SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
November 29, 1994
HOMELAND HOLDING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 33-48862 73-1311075
State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 N. E. 36th Street
Oklahoma City, OK 73105
(Address of Principal Executive Offices) (Zip Code)
(405) 557-5500
Registrant's Telephone Number, Including Area Code:
<PAGE>
Item 5. Other Events.
On November 30, 1994, Homeland Stores, Inc. (the
"Company"), a wholly-owned subsidiary of the registrant, Homeland
Holding Corporation ("Holding" and, together with the Company,
"Homeland"), entered into a letter of intent (the "Letter of
Intent") with Associated Wholesale Grocers, Inc. ("AWG") with
respect to the purchase by AWG of 29 of the Company's stores and
its warehouse complex for a purchase price of $45 million plus the
value of the inventory in the 29 stores and the warehouse. As part
of the transaction memorialized in the Letter of Intent (the
"Transaction"), the Company will also enter into a seven year
supply agreement with AWG. A copy of the Letter of Intent is
attached hereto as Exhibit 10pp.
In addition, on November 29, 1994, the Company's
President and Chief Executive Officer, Max E. Raydon, resigned, and
the Board of Directors of the Company appointed James A. Demme to
replace Mr. Raydon.
On November 30, 1994, the Company issued a press release
describing the Transaction and announcing the resignation of Mr.
Raydon and the appointment of Mr. Demme. A copy of the press
release is attached hereto as Exhibit 99a.
Attached hereto as Exhibit 99b is certain financial
information consisting of (a) an unaudited summary projection of
Homeland's financial results for 1994 and (b) an unaudited summary
projection of Homeland's financial results for 1994 adjusted to
give effect to the Transaction and certain related transactions.
Item 7. Financial Statements and Exhibits
(c) Exhibits: The following exhibits are filed as part
of this Report:
Exhibit No. Description
10pp Letter of Intent, executed on November 30,
1994, between Homeland Stores, Inc. and
Associated Wholesale Grocers, Inc.
99a Press release issued by Homeland Stores, Inc.
on November 30, 1994.
99b Unaudited Summary Financial Data for the 52
weeks ended December 31, 1994.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to signed
on its behalf by the undersigned thereunto duly authorized.
HOMELAND HOLDING CORPORATION
By: Mark S. Sellers
Mark S. Sellers, Executive
Vice President/Finance,
Treasurer, Chief Financial
Officer and Secretary
Dated: December 3, 1994
<PAGE>
Form 8-K Exhibit Index
Exhibit NO. Description
10pp Letter of Intent, executed on November 30,
1994, between Homeland Stores, Inc. and
Associated Wholesale Grocers, Inc.
99a Press release issued by Homeland Stores, Inc.
on November 30, 1994
99b Unaudited Summary Financial Data for the 52
weeks ended December 31, 1994.
November 23, 1994
Via Federal Express
Mr. Mark S. Sellers
Executive Vice President - Finance,
Chief Financial Officer
Homeland Stores, Inc.
400 N.E. 36th Street
Oklahoma City, Oklahoma 73105
Re: Purchase of Assets
Dear Mark:
This letter incorporates by reference that certain discussion
document entitled "Notes of Conversation for Proposed Homeland and
Associated Wholesale Grocers, Inc. Transaction" (a copy of which is
attached hereto as Exhibit A and incorporated herein by reference)
(referred to herein as the "Outline") and further sets forth the
general structure of a proposed purchase agreement ("Purchase
Agreement") between Associated Wholesale Grocers, Inc. ("AWG"), as
buyer, and Homeland Stores, Inc. ("Homeland"), as seller. This
letter represents only our current good-faith intention to
negotiate and enter into the definitive Purchase Agreement and to
consummate the transaction contemplated in the Outline, subject to
complete due diligence.
The Purchase Agreement will address the following provisions, due
diligence, and conditions precedent and other terms and conditions
as follows:
1. The parties hereto shall enter into the Purchase Agreement
which will enumerate and identify with specificity (a) ongoing
transactions and relationships among the parties, (b) transactions
and relationships involving third parties and (c) the assets
("Assets") to be purchased and otherwise be dealt with thereunder.
All are generally contemplated in the Outline.
2. The Purchase Agreement will: (a) have schedules attached
detailing all of the Assets to be owned by Homeland as of the date
of the closing hereof ("Closing"); (b) contain the normal and usual
warranties relating to organization, affiliate or subsidiary
status, authorization, execution and delivery, audited financial
statements, absence of conflicts and litigation, compliance with
laws, payment of taxes, insurable and marketable title, absence of
material changes, existence and status of contracts, maintenance of
insurance coverage, broker's fees, breaches of representations and
warranties, and breaches of the Purchase Agreement; (c) contain a
provision whereby Homeland will not compete with AWG relating to
wholesale operations; (d) contain the normal and usual covenants
pertaining to investigative rights regarding the Assets,
acquisition review, required corporate action, assignments and
transfers, compliance with laws, maintenance of insurance, conduct
of business in the ordinary course and no changes in business or
financial structure, in each case, to the extent it adversely
affects the Assets or Supply Agreement (as described in the
Outline); (e) contain mutually agreeable provisions regarding
discharge by Homeland of liabilities encumbering the Assets prior
to or at the Closing; (f) contain mutually acceptable provisions
concerning any contingent or unidentifiable liabilities; (g)
contain mutually agreeable provisions concerning any union
contracts and other agreements pertaining to employees and/or
managers employed in connection with any Asset (except as described
in the Outline, AWG contemplates that it shall have no liability
under any of the foregoing unless specifically assumed by AWG at
Closing) and (h) not be signed without approval by both of AWG's
and Homeland's Board of Directors. AWG's obligation to consummate
the transaction shall not be conditioned upon or subject to the
purchase of any of the Assets by any third party. Homeland
understands that AWG intends to transfer certain of the Assets to
its retail members and that a contemporaneous closing of all of
these related transactions is imperative to AWG to insure
continuity of operations and Homeland agrees to use its best
efforts to coordinate the timing of the Closing and other Closing
mechanics with AWG so as to permit the transfer of such Assets to
its retail members. In addition, the Purchase Agreement will
contain further appropriate terms and conditions as any party may
determine necessary and are acceptable to the other parties.
Nothing contained herein shall be construed as a comprehensive
description of the provisions in the Purchase Agreement, nor a
limitation upon AWG or Homeland in respect to the Purchase
Agreement.
3. The following must be completed prior to the execution of the
Purchase Agreement:
a) Except as provided in paragraph 4.(k), AWG conducting a
physical inspection of all Assets to be purchased and performing
all tests and acts deemed necessary by AWG, including without
limitation, mechanical inspections, engineering and soil borings,
such activities to be conducted at AWG's expense. The foregoing is
in addition to (and not in lieu of) a physical inventory of all
FFE, as defined in the Outline. To the extent such inspections are
not completed prior to the execution of the Purchase Agreement or
reveal unsatisfactory conditions, the Purchase Agreement will
contain appropriate provisions relating to the foregoing, which are
mutually acceptable to the parties.
b) AWG's review of complete, true and correct copies of all
leases and AWG's conclusion that such leases do not contain
commercially unreasonable terms, in AWG's sole discretion.
c) Receipt by AWG of Homeland's proforma opening balance sheet
and profit and loss statement showing projections of Homeland's
operation after Closing.
d) AWG's review of complete, true and correct copies of all
contracts referred to in paragraph 7 of the Outline.
e) Mutually acceptable Supply Agreement.
The foregoing shall not preclude AWG from making provisions in
the Purchase Agreement for factual matters relating to any of the
foregoing which are not disclosed to AWG until after the execution
of the Purchase Agreement.
4. The Purchase Agreement shall also provide that the
obligations of AWG thereunder are expressly subject to the
following, without limitation, conditions precedent to Closing:
a) The Assets shall be owned by Homeland at Closing.
b) Satisfactory evidence of insurability, marketability and
transferability of title of all leasehold interests and real
property.
c) Satisfactory evidence of marketability and transferability of
title of all Assets including an acceptable UCC search on all
leased premises, furniture, fixtures, equipment, inventory and
supplies.
d) The existence of no material misrepresentations,
misstatements or adverse changes relating to the Assets or any
other material matter.
e) Payment by the appropriate party of any transfer taxes and/or
charges incurred in connection with the transfer of Assets to AWG.
f) If applicable, compliance with Bulk Sales Law or such other
arrangement mutually agreed to by the parties.
g) Receipt by AWG of all audited financial statements of
Homeland Holding Corporation available from time to time, along
with all consolidating detailed financial statements.
h) Except as provided otherwise, transfer of the Assets free and
clear of all liens and encumbrances.
i) If required, the consent and/or nondisturbance and attornment
agreement of the landlord/lessor of any leasehold interest in
connection with the assignment of any leasehold interests.
Homeland will not be required to give economic incentives in
connection with obtaining the foregoing.
j) AWG's receipt of an estoppel certificate acceptable to AWG
from all landlords and/or lessors on any lease being assumed by
AWG, except where the failure to obtain any such certificate or
certificates would not have a material adverse effect on the Assets
in connection with the 29 Stores and Warehouse Complex taken as a
whole. AWG's receipt of an estoppel certificate acceptable to AWG
from all third parties to any material contract being assumed by
AWG, except where the failure to obtain any such certificate or
certificates would not have a material adverse effect on the Assets
taken as a whole. In the event an estoppel certificate reveals a
non-material but significant economic discrepancy (as defined in
the Purchase Agreement) previously unknown to the parties, the
parties will equitably resolve such discrepancy prior to or at
Closing. Homeland will not be required to give economic incentives
in connection with obtaining the foregoing.
k) AWG conducting prior to Closing surveys and environmental
audits. Such activities to be conducted at AWG's expense.
l) AWG conducting in concert with Homeland prior to Closing a
detailed physical inventory of all inventories and FFE described in
the Outline.
m) Satisfaction of AWG's credit requirements as set forth in
Paragraph 9d of the Outline.
n) Satisfactory evidence of compliance by Homeland with all
requirements of Homeland's lender/debt/lien/security documents to
the extent necessary so that the transactions contemplated do not
constitute a default under such documents.
o) Performance by Homeland of all obligations required by the
Purchase Agreement.
p) Receipt by AWG of a satisfactory fair market value
opinion/appraisal, and an auditor's review report from appropriate
experts. HL will engage experts reasonably acceptable to AWG;
provided, however, such activities will be at AWG's expense. Such
appraisal or report shall be reasonably satisfactory to AWG in all
material respects.
q) Receipt by AWG of a report regarding the solvency of Homeland
(whether solvent or not) from an appropriate expert. HL will
engage experts reasonably acceptable to AWG; provided however, such
activities will be at AWG's expense. For purposes hereof, The
Manufactures' Appraisal Company ("MAC") will be an independent
expert acceptable to AWG.
5. The Purchase Agreement shall also provide that the
obligations of Homeland and AWG thereunder are expressly subject to
the following, without limitation, conditions precedent to Closing:
a) All requirements, which in the reasonable opinion of legal
counsel, need to be satisfied relating to the Anti-Trust
Improvements Act of 1976, Department of Justice, Federal Trade
Commission, Securities Exchange Commission and any other approval
by any applicable regulatory authority required or requested to
rule on this transaction.
b) Receipt of satisfactory opinions from the other party's legal
counsel.
c) Compliance with the Worker Adjustment and Retraining
Notification Act and all related laws, regulations or ordinances in
respect to plant closings.
d) Compliance with laws relating to transfer of any inventory
consisting of liquor and pharmaceuticals.
e) Mutual acceptable allocations of the purchase price to the
components of the Assets. The form of the allocation certificate
shall be attached as an exhibit to the Purchase Agreement. It is
agreed that the amounts paid for the Supply Agreement from time to
time pursuant to the formula set forth in paragraph 9 of the
Outline is consideration solely for the Supply Agreement.
6. The Purchase Agreement shall also provide that the
obligations of Homeland are expressly subject to the following,
without limitation, conditions precedent to the closing:
a) Receipt of all necessary consents and approvals, including
those of lessors, landlords, lenders and security holders.
b) The existence of no material misrepresentations,
misstatements or adverse changes relating to AWG.
c) Performance by AWG of all obligations required by the
Purchase Agreement.
7. After the full execution of this letter of intent, AWG is to
begin due diligence in earnest and shall be permitted to make a
full and complete investigation of the Assets to be purchased, the
leases and contracts to be assumed and all other documents which
control the transactions or relationships addressed by the Outline.
In addition, as soon as reasonably possible following the execution
of this letter of intent by AWG and Homeland, Homeland will provide
to AWG the documents described on Exhibit B attached hereto and
incorporated herein. Upon execution of this letter of intent by
both parties, AWG agrees to immediately commence and diligently
pursue (i) the review of the documents on Exhibit B upon receipt by
AWG thereof, and (ii) all investigations, inspections and due
diligence contemplated hereunder and to use its reasonable efforts
to complete all such due diligence as soon as practicable prior to
the signing of the Purchase Agreement. AWG will use its best
efforts to reduce the number and scope of conditions precedent to
its obligations to close the transactions contemplated hereby. The
Purchase Agreement shall also provide that upon reasonable request
prior to the Closing Date, AWG and its representatives shall have,
at all reasonable times and upon reasonable notice, access to any
other records of Homeland pertaining to the Assets and the premises
relating to any of the leases described herein and such other
information or access as AWG shall, from time to time, reasonably
request.
8. In consideration of the substantial expenditures of time,
effort and expense to be undertaken by AWG in connection with the
preparation and execution of the Purchase Agreement, and the
various investigations and review referred to above, Homeland
undertakes and agrees that during the period from execution of this
letter of intent through December 1, 1994 (or shorter period if AWG
or Homeland terminates its good faith intent to proceed with the
transaction) Homeland shall not actively solicit any other
prospective purchaser of the Assets which are the subject of this
letter agreement, other than dispositions of Assets in the ordinary
course of business.
9. Other than any commission owed to Lazard Freres & Co. which
will be paid by Homeland, AWG and Homeland warrant each to the
other that there are no claims for brokerage commissions or
finders' fees in connection with this transaction.
10. Whether or not the transactions contemplated by this letter
agreement are consummated, except as otherwise expressly stated
herein, AWG and Homeland will bear their own costs and expenses
incurred in connection with such transactions. Transfer taxes
and/or charges incurred in connection with the transfer of the
Assets to AWG will be split by the parties, unless otherwise
required by applicable law.
11. Except as required by law and except for a press release
which has been agreed to by Homeland and AWG and which will be
issued upon execution of this letter of intent, no public
announcement regarding the execution of this letter of intent or
the transaction contemplated hereby shall be made without the
mutual consent of AWG and Homeland. In that regard, the partes
agree that neither party will make statements for the other party.
The parties will carefully coordinate all communication with any
third party. The foregoing shall not prohibit or restrict Homeland
from discussing the transaction with its lenders or security
holders. AWG shall not communicate with any Homeland employee or
employee representative without the prior verbal consent of a
designated representative of Homeland and Homeland may condition
its consent upon its participation in any such communication.
12. (a) The Confidentiality Agreement heretofore executed by
the parties on or about April 12, 1994 shall remain in full force
and effect. In addition, it is hereby agreed that operational
information supplied by any party shall be included as either
"Homeland Confidential Information" or "AWG Confidential
Information" as the case may be. To the extent that any party
believes that the terms of the Confidentiality Agreement need to be
further expanded (or further defined) to protect their interests in
proprietary information, all other parties shall agree to such
modifications as are commercially reasonable under the
circumstances.
(b) Notwithstanding the foregoing, Homeland acknowledges
and agrees that AWG does not operate retail grocery stores.
Consequently, it is recognized that all of the Assets and
obligations contemplated by the Outline which pertain to the
operation of retail locations will be sold to and/or assumed by
current or future AWG retail members contemporaneously with the
Closing of the Purchase Agreement. Toward that end, AWG has
already (with the permission of Homeland) provided certain
information to its retail members and third parties interested in
retail grocery stores to be purchased by AWG. In addition, with
Homeland's prior written approval which shall not be unreasonably
withheld, AWG may forward to its shareholders and such third
parties additional information with respect to the Assets,
including the location and size of stores. If an approved AWG
shareholder or third party requests additional information on one
or more stores, such information may be provided to said
shareholder by AWG with Homeland's prior written approval which
shall not be unreasonably withheld. AWG shall obtain or have
obtained an executed confidentiality agreement by said shareholder
or third parties receiving such information containing
substantially the same terms and provisions as this paragraph and
the Confidentiality Agreement.
AWG considers that time is of the essence in consummating the
proposed transaction. Accordingly, we have instructed our counsel
to work with your counsel after the execution of this letter of
intent to prepare the Purchase Agreement which will contain
provisions in accordance with the foregoing, together with such
further appropriate terms and conditions as counsel may mutually
determine, in addition to such ancillary documents as may be
necessary to implement the foregoing. The Purchase Agreement and
such additional documents shall be subject, in all respects, to the
approval of all parties thereto. It is, of course, understood (i)
that this letter is intended to be, and shall be construed only as,
a letter of intent, summarizing and evidencing AWG's proposal and
not as an offer to purchase the above-described Assets or an
agreement with respect thereto; (ii) that the respective rights and
obligations of AWG and Homeland remain to be defined in the
definitive Purchase Agreement, into which this letter of intent and
all prior discussions shall merge; and (iii) in the event the
definitive Purchase Agreement is not fully executed within thirty
(30) days after execution by the last party to sign this letter of
intent for any reason whatsoever, then neither AWG nor Homeland
shall have any rights or obligations hereunder; provided, however,
that the obligation of Homeland and AWG under paragraphs 7, 8, 11
and 12 shall be binding upon Homeland and AWG when this letter of
intent is executed and delivered by you. If the parties do not
execute a Purchase Agreement within thirty (30) days after
execution by the last party to sign this letter of intent, then the
provisions of paragraphs 7 and 8, shall no longer be binding upon
Homeland or AWG.
<PAGE>
The intentions expressed in this letter shall be null and void
unless Homeland accepts and executes this letter and AWG receives
the executed letter on or before December 1, 1994. If the
foregoing meets with the approval of Homeland, please sign and
return the enclosed duplicate copy of this letter at your earliest
convenience.
Very truly yours,
ASSOCIATED WHOLESALE GROCERS, INC.
By: /s/Mike DeFabis
Mike DeFabis, President
APPROVED AND ACCEPTED:
HOMELAND STORES, INC.
By: /s/Mark S. Sellers
Mark S. Sellers
Executive Vice President - Finance
Chief Financial Officer
Date: November 30, 1994
p:\wp50\docs\acquisit\homeland\letterof.int\shields.12
December 5, 1994 cap/cm
<PAGE>
For Discussion Purposes Only November 23, 1994
NOTES OF CONVERSATION
FOR PROPOSED
HOMELAND STORES, INC. ("HL") AND
ASSOCIATED WHOLESALE GROCERS, INC. ("AWG")
TRANSACTION
1. AWG agrees to purchase certain assets of HL.
AWG to purchase 29 of the 111 stores (See list on Ex A).
AWG to supply 67 of the remaining stores and the Edmond Store.
2. The Assets included in the Purchase Price are as follows:
a. The 29 Stores listed on Exhibit A, includes:
(i) Leases ("Store Leases");
(ii) Real estate owned (6 properties);
(iii) Furniture, fixtures, equipment and supplies which do
not bear the HL name or logo ("FFE");
(iv) Inventory in the stores (other than Edmond);
(1) Edmond, OK (Store 777) - AWG agrees to grant HL the
option to sublease back this store (and FFE) after
Closing, subject to all of the terms and conditions
contained in the existing lease and the consent of
the landlord thereunder, if required, at the lease
rates specified in the lease from time to time for
a term from Closing to June 1, 1995 and thereafter
on a month-to-month basis (at HL's election) but in
no event later than January 1, 1996. FFE will be
leased at $110,826 per annum. Upon the termination
of such sublease, AWG will pay HL for the Edmond
inventory at a price to be calculated pursuant to
the formula described in Section 6 below.
b. The warehouse complexes and associated offices, (including
all leases ("Warehouse Leases") and real estate owned
relating thereto), including:
(i) Grocery Warehouse Lease;
(ii) Produce Warehouse Lease;
(iii) Annex Lease;
EXHIBIT A
TO LETTER OF INTENT
(iv) Repack/Variety Lease;
(v) HL's Corporate Office Lease.
(vi) Dairy and Ice Cream property and improvements held
in fee;
(vii) FFE relating to the foregoing, other than FFE
relating to HL's corporate headquarters' ongoing
operations; however, prior to finalizing the
definitive agreement, as to FFE relating to HL's
corporate headquarters' ongoing operations, the
parties will analyze certain shared items involved
and mutually agree on such items' inclusion or
exclusion with the intent that HL will be able to
retain or have access to all FFE necessary to
continue its business operations; and
(viii) Inventory in the warehouse(s);
3. AWG will pay to HL a Purchase Price of $45 million for the
above Assets, other than inventory.
4. Inventory at the warehouses.
a) AWG will purchase all good saleable inventory.
b) The purchase price for the inventory (other than perishable
inventory) will be calculated at HL's last System Cost, as
further described in paragraph 4(d) below (acquisition
cost), less certain off-invoice allowances and excluding
cash discounts.
c) Perishable inventory will be calculated at dead net cost,
i.e., HL's book cost.
d) HL will maintain costing until closing which is consistent
with HL's past practice as set forth in HL's Listing of
Warehouse Inventory dated September 20, 1994 heretofore
provided to AWG ("System Cost").
5. Open Purchase Orders
AWG will assume HL's obligations under purchase orders for
warehouse inventory which are open at the time of closing.
6. Inventory in the 29 stores
a) AWG will purchase all good saleable inventory.
b) The inventory will be identified by HL's categories. The
purchase price for such inventory will be an amount equal
to the calculation below:
Cost of inventory at Retail X Inventory Factor.
For purposes herein, the Inventory Factor is calculated as
follows:
(HL's Going-In Gross) + (W/T Expense/Realized Sales) =
Inventory Factor.
For purposes herein, HL's Going-In Gross is defined as the
calculation described as "Percent Spread" on Exhibit B attached
hereto. Warehouse Expenses, Transportation Expense and
Realized Sales will be defined as set forth on Exhibit B. The
W/T Expense is defined as the Warehouse Expenses, plus the
Transportation expense.
When calculating the Going-In Gross, the parties will use the
average of the Going-In Gross from January 1, 1995 through
Closing.
c) The inventory relating to Pharmacy, which AWG is legally
permitted to purchase, will be calculated at HL's
acquisition cost. Any Pharmacy product with less than a
three-month shelf life will either be returned to the
supplier by HL; or if return is restricted, the purchase
price for such inventory will be HL's acquisition cost
times 50%. HL will also have the option to transfer such
product with less than a three-month shelf life to another
HL store.
7. Existing Contracts. (Subject to AWG review, AWG approval and
required third party consents.)
a) HL will provide AWG with a complete list of all existing
supply, service and equipment and other contracts
(excluding union contracts), as well as copies thereof to
the extent requested by AWG. With respect to any
equipment, service, supply or other contract, the parties
shall enter into an undertaking whereby the burdens and
benefits of such agreements are equitably apportioned
between the parties. [AWG will not be responsible for or
enter into undertakings in connection with any contracts
relating to the 29 Stores (as described below) or HL's
distribution center to which HL enters after the execution
of the letter of intent, unless mutually agreed to
otherwise by the parties.]
b) For purposes hereof, it is agreed that contracts which
affect all stores ("ASC") shall be subject to the following
apportionments:
(i) Except as set forth below, AWG will undertake to be
responsible for 25% of the obligations set forth in
each ASC, as such undertaking relates to the 29
stores listed on Exhibit A to the Outline ("29
Stores").
(ii) With respect to obligations, if any, to repay, buy
back or otherwise compensate ("Repayment") the other
party to an ASC due to a default (the parties will
mutually agree upon what constitutes an appropriate
level of default):
A. If AWG's actions or omissions (or the actions or
omissions of any AWG member or purchaser of any of
the 29 Stores) trigger a Repayment, AWG shall be
responsible for all of such Repayment.
B. If the Repayment is triggered by any event not
covered by subparagraphs A or C, AWG shall be
responsible for 25% of the Repayment and HL shall be
responsible for the remainder.
C. If the Repayment is triggered by HL in connection
with the 82 remaining stores and such trigger is not
related to the 29 Stores sold to AWG, HL shall be
responsible for all of such Repayment.
(iii) With respect to obligations to deal exclusively,
obligations to meet certain performance levels and
promotional obligations under an ASC, AWG will cause
its retail members or any purchasers which operate
the 29 Stores to carry the required products and/or
to otherwise comply with the required performance
levels and promotional obligations and AWG will be
responsible for any breach.
(iv) Any benefits, monetary or otherwise, relating to the
ASC contracts received by HL on an ongoing basis
after Closing will be prorated in a manner
consistent with the allocation of obligations as set
forth above.
c) With respect to any contracts exclusively relating to the
warehouse (other than collective bargaining agreements),
AWG will assume all such contracts.
d) With respect to any contracts which exclusively relate to
one or more of the 29 Stores or which any such Store is a
party, AWG will cause the applicable retail member or
purchaser of such Store(s) to assume such contract or enter
into an agreement whereby such retailer agrees to be
responsible for such liability and AWG will be responsible
for any damages or liabilities resulting from any breach,
non-performance or non-assumption.
e) With respect to the Corrugated Service contract, AWG will
assume the contract.
f) The K-C Computer Services, Inc. ("K-CCS") contract will be
handled in the following manner:
(i) HL shall analyze its ongoing needs to operate the
segment of its business which is not being sold to
AWG at this time. HL shall advise AWG of its
requirements for services under the K-CCS contract.
(ii) AWG will undertake to satisfy and will be
responsible for all obligations (including any
payments) under the K-CCS contract which are above
and beyond HL's ongoing requirements.
g) The Drake Refrigerated Lines, Inc. ("Drake") contract
relating to HL's fleet will be assumed by AWG.
h) Both parties will cooperate to avoid and/or minimize
Teamster pension withdrawal liability ("TPWL"). If any
TPWL is triggered by any of the transactions contemplated
hereby or otherwise subsequent to the Closing, AWG will
reimburse HL for such TPWL up to $3,471,000. If HL and AWG
agree to alternative arrangements for the avoidance of
TPWL, AWG will reimburse HL the costs associated with such
alternative arrangements, if any, up to $3,471,000.
8. Office Sharing.
a) During a transition period while HL is relocating its
headquarters and office space to service their remaining
stores, AWG will lease space to HL (at zero rental cost) in
the current HL Corporate Offices, which will be
reconfigured to accommodate AWG's and HL's respective
needs.
b) The transition period will be the nine-month period after
the Closing date.
9. HL will enter into a Supply Agreement with AWG and AWG will be
HL's primary supplier. Subject to the provisions of paragraph
7 above and subparagraph 9(f) below, HL will agree to buy the
products offered for sale in HL stores from AWG, which are
available from AWG's warehouse from time to time, and AWG
agrees to sell to HL products available from AWG's warehouse
at the lowest prices and best terms available to other AWG
retailer/members. HL shall have available to it all cost
saving mechanisms available to other AWG members, including
AWG's Concentrated Purchase Allowance Program ("CPA"). The
schedule relating to AWG's current CPA program is attached as
Exhibit "C".
a. As consideration for the Supply Agreement, AWG will pay to
HL an amount calculated as follows each AWG fiscal quarter
for a period of seven (7) years:
Quarterly Payment = Target Payment X Operative Fraction.
(i) For purposes of the foregoing calculation, the
Target Payment amounts shall be as set forth on the
quarterly payment schedule ("QPS"), attached hereto
as Exhibit "D" and the Operative Fraction shall be
a function of the Purchase Percentage as set forth
below. The Purchase Percentage shall be determined
from a fraction the numerator of which is the actual
purchases through AWG's warehouse by HL during the
quarter in question and the denominator of which is
$72,500,000 [$290,000,000/4]. The Operative
Fraction to be utilized is reflected in the
following table:
If the Purchase The Operative
Percentage is: Fraction shall be:
100 - 90.01% 100%
90 - 80.01% 90%
80 - 70.01% 80%
70 - 60.01% 70%
60 - 50.01% 60%
50 - 40.01% 50%
40 - 30.01% 40%
30% or below 0%
(ii) For reference purposes, the QPS sets forth the
dollar amounts of the Quarterly Payments associated
with the foregoing; provided, however, the Quarterly
Payments made for the first three quarters of any
fiscal year during the term of the Supply Agreement
shall be subject to a year-end adjustment such that
the Purchase Percentage and the Operative Fraction
shall be calculated as to HL's cumulative purchases
at fiscal year-end.
(iii) In the event that HL sells any of its remaining
stores to one or more current or future AWG retail
members, the purchases by such AWG retail member
shall be credited to HL's benefit for purposes of
the Operative Fraction and Purchase Percentage;
provided, however, that the amount of such credit
shall be equal to the purchases of each such sold
store for the prior four fiscal quarters as an HL
store.
b. Failures to perform by either party under the terms of the
Supply Agreement will be addressed in the definitive
agreement.
(i) Force Majeure will be addressed in the Supply
Agreement, and such provision will address, among
other things, if AWG does not or cannot supply HL
due to force majeure-type events or the levels for
out of stock products exceeds 10% in the aggregate
subsequent to notice by HL and a reasonable time
period thereafter, (all of which will be defined in
the Supply Agreement), HL will be able to seek
alternative suppliers until such condition is cured
by AWG and such purchases shall be treated as
purchases through AWG's warehouse for purposes of
computing the Operative Fraction and Purchase
Percentage.
c. AWG will agree to supply HL with certain items, including,
without limitation, cross docked merchandise, requested by
HL on terms and conditions acceptable to both parties;
provided, however, such items must meet reasonable minimum
volume requirements.
d. HL will provide the hard collateral required of AWG Members
to secure the Open Account for HL to receive credit terms
from AWG. [AWG has provided to HL credit options and
associated collateral requirements from which HL may
choose.] HL understands that such collateral is a
condition precedent to AWG's consummation of this
transaction. Any HL patronage with AWG will be acceptable
hard collateral toward meeting the foregoing collateral
requirements. HL is to provide a proforma opening balance
sheet and profit and loss statement showing projections of
HL's operation after the Closing.
e. HL's obligation to purchase goods from AWG under the Supply
Agreement and AWG's obligation to make required quarterly
payments will be for 7 years.
f. While it is the intent of the parties for AWG to be HL's
primary supplier of products, Homeland will be permitted to
purchase products from other suppliers from time to time
and products commonly categorized as "DSD" items, such as
soft drinks, milk and bread.
g. For purposes of the Supply Agreement, purchases by HL
through AWG's warehouse will include purchases that are
billed or sold through AWG warehouses in connection with
products which are carried in AWG's warehouses. For
purposes herein, the word "carried" includes products upon
which AWG is able to realize a gross margin in contrast to
products which may be handled on its docks for a handling
fee on a cost recovery basis. The Supply Agreement will
detail various types of transactions, such as SOLOS and
continuities, which qualify as "billed or sold".
(Notwithstanding the foregoing, qualifying purchases for
purposes of calculating year-end patronage shall be
calculated pursuant to AWG's policy then in effect during
the terms of the Supply Agreement.)
h. The Supply Agreement will include all HL stores now owned
or hereafter acquired or opened (excluding 29 Stores sold
to AWG).
i. HL will be given credit for unsalable products and pricing
adjustments on best terms available to other AWG members or
retailers, where applicable.
j. AWG will pass-through promotional and advertising
allowances and rebates from manufacturers and vendors to HL
on the same basis as any other AWG member and as
appropriate for HL's level of purchases.
k. HL will receive seasonal, special promotions and
advertising programs on the best terms available to other
AWG members and as appropriate for HL's level of purchases.
l. The quality relating to goods will be consistent with other
wholesalers within market area.
m. The activities of AWG will meet all applicable legal and
regulatory requirements.
n. AWG will provide to HL a service level commensurate with
all other members.
(i) AWG will make timely deliveries.
o. AWG will make available to HL all information and reports
which are available to other members at a cost, if any,
equal to that charged to other members (Note: any such
charge is based on a cost recovery for AWG.)
p. HL to provide copies to AWG of all SEC filings and reports.
q. The term of the Supply Agreement will be 7 years.
r. The Supply Agreement will address the rights of either
party upon material breach of agreement.
s. The specific events of defaults will be addressed in the
Supply Agreement.
t. Remedies will be addressed in detail in the Supply
Agreement and will address those matters described in
paragraphs 9(v) and 9(w) below.
u. AWG will provide HL evidence of products liability and
comprehensive liability insurance.
v. The Supply Agreement will provide that there will be no
cross-defaults between the Supply Agreement and the
Purchase Agreement.
w. During the first two (2) years of the term of the Supply
Agreement in the event there is a material breach of the
right of first offer or non-compete provisions of the
Supply Agreement by HL (or permitted successors), then
AWG's obligations with respect to the Drake and K-CCS
contracts will cease and HL will be liable for such
obligations. Such a material breach of the Supply
Agreement will not change the obligations of the parties
with respect to any other existing contracts or other
obligations described in paragraph 7 above and AWG's
obligations in connection with such existing contracts or
other obligations will continue notwithstanding such
breach. In addition, breaches of the Supply Agreement
other than such a material breach will not change the
obligations of the parties with respect to any existing
contracts or other obligations described in paragraph 7
above and AWG's obligations in connection with such
existing contracts or other obligations will continue
notwithstanding such breaches. If following a material
breach of the right of first offer or non-compete
provisions of the Supply Agreement terminating AWG's
obligations with respect to the Drake and K-CCS contracts,
AWG brings suit against HL for damages resulting from such
breach, AWG will not seek and will not be entitled to
receive damages in respect of any liabilities under such
contracts originally assumed by AWG but for which AWG's
responsibility has terminated.
10. This provision is subject to approval by AWG's Board of
Directors. HL will grant a Right of First Offer to AWG on the
remaining 67 stores. In the event HL decides to sell any
store, HL must give notice to AWG of any desired sale (which
notice would include the desired sales price and the general
terms). AWG would have 45 days to accept the offer of sale
described in such notice and to enter into a definitive sale
agreement. AWG and HL would negotiate in good faith to enter
into a definitive sale agreement. If AWG does not accept the
offer of sale described in such notice and enter into such sale
agreement within such forty-five day period, HL may sell such
store to any other party for a price that is not less than 90%
of the proposed sales price, and on other general terms that
are not more favorable in the aggregate than the terms
contained in the notice described above. Sales to "affiliates"
shall not be subject to the foregoing; provided, however, (i)
affiliates shall include only entities which are wholly owned
by HL or Homeland Holding Corporation; (ii) the affiliate must
agree in writing prior to such sale to use AWG as the
affiliate's wholesale supplier in accordance with the terms of
the Supply Agreement between the parties, (iii) the affiliate
must agree in writing that any subsequent sale by such
affiliate is subject to the foregoing Right of First Offer,
(iv) such sale to an affiliate shall not be an event of default
under any of HL's then outstanding loans, indebtedness or other
material contracts, and (v) such transfer shall not result in
the insolvency of either HL or the affiliate.
11. HL will become a member/retailer of AWG.
a. Purchase 15 shares of AWG Class A Voting Stock at $1,055
per share.
12. Summary - AWG will pay to HL a Purchase Price of:
a. $45 Million for the Assets listed in paragraph 2;
b. Plus, the amount calculated pursuant to paragraph 4 above
for inventory in the warehouses;
c. Plus, the amount calculated pursuant to paragraph 6 above,
for inventory in 28 of the 29 Stores and the Edmond store
upon termination of the lease thereof;
d. Plus, assume liability under the Store Leases;
e. Plus, assume liability under the Warehouse Leases; and
f. Plus, the undertakings and liabilities described in
connection with the contracts and other obligations in
paragraph 7.
The foregoing is subject to further discussions, normal
documentation, due diligence and definition of terms.
p:\wp50\docs\acquisit\homeland\docs\ts29
11/23/94
<PAGE>
STORES TO BE PURCHASED BY AWG
<TABLE>
<CAPTION>
Homeland
Store # Address City State Status
<S> <C> <C> <C> <C> <C>
1. 64 220 E. 13th Street Ada OK Leased
2. 104 4439 N.W. 50th Oklahoma City OK Leased
3. 130 702 First Perry OK Leased
4. 134 409 W. Main Watonga OK Owned
5. 144 1205 E. Lindsey Norman OK Leased
6. 147 5324 Cache Road Lawton OK Leased
7. 168 310 S. Main Blackwell OK Leased
8. 171 616 N. Summit Arkansas City KS Leased
9. 172 1116 N. Main Altus OK Leased
10. 185 1648 S.W. 89th Oklahoma City OK Leased
11. 194 616 N.W. Sheridan Lawton OK Leased
12. 198 4510 Lee Blvd.,S.E. Lawton OK Leased
13. 199 600 W. Independence Shawnee OK Owned
14. 487 1424 S. Yale Tulsa OK Owned
15. 491 105 N. Scraper Vinita OK Leased
16. 504 420 E. 8th Okmulgee OK Leased
17. 506 305 S. Broadway Cleveland OK Owned
18. 508 1530 S. Lewis Tulsa OK Leased
19. 516 316 E. Main Pawhuska OK Leased
20. 524 814 E. Cherokee Sallisaw OK Leased
21. 530 1000 Hall Street Coffeyville KS Leased
22. 531 416 W. Myrtle Independence KS Owned
23. 532 108 S. Division Okemah OK Leased
24. 535 2110 Broadway Parsons KS Leased
25. 537 601 E. Wyandotte McAlester OK Leased
26. 544 1500 S.E. Washington Idabel OK Owned
27. 555 332 N. Lynn Riggs Claremore OK Leased
28. 562 800 E. Okmulgee Muskogee OK Leased
29. 777 198 E. 33rd Edmond OK Leased
</TABLE>
p:\wp50\docs\acquisit\homeland\stores.lst\29stores.920
EXHIBIT A
TO NOTES OF CONVERSATION
<PAGE>
Exhibit B to Outline
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
<TABLE>
<CAPTION>
GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY
0064 0064 0104 0104 0130 0130
<S> <C> <C> <C> <C> <C> <C>
Beg. inventory & purchases at retail 582,376 277,089 528,739 239,799 446,733 150,092
Beg. inventory & purchases at cost 413,587 187,498 382,691 162,660 315,244 102,880
----------------------------------------------------------------
Percent spread 71.02% 67.67% 72.38% 67.83% 70.57% 68.54%
Beg. inventory & purchases at retail 582,376 277,089 528,739 239,799 446,733 150,092
Less: Realized sales 236,927 34,227 184,515 28,886 205,382 24,705
Markdowns 19,072 2,187 12,821 1,949 14,019 1,730
Inventory overage (shortage) 0 0 2,545 0 0 0
----------------------------------------------------------------
Ending inventory at retail 326,377 240,675 328,858 208,964 227,332 123,657
Percent spread 71.02% 67.67% 72.38% 67.83% 70.57% 68.54%
----------------------------------------------------------------
Ending inventory at cost 231,784 162,858 238,021 141,744 160,420 84,760
Realized sales 236,927 34,227 184,515 28,886 205,382 24,705
Beg. inventory & purchases at cost (413,587) (187,498)(382,691)(162,660)(315,244)(102,880)
Ending inventory at cost 231,784 162,858 238,021 141,744 160,420 84,760
----------------------------------------------------------------
824 gross profit 55,124 9,587 39,845 7,970 50,558 6,585
824 gross profit % 23.27% 28.01% 21.59% 27.59% 24.62% 26.66%
Adjustments:
Retail allowances 6,249 1,182 4,732 995 4,659 764
Warehouse inv. over/short 68 6 26 5 55 5
Warehouse gains/losses 2,810 250 2,539 200 2,804 201
----------------------------------------------------------------
Realized gross before W&T 64,250 11,025 47,142 9,169 58,076 7,555
Realized gross % before W&T 27.12% 32.21% 25.55% 31.74% 28.28% 30.58%
Warehouse expense (4,324) (765) (2,884) (646) (4,185) (616)
Transportation expense (2,019) (116) (897) (61) (2,029) (88)
----------------------------------------------------------------
Realized gross after W&T 57,908 10,144 43,361 8,463 51,863 6,851
================================================================
Realized gross % after W&T 24.44% 29.64% 23.50% 29.30% 25.25% 27.73%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY
0134 0134 0144 0144 0147 0147
Beg. inventory & purchases at retail 571,450 238,424 794,278 305,294 675,426 263,981
Beg. inventory & purchases at cost 410,143 161,735 578,635 208,022 491,421 177,153
-----------------------------------------------------------------
Percent spread 71.77% 67.83% 72.85% 68.14% 72.76% 67.11%
Beg. inventory & purchases at retail 571,450 238,424 794,278 305,294 675,426 263,981
Less: Realized sales 232,272 38,076 370,180 59,611 264,912 39,044
Markdowns 15,407 3,084 19,098 2,953 17,120 1,966
Inventory overage (shortage) (23,849) (14,957) 0 1,665 0 5,587
-----------------------------------------------------------------
Ending inventory at retail 347,620 212,221 405,000 241,065 393,394 217,384
Percent spread 71.77% 67.83% 72.85% 68.14% 72.76% 67.11%
-----------------------------------------------------------------
Ending inventory at cost 249,495 143,960 295,044 164,258 286,222 145,883
Realized sales 232,272 38,076 370,180 59,611 264,912 39,044
Beg. inventory & purchases at cost (410,143) (161,735)(578,635) (208,022)(491,421)(177,153)
Ending inventory at cost 249,495 143,960 295,044 164,258 286,222 145,883
-----------------------------------------------------------------
824 gross profit 71,624 20,301 86,589 15,846 59,714 7,773
824 gross profit % 30.84% 53.32% 23.39% 26.58% 22.54% 19.91%
Adjustments:
Retail allowances 5,610 1,292 9,202 1,940 6,852 1,287
Warehouse inv. over/short 60 7 88 9 65 7
Warehouse gains/losses 2,929 263 4,866 389 3,541 232
-----------------------------------------------------------------
Realized gross before W&T 80,223 21,862 100,745 18,184 70,171 9,299
Realized gross % before W&T 34.54% 57.42% 27.22% 30.50% 26.49% 23.82%
Warehouse expense (4,262) (790) (6,669) (1,279) (4,601) (685)
Transportation expense (1,656) (89) (1,224) (74) (2,339) (104)
------------------------------------------------------------------
Realized gross after W&T 74,305 20,984 92,851 16,831 63,231 8,510
==================================================================
Realized gross % after W&T 31.99% 55.11% 25.08% 28.24% 23.87% 21.80%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
GROCERY VARIETY GROCERY GROCERY VARIETY GROCERY
0168 0168 0171 0172 0172 0185
Beg. inventory & purchases at retail 527,713 238,658 885,649 726,063 295,270 739,092
Beg. inventory & purchases at cost 382,015 163,269 635,303 526,786 198,795 535,056
-----------------------------------------------------------------
Percent spread 72.39% 68.41% 71.73% 72.55% 67.33% 72.39%
Beg. inventory & purchases at retail 527,713 238,658 885,649 726,063 295,270 739,092
Less: Realized sales 219,342 22,365 201,299 270,976 36,219 298,154
Markdowns 17,847 2,977 21,566 23,614 2,305 25,318
Inventory overage (shortage) 0 2,834 1,952 6,559 34,798 0
-----------------------------------------------------------------
Ending inventory at retail 290,524 210,482 660,832 424,914 221,948 415,620
Percent spread 72.39% 68.41% 71.73% 72.55% 67.33% 72.39%
-----------------------------------------------------------------
Ending inventory at cost 210,312 143,994 474,035 308,291 149,430 300,883
Realized sales 219,342 22,365 201,299 270,976 36,219 298,154
Beg. inventory & purchases at cost (382,015) (163,269)(635,303)(526,786)(198,795)(535,056)
Ending inventory at cost 210,312 143,994 474,035 308,291 149,430 300,883
-----------------------------------------------------------------
824 gross profit 47,639 3,089 40,031 52,481 (13,146) 63,981
824 gross profit % 21.72% 13.81% 19.89% 19.37% -36.30% 21.46%
Adjustments:
Retail allowances 5,037 850 5,501 6,803 1,237 7,558
Warehouse inv. over/short 63 5 48 72 8 78
Warehouse gains/losses 2,805 184 2,695 3,854 270 4,127
-----------------------------------------------------------------
Realized gross before W&T 55,545 4,129 48,275 63,211 (11,631) 75,743
Realized gross % before W&T 25.32% 18.46% 23.98% 23.33% -32.11% 25.40%
Warehouse expense (4,298) (559) (4,348) (5,544) (810) (5,024)
Transportation expense (1,755) (80) (2,574) (3,403) (156) (1,230)
------------------------------------------------------------------
Realized gross after W&T 49,492 3,490 41,353 54,264 (12,597) 69,489
==================================================================
Realized gross % after W&T 22.56% 15.60% 20.54% 20.03% -34.78% 23.31%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY
0185 0194 0194 0198 0198 0199
Beg. inventory & purchases at retail 395,693 860,337 332,984 650,736 314,475 838,584
Beg. inventory & purchases at cost 268,549 620,003 223,429 469,990 211,238 606,491
-----------------------------------------------------------------
Percent spread 67.87% 72.07% 67.10% 72.22% 67.17% 72.32%
Beg. inventory & purchases at retail 395,693 860,337 332,984 650,736 314,475 838,584
Less: Realized sales 53,607 349,677 48,862 285,156 42,751 374,077
Markdowns 4,565 24,173 3,159 17,348 1,668 29,436
Inventory overage (shortage) 2,420 0 4,478 0 0 0
-----------------------------------------------------------------
Ending inventory at retail 335,101 486,487 276,485 348,232 270,056 435,071
Percent spread 67.87% 72.07% 67.10% 72.22% 67.17% 72.32%
-----------------------------------------------------------------
Ending inventory at cost 227,427 350,588 185,519 251,509 181,401 314,657
Realized sales 53,607 349,677 48,862 285,156 42,751 374,077
Beg. inventory & purchases at cost (268,549) (620,003) (223,429) (469,990)(211,238)(606,491)
Ending inventory at cost 227,427 350,588 185,519 251,509 181,401 314,657
-----------------------------------------------------------------
824 gross profit 12,484 80,261 10,952 66,674 12,914 82,243
824 gross profit % 23.29% 22.95% 22.41% 23.38% 30.21% 21.99%
Adjustments:
Retail allowances 1,898 8,548 1,669 7,344 1,548 9,360
Warehouse inv. over/short 10 104 10 70 8 115
Warehouse gains/losses 375 4,517 334 3,498 279 4,962
-----------------------------------------------------------------
Realized gross before W&T 14,767 93,431 12,965 77,586 14,749 96,680
Realized gross % before W&T 27.55% 26.72% 26.53% 27.21% 34.50% 25.85%
Warehouse expense (1,189) (6,431) (1,128) (5,374) (884) (6,893)
Transportation expense (87) (2,422) (134) (2,434) (121) (1,151)
------------------------------------------------------------------
Realized gross after W&T 13,492 84,578 11,703 69,777 13,744 88,637
==================================================================
Realized gross % after W&T 25.17% 24.19% 23.95% 24.47% 32.15% 23.69%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY
0199 0487 0487 0491 0491 0504
Beg. inventory & purchases at retail 369,713 609,644 246,266 423,536 162,951 557,976
Beg. inventory & purchases at cost 255,000 438,523 165,478 303,926 110,231 404,574
-----------------------------------------------------------------
Percent spread 68.97% 71.93% 67.19% 71.76% 67.65% 72.51%
Beg. inventory & purchases at retail 369,713 609,644 246,266 423,536 162,951 557,976
Less: Realized sales 53,653 274,701 34,333 145,913 17,904 161,267
Markdowns 3,614 17,323 1,986 11,893 2,953 14,979
Inventory overage (shortage) 883 149 1,007 0 0 (16,891)
-----------------------------------------------------------------
Ending inventory at retail 311,563 317,471 208,940 265,730 142,094 398,621
Percent spread 68.97% 71.93% 67.19% 71.76% 67.65% 72.51%
-----------------------------------------------------------------
Ending inventory at cost 214,893 228,360 140,397 190,686 96,122 289,030
Realized sales 53,653 274,701 34,333 145,913 17,904 161,267
Beg. inventory & purchases at cost (255,000) (438,523) (165,478)(303,926)(110,231)(404,574)
Ending inventory at cost 214,893 228,360 140,397 190,686 96,122 289,030
-----------------------------------------------------------------
824 gross profit 13,546 64,538 9,252 32,673 3,795 45,723
824 gross profit % 25.25% 23.49% 26.95% 22.39% 21.20% 28.35%
Adjustments:
Retail allowances 1,787 6,699 1,061 3,250 554 3,557
Warehouse inv. over/short 9 73 6 36 4 48
Warehouse gains/losses 352 3,799 269 2,012 153 2,078
-----------------------------------------------------------------
Realized gross before W&T 15,693 75,109 10,589 37,970 4,505 51,406
Realized gross % before W&T 29.25% 27.34% 30.84% 26.02% 25.16% 31.88%
Warehouse expense (1,161) (5,250) (931) (3,102) (455) (3,358)
Transportation expense (61) (2,653) (140) (2,432) (127) (2,253)
------------------------------------------------------------------
Realized gross after W&T 14,472 67,206 9,517 32,436 3,923 45,795
==================================================================
Realized gross % after W&T 26.97% 24.47% 27.72% 22.23% 21.91% 28.40%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY
0504 0506 0506 0508 0508 0516
Beg. inventory & purchases at retail 459,635 517,492 185,695 650,633 247,248 662,212
Beg. inventory & purchases at cost 298,953 366,691 127,444 466,620 165,293 468,820
-----------------------------------------------------------------
Percent spread 65.04% 70.86% 68.63% 71.72% 66.85% 70.80%
Beg. inventory & purchases at retail 459,635 517,492 185,695 650,633 247,248 662,212
Less: Realized sales 33,827 236,535 20,449 297,395 43,247 189,545
Markdowns 1,760 15,697 2,628 16,810 2,764 14,054
Inventory overage (shortage) 27,390 (4,272) 5,837 0 0 155
-----------------------------------------------------------------
Ending inventory at retail 396,658 269,532 156,781 336,428 201,237 458,458
Percent spread 65.04% 70.86% 68.63% 71.72% 66.85% 70.80%
-----------------------------------------------------------------
Ending inventory at cost 257,992 190,988 107,600 241,279 134,534 324,570
Realized sales 33,827 236,535 20,449 297,395 43,247 189,545
Beg. inventory & purchases at cost (298,953) (366,691)(127,444) (466,620)(165,293)(468,820)
Ending inventory at cost 257,992 190,988 107,600 241,279 134,534 324,570
-----------------------------------------------------------------
824 gross profit (7,134) 60,833 605 72,054 12,487 45,295
824 gross profit % -21.09% 25.72% 2.96% 24.23% 28.87% 23.90%
Adjustments:
Retail allowances 1,249 4,974 760 6,545 1,412 4,033
Warehouse inv. over/short 8 71 6 68 7 53
Warehouse gains/losses 233 3,666 201 4,006 305 2,582
-----------------------------------------------------------------
Realized gross before W&T (5,644) 69,544 1,572 82,673 14,211 51,963
Realized gross % before W&T -16.68% 29.40% 7.69% 27.80% 32.86% 27.41%
Warehouse expense (550) (4,815) (489) (5,366) (958) (4,329)
Transportation expense (142) (2,383) (88) (2,594) (130) (2,542)
------------------------------------------------------------------
Realized gross after W&T (6,336) 62,345 996 74,713 13,123 45,093
==================================================================
Realized gross % after W&T -18.73% 26.36% 4.87% 25.12% 30.34% 23.79%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY
0524 0524 0530 0530 0531 0531
Beg. inventory & purchases at retail 525,425 176,399 650,031 401,722 750,062 424,764
Beg. inventory & purchases at cost 378,750 119,809 467,015 262,767 539,213 280,564
-----------------------------------------------------------------
Percent spread 72.08% 67.92% 71.85% 65.41% 71.89% 66.05%
Beg. inventory & purchases at retail 525,425 176,399 650,031 401,722 750,062 424,764
Less: Realized sales 156,520 16,932 257,350 37,098 284,574 53,462
Markdowns 17,152 3,020 18,536 3,454 19,118 2,939
Inventory overage (shortage) 0 636 0 2,797 0 0
-----------------------------------------------------------------
Ending inventory at retail 351,753 155,811 374,145 358,373 446,370 368,363
Percent spread 72.08% 67.92% 71.85% 65.41% 71.89% 66.05%
-----------------------------------------------------------------
Ending inventory at cost 253,559 105,826 268,805 234,412 320,892 243,310
Realized sales 156,520 16,932 257,350 37,098 284,574 53,462
Beg. inventory & purchases at cost (378,750) (119,809)(467,015)(262,767)(539,213)(280,564)
Ending inventory at cost 253,559 105,826 268,805 234,412 320,892 243,310
-----------------------------------------------------------------
824 gross profit 31,330 2,949 59,139 8,743 66,252 16,208
824 gross profit % 20.02% 17.42% 22.98% 23.57% 23.28% 30.32%
Adjustments:
Retail allowances 3,733 523 6,495 1,303 6,494 1,829
Warehouse inv. over/short 46 5 76 8 87 11
Warehouse gains/losses 2,084 183 3,325 268 3,659 367
-----------------------------------------------------------------
Realized gross before W&T 37,192 3,660 69,035 10,323 76,492 18,415
Realized gross % before W&T 23.76% 21.62% 26.83% 27.83% 26.88% 34.45%
Warehouse expense (3,416) (565) (4,740) (639) (5,323) (913)
Transportation expense (2,310) (123) (3,398) (177) (3,628) (231)
------------------------------------------------------------------
Realized gross after W&T 31,467 2,973 60,897 9,507 67,541 17,271
==================================================================
Realized gross % after W&T 20.10% 17.56% 23.66% 25.63% 23.73% 32.31%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
GROCERY GROCERY VARIETY GROCERY VARIETY GROCERY
0532 0535 0535 0537 0537 0544
Beg. inventory & purchases at retail 766,212 637,123 352,880 741,565 485,086 750,261
Beg. inventory & purchases at cost 540,915 457,149 225,042 538,981 316,426 542,622
-----------------------------------------------------------------
Percent spread 70.60% 71.75% 63.77% 72.68% 65.23% 72.32%
Beg. inventory & purchases at retail 766,212 637,123 352,880 741,565 485,086 750,261
Less: Realized sales 204,297 282,071 40,849 280,376 65,754 354,621
Markdowns 21,463 20,396 2,584 23,043 5,237 29,999
Inventory overage (shortage) 17,300 0 558 0 4,081 4,429
-----------------------------------------------------------------
Ending inventory at retail 523,152 334,656 308,889 438,146 410,014 361,212
Percent spread 70.60% 71.75% 63.77% 72.68% 65.23% 72.32%
-----------------------------------------------------------------
Ending inventory at cost 369,325 240,122 196,988 318,451 267,456 261,245
Realized sales 204,297 282,071 40,849 280,376 65,754 354,621
Beg. inventory & purchases at cost (540,915) (457,149)(225,042)(538,981)(316,426)(542,622)
Ending inventory at cost 369,325 240,122 196,988 318,451 267,456 261,245
-----------------------------------------------------------------
824 gross profit 32,706 65,045 12,795 59,846 16,784 73,243
824 gross profit % 16.01% 23.06% 31.32% 21.35% 25.53% 20.65%
Adjustments:
Retail allowances 4,694 6,426 1,234 6,640 2,157 8,097
Warehouse inv. over/short 67 76 8 89 11 118
Warehouse gains/losses 2,718 3,409 301 3,711 436 4,912
-----------------------------------------------------------------
Realized gross before W&T 40,185 74,957 14,338 70,286 19,387 86,371
Realized gross % before W&T 19.67% 26.57% 35.10% 25.07% 29.48% 24.36%
Warehouse expense (4,614) (5,059) (733) (5,860) (1,424) (7,479)
Transportation expense (1,380) (3,712) (199) (3,611) (270) (4,259)
------------------------------------------------------------------
Realized gross after W&T 34,191 66,185 13,407 60,815 17,693 74,632
==================================================================
Realized gross % after W&T 16.74% 23.46% 32.82% 21.69% 26.91% 21.05%
==================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
VARIETY GROCERY VARIETY GROCERY VARIETY
0544 0555 0555 0562 0562
Beg. inventory & purchases at retail 360,533 797,460 451,901 1,006,563 521,342
Beg. inventory & purchases at cost 246,676 581,475 300,307 725,827 337,872
----------------------------------------------------------------
Percent spread 68.42% 72.92% 66.45% 72.11% 64.81%
Beg. inventory & purchases at retail 360,533 797,460 451,901 1,006,563 521,342
Less: Realized sales 32,094 331,524 55,160 424,114 79,202
Markdowns 3,723 32,536 4,879 31,743 3,704
Inventory overage (shortage) 0 0 3,339 0 814
----------------------------------------------------------------
Ending inventory at retail 324,716 433,400 388,523 550,706 437,622
Percent spread 68.42% 72.92% 66.45% 72.11% 64.81%
----------------------------------------------------------------
Ending inventory at cost 222,170 316,017 258,190 397,111 283,614
Realized sales 32,094 331,524 55,160 424,114 79,202
Beg. inventory & purchases at cost (246,676) (581,475)(300,307)(725,827) (337,872)
Ending inventory at cost 222,170 316,017 258,190 397,111 283,614
----------------------------------------------------------------
824 gross profit 7,588 66,067 13,043 95,398 24,945
824 gross profit % 23.64% 19.93% 23.65% 22.49% 31.50%
Adjustments:
Retail allowances 1,124 7,251 1,935 9,473 2,757
Warehouse inv. over/short 8 98 10 132 12
Warehouse gains/losses 272 4,458 406 5,814 480
----------------------------------------------------------------
Realized gross before W&T 8,992 77,873 15,394 110,816 28,194
Realized gross % before W&T 28.02% 23.49% 27.91% 26.13% 35.60%
Warehouse expense (933) (6,093) (1,160) (8,595) (1,421)
Transportation expense (157) (3,681) (217) (4,585) (237)
----------------------------------------------------------------
Realized gross after W&T 7,902 68,099 14,017 97,636 26,536
================================================================
Realized gross % after W&T 24.62% 20.54% 25.41% 23.02% 33.50%
=================================================================
<PAGE>
Homeland Stores, Inc.
Analysis of 824 Gross Profit to Realized Gross Profit
For the 4 weeks ended September 10, 1994
GROCERY VARIETY
0777 0777
Beg. inventory & purchases at retail 1,326,977 815,978
Beg. inventory & purchases at cost 950,572 547,726
-----------------------------
Percent spread 71.63% 67.13%
Beg. inventory & purchases at retail 1,326,977 815,978
Less: Realized sales 728,399 133,905
Markdowns 40,988 7,381
Inventory overage (shortage) 0 (2,198)
-----------------------------
Ending inventory at retail 557,590 676,890
Percent spread 71.63% 67.13%
-----------------------------
Ending inventory at cost 399,426 454,363
Realized sales 728,399 133,905
Beg. inventory & purchases at cost (950,572) (547,726)
Ending inventory at cost 399,426 454,363
-----------------------------
824 gross profit 177,253 40,542
824 gross profit % 24.33% 30.28%
Adjustments:
Retail allowances 17,087 4,573
Warehouse inv. over/short 189 15
Warehouse gains/losses 9,997 695
-----------------------------
Realized gross before W&T 204,527 45,825
Realized gross % before W&T 28.08% 34.22%
Warehouse expense (12,003) (2,589)
Transportation expense (1,628) (99)
-----------------------------
Realized gross after W&T 190,895 43,137
=============================
Realized gross % after W&T 26.21% 32.21%
=============================
/TABLE
<PAGE>
EXHIBIT C TO OUTLINE
ASSOCIATED WHOLESALE GROCERS, INC.
CONCENTRATED PURCHASE ALLOWANCE TABLE
1994
ANNUAL PURCHASES WEEKLY PURCHASES DISCOUNT RATE
$2,812,253.00 $53,061.37 .100%
$4,218,379.00 $79,592.05 .150%
$5,624,506.00 $106,122.75 .200%
$8,436,759.00 $159,184.13 .225%
$11,249,012.00 $212,245.50 .250%
$16,873,518.00 $318,368.26 .275%
$22,498,024.00 $424,491.01 .300%
$33,747,036.00 $636,736.52 .325%
$44,996,047.00 $848,982.01 .350%
$56,245,059.00 $1,061,227.52 .375%
$67,494,071.00 $1,273,473.03 .400%
$89,992,095.00 $1,697,964.05 .450%
$112,490,119.00 $2,122,455.07 .500%
$134,988,142.00 $2,546,946.07 .550%
$157,486,166.00 $2,971,437.09 .600%
$179,984,190.00 $3,395,928.11 .650%
$202,482,213.00 $3,820,419.11 .700%
$224,980,237.00 $4,244,910.13 .750%
- - - Concentrated Purchase Allowance (CPA) will be paid quarterly by check.
- - - CPA will be calculated quarterly, annualized and adjusted each quarter to
reflect the qualifying volume bracket.
- - - The CPA brackets will be indexed to the Consumer Price Index and adjusted
annually.
- - - Annual purchases will be based on qualifying sales by equity group and
will be calculated in the same manner as year-end rebate.
<PAGE>
EXHIBIT D TO OUTLINE
SUPPLY AGREEMENT
QUARTERLY PAYMENT SCHEDULE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
% MINIMUM 90.01% 80.01% 70.01% 60.01% 50.01% 40.01% 30.01%
% MAXIMUM 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00%
-----------------------------------------------------------------------------------------------------
@ 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00%
-----------------------------------------------------------------------------------------------------
MINIMUM $261,000,029 $232,029,000 $203,029,000 $174,029,000 $145,029,000 $116,029,000 $87,029,000
MAXIMUM $290,000,000 $261,000,029 $232,029,000 $203,029,000 $174,029,000 $145,029,000 $116,029,000
1 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
2 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
3 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
4 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
5 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
6 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
7 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
8 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15
9 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
10 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
11 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
12 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
13 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
14 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
15 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
16 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
17 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
18 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
19 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
20 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
21 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
22 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
23 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
24 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
25 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
26 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
27 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
28 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50
$33,882,388.04 $30,494,149.24 $27,105,910.43 $23,717,671.63 $20,329,432.82 $16,941,194.02 $13,552,955.22
<PAGE>
EXHIBIT B
TO LETTER OF INTENT
Initial documents and/or schedules to be provided to Associated
Wholesale Grocers, Inc. (AWG) by Homeland Stores, Inc. (Homeland)
relating to the Assets:
1. Schedules detailing all Assets owned by Homeland which are
to be transferred to AWG at the date of the Closing.
2. Schedule of all lawsuits and/or threatened claims relating
to the Assets to which Homeland is a party.
3. Schedule of insurance policies relating to all real
property, leasehold interests and Assets.
4. Complete copies of all material contracts relating to the
Assets, including without limitation:
a. non-compete agreements
b. franchise and/or license agreements
c. computer software and hardware licenses, leases and/or
agreements
d. management and employment contracts
e. professional service agreements
f. supply agreements
g. equipment leases
h. union contracts
i. employment agreements or other agreements pertaining to
employees or managers relating to the Assets
j. fleet leases
5. Schedule of all taxes (other than income), including
property and sales, which are due and payable or which are to
become due and payable for the current fiscal year.
6. Schedule of all salable inventory owned in connection with
the Assets.
7. Schedule of all equipment, furniture, fixtures, furnishings,
trade fixtures, fleet, machinery, computers, and all other
equipment and used in connection with the Assets.
8. Schedule of all trade names and service marks used in
connection with the Assets.
9. Schedule of all leases relating to the Assets, in addition
to the following documents on each lease:
a. Complete, true and correct copies of each lease.
b. Location.
c. Current purpose and use by Homeland.
d. All amendments, modifications, guarantees, exhibits and
schedules.
e. All site plans relating to the location, if any.
f. All title commitments or title policies relating to the
location, if any.
g. All surveys, if any.
h. All subordination, non-disturbance, attornment and
estoppel certificates, assignments, consents to
assignments, or other agreements executed by Homeland or
its predecessors-in-interest relating to each lease.
i. Environmental audits, if any.
j. Legal description.
k. All plans and specifications, if any.
l. All construction contracts or work orders pertaining to
any work currently being or to be performed on the
leasehold interests.
10. Schedule of owned real estate relating to or included in the
Assets, in addition to the following on each property:
a. Location.
b. Legal Description.
c. Current purpose and use by Homeland.
d. The purchase and sales agreement and all amendments
thereto relating to the acquisition of the property and
all other agreements relating to the property.
e. The most recent title policy and a copy of all exception
documents, if any.
f. All surveys, if any.
g. All plans and specifications, if improved property, if
any.
h. All soils and substrata tests performed and results,
engineering plans and studies, if any.
i. All environmental audits, if any.
j. Copies of all easements and encumbrances, if not
included in 10.d above.
k. Evidence, if any, of utilities available to the site.
l. Evidence, if any, from city or municipality that there
are no current violations of ordinances, rules and
regulations.
m. Evidence, if any, of proper zoning.
n. Photographs of the property, if any.
o. Copies of all building and maintenance contracts and
warranties.
p. Copies of the certificates of occupancy.
q. All construction contracts or work orders pertaining to
any work currently being or to be performed on the
property.
r. Copy of Warranty Deed conveying property to Homeland.
11. Latest UCC search on all Assets, including, real estate,
leasehold interests, inventory and equipments, if any.
12. Summary of all equipment warranties of manufacturers and/or
vendors relating to the Assets.
13. Certified Copy of Articles of Incorporation, Bylaws,
Certificate of Good Standing of Homeland Stores, Inc. and Homeland
Holding Corporation.
14. Copy of most recent audited financial statements of Homeland
along with the following:
a. P & L on each store to be purchased by AWG.
b. P & L on distribution center.
c. Schedule of the book value of all Assets, including date
of purchase, original cost and depreciation taken to
date.
d. All audited work papers relating to the Assets.
15. Any and all other documents in Homeland's possession or
control, or otherwise, relating to the proposed acquisition,
reasonably determined by AWG or its external advisers to be
necessary to review.
p:\wp50\docs\acquisit\homeland\letterof.int\exh-b.new
11/10/94 cap/cm
</TABLE>
Exhibit 99a
<PAGE>
For Immediate Release
For: Homeland Stores, Inc. Contact: Robert Mead
(405) 557-5549
(212) 484-6701
HOMELAND REACHED TENTATIVE AGREEMENT TO SELL
29 STORES AND WAREHOUSE OPERATIONS TO
ASSOCIATED WHOLESALE GROCERS, KANSAS CITY
---------------
Homeland to Join Wholesale Cooperative
---------------
James A. Demme Named President and CEO
OKLAHOMA CITY, OK, November 30, 1994---Homeland Stores, Inc. today
announced that it has reached an Agreement in Principle to sell 29
of its stores and its warehouse complex to Associated Wholesale
Grocers, Kansas City ("AWG") -- a major retail-owned buying
cooperative with [735] member stores in a nine state region. As
part of the agreement, Homeland will enter into a seven-year supply
agreement with AWG for its remaining stores that provides Homeland
the lowest prices and best possible terms available through the AWG
system on the purchase of products and services.
Also under the agreement, which is scheduled to close during the
second quarter of 1995, AWG will pay Homeland $45 million plus
value of inventory in the warehouse and 29 stores. Homeland
expects that proceeds from the sale would be used to improve the
Company's financial position by paying down the Company's trade
payables and other liabilities and reducing its outstanding
indebtedness.
Homeland officials said that the Agreement in Principle was an
essential first step in the Company's effort to complete an
operational restructuring that will allow the Company to reduce its
debt burden and fixed operating costs and improve its performance.
Homeland's performance in recent years has been under pressure as
a result of difficult economic conditions and the entry of
aggressive competition into its key markets.
(more)
<PAGE>
"The recent influx of large national competitors into Oklahoma and
surrounding markets has hurt independents and regional chains like
Homeland," said Chuck Ames, Chairman of Homeland. "We believe a
strategic partnership with AWG will benefit Homeland by allowing us
to increase our buying power, reduce both our debt and fixed
operating costs and focus our operations on a core of profitable
stores."
The Company also announced that as part of the restructuring, Max
Raydon has resigned as President and Chief Executive Officer.
"With this Agreement we have taken a major step towards
implementing an operational restructuring that will improve
Homeland's ability to compete, and I feel it is time for me to
pursue other opportunities," said Raydon.
The Company announced that James A. Demme has been appointed
President and Chief Executive Officer effective immediately and
that Raydon will serve as a consultant to the Company to assist
with the transition.
"Jim Demme brings senior management experience in both retail and
wholesale to Homeland. That experience will be key to the success
of our transformation from an independent regional chain to a
member of the AWG wholesale cooperative," said Ames.
Demme has 35 years experience in the wholesale/retail food
industry, most recently as Executive Vice-President of Retail
Operations for Scrivner, Inc. Prior to its recent acquisition by
Fleming Companies, Inc., Scrivner was the third largest wholesale
food distribution company in the nation with sales in excess of $6
billion. Previously, Demme also held the positions of President
and Chief Operating Officer at Shaws Supermarkets, a large retail
chain based in Massachusetts with sales of more than $1.7 billion.
"I'm looking forward to working with the management and employees
of Homeland to revitalize the Company. The Homeland name has
strong consumer appeal in this market, and the restructuring will
give us more balance and consistency in store size and `look' in
our core stores -- allowing us to improve in consistency of
marketing strategy and consumer offering," Demme said.
AWG is the fifth largest wholesale distributor in the country with
more than $2.5 billion in revenues and buying power six times
greater than Homeland. AWG has 735 independent retail stores as
members of its supply cooperative. The acquisition of 29 Homeland
stores and Homeland's joining of the AWG cooperative will bring
that total to 846.
With 111 stores, Homeland is the leading supermarket chain in
Oklahoma, southern Kansas and the Texas Panhandle region with an
estimated overall market share of 27 percent.
-2-
Exhibit 99b
<PAGE>
Financial Information
The unaudited summary financial data set forth below
should be read in conjunction with the Financial Statements and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the Quarterly Report on Form
10-Q for the period ended September 10, 1994 of Holding.
The projected 1994 financial information represents
actual operating data for the 44 weeks ended November 5, 1994 and
projected performance for the 8 weeks ending December 31, 1994,
without, in each case, giving effect to the Transaction. The
adjusted projected 1994 financial information was prepared by
Homeland to illustrate the estimated effects of the Transaction and
certain related transactions as if the Transaction and related
transactions had occurred as of January 2, 1994.
The financial information set forth below (including the
projected 1994 financial information) has been prepared by Homeland
to present the effects of the Transaction and related transactions,
but is not factual and should not be relied upon as being
representative of future results. The estimates and assumptions
underlying such information are inherently uncertain, being based
upon events that have not taken place, are subject to economic,
competitive and other uncertainties and contingencies beyond
Homeland's control and involve judgments based upon past
performance and industry trends which may not necessarily be
indicative of future performance or trends. Consequently, there
may be no assurance that (a) the assumptions underlying such
information will prove correct, (b) the results reflected in such
information can be realized, or (c) the actual results will not be
higher or lower than those projected. However, Homeland believes
that the basis for such information is reasonable, taking into
account the purpose for which it has been prepared.
The financial information set forth below was not
prepared with a view towards public disclosure or compliance with
the published guidelines of the Securities and Exchange Commission
or the American Institute of Certified Public Accountants or
generally accepted accounting principles. The independent auditors
of Homeland have not examined, reviewed or compiled such
information and, accordingly, do not express an opinion or any
other form of assurance on it.
<PAGE>
Homeland does not intend to update or otherwise revise
the financial information set forth below to reflect circumstances
existing after the date hereof or to reflect the occurrence of
unanticipated events, even in the event any or all of the
underlying assumptions are shown to be in error. Furthermore,
Homeland does not intend to update or revise such information to
reflect changes in general economic or industry conditions.
However, upon the consummation of the Transaction, Homeland intends
to file a Current Report on Form 8-K that would include the
information required by Items (2) and (7) of Form 8-K.
<PAGE>
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
UNAUDITED SUMMARY FINANCIAL DATA
For the 52 Weeks Ending December 31, 1994
(In thousands)
Adjusted
Projected Projected
Dec. 31, 1994 Dec. 31, 1994
(1)
Summary Income Statement
Sales $ 779,230 $ 527,404 (3)
Gross Profit 199,431 140,595 (3)
Selling and Administrative 188,117 128,846 (4)
Earnings before Interest and Taxes 11,314 11,749
Depreciation, Amortization and
Non-cash Items 19,058 11,393 (5)
EBITDA 30,372 23,142
Interest Expense 18,135 11,504 (7)
Cash Capital Expenditures 6,200 5,000 (8)
Summary Capitalization
Notes Payable $ 750 $ 750
Floating Senior Notes-Series A 12,000 7,997
Floating Senior Notes-Series D 33,000 21,993
11.75% Senior Notes-Series C 75,000 49,984
Revolving Credit Loans 35,000 23,326
Capital Leases 17,757 8,612
Total Debt 173,507 112,662 (6)
Equity 32,443 (2) 16,483 (9)
Book Capitalization $205,950 $129,145
Summary Coverage Rating
EBITDA/Interest 1.67 2.01
EBITDA-CapEx/Interest 1.33 1.58
Debt/EBITDA 5.71 4.87
The accompanying notes are an integral part
of this summary financial data.
<PAGE>
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED PROJECTED SUMMARY FINANCIAL DATA
1. Projected 1994:
The projected 1994 financial information represents actual
operating data for the 44 weeks ended November 5, 1994 and
projected performance for the 8 weeks ending December 31, 1994
without, in each case, giving effect to the Transaction or to the
closing of certain stores. The balance shown for the Revolving
Credit Loans includes outstanding letters of credit of $9.5
million.
2. Projected Equity:
Reflects the early adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" during the fourth quarter of fiscal
1994. The impact of adoption has resulted in a one-time charge
against equity of $1.9 million.
3. Sales and Gross Profit:
Net sales and gross profit represents actual operating data for the
44 weeks ended November 5, 1994 and projected performance for the
8 weeks ending December 31, 1994 for the continuing stores. Gross
profit has been impacted by the following:
(a) A reduction by 0.5% to reflect the anticipated initial
increase in inventory costs during the Company's transition to
AWG's purchasing programs and procedures. Management believes
that the impact of the transition will be reduced over time.
(b) An increase by 1.0% to reflect the purchase rebates offered
pursuant to the Transaction as set forth in the Letter of
Intent.
4. Selling and Administrative:
Includes management's estimates of certain anticipated corporate
cost reductions, such as reduced headcount and other administrative
expenses, likely to arise from the Transaction. The adjusted
projected results also give effect to the estimated cost impact of
senior ranking union employees employed in the stores to be sold to
AWG or closed, replacing junior union employees in the continuing
stores as provided for in the United Food and Commercial Workers of
North America collective bargaining agreement.
5. Depreciation, Amortization and Non-Cash Items:
Includes certain anticipated corporate asset disposals resulting
from the Transaction.
HOMELAND HOLDING CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED PROJECTED SUMMARY FINANCIAL DATA
6. Debt:
Debt repayments are based on an estimate of the net cash proceeds
to be received from the Transaction and sale of certain assets
relating to closed stores allocated on a pro rata basis to the
projected outstanding debt as of December 31, 1994. The effect of
such pro rata allocation of proceeds may not be consistent with the
requirements set forth under the Company's Revolving Credit
Agreement and Senior Note Indenture. Capital leases are reduced by
$9.1 million resulting from the assumption of some leases and the
termination of others in conjunction with the Transaction and
closing of certain stores.
7. Interest Expense:
Interest expense for the year is estimated based on the rates in
effect during fiscal 1994 applied to the outstanding debt during
the fiscal year assuming the estimated pro rata debt repayments
described in Note 6 above were made as of January 2, 1994.
8. Cash Capital Expenditures:
Represents projected cash capital expenditures to be incurred
during fiscal 1995 for the continuing stores.
9. Adjusted Projected Equity:
Represents the impact of the Transaction on equity and includes the
following:
(a) Estimated net book loss resulting from the Transaction.
(b) Estimated net loss resulting from closing certain stores.
(c) Estimated costs of debt restructuring and other Transaction
related expenses.
