KASH N KARRY FOOD STORES INC, S-1, 1995-05-02

KASH N KARRY FOOD STORES INC
S-1, 1995-05-02
GROCERY STORES

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As filed with the Securities and Exchange Commission on May 1, 1995
Registration No. 33-_________
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

KASH N' KARRY FOOD STORES, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 5411 95-4161591
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation) Number)
6422 Harney Road
Tampa, Florida 33610
(813) 621-0200
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive office)

RAYMOND P. SPRINGER
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Kash n' Karry Food Stores, Inc.
6422 Harney Road
Tampa, Florida 33610
(813) 621-0200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
with copies to:

LAWRENCE LEDERMAN, ESQ. ROBERT S. BOLT, ESQ.
Milbank, Tweed, Hadley & McCloy Barnett, Bolt, Kirkwood & Long
1 Chase Manhattan Plaza 601 Bayshore Boulevard, Suite 700
New York, New York 10005 Tampa, Florida 33606
(212) 530-5680 (813) 253-2020

Approximate date of commencement of proposed sale to the
public: From time to time after the effective date of this
Registration Statement, as determined by the Selling Stockholders.

If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. x

(continues on following page)

Page one of 384 pages.
Exhibit Index appears on page 117.
(continuation of cover page)
<PAGE>
CALCULATION OF REGISTRATION FEE

Proposed Proposed
Maximum Maximum Amount
Title of Each Offering Aggregate of
Class of Securities Amount to be Price Offering Regis-
to be Registered Registered Per Share(1) Price(1) tration fee

Common Stock, 3,100,000 $19.25 $59,675,000 $20,577.59
par value
$.01 per share

(1) Estimated solely for purposes of calculating the registration
fee, pursuant to Rule 457.

The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>
CROSS REFERENCE SHEET

(Pursuant to Item 501(b) of Regulation S-K)

The following information sets forth the location in the Prospectus
of information required by Items 1-12, Part I, of Form S-1

Registration Statement, Items Location in Prospectus
and Heading

1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.............Cover Page of Registration
Statement; Outside Front
Cover Page of Prospectus;
Cross Reference Sheet
2. Inside Front and Outside Back
Cover Pages of Prospectus...........Inside Front Cover Page of
Prospectus; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges....................Prospectus Summary; Investment
Considerations; Selected
Financial Information

4. Use of Proceeds.....................Not Applicable

5. Determination of Offering Price.....Not Applicable

6. Dilution............................Not Applicable

7. Selling Security Holders............Selling Stockholders

8. Plan of Distribution................Plan of Distribution

9. Description of Securities to be
Registered..........................Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Capital Stock
10. Interests of Named Experts
and Counsel........................Not Applicable

11. Information With Respect to the
Registrant.........................Inside Front Cover of Prospectus;
Prospectus Summary; The Company; The
Restructuring; Capitalization;
Selected Financial Information;
MarketPrice and Dividend Policy;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations; Business; Management;
Certain Relationships and Related
Transactions; Principal Stockholders;
Description of Capital Stock
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities ........Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES LAWS OF ANY SUCH STATE.

<PAGE>
SUBJECT TO COMPLETION, DATED MAY 1, 1995
[LOGO]
KASH N' KARRY FOOD STORES, INC.

COMMON STOCK

Up to 3,100,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Kash n' Karry Food Stores, Inc. (the "Company"), may be
offered from time to time by certain holders of the Common Stock
(collectively, the "Selling Stockholders"). See "Selling Stockholders." The
Common Stock offered hereby is listed on the Nasdaq Stock Market's Small Cap
Market under the symbol "KASH." See "Market Price and Dividend Policy."

The Company will not receive any of the proceeds from any sale of Common
Stock offered from time to time by the Selling Stockholders. Any or all of
such Common Stock may be sold by the Selling Stockholders from time to time
(i) to or through underwriters or dealers, (ii) directly to one or more other
purchasers, (iii) through agents on a best-efforts basis, or (iv) through a
combination of any such methods of sale. If required, the names of any
underwriters or agents and the applicable commissions or discounts, along
with pricing information, will also be set forth in an accompanying
Prospectus Supplement. See "Plan of Distribution."

See "Investment Considerations" for a discussion of certain factors that
should be considered by prospective investors in connection with an
investment in the Common Stock.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

The date of this Prospectus is _______________, 1995

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549, and at certain of the following regional offices:
7 World Trade Center, Suite 1300, New York, New York 10048, and Northwest
Atrium Center, 550 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street N.W., Washington, D.C. 20549, at
prescribed rates. The Common Stock is listed on the Nasdaq Small Cap Market;
accordingly, such reports and other information concerning the Company may
also be inspected at the offices of the Nasdaq Stock Market, 1735 K Street
N.W., Washington, D.C. 20006.

The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933 (the "Securities Act") with respect to the Common
Stock offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
offering of Common Stock, reference is made hereby to such Registration
Statement and exhibits.

2
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and the financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. References in this Prospectus to the "Company" mean Kash n'
Karry Food Stores, Inc., references to "Common Stock" mean the 3,100,000
shares of common stock of the Company, par value $.01 per share, issued on
December 29, 1994 in connection with the Restructuring (as herein defined).
All financial information set forth herein is presented in accordance with
generally accepted accounting principles ("GAAP"), unless otherwise noted.

The Company

The Company is the third largest food retailer in west central Florida,
operating 92 multi-department supermarkets, five conventional supermarkets
and 33 liquor stores under the "Kash n' Karry" name and two super warehouse
stores under the "Save 'n Pack" name, all supported by a centrally-located
warehouse and distribution facility. More than one-half of the Company's
stores are located in the Tampa-St. Petersburg area, which is Florida's
largest retail food sales market, with the balance located between
Gainesville, approximately 130 miles to the north, and Bonita Springs,
approximately 150 miles to the south. The west central Florida area has a
diverse and growing economy, which includes high technology and financial
centers, an insurance industry presence, retirement communities, coastal
resorts and commercial agricultural activity. The region's population is
estimated to be increasing at an annual rate of approximately 2%.

The Company currently operates two distinct store concepts:

. a large, full-service multi-department supermarket under the Kash
n' Karry name, which is designed to operate profitably at lower
sales levels than certain competitors; and

. a super warehouse store under the Save 'n Pack name designed to
serve trade areas with low household income.

The Company has developed, and continues to implement, the following
marketing and operating strategies to promote growth in revenues and
operating cash flow:

Marketing Strategy. The Company emphasizes competitive prices on
everyday items, strong weekly features, high quality perishables and a broad
assortment of both national and corporate brands. The Company's food stores
are open seven days a week, with most operating 24 hours a day. The Company
seeks to be either first or second among its competitors in

3<PAGE>
assortment of branded merchandise, stocking over 29,000 SKU's (stock keeping
units) of national brand and corporate brand items. In addition to a full
range of grocery and general merchandise items, most of the Company's
multi-department supermarkets also feature expanded perishable goods
departments, delicatessens and in-store bakeries, and many contain pharmacies
and full-service seafood, full-service floral and video rental departments.

In 1992, the Company introduced its own corporate brand merchandise.
The Company's corporate brand strategy is to offer a product comparable in
quality to the best-selling national brand at a lower price. The Kash n'
Karry brand item generally sells for approximately 10% less than the
competing best-selling national brand but generates a higher per unit gross
profit contribution to the Company. Over 1,100 SKU's in a wide variety of
product categories carry the Kash n' Karry brand name.

Operations Strategy. The Company believes that up-to-date,
strategically located facilities, well-trained associates and information
management systems are key elements to the Company's future success. The
Company operates a modern, 687,000 square foot warehouse, distribution and
office facility in Tampa with sufficient capacity to service anticipated
store expansion for the foreseeable future. The warehouse enables the
Company to reduce costs by purchasing in large quantities, taking advantage
of special promotional prices offered by vendors and purchasing prior to
impending price increases, and reducing delivery costs through cross docking
and backhauls. The central location of the warehouse facility to its stores
also provides the Company with operating efficiencies.

The Company relies on information technology to enhance operating
efficiency. The Company recently entered into an agreement to outsource its
information systems development in order to minimize costs, accelerate the
implementation period for systems improvements, facilitate future software
upgrades, reduce personnel issues and eliminate equipment lease costs.
Specifically, the agreement provides for the acquisition of new procurement,
billing, labor scheduling and accounts payable systems and new point-of-sale
equipment in the stores within the next 18 months.

The Company also devotes significant resources to personnel training,
utilizes labor scheduling programs to allocate manpower based on anticipated
sales levels, and employs a variety of strategies to minimize inventory
losses. None of the Company's associates is covered by a collective
bargaining agreement.

The principal executive offices of the Company are located at 6422
Harney Road, Tampa, Florida 33610, and its telephone number is (813)
621-0200.

4<PAGE>
The Restructuring

The Company was formed in connection with a leveraged acquisition in
1988. Although the Company consistently generated stable operating cash
flows through its 1993 fiscal year, it experienced net losses for each of the
last five fiscal years and the 22-week period ended January 1, 1995 due
primarily to its highly leveraged position.

On November 9, 1994, the Company filed with the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") a "prepackaged"
plan of reorganization (the "Prepackaged Plan") pursuant to Chapter 11 of the
U.S. Bankruptcy Code. The Prepackaged Plan was confirmed by the Bankruptcy
Court on December 12, 1994. Under the terms of the Prepackaged Plan, the
Company effected a comprehensive financial restructuring (the
"Restructuring"). Among other things, the Company restructured its senior
debt, converted its subordinated debt into an 85% equity interest in the
Company, and received $10.0 million in cash from Green Equity Investors, L.P.
("GEI") for the remaining 15% equity interest of the Company. The Company
emerged from bankruptcy on December 29, 1994. For further information with
respect to the Prepackaged Plan and the Restructuring, see "The
Restructuring," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Investment Considerations

The shares offered hereby involve a high degree of risk and should not
be purchased by anyone who cannot afford the loss of their entire investment.
See "Investment Considerations."

5<PAGE>
Summary Financial Data

The following table presents summary financial information of the
Company as of and for each of the fiscal years ended on the Sunday nearest to
July 31, 1994, 1993 and 1992, and as of and for the periods ended January 29,
1995, January 1, 1995 and January 30, 1994, and should be read in conjunction
with the financial statements and related notes thereto appearing elsewhere
in this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The financial statements as of and for the periods ended January 29,
1995, January 1, 1995 and January 30, 1994, from which the summary financial
data has been derived, have not been audited by independent accountants in
accordance with generally accepted auditing standards, but, in the opinion of
management, the financial statements as of and for the period ended January
30, 1994 include all adjustments, consisting only of normal recurring
adjustments, necessary to summarize fairly the Company's financial position
and results of operations. As discussed herein, the Company's Prepackaged
Plan was consummated on December 29, 1994 (the "Effective Date"). The
financial statements as of and for the periods ended January 29, 1995 and
January 1, 1995 reflect the Company's emergence from Chapter 11 and were
prepared utilizing the principles of fresh-start reporting contained in the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." Operations during the period from the Effective Date through January
1, 1995 had no significant impact on the emergence transactions and as a
result have not been separately identified. As a result of the
implementation of fresh-start accounting, certain of the summary financial
data as of and for the periods ended January 29, 1995 and January 1, 1995 is
not comparable to the summary financial data of prior periods due to the
change in reporting entity resulting from the application of fresh-start
accounting. Therefore, summary financial data for the "Reorganized Company"
has been separately identified from that of the "Predecessor Company."
Results for the periods ended January 29, 1995 or January 1, 1995 are not
necessarily indicative of the results for the full year.

The summary store data have been derived from the Company's management
reporting records.

6<PAGE>

Reorganization items. . . . -- (219) --

Extraordinary items -
gain on debt discharge -- 70,166 --

Cumulative effect of change in accounting
principle. . . . . . . . -- (2,000) --
----- ------- --------
Net income (loss) . . . . . $807 $61,054 $(26,882)
===== ======= ========
Income per common share (2), (3) $0.26 -- --

Predecessor Company
Fiscal Year Ended Sunday Nearest July 31, (4)
1994 1993 1992
(In Thousands)
Statement of Operations Data
Sales . . . . . . . . . . . $1,065,165 $1,086,125 $1,071,038
Cost of sales . . . . . . . 845,597 856,156 848,441
---------- ---------- ----------
Gross profit. . . . . . . . 219,568 229,969 222,597
Selling, general and
administrative expenses 176,945 175,177 164,897
Depreciation and amortization 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
---------- ---------- ----------
Operating income. . . . . . 7,495 31,337 37,568

Net interest expense (1). . 45,390 43,257 44,869
---------- ---------- ----------
Net loss. . . . . . . . . . $(37,895) $(11,920) $(7,301)
========== ========== ==========
7<PAGE>
Reorganized Predecessor
Company Company
Period Ended
January 29, January 1, January 30,
1995 1995 1994
(4 weeks) (22 weeks) (26 weeks)
(Dollar Amounts In Thousands)
Balance Sheet Data
Total assets. . . . . . . . $381,751 $381,492 $408,154
Inventories . . . . . . . . 78,756 87,115 85,952
Property and equipment, net 143,813 144,979 165,518
Working capital . . . . . . 7,207 7,045 (367)
Total long-term debt and capital
leases (including current
maturities)(5) 240,286 242,786 353,723
Preferred stock . . . . . . -- -- 4,650
Total stockholders'
equity (deficit) 47,302 46,495 (50,041)

Other Data
Operating cash flow (EBITDA) (6) 5,188 17,060 18,758
Capital expenditures (7). . 162 665 10,606

Store Data
Food stores open at end of
period (8). . . . . . . . 99 99 101
Avg. selling sq. ft. during period (in
thousands) (9). . . . . . 2,903 2,903 3,096
Avg. sales per store week (10) $218 $196 $190

Predecessor Company
Fiscal Year Ended Sunday Nearest July 31, (4)
1994 1993 1992
Balance Sheet Data (Dollar Amounts in Thousands)
Total assets. . . . . . . . $389,893 $423,208 $399,419
Inventories . . . . . . . . 76,094 95,385 91,226
Property and equipment, net 160,491 164,937 145,372
Working capital . . . . . . (12,747) 19,137 26,031
Total long-term debt and capital
leases (including current
maturities) (5) 360,121 351,890 316,220
Preferred stock . . . . . . 4,650 4,650 4,650
Total stockholders' deficit (61,054) (23,159) (11,239)

Other Data
Operating cash flow
(EBITDA) (6) $42,623 $54,792 $57,700
Capital expenditures (7). . 15,471 37,703 15,385

Store Data
Food stores open at end of
period (8). . . . . . . . 100 115 111
Avg. selling sq. ft. during period (in
thousands) (9). . . . . . 3,084 3,100 2,970
Avg. sales per store week (10) $196 $183 $181
8<PAGE>
Notes to Summary Financial Data
(Dollar Amounts In Thousands)

(1) Includes amortization of deferred financing costs of $182, $1,152 and
$1,549 for the four weeks ended January 29, 1995, 22 weeks ended January
1, 1995, and 26 weeks ended January 30, 1994, respectively; and $2,950,
$2,850, and $2,932 for the 1994, 1993 and 1992 fiscal years,
respectively.

(2) Based on 3,100,00 shares (the weighted average number of shares of
Common Stock outstanding).

(3) Net income per share of Common Stock is not meaningful prior to January
1, 1995 due to the significant change in the capital structure in
connection with the Restructuring.

(4) The Company's fiscal year is based on a 52/53 week fiscal year ending on
the Sunday nearest to July 31. Therefore, the 1992 fiscal year included
53 weeks of operations. The 1994 and 1993 fiscal years each had 52
weeks of operations.

(5) Total long-term debt includes long-term debt, current maturities of
long-term debt, capital lease obligations and certain other debt.

(6) Represents earnings before net interest expense (which includes
amortization of deferred financing costs), provision for income taxes,
depreciation and amortization, store closing and other costs,
reorganization items, extraordinary items, and cumulative effect of
change in accounting principle. Operating cash flow (EBITDA) is
presented here as a measure of the Company's debt service ability, and
should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles)
or to cash flows from operating activities (as determined on the
Statements of Cash Flows in the Company's financial statements).

(7) Capital expenditures consist of cash expenditures, additions to capital
leases and, for the 1994, 1993 and 1992 fiscal years, amounts funded
under the capital improvements revolving credit facility under the Old
Credit Agreement (as defined in "The Restructuring").

(8) Data relating to the number of stores is expressed in actual numbers.

(9) Represents the average of the selling square footage of the Company's
stores on the first and last day of the respective periods. Selling
square footage includes adjacent liquor stores, where applicable, but
does not include backroom and receiving areas.

(10) Represents, for each of the respective periods, sales for such period
divided by the sum of the number of weeks for which each of the
Company's stores was open during such period.
9<PAGE>
INVESTMENT CONSIDERATIONS

An investment in the shares of Common Stock offered hereby involves a
high degree of risk. Prospective investors should carefully consider the
following matters, in addition to the other information set forth in this
Prospectus, in connection with an investment in the Common Stock offered
hereby.

History of Net Losses; Reorganization

The Company experienced net losses for each of the last five fiscal
years. The Company's statements of operations reflect a net loss of
approximately $37.9 million for the 1994 fiscal year, $11.9 million for the
1993 fiscal year, $7.3 million for the 1992 fiscal year, $39.0 million for
the 1991 fiscal year, and $25.6 million for the 1990 fiscal year. See
"Selected Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

On November 9, 1994, the Company sought relief pursuant to a
"prepackaged" plan of reorganization under Chapter 11 of the U.S. Bankruptcy
Code to reduce its debt service requirements and overall level of
indebtedness, to realign its capital structure and to provide the Company
with greater liquidity. See "The Restructuring." There can be no assurance
that the Company will operate profitably in its reorganized form.

Tax Considerations

As a result of the Restructuring (as defined in "The Restructuring"), an
ownership change within the meaning of Code section 382(g) occurred with
respect to the Company on December 29, 1994 (the "Change Date").
Accordingly, the Company's ability to carry forward all of the net operating
losses (and "recognized built-in losses," if any), to taxable years beginning
after the Change Date within the meaning of Code section 382(j) (and a
portion of the taxable year which includes the Change Date) will become
subject to an annual limitation under Code sections 382 and 383.

The Company intends to determine the annual limitation under the
provisions of Code section 382(l)(6), which deals with a loss corporation
that exchanges stock for debt and undergoes an ownership change in a
proceeding under Chapter 11. The amount of income that may be offset by the
net operating loss carryovers should generally be limited to an amount
(subject to a proration rule for the taxable year that includes the Effective
Date) equal to the product of (i) the value of the stock of the Company,
determined immediately prior to the Restructuring but increased to take into
account the effect on such value of the issuance of Common Stock to the
holders of Old Subordinated Debentures (as defined in "The Restructuring")
and (ii) the long-term tax-exempt rate, within the meaning of Code section
382(f). This annual limitation will be increased by "recognized built-in
gain," if any. The
10<PAGE>
Annual limitation on the Company's ability to carry forward its net operating
losses (and "reorganized built-in losses," if any) may be substantial.

Highly Leveraged Position

Even after the Restructuring, the Company remains highly leveraged. As
of January 29, 1995, the Company had total long-term indebtedness (including
current maturities) of $240.2 million, including $144.1 million of aggregate
principal amount of New Senior Floating Rate Notes and New Senior Fixed Rate
Notes (as defined in "The Restructuring") (collectively, the "New Notes"),
which mature on February 1, 2003, $47.0 million of term loan and revolving
loan indebtedness under the New Credit Agreement (as defined in "The
Restructuring"), $33.6 million of indebtedness under mortgages maturing
between 1999 and 2003, and $15.6 million of capital lease and other
obligations. Under the indentures governing the New Notes, the Company has
the option of paying interest in kind on the New Senior Floating Rate Notes
through August 1, 1995, and on the New Senior Fixed Rate Notes through
February 1, 1996. The Company expects to exercise the payment-in-kind
option, which will increase the principal amount of the New Notes outstanding
by $16.9 million through February 1, 1996 (assuming a 9.0% annual interest
rate on the New Senior Floating Rate Notes and 11.5% on the New Senior Fixed
Rate Notes). If future cash provided by operations is less than currently
expected, the Company may experience difficulty in meeting interest and
principal payments due on outstanding indebtedness and other obligations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

The degree to which the Company is leveraged could have important
consequences to holders of Common Stock of the Company, including the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal of and interest on its existing indebtedness, which
materially decreases the funds available to the Company to finance its
working capital, capital expenditures and business operations generally;
(iii) certain of the Company's borrowings are at variable rates of interest,
which, in the absence of interest rate hedging arrangements, make the Company
vulnerable to increases in interest rates; (iv) the Company's indentures and
New Credit Agreement impose significant financial and operating restrictions
which, if violated, could permit the Company's creditors to accelerate
payments thereunder (see "Investment Considerations -- Restrictions Imposed
Under Indebtedness"); (v) the Company is more highly leveraged than its
principal competitors, which may place the Company at a competitive
disadvantage (see "Competition" below); and (vi) the Company's high degree of
leverage may make it vulnerable to economic downturns and may limit its
ability to withstand competitive pressures and adverse changes in government
regulation and to capitalize on significant business opportunities.
11<PAGE>
Restrictions Imposed Under Indebtedness

The New Credit Agreement (as defined in "The Restructuring") and the
indentures governing the New Notes contain numerous limitations, including
restrictions on the ability of the Company to (i) incur additional
indebtedness, (ii) place liens on assets, (iii) sell assets, (iv) engage in
mergers or consolidations, (v) pay dividends and (vi) engage in certain
transactions with affiliates. The New Credit Agreement also requires the
Company to maintain compliance with certain financial covenants. These
limitations and requirements may restrict the ability of the Company to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes.

The ability of the Company to comply with the covenants in its debt
agreements will be dependent on its future financial performance, which will
be subject to prevailing economic conditions and other factors, including
factors beyond the control of the Company. Failure to comply with any of
these covenants could result in a default or event of default under the
relevant debt agreements, permitting lenders to accelerate the maturity of
the indebtedness under such agreements and to foreclose upon any collateral
securing such indebtedness. Any such failure to comply or any default, event
of default or acceleration under any particular indebtedness could also
result in the acceleration of other debt of the Company under agreements that
contain cross-default or cross-acceleration provisions.

Fresh-Start Reporting Presentation

The Company's Prepackaged Plan was confirmed by the U.S. Bankruptcy
Court on December 12, 1994, and consummated on December 29, 1994. In
accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code," the Company adopted "fresh-start
reporting." Accordingly, financial statements for periods subsequent to
December 29, 1994 have been prepared on a basis not comparable to prior
periods. The application and impact of "fresh-start reporting" is set forth
in greater detail in the notes to the Company's financial statements, which
are included in this Prospectus. See "Capitalization," "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and the Company's financial statements, including the
notes thereto.

Competition

The food retailing business is highly competitive. The Company competes
with several national, regional and local supermarket chains, particularly
Publix, Winn-Dixie, Albertson's and Food Lion. The Company is also in
competition with convenience stores, stores owned and operated or otherwise
affiliated with large food wholesalers, unaffiliated independent food stores,
merchandise clubs, discount drugstore chains and discount general merchandise
chains and supercenters.
12<PAGE>
The Company's principal competitors have greater financial resources
than the Company and could use those resources to take steps which could
adversely affect the Company's competitive position and financial
performance. For example, operating results generally and sales growth in
particular were adversely affected by approximately 84 competitive
supermarket openings during the 1994, 1993, 1992 and 1991 fiscal years by
both established competitors and new entrants in the Company's market area.
In fiscal 1995, the Company expects approximately 12 such competitive store
openings, and it is anticipated that these competitive store openings will
continue in the future.

Another example of the highly competitive nature of the food retailing
business is the practice of competitors to reposition their pricing
structure. Over the past several years, each of the Company's major
competitors has changed its pricing practices in a manner that has adversely
affected general retail pricing in the market. Winn-Dixie discontinued
double coupons and introduced its every day low price program in the spring
of 1991. In the spring of 1993, Publix began a campaign focused on
"surprisingly low prices," and Food Lion began a double coupon program which
has since been discontinued. The Company has had to deal with each of these
changes in a manner that has, in some instances, adversely affected its
operating results and may continue to do so in the future.

In addition, the Company's ability to compete may be adversely affected
by its high leverage and the limitations imposed by its debt agreements.

Anti-Takeover Provisions

The Company has adopted a preferred stock purchase rights plan (the
"Rights Plan"). See "Description of Capital Stock -- Certain Anti-Takeover
and Charter Provisions." The Rights Plan is designed to assure that all
stockholders receive fair and equal treatment in the event of any proposed
takeover of the Company. The Rights Plan could discourage certain potential
acquisition proposals and could delay or prevent a change in control of the
Company in certain circumstances. The Rights Plan could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the Common
Stock, or proxy contests, and may also inhibit fluctuations in the market
price of the Common Stock that could result from takeover attempts. In
addition, the Board of Directors, without further stockholder approval, may
issue Preferred Stock with such terms as the Board of Directors may
determine, and which could have the effect of delaying or preventing a change
in control of the Company. The issuance of such Preferred Stock could also
adversely affect the voting power of the holders of Common Stock. See
"Description of Capital Stock -- Preferred Stock." The Company is also
afforded the protections of Section 203 of the Delaware General Corporation
Law, which could delay or prevent a change in control of the Company or could
impede a merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company. See
"Description of Capital Stock -- Certain Anti-takeover and Charter
Provisions."
13<PAGE>
Restrictions on Dividends

The Company presently does not intend to pay dividends or make other
distributions with respect to the Common Stock for the foreseeable future.
In addition, the New Credit Agreement and the indentures governing the New
Notes contain limitations on the ability of the Company to pay dividends.
See "Market Price and Dividend Policy" and "Description of Capital Stock."

Limited Public Market

On March 2, 1995 the Common Stock was listed for trading on the Nasdaq
Small Cap Market under the symbol "KASH." Prior to such date, there was no
established public trading market for its Common Stock. There is no
assurance that an active trading market in the Common Stock will continue.
Accordingly, no assurance can be given as to the price at which any holder
may sell his Common Stock or whether a liquid market in the Common Stock will
exist at the time of any given sale.

THE COMPANY

The Company is a Delaware corporation, formed as a vehicle for the
October 1988 leveraged acquisition of 121 food and 25 liquor stores in two
separate transactions from Lucky Stores, Inc., a subsidiary of American
Stores Company, and Superx Drugs Corporation, a subsidiary of The Kroger Co.
The Company's original equity capitalization was provided by The Fulcrum III
Limited Partnership and The Second Fulcrum III Limited Partnership
(collectively, the "Fulcrum Partnerships") (the Fulcrum Partnerships are
investment funds managed by Gibbons, Goodwin, van Amerongen, L.P. ("GGvA")
(formerly known as Gibbons, Green, van Amerongen, L.P.)), certain affiliates
of Merrill Lynch & Co., Inc. and members of management. In November 1991,
Green Equity Investors, L.P. ("GEI"), an investment fund managed by Leonard
Green & Partners, L.P., invested $27.7 million in cash in exchange for an
equity interest in the Company. At the same time, the Fulcrum Partnerships
invested an additional $2.3 million and exchanged certain preferred stock of
the Company for common stock of the Company. After the November 1991 equity
infusion, and until the Restructuring was consummated, GEI owned
approximately 60.9%, and the Fulcrum III Partnerships owned approximately
33.8%, of the outstanding Common Stock of the Company.

The principal executive offices of the Company are located at 6422
Harney Road, Tampa, Florida 33610, and its telephone number is (813)
621-0200. The Company's symbol for trading on the Nasdaq Small Cap Market is
"KASH."

14<PAGE>
THE RESTRUCTURING

On November 9, 1994 (the "Petition Date") the Company filed with the
U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
a voluntary petition for reorganization under Chapter 11 of the Bankruptcy
Code and a "prepackaged" plan of reorganization (the "Prepackaged Plan").
During the pendency of the bankruptcy case, the Company, with the approval of
the Bankruptcy Court, operated its business in the ordinary course, and paid
all pre-petition and post-petition claims of its general unsecured creditors,
trade creditors and employees in full. The Prepackaged Plan was confirmed by
the Bankruptcy Court on December 12, 1994, and the Company emerged from
bankruptcy on December 29, 1994 (the "Effective Date").

Pursuant to the Prepackaged Plan, on the Effective Date:

(1) Each $1,000 principal amount of the Company's $85.0 million Senior
Floating Rate Notes due August 2, 1996 (the "Old Senior Floating Rate Notes")
was exchanged for (a) new Senior Floating Rate Notes due February 1, 2003
(the "New Senior Floating Rate Notes") in an original principal amount equal
to $1,000 plus 100% of the accrued interest under the Old Senior Floating
Rate Notes from and including February 3, 1994, through but not including the
Petition Date, or, at such holder's election, (b) new 11.5% Senior Fixed Rate
Notes due February 1, 2003 (the "New Senior Fixed Rate Notes") in the same
original principal amount, or, at such holder's election, (c) an amount of
New Senior Floating Rate Notes and an amount of New Senior Fixed Rate Notes
equal, in the aggregate, to 100% of such claim;

(2) Each $1,000 principal amount of the Company's $50.0 million 12 3/8%
Senior Fixed Rate Notes due February 1, 1999 (the "Old Senior Fixed Rate
Notes") was exchanged for (a) New Senior Floating Rate Notes in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Fixed Rate Notes from and including February 2, 1994, through but
not including the Petition Date, or, at such holder's election, (b) New
Senior Fixed Rate Notes in the same original principal amount, or, at such
holder's election, (c) an amount of New Senior Floating Rate Notes and an
amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim;

(3) the Company's $105.0 million 14% Subordinated Debentures due
February 1, 2001 (the "Old Subordinated Debentures") were exchanged for the
aggregate amount of 2,635,000 shares of newly-issued Common Stock,
representing 85 percent of the Common Stock outstanding on the Effective
Date;

(4) GEI invested $10.0 million cash in exchange for 465,000 shares of
newly-issued Common Stock, representing 15 percent of the Common Stock
outstanding on the Effective Date; and

(5) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company were extinguished.

15<PAGE>
Pursuant to the Prepackaged Plan, the Company is required within four
months after the Effective Date, or such longer time as may be required to
prepare the necessary financial statements, to take the necessary steps to
register the newly-issued shares of Common Stock in a "shelf registration,"
to be effective for a period of three years, pursuant to the appropriate
requirements of the Securities and Exchange Commission. The Registration
Statement, of which this Prospectus is a part, has been filed to satisfy that
requirement.

Also pursuant to the Prepackaged Plan, the Company refinanced its
principal bank indebtedness on the Effective Date by entering into a new
Credit Agreement with The CIT Group/Business Credit, Inc., as administrative
agent for itself and certain other lenders (the "New Credit Agreement"). The
New Credit Agreement provides the Company with a 3-year $35.0 million term
loan facility and a 3-year $50.0 million revolving credit facility, and is
secured by liens upon substantially all of the Company's real and personal
property. As a result of such refinancing, the obligations of the Company
under the Credit Agreement dated October 12, 1988, as restated on September
14, 1989, and thereafter amended, with Bank of America National Trust and
Savings Association (as successor by merger to Security Pacific National
Bank), as administrative agent, and certain other senior lenders (the "Old
Credit Agreement"), were satisfied, and the Old Credit Agreement was
terminated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition."

MARKET PRICE AND DIVIDEND POLICY

On March 2, 1995 the Common Stock was listed for trading on the Nasdaq
Small Cap Market under the symbol "KASH." Prior to such date, there was no
established public trading market for its Common Stock. For the period of
March 2, 1995 through April 26, 1995, the range of high and low bids for a
single share of Common Stock was $20 - $18.25, as quoted in the Nasdaq Small
Cap Market. As of April 26, 1995, the average of the low bid and high ask
prices as quoted on the Nasdaq Small Cap Market was $19.25. Such
over-the-market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.

As of April 26, 1995, there were approximately 21 holders of record of
shares of Common Stock.

The Company has not in the past paid cash dividends to its stockholders
and does not intend to pay any cash dividends in the foreseeable future. The
Company's ability to declare cash dividends on its Common Stock is materially
limited by prohibitions or restrictions in the New Credit Agreement and the
indentures governing the New Senior Fixed Rate Notes and the New Senior
Floating Rate Notes. See "Description of Capital Stock."

16<PAGE>
CAPITALIZATION

The following table sets forth the unaudited capitalization of the
Company as of January 29, 1995 on an actual basis after giving effect to the
transactions in connection with the Restructuring and the application of
fresh-start reporting. This table should be read in conjunction with the
detailed information and financial statements and related notes appearing
elsewhere in this Prospectus.
As of January 29, 1995
(dollars in thousands)

Current portion of long-term debt (1). . . . $12,764
=======
Long-term debt:
Term Loan Facility. . . . . . . . . . . . . $35,000
Revolving Loan Facility (2) . . . . . . . 12,000
Mortgages payable, bearing interest
at rates from 7.50% to 10.35%,
in equal monthly installments of $355,
with maturities from 1999 through 2003 . . 33,555
Capital lease obligations . . . . . . . . . 8,410
Senior Floating Rate Notes due 2003 . . . . 22,953
11.5% Senior Fixed Rate Notes Due 2003. . . 121,162
Other . . . . . . . . . . . . . . . . . . . 7,206
Less current portion . . . . . . . . . . . (12,764)
--------
Total long-term debt . . . . . . . . . . . $227,522
--------
Stockholders' equity:
Common Stock of $.01 par value:
authorized 5,500,000 shares;
outstanding 3,100,000 shares . . . . . . . 31
Capital in excess of par value. . . . . . . 46,464
Retained Earnings (3) . . . . . . . . . . . 807
--------
Total stockholders' equity . . . . . . . . 47,302
--------
Total capitalization . . . . . . . . . . . $274,824
========
_______________

(1) Includes term loan facility under the New Credit Agreement, $7.0
million; mortgages payable, $.9 million; and capital lease obligations
and other, $4.9 million.

(2) The New Credit Agreement has a revolving credit facility with an
individual sublimit of $25.0 million for letters of credit (of which
$17.3 million were outstanding at January 29, 1995), with a maximum of
the lesser of (i) 85% of eligible receivables and 80% of eligible
inventories (as defined in the New Credit Agreement), or (ii) $50.0
million permitted to be outstanding under the revolving credit facility
at any one time.

(3) Reflects the application of fresh-start reporting.

17<PAGE>
SELECTED FINANCIAL INFORMATION

The following table presents selected financial information of the
Company as of and for each of the fiscal years ended on the Sunday nearest to
July 31, 1994, 1993, 1992, 1991 and 1990 and as of and for the periods ended
January 29, 1995, January 1, 1995 and January 30, 1994, and should be read in
conjunction with the financial statements and related notes thereto appearing
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

The financial statements as of and for the periods ended January 29,
1995, January 1, 1995 and January 30, 1994 from which the selected financial
information has been derived, have not been audited by independent
accountants in accordance with generally accepted auditing standards, but, in
the opinion of management, the financial statements as of and for the period
ended January 30, 1994 include all adjustments, consisting only of normal
recurring adjustments, necessary to summarize fairly the Company's financial
position and results of operations. As discussed herein, the Company's
Prepackaged Plan was consummated on December 29, 1994 (the "Effective Date").
The financial statements as of and for the periods ended January 29, 1995 and
January 1, 1995 reflect the Company's emergence from Chapter 11 and were
prepared utilizing the principles of fresh-start reporting contained in the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." Operations during the period from the Effective Date through January
1, 1995 had no significant impact on the emergence transactions and as a
result have not been separately identified. As a result of the
implementation of fresh-start accounting, certain of the selected financial
data as of and for the periods ended January 29, 1995 and January 1, 1995 is
not comparable to the selected financial data of prior periods due to the
change in reporting entity resulting from the application of fresh-start
accounting. Therefore, selected financial data for the "Reorganized Company"
has been separately identified from that of the "Predecessor Company."
Results for the periods ended January 29, 1995 or January 1, 1995 are not
necessarily indicative of the results for the full year.

The selected store data have been derived from the Company's management
reporting records.

18<PAGE>

Reorganized Predecessor
Company Company
Period Ended
January 29, January 1, January 30,
1995 1995 1994
(4 weeks) (22 weeks) (26 weeks)
(In Thousands, Except Per Share Amounts)
Statement of Operations Data
Sales . . . . . . . . . . . $86,354 $426,681 $534,801
Cost of sales . . . . . . . 68,940 340,802 425,915
------- -------- -------
Gross profit. . . . . . . . 17,414 85,879 108,886
Selling, general and
administrative expenses 12,226 68,819 90,128
Depreciation and amortization 1,979 10,234 12,111
Store closing and other costs -- -- 11,016
------- -------- -------
Operating income (loss) . . 3,209 6,826 (4,369)
Net interest expense (1). . 2,402 13,719 22,513
------- -------- -------
Income (loss) from operations before
reorganization items, income taxes,
extraordinary items and change in
accounting principle 807 (6,893) (26,882)
Reorganization items. . . . -- (219) --
Extraordinary items -
gain on debt discharge -- 70,166 --
Cumulative effect of change in accounting
principle. . . . . . . . -- (2,000) --
------- -------- -------
Net income (loss) . . . . . $807 $61,054 $(26,882)
======= ======== ========
Income per common share (2), (3) $0.26 -- --
Predecessor Company
Fiscal Year Ended Sunday Nearest July 31, (4)
1994 1993 1992 1991 1990
Statement of Operations (In Thousands)
Data Sales . . . . . . $1,065,165 $1,086,125 $1,071,038 $1,059,636 $1,039,209
Cost of sales . . . . . . 845,597 856,156 848,441 842,687 831,644
---------- ---------- ---------- ---------- ----------
Gross profit. . . . . . . 219,568 229,969 222,597 216,949 207,565
Selling, general and
administrative expenses 176,945 175,177 164,897 159,359 151,970
Depreciation and
amortization 24,112 23,455 20,132 54,435 31,416
Store closing and other
costs 11,016 -- -- -- --
---------- ---------- ---------- ---------- ----------
Operating income. . . . . 7,495 31,337 37,568 3,155 24,179
Net interest expense (1). 45,390 43,257 44,869 45,610 50,692
---------- ---------- ---------- ---------- ----------
Loss from operations before
extraordinary items (37,895) (11,920) (7,301) (42,455) (26,513)
---------- ---------- ---------- ---------- ----------
Extraordinary gain 0 0 0 3,427 943
Net loss. . . . . . . . .$(37,895) $(11,920) $(7,301) $(39,028) $(25,570)
========== ========== ========== ========== ==========
19<PAGE>
Reorganized Predecessor
Company Company
Period Ended
January 29, January 1, January 30,
1995 1995 1994
(4 weeks) (22 weeks) (26 weeks)
(Dollar Amounts In Thousands)
Balance Sheet Data
Total assets. . . . . . . . $381,751 $381,492 $408,154
Inventories . . . . . . . . 78,756 87,115 85,952
Property and equipment, net 143,813 144,979 165,518
Working capital . . . . . . 7,207 7,045 (367)
Total long-term debt and capital
leases (including current
maturities)(5) 240,286 242,786 353,723
Preferred stock . . . . . . -- -- 4,650
Total stockholders'
equity (deficit) 47,302 46,495 (50,041)
Other Data
Operating cash flow (EBITDA) (6) 5,188 17,060 18,758
Capital expenditures (7). . 162 665 10,606
Store Data
Food stores open at end of
period (8). . . . . . . . 99 99 101
Avg. selling sq. ft. during period (in
thousands) (9). . . . . . 2,903 2,903 3,096
Avg. sales per store week (10) $218 $196 $190

Predecessor Company
Fiscal Year Ended Sunday Nearest July 31, (4)
1994 1993 1992 1991 1990
(Dollar Amounts in Thousands)
Balance Sheet Data
Total assets. . . . . . . $389,893 $423,208 $399,419 $401,860 $455,204
Inventories . . . . . . . 76,094 95,385 91,226 92,451 92,474
Property and equipment, net . 160,491 164,937 145,372 146,513 148,100
Working capital . . . . . . . (12,747) 19,137 26,031 15,684 11,959
Total long-term debt and
capital leases (including
current maturities)(5) 360,121 351,890 316,220 342,826 337,861
Preferred stock . . . . . . . 4,650 4,650 4,650 45,991 45,991
Total stockholders' deficit (61,054) (23,159) (11,239) (72,640) (33,609)

Other Data
Operating cash flow(EBITDA)(6) $42,623 $54,792 $57,700 $57,590 $55,595
Capital expenditures (7). . . 15,471 37,703 15,385 15,672 16,079

Store Data
Food stores open at end of
period (8). . . . . . . . . 100 115 111 113 112
Avg. selling sq. ft. during
period (in thousands) (9) . 3,084 3,100 2,970 2,949 2,918
Avg. sales per store week(10) $196 $183 $181 $180 $175
20<PAGE>
Notes to Selected Financial Information
(Dollar Amounts in Thousands)

(1) Includes amortization of deferred financing costs of $182, $1,152 and
$1,549 for the four weeks ended January 29, 1995, 22 weeks ended January
1, 1995, and 26 weeks ended January 30, 1994, respectively; and $2,950,
$2,850, $2,932, $3,017 and $6,346 for the 1994, 1993, 1992, 1991 and 1990
fiscal years, respectively.

(2) Based on 3,100,00 shares (the weighted average number of shares of Common
Stock outstanding).

(3) Net income per share of Common Stock is not meaningful prior to January 1,
1995 due to the significant change in the capital structure in connection
with the Restructuring.

(4) The Company's fiscal year is based on a 52/53 week fiscal year ending on
the Sunday nearest to July 31. Therefore, the 1992 fiscal year included
53 weeks of operations. The 1994, 1993, 1991 and 1990 fiscal years each
had 52 weeks of operations.

(5) Total long-term debt includes long-term debt, current maturities of
long-term debt, capital lease obligations and certain other debt.

(6) Represents earnings before net interest expense (which includes
amortization of deferred financing costs), provision for income taxes,
depreciation and amortization, store closing and other costs,
reorganization items, extraordinary items, and cumulative effect of change
in accounting principle. Operating cash flow (EBITDA) is presented here
as a measure of the Company's debt service ability, and should not be
construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) or to cash flows
from operating activities (as determined on the Statements of Cash Flows
in the Company's financial statements).

(7) Capital expenditures consist of cash expenditures, additions to capital
leases and, for the 1994, 1993 and 1992 fiscal years, amounts funded under
the capital improvements revolving credit facility under the Old Credit
Agreement (as defined in "The Restructuring").

(8) Data relating to the number of stores is expressed in actual numbers.

(9) Represents the average of the selling square footage of the Company's
stores on the first and last day of the respective periods. Selling
square footage includes adjacent liquor stores where applicable but does
not include backroom and receiving areas.

(10) Represents, for each of the respective periods, sales for such period
divided by the sum of the number of weeks for which each of the Company's
stores was open during such period.

21<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This analysis should be read in conjunction with the financial
statements and related notes thereto included elsewhere in this document.
The Company follows a 52/53 week fiscal year ending on the Sunday nearest to
July 31. The fiscal year ended August 2, 1992 included 53 weeks of
operations. Historical results of operations are given for the Company's
fiscal years ended July 31, 1994, August 1, 1993 and August 2, 1992
(respectively, the "1994, 1993 and 1992 Fiscal Years"), the four weeks ended
January 29, 1995 and the 22 weeks ended January 1, 1995 (combined, the "1995
Six-Month Period"), and the 26 weeks ended January 30, 1994 (the "1994
Six-Month Period"). On November 9, 1994, the Company filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code; on
December 12, 1994, the Bankruptcy Court confirmed the Company's "prepackaged"
plan of reorganization. The Prepackaged Plan became effective on December
29, 1994, when the Company emerged from bankruptcy. The financial statements
as of and for the periods ended January 29, 1995 and January 1, 1995 reflect
the Company's emergence from Chapter 11 proceedings and were prepared
utilizing the principles of fresh-start reporting contained in the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(the "SOP 90-7"). Operations during the three-day period from the Effective
Date through January 1, 1995 had no significant impact on the emergence
transactions and as a result have not been separately identified.

The Company acquired substantially all of its assets in October 1988.
The acquisitions were accounted for as purchases and the assets were recorded
at fair market value based on independent appraisals, resulting in an
increase in the carrying value of the assets of approximately $215.4 million.
The write-up was allocated to property and equipment ($22.6 million),
favorable lease interests ($26.2 million), depreciable intangible assets
($53.6 million), and excess of cost over net assets acquired ($113.0
million). As a result, the Company has since incurred a significant amount
of noncash charges. In addition, during the first quarter of 1994, the
Company recorded a non-recurring charge of $11.0 million, which reflects
expenses associated with a program of closing 12 underperforming stores,
reducing administrative staff, and expensing costs associated with
unsuccessful financing activities. The financial statements as of and for
the periods ending January 29, 1995 and January 1, 1995 are not comparable to
the financial statements of prior periods due to the change in reporting
entity resulting from the application of fresh-start accounting. For the
reasons outlined above, the Company believes that the most relevant measure
of its operating results is earnings before interest, taxes, depreciation and
amortization, store closing and other costs, reorganization items,
extraordinary items, and the cumulative effect of change in accounting
principle (operating cash flow):

22<PAGE>
Four Twenty-two
Weeks Weeks Twenty-six
Ended Ended Weeks Ended Sunday Nearest July 31
January January January 30, Fiscal Year Ended
29, 1995 1, 1995 1994 1994 1993 1992 1991
(In Thousands)

Operating income
(loss) $3,209 $6,826 $(4,369) $ 7,495 $31,337 $37,568 $3,155
Depreciation and
amortization 1,979 10,234 12,111 24,112 23,455 20,132 54,435
Store closing and
other costs -- -- 11,016 11,016 -- -- --
------ ------ ------- ------ ------ ------ ------
Operating cash
flow $5,188 $17,060 $18,758 $42,623 $54,792 $57,700 $57,590
====== ======= ======= ======= ======= ======= =======

Results of Operations of the Company

The discussion below compares the results of operations for the 1995
Six-Month Period with the 1994 Six-Month Period. Except as specifically
acknowledged below, management believes that the impact of the Restructuring
and the implementation of fresh-start reporting did not significantly affect
the results of operations for the 1995 Six-Month Period, and that the
operating results of the individual four-week period and 22-week period ended
January 29, 1995 and January 1, 1995, respectively, are indicative of the
results of operations for the 26-week period ended January 29, 1995.

Operating cash flow for the 1995 Six-Month Period was $22.2 million
compared to $18.8 million for the 1994 Six-Month Period. The increase in
operating cash flow was attributable to the factors indicated below.

Sales 26 Weeks Ended

January 29, January 30,
1995 1994

Sales (in millions). . . . . . . . . . . . . $513.0 $534.8
Change in same store sales . . . . . . . . . (0.22%) (2.96%)
Average sales per store week (in thousands). $199 $190

The Company closed 17 stores and opened two new stores over the last
year as part of an overall strategic consolidation of its store network. The
Company was able to mitigate the sales impact of these store closings by
transferring a portion of the sales of the closed stores to operating stores;
therefore, there was not a substantial adverse impact on the Company's
operating cash flow. In addition, sales have been positively impacted as a
result of a recently-initiated store remodelling program and aggressive sales
promotional activities.

23<PAGE>
Gross Profit

The Company had gross profit of $103.3 million, or 20.1% as a percentage
of sales, for the 1995 Six-Month Period; and gross profit of $108.9 million,
or 20.4% of sales, for the 1994 Six-Month Period. The decrease in gross
margin as a percentage of sales was due to the effect of lower investment in
forward buy inventory and receipt of less promotional funds, offset by
improved perishable margins and increased efficiency in warehouse and
distribution operations.

Selling, General and Administrative Expenses

The Company had selling, general and administrative expenses of $81.0
million, or 15.8% as a percentage of sales, for the 1995 Six-Month Period and
$90.1 million, or 16.9% as a percentage of sales, for the 1994 Six-Month
Period. The reduction of selling, general and administrative expenses was
due to lower store labor costs, reduced corporate overhead expenses and lower
advertising expenditures associated with a comprehensive operational
restructuring of the Company initiated during the year; and reduced operating
costs associated with stores that were closed during the last 12 months.
These improvements were partially offset by an increase in workers'
compensation insurance reserves.

Depreciation and Amortization

The Company's depreciation and amortization expenses were $12.2 million
for the 1995 Six-Month Period compared to $12.1 million for the 1994
Six-Month Period. The increase is primarily attributable to new stores and
major remodels, partially offset by the retirement of assets of stores
closed.

Store Closing and Other Costs

During the first quarter of fiscal 1994, the Company recorded a
non-recurring charge of $11.0 million. This charge included $1.9 million of
costs associated with unsuccessful financing activities, $4.2 million of
favorable lease interests written off in connection with the closing of 12
underperforming stores, $4.0 million representing an adjustment to the
expected lease liability on closed stores, net of sublease income, and $.9
million of other store closing and related expenses.

Interest Expense

Interest expense for the 1994 Six-Month Period was primarily comprised
of interest under the Old Credit Agreement, the Old Senior Floating Rate
Notes, the Old Senior Fixed Rate Notes, the Old Subordinated Debentures, and
various mortgages and capital leases. For the

24<PAGE>
1995 Six-Month Period, interest expense was reported on the Old Senior
Floating Rate Notes, the Old Senior Fixed Rate Notes, and the Old
Subordinated Debentures through the Petition Date; and interest expense was
reported on the New Senior Floating Rate Notes and the New Senior Fixed Rate
Notes from the Effective Date through January 29, 1995. In accordance with
the Prepackaged Plan, no interest was due to the holders of the Old Senior
Floating Rate Notes, Old Senior Fixed Rate Notes, or Old Subordinated
Debentures for the period between the Petition Date and the Effective Date,
and therefore no interest expense allocable to such instruments was recorded
for this period. As provided in the Prepackaged Plan, interest accrued from
and including February 2, 1994, in the case of the Old Senior Fixed Rate
Notes, and from and including February 3, 1994, in the case of the Old Senior
Floating Rate Notes, through the Petition Date, was paid by issuing
additional New Senior Floating Rate Notes and New Senior Fixed Rate Notes.
Interest on the Old Subordinated Debentures accrued from and including
February 2, 1994 through the Petition Date was converted into stockholders'
equity.

Reorganization Costs

In accordance with SOP 90-7, income and costs directly related to the
reorganization have been segregated and are separately disclosed. The major
components are restructuring costs, adjustments to fair value, professional
fees and other expenses.

Gain on Debt Discharge

The gain on debt discharge reflects the conversion of $105.0 million of
Old Subordinated Debentures, plus accrued interest from and including
February 2, 1994 through the Petition Date, into $39.5 million of
stockholders' equity, resulting in a $70.2 million gain. The gain is
presented net of write-offs and costs associated with the repayment of
borrowings on the Effective Date.

1994, 1993 and 1992 Fiscal Years

During the three year period ended July 31, 1994, the Company opened
seven new food stores, acquired one food store and three super warehouse food
stores (operating under the "Save 'n Pack" name), and completed major
expansion remodels on three existing food stores. However, sales growth was
constrained primarily by the opening of 54 competitive supermarkets and the
closing of 24 of the Company's stores during this three year period. The
Company experienced a net loss in each of the 1994, 1993 and 1992 Fiscal
Years primarily due to depreciation and amortization resulting from, and
interest costs associated with, financing the 1988 acquisition of the Kash n'
Karry and Superx stores.

The following table sets forth certain items from the Company's
Statements of Operations as a percentage of sales for the periods indicated:
25<PAGE>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
July 31, 1994 August 1, 1993 August 2, 1992

Sales 100.00% 100.00% 100.00%
Gross profit 20.6% 21.2% 20.8%
Selling, general
and administrative expenses 16.6% 16.1% 15.4%
Depreciation and amortization 2.3% 2.2% 1.9%
Interest expense 4.3% 4.0% 4.2%
Net loss -3.6% -1.1% -0.7%
Operating cash flow (EBITDA) 4.0% 5.0% 5.4%

The Company generated operating cash flow of $42.6 million for the 52
weeks ended July 31, 1994, compared to operating cash flow of $54.8 million
for the 52 weeks ended August 1, 1993 and $57.7 million for the 53 weeks
ended August 2, 1992.

Sales 52 Weeks 52 Weeks 53 Weeks
Ended Ended Ended
July 31, 1994 August 1, 1993 August 2, 1992

Sales (in millions) $1,065 $1,086 $1,071
Number of stores:
Food stores opened or acquired 2 8 1
Food stores closed 17 4 3
Expansion remodels 1 2 --
Total food stores at period end 100 115 111
Average selling square feet during
year (in thousands) 3,084 3,100 2,970
Average sales per store week
(in thousands) $196 $183 $181

The Company maintained a relatively stable level of sales during the
three year period. Sales were positively impacted by opening and acquiring
new stores, expanding and upgrading existing stores and increasing
promotional activities and advertising expenditures. However, sales were
adversely affected by a weak economy, price deflation in certain commodities,
ongoing competitive new store and remodel activity, pricing and promotional
changes by certain competitors, and the closing of 24 of the Company's
stores. Store closings adversely impacted sales, but did not cause a
substantial adverse impact on the Company's operating cash flow.

26<PAGE>
Gross Profit

Gross profit as a percentage of sales was 20.6% in the 1994 Fiscal Year,
21.2% in the 1993 Fiscal Year, and 20.8% in the 1992 Fiscal Year. The
decrease in gross profit as a percentage of sales from the 1993 Fiscal Year
to the 1994 Fiscal Year was attributable to the impact of eliminating
investment in forward buy inventory (estimated to be approximately 57 basis
points), receipt of fewer promotional funds, and generally lower retail
prices, partially offset by improved perishable margins and efficiencies in
product preparation and handling. The improvement from the 1992 Fiscal Year
to the 1993 Fiscal Year was primarily attributable to the receipt of more
promotional funds and increased efficiencies in product acquisition and
warehousing and distribution operations, partially offset by low inflation
and the competitive factors mentioned above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses of the Company, as a
percentage of sales, were 16.6% in the 1994 Fiscal Year, 16.1% in the 1993
Fiscal Year, and 15.4% in the 1992 Fiscal Year. The increase of $1.8 million
from the 1993 Fiscal Year to the 1994 Fiscal Year was primarily the result of
increased occupancy costs and other expenses related to stores opened,
acquired or remodeled, and an increase in insurance reserves and advertising
expenses, offset by reduced operating costs due to store closings. The
increase as a percentage of sales was attributable to operating costs of
comparable stores in the aggregate declining at a lesser rate than the rate
of sales decline in those stores. The increase, as a percentage of sales,
for the 1993 Fiscal Year compared to the 1992 Fiscal Year was primarily
attributable to certain expenses, such as employee benefits, utilities, and
repairs and maintenance, which increased at a faster rate than the rate of
growth in sales, offset partially by lower average cost per hour and improved
labor productivity in the stores.

Depreciation and Amortization

The Company's depreciation and amortization expenses were $24.1 million,
or 2.3% of sales, for the 1994 Fiscal Year; $23.5 million, or 2.2% of sales,
for the 1993 Fiscal Year; and $20.1 million, or 1.9% of sales, for the 1992
Fiscal Year. The increase in depreciation and amortization for the three
year period was attributable to the new stores and major remodels, and
accelerated amortization of favorable lease interests on certain stores
closed during the period.

27<PAGE>
Interest Expense
Fiscal Year ended Sunday Nearest
July 31,
1994 1993 1992
(In Thousands)
Interest expense, net. . . . . . . . . .$42,917 $41,211 $42,292
Amortization of deferred financing costs 2,950 2,850 2,932
Capitalized interest . . . . . . . . . . . (477) (804) (355)
------- ------- -------
Interest expense, net. . . . . . .$45,390 $43,257 $44,869
======= ======= =======

Interest expense for the 1994 Fiscal Year was primarily comprised of
interest under the Old Credit Agreement, the Old Senior Floating Rate Notes,
the Old Senior Fixed Rate Notes, the Old Subordinated Debentures, various
mortgages and capital leases. The increase in interest expense for the 1994
Fiscal Year was primarily attributable to increased average borrowings under
the revolving credit facility under the Old Credit Agreement, additional
capital leases on store equipment, and slightly higher interest rates on bank
borrowings.

Losses

For the reasons set forth above, the Company experienced net losses of
$37.9 million for the 1994 Fiscal Year, $11.9 million for the 1993 Fiscal
Year, and $7.3 million for the 1992 Fiscal Year.

Financial Condition

During the pendency of its bankruptcy case discussed above, the Company
operated its business in the ordinary course, and paid all pre-petition and
post-petition claims of the Company's general unsecured creditors, trade
creditors, and employees in full. The provisions of the Prepackaged Plan,
which are discussed in footnote 1 to the accompanying condensed financial
statements, have had an immediate beneficial impact on the Company's
financial condition, primarily as a result of significantly deleveraging the
Company's balance sheet.

Prior to the Petition Date, the Company's Old Credit Agreement provided
for a revolving credit facility with individual sublimits of $30.0 million
for working capital loans and $25.0 million for letters of credit, with a
maximum of $50.0 million outstanding under the total facility at any one
time. During the weeks preceding the bankruptcy filing, the Company, with
the approval of its bank lenders, increased its cash position by fully
drawing the remaining availability under its working capital line. On
November 9, 1994, the Bankruptcy Court approved the use of cash collateral
and a letter of credit facility of $17.7 million under the Old Credit
Agreement, and additional debtor-in-possession financing provided by
BankAmerica Business Credit, Inc. of $11.2 million, subject to certain terms
and conditions. The outstanding
28<PAGE>
borrowings under those facilities were refinanced on the Effective Date, when
the Company entered into the New Credit Agreement with The CIT Group/Business
Credit Inc. and certain bank lenders to provide a 3-year $35.0 million term
loan facility and a 3-year $50.0 million revolving credit facility.

Beginning August 1, 1994, the Company implemented a new short-term
business strategy to improve the Company's financial performance. The focus
of this strategy is to conserve capital, reduce administrative and operating
expenses, and direct management attention toward the operation of existing
stores. During the first six months of fiscal 1995 the Company significantly
improved its liquidity as a result of the payment moratorium on interest due
on the Old Senior Fixed Rate Notes, Old Senior Floating Rate Notes, and Old
Subordinated Debentures; managing working capital; and reducing operating
expenses and capital expenditures by $12.0 million on an annualized basis.
In addition, the Company expects to exercise its option of paying interest in
kind under the New Senior Floating Rate Notes through August 1, 1995, and on
the New Senior Fixed Rate Notes through February 1, 1996, which will further
increase its liquidity through the first half of fiscal 1996. The Company
also has an agreement in principle for a $28.0 million sale-leaseback
transaction on 11 of its fee-owned store properties. The Company intends to
apply $13.0 million of the proceeds to reduce the term loan facility under
the New Credit Agreement, and $14.0 million of such proceeds to reduce its
mortgage obligations. As a result of its increased liquidity, the Company
expects to invest $6.0 million in forward buy inventory in fiscal 1995, has
made prepayments totalling $7.0 million on its term loan facility, and
intends to repay the balance of the term loan facility under the New Credit
Agreement by the end of fiscal 1995. As of April 21, 1995, the outstanding
principal balance under the term loan facility was $28.0 million, and the
Company had $7.4 million in borrowings and $12.6 million in letters of credit
outstanding under the revolving credit facility under the New Credit
Agreement.

Consistent with its short-term business strategy, the Company does not
anticipate opening or acquiring any new stores during the current fiscal
year, but expects that capital expenditures of approximately $6.0 million
will be used to upgrade its existing store facilities, including minor
remodelling projects at 41 stores. The Company's capital expenditure plans
through the end of fiscal 1996 include the completion of major remodelling
projects at 19 stores, minor remodelling projects at 25 additional stores and
the construction of two new stores.

The Company has entered into an interest rate swap through August 1995
to reduce its exposure to increases in short-term interest rates on the
majority of its floating rate debt. The Company does not believe that there
would be any material impact on the accompanying financial statements as of
January 29, 1995 as a result of liquidating this contract.

Based upon the Company's ability to generate working capital through its
operations and its new $50.0 million revolving credit facility, the Company
believes that it has the financial resources necessary to pay its capital
obligations and implement its business plan.

29<PAGE>
Effects of Inflation

The Company's primary costs, inventory and labor, are affected by a
number of factors that are beyond its control, including availability and
price of merchandise, the competitive climate and general and regional
economic conditions. As is typical of the supermarket industry, the Company
has generally been able to maintain margins by adjusting its retail prices,
but competitive conditions may from time to time render it unable to do so
while maintaining its market share.

BUSINESS

General

Company Store Profile

The following table presents a profile of the Company's stores:

Number of Stores At Fiscal Year End
Total Square
Store Type Footage(1) 1994 1993 1992 1991 1990
---------- ------------ ---- ---- ---- ---- ----
Kash n' Karry Food Stores 40,000--57,000 50 48 42 42 39
25,000--39,999 43(2) 55 57 57 58
less than 25,000 5 9 12 14 15
Save 'n Pack Super
Warehouse Stores 76,000--88,000 2 3 -- -- --
Kash n' Karry Liquor Stores 1,800-- 2,700 33 35 30 31 26

_______________

(1) Includes selling and backroom areas.

(2) Includes one store that was closed subsequent to July 31, 1994.

30<PAGE>
Supermarket stores
The Company currently operates 92 multi-department supermarkets, with an
average size of approximately 40,000 total square feet. The Company also
operates five conventional supermarkets which average approximately 18,000
total square feet. All of the Company's supermarket stores offer a wide
selection of items typically sold in grocery stores, including staple
groceries, fresh fruits and vegetables, bakery and dairy products,
delicatessen items, frozen foods and fresh meats. Each of the Company's
supermarket stores also sells certain non-food items such as health and
beauty care items, paper and tobacco products, soaps and detergents, drugs,
sundries and housewares. The Company's multi-department stores offer, in
addition, a wider variety of non-food items, including cosmetics and
toiletries, small hardware and a limited selection of soft goods. Most of
the Company's multi-department stores also feature expanded perishable goods
departments, delicatessens and in-store bakeries, and many contain pharmacies
and full-service seafood, full-service floral and video rental departments.
All of the Company's stores feature national brands and also carry a
selection of corporate brand merchandise. Most of the Company's food stores
are located in shopping centers. The Company's food stores are open seven
days a week, and most operate 24 hours a day.

Super warehouse stores
In 1993, the Company acquired three super warehouse stores (one of which
was subsequently closed) operating under the "Save 'n Pack" name. The two
existing super warehouse stores, which are 76,000 and 88,000 square feet in
size, respectively, feature among the lowest prices on basic items carried by
supermarkets and are designed to cater to the needs of the low-income
household. In its super warehouse store promotions, the Company encourages
consumers to verify the stores' tag line, "No One Has Lower Prices." The
assortment of packaged goods carried by the super warehouse stores is more
limited than that of a supermarket and is frequently augmented by one-time
purchases of specially priced products that may not be available on a regular
basis. Store decor is austere compared to that of a traditional supermarket,
and product is displayed on warehouse racking and on floor pallets to enhance
productivity and promote a low-price impression. The stores provide a full
complement of perishable departments, including meat, produce, bakery, deli
and fresh seafood, which also feature low prices and are frequently
self-service. The super warehouse stores do not have certain specialty
departments such as pharmacies, video rental departments or full-service
floral departments and do not provide supermarket services such as grocery
bagging, carry-out service, check cashing services and electronic funds
transfer. Because of reduced display, labor and advertising costs and the
more limited services, the Company is able to operate its super warehouse
stores successfully with lower gross margins than the Kash n' Karry
supermarket stores. The super warehouse stores operate 24 hours a day, seven
days a week.

Liquor stores

Each of the Company's 33 liquor stores is located on property adjacent
to one of the Company's supermarket stores and is operated as a department of
such store, although, in
31<PAGE>
accordance with Florida law, each liquor store must maintain a separate
entrance. Liquor stores complement the Company's core business, as they can
be advertised through existing media without incremental expense, pay
supermarket (as compared to shopping center) rents and benefit from operating
and marketing synergies with the adjacent supermarkets. The liquor stores
offer a wide variety of wines, beers and hard liquors, as well as mixers,
soft drinks, snacks, ice and other party accessories and a limited number of
traditional grocery items. Sales from the Company's liquor stores represent
approximately 2% of the Company's total sales. The Company's liquor stores
range in size from 1,800 to 2,700 square feet, and most are open seven days
a week.

Operations Strategy

The Company believes that up-to-date, strategically located facilities,
well-trained associates and information management systems are key elements
to the Company's future success. The Company operates a modern, 687,000
square foot warehouse, distribution and office facility in Tampa with
sufficient capacity to service anticipated store expansion for the
foreseeable future. The warehouse enables the Company to reduce costs by
purchasing in large quantities, taking advantage of special promotional
prices offered by vendors and purchasing prior to impending price increases,
and reducing delivery costs through cross docking and backhauls. The central
location of the warehouse facility to its stores also provides the Company
with operating efficiencies.

Marketing Strategy

The Company emphasizes competitive prices on everyday items, strong
weekly features, high quality perishables and a broad assortment of both
national and corporate brands. The Company's food stores are open seven days
a week, with most operating 24 hours a day. The Company seeks to be either
first or second among its competitors in assortment of branded merchandise,
stocking over 29,000 SKU's (stock keeping units) of national brand and
corporate brand items. In addition to a full range of grocery and general
merchandise items, most of the Company's multi-department supermarkets also
feature expanded perishable goods departments, delicatessens and in-store
bakeries, and many contain pharmacies and full-service seafood, full-service
floral and video rental departments.

32
<PAGE>
In 1992, the Company introduced its own corporate brand merchandise.
The Company's corporate brand strategy is to offer a product comparable in
quality to the best-selling national brand at a lower price. The Kash n'
Karry brand item generally sells for approximately 10% less than the
competing best-selling national brand but generates a higher per unit gross
profit contribution to the Company. Over 1,100 SKU's in a wide variety of
product categories carry the Kash n' Karry brand name.

Competition

The food retailing business is highly competitive. The Company operates
in an environment where more than 90% of sales are by chains. The principal
competitive factors include store locations, product selection and quality,
price, cleanliness of stores, customer service and overall store image.
Based on its marketing research, the Company believes that consumers perceive
the Company as having a favorable value image in the markets that it serves
and offering a wide variety of quality products and services in a pleasant
environment. The Company believes that its competitive strengths include
desirable store locations combined with a strong consumer franchise and
efficient warehousing and distribution facilities.

The Company competes with several national, regional and local
supermarket chains, particularly Publix, Winn-Dixie, Albertson's and Food
Lion. The Company is also in competition with convenience stores, stores
owned and operated or otherwise affiliated with large food wholesalers,
unaffiliated independent food stores, merchandise clubs, discount drugstore
chains and discount general merchandise chains. The Company's principal
competitors have greater financial resources than the Company and could use
those resources to take steps which could adversely affect the Company's
competitive position and financial performance. For example, operating
results generally and sales growth in particular were adversely affected by
approximately eight, 21, 25 and 30 store openings by principal grocery
competitors during the 1994, 1993, 1992 and 1991 fiscal years, respectively.
In the first six months of fiscal 1995, there were approximately four such
competitive store openings, and it is anticipated that competitive store
openings will continue. Another example of the highly competitive nature of
the food retailing business is the practice of competitors to reposition
their pricing structure. Over the past several years, each of the Company's
major competitors has changed its pricing practices in a manner that has
adversely affected general retail pricing in the market. Winn-Dixie
discontinued double coupons and introduced its everyday low-price program in
the spring of 1991. In the spring of 1993, Publix began a campaign focused
on "surprisingly low prices," and Food Lion began a double coupon program
which has since been discontinued. The Company has had to deal with each of
these changes in a manner that has, in some instances, adversely affected its
operating results and may continue to do so in the future. In addition, the
Company's ability to compete may be adversely affected by its high leverage
and the limitations imposed by the New Credit Agreement and other debt
agreements.

33<PAGE>
Seasonality

The Company's sales and related inventory levels tend to increase
during the winter months due to the holidays, increased tourism and the
influx of winter residents, and to decrease during the summer months.
Typically, approximately 60% of the Company's operating cash flow is recorded
during the second and third quarters of its fiscal year.

Employees

The Company currently employs approximately 3,700 full-time and 5,600
part-time associates, none of whom is covered by a collective bargaining
agreement. The Company believes that it has good relations with its
associates.

Trademarks and Licenses

The Company employs various trademarks, trade names and service marks in
its business, including the "Kash n' Karry" logo and trade name. Except for
"Kash n' Karry" and its derivatives, and "So Much More to Pay Less For!,"
"Kash $aver," "$mart Buy," "Five Star Meat," "Nature Friendly" and "Save 'n
Pack," the Company does not believe that any of such trademarks or service
marks are material to the business of the Company.

Certain governmental licenses and permits, including alcoholic beverage
licenses, health permits and various business licenses, are necessary in the
Company's operations. The Company believes it has all material licenses and
permits necessary to enable it to conduct its business.

Properties

The Company's 92 multi-department supermarkets and five conventional
supermarket stores have an aggregate selling area of approximately three
million square feet. Thirteen of the food stores (comprising approximately
504,000 square feet) are owned by the Company. The remaining 84 supermarket
stores are leased by the Company. Six of the leased stores are operated
under long-term ground leases with the Company owning the improvements at
such locations. Seventeen leases expire during the next five years, with the
Company having options to renew all but two. Most of the Company's food
store leases have minimum rentals with additional rentals based on a
percentage of sales. In March 1995, the Company entered into an agreement in
principle to sell 11 of its fee-owned stores to a third party, and to
simultaneously enter into long-term leases for those sites. The Company
expects to consummate the sale-leaseback transaction before the end of the
1995 fiscal year.

34<PAGE>
The Company's two Save 'n Pack super warehouse stores have an aggregate
selling area of approximately 119,000 square feet. One of the stores is
leased, with the remaining store operated under a long-term ground lease with
the Company owning the improvements at the location. Neither of the leases
expires within the next five years.

The Company's liquor stores have an aggregate selling area of
approximately 53,000 square feet. Four of the liquor stores are owned by the
Company. The remaining 29 liquor stores are leased by the Company. Three of
the leases expire during the next five years, with the Company having an
option to renew.

The Company's warehouse, distribution and office facility is located on
53.6 acres of land, which the Company owns.

Legal Proceedings

For information regarding the Company's reorganization proceedings under
Chapter 11 of the U.S. Bankruptcy Code, see "The Restructuring" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

On December 30, 1994, the Company's former chief executive officer,
Ronald J. Floto, filed a proof of claim in the bankruptcy proceeding seeking
payments allegedly owed to him in connection with his severance from the
Company. The total principal amount of Mr. Floto's claim is less than $1.5
million. On March 31, 1995, the Company filed an objection to the proof of
claim, and on April 29, 1995, Mr. Floto filed a response to the Company's
objection. A hearing on the Company's objection is scheduled for May 18,
1995.

The Company has been engaged in various other legal actions and claims
arising in the ordinary course of business. Management believes, after
discussions with legal counsel, that the ultimate outcome of such litigations
and claims will not have a material adverse affect on the Company's financial
position.

35<PAGE>
MANAGEMENT

BOARD OF DIRECTORS

Set forth below is certain information regarding each of the directors
of the Company as of April 24, 1995:

Name Age

Everett L. Buckardt. . . . . . . . . . . . . . . . . 61
John J. Delucca. . . . . . . . . . . . . . . . . . . 52
Jennifer Holden Dunbar . . . . . . . . . . . . . . . 32
Ben Evans. . . . . . . . . . . . . . . . . . . . . . 65
Thomas W. Harberts . . . . . . . . . . . . . . . . . 50
Ronald E. Johnson. . . . . . . . . . . . . . . . . . 45
Robert Spiegel . . . . . . . . . . . . . . . . . . . 58
Christopher V. Walker. . . . . . . . . . . . . . . . 48
Peter Zurkow . . . . . . . . . . . . . . . . . . . . 41

Ms. Dunbar, Mr. Evans and Mr. Zurkow comprise the Company's Compensation
Committee, its Stock Option Committee, and its Nominating Committee, and Mr.
Buckardt, Ms. Dunbar, Mr. Evans and Mr. Harberts comprise the Company's Audit
Committee.

Pursuant to an understanding among the Company, Green Equity Investors,
L.P. ("GEI") and the unofficial committee of the holders of the Old Senior
Fixed Rate Notes, the Old Senior Floating Rate Notes and the Old Subordinated
Debentures (the "Bondholder Committee"), as of December 29, 1994 the
Company's Board of Directors was reconstituted to consist of nine members
selected as follows: GEI selected Ms. Dunbar and Mr. Walker, the Bondholder
Committee selected Messrs. Buckardt, Delucca, Evans, Harberts, Spiegel and
Zurkow, and the Company selected its then acting Chief Executive Officer,
Anthony R. Petrillo. No such understanding exists as to the election of
directors following the expiration of the terms of the incumbent directors,
or upon their resignation or removal as directors. On March 9, 1995, Mr.
Petrillo resigned as a director and Mr. Johnson was appointed to succeed him.

Biographical Information

Everett L. Buckardt has been a Director of the Company since December
29, 1994. Mr. Buckardt has been Chairman and Chief Executive Officer of
Warehouse Club, Inc. since January 1993. On February 3, 1995, Warehouse
Club, Inc. filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. In 1992, Mr. Buckardt retired from a 33 year
career with Sears Roebuck and Company, where he served in various capacities,
most recently as President of Sears Catalog and Direct Marketing Division.

36<PAGE>
John J. Delucca has been a Director of the Company since December 29,
1994. Mr. Delucca has been the Senior Vice President and Treasurer of RJR
Nabisco since October 1993. He served as Managing Director and Chief
Financial Officer of HASCO Associates, Inc., a Greenwich, Connecticut-based
private holding company, from May 1991 to October 1993, as President and
Chief Financial Officer of the Lexington Group, a workout and restructuring
advisory group, from January 1990 to May 1991, and as Senior Vice President
of Finance and Managing Director of the Trump Group from June 1988 to January
1990. Mr. Delucca is a director of Edison Controls Corp. and Enzo Biochem,
Inc.

Jennifer Holden Dunbar has been a Director of the Company since November
1991. Ms. Dunbar has been a general partner of Leonard Green & Partners,
L.P. since 1994, and was a principal of Leonard Green & Partners, L.P. from
January 1992 to January 1994 and an associate of Leonard Green & Partners,
L.P. from November 1989. Prior to that time, Ms. Dunbar was an associate of
Gibbons, Green, van Amerongen, L.P. and a financial analyst with Morgan
Stanley & Co., Incorporated in its mergers and acquisitions department. Ms.
Dunbar is a director of Big 5 Holdings Inc., UMC Corporation, Thrifty
Payless, Inc., and Thrifty PayLess Holdings, Inc.

Ben Evans has been a Director of the Company since December 29, 1994.
Mr. Evans has been a consultant for the firm of Ernst & Young in its
financial advisory services group since 1989. He is a director of Revco
D.S., Inc., Jamesway Corporation and Megafoods Stores, Inc.

Thomas W. Harberts has been a Director of the Company since December 29,
1994. Mr. Harberts is the owner of Cub Foods, a single outlet retail food
store in Oshkosh, Wisconsin. From 1970 to 1994, he served in various
capacities for Byerly's, an upscale retail food chain based in Minnesota,
most recently as its Chief Executive Officer.

Ronald E. Johnson has been Chairman of the Board of the Company since
March 1995 and has been its President and Chief Executive Officer since
January 1995. Mr. Johnson served as Chief Operating Officer of Farm Fresh
from December 1993 to January 1995 and as its Senior Vice President of Store
Operations from 1990 to 1993.

Robert Spiegel has been a Director of the Company since December 29,
1994. Mr. Spiegel has served as Chairman and Chief Executive Officer of RJR
Drug Distributors, a Louisville, Kentucky franchisee of Drug Emporium, since
1984. Mr. Spiegel is a director of Graham Field Health Products, Inc., and
Hoenig Group, Inc.

Christopher V. Walker has been a Director of the Company since November
1991. Mr. Walker also served as a Director of the Company from April 1988 to
July 1991, and from November 1991 to present. Mr. Walker is a Managing
Director of Trust Company of the West. He was a general partner of Leonard
Green & Partners, L.P. from November 1989 to March 1995, was a general
partner of Gibbons, Green, van Amerongen, L.P. from January 1989 to August
1989, and was a limited partner of Gibbons, Green, van Amerongen, L.P. from

37<PAGE>
October 1985 to January 1989. Mr. Walker is a director of Foodmaker, Inc.,
and Australian Resources and Mining Company NL.

Peter Zurkow has been a Director of the Company since December 29, 1994.
Mr. Zurkow has been a member of the High Yield Department of PaineWebber
Incorporated since August 1994. He was an Associate Managing Director and
served as a portfolio manager in the risk arbitrage department of Wertheim
Schroder for more than five years prior to joining PaineWebber Incorporated.

All Directors hold office until their successors are duly elected and
qualified or until their earlier resignation or removal.

Director Compensation

Each member of the Board of Directors (excluding management) receives
$12,500 per year (payable quarterly), plus $2,500 for each Board meeting
attended in person, and $1,000 for each meeting of a committee to which such
director is a member attended in person. In addition, each director is
reimbursed for reasonable and necessary out-of-pocket expenses incurred in
connection with attending such meetings in person. The cash compensation
payable to directors affiliated with Leonard Green & Partners, L.P. ("LGP")
is credited against the annual management fee payable to LGP. See "Certain
Relationships and Related Transactions." As of April 24, 1995, Ms. Dunbar
and Mr. Walker are the only directors who are affiliated with LGP.

On March 9, 1995, the Company adopted the 1995 Non-Employee Director
Stock Option Plan (the "Director Plan"), and, pursuant to the Director Plan,
granted to certain of its directors options to purchase a total amount of
36,000 shares of Common Stock. Messrs. Buckardt, Delucca, Evans, Harberts,
Spiegel and Zurkow each received options to purchase 3,000 shares of Common
Stock for $15.00 per share, vesting on July 30, 1995, and options to purchase
an additional 3,000 shares of Common Stock for $20.00 per share, vesting on
July 28, 1996. All of such options expire on March 8, 2005, or earlier upon
the occurrence of certain events. On the same date, in lieu of granting
options to Ms. Dunbar and Mr. Walker under the Director Plan, the Company
granted to Green Equity Investors, L.P. ("GEI") options to purchase 6,000
shares of Common Stock for $15.00 per share, vesting on July 30, 1995, and
options to purchase an additional 6,000 shares of Common Stock for $20.00 per
share, vesting on July 28, 1996. GEI is a principal stockholder of the
Company. See "Principal Stockholders." The terms of the options granted to
GEI are substantially the same as the terms of the options granted under the
Director Plan.

38<PAGE>
EXECUTIVE OFFICERS

Set forth below is certain information regarding each of the executive
officers of the Company as of April 24, 1995.

Name Age Position

Ronald E. Johnson. . . 45 Chairman of the Board, President and Chief
Executive Officer

Raymond P. Springer. . 44 Senior Vice President, Chief Financial Officer,
Treasurer and Secretary

Edward Kolodzieski . . 35 Senior Vice President, Operations

Gary M. Shell. . . . . 47 Senior Vice President, Marketing/Nonperishables

Clifford C. Smith Jr.. 35 Senior Vice President, Marketing/Perishables

Richard D. Coleman . . 40 Vice President, Controller

Biographical Information

See "-- Board of Directors; Biographical Information" for biographical
information concerning Ronald E. Johnson.

Raymond P. Springer has been Senior Vice President, Chief Financial
Officer, and Treasurer of the Company since March 1995, and Secretary of the
Company since January 1995. Mr. Springer served as Executive Vice President,
Administration of the Company from October 1988 to March 1995. Mr. Springer
also served as a Director of the Company from October 1988 to July 1991, and
from November 1991 to December 1994.

Edward Kolodzieski has been Senior Vice President of Operations of the
Company since March 1995. Mr. Kolodzieski served in various capacities with
the Company since October 1988, including Vice President, Operations and
Regional Manager.

Gary M. Shell has been Senior Vice President of Marketing of
Nonperishables of the Company since March 1995. Mr. Shell served as Vice
President of Marketing and Merchandising of B. Green & Company, a food
wholesaler and retailer, from May 1991 to February 1995, and as Vice
President of Purchasing and Promotions of Rich Foods, Inc. from 1987 to 1991.

39<PAGE>
Clifford C. Smith Jr. has been Senior Vice President of Marketing of
Perishables of the Company since March 1995. Mr. Smith served as the
Director of Deli, Bakery and Food Service for Harris-Teeter from 1992 to
March 1995, and as the Vice President of Deli, Bakery and Food Service for
Mayfair Supermarkets, Inc. from 1981 to 1992.

Richard D. Coleman has been Vice President and Controller of the Company
since October 1988, and Director of Risk Management of the Company since
January 1995. From October 1988 to January 1995, Mr. Coleman also served as
Secretary of the Company.

Compensation of Executive Officers

Summary Compensation

The following table sets forth compensation for the fiscal years ended
July 31, 1994, August 1, 1993 and August 2, 1992, respectively, awarded to,
earned by, or paid to the Chief Executive Officer and the acting Chief
Executive Officer of the Company during fiscal year 1994, and the individuals
who, in fiscal year 1994, were the other four most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers").

40<PAGE>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
All Other
Name & Principal Position(1) Year Salary(2) Bonus Options Compensation
Ronald J. Floto
Chairman of the Board,
President and
Chief Executive Officer...1994 $346,056 $ 0 0 $ 8,978(3),(4)
1993 248,358 41,400 0 100,990
1992 358,270 267,720 39,485 24,265
Raymond P. Springer
Executive Vice President,
Administration............1994 $177,298 $ 0 0 $ 11,910(3)
1993 131,233 15,000 0 51,832
1992 186,923 87,300 18,120 12,617
Dennis V. Carter
Executive Vice President,
Operations ...............1994 $133,356 $ 0 0 $ 7,514(3)
1993 123,250 17,000 4,162 8,764
1992 139,038 91,665 15,351 9,618
Thomas A. Whipple
Executive Vice President,
Marketing.................1994 $118,331 $ 0 0 $ 3,073(3)
1993 60,923 0 0 787
1992 186,923 87,300 12,165 12,962
Richard D. Coleman
Vice President,
Controller and Secretary..1994 $100,000 $ 0 0 $ 2,574(3)
1993 95,481 5,000 0 6,682
1992 103,846 27,160 4,515 6,948

____________________________

(1) The principal position held by the Named Executive Officers as of July
31, 1994 is given, except in the case of Mr. Floto. Mr. Floto's
employment with the Company terminated on July 29, 1994, and Anthony R.
Petrillo was appointed to replace him on an interim basis on August 1,
1994. Since the Restructuring was consummated on December 29, 1994,
Ronald E. Johnson joined the Company as Chairman of the Board, President
and Chief Operating Officer, replacing Mr. Petrillo, Messrs. Carter and
Whipple resigned from the Company, Mr. Springer's title was
re-designated as Senior Vice President, Chief Financial Officer, and
Edward Kolodzieski, Gary M. Shell and Clifford C. Smith Jr. became
executive officers. The current annual salaries of Messrs. Johnson,
Kolodzieski, Shell and Smith are $325,000, $150,000, $130,000 and
$130,000, respectively. During his tenure as acting Chairman of the
Board, President and Chief Executive Officer, Mr. Petrillo received a
weekly salary of $13,462 and a bonus of $200,000. Mr. Petrillo
continues to serve as a consultant to the Company, for which he is
compensated at the rate of $200 per hour.
41a<PAGE>
(2) Includes amounts deferred at the election of the Named Executive
Officers under the Company's Retirement Estates 401(k) Plan (the
"Retirement Plan"), a trusteed defined contribution plan, and its
nonqualified unfunded supplemental salary deferral plan (the
"Supplemental Retirement Plan").

(3) Represents (i) matching contributions by the Company under its
Retirement Plan of $2,587 for the benefit of Mr. Floto, $1,292 for the
benefit of Mr. Whipple, $1,321 for the benefit of Mr. Springer, $990 for
the benefit of Mr. Carter and $741 for the benefit of Mr. Coleman; (ii)
matching allocations by the Company under its Supplemental Retirement
Plan of $5,175 for the benefit of Mr. Floto, $1,453 for the benefit of
Mr. Whipple, $9,854 for the benefit of Mr. Springer, $6,075 for the
benefit of Mr. Carter and $1,500 for the benefit of Mr. Coleman; and
(iii) above-market interest recorded by the Company under its
Supplemental Retirement Plan of $1,216 for the benefit of Mr. Floto,
$328 for the benefit of Mr. Whipple, $735 for the benefit of Mr.
Springer, $449 for the benefit of Mr. Carter and $333 for the benefit of
Mr. Coleman.

41b<PAGE>
(4) Mr. Floto filed a proof of claim against the Company seeking payments
allegedly owed to him in connection with his severance from the Company.
See "Business -- Legal Proceedings." Due to the contingency of such
claim, it is not reflected in this table.

Stock Option Grants in Last Fiscal Year

Prior to the Restructuring, the Company administered two stock option
plans for the benefit of its executive officers and other valued employees --
the Restated 1988 Management Stock Option Plan and the 1991 Management Stock
Option Plan (the "Old Option Plans"). No options were granted in fiscal year
1994 under either of the Old Option Plans. Pursuant to the Prepackaged Plan,
all of the outstanding options under the Old Option Plans were extinguished
on December 29, 1994.

In March 1995, the Company adopted the 1995 Key Employee Stock Option
Plan (the "New Option Plan"), which authorizes the issuance to eligible
participants of options to purchase up to 236,946 shares of Common Stock of
the Company. (Capitalized terms not otherwise defined in this paragraph are
defined in the New Option Plan.) Thereafter, the Stock Option Committee
granted to certain executive officers options to purchase the aggregate
amount of 125,240 shares of Common Stock under the New Option Plan (the
"Initial Options"). The Initial Options vest in serial increments in the
amount of 20% per year, on the last day of each of the 1995, 1996, 1997, 1998
and 1999 fiscal years of the Company. However, upon the occurrence of a
Merger Event or a Change of Control, the Initial Options become 100% vested.
In addition, upon the termination of Mr. Johnson's employment Without Cause
(as defined in his employment agreement), all of Mr. Johnson's Initial
Options become 100% vested. The Initial Options expire, to the extent not
exercised, on the tenth anniversary of the date of grant. However, upon
termination of an optionee's employment with the Company, all unvested
Initial Options lapse, and all vested Initial Options expire 180 days after
the termination of employment, if such termination is due to the death,
Disability or Retirement of the optionee, or 45 days after the termination of
employment, if such termination is due to any other reason, other than a
Termination for Cause. If a Termination for Cause occurs, all vested and
unvested Initial Options expire immediately. The following table sets forth
certain information with respect to the Initial Options:

Number of Securities
Underlying Options Exercise Price
Name Granted (Dollars/Share) Expiration Date

Ronald E. Johnson 33,849 $15.00 March 8, 2005

Raymond P. Springer 30,464 $15.00 March 8, 2005

Edward Kolodzieski 20,309 $15.00 March 8, 2005

Gary M. Shell 20,309 $15.00 March 8, 2005

Clifford C. Smith Jr. 20,309 $15.00 March 25, 2005
42<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values

None of the options granted under the Old Option Plans were exercised
before they were extinguished pursuant to the Prepackaged Plan on December
29, 1994. The following table shows information concerning the value of the
unexercised options granted under the Old Option Plans held by the Named
Executive Officers as of July 31, 1994:
Value of
Number of Unexercised
Name Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End

Exercisable/ Exercisable/
Unexercisable Unexercisable
Ronald J. Floto -0-/-0- (1)
Thomas A. Whipple 1,877/12,349 (1)
Raymond P. Springer 1,877/18,304 (1)
Dennis V. Carter 1,102/19,697 (1)
Richard D. Coleman 610/4,569 (1)

(1) As of July 31, 1994, the Company had reached an agreement in principle
with the Unofficial Bondholders' Committee with respect to the
Restructuring. Accordingly, the fair market value of the Common Stock
underlying the options was nil and none of the options were
in-the-money. On December 29, 1994, all of such options were
extinguished pursuant to the Prepackaged Plan.

Employment Contracts and Termination of Employment and Change-of-Control
Arrangements

Messrs. Johnson, Shell and Smith have each entered into employment
agreements with the Company for a three-year term. Mr. Johnson's term
commenced in January 1995 and Messrs. Shell's and Smith's terms each
commenced in March 1995. Under the employment agreements, the Company agrees
to pay a base salary and to allow the employee to participate proportionally
in all fringe benefit plans available to the most senior executive officers
of the Company from time to time during the term, including the Company's
current bonus plan. Employment under the agreements may be terminated for
cause or without cause in certain circumstances, as defined therein,
including the employee's death or disability. Upon a termination without
cause, the employee is entitled to continuation of salary and, in certain
circumstances, benefits and bonus, through the term of the employment
agreement. Mr. Johnson's agreement also provides that options granted to him
under the New Option Plan will become fully vested upon a termination of his
employment without cause. The agreements also

43<PAGE>
contain certain requirements of noncompetition, including a requirement of
noncompetition for a period of one year following a termination of
employment, other than a termination without cause.

The Company has severance pay agreements with certain members of its
senior management and other key employees. The severance pay agreements
provide, among other things, that if the employee is terminated without Cause
(as defined therein) in connection with a Change of Control (as defined
therein) then such employee will be entitled to payment ranging from 50% to
100% of that employee's annual compensation.

The Company maintains the Kash n' Karry Retirement Estates ("KKRE"), a
trusteed defined contribution retirement plan. KKRE is a tax savings/profit
sharing plan maintained for the purpose of providing retirement income for
eligible employees of the Company. KKRE is qualified under Section 401(a)
and Section 401(k) of the Internal Revenue Code of 1986, as amended.
Generally, all employees who have attained the age of 21 years and complete
one year of participation service (as defined under KKRE) are eligible to
participate in KKRE. During the 1994 fiscal year, each of the Named
Executive Officers participated in KKRE.

Certain members of senior management and other key employees also
participate in the Kash n' Karry Executive Supplemental Retirement Plan
("KESP"), a non-qualified, unfunded salary deferral plan. During the 1994
fiscal year, each of the Named Executive Officers participated in KESP.
Prior to the beginning of each plan year, a participant may elect to defer an
amount not to exceed 15% of such participant's annual base compensation (as
defined under KESP). The Company matches a certain portion of the amount
deferred by the participant, but the amount of the match may not exceed 6% of
such participant's annual base compensation. The Company records income to
the participant's account at an annual rate as determined by the Board of
Directors, but the rate of such income shall not be less than 8% per annum.
The vested percentage of the amounts recorded in the participant's account
will be paid to the participant upon the earlier of: (i) such participant's
death, disability, retirement or other separation of service from the
Company; (ii) the date the Plan is terminated; or (iii) the date that a
change in control occurs (as defined under KESP).

Compensation Committee Interlocks and Insider Participations

The Board of Directors has established a Compensation Committee and a
Stock Option Committee. The Compensation Committee approves compensation
payable to the executive officers and the Stock Option Committee administers
the Company's stock option plans. Currently, Jennifer Holden Dunbar, Ben
Evans and Peter Zurkow comprise both such committees. During the 1994 fiscal
year, Ronald J. Floto, Leonard I. Green, Christopher V. Walker and Edward W.
Gibbons (each of whom was a director during the 1994 fiscal year) performed
the functions of the Compensation Committee and Messrs. Floto, Green and
Gibbons served on the Stock Option Committee.

44<PAGE>
Mr. Green and Ms. Dunbar are each controlling shareholders of general
partners of LGP, and Mr. Green is a former partner of Gibbons, Green, van
Amerongen, L.P. ("Gibbons, Green"), now known as Gibbons, Goodwin, van
Amerongen, L.P. ("GGvA"). Mr. Walker is a former general partner of LGP and
of Gibbons, Green. Mr. Gibbons is a general partner of GGvA. LGP is the
general partner of Green Equity Investors, L.P., which owned 60.9% of the
Company's common stock during the 1994 fiscal year, and which currently owns
27.7% of the Company's Common Stock. See "Principal Stockholders." GGvA is
the general partner of the Fulcrum Partnerships, which collectively owned
33.8% of the Company's common stock during the 1994 fiscal year. The equity
interest of the Fulcrum Partnerships was extinguished in December 1994
pursuant to the Prepackaged Plan. Gibbons, Green is a predecessor of GGvA.
Mr. Floto was the Chairman of the Board, President and Executive Officer of
the Company until July 29, 1994.

During fiscal 1994, as consideration for the provision of financial
advisory services, the Company agreed to pay an annual fee of $554,000, plus
related out-of-pocket expenses, to LGP and an annual fee of $232,000, plus
related out-of-pocket expenses, to GGvA. From September 1993 through
December 1994, the Company did not pay the annual fees to LGP or GGvA, but
reimbursed them for out-of-pocket expenses billed to the Company. Pursuant
to the Prepackaged Plan, on December 29, 1994 the Company entered into a
Management Services Agreement with LGP, pursuant to which LGP agreed to
provide management, consulting, financial planning and financial advisory
services for a two year term, in consideration for an annual fee of $200,000.

45<PAGE>
Security Ownership of Management

The following table sets forth as of April 24, 1995, the number and
percentage of all shares of Common Stock owned by each of the directors of
the Company, each of the Named Executive Officers, each of the current
executive officers of the Company, and all directors, Named Executive
Officers and current executive officers as a group.

Number of
Name Shares Owned Percent (1)
Everett L. Buckardt -0- -0-

John J. Delucca -0- -0-

Dennis V. Carter -0- -0-

Richard D. Coleman -0- -0-

Jennifer Holden Dunbar (2) 857,629 27.7

Ben Evans 2,500 *

Ronald J. Floto -0- -0-

Thomas W. Harberts -0- -0-

Ronald E. Johnson -0- -0-

Edward Kolodzieski -0- -0-

Gary M. Shell -0- -0-

Clifford C. Smith Jr. -0- -0-

Robert Spiegel 10,000 *

Raymond P. Springer -0- -0-

Christopher V. Walker (2) 857,378 27.7

Thomas A. Whipple -0- -0-

Peter Zurkow -0- -0-
All Directors, Named Executive Officers and
current executive officers as a group
(17 persons) (2). . . . . . . . 870,129 28.1
- ----------------------
* Less than 1%
(1) Based on 3,100,000 shares of Common Stock outstanding.
(2) Includes 857,378 shares owned by Green Equity Investors, L.P., of which
Leonard Green & Partners, L.P. ("LGP"), is the sole general partner.
Ms. Dunbar may be deemed to be the beneficial owner of such shares by
reason of her being the controlling shareholder of a general partner of
LGP, and Mr. Walker may be deemed to be the beneficial owner of such
shares by reason of his being a former general partner of LGP.
46<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 1994, 1993, and 1992, respectively, as consideration for
the provision of financial advisory services, the Company agreed to pay an
annual fee of $554,000, plus related out-of-pocket expenses, to Leonard Green
& Partners, L.P. ("LGP"), and an annual fee of $232,000, plus related out-of-
pocket expenses, to Gibbons, Goodwin, van Amerongen, L.P. ("GGvA"). From
September 1993 through December 1994, the Company did not pay the annual fees
to LGP or GGvA, but reimbursed them for out-of-pocket expenses billed to the
Company. Pursuant to the Prepackaged Plan, on December 29, 1994 the Company
entered into a Management Services Agreement with LGP, pursuant to which LGP
agreed to provide management, consulting, financial planning and financial
advisory services for a two year term, in consideration for an annual fee of
$200,000.

LGP is the sole general partner of Green Equity Investors, L.P., which
owned approximately 60.9% of the Company's outstanding common stock
immediately prior to the consummation of the Prepackaged Plan. GGvA is the
general partner of The Fulcrum III Limited Partnership and The Second Fulcrum
III Limited Partnership, which collectively owned 33.8% of the Company's
outstanding common stock immediately prior to the consummation of the
Prepackaged Plan. Jennifer Holden Dunbar, who is a director of the Company,
is the controlling shareholder of a general partner of LGP. Christopher V.
Walker, who is also a director of the Company, is a former general partner of
LGP and of GGvA.

47<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth, as of April 24, 1995 (unless otherwise
specified), the name and address of each person known by the Company to be
the beneficial owner of more than five percent of the outstanding Common
Stock (the only class of voting securities of the Company):

Name and Address Number of Shares Percent

American Express Company 652,470(1) 21.1%
American Express Tower
World Financial Center
New York, NY 10285

American Express Financial Corporation 652,470(1) 21.1
IDS Tower 10
Minneapolis, MN 55440

Green Equity Investors, L.P. 857,378(2) 27.7
333 S. Grand Avenue
Suite 5400
Los Angeles, CA 90071

IDS Extra Income Fund 552,090(1) 17.8
IDS Tower 10
Minneapolis, MN 55440

The Prudential Insurance Company 435,384(3) 14.0
of America
Prudential Plaza
Newark, NJ 07102-3777

PaineWebber Incorporated 402,568(4) 13.0
1285 Avenue of the Americas
New York, NY 10019

(1) Based upon information supplied by American Express Company, American
Express Financial Corporation and IDS Extra Income Fund. Represents
shares over which each such person shares dispositive power, with
respect to which American Express Company has advised the Company that
it disclaims beneficial ownership.

(2) Based upon information supplied by Green Equity Investors, L.P.

(3) Based upon information supplied by The Prudential Insurance Company of
America ("Prudential"). Includes 32,233 shares held for the benefit of
clients of Prudential over which Prudential may have direct or indirect
voting and/or investment discretion, with

48<PAGE>
respect to which Prudential has advised the Company that it disclaims
beneficial ownership.

(4) Based upon information supplied by PaineWebber Incorporated, as of April
15, 1995. PaineWebber Incorporated, a registered broker-dealer, makes
a market in the Common Stock of the Company.

DESCRIPTION OF CAPITAL STOCK

Authorized Capital Stock

The authorized capital stock of the Company consists of 5,500,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share. The authorized Preferred Stock includes
35,000 shares of Series A Junior Participating Preferred Stock (the "Series
A Preferred"). As of April 24, 1995, 3,100,000 shares of Common Stock and no
shares of Preferred Stock were outstanding, an additional 173,240 shares of
Common Stock were reserved for issuance pursuant to outstanding options
granted to GEI and to certain directors and executive officers pursuant to
the Director Plan and New Option Plan, and all 35,000 shares of Series A
Preferred were reserved for issuance to the holders of Rights. See
"Management" and "-- Certain Anti-Takeover and Charter Provisions; Rights
Plan."

The following description of those terms and provisions of the capital
stock of the Company which are deemed material to an investment in the Common
Stock is intended to be a summary thereof and does not purport to be a
complete description of the terms and conditions of such capital stock.
Reference is made to the Company's Restated Certificate of Incorporation, the
Certificate of Designations of the Series A Preferred, and the Rights
Agreement dated as of April 13, 1995 (the "Rights Agreement") between the
Company and Shawmut Bank Connecticut, N.A., as Rights Agent (the "Rights
Agent"). Copies of each of the foregoing documents have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.

Common Stock

Each holder of Common Stock is entitled to one vote per share on all
matters to be voted on by the stockholders, including elections of directors,
and, except as otherwise provided by law or as may be provided with respect
to any series of Preferred Stock created by the Board of Directors from time
to time, the holders of such shares of Common Stock exclusively possess all
voting power. See "Description of Capital Stock -- Preferred Stock."
Holders of Common Stock are not entitled to cumulate their votes.

49<PAGE>
Subject to certain preferential rights of any outstanding series of
Preferred Stock created by the Board of Directors from time to time, holders
of Common Stock are entitled to dividends and other distributions as and when
declared by the Board of Directors out of assets legally available therefor,
and upon the liquidation, dissolution or winding up of the Company, the
holders of Common Stock would be entitled to share equally in the
distribution of all of the Company's assets. The holders of Common Stock
have no preemptive rights to purchase shares of Common Stock of the Company.

The transfer agent and registrar for the Company's Common Stock is
Shawmut Bank Connecticut, N.A., of 777 Main Street, MSN 238, Hartford,
Connecticut 06115.

The Common Stock is listed on the Nasdaq Small Cap Market under the
symbol "KASH."

Preferred Stock

Blank check authority

The Board of Directors has the authority, without action by the
stockholders, to issue shares of Preferred Stock in one or more series and,
within certain limitations, to determine the dividend rights, dividend rate,
rights and terms of redemption, liquidation preferences, sinking fund terms,
conversion rights and voting rights of any series of Preferred Stock, the
number of shares constituting any such series, the designation thereof, and
the price therefor.

As of April 24, 1995, the Board of Directors has not authorized the
issuance of any Preferred Stock other than the Series A Preferred. See "--
Series A Preferred."

The Company believes that the ability of its Board of Directors to issue
one or more series of Preferred Stock will provide the Company with
flexibility in structuring possible future financings and acquisitions, and
in meeting other corporate needs which might arise. The authorized shares of
Preferred Stock, as well as Common Stock, will be available for issuance
without further action by the Company's stockholders, unless such action is
required by applicable law or the rules of any exchange or automated
quotation system on which the Company's securities may be listed or traded.

Series A Preferred

There are 35,000 authorized shares of Series A Preferred. As of April
24, 1995, none of the Series A Preferred is outstanding, but all of such
shares are reserved for issuance pursuant to an exercise of Rights. See "--
Certain Anti-Takeover and Charter Provisions; Rights Plan."

50<PAGE>
The Series A Preferred is not redeemable and has no sinking fund. Each
share of Series A Preferred will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an
aggregate dividend equal to the dividends on 100 shares of Common Stock. In
addition, each share of Series A Preferred will have a liquidation preference
of $100 per share but will be entitled to an aggregate payment of 100 times
the payment made per share of Common Stock. Each share of Series A Preferred
will have 100 votes, voting together with the shares of Common Stock.
Finally, in the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each share of Series A Preferred
will be entitled to receive 100 times the amount received per share of Common
Stock. These rights are protected by customary anti-dilution provisions.

Restrictions on Dividends

The indentures governing the New Senior Fixed Rate Notes and the New
Senior Floating Rate Notes (the "Indentures") provide that the Company will
not, directly or indirectly, (i) declare or pay any dividend on or make any
distributions in respect of the capital stock of the Company or any
Subsidiary thereof (except for (x) dividends or distributions payable solely
to the Company or any Subsidiary of the Company and (y) dividends or
distributions of a Subsidiary of the Company solely on the capital stock of
such Subsidiary), or purchase, redeem or retire for value, or make any
payment on account of the purchase, redemption or other acquisition or
retirement for value of, any capital stock or warrants, rights or options to
purchase such capital stock, (ii) make any principal payment on, or redeem,
repurchase or defease, or otherwise acquire or retire for value, Subordinated
Debt (as defined in the Indentures), prior to any scheduled principal
payment, scheduled sinking fund payment or maturity thereof, or (iii) make
any loan or advance to, or any other Investment (as defined in the
Indentures) in, any of its Affiliates other than a Subsidiary of the Company
(such payments or any other actions described in (i), (ii) and (iii),
collectively, "Restricted Payments") unless (1) at the time of and after
giving effect to the proposed Restricted Payment, no Event of Default (as
defined in the Indentures) or event that, after notice or lapse of time or
both would become an Event of Default, shall have occurred and be continuing,
and (2) at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such payment, if other than cash, to be determined
by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution (as defined in the Indentures)) (A) the
Consolidated Net Worth (as defined in the Indentures) of the Company shall be
at least $75,000,000 and (B) the aggregate amount of all Restricted Payments
after January 29, 1995 shall not exceed 50% of Cumulative Net Available Cash
(as defined in the Indentures) of the Company and (C) the Fixed Charge
Coverage Ratio (as defined in the Indentures) calculated on a pro forma basis
for the full twelve-month period ending on the last day of the Company's
fiscal quarter immediately preceding such proposed Restricted Payment shall
be at least 1.50 to 1. Notwithstanding the foregoing, this provision will
not prohibit the redemption, by the Company, of its common stock (on a fully
diluted basis) from time to time under the terms and conditions of management
equity subscription agreements or stock option agreements and related
exhibits, so long as such

51<PAGE>
redemption does not otherwise result in an Event of Default or event that,
after notice or lapse of time or both, would become an Event of Default.

The foregoing provisions shall not be deemed to prohibit (1) the payment
of any dividend within 60 days after the date of declaration thereof, if at
such declaration date such declaration complied with the provisions of the
Indentures, or (2) the redemption, repurchase or other acquisition or
retirement (a "retirement") of any shares of any class of capital stock of
the Company or of any Subsidiary thereof in exchange for (including any such
exchange pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of fractional
shares or scrip), or out of the proceeds of a substantially concurrent issue
and sale (other than to a Subsidiary of the Company) of, other shares of
capital stock of the Company, or (3) the retirement of Subordinated Debt out
of the proceeds of a substantially concurrent sale (other than to a
Subsidiary of the Company) of shares of capital stock of the Company or
issuance other than to a Subsidiary of the Company of new Indebtedness which
has a weighted average life to maturity at least as long as the Stated
Maturity of the New Notes and no sinking fund or scheduled principal payments
prior to the maturity of the New Notes and the payment of which is
subordinated in right of payment and otherwise to the New Notes at least to
the same extent as such Subordinated Debt, or (4) the payment of dividends or
the making of distributions on shares of capital stock of the Company solely
in shares of capital stock of the Company.

The New Credit Agreement provides that the Company will not declare or
make any Dividend Payment (as defined in the New Credit Agreement) at any
time (other than Dividend Payments in respect of the Company's obligations to
repurchase capital stock or Equity Rights (as defined in the New Credit
Agreement) of the Company of retired, terminated or deceased directors,
officers or employees of the Company, provided that (a) the aggregated amount
of such payments in any fiscal year of the Company shall not exceed the sum
of (i) $500,000 plus (ii) for each fiscal year of the Company beginning after
the Effective Date, an amount equal to the excess (if any) of $500,000 over
the amount of such payments made by the Company in its immediately preceding
fiscal year and (b) no such Dividend Payments may be made after the
occurrence and during the continuance of any Default (as defined in the New
Credit Agreement)).

Certain Anti-Takeover and Charter Provisions

Delaware General Corporation Law

The Company is subject to Section 203 of the Delaware General
Corporation Law, as amended ("Section 203"). Section 203 provides that,
subject to certain exceptions specified therein, an "interested stockholder"
of a Delaware corporation shall not engage in any business combination,
including mergers or consolidations or acquisitions of additional shares of
the corporation, with the corporation for a three-year period following the
date that such stockholder becomes an "interested stockholder" unless (i)
prior to such date, the board of directors of the
52<PAGE>
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder," (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66-2/3% of the outstanding voting stock
which is not owned by the "interested stockholder." Except as otherwise
specified in Section 203, an "interested stockholder" is defined to include
(x) any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the corporation
and was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within three years immediately prior to the relevant
date and (y) the affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate of Incorporation does not exclude the Company
from the restrictions imposed under Section 203. The provisions of Section
203 may encourage companies interested in acquiring the Company to negotiate
in advance with the Board of Directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction which results in
the shareholder becoming an interested shareholder. Such provisions also may
have the effect of preventing changes in the management of the Company. It
is possible that such provisions could make it more difficult to accomplish
transactions which stockholders may otherwise deem to be in their best
interests.

Severance arrangements

Certain executive officers of the Company have severance arrangements
with the Company, which may have the effect of increasing the costs of
acquiring the Company in a hostile takeover. See "Management -- Termination
of Employment and Change-of-Control Arrangements."

Rights Plan

On April 13, 1995, the Company adopted a preferred stock purchase rights
plan (the "Rights Plan"). Under the Rights Plan, the Board declared a
dividend in the form of one right (a "Right" and, collectively, the "Rights")
for each outstanding share of Common Stock. The dividend was payable on
April 27, 1995 (the "Record Date") and was declared with respect to both the
shares then outstanding and shares that shall become outstanding between the
Record Date and the earliest of the Distribution Date (as defined below) and
the date on which the

53<PAGE>
Rights are redeemed or expire. The certificates representing any such shares
of Common Stock so issued will bear a legend to the effect that the
certificates also evidence the Rights.

Subject to adjustment upon the occurrence of certain events described
below, each Right entitles the holder thereof to purchase one one-hundredth
of a share of Series A Preferred (the "Preferred Shares") for $76.00 (the
"Purchase Price"), ten days after a person or group (an "Acquiring Person")
acquires 25% or more of the Company's Common Stock (or, subject to the terms
of the Rights Agreement, more than 29% in the case of Leonard Green &
Partners, L.P. ("LGP") or any person or entity which at any time purchases
all of the shares of Common Stock owned by LGP), or certain actions are taken
in respect of such acquisition. The first date on which the right to
purchase Preferred Shares could be exercised is referred to herein as the
Distribution Date.

The Purchase Price payable, and the number of Preferred Shares or other
securities issuable, upon exercise of the Rights shall be adjusted in the
event (i) of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) of a grant to holders of the
Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares at a price, or securities convertible into Preferred Shares
with a conversion price, less than the then-current market price of the
Preferred Shares or (iii) of a distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular periodic
cash dividends paid out of earnings or retained earnings or dividends payable
in Preferred Shares) or of subscription rights or warrants (other than those
referred to above).

The number of outstanding Rights and the number of one one-hundredths of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the shares of Common Stock or a
stock dividend on the shares of Common Stock payable in shares of Common
Stock or subdivisions, consolidations or combinations of shares of the Common
Stock occurring, in any such case, prior to the Distribution Date.

In the event any person or group becomes an Acquiring Person, each
holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter be void), will thereafter have the right to
receive (subject to adjustment) upon exercise that number of shares of Common
Stock having a market value of two times the exercise price of the Right. In
addition, if there is a merger or other business combination between the
Company and an Acquiring Person, or if certain other events occur involving
an Acquiring Person, each Right (if not previously exercised) would entitle
the holder to purchase that number of shares of common stock of the Acquiring
Person which at the time of such transaction will have a market value of two
times the exercise price of the Right.

Prior to the Distribution Date, the Rights cannot be transferred apart
from the Common Stock and will be represented solely by the Common Stock
certificates. If the Distribution Date occurs, separate certificates
representing the Rights will be mailed to holders of the Common

54<PAGE>
Stock as of such date, and the Rights could then begin to trade separately
from the Common Stock.

At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Company may exchange the Rights
(other than Rights owned by an Acquiring Person, which will have become
void), in whole or in part, at an exchange ratio of one share of Common
Stock, or one one-hundredth of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).

The Rights are redeemable by the Company at $.01 per Right at any time
prior to the occurrence of the Distribution Date. In the event the Company
receives a written notice from the holder or holders of at least ten percent
of the shares of Common Stock then outstanding directing the Board of
Directors to submit to a vote of stockholders at the Company's next annual
meeting of stockholders a resolution authorizing the redemption of all the
then outstanding Rights at the Redemption Price (the "Resolution") and the
written notice complies with certain procedural requirements, then the Board
of Directors is required to take such actions as are necessary or desirable
to cause the Resolution to be so submitted to a vote of stockholders,
including by including a proposal relating to the adoption of the Resolution
in the Board of Directors' proxy materials relating to such annual meeting of
stockholders. Subject to the requirements of applicable law, the Board of
Directors of the Company may take a position in favor of or opposed to the
adoption of the Resolution, or no position with respect to the Resolution, as
it deems appropriate. If at the annual meeting the Resolution receives the
affirmative vote of a majority of the shares of Common Stock outstanding as
of the record date for such annual meeting, and provided that no person or
entity has become an Acquiring Person prior to the redemption date, then all
of the Rights will be redeemed by such stockholder action at the Redemption
Price, effective as of the close of business on the tenth business day
following the date on which the results of the vote on the Resolution at the
annual meeting are certified as official. The Rights will automatically
expire on April 13, 2000 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company.

The Rights will not have any voting rights and will not be entitled to
dividends. The terms of the Rights may be amended without the consent of the
holders of the Rights, provided that after the Distribution Date the
amendment does not adversely affect the interest of the holders.

The Preferred Shares are not redeemable and have no sinking fund. Each
Preferred Share will be entitled to a minimum preferential quarterly dividend
payment of $1 per share but will be entitled to an aggregate dividend equal
to the dividends on 100 shares of Common Stock. In addition, each Preferred
Share will have a liquidation preference of $100 per share but will be
entitled to an aggregate payment of 100 times the payment made per share of
Common Stock.

55<PAGE>
Each Preferred Share will have 100 votes, voting together with the shares of
Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each Preferred
Share will be entitled to receive 100 times the amount received per share of
Common Stock. These rights are protected by customary anti-dilution
provisions.

The Rights may have certain anti-takeover effects. The Rights will
cause substantial dilution to any person or group which becomes an Acquiring
Person or if an Acquiring Person attempts to merge with, or engage in certain
other transactions with, the Company. The Rights should not, however,
interfere with any merger or other business combination approved by the
Company's Board of Directors prior to the occurrence of a Distribution Date
because the Rights may be redeemed prior to such time.

Limitation of Liability of Directors

The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.

While the Certificate of Incorporation provides directors with
protection from awards for monetary damages for breaches of their duty of
care, it does not eliminate such duty. Accordingly, the Certificate of
Incorporation will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a director's breach of his or
her duty of care. The provisions of the Certificate of Incorporation
described above apply to an officer of the Company only if he or she is a
director of the Company and is acting in his or her capacity as director, and
do not apply to officers of the Company who are not directors.

56<PAGE>
SELLING STOCKHOLDERS

Certain holders of Common Stock (the "Selling Stockholders") may offer
such securities hereby on a continuous or delayed basis pursuant to Rule 415
promulgated under the Securities Act.

The following table sets forth certain information as of April 26, 1995
with respect to each Selling Stockholder for whose account Common Stock may
be sold pursuant to this Prospectus, which information has been furnished to
the Company by the Selling Stockholders and other sources that the Company
has not certified. Because the Selling Stockholders may sell, pursuant to
this Prospectus, all or some part of the Common Stock that they hold, no
estimate can be given as to the amount of Common Stock that will be held by
the Selling Stockholders at any time subsequent to the date of this
Prospectus. See "Plan of Distribution." As of April 26, 1995, none of the
Selling Stockholders except Green Equity Investors, L.P. ("GEI") has had a
material relationship within the past three years with the Company, other
than as a result of the ownership of securities of the Company. For a
discussion of the relationship between GEI and the Company, see "Certain
Relationships and Related Transactions."

Beneficial Ownership Prior Beneficial
to Offering (1) Ownership
After
Number of Percentage Shares Offering
Name of Selling Stockholder Shares of Class Offered Hereby (1), (2)

American Express Company 652,470(3) 21.1 652,470 -0-

American Express Financial
Corporation 652,470(3) 21.1 652,470 -0-

Eugene Aspy and Helen
Breland, as joint tenants 10 * 10 -0-

William H. Bartman and 251 * 251 -0-
Margaret L. Bartman, as
Trustees u/a dated July 28,
1971

Wayne R. Bernhardt 125 * 125 -0-

Harold Buchhalter 501 * 502 -0-

Gino J. Caccanisi and 250 * 250 -0-
Barbara V. Caccanisi, as
joint tenants

Cede & Co. 3,076,283(4) 99.24 3,076,283 -0-

Jennifer Holden Dunbar 251 * 251 -0-

57<PAGE>
Mary J. Eichhorn, as Trustee 502 * 502 -0-
u/a dated May 21, 1991 f/b/o
Walter J. Eichhorn, Sr.
Revocable Trust

Ruth E. Geniesse 50 * 50 -0-

Green Equity Investors, L.P. 857,378 27.7 857,378 -0-

Paul J. Green & Joan Green, 125 * 125 -0-
as joint tenants

Florence T. Harlow and 251 * 251 -0-
Joseph E. Harlow, as joint
tenants

Letitia Haugen, as Trustee 250 * 250 -0-
u/a dated April 30, 1980
f/b/o Letitia Haugen Trust

IDS Extra Income Fund 552,090(3) 17.8

Kray & Co. 5,321 * 5,321 -0-

Lewis J. Lamm 2,761 * 2,761 -0-

Malcom W. Morris, Jr. 176 * 176 -0-

Edward J. Mytkowicz and 627 * 627 -0-
Esther Mytkowicz, as trustee
f/b/o Edward J. Mytkowicz
and Esther Mytlowicz Family
Trust dated April 29, 1980

PaineWebber Incorporated 402,568(5) 13.0 402,568 -0-

Philadep & Co. 1,004 * 1,004 -0-

The Prudential Insurance 435,384 14.0 435,384 -0-
Company of America

Richard H. Rohlwing and 627 * 627 -0-
Linda Rohlwing, as joint
tenants

George A. Shurick 6,526 * 6,526 -0-

Ellen M. Skaggs and Delois 125 * 125 -0-
V. Skaggs, as joint tenants

Geoffrey Skinner 2,000 * 2,000 -0-

58<PAGE>
Raymond L. Valente, as 376 * 376 -0-
Trustee f/b/o Loretta S.
Valente Trust u/a dated July
12, 1990

* Less than 1%

(1) Information with respect to beneficial ownership was obtained from the
Selling Stockholders. Except to the extent otherwise provided herein,
the persons named in the table have sole voting and dispositive power
with respect to all shares of Common Stock shown as beneficially owned
by them.

(2) Assumes sale of all, and no other purchases of, Common Stock. See "Plan
of Distribution."

(3) Represents shares over which American Express Company, American Express
Financial Corporation and IDS Extra Income Fund share dispositive power,
and as to which American Express Company has indicated that it disclaims
beneficial ownership.

(4) Includes 857,378 shares beneficially owned by Green Equity Investors,
L.P., 652,470 shares beneficially owned by American Express Company,
American Express Financial Corporation and IDS Extra Income Fund,
435,384 shares beneficially owned by the Prudential Insurance Company of
America, 402,568 shares beneficially owned by PaineWebber Incorporated,
and 251 shares beneficially owned by Jennifer Holden Dunbar.

(5) As of April 15, 1995.

All of the shares offered hereby were acquired by the Selling
Stockholders (or their authorized assignors) pursuant to the Prepackaged
Plan. The shares of Common Stock are being registered to satisfy a condition
set forth in the Prepackaged Plan. Pursuant to the Prepackaged Plan, the
Company is required to use its best efforts to keep such Registration
Statement continuously effective until the third anniversary of its original
effectiveness. However, there can be no assurance that the Selling
Stockholders will sell any or all of the shares of Common Stock which may be
offered pursuant to this Prospectus.

59<PAGE>
PLAN OF DISTRIBUTION

The Company will not receive any of the proceeds from the sale by the
Selling Stockholders of the Common Stock offered by this Prospectus. Any or
all of such Common Stock may be sold by the Selling Stockholders from time to
time (i) to or through underwriters or dealers, (ii) directly to one or more
other purchasers, (iii) through agents on a best-efforts basis, or (iv)
through a combination of any such methods of sale. The Selling Stockholders
and any such underwriters, dealers or agents that participate in the
distribution of the Common Stock may be deemed to be underwriters within the
meaning of the Securities Act, and any profit on the sale of the Common Stock
by them, and any discounts, commissions or concessions received by them, may
be deemed to be underwriting discounts and commissions under the Securities
Act. The Common Stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices
will be determined by the Selling Stockholders or by agreement between the
Selling Stockholders and underwriters or dealers. Brokers or dealers acting
in connection with the sale of Common Stock contemplated by this Prospectus
may receive fees or commissions in connection therewith.

At the time a particular offer of Common Stock is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate number of shares of Common Stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter
for Common Stock purchased from the Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and/or the Company and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, including the proposed selling price
to the public. Each supplement to this Prospectus and, if necessary, a
post-effective amendment to the Registration Statement of which this
Prospectus is a part, will be filed with the Commission to reflect the
disclosure of additional information with respect to the distribution of
Common Stock.

The outstanding Common Stock is, and the Common Stock offered hereby
will be, listed on the Nasdaq Small Cap Market.

Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of Common Stock may not simultaneously
engage in market making activities with respect to the Common Stock for a
period of nine business days prior to the commencement of such distribution.
In addition and without limiting the foregoing, the Selling Stockholders and
any person participating in the distribution of the Common Stock will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of the Common
Stock by the Selling Stockholders or any such other person.

60<PAGE>
In order to comply with certain states' securities laws, if applicable,
the Common Stock will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In certain states the Common Stock may not
be sold unless it has been registered or qualified for sale in such state, or
unless an exemption from registration or qualification is available.

The Registration Statement, of which the Prospectus is a part, is being
filed by the Company to satisfy a condition set forth in the Prepackaged
Plan. Pursuant to the Prepackaged Plan, the Company is required to use its
best efforts to keep such Registration Statement continuously effective until
the third anniversary of its original effectiveness.

Pursuant to the Prepackaged Plan, the Company has paid or will pay any
and all expenses incident to the performance of or compliance with its
registration obligations, including, among other things, registration and
filing fees, fees and expenses incurred in connection with compliance with
securities or blue sky laws of the applicable states, fees and disbursements
of counsel and independent public accountants for the Company, but excluding
underwriting discounts and commissions, the fees and expenses of counsel to
the Selling Stockholders and transfer taxes, if any.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon by
Milbank, Tweed, Hadley & McCloy.

EXPERTS

The financial statements of the Company as of July 31, 1994 and August
1, 1993 and for the 52 weeks ended July 31, 1994 and August 1, 1993 and the
53 weeks ended August 2, 1992, have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP
("KPMG"), independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

On February 17, 1995, KPMG, the Company's independent accountants who
were previously engaged as the principal accountants to audit the Company's
financial statements, were dismissed. KPMG's report on the financial
statements of the Company for the past two years contained no adverse opinion
or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles, except that KPMG's report
on the 1994 financial statements of the Company contained a separate
paragraph stating that "Kash n' Karry Food Stores, Inc. has suffered
recurring losses from operations and has a net capital deficiency. As
discussed in note 1 to the financial statements, Kash n' Karry Food Stores,
Inc. filed a pre-packaged petition under Chapter 11 of the United

61<PAGE>
States Bankruptcy Code on November 9, 1994. These matters raise substantial
doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty." The Company's plan of reorganization was approved by
the bankruptcy court on December 12, 1994 and became effective on December
29, 1994.

The decision to change accountants was approved by the Board of
Directors of the Company. During the Company's two most recent fiscal years
and any subsequent interim period preceding the dismissal, there were no
disagreements between the Company and KPMG on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure which, if not resolved to the satisfaction of KPMG would have
caused KPMG to make reference to the subject matter of the disagreement in
connection with its report. Also, during the aforementioned period, there
occurred no "reportable event" within the meaning of Item 304(a)(1)(v) of
Regulation S-K of the Commission.

On February 17, 1995, the Company engaged Coopers & Lybrand L.L.P. as
the principal accountants to audit the Company's financial statements for the
fiscal year ending July 30, 1995. The Company did not consult with Coopers
& Lybrand, L.L.P. regarding accounting advice prior to its engagement.

62<PAGE>
INDEX TO FINANCIAL STATEMENTS

UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

Page

Condensed Balance Sheets as of January 29, 1995, and July 31, 1994 . . . . F- 3

Condensed Statements of Operations for the four weeks ended
January 29, 1995, the 22 weeks ended January 1, 1995,
and the 26 weeks ended January 30, 1994 . . . . . . . . . . . . . . . F- 5

Condensed Statements of Cash Flows for the four weeks ended
January 29, 1995, the 22 weeks ended January 1, 1995,
and the 26 weeks ended January 30, 1994 . . . . . . . . . . . . . . . F- 7

Notes to Condensed Financial Statements. . . . . . . . . . . . . . . . . . F- 9

AUDITED FINANCIAL STATEMENTS

Page

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . F-15

Balance Sheets as of July 31, 1994 and August 1, 1993. . . . . . . . . . . F-16

Statements of Operations for the fiscal years ended July 31, 1994,
August 1, 1993 and August 2, 1992 . . . . . . . . . . . . . . . . . . F-17

Statement of Stockholders' Deficit for the fiscal years ended July 31, 1994,
August 1, 1993 and August 2, 1992 . . . . . . . . . . . . . . . . . . F-18

Statements of Cash Flows for the fiscal years ended July 31, 1994,
August 1, 1993 and August 2, 1992 . . . . . . . . . . . . . . . . . . F-19

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . F-21

F-1<PAGE>

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

Page

Pro Forma Financial Information. . . . . . . . . . . . . . . . . . . . . . F-36

Unaudited Pro Forma Balance Sheet as of July 31, 1994. . . . . . . . . . . F-37

Notes to Unaudited Pro Forma Balance Sheet . . . . . . . . . . . . . . . . F-39

Unaudited Pro Forma Statement of Operations
for the fiscal year ended July 31, 1994 . . . . . . . . . . . . . . . F-40

Notes to Unaudited Pro Forma Statement of Operations . . . . . . . . . . . F-41

F-2<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)

ASSETS

Reorganized Predecessor
Company Company
------------ -----------
January 29, July 31,

1995 1994
------------ -----------
(Unaudited)
(Note 1)
Current assets:
Cash and cash equivalents $ 10,517 $ 6,852
Accounts receivable 6,701 8,084
Inventories 78,756 76,094
Prepaid expenses and other current assets 3,246 12,805
--------- ---------
Total current assets 99,220 103,835
Property and equipment, at cost, less
accumulated depreciation 143,813 160,491
Favorable lease interests, less accumulated
amortization of $192 and $13,543 29,762 12,312
Deferred financing costs, less accumulated
amortization of $182 and $22,572 4,043 12,630
Reorganization value in excess of amount allocable
to identifiable assets, less accumulated
amortization of $460 at January 29, 1995 102,059 --
Excess of cost over net assets acquired, less
accumulated amortization of $16,288 at
July 31, 1994 -- 96,758
Other assets 2,854 3,867
--------- ---------
Total assets $381,751 $389,893
========= =========

See accompanying notes to condensed financial statements.

F-3<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Reorganized Predecessor
Company Company
------------ -----------
January 29, July 31,

1995 1994
------------ -----------
(Unaudited)
(Note 1)
Current liabilities:
Current portion of long-term debt $ 12,764 $ 42,740
Accounts payable 39,883 34,908
Accrued payroll and benefits 9,023 5,579
Accrued interest 4,618 15,849
Taxes, other than income 4,052 6,056
Other accrued expenses 21,673 11,450
--------- ---------
Total current liabilities 92,013 116,582

Long-term debt, less current obligations 227,522 317,381
Other long-term liabilities 14,914 12,334
Old Series B Cumulative Preferred Stock of $.01 par
value and a stated value of $100 a share.
Authorized 50,000 shares; 38,750 shares
outstanding at July 31, 1994. -- 3,875
Old Series C Convertible Preferred Stock of
$.01 par value. Authorized 100,000 shares;
77,500 shares outstanding at July 31, 1994. -- 775

Stockholders' equity (deficit):
New Common Stock of $.01 par value.
Authorized 5,500,000 shares; 3,100,000
shares outstanding at January 29, 1995. 31 --
Old Common Stock of $.01 par value.
Authorized 4,000,000 shares; 2,819,589
shares outstanding at July 31, 1994. -- 28
Capital in excess of par value 46,464 77,695
Retained earnings (deficit) 807 (138,740)
Less cost of treasury stock - 2,437 shares
at July 31, 1994 -- (37)
--------- ---------
Total stockholders' equity (deficit) 47,302 (61,054)
--------- ---------
Total liabilities & stockholders' equity $381,751 $389,893
========= =========

See accompanying notes to condensed financial statements.

F-4<PAGE>
KASH N' KARRY FOOD STORES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
----------- --------------------------
Four Nine Thirteen
Weeks Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Sales $ 86,354 $186,535 $278,166
Cost of sales 68,940 149,070 221,706
--------- ----------- ----------
Gross profit 17,414 37,465 56,460
Selling, general and
administrative expenses 12,226 28,319 45,300
Depreciation and amortization 1,979 4,161 6,220
--------- --------- ----------
Operating income 3,209 4,985 4,940

Interest expense 2,402 3,159 11,372
--------- --------- ----------
Income (loss) before reorganization
items, income taxes, extra-
ordinary item and change in
accounting principle 807 1,826 (6,432)

Reorganization items -- (219) --
--------- --------- ----------
Income (loss) before income taxes,
extraordinary item and change
in accounting principle 807 1,607 (6,432)

Provision for income taxes -- -- --
--------- --------- ----------
Income (loss) before extra-
ordinary item and change in
accounting principle 807 1,607 (6,432)

Net income per common share (A)(B) $ 0.26
=========
(A) Based on a weighted average number of shares of common stock of 3,100,000
outstanding.
(B) Net income per common share is not meaningful prior to January 1, 1995
due to the significant change in the capital structure in connection with
the Restructuring.
See accompanying notes to condensed financial statements.
F-5<PAGE>
KASH N' KARRY FOOD STORES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
----------- --------------------------
Four Twenty-Two Twenty-Six
Weeks Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Sales $ 86,354 $426,681 $534,801
Cost of sales 68,940 340,802 425,915
--------- ----------- ----------
Gross profit 17,414 85,879 108,886
Selling, general and
administrative expenses 12,226 68,819 90,128
Depreciation and amortization 1,979 10,234 12,111
Store closing and other costs -- -- 11,016
--------- --------- ----------
Operating income (loss) 3,209 6,826 (4,369)

Interest expense 2,402 13,719 22,513
--------- --------- ----------
Income (loss) before reorganization
items, income taxes, extra-
ordinary item and change in
accounting principle 807 (6,893) (26,882)

Reorganization items -- (219) --
--------- --------- ----------
Income (loss) before income taxes,
extraordinary item and change
in accounting principle 807 (7,112) (26,882)

Provision for income taxes -- -- --
--------- --------- ----------
Income (loss) before extra-
ordinary item and change
in accounting principle 807 (7,112) (26,882)

Extraordinary item - gain on
debt discharge -- 70,166 --
Cumulative effect of change in
accounting principle -
postretirement medical benefits -- (2,000) --
--------- --------- ----------
Net income (loss) $ 807 $ 61,054 $ (26,882)
========= ========= ==========
Net income per common share (A)(B) $ 0.26
=========
(A) Based on a weighted average number of shares of common stock of 3,100,000
outstanding.
(B) Net income per common share is not meaningful prior to January 1, 1995
due to the significant change in the capital structure in connection with
the Restructuring.
See accompanying notes to condensed financial statements.
F-6<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

Reorganized Predecessor
Company Company
------------ -----------------------
Four Weeks Twenty-Two Twenty-Six
Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------

Net cash flow from operating activities:
Net income (loss) $ 807 $61,054 $(26,882)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization,
excluding deferred financing costs 1,979 11,234 12,111
Store closing and other costs -- -- 11,016
Amortization of deferred financing costs 182 1,152 1,549
Reorganization expense -- 4,329 --
Adjustment of accounts to fair value -- (4,110) --
Change in accounting principle -- 2,000 --
Write-off of transaction costs -- 12,989 --
Gain on discharge of debt -- (70,166) --
(Increase) decrease in assets:
Accounts receivable (939) 2,322 660
Inventories 8,358 (5,917) 9,433
Prepaid expenses and other assets (149) (270) (454)
Increase (decrease) in liabilities:
Accounts payable 3,175 1,800 1,652
Accrued expenses and other
liabilities (1,072) (4,012) 2,697
--------- -------- ---------

Net cash provided (used) by
operating activities 12,341 12,405 11,782
---------- -------- ---------

Cash used by investing activities:
Additions to property and equipment (162) (665) (6,194)
Leased/financed asset additions -- -- (4,412)
Proceeds from sale of property and
equipment -- -- 359
---------- -------- ---------

Net cash used by investing
activities (162) (665) (10,247)
---------- -------- ---------

See accompanying notes to condensed financial statements.
F-7<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(Continued)
(In Thousands)
(Unaudited)

Cash provided (used) by financing activities:
Borrowings under revolving loan facility $ 4,200 $ 800 $ 15,700
Additions to obligations under
capital leases and notes payable -- -- 799
Repayments on revolving loan facility (6,700) (18,000) (9,100)
Repayments on term loan facility -- (3,098) (2,925)
Repayments of other long-term liabilities (151) (2,235) (2,642)
Sale of Common Stock -- 10,000 --
Other financing activities -- (5,070) (512)
--------- --------- ----------

Net cash provided (used) by
financing activities (2,651) (17,603) 1,320
--------- --------- ----------

Net increase (decrease) in cash
and cash equivalents 9,528 (5,863) 2,855
Cash and cash equivalents at beginning
of period 989 6,852 2,145
--------- --------- ----------

Cash and cash equivalents at end of period $ 10,517 $ 989 $ 5,000
========= ========= ==========

See accompanying notes to condensed financial statements.

F-8<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)

1. On September 3, 1994, the Company began to solicit acceptances of all
impaired parties of a restructuring of the Company which would be implemented
through the consummation of a "prepackaged" plan of reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Restructuring"). As a
result of this solicitation, the voting requirements prescribed by Section
1126 of the Bankruptcy Code were satisfied, and on November 9, 1994 (the
"Petition Date") the Company filed with the Bankruptcy Court a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. On
December 12, 1994, the Bankruptcy Court confirmed the plan of reorganization,
and the Company emerged from bankruptcy on December 29, 1994 (the "Effective
Date"). During the pendency of the bankruptcy case, the Company, with the
Bankruptcy Court's approval, operated its business in the ordinary course,
and paid all pre-petition and post-petition claims of the Company's general
unsecured creditors, trade creditors and employees in full. In connection
with the Restructuring:

(i) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes was exchanged for (a) new Senior Floating Rate Notes due February
1, 2003 (the "New Senior Floating Rate Notes") in an original principal
amount equal to $1,000 plus 100% of the accrued interest under the Old Senior
Floating Rate Notes from and including February 3, 1994, through but not
including the Petition Date, or, at such holder's election, (b) new 11.5%
Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed Rate
Notes") in the same original principal amount, or, at such holder's election,
(c) an amount of New Senior Floating Rate Notes and an amount of New Senior
Fixed Rate Notes equal, in the aggregate, to 100% of such claim;

(ii) Each $1,000 principal amount of the Company's Old Senior Fixed
Rate Notes was exchanged for (a) New Senior Floating Rate Notes in an
original principal amount equal to $1,000 plus 100% of the accrued interest
under the Old Senior Fixed Rate Notes from and including February 2, 1994,
through but not including the Petition Date, or, at such holder's election,
(b) New Senior Fixed Rate Notes in the same original principal amount, or, at
such holder's election, (c) an amount of New Senior Floating Rate Notes and
an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim;

(iii) the Old Subordinated Debentures were exchanged for newly-issued
common stock of the Company representing 85 percent of the common stock
outstanding on the Effective Date;

(iv) Green Equity Investors, L.P. invested $10,000 cash in exchange for
newly-issued common stock of the Company representing 15 percent of the
common stock outstanding on the Effective Date;

(v) the Company entered into a new credit agreement with The CIT
Group/Business Credit, Inc. as Administrative Agent, and the lenders under
its old bank credit agreement; and

F-9<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)

(vi) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company was extinguished.

2. The condensed financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q and do not include all of
the information and note disclosures required by generally accepted
accounting principles. These statements should be read in conjunction with
the fiscal 1994 Form 10-K filed by the Company. The accompanying condensed
financial statements have not been audited by independent accountants in
accordance with generally accepted auditing standards, but in the opinion of
management the condensed financial statements for the period ended January
30, 1994 includes all adjustments, consisting only of normal recurring
adjustments, necessary to summarize fairly the Company's financial position
and results of operations.

The condensed financial statements as of and for the period ended
January 29, 1995 reflect the Company's emergence from Chapter 11 and were
prepared according to the principles of fresh start reporting contained in
American Institute of Certified Public Accountants' Statement of Position
90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). Operations during the period from the Effective Date
through January 1, 1995 had no significant impact on the emergence
transactions and as a result have not been separately identified. As a
result of the implementation of fresh start accounting, the Company's
condensed financial statements are not comparable to the Company's condensed
financial statements of prior periods. Results for the periods ended January
29, 1995 or January 1, 1995 are not necessarily indicative of the results for
the full year.

The total reorganization value assigned to the Company's assets was
estimated by calculating projected cash flows before debt service
requirements discounted back to present value using a discount rate of 13.3%
(representing the estimated weighted cost of capital), as well as by
analyzing market cash flow multiples applied to the Company's adjusted
12-month trailing cash flows. After extensive negotiations between
independent investment banking firms representing the Company and an ad hoc
committee of bondholders, the reorganization value was agreed to by the
parties and confirmed by the Bankruptcy Court. The excess of the
reorganization value over the value of the identifiable assets is reported as
"Reorganization Value in Excess of Amounts Allocable to Identifiable Assets"
and is being amortized over twenty years. Under the principles of fresh
start accounting, the Company's total assets were recorded at this assumed
reorganization value, with the reorganization value allocated to identifiable
tangible and intangible assets on the basis of their estimated fair value.
In addition, the Company's accumulated deficit was eliminated.

The effect of the Restructuring and the implementation of fresh start
accounting on the Company's condensed balance sheet as of January 1, 1995 was
as follows: F-10
<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
Fresh
Start
Pre-Fresh Balance
Start Balance Adjustments Sheet
Sheet January of Fair Value January
1, 1995 Restructuring Adjustment 1, 1995
(A) (B)
------------- ------------- ---------- --------
Cash and cash equivalents $ 9,166 $ (8,177) $ -- $ 989
Accounts receivable 5,762 -- -- 5,762
Inventories 82,011 -- 5,104 87,115
Prepaid expenses and other
current assets 3,088 -- -- 3,088
--------- --------- --------- --------
Total current assets 100,027 (8,177) 5,104 96,954

Property and equipment, net 162,754 -- (17,775) 144,979
Favorable lease interests, net 11,673 -- 18,280 29,953
Deferred financing costs 17,769 (7,456) (6,088) 4,225
Reorganization value in
excess of amount alloc-
able to identifiable
assets -- -- 102,519 102,519
Excess of cost over net
assets acquired 95,560 -- (95,560) --
Other assets 3,790 -- (928) 2,862
--------- --------- --------- --------
Total assets $391,573 $(15,633) $ 5,552 $381,492
========= ========== ========= ========
Current liabilities, excluding
current portion of long-
term debt $ 82,983 $(12,617) $ 6,779 $ 77,145
Long-term debt, including
current obligations 366,231 (119,486) (3,959) 242,786
Other long-term liabilities 6,226 -- 8,840 15,066
Redeemable Preferred Stock 4,650 (4,650) -- --
Stockholders' equity (deficit) (68,517) 121,120 (6,108) 46,495
--------- --------- --------- --------
Total liabilities
and stockholders'
equity $391,573 $(15,633) $ 5,552 $381,492
========= ========== ========= ========

(A) To record the transactions applicable to the Restructuring as outlined
in footnote 1 and eliminate the deficit in accumulated deficit.
(B) To record the adjustments to state assets and liabilities at fair value,
and to record the cumulative effect of adopting SFAS No. 106 as of the
Effective Date.

3. Inventories consist of merchandise held for resale and are stated at the
lower of cost or market; cost is determined using average cost, which
approximates the first-in, first-out (FIFO) method.

F-11<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)

4. The Company had a policy of classifying capital expenditures to be
refinanced within one year as prepaid expenses and other current assets.
These amounts have been classified as property and equipment at January 29,
1995. At July 31, 1994, prepaid expenses and other current assets included
$9,987 of expenditures for construction in progress expected to be financed
within one year.

5. Long-term debt consists of the following:

January 29, July 31,
1995 1994
----------- --------

New term loan and revolving
credit facilities (A) $ 47,000 $ --
Old bank term and revolving
credit facilities (A) -- 59,629
New Senior Floating
Rate Notes (B) 22,953 --
New Senior Fixed Rate
Notes (C) 121,162 --
Old Senior Floating
Rate Notes (B) -- 85,000
Old Senior Fixed
Rate Notes (C) -- 50,000
Subordinated Debentures -- 105,000
Mortgages payable 33,555 34,368
Capital lease obligations 8,410 13,877
Other 7,206 12,247
--------- ---------
Long-term debt including
current portion 240,286 360,121

Less current portion (12,764) (42,740)
--------- ---------
Long-term debt $227,522 $317,381
========= =========

(A) In connection with the Restructuring, the Company entered into a new
term loan and revolving credit agreement (the "New Credit Agreement") on
December 29, 1994. At January 29, 1995, the Company's New Credit Agreement
provides for borrowings of up to $35,000 under a term loan facility (with
quarterly principal repayments of $1,750 and a $14,000 repayment due when the
facility terminates on December 29, 1997) and a $50,000 revolving credit
facility with a $25,000 sublimit for letters of credit. At January 29, 1995,
the Company had $12,000 in borrowings under the working capital line, and had
$17,300 of letters of credit issued against the revolving credit facility.
Amounts outstanding under the term facility bear interest (11.0% at January
29, 1995) equal to the prime rate (as defined) plus 250 basis points.
Amounts outstanding under the revolving credit facility bear interest (9.50%
at January 29, 1995) equal to the prime rate plus 100 basis points.

F-12<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)

(B) The New Senior Floating Rate Notes mature on February 1, 2003, and bear
interest (7.31% at January 29, 1995) payable semiannually, at a rate equal to
six-month LIBOR (as defined in the New Senior Floating Rate Note Indenture)
plus 200 basis points. The New Senior Floating Rate Notes are redeemable in
whole or in part, at the option of the Company, on not less than 30 nor more
than 60 days' prior notice in amounts of $1,000 or an integral multiple
thereof, at 100% of the principal amount and unpaid interest, if any, to the
redemption date. Through August 1, 1995, all interest on the New Senior
Floating Rate Notes may, at the option of the Company, be paid by issuing in
lieu of cash additional New Senior Floating Rate Notes in an aggregate
principal amount equal to the amount of interest due. The Old Senior
Floating Rate Notes bore interest (5.88% at July 31, 1994) payable
semiannually, at a rate equal to six-month LIBOR plus 250 basis points.

(C) The New Senior Fixed Rate Notes mature on February 1, 2003, and bear
interest at 11.5% per annum, payable semiannually. The New Senior Fixed Rate
Notes are redeemable in whole or in part, at the option of the Company, on
not less than 30 nor more than 60 days' prior notice in amounts of $1,000 or
an integral multiple thereof, at 100% of the principal amount and unpaid
interest, if any, to the redemption date. Through February 1, 1996, all
interest on the New Senior Fixed Rate Notes may, at the option of the
Company, be paid by issuing in lieu of cash additional New Senior Fixed Rate
Notes in an aggregate principal amount equal to the amount of interest due.
The Old Senior Fixed Rate Notes bore interest, payable semiannually, at an
annual rate of 12.375%.

6. Reorganization items included in the condensed statements of operations
consist of restructuring costs, adjustments to fair value, professional fees
and other expenses.

7. The Company has a retiree medical plan under which medical coverage is
available to current retirees and those active employees who, on August 1,
1993, had attained age 65 with at least 15 years of service. In accordance
with SOP 90-7, which the Company adopted on the Effective Date of the
Restructuring, the provisions of Financial Accounting Standards Board
Statement 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" were also adopted as of that date. The following table sets
forth the projected actuarial present value of unfunded postretirement
benefit obligations for the plan at January 29, 1995:

Accumulated postretirement
benefit obligation:

Retirees $1,915
Fully eligible active
plan participants 85
-------
Accrued postretirement
benefit obligation $2,000
=======
F-13<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0%.

8. During the first quarter of fiscal 1994, the Company recorded a
non-recurring charge of $11,016 which reflects expenses associated with a
program of closing twelve underperforming stores and expensing costs
associated with unsuccessful financing activities.

F-14<PAGE>
Independent Auditors' Report

The Board of Directors
Kash n' Karry Food Stores, Inc.:

We have audited the accompanying balance sheets of Kash n' Karry
Food Stores, Inc. as of July 31, 1994 and August 1, 1993, and the
related statements of operations, stockholders' deficit, and cash
flows for the fifty-two weeks ended July 31, 1994 and August 1,
1993, and fifty-three weeks ended August 2, 1992. 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 audits.

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, the financial statements referred to above present
fairly, in all material respects, the financial position of Kash n'
Karry Food Stores, Inc. at July 31, 1994 and August 1, 1993, and
the results of its operations and its cash flows for the fifty-two
weeks ended July 31, 1994 and August 1, 1993, and fifty-three weeks
ended August 2, 1992, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming
that Kash n' Karry Food Stores, Inc. will continue as a going
concern. However, Kash n' Karry Food Stores, Inc. has suffered
recurring losses from operations and has a net capital deficiency.
As discussed in Note 1 to the financial statements, Kash n' Karry
Food Stores, Inc. filed a pre-packaged petition under Chapter 11 of
the United States Bankruptcy Code on November 9, 1994 and these
matters raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ KPMG Peat Marwick LLP
- -----------------------------------
Tampa, Florida
September 16, 1994, except with respect to
Notes 1 and 5, which are as of November 9, 1994

F-15<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)

ASSETS
July 31, August 1,
1994 1993
-------- ---------
Current assets:
Cash and cash equivalents $ 6,852 $ 2,145
Accounts receivable 8,084 10,888
Inventories 76,094 95,385
Prepaid expenses and other current assets 12,805 13,151
-------- --------
Total current assets 103,835 121,569
Property and equipment, at cost, net 160,491 164,937
Favorable lease interests, less accumulated
amortization of $13,543 and $7,506 12,312 18,349
Deferred financing costs, less accumulated
amortization of $22,572 and $19,622 12,630 15,153
Excess of cost over net assets acquired, less
accumulated amortization of $16,288 and $13,457 96,758 99,589
Other assets 3,867 3,611
-------- --------
Total assets $389,893 $423,208
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Current portion of long-term debt $ 42,740 $ 22,628
Accounts payable 34,908 42,561
Accrued expenses 38,934 37,243
-------- --------
Total current liabilities 116,582 102,432

Long-term debt, less current portion 317,381 329,262
Other long-term liabilities 12,334 10,023
Series B Cumulative Preferred Stock of $.01
par value and a stated value of $100 a share.
Authorized 50,000 shares; 38,750 shares
outstanding. 3,875 3,875
Series C Convertible Preferred Stock of $.01
par value. Authorized 100,000 shares; 77,500
shares outstanding. 775 775
Stockholders' deficit:
Common Stock of $.01 par value. Authorized
4,000,000 and 3,200,000 shares; 2,819,589
shares outstanding. 28 28
Capital in excess of par value 77,695 77,695
Accumulated deficit (138,740) (100,845)
Less cost of Treasury Stock - 2,437 shares (37) (37)
-------- --------
Total stockholders' deficit (61,054) (23,159)
-------- --------
Total liabilities and stockholders' deficit $389,893 $423,208
======== ========
See accompanying notes to financial statements.
F-16<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF OPERATIONS
(In Thousands)

Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
------------- -------------- --------------

Sales $1,065,165 $1,086,125 $1,071,038

Cost of sales 845,597 856,156 848,441
---------- ---------- ----------

Gross profit 219,568 229,969 222,597

Selling, general and administrative
expenses 176,945 175,177 164,897
Depreciation and amortization 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
---------- ---------- ----------
Operating income 7,495 31,337 37,568

Interest expense (net of interest
income of $4, $1 and $25) 45,390 43,257 44,869
---------- ---------- ----------
Net loss (37,895) (11,920) (7,301)
Undeclared dividends on
Preferred Stock 464 464 474
---------- ---------- ----------

Loss attributable to
Common Stock $ (38,359) $ (12,384) $ (7,775)
========== ========== ==========

See accompanying notes to financial statements.

F-17<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
Fiscal Years Ended July 31, 1994,
August 1, 1993 and August 2, 1992
(Dollar Amounts In Thousands)

Capital
in Excess
Common of Par Accumulated Treasury
Stock Value Deficit Stock Total
------ --------- ----------- -------- ---------

Balance at July 28, 1991 $ 9 $ 8,994 $(81,624) $ (19) $(72,640)

Purchase of 250 shares
for Treasury -- -- -- (3) (3)

Reclassification of Series
A Preferred Stock to -- 40,000 -- (11) 39,989
Common Stock

Conversion of 11,250 shares
of Series B Preferred
Stock and 22,500 shares
of Series C Preferred
Stock to 22,500 shares
of Common Stock -- 1,350 -- -- 1,350

Sale of 1,859,531 shares
of Common Stock for cash 19 27,347 -- -- 27,366

Loss for period -- -- (7,301) -- (7,301)
---- ------- --------- ----- --------

Balance at August 2, 1992 $ 28 $77,691 $(88,925) $ (33) $(11,239)

Purchase of 2,713 shares
for Treasury -- -- -- (40) (40)

Sale of 2,436 shares
of Treasury Stock -- 4 -- 36 40

Loss for period -- -- (11,920) -- (11,920)
---- ------- --------- ----- --------

Balance at August 1, 1993 $ 28 $77,695 $(100,845) $ (37) $(23,159)

Loss for period -- -- (37,895) -- $(37,895)
---- ------- --------- ----- --------

Balance at July 31, 1994 $ 28 $77,695 $(138,740) $ (37) $(61,054)
==== ======= ========= ===== ========

See accompanying notes to financial statements.

F-18<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)

Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1,1993 August 2, 1992
------------- ------------- --------------

Net cash flows from
operating activities:
Net loss $ (37,895) $ (11,920) $ (7,301)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and amortization,
excluding deferred
financing costs 24,112 23,455 20,132
Store closing and other costs 11,016 -- --
Amortization of deferred
financing costs 2,950 2,850 2,932
Senior Subordinated Extendible
Reset Notes ("Reset Notes")
issued in lieu of cash interest -- -- 2,222
(Increase) decrease in assets:
Accounts receivable 2,804 (3,778) (2,090)
Inventories 19,291 (4,159) 1,225
Prepaid expenses and
other assets (278) (5,426) (842)
Increase (decrease) in liabilities:
Accounts payable (7,653) 3,722 3,283
Accrued expenses and
other liabilities (1,565) (3,684) 822
--------- --------- --------
Net cash provided by
operating activities 12,782 1,060 20,383
--------- --------- --------

Cash provided (used) by investing
activities:
Additions to property and equipment (10,942) (13,103) (11,660)
Leased asset additions (4,529) (24,600) (3,725)
Sale of property and equipment 504 91 570
--------- --------- --------
Net cash used by investing
activities (14,967) (37,612) (14,815)
--------- --------- --------

F-19<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
(In Thousands)

Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1,1993 August 2, 1992
------------- ------------- --------------

Cash provided (used) by financing
activities:
Borrowings under term and
revolving loan facilities 17,700 38,100 16,000
Additions to obligations under
capital leases and notes payable 5,230 14,867 3,725
Sale of Senior Notes -- -- 49,750
Sale of Common Stock (net of
Treasury Stock transactions
and transaction costs) -- -- 27,362
Repurchase of Reset Notes -- -- (32,426)
Repayments of term and revolving
loan facilities (5,488) (12,881) (62,497)
Repayments of other long-term
liabilities (9,212) (4,415) (3,632)
Financing costs (1,338) (1,453) (3,160)
--------- --------- ---------
Net cash provided (used)
by financing activities 6,892 34,218 (4,878)
--------- --------- ---------

Net increase (decrease) in cash and
cash equivalents 4,707 (2,334) 690
Cash and cash equivalents at
beginning of year 2,145 4,479 3,789
--------- --------- ---------

Cash and cash equivalents at
the end of year $ 6,852 $ 2,145 $ 4,479
========= ========= =========

See accompanying notes to financial statements.

F-20<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(1) Subsequent Event.

On September 3, 1994, the Company began to solicit acceptances of all
impaired parties of a restructuring of the Company which would be implemented
through the consummation of a "prepackaged" plan of reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Plan"). As a result of
such solicitation, the voting requirements prescribed by Section 1126 of the
Bankruptcy Code were satisfied, and the Company filed with the Bankruptcy
Court a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code, and is seeking, as promptly as is practicable, confirmation
by the Bankruptcy Court of the Plan. During the pendency of the bankruptcy
case, the Company intends to operate its business in the ordinary course, and
to pay all pre-petition claims of the Company's secured lenders, general
unsecured creditors, trade creditors and employees in full. The Plan also
provides that:

(i) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes would be exchanged for (a) new Senior Floating Rate Notes due
February 1, 2003 (the "New Senior Floating Rate Notes") in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Floating Rate Notes from and including February 3, 1994, through
but not including the petition date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed
Rate Notes") in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of
New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim.

(ii) Each $1,000 principal amount of the Company's Old Senior Fixed
Rate Notes would be exchanged for (a) New Senior Floating Rate Notes in an
original principal amount equal to $1,000 plus 100% of the accrued interest
under the Old Senior Fixed Rate Notes from and including February 2, 1994,
through but not including the petition date, or, at such holder's election,
(b) New Senior Fixed Rate Notes in the same original principal amount, or, at
such holder's election, (c) an amount of New Senior Floating Rate Notes and
an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim.

(iii) the Old Subordinated Debentures would be exchanged for
newly-issued common stock of the Company representing 85 percent of the
common stock to be outstanding on the effective date of the Plan (the
"Effective Date");

(iv) Green Equity Investors, L.P., would invest $10 million cash in
exchange for newly-issued common stock of the Company representing 15 percent
of the common stock to be outstanding on the Effective Date; and

(v) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company would be extinguished.

See also Footnote 5 - "Long-Term Debt," Footnote 6 - "Redeemable Preferred
Stock," Footnote 7 - "Common Stock," Footnote 8 - "Stock Option Plans," and
Footnote 10 - "Income Taxes."
F-21<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(2) Summary of Significant Accounting Policies

Fiscal Year End. The Company follows a 52/53 week fiscal year ending on
the Sunday nearest July 31. The fiscal year ended August 2, 1992 included 53
weeks of operations.

Inventories. Inventories consist of merchandise held for resale and are
stated at the lower of cost or market; cost is determined using average cost,
which approximates the first-in, first-out (FIFO) method.

Prepaid Expenses and Other Current Assets. Prepaid expenses and other
current assets include expenditures for construction in progress expected to
be financed ($9,987 at July 31, 1994 and $9,246 at August 1, 1993) and
prepaid expenses to be recognized over the next twelve months.

Depreciation, Amortization, and Maintenance and Repairs. Depreciation
is provided principally using the composite method based on the estimated
useful lives of the respective asset groups. Amortization of leasehold
improvements is based on the estimated useful lives or the remaining lease
terms, whichever is shorter. Property under capital leases consists of
buildings and fixtures and equipment. Interest costs of property under
development are capitalized during the development period. Capitalized
amounts were $477, $804, and $355 for the fiscal years ended July 31, 1994,
August 1, 1993, and August 2, 1992, respectively. The approximate annual
rates used to compute depreciation and amortization are:
Rate
----
Buildings and improvements 5%
Fixtures and equipment 10%
Transportation equipment 25%
Leasehold improvements 8%

Maintenance and repairs are charged to expense as incurred. The Company
capitalizes expenditures for renewals and betterments.

Favorable Lease Interests. Favorable lease interests represent the
present value of the excess of current market rental rates over rents that
existed under the Company's operating leases of store locations as of October
12, 1988. Such costs are amortized on the straight-line method over the
average life of the favorable leases, which was approximately 20 years.

Deferred Financing Costs. Deferred financing costs represent fees and
expenses related to various financing activities and are amortized on a
straight-line basis over the life of the related debt and classified as
interest expense.

Excess of Cost Over Net Assets Acquired. Excess of cost over net assets
acquired represents the excess of amounts paid over the fair value of net
assets acquired, and is being amortized over forty years. As discussed in
Footnote 1, the Company filed a voluntary petition for reorganization under
Chapter 11 of the Bankruptcy Code. Management of the Company believes that,
based on the proposed restructuring, the excess of cost over net assets
acquired has not been permanently impaired, and that an appropriate valuation
of such amounts is reflected in the accompanying financial statements as of
July 31, 1994 and August 1, 1993. F-22 <PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

Costs of Opening and Closing Stores. Preopening costs of new stores are
charged to expense in the year the store opens. These costs are primarily
labor to stock the store, preopening advertising, store supplies and other
expendable items. When operations are discontinued and a store is closed,
the remaining investment, net of realizable value, is charged against
earnings, and, for leased stores, a provision is made for the remaining lease
liability, net of expected sublease income.
Store Closing and Other Costs. During the first quarter of fiscal 1994
the Company recorded a non-recurring charge of $11,016. This charge included
$1,900 of costs associated with unsuccessful financing activities, $4,159 of
favorable lease interests written off in connection with the closing of
twelve underperforming stores, $4,000 representing an adjustment to the
expected lease liability on closed stores, net of sublease income, and $957
of other store closing and related expenses.

Income Taxes. The Company is in a loss position for income tax
purposes, and, consequently, no income taxes have been provided. The
Company adopted Statement of Financial Accounting Standards No. 109 ("SFAS
109") as of August 2, 1993. No cumulative effect of this change in
accounting was required as of August 2, 1993 and prior years' financial
statements have not been restated to apply the provisions of SFAS 109. The
effect on prior years' financial statements of retroactively implementing
SFAS 109 would be immaterial.
Interest Rate Hedge Agreements. The Company enters into interest rate
hedging agreements which involve the exchange of fixed and floating rate
interest payments periodically over the life of such agreements without the
exchange of the underlying principal amounts. The differential to be paid or
received is accrued as interest rates change and is recognized over the life
of the agreements as an adjustment to interest expense.

Cash and Cash Equivalents. The Company considers all highly liquid
investment instruments with a maturity of three months or less when purchased
to be cash equivalents. There were no cash equivalents at July 31, 1994 or
August 1, 1993.

Cash interest paid (excluding financing costs) was $41,545, $41,675, and
$39,202, for the fiscal years ended July 31, 1994, August 1, 1993, and August
2, 1992, respectively.

F-23<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(3) Property and Equipment

Property and equipment is summarized as follows: July 31, August 1,
1994 1993
-------- ---------

Land $ 19,543 $ 18,713
Buildings and improvements 63,517 56,421
Fixtures and equipment 100,717 104,686
Transportation equipment 2,593 2,595
Leasehold improvements 28,402 25,957
Construction in progress 4,115 4,275
-------- --------
218,887 212,647
Less accumulated depreciation (70,196) (61,831)
-------- --------
148,691 150,816
Property under capital leases
(less accumulated amortization
of $11,154 and $8,032) 11,800 14,121
-------- --------
$160,491 $164,937
======== ========

(4) Accrued Expenses

Accrued expenses consist of the following: July 31, August 1,
1994 1993
-------- ---------

Accrued payroll and benefits $ 5,579 $ 4,492
Accrued interest 15,849 15,080
Taxes, other than income 6,056 5,708
Accrued insurance reserves 4,886 5,684
Other accrued expenses 6,564 6,279
-------- --------
$ 38,934 $ 37,243
======== ========

F-24<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(5) Long-Term Debt

Long-term debt consists of the following: July 31, August 1,
1994 1993
-------- ---------
Bank term and revolving loan facilities (a) $ 59,629 $ 47,417
Senior Floating Rate Notes (b) 85,000 85,000
Senior Fixed Rate Notes (c) 50,000 50,000
Subordinated Debentures (d) 105,000 105,000
Mortgages payable, bearing interest at rates
from 7.50% to 10.35%, in equal monthly
installments of $355, with maturities
from 1999 through 2003 (e) 34,368 34,772
Capital lease obligations 13,877 16,999
Other 12,247 12,702
-------- --------
Long-term debt including current portion 360,121 351,890
Less current portion (f) (42,740) (22,628)
-------- --------
Long-term debt $317,381 $329,262
======== ========
(a) At July 31, 1994, the Bank Credit Agreement (as amended and
restated) provides for borrowings of up to $17,229 under a term loan facility
(with principal repayments varying from $1,463 to $4,409 per quarter until
the Bank Credit Agreement terminates in April 1996), and a revolving credit
facility with individual sublimits of $30,000 for working capital, $25,000
for letters of credit, and $13,700 for capital improvement loans, with a
maximum of $60,000 outstanding under the revolving credit facility at any
time. At July 31, 1994, the Company had $28,700 in borrowings under the
working capital line, $13,700 in borrowings under the capital improvement
line, and had $16,358 of letters of credit issued against the revolving
credit facility. On August 1, 1994, the outstanding balance of capital
improvement loans converted into a term loan amortizing to maturity in April
1996 (with principal repayments varying from $1,713 to $2,283 per quarter)
and the maximum borrowings under the revolving credit facility was reduced to
$50,000.

Amounts outstanding under the Bank Credit Agreement bear interest
(8.36% at July 31, 1994) equal to the bank's prime rate plus 1.0%. Prior to
December 15, 1993, amounts outstanding under the Bank Credit Agreement bore
interest (6.27% at August 1, 1993) equal to, at the Company's option, (1) the
bank's prime rate plus 1.0%, (2) the certificate of deposit rate plus 2.25%
or (3) the Eurodollar rate plus 2.0%.

(b) The Senior Floating Rate Notes mature on August 2, 1996, and bear
interest (5.88% at July 31, 1994 and August 1, 1993) payable semiannually, at
a rate equal to six-month LIBOR (as defined in the Senior Floating Rate Note
Indenture) plus 250 basis points. The Senior Floating Rate Notes are
redeemable in whole or in part (subject to a minimum redemption of $9,000),
at the option of the Company, on any interest payment date at a redemption
price equal to 101% of the principal amount with accrued interest to the
redemption date.

F-25<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(c) The Senior Fixed Rate Notes mature on February 1, 1999, and bear
interest at 12.375% per annum, payable semiannually. The Senior Fixed Rate
Notes will be subject to redemption, otherwise than through operation of the
sinking fund, at any time on and after February 1, 1996 or from time to time
thereafter, at the option of the Company, as a whole or in part, on not less
than 30 nor more than 60 days notice, at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning February 1, of the years indicated:

Redemption
Year Price
---- ----------
1996 104.125%
1997 102.000%
1998 100.000%

and thereafter at 100% of the principal amount, together in the case of any
such redemption with accrued interest to the redemption date. The Senior
Fixed Rate Notes are subject to redemption on February 1, 1998 through the
operation of a sinking fund, at a redemption price equal to the principal
amount and accrued interest at the redemption date. The sinking fund
provides for the redemption in such year of $25,000 aggregate principal
amount of the Senior Fixed Rate Notes, calculated to retire 50% of the notes
prior to maturity. Senior Fixed Rate Notes acquired or redeemed by the
Company (other than through the operation of the sinking fund) may be
credited against sinking fund requirements. The Senior Fixed Rate Notes are
also subject to mandatory redemption upon a change in control of the Company
(as defined in the Senior Fixed Rate Note Indenture).

(d) The Subordinated Debentures will mature on February 1, 2001, and
bear interest, payable semiannually, at the rate of 14% per annum. The
Subordinated Debentures are redeemable, in whole or in part, at the option of
the Company, at any time and from time to time on and after February 1, 1994
at the following redemption prices together with accrued interest to the date
of redemption:
Year Redemption Price
---- ----------------
1994 106.22%
1995 104.67%
1996 103.11%
1997 101.56%
1998 100.00%

Mandatory sinking fund payments on the Subordinated Debentures, commencing
February 1, 1999, are calculated to retire 50% of the original principal
amount prior to maturity.

(e) In September 1989, the Company completed a $17,000 mortgage
financing of its warehouse, distribution, and office facility; in November
1989, seven fee-owned store properties were mortgaged for $13,200; and in
January 1990, an additional fee-owned store property was mortgaged for
$2,000. The net proceeds of these transactions were used to reduce existing
bank debt. Final payments of $12,529 and $13,895 are due October 1999 and
November 1999, respectively, on these mortgages.
F-26<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(f) Approximate principal payments for the next five fiscal years are:

Senior Capital
Year Ending Term Loans Notes Mortgages Leases Other Total*
- ----------- ---------- ------- --------- ------- ------ -------
1995 $11,504 $ -- $ 1,260 $4,114 $2,162 $19,040
1996 19,425 -- 960 4,357 949 25,691
1997 -- 85,000 1,057 2,694 752 89,503
1998 -- 25,000 1,163 734 640 27,537
1999 -- 25,000 1,282 370 540 27,192

* Does not include $28,700 outstanding under the working capital line at
July 31, 1994. The revolving credit facility under the Bank Credit Agreement
requires the Company to pay down its outstanding working capital borrowings
for a 30 day period in each fiscal year to an average daily balance not to
exceed $5,000 with all such borrowings required to be repaid prior to
termination of the Bank Credit Agreement in April 1996. Therefore, the
Company classifies any outstanding balance in excess of $5,000 as current
portion of long-term debt. In August 1994, the outstanding balance of
capital improvement loans of $13,700 converted into a term loan amortizing to
maturity in April 1996, and these amounts are included as term loans in the
table above.
The Bank Credit Agreement, which is secured by a pledge of substantially
all assets of the Company, requires the Company to maintain a minimum net
worth and to satisfy certain other financial ratios, and provides for certain
restrictions on nonstock distributions and certain other restrictions. The
Senior Floating Rate Notes, the Senior Fixed Rate Notes, the Subordinated
Debentures, and certain other of the Company's indebtedness also contain
compliance covenants that are less restrictive than the covenants under the
Bank Credit Agreement. Due to the non-recurring charges incurred during the
first quarter as well as its operating performance, the Company breached
several financial covenants under its Bank Credit Agreement for each of the
reporting periods during the fiscal year ended July 31, 1994. The Company
has received all necessary waivers from the banks through the petition date
discussed in Note 1. Additionally, the Company has not paid $2,511, $3,094,
and $7,350 in interest due on the Senior Floating Rate Notes, the Senior
Fixed Rate Notes, and the Subordinated Debentures, respectively. These
amounts have been accrued on the accompanying financial statements, and as
provided in the plan of reorganization discussed in Footnote 1, all interest
on the Senior Floating Rate Notes and the Senior Fixed Rate Notes which is
accrued and unpaid as of the date the Company filed its voluntary petition
with the Bankruptcy Court shall be capitalized into New Senior Floating Rate
Notes or New Senior Fixed Rate Notes and all interest which is accrued and
unpaid on the Subordinated Debentures will be converted into equity. Given
the automatic stay provisions of the Chapter 11 filing discussed in Note 1
the creditors discussed above are not able to declare these obligations in
default and currently due. Therefore, certain portions of these obligations
have been classified as long-term debt in the July 31, 1994 balance sheet.

The Company has entered into a series of interest rate hedging
transactions to reduce its exposure to fluctuations in short-term interest

F-27<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

rates on the majority of its floating rate indebtedness. Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
107 (SFAS 107), "Disclosures about Fair Value of Financial Instruments",
requires disclosure of estimated fair values of financial instruments, whether
recognized or not in the balance sheets, for which it is practical to
estimate such value. In calculating the fair value of each material class of
financial instrument, the value is estimated by the Company to be the current
carrying value adjusted to estimate the cost to liquidate the financial
instruments. The Company does not intend to dispose of a significant portion
of its financial instruments and thus any aggregate unrealized gains and
losses should not be interpreted as a forecast of future earnings or cash
flows. The Company estimates the cost to liquidate its interest rate hedging
agreements to be approximately $2,600 at July 31, 1994. Carrying value is
considered a reasonable estimate of the fair value of the remainder of the
Company's financial instruments. Fair value estimates do not include the
value of nonfinancial instruments, such as fixed assets, the value of
customer relationships and various other factors. As a result, these fair
values are not comprehensive and, therefore, do not reflect the underlying
value of the Company.

(6) Redeemable Preferred Stock

The Series B Preferred Stock shareholders are entitled to receive, when,
as, and if declared by the Board of Directors of the Company, cash dividends
at the rate of 12% per annum on the face amount per share, and such dividends
shall be cumulative and shall accrue whether or not earned or declared from
the date of issue or from the most recent preceding dividend payment date
through which dividends have been paid, as the case may be. Cumulative
undeclared dividends are $2,562 from October 12, 1988 through July 31, 1994.
Shares of Series B Preferred Stock are not entitled to any voting rights with
respect to matters voted on by stockholders of the Company, except as
otherwise required by Delaware law.

The Series C Preferred Stock ranks junior to all classes and series of
stock of the Company other than Common Stock. The holders of Common Stock
and Series C Preferred Stock are entitled to share equally in such dividends
(other than dividends in Common Stock) as may be declared by the Board of
Directors and paid by the Company out of funds legally available therefor.
Upon the voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of shares of Series C Preferred Stock shall be
entitled, before any payment is made in respect of the Common Stock, to be
paid a liquidation preference in cash equal to $4.00 per share. After
payment of the liquidation preference to the holders of the Series C
Preferred Stock, the holders of shares of Common Stock then outstanding shall
be entitled to be paid an amount in cash equal to $4.00 per share, following
which each outstanding share of Series C Preferred Stock and Common Stock
shall share in the distribution of the remaining assets of the Company, each
share of Series C Preferred Stock being entitled to the amount it would have
received had it been converted to Common Stock immediately prior to such
distribution. Except as otherwise provided by Delaware law, holders of
Series C Preferred Stock have no right to vote for the election of directors
or on any other matters that may be submitted to a vote of the Company's
stockholders except in the case of a proposal to merge or consolidate the
Company with or into another F-28 <PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

entity, to sell, lease or exchange all or substantially all of the assets of
the Company as an entirety, to dissolve or liquidate the Company or to adopt
a plan to do any of the foregoing. In any such event, holders of shares of
Series C Preferred Stock shall be entitled to one vote per share and shall
vote together as a class with the Common Stock and not as a separate class.

The payment of cash dividends by the Company is prohibited by the terms
of the Bank Credit Agreement and restricted by the Indentures relating to the
Company's Senior Floating Rate Notes, Senior Fixed Rate Notes and
Subordinated Debentures.

The Company has certain mandatory redemption requirements applicable to
the Series B Preferred Stock, and certain repurchase obligations on the
Series B Preferred Stock and Series C Preferred Stock, provided that such
redemption or repurchase does not, among other things, violate any terms of
an existing or future financing agreement. The Company's current Bank Credit
Agreement and its current Indentures prohibit or significantly restrict the
redemption or repurchase by the Company of any shares of its capital stock.
However, due to these redemption requirements, preferred stock has been
excluded from the stockholders' deficit section of the accompanying balance
sheets. If or when such redemption or repurchase is allowed to occur, the
Company, at its option, may consummate the transaction in the form of cash or
by issuing subordinated notes.

(7) Common Stock

In November 1991, Green Equity Investors, L.P. ("GEI"), an investment
fund managed by Leonard Green & Partners, L.P. ("LGP"), purchased 1,716,967
newly issued shares of the Company's Common Stock, or approximately 55.4% on
a fully-diluted basis, for $27,700 in cash and The Fulcrum III Limited
Partnership and The Second Fulcrum III Limited Partnership (collectively, the
"Fulcrum Partnerships"), investment funds managed by Gibbons, Goodwin, van
Amerongen ("GGvA"), collectively purchased 142,564 newly issued shares of the
Company's Common Stock, or approximately 4.5% on a fully-diluted basis, for
$2,300 in cash. Contemporaneously, a majority of the holders of the
Company's Series A Preferred Stock voted to amend the Company's Certificate
of Incorporation to reclassify each share of Series A Preferred Stock and all
cumulative and unpaid dividends thereon into one-tenth (1/10) of a share of
Common Stock. As a result of the reclassification, all shares of Series A
Preferred Stock, together with all cumulative and unpaid dividends thereon,
were converted into an aggregate of 40,000 shares of Common Stock,
representing 1.3% of the Common Stock, on a fully-diluted basis. In
addition, the Fulcrum Partnerships exchanged shares of the Company's Series B
Preferred Stock, and all cumulative and unpaid dividends thereon, and Series
C Preferred Stock for Common Stock. As a result, cumulative undeclared
dividends as of the date of these transactions were reduced from $16,648 to
$1,304.

In February 1994, GEI loaned the Company $2,000 in cash in exchange for
warrants to purchase 63,235 shares of Common Stock. At the time of this
transaction, the warrant was deemed to have nominal value, and therefore no
adjustment was made to equity in the accompanying financial statements.

F-29 <PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(8) Stock Option Plans

Certain key employees, including all executive officers, are eligible to
receive nonqualified stock options to purchase Common Stock under the
Restated 1988 Management Stock Option Plan (the "1988 Option Plan") and/or
the 1991 Management Stock Option Plan (the "1991 Option Plan" and, together
with the 1988 Option Plan, the "Option Plans"). Options granted under the
1988 Option Plan have an exercise price of the greater of 85% of fair market
value at the date of grant or $10 per share and options granted under the
1991 Option Plan have an exercise price of (a) $16.13 per share for options
granted within 30 days of the approval of the 1991 Option Plan by the
stockholders of the Company and (b) thereafter at 100% of the fair market
value at the date of grant. The 1988 Option Plan terminates at the end of
the Company's 1995 fiscal year and the 1991 Option Plan terminates on
November 26, 2001. A three-person committee of the Board of Directors (the
"Option Committee"), which includes one officer of the Company, administers
both Option Plans. The Option Committee designates the class of employees
eligible to participate in the Option Plans and, during each fiscal year of
the Option Plans, designates eligible employees who will be granted options
and the number of shares subject to such options. Members of the Option
Committee are eligible to receive options.

The Option Plans provide for tenure-vesting based upon a participant's
employment with the Company and, in addition, the 1988 Option Plan provides
for performance-vesting based on the Company meeting certain earnings
targets. Once exercised, the transfer of the shares subject to the options
will be restricted pursuant to the terms of a Restricted Stock Agreement to
be entered into among the Company and each holder.
A summary of changes in the Option Plans for the fiscal years ended July
31, 1994, August 1, 1993, and August 2, 1992, are presented below:

1988 Option Plan
Fiscal Year
-----------
1994 1993 1992
---- ---- ----
Stock options outstanding
at beginning of year 27,147 27,976 28,924
Granted -- -- --
Exercised -- -- --
Forfeited 1,136 829 948

Outstanding at end
of year 26,011 27,147 27,976

Exercisable at end
of year 25,061 18,255 15,972

Average option price
per share $11.45 $11.54 $11.50

Reserved for future
grant -- -- --

F-30<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

1991 Option Plan
Fiscal Year
-----------
1994 1993 1992
---- ---- ----

Stock options outstanding
at beginning of year 118,597 110,722 --
Granted -- 8,875 110,722
Exercised -- -- --
Forfeited 1,000 1,000 --

Outstanding at
end of year 117,597 118,597 110,722

Exercisable at
end of year -- -- --

Average option price
per share $16.16 $16.16 $16.13

Reserved for future
grant 1,000 1,000 8,875

For the 1988 Option Plan, compensation expense is determined based on
the difference between the fair market value (as determined by the Option
Committee) and exercise price upon performance-vesting, such compensation
expense to be recognized over the tenure-vesting period on a pro rata basis.

For the 1991 Option Plan, options are granted at the fair market value
of Common Stock (as determined by the Option Committee) at the date of grant
and therefore no compensation expense will be recorded.

(9) Leases

The Company leases certain stores, other facilities and equipment under
leases that are not cancelable. Such leases generally contain renewal
options exercisable at the Company's option. In addition to minimum rental
payments, certain leases provide for payments of taxes, maintenance and
percentage rentals based upon sales in excess of stipulated amounts. The
future minimum payments under leases that are not cancelable, as of July 31,
1994, are:

F-31<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

Operating Capital
Year Ending in leases leases
-------------- --------- --------
1995 $ 23,200 $ 5,430
1996 22,900 5,238
1997 21,800 3,163
1998 20,600 1,030
1999 20,400 965
Thereafter 212,400 2,329
-------- --------
Total minimum lease payments $321,300 18,155
========
Less portion representing interest (4,278)
Present value of net minimum lease payments at --------
July 31, 1994 $13,877
========
Total rent expense was $26,642, $25,475, and $24,059 for the fiscal
years ended July 31, 1994, August 1, 1993, and August 2, 1992, respectively.
Included in total rent expense are percentage rents totaling $241, $446, and
$534, for 1994, 1993, and 1992, respectively.

(10) Income Taxes

The Company has reported a pretax loss for all fiscal years since
October 12, 1988, and, consequently, no income tax expense has been reported.
Financial Accounting Standards Board Statement 109 (SFAS 109) was adopted by
the Company as of August 2, 1993. There was no cumulative effect of this
change in accounting for income taxes determined as of August 2, 1993. Prior
years' financial statements have not been restated to apply the provisions of
SFAS 109. The effect on prior years' financial statements of retroactively
implementing SFAS 109 would be immaterial.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of July
31, 1994 are presented as follows:

Deferred tax assets:
Inventory, principally due to reserves and
additional costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 $ 900
Insurance and other reserves 8,100
Net operating loss carryforward 35,000
General business credit carryforward 1,600
Charitable contributions carryforward 3,200
Other, net 1,800
--------
Total gross deferred tax assets 50,600

Less valuation allowance (50,600)
--------
Net deferred tax assets $ --
========
F-32<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

Upon adoption of SFAS 109, effective August 2, 1993, the Company
determined a valuation allowance requirement in the amount of $36,200. The
valuation allowance as of July 31, 1994 has been determined to be $50,600,
resulting in a change in the valuation allowance in the amount of $14,400.

The Company has net operating loss ("NOL") carryforwards for federal
income tax purposes of $93,000 which are available to offset future taxable
income, if any, through the year 2009. The Company has general business
credit carryforwards of $1,600 which are also available to reduce future
federal income taxes, if any, through the year 2009. The Company anticipates
that, in connection with the restructuring discussed in Footnote 1, it will
undergo an ownership change pursuant to Internal Revenue Code Section 382
that will result in an annual limitation on the amount of the NOL and general
business credit carryforwards that the Company may utilize to offset future
federal taxable income. In addition, should the Company fail to emerge from
bankruptcy by December 31, 1994, its NOL and general business credit
carryforwards will be eliminated to the extent of any income realized from
the cancellation of debt by the Company.

(11) Supplementary Statements of Operations Information

Supplementary Statements of Operations information is as follows:

Fifty-two Fifty-two Fifty-three
Weeks Ended Weeks Ended Weeks Ended
July 31, 1994 August 1, 1993 August 2, 1992
-------------- -------------- --------------
Amortization of:
Lease interests $ 6,037 $ 2,576 $ 1,293
Deferred financing costs 2,950 2,850 2,932
Goodwill 2,831 2,832 2,886
------- ------- -------
Total amortization of
intangible assets $11,818 $ 8,258 $ 7,111
======= ======= =======

Advertising costs $14,099 $13,530 $12,428
======= ======= =======

(12) Employee Benefit Plans

Kash n' Karry Retirement Estates ("KKRE"), a trusteed defined
contribution retirement plan, was authorized by the Company's Board of
Directors in 1988. KKRE is a tax savings/profit sharing plan maintained
primarily for the purpose of providing retirement income for eligible
employees of the Company. KKRE is qualified under Section 401(a) and Section
401(k) of the Internal Revenue Code of 1986. Generally, all employees who
have attained the age of 21 years and complete one year of participation

F-33<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

service (as defined under KKRE) are eligible to participate in KKRE.
Participants may, subject to certain federal limitations, elect to defer an
amount not to exceed 15% of their base compensation and have such amount
contributed to KKRE. The Company may match all or a portion of the
participant's deferred compensation, but the amount of the matching
contribution may not exceed 3% of such participant's compensation.
Additional non-matching contributions may be made to KKRE by the Company in
such amount as determined by the Company's Board of Directors based on the
Company's operating performance. Funds that participants elect to defer are
invested, at the participant's option, into various investment accounts. The
vested percentage of the amounts allocated to a participant's account will be
payable to the participant upon such participant's death, disability,
retirement, or other separation of service from the Company. Plan expenses
were $573, $573, and $461, for the fiscal years ended July 31, 1994, August
1, 1993, and August 2, 1992, respectively.

Kash n' Karry Executive Supplemental Retirement Plan ("KESP"), a non-
qualified, unfunded salary deferral plan, was authorized by the Company's
Board of Directors in November 1989. Certain Key Employees (as defined under
KESP) of the Company as selected by its Board of Directors participate in
KESP. Currently, nineteen Key Employees participate in KESP. Prior to the
beginning of each plan year, a participant may elect to defer an amount not
to exceed 15% of such participant's annual base compensation (as defined
under KESP). The Company will match a certain portion of the amount deferred
by the participant, but the amount of the match may not exceed 6% of such
participant's annual base compensation. The Company will record income to
the participant's account at an annual rate (11% for the 1994, 1993 and 1992
plan years) as determined by the Company's Board of Directors, but the rate
of such income shall not be less than 8% per annum.

The vested percentage of the amounts recorded in the participant's
account will be paid to the participant upon the earlier of: (i) such
participant's death, disability, retirement, or other separation of service
from the Company; (ii) the date the plan is terminated; or (iii) the date
that a change in control occurs (as defined under KESP). Expense for this
plan was $135, $149, and $172, for the fiscal years ended July 31, 1994,
August 1, 1993, and August 2, 1992, respectively.

(13) Commitments and Contingencies

The Company had letters of credit outstanding totaling $16,358 and
$19,118 at July 31, 1994 and August 1, 1993, respectively, which amounts have
been reflected as reductions of the available revolving loan facility as of
those dates. These letters of credit primarily guarantee various insurance
and financing activities.

F-34<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)

(14) Related Party Transactions

Leonard Green & Partners ("LGP"), the sole general partner of Green
Equity Investors, L.P., which owns approximately 55.4% of the Company's
Common Stock on a fully-diluted basis, received a closing fee on November 26,
1991 as compensation in connection with its equity investment in the Company
and was also reimbursed for its out-of-pocket expenses. In addition, as
consideration for the provision of ongoing financial advisory services, the
Company agreed to pay LGP an annual fee plus related out-of-pocket expenses.
Three of the Company's Directors are general partners of LGP. The Company has
made $143, $598 and $489 in such payments for the fiscal years ended July 31,
1994, August 1, 1993 and August 2, 1992, respectively.

Gibbons, Goodwin, van Amerongen ("GGvA"), the sole general partner of
The Fulcrum III and The Second Fulcrum III Limited Partnerships, which
combined own approximately 30.7% of the Company's Common Stock on a
fully-diluted basis, received a closing fee on November 26, 1991 as
compensation in connection with its equity investment in the Company and was
also reimbursed for its out-of-pocket expenses. In addition, GGvA receives,
as consideration for the provision of ongoing financial advisory services, an
annual fee plus related out-of-pocket expenses. One of the Company's
Directors is a general partner of GGvA. The Company made total payments to
GGvA for on-going services of $42, $235, and $262, for the fiscal years ended
July 31, 1994, August 1, 1993, and August 2, 1992, respectively.

F-35<PAGE>
KASH N' KARRY FOOD STORES, INC.
PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial statements have been
prepared using the principles of "fresh-start" accounting pursuant to the
American Institute of Certified Public Accountants Statement of Position No.
90-7, entitled "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOS No. 90-7"). The unaudited pro forma statement of
operations of the Company for the fiscal year ended July 31, 1994 gives
effect to the Restructuring as if it had occurred on August 2, 1993. The
unaudited pro forma balance sheet of the Company as of July 31, 1994 gives
effect to the Restructuring as if such Restructuring had occurred on July 31,
1994. The pro forma data are not necessarily indicative of the financial
position or results of operations that would have been reported had the
Restructuring occurred on the dates referred to, nor are they necessarily
indicative of the financial position or results of operations to be expected
in the future. KPMG Peat Marwick LLP, the Company's independent auditors,
have neither examined, reviewed nor compiled the pro forma information and,
consequently, do not express an opinion or any other form of assurance or
other association with respect thereto.

The pro forma data should be read together with the other information
contained herein under the headings "Selected Financial Data," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company and the notes
thereto.

F-36<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of July 31, 1994
(In Thousands)

ASSETS

Pro Forma Adjustments
---------------------
July 31, Discharge Fresh Pro Forma
1994 and Exchange Start Reorganized
Current assets: --------- -------------- ------ -----------
Cash and cash equivalents $ 6,852 $ (2,312)(a)$ $ 5,600
10,000 (b)
(4,500)(c)
(4,440)(d)
Accounts receivable 8,084 8,084
Inventories 76,094 5,104(g) 81,198
Prepaid expenses and
other current assets 12,805 12,805
--------- ---------- -------- --------
Total currents assets 103,835 (1,252) 5,104 107,687
Property and equipment,
at cost, net 160,491 (17,775)(g) 142,716
Favorable lease interest, net 12,312 18,280 (g) 30,592
Deferred financing costs, net 12,630 (10,717)(e) 4,225
2,312 (a)
Excess of cost over fair value of
net assets acquired, net 96,758 (96,758)(f) --
Reorganization value in excess of
amounts allocated to net assets -- 102,521 (g) 102,521
Other assets 3,867 (928)(g) 2,939
--------- -------- -------- -------
Total assets $ 389,893 $ (9,657) $10,444 $390,680
========= ======== ======== ========

F-37<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
As of July 31, 1994
(Continued)
(In Thousands)

LIABILITIES & STOCKHOLDERS' EQUITY

Pro Forma Adjustments
---------------------
July 31, Discharge Fresh Pro Forma
1994 and Exchange Start Reorganized
--------- -------------- ------ -----------
Current liabilities:
Current portion of
long-term debt $ 42,740 $ (940)(d)$ $ 13,596
(28,204)(h)
Accounts payable 34,908 34,908
Accrued expenses 38,934 (7,350)(i) 5,838(g) 31,831
(5,591)(j)
--------- ---------- -------- --------
Total current liabilities 116,582 (42,085) 5,838 80,335
Long-term debt,
less current portion 317,381 (105,000)(i) 242,676
28,204 (h)
5,591 (j)
(3,500)(d)
Other long-term liabilities 12,334 8,840(g) 21,174
Series B preferred stock 3,875 (3,875)(k) --
Series C preferred stock 775 (775)(k) --
Stockholders' equity (deficit):
Common stock, pre-restructuring 28 (28)(k) --
Common stock, post-restructuring -- 26 (i) 31
5 (b)
Capital in excess of par value 77,695 (77,695)(k) 46,464
112,324 (i)
9,995 (b)
(4,500)(c)
(71,355)(g)
Accumulated deficit (138,740) 71,619 (l) --
67,121 (g)
Less cost of treasury stock (37) 37 (k) --
--------- --------- -------- --------
Total stockholders'
equity (deficit) (61,054) 111,783 4,606 46,495
--------- --------- -------- --------
Total liabilities and
stockholders' equity
(deficit) $ 389,893 $ (9,657) $ 10,444 $390,680
========= ========= ======== ========

F-38<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(Dollar Amounts in Thousands, Except per Share Amounts)

The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma Balance Sheet. The pro forma adjustments
are based on management's best estimates using information currently
available.

The pro forma Balance Sheet has been prepared based on the
post-restructuring capital structure of the Company, which was 3,100,000
shares of $.01 common stock with an approximate market value of $15 per
share. Market value is based on a multiple of projected operating cash flow
(which is the methodology most often used to value grocery businesses) less
the long-term debt of the Company, and was the approximate trading value of
the shares when they began trading publicly subsequent to December 29, 1994.

(a) To reflect estimated transaction costs associated with the Company's New
Bank Credit Agreement.

(b) To reflect the purchase of 15.0% of the New Common Stock by GEI in
exchange for $10,000 in cash.

(d) To repay certain notes on the Effective Date.

(e) To reflect the elimination of net capitalized transaction costs
associated with the $105,000 Old Subordinated Debentures, Old Credit
Agreement, and the Old Senior Floating Rate Notes and Old Senior Fixed
Rate Notes.

(f) To reflect the elimination of pre-existing goodwill.

(g) To record "fresh-start" accounting adjustments.

(h) To reflect principal amortization adjustments between the New Bank
Credit Agreement and the Old Credit Agreement. Adjustment reflects
current portions of the Old Credit Agreement of $35,204 and current
portions of the New Bank Credit Agreement of $7,000.

(i) To reflect the conversion of $105,000 Old Subordinated Debentures, plus
accrued interest totaling approximately $7,350 for 85.0% of the New
Common Stock.

(j) To reflect the conversion of Old Senior Floating Rate Notes totaling
$85,000 and Old Senior Fixed Rate Notes totaling $50,000, along with
accrued interest thereon totaling approximately $5,591, into New Senior
Fixed Rate Notes.

(k) To reflect the elimination of Old Equity Interests.

(l) To reflect the net operating impact of discharge and exchange
adjustments.

F-39<PAGE>
KASH N' KARRY FOOD STORES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

Fifty-Two Weeks Ended July 31, 1994
(In Thousands, Except Share and Per Share Amounts)

July 31, Pro Forma Pro Forma
1994 Adjustments Reorganized
---------- ----------- -----------

Sales $1,065,165 $ $1,065,165
Cost of sales 845,597 845,597
---------- --------- ----------
Gross profit 219,568 219,568
Selling, general and
administrative expenses 176,945 176,945
Depreciation and amortization 24,112 (2,832)(a) 26,406
5,126 (b)
Store closing and other costs 11,016 11,016
---------- --------- ----------
Operating income 7,495 5,201
Interest expense, net 45,390 (14,700)(c) 34,386
(11,289)(d)
16,000 (e)
(2,423)(f)
1,408 (g)
---------- --------- ----------
Loss before income taxes (37,895) (29,185)
Income taxes -- --
---------- --------- ----------
Net loss (37,895) (29,185)
Undeclared dividends on preferred stock (464) 464 (h) --
---------- ----------
Net loss attributable to common stock $ (38,359) $ (29,185)
========== ==========
Pro forma loss per common share $ (9.41)
==========
Weighted average common shares outstanding 3,100,000
==========

F-40<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Dollar Amounts In Thousands)

The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma Statement of Operations. The pro forma
adjustments are based on management's best estimates using information
currently available.

The pro forma Statement of Operations has been prepared based on the
post-restructuring capital structure of the Company, which was 3,100,000
shares of $.01 common stock with an approximate market value of $15 per
share. Market value is based on a multiple of projected operating cash flow
(which is the methodology most often used to value grocery businesses) less
the long-term debt of the Company, and was the approximate trading value of
the shares when they began trading publicly subsequent to December 29, 1994.

(a) To reflect the elimination of amortization on previously capitalized
excess of cost over fair value of net assets acquired.

(b) To reflect the amortization of reorganizational value in excess of
amounts allocated to net assets totaling $102,521 over 20 years.

(d) To reflect the elimination of interest expense on the Old Senior Fixed
Rate Notes and Old Senior Floating Rate Notes.

(e) To reflect interest expense on New Senior Fixed Rate Notes of $121,162
at 11.5% and on New Senior Floating Rate Notes of $22,953 at 9.0%.

(f) To reflect the elimination of amortization on deferred transaction costs
related to the Old Credit Agreement and the $105,000 Old Subordinated
Debentures and the Old Senior Floating Rate Notes and Old Senior Fixed
Rate Notes.

(g) To reflect the amortization of transaction costs related to the New Bank
Credit Agreement.

(h) To reflect the elimination of undeclared dividends on Old Equity
Interests.

F-41
20/WL/LWH/KNK.SEC/S1.95/FS.1<PAGE>
No dealer, salesperson or any other
person has been authorized to give
any information or to make any
representations in connection with
this offering other than those
contained in this Prospectus, and,
if given or made, such information
or representations must not be
relied upon as having been so [Logo]
authorized. This Prospectus does
not constitute an offer to sell or
a solicitation of an offer to
buy by anyone in any jurisdiction
in which such offer or solicitation KASH N' KARRY
is not authorized or in which such FOOD STORES, INC.
person making such offer or solicitation
is not qualified to do so or to any
person to whom it is unlawful to
make such offer or solicitation.
Neither the delivery of this
Prospectus nor any sale hereunder
shall, under any circumstances,
create any implication that there
has been no change in the affairs
of the Company since the date
hereof or that the information
contained herein is correct as of
any time subsequent to its date.
Common Stock
TABLE OF CONTENTS
Page
Available Information. . . . 2
Prospectus Summary . . . . . 3
Investment Considerations. . 10
The Company. . . . . . . . . 14
The Restructuring. . . . . . 15
Market Price and Dividend Policy 16
Capitalization . . . . . . . 17
Selected Financial Information 18
Management's Discussion and Analysis PROSPECTUS
of Financial Condition and
Results of Operations 22
Business . . . . . . . . . . 30
Management . . . . . . . . . 36
Certain Relationships and
Related Transactions . . . 47
Principal Stockholders . . . 48
Description of Capital Stock 49
Selling Stockholders . . . . 57
Plan of Distribution . . . . 60
Legal Matters. . . . . . . . 61
Experts. . . . . . . . . . . 61
Index to Financial Statements F-1
________________, 1995
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the fees and expenses payable in
connection with the sale of the Common Stock being registered. The Company
will pay all such fees and expenses. All amounts are estimates except for
the registration fee.

SEC Registration Fee . . . . . . . . $20,577.59

Blue Sky fees and expenses . . . . . *

Accounting fees and expenses . . . . *

Legal fees and expenses . . . . . . *

Transfer agent fees and expenses . . *

Printing and engraving fees and expenses *

Miscellaneous fees and expenses . . *

Total . . . . . . . . . . . *

* To be completed by amendment.

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law ("DGCL") permits a
Delaware corporation to indemnify any person who is or was a director,
officer, employee and agent of the corporation, or who is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against actual and reasonable expenses
(including attorneys' fees) incurred by such person in connection with any
action, suit or proceeding if (i) he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and (ii) in the case of a criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. Except as ordered by
a court, no indemnification shall be made in connection with any proceeding
brought by or in the right of the Company where the person involved is
adjudged to be liable to the Company.

Article XV of the Bylaws of the Company provides for indemnification of
the officers and directors of the Company to the full extent permitted by
law, as now in effect or later amended.

II-1<PAGE>
The Company has entered into indemnity agreements with each of its
directors and executive officers. The indemnity agreements generally
indemnify such persons against liabilities arising out of their service in
their capacities as directors, officers, employees or agents of the Company.
The Company may from time to time enter into indemnity agreements with
additional individuals who become officers and/or directors of the Company.

Section 145 of the DGCL further authorizes a corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation or enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would otherwise have the power to indemnify
him under Section 145. The Company maintains policies insuring the Company's
directors and executive officers against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act.

Article Seventh of the Company's Restated Certificate of Incorporation
limits under certain circumstances the liability of the Company's directors
for a breach of their fiduciary duty as directors. These provisions do not
eliminate the liability of a director (i) for a breach of the director's duty
of loyalty to the Company or its shareholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (relating to the declaration of
dividends and purchase or redemption of shares in violation of the DGCL), or
(iv) for any transaction from which the director derived an improper personal
benefit.

At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being
sought nor is the Company aware of any threatened litigation that may result
in claims for indemnification by any officer, director or employee of the
Company.

Item 15. Recent Sales of Unregistered Securities

On November 9, 1994, the Company filed with the United States Bankruptcy
Court for the District of Delaware a "prepackaged" plan of reorganization
(the "Prepackaged Plan") pursuant to Chapter 11 of the U.S. Bankruptcy Code.
The Prepackaged Plan was confirmed by the Bankruptcy Court on December 12,
1994. Pursuant to the Prepackaged Plan, on December 29, 1994 the Company
issued 2,635,000 shares of Common Stock to the holders of its $105.0 million
14% Subordinated Debentures due February 1, 2001 (the "Old Subordinated
Debentures"), in exchange for the Old Subordinated Debentures, and issued
465,000 shares of its Common Stock to Green Equity Investors, L.P., its
former majority shareholder, in consideration for the sum of $10.0 million.
In addition, holders of the Company's $85.0 million Senior Floating Rate
Notes due August 2, 1996 and its $50.0 million 12 3/8% Senior Fixed Rate
Notes due February 1, 1999, exchanged such notes for $23.0 million aggregate
principal amount of new Senior Floating Rate Notes due February 1, 2003 and
$121.1 million aggregate principal amount of new 11.5% Senior Fixed Rate
Notes due February 1, 2003 (collectively, the "New Senior Notes").

II-2<PAGE>
The Common Stock and New Senior Notes issued pursuant to the Prepackaged
Plan were issued in reliance upon Section 1145(a) of the U.S. Bankruptcy Code
under an order confirming the Company's Prepackaged Plan. This section
provides an independent exemption from the registration requirement for the
offer and sale of securities of a debtor issued under a plan of
reorganization. The requirements for relying upon the exemption under
Section 1145(a) of the Bankruptcy Code -- i.e., (i) issuance of securities
under a plan of reorganization; (ii) issuance of securities by the debtor;
and (iii) issuance of securities in exchange or principally in exchange for
claims or interests -- have been satisfied and the Prepackaged Plan was
confirmed by the Bankruptcy Court.

Item 16. Exhibits and Financial Statement Schedules

(a) The following exhibits are filed as part of this Registration
Statement:

Exhibit No. Description

2 First Amended Plan of Reorganization filed by the Company with the
United States Bankruptcy Court of the District of Delaware on
November 9, 1994, as amended by notices of technical modifications
thereto filed on November 9, 1994, and December 12, 1994
(previously filed as Exhibit 2 to the Company's Quarterly Report on
Form 10-Q for the period ended October 30, 1994, which exhibit is
hereby incorporated by reference).

3(i)(a) Restated Certificate of Incorporation filed with the Delaware
Secretary of State on December 29, 1994 (previously filed as
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
period ended January 29, 1995, which exhibit is hereby incorporated
by reference).

3(i)(b) Certificate of Designations of Series A Junior Participating
Preferred Stock filed with the Secretary of State of the State of
Delaware on April 26, 1995 (filed herewith).

3(ii)(a) Bylaws adopted October 12, 1988 (previously filed as Exhibit
3(ii)(a) to the Company's Quarterly Report on Form 10-Q for the
period ended January 29, 1995, which exhibit is hereby incorporated
by reference).

3(ii)(b) First Amendment to Bylaws adopted July 30, 1991 (previously filed
as Exhibit 3(ii)(b) to the Company's Quarterly Report on Form 10-Q
for the period ended January 29, 1995, which exhibit is hereby
incorporated by reference).

3(ii)(c) Second Amendment to Bylaws adopted December 29, 1994 (previously
filed as Exhibit 3(ii)(c) to the Company's Quarterly Report on Form
10-Q for the period ended January 29, 1995, which exhibit is hereby
incorporated by reference).

II-3<PAGE>
4.1 Indenture dated as of December 29, 1994, between the Company and
Shawmut Bank Connecticut, N.A., as Trustee, relating to 11.5%
Senior Fixed Rate Notes due 2003 (previously filed as Exhibit 4.1
to the Company's Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).

4.2 Indenture dated as of December 29, 1994, between the Company and
IBJ Schroder Bank & Trust Company, as Trustee, relating to Senior
Floating Notes due 2003 (previously filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).

4.3 Rights Agreement dated as of April 13, 1995 between the Company and
Shawmut Bank Connecticut, N.A., as Rights Agent (previously filed
as Exhibit 1 to the Company's Current Report on Form 8-K dated
April 13, 1995, which exhibit is hereby incorporated by reference).

4.4 Specimen form of Common Stock certificate (filed herewith).

5 Opinion of Milbank, Tweed, Hadley & McCloy re: legality (to be
filed by amendment).

10.1 Credit Agreement dated as of December 29, 1994, among the Company,
certain lenders, The CIT Group/Business Credit, Inc., as
administrative agent, and Bank of America National Trust and
Savings Association, as co-agent (previously filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).

10.2 Mortgage, Fixture Filing, Security Agreement and Assignment of
Rents between the Company, as mortgagor, and Sun Life Insurance Co.
of America, as mortgagee, dated as of September 7, 1989 (previously
filed as Exhibit 28.1(a) to the Company's Quarterly Report on Form
10-Q for the period ended October 29, 1989, which exhibit is hereby
incorporated by reference).

10.4 Trademark License Agreement dated as of October 12, 1988 between
the Company and Lucky Stores, Inc. (previously filed as Exhibit
10.11 to the Company's Registration Statement on Form S-1,
Registration No. 33-25621, which exhibit is hereby incorporated by
reference).

10.5(a) Services Agreement dated as of March 1, 1995 between the Company
and GSI Outsourcing Corporation (filed herewith).

II-4<PAGE>
10.5(b) First Amendment to Services Agreement between the Company and GSI
Outsourcing Corporation (filed herewith).

10.6 Form of Indemnity Agreement between the Company and its directors
and certain of its officers (previously filed as Exhibit 10.3 to
the Company's Registration Statement on Form S-1, Registration No.
33-25621, which exhibit is hereby incorporated by reference).

10.7(a) 1995 Non-Employee Director Stock Option Plan adopted on March 9,
1995 (filed herewith).

10.7(b) Form of Non-Qualified Stock Option Agreement entered into between
the Company and certain directors, as optionees, pursuant to the
1995 Non-Employee Director Stock Option Plan (filed herewith).

10.8 Non-Qualified Stock Option Agreement dated as of January 17, 1995,
between the Company and Green Equity Investors, L.P. (filed
herewith).

10.9 Management Services Agreement dated as of December 29, 1994, by and
between the Company and Leonard Green & Partners (previously filed
as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the period ended January 29, 1995, which exhibit is hereby
incorporated by reference).

10.10 Employment Agreement dated as of January 24, 1995, between the
Company and Ronald Johnson (filed herewith).

10.11 Employment Agreement dated as of March 6, 1995, between the Company
and Gary M. Shell (filed herewith).

10.12 Employment Agreement dated as of March 16, 1995, between the
Company and Cliff Smith (filed herewith).

10.13 Incentive Compensation Plan adopted on October 26, 1994 (filed
herewith).

10.14 Amended and Restated Kash n' Karry Retirement Estates and Trust
(401(k) Plan) dated October 14, 1993, effective as of January 1,
1992 (previously filed as Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the period ended August 1, 1993, which
exhibit is hereby incorporated by reference).

10.15(a) Form of Deferred Compensation Agreement dated as of December 21,
1989 between the Company and key employees and a select group of
management (KESP) (previously filed as Exhibit 28.3(a) to the
Company's Quarterly Report on Form 10-Q for the period ended
January 28, 1990, which exhibit is hereby incorporated by
reference).

II-5<PAGE>
10.15(b) Master First Amendment to Deferred Compensation Agreements, dated
as of November 11, 1991 between the Company and the key employees
party thereto (previously filed as Exhibit 28.3 to the Company's
Quarterly Report on Form 10-Q for the period ended November 3,
1991, which exhibit is hereby incorporated by reference).

10.15(c) Master Second Amendment to Deferred Compensation Agreements, dated
as of December 30, 1993 between the Company and the key employees
party thereto (previously filed as Exhibit 10.13(d) to the
Company's Quarterly Report on Form 10-Q for the period ended
January 30, 1994, which exhibit is hereby incorporated by
reference).

10.15(d) Master Third Amendment to Deferred Compensation Agreements, dated
as of September 2, 1994, between the Company and the key employees
party thereto (previously filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended January 29,
1995, which exhibit is hereby incorporated by reference).

10.16(a) 1995 Key Employee Stock Option Plan (filed herewith).

10.16(b) Non-Qualified Stock Option Agreement dated March 9, 1995 between
the Company and Ronald E. Johnson (filed herewith).

10.16(c) Form of Non-Qualified Stock Option Agreement entered into between
the Company and certain key employees, as optionees, pursuant to
the 1995 Key Employee Stock Option Plan (filed herewith).

16 Letter re change in certifying accountant (previously filed as
Exhibit 16 to the Company's Current Report on Form 8-K dated
February 17, 1995).

23.1 Consent of Milbank, Tweed, Hadley & McCloy (to be included in
Exhibit 5).

23.2 Consent of KPMG Peat Marwick, L.L.P. (filed herewith).

24 Power of Attorney (included in signature page).

27 Financial Data Schedule (filed herewith).

II-6<PAGE>
Item 17. Undertakings

1. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to its Certificate of Incorporation,
Bylaws or otherwise, the registrant has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

2. The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

II-7
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida, on April 30, 1995.

KASH N' KARRY FOOD STORES, INC.

/s/ Ronald E. Johnson
By:
Ronald E. Johnson
Chairman of the Board,
President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald E. Johnson and Raymond P. Springer, and
each or either of them, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments and post-effective amendments to this Registration Statement, and
to file the same with all exhibits thereto, unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or
either of them or their substitutes, may lawfully do or cause to be done by
virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Capacity Date

/s/ Ronald E. Johnson
Ronald E. Johnson Chairman of the Board, April 30, 1995
President and Chief Executive
Officer
(principal executive officer)

/s/ Raymond P. Springer
Raymond P. Springer Senior Vice President, April 28, 1995
Chief Financial Officer
(principal financial officer)

<PAGE>

/s/ Richard D. Coleman
Richard D. Coleman Vice President, Controller April 30, 1995
(principal accounting officer)

/s/ Everett L. Buckardt
Everett L. Buckardt Director April 30, 1995

/s/ John J. Delucca
John J. Delucca Director April 30, 1995

Jennifer Holden Dunbar Director April ___, 1995

Ben Evans Director April ___, 1995

/s/ Thomas W. Harberts
Thomas W. Harberts Director April 28, 1995

/s/ Robert Spiegel
Robert Spiegel Director April 28, 1995

Christopher V. Walker Director April ___, 1995

/s/ Peter Zurkow
Peter Zurkow Director April 28, 1995

20/LWH/KNK.SEC/S1.95/K10008s1.4

<PAGE>

EXHIBIT INDEX Sequentially
Exhibit Numbered
No. Description of Exhibit Page

2 First Amended Plan of Reorganization filed
by the Company with the United States
Bankruptcy Court of the District of Delaware
on November 9, 1994, as amended by notices of
technical modifications thereto filed on
November 9, 1994, and December 12, 1994
(previously filed as Exhibit 2 to the
Company's Quarterly Report on Form 10-Q for
the period ended October 30, 1994, which
exhibit is hereby incorporated by reference).

3(i)(a) Restated Certificate of Incorporation filed
with the Delaware Secretary of State on
December 29, 1994 (previously filed as Exhibit
3(i) to the Company's Quarterly Report on Form
10-Q for the period ended January 29, 1995,
which exhibit is hereby incorporated by
reference).

3(i)(b) Certificate of Designations of Series 122
A Junior Participating Preferred Stock filed
with the Secretary of State of the State of
Delaware on April 26, 1995.

3(ii)(a) Bylaws adopted October 12, 1988 (previously
filed as Exhibit 3(ii)(a) to the Company's
Quarterly Report on Form 10-Q for the period
ended January 29, 1995, which exhibit is
hereby incorporated by reference).

3(ii)(b) First Amendment to Bylaws adopted
July 30, 1991 (previously filed as Exhibit
3(ii)(b) to the Company's Quarterly Report on
Form 10-Q for the period ended January 29,
1995, which exhibit is hereby incorporated by
reference).

3(ii)(c) Second Amendment to Bylaws adopted
December 29, 1994 (previously filed as Exhibit
3(ii)(c) to the Company's Quarterly Report on
Form 10-Q for the period ended January 29,
1995, which exhibit is hereby incorporated by
reference).

4.1 Indenture dated as of December 29, 1994,
between the Company and Shawmut Bank
Connecticut, N.A., as Trustee, relating to<PAGE>
11.5% Senior Fixed Rate Notes due 2003
(previously filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for
the period ended January 29, 1995, which
exhibit is hereby incorporated by reference).

4.2 Indenture dated as of December 29, 1994,
between the Company and IBJ Schroder Bank &
Trust Company, as Trustee, relating to Senior
Floating Rate Notes due 2003 (previously filed
as Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby
incorporated by reference).

4.3 Rights Agreement dated as of April 13, 1995
between the Company and Shawmut Bank
Connecticut, N.A., as Rights Agent (previously
filed as Exhibit 1 to the Company's Current
Report on Form 8-K dated April 13, 1995, which
exhibit is hereby incorporated by reference).

4.4 Specimen form of Common Stock certificate. 129

5 Opinion of Milbank, Tweed, Hadley & McCloy
re: legality (to be filed by amendment).

10.1 Credit Agreement dated as of
December 29, 1994, among the Company, certain
lenders, The CIT Group/Business Credit, Inc.,
as administrative agent, and Bank of America
National Trust and Savings Association, as
co-agent (previously filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q
for the period ended January 29, 1995, which
exhibit is hereby incorporated by reference).

10.2 Mortgage, Fixture Filing, Security Agreement
and Assignment of Rents between the Company,
as mortgagor, and Sun Life Insurance Co. of
America, as mortgagee, dated as of September
7, 1989 (previously filed as Exhibit 28.1(a)
to the Company's Quarterly Report on Form 10-Q
for the period ended October 29, 1989, which
exhibit is hereby incorporated by reference).

10.3 Mortgage between the Company, as mortgagor,
and Ausa LifeInsurance Company, as mortgagee,
dated as of November 21, 1989 (previously
filed as Exhibit 28.2(a) to the Company's
Quarterly Report on Form 10-Q for the period
ended October 29, 1989, which exhibit is
hereby incorporated by reference).
<PAGE>
10.4 Trademark License Agreement dated as of
October 12, 1988 between the Company and Lucky
Stores, Inc. (previously filed as Exhibit
10.11 to the Company's Registration Statement
on Form S-1, Registration No. 33-25621, which
exhibit is hereby incorporated by reference).

10.5(a) Services Agreement dated as of March 1, 1995 132
between the Company and GSI Outsourcing
Corporation.

10.5(b) First Amendment to Services Agreement between 241
the Company and GSI Outsourcing Corporation.

10.6 Form of Indemnity Agreement between the
Company and its directors and certain of its
officers (previously filed as Exhibit 10.3 to
the Company's Registration Statement on Form
S-1, Registration No. 33-25621, which exhibit
is hereby incorporated by reference).

10.7(a) 1995 Non-Employee Director Stock Option Plan 247
adopted on March 9, 1995.

10.7(b) Form of Non-Qualified Stock Option Agreement 261
entered into between the Company and certain
directors, as optionees, pursuant to the 1995
Non-Employee Director Stock Option Plan.

10.8 Non-Qualified Stock Option Agreement dated 266
as of January 17, 1995, between the Company
and Green Equity Investors, L.P.

10.9 Management Services Agreement dated as of
December 29, 1994, by and between the Company
and Leonard Green & Partners (previously filed
as Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby
incorporated by reference).

10.10 Employment Agreement dated as of 272
January 24, 1995, between the Company and
Ronald Johnson.

10.11 Employment Agreement dated as of 295
March 6, 1995, between the Company and Gary M.
Shell.

10.12 Employment Agreement dated as of 322
March 16, 1995, between the Company and Cliff
Smith.

<PAGE>
10.13 Incentive Compensation Plan adopted 349
on October 26, 1994.

10.14 Amended and Restated Kash n' Karry
Retirement Estates and Trust (401(k) Plan)
dated October 14, 1993, effective as of
January 1, 1992 (previously filed as Exhibit
10.5 to the Company's Annual Report on Form
10-K for the period ended August 1, 1993,
which exhibit is hereby incorporated by
reference).

10.15(a) Form of Deferred Compensation Agreement
dated as of December 21, 1989 between the
Company and key employees and a select group
of management (KESP) (previously filed as
Exhibit 28.3(a) to the Company's Quarterly
Report on Form 10-Q for the period ended
January 28, 1990, which exhibit is hereby
incorporated by reference).

10.15(b) Master First Amendment to Deferred
Compensation Agreements, dated as of November
11, 1991 between the Company and the key
employees party thereto (previously filed as
Exhibit 28.3 to the Company's Quarterly Report
on Form 10-Q for the period ended November 3,
1991, which exhibit is hereby incorporated by
reference).

10.15(c) Master Second Amendment to Deferred
Compensation Agreements, dated as of December
30, 1993 between the Company and the key
employees party thereto (previously filed as
Exhibit 10.13(d) to the Company's Quarterly
Report on Form 10-Q for the period ended
January 30, 1994, which exhibit is hereby
incorporated by reference).

10.15(d) Master Third Amendment to Deferred
Compensation Agreements, dated as of September
2, 1994, between the Company and the key
employees party thereto (previously filed as
Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the period ended January 29,
1995, which exhibit is hereby incorporated by
reference).

10.16(a) 1995 Key Employee Stock Option Plan. 355

10.16(b) Non-Qualified Stock Option Agreement 373
dated March 9, 1995 between the Company and
Ronald E. Johnson.
<PAGE>
10.16(c) Form of Non-Qualified Stock Option 378
Agreement entered into between the Company and
certain key employees, as optionees, pursuant
to the 1995 Key Employee Stock Option Plan.

16 Letter re change in certifying accountant
(previously filed as Exhibit 16 to the
Company's Current Report on Form 8-K dated
February 17, 1995).

23.1 Consent of Milbank, Tweed, Hadley & McCloy
(to be included in Exhibit 5).

23.2 Consent of KPMG Peat Marwick, L.L.P. 383

24 Power of Attorney (included in
signature page)

27 Financial Data Schedule 384

State of Delaware
Secretary of State
Division of Corporations
Filed 09:00 AM 4/26/1995
9500991755 - 2159029

CERTIFICATE OF DESIGNATIONS

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

KASH N' KARRY FOOD STORES, INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)

____________________________________

Kash N' Karry Food Stores, Inc., a corporation
organized and existing under the General Corporation Law of the
State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by
Section 151 of the General Corporation Law at a meeting duly
called and held on April 13, 1995:

RESOLVED, that pursuant to the authority granted to
and vested in the Board of Directors of this Corporation
(hereinafter called the "Board of Directors" or the "Board") in
accordance with the provisions of the Amended and Restated
Certificate of Incorporation of the Corporation, the Board of
Directors hereby creates a series of Preferred Stock, par value
$.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as
follows:

Series A Junior Participating Preferred Stock:

Section 1. Designation and Amount. The shares of
this series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock")
and the number of shares constituting the Series A Preferred
Stock shall be Thirty-Five Thousand (35,000). Such number of
shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities <PAGE>
issued by the Corporation convertible into Series A Preferred
Stock.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any
shares of any series of Preferred Stock (or any other
stock) ranking prior and superior to the Series A
Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock, in preference to the
holders of Common Stock, par value $.01 per share (the
"Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in
cash on the first day of March, June, September and
December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series
A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b)
subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.

(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided
in paragraph (A) of this Section immediately after it
declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution
shall have been -2-<PAGE>
declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on
the Series A Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumula-
tive on outstanding shares of Series A Preferred Stock
from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the
payment thereof.

Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting
rights:

(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred
Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which
is the number of shares of Common Stock that were
outstanding immediately prior to such event.
-3-<PAGE>
(B) Except as otherwise provided herein, in any
other Certificate of Designations creating a series of
Preferred Stock or any similar stock, in the Amended and
Restated Certificate of Incorporation of the Corporation
or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general
voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the
Corporation.

(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not
be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for
taking any corporate action.

Section 4. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Preferred Stock
as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the
Corporation shall not:

(i) declare or pay dividends, or make any
other distributions, on any shares of stock ranking
junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;

(ii) declare or pay dividends, or make any
other distributions, on any shares of stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid
ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dis-
solution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any
stock of the Corporation ranking junior (as to
dividends and upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or

-4-<PAGE>
(iv) redeem or purchase or otherwise acquire
for consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in ac-
cordance with a purchase offer made in writing or by
publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration
of the respective annual dividend rates and other
relative rights and preferences of the respective
series and classes, shall determine in good faith
will result in fair and equitable treatment among
the respective series or classes.

(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at
such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series
A Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Amended
and Restated Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Preferred
Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders
of shares of stock ranking junior (upon liquidation,
dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (upon
liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in propor-
tion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination
or consolidation of - 5- <PAGE>
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such
case each share of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior
to such event.

Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable.

Section 9. Rank. The Series A Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class
of Preferred Stock.

Section 10. Amendment. The Amended and Restated
Certificate of Incorporation of the Corporation shall not be
amended in any manner which would materially alter or change
the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting together
as a single class.

-6-<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations
is executed on behalf of the Corporation by its Chairman of the
Board, Chief Executive Officer and President this 25th day of
April, 1995.

KASH N' KARRY FOOD STORES, INC.

/s/ Ronald E. Johnson
Title: Chairman of the Board,
Chief Executive Officer
and President

-7-
20/WL/LWH/KNK.SEC/S1.95/EX-3IB.ASC

Number Shares
(LOGO CONSISTING OF THREE
TRIANGLES FORMING THE LETTER K)
____________ ____________
KASH N' KARRY
FOOD STORES, INC.

COMMON STOCK CUSIP 48577P 10 6

PAR VALUE $.01 SEE REVERSE FOR CERTAIN DEFINITIONS

INCORPORATION UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN HARTFORD, CONNECTICUT AND
NEW YORK, NEW YORK

THIS CERTIFIES that_______________________________________________

is the owner of___________________________________________________

FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE
$.01 PER SHARE, Of KASH N' KARRY FOOD STORES, INC., transferable on
the books of the Corporation only by the registered holder hereof,
in person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to the
provisions of the Corporation's Restated Certificate of
Incorporation, as amended. This Certificate is not valid unless
countersigned by the Transfer Agent and registered by the
Registrar.

WITNESS the seal of the Corporation and the signatures of its
duly authorized officers.

Dated:

Countersigned and Registered: Attest:/s/ Richard D. Coleman
SHAWMUT BANK CONNECTICUT, N.A. Secretary

Transfer Agent By:/s/R. P. Springer
and Registrar Executive Vice President

By:___________________________

Authorized Signature

Kash n' Karry Food Stores, Inc.
CORPORATE
SEAL
1988
DELAWARE<PAGE>
(reverse side of certificate)

KASH N' KARRY FOOD STORES, INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS, A FULL STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL, OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE CORPORATION OR
SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF SUCH PREFERENCES AND/OR RIGHTS. COPIES OF SUCH STATEMENT ARE
ALSO ON FILE WITH THE TRANSFER AGENT AND ARE AVAILABLE TO ANY
STOCKHOLDER WITHOUT CHARGE UPON APPLICATION TO THE TRANSFER AGENT.

The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:

TEN COM -as tenants in common UNIF GIFT MIN ACT -__ Custodian __
(Cust) (minor)
TEN ENT -as tenants Under Uniform Gifts to Minors Act
by the entireties

JT TEN -as joint tenants with
with right of survivorship
and not as tenants in common

Additional abbreviations may also be used though not in the above
list.

FOR VALUE RECEIVED, ___________________ hereby sell, assign and
transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________

_________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP
CODE OF ASSIGNEE)
_________________________________________________________________

_________________________________________________________________

_____________________________________________ Shares of the Common
Stock represented by the within Certificate, and do hereby
irrevocable constitute ____________________________________________

_________________________________________________________________
Attorney to transfer the said stock on the books of the within-
named Corporation with full power of substitution in the premises.

Dated:______________________
<PAGE>
(continuation of reverse side)
_____________________________

_____________________________
NOTICE: The signature to this
assignment must correspond
with the name as written upon
the face of the Certificate,
in every particular, without
alteration or enlargement, or
any change whatever.

SIGNATURE GUARANTEE: _____________________________
Your signature must be
guaranteed by an eligible
guarantor institution
which is a member of the
Securities Transfer Agents
Medallion Program, the
Stock Exchanges Medallion
Program or the New York
Stock Exchange Medallion
Signature Program.

20/lwh/knk.sec/s1.95/Ex-4-4.ASC

[Execution copy]

[CONFORMED COPY]

SERVICES AGREEMENT
DATED AS OF MARCH 1, 1995
BY AND BETWEEN
KASH N' KARRY FOOD STORES, INC.
AND
GSI OUTSOURCING CORPORATION

<PAGE>
[Execution copy]
TABLE OF CONTENTS

ARTICLE 1: BACKGROUND AND OBJECTIVES. . . . . . . . . . . . . 1

ARTICLE 2: DEFINITIONS, DOCUMENTS AND TERM. . . . . . . . . . 1
2.1 General Definitions. . . . . . . . . . . . . . . . . 1
2.2 Other Definitions. . . . . . . . . . . . . . . . . . 8
2.3 Associated Contract Documents. . . . . . . . . . . . 8
2.4 Supporting Data. . . . . . . . . . . . . . . . . . . 8
2.5 Term.. . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Renewal and Expiration.. . . . . . . . . . . . . . . 8

ARTICLE 3: TRANSITION . . . . . . . . . . . . . . . . . . . . 9
3.1 Overview.. . . . . . . . . . . . . . . . . . . . . . 9
3.2 Staff. . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Transfer of Assets and Contracts.. . . . . . . . . . 11
3.4 Required Consents and Retained Contracts.. . . . . . 13
3.5 Agency and Disbursements.. . . . . . . . . . . . . . 14
3.6 Joint Verification.. . . . . . . . . . . . . . . . . 14
3.7 Other Obligations. . . . . . . . . . . . . . . . . . 14
3.8 Documentation. . . . . . . . . . . . . . . . . . . . 15
3.9 Service Charges During Transition Period.. . . . . . 15
3.10 Closing of Transition Period.. . . . . . . . . . . . 15

ARTICLE 4: GSI RESPONSIBILITIES . . . . . . . . . . . . . . . 16
4.1 GSI Personnel. . . . . . . . . . . . . . . . . . . . 16
4.2 Standards. . . . . . . . . . . . . . . . . . . . . . 18
4.3 Efficient Use of Resources.. . . . . . . . . . . . . 18
4.4 Technological Advancements.. . . . . . . . . . . . . 18
4.5 Management and Control.. . . . . . . . . . . . . . . 19
4.6 PC Machines. . . . . . . . . . . . . . . . . . . . . 23
4.7 Data Transmission (Lines/Circuits).. . . . . . . . . 23
4.8 Software.. . . . . . . . . . . . . . . . . . . . . . 23
4.9 Operations, Support and Maintenance. . . . . . . . . 24
4.10 Consolidation and Relocation Services. . . . . . . . 25
4.11 Systems Management.. . . . . . . . . . . . . . . . . 25
4.12 Disaster Recovery. . . . . . . . . . . . . . . . . . 26
4.13 Production Services. . . . . . . . . . . . . . . . . 26
4.14 Help Desk. . . . . . . . . . . . . . . . . . . . . . 26
4.15 Audits/Compliance with Law.. . . . . . . . . . . . . 27
4.16 Other Responsibilities.. . . . . . . . . . . . . . . 28
4.17 Corporate Organization.. . . . . . . . . . . . . . . 28

ARTICLE 5: KASH N' KARRY RESPONSIBILITIES . . . . . . . . . . 29
5.1 MIS Coordinator. . . . . . . . . . . . . . . . . . . 29
5.2 Applications Software. . . . . . . . . . . . . . . . 29
5.3 Facilities and Support Services. . . . . . . . . . . 29
5.4 Other Responsibilities.. . . . . . . . . . . . . . . 29

ARTICLE 6: CHARGES AND EXPENSES . . . . . . . . . . . . . . . 30

i<PAGE>
[Execution copy]
6.1 Annual Services Charge.. . . . . . . . . . . . . . . 30
6.2 New Entities.. . . . . . . . . . . . . . . . . . . . 31
6.3 New Services and Extension of Current Parameter. . . 31
6.4 Substantial Reduction of Resources.. . . . . . . . . 32
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 33
6.6 Other Expenses and Charges.. . . . . . . . . . . . . 34

ARTICLE 7: INVOICING AND PAYMENT. . . . . . . . . . . . . . . 34
7.1 Annual Services Charge Invoices. . . . . . . . . . . 34
7.2 Other Charges. . . . . . . . . . . . . . . . . . . . 35
7.3 Late Charges.. . . . . . . . . . . . . . . . . . . . 35
7.4 Proration. . . . . . . . . . . . . . . . . . . . . . 35
7.5 Refundable Items.. . . . . . . . . . . . . . . . . . 35
7.6 Credits. . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE 8: REVERSION. . . . . . . . . . . . . . . . . . . . . 36

ARTICLE 9: INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . 36
9.1 Materials. . . . . . . . . . . . . . . . . . . . . . 36
9.2 New GSI Software.. . . . . . . . . . . . . . . . . . 40

ARTICLE 10: CONFIDENTIALITY/DATA SECURITY . . . . . . . . . . 40
10.1 Confidential Information.. . . . . . . . . . . . . . 40
10.2 Obligations. . . . . . . . . . . . . . . . . . . . . 41
10.3 Exclusions.. . . . . . . . . . . . . . . . . . . . . 42
10.4 Protection of Kash n' Karry Information. . . . . . . 42
10.5 Loss of Confidential Information.. . . . . . . . . . 42
10.6 Limitation.. . . . . . . . . . . . . . . . . . . . . 42
10.7 Survival.. . . . . . . . . . . . . . . . . . . . . . 43

ARTICLE 11: EVENTS OF DEFAULT; REMEDIES; TERMINATION. . . . . 43
11.1 Events of Default. . . . . . . . . . . . . . . . . . 43
11.2 Remedies.. . . . . . . . . . . . . . . . . . . . . . 44
11.3 Termination for Cause. . . . . . . . . . . . . . . . 44
11.4 Kash n' Karry Termination without Cause. . . . . . . 45
11.5 Extension of Termination Effective Date. . . . . . . 45
11.6 Termination Assistance.. . . . . . . . . . . . . . . 45
11.7 Other Rights Upon Termination. . . . . . . . . . . . 48
11.8 Burden of Proof. . . . . . . . . . . . . . . . . . . 49

ARTICLE 12: LIABILITY . . . . . . . . . . . . . . . . . . . . 49
12.1 General Intent.. . . . . . . . . . . . . . . . . . . 49
12.2 Limitations on Losses. . . . . . . . . . . . . . . . 50

ARTICLE 13: WARRANTY. . . . . . . . . . . . . . . . . . . . . 51
13.1 Work Standards.. . . . . . . . . . . . . . . . . . . 51
13.2 Maintenance. . . . . . . . . . . . . . . . . . . . . 51
13.3 Claims.. . . . . . . . . . . . . . . . . . . . . . . 51
13.4 Ownership of Kash n' Karry Machines. . . . . . . . . 51
13.5 Noninfringement. . . . . . . . . . . . . . . . . . . 51

ii<PAGE>
[Execution copy]
13.6 Compliance with Obligations. . . . . . . . . . . . . 51
13.7 Warranties and Disclaimer. . . . . . . . . . . . . . 52
13.8 Authorization and Enforceability.. . . . . . . . . . 52
13.9 Regulatory and Corporate Proceedings.. . . . . . . . 53

ARTICLE 14: INDEMNITIES . . . . . . . . . . . . . . . . . . . 53
14.1 Indemnity by GSI.. . . . . . . . . . . . . . . . . . 53
14.2 Indemnity by Kash n' Karry.. . . . . . . . . . . . . 54
14.3 Subrogation. . . . . . . . . . . . . . . . . . . . . 55
14.4 Indemnification Procedures.. . . . . . . . . . . . . 55

ARTICLE 15: INSURANCE AND RISK OF LOSS. . . . . . . . . . . . 56
15.1 Insurance. . . . . . . . . . . . . . . . . . . . . . 56
15.2 Risk of Loss.. . . . . . . . . . . . . . . . . . . . 56

ARTICLE 16: PUBLICITY . . . . . . . . . . . . . . . . . . . . 56

ARTICLE 17: REVIEW COMMITTEE AND DISPUTE RESOLUTION . . . . . 57
17.1 Joint Advisory Committee.. . . . . . . . . . . . . . 57
17.2 Dispute Resolution.. . . . . . . . . . . . . . . . . 57
17.3 Continued Performance. . . . . . . . . . . . . . . . 59

ARTICLE 18: GENERAL . . . . . . . . . . . . . . . . . . . . . 60
18.1 Control of Services. . . . . . . . . . . . . . . . . 60
18.2 Right to Perform Services for Others.. . . . . . . . 60
18.3 Scope of Services. . . . . . . . . . . . . . . . . . 60
18.4 Amendments.. . . . . . . . . . . . . . . . . . . . . 60
18.5 Force Majeure. . . . . . . . . . . . . . . . . . . . 61
18.6 Nonperformance.. . . . . . . . . . . . . . . . . . . 62
18.7 Remarketing. . . . . . . . . . . . . . . . . . . . . 62
18.8 Waiver.. . . . . . . . . . . . . . . . . . . . . . . 63
18.9 Severability.. . . . . . . . . . . . . . . . . . . . 63
18.10 Counterparts.. . . . . . . . . . . . . . . . . . . 63
18.11 Governing Law. . . . . . . . . . . . . . . . . . . 63
18.12 Nondisturbance and Attornment. . . . . . . . . . . 64
18.13 Binding Nature and Assignment. . . . . . . . . . . 64
18.14 Notices. . . . . . . . . . . . . . . . . . . . . . 65
18.15 No Third Party Beneficiaries.. . . . . . . . . . . 67
18.16 Other Documents. . . . . . . . . . . . . . . . . . 67
18.17 Limitation Period Upon Termination.. . . . . . . . 68
18.18 Headings.. . . . . . . . . . . . . . . . . . . . . 68
18.19 Noncompetition Agreement.. . . . . . . . . . . . . 68
18.20 Severability of Contracts.. . . . . . . . . . . 68

ARTICLE 19: BANKRUPTCY CONCERNS . . . . . . . . . . . . . . . 69
19.1 Personal Services Contract.. . . . . . . . . . . . . 69
19.2 Default in the Event of Bankruptcy and Post-Filing
Bankruptcy Remedies for Non-Performance. . . . . . . 69
19.3 Waiver of Automatic Stay . . . . . . . . . . . . . . 70

iii<PAGE>
[Execution copy]

ARTICLE 20: NEW CLIENT INCENTIVES . . . . . . . . . . . . . . 71

TABLE OF SCHEDULES

SECTION IN
SCHEDULE WHICH DEFINED

A - Annual Services Charge 2.1(b)
B - Current Parameter 2.1(k)
C - Data Network Schematic (List of Kash n' Karry
Locations) 2.1(m)
D - Leased Machines 2.1(w)
E - Licenses 2.1(y)
F - Machine Leases 2.1(aa)
G - Maintenance Contracts 2.1(ac)
H - MIS Budget 2.1(ad)
I - Owned Machines 2.1(ah)
J - Point of Sale Machines 2.1(ak)
K - Projects 2.1(al)
K-1 - Point of Sale Project
K-2 - Polling Solution Project
K-3 - Procurement and Billing System Project
K-4 - Accounts Payable Project
K-5 - Labor Tracking and Scheduling Project
L - Retained Contracts 2.1(an)
M - Supporting Data 2.4
N - Transition Plan 3.1
O - Affected Employees 3.2(a)
P - Disaster Recovery Plan 4.12
Q - Help Desk 4.14
R - GSI Corporate Structure 4.17
S - GSI Wire Transfer Instructions 7.1
T - Confidential Information Obligations 10.2; 10.4
U - Termination Charges 11.3; 11.4
V - Maintenance 13.2
W - Claims 13.3

iv<PAGE>
[Execution copy]

DEFINED TERMS

SECTION IN
TERMS WHICH DEFINED

Actual Losses 12.2(b)
Affected Employees 3.2(a)
Affiliate 2.1(a)
Agreement Introduction
Annual Services Charge 2.1(b)
Applications Software 2.1(c)
Assets 2.1(d)
Assignment Instruments 3.3(a)
Bankruptcy Event 19.2
Building 2.1(e)
Building Lease 2.1(f)
Change Control Procedures 4.5(b)
Claim 14.4(a)
Closing Date 2.1(g)
Code 9.1
Commencement Date 2.1(h)
Committed Costs 2.1(i)
Confidential Information 10.1
Consequential Losses 12.2(a)
Contracts 2.1(j)
Control 2.1(a)
Current Parameter 2.1(k)
Data Center 2.1(l)
Data Center Bonus Article 20
Data Network 2.1(m)
Derivative Work 9.1(e)(8)
Develop 9.1
Distribution Center 2.1(n)
Effective Date 2.1(o)
End Users 2.1(p)
End User Locations 2.1(q)
Events of Default 11.1
Force Majeure Event 18.5(a)
GSI Introduction
GSI End User Machines 2.1(r)
GSI Machines 2.1(s)
GSI Materials 9.1(e)(1)
Indemnified Party 14.4(a)
Indemnifying Party 14.4(a)
Introduction Bonus Article 20
Kash n' Karry Introduction
Kash n' Karry End User Machines 2.1(t)
Kash n' Karry Machines 2.1(u)
Kash n' Karry Materials 9.1(e)(2)

v<PAGE>
[Execution copy]

Kash n' Karry Offices 2.1(v)
Leased Machines 2.1(w)
Leases 2.1(x)
Licenses 2.1(y)
Lines 4.7
Losses 2.1(z)
Machine Leases 2.1(aa)
Machines 2.1(ab)
Maintenance Contracts 2.1(ac)
MIS Budget 2.1(ad)
MIS Department 2.1(ae)
Modifications 18.20
Monetary Event of Default 11.1(a)
Moves, Adds and Changes or MAC 2.1(af)
New GSI Software 2.1(ag)
Owned Machines 2.1(ah)
Payment Terms 2.1(ai)
Platform 2.1(aj)
Point of Sale Machines 2.1(ak)
Procedures Manual 4.5(a)
Projects 2.1(al)
Required Consents 2.1(am)
Retained Contracts 2.1(an)
Schedules 2.3
Services 2.1(ao)
Store 12.1(b)
Subcontractor 2.1(ap)
Supplies 2.1(aq)
Supporting Data 2.4
Systems Software 2.1(ar)
Term 2.5
Termination Assistance 11.6(a)
Transferred Employees 3.2(b)
Transition Plan 3.1
Transition 2.1(as)
Transition Period 2.1(at)
Type I Materials 9.1(a)
Type II Materials 9.1(b)
Type III Materials 9.1(c)
Type IV Materials 9.1(d)
Type V Materials 9.1(e)

vi<PAGE>
[Execution copy]

KASH N' KARRY FOOD STORES, INC./GSI OUTSOURCING CORPORATION
SERVICES AGREEMENT

This Services Agreement (the "Agreement"), dated as of March
1, 1995, is by and between Kash n' Karry Food Stores, Inc., a
Delaware corporation having its principal place of business at 6422
Harney Road, Tampa, Florida 33610 ("Kash n' Karry"), and GSI
Outsourcing Corporation, a Delaware corporation and a subsidiary of
GSI - U.S.A. Incorporated, a Delaware corporation, having its
principal place of business at 6401 Harney Road, Tampa, Florida
33610 ("GSI").

ARTICLE 1: BACKGROUND AND OBJECTIVES

Kash n' Karry desires that all of the information systems
operations and related services and functions currently performed
by or for Kash n' Karry by its MIS Department be performed and
managed by GSI, and that GSI complete certain Projects relating to
those services.

After careful evaluation of GSI's proposals, Kash n' Karry has
agreed to engage GSI to render Services and to complete certain
Projects during the Term. After careful evaluation of Kash n'
Karry's industry, business operations and needs, and GSI's ability
to satisfy such needs, GSI has agreed to perform the Services and
to complete the Projects. This Agreement documents the terms and
conditions of such arrangement. The parties agree that this is a
personal services agreement and that their respective rights and
obligations herein are inextricably intertwined.

ARTICLE 2: DEFINITIONS, DOCUMENTS AND TERM

2.1 General Definitions.

As used in this Agreement and unless the context otherwise
plainly requires, the terms defined in this Agreement shall have
the meanings ascribed to them in this Section 2.1, and shall
include the plural as well as the singular number:

(a) "Affiliate" means, with respect to a person, any person
controlling, controlled by or under common control with, such
person. The term "control," when used with respect to a
person, shall mean the legal, beneficial or equitable
ownership, directly or indirectly, of more than 50% of the
aggregate of all voting equity interests in such person.

(b) "Annual Services Charge" shall mean the total fee charged by
GSI to Kash n' Karry in consideration for providing the

1<PAGE>
[Execution copy]

Services for any 12 month period during the Term hereof in the
amount set forth on Schedule A hereto, as the same may be
amended from time to time pursuant to this Agreement.

(c) "Applications Software" means those programs and programming,
including all supporting documentation and media, that perform
specific user-related data processing and telecommunication
tasks used in providing Services.

(d) "Assets" means all of Kash n' Karry's right, title and
interest in the Building and the Leased Machines under the
Leases, and in the Applications Software and Systems Software
under the Licenses, all of its assignable rights and
privileges under the Contracts, and all of its right, title
and interest in the Owned Machines, the GSI End User Machines
and in any other properties that are owned or leased by Kash
n' Karry and used by the MIS Department as of the Effective
Date to provide services that will be performed by GSI during
the Term, but excluding the Lines and the Kash n' Karry
Machines.

(e) "Building" means the leasehold premises occupied by Kash n'
Karry for use as its Data Center at 6401 Harney Road, Tampa,
Florida 33610 pursuant to the Building Lease.

(f) "Building Lease" means that certain Lease Agreement dated
December 7, 1992, between Kash n' Karry and Ferris-Funk
Associates, as modified from time to time, pursuant to which
Kash n' Karry occupies the Building as of the Effective Date.

(g) "Closing Date" means the latest of March 1, 1995, such later
date on which the parties agree in writing to complete the
Transition hereunder, or 30 days after the Effective Date.

(h) "Commencement Date" means January 2, 1995.

(i) "Committed Costs" means all reasonable and necessary costs and
expenses of whatever nature of GSI relating to GSI's
investment in the Assets, the GSI Machines, the GSI End User
Machines, the Projects, and any property acquired or used by
GSI in rendering the Services to Kash n' Karry, and, in the
event this Agreement is terminated, also includes the
following:

(1) All fees, penalties or other charges incurred by GSI by
reason of the termination of any unexpired hardware
leases, software licenses and contracts for services used
in providing the Services to Kash n' Karry;

2<PAGE>
[Execution copy]

(2) Net book value of GSI-owned hardware or software used in
providing the Services to Kash n' Karry, including the
GSI Machines and GSI End User Machines;

(3) Removal of assets (e.g., shipping, storage expense,
reconfiguration of Machines) used in providing the
Services to Kash n' Karry;

(4) Expenses incurred by GSI in maintaining or repairing the
assets used in providing the Services to Kash n' Karry
(excluding such expenses associated with normal wear and
tear);

(5) Severance pay and placement assistance expenses, if any,
paid by GSI in accordance with its standard severance
policy to such of its employees who were, as of the
termination date, engaged in the provision of Services
hereunder;

(6) All costs relating to the Building arising on or after
the termination date;

(7) Any adverse impact on any other client account held by
GSI in which GSI found synergies based upon this
Agreement; provided, however, that Kash n' Karry will pay
a proportionate part corresponding to the relative
Services provided by GSI to Kash n' Karry and GSI's other
customers; and

(8) The direct costs incurred by GSI in performing Services
for Kash n' Karry in connection with the divestment by
GSI in any property acquired or used by GSI in rendering
the Services, including, without limitation,
installation, security and surveillance, and consulting
fees, to the extent such direct costs were not previously
invoiced to and paid by Kash n' Karry.

(j) "Contracts" means the Leases, the Licenses and the Maintenance
Contracts, but excluding the Retained Contracts.

(k) "Current Parameter" means the current computing capacity and
standard MIS functions of the MIS Department reflected in the
MIS Budget, and all services currently performed by the MIS
Department, as of the Commencement Date, as described more
specifically in Schedule B.

(l) "Data Center" means the Machines and the Applications Software
and Systems Software located or used at the Building, or any
other location from which GSI may provide Services.
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(m) "Data Network" means all Machines, Point of Sale Machines,
local area networks, associated attachments, features and
accessories, Applications Software, Systems Software and
cabling (excluding, however, public telephone lines) used to
connect and transmit data between the Data Center and Kash n'
Karry locations listed in Schedule C, including, but not
limited to, communication controllers, multiplexors,
modems/DSUs, up to and including the terminal control units,
but does not include Kash n' Karry End User Machines or GSI
End User Machines. The Data Network does not include any
public switched or dial-up network, which are not under the
control of GSI.

(n) "Distribution Center" means the central warehouse and
distribution facility operated by Kash n' Karry at 6422 Harney
Road, Tampa, Florida, and the returns processing center
operated by Kash n' Karry at 1432 Tampa East Boulevard,
Tampa, Florida.

(o) "Effective Date" means the date on which the parties execute
and deliver this Agreement.

(p) "End Users" means employees or Subcontractors of Kash n' Karry
who access the Applications Software.

(q) "End User Locations" means those locations in which Kash n'
Karry End User Machines or GSI End User Machines, equipment
and associated software are located, which locations are
facilities or floors in facilities outside the Data Center.

(r) "GSI End User Machines" means all Point of Sale Machines and
all existing (as of the Effective Date) host-attached
terminals located at the Kash n' Karry Offices, Kash n'
Karry's stores and the Distribution Center.

(s) "GSI Machines" means machines within the Data Center and Data
Network which are provided by GSI on or after the Commencement
Date in order to meet its obligations under this Agreement,
including, without limitation, Owned Machines, Leased Machines
and GSI End User Machines to be acquired from Kash n' Karry on
the Closing Date.

(t) "Kash n' Karry End User Machines" means all stand alone
terminals, work stations, local area network servers and
associated peripheral equipment title to which is retained by
Kash n' Karry on the Closing Date or is acquired by Kash n'
Karry from time to time during the Term, such as, by way of
example, PC machines used by Kash n' Karry in its pharmacy and
video departments and its administrative offices, but
excluding any such items included within the Data Network or
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the Data Center, and excluding GSI End User Machines located
at End User Locations.

(u) "Kash n' Karry Machines" means all machines that are part of
the Current Parameter within the Data Center and Data Network,
title to which is retained by Kash n' Karry on the Closing
Date, and all such machines that are acquired by Kash n' Karry
from time to time during the Term, including, without
limitation, the Kash n' Karry End User Machines, but excluding
the Owned Machines and the Leased Machines.

(v) "Kash n' Karry Offices" means the offices occupied by the
senior management of Kash n' Karry from time to time during
the Term hereof, which were located at 6422 Harney Road,
Tampa, Florida, as of the Commencement Date.

(w) "Leased Machines" means those machines and Applications
Software and Systems Software leased by Kash n' Karry as of
the Commencement Date pursuant to the Leases. Leased Machines
are specified in Schedule D.

(x) "Leases" means the Building Lease and the Machine Leases.

(y) "Licenses" means those written contractual arrangements under
which Kash n' Karry received the right to use the Applications
Software, Systems Software, hardware and other products for
which GSI has undertaken or will undertake financial and
administrative responsibility as of the Closing Date.
Licenses are listed in Schedule E.

(z) "Losses" means all losses, liabilities, damages and claims
(including taxes), and all related costs and expenses
(including any and all reasonable attorneys' fees and
reasonable costs of investigation, litigation, settlement,
judgment, interest, penalties and all other out-of-pocket
expenses, but does not include staff time or items of general
overhead).

(aa) "Machine Leases" means those leases identified on Schedule F
to which Kash n' Karry was a party as of the Effective Date,
and pursuant to which Kash n' Karry used and possessed the
Leased Machines as of the Effective Date.

(ab) "Machines" means either or both of Kash n' Karry Machines and
GSI Machines, as applicable.

(ac) "Maintenance Contracts" means those written contractual
arrangements listed on Schedule G under which Kash n' Karry
has arranged for maintenance or other service with respect to
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Applications Software, Systems Software, Owned Machines,
Leased Machines, Kash n' Karry Machines, and the Lines.

(ad) "MIS Budget" means the combined annual operating budget of
$8.079 million for the MIS Department and the Point of Sale
Machines and related functions included in the Current
Parameter based on Kash n' Karry's fiscal year ended July 31,
1994, according to the handwritten annotations to that certain
report run date of August 20, 1994, a copy of which is
attached hereto as Schedule H.

(ae) "MIS Department" means the group of employees and
subcontractors of Kash n' Karry who, as of the Commencement
Date, provided to Kash n' Karry the information services
operations and related services and functions to be performed
and managed by GSI pursuant to this Agreement.

(af) "Moves, Adds and Changes" or "MAC" means the relocation,
replacement, or removal of Point of Sale Machines or Kash n'
Karry End User Machines. Unless otherwise specifically
provided in this Agreement, MAC refers only to the removal or
replacement service (manpower) (and insuring that, once
installed, such machines are functioning) and does not include
the costs related to the Point of Sale Machines, other devices
or functions required for the move or change, or the cabling
for a physical modification to the locations necessary to
effectuate a MAC with respect to Point of Sale Machines.

(ag) "New GSI Software" means Applications Software and Systems
Software acquired or developed by GSI from time to time during
the Term, by license or otherwise, for use in connection with
the performance of Services.

(ah) "Owned Machines" means machines owned by Kash n' Karry as of
the Commencement Date that are part of the Current Parameter
within the Data Center and Data Network. Owned Machines are
specified on Schedule I.

(ai) "Payment Terms" means the method by which Kash n' Karry and
GSI shall make payments to each other as set forth in Article
7.

(aj) "Platform" means, with respect to a given item of computer
equipment, the type of computer and the type of operating
system on which such item operates, such as, by way of
example, "mainframe/MVS," "Sun/Unix," and "IBM/4690."

(ak) "Point of Sale Machines" means the equipment and existing
in-store processors currently installed in Kash n' Karry's 99
retail locations and in the training center, and the equipment
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and in-store processors which shall be added or which shall
replace such items, as described in Schedule J. Point of Sale
Machines do not include hand-held scanners currently being
utilized in the Kash n' Karry retail locations.

(al) "Projects" means the Services outside of the Current Parameter
as identified in Schedules K-1 through K-5 attached to this
Agreement.

(am) "Required Consents" means any consents or approvals required
to be obtained by either party for the licensing or transfer
to the other party of the right to use applicable facilities,
space, equipment, software or third party services.

(an) "Retained Contracts" means the agreements between Kash n'
Karry and certain lessors or vendors relating to contracts
used in connection with the rendering of the services with
respect to the Current Parameter which are not assigned by
Kash n' Karry to GSI on the Closing Date, including, without
limitation, those described in Schedule L.

(ao) "Services" means those services and functions which GSI agrees
to provide to Kash n' Karry pursuant to this Agreement,
including those described on the attached Schedules.

(ap) "Subcontractor" means any person engaged on a subcontract
basis by GSI or Kash n' Karry in accordance with the terms and
conditions hereof to perform all or any part of the Services
or GSI's or Kash n' Karry's obligations hereunder.

(aq) "Supplies" means microfiche, paper, ink, ribbons, floppies,
printing heads, tapes (cartridges), toner and other similar
items.

(ar) "Systems Software" means those programs and programming,
including all supporting documentation and media, that perform
tasks basic to the functioning of the data processing and
telecommunication equipment and which are required to operate
the Applications Software or otherwise support the provision
of Services by GSI or provide the Services themselves.

(as) "Transition" means the process by which all of the Assets and
Transferred Employees will be transferred to GSI on or before
the Closing Date.

(at) "Transition Period" means the period of time beginning on the
Commencement Date and ending on the earlier of (i) the Closing
Date, or (ii) in the event of a termination of this Agreement
pursuant to Section 3.10, the expiration of GSI's obligations
to manage the MIS Department pursuant to Section 3.10(c).
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2.2 Other Definitions.

Certain other terms are defined in this Agreement and are used
with the meanings so ascribed to them. References to the
definitions of such terms are set forth on pages (iv) through (vi)
of this Agreement.

2.3 Associated Contract Documents.

This Agreement also includes the various "Schedules" attached
hereto, which may be updated in writing and on a mutually-agreed
basis by the parties as necessary or appropriate during the Term;
provided, however, in the event of any conflict between the terms
and conditions of the Schedules on the one hand and this Agreement
on the other, the terms and conditions of the Schedules shall
control and shall govern. In connection therewith, the parties
agree that in the event of any apparent conflicts or
inconsistencies between this Agreement or any Schedules, to the
extent possible such provisions shall be construed and interpreted
so as to make them consistent.

2.4 Supporting Data.

All proposals, documents and information relied upon by the
parties will be identified or attached as Schedule M, which will
evidence the parties' intentions and objectives in entering into
the Agreement. To the extent the Agreement is unclear or
ambiguous, the Agreement will be interpreted and construed with
reference to Schedule M, which will be hereafter collectively
referred to as the "Supporting Data."

2.5 Term.

The term of this Agreement (the "Term") will begin as of 12:01
a.m. EST on the Commencement Date and will end as of 12:00 midnight
EST on December 31, 2004, unless earlier terminated or extended in
accordance with this Agreement.

2.6 Renewal and Expiration.

GSI agrees to notify Kash n' Karry in writing, on or before
January 1, 2004, whether it desires to renew this Agreement and of
GSI's proposed prices and terms to govern such renewal. If GSI
notifies Kash n' Karry that it desires to renew this Agreement,
Kash n' Karry agrees to inform GSI in writing, on or before June
30, 2004, whether it desires to renew this Agreement.

If Kash n' Karry and GSI both desire to renew the Agreement as
described in such notices, the parties agree to negotiate in good
faith regarding the prices, terms and conditions of such renewal,
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but if the parties are unable to agree upon renewal prices, terms
and conditions on or before January 1, 2005, this Agreement may, at
Kash n' Karry's option, be extended for up to one year at the then
current GSI market prices, terms and conditions, not to exceed the
prices in effect under this Agreement during the tenth year of the
Agreement. If the parties are unable to reach agreement on renewal
during the Term or such extension period, if applicable, this
Agreement will expire at the end of the Term or such extension
period, if applicable.

ARTICLE 3: TRANSITION

3.1 Overview.

There will be a Transition Period which may not be extended by
the parties. During the Transition Period, GSI will, with the
assistance of Kash n' Karry, be responsible for managing the MIS
Department and effecting the Transition; provided, however, that
Kash n' Karry will make available to GSI all resources and
personnel necessary to perform such services, including, without
limitation, the Applications Software and Systems Software; and
provided, further, that if a disaster occurs during the Transition
Period and if GSI is not at fault, then GSI will be responsible
only for putting into effect Kash n' Karry's existing disaster
recovery plan to the best of GSI's ability.

During the Transition Period, the parties will commence and
complete a phased Transition of the necessary staff and resources
from Kash n' Karry to GSI as described in (i) this Article 3 and
(ii) in a written transition plan to be mutually agreed upon by the
parties and attached hereto as Schedule N (the "Transition Plan"),
so that, at the end of the Transition Period all such resources and
personnel necessary to enable GSI to adequately perform the
Services, except for Retained Contracts, if any, shall be
transferred to GSI on or before the Closing Date. Kash n' Karry
will cooperate with GSI in accomplishing all aspects of the
Transition, including the commission of the resources necessary to
complete the Transition during the Transition Period. GSI hereby
agrees to use all reasonable efforts during the Transition Period
to cause the phased Transition of the necessary staff and resources
from Kash n' Karry to GSI as described in this Article 3 and in the
Transition Plan to occur with as little disruption to the business
operations of Kash n' Karry as is possible under the circumstances.

Kash n' Karry agrees to cooperate and assist GSI in completing the
Transition described in this Article 3 and the Transition Plan by
devoting appropriate resources to such Transition.

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3.2 Staff.

(a) Kash n' Karry will use reasonable efforts to maintain staffing
of the Data Network and Data Center during the Transition
Period; provided, however, that:

(1) GSI acknowledges that Kash n' Karry may lose staff during
the Transition Period, and

(2) Kash n' Karry acknowledges that a loss of staff generally
or loss of certain critical employees may affect
completion of the Transition within 30 days after the
Effective Date.

Within 10 days after the Effective Date, GSI or its
Subcontractors will offer, or cause to be offered, employment
to those Kash n' Karry employees listed on Schedule O (the
"Affected Employees"). Subject to the provisions of Section
3.2(b), such employment will become effective on the Closing
Date. All such employment will be at will, and nothing in
this Agreement shall be construed as an obligation on either
Kash n' Karry or GSI to employ the Affected Employees for a
definite term.

(b) GSI or its Subcontractors will hire those Affected Employees
receiving offers who:

(1) are employed by Kash n' Karry as of the date the offer is
made,

(2) meet GSI's or its Subcontractors' customary pre-
employment screening procedures for health and drug
testing and accuracy of background information, and

(3) accept the offer of employment from GSI or its
Subcontractors within ten days from the date the offer is
made.

Affected Employees meeting each of the above conditions and
hired by GSI or its Subcontractors shall be known as the
"Transferred Employees." On or before the Closing Date, Kash
n' Karry will pay to such Transferred Employees all monies
owed to them by reason of their employment with Kash n'
Karry, on a prorata basis as of the Closing Date. GSI shall
indemnify and hold Kash n' Karry harmless from any Losses
incurred by Kash n' Karry with respect to the Transferred
Employees caused by or arising directly or indirectly from
actions or omissions of GSI on or after the Closing Date.
Kash n' Karry shall indemnify and hold GSI harmless from any
Losses incurred by GSI with respect to the Transferred

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Employees caused by or arising directly or indirectly from
actions or omissions of Kash n' Karry before the Closing Date.

(c) During the Transition Period, all Affected Employees remaining
on Kash n' Karry's payroll shall perform their duties under
the direction and control of Kash n' Karry, and will be
treated as Kash n' Karry employees for all purposes; provided,
however, that nothing herein shall be interpreted so as to
relieve GSI of its obligations to provide the Services as of
the Commencement Date in accordance with this Agreement.

(d) Replacements for the Affected Employees who choose to leave
Kash n' Karry's employ during the Transition Period shall be
selected by GSI as it deems necessary, at GSI's expense and as
GSI's employees, and GSI shall pay (at its expense) all salary
and benefits for such replacements.

(e) Each offer of employment to an Affected Employee shall include
an initial base salary at least equal to the base salary each
such Affected Employee currently receives from Kash n' Karry,
and a benefits package which is substantially similar to that
currently received by such employees while employed by Kash n'
Karry; provided, however, that titles of Affected Employees
may, in GSI's sole judgment, vary.

(f) During the Transition Period:

(1) Denise Matthys will act as MIS Coordinator and report to
Tony Petrillo or Kash n' Karry's successor CEO,

(2) John Patrick will work for Kash n' Karry in the spirit of
joining GSI on the Closing Date, and will be the GSI
Account Executive, and

(3) GSI will report directly to Tony Petrillo, or Kash n'
Karry's successor CEO.

(g) Kash n' Karry will appoint "champions" (department heads,
director level or above), who will interact as focal point
with GSI for any information services business domain, e.g.,
for business functions, business specifications writing, and
department organizational issues.

3.3 Transfer of Assets and Contracts.

(a) On the Closing Date, Kash n' Karry shall transfer to GSI all
of the Assets, and GSI shall assume the obligations of Kash n'
Karry under the Contracts. Without limitation of the
foregoing, on the Closing Date, Kash n' Karry shall execute
and deliver to GSI a general bill of sale and such other
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instruments of conveyance as may be appropriate to convey to
GSI all of the right, title and interest of Kash n' Karry in
the Assets, and an instrument of assignment and assumption
with respect to each of the Contracts (the "Assignment
Instruments"), and GSI shall execute and deliver to Kash n'
Karry the Assignment Instruments. Kash n' Karry shall retain,
and shall not transfer to GSI, the Kash n' Karry Machines, the
Lines, and any and all proprietary information and data
generated by Kash n' Karry in the operation of its business.

(b) As of the Closing Date, GSI will be responsible for managing
and performing all of Kash n' Karry's obligations under the
Contracts arising on or after the Closing Date, to the extent
that such obligations:

(1) are performable by GSI (as opposed to Kash n' Karry);
provided, however, that GSI agrees to similarly perform
any obligations contained in any Contract that are
obligations of Kash n' Karry. For example, and not by
way of limitation, if Kash n' Karry has agreed in a
Contract that Kash n' Karry will keep certain information
regarding such Contract confidential, Kash n' Karry shall
not be relieved of such obligation by this Agreement but
GSI shall also perform such obligation in accordance with
its terms; and

(2) were disclosed to GSI on or before the Closing Date;

provided, however, that nothing contained in this Section
shall constitute or be deemed to constitute an assignment or
assumption of the Contracts prior to the Closing Date;
provided, further, however, that GSI will not be responsible
for any illegal or pirated Applications Software or Systems
Software, or balloon payments accruing prior to the Closing
Date.

(c) Kash n' Karry warrants that all obligations with respect to
the Contracts accruing prior to the Closing Date will be
satisfied. Kash n' Karry shall, upon the written request of
GSI from time to time during the Term, terminate any Contracts
and GSI shall reimburse Kash n' Karry for any termination
charges or penalties; provided, however, that Kash n' Karry
will make its best reasonable efforts to maintain such charges
or penalties as low as possible. GSI shall indemnify and hold
Kash n' Karry harmless from any and all Losses caused by or
arising out of any such requested termination and shall
further indemnify and hold Kash n' Karry harmless from any
failure of GSI to perform any or all of GSI's obligations
under the Contracts in the manner described in this Section
3.3 from and after the Closing Date. Kash n' Karry shall
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indemnify and hold harmless GSI from any and all Losses caused
by or arising out of any failure of Kash n' Karry to perform
any or all of Kash n' Karry's obligations under the Contracts
prior to the Closing Date.

(d) In its sole discretion GSI may, at its expense, obtain from
sources satisfactory to GSI products or services to replace
those covered by any Contract which either expires by its
terms during the Term of this Agreement or is terminated by
GSI in accordance with the requirements of Section 3.3(c). In
either such event, GSI shall comply fully with any obligations
of Kash n' Karry regarding such termination or expiration as
described in this Article 3. Any such replacement and/or
termination shall not relieve GSI from its obligations to
perform the Services.

3.4 Required Consents and Retained Contracts.

(a) Kash n' Karry shall use its reasonable best efforts to obtain
all Required Consents to the assignment to, and assumption by,
GSI of the Assets, or to otherwise enable GSI to use the
Applications Software, the Systems Software, the Building, the
Leased Assets, and services provided under the Contracts.
Kash n' Karry shall bear the costs, if any, of obtaining all
such Required Consents; provided, however, that if Kash n'
Karry reasonably determines that the cost of obtaining any
particular Required Consent is prohibitive, then Kash n' Karry
may elect to designate such contract as a Retained Contract.
In the event that any Required Consent is not obtained with
respect to any given Contract, then, unless and until such
Required Consent is obtained, the parties shall cooperate with
each other in achieving a reasonable alternative arrangement
for Kash n' Karry to continue to process its work with minimum
interference to its business operations.

(b) If Kash n' Karry and GSI agree prior to the Closing Date that
Kash n' Karry will not assign certain Contracts, e.g., due to
costs associated with assigning the Contract, then the parties
will amend Schedule L to include such Contracts as Retained
Contracts. During the Term, and to the extent permitted by
law and the vendor, GSI, acting as Kash n' Karry's agent, will
manage, administer and maintain the Retained Contracts and
will have full use of the equipment and Applications Software
covered thereby, including for other clients' use. With Kash
n' Karry's consent, GSI may modify, renew or terminate the
Retained Contracts, and Kash n' Karry will pay any related
fees or charges, except to the extent the fees or charges are
caused by GSI's negligence or willful acts in managing the
Retained Contract. Upon receipt of Requisite Consent to the
assignment of a Retained Contract, or otherwise with the
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approval of Kash n' Karry, GSI may request Kash n' Karry to
assign such Retained Contract to GSI.

3.5 Agency and Disbursements.

Beginning on the Closing Date and for so long as no Monetary
Event of Default by Kash n' Karry shall have occurred and be
continuing, GSI will pay, fully and on time, the lessors, vendors
and suppliers identified in all of the Contracts. Subject to its
obligation to pay applicable termination charges and its
obligations to indemnify Kash n' Karry in accordance under Section
3.3, GSI may cancel, substitute, or change such lessors, vendors or
suppliers as it chooses so long as GSI continues to perform the
Services in the manner required by this Agreement.

3.6 Joint Verification.

During the Transition Period, GSI and Kash n' Karry reserve
the right to inventory, validate and update the Supporting Data and
any other material information that is reflected in or omitted from
the attached Schedules, and more particularly, the MIS Budget,
which was used by GSI as a basis for its offer to Kash n' Karry.
Any changes shall be mutually agreed to by the parties in writing.
If material discrepancies are detected during the Transition
Period, there shall be a fair adjustment made, which will be
confirmed in writing by the parties. Prior to the Closing Date,
the parties agree to negotiate in good faith any adjustments to the
Annual Services Charge attributable to any Retained Contracts,
costs related to assigning the Assets, commitments, postponed or
retroactive payments, material costs and liabilities not disclosed
in the Supporting Data, costs reallocated between the parties
pursuant to negotiations, etc.

3.7 Other Obligations.

Beginning on the earlier of the Effective Date or the Closing
Date, and except in the case of emergency, Kash n' Karry will not
enter into any new or amend any existing agreements or
arrangements, written or oral, affecting or impacting upon Affected
Employees (provided, however, that GSI acknowledges that Affected
Employees may leave Kash n' Karry's employ) or the Assets without
the prior written consent of GSI, which consent shall not be
unreasonably withheld or delayed. Kash n' Karry acknowledges and
agrees that, notwithstanding any consent granted or refused by GSI
as described above, any new or amended agreements or arrangements
may impact GSI's cost in providing the Services and therefore may
require an adjustment to the Annual Services Charge. Any such
adjustment shall be mutually agreed upon by the parties in writing.
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3.8 Documentation.

Prior to the Closing Date, Kash n' Karry will provide GSI with
all documentation in its possession relating to the Assets and any
other resource to be used by GSI in rendering the Services. Where
no such documentation exists, Kash n' Karry will provide GSI with
all information reasonably available to Kash n' Karry. After the
Closing Date, this documentation shall still be considered by Kash
n' Karry as reasonable, and GSI will have no specific obligation to
improve it.

3.9 Service Charges During Transition Period.

During the Transition Period, Kash n' Karry will pay GSI its
monthly compensation, based on the monthly prorated Annual Services
Charge, in arrears, after deducting all costs and expenses
associated with the Agreement paid or incurred by Kash n' Karry
during the Transition Period. Prior to the Closing Date, the
parties agree to negotiate in good faith any adjustments to the
Annual Services Charge attributable to any Retained Contracts,
costs relating to assigning the Assets, material costs and
liabilities not disclosed in the MIS Budget, and any costs
reallocated between the parties pursuant to negotiations during the
Transition Period. On or before the Closing Date, a reconciliation
and substantiation of all costs and expenses paid by Kash n' Karry
during the Transition Period will be made.

3.10 Closing of Transition Period.

(a) Kash n' Karry may terminate this Agreement, in its sole
discretion, at any time prior to the Closing Date by
delivering written notice to GSI executed by the Chief
Executive Officer of Kash n' Karry, subject to the approval of
Kash n' Karry's Board of Directors, which approval will not be
unreasonably withheld. If Kash n' Karry terminates this
Agreement pursuant to this Section 3.10, it will promptly
reimburse GSI its reasonable costs and expenses paid during
the Transition Period in performing its obligations under this
Agreement, including any costs relating to any Machines, End
Users Machines, Applications Software and Systems Software
purchased by GSI for the Services and the Projects; provided,
further, that GSI will transfer to Kash n' Karry all of GSI's
rights, title and interest in property or rights to use
property associated with costs paid by Kash n' Karry.

(b) GSI may terminate this Agreement at any time prior to the
Closing Date by delivering written notice to Kash n' Karry
executed by Philippe Guionnet, if but only if: (1) there is a

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newly-discovered specific liability or cost that was not
disclosed in the MIS Budget and its associated Supporting
Data, and (2) Kash n' Karry elects not to pay the newly-
discovered liability or cost, and (3) Kash n' Karry and GSI
cannot arrange to pay, indemnify against, work out or
otherwise avoid the cost or liability.

(c) If either party elects to terminate this Agreement prior to
the Closing Date, pursuant to this Section 3.10, then, until
the earlier of the engagement by Kash n' Karry of a successor
vendor to perform the Services, or the expiration of four
months from the delivery by the terminating party of the
written notice of termination: (1) GSI will continue to
manage the MIS Department within the Current Parameter, and on
the other terms and conditions of this Article 3, (2) John
Patrick will remain employed at Kash n' Karry at GSI's cost,
and (3) the parties agree not to take legal action against
each other or their employees based on the decision to
terminate this Agreement.

ARTICLE 4: GSI RESPONSIBILITIES

4.1 GSI Personnel.

(a) GSI will designate, prior to the Closing Date, a Project
Executive to whom all of Kash n' Karry's communications may be
addressed and who has the authority to act for and bind GSI
and its Subcontractors in connection with all aspects of this
Agreement.

(b) Before assigning an individual to the position of Project
Executive, whether the individual is initially assigned or is
subsequently assigned, GSI shall:

(1) notify Kash n' Karry in writing, at least 30 days in
advance of the proposed assignment,

(2) introduce the individual to appropriate Kash n' Karry
representatives, and

(3) consistent with GSI's personnel practices, provide Kash
n' Karry with any other information about the individual
reasonably requested by Kash n' Karry.

GSI agrees to discuss with Kash n' Karry any objections Kash
n' Karry may have to such assignment, and attempt to resolve
such concerns on a mutually agreeable basis. GSI agrees that
if Kash n' Karry shall have reasonable and good faith
objections to any proposed Project Executive which cannot be

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resolved by the parties, GSI shall propose a different
individual to serve as Project Executive, and shall go through
the process and provide the information set forth above
regarding such individual.

(c) In the event of a change in a Project Executive, GSI is
permitted to hire an interim Project Executive pending
completion of the procedure set forth in this Section 4.1(a)
with respect to the selection of a Project Executive.

(d) GSI reserves the right to employ Subcontractors to perform
part (but not all) of its obligations hereunder; provided,
that the majority of employees performing the Services will be
employees of GSI. GSI agrees that all Subcontractors employed
by GSI shall:

(1) work under GSI's guidelines, and as to each such
Subcontractor, be bound by all of GSI's obligations
contained herein regarding confidentiality; and

(2) follow the reasonable workplace rules of conduct of Kash
n' Karry.

(e) In the event that Kash n' Karry reasonably and in good faith
determines that it is not in the best interests of Kash n'
Karry for any GSI employee or Subcontractor to continue to
perform any of the Services, then Kash n' Karry shall give GSI
written notice, specifying the reasons for its position, and
requesting that the employee or Subcontractor be replaced.
Promptly after its receipt of such notice, GSI shall
investigate the matters stated in the notice and conclude such
investigation within 30 days following GSI's receipt of Kash
n' Karry's notice. If it determines that Kash n' Karry's
concerns are reasonable, GSI shall ensure that such employee
or Subcontractor no longer performs any of the Services for
Kash n' Karry.

(f) GSI agrees that Kash n' Karry shall have no obligation of any
kind or character to any such Subcontractor, and GSI hereby
agrees to indemnify and hold Kash n' Karry harmless from any
and all Losses caused by or arising from the claims of any
Subcontractor against Kash n' Karry or the claims of any
person asserting a claim against Kash n' Karry by or through
the Subcontractor. GSI further agrees that the use of any
Subcontractor shall not in any way relieve GSI of all or any
part of its obligations hereunder.

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4.2 Standards.

(a) For so long as no Event of Default by Kash n' Karry has
occurred and is continuing, GSI agrees to provide the Services
in accordance with this Agreement. The parties agree that
nothing contained in this Section 4.2(a) is intended to waive,
limit or release the provisions of Sections 11.3, 11.4 or 17.3
hereof.

(b) GSI agrees that its performance of the Services will meet or
exceed each of its obligations under this Agreement,
including, but not limited to, meeting or exceeding the
services and functions established in the Current Parameter;
provided, however, so long as GSI fulfills such obligations,
GSI has no obligation to: (1) retain certain employees,
(2) employ a minimum number of employees, (3) retain the Unix
excess capacity or functions, or (4) maintain each and every
component of the computing capacity reflected in the Current
Parameter.

(c) If GSI stops providing Services that are critical to Kash n'
Karry's core operations, Kash n' Karry is entitled to do
whatever is necessary to maintain the Current Parameter and
the Projects, and GSI will pay or reimburse Kash n' Karry for
any additional reasonable and substantiated costs paid or
incurred by Kash n' Karry in covering the default provided
Kash n' Karry has exhausted the dispute resolution procedures
set forth in this Agreement.

4.3 Efficient Use of Resources.

GSI shall take all commercially reasonable actions to
efficiently use resources that will become chargeable to Kash n'
Karry under this Agreement, including, but not limited to:

(a) making schedule adjustments (consistent with Kash n' Karry's
priorities and schedules for the Services and GSI's obligation
to meet the Current Parameter);

(b) delaying the performance of noncritical functions within
established limits; and

4.4 Technological Advancements.

(a) GSI promises that it will, without additional charge to Kash
n' Karry, maintain the Applications Software (excluding
specifically the Wingz Product), and pass on to Kash n' Karry
any "evolutive" and corrective enhancements made by software

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vendors pursuant to their maintenance agreements with GSI.
Any additional costs relating to enhancements of Applications
Software will, to the extent not already included within the
contract price paid to the software vendor or provided
pursuant to Section 4.8(a) hereof, be paid by Kash n' Karry.
GSI agrees to maintain all Systems Software so that there will
be no obsolete Systems Software.

(b) In the event that during the Term Kash n' Karry becomes aware
of any commercially available, significant, technological
advancement in Kash n' Karry's industry or in the information
systems industry that, if implemented by GSI with Kash n'
Karry's investment, would materially reduce GSI's overall Kash
n' Karry-related investment and/or the net cost of providing
the Services to Kash n' Karry (excluding Committed Costs),
Kash n' Karry may notify GSI of any such advancement. GSI and
Kash n' Karry agree to then negotiate promptly and in good
faith with reasonable diligence to determine (i) if there is
mutually beneficial advantage in implementing such technology;
and (ii) the reduction of the charges payable by Kash n' Karry
under this Agreement that would result from the implementation
of such technology; provided, however, GSI shall not be
required to negotiate a reduction of its fees under this
Section 4.4(b) more frequently than once per calendar year.

4.5 Management and Control.

(a) Within 90 days after the Closing Date, GSI shall provide to
Kash n' Karry a written procedures manual describing the
business processes and procedures relating to the Services
(the "Procedures Manual"). At a minimum, the Procedures
Manual will reasonably describe the Platforms and Applications

Software being used, and include the documentation (i.e.,
training guides, action plans, implementation plans/goals,
communication plans for issue management, business plans,
etc.) for such Platforms and Applications Software. The
Procedures Manual shall be written in nontechnical language
that can be understood by the Kash n' Karry employees working
with GSI in connection with this Agreement.

(1) The Procedures Manual shall be provided to Kash n' Karry
for review and comment and any reasonable comments or
suggestions of Kash n' Karry will be incorporated
therein, and prior to being considered final by the
parties, shall be subject to the written approval of Kash
n' Karry, which approval shall not be unreasonably
withheld or delayed.

(2) Thereafter, within 90 days after the completion of any
new projects or modifications to the Platforms,
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Applications Software or Services described in the
Procedures Manual, GSI shall update the Procedures Manual
to reflect any changes in the operations or procedures
described therein; provided, however, that any changes
thereto which will affect End Users shall first be
communicated to Kash n' Karry in writing and shall be
subject to the prior written approval of Kash n' Karry,
which shall not be unreasonably withheld or delayed.

(3) GSI shall perform all Services in accordance with the
terms and conditions of this Agreement and the Procedures
Manual.

(b) Within 90 days after the Closing Date, GSI shall prepare and
provide to Kash n' Karry written procedures describing the
processes by which changes will be made to Applications
Software affecting End Users (the "Change Control
Procedures"). The Change Control Procedures shall provide, at
a minimum, as follows:

(1) GSI will make no change, including modifications to any
Schedules, which may adversely affect Kash n' Karry's
overall operating costs, the business operations of Kash
n' Karry or the amounts payable by Kash n' Karry to GSI
hereunder, without first obtaining the prior written
approval of Kash n' Karry, which may be reasonably
withheld by Kash n' Karry.

(2) From and after the first anniversary of the Effective
Date, GSI agrees to maintain, as part of a standard
maintenance contract, reasonable currency for releases
and versions of Applications Software used to service the
Current Parameter and the Projects. For purposes of this
Article, reasonable currency shall mean (A) as to
Applications Software, that the new release or version is
installed not later than 12 months after the date the
licensor makes such release or version commercially
available, except that a new version or release may be
installed later than 12 months after commercial release
if mutually agreed by the parties, and (B) as to Systems
Software, that the existing Systems Software is not
obsolete. Kash n' Karry may contact software vendors
directly for the purpose of obtaining information about
new releases and versions of Applications Software, but
GSI will not be obligated to inform Kash n' Karry of the
new releases and versions.

(3) GSI agrees that Kash n' Karry may, upon written notice to
GSI, delay or prohibit implementation of a new version or
release of Applications Software. Kash n' Karry
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acknowledges that Kash n' Karry's decision to prohibit or
delay such implementation may impact GSI's ability to
meet its obligations under this Agreement with respect to
such Applications Software, including the Current
Parameter. GSI agrees that, in the event such a delay or
prohibition is requested by Kash n' Karry, GSI will
provide written notice to Kash n' Karry if, in the
reasonable judgment of GSI, as a result of such a
decision (A) maintenance and support will be lost for any
back level version or release of Applications Software
because of a discontinuation thereof by the software
vendor or (B) GSI's ability to provide the Services will
be affected in a materially adverse manner. In the event
GSI shall deliver such notice, the parties agree to
negotiate in good faith regarding GSI's concerns.

(4) GSI will assure that all programs are moved from the
application development and test environments to the
production environment in a controlled and documented
manner. Kash n' Karry shall have the right to reasonably
audit, control and approve all new Applications Software
in the spirit that they are in conformity with Kash n'
Karry's written requirements given to GSI prior to their
promotion into production.

(5) GSI will schedule all Data Center and Data Network
projects affecting Applications Software so as not to
unreasonably interrupt Kash n' Karry's business
operations. GSI will consult with Kash n' Karry prior to
initiating such projects.

(6) GSI will prepare monthly, in writing, a rolling quarterly
"look ahead" schedule for ongoing and planned Data Center
and Data Network changes affecting Applications Software.

The status of such changes will be monitored and tracked
against the applicable schedule.

(7) Subject to Section 4.5(b)(1) and 4.5(b)(5), at least 24
hours before making any change to the Data Center, the
Data Network or the Applications Software that would
affect End Users, GSI shall notify Kash n' Karry in
writing of such change. Any such notice shall describe
in reasonable detail the reasons for such change and the
effects on End Users as a result thereof. Except in the
case of emergency, no change to Applications Software
shall be made which shall constitute a breach of or
default under the License governing such Applications
Software. GSI shall indemnify and hold Kash n' Karry
harmless from and against any and all Losses that may be
caused by or arise as a result of any such emergency
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change, unless such emergency change is requested by Kash
n' Karry. If a change to Applications Software is
requested by Kash n' Karry, then GSI is required give
only oral notice prior to effecting the change.

The Change Control Procedures shall be provided to Kash
n' Karry for review and comment and any reasonable comments or
suggestions of Kash n' Karry will be incorporated therein, and
prior to being considered final by the parties, all portions
thereof shall be subject to the written approval of Kash n'
Karry, which approval shall not be unreasonably withheld or
delayed.

(c) Within 90 days after the Closing Date, the parties will
mutually determine an appropriate set of periodic reports
regarding GSI's performance of the Services to be issued by
GSI to Kash n' Karry. At a minimum, these reports will
include the following:

(1) a monthly performance report, in a form and with content
mutually established by the parties, documenting GSI's
performance with respect to this Agreement and the
Current Parameter. In addition, GSI will provide Kash n'
Karry with such documentation and other information as
may be reasonably requested by Kash n' Karry from time to
time in order to verify that GSI's performance of the
Services is in compliance with this Agreement and the
Current Parameter;

(2) a monthly project schedule report containing the
information described in Section 4.5(b)(6); and

(3) a monthly change report setting forth a record of all
changes to the Data Center and Data Network affecting
Applications Software performed during the previous
month.

(d) Within 60 days after the Closing Date, the parties will
mutually determine an appropriate set of periodic meetings to
be held between representatives of Kash n' Karry and GSI. At
a minimum, these meetings will include the following:

(1) a weekly meeting among operational personnel to discuss
ongoing issues relating generally to daily performance
and planned or anticipated activities and changes;

(2) a monthly management meeting to review the performance
report, the project schedule report, the changes report,
and such other matters as appropriate; and

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(3) a quarterly senior management meeting to review relevant
contract and performance issues.

All meetings will have a published agenda issued by GSI
sufficiently in advance of the meeting to allow meeting
participants a reasonable opportunity to prepare for the
meeting. Upon request by Kash n' Karry for review of a given
issue at a given meeting, GSI will incorporate Kash n' Karry's
request into the published agenda.

4.6 PC Machines.

GSI will administer the hardware maintenance for Kash n' Karry
End User Machines consisting of PC machines in accordance with the
hardware maintenance standards set forth in the existing
Maintenance Contracts covering such PC machines. GSI will bill
Kash n' Karry for this maintenance (excluding the maintenance costs
included in the MIS Budget) in an amount not greater than the fee
payable by Kash n' Karry under such Maintenance Contracts. GSI
will not be liable for any license usage and/or have an obligation
for software support with respect to the PC machines.

4.7 Data Transmission (Lines/Circuits).

GSI will undertake complete management and administrative
responsibility for the existing leased data transmission lines and
circuits (the "Lines") between and among the Data Center, the Kash
n' Karry Offices, the Distribution Center (including Returns
Processing Center) and Kash n' Karry's stores. As between Kash n'
Karry and GSI, Kash n' Karry will retain title to, and contract and
financial responsibility for, the Lines. Kash n' Karry will
cooperate with GSI in the event that there is an issue with the
vendor. Additions, replacements and upgrades to Lines, if
requested by Kash n' Karry, together with any other changes to the
Data Network requested by Kash n' Karry, will be chargeable as New
Services in accordance with Section 6.3.

4.8 Software.

GSI will:

(a) be solely responsible for operating, maintaining and enhancing
all Applications Software and Systems Software in the Data
Center and Data Network so that it performs, at all times
during the Term hereof, in accordance with this Agreement and
the Current Parameter. GSI will install new versions and
releases, upgrades, replacements or additional Applications
Software and Systems Software as GSI deems necessary in order
to perform the Services in accordance with this Agreement,

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including but not limited to, the Current Parameter, at no
additional cost to Kash n' Karry;

(b) apply preventive maintenance and program temporary fixes to
correct defects in the Applications Software and Systems
Software so as to keep it running in accordance with this
Agreement, including, without limitation, the Current
Parameter;

(c) install new versions and releases of Applications Software in
accordance with this Agreement and the Change Control
Procedures (as described in Section 4.5);

(d) provide all additions and replacements to the Applications
Software, which will be considered New Services as described
in Section 6.3; provided, however that new releases and
versions of the Applications Software provided as part of a
standard maintenance contract shall not be considered as
additions and replacements and therefore shall not be
considered New Services.

4.9 Operations, Support and Maintenance.

During the Term hereof, GSI will perform the following operational,
support and maintenance services as part of the Services rendered
to Kash n' Karry hereunder:

(a) operate the Data Center using the Machines and Applications
Software and Systems Software;

(b) operate the Data Network using the Machines and Applications
Software and Systems Software;

(d) support the Data Network and the End Users by operating a help
desk in accordance with Section 4.14, which will provide first
level trouble analysis, problem recording, place service calls
to vendors to perform corrective maintenance, and manage
problems to resolution;

(e) provide printed output to the local Kash n' Karry distribution
system located in the Kash n' Karry Offices or transmit print
files to remote sites for local printing;

(f) provide maintenance services for laser printers and
replacements located at the Kash n' Karry Offices;

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(g) store, maintain and provide security for storage media (tapes,
disk packs, etc.) provided to GSI using library and retention
procedures in accordance with the Procedures Manual;

(h) assume responsibility for microfiche operations (i.e.,
creation of tape);

(i) complete the Projects according to their terms as stated in
the Schedules attached to this Agreement; and

(j) otherwise fully perform all of its obligations under this
Agreement.

4.10 Consolidation and Relocation Services.

During the Term hereof, GSI will provide the following
consolidation and relocation services as part of the Services
rendered to Kash n' Karry hereunder:

(a) install, rearrange and relocate equipment in the Data Center
and Data Network as GSI deems necessary in order to perform in
accordance with this Agreement, including, without limitation,
the Current Parameter, and in such a manner so as to minimize,
as much as reasonably possible, service level impact to End
Users; and

(b) provide MAC support (manpower only) for GSI End User Machines
and as reasonably requested by Kash n' Karry from time to
time; provided, however, GSI may charge Kash n' Karry for such
support in an amount not to exceed $100 per GSI End User
Machine for each GSI End User Machine in excess of ten per
calendar year that is moved, changed or added at Kash n'
Karry's request.

4.11 Systems Management.

During the Term hereof, GSI will provide the following systems
management services as part of the Services rendered to Kash n'
Karry hereunder:

(a) perform capacity planning, performance analysis and tuning for
the Machines and Systems Software in the Data Center and the
Data Network;

(b) create and maintain an inventory and configuration diagram of
the Data Network;

(c) develop and implement controls to effectively manage the Data
Center and Data Network environments, including change and
problem management systems;
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(d) provide backup and restore capability for all data and
programs maintained in the Data Center;

(e) invoke the disaster recovery plan when appropriate; and

(f) provide for systems access security through the use of
appropriate security products.

4.12 Disaster Recovery.

GSI will provide, with the assistance of Kash n' Karry,
disaster recovery services at a level comparable to that in effect
under the existing Contract for the provision of disaster recovery
services described on Schedule P. GSI will provide planning and
backup, including a "hot" site, and Kash n' Karry will pay for
actual use of the "hot" site, including time and materials for a
reasonable period of time, depending on the nature of the disaster.

If, at any time after the 90th day following the Closing Date,
(a) GSI is unable to restore certain critical functions within 20
days, or (b) GSI provides the Services from a "hot" site for longer
than 20 days, then Kash n' Karry may terminate the Agreement by
delivering written notice to GSI. In such event, Kash n' Karry's
obligations to GSI hereunder in respect of such termination shall
be as set forth in Section 11.3(b).

4.13 Production Services.

During the Term hereof, GSI will provide the following production
services as part of the Services rendered to Kash n' Karry
hereunder:

(a) schedule, control and monitor the running of production jobs
in the Data Center using scheduling and quality control
procedures; and

(b) follow procedures for scheduling and directing output of all
production work (including workload and performance
balancing).

4.14 Help Desk.

GSI will maintain a help desk for Kash n' Karry and thereby
provide initial, single point-of-contact support to trained End
Users to assist them with Services-related problem determination,
how-to questions relating to product support, systems status,
problem recording and reporting, general Services support and
changes which may affect them, in accordance with Schedule Q. The
Services to be rendered by GSI at the help desk specifically
exclude any kind of development or control by GSI of data content.
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4.15 Audits/Compliance with Law.

GSI will assist Kash n' Karry in meeting its audit (including
technical contract audit) and regulatory requirements, including,
but not limited to, providing access to the Data Center and all
Kash n' Karry data maintained or contained therein to enable
Kash n' Karry, its employees, agents, auditors, Subcontractors and
examiners (excluding direct competitors of GSI, e.g., Arthur
Anderson) to conduct reasonably appropriate audits and examinations
of Kash n' Karry's operations and the operations of GSI relating to
the performance of the Services to verify:

(a) that GSI is exercising reasonable procedures to control the
resources utilized by GSI in providing Services to Kash n'
Karry;

(b) that Services are being provided in accordance with this
Agreement, including but not limited to, the Current
Parameter; and

(c) that GSI is exercising reasonable policies and procedures to
protect and provide for the integrity of information so that
Kash n' Karry's auditors can successfully opine on the
accuracy of the information used to compile Kash n' Karry's
books and records.

Such access will require 48 hour notice to GSI and will be
provided at reasonable hours, provided that any audit does not
interfere with GSI's ability to perform the Services in accordance
with this Agreement, including but not limited to, the Current
Parameter. GSI will provide access only to information reasonably
necessary to perform the audit. GSI shall not allow Kash n' Karry,
its employees, agents, Subcontractors, examiners or auditors access
to other GSI customers' or GSI's proprietary data. GSI will also
assist Kash n' Karry's employees, agents, Subcontractors, examiners
or auditors as may be reasonably required in testing Kash n'
Karry's data files and programs, including, without limitation,
installing and running audit software. If requested by Kash n'
Karry's external auditors or required by law (e.g., for SEC or
other governmental agency reporting purposes), GSI will assist Kash
n' Karry in responding to those requests and requirements,
including copying. All costs and expenses related to such audits
will be fully borne by Kash n' Karry.

During the Term, GSI shall comply (and shall cause its
Subcontractors to comply) with all applicable laws or regulations
in the providing of the Services and in performing its obligations
under this Agreement, including (subject to Section 6.3) making any
changes and taking other actions which are necessary in order to
maintain compliance with applicable laws or regulations. Kash n'

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Karry may submit additional findings or recommendations to GSI for
its consideration, and GSI shall consider such findings, and advise
Kash n' Karry in writing and in reasonable detail whether or not
such findings and recommendations have been accepted. In each such
case, Kash n' Karry will pay or reimburse GSI, upon demand, for all
reasonable and necessary costs and expenses incurred by GSI in
complying with any applicable laws or regulations that are related
to Kash n' Karry's business.

4.16 Other Responsibilities.

During the Term hereof, GSI will provide the following other
services as part of the Services rendered to Kash n' Karry
hereunder:

(a) provide, maintain and support Kash n' Karry End User Machines
which are included or equivalent to the ones in the Current
Parameter;

(b) be responsible for all MACs with respect to Kash n' Karry End
User Machines; provided, however, GSI may charge Kash n' Karry
for such support in an amount not to exceed $100 per Kash n'
Karry End User Machine for each Kash n' Karry End User Machine
in excess of ten per calendar year that is moved, changed or
added at Kash n' Karry's request;

(c) provide support to End Users for questions and problems
related to Applications Software, developments and training at
the help desk described in Section 4.14;

(d) provide maintenance support for and pay all Leases on printers
(excluding usage costs) existing as of the Closing Date, in
accordance with the Current Parameter;

(e) be responsible for training the Kash n' Karry training
personnel (trainers);

(f) be responsible for the creation and administration of user
access and password management and security programs; and

(g) be responsible for the costs of all Supplies used or consumed
at the Data Center.

4.17 Corporate Organization.

GSI represents and warrants to Kash n' Karry that it is a
subsidiary of GSI - U.S.A. Incorporated, that its relationship to
such entity is as set forth on Schedule R attached hereto, and
that, on or before the Closing Date, it shall have received an
initial and permanent capital investment in an amount
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not less than Two Million U.S. Dollars ($2,000,000). During the
Term, Kash n' Karry shall have the right to appoint an individual
(selected by Kash n' Karry from among its executive officers,
subject to the approval of GSI, which approval shall not be
unreasonably withheld) to serve on the Board of Directors of GSI.

ARTICLE 5: KASH N' KARRY RESPONSIBILITIES

5.1 MIS Coordinator.

Kash n' Karry agrees to designate, at all times during the
Term, a person reasonably acceptable to GSI to act as Kash n'
Karry's MIS Coordinator, and the person to whom all GSI
communications may be addressed.

5.2 Applications Software.

During the Term, Kash n' Karry will be responsible for
selecting, or defining requirements for, all Applications Software,
including all Applications Software which executes on GSI End User
Machines or Kash n' Karry End User Machines. GSI agrees that Kash
n' Karry may, during the Term, require replacement or substitution
of Applications Software, provided that GSI shall bill Kash n'
Karry for all corresponding costs of whatever nature.

5.3 Facilities and Support Services.

During the Term hereof, and to enable GSI to provide Services,
Kash n' Karry agrees to perform the following facilities and
support services:

(a) perform its responsibilities in accordance with the Procedures
Manual, Change Control Procedures, Current Parameter and
Projects, and until such time as documents relating to those
matters are completed, in whole or in part, in accordance with
Kash n' Karry's practices and policies as of the Commencement
Date; and

(b) provide, for the Data Network facilities located at premises
under Kash n' Karry's management and control during the Term
(excluding the Building), all heat, light, power, air
conditioning, and such other similar utilities as may
reasonably be necessary for GSI to perform the Services as
described in this Agreement.

5.4 Other Responsibilities.

During the Term hereof, Kash n' Karry also agrees to provide
the following other services:

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(a) operate the Xerox printers and pay the paper supply costs for
those printers including usage costs;

(b) provide to GSI data, data entry, and administration, and
coordinate such activities with GSI's systems design and
production functions;

(c) designate and document information requirements, including
report design and content, frequency of reports, and
accessibility to information with all costs to be paid by Kash
n' Karry;

(d) provide all paper forms and Supplies purchased by Kash n'
Karry for use or consumption by End Users;

(e) be responsible for creation, storage and retrieval of any and
all microfilm/microfiche output;

(f) be responsible for voice network, telephones, all common
carrier charges for local, long distance, and WATS (in and
out) telecommunications services for voice network, and
provide GSI with telephones and with access to Kash n' Karry's
PBX system at communication cost; provided however that Kash
n' Karry may charge GSI for GSI's communication costs;

(g) provide written authorization to GSI for user access and/or
password management;

(h) be responsible for all of Kash n' Karry's mail, messenger,
postage, courier and print distribution services;

(i) be responsible for such other Kash n' Karry activities and
functions as are described in this Agreement;

(j) assist GSI in the performance of its mission in good faith;

(k) be responsible for training the End Users and providing
"champions" (department heads/director level and above); and

(l) collaborate with GSI in particular by indicating significant
changes of business and/or environment affecting GSI's
information services environment.

ARTICLE 6: CHARGES AND EXPENSES

6.1 Annual Services Charge.

For so long as no Event of Default by GSI shall have occurred
and be continuing hereunder, Kash n' Karry agrees to pay the Annual
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Services Charge specified in Schedule A for each year of the Term,
together with the other amounts as described in this Article 6.

6.2 New Entities.

If Kash n' Karry acquires any additional Affiliate (or
significant new assets) during the Term, and Kash n' Karry desires
that GSI provide Services for such Affiliate or new assets, subject
to additional charges if acceptance of such responsibilities would
require New Services as described in Section 6.3, then, upon
written request from Kash n' Karry, GSI will provide such Services
in accordance with this Agreement. Prior to the provision of such
New Services, GSI will notify Kash n' Karry in writing of the
amount of additional charges for such New Services and GSI agrees
that Kash n' Karry may withdraw its request for such New Services
if such withdrawal is delivered in writing not later than ten days
after receipt of GSI's notification as to additional charges. GSI
reserves the right to decline to provide New Services pursuant to
this Section 6.2 if Kash n' Karry's new business differs from its
business as of the Effective Date.

6.3 New Services and Extension of Current Parameter.

(a) If Kash n' Karry's demand for Services would exceed the
Current Parameter and the Projects ("New Services"), GSI or
Kash n' Karry will promptly inform each other, and GSI will
bill Kash n' Karry fair and justified amounts corresponding to
such excess variation.

(b) GSI will offer New Services to Kash n' Karry at prices not
exceeding the lowest prices then being made available by GSI
to its other customers engaged in retail food store sales in
the United States for similar services, but Kash n' Karry will
be under no obligation to purchase at those prices. GSI will
have the first right to bid on New Services, and if GSI's bid
is competitive and properly reflects the synergy existing
between Kash n' Karry and GSI, then Kash n' Karry will engage
GSI to perform the New Services.

(c) If Kash n' Karry requests that GSI cooperate with other
vendors whose products or services are purchased by Kash n'
Karry and which interface with the Current Parameter and
Projects, GSI shall so cooperate, subject to security and
confidentiality requirements; provided, however, GSI may
charge Kash n' Karry a fair and justified amount for such
services. GSI, however, will bear no responsibility for
Losses resulting directly or indirectly from the interference
of any software and/or hardware and/or service of whatever
nature ordered by Kash n' Karry from a third party vendor and
which would in any manner adversely impact upon the Services.
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(d) GSI's books and records will be made available to Kash n'
Karry's independent auditors in order for the auditors to
confirm whether the prices offered pursuant to this Article
are in fact not in excess of the lowest prices then made
available by GSI to its other customers engaged in retail food
store sales in the United States for similar services;
provided, however, that Kash n' Karry's auditors shall not
disclose to Kash n' Karry the specific, actual prices
disclosed in GSI's books and records.

6.4 Substantial Reduction of Resources.

(a) If, during the Term, Kash n' Karry experiences significant
changes in the scope, nature or volume of its business, or if
Kash n' Karry elects to change the manner or method by which
Kash n' Karry does business (including, but not limited to, an
election by Kash n' Karry to effect a sale or other
disposition of material assets, subject to the requirements of
Section 18.13), which have or may have the effect of causing
a decrease in the quantity or quality of the Services that
will be needed by Kash n' Karry, then Kash n' Karry may
request GSI to reduce the level of Services (or to reduce any
of the standards set forth in the Current Parameter) and the
Annual Service Charges to Kash n' Karry under this Agreement
as set forth below; provided, however, that Kash n' Karry
agrees that: (i) in no event shall the Annual Services Charge
be reduced to a level less than the Committed Costs; and (ii)
any such reduction must not adversely impact upon GSI's
ability to reasonably perform its obligations under the
Agreement.

(b) In such event, GSI shall estimate, in writing and in good
faith, the aggregate decreased charges to Kash n' Karry from
GSI's ceasing to perform such Services and shall provide such
written estimate to Kash n' Karry (together with notice of any
consequential change to the Current Parameter), no later than
30 days from GSI's receipt of Kash n' Karry's notice. Kash n'
Karry, upon receipt of such estimate, may then elect by
written notice given to GSI within 15 days following receipt
of GSI's written estimate to: (i) withdraw its request for a
cessation of part of the Services; (ii) implement such partial
cessation of Services based upon the estimate of GSI; or (iii)
request that GSI negotiate with Kash n' Karry regarding the
aggregate reduction in the Annual Service Charges due to GSI
from Kash n' Karry hereunder as a result of the partial
cessation of Services. If Kash n' Karry shall elect to
request GSI to negotiate, the parties shall promptly negotiate
in good faith regarding the amount of such reduction.

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6.5 Taxes.

(a) The Annual Services Charge payable by Kash n' Karry is
inclusive of any applicable sales, use, personal property or
other taxes based upon or measured by GSI's cost in acquiring
or providing equipment, materials, supplies or services
furnished or used by GSI in performing or furnishing the
Services, and Kash n' Karry shall not be required to pay the
taxes described in this Section 6.5(a), which are the sole
expense of GSI, it being understood that GSI is the ultimate
user of all Assets, including, but not limited to, its
purchased and leased tangible personal property and real
property used to provide the Services. It is the parties'
specific intent that: (1) the Services consist solely of
professional and personal service information transactions,
(2) all written reports or data issued or made available by
GSI to Kash n' Karry are of an individual and unique nature,
are produced and provided to Kash n' Karry, and shall not be
used in any written reports or data issued by GSI to third
parties, (3) Kash n' Karry shall have no right to access GSI's
computers, compile programs, perform computations, enter data,
or control any aspect of the processing of data, and all
functions to provide the Current Parameter and other Services
hereunder shall be performed and controlled by GSI.

(b) In the event that a sales, use, excise or services tax is
assessed on the provision of the Services (or any New
Services), or any portion thereof, by GSI to Kash n' Karry or
on any of GSI's charges to Kash n' Karry under this Agreement,
however levied or assessed, by any federal, state or local
governmental entity in any jurisdiction in which Kash n' Karry
has a facility which is receiving Services from GSI (Kash n'
Karry facilities "receiving services from GSI" shall not
include the Data Center or any non-Kash n' Karry owned or
leased location from which GSI elects to provide the
Services), Kash n' Karry will be responsible for and pay the
amount of any such tax. Kash n' Karry will also be
responsible for paying all personal property or use taxes due
on or with respect to Kash n' Karry Machines. Upon the
request of Kash n' Karry, GSI shall separately invoice all
charges that are determined to be taxable and shall separately
state the tax thereon. GSI shall not be required to pay the
taxes described in this Section 6.5(b), which are the sole
expense of Kash n' Karry.

(c) Each party shall bear sole responsibility for all taxes,
assessments and other real property-related levies on its
owned or leased real property.

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(d) Subject to the provisions of Sections 6.5(a) and (b), the
parties agree to perform all acts reasonably requested by the
other party to minimize such party's tax liability to the
extent legally permissible.

(e) Each party shall provide and make available to the other any
resale certificates, information regarding out-of-state sales
or use of equipment, materials or services, and other
exemption certificates or information reasonably requested by
either party.

(f) Neither party shall have any obligation of any kind or
character to pay any income, franchise or similar taxes
relating to the other party's income or receipts from its
business operations.

(g) Upon the request of a party, the other party to this Agreement
shall explain any taxes paid or payable by such party and
shall provide sufficient documentation supporting the amount
of and the payment of all such taxes.

6.6 Other Expenses and Charges.

Kash n' Karry will be financially responsible for all costs
and expenses associated with its responsibilities specified in
Article 5. Such costs and expenses are not included within the
Annual Services Charge or any other charges payable by Kash n'
Karry under this Agreement. GSI shall be financially responsible
for all costs and expenses incurred in providing the Services or
otherwise associated with its responsibilities specified in this
Agreement, unless otherwise expressly set forth in this Agreement.

ARTICLE 7: INVOICING AND PAYMENT

7.1 Annual Services Charge Invoices.

GSI will bill Kash n' Karry annually for the Annual Services
Charge allocable to such calendar year. The total amount stated on
such annual invoice will be payable in 12 equal monthly
installments, which will be due and payable by Kash n' Karry on the
first day of each month. Provided, however, the first installment
of the Annual Services Charge for 1995 will be payable on the
Closing Date, prorated on a per diem basis for the period from and
including the Closing Date to the last day of such month, and Kash
n' Karry shall receive a credit against the total Annual Services
Charge for 1995 in an amount equal to the sums paid to GSI under
Section 3.9 for services rendered during the Transition Period.
Unless otherwise authorized by GSI, payments made by Kash n' Karry
to GSI hereunder shall be made by bank wire transfer to the account

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of GSI identified on Schedule S hereto. Each invoice issued to
Kash n' Karry will state separately applicable taxes owed by Kash
n' Karry, if any, itemized by tax jurisdiction in accordance with
Section 6.5(b). In the event of an interim adjustment to the
Annual Services Charge for a given year pursuant to this Agreement,
unless the parties otherwise agree at the time of the adjustment,
any charge in addition to the amount stated on the annual invoice,
shall be payable by Kash n' Karry within 30 days of the date of the
interim invoice and any reduction in the amount stated on the
annual invoice shall be credited by GSI against future monthly
installments in the order of their maturity.

7.2 Other Charges.

Any amount due under this Agreement for which a time for
payment is not otherwise specified will be due and payable within
ten days after the date of the invoice.

7.3 Late Charges.

If any payment due by either Kash n' Karry or GSI is not
received within five days following the due date thereof, the
delinquent party shall pay to the other party a late fee equal to
one and a half percent (1.5%) of the amount of such payment per
month until paid.

7.4 Proration.

All periodic charges under this Agreement are to be computed
on a calendar month basis, and will be prorated for any partial
month, unless specifically stated otherwise in this Agreement.

7.5 Refundable Items.

(a) Where Kash n' Karry has paid or prepaid rent, maintenance
fees, or other ongoing charges under any Contract (as opposed
to any non-periodic payment such as license fees), GSI will
refund to Kash n' Karry, promptly upon demand by Kash n'
Karry, that portion of such prepaid expense which is
attributable to periods on and after the Closing Date.

(b) If GSI should receive during the Term any refund, credit or
other rebate in respect of any Contract, which is attributable
to a period prior to the Closing Date (including, but not
limited to, deposits under Leases), GSI will promptly notify
Kash n' Karry of such refund, credit or rebate and will
promptly pay to Kash n' Karry the full amount of such refund,
credit or rebate.

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(c) If Kash n' Karry should receive during the Term any refund,
credit or other rebate in respect of any Contract, which is
attributable to periods on and after the Closing Date, Kash n'
Karry will promptly notify GSI of such refund, credit or
rebate and will promptly pay to GSI the full amount of such
refund, credit or rebate.

7.6 Credits.

Except as otherwise set forth in this Agreement, with respect
to any amount to be paid or reimbursed to Kash n' Karry by GSI
pursuant to this Agreement, Kash n' Karry may, at its option,
obtain payment of such amount from GSI by offsetting any such
amount against the charges otherwise payable to GSI hereunder at
the time any such amount is due and payable to Kash n' Karry. Kash
n' Karry shall provide evidence in reasonable detail of the basis
for any such offsets, prior to effecting the offset. In the event
that the parties shall determine that any such offset by Kash n'
Karry was improper, Kash n' Karry shall promptly deliver the amount
thereof to GSI, together with a late fee equal to one percent of
the amount of such improper offset per month.

ARTICLE 8: REVERSION

[INTENTIONALLY OMITTED]

ARTICLE 9: INTELLECTUAL PROPERTY RIGHTS

9.1 Materials.

Pursuant to this Agreement, GSI and its Subcontractors and
Kash n' Karry and its Subcontractors may develop, create, modify or
personalize (collectively, "Develop") certain computer programming
code, including source and object code ("Code"), and documentation
to perform the Services. Ownership of such Code and documentation
shall be treated as follows: With respect to

(a) Code Developed under this Agreement which constitutes
Derivative Works (as defined below) of software for which the
copyright is owned by Kash n' Karry ("Type I Materials"),
whether Developed solely by GSI or its Subcontractors or
solely by Kash n' Karry and its Subcontractors, or jointly by
GSI and/or its Subcontractors and Kash n' Karry and/or its
Subcontractors;

(b) Code Developed under this Agreement which does not constitute
Derivative Works of any software owned by Kash n' Karry, GSI
or its Affiliates or any third party ("Type II Materials"),
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whether Developed solely by GSI or its Subcontractors or
solely by Kash n' Karry and its Subcontractors, or jointly by
Kash n' Karry and/or its Subcontractors and GSI and/or its
Subcontractors;

(c) Code Developed under this Agreement which constitutes
Derivative Works of software for which the copyright is owned
by GSI, its Affiliates or Subcontractors ("Type III
Materials"), whether Developed solely by GSI or its
Subcontractors or solely by Kash n' Karry and its
Subcontractors, or jointly by Kash n' Karry and/or its
Subcontractors and GSI and/or its Subcontractors;

(d) Literary works of authorship Developed under this Agreement,
which are specific to the financial and business operations of
Kash n' Karry or which are specific to the providing of
Services to Kash n' Karry, as opposed to the general providing
of Services by GSI to its other customers, such as user
manuals, charts, graphs and other written documentation and
machine-readable text and files, but excluding Code ("Type IV
Materials"), which have been Developed solely by Kash n' Karry
and its Subcontractors or solely by GSI or its Subcontractors,
or jointly by Kash n' Karry and/or its Subcontractors and GSI
and/or its Subcontractors; and

(e) Literary works of authorship Developed under this Agreement
which are not specific to the financial and business
operations of Kash n' Karry or which are used generally in the
providing of services such as the Services by GSI to its
customers, such as user manuals, charts, graphs and other
written documentation and machine-readable text and files, but
excluding Code ("Type V Materials"), which have been Developed
solely by Kash n' Karry and its Subcontractors or solely by
GSI or its Subcontractors, or jointly by Kash n' Karry and/or
its Subcontractors and GSI and/or its Subcontractors,

(1) All such Type II, Type III and Type V Materials shall be
owned by GSI (collectively, the "GSI Materials"), and
Kash n' Karry shall have the following license rights:

(A) an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, reproduce, display,
perform and distribute such GSI Materials
internally for the sole benefit of and exclusive
use by Kash n' Karry during the Term; and

(B) the right to sublicense third parties to do any of
the foregoing.

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(2) With respect to Type I Materials and Type IV Materials,
Kash n' Karry shall own such Materials (the "Kash n'
Karry Materials"), and GSI shall have the following
license rights:

(A) an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, reproduce, display,
perform and distribute such Kash n' Karry Materials
internally for the sole benefit of and exclusive
use by GSI during the Term; and

(B) the right to sublicense third parties to do any of
the foregoing.

(3) At the expiration or earlier termination of this
Agreement, so long as Kash n' Karry has fully complied
with all of its obligations, and is not in default under
this Agreement, GSI will grant to Kash n' Karry the
following license rights in the GSI Materials:

(A) an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, reproduce, display,
perform and distribute the GSI Materials internally
for the sole benefit of and exclusive use by Kash
n' Karry; and

(B) the right to sublicense third parties to do any of
the foregoing.

(4) At the expiration or earlier termination of this
Agreement, so long as GSI has fully complied with all of
its obligations, and is not in default under this
Agreement, Kash n' Karry will grant to GSI the following
license rights in the Kash n' Karry Materials:

(A) an irrevocable, nonexclusive, worldwide, paid-up
license to use, execute, reproduce, display,
perform and distribute the Kash n' Karry Materials
internally for the sole benefit of and exclusive
use by GSI; and

(B) the right to sublicense third parties to do any of
the foregoing.

(5) Any ownership or license rights herein granted to either
party are limited by and subject to any patents and
copyrights held by, and terms and conditions of any
license agreements with, applicable third party software
providers and subject in all respects to the parties'
obligations regarding Confidential Information, as set
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forth in Article 10 of this Agreement, it being agreed by
the parties that nothing in this Article 9 shall give
either party the right or obligation, under any
circumstances, to disclose to any person any Confidential
Information of the other party or to allow the other
party to disclose any Confidential Information.

(6) To the extent any of the Type I, Type II, Type III, Type
IV and Type V Materials may not, by operation of law, be
owned by the party to which ownership has been granted
(as described in this Article 9), each party agrees to
assign and hereby assigns, without further consideration,
the ownership of all right, title and interest in all
U.S. and foreign copyrights, and mask work rights (if
any) included in such Materials to the other party, and
such assignee party shall have the right to obtain and
hold in its own name copyrights, registrations, renewals
and all other rights relating or pertinent thereto.

(7) The parties agree to reproduce copyright legends which
appear on any portion of the Type I, Type II, Type III,
Type IV and Type V Materials which may be owned by third
parties.

(8) For purposes of this Section 9, a "Derivative Work" shall
mean a work based on one or more preexisting works,
including, without limitation, a condensation,
transformation, expansion or adaptation, which, if
prepared without authorization of the owner of the
copyright of such preexisting work, would constitute a
copyright infringement.

(9) This Agreement shall not preclude GSI or Kash n' Karry
from Developing materials or providing services which are
competitive to the Type I, Type II, Type III, Type IV and
Type V Materials irrespective of their similarity to
computer programming code, documentation or other
materials or services which might be delivered pursuant
to this Agreement, except to the extent any of same may
infringe any of the other party's patent rights or
copyrights.

(10) Nothing contained in this Agreement shall restrict either
party from the use of any ideas, concepts, know-how, or
techniques relating to data processing or network
management which either party, individually or jointly,
develops or discloses under this Agreement, except to the
extent such use infringes any of either party's patent
rights or copyrights. However, except for the licenses
expressly granted under this Article 9, neither this
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Agreement nor any disclosure made hereunder grants any
license to either party under any patents or copyrights
of the other party.

(11) Upon the expiration of this Agreement in accordance with
its terms, or, if any, the earlier termination of this
Agreement, the parties agree to negotiate in good faith
as to whether any of the materials addressed in this
Article 9 are Type I, Type II, Type III, Type IV and Type
V Materials and as to the rights of each party in such
Materials.

9.2 New GSI Software.

GSI will give Kash n' Karry a non-exclusive right to use the
New GSI Software during the Term solely in connection with the
Services. From time to time during the Term, Kash n' Karry may
require GSI to deposit in escrow the New GSI Software (excluding
New GSI Software acquired by GSI from third parties) (and source
code). Upon termination of the Agreement, GSI will give Kash n'
Karry (and its third party service providers) a non-exclusive
license to use any New GSI Software that is proprietary to GSI at
no cost to Kash n' Karry, and will, at Kash n' Karry's request,
assign, transfer or sublicense to Kash n' Karry any New GSI
Software owned by any third party, in which event Kash n' Karry
will pay any ongoing maintenance or licensing costs and GSI will
pay any transfer or one-time charges.

ARTICLE 10: CONFIDENTIALITY/DATA SECURITY

10.1 Confidential Information.

Except as otherwise specifically provided by the parties,
"Confidential Information" shall mean:

(a) all information marked confidential, restricted, or
proprietary by either party;

(b) Kash n' Karry's customer lists, customer information, account
information, and information regarding business planning and
operations of Kash n' Karry and Kash n' Karry's
administrative, financial or marketing activities;

(c) GSI's customer lists, customer information, account
information, and information regarding business planning and
operations of GSI and GSI's administrative, financial or
marketing activities;

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(d) information that has been created, discovered, developed by or
provided to GSI or Kash n' Karry by third parties and in which
property rights have been licensed, assigned or otherwise
conveyed to GSI or Kash n' Karry, which information has
commercial value in GSI's or Kash n' Karry's business and is
not subject to one or more of the exclusions set forth in
Section 10.3; and

(e) all other information which relates to either party's business
operations or activities which is not in the public domain.

10.2 Obligations.

(a) Except as otherwise specified in Schedule T, Kash n' Karry and
GSI will each use the same care to prevent disclosing to third
parties the Confidential Information of the other as it
employs to avoid disclosure, publication or dissemination of
its own information of a similar nature. Notwithstanding the
foregoing, the parties may disclose such information to
Subcontractors involved in providing Services under this
Agreement where

(1) such disclosure is necessary to permit the Subcontractor
to perform its duties hereunder, and

(2) the disclosing party assumes full responsibility for the
acts or omissions of its Subcontractor, no less than if
the acts or omissions were those of the disclosing party.

(b) Except to the extent required by law or permitted by Article
16, neither party will publicly disclose the terms of this
Agreement, without the prior written consent of the other.
Furthermore, neither GSI nor Kash n' Karry will

(1) make any use of the Confidential Information of the other
except as contemplated by this Agreement;

(2) acquire any right in or assert any lien against the
Confidential Information of the other; or

(3) refuse to promptly return, provide a copy of, or destroy
such Confidential Information upon the request of the
other party;

provided, however, that neither party will be restricted in
using any data processing or network management ideas,
concepts, know-how and techniques, including, without
limitation, in the development, manufacturing and marketing of
data processing or network management products and services

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unless the use thereof would result in the disclosure of
Confidential Information.

10.3 Exclusions.

Notwithstanding the foregoing, Confidential Information shall
not include information which GSI or Kash n' Karry can demonstrate
was:

(a) at the time of disclosure to it, in the public domain;

(b) after disclosure to it, published or otherwise becomes part of
the public domain through no act or omission of the receiving
party;

(c) independently developed by the receiving party without
reference to or use of Confidential Information of the
furnishing party; or

(d) received after disclosure to it from a third party: (i) who
had a lawful right to disclose such information and (ii) who
had no further obligations of confidentiality regarding such
information to the party granting the right to disclose.

It is understood that the receipt of Confidential Information under
this Agreement will not limit or restrict assignment or
reassignment of employees of GSI and Kash n' Karry within or
between the respective parties and their Affiliates; provided,
however, that the parties agree that no such assignment or
reassignment shall allow either party or their employees to
disclose Confidential Information in violation of this Agreement.

10.4 Protection of Kash n' Karry Information.

Any additional responsibilities of GSI and Kash n' Karry with
respect to protection of Confidential Information are set forth in
Schedule T.

10.5 Loss of Confidential Information.

In the event of any disclosure or loss of Confidential
Information by a receiving party, the receiving party will notify
the furnishing party immediately.

10.6 Limitation.

GSI will not be responsible for loss or disclosure of any of
the following Confidential Information of Kash n' Karry, except to
the extent such loss or disclosure is due to the negligence or
willful misconduct of GSI: (1) data content, (2) corruption, loss
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or mistransmission of data during transmission via public
telecommunications facilities or (3) loss of the security of data
during transmission via public telecommunications facilities.

10.7 Survival.

The obligations of the parties contained in this Article 10
shall survive the expiration or termination of this Agreement for
a period of three years, even if such termination is as a result of
the occurrence of an Event of Default by either of the parties.

ARTICLE 11: EVENTS OF DEFAULT; REMEDIES; TERMINATION

11.1 Events of Default.

If any one or more of the following events ("Events of
Default") shall occur and be continuing, then the nondefaulting
party shall have the rights set forth in Section 11.2 hereof:

(a) Kash n' Karry shall fail to pay any sums required to be paid
to GSI hereunder, as and when the same become due, and such
default shall continue unremedied for five or more days (a
"Monetary Event of Default"); provided, however, that if a
dispute exists with respect to the amount of any sum due
hereunder, the disputed amount shall not be deemed to be due
for purposes of this Section 11.1(a) unless and until the
dispute resolution procedure set forth in Article 17 hereof
shall have been exhausted with respect to any such dispute;

(b) Either party shall default in the performance of any of its
material obligations hereunder (excluding Kash n' Karry's
obligations to pay money, the default of which is governed by
Section 11.1(a)(1) hereof), and such default shall continue
unremedied for a period of 30 days after written notice of
such default shall have been given to the defaulting party by
the non-defaulting party; provided, however, that no such
notice of default shall be effective with respect to any such
obligations as to which there is a dispute unless and until
the dispute resolution procedure set forth in Article 17 shall
have been exhausted with respect to any such obligation;

(c) Either party shall default in the performance of its
obligations under Section 17.3, and such default shall
continue unremedied for a period of five days; and

:\E A Bankruptcy Event shall have occurred with respect to a party
and thereafter a Monetary Event of Default shall occur with
respect to such party or such party shall default in the
performance of any of its other obligations hereunder.
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11.2 Remedies.

When any Event of Default shall have occurred and be
continuing, the nondefaulting party may take one or any combination
of the following steps:

(a) Terminate this Agreement in accordance with Section 11.3;

(b) Declare any sums due to the nondefaulting party to be
immediately due and payable, including, without limitation,
any liquidated damages under this Agreement;

(c) Have reasonable access to and inspect, examine and make copies
of, during regular business hours, the books and records of
the defaulting party and any and all accounts, data and other
information related to the Services and the Projects to be
performed under this Agreement;

(d) Take whatever action at law or in equity may appear necessary
or desirable to collect any amounts then due and thereafter to
become due under the Agreement, or to enforce performance and
observance of any obligation, agreement or covenant of the
defaulting party under the Agreement; and

(e) Exercise any and all rights and remedies generally afforded by
law or equity and as otherwise afforded herein.

11.3 Termination for Cause.

(a) Upon the occurrence of an Event of Default by either party,
the other party may terminate this Agreement by delivering
written notice to the other party, at no cost or expense to
the terminating party except as set forth in this Section
11.3.

(b) If Kash n' Karry shall terminate this Agreement pursuant to
this Section 11.3 upon the occurrence of an Event of Default
by GSI, (1) Kash n' Karry shall pay to GSI that portion of the
Committed Costs set forth in Section 2.1(i)(1), (2), (6) and
(7) and no more; (2) no Termination Charges shall be payable
by Kash n' Karry; (3) Kash n' Karry will offer employment to
those GSI employees who provide Services and who are working
on the Projects; and (4) all other payment obligations of Kash
n' Karry hereunder shall expire.

(c) If GSI shall terminate this Agreement pursuant to this Section
11.3 upon the occurrence of an Event of Default by Kash n'
Karry, (1) Kash n' Karry shall pay to GSI the Committed Costs
and the Annual Services Charge for such year, prorated to the
effective date of termination; (2) Kash n' Karry shall pay
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Termination Charges as specified on Schedule U attached
hereto, which shall not exceed Two Million U.S. Dollars
($2,000,000); and (3) all obligations of GSI to provide
Services hereunder shall expire.

11.4 Kash n' Karry Termination without Cause.

(a) Subject to the other provisions of this Agreement, Kash n'
Karry may terminate this Agreement on an "AT WILL" basis in
Kash n' Karry's sole judgment upon at least 180 days prior
written notice to GSI in accordance with Section 11.4(b)
hereof. If Kash n' Karry terminates this Agreement prior to
the expiration of the Term, other than pursuant to Section
11.3, Kash n' Karry agrees to pay GSI on the effective date of
the termination,

(1) the Termination Charges as specified in Schedule U, and

(2) the Committed Costs.

(b) The parties agree that the amounts determined in accordance
with Sections 11.4(a)(1) and (2) constitute Kash n' Karry's
sole and exclusive liability for such termination. In
connection with any such termination, the parties agree that:
(i) Kash n' Karry shall provide written notice of Kash n'
Karry's desire to consider the effecting of such a
termination, which shall request that GSI shall provide to
Kash n' Karry a calculation of the Termination Charges and an
estimate of the Committed Costs; (ii) GSI shall, within 30
days of GSI's receipt of Kash n' Karry's notice, prepare in
good faith a written estimate of the Committed Costs and a
calculation of the Termination Charges; and (iii) within 30
days after Kash n' Karry's receipt of such estimate, Kash n'
Karry may elect to terminate this Agreement by delivering
written notice to GSI, which notice shall state a date of
termination that is at least 180 days, but no more than 240
days, from the date of such notice.

11.5 Extension of Termination Effective Date.

In the event of a termination of this Agreement by GSI
pursuant to Section 11.3, Kash n' Karry may extend the effective
date of termination for a single period of not more than 180 days
by delivering written notice of such extension to GSI not less than
60 days prior to the then scheduled termination date.

11.6 Termination Assistance.

(a) Upon the expiration or termination of this Agreement, GSI
shall cooperate with Kash n' Karry and shall assist with the
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orderly transfer of the services, functions and operations
provided by GSI hereunder to another services provider or Kash
n' Karry itself. Prior to termination or expiration of the
Agreement, Kash n' Karry may request GSI in writing to
perform, and in such event GSI shall perform (except in the
event of a termination by GSI pursuant to Section 11.3),
services in connection with migrating the work of Kash n'
Karry to another services provider or Kash n' Karry itself
("Termination Assistance"). GSI shall provide Termination
Assistance for so long as may be requested by Kash n' Karry to
complete the transition, but in no event for more than four
months after the effective date of termination or expiration
of this Agreement.

(b) Termination Assistance shall include, in addition to the
performance of the Services in the manner set forth herein
prior to termination or expiration of the Agreement, providing
Kash n' Karry and its Affiliates and their agents, contractors
and consultants as necessary with the following:

(1) Pre-migration Services, consisting of the following:

(A) freezing all noncritical Applications Software and
Systems Software changes,

(B) notifying all outside vendors of procedures to be
followed during the turnover phase,

(C) reviewing all Applications Software and Systems
Software libraries (tests and production) with the
new service provider and/or Kash n' Karry,

(D) assisting in establishing naming conventions for
the new production site,

(E) analyzing space required for the databases and
Applications Software and Systems Software
libraries,

(F) generating a tape and computer listing of the
source code of any Applications Software or Systems
Software owned by Kash n' Karry in a form
reasonably requested by Kash n' Karry, and

(G) promptly delivering the Procedures Manual and other
documentation necessary to the performance of the
Services.

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(2) Migration Services, consisting of the following, provided
that in providing such migration services, GSI does not
infringe any third party's rights:

(A) unloading the production databases and any other
proprietary data of Kash n' Karry,

(B) delivering tapes of production databases (with
content listings) to new operations staff,

(D) assisting with the telecommunications turnover,
and

(E) assisting in the execution of a parallel operation,
until the effective date of expiration or
termination of this Agreement.

(3) Post-Migration Services, consisting of the following:

(A) answering questions regarding the Services on an
"as needed" basis, and

(B) turnover of any remaining Kash n' Karry-owned
reports, proprietary data and documentation still
in GSI's possession.

(c) In addition to the specific items listed in Section 11.6(b),
GSI agrees to take other commercially reasonable actions
requested by Kash n' Karry within 30 days after the expiration
or termination of this Agreement to assist Kash n' Karry with
the orderly transfer of the services, functions and operations
provided by GSI hereunder to another service provider or Kash
n' Karry itself; provided, however, that Kash n' Karry
acknowledges and agrees that GSI is only providing transition
assistance and is not ultimately responsible or liable for the
completion of such transfer or its success.

(d) Upon Kash n' Karry's written request, GSI shall provide Kash
n' Karry with additional termination-related services after
the expiration or termination of this Agreement, which
services shall be chargeable to Kash n' Karry at GSI's then
current commercially available rates for such services.

(e) If any Termination Assistance provided by GSI requires the
utilization of additional resources above the then current
baseline, which GSI would not otherwise have utilized in the
performance of Services immediately prior to the termination
or expiration date, Kash n' Karry will pay GSI for such usage
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at GSI's then current commercially available costs for such
services.

11.7 Other Rights Upon Termination.

(a) In the event of a termination of this Agreement, and providing
that Kash n' Karry pays Committed Costs, or, in the case of a
termination by Kash n' Karry pursuant to Section 11.3 hereof,
the portion of the Committed Costs specified therein, GSI
shall sell, license, transfer and assign to Kash n' Karry all
of its right, title and interest in the Assets acquired from
Kash n' Karry and the hardware and software acquired by GSI
during the Term and used in providing the Services to Kash n'
Karry, and all rights and privileges of GSI under any
unexpired hardware leases, software licenses and third party
service contracts, to the extent necessary to allow Kash n'
Karry to provide or procure an alternate supply source for the
provision of the Services. Notwithstanding the foregoing, if
any of the leased equipment, software or third party service
contracts is not used by GSI exclusively for providing
Services to Kash n' Karry, then GSI shall not be required to
transfer title thereto to Kash n' Karry, but shall obtain such
accommodations, sublicenses, or other authorizations from the
applicable contract vendors as may be necessary to allow Kash
n' Karry full use thereof in connection with the provision of
the Services. GSI shall obtain, at its sole expense, all
Required Consents to such assignments, accommodations,
sublicenses or other authorizations; provided, however, that,
prior to the Closing Date, Kash n' Karry shall obtain from
each Contract vendor a firm quote for the cost to be charged
by such vendor in connection with the reversion or other
assignment to Kash n' Karry of such Contracts upon termination
of this Agreement; and provided, further, that GSI shall not
be required to transfer or assign any Asset to Kash n' Karry
unless Kash n' Karry shall have obtained all Required Consents
thereto, at GSI's expense.

(b) For Applications Software and Systems Software proprietary to
GSI and not otherwise owned by or licensed to Kash n' Karry in
accordance with Article 9 and not generally commercially
available, GSI will provide a license to Kash n' Karry for its
internal use only upon terms and prices to be mutually agreed
upon by the parties or, at Kash n' Karry's option, GSI will
recommend a mutually agreeable and commercially available
substitute to perform the same function. With respect to
generally commercially available Applications Software, or
with respect to generally commercially available Systems
Software installed at Kash n' Karry's written request, if GSI
has licensed or purchased and is using any such Applications
Software or Systems Software in providing the Services to Kash
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n' Karry at the date of expiration or termination, GSI will
assign all of GSI's right, title and interest in such
Applications Software and Systems Software to Kash n' Karry,
limited to the Services and the Projects subject to the terms
of the applicable license, and Kash n' Karry will reimburse
GSI for initial license or purchase charges for such
Applications Software and Systems Software in an amount equal
to the remaining unamortized cost of such Applications
Software or Systems Software, if any, depreciated over a five
year life, and pay any transfer fee or charge imposed by any
applicable vendor.

11.8 Burden of Proof.

For purposes of this Article 11, Section 3.10, and this
Agreement, the burden of proving and substantiating the costs and
expenses relating to the termination of this Agreement that qualify
as Committed Costs, or for which GSI is otherwise entitled to be
paid by Kash n' Karry, shall be on GSI.

ARTICLE 12: LIABILITY

12.1 General Intent.

(a) Except as and to the extent set forth in Section 12.2 below,
upon the occurrence of an Event of Default by either party
hereunder, the defaulting party will be fully and
unconditionally liable to the nondefaulting party for any
Losses incurred by the nondefaulting party as a result of the
defaulting party's failure to perform its covenants and
agreements in the manner required by this Agreement or as a
result of the breach of any representation or warranty made by
the defaulting party contained herein.

(b) Without limitation of the foregoing, in the event of a breach
by GSI of any representations or warranties contained herein
and/or a failure by GSI to perform any of its covenants or
agreements set forth in this Agreement which shall cause (y)
a substantial impairment of Kash n' Karry's business
operations at a Kash n' Karry retail grocery store or stores
(individually, a "Store" and collectively the "Stores") for a
period of 48 hours or more and (z) a substantial impact on
Kash n' Karry's revenues at such Store or Stores, measured on
a historical basis, then GSI agrees to pay to Kash n' Karry
all Actual Losses (as defined in Section 12.2(b)) of every
kind and character (for example, such as, but not limited to,
Actual Losses arising from spoiled products, incorrect
pricing, or increased employee expense) incurred by Kash n'
Karry caused by or arising as a result of such breach or
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failure, subject to the FRF40,000,000/$7,300,000 limitation
set forth in Section 12.2(b) hereof.

12.2 Limitations on Losses.

(a) In no event shall either party have any liability, whether
based on contract, tort (including, without limitation,
negligence), warranty or any other legal or equitable grounds,
for any consequential, indirect, incidental, special, punitive
or exemplary damages (such consequential, indirect,
incidental, special, punitive or exemplary damages shall be
defined collectively herein as the "Consequential Losses")
suffered by the other party, arising from or related to this
Agreement, even if such party has been advised of the
possibility of such losses or damages.

(b) In no event shall GSI have any liability in excess of the sum
of Forty Million French Francs (FRF40,000,000), nor shall Kash
n' Karry have any liability in excess of the sum of Seven
Million Three Hundred Thousand U.S. Dollars ($7,300,000), in
each case calculated on a per event or per occurrence basis,
whether based on contract, tort (including, without
limitation, negligence), warranty or any other legal or
equitable grounds, for actual or direct Losses (such actual or
direct Losses shall be defined herein as the "Actual Losses");
provided, however, that the parties agree that the
FRF40,000,000/$7,300,000 limitation set forth above in this
Section 12.2(b) shall not apply to:

(1) Any failure by Kash n' Karry or GSI to pay any amounts
due and owing to the other pursuant to the terms of this
Agreement;

(2) Losses by either party for bodily injury or damage to
real property or tangible personal property;

(3) Claims for indemnification pursuant to Sections 14.1(a)
or (d) or 14.2(a) or (d); or

(4) Losses by either party due to the inaccuracy or
untruthfulness of the representations and warranties by
the other party in this Agreement, or the failure of the
other party to perform the covenants and agreements set
forth therein.

(c) In no event will GSI or its Subcontractors be liable for any
damages to Kash n' Karry if and to the extent caused by Kash
n' Karry's failure to perform any of its agreements or
covenants set forth in this Agreement, nor shall Kash n' Karry
or its Subcontractors be liable to GSI for any damages if and
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to the extent caused by any failure to perform any or all of
its agreements or covenants set forth in this Agreement by GSI
or its Subcontractors.

ARTICLE 13: WARRANTY

13.1 Work Standards.

GSI represents and warrants that all Services performed by GSI
for Kash n' Karry will be performed in a good and workmanlike
manner in accordance with this Agreement, including, but not
limited to, the Current Parameter.

13.2 Maintenance.

GSI represents and warrants that it will maintain the Machines
in accordance with the terms and conditions set forth in Schedule
V or, if applicable, the Leases governing such Machines.

13.3 Claims.

Kash n' Karry warrants that it has no actual knowledge or
written notice of any actual or threatened claim or action by, on
behalf of, or related to, any of the Affected Employees, including,
but not limited to, claims arising under the Occupational Safety
and Health Administration, Equal Employment Opportunity Commission,
National Labor Relations Board or Fair Labor Standards Act, or
other applicable federal, state or local laws or regulations,
except as such claims or actions are identified in Schedule W.

13.4 Ownership of Kash n' Karry Machines.

Kash n' Karry represents that Kash n' Karry is either the
owner of each Kash n' Karry Machine or, subject to obtaining any
Required Consent, is authorized by its owner to include it under
this Agreement.

13.5 Noninfringement.

The parties represent and warrant that they will perform their
responsibilities under this Agreement in a manner that does not
infringe, or constitute an infringement or misappropriation of, any
patent, trade secret, copyright or other proprietary right of any
third party.

13.6 Compliance with Obligations.

Each party represents and warrants that its execution and
delivery of, and performance of its obligations under, this
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Agreement does not violate or constitute a breach of any of its
contractual obligations with third parties.

13.7 Warranties and Disclaimer.

(a) GSI represents and warrants the following to Kash n' Karry:

(1) GSI's dealings with Kash n' Karry under this Agreement
will be fair and in good faith;

(2) GSI, in its dealing with Kash n' Karry under this
Agreement, will use honesty in fact and will observe
reasonable commercial standards of fair dealing in GSI's
trade;

(3) As of the Closing Date, and thereafter during the Term,
the equipment and goods selected by GSI (and not by Kash
n' Karry) in providing the Services will be suitable and
fit for the purposes of providing the Services under this
Agreement.

(b) GSI does not warrant the accuracy of any advice, report, data
or other product delivered to Kash n' Karry which is produced
with or from data and/or Applications Software provided or
selected by Kash n' Karry. Such products are delivered AS IS,
and GSI shall not be liable for any inaccuracy thereof;
provided, however, that notwithstanding the foregoing, if such
inaccuracy is due to the acts or omissions of GSI, GSI shall
be fully liable to Kash n' Karry for all Losses caused thereby
to Kash n' Karry in accordance with this Agreement.

(c) EXCEPT AS PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
EXPRESS WARRANTIES AND THERE ARE NO IMPLIED WARRANTIES;
provided, however, that nothing in this Section 13.7(c) is
intended to disclaim the implied warranty of merchantability.

13.8 Authorization and Enforceability.

Each party hereby represents that:

(a) it has all requisite corporate power and authority to enter
into this Agreement and to carry out the transactions
contemplated hereby;

(b) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have
been duly authorized by all requisite corporate action on the
part of each party; and

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(c) this Agreement has been duly executed and delivered by such
party and (assuming the due authorization, execution and
delivery hereof by the other party) is a valid and binding
obligation of such party, enforceable against it in accordance
with its terms, except as such enforceability is limited by
principles of equity and by bankruptcy, insolvency end other
laws affecting the rights of creditors generally.

13.9 Regulatory and Corporate Proceedings.

Each party agrees to obtain all necessary regulatory approvals
applicable to its business, obtain any necessary permits and
Required Consents, and comply with any regulatory requirement or
law applicable to the performance of the Services and their other
respective obligations under this Agreement.

ARTICLE 14: INDEMNITIES

14.1 Indemnity by GSI.

Subject in all respects to the parties' agreements set forth
in Section 12.2 hereof, GSI agrees to indemnify, defend and hold
Kash n' Karry, its Affiliates and their respective officers,
directors, employees, agents, successors and assigns harmless, in
accordance with the procedures described in Section 14.4 from and
against any and all Losses incurred by Kash n' Karry arising from
or in connection with:

(a) any claims of infringement made against Kash n' Karry of any
United States or foreign letters patent, or any copyright,
trademark, service mark, trade name or similar proprietary
rights conferred by contract or by common law or by any law of
the United States or any state, or any other country, alleged
to have occurred because of equipment, systems, products or
other resources or items provided to Kash n' Karry by GSI;
provided, however, that GSI will have no obligation with
respect to any Losses to the extent the same arise out of or
in connection with Kash n' Karry's modification of a program
or a machine or Kash n' Karry's combination, operation or use
with devices, data or programs not furnished by GSI or its
Subcontractors;

(b) GSI's failure to perform any duties or obligations accruing on
or after the Closing Date regarding the Contracts and/or
agreements relating to lines and circuits in accordance with
Section 3.3;

(c) the inaccuracy or untruthfulness of any representation or
warranty made by GSI under this Agreement;
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(d) any amounts, including but not limited to taxes, interest and
penalties, assessed against Kash n' Karry which are
obligations of GSI pursuant to Section 6.5; and

(e) GSI's failure to perform any of its covenants, agreements,
duties and obligations under this Agreement, including but not
limited to the Schedules hereto.

14.2 Indemnity by Kash n' Karry.

Subject in all respects to the parties' agreements set forth
in Section 12.2 hereof, Kash n' Karry agrees to indemnify, defend
and hold GSI, its Affiliates and their respective officers,
directors, employees, agents, successors and assigns harmless, in
accordance with the procedures described in Section 14.4, from and
against any and all Losses, arising from or in connection with:

(a) any claims of infringement made against GSI of any United
States or foreign letters patent, or any copyright, trademark,
service mark, trade name or similar proprietary rights
conferred by contract or by common law or by any law of the
United States or any state, or any other country, alleged to
have occurred because of equipment, systems, products or other
resources or items provided to GSI by Kash n' Karry hereunder;
provided, however, that Kash n' Karry will have no obligation
with respect to any Losses to the extent the same arise out of
or in connection with GSI's modification of a program or a
machine or GSI's combination, operation or use with devices,
data or programs not furnished by Kash n' Karry or its
Subcontractors;

(b) Kash n' Karry's failure to perform any duties or obligations
accruing prior to the Closing Date regarding the Contracts
and/or agreements relating to lines and circuits in accordance
with Section 3.3;

(d) any amounts, including but not limited to taxes, interest and
penalties, assessed against GSI which are obligations of Kash
n' Karry pursuant to Section 6.5; and

(e) Kash n' Karry's failure to perform any of its covenants,
agreements, duties and obligations under this Agreement,
including but not limited to the Schedules and the Schedules
hereto.

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14.3 Subrogation.

In the event that an Indemnifying Party shall be obligated to
indemnify an Indemnified Party pursuant to Sections 14.1 or 14.2,
the Indemnifying Party shall, upon payment of such indemnity in
full, be subrogated to all rights of the Indemnified Party with
respect to the claims and defenses to which such indemnification
relates.

14.4 Indemnification Procedures.

(a) In the event a party shall consider itself to be entitled to
indemnification from the other party in the absence of a Claim
(as defined below), such party shall give written notice
thereof to the party from whom indemnification is sought in
accordance with the requirements of Section 14.1 and 14.2
hereof. If any Claim (as defined below) is threatened against
a party or if any civil, criminal, administrative or
investigative action or proceeding (any of the above being a
"Claim") is commenced against any party entitled to
indemnification hereunder (an "Indemnified Party"), written
notice thereof shall be given to the party that is obligated
to provide indemnification (the "Indemnifying Party") as
promptly as practicable. After such notice, if the
Indemnifying Party shall (i) acknowledge in writing to such
Indemnified Party that this Agreement applies with respect to
such Claim, and (ii) shall agree in writing to indemnify the
Indemnified Party, the Indemnifying Party shall be entitled,
if it so elects, in a written notice delivered to the
Indemnified Party not fewer than ten days prior to the date on
which a response to such Claim is due, to take control of the
defense and investigation of such Claim and to employ and
engage attorneys of its sole choice to handle and defend the
same, at the Indemnifying Party's sole cost and expense. The
Indemnified Party shall cooperate in all reasonable respects
with the Indemnifying Party and its attorneys in the
investigation, trial and defense of such Claim and any appeal
arising therefrom; provided, however, that the Indemnified
Party may, at its own cost and expense, participate, through
its attorneys or otherwise, in such investigation, trial and
defense of such Claim and any appeal arising therefrom. No
settlement of a Claim (y) that involves a remedy other than
the payment of money by the Indemnifying Party or (z) that
shall result in other than a full, final and complete release
(in form, scope and substance reasonably satisfactory to the
Indemnified Party) of the Indemnified Party, shall be entered
into without the consent of the Indemnified Party, which
consent will not be unreasonably withheld or delayed.

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(b) After notice by the Indemnifying Party to the Indemnified
Party of its election to assume full control of the defense of
any such Claim and the execution of an agreement reasonably
satisfactory to the Indemnified Party wherein the Indemnifying
Party agrees to indemnify the Indemnified Party, the
Indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses (including disbursements)
incurred thereafter by such Indemnified Party in connection
with the defense of that Claim. If the Indemnifying Party does
not assume full control over the defense of a Claim subject to
such defense as provided in this Section 14.4, the
Indemnifying Party may participate in such defense, at its
sole cost and expense, and the Indemnified Party shall have
the right to defend the Claim in such manner as it may deem
appropriate, at the cost and expense of the Indemnifying
Party.

ARTICLE 15: INSURANCE AND RISK OF LOSS

15.1 Insurance.

When this Agreement requires performance by GSI's or Kash n'
Karry's employees, invitees or agents on the other party's
premises, the performing party shall (i) carry and maintain workers
compensation and employers' extended coverage liability insurance
covering its employees, invitees or agents engaged in such
performance in amounts no less than required by law in the
applicable location; (ii) cause such employees, invitees or agents
to abide by the workplace rules of the other party; and (iii) cause
such employees, invitees or agents to comply with any and all
applicable federal, state and local laws, rules and regulations.

15.2 Risk of Loss.

Kash n' Karry is responsible for risk of loss of, or damage
to, the Machines and the Point of Sale Machines located on its
premises unless such damage is caused by the negligence or willful
misconduct of GSI. GSI is responsible for risk of loss of, or
damage to, the Machines located in the Building or on the premises
of the Data Center unless such damage is caused by the negligence
or willful misconduct of Kash n' Karry.

ARTICLE 16: PUBLICITY

Each party will submit to the other all advertising, written
sales promotions, press releases and other publicity matters
relating to this Agreement in which the other party's name or mark
is mentioned or language from which the connection of said name or
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mark may be inferred or implied, and will not publish or use such
advertising, sales promotions, press releases, or publicity matters
without prior written approval of the other party. Provided it is
done in good taste and not in violation of any SEC regulations,
either party may include the other party's name and a mutually
agreed upon factual description of this Agreement (but no financial
information regarding the Agreement) on Employee Bulletin Boards,
in its list of references and in the experience section of
proposals to third parties, in internal business planning documents
and in its Annual Report to Stockholders, and whenever required by
reason of legal, accounting or regulatory requirements.

ARTICLE 17: REVIEW COMMITTEE AND DISPUTE RESOLUTION

17.1 Joint Advisory Committee.

GSI and Kash n' Karry agree to create a Joint Advisory
Committee consisting of the National Director of GSI, the GSI
Project Executive, the Chief Executive Officer of Kash n' Karry,
and the Chief Financial Officer of Kash n' Karry.

The Joint Advisory Committee will:

(a) conduct quarterly reviews of the progress on Projects;

(b) annually review the operating and strategic plans prepared by
GSI's Project Executive;

(d) provide advice and direction on technology changes;

(e) attempt to resolve disputes between the parties; and

(f) undertake such other actions and perform such other tasks as
may be agreed upon by the parties in furtherance of this
Agreement.

Either party may bring other individuals to the meetings of the
Joint Advisory Committee, such as consultants or employees, as may
be mutually agreed upon by the parties.

17.2 Dispute Resolution.

(a) Except as set forth in Section 17.2(d) and Section 17.2(e)
below, any dispute between the parties either with respect to
the interpretation of any provision of this Agreement or with

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respect to the performance by GSI or by Kash n' Karry
hereunder shall be resolved as specified in this Section 17.2.

(1) Upon the written notice of either party, the Joint
Advisory Committee will meet within five days.

(2) For a period of 30 days following such initial meeting,
the designated representatives shall meet no less than
bi-weekly (and such meetings may be by telephone) in
order to gather and furnish to the other all information
with respect to the matter at issue which the parties
believe to be appropriate and germane in connection with
its resolution.

(3) Such representatives shall discuss the problem and
negotiate in good faith during such 30 day period in an
effort to resolve the dispute without the necessity of
any formal proceeding relating thereto.

(4) During the course of such negotiation, all reasonable
requests made by one party to the other for non-
privileged information reasonably related to this
Agreement will be honored in order that each of the
parties may be fully advised of the other's position.

(5) The specific format for such discussions will be left to
the discretion of the designated representatives but may
include the preparation of agreed upon statements of fact
or written statements of position furnished to the other
party.

(b) If the designated representatives cannot resolve the dispute
on or before the expiration of such 30 day period, then the
dispute shall be promptly escalated to the Chairman of the
Board of Kash n' Karry and the President of Facility
Management for GSI, for their review and resolution within ten
days after the expiration of such 30 day period. If the
dispute cannot be resolved by such officers within such ten
day period, then the parties may initiate arbitration
proceedings in accordance with Section 17.2(c) hereof.

(c) Any dispute between the parties that is not resolved within
the timeframe set forth in Sections 17.2(a) and (b) may be
resolved by nonbinding arbitration in accordance with the
provisions of the American Arbitration Association. Such
arbitration may be held in any state in the continental United
States, except for the State of Florida. Either party may
initiate a proceeding in arbitration by giving notice to the
other of its choice of a qualified arbitrator, together with
a statement of the claim, the facts that support that claim
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and the relief requested. The responding party shall, within
15 days, state its defenses and/or counterclaims, together
with a statement of the facts that support the defenses or
counterclaims and, in the case of counterclaims, the relief
requested. Additionally, the responding party shall state
whether the proposed arbitrator is acceptable. In the event
the proposed arbitrator is unacceptable, the parties shall
make a good faith effort to agree on another qualified
individual to serve as a single arbitrator. If the parties
cannot agree on a single arbitrator within 15 days, each party
shall designate an arbitrator and those two arbitrators shall
select a qualified neutral third arbitrator to serve with them
as an arbitration panel.

(d) The parties agree that nothing in this Agreement and/or this
Article 17 shall limit or prohibit in any way or shall be
construed to limit or prohibit in any way any party from
taking formal action (including, but not limited to, judicial
action) to protect its interests:

(1) if GSI shall have stopped providing Services that are
critical to Kash n' Karry's core operations and such
cessation shall have continued unremedied for 24 hours
after Kash n' Karry shall have notified GSI in writing
(in accordance with Section 18.14) that such cessation
constitutes an emergency; or

(2) in the event that GSI shall reasonably believe that GSI
is in danger of suffering immediate Losses or immediate
irreparable harm as a result of the actions or failure to
act by Kash n' Karry, and such actions or failure to act
shall continue unremedied for 24 hours after GSI shall
have notified Kash n' Karry in writing (in accordance
with Section 18.14) of such danger.

(e) The parties further agree that nothing in this Agreement
and/or this Article 17 shall limit or prohibit in any way or
shall be construed to (i) limit or prohibit in any way any
party from providing notice to the other of a breach of this
Agreement, except as expressly provided in Section 11.1 hereof
or (ii) limit the operation of Article 11 hereof. The parties
agree that in the event of a conflict between the terms and
conditions of Article 11 and this Article 17, the terms and
conditions of Article 11 shall control and govern.

17.3 Continued Performance.

Both parties agree to continue performing their respective
obligations under this Agreement (including, without limitation,
GSI's obligation to perform Services, and Kash n' Karry's
59<PAGE>
[Execution copy]

obligation to make payments in accordance with Article 7) while the
dispute is being resolved in accordance with this Article 17,
unless and until such obligations are terminated after dispute
resolution or expire in accordance with the provisions hereof. The
parties agree that in the event of a conflict between this Section
17.3 and any other provision of this Agreement, the provision of
this Section 17.3 shall control and govern.

ARTICLE 18: GENERAL

18.1 Control of Services.

This Agreement shall not be construed as constituting either
party as partner of the other or to create any other form of legal
association that would impose liability upon one party for the act
or failure to act of the other or as providing either party with
the right, power or authority (express or implied) to create any
duty or obligation of the other party. Each party shall be
responsible for the management, direction and control of its
employees, and such employees shall not be employees of the other
party. Except where this Agreement expressly provides that GSI
will perform certain identified Services as agent for Kash n'
Karry, the Services will be under the control, management and
supervision of GSI.

18.2 Right to Perform Services for Others.

Each party recognizes that GSI personnel providing Services to
Kash n' Karry under this Agreement may perform similar services
from time to time for others, and, subject to the provisions of
Section 18.20, this Agreement shall not prevent GSI from using the
personnel and equipment used to provide Services to Kash n' Karry
under this Agreement for such purposes. Subject to the provisions
of Section 4.1, GSI may perform its obligations by use of its
Affiliates, or through the use of GSI-selected Subcontractors;
provided, however, that GSI shall not be relieved of its
obligations under this Agreement by use of such Affiliates or
Subcontractors.

18.3 Scope of Services.

The Services provided under this Agreement relate to Machines
and facilities located within the United States.

18.4 Amendments.

(a) Any changes or modifications to this Agreement may be made
only by a written amendment signed by both parties, executed

60<PAGE>
[Execution copy]

and delivered, as to Kash n' Karry, by either its Chief
Executive Officer or its the Chief Financial Officer.

(b) On each anniversary of the Commencement Date throughout the
Term, the parties agree to bear their own expenses of
reviewing this Agreement in view of the actual conduct of the
parties over the preceding 12 months and of revising the terms
of this Agreement so that the written terms of this Agreement
conform to and reflect the parties' actual conduct.

18.5 Force Majeure.

(a) Neither party shall be liable for any default or delay in the
performance of its obligations hereunder if and to the extent
such default or delay is caused, directly or indirectly, by
fire, flood, earthquake, elements of nature or acts of God,
acts of war, terrorism, riots, civil disorders, rebellions or
revolutions in the United States, or any other similar cause
beyond the reasonable control of such party (individually,
each being a "Force Majeure Event").

(b) In such event, the nonperforming party will be excused from
any further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such
party continues to use all commercially reasonable efforts to
recommence performance or observance whenever and to whatever
extent possible without delay. Any party so delayed in its
performance will immediately notify the other by telephone (to
be confirmed in writing within five days of the inception of
such delay) and describe at a reasonable level of detail the
circumstances causing such delay.

(c) If any Force Majeure Event substantially prevents, hinders, or
delays performance of the Services and GSI fails to provide
disaster recovery services at its primary disaster recovery
facility designated for Kash n' Karry in accordance with
Section 4.12 and Schedule P (unless such failure to provide
such disaster recovery services is as a direct result of the
Force Majeure Event, which circumstance is governed by Section
18.5(d) hereof), Kash n' Karry may procure such disaster
recovery services from an alternate source (and shall provide
written notice thereof from Kash n' Karry to GSI) and GSI will
pay or reimburse Kash n' Karry for all costs incurred by Kash
n' Karry in procuring such disaster recovery services for up
to 180 days. If the Services shall not have been restored by
the end of this 180 day period, this Agreement shall
automatically terminate unless extended by mutual written
agreement of the parties. In such event, Kash n' Karry's
obligations to GSI hereunder in respect of such termination
shall be as set forth in Section 11.3(b).
61<PAGE>
[Execution copy]

(d) If any Force Majeure Event affects both the Data Center and
GSI's primary disaster recovery facility designated for Kash
n' Karry (thereby preventing the delivery to Kash n' Karry of
disaster recovery services in accordance with Section 4.12 and
Schedule P), and substantially prevents, hinders or delays
performance of the Services, then:

(1) Kash n' Karry may procure such disaster recovery services
from an alternate source (after written notice from Kash
n' Karry to GSI) for 20 days, which shall be at Kash n'
Karry's sole cost and expense; and

(2) Beginning on the 21st day after failure by GSI to deliver
disaster recovery services in accordance with Section
4.12 and Schedule P due to the occurrence of the Force
Majeure Event, if Services or disaster recovery services
have not been restored by GSI by such date, GSI will pay
or reimburse Kash n' Karry for all costs incurred by Kash
n' Karry in procuring such disaster recovery services for
up to 180 days. If Services shall not have been restored
by the end of this 180 day period, this Agreement shall
automatically terminate unless extended by mutual written
agreement of the parties. In such event, Kash n' Karry's
obligations to GSI hereunder in respect of such
termination shall be as set forth in Section 11.3(c).

(e) This Section 18.5 does not limit or otherwise affect GSI's
obligation to provide disaster recovery services in accordance
with Section 4.12 and Schedule P.

18.6 Nonperformance.

To the extent any nonperformance by either party of its
obligations under this Agreement results from or is caused by the
other party's failure to perform its obligations under this
Agreement, such nonperformance shall be excused.

18.7 Remarketing.

Kash n' Karry may not remarket all or any portion of the
Services provided under this Agreement, or make all or any portion
of the Services available to any party other than Kash n' Karry,
without the prior written consent of GSI; provided, however, that
nothing in this Agreement shall limit or prohibit or shall be
construed to limit or prohibit:

(a) Kash n' Karry's ability to enter into new areas or types of
business not engaged in by Kash n' Karry on the Closing Date;

62<PAGE>
[Execution copy]

(b) Kash n' Karry's ability to obtain data processing services or
functions not covered by this Agreement from other providers
of such services;

(d) Kash n' Karry's ability to make acquisitions; or

(e) subject to the provisions of Section 18.13, Kash n' Karry's
ability to sell or otherwise divest itself of portions of its
business operations.

18.8 Waiver.

No action taken pursuant to this Agreement by either party
shall be deemed to constitute a waiver by such party of compliance
with any covenant or agreement contained herein unless the waiver
is made expressly in writing signed by the waiving party, and such
waiver of any breach of any provision of this Agreement shall not
constitute a waiver of any prior, concurrent or subsequent breach
of the same or any other provisions hereof.

18.9 Severability.

If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and such provision shall be deemed to
be restated to reflect the original intentions of the parties as
nearly as possible in accordance with applicable law(s).

18.10 Counterparts.

This Agreement shall be executed in duplicate counterparts.
Each such counterpart shall be an original and both together shall
constitute but one and the same document.

18.11 Governing Law.

This Agreement shall be governed by the laws of the State of
Florida as such laws are applied to contracts which are entered
into and performed entirely within the State of Florida including
the conflicts of law principles thereof. Except as provided in
Section 17.2(c) with respect to venue for arbitration, the sole and
exclusive venue for any litigation or informal dispute resolution
shall be Hillsborough County, Florida. GSI, and any Affiliate of
GSI rendering Services under this Agreement, agree to appoint CT
Corporation or equivalent corporate service agent in Florida as its
agent for purposes of service of process.
63<PAGE>
[Execution copy]
18.12 Nondisturbance and Attornment.

(a) Without the prior written consent of Kash n' Karry, GSI shall
not enter into any equipment lease in respect of, or grant a
security interest in, any GSI End User Machines, unless the
equipment lessor, secured party or other lender shall agree
(1) to provide to Kash n' Karry written notice of, and an
opportunity to cure, any default or event of default by GSI
under such equipment lease, security agreement or obligation
secured thereby, (2) not to disturb Kash n' Karry from the use
and possession of such GSI End User Machines, so long as no
event of default shall occur and continue following the
expiration of Kash n' Karry's cure period, and (3) to consent
to the assignment by GSI to Kash n' Karry, upon termination of
this Agreement, of its rights and privileges under any such
equipment lease and its right, title and interest in any such
GSI End User Machines (subject to the interest of such
equipment lessor or secured party).

(b) GSI hereby acknowledges and consents to the lien upon the
rights and privileges of Kash n' Karry under this Agreement to
secure the obligations of Kash n' Karry to The CIT
Group/Business Credit, Inc., as Administrative Agent, under
that certain Credit Agreement dated as of December 29, 1994,
and any obligations hereafter created by Kash n' Karry to
refinance such obligations. Notwithstanding any contrary
provision in Section 18.13, GSI consents to an assignment by
Kash n' Karry of its rights and privileges hereunder to any
such secured party following the occurrence of an event of
default by Kash n' Karry under such secured obligations.

18.13 Binding Nature and Assignment.

(a) This Agreement will be binding on the parties and their
respective successors and permitted assigns. Neither party
may, or will have the power to, assign its rights and
obligations under this Agreement without the prior written
consent of the other, which will not be unreasonably withheld.

(b) Notwithstanding anything to the contrary contained in Sections
18.13(a) and 19.1, either party may assign its rights and
obligations under this Agreement, without the approval of the
other, to an Affiliate which expressly assumes, pursuant to a
written agreement in form, scope and substance reasonably
satisfactory to the other party, this Agreement and such
party's obligations and responsibilities hereunder, provided
that the assigning party remains jointly and severally liable
for the performance of all obligations under this Agreement
with the assignee and the assignor shall not be relieved from
the full performance of all obligations under this Agreement.

64<PAGE>
[Execution copy]

(c) Notwithstanding anything to the contrary contained in this
Section 18.13, but subject to the provisions of Section 19.1,
either party may assign this Agreement without the prior
written consent of the other party to an entity which acquires
all or substantially all of the assets of such party, so long
as:

(1) the assignee shall have a net worth, determined in
accordance with generally accepted accounting principles,
consistently applied, after giving effect to such
assignment, equal to or greater than the assignor's net
worth immediately prior to such assignment; and

(2) the assignee shall expressly assume the assignor's
obligations and responsibilities hereunder from and after
the date of assignment.

(d) Any attempted assignment that does not comply with the terms
of this Article shall be null and void. Any party assigning
its rights or obligations in accordance with Sections 18.13(b)
or (c) shall, within three days of such assignment, provide
written notice thereof to the other party together with a copy
of the assignment instrument.

18.14 Notices.

Under this Agreement, whenever one party is required or
permitted to give notice to the other, such notice will be deemed
given when delivered in hand, one day after being given to a
national express courier with a reliable system for tracking
delivery, or three days after the day of mailing, when mailed by
United States mail, registered or certified mail, return receipt
requested, postage prepaid (regardless of whether the return
receipt is subsequently received), or when sent by facsimile and
thereafter delivered by one of the foregoing methods of delivery.
and addressed as follows:

(a) For notices called for by Sections 4.1 (Personnel); 4.5(b)
(Change Control); 5.4 (Kash n' Karry Responsibilities); 6.3
(New Services); 6.4 (Reduced Services); Article 10
(Confidentiality); Article 11 (Termination); Sections 14.4
(Indemnification); 17.2 (Dispute Resolution); 18.5 (Force
Majeure) and 18.13 (Assignment), notify:

In the case of GSI:

GSI Project Executive
6401 Harney Road
Tampa, FL 33610
Telephone:
Facsimile: 65<PAGE>
[Execution copy]
with a copy to:

GSI General Counsel
___________________
___________________
Facsimile:

In the case of Kash n' Karry:

Kash n' Karry Food Stores, Inc.
P.O. Box 11675
Tampa, FL 33680

ATTN: Chief Executive Officer
Telephone:
Facsimile:

with a copy to:

_______________________
_______________________
_______________________

Telephone:
Facsimile:

(b) For all other notices:

In the case of GSI:

GSI Project Executive
6401 Harney Road
Tampa, FL 33610
Telephone:
Facsimile:

In the case of Kash n' Karry:

Kash n' Karry MIS Coordinator
Kash n' Karry Food Stores, Inc.
P.O. Box 11675
Tampa, FL 33680

Telephone:
Facsimile:

For notices described in (b) above, these may be delivered by
computer transmission (e.g., electronic mail) in a format printable
by the receiving party. If requested by the receiving party, the
sending party will follow up any such computer transmission by

66<PAGE>
[Execution copy]

delivering as soon as reasonably possible thereafter hard copy of
such notice by United States mail to the recipient. These notices
shall be deemed given on the date the computer transmission is made
so long as hard copy is received by the sending party if requested.
Either party hereto may from time to time change its address for
notification purposes, or the person to whom such notice shall be
given, by giving the other party prior written notice of the new
address or addressee, and the date upon which such change will
become effective.

18.15 No Third Party Beneficiaries.

Except as specified in Article 12 with respect to either
party's Subcontractors, the parties do not intend, nor will any
clause be interpreted, to create in any third party, any
obligations to, or benefit from, either GSI or Kash n' Karry.

18.16 Other Documents.

(a) On or after the Effective Date and the date(s) of any
amendments hereto and at the request of the other party, each
party shall furnish to the other such certificate of its
secretary or certified copy of resolutions of its Board of
Directors as shall evidence that this Agreement or any
amendment hereto has been duly executed and delivered on
behalf of such party.

(b) During the Term and at the reasonable request of the other
party, each party shall furnish to the other a certificate
stating that:

(1) this Agreement is in full force and effect; and

(2) that no Event of Default by either party shall have
occurred and be continuing, or the respect in which any
breach or default shall have occurred and be continuing.

(c) The parties will execute and deliver or cause to be delivered
such further documents, from time to time, as may reasonably
be required for the purposes of assuring and confirming the
rights hereby created, or for facilitating the performance of
the terms of the Agreement; provided, however, that neither
party shall be required to execute or deliver any document or
agreement that will vary, waive, limit or release any of the
terms hereof.

(d) Subject to Kash n' Karry's obligations to its existing
creditors, Kash n' Karry acknowledges and agrees that
financing statements and related filings (including, without
limitation, UCC-1 statements) may have to be executed and
67<PAGE>
[Execution copy]

delivered by Kash n' Karry in connection with the provision by
GSI of machines, equipment and software in performing the
Services so as to evidence GSI's ownership of such items. GSI
shall not be obligated to deliver any such machines, equipment
and software to Kash n' Karry facilities unless and until such
documents are executed and delivered by Kash n' Karry, and GSI
shall not be responsible for any failure to provide the
Services, including, without limitation, meeting of the
Current Parameter, due to nondelivery of such items caused by
Kash n' Karry's failure to execute and deliver such documents.
GSI agrees that such documents shall be in form, scope and
substance reasonably satisfactory to Kash n' Karry, and that
no such documents shall vary, waive, limit or release any of
the terms hereof, and agrees to provide any such documents for
review and execution by Kash n' Karry a reasonable time prior
to the time any material adverse impact upon the ability of
GSI to provide the Services shall result from GSI's not
receiving such documents from Kash n' Karry.

18.17 Limitation Period Upon Termination.

Neither party may bring an action arising out of this
Agreement more than three years after the expiration or earlier
termination of this Agreement.

18.18 Headings.

All headings herein, the table of contents and the index of
defined terms are not to be considered in the construction or
interpretation of any provision of this Agreement. This Agreement
was drafted with the joint participation of both parties and shall
be construed neither against nor in favor of either, but rather in
accordance with the fair meaning thereof.

18.19 Noncompetition Agreement.

Without Kash n' Karry's approval, GSI will not provide
services similar to the Services described in this Agreement to any
competing retail grocery chain within Kash n' Karry's market area
as of the Commencement Date.

18.20 Severability of Contracts.

It is the intent of the parties hereto that any and all of such
changes, modifications, amendments, supplements, riders or
restructuring or updating (collectively, the "Modifications")
hereto shall constitute one and the same contract with this
Agreement. The parties hereto agree that the Agreement, the
Schedules and the Modifications shall constitute one single
integrated contract and further agree that (i) the nature and
68<PAGE>
[Execution copy]

purpose of the Agreement, the Schedules and the Modifications are
the same, (ii) the consideration for the Agreement, the Schedules
and the Modifications is not separate and distinct but is the same
consideration, and (iii) the obligations of the parties hereto to
the Agreement, the Schedules and the Modifications are
interrelated.

ARTICLE 19: BANKRUPTCY CONCERNS

19.1 Personal Services Contract.

GSI acknowledges and agrees that Kash n' Karry is entering
into the Agreement solely in reliance upon GSI's expertise in
providing the Services. Accordingly, the parties agree that the
Agreement constitutes a contract for the provision of personal
services by GSI to Kash n' Karry and, in the event GSI is unable to
or refuses to perform the Services or upon the occurrence of a
Bankruptcy Event and if GSI does not perform the Services, Kash n'
Karry shall not be required to accept performance of the Services
by any party other than GSI.

19.2 Default in the Event of Bankruptcy and Post-Filing Bankruptcy
Remedies for Non-Performance.

If either GSI or Kash n' Karry (i) shall apply for, or consent
in writing to, the appointment of a receiver, trustee or
liquidator; or (ii) shall file a voluntary petition in bankruptcy
or be unable, or admit in writing to the inability generally, to
pay debts as they become due; or (iii) shall make a general
assignment for the benefit of creditors; or (iv) shall file a
petition or an answer seeking a reorganization or an arrangement or
readjustment of debt with creditors, or take advantage of any
insolvency, bankruptcy, liquidation or dissolution law of the
United States or of any state or country; or (v) shall file an
answer admitting the material allegations of a petition filed
against it in any such bankruptcy, reorganization or insolvency
proceedings (hereinafter, collectively, a "Bankruptcy Event"), then
the following provisions shall take effect:

(a) Upon the occurrence of a Bankruptcy Event as to GSI, then in
order to protect the vital business interests of Kash n'
Karry, GSI hereby consents in advance to the immediate entry
of an order of the bankruptcy court having jurisdiction over
its case, without the necessity of a hearing, which will
provide for complete relief from the automatic stay in favor
of Kash n' Karry. If the bankruptcy court declines to enter
such an order without a hearing, GSI agrees that the
circumstances warrant a hearing on an emergency basis and on
short notice to GSI. For so long as no Event of Default by
69<PAGE>
[Execution copy]
GSI shall have occurred and be continuing, then Kash n' Karry
agrees not to proceed against the estate or assets of GSI in
such bankruptcy case. If, however, GSI fails to perform all
of its obligations under the Agreement following the
occurrence of a Bankruptcy Event, then Kash n' Karry shall
have all rights and remedies which are necessary to protect
Kash n' Karry's business interests.

(b) Upon the occurrence of a Bankruptcy Event as to Kash n' Karry,
then in order to protect the vital business interests of GSI,
Kash n' Karry hereby consents in advance to the immediate
entry of an order of the bankruptcy court having jurisdiction
over its case, without the necessity of a hearing, which will
provide for complete relief from the automatic stay in favor
of GSI. If the bankruptcy court declines to enter such an
order without a hearing, Kash n' Karry agrees that the
circumstances warrant a hearing on an emergency basis and on
short notice to Kash n' Karry. For so long as no Monetary
Event of Default by Kash n' Karry shall have occurred and be
continuing, then GSI agrees not to proceed against the estate
or assets of Kash n' Karry in such bankruptcy case. If,
however, a Monetary Event of Default by Kash n' Karry shall
have occurred and be continuing following the occurrence of a
Bankruptcy Event, then GSI shall have all rights and remedies
which are necessary to protect GSI's business interests.

19.3 Waiver of Automatic Stay

In the event a bankruptcy case is commenced by or against
either party hereto after the execution of this Agreement, then the
automatic stay imposed by 11 U.S.C. 362 or any similar law,, and
any rights to and injunction under 11 U.S.C. 105(a) or any
similar law, shall be deemed automatically waived as to the other
party with respect to the Agreement, the Schedule or any other
documents executed in connection herewith. The Court with
jurisdiction over any such bankruptcy case shall enter an order
terminating the automatic stay without the necessity of a hearing,
proof or evidence, upon motion made by the other party. Each of
the parties hereto specifically agree and acknowledge that the
lifting of the automatic stay hereunder by the appropriate
bankruptcy court shall be deemed "for cause" pursuant to Section
362(d)(1) of the Bankruptcy Code. Each party also specifically
agrees not to directly or indirectly oppose or otherwise defend
against the other party's effort to gain relief from the automatic
stay. This provision is not intended to preclude either party from
filing for protection under any chapter of the Bankruptcy Code.
The remedies prescribed in this paragraph are not exclusive and
shall not limit a party's rights under the Agreement or under any
law. All of the above terms and conditions have been freely
bargained for and are all supported by reasonable and adequate
consideration and the
70<PAGE>
[Execution copy]

provisions herein are a material inducement for each party to enter
into this Agreement.

ARTICLE 20: NEW CLIENT INCENTIVES

It is GSI's intention to provide services to new clients from
the Data Center. With respect to any new clients introduced to the
Data Center, then provided that Kash n' Karry participates in such
introduction, such as by providing references for GSI, GSI will pay
to Kash n' Karry a one-time bonus payment (the "Data Center Bonus")
equal to 3/10 of one percent (0.3%) of GSI's first year annual
services charges to such new clients. The bonus will be due and
payable six months after commencement of GSI's services to such new
clients. With respect to any new clients introduced to GSI by Kash
n' Karry, regardless of whether such services will be provided from
the Data Center or otherwise, GSI will pay to Kash n' Karry a bonus
payment (the "Introduction Bonus") equal to one-half of one percent
(0.5%) of the annual services charges payable by such new clients
for the first two years of such service. Such bonus payments will
be due and payable in two equal installments, the first of which
will be due and payable six months after the commencement of
services to such new client, and the second of which will be due
and payable six months after the first year anniversary of such
commencement If Kash n' Karry introduces a new client to GSI for
which GSI provides services from the Data Center, GSI shall pay the
Introduction Bonus to Kash n' Karry, and not the Data Center Bonus.

THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT,
UNDERSTAND IT, AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
FURTHER, THE PARTIES AGREE THAT THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES RELATING TO THIS
SUBJECT SHALL CONSIST OF 1) THIS AGREEMENT, AND 2) THE SCHEDULES,
INCLUDING THOSE MADE EFFECTIVE BY THE PARTIES IN THE FUTURE. THIS
STATEMENT OF THE AGREEMENT SUPERSEDES ALL PROPOSALS OR OTHER PRIOR
AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN
THE PARTIES RELATING TO THE SUBJECT MATTER DESCRIBED IN THIS
AGREEMENT.

Accepted by: Accepted by:
GSI Outsourcing Corporation Kash n' Karry Food Stores, Inc.

By: /s/ Jacques Szulevicz By: /s/ Ronald E. Johnson
Authorized Signature Authorized Signature

By: /s/ Philippe Guionnet By: /s/ R. P. Springer
Authorized Signature Authorized Signature
R. P. Springer
Executive Vice President

20/WL/LWH/KNK.SEC/S1.95/EX-10-5A.ASC
71<PAGE>
SCHEDULE A

Annual Services Charge

See Annex "1" attached<PAGE>
SCHEDULE A

1-Mar-95
DOLLARS ROUNDED OOO NOTES CY 1995 CY 1996 CY 1997 CY 1998
TOTAL BILL W/GSI 1 7,839 8,535 9,129 8,582

CY 1999 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004 10 Years
8,284 7,577 7,380 7,182 6,985 6,590 78,083

NOTES
1.) CY 1996 - 150 OF THE 8,535 TO BE PAID WHEN A NEW PROCUREMENT &
BILLING SYSTEM
IS INSTALLED ON THE MAINFRAME, OR IF EARLIER BUT IN NO EVENT TO BE
PAID PRIOR TO
08/15/1995
<PAGE>
SCHEDULE B

Current Parameter

To be provided prior to Closing Date<PAGE>
SCHEDULE C

Data Network Schematic

To be provided prior to Closing Date<PAGE>
SCHEDULE D

Leased Machines

To be provided prior to Closing Date<PAGE>
SCHEDULE E

Licenses

To be provided prior to Closing Date
<PAGE>
SCHEDULE F

Machine Leases

To be provided prior to Closing Date
<PAGE>
SCHEDULE G

Maintenance Contracts

To be provided prior to Closing Date
<PAGE>
SCHEDULE H

MIS Budget

To be provided prior to Closing Date<PAGE>
SCHEDULE I

Owned Machines

To be provided prior to Closing Date
<PAGE>
SCHEDULE J

Point of Sale Machines

To be provided prior to Closing Date
<PAGE>
SCHEDULE K

Projects - General

Kash n' Karry has committed to support:

. The effort of GSI to significantly off-load the processes
which are on the SUN equipment as long as a "Network" and
office support system remains in place.

. A complete freeze on all systems except for maintenance
to actual errors in the systems.

. That all modifications and/or development of systems will
be billed on a time and materials basis at a rate not to
exceed the published price of ISSC (pricing list to be
attached).

. That Kash n' Karry will formulate emergency manual
procedures for all systems.

<PAGE>
SCHEDULE K-1

Point of Sale Project

GSI has committed to provide a Point of Sale System which:

. Will be, at a minimum, new 4690 IBM configurations or
equivalent in performance/functionality.

. Will include, at a minimum, the IBM Supermarket
Application (or its equivalent), the IBM EFT feature (or
its equivalent) and current Check Authorization
functionality used at Kash n' Karry.

. Will require GSI to provide all construction and
electrical requirements, per manufacturer specifications.
Kash n' Karry will be responsible for providing all
construction work, cabling, and electrical wiring in a
timely manner, will pay for said work, and comply with
GSI and manufacturer specifications. GSI will install
new POS systems after Kash n' Karry has installed and
modified each store to these specifications.

. Will be delivered to 73 sites replacing current ICL
systems, and 26 sites at which current IBM systems will
be upgraded.

. Will include, at a minimum, a polling solution which
matches current functionality.

. Will require GSI to provide training for the designated
Kash n' Karry trainers, and the subsequent review of the
training performed by the Kash n' Karry trainers. These
Kash n' Karry trainers will be responsible for training
results, with GSI assistance, such as trainee willingness
to learn, training assimilation measures, and timing.

. Will be implemented in at least 43 sites by 12/31/95, and
will be completely implemented by 6/30/96. Failure by
GSI to complete at least 43 installations by 12/31/95,
for any reason other than the failure by Kash n' Karry to
fulfill its obligations under the Agreement, shall
constitute an Event of Default by GSI under the
Agreement.

. Will require Kash n' Karry to train and provide at least
one "super user" of the new system in each store,
available at all times, in particular during pre-
installations, training, installations, system
modifications, problem reporting, trouble-shooting, etc.
<PAGE>

. Will require GSI to provide maintenance support for all
ICL sites starting no later than 4/1/95, and for all new
system sites as implemented.

. Will be installed with the collaboration and involvement
of the Kash n' Karry "champions" as related to this
project.

. Will allow GSI and Kash n' Karry to mutually agree in
order to change the installation schedule for any reason.

. Planning assumptions - 1 pilot installation in May 1995
close to Harney Road, 2 store installations in June 1995,
and 8 store installations per month in July, August,
September, October, and November 1995. Operating
assumptions - stores will be closed between the hours of
10 p.m. and 8 a.m., and installations may occur any day
except Saturday.

K-1 - Page 2<PAGE>
SCHEDULE K-2

Polling Solution Project

See Schedule K-1.

<PAGE>
SCHEDULE K-3

Procurement and Billing System Project
(Merchandise System)

GSI has committed to provide a new Merchandise System which:

. Will be acquired from WorldWide Chain Store Systems
(WCSS) or an equivalent system from another provider.

. Will be implemented by the end of the 4th calendar
quarter of 1995.

. Will include WCSS Purchasing Management System (or its
equivalent), and WCSS Store Order Management System (or
its equivalent).

. Will be a "vanilla" installation of these products.
"Vanilla" in this context means only standard parameters
and that no program modifications will be made to the
software that is acquired from the supplier of the
software.

. Will be a version of the software release provided by the
supplier to the general marketplace, under VSAM, and
includes a Kash n' Karry commitment to a complete
"freeze" on all modifications to the existing Kash n'
Karry Merchandising System during the implementation of
the new systems except for those "fixes" that are
required to continue normal computer operations.

. Will be reviewed by GSI to make its best effort to
establish an interface between it and any "existing
functions" that the CEO of Kash n' Karry requests GSI to
review from the current Merchandising System.

. Will be installed with the collaboration and involvement
of the Kash n' Karry "champions" as relates to this
project.

. Will require GSI to provide Training for the designated
Kash n' Karry trainers and the subsequent review of the
training results. These Kash n' Karry trainers will be
responsible for training results, with GSI assistance,
such as trainee willingness to learn, training
assimilation measures, and timing.

. Will be kept on a maintenance agreement between GSI and
the provider of the software system, under its standard
maintenance contract.<PAGE>
SCHEDULE K-4

Merchandising Accounts Payable Project

GSI has committed to provide a new Merchandise Accounts Payable
System which:

. Will be implemented by the end of calendar 1996.

. Will be reasonably equivalent to the existing system.

. Will require that there is a complete "freeze" on all
modifications to the existing Kash n' Karry Merchandising
Accounts Payable system during the implementation period,
except for "fixes" which are required to continue normal
computer operations.
<PAGE>
SCHEDULE K-5

Labor Tracking and Scheduling Project

GSI has committed to provide a Store Level Labor Tracking and
Scheduling System:

. Labor Tracking will be implemented as part of the rollout
of P.O.S. equipment.

. Scheduling will be implemented by the end of the 1st
calendar quarter of 1996 for those stores installed in
1995.

. Scheduling for the remaining stores will be implemented
by the 3rd calendar quarter of 1996.

. That will be, at a minimum, equal to the current systems
acquired by Kash n' Karry for their IBM 4680
installations.

<PAGE>
SCHEDULE L

Retained Contracts

To be provided prior to Closing Date<PAGE>
SCHEDULE M

Supporting Data

To be provided prior to Closing Date
<PAGE>
SCHEDULE N

Transition Plan

To be provided prior to Closing Date
<PAGE>
SCHEDULE O

Affected Employees

To be provided prior to Closing Date
<PAGE>
SCHEDULE P

Disaster Recovery Plan

To be provided prior to Closing Date
<PAGE>
SCHEDULE Q

Help Desk

To be provided prior to Closing Date
<PAGE>
SCHEDULE R

GSI Corporate Structure

To be provided prior to Closing Date
<PAGE>
SCHEDULE S

GSI Wire Transfer Instructions

To be provided prior to Closing Date
<PAGE>
SCHEDULE T

Confidential Information Obligations

To be provided prior to Closing Date
<PAGE>
SCHEDULE U

Termination Charges

See Annex "1" attached hereto<PAGE>
SCHEDULE U

28-Feb-95
DOLLARS ROUNDED OOO NOTES CY 1995 CY 1996 CY 1997 CY 1998
KNK TERMINATION CHARGES 2,700 2,600 2,500 1,900

CY 1999 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004
1,300 900 500 200 0 0
<PAGE>
SCHEDULE V

Maintenance

To be provided prior to Closing Date
<PAGE>
SCHEDULE W

Claims

To be provided prior to Closing Date

[CONFORMED COPY]

FIRST AMENDMENT TO SERVICES AGREEMENT

This is the First Amendment to that certain Services Agreement
dated as of March 1, 1995 (the "Services Agreement"), by and
between Kash n' Karry Food Stores, Inc., a Delaware corporation
("Kash n' Karry"), and GSI Outsourcing Corporation, a Delaware
corporation ("GSI").

TERMS

In consideration of the mutual covenants and promises
hereinafter set forth, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1. Staff.

1.1. Section 3.2(a) of the Services Agreement is hereby
amended by deleting the second and third sentences and inserting
the following in lieu thereof:

Within 10 days prior to the Effective Employment Date (as
hereinafter defined), GSI or its Subcontractors will
offer, or cause to be offered, employment to those Kash
n' Karry employees listed on Schedule O (the "Affected
Employee"), as the same may be amended from time to time
after the Closing Date to reflect changes in such
personnel. Subject to the provisions of Section 3.2(b),
such employment will become effective on the earlier of
May 1, 1995, or the date that is 31 days after the
Closing Date (the "Effective Employment Date").

1.2. Section 3.2(b) of the Services Agreement is hereby
amended by deleting the third sentence and inserting the following
in lieu thereof:

On or before the Effective Employment Date, Kash n' Karry
will pay to such Transferred Employees all monies owed to
them by reason of their employment with Kash n' Karry, on
a prorata basis as of the Effective Employment Date.

1.3. GSI represents and warrants to Kash n' Karry that GSI is
presently obtaining bids for workers compensation and employers'
extended coverage liability insurance as required pursuant to
Section 15.1 of the Agreement. GSI further covenants and agrees to
obtain such coverage and to provide to Kash n' Karry a certificate
of insurance on or before the Effective Employment Date (as defined
in the Agreement).
<PAGE>
2. Reconciliation of Service Charges During Transition Period.

2.1. Section 3.9 of the Services Agreement is hereby deleted
in its entirety, and the following is hereby inserted in lieu
thereof:

(a) On the Closing Date, all payment obligations and
liabilities under the Contracts and all other costs
and expenses associated with the provision of
Services shall be apportioned between the parties
as of the opening of business on the Commencement
Date, it being understood that Kash n' Karry shall
be responsible for any such obligations,
liabilities, costs and expenses for all periods
prior to the Commencement Date, and that GSI shall
be responsible for any such obligations,
liabilities, costs and expenses for all periods
commencing on and after the Commencement Date. To
the extent that Kash n' Karry pays any costs and
expenses associated with the provision of Services
during the Transition Period, such amounts shall be
credited against the portion of the Annual Service
Charge for 1995 that is payable by Kash n' Karry on
the Closing Date pursuant to Section 7.1 hereof.
On or before the Closing Date, Kash n' Karry will
submit to GSI an itemized list of all such costs
and expenses paid by Kash n' Karry through the most
recent practicable date prior to the Closing Date
(the "Itemized Costs"). From time to time after
the Closing Date, the parties agree to make such
further adjustments between them as may be
necessary to properly allocate the payment
obligations and liabilities under the Contracts,
and all other costs and expenses associated with
the provision of Services hereunder, between the
parties as of the Commencement Date. Without
limitation of the foregoing, if, following the
Closing Date, Kash n' Karry incurs additional costs
and expenses in connection with the provision of
Services on and after the Commencement Date
(including, without limitation, the costs and
expenses of employing the Affected Employees
through the Effective Employment Date), GSI will
reimburse Kash n' Karry for such costs and expenses
promptly upon receipt from Kash n' Karry of an
itemized statement thereof. During the three month
period following the Closing Date, GSI shall have
the right to review the books and records of Kash
n' Karry, during normal business hours, for
purposes of auditing the Itemized Costs and any
additional reimbursable costs and expenses of Kash
n' Karry.
2<PAGE>
(b) Prior to and from time to time after the Closing
Date, the parties agree to negotiate in good faith
any adjustments to the Annual Services Charge
attributable to any Retained Contracts, costs
relating to assigning the Assets, material costs
and liabilities not disclosed in the MIS Budget,
and any costs reallocated between the parties
pursuant to negotiations during the Transition
Period.

2.2. Section 7.1 of the Services Agreement is hereby amended
by deleting the third sentence and inserting the following in lieu
thereof:

Provided, however, the Annual Services Charge for 1995
will be due and payable as follows:

(a) an amount equal to the sum of the following will be
payable by Kash n' Karry on the Closing Date:
(i) the portion of the Annual Services Charge for
1995 allocable to the Transition Period, prorated
on a per diem basis, minus (ii) the total amount of
Itemized Costs paid by Kash n' Karry pursuant to
Section 3.9(a) hereof;

(b) an amount equal to 1/12th of the total Annual
Services Charge for 1995, prorated on a per diem
basis for the period from and including the Closing
Date to the last day of such month, will be payable
by Kash n' Karry on the Closing Date; and

(c) the portion of the Annual Services Charge for 1995
allocable to the period commencing on the first day
of the month next succeeding the Closing Date will
be payable in equal installments prorated over the
number of remaining months in 1995.

For example, if (i) the Closing Date occurs on April 1,
1995, (ii) the total Annual Services Charge for 1995 is
$7,839,000, and (iii) the Itemized Costs are $1,500,000,
then:

-- The sum of $459,750 would be payable by Kash n'
Karry on April 1, 1995, pursuant to clause (a)
above ($1,959,750 - $1,500,000 = $459,750);

-- The sum of $653,250 would be payable by Kash n'
Karry on April 1, 1995, pursuant to clause (b)
above; and

_________________
1 ($7,839,000/12) X 3 = $1,959,750
3<PAGE>
-- The sum of $5,226,000 would be payable by Kash n'
Karry in equal monthly installments of $653,250
each commencing on May 1, 1995, and on the first
day of each month thereafter, through and including
December 1, 1995.

3. Appointment of GSI as Paying Agent.

3.1. Section 3.4(a) is hereby amended by adding the following
to the end thereof:

For example, and without limitation of the foregoing,
Kash n' Karry may appoint GSI as its paying agent with
respect to any such given Contract, in which event GSI
will have such rights and obligations with respect to
such Contract and the equipment and Applications Software
covered thereby as if it were a Retained Contract
described in Section 3.4(b); provided, however, in such
event, no adjustment would be made to the Annual Services
Charge by reason of the appointment by GSI as paying
agent, a subsequent assignment to GSI of all rights and
privileges of Kash n' Karry thereunder, the termination
by GSI of the Contract, or the achievement by GSI of
cost-savings in managing any such Contracts in connection
with the performance of Services hereunder..

3.2. Section 3.4(b) is hereby amended by adding the following
clause to the beginning of the first sentence thereof:

Except as provided in Section 3.4(a) with respect to
Contracts for which GSI is appointed as paying agent,

3.3. Kash n' Karry is a party to contracts with IBM
Corporation governing certain Kash n' Karry Machines and certain
Assets and, at the Closing, will appoint GSI as its paying agent
with respect to the contracts governing the Assets identified on
Annex I to Schedule D. Until such time as Kash n' Karry is able to
obtain segregated invoices from IBM reflecting charges allocable
only to the Kash n' Karry Machines, GSI also agrees to serve as
paying agent with respect to the Kash n' Karry Machines as set
forth on Exhibit 1 attached hereto and to submit monthly invoices
to Kash n' Karry reflecting such charges, and Kash n' Karry agrees
to reimburse GSI upon receipt of an invoice for such charges.

4. Hand Held Scanners.

The parties acknowledge and agree that GSI is not required, as
part of the Services rendered under the Agreement, to replace any
obsolete MSI hand-held scanners currently being utilized in the
Kash n' Karry retail locations, notwithstanding the assumption by
GSI of Kash n' Karry's payment obligations under the maintenance
contracts for such units.
4<PAGE>
5. Schedules.

The parties acknowledge and agree that they are presently
collaborating on the preparation of Schedule Q (Help Desk), and
agree to finalize such schedule within three months after the
Closing Date.

6. Incorporation.

This First Amendment is hereby incorporated into and made a
part of the Services Agreement as if fully set forth therein.
Except as amended herein, the Services Agreement remains in full
force and effect. In the event of any conflict between the
provisions of the Services Agreement and the provisions of this
First Amendment, the provisions of this First Amendment shall
govern.

IN WITNESS WHEREOF, the parties hereto have hereunto executed
this First Amendment by and through their duly authorized officers
on the day and year set forth below.

KASH N' KARRY FOOD STORES, INC.,
a Delaware corporation

By: /s/ R. P. Springer
Name: Raymond P. Springer
Title: SR VP - CFO

GSI OUTSOURCING CORPORATION,
a Delaware corporation

By: /s/ Philippe Guionnet
Name: P. Guionnet
Title: VP

20/WL/LWH/KNK.SEC/S1.95/EX-10-5B.ASC
5<PAGE>

SCHEDULE?

GSI acts as the paying agent for Kash n' Karry
on IBM invoices. Kash n' Karry will be re-
invoiced monthly for:

RX $ 4,876.16
Financing Charge 19,434.00
Capital Lease Equipment 14,426.00
Volume Purchase Agreement 6,128.00

Total $44,864.16

Exhibit 1

(As adopted by the
Board on 3/9/95)

KASH N' KARRY FOOD STORES, INC.

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

<PAGE>
TABLE OF CONTENTS

1. Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Definitions.. . . . . . . . . . . . . . . . . . . . . . . 1
2.1. "Affiliate" . . . . . . . . . . . . . . . . . . . . 1
2.2. "Award" . . . . . . . . . . . . . . . . . . . . . . 1
2.3. "Award Agreement" . . . . . . . . . . . . . . . . . 1
2.4. "Board" . . . . . . . . . . . . . . . . . . . . . . 1
2.5. "Cause" . . . . . . . . . . . . . . . . . . . . . . 1
2.6. "Change of Control" . . . . . . . . . . . . . . . . 1
2.7. "Code" . . . . . . . . . . . . . . . . . . . . . . 2
2.8. "Committee" . . . . . . . . . . . . . . . . . . . . 2
2.9. "Common Stock" . . . . . . . . . . . . . . . . . . 2
2.10. "Company" . . . . . . . . . . . . . . . . . . . . . 2
2.11. "Date of Grant" . . . . . . . . . . . . . . . . . . 2
2.12. "Disability" . . . . . . . . . . . . . . . . . . . 2
2.13. "Eligible Director" . . . . . . . . . . . . . . . . 2
2.14. "Exchange Act". . . . . . . . . . . . . . . . . . . 2
2.15. "Fair Market Value" . . . . . . . . . . . . . . . . 2
2.16. "Involuntary Termination" . . . . . . . . . . . . . 3
2.17. "Non-Employee Director" . . . . . . . . . . . . . . 3
2.18. "Option" . . . . . . . . . . . . . . . . . . . . . 3
2.19. "Option Period" . . . . . . . . . . . . . . . . . . 3
2.20. "Original Stockholders" . . . . . . . . . . . . . . 3
2.21. "Plan" . . . . . . . . . . . . . . . . . . . . . . 3
2.22. "SEC" . . . . . . . . . . . . . . . . . . . . . . . 3
2.23. "Subsidiary(ies)" . . . . . . . . . . . . . . . . . 3
2.24. "Voluntary Termination" . . . . . . . . . . . . . . 3
2.25. "Voting Interest" . . . . . . . . . . . . . . . . . 4

3. Administration. . . . . . . . . . . . . . . . . . . . . . 4
3.1. The Committee.. . . . . . . . . . . . . . . . . . . 4
3.2. Plan Administration and Plan Rules. . . . . . . . . 4
3.3. Liability Limitation. . . . . . . . . . . . . . . . 4

4. Term of the Plan/Common Stock Subject to the Plan.. . . . 5
4.1. Term. . . . . . . . . . . . . . . . . . . . . . . . 5
4.2. Common Stock. . . . . . . . . . . . . . . . . . . . 5

5. Awards. . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1. Type of Options.. . . . . . . . . . . . . . . . . . 5
5.2. Initial Awards. . . . . . . . . . . . . . . . . . . 5
5.3. Subsequent Awards.. . . . . . . . . . . . . . . . . 6
5.4. Exercise Price. . . . . . . . . . . . . . . . . . . 6
5.5. Method of Exercise. . . . . . . . . . . . . . . . . 6
5.6. Form of Payment.. . . . . . . . . . . . . . . . . . 6
5.7. Option Period.. . . . . . . . . . . . . . . . . . . 7
5.8. Right to Exercise.. . . . . . . . . . . . . . . . . 8
5.9. Limitation of Rights. . . . . . . . . . . . . . . . 8
5.10. Regulatory Approval.. . . . . . . . . . . . . . . . 8

i<PAGE>
6. Exercisability. . . . . . . . . . . . . . . . . . . . . . 8

7. Withholding.. . . . . . . . . . . . . . . . . . . . . . . 8

8. Changes in Capitalization and Other Matters.. . . . . . . 9
8.1. No Corporate Action Restriction.. . . . . . . . . . 9
8.2. Recapitalization Adjustments. . . . . . . . . . . . 9

9. Change of Control.. . . . . . . . . . . . . . . . . . . . 9
9.1. Acceleration of Awards Vesting. . . . . . . . . . . 9
9.2. Change of Control.. . . . . . . . . . . . . . . . . 9

10. Amendment; Termination. . . . . . . . . . . . . . . . . . 10

11. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . 10
11.1. Unfunded Plan. . . . . . . . . . . . . . . . . . . 10
11.2. Listing, Registration and Other Legal
Compliance.. . . . . . . . . . . . . . . . . . . . 10
11.3. Award Agreements.. . . . . . . . . . . . . . . . . 11
11.4. Designation of Beneficiary.. . . . . . . . . . . . 11
11.5. Governing Law. . . . . . . . . . . . . . . . . . . 11
11.6. Titles and Headings. . . . . . . . . . . . . . . . 11
11.7. Effective Date.. . . . . . . . . . . . . . . . . . 11

ii<PAGE>
KASH N' KARRY FOOD STORES, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

* * * * *

1. Purpose. The purpose of the Kash n' Karry Food Stores,
Inc. 1995 Non-Employee Director Stock Option Plan (the "Plan") is
to promote the interests of the Company by enabling the Company
to retain the experienced and knowledgeable non-employee
directors whose initial election to the Board became effective
upon or after consummation of the Company's Plan of
Reorganization through grants of non-qualified stock options to
acquire the Company's Common Stock, par value $0.01 per share,
and certain limited stock appreciation rights in respect thereof.
In addition, such grants will encourage the closer alignment of
the interests of such directors and the Company's shareholders.

2. Definitions. For purposes of the Plan, the following
terms shall have the meanings set forth below:

2.1. "Affiliate" means (a) a member of a controlled
group of corporations of which the Company is a member or (b) an
unincorporated trade or business which is under common control
with the Company as determined in accordance with Section 414(c)
of the Code. For purposes hereof, a "controlled group of
corporations" shall mean a controlled group of corporations as
defined in Section 1563(a) of the Code, determined without regard
to Sections 1563(a)(4) and 1563(e)(3)(C).

2.2. "Award" means an award or grant of Options made to
an Eligible Director under Section 5 of the Plan.

2.3. "Award Agreement" means the agreement executed by
an Eligible Director pursuant to Section 11.3 of the Plan in
connection with the granting of an Option.

2.4. "Board" means the Board of Directors of the
Company, as constituted from time to time.

2.5. "Cause" means (a) personal dishonesty,
(b) incompetence, (c) willful misconduct, (d) intentional failure
to perform stated duties, (e) breach of a fiduciary duty
involving personal profit or (f) willful violation of any law,
rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order. For purposes of the
preceding sentence, no act shall be considered "willful" unless
done, or omitted to be done, by the Eligible Director not in good
faith and without reasonable belief that such act, or failure to
act, was in the best interests of the Company and its
Subsidiaries.

2.6. "Change of Control" shall have the meaning
ascribed thereto in Section 9.2 of the Plan. <PAGE>
2.7. "Code" means the Internal Revenue Code of 1986,
as in effect and as amended from time to time, or any successor
statute thereto, together with any rules, regulations and
interpretations promulgated thereunder or with respect thereto.

2.8. "Committee" means the Board, or any committee of
the Board established to administer the Plan, as described in
Section 3 of the Plan.

2.9. "Common Stock" means the common stock, par value
$0.01 per share, of the Company or any security of the Company
issued by the Company in substitution or exchange therefor.

2.10. "Company" means Kash n' Karry Food Stores, Inc.,
a Delaware corporation, or any successor corporation to Kash n'
Karry Food Stores, Inc.

2.11. "Date of Grant" means, with respect to an Award,
the date as of when it is granted or awarded to an Eligible
Director.

2.12. "Disability" means any physical or mental
disability which is determined in writing to be total and
permanent by a medical physician selected in good faith by the
Company, as a result of which the Eligible Director is unable to
perform for the Company and its Subsidiaries substantially the
same duties as he or she performed prior to incurring such
physical or mental disability.

2.13. "Eligible Director" means any Non-Employee
Director of the Company whose initial election to the Board
became effective on or after December 29, 1994.

2.14. "Exchange Act" means the Securities Exchange Act
of 1934, as in effect and as amended from time to time, or any
successor statute thereto, together with any rules, regulations
and interpretations promulgated thereunder or with respect
thereto.

2.15. "Fair Market Value" means on, or with respect to,
any given date(s), the mean average of the high bid and low asked
prices of the Common Stock, as reported on the National
Association of Securities Dealers Automated Quotation System,
Inc. ("NASDAQ"), for such date(s) or, if the Common Stock was not
traded on such date(s), on the next preceding day or days on
which the Common Stock was traded. If at any time the Common
Stock is not traded on NASDAQ, the Fair Market Value of a share
of the Common Stock shall be determined in good faith by the
Company.

2<PAGE>
2.16. "Involuntary Termination" means any termination
of an Eligible Director's membership on the Board other than a
Voluntary Termination or a removal from the Board for Cause.

2.17. "Non-Employee Director" means any director of
the Company who is not an employee of, and/or consultant to, the
Company or any Subsidiary of the Company.

2.18. "Option" means any non-qualified stock option
granted or awarded to an Eligible Director pursuant to Section 5
of the Plan and the relevant Award Agreement, whether as a Level
One Grant, or as a Level Two Grant, or as part of a Subsequent
Award pursuant to Section 5.3.

2.19. "Option Period" shall mean, with respect to an
Option, the period commencing on the Date of Grant and ending on
the tenth anniversary of the Date of Grant.

2.20. "Original Stockholders" means members of (x) any
group consisting of members of the Board, or (y) the unofficial
committee of holders of the Company's 12-3/8% Senior Notes due
1999, the Company's Senior Floating Rate Notes due August 2,
1996, and the Company's 14% Subordinated Debentures due February
1, 2001, (the "Bondholder Committee"), which committee
participated in the negotiation of the terms of the Company's
Plan of Reorganization dated as of December 12, 1994, filed in
the United States Bankruptcy Court for the District of Delaware
in respect of Case No. 94-1082 (HSB), or any other group of
holders consisting in whole or in part of members of the
Bondholder Committee.

2.21. "Plan" means the Kash n' Karry Food Stores, Inc.
1995 Non-Employee Director Stock Option Plan, as set forth
herein.

2.22. "SEC" means the United States Securities and
Exchange Commission.

2.23. "Subsidiary(ies)" means any corporation(s)
(other than the Company) in an unbroken chain of corporations,
including and beginning with the Company, if each of such
corporations, other than the last corporation in the unbroken
chain, owns, directly or indirectly, more than fifty percent
(50%) of the voting stock in one of the other corporations in
such chain.

2.24. "Voluntary Termination" means a termination of
an Eligible Director's membership on the Board due to or as a
result of any such Eligible Director's resignation from the Board
(other than due to death or Disability) or refusal (other than
due to death or Disability) to stand for election to the Board
after having been nominated by the Board.
3<PAGE>
2.25. "Voting Interest" means securities of any class
or classes or other ownership interests having general voting
power under ordinary circumstances to elect members of a board of
directors of any entity.

3. Administration.

3.1. The Committee. The Plan shall be administered by
the Committee. The Committee shall be appointed from time to
time by the Board and shall be comprised of not less than two (2)
of the then members of the Board. Consistent with the Bylaws of
the Company, members of the Committee serve at the pleasure of
the Board and the Board may at any time and from time to time
remove members from, or add members to, the Committee. Actions
of the Committee shall be taken by the vote of a majority of its
members. Any action may be taken by a written instrument signed
by a majority of the Committee members, and action so taken shall
be fully as effective as if it had been taken by a vote at a
meeting.

3.2. Plan Administration and Plan Rules. The Committee
is authorized to construe and interpret the Plan and to
promulgate, amend, and rescind rules and regulations relating to
the implementation, administration and maintenance of the Plan.
Subject to the terms and conditions of the Plan, the Committee
shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan
including, without limitation, (a) making Subsequent Awards in
such amounts as the Committee shall determine, and (b) correcting
any technical defects(s) or technical omission(s), or reconciling
any technical inconsistency(ies), in the Plan and/or any Award
Agreement. The Committee may designate persons other than
members of the Committee to carry out the day-to-day ministerial
administration of the Plan under such conditions and limitations
as it may prescribe, except that the Committee shall not delegate
its authority with regard to the granting of any Subsequent
Awards. The Committee's determinations under the Plan need not
be uniform and may be made selectively among Eligible Directors,
whether or not such Eligible Directors are similarly situated.
Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Eligible Directors and any
person(s) claiming under or through any Eligible Directors. The
Company shall effect the granting of Awards under the Plan, in
accordance with the determinations made by the Committee, by
execution of written agreements and/or other instruments in such
form as is approved by the Committee.

3.3. Liability Limitation. Neither the Board nor the
Committee, nor any member of either, shall be liable for any act,
omission, interpretation, construction or determination made in
4<PAGE>
good faith in connection with the Plan (or any Award Agreement),
and the members of the Board and the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including, without
limitation, attorneys' fees) arising or resulting therefrom to
the fullest extent permitted by law and/or under any directors
and officers liability insurance coverage which may be in effect
from time to time.

4. Term of the Plan/Common Stock Subject to the Plan.

4.1. Term. The Plan shall terminate on December 31,
2005, except with respect to Awards then outstanding. After such
date, no further Awards shall be granted under the Plan.

4.2. Common Stock. The maximum number of shares of
Common Stock in respect of which Options may be granted under the
Plan, subject to adjustment as provided in Section 8.2 of the
Plan, shall be thirty-six thousand (36,000) shares of the Common
Stock. Common Stock which may be issued under the Plan may be
either authorized and unissued shares or issued shares which have
been reacquired by the Company (in the open market or in private
transactions) and which are being held as treasury shares.
Shares of Common Stock subject to Options granted under the Plan
that remain unissued upon the forfeiture and cancellation of
Options by reason of a Voluntary Termination shall become
available for further awards under the Plan, but only to Eligible
Directors whose initial election or appointment to the Board is
for the purpose of filling the vacancy left by the Eligible
Director who caused the Voluntary Termination. Except as
provided in the foregoing sentence, if any Options expire
unexercised or are forfeited, surrendered, cancelled or otherwise
terminated, the shares of Common Stock which were theretofore
subject to such Options shall not be available for Options under
the Plan, and upon any such expiration, forfeiture, surrender,
cancellation, or other termination, the maximum number of shares
in respect of which Options may be granted under this Plan shall
be reduced to such extent.

5. Awards.

5.1. Type of Options. All Options granted under the
Plan shall be non-statutory options not intended to qualify as
incentive stock options under Section 422 of the Code.

5.2. Initial Awards. Each Eligible Director who is
serving in such capacity on the date as of when the Plan is
adopted by the Company shall be granted each of the following
Awards (collectively, the "Initial Awards"):

5.2.1. a non-qualified stock option to acquire
three thousand (3,000) shares of the Common Stock, subject
5<PAGE>
to adjustment in accordance with Section 8.2 of the Plan
(the "Level One Grant(s)"); and

5.2.2. a non-qualified stock option to acquire
three thousand (3,000) shares of the Common Stock, subject
to adjustment in accordance with Section 8.2 of the Plan
(the "Level Two Grant(s)").

5.3. Subsequent Awards. The Committee may grant
Options (the "Subsequent Awards") to Eligible Directors whose
initial election or appointment to the Board is for the purpose
of filling a vacancy left by an Eligible Director who received an
Initial Award that was forfeited and cancelled pursuant to
Section 5.7 hereof by reason of a Voluntary Termination.

5.4. Exercise Price. The exercise price per share of
Common Stock subject to Options granted hereunder shall be:

5.4.1. Fifteen Dollars ($15.00), in the case of
Level One Grants;

5.4.2. Twenty Dollars ($20.00), in the case of
Level Two Grants;

5.4.3. The Fair Market Value on the business day
immediately preceding the Date of Grant, in the case of
Subsequent Awards made pursuant to Section 5.3 hereof.

5.5. Method of Exercise. Upon becoming exercisable in
accordance with Section 6 of the Plan, and subject to the
provisions of Section 5.7 hereof, an Option may be exercised in
whole or in part at any time and from time to time during the
Option Period. A partial exercise of an Option will not affect
an Eligible Director's subsequent right to exercise the Option as
to the remaining Common Stock subject to the Option. Any portion
of an Option that is exercised may not be exercised again. To
exercise an Option, an Eligible Director must do the following:
(a) deliver to the Company a written notice of exercise,
specifying the number of shares to be purchased; and (b) tender
to the Company payment in full of the exercise price. The
exercise date of an Option will be the date when the Company has
received the notice of exercise and full payment of the exercise
price. No Option may be exercised at any time in respect of a
fractional share.

5.6. Form of Payment. An Eligible Director may pay
all or any part of the exercise price under an Option in cash, by
certified check, bank draft or money order payable to the order
of the Company or such other form or method of payment as may be
acceptable to the Company and available to all Eligible
Directors. Payment may also be made in whole or in part by the
transfer to the Company of shares of Common Stock already owned
6<PAGE>
by an Eligible Director for at least six months prior to the
exercise date and having a Fair Market Value equal to all or a
portion of the exercise price as of the exercise date. All
payment instruments shall be accepted by the Company subject to
collection.

5.7. Option Period. Each Award shall expire on the
last day of the Option Period, but shall be subject to earlier
termination as follows:

5.7.1. If the Eligible Director is removed from
the Board for Cause, all rights of such Eligible Director
under any then exercisable and unexercisable Options shall
automatically expire and be forfeited and cancelled on the
effective date of any such removal.

5.7.2. In the event of a Voluntary Termination,
all rights of such Eligible Director under any unexercisable
Options shall automatically expire and be forfeited and
cancelled on the effective date of such Voluntary
Termination, and any then exercisable Options shall expire
forty-five (45) days after the date of such Voluntary
Termination (but not beyond the last day of the Option
Period).

5.7.3. In the event of an Involuntary
Termination, the then outstanding Options of such Eligible
Director shall become one hundred percent (100%)
exercisable, to the full extent of the number of shares of
Common Stock remaining covered by such Options, regardless
of whether such Options were previously exercisable, and
each such Option shall expire forty-five (45) days after the
date of such Involuntary Termination (but not beyond the
last day of the Option Period) and thereafter such Options
shall be forfeited and cancelled by the Company.
Notwithstanding the immediately preceding sentence, if any
Involuntary Termination is due to the death or Disability of
an Eligible Director, such Eligible Director (and such
Eligible Director's estate, designated beneficiary or other
legal representative, as the case may be) shall have the
right, to the extent exercisable immediately prior to or as
a result of any such Involuntary Termination, to exercise
any Option at any time within the one hundred eighty (180)
day period following such cessation to serve (but not beyond
the last day of the Option Period).

5.7.4. Exercise of a deceased Eligible Director's
Awards that become or remain exercisable shall be by (a) the
person or persons whom the Eligible Director has designated
in a writing filed with the Company in accordance with
Section 11.4 of the Plan, or (b) if no such designation has
been made, by the person or persons to whom the Eligible
7<PAGE>
Director's rights have passed by will or the laws of
intestate succession.

5.8. Right to Exercise. The right of any Eligible
Director to exercise an Award granted under the Plan shall,
during the lifetime of such Eligible Director, be exercisable
only by such Eligible Director and shall not be assignable or
transferable by such Eligible Director other than by will or the
laws of intestate succession.

5.9. Limitation of Rights. Neither the recipient of an
Award under the Plan nor an Eligible Director's beneficiaries or
successors in interest shall have any rights as a shareholder of
the Company with respect to any Common Stock subject to any Award
until the issuance of a stock certificate in respect of such
Common Stock. Neither the Plan, nor the granting of any Award
thereunder, nor any other action taken pursuant to the Plan,
shall constitute or be evidence of any agreement or
understanding, express or implied, that an Eligible Director has
a right to continue as a director of the Company for any period
of time or at any particular rate of remuneration.

5.10. Regulatory Approval. The Company shall not be
required to issue any certificates for Common Stock upon the
exercise of an Option granted under the Plan or to record as a
holder of record of Common Stock the name of the person
exercising an Option under the Plan, (a) without first obtaining
to the complete satisfaction of the Company the approval of all
regulatory bodies deemed necessary by the Company, and
(b) without first complying, to the Company's satisfaction, with
all rules and regulations under federal, state, or local law
deemed applicable by the Company. Common Stock acquired upon
exercise of an Option may not be sold or otherwise disposed of
prior to six months after the Date of Grant.

6. Exercisability. Subject to Sections 5.7 and 5.10 of
the Plan, all Level One Options granted under the Plan shall
become exercisable on July 30, 1995, all Level Two Options
granted under the Plan shall become exercisable on July 28, 1996,
and all Subsequent Awards shall become exercisable in accordance
with such vesting schedule as the Committee shall determine at
the time of grant.

7. Withholding. The Company shall have the right to
require an Eligible Director, upon the exercise of any Option, to
remit or otherwise arrange for the payment of any federal, state,
local or other taxes of any kind which the Company, in its sole
discretion, deems necessary to be withheld to comply with the
Code and/or any other applicable law, rule or regulation.

8<PAGE>
8. Changes in Capitalization and Other Matters.

8.1. No Corporate Action Restriction. The existence
of the Plan, any Award Agreement and/or the Awards granted
hereunder shall not limit, affect or restrict in any way the
right or power of the Board or the shareholders of the Company to
make or authorize (a) any adjustment, recapitalization,
reorganization or other change in the Company's or any
Subsidiary's capital structure or its business, (b) any merger,
consolidation or change in the ownership of the Company or any
Subsidiary, (c) any issue of bonds, debentures, capital,
preferred or prior preference stocks ahead of or affecting the
Company's or any Subsidiary's capital stock or the rights
thereof, (d) any dissolution or liquidation of the Company or any
Subsidiary, (e) any sale or transfer of all or any part of the
Company's or any Subsidiary's assets or business, or (f) any
other corporate act or proceeding by the Company or any
Subsidiary. No Eligible Director, beneficiary or any other
person shall have any claim against any member of the Board, the
Company or any Subsidiary, or any employees, officers or agents
of the Company or any Subsidiary, as a result of any such action.

8.2. Recapitalization Adjustments. If the outstanding
shares of Common Stock of the Company are increased, decreased,
or changed into or exchanged for, a different number or kind of
securities of the Company through a stock dividend,
reclassification, stock split, reverse stock split,
consolidation, subdivision, split-up, spin-off, split-off or
combination, proportionate adjustments shall be made to reflect
such change, including, without limitation, with respect to the
aggregate number and class of shares of Common Stock subject to
and authorized by the Plan, the number of shares of Common Stock
covered by each outstanding Option, and the exercise price or
other price per share of Common Stock in respect of outstanding
Options.

9. Change of Control.

9.1. Acceleration of Awards Vesting. Anything in the
Plan to the contrary notwithstanding, if a Change of Control of
the Company (as defined in Section 9.2 of the Plan) occurs, all
Awards then unexercised and outstanding shall become fully vested
and exercisable as of the date of the Change of Control. The
immediately preceding sentence shall apply to only those Eligible
Directors who are serving in such capacity as of the date of the
Change of Control.

9.2. Change of Control. For the purpose of this Plan,
a "Change of Control" shall have occurred if at any time either
(a) any person or any persons acting together (excluding the
Original Stockholders) that constitute a "group" for purposes of
Section 13(d) of the Exchange Act shall beneficially own at least
9<PAGE>
fifty percent (50%) of the total Voting Interest of the Company
or (b) any person or any persons acting together (excluding the
Original Stockholders) that constitute a "group" for purposes of
Section 13(d) of the Exchange Act shall succeed in having a
sufficient number of its nominees elected to the Board to
constitute a majority of the Board.

10. Amendment; Termination. The Board may suspend or
terminate the Plan (or any portion thereof) at any time and may
amend the Plan at any time and from time to time in such respects
as the Board may deem advisable.No such amendment, suspension or
termination shall be effective if it would materially adversely
affect the rights of any Eligible Director under any outstanding
Awards, without the consent of such Eligible Director.

11. Miscellaneous.

11.1. Unfunded Plan. The Plan shall be unfunded and
the Company shall not be required to segregate any assets in
connection with any Awards under the Plan. Any liability of the
Company to any person with respect to any Award under the Plan or
any Award Agreement shall be based solely upon the contractual
obligations that may be created as a result of the Plan or any
such award or agreement. No such obligation of the Company shall
be deemed to be secured by any pledge of, encumbrance on, or
other interest in, any property or asset of the Company or any
Subsidiary. Nothing contained in the Plan or any Award Agreement
shall be construed as creating in respect of any Eligible
Director (or beneficiary thereof or any other person) any equity
or other interest of any kind in the assets of the Company or any
Subsidiary or creating a trust of any kind or a fiduciary
relationship of any kind between the Company, any Subsidiary
and/or any such Eligible Director, any beneficiary thereof or any
other person.

11.2. Listing, Registration and Other Legal
Compliance. No Options or Common Stock shall be issued under the
Plan unless legal counsel for the Company shall be satisfied that
any such issuance will be in compliance with all applicable
federal and state securities laws and regulations and any other
applicable laws or regulations. The Company may require, as a
condition of any payment or share issuance, that certain
agreements, undertakings, representations, certificates, and/or
information, as the Company may deem necessary or advisable, in
its sole discretion, be executed or provided to the Company to
assure compliance with all such applicable laws or regulations.
Certificates for any Options and/or Common Stock delivered under
the Plan may be subject to such stock-transfer orders and such
other restrictions as the Company may deem advisable under the
rules, regulations, or other requirements of the SEC, any stock
exchange upon or trading system in which the Common Stock is then
listed or traded, and any applicable federal or state securities
10<PAGE>
law. In addition, if, at any time specified herein (or in any
Award Agreement) for the issuance or other distribution of any
Options and/or Common Stock, or the payment of amounts to any
Eligible Director, any law, rule, regulation or other requirement
of any governmental authority or agency shall require either the
Company, any Affiliate or any Subsidiary or any Eligible Director
(or any estate, designated beneficiary or other legal
representative thereof) to take any action in connection
therewith, any such issuance or distribution, or any such
payment, as the case may be, shall be deferred until such
required action is taken.

11.3. Award Agreements. Each Eligible Director shall
enter into an Award Agreement with the Company in a form
specified by the Company. Each such Eligible Director shall
agree therein to the restrictions, terms and conditions set forth
in such Award Agreement and/or the Plan.

11.4. Designation of Beneficiary. Each Eligible
Director may designate a beneficiary or beneficiaries to exercise
an Option or to receive any payment which, under the terms of the
Plan and the relevant Award Agreement, may become exercisable or
payable on or after the Eligible Director's death. At any time,
and from time to time, any such designation may be changed or
cancelled by the Eligible Director without the consent of any
such beneficiary. Any such designation, change or cancellation
must be on a form provided for that purpose by the Company and
shall not be effective until received by the Company. If no
beneficiary has been designated by a deceased Eligible Director,
or if the designated beneficiaries have predeceased the Eligible
Director, the beneficiary shall be the Eligible Director's
estate. If the Eligible Director designates more than one such
beneficiary, any payments under the Plan to such beneficiaries
shall be made in equal shares unless the Eligible Director has
expressly designated otherwise, in which case the payments shall
be made in the shares designated by the Eligible Director.

11.5. Governing Law. The validity, construction,
enforcement and interpretation of this Plan, and all actions
taken hereunder, are governed by, and shall be construed in
accordance with, the laws of the State of Delaware and the
federal laws of the United States of America, excluding the laws
of those jurisdictions pertaining to the resolution of conflicts
with laws of other jurisdictions.

11.6. Titles and Headings. Any titles and headings
herein are for reference purposes only, and shall in no way
limit, define or otherwise affect the meaning, construction or
interpretation of any provisions of the Plan.

11.7. Effective Date. The Plan shall be effective
upon its adoption by the Board.
11 20/LWH/KNK.SEC/S1.95/EX-10-7A.ASC

NON-QUALIFIED STOCK OPTION AGREEMENT

pursuant to the

KASH N' KARRY FOOD STORES, INC.

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

* * * * *
Optionee:
Date of Grant: March 9, 1995
Expiration Date: March 8, 2005

* * * * *

Level One Grants:

Number of Level One Option Shares: 3,000
Exercise Price: $15.00 Per Share

Level Two Grants:

Number of Level Two Option Shares: 3,000
Exercise Price: $20.00 Per Share

* * * * *

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this
"Agreement"), dated as of the Date of Grant specified above, is
entered into by and between Kash n' Karry Food Stores, Inc., a
Delaware corporation (the "Company"), and the Optionee specified
above, pursuant to the Kash n' Karry Food Stores, Inc. 1995 Non-
Employee Director Stock Option Plan, as in effect and as amended
from time to time (the "Plan"); and

WHEREAS, it has been determined under the Plan that it
would be in the best interests of the Company to grant the non-
qualified stock options provided for herein to the Optionee;

NOW, THEREFORE, in consideration of the mutual
covenants and premises hereinafter set forth and for other good
and valuable consideration, the parties hereto hereby mutually
covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt.
This Agreement is subject in all respects to the terms and
provisions of the Plan (including, without limitation, any
amendments thereto adopted at any time and from time to time if
such amendments are expressly intended to apply to the grant of
the Award hereunder), all of which terms and provisions are made
a part of and incorporated in this Agreement as if they were each
expressly set forth herein. Any capitalized term not defined in
this Agreement shall have the same meaning as is ascribed thereto<PAGE>
under the Plan. The Optionee hereby acknowledges receipt of a
true copy of the Plan and that the Optionee has read the Plan
carefully and fully understands its content. In the event of any
conflict between the terms of this Agreement and the terms of the
Plan, the terms of the Plan shall control.

2. Grant of Options. The Company hereby grants to the
Optionee, as of the Date of Grant specified above, non-qualified
stock options (collectively, the "Options") to acquire from the
Company, at the exercise price of $15.00 per share, 3,000 shares
of Common Stock (the "Level One Option Shares"), and at the
exercise price of $20.00 per share, 3,000 shares of Common Stock
(the "Level Two Option Shares") (collectively, the "Option
Shares"). The Options are not to be treated as (and are not
intended to qualify as) incentive stock options within the
meaning of Section 422 of the Code.

3. Exercise of the Options.

3.1. Exercisability. The Options shall become
exercisable in accordance with and to the extent provided by the
terms and provisions of Section 6 of the Plan.

3.2. Expiration Date. Unless earlier terminated in
accordance with the terms and provisions of the Plan and/or this
Agreement, the Options shall expire and shall no longer be
exercisable after the Expiration Date specified above.

3.3. No Fractional Shares. In no event shall the
Options be exercisable for a fractional share of Common Stock.

3.4. Acceleration of Exercisability. Notwithstanding
any contrary provision herein, the vesting and exercisability of
the Options shall be accelerated, in accordance with Section 9 of
the Plan, upon the occurrence of a Change of Control of the
Company.

4. Method of Exercise and Payment. The Options shall be
exercised by the Optionee by delivering to the Secretary of the
Company or his designated agent on any business day a written
notice of exercise, in such manner and form as may be required by
the Company, specifying the number of the Option Shares the
Optionee then desires to purchase (the "Exercise Notice"). The
Exercise Notice shall be accompanied by payment in full in an
amount equal to the product of (a) the exercise price per share
specified above, multiplied by (b) the number of Option Shares
specified in the Exercise Notice. Such payment shall be made in
the manner set forth in Section 5.6 of the Plan.

5. Termination. These Options shall terminate and be of
no force or effect in accordance with and to the extent provided

2<PAGE>
by the terms and provisions of Section 5.7 of the Plan. In any
event, these Options shall terminate on the Expiration Date.

6. Non-transferability. These Options, and any rights or
interests therein, shall not be sold, exchanged, transferred,
assigned or otherwise disposed of in any way at any time by the
Optionee (or any beneficiary(ies) of the Optionee), other than by
testamentary disposition by the Optionee or the laws of intestate
succession. These Options shall not be pledged, encumbered or
otherwise hypothecated in any way at any time by the Optionee (or
any beneficiary(ies) of the Optionee) and shall not be subject to
execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise
dispose of or hypothecate these Options, or the levy of any
execution, attachment or similar legal process upon these
Options, contrary to the terms of this Agreement and/or the Plan
shall be null and void and without legal force or effect. The
Options shall be exercisable during the Optionee's lifetime only
by the Optionee.

8. Miscellaneous.

8.1. Notices. Any Exercise Notice or other notice
which may be required or permitted under this Agreement shall be
in writing, and shall be delivered in person or via facsimile
transmission, overnight courier service or certified mail, return
receipt requested, postage prepaid, properly addressed as
follows:

If such notice is to the Company:

To the attention of the Secretary of Kash n' Karry Food
Stores, Inc., at P.O. Box 11675, Tampa, Florida 33680 (for
delivery via U.S. mail), at 6422 Harney Road, Tampa, Florida
33610 (for delivery in person or via overnight courier
service), or at (813) 626-9550 (for delivery via facsimile
transmission), or at such other address as the Company, by
notice to the Optionee, shall designate in writing from time
to time.

If such notice is to the Optionee:

At his or her address as shown on the Company's
records, or at such other address as the Optionee, by notice
3<PAGE>
to the Company, shall designate in writing from time to
time.

8.2. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws
thereof.

8.4. Binding Agreement; Assignment. This Agreement shall
inure to the benefit of, be binding upon, and be enforceable by
the Company and its successors and assigns. The Optionee shall
not assign any part of this Agreement without the prior express
written consent of the Company.

8.5. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
instrument.

8.6. Headings. The titles and headings of the various
sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be a part of this
Agreement.

8.8. Severability. The invalidity or unenforceability of
any provisions of this Agreement in any jurisdiction shall not
affect the validity, legality or enforceability of the remainder
of this Agreement in such jurisdiction or the validity, legality
or enforceability of any provision of this Agreement in any other
jurisdiction, it being intended that all rights and obligations
of the parties hereunder shall be enforceable to the fullest
extent permitted by law.
4<PAGE>

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer, and the
Optionee has hereunto set his hand, all as of the Date of Grant
specified above.

KASH N' KARRY FOOD STORES, INC.

By:__________________________________
Ronald E. Johnson, President

_____________________________________
Print Name:

Optionee

20/LWH/KNK.SEC/S1.95/EX-10-7B.ASC
5

[CONFORMED COPY]
NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this
"Agreement"), dated as of January 17, 1995 (the "Date of Grant"),
is entered into by and between Kash n' Karry Food Stores, Inc., a
Delaware corporation (the "Company"), and Green Equity Investors,
L.P., a Delaware limited partnership (the "Optionee").

WHEREAS, it has been determined that it would be in the
best interests of the Company to grant the non-qualified stock
options provided for herein to the Optionee;

1. Definitions. Any capitalized term not defined in this
Agreement shall have the same meaning as is ascribed thereto
under the Kash n' Karry Food Stores, Inc. 1995 Non-Employee Stock
Option Plan, a copy of which is incorporated by this reference
herein (the "Plan").

2. Grant of Options. The Company hereby grants to the
Optionee, as of the Date of Grant, non-qualified stock options
(collectively, the "Options") to acquire from the Company, at the
exercise price of $15.00 per share, 6,000 shares of Common Stock
(the "Level One Option Shares"), and at the exercise price of
$20.00 per share, 6,000 shares of Common Stock (the "Level Two
Option Shares") (collectively, the "Option Shares"). The Options
are not to be treated as (and are not intended to qualify as)
incentive stock options within the meaning of Section 422 of the
Code.

3. Exercise of the Options.

3.1. Exercisability. Subject to Section 9.3 of this
Agreement, the Level One Options shall vest and become
exercisable on July 30, 1995, and the Level Two Options shall
vest and become exercisable on July 28, 1996. Notwithstanding
the above, upon the occurrence of a Change of Control, all
Options held by the Optionee, whether or not exercisable at such
time, shall become immediately vested and one hundred percent
(100%) exercisable.

3.2. Expiration Date. Unless earlier terminated in
accordance with the terms and provisions of this Agreement, the
Options shall expire and shall no longer be exercisable after
January 16, 2005 (the "Expiration Date").

3.3. No Fractional Shares. In no event shall the
Options be exercisable for a fractional share of Common Stock.<PAGE>
3.4. Limitation of Rights. Neither the Optionee nor
its successors in interest shall have any rights as a shareholder
of the Company with respect to any Common Stock subject to any
Option until the issuance of a stock certificate in respect of
such Common Stock.

4. Method of Exercise and Payment. Upon becoming
exercisable in accordance with Section 3 of this Agreement, the
Options may be exercised in whole or in part at any time and from
time to time prior to the Expiration Date. A partial exercise of
the Options will not affect the Optionee's subsequent right to
exercise the Options as to the remaining Option Shares. Any
portion of an Option that is exercised may not be exercised
again. The Options shall be exercised by the Optionee by
delivering to the Secretary of the Company or his designated
agent on any business day a written notice of exercise, in such
manner and form as may be required by the Company, specifying the
number of the Option Shares the Optionee then desires to
purchase, or with respect to which the Optionee then desires to
exercise his Limited Rights (the "Exercise Notice"). The
Exercise Notice shall be accompanied by payment in full in an
amount equal to the product of (a) the exercise price per share
specified above, multiplied by (b) the number of Option Shares
specified in the Exercise Notice. All or any part of the
exercise price under the Options may be paid in cash, by
certified check, bank draft or money order payable to the order
of the Company or such other form or method of payment as may be
acceptable to the Company and available to the Eligible Directors
under the Plan. Payment may also be made in whole or in part by
the transfer to the Company of shares of Common Stock already
owned by the Optionee for at least six (6) months prior to the
exercise date and having a Fair Market Value equal to all or a
portion of the exercise price as of the exercise date. All
payment instruments shall be accepted by the Company subject to
collection.

5. Non-transferability. These Options, and any rights or
interests therein, shall not be sold, exchanged, transferred,
assigned or otherwise disposed of in any way at any time by the
Optionee. These Options shall not be pledged, encumbered or
otherwise hypothecated in any way at any time by the Optionee and
shall not be subject to execution, attachment or similar legal
process. Any attempt to sell, exchange, pledge, transfer,
assign, encumber or otherwise dispose of or hypothecate these
Options, or the levy of any execution, attachment or similar
legal process upon these Options, contrary to the terms of this
Agreement shall be null and void and without legal force or
effect. These Options shall be exercisable only by the Optionee.

2<PAGE>
6. Changes in Capitalization and Other Matters.

6.1. No Corporate Action Restriction. The existence
of this Agreement and/or the Options granted hereunder shall not
limit, affect or restrict in any way the right or power of the
Board or the shareholders of the Company to make or authorize
(a) any adjustment, recapitalization, reorganization or other
change in the Company's or any Subsidiary's capital structure or
its business, (b) any merger, consolidation or change in the
ownership of the Company or any Subsidiary, (c) any issue of
bonds, debentures, capital, preferred or prior preference stocks
ahead of or affecting the Company's or any Subsidiary's capital
stock or the rights thereof, (d) any dissolution or liquidation
of the Company or any Subsidiary, (e) any sale or transfer of all
or any part of the Company's or any Subsidiary's assets or
business, or (f) any other corporate act or proceeding by the
Company or any Subsidiary. Neither the Optionee nor any other
person shall have any claim against any member of the Board, the
Company or any Subsidiary, or any employees, officers or agents
of the Company or any Subsidiary, as a result of any such action.

6.2. Recapitalization Adjustments. If the outstanding
shares of Common Stock of the Company are increased, decreased,
or changed into or exchanged for, a different number or kind of
securities of the Company through a stock dividend,
reclassification, stock split, reverse stock split,
consolidation, subdivision, split-up, spin-off, split-off or
combination, proportionate adjustments shall be made to reflect
such change, including, without limitation, with respect to the
number of Option Shares and the exercise price or other price per
share of Common Stock in respect of the Options.

8. Miscellaneous.

3<PAGE>
If such notice is to the Company:

To the attention of the Secretary of Kash n' Karry Food
Stores, Inc., at P.O. Box 11675, Tampa, Florida 33680 (for
delivery via U.S. mail), at 6422 Harney Road, Tampa, Florida
33610 (for delivery in person or via overnight courier
service), or at (813) ______-________ (for delivery via
facsimile transmission), or at such other address as the
Company, by notice to the Optionee, shall designate in
writing from time to time.

If such notice is to the Optionee:

At its address as shown on the Company's records, or at
such other address as the Optionee, by notice to the
Company, shall designate in writing from time to time.

8.2. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws
thereof.

8.3. Compliance with Laws. The issuance of these Options
(and the Option Shares upon exercise of the Options) pursuant to
this Agreement shall be subject to, and shall comply with, any
applicable requirements of any federal and state securities laws,
rules and regulations (including, without limitation, the
provisions of the Securities Act of 1933, the Exchange Act and
the respective rules and regulations promulgated thereunder) and
any other law or regulation applicable thereto. The Company
shall not be obligated to issue these Options or any of the
Option Shares pursuant to this Agreement if any such action would
violate any such requirements. The Company may require, as a
condition of any payment or share issuance, that certain
agreements, undertakings, representations, certificates, and/or
information, as the Company may deem necessary or advisable, in
its sole discretion, be executed or provided by the Optionee to
the Company to assure compliance with all such applicable laws or
regulations. Certificates for any Common Stock delivered under
this Agreement may be subject to such stock-transfer orders and
such other restrictions as the Company may deem advisable under
the rules, regulations, or other requirements of the SEC, any
stock exchange upon or trading system in which the Common Stock
is then listed or traded, and any applicable federal or state
securities law. In addition, if, at any time specified herein
for the issuance or other distribution of any Options and/or
Common Stock, or the payment of amounts to the Optionee, any law,
rule, regulation or other requirement of any governmental
authority or agency shall require either the Company, any
Affiliate or any Subsidiary or the Optionee to take any action in
connection therewith, any such issuance or distribution, or any

4<PAGE>
such payment, as the case may be, shall be deferred until such
required action is taken.

8.5. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
instrument.

8.6. Headings. The titles and headings of the various
sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be a part of this
Agreement.

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer, and the
Optionee has hereunto set his hand, all as of the Date of Grant
specified above.

KASH N' KARRY FOOD STORES, INC.

By: /s/ Ronald E. Johnson
Ronald E. Johnson, President

5<PAGE>
GREEN EQUITY INVESTORS, L.P.

By: LEONARD GREEN & PARTNERS, L.P.,
Its General Partner

By: /s/ Jennifer Holden Dunbar
Jennifer Holden Dunbar
Its: President, Willow III Inc.
a General Partner of
Leonard Green & Partners

20/WL/LWH/KNK.SEC/S1.95/EX-10-8.ASC

[CONFORMED COPY]
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and

entered into as of January 24, 1995, between KASH N' KARRY FOOD

STORES, INC., a Delaware corporation (the "Company"), and RONALD

JOHNSON (the "Employee").

WHEREAS, the Company and the Employee desire to enter into

this Agreement to assure the Company of the services of the

Employee for the benefit of the Company and to set forth the

respective rights and duties of the parties hereto;

WHEREAS, the Company is in the business of owning, operating

and managing supermarkets and retail liquor, food, grocery and

warehouse format stores in Florida and may, in the future, own,

operate and manage additional supermarkets or retail liquor, food,

grocery or warehouse format stores in or outside of Florida (such

business, present and future, being hereinafter referred to as the

"Business");

NOW, THEREFORE, in consideration of the premises and the

mutual covenants, terms and conditions set forth herein, the

Company and the Employee agree as follows:

ARTICLE 1

Employment

1.1 Employment and Title. The Company hereby employs the

Employee, and the Employee hereby accepts such employment as the

Chief Executive Officer and President of the Company, upon the

terms and conditions set forth herein.<PAGE>
1.2 Services.

(a) During the Term (as hereinafter defined) hereof, the

Employee agrees to perform diligently and in good faith such duties

and services for the Company under the direction of the Board of

Directors of the Company (the "Board of Directors") as are

consistent with the position of Chief Executive Officer and

President of the Company. The Employee agrees to devote his best

efforts and all of his full business time, energies and abilities

to the services to be performed hereunder and for the exclusive

benefit of the Company; provided, that this clause shall not be

construed to prevent the Employee from personally, and for his own

account, trading in stocks, bonds, securities, real estate, or

other forms of investment for his own benefit, so long as any such

activity does not materially interfere with the performance of his

duties hereunder, and, provided, further, that Employee shall be

entitled to engage in those further activities permitted under

Section 1.4. The Employee shall be vested with such authority as

is generally concomitant with the position to which he is

appointed, provided, that the Employee shall have no authority to

do any of the following without the express authority and approval

of the Board of Directors:

(i) acquire on behalf of, or dispose of the

Company's interest in, (by lease or otherwise) any real property or

interest in real property, except in the ordinary course of

business;

2<PAGE>
(ii) dispose of supermarkets, liquor stores, grocery

stores, food stores, warehouse stores or any substantial portion of

the Business of the Company or any significant part of its assets,

except in the ordinary course of its business;

(iii) acquire supermarkets, liquor stores, grocery

stores, food stores, warehouse stores or other businesses on behalf

of the Company, except in the ordinary course of business;

(iv) incur indebtedness on behalf of the Company,

except in the ordinary course of business; or

(v) expend sums in excess of the amounts set forth

in a periodic budget as developed and approved by the Board of

Directors, except in the ordinary course of business or to meet

emergencies, provided that in such case the Employee shall notify

the Board of Directors as promptly as practicable after the

expenditure has been made.

(b) The Employee shall communicate and report to the

Board of Directors on a periodic basis as to the operations,

financial condition and plans of the Business.

1.3 Location. The principal place of employment and the

location of the Employee's principal office and ordinary place of

work shall be in Tampa, Florida; provided, however, the Employee

shall, when requested by his superiors, or may, if he determines it

to be reasonably necessary, temporarily perform services outside

said area as are reasonably required for the proper performance of

his duties under this Agreement.

3<PAGE>
1.4 Exclusivity. The Employee shall not, without the prior

written consent of the Company, directly or indirectly, during the

term of this Agreement render services of a business, professional

or commercial nature to any other person or entity, whether for

compensation or otherwise.

1.5 Representations. Each party represents and warrants to

the other that he/it has full power and authority to enter into and

perform this Agreement and that his/its execution of and

performance of this Agreement shall not constitute a default under

or breach of any of the terms of any agreement to which he/it is a

party or under which he/it is bound. Each party represents that no

consent or approval of any third party is required for his or its

execution, delivery and performance of this Agreement. The

Employee further represents and warrants to the Company that he is

free to accept this employment, and that he has no other

obligations or commitments of any kind to any one which would in

any way hinder or interfere with his acceptance of, full

performance of his obligations under, or exercise of his best

efforts with respect to, this Agreement.

ARTICLE 2

Term

2.1 Term. The term of the Employee's employment hereunder

(the "Term") shall commence on January 24, 1995 (the "Commencement

Date") and shall continue until (but not including) the third

anniversary of the Commencement Date (the "Scheduled Termination

4<PAGE>
Date") unless earlier terminated pursuant to the provisions of this

Agreement. On or before July 24, 1997, the parties agree to begin

negotiating the terms of the Employee's employment, if any, after

the Scheduled Termination Date.

ARTICLE 3

Compensation

3.1 Salary. As compensation for the services to be rendered

by the Employee, the Company shall pay the Employee, during the

Term of this Agreement, an annual salary in the amount of Three

Hundred Twenty-five Thousand Dollars ($325,000), which salary shall

accrue weekly (prorated for periods less than a week) and shall be

payable in equal weekly installments, in arrears.

3.2 Other Compensation. During the Term hereof, the Employee

shall be entitled to participate, on a basis proportionate to the

participation of the other executive officers of the Company, in

any compensatory plan, contract or arrangement that is available to

the Company's most senior executive officers from time to time

during the Term hereof, including, but not limited to (a) the

Company's current bonus plan, generally referred to as the

Incentive Compensation Plan, as in effect on the Commencement Date,

and (b) a management stock option plan to be adopted by the Company

on such terms as shall be hereafter determined by the Board of

Directors (the "Proposed Stock Option Plan"). When the Company

adopts the Proposed Stock Option Plan, the Company will grant to

the Employee thereunder options to purchase one percent (1%) of the

5<PAGE>
then outstanding common stock of the Company on a fully-diluted

basis, on the terms set forth therein. Also, for purposes of

determining the Employee's Target Bonus under the Incentive

Compensation Plan, for the fiscal year ending in 1995, the parties

agree that the Employee's Target Percentage will be not less than

fifty percent (50%), and that the Employee's base salary under the

plan will be the Employee's annual salary under this Agreement,

prorated over the last two (2) quarters of that fiscal year.

3.3 Benefits and Perquisites. The Employee shall be

entitled, during the Term hereof, to the same medical, hospital,

dental and life insurance coverage and benefits, vacations, and

other perquisites, as are available to the Company's most senior

executive officers on the Commencement Date or benefits that are

substantially comparable; provided, however, that Employee shall be

entitled to a two (2) weeks vacation in the fiscal year ending in

1995, which he may take at any time.

3.4 Withholding. Any and all amounts payable under this

Agreement, including, without limitation, amounts payable in the

event of the termination hereof under Sections 7.3 and 7.4 hereof,

are subject to withholding for such federal, state and local taxes

as the Company in its reasonable judgment determines to be required

pursuant to any applicable law, rule or regulation.

3.5 Annual Review. No less frequently than annually, the

Board of Directors shall review the Employee's performance of his

duties and services under this Agreement, and may, commensurate

with the Employee's and the Company's performance, increase, but

6<PAGE>
not decrease, the salary, stock options, other compensation and

benefits payable to the Employee under this Agreement during the

remaining Term.

ARTICLE 4

Working Facilities, Expenses and Insurance

4.1 Working Facilities and Expenses. The Employee shall be

furnished with an office at the principal office of the Company, or

at such other location as may be agreed to by the Employee and the

Board of Directors, and other working facilities and secretarial

and other assistance suitable to his position and adequate for the

performance of his duties hereunder. The Company shall reimburse

the Employee for all the Employee's reasonable expenses incurred

while employed and performing his duties under and in connection

with the terms and conditions of the Agreement, subject to the

Employee's full appropriate documentation, including, without

limitation, receipts for all such expenses in the manner required

pursuant to Company's policies and procedures and the Internal

Revenue Code.

4.2 Insurance. The Company may secure in its own name or

otherwise, and at its own expense, life, disability and other

insurance covering the Employee or the Employee and others, and the

Employee shall not have any right, title or interest in or to such

insurance other than as expressly provided herein. The Employee

agrees to assist the Company in procuring such insurance by

submitting to the usual and customary medical and other

7<PAGE>
examinations to be conducted by such physician(s) as the Company or

such insurance company may designate and by signing such

applications and other written instruments as may be required by

the insurance companies to which application is made for such

insurance.

ARTICLE 5

Illness or Incapacity

5.1 Right to Terminate. If, during the Term of this

Agreement, the Employee shall be unable to perform in all material

respects his duties hereunder for a period exceeding one hundred

twenty (120) consecutive calendar days, or a total of one hundred

eighty-six (186) non-consecutive calendar days, by reason of

illness or incapacity, this Agreement may be terminated by the

Company at its election pursuant to Section 7.2(b) hereof.

5.2 Right to Replace. If the Employee's illness or

incapacity, whether by physical or mental cause, renders him unable

for a minimum period of 30 consecutive calendar days to carry out

his duties and responsibilities as set forth herein, the Company

shall have the right to designate a person to temporarily succeed

the Employee in the capacity described in Article 1 hereof;

provided, however, that if the Employee returns to work from such

illness or incapacity within the six (6) month period following his

inability due to illness or incapacity, he shall be entitled to be

reinstated in the capacity described in Article 1 hereof with all

duties and privileges attendant thereto.

8<PAGE>
5.3 Rights Prior to Termination. The Employee shall be

entitled to his full remuneration and benefits hereunder during

such illness or incapacity unless and until an election is made by

the Company to terminate this Agreement in accordance with the

provisions of this Article.

ARTICLE 6

Confidentiality

6.1 Confidentiality. During the Term of this Agreement and

at all times thereafter, the Employee agrees to maintain the

confidential nature of all trade secrets, including, without

limitation, development ideas, acquisition strategies and plans,

financial information, records, "know-how", methods of doing

business, customer, supplier and distributor lists and all other

confidential information of the Company. The Employee shall not be

obligated to maintain the confidential nature of information the

disclosure of which is required by law or which already is in the

public domain. The Employee shall not use (other than in

connection with his employment), in any way whatsoever, such trade

secrets except as authorized in writing by the Company. The

Employee shall, upon terminating his employment, deliver to the

Company any and all records, books, documents or any other

materials whatsoever (including all copies thereof) containing such

trade secrets, which shall be and remain the property of the

Company.

9<PAGE>
6.2 Non-Removal of Records. All documents, papers,

materials, notes, books, correspondence, drawings and other written

and graphical records relating to the Business of the Company which

the Employee shall prepare or use, or come into contact with, shall

be and remain the sole property of the Company and shall not be

removed from their respective premises without the Company's prior

written consent.

ARTICLE 7

Termination

7.1 Termination For Cause. This Agreement and the employment

of the Employee may be terminated by the Company "For Cause" in any

of the following circumstances:

(a) The Employee has committed any act or acts of fraud

or misappropriation that result in or are intended to result in his

personal enrichment at the expense of the Company;

(b) The Employee is in default in a material respect in

the performance of his obligations, services or duties hereunder,

which shall include, without limitation, the Employee's

disregarding the written instructions (in the Company's minutes or

otherwise) from the Company's Board of Directors or his superiors

concerning the conduct of his duties hereunder, the Employee's

acting in a manner materially inconsistent with the published

policies of the Company or its affiliates, as promulgated from time

to time and which are generally applicable to all employees and/or

senior executives of the Company, the Employee's acting in a manner

10<PAGE>
materially inconsistent with the customary standards of performance

applicable to persons in similar positions in the supermarket

industry in the United States, or if the Employee has breached any

other material provision of this Agreement; provided that if, and

only if, such default or breach is curable, the Employee shall not

be in default hereunder unless he shall have failed to cure such

default or breach within 15 days of written notice thereof by the

Company to the Employee;

substantial damage or loss to the Company, or engages in willful

misconduct in the performance of his duties hereunder; provided,

however, that the Employee may be terminated under this paragraph

7.1(c) only if the disinterested directors of the Company's Board

of Directors first unanimously approve of the termination; or

(d) The Employee has engaged in illegal activities

which, individually, or in the aggregate, reflect materially

adversely upon, or have a materially adverse impact on, the

Company.

A termination For Cause under this Section 7.1 shall be

effective upon the date set forth in a written notice of

termination delivered to the Employee.

7.2 Termination Without Cause. This Agreement and the

employment of the Employee may be terminated "Without Cause" as

follows:

(a) by mutual agreement of the parties hereto;

11<PAGE>
(b) at the election of the Company at any time by its

giving at least thirty (30) days advance written notice to the

Employee;

written notice to the Company in the event that the Company shall

default in or breach the performance of any of its obligations

under this Agreement, or in the event that the Company shall effect

a material diminution or material adverse change in the Employee's

title, responsibilities or duties; provided, that if, and only if,

such default, breach, diminution or change is curable, the Employee

may not elect to give notice under this Section 7.2 (c), unless the

Company shall have failed to cure such default, breach, diminution

or change within fifteen (15) days of written notice thereof

provided by the Employee to the Company; or

(d) upon the Employee's death.

A termination Without Cause under this Section 7.2 shall be

effective upon the date set forth in a written notice of

termination delivered hereunder, which shall be not less than

thirty (30) days nor more than 45 days after the giving of such

notice, except for a termination pursuant to Section 7.2(d) hereof,

which shall be automatically effective upon the occurrence of the

event described therein.

7.3 Effect of Termination For Cause. If the Employee's

employment is terminated For Cause:

(a) The Employee shall be entitled to accrued salary

through the date of termination;

12<PAGE>
(b) The Employee shall be entitled to reimbursement for

expenses accrued through the date of termination in accordance with

the provisions of Section 4.1 hereof; and

shall thereupon be of no further force and effect.

7.4 Effect of Termination Without Cause. If the Employee's

employment is terminated Without Cause:

(a) The Employee shall be entitled to accrued salary

through the date of termination;

(b) The Employee shall be entitled to reimbursement for

expenses accrued through the date of termination in accordance with

the provisions of Section 4.1 hereof; and

termination Without Cause under Section 7.2(d), the Employee shall

be entitled to receive all amounts of salary as would have been

payable under Section 3.1 hereof through the Scheduled Termination

Date, which amounts shall be paid as and when the same would have

been payable under the Agreement had it not been terminated;

provided, however, in the case of a Termination Without Cause

pursuant to Section 7.2 (c), then Employee is entitled to elect to

receive all salary due under this Section 7.4 (c) in a lump sum,

discounted to reflect the present value of that salary over the

Unexpired Term;

(d) Subject to Section 7.5 and except in the case of a

termination Without Cause under Section 7.2(d), the Employee shall

be entitled to receive all medical, hospital and dental coverage

13<PAGE>
and benefits as would have been payable under Section 3.3 hereof

through the Scheduled Termination Date, which amounts shall be paid

as and when the same would have been payable under the Agreement

had it not been terminated, and if the Employee is not entitled to

participate in any such benefit plan under the terms thereof

following the termination, then the Company shall provide the

Employee with substantially identical coverage and benefits;

(e) Subject to Section 7.5, if the Employee is

participating in a Company bonus plan as of the date of

termination, he shall be entitled to an accrued bonus through the

date of termination, computed on a per diem basis based upon the

bonus which would have otherwise been payable to the Employee for

the fiscal year during which the date of termination falls had the

Agreement not been terminated, computed on the same basis as in

effect immediately prior to the date of termination, which bonus

shall be paid as and when the same would have otherwise been

payable under the bonus plan had the Agreement not been terminated;

(f) All options granted to Employee pursuant to the

Company's stock option plan shall become fully vested, if not

already previously vested; and

(g) Except as provided in Article 11, this Agreement

shall be of no further force or effect.

7.5 Mitigation and Offset. In the event of a termination of

employment hereunder, the Employee shall be under no obligation to

seek alternative employment or other gainful occupation during the

period from the termination of this Agreement through the Scheduled

14<PAGE>
Termination Date (the "Unexpired Term") by way of mitigation of

amounts payable to the Employee under this Article 7; provided,

however, that, except in the case of Employee's Termination Without

Cause under Section 7.2 (c), if the Employee provides, directly or

indirectly (including through any personal service entity), any

services (whether as employee, consultant, independent contractor

or otherwise) to any person engaged in a business similar to the

business of the Company as then conducted (a "Third Party") during

the Unexpired Term, all amounts paid or payable to the Employee by

or on behalf of such Third Party in respect thereof (exclusive of

any fringe benefits, profit sharing and deferred compensation

arrangements customarily offered to senior management of the Third

Party) ("Offset Amounts") shall reduce any amounts payable

thereafter by the Company to the Employee under Sections 7.4(c),

(d) and (e) hereof on a dollar-for-dollar basis. Upon the request

of the Company, from time to time, the Employee shall certify in

writing to the Company all Offset Amounts received or receivable by

him and shall provide the Company with true copies of all written

agreements and a summary of the terms of all oral agreements

pursuant to which such Offset Amounts are paid or payable to the

Employee.

7.6 Full Settlement. The payments provided for in Article 7

of this Agreement are in full settlement of any claims the Employee

may have against the Company arising out of his termination,

including, but not limited to, any claims for wrongful discharge;

provided, however, that nothing herein shall limit any rights or

15<PAGE>
obligations of the parties under any other agreement with the

Company or any pension, severance, retirement, stock option,

deferred compensation or other benefit plans of the Company which

are applicable to the Employee and which provide for specified

rights and obligations in the event of a termination of the

Employee's employment with the Company.

ARTICLE 8

Non-Competition And Non-Interference

8.1 Non-Competition. The Employee agrees that during the

Term hereof and for a period of one year thereafter, except in the

case of a Termination Without Cause, the Employee will not,

directly, indirectly or as an agent on behalf of or in conjunction

with any person, firm, partnership, corporation or other entity,

own, manage, control, join, or participate in the ownership,

management, operation, or control of, or be financially interested

in or advise, lend money to, or be employed by or provide

consulting services to, or be connected in any manner with (a) any

supermarket, retail food store, grocery store, liquor store,

warehouse store or any similar business located in market areas

where the Company operates; or (b) any company, entity or business

with which Company was in active negotiation for the purchase of a

supermarket, retail food store, grocery store, liquor store or

warehouse store at the time of termination of the Employee's

employment, or with any other company which shall acquire such

supermarket, retail food store, grocery store, liquor store or

16<PAGE>
warehouse store. The Employee acknowledges that the business of

the Company is presently conducted throughout the counties in

Florida listed on Exhibit A attached hereto and any county

contiguous thereto and that such counties constitute the present

market area of the Company.

Ownership of less than 1% of the stock in a publicly-held

company shall not be deemed a violation of this Section 8.1.

8.2 Non-Interference. The Employee agrees that during the

Term hereof and for a period of one year thereafter, the Employee

will not, directly, indirectly or as an agent on behalf of or in

conjunction with any person, firm, partnership, corporation or

other entity, induce or entice any employee of the Company to leave

such employment or cause anyone else to do so.

8.3 Severability. If any covenant or provision contained in

Section 8.1 is determined to be void or unenforceable in whole or

in part, it shall not be deemed to affect or impair the validity of

any other covenant or provision. The parties intend that the

covenants contained in Section 8.1 shall be deemed to be a series

of separate covenants, one for each county referenced therein.

Except for geographic coverage, each such separate covenant shall

be deemed identical in terms to the covenant contained in such

Section. If, in any arbitral or judicial proceeding, a court shall

refuse to enforce all of the separate covenants deemed included in

such Section, then such unenforceable covenants shall be deemed

eliminated from the provisions hereof for the purpose of such

17<PAGE>
proceedings to the extent necessary to permit the remaining

separate covenants to be enforced in such proceedings.

ARTICLE 9

Remedies

9.1 Equitable Remedies. The Employee and the Company agree

that the services to be rendered by the Employee pursuant to this

Agreement, and the rights and interests granted and the obligations

to be performed by the Employee to the Company pursuant to this

Agreement, are of a special, unique, extraordinary and intellectual

character, which gives them a peculiar value, the loss of which

cannot be reasonably or adequately compensated in damages in any

action at law, and that a breach by the Employee of any of the

terms of the Agreement will cause the Company great and irreparable

injury and damage. In the event of a breach or threatened breach

of Article 6, Section 8.1 or Section 8.2, the Employee hereby

expressly agrees that the Company shall be entitled to the remedies

of injunction, specific performance and other equitable relief to

prevent a breach of the Agreement, both pendente lite and

permanently, against the Employee, as such breach would cause

irreparable injury to the Company and a remedy at law would be

inadequate and insufficient. Therefore, the Company may, in

addition to pursuing its other remedies, obtain an injunction from

any court having jurisdiction in the matter restraining any further

violation. The Employee agrees that a bond in the amount of $5,000

shall be adequate security for issuance of any temporary

18<PAGE>
injunction. The Company shall also be entitled to such damages as

it can show it has sustained, directly or indirectly, by reason of

said breach.

9.2 Rights and Remedies Preserved. Nothing in this Agreement

except Sections 7.6 and 10.11 shall limit any right or remedy the

Company or the Employee may have under this Agreement or pursuant

to law for any breach of this Agreement by the other party. Except

as set forth in Sections 7.6 and 10.11, the rights granted to the

Company and the Employee herein are cumulative and the election of

one shall not constitute a waiver of such party's right to assert

all other legal remedies available under the circumstances.

ARTICLE 10

Miscellaneous

10.1 No Waivers. The failure of either party to enforce any

provision of this Agreement shall not be construed as a waiver of

any such provision, nor prevent such party thereafter from

enforcing such provision or any other provision of this Agreement.

10.2 Notices. Any notice to be given to the Company and the

Employee under the terms of this Agreement may be delivered

personally, by telecopy, telex or other form of written electronic

transmission, or by registered or certified mail, postage prepaid,

and shall be addressed as follows:

19<PAGE>
If to the Company: Attention: Raymond P. Springer,
Executive Vice President, Administration
Kash n' Karry Food Stores, Inc.
6422 Harney Road
Tampa, Florida 33610
Telecopier: (813) 626-9550

With a copy to: Attention: Robert S. Bolt, Esq.
Barnett, Bolt, Kirkwood & Long
601 Bayshore Boulevard
Suite 700
Tampa, Florida 33606
Telecopier: (813) 251-6711

If to the Employee: Ronald Johnson
928 Forest Lake Circle
Chesapeake, Virginia 23320

With a copy to: William R. VanBuren, III
Kaufman & Canoles
One Commercial Place
Norfolk, VA 23514-3037
Telecopier: (804) 624-3169

Either party may hereafter notify the other in writing of any

change in address. Any notice shall be deemed duly given (i) when

personally delivered, or (ii) on the third day after it is mailed

by registered or certified mail, postage prepaid, as provided

herein.

10.3 Severability. The provisions of this Agreement are

severable and if any provision of this Agreement shall be held to

be invalid or otherwise unenforceable, in whole or in part, the

remainder of the provisions, or enforceable parts thereof, shall

not be affected thereby.

20<PAGE>
10.4 Successors and Assigns. The rights and obligations of

the Company under this Agreement shall inure to the benefit of and

be binding upon the successors and assigns of the Company,

including the survivor upon any merger, consolidation or

combination of the Company with any other entity. The Employee

shall not have the right to assign, delegate or otherwise transfer

any duty or obligation to be performed by him hereunder to any

person or entity, nor to assign or transfer any rights hereunder.

10.5 Entire Agreement. With respect to the terms of

Employee's employment, this Agreement supersedes all prior

agreements and understandings between the parties hereto, oral or

written, and may not be modified or terminated orally. No

modification, termination or attempted waiver shall be valid unless

in writing, signed by the party against whom such modification,

termination or waiver is sought to be enforced. This Agreement was

the subject of negotiation by the parties hereto and their counsel.

The parties agree that no prior drafts of this Agreement shall be

admissible as evidence (whether in any arbitration or court of law)

in any proceeding which involves the interpretation of any

provisions of this Agreement.

10.6 Governing Law. This Agreement shall be governed by and

construed in accordance with the internal laws of the State of

Florida without reference to the conflict of law principles

thereof.

21<PAGE>
10.7 Section Headings. The section headings contained herein

are for the purposes of convenience only and are not intended to

define or limit the contents of said sections.

10.8 Further Assurances. Each party hereto shall cooperate

and shall take such further action and shall execute and deliver

such further documents as may be reasonably requested by any other

party in order to carry out the provisions and purposes of this

Agreement.

10.9 Gender. Whenever the pronouns "he" or "his" are used

herein they shall also be deemed to mean "she" or "hers" or "it" or

"its" whenever applicable. Words in the singular shall be read and

construed as though in the plural and words in the plural shall be

read and construed as though in the singular in all cases where

they would so apply.

10.10 Counterparts. This Agreement may be executed in

counterparts, all of which taken together shall be deemed one

original.

10.11 Arbitration. The parties hereto agree that any dispute

concerning or arising out of the provisions of the Agreement shall

be resolved by arbitration in accordance with the rules of the

American Arbitration Association. Such arbitration shall be held

in Tampa, Florida and the decision of the arbitrator(s) shall be

conclusive and binding on the parties and shall be enforceable by

either party in any court of competent jurisdiction. The

arbitrator may, in his or her discretion, award attorneys' fees and

costs to such party as he or she sees fit in rendering his or her

22<PAGE>
decision. Notwithstanding the foregoing, if any dispute arises

hereunder as to which the Company desires to exercise any rights or

remedies under Section 9.1 hereof, the Company may, in its

discretion, in lieu of submitting the matter to arbitration, bring

an action thereon in any court of competent jurisdiction in

Hillsborough County, Florida, which court may grant any and all

relief available in equity or at law. In any such action, the

prevailing party shall be entitled to reasonable attorneys' fees

and costs as may be awarded by the court.

ARTICLE 11

Survival

11.1 Survival. The provisions of Article 6, 8, 9 and 10, and

Sections 7.3, 7.4, 7.5 and 7.6 of this Agreement shall survive the

termination of this Agreement whether upon, or prior to, the

Scheduled Termination Date hereof.

IN WITNESS WHEREOF, the parties hereto have executed this

Employment Agreement as of the date first above written.

KASH N' KARRY FOOD STORES, INC.,
a Delaware corporation

/s/ Robert S. Bolt By: /s/ R. P. Springer
Name:Raymond P. Springer
/s/ Anthony R. Petrillo Title:Executive Vice President
As to the Company

/s/ Robert S. Bolt /s/ Ronald Johnson
RONALD JOHNSON
/s/ Anthony R. Petrillo Title:Executive Vice President
As to the Employee
20\WL\LWH\KNK.SEC\S1.95\ex-10-10.ASC
23

[CONFORMED COPY]
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and

entered into as of March 6, 1995 (the "Execution Date"), between

KASH N' KARRY FOOD STORES, INC., a Delaware corporation (the

"Company"), and GARY M. SHELL (the "Employee").

WHEREAS, the Company and the Employee desire to enter into

this Agreement to assure the Company of the services of the

Employee for the benefit of the Company and to set forth the

respective rights and duties of the parties hereto;

WHEREAS, the Company is in the business of owning, operating

and managing supermarkets and retail liquor, food, grocery and

warehouse format stores in Florida and may, in the future, own,

operate and manage additional supermarkets or retail liquor, food,

grocery or warehouse format stores in or outside of Florida (such

business, present and future, being hereinafter referred to as the

"Business");

NOW, THEREFORE, in consideration of the premises and the

mutual covenants, terms and conditions set forth herein, the

Company and the Employee agree as follows:

ARTICLE 1

Employment

1.1 Employment and Title. The Company hereby employs the

Employee, and the Employee hereby accepts such employment as the

Senior Vice President, Marketing and Non-Perishables, of the

Company, upon the terms and conditions set forth herein.

1.2 Services. During the Term (as hereinafter defined)

hereof, the Employee agrees to perform diligently and in good faith

such duties and services for the Company under the direction of the

Chief Executive Officer as are consistent with the position of

Senior Vice President-Marketing and Non-perishables. The Employee

agrees to devote his best efforts and all of his full business

time, energies and abilities to the services to be performed

hereunder and for the exclusive benefit of the Company; provided,

that this clause shall not be construed to prevent the Employee

from personally, and for his own account, trading in stocks, bonds,

securities, real estate, or other forms of investment for his own

benefit, so long as any such activity does not materially interfere

with the performance of his duties hereunder. The Employee shall

be vested with such authority as is generally concomitant with the

position to which he is appointed.

1.3 Location. The principal place of employment and the

location of the Employee's principal office and ordinary place of

work shall be in Tampa, Florida; provided, however, the Employee

shall, when requested by his superiors, or may, if he determines it

to be reasonably necessary, temporarily perform services outside

said area as are reasonably required for the proper performance of

his duties under this Agreement.

1.4 Exclusivity. The Employee shall not, without the prior

written consent of the Company, directly or indirectly, during the

term of this Agreement render services of a business, professional

2<PAGE>
or commercial nature to any other person or entity, whether for

compensation or otherwise.

1.5 Representations. Each party represents and warrants to

the other that he/it has full power and authority to enter into and

perform this Agreement and that his/its execution of and

performance of this Agreement shall not constitute a default under

or breach of any of the terms of any agreement to which he/it is a

party or under which he/it is bound. Each party represents that no

consent or approval of any third party is required for his or its

execution, delivery and performance of this Agreement. The

Employee further represents and warrants to the Company that he is

free to accept this employment, and that he has no other

obligations or commitments of any kind to any one which would in

any way hinder or interfere with his acceptance of, full

performance of his obligations under, or exercise of his best

efforts with respect to, this Agreement.

ARTICLE 2

Term

2.1 Term. The term of the Employee's employment hereunder

(the "Term") shall commence on March 6, 1995, (the "Commencement

Date") and shall continue until (but not including) the third

anniversary of the Commencement Date (the "Scheduled Termination

Date") unless earlier terminated pursuant to the provisions of this

Agreement.

3<PAGE>
ARTICLE 3

Compensation

3.1 Salary. As compensation for the services to be rendered

by the Employee, the Company shall pay the Employee, during the

Term of this Agreement, an annual salary in the amount of One

Hundred Thirty Thousand Dollars ($130,000), which salary shall

accrue weekly (prorated for periods less than a week) and shall be

payable in equal weekly installments, in arrears.

3.2 Other Compensation. During the Term hereof, the Employee

shall be entitled to participate, on a basis proportionate to the

participation of the other executive officers of the Company, in

any compensatory plan, contract or arrangement that is available to

the Company's most senior executive officers from time to time

during the Term hereof, including, but not limited to the Company's

current bonus plan, generally referred to as the Incentive

Compensation Plan, as in effect on the Commencement Date. For

purposes of determining the Employee's Target Bonus under the

Incentive Compensation Plan for the fiscal year ending in 1995, the

parties agree that the Employee's Target Percentage will be not

less than Fifty Percent (50%), and that the Employee's base salary

under the Incentive Compensation Plan will be the Employee's annual

salary under this Agreement, prorated on a weekly basis over the

remaining period of that fiscal year. On the Execution Date, the

Company will grant to the Employee, pursuant to its 1995 Key

Employee Stock Option Plan (the "Stock Option Plan"), options to

purchase 20,309 shares of common stock of the Company, representing

4<PAGE>
six-tenths of one percent (.6%) of the then outstanding common

stock of the Company on a fully-diluted basis, for the exercise

price of $15.00 per share and on the other terms set forth in the

Stock Option Plan.

3.3 Benefits and Perquisites. The Employee shall be

entitled, during the Term hereof, to the same medical, hospital,

dental and life insurance coverage and benefits, vacations, and

other perquisites, as are available to the Company's most senior

executive officers on the Commencement Date or benefits that are

substantially comparable, including those benefits described in the

letter dated February 20, 1995, from Ron Johnson to the Employee,

a copy of which is attached hereto as Exhibit A.

3.4 Withholding. Any and all amounts payable under this

Agreement, including, without limitation, amounts payable in the

event of the termination hereof under Sections 7.3 and 7.4 hereof,

are subject to withholding for such federal, state and local taxes

as the Company in its reasonable judgment determines to be required

pursuant to any applicable law, rule or regulation.

3.5 Annual Review. No less frequently than annually, the

Chief Executive Officer of the Company shall review the Employee's

performance of his duties and services under this Agreement, and

may, commensurate with the Employee's and the Company's performance

and subject to the approval of the Board of Directors of the

Company, increase, but not decrease, the salary, stock options,

other compensation and benefits payable to the Employee under this

Agreement during the remaining Term.

5<PAGE>
ARTICLE 4

Working Facilities, Expenses and Insurance

4.1 Working Facilities and Expenses. The Employee shall be

furnished with an office at the principal office of the Company, or

at such other location as may be agreed to by the Employee and the

Chief Executive Officer of the Company, and other working

facilities and secretarial and other assistance suitable to his

position and adequate for the performance of his duties hereunder.

The Company shall reimburse the Employee for all the Employee's

reasonable expenses incurred while employed and performing his

duties under and in connection with the terms and conditions of the

Agreement, subject to the Employee's full appropriate

documentation, including, without limitation, receipts for all such

expenses in the manner required pursuant to Company's policies and

procedures and the Internal Revenue Code.

4.2 Insurance. The Company may secure in its own name or

otherwise, and at its own expense, life, disability and other

insurance covering the Employee or the Employee and others, and the

Employee shall not have any right, title or interest in or to such

insurance other than as expressly provided herein. The Employee

agrees to assist the Company in procuring such insurance by

submitting to the usual and customary medical and other

examinations to be conducted by such physician(s) as the Employee,

the Company or such insurance company may agree to and designate

and by signing such applications and other written instruments as

6<PAGE>
may be required by the insurance companies to which application is

made for such insurance.

ARTICLE 5

Illness or Incapacity

5.1 Right to Terminate. If, during the Term of this

Agreement, the Employee shall be unable to perform in all material

respects his duties hereunder for a period exceeding one hundred

twenty (120) consecutive calendar days, or a total of one hundred

eighty-six (186) non-consecutive calendar days, by reason of

illness or incapacity, this Agreement may be terminated by the

Company at its election pursuant to Section 7.2(b) hereof.

5.2 Right to Replace. If the Employee's illness or

incapacity, whether by physical or mental cause, renders him unable

for a minimum period of 30 consecutive calendar days to carry out

his duties and responsibilities as set forth herein, the Company

shall have the right to designate a person to temporarily succeed

the Employee in the capacity described in Article 1 hereof;

provided, however, that if the Employee returns to work from such

illness or incapacity within the six (6) month period following his

inability due to illness or incapacity, he shall be entitled to be

reinstated in the capacity described in Article 1 hereof with all

duties and privileges attendant thereto.

5.3 Rights Prior to Termination. The Employee shall be

entitled to his full remuneration and benefits hereunder during

such illness or incapacity unless and until an election is made by

7<PAGE>
the Company to terminate this Agreement in accordance with the