-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KPy0wBub7EUCAiy3NKdpG6gbCnY1Z6kk0+BqBnVn/mup7n7oNgXx4ljp5iRX+tDr M2OMxQwP+38sBnRXR8v+dw== 0000835582-94-000012.txt : 19941222 0000835582-94-000012.hdr.sgml : 19941222 ACCESSION NUMBER: 0000835582-94-000012 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941129 ITEM INFORMATION: Other events FILED AS OF DATE: 19941205 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMELAND HOLDING CORP CENTRAL INDEX KEY: 0000835582 STANDARD INDUSTRIAL CLASSIFICATION: 5400 IRS NUMBER: 731311075 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-22829 FILM NUMBER: 94563284 BUSINESS ADDRESS: STREET 1: 400 N E 36TH ST CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 BUSINESS PHONE: 4055575500 MAIL ADDRESS: STREET 1: 400 N E 36TH CITY: OKLAHOMA CITY STATE: OK ZIP: 73125 FORMER COMPANY: FORMER CONFORMED NAME: SWO HOLDING CORP DATE OF NAME CHANGE: 19901017 FORMER COMPANY: FORMER CONFORMED NAME: SWO ACQUISTION CORP DATE OF NAME CHANGE: 19890716 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): November 29, 1994 HOMELAND HOLDING CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 33-48862 73-1311075 State or Other Jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 400 N. E. 36th Street Oklahoma City, OK 73105 (Address of Principal Executive Offices) (Zip Code) (405) 557-5500 Registrant's Telephone Number, Including Area Code: Item 5. Other Events. On November 30, 1994, Homeland Stores, Inc. (the "Company"), a wholly-owned subsidiary of the registrant, Homeland Holding Corporation ("Holding" and, together with the Company, "Homeland"), entered into a letter of intent (the "Letter of Intent") with Associated Wholesale Grocers, Inc. ("AWG") with respect to the purchase by AWG of 29 of the Company's stores and its warehouse complex for a purchase price of $45 million plus the value of the inventory in the 29 stores and the warehouse. As part of the transaction memorialized in the Letter of Intent (the "Transaction"), the Company will also enter into a seven year supply agreement with AWG. A copy of the Letter of Intent is attached hereto as Exhibit 10pp. In addition, on November 29, 1994, the Company's President and Chief Executive Officer, Max E. Raydon, resigned, and the Board of Directors of the Company appointed James A. Demme to replace Mr. Raydon. On November 30, 1994, the Company issued a press release describing the Transaction and announcing the resignation of Mr. Raydon and the appointment of Mr. Demme. A copy of the press release is attached hereto as Exhibit 99a. Attached hereto as Exhibit 99b is certain financial information consisting of (a) an unaudited summary projection of Homeland's financial results for 1994 and (b) an unaudited summary projection of Homeland's financial results for 1994 adjusted to give effect to the Transaction and certain related transactions. Item 7. Financial Statements and Exhibits (c) Exhibits: The following exhibits are filed as part of this Report: Exhibit No. Description 10pp Letter of Intent, executed on November 30, 1994, between Homeland Stores, Inc. and Associated Wholesale Grocers, Inc. 99a Press release issued by Homeland Stores, Inc. on November 30, 1994. 99b Unaudited Summary Financial Data for the 52 weeks ended December 31, 1994. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to signed on its behalf by the undersigned thereunto duly authorized. HOMELAND HOLDING CORPORATION By: Mark S. Sellers Mark S. Sellers, Executive Vice President/Finance, Treasurer, Chief Financial Officer and Secretary Dated: December 3, 1994 Form 8-K Exhibit Index Exhibit NO. Description 10pp Letter of Intent, executed on November 30, 1994, between Homeland Stores, Inc. and Associated Wholesale Grocers, Inc. 99a Press release issued by Homeland Stores, Inc. on November 30, 1994 99b Unaudited Summary Financial Data for the 52 weeks ended December 31, 1994. EX-1 2 November 23, 1994 Via Federal Express Mr. Mark S. Sellers Executive Vice President - Finance, Chief Financial Officer Homeland Stores, Inc. 400 N.E. 36th Street Oklahoma City, Oklahoma 73105 Re: Purchase of Assets Dear Mark: This letter incorporates by reference that certain discussion document entitled "Notes of Conversation for Proposed Homeland and Associated Wholesale Grocers, Inc. Transaction" (a copy of which is attached hereto as Exhibit A and incorporated herein by reference) (referred to herein as the "Outline") and further sets forth the general structure of a proposed purchase agreement ("Purchase Agreement") between Associated Wholesale Grocers, Inc. ("AWG"), as buyer, and Homeland Stores, Inc. ("Homeland"), as seller. This letter represents only our current good-faith intention to negotiate and enter into the definitive Purchase Agreement and to consummate the transaction contemplated in the Outline, subject to complete due diligence. The Purchase Agreement will address the following provisions, due diligence, and conditions precedent and other terms and conditions as follows: 1. The parties hereto shall enter into the Purchase Agreement which will enumerate and identify with specificity (a) ongoing transactions and relationships among the parties, (b) transactions and relationships involving third parties and (c) the assets ("Assets") to be purchased and otherwise be dealt with thereunder. All are generally contemplated in the Outline. 2. The Purchase Agreement will: (a) have schedules attached detailing all of the Assets to be owned by Homeland as of the date of the closing hereof ("Closing"); (b) contain the normal and usual warranties relating to organization, affiliate or subsidiary status, authorization, execution and delivery, audited financial statements, absence of conflicts and litigation, compliance with laws, payment of taxes, insurable and marketable title, absence of material changes, existence and status of contracts, maintenance of insurance coverage, broker's fees, breaches of representations and warranties, and breaches of the Purchase Agreement; (c) contain a provision whereby Homeland will not compete with AWG relating to wholesale operations; (d) contain the normal and usual covenants pertaining to investigative rights regarding the Assets, acquisition review, required corporate action, assignments and transfers, compliance with laws, maintenance of insurance, conduct of business in the ordinary course and no changes in business or financial structure, in each case, to the extent it adversely affects the Assets or Supply Agreement (as described in the Outline); (e) contain mutually agreeable provisions regarding discharge by Homeland of liabilities encumbering the Assets prior to or at the Closing; (f) contain mutually acceptable provisions concerning any contingent or unidentifiable liabilities; (g) contain mutually agreeable provisions concerning any union contracts and other agreements pertaining to employees and/or managers employed in connection with any Asset (except as described in the Outline, AWG contemplates that it shall have no liability under any of the foregoing unless specifically assumed by AWG at Closing) and (h) not be signed without approval by both of AWG's and Homeland's Board of Directors. AWG's obligation to consummate the transaction shall not be conditioned upon or subject to the purchase of any of the Assets by any third party. Homeland understands that AWG intends to transfer certain of the Assets to its retail members and that a contemporaneous closing of all of these related transactions is imperative to AWG to insure continuity of operations and Homeland agrees to use its best efforts to coordinate the timing of the Closing and other Closing mechanics with AWG so as to permit the transfer of such Assets to its retail members. In addition, the Purchase Agreement will contain further appropriate terms and conditions as any party may determine necessary and are acceptable to the other parties. Nothing contained herein shall be construed as a comprehensive description of the provisions in the Purchase Agreement, nor a limitation upon AWG or Homeland in respect to the Purchase Agreement. 3. The following must be completed prior to the execution of the Purchase Agreement: a) Except as provided in paragraph 4.(k), AWG conducting a physical inspection of all Assets to be purchased and performing all tests and acts deemed necessary by AWG, including without limitation, mechanical inspections, engineering and soil borings, such activities to be conducted at AWG's expense. The foregoing is in addition to (and not in lieu of) a physical inventory of all FFE, as defined in the Outline. To the extent such inspections are not completed prior to the execution of the Purchase Agreement or reveal unsatisfactory conditions, the Purchase Agreement will contain appropriate provisions relating to the foregoing, which are mutually acceptable to the parties. b) AWG's review of complete, true and correct copies of all leases and AWG's conclusion that such leases do not contain commercially unreasonable terms, in AWG's sole discretion. c) Receipt by AWG of Homeland's proforma opening balance sheet and profit and loss statement showing projections of Homeland's operation after Closing. d) AWG's review of complete, true and correct copies of all contracts referred to in paragraph 7 of the Outline. e) Mutually acceptable Supply Agreement. The foregoing shall not preclude AWG from making provisions in the Purchase Agreement for factual matters relating to any of the foregoing which are not disclosed to AWG until after the execution of the Purchase Agreement. 4. The Purchase Agreement shall also provide that the obligations of AWG thereunder are expressly subject to the following, without limitation, conditions precedent to Closing: a) The Assets shall be owned by Homeland at Closing. b) Satisfactory evidence of insurability, marketability and transferability of title of all leasehold interests and real property. c) Satisfactory evidence of marketability and transferability of title of all Assets including an acceptable UCC search on all leased premises, furniture, fixtures, equipment, inventory and supplies. d) The existence of no material misrepresentations, misstatements or adverse changes relating to the Assets or any other material matter. e) Payment by the appropriate party of any transfer taxes and/or charges incurred in connection with the transfer of Assets to AWG. f) If applicable, compliance with Bulk Sales Law or such other arrangement mutually agreed to by the parties. g) Receipt by AWG of all audited financial statements of Homeland Holding Corporation available from time to time, along with all consolidating detailed financial statements. h) Except as provided otherwise, transfer of the Assets free and clear of all liens and encumbrances. i) If required, the consent and/or nondisturbance and attornment agreement of the landlord/lessor of any leasehold interest in connection with the assignment of any leasehold interests. Homeland will not be required to give economic incentives in connection with obtaining the foregoing. j) AWG's receipt of an estoppel certificate acceptable to AWG from all landlords and/or lessors on any lease being assumed by AWG, except where the failure to obtain any such certificate or certificates would not have a material adverse effect on the Assets in connection with the 29 Stores and Warehouse Complex taken as a whole. AWG's receipt of an estoppel certificate acceptable to AWG from all third parties to any material contract being assumed by AWG, except where the failure to obtain any such certificate or certificates would not have a material adverse effect on the Assets taken as a whole. In the event an estoppel certificate reveals a non-material but significant economic discrepancy (as defined in the Purchase Agreement) previously unknown to the parties, the parties will equitably resolve such discrepancy prior to or at Closing. Homeland will not be required to give economic incentives in connection with obtaining the foregoing. k) AWG conducting prior to Closing surveys and environmental audits. Such activities to be conducted at AWG's expense. l) AWG conducting in concert with Homeland prior to Closing a detailed physical inventory of all inventories and FFE described in the Outline. m) Satisfaction of AWG's credit requirements as set forth in Paragraph 9d of the Outline. n) Satisfactory evidence of compliance by Homeland with all requirements of Homeland's lender/debt/lien/security documents to the extent necessary so that the transactions contemplated do not constitute a default under such documents. o) Performance by Homeland of all obligations required by the Purchase Agreement. p) Receipt by AWG of a satisfactory fair market value opinion/appraisal, and an auditor's review report from appropriate experts. HL will engage experts reasonably acceptable to AWG; provided, however, such activities will be at AWG's expense. Such appraisal or report shall be reasonably satisfactory to AWG in all material respects. q) Receipt by AWG of a report regarding the solvency of Homeland (whether solvent or not) from an appropriate expert. HL will engage experts reasonably acceptable to AWG; provided however, such activities will be at AWG's expense. For purposes hereof, The Manufactures' Appraisal Company ("MAC") will be an independent expert acceptable to AWG. 5. The Purchase Agreement shall also provide that the obligations of Homeland and AWG thereunder are expressly subject to the following, without limitation, conditions precedent to Closing: a) All requirements, which in the reasonable opinion of legal counsel, need to be satisfied relating to the Anti-Trust Improvements Act of 1976, Department of Justice, Federal Trade Commission, Securities Exchange Commission and any other approval by any applicable regulatory authority required or requested to rule on this transaction. b) Receipt of satisfactory opinions from the other party's legal counsel. c) Compliance with the Worker Adjustment and Retraining Notification Act and all related laws, regulations or ordinances in respect to plant closings. d) Compliance with laws relating to transfer of any inventory consisting of liquor and pharmaceuticals. e) Mutual acceptable allocations of the purchase price to the components of the Assets. The form of the allocation certificate shall be attached as an exhibit to the Purchase Agreement. It is agreed that the amounts paid for the Supply Agreement from time to time pursuant to the formula set forth in paragraph 9 of the Outline is consideration solely for the Supply Agreement. 6. The Purchase Agreement shall also provide that the obligations of Homeland are expressly subject to the following, without limitation, conditions precedent to the closing: a) Receipt of all necessary consents and approvals, including those of lessors, landlords, lenders and security holders. b) The existence of no material misrepresentations, misstatements or adverse changes relating to AWG. c) Performance by AWG of all obligations required by the Purchase Agreement. 7. After the full execution of this letter of intent, AWG is to begin due diligence in earnest and shall be permitted to make a full and complete investigation of the Assets to be purchased, the leases and contracts to be assumed and all other documents which control the transactions or relationships addressed by the Outline. In addition, as soon as reasonably possible following the execution of this letter of intent by AWG and Homeland, Homeland will provide to AWG the documents described on Exhibit B attached hereto and incorporated herein. Upon execution of this letter of intent by both parties, AWG agrees to immediately commence and diligently pursue (i) the review of the documents on Exhibit B upon receipt by AWG thereof, and (ii) all investigations, inspections and due diligence contemplated hereunder and to use its reasonable efforts to complete all such due diligence as soon as practicable prior to the signing of the Purchase Agreement. AWG will use its best efforts to reduce the number and scope of conditions precedent to its obligations to close the transactions contemplated hereby. The Purchase Agreement shall also provide that upon reasonable request prior to the Closing Date, AWG and its representatives shall have, at all reasonable times and upon reasonable notice, access to any other records of Homeland pertaining to the Assets and the premises relating to any of the leases described herein and such other information or access as AWG shall, from time to time, reasonably request. 8. In consideration of the substantial expenditures of time, effort and expense to be undertaken by AWG in connection with the preparation and execution of the Purchase Agreement, and the various investigations and review referred to above, Homeland undertakes and agrees that during the period from execution of this letter of intent through December 1, 1994 (or shorter period if AWG or Homeland terminates its good faith intent to proceed with the transaction) Homeland shall not actively solicit any other prospective purchaser of the Assets which are the subject of this letter agreement, other than dispositions of Assets in the ordinary course of business. 9. Other than any commission owed to Lazard Freres & Co. which will be paid by Homeland, AWG and Homeland warrant each to the other that there are no claims for brokerage commissions or finders' fees in connection with this transaction. 10. Whether or not the transactions contemplated by this letter agreement are consummated, except as otherwise expressly stated herein, AWG and Homeland will bear their own costs and expenses incurred in connection with such transactions. Transfer taxes and/or charges incurred in connection with the transfer of the Assets to AWG will be split by the parties, unless otherwise required by applicable law. 11. Except as required by law and except for a press release which has been agreed to by Homeland and AWG and which will be issued upon execution of this letter of intent, no public announcement regarding the execution of this letter of intent or the transaction contemplated hereby shall be made without the mutual consent of AWG and Homeland. In that regard, the partes agree that neither party will make statements for the other party. The parties will carefully coordinate all communication with any third party. The foregoing shall not prohibit or restrict Homeland from discussing the transaction with its lenders or security holders. AWG shall not communicate with any Homeland employee or employee representative without the prior verbal consent of a designated representative of Homeland and Homeland may condition its consent upon its participation in any such communication. 12. (a) The Confidentiality Agreement heretofore executed by the parties on or about April 12, 1994 shall remain in full force and effect. In addition, it is hereby agreed that operational information supplied by any party shall be included as either "Homeland Confidential Information" or "AWG Confidential Information" as the case may be. To the extent that any party believes that the terms of the Confidentiality Agreement need to be further expanded (or further defined) to protect their interests in proprietary information, all other parties shall agree to such modifications as are commercially reasonable under the circumstances. (b) Notwithstanding the foregoing, Homeland acknowledges and agrees that AWG does not operate retail grocery stores. Consequently, it is recognized that all of the Assets and obligations contemplated by the Outline which pertain to the operation of retail locations will be sold to and/or assumed by current or future AWG retail members contemporaneously with the Closing of the Purchase Agreement. Toward that end, AWG has already (with the permission of Homeland) provided certain information to its retail members and third parties interested in retail grocery stores to be purchased by AWG. In addition, with Homeland's prior written approval which shall not be unreasonably withheld, AWG may forward to its shareholders and such third parties additional information with respect to the Assets, including the location and size of stores. If an approved AWG shareholder or third party requests additional information on one or more stores, such information may be provided to said shareholder by AWG with Homeland's prior written approval which shall not be unreasonably withheld. AWG shall obtain or have obtained an executed confidentiality agreement by said shareholder or third parties receiving such information containing substantially the same terms and provisions as this paragraph and the Confidentiality Agreement. AWG considers that time is of the essence in consummating the proposed transaction. Accordingly, we have instructed our counsel to work with your counsel after the execution of this letter of intent to prepare the Purchase Agreement which will contain provisions in accordance with the foregoing, together with such further appropriate terms and conditions as counsel may mutually determine, in addition to such ancillary documents as may be necessary to implement the foregoing. The Purchase Agreement and such additional documents shall be subject, in all respects, to the approval of all parties thereto. It is, of course, understood (i) that this letter is intended to be, and shall be construed only as, a letter of intent, summarizing and evidencing AWG's proposal and not as an offer to purchase the above-described Assets or an agreement with respect thereto; (ii) that the respective rights and obligations of AWG and Homeland remain to be defined in the definitive Purchase Agreement, into which this letter of intent and all prior discussions shall merge; and (iii) in the event the definitive Purchase Agreement is not fully executed within thirty (30) days after execution by the last party to sign this letter of intent for any reason whatsoever, then neither AWG nor Homeland shall have any rights or obligations hereunder; provided, however, that the obligation of Homeland and AWG under paragraphs 7, 8, 11 and 12 shall be binding upon Homeland and AWG when this letter of intent is executed and delivered by you. If the parties do not execute a Purchase Agreement within thirty (30) days after execution by the last party to sign this letter of intent, then the provisions of paragraphs 7 and 8, shall no longer be binding upon Homeland or AWG. The intentions expressed in this letter shall be null and void unless Homeland accepts and executes this letter and AWG receives the executed letter on or before December 1, 1994. If the foregoing meets with the approval of Homeland, please sign and return the enclosed duplicate copy of this letter at your earliest convenience. Very truly yours, ASSOCIATED WHOLESALE GROCERS, INC. By: /s/Mike DeFabis Mike DeFabis, President APPROVED AND ACCEPTED: HOMELAND STORES, INC. By: /s/Mark S. Sellers Mark S. Sellers Executive Vice President - Finance Chief Financial Officer Date: November 30, 1994 p:\wp50\docs\acquisit\homeland\letterof.int\shields.12 December 5, 1994 cap/cm For Discussion Purposes Only November 23, 1994 NOTES OF CONVERSATION FOR PROPOSED HOMELAND STORES, INC. ("HL") AND ASSOCIATED WHOLESALE GROCERS, INC. ("AWG") TRANSACTION 1. AWG agrees to purchase certain assets of HL. AWG to purchase 29 of the 111 stores (See list on Ex A). AWG to supply 67 of the remaining stores and the Edmond Store. 2. The Assets included in the Purchase Price are as follows: a. The 29 Stores listed on Exhibit A, includes: (i) Leases ("Store Leases"); (ii) Real estate owned (6 properties); (iii) Furniture, fixtures, equipment and supplies which do not bear the HL name or logo ("FFE"); (iv) Inventory in the stores (other than Edmond); (1) Edmond, OK (Store 777) - AWG agrees to grant HL the option to sublease back this store (and FFE) after Closing, subject to all of the terms and conditions contained in the existing lease and the consent of the landlord thereunder, if required, at the lease rates specified in the lease from time to time for a term from Closing to June 1, 1995 and thereafter on a month-to-month basis (at HL's election) but in no event later than January 1, 1996. FFE will be leased at $110,826 per annum. Upon the termination of such sublease, AWG will pay HL for the Edmond inventory at a price to be calculated pursuant to the formula described in Section 6 below. b. The warehouse complexes and associated offices, (including all leases ("Warehouse Leases") and real estate owned relating thereto), including: (i) Grocery Warehouse Lease; (ii) Produce Warehouse Lease; (iii) Annex Lease; EXHIBIT A TO LETTER OF INTENT (iv) Repack/Variety Lease; (v) HL's Corporate Office Lease. (vi) Dairy and Ice Cream property and improvements held in fee; (vii) FFE relating to the foregoing, other than FFE relating to HL's corporate headquarters' ongoing operations; however, prior to finalizing the definitive agreement, as to FFE relating to HL's corporate headquarters' ongoing operations, the parties will analyze certain shared items involved and mutually agree on such items' inclusion or exclusion with the intent that HL will be able to retain or have access to all FFE necessary to continue its business operations; and (viii) Inventory in the warehouse(s); 3. AWG will pay to HL a Purchase Price of $45 million for the above Assets, other than inventory. 4. Inventory at the warehouses. a) AWG will purchase all good saleable inventory. b) The purchase price for the inventory (other than perishable inventory) will be calculated at HL's last System Cost, as further described in paragraph 4(d) below (acquisition cost), less certain off-invoice allowances and excluding cash discounts. c) Perishable inventory will be calculated at dead net cost, i.e., HL's book cost. d) HL will maintain costing until closing which is consistent with HL's past practice as set forth in HL's Listing of Warehouse Inventory dated September 20, 1994 heretofore provided to AWG ("System Cost"). 5. Open Purchase Orders AWG will assume HL's obligations under purchase orders for warehouse inventory which are open at the time of closing. 6. Inventory in the 29 stores a) AWG will purchase all good saleable inventory. b) The inventory will be identified by HL's categories. The purchase price for such inventory will be an amount equal to the calculation below: Cost of inventory at Retail X Inventory Factor. For purposes herein, the Inventory Factor is calculated as follows: (HL's Going-In Gross) + (W/T Expense/Realized Sales) = Inventory Factor. For purposes herein, HL's Going-In Gross is defined as the calculation described as "Percent Spread" on Exhibit B attached hereto. Warehouse Expenses, Transportation Expense and Realized Sales will be defined as set forth on Exhibit B. The W/T Expense is defined as the Warehouse Expenses, plus the Transportation expense. When calculating the Going-In Gross, the parties will use the average of the Going-In Gross from January 1, 1995 through Closing. c) The inventory relating to Pharmacy, which AWG is legally permitted to purchase, will be calculated at HL's acquisition cost. Any Pharmacy product with less than a three-month shelf life will either be returned to the supplier by HL; or if return is restricted, the purchase price for such inventory will be HL's acquisition cost times 50%. HL will also have the option to transfer such product with less than a three-month shelf life to another HL store. 7. Existing Contracts. (Subject to AWG review, AWG approval and required third party consents.) a) HL will provide AWG with a complete list of all existing supply, service and equipment and other contracts (excluding union contracts), as well as copies thereof to the extent requested by AWG. With respect to any equipment, service, supply or other contract, the parties shall enter into an undertaking whereby the burdens and benefits of such agreements are equitably apportioned between the parties. [AWG will not be responsible for or enter into undertakings in connection with any contracts relating to the 29 Stores (as described below) or HL's distribution center to which HL enters after the execution of the letter of intent, unless mutually agreed to otherwise by the parties.] b) For purposes hereof, it is agreed that contracts which affect all stores ("ASC") shall be subject to the following apportionments: (i) Except as set forth below, AWG will undertake to be responsible for 25% of the obligations set forth in each ASC, as such undertaking relates to the 29 stores listed on Exhibit A to the Outline ("29 Stores"). (ii) With respect to obligations, if any, to repay, buy back or otherwise compensate ("Repayment") the other party to an ASC due to a default (the parties will mutually agree upon what constitutes an appropriate level of default): A. If AWG's actions or omissions (or the actions or omissions of any AWG member or purchaser of any of the 29 Stores) trigger a Repayment, AWG shall be responsible for all of such Repayment. B. If the Repayment is triggered by any event not covered by subparagraphs A or C, AWG shall be responsible for 25% of the Repayment and HL shall be responsible for the remainder. C. If the Repayment is triggered by HL in connection with the 82 remaining stores and such trigger is not related to the 29 Stores sold to AWG, HL shall be responsible for all of such Repayment. (iii) With respect to obligations to deal exclusively, obligations to meet certain performance levels and promotional obligations under an ASC, AWG will cause its retail members or any purchasers which operate the 29 Stores to carry the required products and/or to otherwise comply with the required performance levels and promotional obligations and AWG will be responsible for any breach. (iv) Any benefits, monetary or otherwise, relating to the ASC contracts received by HL on an ongoing basis after Closing will be prorated in a manner consistent with the allocation of obligations as set forth above. c) With respect to any contracts exclusively relating to the warehouse (other than collective bargaining agreements), AWG will assume all such contracts. d) With respect to any contracts which exclusively relate to one or more of the 29 Stores or which any such Store is a party, AWG will cause the applicable retail member or purchaser of such Store(s) to assume such contract or enter into an agreement whereby such retailer agrees to be responsible for such liability and AWG will be responsible for any damages or liabilities resulting from any breach, non-performance or non-assumption. e) With respect to the Corrugated Service contract, AWG will assume the contract. f) The K-C Computer Services, Inc. ("K-CCS") contract will be handled in the following manner: (i) HL shall analyze its ongoing needs to operate the segment of its business which is not being sold to AWG at this time. HL shall advise AWG of its requirements for services under the K-CCS contract. (ii) AWG will undertake to satisfy and will be responsible for all obligations (including any payments) under the K-CCS contract which are above and beyond HL's ongoing requirements. g) The Drake Refrigerated Lines, Inc. ("Drake") contract relating to HL's fleet will be assumed by AWG. h) Both parties will cooperate to avoid and/or minimize Teamster pension withdrawal liability ("TPWL"). If any TPWL is triggered by any of the transactions contemplated hereby or otherwise subsequent to the Closing, AWG will reimburse HL for such TPWL up to $3,471,000. If HL and AWG agree to alternative arrangements for the avoidance of TPWL, AWG will reimburse HL the costs associated with such alternative arrangements, if any, up to $3,471,000. 8. Office Sharing. a) During a transition period while HL is relocating its headquarters and office space to service their remaining stores, AWG will lease space to HL (at zero rental cost) in the current HL Corporate Offices, which will be reconfigured to accommodate AWG's and HL's respective needs. b) The transition period will be the nine-month period after the Closing date. 9. HL will enter into a Supply Agreement with AWG and AWG will be HL's primary supplier. Subject to the provisions of paragraph 7 above and subparagraph 9(f) below, HL will agree to buy the products offered for sale in HL stores from AWG, which are available from AWG's warehouse from time to time, and AWG agrees to sell to HL products available from AWG's warehouse at the lowest prices and best terms available to other AWG retailer/members. HL shall have available to it all cost saving mechanisms available to other AWG members, including AWG's Concentrated Purchase Allowance Program ("CPA"). The schedule relating to AWG's current CPA program is attached as Exhibit "C". a. As consideration for the Supply Agreement, AWG will pay to HL an amount calculated as follows each AWG fiscal quarter for a period of seven (7) years: Quarterly Payment = Target Payment X Operative Fraction. (i) For purposes of the foregoing calculation, the Target Payment amounts shall be as set forth on the quarterly payment schedule ("QPS"), attached hereto as Exhibit "D" and the Operative Fraction shall be a function of the Purchase Percentage as set forth below. The Purchase Percentage shall be determined from a fraction the numerator of which is the actual purchases through AWG's warehouse by HL during the quarter in question and the denominator of which is $72,500,000 [$290,000,000/4]. The Operative Fraction to be utilized is reflected in the following table: If the Purchase The Operative Percentage is: Fraction shall be: 100 - 90.01% 100% 90 - 80.01% 90% 80 - 70.01% 80% 70 - 60.01% 70% 60 - 50.01% 60% 50 - 40.01% 50% 40 - 30.01% 40% 30% or below 0% (ii) For reference purposes, the QPS sets forth the dollar amounts of the Quarterly Payments associated with the foregoing; provided, however, the Quarterly Payments made for the first three quarters of any fiscal year during the term of the Supply Agreement shall be subject to a year-end adjustment such that the Purchase Percentage and the Operative Fraction shall be calculated as to HL's cumulative purchases at fiscal year-end. (iii) In the event that HL sells any of its remaining stores to one or more current or future AWG retail members, the purchases by such AWG retail member shall be credited to HL's benefit for purposes of the Operative Fraction and Purchase Percentage; provided, however, that the amount of such credit shall be equal to the purchases of each such sold store for the prior four fiscal quarters as an HL store. b. Failures to perform by either party under the terms of the Supply Agreement will be addressed in the definitive agreement. (i) Force Majeure will be addressed in the Supply Agreement, and such provision will address, among other things, if AWG does not or cannot supply HL due to force majeure-type events or the levels for out of stock products exceeds 10% in the aggregate subsequent to notice by HL and a reasonable time period thereafter, (all of which will be defined in the Supply Agreement), HL will be able to seek alternative suppliers until such condition is cured by AWG and such purchases shall be treated as purchases through AWG's warehouse for purposes of computing the Operative Fraction and Purchase Percentage. c. AWG will agree to supply HL with certain items, including, without limitation, cross docked merchandise, requested by HL on terms and conditions acceptable to both parties; provided, however, such items must meet reasonable minimum volume requirements. d. HL will provide the hard collateral required of AWG Members to secure the Open Account for HL to receive credit terms from AWG. [AWG has provided to HL credit options and associated collateral requirements from which HL may choose.] HL understands that such collateral is a condition precedent to AWG's consummation of this transaction. Any HL patronage with AWG will be acceptable hard collateral toward meeting the foregoing collateral requirements. HL is to provide a proforma opening balance sheet and profit and loss statement showing projections of HL's operation after the Closing. e. HL's obligation to purchase goods from AWG under the Supply Agreement and AWG's obligation to make required quarterly payments will be for 7 years. f. While it is the intent of the parties for AWG to be HL's primary supplier of products, Homeland will be permitted to purchase products from other suppliers from time to time and products commonly categorized as "DSD" items, such as soft drinks, milk and bread. g. For purposes of the Supply Agreement, purchases by HL through AWG's warehouse will include purchases that are billed or sold through AWG warehouses in connection with products which are carried in AWG's warehouses. For purposes herein, the word "carried" includes products upon which AWG is able to realize a gross margin in contrast to products which may be handled on its docks for a handling fee on a cost recovery basis. The Supply Agreement will detail various types of transactions, such as SOLOS and continuities, which qualify as "billed or sold". (Notwithstanding the foregoing, qualifying purchases for purposes of calculating year-end patronage shall be calculated pursuant to AWG's policy then in effect during the terms of the Supply Agreement.) h. The Supply Agreement will include all HL stores now owned or hereafter acquired or opened (excluding 29 Stores sold to AWG). i. HL will be given credit for unsalable products and pricing adjustments on best terms available to other AWG members or retailers, where applicable. j. AWG will pass-through promotional and advertising allowances and rebates from manufacturers and vendors to HL on the same basis as any other AWG member and as appropriate for HL's level of purchases. k. HL will receive seasonal, special promotions and advertising programs on the best terms available to other AWG members and as appropriate for HL's level of purchases. l. The quality relating to goods will be consistent with other wholesalers within market area. m. The activities of AWG will meet all applicable legal and regulatory requirements. n. AWG will provide to HL a service level commensurate with all other members. (i) AWG will make timely deliveries. o. AWG will make available to HL all information and reports which are available to other members at a cost, if any, equal to that charged to other members (Note: any such charge is based on a cost recovery for AWG.) p. HL to provide copies to AWG of all SEC filings and reports. q. The term of the Supply Agreement will be 7 years. r. The Supply Agreement will address the rights of either party upon material breach of agreement. s. The specific events of defaults will be addressed in the Supply Agreement. t. Remedies will be addressed in detail in the Supply Agreement and will address those matters described in paragraphs 9(v) and 9(w) below. u. AWG will provide HL evidence of products liability and comprehensive liability insurance. v. The Supply Agreement will provide that there will be no cross-defaults between the Supply Agreement and the Purchase Agreement. w. During the first two (2) years of the term of the Supply Agreement in the event there is a material breach of the right of first offer or non-compete provisions of the Supply Agreement by HL (or permitted successors), then AWG's obligations with respect to the Drake and K-CCS contracts will cease and HL will be liable for such obligations. Such a material breach of the Supply Agreement will not change the obligations of the parties with respect to any other existing contracts or other obligations described in paragraph 7 above and AWG's obligations in connection with such existing contracts or other obligations will continue notwithstanding such breach. In addition, breaches of the Supply Agreement other than such a material breach will not change the obligations of the parties with respect to any existing contracts or other obligations described in paragraph 7 above and AWG's obligations in connection with such existing contracts or other obligations will continue notwithstanding such breaches. If following a material breach of the right of first offer or non-compete provisions of the Supply Agreement terminating AWG's obligations with respect to the Drake and K-CCS contracts, AWG brings suit against HL for damages resulting from such breach, AWG will not seek and will not be entitled to receive damages in respect of any liabilities under such contracts originally assumed by AWG but for which AWG's responsibility has terminated. 10. This provision is subject to approval by AWG's Board of Directors. HL will grant a Right of First Offer to AWG on the remaining 67 stores. In the event HL decides to sell any store, HL must give notice to AWG of any desired sale (which notice would include the desired sales price and the general terms). AWG would have 45 days to accept the offer of sale described in such notice and to enter into a definitive sale agreement. AWG and HL would negotiate in good faith to enter into a definitive sale agreement. If AWG does not accept the offer of sale described in such notice and enter into such sale agreement within such forty-five day period, HL may sell such store to any other party for a price that is not less than 90% of the proposed sales price, and on other general terms that are not more favorable in the aggregate than the terms contained in the notice described above. Sales to "affiliates" shall not be subject to the foregoing; provided, however, (i) affiliates shall include only entities which are wholly owned by HL or Homeland Holding Corporation; (ii) the affiliate must agree in writing prior to such sale to use AWG as the affiliate's wholesale supplier in accordance with the terms of the Supply Agreement between the parties, (iii) the affiliate must agree in writing that any subsequent sale by such affiliate is subject to the foregoing Right of First Offer, (iv) such sale to an affiliate shall not be an event of default under any of HL's then outstanding loans, indebtedness or other material contracts, and (v) such transfer shall not result in the insolvency of either HL or the affiliate. 11. HL will become a member/retailer of AWG. a. Purchase 15 shares of AWG Class A Voting Stock at $1,055 per share. 12. Summary - AWG will pay to HL a Purchase Price of: a. $45 Million for the Assets listed in paragraph 2; b. Plus, the amount calculated pursuant to paragraph 4 above for inventory in the warehouses; c. Plus, the amount calculated pursuant to paragraph 6 above, for inventory in 28 of the 29 Stores and the Edmond store upon termination of the lease thereof; d. Plus, assume liability under the Store Leases; e. Plus, assume liability under the Warehouse Leases; and f. Plus, the undertakings and liabilities described in connection with the contracts and other obligations in paragraph 7. The foregoing is subject to further discussions, normal documentation, due diligence and definition of terms. p:\wp50\docs\acquisit\homeland\docs\ts29 11/23/94 STORES TO BE PURCHASED BY AWG
Homeland Store # Address City State Status 1. 64 220 E. 13th Street Ada OK Leased 2. 104 4439 N.W. 50th Oklahoma City OK Leased 3. 130 702 First Perry OK Leased 4. 134 409 W. Main Watonga OK Owned 5. 144 1205 E. Lindsey Norman OK Leased 6. 147 5324 Cache Road Lawton OK Leased 7. 168 310 S. Main Blackwell OK Leased 8. 171 616 N. Summit Arkansas City KS Leased 9. 172 1116 N. Main Altus OK Leased 10. 185 1648 S.W. 89th Oklahoma City OK Leased 11. 194 616 N.W. Sheridan Lawton OK Leased 12. 198 4510 Lee Blvd.,S.E. Lawton OK Leased 13. 199 600 W. Independence Shawnee OK Owned 14. 487 1424 S. Yale Tulsa OK Owned 15. 491 105 N. Scraper Vinita OK Leased 16. 504 420 E. 8th Okmulgee OK Leased 17. 506 305 S. Broadway Cleveland OK Owned 18. 508 1530 S. Lewis Tulsa OK Leased 19. 516 316 E. Main Pawhuska OK Leased 20. 524 814 E. Cherokee Sallisaw OK Leased 21. 530 1000 Hall Street Coffeyville KS Leased 22. 531 416 W. Myrtle Independence KS Owned 23. 532 108 S. Division Okemah OK Leased 24. 535 2110 Broadway Parsons KS Leased 25. 537 601 E. Wyandotte McAlester OK Leased 26. 544 1500 S.E. Washington Idabel OK Owned 27. 555 332 N. Lynn Riggs Claremore OK Leased 28. 562 800 E. Okmulgee Muskogee OK Leased 29. 777 198 E. 33rd Edmond OK Leased
p:\wp50\docs\acquisit\homeland\stores.lst\29stores.920 EXHIBIT A TO NOTES OF CONVERSATION Exhibit B to Outline Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994
GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY 0064 0064 0104 0104 0130 0130 Beg. inventory & purchases at retail 582,376 277,089 528,739 239,799 446,733 150,092 Beg. inventory & purchases at cost 413,587 187,498 382,691 162,660 315,244 102,880 ---------------------------------------------------------------- Percent spread 71.02% 67.67% 72.38% 67.83% 70.57% 68.54% Beg. inventory & purchases at retail 582,376 277,089 528,739 239,799 446,733 150,092 Less: Realized sales 236,927 34,227 184,515 28,886 205,382 24,705 Markdowns 19,072 2,187 12,821 1,949 14,019 1,730 Inventory overage (shortage) 0 0 2,545 0 0 0 ---------------------------------------------------------------- Ending inventory at retail 326,377 240,675 328,858 208,964 227,332 123,657 Percent spread 71.02% 67.67% 72.38% 67.83% 70.57% 68.54% ---------------------------------------------------------------- Ending inventory at cost 231,784 162,858 238,021 141,744 160,420 84,760 Realized sales 236,927 34,227 184,515 28,886 205,382 24,705 Beg. inventory & purchases at cost (413,587) (187,498)(382,691)(162,660)(315,244)(102,880) Ending inventory at cost 231,784 162,858 238,021 141,744 160,420 84,760 ---------------------------------------------------------------- 824 gross profit 55,124 9,587 39,845 7,970 50,558 6,585 824 gross profit % 23.27% 28.01% 21.59% 27.59% 24.62% 26.66% Adjustments: Retail allowances 6,249 1,182 4,732 995 4,659 764 Warehouse inv. over/short 68 6 26 5 55 5 Warehouse gains/losses 2,810 250 2,539 200 2,804 201 ---------------------------------------------------------------- Realized gross before W&T 64,250 11,025 47,142 9,169 58,076 7,555 Realized gross % before W&T 27.12% 32.21% 25.55% 31.74% 28.28% 30.58% Warehouse expense (4,324) (765) (2,884) (646) (4,185) (616) Transportation expense (2,019) (116) (897) (61) (2,029) (88) ---------------------------------------------------------------- Realized gross after W&T 57,908 10,144 43,361 8,463 51,863 6,851 ================================================================ Realized gross % after W&T 24.44% 29.64% 23.50% 29.30% 25.25% 27.73% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY 0134 0134 0144 0144 0147 0147 Beg. inventory & purchases at retail 571,450 238,424 794,278 305,294 675,426 263,981 Beg. inventory & purchases at cost 410,143 161,735 578,635 208,022 491,421 177,153 ----------------------------------------------------------------- Percent spread 71.77% 67.83% 72.85% 68.14% 72.76% 67.11% Beg. inventory & purchases at retail 571,450 238,424 794,278 305,294 675,426 263,981 Less: Realized sales 232,272 38,076 370,180 59,611 264,912 39,044 Markdowns 15,407 3,084 19,098 2,953 17,120 1,966 Inventory overage (shortage) (23,849) (14,957) 0 1,665 0 5,587 ----------------------------------------------------------------- Ending inventory at retail 347,620 212,221 405,000 241,065 393,394 217,384 Percent spread 71.77% 67.83% 72.85% 68.14% 72.76% 67.11% ----------------------------------------------------------------- Ending inventory at cost 249,495 143,960 295,044 164,258 286,222 145,883 Realized sales 232,272 38,076 370,180 59,611 264,912 39,044 Beg. inventory & purchases at cost (410,143) (161,735)(578,635) (208,022)(491,421)(177,153) Ending inventory at cost 249,495 143,960 295,044 164,258 286,222 145,883 ----------------------------------------------------------------- 824 gross profit 71,624 20,301 86,589 15,846 59,714 7,773 824 gross profit % 30.84% 53.32% 23.39% 26.58% 22.54% 19.91% Adjustments: Retail allowances 5,610 1,292 9,202 1,940 6,852 1,287 Warehouse inv. over/short 60 7 88 9 65 7 Warehouse gains/losses 2,929 263 4,866 389 3,541 232 ----------------------------------------------------------------- Realized gross before W&T 80,223 21,862 100,745 18,184 70,171 9,299 Realized gross % before W&T 34.54% 57.42% 27.22% 30.50% 26.49% 23.82% Warehouse expense (4,262) (790) (6,669) (1,279) (4,601) (685) Transportation expense (1,656) (89) (1,224) (74) (2,339) (104) ------------------------------------------------------------------ Realized gross after W&T 74,305 20,984 92,851 16,831 63,231 8,510 ================================================================== Realized gross % after W&T 31.99% 55.11% 25.08% 28.24% 23.87% 21.80% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 GROCERY VARIETY GROCERY GROCERY VARIETY GROCERY 0168 0168 0171 0172 0172 0185 Beg. inventory & purchases at retail 527,713 238,658 885,649 726,063 295,270 739,092 Beg. inventory & purchases at cost 382,015 163,269 635,303 526,786 198,795 535,056 ----------------------------------------------------------------- Percent spread 72.39% 68.41% 71.73% 72.55% 67.33% 72.39% Beg. inventory & purchases at retail 527,713 238,658 885,649 726,063 295,270 739,092 Less: Realized sales 219,342 22,365 201,299 270,976 36,219 298,154 Markdowns 17,847 2,977 21,566 23,614 2,305 25,318 Inventory overage (shortage) 0 2,834 1,952 6,559 34,798 0 ----------------------------------------------------------------- Ending inventory at retail 290,524 210,482 660,832 424,914 221,948 415,620 Percent spread 72.39% 68.41% 71.73% 72.55% 67.33% 72.39% ----------------------------------------------------------------- Ending inventory at cost 210,312 143,994 474,035 308,291 149,430 300,883 Realized sales 219,342 22,365 201,299 270,976 36,219 298,154 Beg. inventory & purchases at cost (382,015) (163,269)(635,303)(526,786)(198,795)(535,056) Ending inventory at cost 210,312 143,994 474,035 308,291 149,430 300,883 ----------------------------------------------------------------- 824 gross profit 47,639 3,089 40,031 52,481 (13,146) 63,981 824 gross profit % 21.72% 13.81% 19.89% 19.37% -36.30% 21.46% Adjustments: Retail allowances 5,037 850 5,501 6,803 1,237 7,558 Warehouse inv. over/short 63 5 48 72 8 78 Warehouse gains/losses 2,805 184 2,695 3,854 270 4,127 ----------------------------------------------------------------- Realized gross before W&T 55,545 4,129 48,275 63,211 (11,631) 75,743 Realized gross % before W&T 25.32% 18.46% 23.98% 23.33% -32.11% 25.40% Warehouse expense (4,298) (559) (4,348) (5,544) (810) (5,024) Transportation expense (1,755) (80) (2,574) (3,403) (156) (1,230) ------------------------------------------------------------------ Realized gross after W&T 49,492 3,490 41,353 54,264 (12,597) 69,489 ================================================================== Realized gross % after W&T 22.56% 15.60% 20.54% 20.03% -34.78% 23.31% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY 0185 0194 0194 0198 0198 0199 Beg. inventory & purchases at retail 395,693 860,337 332,984 650,736 314,475 838,584 Beg. inventory & purchases at cost 268,549 620,003 223,429 469,990 211,238 606,491 ----------------------------------------------------------------- Percent spread 67.87% 72.07% 67.10% 72.22% 67.17% 72.32% Beg. inventory & purchases at retail 395,693 860,337 332,984 650,736 314,475 838,584 Less: Realized sales 53,607 349,677 48,862 285,156 42,751 374,077 Markdowns 4,565 24,173 3,159 17,348 1,668 29,436 Inventory overage (shortage) 2,420 0 4,478 0 0 0 ----------------------------------------------------------------- Ending inventory at retail 335,101 486,487 276,485 348,232 270,056 435,071 Percent spread 67.87% 72.07% 67.10% 72.22% 67.17% 72.32% ----------------------------------------------------------------- Ending inventory at cost 227,427 350,588 185,519 251,509 181,401 314,657 Realized sales 53,607 349,677 48,862 285,156 42,751 374,077 Beg. inventory & purchases at cost (268,549) (620,003) (223,429) (469,990)(211,238)(606,491) Ending inventory at cost 227,427 350,588 185,519 251,509 181,401 314,657 ----------------------------------------------------------------- 824 gross profit 12,484 80,261 10,952 66,674 12,914 82,243 824 gross profit % 23.29% 22.95% 22.41% 23.38% 30.21% 21.99% Adjustments: Retail allowances 1,898 8,548 1,669 7,344 1,548 9,360 Warehouse inv. over/short 10 104 10 70 8 115 Warehouse gains/losses 375 4,517 334 3,498 279 4,962 ----------------------------------------------------------------- Realized gross before W&T 14,767 93,431 12,965 77,586 14,749 96,680 Realized gross % before W&T 27.55% 26.72% 26.53% 27.21% 34.50% 25.85% Warehouse expense (1,189) (6,431) (1,128) (5,374) (884) (6,893) Transportation expense (87) (2,422) (134) (2,434) (121) (1,151) ------------------------------------------------------------------ Realized gross after W&T 13,492 84,578 11,703 69,777 13,744 88,637 ================================================================== Realized gross % after W&T 25.17% 24.19% 23.95% 24.47% 32.15% 23.69% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY 0199 0487 0487 0491 0491 0504 Beg. inventory & purchases at retail 369,713 609,644 246,266 423,536 162,951 557,976 Beg. inventory & purchases at cost 255,000 438,523 165,478 303,926 110,231 404,574 ----------------------------------------------------------------- Percent spread 68.97% 71.93% 67.19% 71.76% 67.65% 72.51% Beg. inventory & purchases at retail 369,713 609,644 246,266 423,536 162,951 557,976 Less: Realized sales 53,653 274,701 34,333 145,913 17,904 161,267 Markdowns 3,614 17,323 1,986 11,893 2,953 14,979 Inventory overage (shortage) 883 149 1,007 0 0 (16,891) ----------------------------------------------------------------- Ending inventory at retail 311,563 317,471 208,940 265,730 142,094 398,621 Percent spread 68.97% 71.93% 67.19% 71.76% 67.65% 72.51% ----------------------------------------------------------------- Ending inventory at cost 214,893 228,360 140,397 190,686 96,122 289,030 Realized sales 53,653 274,701 34,333 145,913 17,904 161,267 Beg. inventory & purchases at cost (255,000) (438,523) (165,478)(303,926)(110,231)(404,574) Ending inventory at cost 214,893 228,360 140,397 190,686 96,122 289,030 ----------------------------------------------------------------- 824 gross profit 13,546 64,538 9,252 32,673 3,795 45,723 824 gross profit % 25.25% 23.49% 26.95% 22.39% 21.20% 28.35% Adjustments: Retail allowances 1,787 6,699 1,061 3,250 554 3,557 Warehouse inv. over/short 9 73 6 36 4 48 Warehouse gains/losses 352 3,799 269 2,012 153 2,078 ----------------------------------------------------------------- Realized gross before W&T 15,693 75,109 10,589 37,970 4,505 51,406 Realized gross % before W&T 29.25% 27.34% 30.84% 26.02% 25.16% 31.88% Warehouse expense (1,161) (5,250) (931) (3,102) (455) (3,358) Transportation expense (61) (2,653) (140) (2,432) (127) (2,253) ------------------------------------------------------------------ Realized gross after W&T 14,472 67,206 9,517 32,436 3,923 45,795 ================================================================== Realized gross % after W&T 26.97% 24.47% 27.72% 22.23% 21.91% 28.40% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 VARIETY GROCERY VARIETY GROCERY VARIETY GROCERY 0504 0506 0506 0508 0508 0516 Beg. inventory & purchases at retail 459,635 517,492 185,695 650,633 247,248 662,212 Beg. inventory & purchases at cost 298,953 366,691 127,444 466,620 165,293 468,820 ----------------------------------------------------------------- Percent spread 65.04% 70.86% 68.63% 71.72% 66.85% 70.80% Beg. inventory & purchases at retail 459,635 517,492 185,695 650,633 247,248 662,212 Less: Realized sales 33,827 236,535 20,449 297,395 43,247 189,545 Markdowns 1,760 15,697 2,628 16,810 2,764 14,054 Inventory overage (shortage) 27,390 (4,272) 5,837 0 0 155 ----------------------------------------------------------------- Ending inventory at retail 396,658 269,532 156,781 336,428 201,237 458,458 Percent spread 65.04% 70.86% 68.63% 71.72% 66.85% 70.80% ----------------------------------------------------------------- Ending inventory at cost 257,992 190,988 107,600 241,279 134,534 324,570 Realized sales 33,827 236,535 20,449 297,395 43,247 189,545 Beg. inventory & purchases at cost (298,953) (366,691)(127,444) (466,620)(165,293)(468,820) Ending inventory at cost 257,992 190,988 107,600 241,279 134,534 324,570 ----------------------------------------------------------------- 824 gross profit (7,134) 60,833 605 72,054 12,487 45,295 824 gross profit % -21.09% 25.72% 2.96% 24.23% 28.87% 23.90% Adjustments: Retail allowances 1,249 4,974 760 6,545 1,412 4,033 Warehouse inv. over/short 8 71 6 68 7 53 Warehouse gains/losses 233 3,666 201 4,006 305 2,582 ----------------------------------------------------------------- Realized gross before W&T (5,644) 69,544 1,572 82,673 14,211 51,963 Realized gross % before W&T -16.68% 29.40% 7.69% 27.80% 32.86% 27.41% Warehouse expense (550) (4,815) (489) (5,366) (958) (4,329) Transportation expense (142) (2,383) (88) (2,594) (130) (2,542) ------------------------------------------------------------------ Realized gross after W&T (6,336) 62,345 996 74,713 13,123 45,093 ================================================================== Realized gross % after W&T -18.73% 26.36% 4.87% 25.12% 30.34% 23.79% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 GROCERY VARIETY GROCERY VARIETY GROCERY VARIETY 0524 0524 0530 0530 0531 0531 Beg. inventory & purchases at retail 525,425 176,399 650,031 401,722 750,062 424,764 Beg. inventory & purchases at cost 378,750 119,809 467,015 262,767 539,213 280,564 ----------------------------------------------------------------- Percent spread 72.08% 67.92% 71.85% 65.41% 71.89% 66.05% Beg. inventory & purchases at retail 525,425 176,399 650,031 401,722 750,062 424,764 Less: Realized sales 156,520 16,932 257,350 37,098 284,574 53,462 Markdowns 17,152 3,020 18,536 3,454 19,118 2,939 Inventory overage (shortage) 0 636 0 2,797 0 0 ----------------------------------------------------------------- Ending inventory at retail 351,753 155,811 374,145 358,373 446,370 368,363 Percent spread 72.08% 67.92% 71.85% 65.41% 71.89% 66.05% ----------------------------------------------------------------- Ending inventory at cost 253,559 105,826 268,805 234,412 320,892 243,310 Realized sales 156,520 16,932 257,350 37,098 284,574 53,462 Beg. inventory & purchases at cost (378,750) (119,809)(467,015)(262,767)(539,213)(280,564) Ending inventory at cost 253,559 105,826 268,805 234,412 320,892 243,310 ----------------------------------------------------------------- 824 gross profit 31,330 2,949 59,139 8,743 66,252 16,208 824 gross profit % 20.02% 17.42% 22.98% 23.57% 23.28% 30.32% Adjustments: Retail allowances 3,733 523 6,495 1,303 6,494 1,829 Warehouse inv. over/short 46 5 76 8 87 11 Warehouse gains/losses 2,084 183 3,325 268 3,659 367 ----------------------------------------------------------------- Realized gross before W&T 37,192 3,660 69,035 10,323 76,492 18,415 Realized gross % before W&T 23.76% 21.62% 26.83% 27.83% 26.88% 34.45% Warehouse expense (3,416) (565) (4,740) (639) (5,323) (913) Transportation expense (2,310) (123) (3,398) (177) (3,628) (231) ------------------------------------------------------------------ Realized gross after W&T 31,467 2,973 60,897 9,507 67,541 17,271 ================================================================== Realized gross % after W&T 20.10% 17.56% 23.66% 25.63% 23.73% 32.31% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 GROCERY GROCERY VARIETY GROCERY VARIETY GROCERY 0532 0535 0535 0537 0537 0544 Beg. inventory & purchases at retail 766,212 637,123 352,880 741,565 485,086 750,261 Beg. inventory & purchases at cost 540,915 457,149 225,042 538,981 316,426 542,622 ----------------------------------------------------------------- Percent spread 70.60% 71.75% 63.77% 72.68% 65.23% 72.32% Beg. inventory & purchases at retail 766,212 637,123 352,880 741,565 485,086 750,261 Less: Realized sales 204,297 282,071 40,849 280,376 65,754 354,621 Markdowns 21,463 20,396 2,584 23,043 5,237 29,999 Inventory overage (shortage) 17,300 0 558 0 4,081 4,429 ----------------------------------------------------------------- Ending inventory at retail 523,152 334,656 308,889 438,146 410,014 361,212 Percent spread 70.60% 71.75% 63.77% 72.68% 65.23% 72.32% ----------------------------------------------------------------- Ending inventory at cost 369,325 240,122 196,988 318,451 267,456 261,245 Realized sales 204,297 282,071 40,849 280,376 65,754 354,621 Beg. inventory & purchases at cost (540,915) (457,149)(225,042)(538,981)(316,426)(542,622) Ending inventory at cost 369,325 240,122 196,988 318,451 267,456 261,245 ----------------------------------------------------------------- 824 gross profit 32,706 65,045 12,795 59,846 16,784 73,243 824 gross profit % 16.01% 23.06% 31.32% 21.35% 25.53% 20.65% Adjustments: Retail allowances 4,694 6,426 1,234 6,640 2,157 8,097 Warehouse inv. over/short 67 76 8 89 11 118 Warehouse gains/losses 2,718 3,409 301 3,711 436 4,912 ----------------------------------------------------------------- Realized gross before W&T 40,185 74,957 14,338 70,286 19,387 86,371 Realized gross % before W&T 19.67% 26.57% 35.10% 25.07% 29.48% 24.36% Warehouse expense (4,614) (5,059) (733) (5,860) (1,424) (7,479) Transportation expense (1,380) (3,712) (199) (3,611) (270) (4,259) ------------------------------------------------------------------ Realized gross after W&T 34,191 66,185 13,407 60,815 17,693 74,632 ================================================================== Realized gross % after W&T 16.74% 23.46% 32.82% 21.69% 26.91% 21.05% ================================================================== Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 VARIETY GROCERY VARIETY GROCERY VARIETY 0544 0555 0555 0562 0562 Beg. inventory & purchases at retail 360,533 797,460 451,901 1,006,563 521,342 Beg. inventory & purchases at cost 246,676 581,475 300,307 725,827 337,872 ---------------------------------------------------------------- Percent spread 68.42% 72.92% 66.45% 72.11% 64.81% Beg. inventory & purchases at retail 360,533 797,460 451,901 1,006,563 521,342 Less: Realized sales 32,094 331,524 55,160 424,114 79,202 Markdowns 3,723 32,536 4,879 31,743 3,704 Inventory overage (shortage) 0 0 3,339 0 814 ---------------------------------------------------------------- Ending inventory at retail 324,716 433,400 388,523 550,706 437,622 Percent spread 68.42% 72.92% 66.45% 72.11% 64.81% ---------------------------------------------------------------- Ending inventory at cost 222,170 316,017 258,190 397,111 283,614 Realized sales 32,094 331,524 55,160 424,114 79,202 Beg. inventory & purchases at cost (246,676) (581,475)(300,307)(725,827) (337,872) Ending inventory at cost 222,170 316,017 258,190 397,111 283,614 ---------------------------------------------------------------- 824 gross profit 7,588 66,067 13,043 95,398 24,945 824 gross profit % 23.64% 19.93% 23.65% 22.49% 31.50% Adjustments: Retail allowances 1,124 7,251 1,935 9,473 2,757 Warehouse inv. over/short 8 98 10 132 12 Warehouse gains/losses 272 4,458 406 5,814 480 ---------------------------------------------------------------- Realized gross before W&T 8,992 77,873 15,394 110,816 28,194 Realized gross % before W&T 28.02% 23.49% 27.91% 26.13% 35.60% Warehouse expense (933) (6,093) (1,160) (8,595) (1,421) Transportation expense (157) (3,681) (217) (4,585) (237) ---------------------------------------------------------------- Realized gross after W&T 7,902 68,099 14,017 97,636 26,536 ================================================================ Realized gross % after W&T 24.62% 20.54% 25.41% 23.02% 33.50% ================================================================= Homeland Stores, Inc. Analysis of 824 Gross Profit to Realized Gross Profit For the 4 weeks ended September 10, 1994 GROCERY VARIETY 0777 0777 Beg. inventory & purchases at retail 1,326,977 815,978 Beg. inventory & purchases at cost 950,572 547,726 ----------------------------- Percent spread 71.63% 67.13% Beg. inventory & purchases at retail 1,326,977 815,978 Less: Realized sales 728,399 133,905 Markdowns 40,988 7,381 Inventory overage (shortage) 0 (2,198) ----------------------------- Ending inventory at retail 557,590 676,890 Percent spread 71.63% 67.13% ----------------------------- Ending inventory at cost 399,426 454,363 Realized sales 728,399 133,905 Beg. inventory & purchases at cost (950,572) (547,726) Ending inventory at cost 399,426 454,363 ----------------------------- 824 gross profit 177,253 40,542 824 gross profit % 24.33% 30.28% Adjustments: Retail allowances 17,087 4,573 Warehouse inv. over/short 189 15 Warehouse gains/losses 9,997 695 ----------------------------- Realized gross before W&T 204,527 45,825 Realized gross % before W&T 28.08% 34.22% Warehouse expense (12,003) (2,589) Transportation expense (1,628) (99) ----------------------------- Realized gross after W&T 190,895 43,137 ============================= Realized gross % after W&T 26.21% 32.21% ============================= /TABLE EXHIBIT C TO OUTLINE ASSOCIATED WHOLESALE GROCERS, INC. CONCENTRATED PURCHASE ALLOWANCE TABLE 1994 ANNUAL PURCHASES WEEKLY PURCHASES DISCOUNT RATE $2,812,253.00 $53,061.37 .100% $4,218,379.00 $79,592.05 .150% $5,624,506.00 $106,122.75 .200% $8,436,759.00 $159,184.13 .225% $11,249,012.00 $212,245.50 .250% $16,873,518.00 $318,368.26 .275% $22,498,024.00 $424,491.01 .300% $33,747,036.00 $636,736.52 .325% $44,996,047.00 $848,982.01 .350% $56,245,059.00 $1,061,227.52 .375% $67,494,071.00 $1,273,473.03 .400% $89,992,095.00 $1,697,964.05 .450% $112,490,119.00 $2,122,455.07 .500% $134,988,142.00 $2,546,946.07 .550% $157,486,166.00 $2,971,437.09 .600% $179,984,190.00 $3,395,928.11 .650% $202,482,213.00 $3,820,419.11 .700% $224,980,237.00 $4,244,910.13 .750% - - - Concentrated Purchase Allowance (CPA) will be paid quarterly by check. - - - CPA will be calculated quarterly, annualized and adjusted each quarter to reflect the qualifying volume bracket. - - - The CPA brackets will be indexed to the Consumer Price Index and adjusted annually. - - - Annual purchases will be based on qualifying sales by equity group and will be calculated in the same manner as year-end rebate. EXHIBIT D TO OUTLINE SUPPLY AGREEMENT QUARTERLY PAYMENT SCHEDULE
% MINIMUM 90.01% 80.01% 70.01% 60.01% 50.01% 40.01% 30.01% % MAXIMUM 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% ----------------------------------------------------------------------------------------------------- @ 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% ----------------------------------------------------------------------------------------------------- MINIMUM $261,000,029 $232,029,000 $203,029,000 $174,029,000 $145,029,000 $116,029,000 $87,029,000 MAXIMUM $290,000,000 $261,000,029 $232,029,000 $203,029,000 $174,029,000 $145,029,000 $116,029,000 1 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 2 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 3 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 4 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 5 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 6 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 7 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 8 $1,322,170.38 $1,189,953.34 $1,057,736.30 $925,519.27 $793,302.23 $661,085.19 $528,868.15 9 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 10 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 11 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 12 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 13 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 14 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 15 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 16 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 17 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 18 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 19 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 20 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 21 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 22 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 23 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 24 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 25 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 26 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 27 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 28 $1,165,251.25 $1,048,726.13 $932,201.00 $815,675.88 $699,150.75 $582,625.62 $466,100.50 $33,882,388.04 $30,494,149.24 $27,105,910.43 $23,717,671.63 $20,329,432.82 $16,941,194.02 $13,552,955.22 EXHIBIT B TO LETTER OF INTENT Initial documents and/or schedules to be provided to Associated Wholesale Grocers, Inc. (AWG) by Homeland Stores, Inc. (Homeland) relating to the Assets: 1. Schedules detailing all Assets owned by Homeland which are to be transferred to AWG at the date of the Closing. 2. Schedule of all lawsuits and/or threatened claims relating to the Assets to which Homeland is a party. 3. Schedule of insurance policies relating to all real property, leasehold interests and Assets. 4. Complete copies of all material contracts relating to the Assets, including without limitation: a. non-compete agreements b. franchise and/or license agreements c. computer software and hardware licenses, leases and/or agreements d. management and employment contracts e. professional service agreements f. supply agreements g. equipment leases h. union contracts i. employment agreements or other agreements pertaining to employees or managers relating to the Assets j. fleet leases 5. Schedule of all taxes (other than income), including property and sales, which are due and payable or which are to become due and payable for the current fiscal year. 6. Schedule of all salable inventory owned in connection with the Assets. 7. Schedule of all equipment, furniture, fixtures, furnishings, trade fixtures, fleet, machinery, computers, and all other equipment and used in connection with the Assets. 8. Schedule of all trade names and service marks used in connection with the Assets. 9. Schedule of all leases relating to the Assets, in addition to the following documents on each lease: a. Complete, true and correct copies of each lease. b. Location. c. Current purpose and use by Homeland. d. All amendments, modifications, guarantees, exhibits and schedules. e. All site plans relating to the location, if any. f. All title commitments or title policies relating to the location, if any. g. All surveys, if any. h. All subordination, non-disturbance, attornment and estoppel certificates, assignments, consents to assignments, or other agreements executed by Homeland or its predecessors-in-interest relating to each lease. i. Environmental audits, if any. j. Legal description. k. All plans and specifications, if any. l. All construction contracts or work orders pertaining to any work currently being or to be performed on the leasehold interests. 10. Schedule of owned real estate relating to or included in the Assets, in addition to the following on each property: a. Location. b. Legal Description. c. Current purpose and use by Homeland. d. The purchase and sales agreement and all amendments thereto relating to the acquisition of the property and all other agreements relating to the property. e. The most recent title policy and a copy of all exception documents, if any. f. All surveys, if any. g. All plans and specifications, if improved property, if any. h. All soils and substrata tests performed and results, engineering plans and studies, if any. i. All environmental audits, if any. j. Copies of all easements and encumbrances, if not included in 10.d above. k. Evidence, if any, of utilities available to the site. l. Evidence, if any, from city or municipality that there are no current violations of ordinances, rules and regulations. m. Evidence, if any, of proper zoning. n. Photographs of the property, if any. o. Copies of all building and maintenance contracts and warranties. p. Copies of the certificates of occupancy. q. All construction contracts or work orders pertaining to any work currently being or to be performed on the property. r. Copy of Warranty Deed conveying property to Homeland. 11. Latest UCC search on all Assets, including, real estate, leasehold interests, inventory and equipments, if any. 12. Summary of all equipment warranties of manufacturers and/or vendors relating to the Assets. 13. Certified Copy of Articles of Incorporation, Bylaws, Certificate of Good Standing of Homeland Stores, Inc. and Homeland Holding Corporation. 14. Copy of most recent audited financial statements of Homeland along with the following: a. P & L on each store to be purchased by AWG. b. P & L on distribution center. c. Schedule of the book value of all Assets, including date of purchase, original cost and depreciation taken to date. d. All audited work papers relating to the Assets. 15. Any and all other documents in Homeland's possession or control, or otherwise, relating to the proposed acquisition, reasonably determined by AWG or its external advisers to be necessary to review. p:\wp50\docs\acquisit\homeland\letterof.int\exh-b.new 11/10/94 cap/cm
EX-2 3 Exhibit 99a For Immediate Release For: Homeland Stores, Inc. Contact: Robert Mead (405) 557-5549 (212) 484-6701 HOMELAND REACHED TENTATIVE AGREEMENT TO SELL 29 STORES AND WAREHOUSE OPERATIONS TO ASSOCIATED WHOLESALE GROCERS, KANSAS CITY --------------- Homeland to Join Wholesale Cooperative --------------- James A. Demme Named President and CEO OKLAHOMA CITY, OK, November 30, 1994---Homeland Stores, Inc. today announced that it has reached an Agreement in Principle to sell 29 of its stores and its warehouse complex to Associated Wholesale Grocers, Kansas City ("AWG") -- a major retail-owned buying cooperative with [735] member stores in a nine state region. As part of the agreement, Homeland will enter into a seven-year supply agreement with AWG for its remaining stores that provides Homeland the lowest prices and best possible terms available through the AWG system on the purchase of products and services. Also under the agreement, which is scheduled to close during the second quarter of 1995, AWG will pay Homeland $45 million plus value of inventory in the warehouse and 29 stores. Homeland expects that proceeds from the sale would be used to improve the Company's financial position by paying down the Company's trade payables and other liabilities and reducing its outstanding indebtedness. Homeland officials said that the Agreement in Principle was an essential first step in the Company's effort to complete an operational restructuring that will allow the Company to reduce its debt burden and fixed operating costs and improve its performance. Homeland's performance in recent years has been under pressure as a result of difficult economic conditions and the entry of aggressive competition into its key markets. (more) "The recent influx of large national competitors into Oklahoma and surrounding markets has hurt independents and regional chains like Homeland," said Chuck Ames, Chairman of Homeland. "We believe a strategic partnership with AWG will benefit Homeland by allowing us to increase our buying power, reduce both our debt and fixed operating costs and focus our operations on a core of profitable stores." The Company also announced that as part of the restructuring, Max Raydon has resigned as President and Chief Executive Officer. "With this Agreement we have taken a major step towards implementing an operational restructuring that will improve Homeland's ability to compete, and I feel it is time for me to pursue other opportunities," said Raydon. The Company announced that James A. Demme has been appointed President and Chief Executive Officer effective immediately and that Raydon will serve as a consultant to the Company to assist with the transition. "Jim Demme brings senior management experience in both retail and wholesale to Homeland. That experience will be key to the success of our transformation from an independent regional chain to a member of the AWG wholesale cooperative," said Ames. Demme has 35 years experience in the wholesale/retail food industry, most recently as Executive Vice-President of Retail Operations for Scrivner, Inc. Prior to its recent acquisition by Fleming Companies, Inc., Scrivner was the third largest wholesale food distribution company in the nation with sales in excess of $6 billion. Previously, Demme also held the positions of President and Chief Operating Officer at Shaws Supermarkets, a large retail chain based in Massachusetts with sales of more than $1.7 billion. "I'm looking forward to working with the management and employees of Homeland to revitalize the Company. The Homeland name has strong consumer appeal in this market, and the restructuring will give us more balance and consistency in store size and `look' in our core stores -- allowing us to improve in consistency of marketing strategy and consumer offering," Demme said. AWG is the fifth largest wholesale distributor in the country with more than $2.5 billion in revenues and buying power six times greater than Homeland. AWG has 735 independent retail stores as members of its supply cooperative. The acquisition of 29 Homeland stores and Homeland's joining of the AWG cooperative will bring that total to 846. With 111 stores, Homeland is the leading supermarket chain in Oklahoma, southern Kansas and the Texas Panhandle region with an estimated overall market share of 27 percent. -2- EX-3 4 Exhibit 99b Financial Information The unaudited summary financial data set forth below should be read in conjunction with the Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Quarterly Report on Form 10-Q for the period ended September 10, 1994 of Holding. The projected 1994 financial information represents actual operating data for the 44 weeks ended November 5, 1994 and projected performance for the 8 weeks ending December 31, 1994, without, in each case, giving effect to the Transaction. The adjusted projected 1994 financial information was prepared by Homeland to illustrate the estimated effects of the Transaction and certain related transactions as if the Transaction and related transactions had occurred as of January 2, 1994. The financial information set forth below (including the projected 1994 financial information) has been prepared by Homeland to present the effects of the Transaction and related transactions, but is not factual and should not be relied upon as being representative of future results. The estimates and assumptions underlying such information are inherently uncertain, being based upon events that have not taken place, are subject to economic, competitive and other uncertainties and contingencies beyond Homeland's control and involve judgments based upon past performance and industry trends which may not necessarily be indicative of future performance or trends. Consequently, there may be no assurance that (a) the assumptions underlying such information will prove correct, (b) the results reflected in such information can be realized, or (c) the actual results will not be higher or lower than those projected. However, Homeland believes that the basis for such information is reasonable, taking into account the purpose for which it has been prepared. The financial information set forth below was not prepared with a view towards public disclosure or compliance with the published guidelines of the Securities and Exchange Commission or the American Institute of Certified Public Accountants or generally accepted accounting principles. The independent auditors of Homeland have not examined, reviewed or compiled such information and, accordingly, do not express an opinion or any other form of assurance on it. Homeland does not intend to update or otherwise revise the financial information set forth below to reflect circumstances existing after the date hereof or to reflect the occurrence of unanticipated events, even in the event any or all of the underlying assumptions are shown to be in error. Furthermore, Homeland does not intend to update or revise such information to reflect changes in general economic or industry conditions. However, upon the consummation of the Transaction, Homeland intends to file a Current Report on Form 8-K that would include the information required by Items (2) and (7) of Form 8-K. HOMELAND HOLDING CORPORATION AND SUBSIDIARY UNAUDITED SUMMARY FINANCIAL DATA For the 52 Weeks Ending December 31, 1994 (In thousands) Adjusted Projected Projected Dec. 31, 1994 Dec. 31, 1994 (1) Summary Income Statement Sales $ 779,230 $ 527,404 (3) Gross Profit 199,431 140,595 (3) Selling and Administrative 188,117 128,846 (4) Earnings before Interest and Taxes 11,314 11,749 Depreciation, Amortization and Non-cash Items 19,058 11,393 (5) EBITDA 30,372 23,142 Interest Expense 18,135 11,504 (7) Cash Capital Expenditures 6,200 5,000 (8) Summary Capitalization Notes Payable $ 750 $ 750 Floating Senior Notes-Series A 12,000 7,997 Floating Senior Notes-Series D 33,000 21,993 11.75% Senior Notes-Series C 75,000 49,984 Revolving Credit Loans 35,000 23,326 Capital Leases 17,757 8,612 Total Debt 173,507 112,662 (6) Equity 32,443 (2) 16,483 (9) Book Capitalization $205,950 $129,145 Summary Coverage Rating EBITDA/Interest 1.67 2.01 EBITDA-CapEx/Interest 1.33 1.58 Debt/EBITDA 5.71 4.87 The accompanying notes are an integral part of this summary financial data. HOMELAND HOLDING CORPORATION AND SUBSIDIARY NOTES TO UNAUDITED PROJECTED SUMMARY FINANCIAL DATA 1. Projected 1994: The projected 1994 financial information represents actual operating data for the 44 weeks ended November 5, 1994 and projected performance for the 8 weeks ending December 31, 1994 without, in each case, giving effect to the Transaction or to the closing of certain stores. The balance shown for the Revolving Credit Loans includes outstanding letters of credit of $9.5 million. 2. Projected Equity: Reflects the early adoption of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" during the fourth quarter of fiscal 1994. The impact of adoption has resulted in a one-time charge against equity of $1.9 million. 3. Sales and Gross Profit: Net sales and gross profit represents actual operating data for the 44 weeks ended November 5, 1994 and projected performance for the 8 weeks ending December 31, 1994 for the continuing stores. Gross profit has been impacted by the following: (a) A reduction by 0.5% to reflect the anticipated initial increase in inventory costs during the Company's transition to AWG's purchasing programs and procedures. Management believes that the impact of the transition will be reduced over time. (b) An increase by 1.0% to reflect the purchase rebates offered pursuant to the Transaction as set forth in the Letter of Intent. 4. Selling and Administrative: Includes management's estimates of certain anticipated corporate cost reductions, such as reduced headcount and other administrative expenses, likely to arise from the Transaction. The adjusted projected results also give effect to the estimated cost impact of senior ranking union employees employed in the stores to be sold to AWG or closed, replacing junior union employees in the continuing stores as provided for in the United Food and Commercial Workers of North America collective bargaining agreement. 5. Depreciation, Amortization and Non-Cash Items: Includes certain anticipated corporate asset disposals resulting from the Transaction. HOMELAND HOLDING CORPORATION AND SUBSIDIARY NOTES TO UNAUDITED PROJECTED SUMMARY FINANCIAL DATA 6. Debt: Debt repayments are based on an estimate of the net cash proceeds to be received from the Transaction and sale of certain assets relating to closed stores allocated on a pro rata basis to the projected outstanding debt as of December 31, 1994. The effect of such pro rata allocation of proceeds may not be consistent with the requirements set forth under the Company's Revolving Credit Agreement and Senior Note Indenture. Capital leases are reduced by $9.1 million resulting from the assumption of some leases and the termination of others in conjunction with the Transaction and closing of certain stores. 7. Interest Expense: Interest expense for the year is estimated based on the rates in effect during fiscal 1994 applied to the outstanding debt during the fiscal year assuming the estimated pro rata debt repayments described in Note 6 above were made as of January 2, 1994. 8. Cash Capital Expenditures: Represents projected cash capital expenditures to be incurred during fiscal 1995 for the continuing stores. 9. Adjusted Projected Equity: Represents the impact of the Transaction on equity and includes the following: (a) Estimated net book loss resulting from the Transaction. (b) Estimated net loss resulting from closing certain stores. (c) Estimated costs of debt restructuring and other Transaction related expenses. -----END PRIVACY-ENHANCED MESSAGE-----