessarily consistent with the percentage of total sales represented by such product category. Wakefern Food Corporation The Registrant owns a 12.9% interest in Wakefern, a New Jersey corporation organized in 1946, which provides purchasing, warehousing and distribution services on a cooperative basis to its shareholder members, including the Registrant, who are operators of ShopRite supermarkets. Together, Wakefern and its shareholder members operate approximately 193 supermarkets. Products bearing the ShopRite label accounted for approximately 17% of total sales for the period. Wakefern maintains warehouses in Elizabeth and South Brunswick, New Jersey which handle a full line of groceries, meats, frozen foods, produce, bakery, dairy and delicatessen products and health and beauty aids, as well as a number of non-food items. Wakefern also operates a grocery and perishable products warehouse in Wallkill, New York. Wakefern's professional advertising staff and its advertising agency develop and place most of the Registrant's advertising on television, radio and in major newspapers. The Registrant is charged for these services based on various formulas which account for the estimated proportional benefits it receives. In addition, Wakefern charges the Registrant for, and provides the Registrant with, product and support services in numerous administrative functions. These include insurance, supplies, technical support for communications and electronic payment systems, equipment purchasing and the coordination of coupon processing. Wakefern distributes, as a patronage dividend to each of its members, a share of its net earnings in proportion to the dollar volume of business transacted by each member with Wakefern during each fiscal year. Although Wakefern has a significant in house professional staff, it operates as a member cooperative and senior executives of the Registrant spend a substantial amount of their time working on Wakefern committees overseeing and directing Wakefern purchasing, merchandising and various other programs. Wakefern licenses the ShopRite name to its shareholder members and provides a substantial and extensive merchandising program for the ShopRite label. Except for the license to use the name "ShopRite", the Registrant does not believe that the ownership of or rights in patents, trademarks, licenses, franchises and concessions is material to its business. The locations at which the Registrant may open new supermarkets under the name ShopRite are subject to the approval of Wakefern's Site Development Committee. Under circumstances specified in its By-Laws, Wakefern may refuse to sell merchandise to, and may repurchase the Wakefern stock of, any shareholder member. Such circumstances include certain unapproved transfers by a shareholder member of its supermarket business or its capital stock in Wakefern, unapproved acquisition by a shareholder member of certain supermarket or grocery wholesale supply businesses, the conduct of a business in a manner contrary to the policies of Wakefern, the material breach of any provision of Wakefern By-Laws or any agreement with Wakefern or a determination by Wakefern that the continued supplying of merchandise or services to such shareholder member would adversely affect Wakefern. Wakefern requires each shareholder to invest in Wakefern's capital stock to a maximum of $450,000 for each store operated by such shareholder member. The precise amount of the investment is computed according to a formula based on the volume of each store's purchases from Wakefern. Under its By-Laws, all bills for merchandise and other indebtedness are due and payable to Wakefern weekly and, in the event that such bills are not paid in full, an additional 1% service charge is due on the unpaid portion. Wakefern requires its shareholder members to pledge their Wakefern stock certificates with it as collateral for payment of their obligation to Wakefern. As of November 1, 1997 and November 2, 1996, the Registrant's investment in Wakefern was $8,427,000. The Registrant also has an investment in another company affiliated with Wakefern which was $829,000 at November 1, 1997 and $788,000 at November 2, 1996, respectively. See Note 4 of Notes to Consolidated Financial Statements. Since September 18, 1987, the Registrant has had an agreement, amended in 1992, with Wakefern and all other shareholders of Wakefern, which provides for certain commitments and restrictions on all shareholders of Wakefern. Under the agreement, each shareholder, including the Registrant, agreed to purchase at least 85% of its merchandise in certain defined product categories from Wakefern. The Registrant fulfilled this obligation during the 52 week period ended November 1, 1997. If any shareholder fails to meet such purchase requirements, it must make payments to Wakefern (the "Compensatory Payments") based on a formula designed to compensate Wakefern for the profit lost by it by virtue of its lost warehouse volume. Similar payments are due if Wakefern loses volume by reason of the sale of one or more of a shareholder's stores, any shareholder's merger with another entity or the transfer of a controlling interest in the shareholder. Subject to a right of first refusal granted to Wakefern, sales of certain under facilitated stores are permitted free of the restrictions of the agreement. Also, the restrictions of the agreement do not apply if volume lost by a shareholder by the sale of a store is made up by such shareholder by increased volume of new or existing stores and, in any event, the Compensatory Payments otherwise required to be made by the shareholder to Wakefern are not required if the sale is made to Wakefern, another shareholder of Wakefern or to a purchaser which is neither an owner or operator of a chain of 25 or more supermarkets in the United States, excluding any ShopRite supermarkets in any area in which Wakefern operates. The agreement extends for an indefinite term and is subject to termination ten years after the approval by a vote of 75% of the outstanding voting stock of Wakefern. See Management's Discussion and Analysis - Financial Condition and Liquidity for a discussion of Preferred Stock issued by the Registrant to Wakefern. The loss of, or material change in, the Registrant's relationship with Wakefern (neither of which is considered likely) could have a significant adverse impact on the Registrant's business. The failure of Wakefern to fulfill its obligations or another member's insolvency or withdrawal from Wakefern could result in additional costs to the remaining members. The Registrant also purchases products and items sold in the Registrant's supermarkets from a variety of sources other than Wakefern. Neither the Registrant nor, to the best of the Registrant's knowledge, Wakefern has experienced or anticipates experiencing any unique material difficulties in procuring products and items in adequate quantities. Competition The supermarket business is highly competitive. The Registrant competes directly with a number of national and regional chains, including A&P, Pathmark, Grand Union, Acme, Edwards and Foodtown, as well as various local chains and numerous single-unit stores. The Registrant also competes with warehouse club stores which charge a membership fee, are non-unionized and operate larger units. Additional competition comes from drug stores, discount general merchandise stores, fast food chains and convenience stores. See Management's Discussion and Analysis-Results of Operations. Many of the Registrant's competitors have greater financial resources and sales. As most of the Registrant's competitors offer substantially the same type of products, competition is based primarily upon price, and particularly in the case of meat, produce, delicatessen, and prepared foods, on quality. Competition is also based on service, the location and appearance of stores and on promotion and advertising. The Registrant believes that its membership in Wakefern and ShopRite allows it to maintain a low-price image while providing quality products and the availability of a wide variety of merchandise including numerous private label products under the ShopRite brand name. The Registrant also provides clean, well maintained stores, courteous and quick service to the customer and flexibility in tailoring the products offered in each store to the demographics of the communities it services. The supermarket business is characterized by narrow profit margins, and accordingly, the Registrant's viability depends primarily on its ability to maintain a relatively greater sales volume and more efficient operations than its' competitors. Regulatory and Environmental Matters The Registrant's stores and facilities, in common with those of the industry in general, are subject to numerous existing and proposed Federal, State and Local regulations which regulate the discharge of materials into the environment or otherwise protect the environment, establish occupational safety and health standards and cover other matters, including the licensing of the Registrant's pharmacies and two liquor stores. The Registrant believes its operations are in compliance with such existing regulations and is of the opinion that compliance therewith has not had and will not have any material adverse effect upon the Registrant's capital expenditures, earnings or competitive position. Employees As of December 31, 1997, the Registrant employed approximately 4,000 persons, of whom approximately 3,600 are covered by collective bargaining agreements. 73% of the employees are part time and almost all of these employees are covered by the collective bargaining agreements. The Registrant has historically maintained favorable relations with its unionized employees. However, a strike of Retail Clerk Union Local 1262 workers occurred in May 1993 against the Registrant and three other New Jersey supermarket chains and continued for three weeks until it was satisfactorily settled. The Registrant is subject to six collective bargaining agreements expiring on various dates from April 1998 to April 2001. By virtue of the nature of the Registrant's supermarket operations, information concerning backlog, seasonality, major customers, government contracts, research and development activities and foreign operations and export sales is not relevant. Item 2. Properties The Registrant's twenty supermarkets, all of which are leased, range in size from 31,000 to 101,000 square feet with sales area averaging 75 percent of the total area. All stores are air-conditioned, have modern fixtures and equipment, have their own ample parking facilities and are located in suburban areas. The leases expire on various dates from 1999 through 2022. One lease expires in 1999 and does not contain a renewal clause. This location will be replaced by a new supermarket which is under construction and for which a lease has been signed. All other leases contain renewal options ranging from 5 to 25 years. Six leases require, in addition to a fixed rental, a further rental payment based on a percentage of the annual sales in excess of a stipulated minimum. The minimum has been exceeded in two of the six locations in the last fiscal year. Most leases also require the Registrant to pay for insurance, common area maintenance and real estate taxes. Four additional leases have been signed for supermarket locations, one of which is scheduled to open during fiscal year 1998. The three other sites will be replacements for existing stores. Also, the Registrant is subject to a lease covering its executive and principal administrative offices containing approximately 18,000 square feet in Howell, New Jersey. The Registrant also leases 57,000 square feet of space used for its bakery operations and storage in Howell, New Jersey and owns meat and prepared foods processing facilities in Linden, New Jersey. As part of the Registrant's Asset Redeployment Program, the Registrant sold in 1997 its limited partnership interest in two partnerships and financed the facility in Linden, New Jersey, which is the only real property owned by the Registrant. In addition, the Registrant is a party to an additional fifteen leases relating to locations where the Registrant no longer conducts supermarket operations; thirteen of such locations have been sublet to non-affiliated persons. In most instances these stores have been sublet at terms at least substantially equivalent to the Registrant's obligations under its prime lease. See Management's Discussion and Analysis-Financial Condition and Liquidity. Item 3. Legal Proceedings In the ordinary course of its business, the Registrant is party to various legal actions not covered by insurance. Although a possible range of loss cannot be estimated, it is the opinion of management, that settlement or resolution of these proceedings will not, in the aggregate, have a material adverse impact on the financial condition or results of operations of the Registrant. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Part II Item 5. Market for Registrant's Common Stock and Security Holder Matters (a) The Registrant's Common Stock is traded on the American Stock Exchange. The following table sets forth the high and low sales prices for the Common Stock as reported on the American Stock Exchange for the fiscal years ended November 2, 1996 and November 1, 1997. Fiscal Quarter Ended High Low January 27, 1996 13 5/8 10 April 27, 1996 18 1/4 13 3/8 July 27, 1996 21 1/2 17 November 2, 1996 17 1/2 14 1/4 February 1, 1997 16 3/4 14 May 3, 1997 17 3/8 14 7/8 August 2, 1997 19 1/2 17 1/2 November 1, 1997 18 3/4 16 7/8 (b) The approximate number of record holders of the Registrant's Common Stock was 435 as of January 16, 1998. (c) No dividends have been declared or paid with respect to the Registrant's Common Stock since October 1979. The Registrant is prohibited from paying dividends on its Common Stock by the Revolving Credit and Term Loan Agreement between the Registrant and a financial institution. See Management's Discussion and Analysis-Financial Condition and Liquidity. The Registrant has no intention of paying dividends on its Common Stock in the foreseeable future. Item 6. Selected Financial Data The selected financial data set forth below is derived from the Registrant's consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. See Management's Discussion and Analysis-Financial Condition and Liquidity and Results of Operations. Year Ended November 1, November 2, October 28, October 29, October 30, 1997 1996 (1) 1995 (2) 1994 (3) 1993 (4) (Dollars in thousands, except per share amounts) Income Statement Data: Sales $636,731 $601,143 $586,477 $611,074 $674,675 Net income (loss) $ 1,064 $ 1,396 $ (191) $ (513) $ (1,965) Income (loss) per common share $ .90 $ 1.13 $ (.29) $ (.58) $ (1.84) Cash dividends per common share - - - - - Balance sheet data (at year end): Working capital $ 3,518 $ 3,056 $ (4,451) $ (8,674) $ (30,613)(5) Total assets $121,500 $124,181 $110,984 $130,821 $137,440 Long-term debt (excluding current portion) $ 36,996 $ 41,243 $ 28,334 $ 37,439 $ 13,432 (6) Common share- holders' equity $ 31,315 $ 30,315 $ 28,672 $ 28,984 $ 30,182 Book value per common share $ 28.03 $ 27.11 $ 25.64 $ 25.92 $ 27.00 Tangible book value per common share $ 23.47 $ 22.22 $ 20.24 $ 19.21 $ 19.71 (1) 53 week period. The Registrant opened two new locations in June and July, 1996. See Management's Discussion and Analysis - Results of Operations - Sales. (2) The period presented includes the results of operations of the two Pennsylvania stores for the 30 weeks prior to their sale on May 23, 1995. The net sales of these two stores for the 30 weeks of fiscal 1995 during which they were owned by the Registrant were $29.2 million. (3) The period presented includes the results of operations of one New Jersey store for 34 weeks prior to its closing on June 25, 1994,. Net sales for this location for the 34 weeks prior to its closing were $6.0 million. (4) The period presented includes the results of operations of the five New York stores for the 50 weeks prior to their sale on October 18, 1993. Net sales for the five locations for the 50 weeks of fiscal 1993 during which they were owned by the Registrant were $85.4 million. (5) Includes $32.6 million of long term debt at October 30, 1993 reclassified as current. See note 6 below. (6) Does not include $32.6 million of long-term debt at October 30, 1993 reclassified as current due to a default of a loan covenant under the Registrant's credit agreements which terminated February 15, 1995. Such long-term debt was classified as a current liability on the Registrant's balance sheet at October 30, 1993. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION AND LIQUIDITY The Registrant entered into a Revolving Credit and Term Loan Agreement on February 15, 1995 ("the Credit Agreement"), which was amended as of July 26, 1996 (the "Amended Credit Agreement"). The Amended Credit Agreement was assigned by the lending group to one financial institution on December 12, 1996, and was further amended as of May 2, 1997, October 28, 1997, November 14, 1997 and January 15, 1998 (the "Amended and Restated Credit Agreement"). The Amended and Restated Credit Agreement is secured by substantially all of the Registrant's assets and provides for a total commitment of $30,200,000, including a revolving credit facility of up to $17,500,000 and term loans referred to as Term Loan C in the amount of $11,000,000 and the Stock Redemption Facility in the amount of $1,700,000. The Amended and Restated Credit Agreement contains certain affirmative and negative covenants which, among other matters will require the maintenance of a debt service coverage ratio. The Registrant was in compliance with such covenants through November 1, 1997. The Amended and Restated Credit Agreement (a) provides for a Stock Redemption Facility of $1,700,000 which the Registrant is required to use to repay the revolving credit facility for the monies used to redeem the Preferred Stock held by Wakefern on March 31, 1997; (b) revises the repayment schedule for Term Loan C to provide for a quarterly payment schedule through December 31, 1999 and a final payment of $500,000 on February 15, 2000;(c) amends certain definitions; (d) changes certain borrowing limitations, including a provision which permits secured borrowing of up to $1,500,000 from third party lenders in fiscal 1997; (e) eliminates all the major financial covenants except the fixed charge coverage ratio which was redefined and renamed the debt service coverage ratio; (f) reduces interest rates on the revolving credit facility by 1.00% and on Term Loans by .75% to the Base Rate (defined below) plus .25% and .50%, respectively; and (g) redefines Term Loan C and the Stock Redemption Facility as Fixed Rate Loans. The interest rate on the Fixed Rate Loans is 8.38%. The Base Rate is the rate which is the greater of the (i) 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 Registrant has the ability to use the London Interbank Offered Rate ("LIBOR") to determine the interest rate. Other terms and conditions of the Credit Agreement previously reported upon by the Registrant have not been modified. The Registrant has pursued an asset redeployment program since entering into the Credit Agreement, utilizing the proceeds from the disposition of certain assets to repay indebtedness under the Credit Agreement. The program was completed November 14, 1997. The components of the asset redeployment program completed in 1997 were the sale/leaseback of a supermarket property in Aberdeen, New Jersey on February 3, 1997 for $2.3 million which resulted in a deferred gain of $199,000; the sale of a real estate partnership interest in a shopping center in West Long Branch, New Jersey in which the Registrant operates a supermarket on October 6, 1997 resulting in a gain of $140,000 and the receipt of $677,000 in payment of accounts receivable owed by the partnership to the Registrant; the sale of a real estate partnership interest in a non-supermarket property located in Shrewsbury, New Jersey on October 8, 1997 for $735,000 which resulted in a gain of the same amount; and the financing of two buildings owned by the Registrant and located in Linden, New Jersey on November 14, 1997. The proceeds from the financing, $1.5 million, were used to purchase a third building in the complex for $600,000, with the balance of the proceeds to be used for the remodeling and refurbishment of the meat and prepared foods processing facility which is housed in the three buildings. The note bears interest at 9.18% and is payable in monthly installments over its seven year term based on a ten year amortization. The Amended and Restated Credit Agreement combined with the completion of the asset redeployment plan described above strengthened the Registrant's financial condition by increasing liquidity and providing increased working capital through the Revolving Note. On May 23, 1995 the Registrant concluded the sale of its two operating locations in Pennsylvania for $5,700,000 plus inventory of $2,300,000 and obtained the return of its investments of $1,200,000 in Wakefern, a related party, with respect to the two stores. All proceeds were in cash and were used to reduce outstanding debt. On January 25, 1996 the Registrant financed $4,068,000 of used equipment at three existing locations. The note bears interest at 10.58% and is payable in monthly installments over its four year term. The proceeds were used to repay existing debt. On September 13, 1996 the Registrant financed $536,000 of Point of Sale ("POS") equipment at two existing locations. The note bears interest at 8.82% and is payable in monthly installments over its four year term. The proceeds were used to purchase the POS equipment. On September 30, 1996 and November 1, 1996 the Registrant financed the purchase of $4,602,075 and $1,397,925, respectively, of equipment for the two new store locations in Marlboro and Montgomery, New Jersey. The notes bear interest at 9.02% and 8.74%, respectively, and are payable in monthly installments over their eight year terms. The Registrant's compliance with the major financial covenant under the Amended and Restated Credit Agreement was as follows as of November 1, 1997: Actual Amended and (As defined in the Financial Restated Credit Amended and Restated Covenant Agreement Credit Agreement) Debt Service Coverage Ratio Not less than 1.00 to 1.00 1.26 to 1.00 As of March 29, 1996 the Registrant and Wakefern Food Corporation ("Wakefern"), 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 since then has paid dividends of $34,000 per quarter. The Amended Credit Agreement provides 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. The Registrant met all of these targets and redeemed all of the outstanding Preferred Stock on March 31, 1997. The pro-rata portion of the dividend due, $22,667, was also paid at that time. 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 Amended and Restated Credit Agreement does not permit the payment of any cash dividends on the Registrant's Common Stock. Working Capital: At November 1, 1997, the Registrant had working capital of $3,518,000 compared to $3,056,000 at November 2, 1996 and a deficiency of $4,451,000 at October 28, 1995. Working capital in fiscal 1997 remained at approximately the same levels as the prior year. Accounts receivable consist primarily of bad checks due the Registrant, coupon receivables, third party pharmacy insurance claims and organization charge accounts. The terms of most receivables are 30 days or less. The allowance for uncollectible accounts is large in comparison to the amount of accounts receivable because the allowance consists primarily of a reserve for bad checks which are not written off until all collection efforts are exhausted. The Registrant 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 improved in fiscal 1996 as the result of (a) the equipment financing completed in January 1996, with $3,000,000 of current debt replaced by long term borrowing; (b) the reduction in current payables relating to inventory and store operations using proceeds of long term borrowings under the Revolving Note; and (c) an increase of $1,000,000 in current related party receivables which become due in fiscal 1997. Changes in working capital components for fiscal 1995 were primarily attributable to the sale of assets in Pennsylvania, the accelerated application of cash receipts against the Revolving Note and the improved liquidity resulting from the Credit Agreement. Working capital ratios were as follows: November 1, 1997 1.1 to 1.0 November 2, 1996 1.1 to 1.0 October 28, 1995 .9 to 1.0 Cash flows (in millions) were as follows: 1997 1996 1995 From operations..................... $10.1 $ 9.7 $ 9.6 Investing activities................ .5 (6.5) 2.7 Financing activities................ (10.0) (3.5) (14.4) Totals $ .6 $( .3) $(2.1) Fiscal 1997 capital expenditures totaled $3,620,000 with depreciation of $8,104,000 compared to $13,181,000 and $8,207,000 respectively for fiscal 1996 and $3,755,000 and $8,371,000 respectively for fiscal 1995. In fiscal 1997 long-term debt decreased $2,231,000, using proceeds from the sale of assets under the asset redeployment program and cash generated by operations which was partially offset by financing obtained under the Stock Redemption Facility, the capitalization of a real estate lease for the Aberdeen, New Jersey store and increased debt as the result of the Insur-Rite premium calls. In fiscal 1996 long-term debt increased $10,106,000 as the result of the financing of POS equipment in two locations and equipment in the two new locations in Marlboro and Montgomery, New Jersey and the capitalization of a real estate lease for the Montgomery store. In fiscal 1995 the Registrant reduced its long-term debt by $13.0 million, using proceeds from the sale of the Pennsylvania stores and cash generated by operations. The Registrant had $11,727,000 of available credit, at November 1, 1997, under its revolving credit facility and believes that its capital resources are adequate to meet its operating needs, scheduled capital expenditures and debt service for fiscal 1998. RESULTS OF OPERATIONS Sales: The Company's sales were $636.7 million, $601.1 million and $586.5 million, respectively in fiscal 1997, 1996 and 1995. This represents an increase of 5.9 percent in 1997 and an increase of 2.5 percent in 1996. These changes in sales levels were the result of the 53rd week in fiscal 1996, opening of two new locations in June and July 1996 and the sale of two Pennsylvania stores in May 1995. Comparable store sales were $581.1 million, $571.5 million and $556.9 million in the respective three year periods, an increase of 1.7% in fiscal 1997 and 2.6% in fiscal 1996 after adjusting for the 53rd week in fiscal 1996. Gross Profit: Gross profit totaled $161.0 million in fiscal 1997 compared to $152.1 million in fiscal 1996 and $148.3 million in fiscal 1995. Gross profit as a percent of sales was 25.3%, in each of the three fiscal years 1997, 1996 and 1995. In both fiscal 1997 and 1996 gross profit percentage was positively affected by the continued improvement in product mix and Wakefern incentive programs for the two new locations. However, this improvement was offset by price reductions instituted to combat increased competitive pressure in the Registrant's marketing area. The increase in gross profit percentage in fiscal 1995, when compared to the gross profit percentage of 24.3% for fiscal 1994, was primarily due to improved product mix and the ability of the Registrant to maintain full inventory levels in its stores. The ability to maintain full inventory levels is the result of improved liquidity under the new financing obtained on February 15, 1995. The exclusion of results of the two Pennsylvania stores sold on May 23, 1995 would not have had any material impact on gross profit percentages when comparing fiscal 1995 results to the prior year results. Patronage dividends applied as a reduction of the cost of merchandise sold were $6,633,000, $6,905,000 and $7,246,000 for the last three fiscal years. This translates to 1.04%, 1.15% and 1.24% of sales for the respective periods. Fiscal Years Ended 11/01/97 11/02/96 10/28/95 (in millions) Sales........................ $636.7 $601.1 $586.5 Gross profit................. 161.0 152.1 148.3 Gross profit percentage...... 25.3% 25.3% 25.3% Operating, General and Administrative Expenses: Fiscal 1997 expenses totaled $155.9 million compared to $147.0 million in fiscal 1996 and $142.9 million in fiscal 1995. Fiscal Years Ended 11/01/97 11/02/96 10/28/95 (in millions) Sales........................ $636.7 $601.1 $586.5 Operating, General and Administrative Expenses...... 155.9 147.0 142.9 % of Sales................... 24.5% 24.5% 24.4% Operating, general and administrative expenses as a percent of sales remained the same in fiscal 1997 compared to fiscal 1996. Decreases, primarily related to the two new locations opened in fiscal 1996, in selling expense and labor and related fringe benefit costs, as well as reduced corporate administrative expense, were offset by increases in general liability insurance expense, other store expenses, which include debit and credit card processing fees and Wakefern support services, and the amortization of deferred pre-store opening costs. The general liability insurance increase was the result of premium calls from Insure-Rite, Ltd., for policy years ended December 1, 1993 and December 1, 1994 as previously discussed in the Commitments and Contingencies footnote in prior years financial statements. As a percentage of sales, selling expense decreased .27%, payroll and related fringe benefit costs decreased .10% and corporate administrative expense decreased .09%. These decreases were offset by increases in general liability insurance of .27%, other store expenses of .18% and amortization of deferred pre-store opening costs of .04%. Pre-opening costs were $505,000 in fiscal 1997. Operating, general and administrative expenses increased slightly in fiscal 1996 compared to fiscal 1995. 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 .28%, selling expense increased .25% and miscellaneous income declined .08%. These increases were partially offset by decreases in other store expenses of .13% and administrative expense of .29%. Pre-opening costs were $90,000 in fiscal 1996. Amortization expense increased in fiscal 1997 to $1,956,000 compared to $1,826,000 in fiscal 1996 and $2,954,000 in fiscal 1995. The increase in fiscal 1997, as compared to fiscal 1996, was the result of increased amortization of deferred escalation rents and deferred pre-store opening costs partially offset by decreased amortization of goodwill and deferred financing costs. The decline in fiscal 1996 was the result of decreased amortization of goodwill and deferred escalation rents as compared to fiscal 1995 which included the write off of goodwill on the sale of the Pennsylvania stores. Interest Expense: Interest expense totaled $4.3 million in fiscal 1997 compared to $3.5 million in fiscal 1996 and $4.6 million in fiscal 1995. The increase in fiscal 1997, as compared to fiscal 1996, was due to an increase in the average debt outstanding since November 2, 1996 partially offset by lower interest rates on the Registrant's credit facility. The decrease in fiscal 1996, as compared to fiscal 1995, resulted from an overall reduction in debt levels coupled with lower rates on the Registrant's bank credit facility. Interest income was $0.3 million in fiscal 1997 compared to $0.2 million in fiscal 1996 and $0.4 million in fiscal 1995. Income Taxes: The Registrant recorded a tax provision of $0.6 million in fiscal 1997 and $0.3 million in fiscal 1996 and a tax benefit of $0.2 million in fiscal 1995. See Note 15 of Notes to Consolidated Financial Statements. Net Income: The Registrant had net income of $1,064,000 or $.90 per share in fiscal 1997 compared to net income of $1,396,000 or $1.13 per share in fiscal 1996. 1997 results included a net gain after tax on real estate transactions of $413,000 or $.37 per share. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 1997 were $15,744,000 as compared to $15,107,000 in fiscal 1996. Fiscal 1997 EBITDA includes $656,000 as a result of the gain on real estate transactions. Fiscal 1995 resulted in a net loss of $191,000 or $.29 per share after an extraordinary charge of $1,009,000 or $.90 per share for the write off of expenses related to the early extinguishment of debt and a charge for the cumulative effect of a change in accounting for post-employment benefits of $129,000 or $.12 per share in fiscal 1995. 1995 results included a net gain on real estate transactions of $259,000 or $.23 per share. Excluding the net loss from the sale of, and operating losses from, the two Pennsylvania stores sold on May 23, 1995, income before the extraordinary item and the change in accounting would have been $1,802,000 or $1.49 a share for fiscal 1995. EBITDA for fiscal 1995 were $17,205,000 after the gain of $474,000 on real estate transactions. Shares outstanding were 1,117,150 for fiscal 1997 and 1,118,150 for fiscal 1996 and fiscal 1995. Per share amounts for fiscal 1997, 1996 and 1995 are after Preferred Stock dividends of $56,667, $136,000 and $136,000, respectively. RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the FASB issued SFAS No. 128, "Earnings per Share". This Statement establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This Statement simplifies the standards for computing earnings per share and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. The Registrant does not expect a material impact from adopting the provisions of SFAS No. 128 which becomes effective for the Registrant in the first quarter of fiscal 1998. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This Statement establishes standards for reporting and display of comprehensive income and its components (revenue, expenses, gains, and losses) in a full set of general-purpose financial statements. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Registrant does not expect a material impact from adopting the provisions of SFAS No. 130 which becomes effective for the Registrant in fiscal 1999. In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." This Statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Registrant does not expect a material impact from adopting the provisions of SFAS No. 131 which becomes effective for the Registrant in fiscal 1999. Item 8. Financial Statements and Supplementary Data See Consolidated Financial Statements and Schedules included in Part IV, Item 14. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure As previously reported in Form 8-K filed November 1, 1996 and Form 8-K/A filed December 4, 1996, on October 25, 1996, Amper, Politziner and Mattia was appointed to serve as the independent public accountants for the Registrant for the fiscal year ended November 2, 1996. Deloitte & Touche, LLP ("Deloitte") had served as the Registrant's independent public accountants for the fiscal year ended October 28, 1995 and until Deloitte's dismissal on October 25, 1996. The decision to dismiss Deloitte and appoint Amper, Politziner and Mattia was approved by the Registrant's Audit Committee and Board of Directors. In connection with the audits of the fiscal year ended October 28, 1995, and the subsequent interim period through October 25, 1996, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to Deloitte's satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement. The Registrant's audit report issued by Deloitte contained no adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. Part III Item 10. Directors and Executive Officers of the Registrant The information required in response to this item is contained in the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A under the caption "Directors and Executive Officers of the Registrant" and such information is incorporated herein by reference. Item 11. Executive Compensation The information required in response to this item is contained in the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A under the caption "Executive Compensation" and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required in response to this item is contained in the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A under introductory paragraphs and under the captions "Principal Shareholders" and "Election of Directors" and such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information required in response to this item is contained in the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A under the caption "Executive Compensation - Certain Transactions" and such information is incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules,and Reports on Form 8-K a.1. Audited financial statements and Page No. supplementary data Independent Auditors' Report F-1-2 Foodarama Supermarkets, Inc. and Subsidiaries Consolidated Financial Statements: Balance Sheets as of November 1, 1997 F-3-4 and November 2, 1996. Statements of Operations for each of the F-5 fiscal years ended November 1, 1997, November 2, 1996 and October 28, 1995. Statements of Shareholders' Equity F-6 for each of the fiscal years ended November 1, 1997, November 2, 1996 and October 28, 1995. Statements of Cash Flows for each of the F-7 fiscal years ended November 1, 1997, November 2, 1996 and October 28, 1995. Notes to Consolidated Financial Statements F-8 to 30 a.2. Financial Statement Schedules Schedule II S-1 Schedules other than Schedule II have been omitted because they are not applicable. a.3. Exhibits E-1 to 6 b. Reports on Form 8-K No reports on Form 8-K were required to be filed during the fourth quarter of fiscal 1997. * * * * * * SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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) /S/ Michael Shapiro Michael Shapiro Senior Vice President, Chief Financial Officer /S/ Joseph C. Troilo Joseph C. Troilo Senior Vice President, Principal Accounting Officer Date: January 29, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Title Date /S/ Joseph J. Saker Joseph J. Saker Chairman of the Board January 27, 1998 of Directors and President, Chief Executive Officer /S/ Charles T. Parton Charles T. Parton Director January 28, 1998 Albert A. Zager Director /S/ Richard Saker Richard Saker Executive Vice President, January 27, 1998 Secretary and Director, Chief Operating Officer Independent Auditors' Report Board of Directors and Shareholders Foodarama Supermarkets, Inc. Freehold, New Jersey We have audited the accompanying consolidated balance sheets of Foodarama Supermarkets, Inc. and Subsidiaries as of November 1, 1997 and November 2, 1996 and the related consolidated statements of operations, shareholders' equity and cash flows for the fiscal years ended November 1, 1997 and November 2, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated statements of operations, shareholders' equity and cash flows of Foodarama Supermarkets Inc. and Subsidiaries for the fiscal year ended October 28, 1995 were audited by other auditors whose report dated January 25, 1996 expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Foodarama Supermarkets, Inc. and Subsidiaries as of November 1, 1997 and November 2, 1996 and the results of their operations and their cash flows for the fiscal years ended November 1, 1997 and November 2, 1996 in conformity with generally accepted accounting principles. In connection with our audits of the financial statements referred to above, we audited the financial schedule listed under Item 14. In our opinion, the financial schedule, when considered in relation to the financial statements taken as a whole, presents fairly, in all material respects, the information stated therein. Amper, Politziner & Mattia P.A. AMPER, POLITZINER & MATTIA P.A. January 23, 1998 Edison, New Jersey Independent Auditors' Report Board of Directors and Shareholders Foodarama Supermarkets, Inc. Freehold, New Jersey We have audited the accompanying consolidated statements of operations, shareholders' equity and cash flows for the fiscal year ended October 28, 1995 of Foodarama Supermarkets, Inc. and Subsidiaries. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Foodarama Supermarkets, Inc. and Subsidiaries for the fiscal year ended October 28, 1995 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Parsippany, New Jersey January 25, 1996 FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Balance Sheets November 1, 1997 and November 2, 1996 Assets 1997 1996 Current assets Cash and cash equivalents $ 3,678,000 $ 3,114,000 Merchandise inventories 33,585,000 31,654,000 Receivables and other current assets 3,576,000 2,731,000 Prepaid income taxes 392,000 974,000 Related party receivables - Wakefern 5,389,000 6,032,000 Related party receivables - other 238,000 1,259,000 46,858,000 45,764,000 Property and equipment Land 93,000 1,650,000 Buildings and improvements 829,000 1,867,000 Leasehold improvements 32,064,000 33,238,000 Equipment 65,935,000 62,314,000 Property under capital leases 19,443,000 15,259,000 118,364,000 114,328,000 Less accumulated depreciation and amortization 62,210,000 55,592,000 56,154,000 58,736,000 Other assets Investments in related parties 9,256,000 9,215,000 Intangibles 5,100,000 5,475,000 Other 2,847,000 3,730,000 Related party receivables - Wakefern 1,191,000 1,029,000 Related party receivables - other 94,000 232,000 18,488,000 19,681,000 $ 121,500,000 $ 124,181,000 See notes to consolidated Financial Statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Balance Sheets November 1, 1997 and November 2, 1996 Liabilities and Shareholders' Equity 1997 1996 Current liabilities Current portion of long-term debt $ 6,647,000 $ 5,182,000 Current portion of long-term debt, related party 738,000 589,000 Current portion of obligations under capital leases 469,000 67,000 Deferred income tax liability 945,000 1,261,000 Accounts payable Related party - Wakefern 23,723,000 23,850,000 Others 3,763,000 5,100,000 Accrued expenses 7,055,000 6,659,000 43,340,000 42,708,000 Long-term debt 17,874,000 26,852,000 Long-term debt, related party 1,797,000 757,000 Obligations under capital leases 17,325,000 13,634,000 Deferred income taxes 3,828,000 2,886,000 Other long-term liabilities 6,021,000 5,329,000 46,845,000 49,458,000 Mandatory redeemable preferred stock, $12.50 par; authorized 1,000,000 shares; issued and outstanding -0- shares November 1, 1997; 136,000 shares November 2, 1996 - 1,700,000 Shareholders' equity Common stock, $1.00 par; authorized 2,500,000 shares; issued 1,621,627 shares 1,622,000 1,622,000 Capital in excess of par 2,351,000 2,351,000 Retained earnings 33,971,000 32,964,000 37,944,000 36,937,000 Less 504,477 shares November 1, 1997; 503,477 shares November 2, 1996, held in treasury, at cost 6,629,000 6,622,000 31,315,000 30,315,000 $ 121,500,000 124,181,000 See notes to consolidated financial statments FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28, 1995 1997 1996 1995 Sales $ 636,731,000 $ 601,143,000 $ 586,477,000 Cost of merchandise sold 475,764,000 449,077,000 438,222,000 Gross profit 160,967,000 152,066,000 148,255,000 Operating, general and administrative expenses 155,939,000 146,992,000 142,849,000 Income from operations 5,028,000 5,074,000 5,406,000 Other (expense) income: Gain on sale of stores - - 474,000 Gain on real estate transactions 656,000 - - Interest expense (4,273,000) (3,522,000) (4,578,000) Interest income 279,000 183,000 432,000 (3,338,000) (3,339,000) (3,672,000) Income before taxes, extraordinary item and cumulative effect of change in accounting 1,690,000 1,735,000 1,734,000 Income tax provision (626,000) (339,000) (787,000) Income before extraordinary item and cumulative effect of change in accounting 1,064,000 1,396,000 947,000 Extraordinary item: Early extinguishment of debt (net of tax benefit of $839,000) - - (1,009,000) Cumulative effect of change in accounting (net of tax benefit of $107,000) - - (129,000) Net income (loss) $ 1,064,000 $ 1,396,000 $ (191,000) Per share information: Income before extraordinary item and cumulative effect of change in accounting $ .90 $ 1.13 $ .73 Extraordinary item - - (.90) Cumulative effect of change in accounting - - (.12) Net income (loss) per common share $ .90 $ 1.13 $ ( .29) Weighted average shares outstanding 1,117,150 1,118,150 1,118,150 See notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28, 1995 Capital Common Stock in Excess Retained Shares Amount of Par Earnings Balance - October 29,1994 1,621,627 $ 1,622,000 $ 2,351,000 $ 32,318,000 Net loss 1995 - - - (191,000) Minimum pension liability adjustment - - - - Balance - October 28, 1995 1,621,627 1,622,000 2,351,000 32,127,000 Net income 1996 - - - 1,396,000 Preferred stock dividends paid - $4.11 per share - - - (559,000) Minimum pension liability adjustment - - - - Balance - November 2, 1996 1,621,627 1,622,000 2,351,000 32,964,000 Net income 1997 - - - 1,064,000 Shares repurchased - - - - Preferred stock dividends paid - $.42 per share - - - (57,000) Balance - November 1, 1997 1,621,627 $ 1,622,000 $ 2,351,000 $ 33,971,000 Minimum Pension Liability Treasury Stock Total Adjustment Shares Amount Equity Balance - October 29, 1994 $ (685,000) $ (503,477) $(6,622,000) $ 28,984,000 Net Loss 1995 - - - (191,000) Minimum pension liability adjustment (121,000) - - (121,000) Balance - October 28, 1995 (806,000) (503,477) (6,622,000) 28,672,000 Net Income 1996 - - - 1,396,000 Preferred Stock dividends paid - $4.11 per share - - - (559,000) Minimum pension liability adjustment 806,000 - - 806,000 Balance - Novemeber 2, 1996 - (503,477) (6,622,000) 30,315,000 Net Income 1997 - - - 1,064,000 Shares repurchased - (1,000) (7,000) (7,000) Preferred stock dividends paid - $.42 per share - - - (57,000) Balance - November 1, 1997 - (504,477) $ (6,629,000) $ 31,315,000 See notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28, 1995 1997 1996 1995 Cash flows from operating activities Net income (loss) $ 1,064,000 $ 1,396,000 $ (191,000) Adjustments to reconcile net income (loss) to net cash from operating activities Depreciation 8,104,000 8,207,000 8,371,000 Amortization, intangibles 375,000 563,000 1,440,000 Amortization, deferred financing costs 642,000 820,000 846,000 Amortization, deferred rent escalation 434,000 353,000 539,000 Amortization, other assets 505,000 90,000 129,000 Gain on real estate transactions (656,000) - (474,000) Deferred income taxes 626,000 136,000 (729,000) Loss on disposal of store property and equipment and other assets - - 93,000 (Increase) decrease in Merchandise inventories (1,931,000) (3,985,000) 2,131,000 Receivables and other current assets (845,000) 185,000 946,000 Prepaid income taxes 582,000 (974,000) - Other assets (78,000) 2,484,000 1,928,000 Related party receivables - Wakefern 481,000 (1,386,000) 1,065,000 Increase (decrease) in Accounts payable (1,464,000) 2,958,000 (5,551,000) Income taxes payable - (77,000) (168,000) Other liabilities 2,286,000 (1,042,000) (623,000) Other - - (121,000) 10,125,000 9,728,000 9,631,000 Cash flows from investing activities Net proceeds from the sale of property and equipment - - 41,000 Net proceeds from the sale of stores - - 6,649,000 Net proceeds from real estate transactions 2,938,000 - - Cash paid for the purchase of property and equipment (3,620,000) (6,645,000) (3,755,000) (Increase) decrease in related party receivables - other 1,159,000 95,000 (246,000) 477,000 (6,550,000) 2,689,000 See notes to consolidated financial statements. FOODARAMA SUPERMARKETS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows - (continued) Fiscal Years Ended November 1, 1997, November 2, 1996 and October 28, 1995 Cash flows from financing activities Payment for redemption of preferred stock (1,700,000) - - Preferred stock dividend payments (57,000) (559,000) - Proceeds from issuance of debt 1,700,000 13,202,000 35,005,000 Principal payments under long-term debt (9,213,000) (15,768,000) (46,618,000) Principal payments under capital lease obligations (91,000) (197,000) (1,380,000) Principal payments under long-term debt, related party (450,000) (177,000) - Deferred financing costs (227,000) - - Debt restructuring costs - - (1,434,000) (10,038,000) (3,499,000) (14,427,000) Net change in cash and cash equivalents 564,000 (321,000) (2,107,000) Cash and cash equivalents, beginning of year 3,114,000 3,435,000 5,542,000 Cash and cash equivalents, end of year $ 3,678,000 $ 3,114,000 $ 3,435,000 Supplemental disclosures of cash paid (received) Interest $ 4,277,000 $ 3,526,000 $ 5,105,000 Income taxes (606,000) 1,263,000 494,000 See notes to consolidated financial statement. Notes to Consolidated Financial Statements. Note 1 - Summary of Significant Accounting Policies Nature of Operations Foodarama Supermarkets, Inc. and Subsidiaries operate 20 ShopRite supermarkets primarily in Central New Jersey. The Company is a member of Wakefern Food Corporation ("Wakefern"), the largest retailer-owned food cooperative in the United States. Fiscal Year The Company's fiscal year ends on the Saturday closest to October 31. Fiscal 1997 consists of the 52 weeks ended November 1, 1997, fiscal 1996 consists of the 53 weeks ended November 2, 1996 and fiscal 1995 consists of the 52 weeks ended October 28, 1995. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Industry Segment The Company operates in one industry segment, the retail sale of food and non-food products, primarily in the central New Jersey region. Reclassifications Certain reclassifications have been made to prior years' financial statements in order to conform to the current year presentation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Merchandise Inventories Merchandise inventories are stated at the lower of cost (first-in, first-out) or market with cost being determined under the retail method. Note 1 - Summary of Significant Accounting Policies - (continued) Property and Equipment Property and equipment is stated at cost and is depreciated on a straight-line basis over the estimated useful lives of between three and ten years for equipment, the shorter of the useful life or lease term for leasehold improvements, and twenty years for buildings. Property and equipment under capital leases is recorded at the lower of fair market value or the net present value of the minimum lease payments. They are depreciated on a straight-line basis over the shorter of the related lease terms or its useful life. Investments The Company's investment in its principal supplier, Wakefern, is stated at cost (see Note 4). Intangibles Intangibles consist of goodwill, favorable operating lease costs and a covenant not to compete. Goodwill is being amortized on a straight-line basis over periods from 15 to 37 years. The favorable operating lease costs are being amortized on a straight-line basis over the terms of the related leases which range from 14 to 31 years. The covenant not to compete was amortized on a straight-line basis over the contractual life of the agreements of six years, ending March 1996. Deferred Financing Costs Deferred financing costs are being amortized over the life of the related debt using the effective interest method. Postretirement Benefit other than Pensions The Company accrues for the cost of providing Postretirement benefits, principally supplemental income payments and limited medical benefits, over the working careers of the officers in the plan. Postemployment Benefits Effective October 30, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS No. 112). In accordance with SFAS No. 112, the Company accrues for the expected cost of providing postemployment benefits, primarily short-term disability payments, over the working careers of its employees. The Company previously expensed the cost of these benefits as claims were paid. Note 1 - Summary of Significant Accounting Policies - (continued) Advertising Advertising costs are expensed as incurred. Advertising expense was $13,204,000, $14,028,000 and $12,776,000, for the fiscal years 1997, 1996 and 1995, respectively. Preopening Costs Costs associated with the opening of new stores are amortized over a period of twelve months commencing one month after the opening of the store. Store Closing Costs The costs, net of amounts expected to be recovered, are expensed when a decision to close a store is made. Until a store is closed, operating results continue to be reported. Earnings (Loss) Per Share The computation of earnings (loss) per share is based on the weighted average number of common shares outstanding during each year (1,117,150 shares in 1997 and 1,118,150 shares in 1996 and 1995) and mandatory preferred stock dividend requirements of $57,000 in fiscal 1997 and $136,000 in fiscal 1996 and 1995. Fully diluted net income (loss) per share has not been presented since the amount would be antidilutive or would not result in a material dilution of net income (loss) per share. Note 2 - Concentration of Cash Balance As of November 1, 1997 and November 2, 1996 cash balances of approximately $854,000 and $1,051,000, respectively, were maintained in bank accounts insured by the Federal Deposit Insurance Corporation (FDIC). These balances exceed the insured amount of $100,000. Note 3 - Receivables and Other Current Assets November 1, November 2, 1997 1996 Accounts receivable $ 2,676,000 $ 1,867,000 Prepaids 1,279,000 979,000 Rents receivable 94,000 550,000 Less allowance for uncollectible accounts (473,000) (665,000) $ 3,576,000 $ 2,731,000 Note 4 - Related Party Transactions Wakefern Food Corporation As required by Wakefern's By-Laws, all members of the cooperative are required to make an investment in the common stock of Wakefern for each supermarket operated ("Store Investment Program"), with the exact amount per store computed in accordance with a formula based on the volume of each store's purchases from Wakefern. The maximum required investment per store was $450,000 at November 1, 1997 and November 2, 1996. The Company has a 13% investment in Wakefern of $8,427,000 at November 1, 1997 and November 2, 1996. Wakefern is operated on a cooperative basis for its members. The shares of stock in Wakefern are assigned to and held by Wakefern as collateral for any obligations due Wakefern. In addition, the obligations to Wakefern are personally guaranteed by principal officers/shareholders of the Company. As of November 1, 1997 and November 2, 1996, the Company was obligated to Wakefern for $757,000 and $809,000, respectively, for the increase in its required investment (see Note 10 Long-Term Debt, Related Party). The Company also has an investment of approximately 13% in Insure-Rite, Ltd., a company affiliated with Wakefern, which was $829,000 at November 1, 1997 and $788,000 at November 2, 1996. Insure-Rite, Ltd. provides the Company with liability and property insurance coverage. In fiscal 1997, Insure-Rite, Ltd. made two retrospective premium calls for the 1992/93 and the 1993/94 policy years for $869,000 and $770,000, respectively. The premium calls represent actuarial projections of claims to be paid in excess of the deposit premium paid by the members. The Company also has a balance due of $139,000 for premium calls for the 1991/92 policy year. After the 1993/94 policy year, Insure-Rite, Ltd. changed its policy to provide for a fixed premium covering all insured losses and the elimination of premium calls. The premium calls are payable in scheduled semi-annual payments through September 1999. No interest is being charged on this obligation. At November 1, 1997 and November 2, 1996, $686,000 and $537,000 was included in current portion of long-term debt, respectively, and $1,092,000 was the long-term portion at November 1, 1997. Insurance premiums paid to Insure-Rite, Ltd. for fiscal years 1997 and 1996 was $2,702,000 and $2,738,000 respectively. Note 4 - Related Party Transactions - (continued) Wakefern Food Corporation - (continued) As a stockholder member of Wakefern, the Company earns a share of an annual Wakefern patronage dividend. The dividend is based on the distribution of operating profits on a pro rata basis in proportion to the dollar volume of business transacted by each member with Wakefern during each fiscal year. It is the Company's policy to accrue quarterly an estimate of the annual patronage dividend. The Company reflects the patronage dividend as a reduction of the cost of merchandise in the consolidated financial statements. For fiscal 1997, 1996 and 1995, the patronage dividends were $6,633,000, $6,905,000 and $7,246,000, respectively. At November 1, 1997 and November 2, 1996, the Company has current receivables due from Wakefern of approximately $5,389,000 and $6,032,000, respectively, representing patronage dividends, vendor rebates, coupons and other receivables due in the ordinary course of business and a noncurrent receivable representing a deposit of approximately $1,191,000 and $1,029,000, respectively. In September 1987, the Company and all other stockholder members of Wakefern, entered into an agreement, as amended in 1992, with Wakefern which provides for certain commitments and restrictions on all stockholder members of Wakefern. The agreement contains an evergreen provision providing for an indefinite term and is subject to termination ten years after the approval of 75% of the outstanding voting stock of Wakefern. Under the agreement, each stockholder, including the Company, agreed to purchase at least 85% of its merchandise in certain defined product categories from Wakefern and, if it fails to meet such requirements, to make payments to Wakefern based on a formula designed to compensate Wakefern for its lost profit. Similar payments are due if Wakefern loses volume by reason of the sale of one or more of a stockholder's stores, merger with another entity or on the transfer of a controlling interest in the stockholder. The Company fulfilled its obligation to purchase a minimum of 85% in certain defined product categories from Wakefern for all periods presented. The Company's merchandise purchases from Wakefern, including direct store delivery vendors processed by Wakefern, approximated $444,000,000, $416,000,000 and $404,000,000 for the fiscal years 1997, 1996 and 1995, respectively. Note 4 - Related Party Transactions - (continued) Wakefern Food Corporation - (continued) Wakefern charges the Company for, and provides the Company with product and support services in numerous administrative functions. These services include advertising, insurance, supplies, technical support for communications and electronic payment systems, equipment purchasing and the coordination of coupon processing. In addition to its investment in Wakefern, which carries only voting rights, the Company's President serves as a member of Wakefern's Board of Directors and its finance committee. Several of the Company's officers and employees also hold positions on various Wakefern committees. Other The Company has receivables from related parties that include shareholders, directors, officers and real estate partnerships. At November 1, 1997 and November 2, 1996, approximately $307,000 and $840,000 respectively, of these receivables, consist of notes bearing interest at 7% to 9%. These receivables have been classified based upon the scheduled payment terms. The remaining amounts are not due upon any specified date and do not bear interest. The Company's management has classified these loans based upon expected payment dates. Fair Value Determination of the fair value of the above receivables is not practicable due to their related party nature. As the Company's investments in Wakefern can only be sold to Wakefern at amounts that approximate the Company's cost, it is not practicable to estimate the fair value of such stock. Note 5 - Intangibles November 1, November 2, 1997 1996 Goodwill $ 3,493,000 $ 3,493,000 Favorable operating lease costs 4,685,000 4,685,000 8,178,000 8,178,000 Less accumulated amortization 3,078,000 2,703,000 $ 5,100,000 $ 5,475,000 Note 6 - Other Assets November 1, November 2, 1997 1996 Cash collateral for workers compensation insurance $ 905,000 $ 927,000 Deferred financing costs 696,000 1,156,000 Deposits 560,000 394,000 Other 686,000 1,253,000 $ 2,847,000 $ 3,730,000 Note 7- Accrued Expenses November 1, November 2, 1997 1996 Payroll and payroll related expenses $ 3,579,000 $ 3,263,000 Insurance 324,000 86,000 Sales, use and other taxes 924,000 900,000 Interest 207,000 207,000 Employee benefits 569,000 544,000 Occupancy costs 964,000 1,058,000 Real estate taxes 276,000 316,000 Other 212,000 285,000 $ 7,055,000 $ 6,659,000 Note 8 - Real Estate Transactions In order to repay indebtedness under the Revolving Credit and Term Loan agreement on a timely basis (see Note 9 Long-Term Debt), the Company developed an Asset Redeployment Program. This program consists of the sale of the assets of two supermarkets, located in Bethlehem and Whitehall, Pennsylvania, the sale of a real estate partnership interest in a non-supermarket property located in Shrewsbury, New Jersey and a shopping center in West Long Branch in which the Company operates a supermarket, the sale/leaseback or mortgaging of buildings owned by the Company and located in Linden and Aberdeen, New Jersey and the financing of equipment at three operating locations in Neptune, Piscataway and Sayreville, New Jersey. On October 8, 1997, the Company sold its Shrewsbury, New Jersey real estate partnership interest, which resulted in proceeds and a gain of $735,000. Note 8 - Real Estate Transactions - (continued) On October 6, 1997, the Company sold its West Long Branch, New Jersey real estate partnership interest, which resulted in proceeds and a gain of $140,000. On April 10, 1997, the Company sold its lessee interest in a Colonia, New Jersey location to the subtenant. The sale provided proceeds and a gain of $245,000. On February 26, 1997, the Company bought out its lease on the East Northport, New York location for $331,000, which resulted in a net loss of $342,000 after the write off of related fixed assets and expenses. On February 3, 1997, the Company bought out its lease on the Oakhurst, New Jersey location for $218,000 and had a loss on fixed assets written off $67,000. The transaction was reserved for in previous years in the amount of $261,000, therefore the transaction resulted in a net loss of $24,000. The Company had other miscellaneous transactions that resulted in a net loss of $97,000 in fiscal year 1997. On May 23, 1995, the Company sold its two operating locations in Pennsylvania to another Wakefern member (see Note 16 Commitments and Contingencies). The sale provided proceeds to the Company of $5,700,000 plus merchandise inventory of $2,300,000 and the return of its investment in Wakefern of $1,200,000. The proceeds were used to reduce outstanding debt as follows: $2,000,000 repaid Term Loan A, $3,000,000 was applied against Term Loan B, $1,200,000 of equipment leases were fully repaid, $900,000 repaid debt due to Wakefern and the balance of the proceeds was applied against accounts payable and the Revolving Note. The sale resulted in a loss of $96,000. On February 3, 1995, the Company sold an owned location in Neptune, New Jersey which had been operated as a supermarket until September 1993. The sale provided net proceeds of $949,000 and resulted in a gain of $570,000. Note 9 - Long-term Debt Long-term debt consists of the following: November 1, November 2, 1997 1996 Term loan C $ 9,500,000 $ 12,500,000 Stock redemption note 1,700,000 - Revolving note 3,773,000 7,809,000 Other notes payable 9,548,000 11,725,000 24,521,000 32,034,000 Less current portion 6,647,000 5,182,000 $ 17,874,000 $ 26,852,000 On February 15, 1995, the Company entered into a Revolving Credit and Term Loan Agreement ("the Agreement"), which was assigned to a financial institution and amended and restated as of May 2, 1997 and had an additional amendment as of October 28, 1997 ("the Amended Agreement"). The Amended Agreement is collateralized by substantially all of the Company's assets and provides for a total commitment of $30,200,000. The Amended Agreement provides the Company with the option to borrow any of the loan amounts in the agreement under a Eurodollar loan rate based on LIBOR. Eurodollar loans must be borrowed in multiples of $1,000,000, no more than three Eurodollar loans can be outstanding at any one time, and the Eurodollar loan term cannot exceed six months. Interest rates on the Eurodollar loans are fixed for that loan term based on the borrowing terms. The Agreement consisted of three Term Loans (A, B, and C) and a Revolving Note. The Amended Agreement consists of the remaining Term Loan C, a Stock Redemption Note and a Revolving Note. Term Loan A totaled $2,000,000, and was due within six months from closing. Term Loan B totaled $8,500,000, and was due within 1 year from closing. As of November 2, 1996, Term Loans A and B have been fully repaid. Term Loan C totaled $12,500,000 and bore interest at 1.25% over prime under the original Agreement. Under the Amended Agreement dated May 2, 1997, Term Loan C totaled $11,000,000, bears interest at .5% over prime or 2.50% over LIBOR, and is payable in quarterly installments through February 15, 2000. At November 1, 1997, the principal balance due on Term Loan C was $9,500,000 and the full balance was under a Eurodollar loan rate, expiring December 1997, with a fixed interest rate of 9.21875%. Note 9 - Long-term Debt - (continued) The Stock Redemption Note totaled $1,700,000 and was used to reimburse the funding of the redemption of the Preferred Stock on March 31, 1997. The Stock Redemption Note bears interest at .5% over prime or 2.50% over LIBOR, and is payable in quarterly installments commencing March 31, 1998 through February 15, 2000. At November 1, 1997, the entire Stock Redemption Note was under a Eurodollar loan rate, expiring December 1997, with a fixed interest rate of 9.21875%. The Revolving Note, with a total availability, based on 60% of eligible inventory, of up to $17,500,000, bears interest at .25% over prime (1.25% over prime under the original Agreement) or 2.25% over LIBOR. A commitment fee of 1/2 of 1 percent is charged on the unused portion of the Revolving Note. At November 1, 1997, $1,800,000 of the revolving note was under a Eurodollar loan rate, expiring December 1997, with a fixed interest rate of 8.96875%. The remaining principal balance of $1,973,000 was at a rate of 8.75% (prime plus .25%). The prime rate on November 1, 1997 was 8.50% and on November 1, 1996 was 8.25%. The Revolving Note matures February 15, 2000. The Company had a $2,000,000 letter of credit outstanding at November 1, 1997 and November 2, 1996 and available credit under the revolving note was $11,727,000 and $7,691,000, respectively. All cash receipts are required to be deposited each day and applied against the Revolving Note balance. Disbursements are charged as they are paid and increase the Revolving Note balance. As of November 1, 1997 and November 2, 1996, $5,201,000 and $4,904,000 of cash receipts on hand or in transit were restricted for application against the Revolving Note balance. The Amended Agreement contains certain affirmative and negative covenants which, among other matters, restrict payment of common dividends, and require the maintenance of a debt service ratio. Pursuant to the provisions of loan agreements which terminated on February 15, 1995, the Company was required to pay a special premium totaling $1,100,000. Additionally, the Company paid the new lenders a facility fee of $1,000,000 and an annual administrative fee of $150,000. The Company recorded an extraordinary write-off of $1,848,000 in 1995 on the early extinguishment of debt. Note 9 - Long-term Debt - (continued) On January 25, 1996, the Company financed, and pledged as collateral, equipment which cost approximately $9,942,000. The note for $4,068,000 bears interest at 10.58% and is payable in monthly installments over its four year term. At November 1, 1997 and November 2, 1996, the balance outstanding on this loan was $2,578,000 and $3,503,000, respectively and is included in other notes payable. Term Loan B was fully repaid from the proceeds of this equipment financing and from the collection of other non-operating assets. The balance of other notes payable consists of various equipment loans. These notes bear interest ranging from 5.87% to 10.58% and the due dates range from March 1999 to November 2004. At November 1, 1997 and November 2, 1996, property and equipment which cost approximately $20,371,000, was pledged as collateral for these notes. Aggregate maturities of long-term debt are as follows: Fiscal Year 1998 $ 6,647,000 1999 6,619,000 2000 7,756,000 2001 772,000 2002 843,000 Thereafter 1,884,000 As of November 1, 1997, the fair value of long-term debt was approximately equivalent to its carrying value, due to the fact that the interest rates currently available to the Company for debt with similar terms are approximately equal to the interest rates for its existing debt. Note 10 - Long-term Debt, Related Party As of November 1, 1997 the Company was indebted for an investment in Wakefern in the amount of $757,000 and to Insure-Rite, Ltd. in the amount of $1,778,000 (see Note 4). The debt is non-interest bearing and payable in scheduled installments as follows: Fiscal Year 1998 $ 738,000 1999 1,263,000 2000 182,000 2001 182,000 2002 170,000 Determination of the fair value of the above long-term debt is not practicable due to its related party nature. Note 11 - Other Long-term Liabilities November 1, November 2, 1997 1996 Deferred escalation rent $ 4,409,000 $ 3,975,000 Deferred compensation 859,000 760,000 Other 753,000 594,000 $ 6,021,000 $ 5,329,000 Note 12 - Long-term Leases Capital Leases November 1, November 2, 1997 1996 Real estate $ 19,443,000 $ 15,259,000 Less accumulated amortization 5,406,000 4,600,000 $ 14,037,000 $ 10,659,000 On February 3, 1997, the Company sold the Aberdeen, New Jersey store at a sale price of $2,300,000 which resulted in a gain of $199,000. The store was leased back for a lease term of twenty-five years. The lease was capitalized and the gain was deferred and will be amortized over the life of the lease. The following is a schedule by year of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments, as of November 1, 1997: Fiscal Year 1998 $ 2,087,000 1999 2,087,000 2000 2,087,000 2001 2,101,000 2002 2,251,000 Thereafter 26,605,000 Total minimum lease payments 37,218,000 Less amount representing interest 19,424,000 Present value of net minimum lease payments 17,794,000 Less current maturities 469,000 Long-term maturities $ 17,325,000 Included in the above are four leases on stores, one of which is being leased from a partnership in which the Company has a 40% limited partnership interest at annual lease payments of $663,000 in fiscal 1997, and $628,000 in fiscal 1996 and 1995. The 40% interest was sold on October 6, 1997. Note 12 - Long-term Leases - (continued) Operating Leases The Company is obligated under operating leases for rent payments expiring at various dates through 2021. Certain leases provide for the payment of additional rentals based on certain escalation clauses and six leases require a further rental payment based on a percentage of the stores annual sales in excess of a stipulated minimum. Percentage rent expense was $219,000, $225,000 and $206,000 for the fiscal years 1997, 1996 and 1995, respectively. Under the majority of the leases, the Company has the option to renew for additional terms at specified rentals. Total rental expense for all operating leases consists of: Fiscal 1997 Fiscal 1996 Fiscal 1995 Land and buildings $ 10,471,000 $ 9,824,000 $ 10,152,000 Less subleases (1,963,000) (2,140,000) (1,920,000) $ 8,508,000 $ 7,684,000 $ 8,232,000 The minimum rental commitments under all noncancellable operating leases reduced by income from noncancellable subleases at November 1, 1997 are as follows: Income from Fiscal Land and Noncancellable Net Rental Year Buildings Subleases Commitment 1998 $ 9,389,000 $ 1,538,000 $ 7,851,000 1999 9,385,000 1,199,000 8,186,000 2000 8,885,000 595,000 8,290,000 2001 8,406,000 506,000 7,900,000 2002 7,734,000 201,000 7,533,000 Thereafter 67,739,000 161,000 67,578,000 $ 111,538,000 $ 4,200,000 $ 107,338,000 The Company is presently leasing one of its supermarkets, a garden center and liquor store, from a partnership in which the president has an interest, at an annual aggregate rental of $645,000, $591,000 and $560,000 for the fiscal years 1997, 1996 and 1995, respectively. Note 13 - Mandatory Redeemable Preferred Stock As of February 16, 1993, the Company received $1,700,000 for the issuance of 136,000 shares of Preferred Stock at $12.50 par value per share to Wakefern Food Corporation. These securities were issued partially to fund capital expenditures made in fiscal 1992. Note 13 - Mandatory Redeemable Preferred Stock - (continued) Dividends on the Preferred Stock are cumulative, accrue at an annual rate of 8% for the first four years and increase by 2% per year thereafter until redeemed, and are payable when and as declared by the Company's board of directors. The Preferred Stock was redeemed and canceled on March 31, 1997, at par value, for $1,700,000. As of the redemption date, all dividends had been declared and paid. Note 14 - Stock Options On May 10, 1995, the Company's shareholders approved the Foodarama Supermarkets, Inc. 1995 Stock Option Plan which provides for the granting of options to purchase up to 100,000 common shares until January 31, 2005, at prices not less than fair market value at the date of the grant. Options granted under the plan vest over a period of three years from the date of grant. At November 1, 1997, no options had been granted. Note 15 - Income Taxes The income tax provision (benefit) consists of the following: Fiscal 1997 Fiscal 1996 Fiscal 1995 Federal: Current $ - $ - $ 412,000 Deferred 526,000 114,000 (699,000) State and local: Current - 203,000 135,000 Deferred 100,000 22,000 (7,000) $ 626,000 $ 339,000 $ (159,000) Note 15 - Income Taxes - (continued) The following tabulations reconcile the federal statutory tax rate to the effective rate: Fiscal Fiscal Fiscal 1997 1996 1995 Tax provision at the statutory rate 34.0 % 34.0 % 34.0% State and local income tax provision, net of federal income tax 5.9 % 5.9 % 9.0% Goodwill amortization not deductible for tax purposes 2.9 % 2.8 % - Officers' life insurance income not includable for tax purposes (0.1)% (2.0)% - Adjustment to prior years tax provision (6.3)% (2.7)% - Adjustment to contingent tax liabilities - (19.0)% - Other 0.6 % .5 % 2.5% Actual tax provision 37.0 % 19.5 % 45.5% Net deferred tax assets and liabilities consist of the following: November 1, November 2, 1997 1996 Current deferred tax assets: Reserves $ 654,000 $ 687,000 Other 646,000 581,000 1,300,000 1,268,000 Current deferred tax liabilities: Patronage dividend receivable (1,401,000) (1,426,000) Inventories (194,000) (291,000) Prepaid pension (451,000) (316,000) Other (199,000) (496,000) (2,245,000) (2,529,000) Current deferred income tax liability $ (945,000) $ (1,261,000) Noncurrent deferred tax assets: Alternative minimum tax credits $ 66,000 $ 230,000 State loss carryforward 664,000 630,000 Investment tax credits - 1,089,000 Lease obligations 1,532,000 1,233,000 Other 380,000 397,000 2,642,000 3,579,000 Note 15 - Income Taxes - (continued) Noncurrent deferred tax liabilities: Depreciation of fixed assets (4,606,000) (5,285,000) Pension obligations (347,000) (311,000) Other (1,517,000) (869,000) (6,470,000) (6,465,000) Noncurrent deferred income tax liability $(3,828,000) $(2,886,000) Note 16 - Commitments and Contingencies Legal Proceedings The Company is involved in various legal actions and claims arising in the ordinary course of business. Management believes that the outcome of any such litigation and claims will not have a material effect on the Company's financial position or results of operations. Guarantees The Company remains contingently liable under leases assumed by third parties. As of November 1, 1997, the minimum annual rental under these leases amounted to approximately $428,000, expiring at various dates through 2000. The Company has not experienced and does not anticipate any material nonperformance by such third parties. Contingencies In May, 1995 the Company sold its two operating locations in Pennsylvania. If the purchaser of these supermarkets ceases to operate prior to May, 2000 the Company may be liable for an unfunded pension withdrawal liability. As of November 1, 1997 the potential withdrawal liability was approximately $860,000. The Company fully anticipates that the purchaser of these stores, a Wakefern member, will remain in operation throughout this period. Note 17 - Retirement and Benefit Plans Defined Benefit Plans The Company sponsors two defined benefit pension plans covering administrative personnel and members of a union. Employees covered under the administrative pension plan earn benefits based upon percentage of annual compensation and may make voluntary contributions to the plan. Employees covered under the union pension benefit plan earn benefits based on a fixed amount for each year of service. The Company's funding policy is to pay at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. The plans' assets consist primarily of publicly traded stocks and fixed income securities. As of November 1, 1997 and November 2, 1996, the plans held at fair market value $688,000 and $523,000 in common stock of the Company. Net pension expense consists of the following: Fiscal Fiscal Fiscal 1997 1996 1995 Service cost - benefits earned during the period $ 296,000 $ 308,000 $ 276,000 Interest cost on projected benefit obligation 466,000 445,000 398,000 Actual return on plan assets (675,000) (621,000) (404,000) Net amortization and deferral 277,000 360,000 154,000 Net pension cost $ 364,000 $ 492,000 $ 424,000 On September 30, 1997, the Company adopted an amendment to freeze all future benefit accruals relating to the plan covering administrative personnel. A curtailment gain of $55,000 was recorded relating to this amendment. The following table sets forth the two pension plan's funded status and amounts recognized in the Company's consolidated financial statements at November 1, 1997 and November 2, 1996. November 1, November 2, 1997 1996 Actuarial present value of benefit obligations: Vested benefits obligation $ 5,162,000 $ 5,106,000 Non-vested benefits obligation 336,000 218,000 Accumulated benefit obligations $ 5,498,000 $ 5,324,000 Note 17 - Retirement and Benefit Plans - (continued) Defined Benefit Plans - (continued) Projected benefit obligations $(5,498,000) $ (6,569,000) Plan assets at fair value 6,206,000 5,658,000 Plan assets in excess of projected benefit obligations 708,000 - Projected benefit obligations in excess of plan assets - (911,000) Unrecognized transition asset (27,000) (36,000) Unrecognized prior service costs 348,000 381,000 Unrecognized loss from prior experience, amortized over eleven and eight years 84,000 1,345,000 Prepaid pension cost $ 1,113,000 $ 779,000 The discount rate used in determining the actuarial present value of the projected benefit obligation ranged from 7.25% to 7.5% at November 1, 1997 and was 7.5% at November 2, 1996. The expected long-term rate of return on plan assets was 8% at November 1, 1997 and November 2, 1996. The rate of increase in future compensation levels was 4% at November 1, 1997 and November 2, 1996. Multi-Employer Plan Health, welfare and retirement expense was approximately $6,354,000 in fiscal 1997, $6,036,000 in fiscal 1996 and $5,942,000 in fiscal 1995 under plans covering union employees. Such plans are administered through the unions involved. Under U.S. legislation regarding such pension plans, a company is required to continue funding its proportionate share of a plan's unfunded vested benefits in the event of withdrawal (as defined by the legislation) from a plan or plan termination. The Company participates in a number of these pension plans and may have potential obligation as a participant. The information required to determine the total amount of this contingent obligation, as well as the total amount of accumulated benefits and net assets of such plans, is not readily available. However, the Company has no present intention of withdrawing from any of these plans, nor has the Company been informed that there is any intention to terminate such plans. (see Note 16). Note 17 - Retirement and Benefit Plans - (continued) 401(k)/Profit Sharing Plan The Company maintains an employee 401(k) Savings Plan for all qualified non-union employees. Employees are eligible to participate in the Plan after completing one year of service (1,000 hours) and attaining age 21. Employee contributions are discretionary to a maximum of 15% of compensation. Effective October 1, 1997, the Company matches 25% of the employees' contributions up to 6% of employee compensation. The Company has the right to make additional discretionary contributions which are allocated to each eligible employee in proportion to their compensation. 401(k) expense for the fiscal year ended November 1, 1997 was approximately $12,000. Note 18 - Other Postretirement and Postemployment Benefits Postretirement Benefits The Company provides certain current and former officers with supplemental income payments and limited medical benefits during retirement. The Company recorded an estimate of deferred compensation payments to be made to the officers based on their anticipated period of active employment, the relevant actuarial assumptions at November 1, 1997 and November 2, 1996, respectively. The Company purchased life insurance to partially fund this obligation. The participants have agreed to certain non-compete arrangements and to provide continued service availability for consulting services after retirement. Net periodic postretirement benefit cost expense consists of the following: Fiscal Fiscal Fiscal 1997 1996 1995 Service cost - benefits earned during the period $ 18,000 $ 16,000 $ 13,000 Interest cost 90,000 83,000 80,000 Net amortization and deferral 38,000 30,000 35,000 Net periodic postretirement benefit cost $ 146,000 $ 129,000 $128,000 The following table sets forth the funded status and amounts recognized in the Company's consolidated financial statements at November 1, 1997 and November 2, 1996. Note 18 - Other Postretirement and Postemployment Benefits - (continued) Postretirement Benefits - (continued) November 1, November 2, 1997 1996 Accumulated postretirement benefit obligation $ 1,309,000 $ 1,240,000 Unrecognized net loss, amortized over eleven and nine years (414,000) (480,000) Unrecognized prior service cost, amortized over ten years (36,000) - Accrued postretirement benefit cost $ 859,000 $ 760,000 The assumed discount rate used in determining the postretirement benefit obligation as of November 1, 1997 and November 2, 1996 was 7.5% and 8%, respectively. Postemployment Benefits Effective October 29, 1994, the Company adopted SFAS No. 112. Under SFAS No. 112, the Company is required to accrue the expected cost of providing postemployment benefits, primarily short-term disability payments, over the working careers of its employees. The Company previously expensed the cost of these benefits as claims were paid. The effect of this change as of October 29, 1994 resulted in a charge to income of $129,000, net of an income tax benefit of $107,000, and has been presented as a cumulative effect of a change in accounting method in the accompanying consolidated statement of operations for fiscal 1995. The accrued liability under SFAS No. 112 as of November 1, 1997 and November 2, 1996 was $384,000 and $306,000, respectively. Note 19- Noncash Investing and Financing Activities A capital lease obligation of $4,184,000 was incurred when the Company entered into a lease for a store in a sale/leaseback transaction during the year ended November 1, 1997. Note 19- Noncash Investing and Financing Activities - (continued) During the year ended November 2, 1996, the Company acquired additional property and equipment for $13,181,000. In conjunction with the acquisition, liabilities were assumed as follows: Cost of property and equipment acquired $ 13,181,000 Cash paid (6,645,000) Liabilities assumed $ 6,536,000 In addition, a capital lease obligation of $5,610,000 was incurred in fiscal 1996 when the Company entered into a lease for a new store. The Company was required to make an additional investment in Wakefern for $900,000 for the two new stores opened during the year ended November 2, 1996. In conjunction with the investment, liabilities were assumed for the same amount. At November 2, 1996, the additional minimum liability of $880,000, the related intangible of $74,000 and the direct charge to equity of $806,000 was reversed since the Company's defined benefit plans assets exceeded the accumulated benefit obligations. Note 20 - Unaudited Summarized Consolidated Quarterly Information Summarized quarterly information for the years ended November 1, 1997 and November 2, 1996 was as follows: Thirteen Weeks Ended February 1, May 3, August 2, November 1, 1997 1997 1997 1997 (Dollars in thousands, except per share data) Sales $ 163,356 $ 155,986 $ 161,128 $ 156,261 Gross profit 40,588 39,766 40,904 39,709 Net income 176 72 245 571 Mandatory preferred stock dividend requirement (34) (23) - - Earnings available to common stock 142 49 245 571 Earnings available per common share .13 .04 .22 .51 Note 20 - Unaudited Summarized Consolidated Quarterly Information - (continued) Thirteen - Fourteen Weeks Ended January 27, April 27, July 27, November 2, 1996 1996 1996 1996 (Dollars in thousands, except per share data) Sales $ 146,303 $ 140,815 $ 147,793 $ 166,232 Gross profit 36,540 35,525 37,756 42,245 Net income 496 374 320 206 Mandatory preferred stock dividend requirement (34) (34) (34) (34) Earnings available to common stock 462 340 286 172 Earnings available per common share .41 .31 .25 .16 Note 21 - Subsequent Events On November 14, 1997, the Company obtained additional financing on the Revolving Credit and Term Loan Agreement (Note 9) of $1,500,000. This additional financing ("Expansion loan") was used to purchase a building in Linden, New Jersey at a cost of $600,000 on November 14, 1997. The remaining balance of the loan will be used to renovate the building and add additional equipment. The expansion loan is collateralized by the building, all improvements and equipment. The note will be payable in monthly installments of $12,500 plus interest at a fixed rate of 9.18%, maturing December 1, 2004. The Revolving Credit and Term Loan Agreement was amended January 15, 1998. The amendment adjusted the interest rate for the Term Loan C and the stock redemption loan to a fixed rate of 8.38% for the remaining term of the loans. Additions Balance Charge to Charge to Balance at beginning costs and other at end Description of year expenses accounts Deductions of year Fiscal year ended 11/1/97: Allowance for doubtful accounts (deducted from receivables and other current assets)$ 665,000 $ 120,000 $ - $ 312,000 (1) $473,000 Fiscal year ended 11/2/96: Allowance for doubtful accounts (deducted from receivables and other current assets)$ 516,000 $ 149,000 $ - $ - $ 665,000 Fiscal year ended 10/28/95: Allowance for doubtful accounts (deducted from receivables and other current assets)$ 779,000 $ - $ - $ 263,000 (1)$ 516,000 (1) Accounts deemed to be uncollectible. S-1 Schedule X c. Exhibits 3. Articles of Incorporation and By-Laws *i. Restated Certificate of Incorporation of Registrant filed with the Secretary of State of the State of New Jersey on May 15, 1970. *ii. Certificate of Merger filed with the Secretary of State of the State of New Jersey on May 15, 1970. *iii. Certificate of Merger filed with the Secretary of State of the State of New Jersey on March 14, 1977. *iv. Certificate of Merger filed with the Secretary of State of the State of New Jersey on June 23, 1978. *v. Certificate of Amendment to Restated Certificate of Incorporation filed with the Secretary of State of the State of New Jersey on May 12, 1987. **vi. Certificate of Amendment to Restated Certificate of Incorporation filed with the Secretary of State of the State of New Jersey on February 16, 1993. ******vii. Amendment to the Certificate of Incorporation of the Registrant dated April 4, 1996. **viii. By-Laws of Registrant. *ix. Amendments to By-Laws of Registrant adopted September 14,1983. x. Amendment to By-Laws of Registrant adopted March 15, 1991 is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended November 2, 1991 filed with the Securities and Exchange Commission on February 18, 1992. * Each of these Exhibits is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended October 29, 1988 filed with the Securities and Exchange Commission on February 13, 1989. ** Each of these Exhibits is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended October 31, 1992 filed with the Securities and Exchange Commission on February 19, 1993. E-1 10. Material Contracts. i. The Agreement dated September 18, 1987 entered into by Wakefern Food Corporation and the Registrant is incorporated herein by reference to Exhibit A to the Registrant's Form 8-K filed with the Securities and Exchange Commission on November 19, 1987. ***ii. Certificate of Incorporation of Wakefern Food Corporation together with amendments thereto and certificates of merger. ***iii. By-laws of Wakefern Food Corporation. iv. Purchase Agreement, dated March 10, 1989, by and between Hilltop Supermarkets, Inc. and the Registrant is incorporated herein by reference to Exhibit (2)(i) to the registrant's Form 8-K filed with the Securities and Exchange Commission on April 4, 1989. v. Agreement, dated March 10, 1989, by and between Afta Equipment Leasing Co., an affiliate of Hilltop Supermarkets, Inc., and the Registrant is incorporated herein by reference to Exhibit (2)(i) to the Registrant's Form 8-K filed with the Securities and Exchange Commission on April 4, 1989. ***vi. Agreements between the Registrant and the principals of Hilltop Supermarkets, Inc. ***vii. Credit Agreement, dated as of March 16, 1989, among the Registrant, each of the Banks which are a signatory thereto and The Chase Manhattan Bank (National Association). ***viii. Amendment No.1 to the Credit Agreement, dated as of June 16, 1989, among the Registrant, each of the Banks which are a signatory thereto and The Chase Manhattan Bank (National Association). ***ix. Note Purchase Agreements, dated as of June 1, 1989, between the Registrant and various institutional Lenders. *** Each of these Exhibits is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended October 28, 1989 filed with the Securities and Exchange Commission on February 9, 1990. E-2 ***x. Letter Agreement, dated January 25, 1990, among the Registrant, the Banks which are parties to the Credit Agreement, dated as of March 16, 1989, and each of institutional lenders who issued senior secured notes pursuant to the several Note Agreements, dated as of June 1, 1989 between each such institutional investor and the Registrant. ***xi. Form of Deferred Compensation Agreement, between the Registrant and certain of its key employees. xii. Registrant's 1987 Incentive Stock Option Plan is incorporated herein by reference to Exhibit 4 (a) to the Registrant's Form S-8 filed with the Securities and Exchange Commission on May 26, 1989. xiii. Amendment No. 2 to the Credit Agreement, dated as of January 25, 1990, among the Registrant, each of the Banks which are a signatory thereto and The Chase Manhattan Bank (National Association) is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended November 3, 1990 filed with the Securities and Exchange Commission on February 20, 1991. ****xiv. Amendment No. 3 to the Credit Agreement, dated as of February 5, 1992, among the Registrant, each of the Banks which are a signatory thereto and The Chase Manhattan Bank (National Association). **** Each of these Exhibits is incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended November 2, 1991, filed with the Securities and Exchange Commission on February 18, 1992. **xv. Amendment No. 4 to the Credit Agreement, dated as of February 12, 1993, among the Registrant, each of the Banks which are a signatory thereto and The Chase Manhattan Bank (National Association). ****xvi. Modification Letter to Note Purchase Agreement, dated as of June 1, 1989, between the Registrant and various Institutional Lenders. ****xvii. Amendment Letter to Note Purchase Agreement, dated as of August 10, 1989, between the Registrant and various Institutional Lenders. ****xviii. Modification Letter to Note Purchase Agreement, dated as of February 5, 1992, between the Registrant and various Institutional Lenders. **xix. Modification Letter to Note Purchase Agreement, dated as of February 16, 1993, between the Registrant and various Institutional Lenders. *****xx. Agreement, dated September 20, 1993, between the Registrant, ShopRite of Malverne, Inc. and The Grand Union Company. xxi. Revolving Credit and Term Loan Agreement, dated as of February 15, 1995 between the Registrant and NatWest Bank as agent for a group of banks is incorporated herein by reference to the Registrant's Form 8-K filed with the Securities and Exchange Commission on July 10, 1995. xxii. Asset Purchase Agreement dated April 20, 1995 and Amendment No. 1 to the Agreement dated May 24, 1995 between the Registrant and Wakefern Food Corp. is incorporated herein by reference to the Registrant's Form 8-K filed with the Securities and Exchange Commission on July 27, 1995. ***** Incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the year ended October 30, 1993, filed with the Securities and Exchange Commission on February 24, 1994. E-4 xxiii. Amendment of Revolving Credit and Term Loan Agreement, dated as of January 25, 1996, between the Registrant and each of the banks which are signatory thereto is incorporated herein by reference to the Registrant's Form 10-Q for the quarterly period ended January 27, 1996, filed with the Securities and Exchange Commission on March 12, 1996. ******xxiv. Agreement, dated as of March 29, 1996, between the Registrant and Wakefern Food Corporation. ******xxv. Amendment of Revolving Credit and Term Loan Agreement, dated as of May 10, 1996, between the Registrant and each of the Banks which are signatory thereto. xxvi. Waiver and Amendment of Revolving Credit and Term Loan Agreement, dated as of July 26, 1996, between the Registrant and each of the Banks which are signatory thereto is incorporated herein by reference to the Registrant's Form 10-Q for the quarterly period ended July 27, 1996, filed with the Securities and Exchange Commission on September 10, 1996. *******xxvii. Amended and Restated Revolving Credit and Term Loan Agreement, dated as of May 2, 1997, between the Registrant and the Financial Institution which are signatory thereto. xxviii. First Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, dated October 28, 1997, between the Registrant and the Financial Institution which are signatory thereto. xxix. Consent and Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement and other loan documents, dated November 14, 1997, between the Registrant and the Financial Institution which are signatory thereto. xxx. Third Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, dated January 15, 1998, between the Registrant and the Financial Institution which are signatory thereto. ****** Incorporated herein by reference to the Registrant's Form 10-Q for the quarterly period ended April 27, 1996, filed with the Securities and Exchange Commission on June 10, 1996. ******* Incorporated herein by reference to the Registrant's Form 10-Q for the quarterly period ended May 3, 1997, filed with the Securities and Exchange Commission on June 16, 1997. E-5 Exhibit 21 LIST OF SUBSIDIARIES OF FOODARAMA SUPERMARKETS, INC. Name of Subsidiary State of Incorporation ShopRite of Malverne, Inc. New York New Linden Price Rite, Inc. New Jersey ShopRite of Reading, Inc. Pennsylvania E-6 MATERIAL CONTRACT XXVIII FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT__________________ (this "Amendment") is made and entered into this ______ day of October 1997, by and among FOODARAMA SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE, INC. ("New Linden"), SHOP RITE OF READING, INC. ("Reading", and together with New Linden, each a "Borrower" and collectively, "Borrowers"), the Guarantors signatory hereto and HELLER FINANCIAL, INC., as Agent for the Lenders party to the Credit Agreement described below (in such capacity, "Agent"). WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are parties to a certain Amended and Restated Revolving Credit and Term Loan Agreement dated May 2, 1997 (as amended, the "Loan Agreement"); and WHEREAS, the parties desire to amend the Loan Agreement as hereinafter set forth; NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such term in the Loan Agreement. 2. Amendments. Article I "Definitions" of the Loan Agreement is amended by deleting the definition of "Applicable Margin" in its entirety and replacing it with the following: "Applicable Margin" shall mean (i) in the case of Loans which are Base Rate Loans, (x) one-quarter of one percent (.25%) if such Base Rate Loans are Revolving Loans, and (y) one-half of one percent (.50%) if such Base Rate Loans are Term Loans or Stock Redemption Loans; and (ii) in the case of Loans which are Eurodollar Loans, (x) two and one-quarter percent (2.25%) if such Eurodollar Loans are Revolving Loans, and (y) two and one-half percent (2.50%) if such Eurodollar Loans are Term Loans or Stock Redemption Loans. 3. Conditions. The effectiveness of this Amendment is subject to the following conditions precedent (unless specifically waived in writing by Agent): A. There shall have occurred no material adverse change in the business, operations, financial condition, profits or prospects of Parent, Borrowers or Guarantors, or in the Collateral; B. Parent, Borrowers and Guarantors shall have executed and delivered such other documents and instruments as Agent may require; C. All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel; and D. No Default or Event of Default under the Loan Agreement as amended hereby shall have occurred and be continuing. 5. Corporate Action. The execution, delivery, and performance of this Amendment has been duly authorized by all requisite corporate action on the part of Parent, Borrowers and Guarantors and this Amendment has been duly executed and delivered by Parent, Borrowers and Guarantors. 6. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 7. References. Any reference to the Loan Agreement contained in any of the other Loan Documents or in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require. 8. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument. 9. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions of the Loan Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above. FOODARAMA SUPERMARKETS, INC., as Parent and as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:_______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF READING, INC., as Borrower and as Guarantor By:______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF MALVERNE, INC., as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO HELLER FINANCIAL, INC., as Agent and Lender By:______________________________ Dwayne L. Coker Title: Vice President MATERIAL CONTRACT XXIX CONSENT AND SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT AND OTHER LOAN DOCUMENTS THIS CONSENT AND SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT__________________ AND OTHER LOAN DOCUMENTS (this "Amendment") is made and entered into this ______ day of November, 1997 by and among FOODARAMA SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE, INC. ("New Linden"), SHOP RITE OF READING, INC. ("Reading", and together with New Linden, each a "Borrower" and collectively, "Borrowers"), the Guarantors signatory hereto and HELLER FINANCIAL, INC., as Agent for the Lenders party to the Credit Agreement described below (in such capacity, "Agent"). WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are parties to a certain Amended and Restated Revolving Credit and Term Loan Agreement dated May 2, 1997 (as amended, the "Loan Agreement"); and WHEREAS, the parties desire to amend the Loan Agreement and modify certain other Loan Documents executed and delivered pursuant to the Loan Agreement as hereinafter set forth; WHEREAS, Agent and Lenders have also agreed to consent to the incurrence by Parent of additional secured indebtedness pursuant to the Asset Redeployment Program contemplated by the Loan Agreement as described below; NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such term in the Loan Agreement. 2. Amendments to Loan Agreement. The Loan Agreement is amended as follows: A. Article I is amended by inserting, in proper alphabetical order, the following new definitions: "Expansion Loan" shall mean the $1,500,000 term loan made by Heller to Parent pursuant to the terms of the Expansion Loan Documents. "Expansion Loan Documents" shall mean the $1,500,000 Promissory Note of even date herewith of Parent payable to the order of Heller, the Security Agreement dated as of November ___, 1997 between Parent and Heller and the Mortgage, Assignment of Rents and Security Agreement dated as of November ___, 1997 by Parent in favor of Heller. "Expansion Loan Obligations" shall mean that portion of the Obligations described in clause (b) of the definition of the term "Obligations" in this Article, regardless of whether Heller is the holder thereof. B. Article I is further amended by deleting the definitions of "Loan Documents," "Obligations," and "Security Documents" in their entirety and replacing them with the following: "Loan Documents" shall mean this Agreement, each Security Document, the Notes, the Intercreditor Agreement, any letter of credit applications with respect to Letters of Credit and each other document, instrument, or agreement now or hereafter delivered to the Agent, any Lender or Heller in connection herewith or therewith, expressly excluding the Expansion Loan Documents. "Obligations" shall mean (a) all obligations, liabilities and Indebtedness of the Parent, any Borrower and/or any Guarantor to the Lenders, the Agent and/or Heller, whether now existing or hereafter created, direct or indirect, due or not, whether created directly or acquired by assignment, participation or otherwise, under or with respect to this Agreement, the Notes, the Security Documents and the other Loan Documents, including without limitation, the principal of and interest on the Loans and the payment or performance of all other obligations, liabilities, and Indebtedness of the Parent, any Borrower and/or any Guarantor to the Lenders, the Agent and/or Heller hereunder, under or with respect to the Letters of Credit or under any one or more of the other Loan Documents, including but not limited to all fees, costs, expenses and indemnity obligations hereunder and thereunder expressly excluding the Expansion Loan Obligations, and (b) for so long as Heller holds both the obligations described in clause (a) above, and those described in this clause (b), all other obligations, liabilities and Indebtedness of the Parent, any Borrower and/or any Guarantor to Heller, whether now existing or hereafter created, under or with respect to the Expansion Loan Documents, including but not limited to, the principal of and interest on the Expansion Loan and all fees, costs, expenses and indemnity obligations under the Expansion Loan Documents (but not including any refinancing of all or any portion thereof by any Person other than Heller). "Security Documents" shall mean the Pledge Agreement, the Security Agreement, the Security Agreement (Partnership Interests), the Mortgages and each other agreement now existing or hereafter created providing collateral security for the payment or performance of any Obligations, other than the Expansion Loan Obligations. C. Section 2.07 is amended by deleting paragraph (b) in its entirety and replacing it with the following: (b) Simultaneously with any termination of the Total Revolving Commitment pursuant to paragraph (a) of this Section 2.07, the Borrower shall (i) pay to the Agent for the account of the Lenders, the Commitment Fee due and owing through and including the date of such termination on the amount of the Revolving Commitment and Stock Redemption Facility commitment of such Lender and (ii) terminate all other Commitments under this Agreement and repay all of the Obligations (other than the Expansion Loan Obligations). D. Section 2.09 is amended by deleting paragraph (b) thereof in its entirety and substituting the following therefor: (b) On the date of any termination of the Total Revolving Commitment pursuant to Section 2.07(a) hereof or elsewhere in this Agreement, the Borrowers shall pay the aggregate principal amount of all Loans then outstanding, together with interest to the date of such payment and all fees and other amounts due under this Agreement (other than fees and other amounts in connection with the Expansion Loan Obligations) and deposit in a cash collateral account with the Agent on terms satisfactory to the Agent an amount equal to 105% of the amount of the Letter of Credit Usage. E. Section 2.09 is further amended by adding the following sentence to the end of clause (iv) of paragraph (e): (iv) Notwithstanding anything to the contrary contained in this paragraph (e), no prepayment of the Obligations shall be due upon the Parent's or any of its subsidiaries' receipt of any net proceeds of any insurance referred to in this paragraph (e) or in Section 6.03 hereof, if such net proceeds constitute proceeds in respect of assets (and/or business operations relating thereto) subject to a lien permitted under the Loan Documents in favor of any person or entity other than Heller, unless such lien is subordinate to the Liens granted under the Security Documents. F. Section 2.09 is further amended by deleting paragraph (f) thereof in its entirety and substituting the following therefor: (f) Subject to paragraph (e)(ii) above, all prepayments made pursuant to the foregoing clause (e)(i) shall be applied in a manner set forth in paragraph (g) below. G. Section 2.09 is further amended by deleting the third sentence of paragraph (g) and replacing it with the following: Prepayments made pursuant to paragraph (d) (other than paragraph (d)(i)) or (e)(i)(x) above shall be applied to the repayment of the Stock Redemption Loans, with any excess to be applied to the repayment of the Term Loan, any further excess to be applied to the repayment of the Revolving Loans, and if the Stock Redemption Loans, the Term Loan and the Revolving Loans have been repaid in full and the Commitment has terminated, any further excess to be applied to the repayment of the Expansion Loan Obligations in accordance with the terms of the Expansion Loan Documents (with respect to the Term Loan and the Stock Redemption Loans, such payment being applied to installments in inverse order of maturity (in the case of prepayments of less than $1,000,000) or, if such prepayment is equal to or greater than $1,000,000, then pro rata to each installment of the Loan being repaid). H. Section 2.11 is amended by deleting such Section in its entirety and substituting the following therefor: SECTION 2.11. Pro Rata Treatment. Except as otherwise provided hereunder and subject to the provisions of Section 2.15 and 2.16 hereof, each borrowing, each payment or prepayment of principal of the Notes, each payment of interest on the Notes, each payment of any fee or other amount payable hereunder (other than payments in respect of the Expansion Loan Obligations) and each reduction of the Total Revolving Loan Commitment and/or the Total Stock Redemption Facility Commitment shall be made pro rata among the Lenders in proportions that their Commitments bear to the Total Commitment. I. Section 2.13 is amended by deleting the last sentence of paragraph (c) thereof and substituting the following therefor: If any Lender receives a refund in respect of any Taxes or Other Taxes for which such Lender has received payment from the Borrowers hereunder, such Lender shall promptly notify the Borrowers of such refund and such Lender shall, within 30 days of receipt of a request by the Borrowers, repay such refund to the Borrowers (or if there shall at such time be continuing a Default or Event of Default, pay the same to the Agent to be applied to the Obligations (other than the Expansion Loan Obligations) in such order and manner as the Agent shall choose in its discretion), provided that the Borrowers, upon the request of such Lender, agree to return such refund (whether returned to the Borrowers or applied to the Obligations (other than the Expansion Loan Obligations)) (plus any penalties, interest or other charges) to such Lender in the event such Lender is required to repay such refund. J. Article VI is amended by deleting the preamble thereto in its entirety and substituting the following therefor: The Parent and each Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect or the principal of or interest on any Note, any amount under or with respect to any Letter of Credit or any fee, expense or amount payable hereunder (other than the Expansion Loan Obligations) or in connection with any of the Transactions shall be unpaid, it will, and will cause each of its Subsidiaries and, with respect to Section 6.07 hereof, each ERISA Affiliate, to: K. Article VII is amended by deleting the preamble thereto in its entirety and substituting the following therefor: The Parent and each Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect or the principal of or interest on any Note, any amount under or with respect to any Letter of Credit or any fee, expense or amount payable hereunder (other than the Expansion Loan Obligations) or in connection with any of the Transactions shall be unpaid, it will, and will cause each of its Subsidiaries and, with respect to Section 7.15 hereof, each ERISA Affiliate, to, either directly or indirectly: L. Article VIII is amended by deleting paragraph (n)(iv) in its entirety and replacing it with the following: (iv) FOURTH, to payment of the principal of the Obligations (excluding the Expansion Loan Obligations and all Obligations with respect to the undrawn amount of Letters of Credit) ratably amongst the Lenders and Heller in accordance with the proportion which the principal amount of the Obligations (excluding the Expansion Loan Obligations and all Obligations with respect to the undrawn amount of Letters of Credit) owing to each such Lender and Heller bears to the aggregate principal amount of the Obligations (excluding the Expansion Loan Obligations and all Obligations with respect to the undrawn amount of Letters of Credit) owing to all of the Lenders and Heller until such principal of the Obligations (excluding the Expansion Loan Obligations and all Obligations with respect to the undrawn amount of Letters of Credit) shall be paid in full; M. Article VIII is further amended by deleting paragraph (n)(vi) in its entirety and replacing it with the following two paragraphs: (vi) SIXTH, to the payment of the Expansion Loan Obligations, in such order and manner as is specified in the Expansion Loan Documents; and (vii) SEVENTH, the balance if any, after all of the Obligations have been satisfied, shall, except as otherwise provided in the Security Documents, be deposited by the Agent in an operating account of the Borrowers with the Agent designated by the Borrowers, or paid over to such other person or persons as may be required by law. N. Article VIII is further amended by deleting the last paragraph thereof in its entirety and replacing it with the following: The Borrowers and the Guarantors acknowledge and agree that they shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral and collections under the Guarantees of the Obligations and the aggregate amount of the sums referred to in the first through sixth clauses above. O. Article IX is amended by deleting clause (a) of the second paragraph of such Article in its entirety and substituting the following therefor: (a) to receive on behalf of each of the Lenders any payment of principal of or interest on the Notes outstanding hereunder and all other amounts accrued hereunder (other than payments in respect of the Expansion Loan Obligations) paid to the Agent, and promptly to distribute to each Lender its proper share of all payments so received. P. Section 10.01 is amended by deleting the third sentence of paragraph (a) in its entirety and replacing it with the following: All Payments that are deposited with the Agent in accordance with the foregoing will, if deposited by 1:00 p.m. (New York time), be applied by the Agent to reduce the outstanding balance of the Revolving Loans and thereafter other Obligations then due and payable (other than the Expansion Loan Obligations), subject to final collection in cash of the item deposited and subject to Section 2.09. Q. Section 10.01 is further amended by deleting the last sentence of paragraph (b)(i) in its entirety and replacing it with the following: This power of attorney being coupled with an interest is irrevocable until all of the Obligations (other than the Expansion Loan Obligations) are paid in full and this Agreement and the Total Commitment is terminated. R. Section 11.08 is amended by adding the following new clause (iii) to the end of paragraph (b) of such Section: and (iii) that no such agreement shall amend, modify or otherwise affect the rights of Heller with respect to the Expansion Loan Obligations under this Agreement without the written consent of Heller S. Section 11.08 is further amended by deleting the last sentence of paragraph (c) in its entirety and replacing it with the following: Notwithstanding that this Agreement may not be extended, this Agreement shall continue in full force and effect, and the duties, covenants and other liabilities of the Borrowers hereunder and under the other Loan Documents shall continue in full force and effect until all Obligations have been paid in full (excluding the Expansion Loan Obligations in the event of a prepayment in full of the Loans not resulting from the liquidation of the Collateral). 2. Modifications to other Loan Documents. Certain of the Loan Documents executed and delivered pursuant to the Loan Agreement are modified as follows: A. Section 27 of the Security Agreement is amended by deleting such Section in its entirety and replacing it with the following: 27. Termination. This Agreement and the Security Interest shall terminate when all the Obligations (excluding the Expansion Loan Obligations in the event of a prepayment in full of the Loans not resulting from the liquidation of the Collateral) have been fully and indefeasibly paid in cash or in a manner otherwise satisfactory to the Agent and when the Lenders have no further commitment to make any Loans or open or cause to be opened Letters of Credit under the Credit Agreement, at which time the Agent shall forthwith assign, transfer and deliver to the Grantors such Collateral as shall not have been sold, transferred or otherwise applied or disposed of pursuant to the terms hereof, such assignment, transfer or delivery to be without any representations or warranties of any kind, and shall execute and deliver to the Grantors all Uniform Commercial Code termination statements and similar documents which the Grantors shall reasonably request to evidence such termination; provided, however, that all indemnities of the Grantors contained in this Agreement shall survive, and remain operative and in full force and effect regardless of the termination of this Agreement. B. Section 14 of the Pledge Agreement is amended by deleting such Section in its entirety and replacing it with the following: 14. Termination. This Agreement shall terminate when all Obligations (excluding the Expansion Loan Obligations in the event of a prepayment in full of the Loans not resulting from the liquidation of the Collateral) have been fully and indefeasibly paid in cash or in a manner otherwise satisfactory to the Agent and when the Lenders have no further commitment to make Loans or open or cause to be opened Letters of Credit under the Credit Agreement, at which time the Agent shall reassign and deliver to the Grantors, or to such person or persons as the Grantors shall designate, against receipt, such of the Collateral (if any) as shall not have been sold or otherwise still be held by it hereunder, together with appropriate instruments of reassignment and release; provided, however, that all indemnities of the Grantors contained in this Agreement shall survive, and remain operative and in full force and effect regardless of, the termination of this Agreement. Upon any such termination, the Agent will, at the Grantors' expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination, such execution and delivery to be without recourse to or warranty by the Agent. 4. Consent. Agent and Lenders hereby consent to the execution and delivery by Parent of the Expansion Loan Documents and its incurrence of the Expansion Loan Obligations. Agent and Lenders hereby confirm to Parent and Borrowers that (a) the Expansion Loan Obligations constitute Indebtedness permitted by Section 7.03 (i) of the Loan Agreement and (b) the Liens created by the Expansion Loan Documents constitute Liens permitted under Section 7.01(l) of the Loan Agreement. In accordance with Section 2.09(d) of the Loan Agreement, the Parent will not be required to prepay the Loans with the proceeds of the loan contemplated by the Expansion Loan Documents. 5. Conditions. The effectiveness of this Amendment is subject to the following conditions precedent (unless specifically waived in writing by Agent): A. There shall have occurred no material adverse change in the business, operations, financial condition, profits or prospects of Parent, Borrowers or Guarantors, or in the Collateral; B. Parent, Borrowers and Guarantors shall have executed and delivered such other documents and instruments as Agent may require; C. All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel; and D. No Default or Event of Default under the Loan Agreement as amended hereby shall have occurred and be continuing. 6. Corporate Action. The execution, delivery, and performance of this Amendment has been duly authorized by all requisite corporate action on the part of Parent, Borrowers and Guarantors and this Amendment has been duly executed and delivered by Parent, Borrowers and Guarantors. 7. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 8. References. Any reference to the Loan Agreement or to any other Loan Document modified hereby contained in any of the other Loan Documents or in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require. 9. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument. 10. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions of the Loan Agreement and the other Loan Documents and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above. FOODARAMA SUPERMARKETS, INC., as Parent and as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:_______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF READING, INC., as Borrower and as Guarantor By:______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF MALVERNE, INC., as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO HELLER FINANCIAL, INC., as Agent and Lender By:______________________________ Dwayne L. Coker Title: Vice President MATERIAL CONTRACT XXX THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT__________________ (this "Amendment") is made and entered into this 15th day of January 1998, by and among FOODARAMA SUPERMARKETS, INC. ("Parent"), NEW LINDEN PRICE RITE, INC. ("New Linden"), SHOP RITE OF READING, INC. ("Reading", and together with New Linden, each a "Borrower" and collectively, "Borrowers"), the Guarantors signatory hereto and HELLER FINANCIAL, INC., as Agent for the Lenders party to the Credit Agreement described below (in such capacity, "Agent"). WHEREAS, Agent, the Lenders, Parent, Borrowers and Guarantors are parties to a certain Amended and Restated Revolving Credit and Term Loan Agreement dated May 2, 1997 (as amended, the "Loan Agreement"); and WHEREAS, the parties desire to amend the Loan Agreement as hereinafter set forth; NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such term in the Loan Agreement. 2. Amendments. A. Article I of the Loan Agreement is amended by deleting the definitions of "Applicable Margin" and "Interest Payment Date" contained in said article in their entirety and replacing them with the following: "Applicable Margin" shall mean (i) in the case of Loans which are Base Rate Loans, (x) one-quarter of one percent (.25%) if such Base Rate Loans are Revolving Loans, and (y) one-half of one percent (.50%) if such Base Rate Loans are Term Loans; and (ii) in the case of Loans which are Eurodollar Loans, (x) two and one-quarter percent (2.25%) if such Eurodollar Loans are Revolving Loans, and (y) two and one-half percent (2.50%) if such Eurodollar Loans are Term Loans. "Interest Payment Date" shall mean (i) in the case of Fixed Rate and Base Rate Loans, the last Business Day of each December, March, June and September, commending June 30, 1997, and (ii) with respect to Eurodollar Loans, the last day of the Interest Period applicable thereto, and, in addition, in respect of any Eurodollar Loan of more than three (3) months' duration, each earlier day which is three (3) months after the first day of such Interest Period. Article I is further amended by inserting, in proper alphabetical order, the following new definition: "Fixed Rate Loans" shall mean (i) the Term Loan evidenced by that certain Amended and Restated Term Note C in the original amount of $12,500,000 dated December 12, 1996 and (ii) the Stock Redemption Loan evidenced by that certain Stock Redemption Facility Note in the original amount of $1,700,000 dated May 14, 1997. B. Section 2.05 of the Loan Agreement is amended by deleting said section in its entirety and replacing it with the following: SECTION 2.05. Interest on Loans. (a) Subject to the provisions of Sections 2.05(c) and Section 2.08 hereof, the Fixed Rate Loans shall bear interest at a rate per annum equal to eight and three-eighths percent (8.38%). (b) Subject to the provisions of Section 2.05(c) and Section 2.08 hereof, (i) each Loan which is a Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin and (ii) each Loan which is a Eurodollar Loan shall bear interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Margin. (c) Interest on each Loan shall be payable in arrears on each applicable Interest Payment Date and on the maturity thereof (whether as scheduled, by acceleration or otherwise). Interest on each Base Rate Loan and each Eurodollar Loan shall be computed based on the number of days elapsed in a year of 360 days. The Agent shall determine each interest rate applicable to said Base Rate and Eurodollar Loans and shall promptly advise the Borrowers and the Lenders of the interest rate so determined (which determination shall be conclusive and binding on the Borrowers and the Lenders absent manifest error). 3. Conditions. The effectiveness of this Amendment is subject to the following conditions precedent (unless specifically waived in writing by Agent): A. There shall have occurred no material adverse change in the business, operations, financial condition, profits or prospects of Parent, Borrowers or Guarantors, or in the Collateral; B. Parent, Borrowers and Guarantors shall have executed and delivered such other documents and instruments as Agent may require; C. All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent and its legal counsel; and D. No Default or Event of Default under the Loan Agreement as amended hereby shall have occurred and be continuing. 5. Corporate Action. The execution, delivery, and performance of this Amendment has been duly authorized by all requisite corporate action on the part of Parent, Borrowers and Guarantors and this Amendment has been duly executed and delivered by Parent, Borrowers and Guarantors. 6. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 7. References. Any reference to the Loan Agreement contained in any of the other Loan Documents or in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require. 8. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which taken together shall be one and the same instrument. 9. Ratification. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions of the Loan Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement are ratified and confirmed and shall continue in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above. FOODARAMA SUPERMARKETS, INC., as Parent and as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO NEW LINDEN PRICE RITE, INC., as Borrower and as Guarantor By:_______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF READING, INC., as Borrower and as Guarantor By:______________________________ Michael Shapiro Title: Senior Vice President and CFO SHOP RITE OF MALVERNE, INC., as Guarantor By:________________________________ Michael Shapiro Title: Senior Vice President and CFO HELLER FINANCIAL, INC., as Agent and Lender By:______________________________ Dwayne L. Coker Title: Vice President EX-27 2
5 1000 YEAR NOV-01-1997 NOV-01-1997 3,678 0 9,682 (473) 33,585 46,858 118,364 (62,210) 121,500 43,340 0 0 0 1,622 29,693 121,500 636,731 637,666 475,764 0 155,939 0 4,273 1,690 626 1,064 0 0 0 1,064 .90 0
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