DOMINICKS SUPERMARKETS INC, 424B1, 1996-11-01

DOMINICKS SUPERMARKETS INC
424B1, 1996-11-01
GROCERY STORES

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<PAGE> 1
Filed Pursuant to
Rule 424(b)(1)
Registration Nos. 333-14995
PROSPECTUS and 333-15049
OCTOBER 29, 1996

8,000,000 SHARES

LOGO

DOMINICK'S SUPERMARKETS, INC.

COMMON STOCK

Of the 8,000,000 shares of common stock (the "Common Stock") offered hereby
(the "Offering"), 5,900,000 shares are being sold by Dominick's Supermarkets,
Inc. (the "Company") and 2,100,000 shares are being sold by certain of the
Company's stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

Prior to this Offering, there has been no public market for the Common
Stock. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "DFF," subject to official notice of issuance.

SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share.................... $18.00 $1.17 $16.83 $16.83
Total (3).................... $144,000,000 $9,360,000 $99,297,000 $35,343,000
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $1,200,000.

(3) The Selling Stockholders have granted to the Underwriters a 30-day option to
purchase up to 1,200,000 additional shares of Common Stock at the Price to
the Public less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to Selling Stockholders will be
$165,600,000, $10,764,000, $99,297,000 and $55,539,000, respectively. See
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about November 1, 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
BT SECURITIES CORPORATION

CHASE SECURITIES INC.
<PAGE> 2

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, unless the context otherwise
requires, the "Company" refers to Dominick's Supermarkets, Inc. and its
consolidated subsidiaries, including its principal operating subsidiary,
Dominick's Finer Foods, Inc. ("Dominick's"). All references to fiscal years in
this Prospectus refer to the fiscal year ending on the Saturday closest to
October 31st of the year indicated (fiscal 1995 refers to the combined fiscal
periods of the Company and its predecessor for the 52 weeks ended October 28,
1995). The Company's fiscal year generally consists of three 12-week quarters
and a 16-week third quarter. All references to market share and demographic data
in this Prospectus are based upon industry publications and, unless otherwise
indicated, all references to numbers of stores are as of October 22, 1996.
Unless otherwise indicated, all information in this Prospectus (i) assumes that
the over-allotment option granted to the Underwriters is not exercised and (ii)
has been adjusted to reflect a 14.638-for-one stock split of the Company's
common stock which was effected prior to the date of this Prospectus.

THE COMPANY

The Company has increased its market share among Chicago-area supermarkets
from 19.0% in 1989 to 25.4% in 1995. With the exception of Jewel Food Stores,
which had a 35.6% market share in 1995, no other supermarket operator in the
Chicago area has more than a 5% market share. The Chicago metropolitan area is
the nation's third largest Metropolitan Statistical Area with a reported
population of approximately 7.7 million people, approximately 2.8 million
households and a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. According to
the U.S. Bureau of the Census, the population of suburban Chicago, where nearly
80% of the Company's stores are located, has grown by approximately 12% since
1986. According to a recent report issued by the U.S. Department of Commerce, by
the year 2005 the Chicago area is also expected to have a population of 8.3
million residents and the largest increase in jobs of all of the nation's major
metropolitan areas. The Company believes that its existing market share and its
plans to add new stores will allow it to benefit from the continuing growth of
the Chicago area.

DOMINICK'S. The Company's Dominick's stores are full-service supermarkets
that emphasize quality, freshness and service. The Company classifies its
Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 23 conventional supermarkets are
typically located in higher density population areas and average
approximately 43,100 square feet in size (including approximately 28,900
square feet of selling space). All of the Company's conventional
supermarkets include a variety of service departments typically found in
full-service supermarkets such as delicatessen, bakery, meat and seafood
departments, and a limited selection of health and beauty care products.
Many stores also feature salad bars, prepared foods, floral departments,
film processing and liquor.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet in size (including
approximately 40,300 square feet of selling space). The combination food
and drug stores offer all products and services typically found in a
conventional supermarket and, by virtue of their large size, include a
full-service drug store complete with a pharmacy, a broader line of health
and beauty care products and an expanded selection of seasonal merchandise.

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<PAGE> 4

Fresh Stores. Dominick's 22 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures and offer an expanded assortment of high quality fresh produce and
other perishables, a large selection of restaurant-quality prepared foods
for carry-out and in-store dining and a superior line of freshly baked
goods and pastry items. Fresh Stores also typically offer expanded
delicatessen, bakery, meat, seafood and floral departments and additional
service departments such as a gourmet coffee cafe. The first Fresh Store
was introduced in 1993 through the conversion of an existing conventional
supermarket. A total of 14 stores have been converted to date, resulting in
an average increase in customer counts, sales per square foot and store
contribution margins for the converted stores over pre-conversion levels.
In addition to the 14 Fresh Stores converted, eight new Fresh Stores have
been opened, and an estimated 16 additional Fresh Stores are expected to be
opened or converted by the end of fiscal 1998. Converted Fresh Stores
average approximately 53,000 square feet in size (including approximately
39,300 square feet of selling space) while new Fresh Stores are expected to
average approximately 70,000 square feet (including approximately 55,000
square feet of selling space).

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). Omni stores offer
modified everyday low prices and compete effectively with warehouse formats and
other discount retailers in the Chicago area. Omni stores have an approximate
7.2% market share, giving Omni the third largest market share among Chicago-area
supermarkets on a stand-alone basis.

GROWTH AND OPERATING STRATEGY

The Company was formed by The Yucaipa Companies ("Yucaipa") for the purpose
of effecting the acquisition of Dominick's on March 22, 1995 (the
"Acquisition"). Yucaipa is a private investment group specializing in the
acquisition and management of supermarket chains, and has investments in and
currently manages supermarket chains with total combined sales of approximately
$11 billion in their most recent fiscal years. Since the Acquisition, the
Company has increased its EBITDA margin for each fiscal quarter, achieving a
5.4% margin in the 16-week period ended August 3, 1996 as compared to 4.8% in
the same period in fiscal 1995.

The Company's senior managers have, on average, over 20 years of experience
in the food retailing industry. Management, in conjunction with Yucaipa, has
formulated a strategic plan to increase sales and profitability consisting of
the following key elements:

ACCELERATE NEW STORE PROGRAM. From 1987 until 1993, the Company's store
development program was focused primarily on developing combination food and
drug stores or converting existing conventional Dominick's stores to the
combination format, closing underperforming stores and creating a critical mass
of Omni stores. From fiscal 1994 until the Acquisition, the Company's growth
plan was focused on the conversion of existing stores to the Fresh Store
concept. During that period, only one new store was opened. Since the
Acquisition, management and Yucaipa have developed a growth strategy designed to
emphasize the expansion of the Dominick's store format in areas currently
underserved by the Company. As part of this strategy, management undertook an
aggressive plan to identify and develop new store sites and has since opened
eight new Fresh Stores during the second half of fiscal 1996. In addition,
management expects to continue to grow the Company's store base by opening nine
Fresh Stores and one Omni store in fiscal 1997 and seven Fresh Stores and one
Omni store in fiscal 1998.

EXPAND DOMINICK'S FRESH STORE CONCEPT. The results of the Company's 14
Fresh Store conversions have been highly favorable and have resulted in an
average increase in estimated annualized sales of approximately 27% compared to
such stores prior to their conversion. It is currently anticipated that
substantially all of the Company's new Dominick's combination food and drug
stores will be Fresh Stores. A number of existing Dominick's conventional
supermarkets and combination food and drug stores will also be converted to
Fresh Stores over the next two years. In addition, certain elements of the Fresh
Store concept, including expanded

4
<PAGE> 5

produce and perishable departments, are currently being incorporated into many
of the remaining Dominick's stores as part of the chain-wide emphasis on high
quality perishables. The Company believes that the expansion of its Fresh Store
concept through the addition of new stores and the conversion of existing stores
should have a favorable impact on the Company's growth in sales and
profitability.

CONTINUE TO IMPROVE PROFIT MARGINS. At the time of the Acquisition,
management and Yucaipa identified areas of opportunity for operating
improvements which they believed would result in approximately $23 million of
annual cost reductions compared to pre-Acquisition levels. These included: (i)
purchasing improvements resulting in part from renegotiating vendor contracts
and coordinating its buying efforts with other Yucaipa-managed supermarket
chains, (ii) labor productivity improvements resulting from increased automation
of labor planning systems and changes in labor processes and procedures, (iii)
general and administrative expense and occupancy expense reductions and (iv)
other merchandising and buying improvements. The Company believes that, as of
the end of the third quarter of fiscal 1996, it had implemented operating
improvements which should provide, on an annualized basis, a level of cost
savings substantially equal to the $23 million estimated at the time of the
Acquisition. The Company believes that approximately $17 million of such cost
savings are reflected in its results of operations for the 52-week period ended
August 3, 1996. In addition, management has identified additional potential cost
savings and efficiencies, including an increase in the percentage of private
label sales, which it has begun to implement. The Company believes that these
cost savings, combined with the greater number of Fresh Stores, should result in
higher overall operating margins than the Company has experienced historically.

THE ACQUISITION

The Company consummated the Acquisition for an aggregate purchase price of
approximately $692.9 million, including $124.5 million of assumed indebtedness
(but excluding fees and expenses of $41.2 million). The principal sources of
cash to finance the Acquisition were a $330 million senior credit facility (the
"Old Credit Facility"), a $150 million senior subordinated credit facility and
$105 million of common equity financing provided by Yucaipa and a group of
institutional investors, including affiliates of Apollo Advisors, L.P.
("Apollo"), and members of Dominick's management. Yucaipa and such equity
investors are parties to a stockholders agreement which, subject to certain
conditions, provides Yucaipa and Apollo the right to nominate six and three
directors, respectively, to the Company's Board of Directors. See "Description
of Capital Stock--Stockholders Agreements." In connection with the Acquisition,
Yucaipa received certain warrants and entered into a consulting agreement with
the Company which provided for a one-time fee of $14 million and annual payments
equal to 2% of Dominick's EBITDA (as defined in such consulting agreement). Upon
consummation of the Offering, such consulting agreement will be terminated and
replaced with a new management agreement providing for annual management fees of
$1 million to be paid to Yucaipa. See "The Acquisition," "Certain Transactions"
and "Description of Capital Stock--Yucaipa Warrant." In connection with the
Acquisition, the Company also redeemed all outstanding SARS of Dominick's (or
exchanged them for Company stock options) and repurchased shares of Dominick's
restricted stock held by certain management employees. See "Management" and
"Certain Transactions." Prior to the Acquisition, Dominick's had been operated
by Dominick DiMatteo, Jr., its founder, and his family for approximately 70
years.

RISK FACTORS

An investment in the Common Stock is subject to a number of material risks,
including risks related to the Company's operations and the industry in which it
competes. The Company's business, results of operations or financial position
may be adversely affected by, among other things, (i) the failure to generate
sufficient cash flow or other sources of liquidity to service its debt and fund
working capital and capital expenditure requirements, (ii) a prolonged labor
dispute with its employees, most of which are unionized and approximately half
of which are covered by a union contract that expired in July 1996, (iii) an
adverse outcome in a pending gender discrimination lawsuit or (iv) increased
competition or entry of new competitors into the supermarket industry in the
Company's market. For a more detailed discussion of these and certain other
risks, see "Risk Factors" beginning on page 9.

5
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered:
By the Company......................... 5,900,000 shares
By the Selling Stockholders............ 2,100,000 shares(1)
----------
Total.......................... 8,000,000 shares(1)
----------
----------
Common Stock to be Outstanding After the
Offering............................... 21,359,035 shares(2)
Use of Proceeds.......................... Of the net proceeds to the Company of $98.1
million, approximately $51.7 million will be used
in connection with the repurchase of the
Company's outstanding 15% Redeemable Exchangeable
Cumulative Preferred Stock (the "Redeemable
Preferred Stock"); approximately $35.9 million
will be used, together with approximately $45.0
million of available cash and approximately
$187.6 million of borrowings under a new $325
million bank credit facility (the "New Credit
Facility"), to repay all outstanding borrowings
under Dominick's Old Credit Facility, together
with accrued interest thereon; and approximately
$10.5 million will be used to terminate the
Company's obligations under its consulting
agreement with Yucaipa (see "Certain
Transactions" for a description of a new
management agreement). The Company will not
receive any of the proceeds from the sale of
shares by the Selling Stockholders.
NYSE Symbol.............................. "DFF"
</TABLE>

- ------------------------------

(1) Assumes no exercise of the Underwriters' over-allotment option.

(2) Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, an
additional 1,000,000 shares of Common Stock reserved for future issuance
under the Company's 1996 Equity Participation Plan, or up to 3,874,492
shares of Common Stock issuable to Yucaipa upon exercise of the Yucaipa
Warrant (as defined herein). The Yucaipa Warrant may be exercised for cash
or on a cashless basis. The Yucaipa Warrant will become exercisable upon the
consummation of the Offering at an exercise price of $20.73 per share.
Pursuant to the cashless exercise provisions of the Yucaipa Warrant, upon
exercise in full Yucaipa would be entitled to receive a number of shares
equal to the difference between 3,874,492 shares and the number of shares
having an aggregate market value at the time of exercise of $80.3 million
(i.e., the aggregate exercise price). See "Management -- 1995 Stock Option
Plan" "-- 1996 Equity Participation Plan" and "Description of Capital
Stock -- Yucaipa Warrant." The total number of shares of Common Stock
outstanding after the Offering includes shares issuable upon the conversion
of all outstanding shares of non-voting Class B Common Stock (the "Class B
Common Stock") which are convertible into Common Stock on a one-for-one
basis at the option of the holder, subject to certain restrictions. See
"Description of Capital Stock -- Non-Voting Common Stock."

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<PAGE> 7

SUMMARY FINANCIAL INFORMATION AND OTHER DATA

The following summary financial information and other data should be read
in conjunction with the historical financial statements, the pro forma financial
statements and the related notes thereto included elsewhere in this Prospectus.
For purposes of the financial presentation below, the "Predecessor Company"
refers to Dominick's prior to the consummation of the Acquisition on March 22,
1995. The pro forma information set forth below gives effect to the Acquisition
and certain related events as though they had occurred on October 30, 1994. See
the Unaudited Pro Forma Financial Statements commencing on page P-1 of this
Prospectus.

PREDECESSOR COMPANY COMPANY
-------------------------- ---------------------------------------------------
PRO FORMA LTM PRO FORMA
52 WEEKS ENDED 52 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
-------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, OCTOBER 28, AUGUST 3, AUGUST 5, AUGUST 3,
1993 1994 1995 1996(A) 1995 1996
----------- ----------- ----------- --------- ---------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales................................ $2,330.2 $2,409.9 $2,433.8 $2,445.2 $1,889.1 $1,900.6
Gross profit......................... 515.2 538.4 552.1 564.7 423.7 437.0
Selling, general and administrative
expenses........................... 469.4 484.3 482.2 481.0 374.9 372.3
Operating income..................... 45.8 54.1 69.9 83.7 48.8 64.7
Interest expense..................... 34.1 30.0 72.4 73.2 56.1 53.4
Net income (loss)(b)................. $ 7.6 $ 7.5 (10.6) 1.8 (12.6) 3.1
Preferred stock accretion............ 6.3 6.7 4.8 5.2
Net loss available to common
stockholders....................... $ (16.9) $ (4.9) $ (17.4) $ (2.1)
SELECTED OPERATING DATA, AS ADJUSTED
FOR THE OFFERING(C):
Interest expense..................... 58.2 60.9 45.1 43.6
Net income (loss).................... (2.1) 9.2 (6.0) 9.0
Income (loss) per common share(d).... $ (0.10) $ 0.43 $ (0.28) $ 0.42
Weighted average common and common
equivalent shares outstanding (in
millions)(d)....................... 21.3 21.4 21.3 21.4
OTHER FINANCIAL DATA:
Depreciation and amortization........ $ 51.1 $ 52.9 $ 41.3 $ 42.3 $ 35.6 $ 34.7
Capital expenditures................. 31.1 60.1 45.5 38.9 31.9 25.3
EBITDA (as adjusted)(e).............. 98.3 112.0 114.9 128.5 87.2 100.9
STORE DATA:
Fresh Store conversions.............. 0 6 8 1 7 0
Stores opened during period.......... 1 1 0 4 0 4
Stores closed during period.......... (1) (1) (4) (4) (4) (4)
Stores open at end of period......... 101 101 97 97 97 97
Comparable store sales growth........ (1.6)% 2.9% 1.8% 1.2% 2.0% 1.1%
Average weekly sales per store (in
thousands)......................... $ 448 $ 466 $ 481 $ 489 $ 484 $ 494
Average sales per selling square
foot............................... $ 601 $ 610 $ 613 $ 614 $ 619 $ 619
Total selling square feet (at end of
period, in thousands).............. 3,969 4,039 4,008 4,074 3,984 4,074
</TABLE>

<TABLE>
<CAPTION>
AUGUST 3, 1996
---------------------------
OCTOBER 28, 1995 ACTUAL AS ADJUSTED(F)
---------------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficit............................................ $ (34.2) $ (6.0) $ (49.3)
Total assets....................................................... 1,100.2 1,094.9 1,041.7
Total debt......................................................... 599.4 604.7 523.5
Redeemable preferred stock......................................... 43.7 49.0 --
Stockholders' equity............................................... 96.2 94.1 179.4
</TABLE>

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- ------------------------------

(a) Information for the "latest twelve months" presents the historical results
of operations of the Company for the four most recent fiscal quarters in
order to provide a full year of post-Acquisition operating results.

(b) Net income (loss) for the 52 weeks ended October 29, 1994 reflects an
extraordinary loss of $6.3 million, net of applicable income tax benefit of
$3.9 million, resulting from the retirement of $60 million principal amount
of Dominick's 11.78% Senior Notes.

(c) Selected operating data, as adjusted for the Offering, reflects the
consummation of the sale of the Common Stock offered hereby and the
application of the net proceeds therefrom, as well as certain related
transactions described under "Use of Proceeds," as if such transactions had
occurred at the beginning of the applicable period. Such adjusted operating
data does not reflect an anticipated charge to earnings associated with the
termination of the existing consulting agreement and the anticipated
write-off of deferred debt issuance costs in connection with the refinancing
of the Old Credit Facility. See footnote (e) below.

(d) Income (loss) per common share, as adjusted for the Offering, is computed
based upon the weighted average number of shares of common stock outstanding
during the period and gives effect to the issuance of the shares of Common
Stock being offered hereby by the Company. In accordance with the rules of
the Securities and Exchange Commission, 85,998 shares of common stock issued
after March 21, 1995 and 29,499 equivalent shares using the treasury stock
method for outstanding stock options granted after March 21, 1995 have been
treated as outstanding for all subsequent periods in calculating earnings
per share because such shares were issued and such options are exercisable
at prices below the assumed initial public offering price.

(e) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. The Company believes that EBITDA (as adjusted) provides
meaningful information regarding the Company's ability to service debt by
eliminating certain non-cash and unusual charges. However, EBITDA (as
adjusted) should not be construed as an alternative to operating income, net
income or cash flow from operating activities (as determined in accordance
with generally accepted accounting principles) and should not be construed
as an indication of the Company's operating performance or as a measure of
liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

(f) As adjusted to give effect to the issuance of the Common Stock offered
hereby and the application of the net proceeds therefrom, together with the
anticipated utilization of existing cash and borrowings under the New Credit
Facility. See "Use of Proceeds." Stockholders' equity is adjusted to reflect
an anticipated charge to earnings of $6.3 million (net of applicable income
tax benefit of $4.2 million) associated with the termination of the existing
consulting agreement and an anticipated extraordinary loss resulting from
the write-off of approximately $6.4 million (net of applicable income tax
benefit of $4.2 million) of deferred financing costs in connection with the
repayment of the Old Credit Facility.

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<PAGE> 9

RISK FACTORS

Prospective investors should carefully consider the following factors, in
addition to the other information contained in this Prospectus, in evaluating
the Company and its business before purchasing shares of the Common Stock
offered hereby.

LEVERAGE; POTENTIAL INABILITY TO SERVICE OR REFINANCE DEBT

At August 3, 1996, as adjusted to give effect to the Offering and the
application of the net proceeds therefrom, the Company's consolidated total
indebtedness and total stockholders' equity would have been $523.5 million and
$179.4 million, respectively. See "Capitalization." In addition, the Company's
balance sheet at August 3, 1996 reflected goodwill of $422.7 million. As of
August 3, 1996, pro forma for the Offering and certain related transactions, the
Company would have had approximately $136.4 million available for borrowing
under the New Revolving Facilities (as defined). The Company's ability to make
scheduled payments of the principal of, or interest on, or to refinance, its
indebtedness and to make scheduled payments under its operating leases depends
on its future performance, which to a certain extent is subject to economic,
financial, competitive and other factors beyond its control. Based upon the
current level of operations, management believes that available cash flow,
together with available borrowings under the New Credit Facility and other
sources of liquidity, including proceeds from sale-leaseback transactions, will
be adequate to meet the Company's anticipated requirements for working capital,
capital expenditures, interest payments and scheduled principal payments under
the New Credit Facility and the Company's other indebtedness. There can be no
assurance, however, that the Company's business will continue to generate cash
flow at or above current levels or that anticipated growth will materialize. If
the Company is unable to meet its obligations from such sources, the Company may
be required to refinance all or a portion of its existing indebtedness, sell
assets or obtain additional financing. There can be no assurance that any such
refinancing would be possible or that any such sales of assets or additional
financing could be completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

LABOR RELATIONS; EXPIRED UNION CONTRACTS

Approximately 91% of the Company's employees are unionized. The Company's
principal union contracts with the Dominick's retail clerks and the Omni
meatcutters which cover approximately 53% and 3% of the Company's employees,
respectively, expired in July 1996 and no new agreements have been reached. The
Company and the respective unions representing such employees are negotiating
the terms of new contracts. While the Company believes that its relations with
its employees are good, a prolonged labor dispute (which could include a work
stoppage) would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees and
Labor Relations."

POTENTIAL ADVERSE EFFECTS OF PENDING LITIGATION

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiff's original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second amended
complaint on August 16, 1996 adding three additional plaintiffs. The plaintiffs'
motion for class certification is currently pending before the court, and the
Company anticipates that the court will rule on such motion before the end of
the year. The parties are conducting discovery with respect to the pending
motion for class certification. The Company plans to vigorously defend this
lawsuit. Due to the numerous legal and factual issues which must be resolved
during the course of this litigation, the Company is unable to predict the
ultimate outcome of this lawsuit. If Dominick's were held liable for the alleged
discrimination (or otherwise concludes that it is in the Company's best interest
to settle the matter), it could be required to pay monetary damages (or
settlement payments) which, depending on the outcome of the class certification
motion (and the size of any class certified), the theory of recovery or the
resolution of the plaintiffs' claims for compensatory and punitive damages,
could be substantial and could have a material adverse effect on the Company.
See "Business -- Legal Proceedings."

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HIGHLY COMPETITIVE INDUSTRY

The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, warehouse club stores, deep discount drug stores and supercenters.
Supermarket chains generally compete on the basis of location, quality of
products, service, price, product variety and store condition. The Company
regularly monitors its competitors' prices and adjusts its prices and marketing
strategy as management deems appropriate in light of existing conditions. There
can be no assurance that new competitors will not enter the supermarket industry
or that the Company can maintain its current market share. See "Business --
Competition."

EXPOSURE TO REGIONAL ECONOMIC TRENDS DUE TO THE COMPANY'S GEOGRAPHIC
CONCENTRATION

All of the Company's stores are located in the greater Chicago metropolitan
area and thus the performance of the Company will be particularly influenced by
developments in this area. A significant economic downturn in the Chicago
metropolitan area could have a material adverse effect on the Company's
business, financial condition or results of operations.

LIMITATIONS ON ACCESS TO CASH FLOW OF DOMINICK'S

The Company is a holding company which conducts its business through its
wholly owned subsidiary, Dominick's, and its subsidiaries. Under the terms of
the New Credit Facility, the indenture governing its 10 7/8% Senior Subordinated
Notes due 2005 (the "Note Indenture") and the other instruments governing its
indebtedness, Dominick's is restricted in its ability to pay dividends or
otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous materials (together,
"Environmental Laws"). From time to time, operations of the Company have
resulted or may result in noncompliance with or liability for cleanup pursuant
to Environmental Laws. Certain investigations conducted in connection with the
Acquisition found that certain of the Company's facilities have had or may have
had releases of hazardous materials associated with Dominick's operations or
those of other current and prior occupants that may require remediation. The
costs to remediate such environmental contamination are currently estimated to
range from approximately $4.1 million to $5.7 million. Pursuant to the terms of
the stock purchase agreement associated with the Acquisition, the prior owners
of Dominick's have agreed to pay one-half of such remediation costs up to $10
million and 75% of such remediation costs between $10 million and $20 million.
Giving effect to such contribution, the Company's net share of such remediation
costs is currently estimated at approximately $4.3 million. To the extent that
the prior owners of Dominick's fail to reimburse the Company for such
remediation costs as they have agreed, the Company would be required to bear
this entire expense and pursue its remedies against such former owners. See
"Business -- Environmental Matters."

CONTROL BY MAJOR STOCKHOLDERS

Upon consummation of the Offering, certain affiliates of Yucaipa and Apollo
will have beneficial ownership of approximately 13.8% and 27.4%, respectively,
of the outstanding Common Stock (assuming, with respect to Apollo, the
conversion of 2,455,224 shares of Class B Common Stock into Common Stock).
Pursuant to a stockholders' agreement (the "Stockholders Agreement") entered
into by such affiliates of Yucaipa and Apollo and certain other stockholders of
the Company, Yucaipa and Apollo have the right to nominate six and three
directors, respectively, to the boards of directors of the Company and
Dominick's and

10
<PAGE> 11

are required to vote their respective shares of Common Stock to elect the
directors nominated by the other party as well as for the two independent
directors who will be appointed to the boards following the consummation of this
Offering. Yucaipa's right to nominate members to such boards of directors will
be reduced by three if Ronald W. Burkle, the controlling general partner of
Yucaipa, ceases for any reason to beneficially own at least 33 1/3% of the
shares beneficially owned by Yucaipa on the date of the Acquisition and shall
terminate if Mr. Burkle ceases for any reason (including death) to beneficially
own at least 25% of the shares beneficially owned by Yucaipa on such date. As a
result of the ownership structure of the Company and the contractual commitments
described above, the voting and management control of the Company is highly
concentrated. As a result of its ability to nominate a majority of the members
of the board of directors, Yucaipa has the ability to direct the actions of the
Company with respect to matters such as the payment of dividends, material
acquisitions and dispositions and other extraordinary corporate transactions.
Concurrently with the consummation of the Offering, Yucaipa will enter into a
new management agreement with the Company and Dominick's, pursuant to which
Yucaipa will render certain management and advisory services to the Company and
Dominick's and will receive fees for such services. Yucaipa will also receive a
payment in connection with the termination of an existing consulting agreement.
See "Certain Transactions," "Principal and Selling Stockholders" and
"Description of Capital Stock."

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends, in part, upon the services of Ronald W.
Burkle, the Company's Chairman, and Robert A. Mariano, the Company's President
and Chief Executive Officer, and other key personnel. The loss of the services
of Mr. Burkle, Mr. Mariano or other key management personnel could have an
adverse effect upon the Company's business, results of operations or financial
condition. The Company has entered into employment agreements with Mr. Mariano
and certain of its other key management personnel. For a description of the
terms of such agreements, see "Management -- Employment Agreements." There can
be no assurance that the Company will be able to retain its existing management
personnel.

POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS

The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. These provisions, among other things, establish
certain advance notice procedures for nominating candidates for election as
directors and for stockholder proposals to be considered at stockholders'
meetings and provide that only the Board of Directors, the Chief Executive
Officer of the Company or the holders of a majority of the outstanding Common
Stock may call special meetings of the stockholders. In accordance with the
terms of the Company's Amended and Restated Certificate of Incorporation,
effective upon the consummation of the Offering, the terms of office of the
Board of Directors will be divided into three classes serving staggered
three-year terms. The Company's Amended and Restated Certificate of
Incorporation also provides that the authorized number of directors may be
changed only by resolution of the Board of Directors and, although directors of
the Company may be removed for cause by the affirmative vote of the holders of a
majority of the Common Stock, the Company's Amended and Restated Certificate of
Incorporation provides that holders of 66 2/3% of the Common Stock must vote to
approve the removal of a director without cause. In addition, the Company's
Amended and Restated Certificate of Incorporation authorizes the Board of
Directors to issue Preferred Stock (as defined) without stockholder approval and
upon such terms as the Board of Directors may determine. While no shares of
Preferred Stock will be outstanding upon the repurchase of the Redeemable
Preferred Stock following the consummation of the Offering and the Company has
no present plans to issue any shares of Preferred Stock, the rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of Preferred Stock that may be issued in the future.
See "Description of Capital Stock."

11
<PAGE> 12

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will develop
or be sustained after the Offering. The initial public offering price has been
determined by negotiations between the Company and the Representatives (as
defined), and there can be no assurance that the market price of the Common
Stock after the Offering will equal or exceed the initial public offering price.
See "Underwriting" for information relating to the factors considered in
determining the initial public offering price of the Common Stock. Following the
consummation of the Offering, the market price of the Common Stock could be
subject to significant fluctuations in response to variations in results of
operations, general economic and market conditions and other factors.

SUBSTANTIAL DILUTION

Purchasers of Common Stock offered hereby will experience substantial
dilution of $31.16 per share in pro forma net tangible book value per share of
Common Stock from the initial public offering price. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

There will be an aggregate of 21,359,035 shares of Common Stock and Class B
Common Stock outstanding immediately following consummation of the Offering. The
8,000,000 shares of Common Stock offered hereby will be freely tradeable without
restriction or registration under the Securities Act by persons other than
"affiliates," as defined in the Securities Act of 1933, as amended (the
"Securities Act"), of the Company. The remaining 13,359,035 shares of
outstanding Common Stock and Class B Common Stock are "restricted securities"
under the Securities Act and may only be sold pursuant to an effective
registration statement under the Securities Act or an applicable exemption from
the registration requirements of the Securities Act, including Rule 144
thereunder. Holders of 12,925,411 such shares of Common Stock and Class B Common
Stock will have certain registration rights upon consummation of the Offering.
In connection with this Offering, all of such holders of Common Stock and Class
B Common Stock and all of the directors and executive officers of the Company
have agreed not to offer, sell, contract to sell, grant any option to purchase
or otherwise dispose of their shares of Common Stock or Class B Common Stock of
the Company or any securities convertible into or exercisable or exchangeable
for such Common Stock or Class B Common Stock, or in any other manner transfer
all or a portion of the economic consequences associated with the ownership of
such Common Stock or Class B Common Stock, or to cause a registration statement
covering any shares of Common Stock or Class B Common Stock to be filed, for a
period of 180 days after the date of this Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. See "Shares
Eligible for Future Sale." Upon the expiration of such lock-up period, there
will be 12,925,411 shares of Common Stock (including Common Stock issuable upon
conversion of the Class B Common Stock, but excluding shares issuable upon
exercise of the Yucaipa Warrant or any employee stock options) eligible for sale
subject to certain volume and other limitations of Rule 144 under the Securities
Act. See "Description of Capital Stock -- Yucaipa Warrant." No prediction can be
made as to the effect, if any, that future sales of shares of Common Stock or
the availability of shares for future sale will have on the market price of
shares of Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issuable upon the exercise of stock
options), or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock.

12
<PAGE> 13

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby (after deducting underwriting discounts and estimated expenses of the
Offering) will be approximately $98.1 million. The Company will not receive any
of the proceeds from the sale of shares by the Selling Stockholders.

The Company will use approximately $51.7 million of the estimated net
proceeds in connection with the repurchase of all of the Company's outstanding
Redeemable Preferred Stock. Approximately $35.9 million of net proceeds,
together with approximately $45.0 million of available cash and approximately
$187.6 million of borrowings under the New Credit Facility, will be used to
repay all outstanding borrowings under the Old Credit Facility, together with
accrued interest thereon. The remaining $10.5 million of such estimated net
proceeds will be used to terminate the Company's obligations under its existing
consulting agreement with Yucaipa. The New Credit Facility will provide the
Company with additional working capital availability to support, among other
things, its strategy to build new stores and to continue remodeling existing
stores. Borrowings under the Old Credit Facility were used to fund a portion of
the purchase price in the Acquisition. Portions of the Old Credit Facility
mature annually on March 31 of 2001, 2002 and 2003 and a portion matures on
September 30, 2003. For the 40 weeks ended August 3, 1996, the borrowings under
the Old Credit Facility had an average blended interest rate of 9.0%. Pursuant
to an agreement with the holder of the Redeemable Preferred Stock, the Company
will repurchase such shares on January 2, 1997. Pending application of the net
proceeds for the purposes specified above, they will be invested in short-term,
interest-bearing obligations or be used to temporarily reduce borrowings under
the New Revolving Facilities (as defined).

DIVIDEND POLICY

The Company anticipates that all earnings in the foreseeable future will be
retained to finance the continuing development of its business and that it will
not pay any dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, the success of the Company's
business activities, capital requirements, the general financial condition of
the Company and general business conditions. The New Credit Facility will
restrict the ability of the Company to pay dividends and the New Credit Facility
and the Note Indenture will restrict the ability of Dominick's to pay dividends
or otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

13
<PAGE> 14

DILUTION

At August 3, 1996, the Company had a deficit in net tangible book value of
$374.5 million, or $24.24 per share of Common Stock and Class B Common Stock.
Net tangible book value per share is equal to the Company's total tangible
assets less its total liabilities, divided by the total number of outstanding
shares of Common Stock and Class B Common Stock. After giving effect to the sale
by the Company of 5,900,000 shares of Common Stock offered hereby at an initial
public offering price of $18.00 per share and the receipt and application of the
net proceeds therefrom, the pro forma deficit in net tangible book value of the
Company at August 3, 1996 would have been $280.9 million, or $13.16 per share.
This represents an immediate decrease in the deficit in net tangible book value
of $11.08 per share to the existing stockholders and an immediate dilution of
$31.16 per share to new stockholders purchasing shares in the Offering. The
following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.................. $ 18.00
Deficit in net tangible book value per share before the
Offering............................................ $(24.24)
Decrease in deficit in net tangible book value per
share attributable to new stockholders.............. 11.08
Pro forma deficit in net tangible book value per share
after the Offering..................................... (13.16)
-------
Dilution per share to new stockholders................... $ 31.16
=======
</TABLE>

The following table summarizes (as of August 3, 1996) the differences
between the existing stockholders and the new stockholders with respect to the
number of shares of Common Stock offered hereby, the total consideration paid to
the Company and the average price paid per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............. 15,446,967 72.4% $105,552,000 49.8% $ 6.83
New stockholders(1).................. 5,900,000 27.6 106,200,000 50.2 18.00
---------- ----- ------------ -----
Total...................... 21,346,967 100.0% $211,752,000 100.0%
========== ===== ============ =====
</TABLE>

The calculations in the tables set forth above (i) assume no exercise of
the Underwriters' over-allotment option, (ii) do not reflect a total of 966,835
shares issuable upon the exercise of options granted pursuant to the Company's
1995 Stock Option Plan or an additional 1,000,000 shares reserved for issuance
pursuant to the 1996 Equity Participation Plan or any shares issuable upon
exercise of the Yucaipa Warrant and (iii) do not reflect a net increase of
12,068 issued and outstanding shares of Common Stock subsequent to August 3,
1996.
- ---------------

(1) Sales by Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to 13,346,967 or approximately 62.5%
(12,146,967 shares or approximately 56.9% if the Underwriters'
over-allotment option is exercised in full) and will increase the number of
shares to be purchased by new stockholders to 8,000,000 or approximately
37.5% (9,200,000 shares or approximately 43.1% if the Underwriters'
over-allotment option is exercised in full) of the total number of shares of
Common Stock and Class B Common Stock outstanding after the Offering. See
"Principal and Selling Stockholders."

14
<PAGE> 15

CAPITALIZATION

The following table sets forth the unaudited consolidated cash and cash
equivalents, the current portion of long-term debt and the capitalization of the
Company at August 3, 1996, and as adjusted to give effect to the Offering and
the application of the net proceeds therefrom, together with the utilization of
existing cash and borrowings under the New Credit Facility to repay all
indebtedness under the Old Credit Facility. See "Use of Proceeds." This table
should be read in conjunction with the consolidated financial statements of the
Company and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 3, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 66.8 $ 21.8
======== ========
Current portion of long-term debt and capital lease obligations....... $ 9.8 $ 8.1
======== ========
Long-term debt:
New Credit Facility(a):
New Term Loan.................................................... $ -- $ 100.0
New Revolving Facilities......................................... -- 88.6
Old Credit Facility................................................. 268.1 --
Capital lease obligations........................................... 121.1 121.1
Mortgages, industrial revenue bonds and other....................... 5.7 5.7
Senior Subordinated Notes due 2005.................................. 200.0 200.0
-------- --------
Total long-term debt............................................. $ 594.9 $ 515.4
-------- --------
Redeemable Preferred Stock(b)......................................... 49.0 --
Stockholders' equity:
Common Stock, $.01 par value(c)..................................... 0.1 0.1
Class B Common Stock, $.01 par value................................ 0.1 0.1
Additional paid-in capital.......................................... 107.6 205.7
Retained earnings (deficit)(d)...................................... (13.8) (26.5)
-------- --------
Total stockholders' equity(d).................................... 94.0 179.4
-------- --------
Total capitalization........................................ $ 737.9 $ 694.8
======== ========
</TABLE>

- ------------------------------

(a) The New Credit Facility will provide a $100 million term loan (the "New Term
Loan"), a $105 million revolving term loan facility (the "New Revolving Term
Facility") and a $120 million revolving credit facility (the "New Revolving
Facility" and, together with the New Revolving Term Facility, the "New
Revolving Facilities") which will be available for working capital and
general corporate purposes. Up to $50 million of the New Revolving Facility
may be used to support commercial and standby letters of credit. The letters
of credit will be used to cover workers' compensation contingencies and for
other purposes permitted under the New Credit Facility. Letters of credit
for approximately $17.2 million were issued under the Old Credit Facility at
August 3, 1996. See "Description of Certain Indebtedness."

(b) Upon the repurchase of the Redeemable Preferred Stock, the Company will have
4,000,000 shares of Preferred Stock authorized, none of which will be issued
and outstanding. See "Use of Proceeds."

(c) Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, an
additional 1,000,000 shares reserved for future issuance under the Company's
1996 Equity Participation Plan, or 3,874,492 shares of Common Stock issuable
to Yucaipa upon exercise of the Yucaipa Warrant. The Yucaipa Warrant will be
exercisable upon the consummation of this Offering at an exercise price of
$20.73 per share. The Yucaipa Warrant may be exercised for cash or on a
cashless basis. Pursuant to the cashless exercise provisions of the Yucaipa
Warrant, upon exercise in full Yucaipa would be entitled to receive a number
of shares equal to the difference between 3,874,492 shares and the number of
shares having an aggregate market value at the time of exercise of $80.3
million (i.e., the aggregate exercise price). See "Management -- 1995 Stock
Option Plan," "-- 1996 Equity Participation Plan" and "Description of
Capital Stock -- Yucaipa Warrant."

(d) Stockholders' equity, as adjusted, gives effect to an anticipated charge to
earnings of $6.3 million (net of applicable income tax benefit of $4.2
million) resulting from the termination of the existing consulting agreement
and an anticipated extraordinary loss of $6.4 million (net of applicable
income tax benefit of $4.2 million) resulting from the write-off of deferred
financing costs in connection with the repayment of the Old Credit Facility.

15
<PAGE> 16

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth selected historical financial data of the
Company as of and for the 52 weeks ended November 2, 1991, the 52 weeks ended
October 31, 1992, the 52 weeks ended October 30, 1993, the 52 weeks ended
October 29, 1994 and the 32 weeks ended October 28, 1995, which, together with
the operating and other financial data for the 20 weeks ended March 21, 1995,
have been derived from the financial statements audited by Ernst & Young LLP,
independent auditors. The selected historical balance sheet data as of March 21,
1995 and the selected historical financial data as of and for the 40 weeks ended
August 3, 1996 have been derived from unaudited interim consolidated financial
statements which, in the opinion of management, reflect all material
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The pro forma information set forth below for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995 gives
effect to the Acquisition and certain related events as though they had occurred
on October 30, 1994. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the historical consolidated financial statements of the Company and
the Predecessor Company, together with the related notes thereto, and the
Unaudited Pro Forma Financial Statements included elsewhere in this Prospectus.

Dominick's was acquired by the Company on March 22, 1995. The historical
financial statements for the 20 weeks ended March 21, 1995 and all prior periods
reflect the Predecessor Company results of operations. The historical results of
operations for the 32 weeks ended October 28, 1995 and the 40 weeks ended August
3, 1996 are those of the Company following the Acquisition.

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
---------------------------------------------------- ---------------------------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 20 WEEKS 32 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
----------------------------------------- ENDED ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1995 1996
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT SHARE AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales.............. $2,245.8 $2,285.7 $2,330.2 $2,409.9 $958.8 $ 1,475.0 $ 2,433.8 $ 1,889.1 $ 1,900.6
Cost of sales...... 1,775.6 1,789.0 1,815.0 1,871.5 747.6 1,136.6 1,881.7 1,465.4 1,463.6
-------- -------- -------- -------- ------- ---------- ---------- ---------- ----------
Gross profit....... 470.2 496.7 515.2 538.4 211.2 338.4 552.1 423.7 437.0
Selling, general
and
administrative
expenses......... 427.9 448.6 469.4 484.3 191.9 293.9 482.2 374.9 372.3
SARs termination
costs(a)......... -- -- -- -- 26.2 -- -- -- --
-------- -------- -------- -------- ------- ---------- ---------- ---------- ----------
Operating income
(loss)........... 42.3 48.1 45.8 54.1 (6.9) 44.5 69.9 48.8 64.7
Interest expense... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Restructuring
charges(b)....... 4.8 -- -- -- -- --
Income tax expense
(benefit)........ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Extraordinary
item(c).......... -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect
of accounting
change........... -- -- -- 1.0 -- -- -- -- --
-------- -------- -------- -------- ------- ---------- ---------- ---------- ----------
Net income
(loss)........... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $ (11.1) (8.0) (10.6) (12.6) 3.1
======== ======== ======== ======== =======
Preferred stock
accretion........ 3.7 6.3 4.8 5.2
---------- ---------- ---------- ----------
Net loss available
to common
stockholders..... $ (11.7) $ (16.9) $ (17.4) $ (2.1)
========= ========== ========== ==========
PER SHARE DATA:
Loss per common
share(d)......... $ (0.76) $ (1.10) $ (1.13) $ (0.14)
========= ========== ========== ==========
Weighted average
common and common
equivalent shares
outstanding(d)... 15,411,793 15,441,324 15,427,149 15,488,574
========= ========== ========== ==========
Income (loss) per
common share, as
adjusted for the
Offering(e)...... $ (0.10) $ 0.42
========== ==========
OTHER FINANCIAL DATA:
Depreciation and
amortization..... $ 45.7 $ 49.2 $ 51.1 $ 52.9 $ 20.5 $ 25.4 $ 41.3 $ 35.6 $ 34.7
Capital
expenditures..... 62.5 39.3 31.1 60.1 22.4 23.1 45.5 31.9 25.3
EBITDA (as
adjusted)(f)..... 91.6 98.5 98.3 112.0 43.2 71.6 114.9 87.2 100.9
Cash flow from
operating
activities....... 19.2 47.9 89.9 73.2 20.0 61.8 32.4
Cash flow from
investing
activities....... (60.4) (34.3) (27.9) (55.5) (14.6) (464.6) (25.0)
Cash flow from
financing
activities....... 44.5 (9.2) (50.6) (29.4) (6.2) 441.1 3.8
STORE DATA:
Fresh Store
conversions...... 0 0 0 6 5 3 8 7 0
Stores opened
during the
period........... 6 5 1 1 0 0 0 0 4
Stores closed
during the
period........... (7) (2) (1) (1) (4) 0 (4) (4) (4)
Stores open at end
of period........ 98 101 101 101 97 97 97 97 97
Comparable store
sales growth..... (0.3)% (3.4)% (1.6)% 2.9% 2.4% 1.5% 1.8% 2.0% 1.1%
Average weekly
sales per store
(in thousands)... $ 441 $ 446 $ 448 $ 466 $ 484 $ 480 $ 481 $ 484 $ 494
Average sales per
selling square
foot............. $ 634 $ 611 $ 601 $ 610 $ 627 $ 606 $ 613 $ 619 $ 619
Total selling
square feet (at
end of period, in
thousands)....... 3,580 3,788 3,969 4,039 3,976 4,008 4,008 3,984 4,074
BALANCE SHEET DATA
(END OF PERIOD):
Working capital
surplus
(deficit)........ $ 15.0 $ 24.0 $ 2.0 $ (22.3) $(21.5) $ (34.2) $ (6.0)
Total assets....... 680.7 693.3 676.6 669.0 653.2 1,100.2 1,094.9
Total goodwill..... -- -- -- -- -- 419.3 422.7
Total debt......... 323.9 329.6 283.6 255.7 250.3 599.4 604.7
Redeemable
preferred
stock............ -- -- -- -- -- 43.7 49.0
Stockholders'
equity........... 97.8 103.5 110.2 116.7 104.7 96.2 94.1
</TABLE>

16
<PAGE> 17

- ------------------------------

(a) In connection with the Acquisition, the Company discharged certain
obligations under its stock appreciation rights ("SARs") plan by making
payments to plan participants. Such amount is considered an acquisition cost
for purposes of calculating the purchase price paid for the Company of $693
million.

(b) The $4.8 million restructuring charge recorded in fiscal 1991 consisted of
charges related to the closure of eight underperforming stores and early
retirement or termination of related personnel.

(c) Net income for the 52 weeks ended October 29, 1994 reflects an extraordinary
loss of $6.3 million, net of applicable income tax benefit of $3.9 million,
resulting from the retirement of $60 million principal amount of Dominick's
11.78% Senior Notes. Net income for the 32 weeks ended October 28, 1995
reflects an extraordinary loss of $4.6 million, net of applicable income tax
benefit of $2.8 million, resulting from the repayment of $150 million
principal amount under a senior subordinated credit facility and the partial
repayment of $50 million of the Old Credit Facility.

(d) Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. In accordance with the rules
of the Securities and Exchange Commission, 85,998 shares of common stock
issued after March 21, 1995 and 29,499 equivalent shares using the treasury
stock method for outstanding stock options granted after March 21, 1995 have
been treated as outstanding for all subsequent periods in calculating
earnings per share because such shares were issued and such options are
exercisable at prices below the assumed initial public offering price.

(e) Reflects the consummation of the sale of the Common Stock offered hereby and
the application of the net proceeds therefrom, as well as certain related
transactions described under "Use of Proceeds," as if such transactions had
occurred at the beginning of the applicable period. Such amounts are
calculated based upon 21.4 million weighted average common shares and common
equivalent shares outstanding during such periods, after giving effect to
the issuance of the shares of Common Stock being offered hereby by the
Company.

(f) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. The Company believes that EBITDA (as adjusted) provides
meaningful information regarding the Company's ability to service debt by
eliminating certain non-cash and unusual charges. However, EBITDA (as
adjusted) should not be construed as an alternative to operating income, net
income or cash flow from operating activities (as determined in accordance
with generally accepted accounting principles) and should not be construed
as an indication of the Company's operating performance or as a measure of
liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

The computation of EBITDA (as adjusted) for the period presented is as
follows (in millions):

PREDECESSOR COMPANY COMPANY
--------------------------------------------------- ------------------------------------------
20 32 PRO FORMA PRO FORMA 40
52 WEEKS ENDED WEEKS WEEKS 52 WEEKS 40 WEEKS WEEKS
---------------------------------------- ENDED ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1995 1996
------- -------- -------- -------- -------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).......... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $(11.1) $(8.0) $(10.6) $(12.6) $ 3.1
Interest expense........... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Income tax expense
(benefit)................ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Depreciation and
amortization............. 45.7 49.2 51.1 52.9 20.5 25.4 41.3 35.6 34.7
SARs expenses.............. 0.1 0.3 0.4 2.0 0.6 -- -- -- --
SARs termination costs..... -- -- -- -- 26.2 -- -- -- --
Seller transaction
expenses................. -- -- -- 0.2 0.8 -- -- -- --
Net equipment write-offs... 1.9 0.3 0.6 1.7 1.3 -- 1.3 1.3 --
LIFO charge................ 1.6 0.6 0.4 1.1 0.7 1.7 2.4 1.5 1.5
Restructuring charges...... 4.8 -- -- -- -- -- -- -- --
Extraordinary loss on
extinguishment of debt .. -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect of
accounting change........ -- -- -- 1.0 -- -- -- -- --
----- ----- ----- ------ ------ ----- ------ ------ ------
EBITDA (as adjusted)....... $91.6 $98.5 $98.3 $112.0 $ 43.2 $71.6 $114.9 $ 87.2 $100.9
===== ===== ===== ====== ====== ===== ====== ====== ======
</TABLE>

17
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Over the past five fiscal years, the Company's sales increased
approximately 8.4% from $2.2 billion in fiscal 1991 to $2.4 billion in fiscal
1995. This growth occurred despite the fact that the total number of stores
operated by the Company decreased slightly, from 98 at the end of fiscal 1991 to
97 at the end of fiscal 1995. Management believes that this sales growth has
resulted in large measure from the substantial steps the Company has taken to
strengthen its store base over this period by remodeling existing stores,
closing certain underperforming stores and selectively adding new stores.
Through fiscal 1991, the Company's capital expenditure program focused on
developing combination food and drug stores, adding pharmacies and expanded
health and beauty care product lines to many stores which were previously
considered conventional supermarkets and creating a critical mass of Omni
stores. In addition to upgrading its store base through capital expenditures,
the Company began to focus on "rationalizing" its conventional store base (i.e.,
closing, converting or replacing underperforming stores). Seven underperforming
stores were closed in fiscal 1991 and an additional eight conventional
supermarkets were closed through the end of fiscal 1995. In order to maximize
the effectiveness of the remaining conventional supermarkets, the Company began
to focus on upgrading their perishable departments and developed new prototypes
to convey a stronger image of quality, selection and freshness to the customer.
These efforts led to the introduction of the Fresh Store concept at the
beginning of fiscal 1994. During the five-year period ended October 28, 1995,
the Company completed 27 major remodels (including the 14 Fresh Store
conversions). In addition to its remodeling and store rationalization
initiatives, the Company continued to build new stores on a selective basis.
From the beginning of fiscal 1991 through the end of fiscal 1995, the Company
opened four Dominick's combination food and drug stores and nine Omni stores.
The Company's net income was $2.6 million in fiscal 1995 and, after giving
effect to the Acquisition, the Company's pro forma net loss for fiscal 1995 was
$10.6 million.

Store Mix. As a result of its store rationalization and capital expenditure
program, the Company's store mix (by number of stores) changed from 54%
conventional, 34% combination food and drug and 12% Omni at the end of fiscal
1991 to 25% conventional, 39% combination food and drug, 19% Fresh Stores and
17% Omni at August 3, 1996. This store mix change, along with the remodels and
departmental improvements discussed above, resulted in a significant increase in
total sales despite the reduction of one store, as average weekly sales per
store increased from $441,000 in fiscal 1991 to $481,000 in fiscal 1995. In
addition, gross margins improved slightly from fiscal 1991 to fiscal 1995 due to
an improvement in gross margin at the Omni stores as the Omni store base matured
and an increase in the number of combination food and drug stores (which
generally have higher margins than conventional stores due to their product mix
and increased offerings of higher-margin perishables). This margin increase was
realized in spite of both the increase in the number of Omni stores as a
percentage of total Company stores, as these stores generally have lower margins
than either conventional supermarkets or combination food and drug stores, and
the negative impact on gross margins resulting from the store disruptions during
the Fresh Store conversions in fiscal 1995. Management believes that as a result
of its store rationalization and capital expenditure programs and its continued
emphasis on opening new Fresh Stores and Omni stores, the Company is well
positioned for future growth.

Fresh Store Conversions. One key aspect of the Company's store
rationalization and capital expenditure programs has been the implementation of
the Fresh Store concept. Dominick's 22 Fresh Stores are enhanced combination
food and drug stores which are designed to create a European-style fresh market
atmosphere and emphasize the store's visual appeal and quality merchandise
perception. The Company's Fresh Stores feature significant upgrades in store
design and offer an expanded assortment of high quality fresh produce and other
perishables, a large selection of restaurant-quality prepared foods for
carry-out and in-store dining and a superior line of freshly baked goods and
pastry items. Fresh Stores also typically offer expanded delicatessen, bakery,
meat, seafood and floral departments, and additional service departments such as
a gourmet coffee cafe. The first Fresh Store was introduced in 1993 through the
conversion of an existing conventional supermarket. A total of 14 stores have
now been converted, resulting in an average increase in customer counts, sales
per square foot and store contribution margins for the converted stores over
pre-conversion levels. In addition, by focusing customers on the increased
offerings of higher-margin perishables and prepared

18
<PAGE> 19

products, the Fresh Store concept is intended to produce a more favorable margin
mix. Although the Company believes that the Fresh Store conversions will
strengthen the Company's financial performance as the converted stores mature,
it also believes that its operating results in fiscal 1994 and fiscal 1995 were
adversely impacted by the conversion program. The conversions completed in
fiscal 1994 and fiscal 1995 generally required complete renovation of the stores
(at an estimated average capital expenditure of approximately $5.2 million per
store conversion) and created significant disruptions to normal retail
operations during the construction period. The Company estimates that the cost
of future Fresh Store conversions will be comparable to such historical costs.
The Company estimates that its capital expenditures associated with the opening
of four new Fresh Stores in fiscal 1996 were approximately $2.7 million per
store. The capital expenditures for opening new Fresh Stores are lower than the
historical cost of conversion due to the fact that store construction is the
responsibility of the site developer and such construction costs are amortized
over the life of the associated lease. In addition, although the converted
stores have generally achieved increased sales levels relatively quickly
following their grand openings as Fresh Stores, their profitability has been
adversely affected during the six-month ramp-up period following such grand
openings as a result of increased promotional costs and other nonrecurring
start-up expenses. The Company held grand openings for six Fresh Stores in
fiscal 1994, eight Fresh Stores in fiscal 1995 and eight Fresh Stores in fiscal
1996. The Company's current expansion plan calls for the construction of nine
new Fresh Stores in fiscal 1997 and the Company is evaluating the feasibility of
converting up to five additional stores to the Fresh Store concept in fiscal
1997. Because future Fresh Store conversions are expected to be completed more
evenly over future periods, the Company does not expect them to cause the same
magnitude of adverse short-term financial consequences which it experienced
during the period of concentrated conversion efforts in fiscal 1994 and fiscal
1995.

Acquisition Accounting. The Acquisition was accounted for as a purchase of
Dominick's by the Company. As a result, all financial statements for periods
subsequent to March 22, 1995, the date the Acquisition was consummated, reflect
Dominick's assets and liabilities at their estimated fair market values as of
March 22, 1995. The purchase price in excess of the fair market value of
Dominick's assets was recorded as goodwill and is being amortized over a 40-year
period. The Company's purchase price allocation resulted in a reduction in the
carrying value of Dominick's fixed assets of approximately $83 million and in
goodwill of approximately $438 million. Dominick's total debt also increased
substantially from approximately $250 million at March 21, 1995 to approximately
$603 million on the date of the Acquisition. As a result of these changes, the
Company's results of operations in periods subsequent to the Acquisition reflect
reduced levels of depreciation and significantly increased levels of
amortization and interest expense. In connection with the Acquisition, the
Company established a closed store reserve in the amount of approximately $26.4
million to cover costs of stores closed, or expected to be closed, at the time
of the Acquisition. For a discussion of certain fees and expenses and other
amounts paid in connection with the Acquisition (which were accounted for as
part of the purchase price), see "The Acquisition" and the Notes to Consolidated
Financial Statements included elsewhere herein.

Forward-Looking Statements. When used in this Prospectus, the words
"estimate," "expect," "project" and similar expressions are intended to identify
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such statements are subject to certain risks and uncertainties,
including those discussed under "Risk Factors" above, that could cause actual
results to differ materially from those projected. These forward-looking
statements speak only as of the date hereof. All of these forward-looking
statements are based on estimates and assumptions made by management of the
Company, which although believed to be reasonable, are inherently uncertain and
difficult to predict; therefore, undue reliance should not be placed upon such
estimates. There can be no assurance that the growth, savings or other benefits
anticipated in these forward-looking statements will be achieved. In addition,
there can be no assurance that unforeseen costs and expenses or other factors
will not offset or adversely affect the expected growth, cost savings or other
benefits in whole or in part. For a discussion of certain risks which may affect
the Company or the trading price of the Common Stock, see "Risk Factors."

19
<PAGE> 20

RESULTS OF OPERATIONS

The following table sets forth the historical operating results of the
Predecessor Company for fiscal 1993 and fiscal 1994, the pro forma operating
results of the Company for the 52 weeks ended October 28, 1995 and the 40 weeks
ended August 5, 1995, in each case giving effect to the Acquisition and certain
related transactions, and the historical operating results of the Company for
the 40 weeks ended August 3, 1996, expressed in millions of dollars and as a
percentage of sales:

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
---------------------------------- -----------------------------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 52 WEEKS 40 WEEKS 40 WEEKS
---------------------------------- ENDED ENDED ENDED
OCT. 30, 1993 OCT. 29, 1994 OCT. 28, 1995 AUG. 5, 1995 AUG. 3, 1996
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales............................... $2,330.2 100.0% $2,409.9 100.0% $2,433.8 100.0% $1,889.1 100.0% $1,900.6 100.0%
Gross profit........................ 515.2 22.1 538.4 22.3 552.1 22.6 423.7 22.4 437.0 23.0
Selling, general and administrative
expenses.......................... 469.4 20.1 484.3 20.1 482.2 19.8 374.9 19.8 372.3 19.6
Operating income.................... 45.8 2.0 54.1 2.2 69.9 2.8 48.8 2.6 64.7 3.4
Interest expense.................... 34.1 1.5 30.0 1.2 72.4 2.9 56.1 3.0 53.4 2.8
Income tax expense.................. 4.1 0.2 9.3 0.4 3.5 0.1 0.7 -- 8.2 0.4
Extraordinary loss on extinguishment
of debt........................... -- -- 6.3 0.3 4.6 0.2 4.6 0.2 -- --
Cumulative effect of accounting
change............................ -- -- 1.0 -- -- -- -- -- -- --
Net income (loss)................... 7.6 0.3 7.5 0.3 (10.6) (0.4) (12.6) (0.6) 3.1 0.2
Preferred stock accretion........... -- -- -- -- 6.3 0.3 4.8 0.3 5.2 0.3
Net income (loss) available to
common stockholders............... $ 7.6 0.3 $ 7.5 0.3 $ (16.9) (0.7) $ (17.4) (0.9) $ (2.1) (0.1)
</TABLE>

The following discussion of the Company's results of operation should be
read in conjunction with the consolidated financial statements of the Company
together with the related notes thereto and other information included elsewhere
herein.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 40 WEEKS ENDED AUGUST 3, 1996
(HISTORICAL) WITH THE 40 WEEKS ENDED AUGUST 5, 1995 (PRO FORMA)

Sales: Sales increased $11.5 million, or 0.6%, from $1,889.1 million in the
40 weeks ended August 5, 1995, to $1,900.6 million in the 40 weeks ended August
3, 1996. The increase in sales in the fiscal 1996 period was primarily
attributable to a 1.1% increase in comparable store sales, partially offset by
the impact of the closure of four conventional stores during fiscal 1995. The
computation of "comparable store" sales growth excludes the sales of a store for
any period if such store or a comparable store was not open during the entire
preceding fiscal year. Replacement stores and stores expanded through remodeling
are considered comparable stores.

Gross Profit: Gross profit increased $13.3 million, or 3.1%, from $423.7
million in the 40 weeks ended August 5, 1995, to $437.0 million in the 40 weeks
ended August 3, 1996. Gross profit as a percentage of sales increased from 22.4%
in the 40 weeks ended August 5, 1995, to 23.0% in the 40 weeks ended August 3,
1996, due primarily to the reduction of product costs resulting from purchasing
improvements and improved perishable and drug department gross profit. The
increase in gross profit from perishables reflects the maturing of the converted
Fresh Stores.

Selling, General and Administrative Expense: Selling, general and
administrative expense ("SG&A") decreased $2.6 million, or 0.7%, from $374.9
million in the 40 weeks ended August 5, 1995 to $372.3 million in the 40 weeks
ended August 3, 1996. SG&A decreased from 19.8% of sales in the 40 weeks ended
August 5, 1995, to 19.6% of sales in the 40 weeks ended August 3, 1996. The
decrease in SG&A reflects improved labor productivity and reduced overhead
costs.

Operating Income: Operating income for the 40 weeks ended August 3, 1996
increased $15.9 million, or 32.6%, from $48.8 million in the 40 weeks ended
August 5, 1995, to $64.7 million as a result of the factors discussed above.

20
<PAGE> 21

Interest Expense: Interest expense decreased from $56.1 million in the 40
weeks ended August 5, 1995 to $53.4 million in the 40 weeks ended August 3, 1996
primarily due to slightly lower interest rates and borrowing levels.

Net Income (Loss): Net income increased $15.7 million from a net loss of
$12.6 million in the 40 weeks ended August 5, 1995 to a net income of $3.1
million in the 40 weeks ended August 3, 1996, as a result of the factors
discussed above. After deducting preferred stock accretion of $4.8 million in
the 40 weeks ended August 5, 1995 and $5.2 million in the 40 weeks ended August
3, 1996, net loss available to common stockholders improved from a loss of $17.4
million in the 40 weeks ended August 5, 1995 to a loss of $2.1 million in the 40
weeks ended August 3, 1996.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 28, 1995 (PRO
FORMA) WITH THE 52 WEEKS ENDED OCTOBER 29, 1994 (PREDECESSOR COMPANY)

Sales: Sales increased $23.9 million, or 1.0%, from $2,409.9 million in
fiscal 1994 to $2,433.8 million in fiscal 1995. The increase in sales in fiscal
1995 was primarily attributable to a 1.8% increase in comparable store sales and
additional sales due to the opening of one new Omni store in May 1994 partially
offset by the impact of the closure of four conventional stores in fiscal 1995.
The growth in comparable store sales primarily reflects strong sales results at
the 14 Fresh Stores opened prior to the end of fiscal 1995.

Gross Profit: Gross profit increased $13.7 million, or 2.5%, from $538.4
million in fiscal 1994 to $552.1 million in fiscal 1995. Gross profit as a
percentage of sales increased from 22.3% in fiscal 1994 to 22.6% in fiscal 1995.
The increase in gross margin was due primarily to the increased gross profit
contribution from the perishable departments resulting from the Fresh Stores
opened prior to the beginning of fiscal 1995 which more than offset the
continuing effects of the Fresh Store conversion program in fiscal 1995.

Selling, General and Administrative Expense: SG&A decreased $2.1 million,
or 0.4%, from $484.3 million in fiscal 1994 to $482.2 million in fiscal 1995.
SG&A decreased from 20.1% of sales in fiscal 1994 to 19.8% of sales in fiscal
1995. The decrease in SG&A as a percentage of sales is due primarily to reduced
depreciation and amortization expenses resulting from purchase accounting
adjustments which reduced the net carrying value of the Company's fixed assets,
offset somewhat by the elimination of certain non-recurring regulatory-ordered
utility refunds which lowered utility costs in fiscal 1994.

Operating Income: Operating income increased $15.8 million, or 29.2%, from
$54.1 million in fiscal 1994 to $69.9 million in fiscal 1995, as a result of the
factors discussed above.

Interest Expense: Interest expense increased from $30.0 million in fiscal
1994 to $72.4 million in fiscal 1995 primarily due to the increased indebtedness
outstanding following the Acquisition.

Net Income (Loss): Net income decreased from $7.5 million in fiscal 1994 to
a net loss of $10.6 million in fiscal 1995. Pro forma net income in fiscal 1995
was adversely affected by an extraordinary charge of $4.6 million associated
with the repayment of $150 million principal amount of Dominick's senior
subordinated credit facility and the prepayment of $50 million principal amount
of Dominick's term loan facilities. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a $1.0 million charge to reflect the cumulative effect on prior years of the
change in the Company's accounting for income taxes. Other factors affecting net
income (loss) are discussed above.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 29, 1994
(PREDECESSOR COMPANY) WITH THE 52 WEEKS ENDED OCTOBER 30, 1993 (PREDECESSOR
COMPANY)

Sales: Sales increased $79.7 million, or 3.4%, from $2,330.2 million in
fiscal 1993 to $2,409.9 million in fiscal 1994. The increase resulted primarily
from a 2.9% increase in comparable store sales, the opening of one new store in
fiscal 1993 and one new store in fiscal 1994 and the completion of one major
remodel and six Fresh Store conversions in fiscal 1994. The increase in
comparable store sales was attributable to continued strong performance of the
Omni format, service department upgrades introduced at Dominick's stores and a
slight improvement in general economic conditions.

21
<PAGE> 22

Gross Profit: Gross profit increased $23.2 million, or 4.5%, from $515.2
million in fiscal 1993 to $538.4 million in fiscal 1994. Gross profit increased
as a percentage of sales from 22.1% in fiscal 1993 to 22.3% in fiscal 1994, due
to an increase in Omni's gross profit which was offset by a slight decrease in
Dominick's gross profit. The decrease in Dominick's gross profit reflected
slightly more promotional activity, partially offset by improvements in product
procurement and an increase in vendor participation in the Company's promotional
costs. The increase in Omni's gross profit resulted primarily from improvements
in product procurement, as well as an increase in vendor participation in the
Company's promotional costs.

Selling, General and Administrative Expense: SG&A increased $14.9 million,
or 3.2%, from $469.4 million in fiscal 1993 to $484.3 million in fiscal 1994.
SG&A as a percentage of sales remained unchanged at 20.1%. The increase in SG&A
is primarily due to the increased sales levels in fiscal 1994 and increased
advertising expenses at the Fresh Stores, offset somewhat by lower utility costs
due to $4.5 million of non-recurring regulatory-ordered utility refunds and
better management of store-level labor costs.

Operating Income: Operating income increased $8.3 million, or 18.1%, from
$45.8 million in fiscal 1993 to $54.1 million in fiscal 1994 as a result of the
factors discussed above.

Interest Expense: Interest expense decreased from $34.1 million in fiscal
1993 to $30.0 million in fiscal 1994. The decrease in interest expense was due
primarily to the reduction in the Company's overall interest expense resulting
from the prepayment of $60 million principal amount of Dominick's 11.78% Senior
Notes.

Net Income (Loss): Net income decreased slightly to $7.5 million in fiscal
1994 from $7.6 million in fiscal 1993. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a $1.0 million charge to reflect the cumulative effect on prior years of a
change in the Company's accounting for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Following the consummation of the Offering, the Company's principal sources
of liquidity will be cash flow from operations, borrowings under the New
Revolving Facilities and capital and operating leases. The Company's principal
uses of liquidity are to provide working capital, finance capital expenditures
and meet debt service requirements.

In connection with the Offering, the Company intends to enter into the New
Credit Facility which will provide for the $100 million amortizing New Term
Loan, the $105 million New Revolving Term Facility and the $120 million New
Revolving Facility, each of which has a six and one-half year term. The New
Revolving Facilities will be available for working capital and general corporate
purposes, including up to $50 million of the New Revolving Facility to support
letters of credit. The Company utilizes letters of credit to cover workers'
compensation self-insurance liabilities and for other general purposes. Letters
of credit for approximately $17.2 million were issued under the Old Credit
Facility at August 3, 1996. Up to $20 million of the New Revolving Facility will
be available as a swingline facility (i.e., a facility which permits same-day
borrowings directly from the agent under the New Credit Facility). The Company
will not be required to reduce borrowings under the New Revolving Facilities by
a specified amount each year. The New Term Loan will require quarterly
amortization payments commencing in the second year following the consummation
of the Offering in amounts ranging from $2.5 million to $7.5 million per
quarter. The Company will also be required to make prepayments under the New
Credit Facility, subject to certain exceptions, with a percentage of its
consolidated excess cash flow and with the proceeds from certain asset sales,
issuances of debt securities and any pension plan reversions. See "Description
of Certain Indebtedness."

The Company will use approximately $51.7 million of the net proceeds of the
Offering in connection with the repurchase of all of its outstanding Redeemable
Preferred Stock. Approximately $35.9 million of the Offering proceeds, together
with approximately $45.0 million of available cash and approximately $187.6
million of borrowings under the New Term Loan and the New Revolving Term
Facility will be used to repay all outstanding borrowings under the Old Credit
Facility. The remaining $10.5 million of

22
<PAGE> 23

net proceeds of the Offering will be used to terminate the Company's obligation
under its consulting agreement with Yucaipa. See "Certain Transactions."

The Company (and the Predecessor Company) generated approximately $81.8
million of cash from operating activities during the 52-week period ended
October 28, 1995 compared to $73.2 million during the 52-week period ended
October 29, 1994. During the 40-week period ended August 3, 1996 the Company
generated approximately $32.4 million of cash from operating activities compared
to $61.0 million generated by the Company (and the Predecessor Company) during
the 40-week period ended August 5, 1995. One of the principal uses of cash in
the Company's operating activities is inventory purchases. However, supermarket
operators typically require small amounts of working capital since inventory is
generally sold prior to the time that payments to suppliers are due. This
reduces the need for short-term borrowings and allows cash from operations to be
used for non-current purposes such as financing capital expenditures and other
investing activities. Consistent with this pattern, the Company had a working
capital deficit of $34.2 million at October 28, 1995 and $6.0 million at August
3, 1996.

The Company (and the Predecessor Company) used $479.2 million in investing
activities for the 52 weeks ended October 28, 1995. Investing activities
consisted primarily of $442.8 million related to the Acquisition (net of cash
acquired) and capital expenditures of $45.5 million. Capital expenditures
related to store remodels, Fresh Store conversions and new store openings and,
to a lesser extent, expenditures for warehousing, distribution, and
manufacturing facilities and equipment, including data processing and computer
systems. The Company used $25.0 million in investing activities for the 40 weeks
ended August 3, 1996, primarily for capital expenditures.

The Company plans to make gross capital expenditures of approximately $56
million (or $23 million net of expected capital leases) in fiscal 1996. Such
expenditures consist of approximately $45 million related to remodels and new
stores, as well as ongoing store expenditures for equipment and maintenance, and
approximately $11 million related to warehousing, distribution and manufacturing
facilities and equipment, including data processing and computer equipment.
Management expects that these capital expenditures will be financed primarily
through cash flow from operations and capital leases. The capital expenditure
budget for fiscal 1996 does not include certain environmental remediation costs
which are estimated to range from approximately $4.1 million to $5.7 million
(the Company's net share of which is currently estimated at approximately $4.3
million, after contributions by the prior owners of the Predecessor Company
pursuant to the terms of the stock purchase agreement associated with the
Acquisition, and for which an accrual has been provided in the Company's
financial statements) and which are expected to be incurred over the next
several years. See "Business -- Environmental Matters." In December 1995, the
Company sold and leased back under capital leases approximately $17 million of
certain existing owned equipment. The Company currently anticipates gross
capital expenditures of approximately $75 million (or $60 million net of
expected capital leases) in fiscal 1997.

The Company has historically utilized leasing facilities to finance the
cost of new store equipment and fixtures. At August 3, 1996, the Company had an
$18 million lease facility available which it anticipates will be substantially
utilized in connection with its new store program in the fourth quarter of
fiscal 1996 and the first quarter of fiscal 1997. The Company will seek
additional lease facilities as required to support its capital expenditure
program. As such lease facilities are utilized, the Company's capital lease
indebtedness will increase by a comparable amount.

The capital expenditure plans discussed above do not include potential
acquisitions which the Company could make to expand within its existing market
or contiguous markets. The Company may consider such acquisition opportunities
from time to time. Any such future acquisition may require the Company to seek
additional debt or equity financing.

The Company is a holding company that has no material operations and no
material assets other than its ownership of the capital stock of Dominick's. As
a result, the Company is dependent upon distributions or advances from
Dominick's to obtain cash to pay dividends or for other corporate purposes.
Dominick's principal debt instruments generally restrict Dominick's from paying
dividends or otherwise distributing cash to the Company, except under certain
limited circumstances, including for the payment of taxes and, subject to

23
<PAGE> 24

limitations, for general administrative purposes. See "Risk
Factors -- Limitations on Access to Cash Flow of Dominick's" and "Description of
Certain Indebtedness."

The Company, in the ordinary course of its business, is party to various
legal actions. One case currently pending alleges gender discrimination by
Dominick's and seeks compensatory and punitive damages in an unspecified amount.
The plaintiffs' motion for class certification is currently pending before the
court, and the Company anticipates that the court will rule on such motion
before the end of the year. Due to the numerous legal and factual issues which
must be resolved during the course of this litigation, the Company is unable to
predict the ultimate outcome of this lawsuit. If Dominick's were held liable for
the alleged discrimination (or otherwise concludes that it is in the Company's
best interest to settle the matter), it could be required to pay monetary
damages (or settlement payments) which, depending on the outcome of the class
certification motion (and the size of any class certified), the theory of
recovery or the resolution of the plaintiffs' claims for compensatory and
punitive damages, could be substantial and could have a material adverse effect
on the Company. Based upon the current state of the proceedings, the Company's
assessment to date of the underlying facts and circumstances and the other
information currently available, and although no assurances can be given, the
Company does not believe that the resolution of this litigation will have a
material adverse effect on the Company's overall liquidity. As additional
information is gathered and the litigation proceeds, the Company will continue
to assess its potential impact. See "Risk Factors -- Potential Adverse Effects
of Pending Litigation" and "Business -- Legal Proceedings."

The Company is highly leveraged. Based upon current levels of operations
and anticipated cost savings and future growth, the Company believes that its
cash flow from operations, together with available borrowings under the New
Revolving Facilities and its other sources of liquidity (including leases) will
be adequate to meet its anticipated requirements for working capital, debt
service and capital expenditures over the next few years.

EFFECTS OF INFLATION

The Company does not believe that inflation has had any significant impact
on the Company's operations. The Company's primary costs, inventory and labor,
are affected by a number of factors that are beyond its control, including, in
addition to inflation, the 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
gross profit 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.

24
<PAGE> 25

BUSINESS

The Company is the second largest supermarket operator in the greater
Chicago metropolitan area with 100 stores. Through its 70 years of operation,
the Company has developed a valuable and strategically located store base,
strong name recognition, customer loyalty and a reputation as a quality and
service leader among Chicago-area supermarket chains. The Company operates 83
full-service supermarkets under the Dominick's(R) name, including 22 Fresh
Stores, and 17 price impact supermarkets under the Omni name. The Company is the
only Chicago-area supermarket chain to operate both full-service and price
impact formats, which allows it to serve a broader customer base and to tailor
its stores to the demographic characteristics of individual store locations. The
Company has a well-maintained and modern store base, with approximately 75% of
its stores new or remodeled since 1989. While the Company's total number of
stores has remained relatively constant since 1989, the Company's average
selling square feet per store has increased by approximately 27%. The Company
also owns and operates two primary distribution facilities totaling
approximately 1.4 million square feet, a satellite facility of approximately
285,000 square feet and a dairy processing plant. In addition, the Company's
management team has proven experience in successfully developing and operating
both full-service and price impact supermarkets. The Company believes these
factors have helped it to increase its market share among Chicago-area
supermarkets from 19.0% in 1989 to 25.4% in 1995.

The Company was incorporated in Delaware in January 1995 and its principal
executive offices are located at 505 Railroad Avenue, Northlake, Illinois 60164,
telephone (708) 562-1000.

STORE FORMATS

DOMINICK'S. The Company's Dominick's format stores are full-service
supermarkets that emphasize quality, freshness and service. The Company
classifies its Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 23 conventional supermarkets are
typically located in higher density population areas, average approximately
43,100 square feet in size (including approximately 28,900 square feet of
selling space) and offer approximately 35,000 SKUs. All of the Company's
conventional supermarkets include a variety of service departments
typically found in full-service supermarkets such as delicatessen, bakery,
meat and seafood departments and a limited selection of health and beauty
care products. In addition, many stores also offer salad bars, prepared
foods, floral departments, film processing and liquor. In fiscal 1991, the
Company began to rationalize its base of 53 conventional supermarkets.
Since then, in addition to the Fresh Store conversions, the Company closed
certain underperforming conventional supermarkets. The Company's 23
remaining conventional supermarkets are stores which are primarily in
locations where either replacement sites are not available or the
demographics of the area do not justify a conversion to a different format.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet (including
approximately 40,300 square feet of selling space) and offer approximately
60,000 SKUs. The combination food and drug stores offer all products and
services typically found in a conventional supermarket and, by virtue of
their large size, include a full service drug store complete with a
pharmacy, a broader line of health and beauty care products and an expanded
selection of seasonal merchandise.

Fresh Stores. Dominick's 22 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures in order to emphasize an expanded assortment of high quality fresh
produce and other perishables, a large selection of restaurant-quality
prepared foods for carry-out and in-store dining and a superior line of
freshly baked goods and pastry items. Fresh Stores also typically offer
expanded delicatessen, bakery, meat, seafood and floral departments and
additional service departments such as a gourmet coffee cafe. The first
Fresh Store was introduced in 1993 through the conversion of an existing
conventional supermarket. A total of 14 stores have been converted to date,
resulting in an average increase in customer counts, sales per square foot
and store contribution margins for the converted stores over pre-conversion
levels. Converted Fresh Stores average approximately 53,000 square feet in
size (including approximately 39,300 square feet of selling space) while
new Fresh Stores are expected to

25
<PAGE> 26

average approximately 70,000 square feet (including approximately 55,000
square feet of selling space). In addition to the 14 converted stores,
eight new Fresh Stores have been opened and an estimated 16 additional
Fresh Stores are expected to be opened or converted by the end of fiscal
1998.

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). The Omni format
has enabled the Company to expand its overall share of the market, as it
attracts the price-conscious shopper who typically would choose a price-oriented
food store over a traditional full-service supermarket. Omni stores have an
approximate 7.2% market share, giving Omni the third largest market share among
Chicago-area supermarkets on a stand-alone basis.

Introduced in 1987 as a response to the entrance of warehouse stores into
the Chicago area, Omni stores offer modified everyday low prices and compete
effectively with warehouse formats and other discount retailers in the Chicago
area. The Company believes that Omni's prices are approximately 10% below those
offered by traditional full-service supermarkets. Omni's marketing program
emphasizes its low prices and reinforces its image with merchandising
presentations such as a "Wall of Values" located near the entrance of the store
which presents the customer with a selection of specially priced merchandise. To
support its low prices, Omni is managed with a strict focus on cost control.
This is achieved through labor efficiencies created by the implementation of
time and cost saving measures such as presenting selected merchandise on
pallets, offering a limited number of service departments and eliminating
certain services such as bagging and customer pickup. The Omni stores also
eliminate certain capital improvements such as more expensive in-store graphics
and fixtures.

All of the Omni stores include service departments in deli, bakery and
seafood, in addition to self-service meat, produce, liquor, bulk foods and club
merchandise departments and a pharmacy. Each Omni store also offers a large
selection of high-turnover general merchandise items typically found in drug and
discount stores, including seasonal items for holiday and back-to-school
seasons. The expanded general merchandise selection is utilized to increase
variety for higher customer draw. All Omni stores also include in-store banking.
Unlike the Dominick's format, the Omni format does not offer salad bars, special
promotions or extensive front-end services.

GROWTH AND OPERATING STRATEGY

Accelerate New Store Program. From 1987 until 1993, the Company's store
development program was focused primarily on developing combination food and
drug stores or converting existing conventional Dominick's stores to the
combination format, closing underperforming stores and creating a critical mass
of Omni stores. From fiscal 1994 until the Acquisition, the Company's growth
plan was focused on the conversion of existing stores to the Fresh Store
concept. During that period, only one new store was opened. Since the
Acquisition, management and Yucaipa have developed a growth strategy designed to
emphasize the expansion of the Dominick's store format in areas currently
underserved by the Company. As part of this strategy, management undertook an
aggressive plan to identify and develop new store sites and has since opened
eight new Fresh Stores during the second half of fiscal 1996. In addition,
management expects to continue to grow the Company's store base by opening nine
Fresh Stores and one Omni store in fiscal 1997 and seven Fresh Stores and one
Omni store in fiscal 1998.

Expand Dominick's Fresh Store Concept. The results of the Company's 14
Fresh Store conversions have been highly favorable and have resulted in an
average increase in estimated annualized sales of approximately 27% compared to
such stores prior to their conversion. It is currently anticipated that
substantially all of the Company's new Dominick's combination food and drug
stores will be Fresh Stores. A number of existing Dominick's conventional
supermarkets and combination food and drug stores will also be converted to
Fresh Stores over the next two years. In addition, certain elements of the Fresh
Store concept, including expanded

26
<PAGE> 27

Continue to Improve Profit Margins. At the time of the Acquisition,
management and Yucaipa identified areas of opportunity for operating
improvements which they believed would result in approximately $23 million of
annual cost reductions compared to pre-Acquisition levels. These included: (i)
purchasing improvements resulting in part from renegotiating vendor contracts
and coordinating its buying efforts with other Yucaipa-managed supermarket
chains, (ii) labor productivity improvements resulting from increased automation
of labor planning systems and changes in labor processes and procedures, (iii)
general and administrative expense and occupancy expense reductions and (iv)
other merchandising and buying improvements. The Company believes that, as of
the end of the third quarter of fiscal 1996, it had implemented operating
improvements which should provide, on an annualized basis, a level of cost
savings substantially equal to the $23 million estimated at the time of the
Acquisition. The Company believes that approximately $17 million of such cost
savings are reflected in its results of operations for the 52-week period ended
August 3, 1996. In addition, since the Acquisition management has identified
additional potential cost savings and efficiencies, including an increase in the
percentage of private label sales which it plans to implement in future periods.
The Company believes that these cost savings, combined with the greater number
of Fresh Stores, should result in higher overall operating margins than the
Company has experienced historically.

STORE DEVELOPMENT

The Company's 70 years of operation in the Chicago area have allowed it to
build its store locations selectively, and management believes that the
Company's current locations include many prime store sites in developed urban
and suburban areas which would be difficult to replicate. In addition to
upgrading its store base through capital expenditures, the Company began to
focus on rationalizing its conventional supermarket base in fiscal 1991. Between
November 1990 and October 1995, 15 conventional supermarkets were closed. This
store rationalization program also included an evaluation of the Company's
perishable departments. In order to maximize the effectiveness of the remaining
conventional supermarkets, the Company began to focus on upgrading their
perishable departments and developing new prototypes to convey a stronger image
of quality, selection and freshness to the customer. Capital investment was
directed toward selectively adding improvements such as European-style bakeries
and enhanced deli departments to existing Dominick's stores. These efforts led
to the introduction of the Fresh Store concept at the beginning of fiscal 1994.
In addition to its remodeling and store rationalization initiatives, the Company
continued to build new stores on a selective basis. From the start of fiscal
1991 through the end of fiscal 1995 the Company opened four combination food and
drug stores and nine Omni stores.

The Company introduced its first Fresh Store in November 1993. To date, the
Company has converted 14 stores to Fresh Stores at a total capital cost of
approximately $70 million and has opened eight new Fresh Stores. The Fresh Store
conversions were very extensive, as these stores required complete overhauls and
expansion of selling space. The results of the Company's 14 conversions of
existing stores to Fresh Stores have been highly favorable and have resulted in
an average increase in annualized sales of approximately 27% compared to such
stores prior to their conversion. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General -- Fresh Store
Conversions."

27
<PAGE> 28

The following table sets forth additional information concerning changes in
the Company's store base.

<TABLE>
<CAPTION>
40 WEEKS PERIOD FROM
FISCAL YEAR ENDED AUG. 4, 1996
------------------------------------ AUG. 3, TO OCT. 22,
1991 1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL STORES:
Beginning of period................... 99 98 101 101 101 97 97
Opened............................. 6 5 1 1 0 4 4
Closed............................. (7) (2) (1) (1) (4) (4) (1)
-- --- --- --- --- -- ---
End of period......................... 98 101 101 101 97 97 100
== === === === === == ===
REMODELS AND CONVERSIONS:
Major remodels........................ 3 4 1 1 4 3 4
Fresh Store conversions............... 0 0 0 6 8 0 0
STORES BY FORMAT (END OF PERIOD):
Dominick's:
Conventional....................... 53 47 45 38 27 24 23
Combination food and drug.......... 33 39 40 40 39 38 38
Fresh Stores....................... 0 0 0 6 14 18 22
-- --- --- --- --- -- ---
Subtotal...................... 86 86 85 84 80 80 83
Omni.................................. 12 15 16 17 17 17 17
-- --- --- --- --- -- ---
Total......................... 98 101 101 101 97 97 100
== === === === === == ===
</TABLE>

MARKET AREA

Chicago is the nation's third largest metropolitan area, with a population
of approximately 7.7 million people and approximately 2.8 million households.
Chicago has a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. The
population base of Chicago is relatively young and affluent compared to the
national average and compared with other leading population centers. In addition
to its attractive demographics, the Chicago metropolitan area has had a
relatively stable economic environment with more stable inflation and
unemployment rates than many other major urban markets. According to the U.S.
Bureau of the Census, the population of suburban Chicago, where nearly 80% of
the Company's stores are located, has grown by approximately 12% since 1986.
According to a recent report issued by the U.S. Department of Commerce, by the
year 2005 the Chicago area is also expected to have a population of 8.3 million
residents and the largest increase in jobs of all of the nation's major
metropolitan areas. The Company believes that its existing market share and its
plans to add new stores will allow it to benefit from the continuing growth of
the Chicago area.

WAREHOUSING, DISTRIBUTION AND PURCHASING

The Company currently owns and operates two primary distribution facilities
with an aggregate of approximately 1.4 million square feet and a satellite
facility of approximately 285,000 square feet for storage of forward buy
inventory. Each store submits orders to the distribution facilities through a
centralized processing system, and merchandise ordered from the warehouses is
normally received at the stores the next day.

The Company's primary warehouse facility is located in Northlake, Illinois
and handles dry grocery, produce, dairy, delicatessen, meat and frozen foods. In
addition, goods prepared at the on-site commissary are cross-docked for delivery
to the stores. The Company's other primary distribution facility, a general
merchandise facility located on the south side of Chicago approximately 15 miles
from the Company's Northlake facility, handles health and beauty care products
and other general merchandise. The Company also owns and operates Ludwig Dairy,
a dairy processing plant in Dixon, Illinois (approximately 100 miles west of
Chicago) that manufactures cultured dairy products and ice cream. A satellite
facility also located in Northlake is currently used only for the storage of
forward buy products and operates at less than 10% of

28
<PAGE> 29

capacity. The Company is currently evaluating the feasibility of selling one of
its warehouse facilities and consolidating its warehousing operations in its
remaining facilities.

The stores receive prepared foods, such as salads and cooked meats, from
the Company's commissary. The commissary also distributes "Chef's Collection"
products, which offer customers restaurant-quality, fully prepared entrees for
carry-out. The commissary is operated as a profit center and charges individual
stores for its services. Management believes that the Company is the only
Chicago-area supermarket chain to operate its own commissary, which gives it
certain competitive advantages, such as higher margins on prepared food,
increased quality control and the ability to develop "signature items" not found
in other supermarkets.

Distribution is accomplished through a Company-operated fleet of tractors
and trailers. Stores are located an average of 15 miles from the principal
distribution center, with the furthest store located approximately 35 miles
away. Management believes this close proximity of the stores to the distribution
facilities results in lower distribution costs and enables the Company to
maintain lower levels of inventory and achieve more efficient warehousing than
would otherwise be possible.

The Company has historically purchased merchandise from a large number of
third party suppliers, none of which supplies a material portion of the
Company's goods and services. The Company is a party to certain exclusivity
contracts for the purchase of products from vendors. While these contracts have
become common in the food retailing industry, the Company has not historically
emphasized such contracts. The Company has begun to focus on such agreements
more aggressively since the Acquisition and is also coordinating its purchasing
efforts with other Yucaipa-managed supermarket chains in an effort to reduce its
product costs. The Company also is pursuing forward buying and secondary
sourcing opportunities. The Company actively participates in a Best Practices
program with all other Yucaipa-managed supermarket chains that is intended to
reduce costs and improve business processes. The Company believes that
additional procurement savings may be realized in the future.

ADVERTISING AND PROMOTION

The Company advertises primarily through direct mail circulars distributed
every Thursday, in addition to Sunday newspaper and radio advertisements.
Television advertising is employed around holidays and other seasonal events to
reaffirm the Company's reputation for high-quality perishables.

The Company's advertising and promotion strategy for its Dominick's stores
stresses their quality, assortment of products, customer service and competitive
prices. Since 1990, the Company has focused its Dominick's print media
advertising on direct mail, which permits highly targeted marketing and supports
the Company's store-specific merchandising goals. On average, the Company
circulates approximately 30 different versions of its Dominick's circular each
week, including eight to ten versions for stores which incorporate the Fresh
Store concept. While all store departments share portions of the weekly
circular, the Company tailors its advertisements to a particular store's trade
area and store type. Management believes direct mail allows for distribution of
the weekly advertising circular at a lower cost and provides more complete
coverage than print advertising in newspapers. The Dominick's stores also
utilize both television and radio advertising.

The Company also employs point-of-sale couponing whereby the Company
provides coupons which are printed with the customer's receipt upon purchase of
certain selected items. Manufacturers pay the Company to print a coupon for one
product when another product is purchased in order to promote complementary or
substitute products. The Company's stores also utilize this type of targeted
marketing to promote items of its choice and to obtain information about
purchasing behavior. To better facilitate the Company's target marketing
programs for its Dominick's stores, the Company is also developing a frequent
shopper card program.

The Company utilizes direct mail circulars as its primary form of
advertising for the Omni stores. By distributing multiple versions of an
advertisement, management believes the Omni stores have been successful in
targeting multiple specific demographic zones from which customers for a
particular store are drawn. Weekly circulars focus on Omni's everyday low prices
and include a variety of weekly specials to draw

29
<PAGE> 30

customers into the store. The Company circulates approximately six different
versions of the Omni circular each week.

PRIVATE LABEL PROGRAM

The Company's private label program represented 11.9% of fiscal 1995 sales
(excluding meats, service delicatessen and produce items) which is significantly
below the national average. One component of management's operating strategy is
to increase private label sales to a level closer to national averages, which
management believes will have a favorable impact on future gross margins. Gross
margins on private label goods are generally eight to ten percent higher than on
national brands, while offering comparable quality at prices that are
approximately 25% lower. Through its private label program, the Company
currently offers approximately 1,750 private label items at Dominick's stores
and approximately 800 private label items at Omni stores. By the end of calendar
1996, the Company intends to introduce the "Private Selection" label as the
premium private label at Dominick's stores. The "Private Selection" label is
owned by Ralph's Grocery Company, a Yucaipa-managed supermarket chain, and will
be licensed to the Company. The Company procures grocery, deli, meat and health
and beauty private label products through Topco Associates, Inc. ("Topco"), a
large, national food buying cooperative. In addition to its "Dominick's" and
"Omni" brand names, the Company features Topco-branded products under the
"Valutime" brand name at its Dominick's stores, under the "Kingston" and "Mega"
brand names at its Omni stores and under the "Top Care" brand name at all of its
stores.

MANAGEMENT INFORMATION AND TRAINING SYSTEMS

In 1989, the Company began modernizing its management information systems
by adopting a "multi-platform" strategy. This entailed upgrading or moving
certain applications from the mainframe to a mid-range or a micro format. The
upgrade of the Company's financial software is substantially complete, while the
upgrade of purchasing software is expected to be completed in approximately one
year. The Company has also initiated an upgrade of its warehousing system and
plans to install radio frequency technology, which will enhance warehouse space
utilization, manpower planning and store service levels. At the store level, all
point-of-sale equipment has been upgraded in the past three years at a cost in
excess of $4 million. Pharmacy terminals that keep detailed patient records and
handle third party billing adjudication have been installed and direct store
delivery receiving and time-and-attendance systems have been largely implemented
at the store level. In addition, new PC-based store-level training systems have
been configured in the Company's stores.

COMPETITION

The supermarket industry is highly competitive and characterized by narrow
profit margins. Supermarket chains generally compete on the basis of location,
quality of products, service, price, product variety and store condition. The
Company's competitors include national and regional supermarket chains,
independent and specialty grocers, drug and convenience stores, warehouse club
stores, deep discount drug stores and supercenters. The Company regularly
monitors its competitors' prices and adjusts its prices and marketing strategy
as management deems appropriate in light of existing conditions.

The Company and Jewel Food Stores ("Jewel"), a subsidiary of American
Stores, Inc., are the leading chains in the Chicago-area market. In 1995, the
Company had a market share of approximately 25.4% among Chicago-area
supermarkets, compared to Jewel which had a market share of approximately 35.6%.
The majority of the Company's other supermarket competitors are regional
supermarket chains or small independent operators, none of which has greater
than a 5% market share. The Company, through its efforts to establish the Omni
format and upgrade its Dominick's format stores, has increased its market share
from approximately 19.0% in 1989 to approximately 25.4% in 1995. A combination
of the strength of Dominick's franchise in the region and the expansion and
successful format differentiation of Omni has helped the Company increase its
market share despite the fact that a substantial number of competitive store
openings occurred in the Chicago metropolitan area between 1989 and 1995.

30
<PAGE> 31

Beginning in the late 1980's and peaking in the early 1990's, a number of
non-traditional competitors opened locations in the Chicago metropolitan area.
These competitors introduced a number of new formats to the Chicago consumer,
including warehouse club stores, mass merchants and supercenters. Though the
Company has traditionally competed primarily with other supermarket chains, the
Company's business strategy has been to compete with these new entrants through
the introduction of its Omni format and continued growth of the Dominick's
combination food and drug stores.

EMPLOYEES AND LABOR RELATIONS

As of August 3, 1996, the Company employed 17,734 people, of whom
approximately 26% were full-time and 74% were part-time. The following table
sets forth additional information concerning the Company's employees.

<TABLE>
<CAPTION>
UNION NON-UNION TOTAL
------ --------- ------
<S> <C> <C> <C>
Salaried....................................... 143 890 1,033
Hourly:
Full-time.................................... 3,157 416 3,573
Part-time.................................... 12,903 225 13,128
------ ----- ------
Total..................................... 16,203 1,531 17,734
====== ===== ======
</TABLE>

Substantially all of the Company's store employees are unionized. Employees
covered by union contracts are represented by six major unions: (i) United Food
and Commercial Workers Union ("UFCW"), (ii) UFCW Union, Meat Division, (iii)
International Brotherhood of Teamsters, (iv) International Brotherhood of
Electrical Workers, (v) Automobile Mechanics Union (International Association of
Machinists and Aerospace Workers) and (vi) Chicago and Northeast Illinois
District Council of Carpenters.

The Company's contracts with its Dominick's retail clerks (covering
approximately 9,400 employees at August 3, 1996) and its Omni meatcutters
(covering approximately 550 employees at August 3, 1996) have expired and
although the Company is currently negotiating with the respective unions for
such employees, no new agreements have been reached. The Company's contract with
the Omni retail clerks has been ratified by the union and is anticipated to be
signed in the near future. The Company's contracts are generally negotiated in
three-year cycles. The Company's contract with the Dominick's meatcutters
expires in July 1997 and the Company's primary Teamsters contract expires in
March 1999. See "Risk Factors -- Labor Relations; Expired Union Contracts."

The Company has never experienced a work stoppage and considers its
relations with its employees to be good. Pursuant to their collective bargaining
agreements, Dominick's contributes to various union-sponsored, multi-employer
pension plans.

TRADE NAMES, SERVICE MARKS AND TRADEMARKS

The Company uses a variety of trade names, service marks and trademarks.
Except for "Dominick's," "Dominick's Finer Foods" and "Omni Superstores," the
Company does not believe any of such trade names, service marks or trademarks is
material to its business. The Company is presently seeking federal registration
of the "Omni Superstores" trademark, and has filed an application to renew the
federal registration for "Dominick's Finer Foods."

GOVERNMENT REGULATION

The Company is subject to regulation by a variety of governmental agencies,
including but not limited to, the U.S. Food & Drug Administration, the U.S.
Department of Agriculture, the Illinois Department of Alcoholic Beverage
Control, the Illinois Department of Agriculture, the Illinois Department of
Professional Regulation and state and local health departments and other
agencies. At present, local regulations prevent the Company from selling liquor,
or certain types of liquor, at certain of its stores.

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<PAGE> 32

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local environmental laws that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (ii) impose liability for the costs of
cleaning up certain damages resulting from sites of past spills, disposals or
other releases of hazardous materials. The Company believes that it currently
conducts its operations, and in the past has operated its business, in
substantial compliance with applicable environmental laws. From time to time,
operations of the Company have resulted, or may result, in noncompliance with or
liability for cleanup pursuant to environmental laws. However, the Company
believes that any such noncompliance or liability under current environmental
laws would not have a material adverse effect on its results of operations and
financial condition. The Company has not incurred material capital expenditures
for environmental controls during the previous three years.

In connection with the Acquisition, the Company and Dominick's conducted
certain investigations (including in some cases, reviewing environmental reports
prepared by others) of the Company's operations and its compliance with
applicable environmental laws. The investigations, which included Phase I and
Phase II assessments and subsequent studies by independent consultants, found
that certain facilities have had or may have had releases of hazardous materials
associated with Dominick's operations or those of other current and prior
occupants that may require remediation, particularly due to releases of
hazardous materials from underground storage tanks and hydraulic equipment. The
costs to remediate such environmental contamination are currently estimated to
range from approximately $4.1 million to $5.7 million. Pursuant to the Stock
Purchase Agreement, the prior owners of Dominick's have agreed to pay one-half
of such remediation costs up to $10 million and 75% of such remediation costs
between $10 million and $20 million. To the extent that the prior owners of
Dominick's fail to reimburse the Company for such remediation costs as they have
agreed, the Company would be required to bear this entire expense and pursue its
remedies against such former owners. Based in part on the investigations
conducted and the cost-sharing provisions of the Stock Purchase Agreement with
respect to environmental matters, the Company believes that its liabilities
relating to these environmental matters will not have a material adverse effect
on its future financial position or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

PROPERTIES

The Company operates a total of 100 stores in the Chicago metropolitan
area, as described in the following table:

<TABLE>
<CAPTION>
AVERAGE SQUARE
NUMBER OF STORES FOOTAGE
-------------------------------- -------------------
OWNED LEASED TOTAL TOTAL SELLING
------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Dominick's:
Conventional............................ 1 22 23 43,100 28,900
Combination food and drug............... 8 30 38 57,600 40,300
Fresh Stores............................ 0 22 22 56,600 42,400
-- -- --- ------ ------
Dominick's total..................... 9 74 83 53,300 37,700
Omni...................................... 3 14 17 92,300 65,300
-- -- --- ------ ------
Company total........................ 12 88 100 60,000 42,400
== == === ====== ======
</TABLE>

At its leased stores, the Company generally enters into long-term net
leases which obligate the Company to pay its proportionate share of real estate
taxes, common area maintenance charges and insurance costs. In addition, such
leases generally provide for contingent rent based upon a percentage of sales
when sales from the store exceed a certain dollar amount. The average remaining
term (including renewal options with increasing rents) of the Company's
supermarket leases is approximately 30 years. Two of the three Omni stores owned
by the Company are subject to long-term ground leases. There are mortgages on
the Company's owned stores totalling approximately $9.3 million at October 28,
1995.

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<PAGE> 33

The Company's administrative offices currently occupy a small portion of an
approximately 285,000 square foot facility at 505 Railroad Avenue (which also
includes a satellite distribution facility) and approximately 171,300 square
feet of space at 333 N. Northwest Avenue in Northlake, Illinois. The Company
also owns and operates two primary warehouse and distribution facilities
totaling 1.4 million square feet and the Ludwig Dairy plant. See "Warehousing,
Distribution and Purchasing."

LEGAL PROCEEDINGS

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiffs' original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second amended
complaint on August 16, 1996 adding three additional plaintiffs. The plaintiffs'
motion for class certification is currently pending before the court, and the
Company anticipates that the court will rule on such motion prior to the end of
the year. The parties are conducting discovery with respect to the pending
motion for class certification. The Company plans to vigorously defend this
lawsuit. Due to the numerous legal and factual issues which must be resolved
during the course of this litigation, the Company is unable to predict the
ultimate outcome of this lawsuit. If Dominick's were held liable for the alleged
discrimination (or otherwise concludes that it is in the Company's best interest
to settle the matter), it could be required to pay monetary damages (or
settlement payments) which, depending on the outcome of the class certification
motion (and the size of any class certified), the theory of recovery or the
resolution of the plaintiffs' claims for compensatory and punitive damages,
could be substantial and could have a material adverse effect on the Company.
Based upon the current state of the proceedings, the Company's assessment to
date of the underlying facts and circumstances and the other information
currently available, and although no assurances can be given, the Company does
not believe that the resolution of this litigation will have a material adverse
effect on the Company's overall liquidity. As additional information is gathered
and the litigation proceeds, the Company will continue to assess its potential
impact.

The Company, in its ordinary course of business, is party to various other
legal actions. Management believes these are routine in nature and incidental to
its operations. Management believes that the outcome of any such other
proceedings to which the Company currently is a party will not have a material
adverse effect upon its business, financial condition or results of operations.
However, adverse developments with respect to any pending or future litigation
could adversely affect the market price of the Company's Common Stock.

33
<PAGE> 34

MANAGEMENT

The following table sets forth certain information with respect to the
members of the Board of Directors and the executive officers of the Company.
Executive officers of the Company are chosen by the Board of Directors and serve
at its discretion.

<TABLE>
<CAPTION>
NAME TITLE AGE
<S> <C> <C>
Ronald W. Burkle Chairman of the Board (l) 43
Robert A. Mariano President, Chief Executive Officer and Director (l) 46
Darren W. Karst Executive Vice President, Finance and 36
Administration, Chief Financial Officer, Secretary
and Director
Robert E. McCoy Executive Vice President of Operations 49
John W. Boyle Group Vice President -- Information Planning and 38
Store Development
Robert R. DiPiazza Group Vice President -- Perishable Merchandising 45
Donald G. Fitzgerald Group Vice President -- Non-Perishable Merchandising 35
and Logistics
Donald S. Rosanova Group Vice President -- Omni Division 47
Herbert R. Young Group Vice President -- Sales, Marketing and 55
Advertising
Peter P. Copses Director 38
Linda McLoughlin Figel Director 32
Patrick L. Graham Director (1) 47
David B. Kaplan Director 29
Mark A. Resnik Director 49
Antony P. Ressler Director 35
</TABLE>

- ------------------------------

(1) Member of the Executive Committee of the Board of Directors.

In accordance with the terms of the Company's Amended and Restated
Certificate of Incorporation, effective upon the closing of the Offering, the
terms of office of the Board of Directors will be divided into three classes:
Class I, Class II and Class III. The terms of office of the respective classes
of directors will be as follows: Class I will expire at the annual meeting of
stockholders to be held in 1997; Class II will expire at the annual meeting of
stockholders to be held in 1998; and Class III will expire at the annual meeting
of stockholders to be held in 1999. At each annual meeting of stockholders
beginning in 1997, the successors to directors whose terms will then expire will
be elected to serve from the time of election and qualification until the third
annual meeting following election and until successors have been duly elected
and have qualified. In addition, the Company's Amended and Restated Certificate
of Incorporation provides that the authorized number of directors may be changed
only by resolution of the Board of Directors. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors. Although directors of the Company may be removed for
cause by the affirmative vote of the holders of a majority of the Common Stock,
the Company's Amended and Restated Certificate of Incorporation provides that
holders of 66 2/3% of the Common Stock must vote to approve the removal of a
director without cause.

The Company has undertaken to appoint an additional director who is not
affiliated with the Company or its principal stockholders promptly following the
consummation of the Offering. The Company has also undertaken to appoint a
second director who is not affiliated with the Company or its principal
stockholders within one year following the consummation of the Offering. Such
persons have not yet been identified. The Board of Directors has an Executive
Committee and intends to establish a Compensation Committee and an Audit
Committee. There are no family relationships among the executive officers or
Directors of the Company.

Pursuant to the Stockholders Agreement among the Company, certain
affiliates of Yucaipa and Apollo and certain other stockholders of the Company,
six of the Company's current directors were selected by Yucaipa and three were
selected by Apollo. Following the consummation of the Offering, Yucaipa and
Apollo

34
<PAGE> 35

will continue to be able to nominate six and three directors, respectively,
provided that certain beneficial ownership requirements set forth in the
Stockholders Agreement continue to be met. See "Description of Capital
Stock -- Stockholders Agreements."

Historically the Company has not paid any compensation to its directors for
serving on the Board, but has reimbursed such persons for their out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors. Following the consummation of the Offering, the Company intends to
pay customary fees to its outside directors for service on the Board, and the
Company anticipates that it will reimburse directors for their out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors.

RONALD W. BURKLE -- Mr. Burkle has been the Chairman of the Company since
March 1995 and served as Chief Executive Officer from March 1995 to January
1996. Mr. Burkle co-founded Yucaipa in 1986 and has served as director and
Chairman of the Board of Food 4 Less Holdings, Inc. ("Food 4 Less") whose
principal operating subsidiary is Ralphs Grocery Company, and Chairman of the
Board and Chief Executive Officer of its predecessor, Food 4 Less Supermarkets,
Inc. since 1987. Mr. Burkle has been a director and the Chief Executive Officer
of Smith's Food & Drug Centers, Inc. ("Smith's") since May 1996 and was Chairman
of the Board of Smitty's Supermarkets, Inc. ("Smitty's") from 1994 until its
merger into Smith's in May 1996. Mr. Burkle also serves as a director of Kaufman
and Broad Home Corporation. Before founding Yucaipa, Mr. Burkle held a number of
supermarket executive positions and was a private investor in Southern
California.

ROBERT A. MARIANO -- Mr. Mariano has been the President and a director of
the Company since March 1995 and Chief Executive Officer since January 1996. Mr.
Mariano also served as Chief Operating Officer from March 1995 until January
1996. Mr. Mariano joined the Company in 1972 and was Senior Vice President of
Marketing and Merchandising from 1994 to 1995, Senior Vice President of
Perishable Merchandising from 1989 to 1994, Senior Vice President of Operations
from 1987 to 1989, and held a number of managerial positions prior to 1987.

DARREN W. KARST -- Mr. Karst joined the Company in March 1995 as Senior
Vice President, Chief Financial Officer, Secretary and a director and was
appointed Executive Vice President, Finance and Administration in March 1996.
Mr. Karst joined Yucaipa in 1988 and has been a general partner since 1991.
Prior to 1988, he was a manager at Ernst & Young LLP.

ROBERT E. MCCOY -- Mr. McCoy has been Executive Vice President of
Operations of the Company since 1996 and served as Senior Vice President of
Operations from 1989 to 1996. Prior to that time, he was Vice President of
Operations at Jewel, where he began his career in 1969.

JOHN W. BOYLE -- Mr. Boyle has been Group Vice President -- Information
Planning and Store Development of the Company since March 1996. Mr. Boyle joined
the Company in January 1995 as Vice President -- Management Information Systems
and became Vice President -- Administration in March 1995. Prior to joining the
Company, Mr. Boyle had been employed as Vice President -- Information Systems at
Food 4 Less Supermarkets, Inc. since 1993, and, before that, had been employed
as a Senior Vice President at Thrifty Drugstores.

ROBERT R. DIPIAZZA -- Mr. DiPiazza has been Group Vice
President -- Perishable Merchandising since March 1996, and, prior to that, had
served as Vice President -- Produce Operations since 1990. Before 1990, Mr.
DiPiazza held a number of other managerial positions at the Company.

DONALD G. FITZGERALD -- Mr. Fitzgerald has been Group Vice
President -- Non-Perishable Merchandising and Logistics since March 1996. Prior
to that time Mr. Fitzgerald had served as Vice President -- Grocery
Merchandising since 1994, as a director of grocery merchandising from 1993 to
1994 and as director of grocery purchasing since 1990. Before 1990 Mr.
Fitzgerald held several other managerial positions at the Company.

DONALD S. ROSANOVA -- Mr. Rosanova has been Group Vice President -- Omni
since March 1996, and, prior to that, had been Vice President -- Distribution
and Transportation since 1992. Before 1992 Mr. Rosanova held several other
managerial positions at the Company.

35
<PAGE> 36

HERBERT R. YOUNG -- Mr. Young has been Group Vice President -- Sales,
Marketing and Advertising of the Company since March 1996 and served as Senior
Vice President of Marketing from March 1995 to 1996. Prior to that time, Mr.
Young was Senior Vice President and General Manager of Omni from 1994 to 1995
and was Senior Vice President of Marketing and Non-Perishable Merchandising from
1990 to 1994. Before joining the Company, he was Executive Vice President of
Topco from 1986 to 1990.

PETER P. COPSES -- Mr. Copses has served as a director of the Company since
March 1995. Mr. Copses also has served as a director of Food 4 Less and Ralphs
since 1995. Since 1990, Mr. Copses has been a limited partner of Apollo
Advisors, L.P. which, together with an affiliate, serves as the managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P., and Apollo Investment
Fund III, L.P., which are private securities investment funds, and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. From
March to September 1990, Mr. Copses was a Vice President in the investment
banking department of Donaldson, Lufkin & Jenrette Securities Corporation. Prior
to 1990, he was employed by Drexel Burnham Lambert Incorporated. Mr. Copses is a
director of Family Restaurants, Inc.

LINDA MCLOUGHLIN FIGEL -- Ms. Figel has been a director of the Company
since August 1996. Ms. Figel also has served as a director of Smith's since May
1996. She joined Yucaipa in 1989 and became a general partner in 1991. Prior to
1989, she was employed by Bankers Trust Company in its Structured Finance Group.

PATRICK L. GRAHAM -- Mr. Graham has served as a director of the Company
since March 1995. Mr. Graham has served as a director of Food 4 Less and Ralphs
since 1995 and served as Vice President and a director of Smitty's from June
1994 until its merger with Smith's in May 1996. Mr. Graham joined Yucaipa as a
general partner in 1993. Prior to that time he was a Managing Director in the
corporate finance department of Libra Investments, Inc. from 1992 to 1993 and
PaineWebber Inc. from 1990 to 1992. Prior to 1990, he was a Managing Director in
the corporate finance department of Drexel Burnham Lambert Incorporated.

DAVID B. KAPLAN -- Mr. Kaplan has served as a director of the Company since
March 1995. Since 1991, Mr. Kaplan has been associated with and is a limited
partner of Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1991, Mr.
Kaplan was a member of the corporate finance department of Donaldson, Lufkin &
Jenrette Securities Corporation. Mr. Kaplan also serves as a director of PRI
Holdings, Inc. and BDK Holdings, Inc.

MARK A. RESNIK -- Mr. Resnik has served as a director of the Company since
March 1995. Mr. Resnik co-founded Yucaipa in 1986, and has served as a director
of Food 4 Less and Ralphs since 1995 and as a director and Vice President of its
predecessor, Food 4 Less Supermarkets, Inc., since 1987. Mr. Resnik served as
Vice President and a director of Smitty's from June 1994 until its merger with
Smith's in May 1996. From 1986 until 1988, Mr. Resnik served as a director and
Vice President of Jurgensen's.

ANTONY P. RESSLER -- Mr. Ressler has served as a director of the Company
since March 1995. In 1990, Mr. Ressler was one of the founding principals of
Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1990, Mr. Ressler was a
Senior Vice President in the high yield bond department of Drexel Burnham
Lambert Incorporated. Mr. Ressler is a director of Family Restaurants, Inc.,
United International Holdings, Vail Resorts, Inc. and PRI Holdings, Inc.

All of the directors named above also serve on the board of directors of
Dominick's.

36
<PAGE> 37

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth information concerning
the compensation of the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (the "Named Executive Officers"),
whose total annual salary and bonus for the 52 weeks ended October 28, 1995
exceeded $100,000 for services rendered in all capacities to the Company and its
subsidiaries for the same period.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(2)
---------------
ANNUAL COMPENSATION SECURITIES
UNDERLYING
FISCAL YEAR -------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION(1) ENDED SALARY($) BONUS($) SARS(#) COMPENSATION($)
------------------------------ ---------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald W. Burkle(3)(4) October 28, 1995 $ -- $ -- -- $ --
Chairman October 29, 1994 -- -- -- --
October 30, 1993 -- -- -- --

Robert A. Mariano(5) October 28, 1995 $334,159 $216,000 146,379 $3,463,718(6)(7)
President and October 29, 1994 216,000 216,000 -- 22,414(6)
Chief Executive Officer October 30, 1993 181,102 23,567 -- 20,631(6)

Darren W. Karst(8) October 28, 1995 $151,570 $ -- 73,189 $ 1,671(9)
Executive Vice President, October 29, 1994 -- -- -- --
Finance and Administration, October 30, 1993 -- -- -- --
Chief Financial Officer and Secretary

Robert E. McCoy October 28, 1995 $236,923 $216,000 146,379 $2,916,273(7)(9)
Executive Vice President October 29, 1994 216,000 216,000 -- 14,484(7)
of Operations October 30, 1993 176,094 21,945 -- 3,777(7)

Herbert R. Young October 28, 1995 $225,617 $210,927 146,379 $2,923,026(7)(9)
Group Vice President October 29, 1994 210,927 210,927 -- 21,045(7)
of Sales, Marketing and October 30, 1993 204,783 17,021 -- 7,620(7)
Administration
</TABLE>

- ------------------------------

(1) Does not include compensation with respect to those executive officers of
the Predecessor Company whose employment was terminated at the time of the
Acquisition and therefore did not become executive officers of the Company.

(2) Information for Messrs. Mariano, McCoy and Young excludes equity-based
compensation of the Predecessor Company which was extinguished in connection
with the Acquisition.

(3) Mr. Burkle provides services to the Company pursuant to the consulting
agreement between Yucaipa and the Company. See "Certain Transactions."
Pursuant to the consulting agreement, the Company paid Yucaipa $1.5 million
in the 32 weeks ended October 28, 1995 for the services of Messrs. Burkle,
Resnik, Graham and other Yucaipa personnel. Such payments to Yucaipa are not
reflected in the table set forth above.

(4) Mr. Burkle served as Chairman and Chief Executive Officer from January 1995
to January 1996.

(5) Mr. Mariano was appointed President and Chief Operating Officer in March
1995 and was subsequently appointed Chief Executive Officer in January 1996.

(6) Includes (i) insurance premiums paid under senior management benefit plans,
(ii) benefits paid under a senior management financial planning plan, (iii)
profit sharing plan contributions made by the Company, (iv) other employee
benefits and (v) for Mr. Mariano, interest forgiven on a promissory note.
The respective amount paid for Messrs. Mariano, McCoy and Young,
respectively, are as follows: (A) insurance premiums: $3,394, $2,612, $5,820
for 1995; $3,394, $2,612, $5,820 for 1994; none in 1993, (B) financial
planning benefits: $0, $8,000, $8,000 for 1995; $0, $8,000, $8,000 for 1994;
none in 1993, (C) forgiven interest: $2,633, $0, $0 for 1995; $12,014, $0,
$0 for 1994; $12,014, $0, $0 for 1993, (D) profit sharing contributions:
$3,288, $3,288, $3,288 for 1995; $2,824, $2,824, $2,824 for 1994; $4,690,
$2,724, $3,162 for 1993; and (E) other benefits: $4,310, $913, $4,458 for
1995; $4,182, $1,048, $4,401 for 1994; $3,927, $1,053, $4,458 for 1993.

(7) Includes the redemption for cash of all Predecessor Company SARs held by
Messrs. Mariano, McCoy and Young at the time of the Acquisition in the
amounts of $3,450,093, $2,901,460, and $2,901,460, respectively.

(8) Mr. Karst joined the Company as Senior Vice President, Chief Financial
Officer and Secretary in March 1995 and was appointed Executive Vice
President, Finance and Administration in March 1996.

(9) Includes employee benefits of $1,671.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company does not have a board committee performing the functions of a
compensation committee. Ronald W. Burkle, the Chairman of the Board and Chief
Executive Officer of the Company during fiscal 1995, and Robert A. Mariano, the
President and Chief Operating Officer of the Company during fiscal 1995, made
decisions with regard to executive officer compensation for fiscal 1995.

37
<PAGE> 38

EMPLOYMENT AGREEMENTS

Concurrently with the consummation of the Acquisition, Dominick's entered
into new employment agreements with certain executive officers. All rights of
such executive officers under their previous employment agreements, including
all rights to receive severance benefits upon a change of control of Dominick's,
terminated at the closing of the Acquisition in consideration of the new
employment agreements described below.

Mariano Employment Agreement. Dominick's and Mr. Mariano entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr.
Mariano was employed as President and Chief Operating Officer (or such other
offices as Dominick's board of directors may designate) at an annual base salary
of $400,000 (subject to increases at the discretion of the board). In January
1996, the board of directors appointed Mr. Mariano to the office of Chief
Executive Officer and raised his annual base salary to $500,000. If Dominick's
meets certain financial targets determined by its board of directors, Mr.
Mariano will also be entitled to receive an annual incentive bonus not to exceed
200% of his annual base salary. Mr. Mariano is eligible to participate in
employee benefit plans generally made available by Dominick's to its executive
officers. At the closing of the Acquisition, Mr. Mariano received a payment of
$864,000 in consideration of the cancellation of certain rights under his prior
employment agreement. Concurrently with the closing of the Acquisition, Mr.
Mariano exchanged 1,200 shares of Dominick's common stock for 190,293 shares of
Common Stock of the Company in a tax-deferred transaction. The employment
agreement may be terminated by either party upon 30 days' notice for any reason,
or immediately by Dominick's for cause. If during the term of the employment
contract, Mr. Mariano resigns or his employment is terminated by Dominick's for
any reason other than for cause, he will be entitled to receive a cash payment
equal to three times his annual base salary, less $864,000, and maintenance at
Dominicks's expense of medical, dental and other benefits for 24 months
following such employment termination.

McCoy Employment Agreement. Dominick's and Mr. McCoy entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. McCoy
was employed at an annual base salary of $250,000. In March 1996, the board of
directors appointed Mr. McCoy to Executive Vice President of Operations and
raised his annual base salary to $300,000. Mr. McCoy is also entitled to receive
an annual incentive bonus, not to exceed 100% of base salary, if Dominick's
meets certain financial targets determined by its board of directors. Mr. McCoy
is entitled to participate in employee benefit plans generally made available by
Dominick's to its executive officers. The employment agreement may be terminated
by either Dominick's or Mr. McCoy upon 30 days' notice for any reason, or
immediately by Dominick's for cause. In consideration of the cancellation of
certain rights under his prior employment agreement, Mr. McCoy received a
payment of $864,000 on March 22, 1996. If Mr. McCoy resigns or his employment is
terminated by Dominick's other than for cause, he is entitled to receive the
discounted present value of the aggregate base salary for the remaining term of
the employment agreement less $864,000, plus the maximum bonus payable in the
year of termination. Unless terminated for cause, Mr. McCoy is also entitled to
continue to receive medical, dental and other employee benefits for the full
three-year term of the employment agreement.

Young Employment Agreement. Dominick's and Mr. Young entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. Young
is employed at an annual base salary of $225,000. Mr. Young is also entitled to
receive an annual incentive bonus, not to exceed 100% of base salary, if
Dominick's meets certain financial targets determined by its board of directors.
Mr. Young is also entitled to participate in employee benefit plans generally
made available by Dominick's to its executive officers. The employment agreement
may be terminated by Dominick's or Mr. Young upon 30 days' notice for any
reason, or immediately by Dominick's for cause. In consideration of the
cancellation of certain rights under his prior employment agreement, Mr. Young
received a payment of $843,708 on March 22, 1996. In the event Mr. Young resigns
or is terminated other than for cause, he is entitled to receive the discounted
present value of the aggregate base salary for the remaining term of the
employment agreement less $843,708, plus the maximum bonus payable in the year
of termination. Unless terminated for cause, Mr. Young will also continue to
receive medical, dental and other employee benefits for the full three-year term
of the employment agreement.

38
<PAGE> 39

FORMER SENIOR MANAGEMENT LONG TERM INCENTIVE PLAN

Prior to the consummation of the Acquisition, the Predecessor Company
maintained a Senior Management Long Term Incentive Plan which awarded SARs to
certain senior executives based upon the individual's length of tenure at the
Predecessor Company and the annual performance of both the individual and the
Predecessor Company. Prior to the consummation of the Acquisition, the
Predecessor Company had approximately 20,800 SARs outstanding, which were held
by 18 current and former officers of the Predecessor Company, including Messrs.
Mariano, McCoy and Young.

Concurrently with the consummation of the Acquisition, approximately $29.5
million of outstanding SARs were redeemed for cash. An additional $2.6 million
of SARs payments that would otherwise have been payable upon consummation of the
Acquisition were cancelled in exchange for the issuance of the Reinvestment
Options (as defined). See "-- 1995 Stock Option Plan."

1995 STOCK OPTION PLAN

On March 19, 1995, the Company adopted the 1995 Stock Option Plan (as
amended, the "1995 Stock Option Plan"), designed to motivate certain executives
to remain in the employ of the Company and to focus their efforts on long-term
financial objectives. Under the 1995 Stock Option Plan, the Company may, from
time to time, grant incentive stock options or nonqualifying options to officers
and other key employees of the Company or its subsidiaries upon the terms,
conditions and provisions of the 1995 Stock Option Plan. Options to purchase a
total of 966,835 shares of Common Stock have been granted under the 1995 Stock
Option Plan and the Company does not intend to grant any additional options
thereunder. Concurrently with the consummation of the Acquisition, the Company
granted each of Messrs. Mariano, McCoy and Young options with a term of ten
years, exercisable for 146,379 shares of Common Stock representing an aggregate
of 1% of the Common Stock and Class B Common Stock outstanding as of the
consummation of the Acquisition. In the case of Mr. Mariano, such options vest
20% per year over five years beginning one year from the date of grant, with an
exercise price equal to $6.83 per share. Messrs. McCoy and Young each received
Reinvestment Options (as defined below) to purchase 97,591 shares of Common
Stock at an exercise price of $1.71 per share which were fully vested and
exercisable on the date of grant, and additional options to purchase 48,788
shares of Common Stock at an exercise price of $6.83 per share which vest 25%
per year over four years beginning two years from the date of grant. Together,
such options entitle each of Messrs. McCoy and Young to purchase 146,379 shares
of Common Stock for an aggregate purchase price of $500,000.

Upon the consummation of the Acquisition, options representing an aggregate
of 2.6% of the total equity of the Company outstanding at such time were issued
to holders of SARs in exchange for the cancellation of approximately $2.6
million of the SARs payments which would otherwise have been payable upon
consummation of the Acquisition (the "Reinvestment Options"). The value of the
SARs payments cancelled were credited against the exercise price for each
Reinvestment Option. The Reinvestment Options were fully vested upon issuance
and are immediately exercisable.

1996 EQUITY PARTICIPATION PLAN

Prior to the consummation of the Offering, it is anticipated that the
Company will adopt the 1996 Equity Participation Plan (the "1996 Equity
Participation Plan") to enable key executive officers, other key employees,
independent directors and consultants of the Company to participate in the
ownership of the Company. The 1996 Equity Participation Plan is designed to
attract and retain executive officers, other key employees, independent
directors and consultants of the Company and to provide incentives to such
persons to maximize the Company's cash flow available for distribution. The 1996
Equity Participation Plan provides for the award to executive officers, other
key employees, independent directors and consultants of the Company of a broad
variety of stock-based compensation alternatives such as nonqualified stock
options, incentive stock options, restricted stock, stock appreciation rights,
performance awards, dividend equivalents and stock payments and provides for the
grant to executive officers, other key employees, independent directors and
consultants of nonqualified stock options. Awards under the 1996 Equity
Participation Plan may provide participants with rights to acquire shares of
Common Stock.

39
<PAGE> 40

The 1996 Equity Participation Plan will be administered by the Board of
Directors (or a Compensation Committee which the Board of Directors may
establish), which is authorized to select from among the eligible participants
the individuals to whom options, restricted stock purchase rights, stock
appreciation rights, performance awards, dividend equivalents and stock payments
are to be granted and to determine the number of shares to be subject thereto
and the terms and conditions thereof. The members of the Board of Directors (or
Compensation Committee, if any) who are not affiliated with the Company will
select from among the eligible participants the individuals to whom nonqualified
stock options are to be granted, except as set forth below, and will determine
the number of shares to be subject thereto and the terms and conditions thereof.
The Board of Directors (or Compensation Committee, if any) is also authorized to
adopt, amend and rescind rules relating to the administration of the 1996 Stock
Option Plan.

Nonqualified Stock Options will provide for the right to purchase Common
Stock at a specified price which may be less than fair market value on the date
of grant (but not less than par value), and usually will become exercisable in
installments after the grant date. Nonqualified stock options may be granted for
any reasonable term.

Incentive Stock Options will be designed to comply with the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and will be subject
to restrictions contained in the Code, including exercise prices equal to at
least 100% of the fair market value of Common Stock on the grant date and a ten
year restriction on their term, but may be subsequently modified to disqualify
them from treatment as an incentive stock option.

Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Board of Directors (or Compensation Committee, if any). Restricted stock,
typically, may be repurchased by the Company at the original purchase price if
the conditions or restrictions are not met. In general, restricted stock may not
be sold, or otherwise transferred or hypothecated, until restrictions are
removed or expire. Purchasers of restricted stock, unlike recipients of options,
will have voting rights and will receive dividends prior to the time when the
restrictions lapse.

Stock Appreciation Rights may be granted in connection with stock options
or other awards, or separately. SARs granted by the Board of Directors (or
Compensation Committee, if any) in connection with stock options or other awards
typically will provide for payments to the holder based upon increases in the
price of the Common Stock over the exercise price of the related option or other
awards, but alternatively may be based upon criteria such as book value. Except
as required by Section 162(m) of the Code with respect to an SAR intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, there are no restrictions specified in the 1996 Equity
Participation Plan on the exercise of SARs or the amount of gain realizable
therefrom, although restrictions may be imposed by the Board of Directors (or
Compensation Committee, if any) in the SAR agreements. The Board of Directors
(or Compensation Committee, if any) may elect to pay SARs in cash or in Common
Stock or in a combination of both.

Performance Awards may be granted by the Board of Directors (or
Compensation Committee, if any) on an individual or group basis. Generally,
these awards will be based upon specific agreements and may be paid in cash or
in Common Stock. Performance awards may include "phantom" stock awards that
provide for payments based upon increases in the price of the Common Stock over
a predetermined period. Performance awards may also include bonuses which may be
granted by the Board of Directors (or Compensation Committee, if any) on an
individual or group basis and which my be payable in cash or in Common Stock or
in a combination of cash and Common Stock.

Dividend Equivalents represent the value of the dividends per share paid by
the Company, calculated with reference to the number of shares covered by the
stock options, SARs or other awards held by the participant.

Stock Payments may be authorized by the Board of Directors (or Compensation
Committee, if any) in the form of shares of Common Stock or an option or other
right to purchase Common Stock as part of a deferred compensation arrangement in
lieu of all or any part of compensation, including bonuses, that would otherwise
be payable in cash to the key employee or consultant.

40
<PAGE> 41

A maximum of 1,000,000 shares will be reserved for issuance under the 1996
Equity Participation Plan.

OPTION GRANTS TABLE
The following Option Grants Table sets forth, as to the Named Executive
Officers, certain information relating to stock options granted during the
fiscal year ended October 28, 1995.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL MARKET ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS PRICE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR ON FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN BASE PRICE GRANT EXPIRATION ----------------------------------
NAME GRANTED (#) FISCAL YEAR (1) ($/SHARE) DATE DATE (2) 0% ($)(3) 5% ($) 10% ($)
----------- --------------- ----------- ------ ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald W. Burkle...... -- -- -- -- -- -- -- --
Robert A. Mariano..... 146,379 15.4% $6.83 $6.83 3/2005 -- $628,895 $1,593,742
Darren W. Karst....... 73,190 7.7% 6.83 6.83 3/2005 -- 314,447 796,871
Robert E. McCoy....... 97,591 10.3% 1.71 6.83 3/2005 $500,000 919,309 1,562,573
48,788 5.1% 6.83 6.83 3/2005 -- 209,610 531,194
Herbert R. Young...... 97,591 10.3% 1.71 6.83 3/2005 500,000 919,309 1,562,573
48,788 5.1% 6.83 6.83 3/2005 -- 209,610 531,194
</TABLE>

- ------------------------------
(1) The total number of shares of Common Stock subject to options granted to
employees in the fiscal year ended October 28, 1995 was 950,379.
(2) Options may terminate before their expiration date if the optionee's status
as an employee or consultant is terminated or upon such optionee's death.
(3) Based upon the market price (i.e., fair market value) of the Common Stock on
the grant date. In the case of Messrs. McCoy and Young, such value relates
to Reinvestment Options issued at the date of Acquisition in lieu of their
respective SAR cancellation payments. See "-- 1995 Stock Option Plan."
(4) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. There can be no assurance that the amounts reflected in this table
will be achieved.

YEAR-END OPTION VALUE TABLE

No Named Executive Officer exercised stock options during the fiscal year
ended October 28, 1995. The following table sets forth certain information
concerning the number of stock options held by the Named Executive Officers as
of October 28, 1995, and the value (based on the fair market value of a share of
stock at fiscal year-end) of in-the-money options outstanding as of such date.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT OCTOBER 28, 1995 AT OCTOBER 28, 1995(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald W. Burkle................................. -- -- -- --
Robert A. Mariano................................ 29,276 117,103 -- --
Darren W. Karst.................................. 14,638 58,552 -- --
Robert E. McCoy.................................. 97,591 48,788 $ 500,000 --
Herbert R. Young................................. 97,591 48,788 $ 500,000 --
</TABLE>

- ------------------------------
(1) Value is based upon the fair market value of the Common Stock at October 28,
1995 minus the exercise price (the "Fair Market Value"). Fair Market Value
has been determined in good faith by the Board of Directors.

SENIOR MANAGEMENT SHORT TERM DISABILITY PLAN

The Company maintains a Short Term Disability Plan ("STD Plan") for its
senior management. Under the STD Plan, an eligible employee who is disabled will
receive payments equal to either 66.67% or 100% of base salary, depending upon
the length of service with the Company, for a period of up to 26 weeks. An
eligible employee is considered disabled if, as a result of injury, covered
illness or pregnancy, the employee is unable to perform the duties of the
officer's regular occupation.

SENIOR MANAGEMENT LONG TERM DISABILITY PLAN

The Company maintains a Long Term Disability Plan ("LTD Plan") for its
senior management, which is designed to provide salary continuation beyond the
coverage extended through the STD Plan. Under the LTD Plan, an eligible employee
who is disabled for 180 days will receive monthly payments equal to 60% of the
employee's monthly earnings (base salary plus bonus), not to exceed a maximum of
$30,000 per month, for the benefit duration specified in the LTD Plan. An
eligible employee is considered disabled if, as a result of injury or illness
for which the employee is under a doctor's care, the employee cannot perform all
of the material and substantial duties of the employee's regular occupation.

41
<PAGE> 42

PRINCIPAL AND SELLING STOCKHOLDERS

The Company's outstanding common equity consists of Common Stock and Class
B Common Stock (together, the "Company Common Stock"). Except as otherwise
described herein, all shares of Common Stock and Class B Common Stock are
identical and entitle the holders thereof to the same rights and privileges
(except with respect to voting privileges). Holders of Class B Common Stock may
elect at any time to convert any or all of such shares into Common Stock, on a
share-for-share basis, to the extent the holder thereof is not prohibited from
owning additional voting securities by virtue of regulatory restrictions. The
holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders of the Company. Except as required by law,
holders of Class B Common Stock do not have the right to vote on any matters to
be voted upon by the stockholders.

The following table sets forth, as of October 1, 1996, the ownership of
Company Common Stock by (i) each person known by the Company to be the owner of
5% or more of the Company Common Stock, (ii) by each person who is a director or
Named Executive Officer of the Company, (iii) by all directors and executive
officers of the Company as a group and (iv) by each Selling Stockholder.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING
----------------------- SHARES -----------------------
NUMBER OF BEING NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
--------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS:
Yucaipa and affiliates:
Yucaipa Blackhawk Partners, L.P. ........ 2,018,106 13.1% -- 2,018,106 9.4%
Yucaipa Chicago Partners, L.P. .......... 253,470 1.6 -- 253,470 1.2
Yucaipa Dominick's Partners, L.P. ....... 663,333 4.3 -- 663,333 3.1
The Yucaipa Companies(2)................. -- -- -- -- --
Yucaipa Management L.L.C.(3)............. -- -- -- -- --
Ronald W. Burkle(4)...................... 2,934,909 19.0 -- 2,934,909 13.7
Linda McLoughlin Figel(2)(5)............. -- -- -- -- --
Patrick L. Graham(2)(6).................. -- -- -- -- --
Darren W. Karst(2)(7).................... 14,637 * -- 14,367 *
Mark A. Resnik(2)(8)..................... -- -- -- -- --
Total............................. 2,949,546 19.0 -- 2,949,546 13.8
Robert A. Mariano(9)....................... 219,568 1.4 -- 219,568 1.0
Robert E. McCoy(10)........................ 97,591 * -- 97,591 *
Herbert R. Young(11)....................... 97,591 * -- 97,591 *
Apollo and affiliates:
Peter P. Copses(12)...................... 5,855,181 37.9 -- 5,855,181 27.4
David B. Kaplan(12)...................... 5,855,181 37.9 -- 5,855,181 27.4
Antony P. Ressler(12).................... 5,855,181 37.9 -- 5,855,181 27.4
Apollo Investment Fund, L.P. ............ 2,927,591 18.9 -- 2,927,591 13.7
Apollo Investment Fund III, L.P. ........ 2,668,412 17.3 -- 2,668,412 12.5
Apollo Overseas Partners III, L.P. ...... 160,036 1.0 -- 160,036 *
Apollo (U.K.) Partners III, L.P. ........ 99,142 * -- 99,142 *
Total (13)........................ 5,855,181 37.9 -- 5,855,181 27.4
BT Investment Partners, Inc.(14)(15)....... 1,332,054 8.6 450,887 881,167 4.1
Bankers Trust New York
Corporation(14)(15)...................... 193,733 1.3 65,577 128,156 *
Chase Equity Associates, L.P.(15)(16)...... 2,272,996 14.7 769,386 1,503,610 7.0
All directors and executive officers as a
group (15 persons)....................... 9,219,477 58.7 -- 9,219,477 42.7
OTHER SELLING STOCKHOLDERS(17):
Bahrain International Bank, E.C. .......... 585,518 3.8% 198,192 387,326 1.8
BHF-Bank Aktiengesellschaft(18)............ 15,647 * 5,296 10,351 *
Continental Casualty Company(18)........... 15,647 * 5,296 10,351 *
Crescent/Mach I Partners, L.P.(19)......... 235,216 1.4 79,619 155,597 *
FSC Corporation(18)........................ 15,647 * 5,296 10,351 *
Indosuez Dominick's Partners............... 878,277 5.7 297,288 580,989 2.7
International Nederlanden (US) Capital
Corp.(18)................................ 15,647 * 5,296 10,351 *
Midland Montagu Private Equity Inc.(18).... 607,050 3.9 205,480 401,570 1.9
TCW Shared Opportunity Fund II, L.P.(20)... 36,594 * 12,387 24,207 *
</TABLE>

42
<PAGE> 43

- ------------------------------

* Less than 1.0%.

(1) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Company Common Stock
owned by such beneficial owner.

(2) Share amounts and percentages for Yucaipa do not include shares issuable
upon exercise of the Yucaipa Warrant, which will become exercisable upon
consummation of the Offering and will entitle Yucaipa to purchase 3,874,492
shares of Common Stock (less a number of shares equal to the aggregate
exercise price, if exercised on a cashless basis) at an exercise price of
$20.73 per share. See "Description of Capital Stock -- Yucaipa Warrant."
Yucaipa is controlled by Ronald W. Burkle. The address of Yucaipa is 10000
Santa Monica Blvd., Los Angeles, California 90067. Ms. Figel and Messrs.
Graham, Karst and Resnik disclaim beneficial ownership of any shares of
Common Stock issuable upon exercise of the Yucaipa Warrant.

(3) Yucaipa Management L.L.C. is a Delaware limited liability company
controlled by Ronald W. Burkle. Yucaipa Management L.L.C. is the sole
general partner of Yucaipa Blackhawk Partners, L.P., Yucaipa Chicago
Partners, L.P., and Yucaipa Dominick's Partners, L.P., which own 2,018,106,
253,470 and 663,333 shares of Common Stock, respectively. The foregoing
limited partnerships are parties to the Stockholders Agreement with certain
other stockholders which gives Yucaipa Management L.L.C. the right to elect
a majority of the directors of the Company. See "Description of Capital
Stock -- Stockholders Agreements." Certain of the limited partners of
Yucaipa Chicago Partners, L.P. are employees of Donaldson, Lufkin &
Jenrette Securities Corporation and its affiliates. In the aggregate, the
proportionate ownership of such employees represents less than 1% of the
outstanding Common Stock.

(4) Represents shares owned by Yucaipa Blackhawk Partners, L.P., Yucaipa
Chicago Partners, L.P., and Yucaipa Dominick's Partners, L.P. These
entities are affiliated partnerships controlled indirectly by Ronald W.
Burkle. Mr. Burkle is the controlling general partner of The Yucaipa
Companies and the controlling managing member of Yucaipa Management L.L.C.
See notes (2) and (3).

(5) Ms. Figel is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. and Yucaipa Dominick's
Partners, L.P. See notes (2) and (3).

(6) Mr. Graham is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. and Yucaipa Dominick's
Partners, L.P. See notes (2) and (3).

(7) Excludes options for 58,552 shares which are not exercisable within 60
days. Mr. Karst is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. See notes (2) and (3).

(8) Mr. Resnik is a general partner of The Yucaipa Companies, a member of
Yucaipa Management L.L.C. and a limited partner of Yucaipa Blackhawk
Partners, L.P. See notes (2) and (3).

(9) Excludes options for 117,103 shares which are not exercisable within 60
days.

(10) Excludes options for 48,788 shares which are not exercisable within 60
days.

(11) Excludes options for 48,788 shares which are not exercisable within 60
days.

(12) The shares reported for each of Messrs. Copses, Kaplan and Ressler are
beneficially owned by Apollo Investment Fund, L.P., Apollo Investment Fund
III, L.P., Apollo Overseas Partners III, L.P. or Apollo (U.K.) Partners
III, L.P. (collectively, the "Apollo Funds"). Messrs. Copses, Kaplan and
Ressler are associated with Apollo Advisors, L.P. and Apollo Advisors II,
L.P., (collectively, "Advisors"), the managing general partners of the
Apollo Funds. See "Management." Messrs. Copses, Kaplan and Ressler disclaim
beneficial ownership of the Common Stock and the Class B Common Stock held
by the Apollo Funds.

(13) The address of Advisors is 2 Manhattanville Road, Purchase, New York 10577.

(14) The address of BT Investment Partners, Inc. and Bankers Trust New York
Corporation is 130 Liberty Street, New York, New York 10006. Bankers Trust
New York Corporation is an affiliate of BT Investment Partners, Inc.
Affiliates of Bankers Trust New York Corporation and BT Investment
Partners, Inc. are administrative agent, co-arranger and lenders under the
Old Credit Facility and will be administrative agent, co-arranger and
lenders under the New Credit Facility and have provided financial advisory,
investment banking or banking services to the Company and its affiliates
from time to time.

(15) Consists of shares of Class B Common Stock. The holder disclaims beneficial
ownership of shares of Common Stock issuable upon conversion of such Class
B Common Stock.

(16) The address of Chase Equity Associates, L.P. is 380 Madison Avenue, New
York, New York 10017. Affiliates of Chase Equity Associates, L.P. are
co-arranger and lenders under the Old Credit Facility and will be
syndication agent, co-arranger and lenders under the New Credit Facility
and have provided financial advisory, investment banking or banking
services to the Company and its affiliates from time to time.

(17) All shares held by the Other Selling Stockholders (other than TCW Shared
Opportunity Fund II, L.P. and Crescent/Mach I Partners, L.P.) are Class B
Common Stock. All such shares being sold pursuant to this Offering will be
converted to Common Stock when sold.

(18) Such Selling Stockholder, or an affiliate thereof, acted as a lender to the
Company under the Senior Subordinated Credit Facility entered in connection
with the Acquisition.

(19) The shares of Common Stock are held beneficially by Crescent/MACH I
Partners, L.P. (the "Partnership") and TCW Asset Management Company
("TAMCO"), as Portfolio Manager, pursuant to a Management Agreement dated
as of December 17, 1993, as amended. The TCW Group, Inc. owns 100% of the
stock of TAMCO. The Portfolio Manager of the Partnership controls the
investment decisions and voting of the shares of Common Stock beneficially
owned by The TCW Group, Inc.

(20) The shares of Common Stock are held beneficially by TCW Shared Opportunity
Fund II, L.P. (the "Fund") and TCW Investment Management Company ("TIMCO"),
as Investment Manager pursuant to an Amended Investment Management
Agreement dated as of October 31, 1995. The TCW Group, Inc. owns 100% of
the stock of TIMCO. The Investment Manager of the Fund controls the
investment decisions and voting of the shares of Common Stock beneficially
owned by The TCW Group, Inc.

43
<PAGE> 44

CERTAIN TRANSACTIONS

YUCAIPA CONSULTING AGREEMENT

On March 22, 1995, the Company and Dominick's entered into a five-year
consulting agreement (the "Consulting Agreement") with Yucaipa for certain
management and financial advisory services to be provided to the Company and its
subsidiaries. The services of Messrs. Burkle, Resnik and Graham and Ms. Figel,
acting in their capacities as directors and/or officers, and the services of
other Yucaipa personnel are provided to the Company, Dominick's and their
respective subsidiaries pursuant to the Consulting Agreement. See "Management."
Messrs. Burkle, Resnik and Graham and Ms. Figel, together with Mr. Karst, are
general partners of Yucaipa. The Consulting Agreement provided for the payment
to Yucaipa of annual management fees in an amount equal to two percent (2.0%) of
Dominick's EBITDA (defined in the Consulting Agreement as net income (or loss)
of Dominick's and its subsidiaries on a consolidated basis, determined in
accordance with generally accepted accounting principles, excluding (i) all net
extraordinary gains or losses, (ii) total interest expense of Dominick's and its
subsidiaries on a consolidated basis, (iii) provisions for taxes based on
income, (iv) total depreciation expense, (v) total amortization expense, (vi)
LIFO provision, and (vii) other non-cash items reducing net income and other
non-cash items increasing net income), plus reimbursement of out-of-pocket
expenses. In connection with the Offering the Company will pay $10.5 million to
Yucaipa to terminate its obligations under the Consulting Agreement. Pursuant to
the Consulting Agreement, Yucaipa received a fee of $14.0 million for consulting
and other services provided in connection with the Acquisition. Fees paid or
accrued under the Consulting Agreement in connection with management services
were approximately $1.5 million during the 32 weeks ended October 28, 1995 and
$2.0 million during the 40 weeks ended August 3, 1996.

MANAGEMENT AGREEMENT

In order to obtain future services from Yucaipa, the Company and Dominick's
will enter into a five-year management agreement (the "Management Agreement")
with Yucaipa upon the consummation of the Offering. In light of the reduced
levels of services anticipated following the consummation of the Offering, the
Management Agreement will provide for the payment of an annual fee to Yucaipa in
the amount of $1.0 million per year. In addition, the Company may retain Yucaipa
in an advisory capacity in connection with certain acquisition or sale
transactions, in which case the Company will pay Yucaipa an advisory fee equal
to one percent (1.0%) of the transaction value. The term of the agreement will
be automatically renewed on April 1 of each year for a five-year term unless 90
days' notice is given by either party. The Management Agreement may be
terminated at any time by the Company upon 90 days' written notice, provided
that Yucaipa will be entitled to full payment of the annual fee under the
agreement for the remaining term thereof, unless the Company terminates for
cause pursuant to the terms of the agreement. Yucaipa may terminate the
agreement if the Company fails to make a payment due thereunder, or upon a
Change of Control (as generally defined in the Management Agreement to include
certain mergers and asset sales, and acquisitions of beneficial ownership of
greater than 51% of the Company's outstanding voting securities by persons other
than Yucaipa). Upon any such termination, Yucaipa will be entitled to full
payment of the annual fee for the remaining term of the agreement.

ACQUISITION-RELATED TRANSACTIONS

In connection with the Acquisition, the Company issued the Yucaipa Warrant
entitling Yucaipa to purchase up to 3,874,492 shares of Common Stock at an
exercise price of $20.73 per share. See "Description of Capital Stock -- Yucaipa
Warrant."

Pursuant to the terms of certain Management Stock Exchange Agreements dated
March 22, 1995, the Company exchanged 190,293 shares of Common Stock (with an
aggregate value at such date of $1,300,000) for shares of restricted common
stock of Dominick's with an equivalent value held by Robert Mariano, the
Company's President and Chief Executive Officer, and exchanged 157,346 shares of
Common Stock (with an aggregate value at such date of $1,075,000) for shares of
restricted common stock of Dominick's with an equivalent value held by three
other management employees of the Company.

44
<PAGE> 45

Concurrently with the consummation of the Acquisition, the Company redeemed
for cash approximately $29.5 million of outstanding SARS of Dominick's held by
18 officers of Dominick's, including Messrs. Mariano, McCoy and Young. In
connection with such redemption transactions, Messrs. Mariano, McCoy and Young
received $3,450,093, $2,901,460 and $2,901,460, respectively. In addition, an
additional $2.6 million of SARS payments that would otherwise have been payable
upon consummation of the Acquisition were cancelled in exchange for the issuance
by the Company of Reinvestment Options (as defined), including 97,591 such
options issued to each of Messrs. McCoy and Young, exercisable for Common Stock
at a price of $1.71 per share. See "Management -- 1995 Stock Option Plan."

DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS

The total amount of authorized capital stock of the Company consists of 50
million shares of Common Stock, par value $0.01 per share, 10 million shares of
Non-Voting Common Stock, par value $0.01 per share (the "Non-Voting Common
Stock"), 8.5 million shares of which are designated as Class B Common Stock, and
4 million shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"). Upon completion of the Offering and the application of the net proceeds
therefrom, 14,932,648 shares of Common Stock will be issued and outstanding,
6,426,387 shares of Class B Common Stock will be issued and outstanding, and no
shares of Preferred Stock will be outstanding. The discussion herein describes
the Company's capital stock, the Amended and Restated Certificate of
Incorporation and Bylaws which will be in effect upon consummation of the
Offering. The following summary of certain provisions of the Company's capital
stock describes all material provisions of, but does not purport to be complete
and is subject to, and qualified in its entirety by, the Amended and Restated
Certificate of Incorporation and the Bylaws of the Company that are included as
exhibits to the Registration Statement of which this Prospectus forms a part and
by the provisions of applicable law.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share of Common
Stock on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. As of October 1, 1996, there were 7,024,654 shares of
Common Stock outstanding held by 43 holders of record. The issued and
outstanding shares of Common Stock are, and the shares of Common Stock being
offered will, upon payment therefor, be validly issued, fully paid and
nonassessable. Subject to the prior rights of the holders of any Preferred
Stock, the holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board may from time to time determine. See "Dividend Policy."

The shares of Common Stock are not redeemable or convertible, and the
holders thereof have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive pro rata, along
with the holders of Non-Voting Common Stock, the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "DFF," subject to official notice of issuance. The
Company has also applied to list the Common Stock on the Chicago Stock Exchange.

The transfer agent and registrar for the Common Stock will be First Chicago
Trust Company of New York.

NON-VOTING COMMON STOCK

The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of shares of Non-Voting Common Stock in series
and may, at the time of issuance, determine the rights, preferences and
limitations of each series, including, without limitation, rights in respect of
dividends, conversion or exchange rights and rights upon the liquidation,
dissolution or winding up of the Company.

45
<PAGE> 46

Satisfaction of any dividend preferences, if any, of outstanding shares of
Non-Voting Common Stock would reduce the amount of funds available for the
payment of dividends on shares of Common Stock. Holders of Non-Voting Common
Stock will not be entitled to vote on matters submitted to a vote of
stockholders, except as may be required by law. Upon consummation of the
Offering, the only designated series of Non-Voting Common Stock will be the
Class B Common Stock, which does not have any preference over the Common Stock.

Class B Common Stock

Unless otherwise required by law, holders of the Class B Common Stock are
not entitled to vote on matters submitted to a vote of stockholders of the
Company, including the election of directors. Holders of Class B Common Stock
may elect at any time to convert any or all of such shares into Common Stock, on
a share-for-share basis, provided that, subject to certain exceptions, shares of
Class B Common Stock beneficially owned by a bank holding company or an
affiliate of a bank holding company may not be converted into shares of Common
Stock if immediately after such conversion such holder and its affiliates would
own more than 4.9% of any class of voting securities of the Company.

As of October 1, 1996, there were 8,434,381 shares of Class B Common Stock
outstanding held by 14 holders of record. The issued and outstanding shares of
Class B Common Stock are validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class B Common Stock are entitled to receive dividends out
of assets legally available therefor at such times and in such amounts as the
Board may from time to time determine. See "Dividend Policy."

The shares of Class B Common Stock are not redeemable or convertible other
than into shares of Common Stock, and the holders thereof have no preemptive or
subscription rights to purchase any securities of the Company. Upon liquidation,
dissolution or winding up of the Company, the holders of Class B Common Stock
are entitled to receive pro rata, along with the holders of Common Stock, the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of Preferred Stock then outstanding.

The Amended and Restated Certificate of Incorporation provides that the
Company may not effect a stock split (whether by dividend or otherwise), reverse
stock split, reclassification or other similar event with respect to the Common
Stock unless it effects at the same time an identical stock split, reverse stock
split, reclassification or other similar event with respect to the Class B
Common Stock. Subject to certain exceptions, the approval of the holders of at
least 66 2/3% of the outstanding shares of Class B Common Stock, voting as a
separate class, is required for any capital reorganization or other
reclassification of the capital stock of the Company, any merger or
consolidation of the Company, or any sale of all or substantially all the
Company's assets, if as a result of any of the foregoing holders of shares of
Class B Common Stock would receive, or such shares would be converted into or
exchanged for, consideration which is different on a per share basis than the
consideration received with respect to or in exchange for or on conversion of
shares of Common Stock or would otherwise be treated differently on a per share
basis from shares of Common Stock in connection with such transaction.

PREFERRED STOCK

The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of additional shares of Preferred Stock in
series and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds available
for the payment of dividends on shares of Common Stock. Holders of shares of
Preferred Stock may be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of shares of Common Stock. Under certain circumstances, the
issuance of shares of Preferred Stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of the Company's securities or the removal of
incumbent management.

46
<PAGE> 47

The Board, without stockholder approval, may issue shares of Preferred Stock
with voting and conversion rights which could adversely affect the holders of
shares of Common Stock. Upon consummation of the Offering and the application of
the net proceeds therefrom, there will be no shares of Preferred Stock
outstanding, and the Company currently has no present intention to issue any
shares of Preferred Stock.

CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
BYLAWS

The Amended and Restated Certificate of Incorporation provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a meeting. The
Amended and Restated Certificate of Incorporation and the Bylaws provide that,
except as otherwise required by law, special meetings of the stockholders can
only be called pursuant to a resolution adopted by a majority of the Board of
Directors or by the Chief Executive Officer of the Company or by the holders of
a majority of the outstanding Common Stock.

The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board. Stockholders at an
annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of the
Board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to the
Company's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. Pursuant to the Bylaws,
stockholder action may only be taken at a meeting of the stockholders and may
not be effected by written consent without a meeting. Although the Bylaws do not
give the Board the power to approve or disapprove stockholder nominations of
candidates or proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the conduct of
certain business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company.

SECTION 203 OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly-held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the transaction
in which the person became an "interested stockholder" or the business
combination is approved by the Board of Directors prior to the date the
interested stockholder obtained such status, (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 for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer or (iii) on or subsequent to such date the "business
combination" is approved by the Board of Directors 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." A "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within three years, did own) 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General Corporation
Law. In addition, the Amended and Restated

47
<PAGE> 48

Certificate of Incorporation provides that the Company shall indemnify directors
and officers of the Company to the fullest extent permitted by such law.

STOCKHOLDERS AGREEMENTS

Under the terms of the Stockholders Agreement entered into by the Company,
certain affiliates of Yucaipa and Apollo and certain other stockholders of the
Company, Yucaipa is entitled to nominate six directors to the Board of Directors
and the board of directors of Dominick's. Yucaipa's right to nominate members to
such boards of directors will be reduced by three if Mr. Burkle ceases for any
reason to beneficially own at least 33 1/3% of the shares beneficially owned by
Yucaipa on the date of the Acquisition and shall terminate if Mr. Burkle ceases
for any reason (including death) to beneficially own at least 25% of the shares
beneficially owned by Yucaipa on such date. The Stockholders Agreement entitles
Apollo to nominate three directors to the Board of Directors and the board of
directors of Dominick's. Apollo's right to nominate members to such boards of
directors will be reduced by one if Apollo ceases to beneficially own at least
33 1/3% of the shares beneficially owned by Apollo on the date of the
Acquisition and shall terminate if Apollo ceases to beneficially own at least
25% of the shares beneficially owned by Apollo on such date. If Apollo ceases to
own at least 25% of the shares beneficially owned by Apollo on the date of the
Acquisition and the parties to the Stockholders Agreement other than Apollo
beneficially own at least 33 1/3% of the shares of Common Stock beneficially
owned by such stockholders on the date of the Acquisition, Yucaipa will be
entitled to nominate an additional member to the Board of Directors and the
board of directors of Dominick's. Notwithstanding the foregoing, however, Apollo
may assign its rights to nominate two directors to a transferee (other than an
affiliate of Yucaipa) acquiring at least 66 2/3% of the shares held by Apollo on
the date of the Acquisition. The Stockholders Agreement provides that the
parties thereto shall vote their shares and take all actions otherwise necessary
to ensure the election to such boards of the Yucaipa nominees and the Apollo
nominees. The Yucaipa nominees to such boards are Messrs. Burkle, Resnik, Karst,
Graham and Mariano and Ms. Figel. The Apollo nominees are Messrs. Copses, Kaplan
and Ressler. In addition, Apollo and certain other stockholders will have the
right to participate in any bona fide transfer of the pecuniary interests in
Common Stock beneficially owned by Yucaipa and its affiliates. In certain
circumstances, Yucaipa will have the right to compel the participation of Apollo
and other stockholders in sales of all the outstanding shares of Company stock.
As of the date of the Acquisition, Yucaipa and its affiliates beneficially owned
an aggregate of 2,934,909 shares of Company capital stock and Apollo and its
affiliates owned an aggregate of 5,855,181 shares of Company capital stock.
Following the consummation of the Offering, affiliates of Yucaipa and Apollo
will beneficially own approximately 13.8% and 27.4%, respectively, of the
outstanding Common Stock, representing an equivalent percentage of the total
voting power of the Company (assuming conversion by Apollo of 2,455,224 shares
of Class B Common Stock into Common Stock).

Each member of management of the Company holding shares of Common Stock,
Reinvestment Options or other Company stock options (collectively, the
"Management Stockholders") executed a management stockholders agreement with the
Company (collectively, the "Management Stockholders Agreements"). The Management
Stockholders Agreements generally provide the Company with a right of first
refusal in the event of proposed sales of Common Stock acquired by the
Management Stockholders upon the exercise of stock options and an option,
exercisable following any termination for cause of a Management Stockholder's
employment or if the Management Stockholder commences employment with a
competitor, to repurchase at Fair Market Value (as defined in the Management
Stockholders Agreements) any Common Stock acquired by such Management
Stockholder upon the exercise of Company stock options. Each Management
Stockholders Agreement contains certain rights of the Management Stockholders to
participate in sales by Yucaipa of Common Stock and certain obligations of the
Management Stockholders to sell their Common Stock in the case of a sale for
cash of all outstanding Common Stock. Finally, the Management Stockholders are
required to vote their Common Stock to elect to the Board of Directors the
directors nominated by Yucaipa and Apollo. The Management Stockholders
Agreements, and all rights and obligations of the Management Stockholders
thereunder described above, will terminate following the Offering.

48
<PAGE> 49

YUCAIPA WARRANT

Upon the closing of the Acquisition, the Company issued to Yucaipa a
warrant to purchase shares of Common Stock (the "Yucaipa Warrant"). The Yucaipa
Warrant will become exercisable at the election of Yucaipa upon the consummation
of the Offering at an exercise price of $20.73 per share. If not exercised, the
Yucaipa Warrant will expire on March 22, 2000; provided, however, that if on
such date certain financial performance requirements are satisfied, the
expiration date will be extended to March 22, 2002 and, in such case, the
exercise price is increased daily at a rate of 25% per annum. The Yucaipa
Warrant may be exercised for cash or on a cashless basis. Pursuant to the
cashless exercise provisions of the Yucaipa Warrant, upon exercise in full
Yucaipa would be entitled to receive a number of shares equal to the difference
between 3,874,492 shares and that number of shares having a market value as of
the exercise date equal to $80.3 million (i.e., the aggregate exercise price).

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
21,359,035 shares of Common Stock and Class B Common Stock. All of the shares
sold in this Offering will be freely tradeable by persons other than affiliates
of the Company.

RULE 144

In general, Rule 144, as currently in effect, provides that a person (or
persons whose sales are aggregated) who is an affiliate of the Company or who
has beneficially owned shares which are issued and sold in reliance upon certain
exemptions from registration under the Securities Act ("Restricted Shares") for
at least two years is entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent (1%) of the then
outstanding shares of Common Stock (beginning on the 91st day immediately after
this Offering) or the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the filing of a notice of intent to sell.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. However, a person who is not deemed to have been an "affiliate" of the
Company at any time during the three months preceding a sale, and who has
beneficially owned Restricted Shares for at least three years, would be entitled
to sell such shares under Rule 144 without regard to volume limitations,
manner-of-sale provisions, notice requirements or the availability of current
public information about the Company. If a proposed amendment to Rule 144 is
adopted, the two- and three-year holding period requirements described above
would be reduced to one and two years, respectively. The Company, each of the
Company's executive officers and directors and certain stockholders have agreed,
subject to certain exceptions relating to the Company, that they will not,
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock, Class B Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of such Common Stock or Class B
Common Stock, or to cause a registration statement covering any shares of Common
Stock to be filed, for a period of 180 days after the date of this Prospectus,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. See "Underwriting."

After the expiration of the lock-up period, 12,925,411 shares of Common
Stock and Class B Common Stock (including Common Stock issuable upon conversion
of the Class B Common Stock, but excluding shares issuable upon exercise of the
Yucaipa Warrant or any employee stock options) will be eligible for sale
pursuant to Rule 144, subject to certain volume limitation and other
requirements.

Prior to the Offering, there has been no public market for the shares of
Common Stock or Class B Common Stock, and no predictions can be made as to the
effect that sales of Common Stock or Class B Common Stock under Rule 144,
pursuant to a registration statement or otherwise, or the availability of shares
of Common Stock or Class B Common Stock for sale, will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception

49
<PAGE> 50

that such sales could occur, could adversely affect prevailing market prices and
could impair the Company's future ability to raise capital through an offering
of its equity securities.

REGISTRATION RIGHTS

Pursuant to a Registration Rights Agreement entered into in connection with
the Acquisition (the "Registration Rights Agreement"), Apollo, and certain other
investors as a group, were each granted two demand and unlimited piggyback
registration rights with respect to Common Stock. The Company intends to enter
into a similar registration rights agreement with certain affiliates of Yucaipa
prior to the consummation of the Offering, which will also provide that at any
time prior to March 22, 1998 such Yucaipa affiliates may require the Company to
file a shelf registration statement pursuant to Rule 415 under the Securities
Act and maintain such shelf registration statement continuously effective for a
period of 12 months after the effective date thereof. Upon the consummation of
the Offering, there will be 12,925,411 shares of Common Stock and Class B Common
Stock held by stockholders with registration rights pursuant to such agreements.
Registration rights can be exercised at any time after the date of this
Prospectus subject to the 180-day lock-up period described under "Underwriting."

THE ACQUISITION

On March 22, 1995, the Company consummated the Acquisition for an aggregate
purchase price of approximately $692.9 million, including $124.5 million of
assumed indebtedness (but excluding the Company's fees and expenses of
approximately $41.2 million). The Company effected the Acquisition by acquiring
100% of the capital stock of Dominick's parent, formerly known as Dodi, Inc.
("Dodi"), for $346.6 million in cash and $40 million of the Company's Redeemable
Preferred Stock. In addition, the Company repaid $34.3 million of secured
promissory notes issued by Dominick's prior to the Acquisition to discharge all
obligations under its SARs plan and to repurchase shares of Dominick's
restricted stock held by certain management employees (the "Management Stock
Transactions"). In connection with the Acquisition, the Company refinanced
$135.7 million of Dominick's existing indebtedness (including premiums and
accrued interest), assumed $124.5 million of existing capital leases and other
indebtedness and paid $11.8 million of employment termination, seller advisory
and other seller fees and expenses.

The principal sources of cash to finance the Acquisition were (i) $330
million in term loans under the Old Credit Facility, consisting of the $140
million six-year amortizing Tranche A Loans, the $60 million seven-year
amortizing Tranche B Loans, the $65 million eight-year amortizing Tranche C
Loans and the $65 million eight and one-half year amortizing Tranche D Loans
(collectively, the "Term Loan Facilities"); (ii) the $150 million unsecured
Senior Subordinated Credit Facility; (iii) a $100 million cash investment in the
Company's common stock by certain affiliates of Yucaipa and certain other
institutional investors, including affiliates of Apollo and affiliates of BT
Securities Corporation and Chase Securities, Inc. In addition, certain members
of the Company's management made a $5 million equity investment in the Company
by cancelling SARs or exchanging restricted stock of Dominick's for Common Stock
or Company stock options.

Prior to the Acquisition, Dominick's distributed two parcels of owned real
estate with a net book value of $3.2 million to its parent, Dodi, which, in
turn, distributed these parcels, together with several parcels of real estate
owned by two other subsidiaries of Dodi, to one of its shareholders (the
"Excluded Properties Transactions"). Dominick's entered into new leases for the
stores located on the two Dominick's owned parcels which were distributed.
Pursuant to the terms of a tax matters agreement dated as of March 22, 1995 the
sellers agreed, subject to certain conditions and limitations, to indemnify the
Company for any taxable gains resulting from the Excluded Properties
Transactions, to the extent such gains are not offset by certain specified
deductions related to the Management Stock Transactions.

In connection with the Acquisition, the Company and Yucaipa entered into
the Consulting Agreement pursuant to which Yucaipa received a $14 million
consulting fee. In addition, Yucaipa received the Yucaipa Warrant. See "Certain
Transactions" and "Description of Capital Stock -- Yucaipa Warrant."

50
<PAGE> 51

The following table illustrates the sources and uses of funds to consummate
the Acquisition:

SOURCES AND USES
(dollars in millions)
<TABLE>
<CAPTION>
CASH SOURCES
- -------------------------------------------------
<S> <C>
Term Loan Facilities.................... $330.0
Senior Subordinated Credit Facility..... 150.0
Equity Investment (Common Stock)(a)..... 100.0
------
Total Cash Sources.................... $580.0
------

<CAPTION>
NON-CASH SOURCES
- -------------------------------------------------
<S> <C>
Redeemable Preferred Stock.............. $40.0
Assumed capital leases.................. 111.9
Assumed mortgages and other............. 12.6
------
Total Non-Cash Sources.................. $164.5
------
Total Sources........................... $744.5
======
<CAPTION>
CASH USES
- -------------------------------------------------
<S> <C>
Purchase Dodi capital stock............. $346.6
Repay existing bank debt................ 24.2
Repay 11.78% Senior Notes(b)............ 111.5
Payment for management stock and SARs... 34.3
Working capital......................... 10.4
Fees and expenses(c).................... 41.2
Employment termination, seller advisory
and other fees(d)....................... 11.8
------
Total Cash Uses......................... $580.0
------
<CAPTION>
NON-CASH USES
- -------------------------------------------------
<S> <C>
Purchase Dodi capital stock............. $40.0
Assumed capital leases.................. 111.9
Assumed mortgages and other............. 12.6
------
Total Non-Cash Uses..................... $164.5
------
Total Uses.............................. $744.5
======
</TABLE>

- ------------------------------
(a) Does not include the $5 million equity investment by certain members of the
Company's management.

(b) Amount represents the $90 million principal amount of the Company's 11.78%
Senior Notes, plus a prepayment premium and accrued interest.

(c) Amount includes a $14.0 million payment to Yucaipa for advisory and other
services provided in connection with the Acquisition.

(d) Represents amount payable to three departing senior officers and one
continuing senior officer under employment contracts, a fee payable to the
sellers' financial advisor and certain other payments to the sellers.

DESCRIPTION OF CERTAIN INDEBTEDNESS

NEW CREDIT FACILITY

In connection with the Offering, the Company intends to enter into the New
Credit Facility with a syndicate of financial institutions. The following is a
summary of the material terms and conditions presently anticipated with respect
to the New Credit Facility. This summary does not purport to be a complete
description of the New Credit Facility, however, and is subject to the detailed
provisions of the loan agreement (the "Loan Agreement") and various related
documents to be entered into in connection with the New Credit Facility, copies
of which will be filed as exhibits to the Registration Statement.

General

The New Credit Facility will provide for a $100 million amortizing New Term
Loan, a $105 million New Revolving Term Facility and a $120 million New
Revolving Facility, each of which has a six and one-half year term. The New
Revolving Term Facility and the New Revolving Facility will be available for
working capital and general corporate purposes, and up to $50 million of the New
Revolving Facility may be used to support letters of credit. The Company
utilizes letters of credit to cover workers' compensation, self-insurance
liabilities and for other general purposes.

Interest Rate; Fees

Borrowings under (i) the New Revolving Facilities and the New Term Loan
will bear interest at a rate equal to, at the option of the Company, the Base
Rate (defined in the Loan Agreement generally to mean the higher of (i) Bankers
Trust Company's prime rate or (ii) the federal funds rate plus 0.5%) plus 0.50%
per annum or the reserve adjusted Euro-Dollar Rate (as defined in the Loan
Agreement) plus a maximum 1.50% per annum (subject to reduction as certain
financial tests are satisfied). Up to $20 million of the New

51
<PAGE> 52

Revolving Facility will be available as a swingline facility and loans
outstanding under the swingline facility shall bear interest at the Base Rate
plus 0.125% per annum (subject to reduction as certain financial tests are
satisfied). Applicable interest rates on the New Term Loan, the New Revolving
Term Facility, the swingline loans and the New Revolving Facility and the fees
payable under the New Revolving Facility on letters of credit, will be reduced
by up to 0.75% per annum (or up to 0.50% per annum in the case of Base Rate
loans) if the Company meets certain financial tests. The Company will pay the
issuing bank a fee of 0.25% per annum on each standby letter of credit and a fee
to be negotiated with the issuing bank on each commercial letter of credit and
will pay the lenders under the New Revolving Facility a letter of credit fee for
standby letters of credit and commercial letters of credit equal to the
applicable margin for Euro-dollar loans under the New Revolving Facility. Each
of these fees will be calculated based on the amount available to be drawn under
a letter of credit. In addition, the Company will pay a commitment fee on the
unused portions of the New Revolving Facilities and for purposes of calculating
this fee, the swingline facility shall not be deemed to be outstanding. The New
Credit Facility may be prepaid in whole or in part without premium or penalty.

Amortization Prepayments

The New Term Loan matures in six and one-half years and is subject to
amortization on a quarterly basis, commencing in the second year of the
facility, in aggregate annual amounts of $10 million in the second year of the
facility; $10 million in the third year; $15 million in the fourth year; $20
million in the fifth year; $30 million in the sixth year and $15 million in the
final six months. The New Revolving Term Facility and the New Revolving Facility
will also mature in six and one-half years. There will not be any annual
cleandown provisions in the New Revolving Term Facility or the New Revolving
Facility. The Company will be required to make certain prepayments, subject to
certain exceptions, on the New Credit Facility with a specified percentage
(which may be reduced to zero if certain financial tests are satisfied) of its
Consolidated Excess Cash Flow (as defined in the Loan Agreement) and with the
proceeds from certain asset sales, issuances of debt securities and any pension
plan reversions.

Guarantees and Collateral

The Company and all subsidiaries of the Company (other than Dominick's)
will guarantee Dominick's obligations under the New Credit Facility. Dominick's
obligations and the guarantees of the Company and its subsidiaries will be
secured by substantially all personal property of the Company and its
subsidiaries, including a pledge of the stock of all subsidiaries of the
Company. The Company's guarantee will be secured by a pledge of the stock of all
of the Company's subsidiaries (including the stock of Dominick's). Dominick's
obligations and the guarantees of the Company and its subsidiaries will also be
secured by first priority liens on certain real property fee interests of the
Company and its subsidiaries. The Company and its subsidiaries will use their
reasonable economic efforts to provide the lenders with a first priority lien on
certain leasehold interests of the Company and its subsidiaries.

Covenants

It is anticipated that the obligation of the lenders under the New Credit
Facility to advance funds will be subject to the satisfaction of certain
conditions customary in agreements of this type. In addition, the Company will
be subject to certain customary affirmative and negative covenants contained in
the New Credit Facility, including, without limitation, covenants that restrict,
subject to specified exceptions, (i) the incurrence of additional indebtedness
and other obligations, (ii) the granting of liens, (iii) the making of certain
investments and joint ventures, (iv) the incurrence of certain contingent
obligations, (v) the payment of certain dividends and restricted payments, (vi)
mergers and acquisitions and other fundamental corporate changes, (vii) cash
capital expenditures, (viii) the incurrence of lease obligations and (ix)
engaging in transactions with affiliates.

It is anticipated that the New Credit Facility will also impose on the
Company and its subsidiaries certain financial tests and minimum ratios which,
among other things, require that the Company (a) maintain a minimum fixed charge
coverage ratio; (b) maintain, during each fiscal quarter, a ratio of
Consolidated Total Debt (as defined in the Loan Agreement) to Consolidated
Adjusted EBITDA (as defined in the Loan

52
<PAGE> 53

Agreement); and (c) maintain at all times a minimum Consolidated Net Worth (as
defined in the Loan Agreement).

Events of Default

The New Credit Facility will also provide for customary events of default.
The occurrence of any of such events of default could result in acceleration of
the Company's obligations under the New Credit Facility and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the Common Stock.

SENIOR SUBORDINATED NOTES DUE 2005

Dominick's 10 7/8% Senior Subordinated Notes (the "Senior Subordinated
Notes") were issued on May 4, 1995 in an aggregate principal amount of $200.0
million. The Senior Subordinated Notes are subordinated to the prior payment
when due of all Senior Indebtedness (as defined in the Note Indenture) and are
guaranteed on a senior subordinated basis by Dominick's wholly-owned
subsidiaries. The Senior Subordinated Notes bear interest at a rate of 10 7/8%
per annum, payable on May 1 and November 1 of each year. The Senior Subordinated
Notes mature on May 1, 2005. On or after May 1, 2000, the Senior Subordinated
Notes may be redeemed in whole or in part, at any time, or in part from time to
time, at the option of Dominick's, at a redemption price equal to the applicable
percentage of the principal amount thereof set forth below, plus accrued and
unpaid interest to the redemption date, if redeemed during the 12 months
commencing on May 1, of the years set forth below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000...................................................... 104.833%
2001...................................................... 103.765%
2002...................................................... 102.417%
2003...................................................... 101.208%
2004 and thereafter....................................... 100.000%
</TABLE>

In addition, on or prior to May 1, 1998 Dominick's may, at its option, use
the net cash proceeds from one or more Public Equity Offerings (as defined in
the Note Indenture) to redeem up to an aggregate of 33 1/3% of the principal
amount of the Senior Subordinated Notes originally issued, at a redemption price
equal to 109.667% of the principal amount thereof if redeemed during the 12
months commencing on May 1, 1996, and 108.458% of the principal amount thereof
if redeemed during the 12 months commencing on May 1, 1997, in each case plus
accrued and unpaid interest, if any, to the redemption date.

The Note Indenture provides that if a Change of Control (as defined
therein) occurs, each holder will have the right to require Dominick's to
repurchase such holder's Senior Subordinated Notes pursuant to a Change of
Control Offer (as defined therein) at 101% of the principal amount thereof plus
accrued interest, if any, to the date of repurchase.

The Note Indenture contains certain covenants, including, but not limited
to, covenants with respect to the following matters: (i) limitations on
dividends and other restricted payments; (ii) limitations on incurrences of
additional indebtedness; (iii) limitations on liens; (iv) limitations on asset
sales; (v) limitations on dividend and other payment restrictions affecting
subsidiaries; (vi) limitations on transactions with affiliates; (vii)
limitations on preferred stock of subsidiaries; (viii) limitations on mergers
and certain other transactions; (ix) limitations on other senior subordinated
indebtedness; and (x) limitations on guarantees of certain indebtedness.

The covenant in the Note Indenture which places limitations on Dominick's
ability to pay dividends and make other restricted payments to the Company
generally provides that Dominick's may pay such dividends or make such payments
if (i) no default or event of default shall have occurred under the Note
Indenture; (ii) Dominick's would be able to borrow at least $1.00 of additional
indebtedness under the provision of the Note Indenture which permits debt to be
incurred if Dominick's pro forma fixed charge coverage ratio is greater than 2.0
to 1.0; and (iii) the aggregate amount spent for all such restricted payments
does not exceed the sum of (a) 50% of Dominick's consolidated net income (plus
100% of any consolidated net loss) from

53
<PAGE> 54

May 4, 1995 to the date of the payment, plus (b) 100% of the net proceeds
received from the issuance of qualified capital stock, or from any capital
contributions to Dominick's, after May 4, 1995; plus (c) $10 million.
Notwithstanding the foregoing limitations, Dominick's is generally permitted to
make certain permitted payments to the Company, including payments for taxes
pursuant to the terms of a tax sharing agreement, to permit the repurchase of
certain employee stock, and to permit the Company to perform legal, accounting,
corporate reporting and administrative functions in the ordinary course of
business.

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and Chase
Securities Inc. are acting as representatives (the "Representatives") have
severally agreed to purchase from the Company and the Selling Stockholders an
aggregate of 8,000,000 shares of Common Stock. The number of shares of Common
Stock that each Underwriter has agreed to purchase is set forth opposite its
name below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
---------------------------------------------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............. 2,100,000
Morgan Stanley & Co. Incorporated............................... 2,100,000
BT Securities Corporation....................................... 525,000
Chase Securities Inc. .......................................... 525,000
Bear, Stearns & Co. Inc. ....................................... 100,000
CS First Boston Corporation..................................... 100,000
Alex. Brown & Sons Incorporated................................. 100,000
Deutsche Morgan Grenfell........................................ 100,000
A.G. Edwards & Sons, Inc........................................ 100,000
Goldman, Sachs & Co. ........................................... 100,000
Lehman Brothers Inc. ........................................... 100,000
Merrill Lynch & Co. ............................................ 100,000
Montgomery Securities........................................... 100,000
J. P. Morgan Securities Inc. ................................... 100,000
PaineWebber Incorporated........................................ 100,000
Prudential Securities Incorporated.............................. 100,000
Salomon Brothers Inc............................................ 100,000
Smith Barney Inc. .............................................. 100,000
Arnhold and S. Bleichroeder, Inc. .............................. 50,000
Robert W. Baird & Co. Incorporated.............................. 50,000
William Blair & Company, L.L.C. ................................ 50,000
The Chicago Corporation......................................... 50,000
Cleary Gull Reiland & McDevitt Inc. ............................ 50,000
Dain Bosworth Incorporated...................................... 50,000
EVEREN Securities Inc. ......................................... 50,000
First of Michigan Corporation................................... 50,000
GS(2) Securities Inc. .......................................... 50,000
Interstate/Johnson Lane Corporation............................. 50,000
Legg Mason Wood Walker Incorporated............................. 50,000
McDonald & Company Securities, Inc. ............................ 50,000
The Ohio Company................................................ 50,000
Ormes Capital Markets, Inc. .................................... 50,000
Parker/Hunter Incorporated...................................... 50,000
</TABLE>

54
<PAGE> 55

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
---------------------------------------------------------------- ---------
<S> <C>
Ragen MacKenzie Incorporated.................................... 50,000
Redwine & Company Inc. ......................................... 50,000
Rodman & Renshaw, Inc........................................... 50,000
Ryan, Beck & Co. ............................................... 50,000
Sands Brothers & Co., Ltd. ..................................... 50,000
Scott & Stringfellow, Inc. ..................................... 50,000
Stephens Inc. .................................................. 50,000
Sutro & Co. Incorporated........................................ 50,000
Tucker Anthony Incorporated..................................... 50,000
Vector Securities International, Inc. .......................... 50,000
Wedbush Morgan Securities....................................... 50,000
Wheat First Butcher Singer...................................... 50,000
---------
Total................................................. 8,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares (other than
shares covered by the over-allotment option described below) must be purchased.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public initially at a price to the public set
forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not to exceed $0.70
per share. The Underwriters may allow, and such dealers may re-allow, discounts
not in excess of $0.10 per share to any other Underwriter and certain other
dealers.

The Selling Stockholders have granted to the Underwriters an option to
purchase up to an aggregate of 1,200,000 additional shares of Common Stock, at
the initial public offering price net of underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time within
30 days after the date of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

Subject to certain exceptions, the Company, the Selling Stockholders and
certain other stockholders who are parties to the Stockholders Agreement have
agreed not to directly or indirectly, offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or in any
other manner transfer all or a portion of the economic consequences associated
with the ownership of such Common Stock, or to cause a registration statement
covering any shares of Common Stock to be filed, for a period of 180 days from
the date of this Prospectus, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation.

Because an affiliate of Chase Securities, Inc. beneficially owns in excess
of 10% of the common equity of the Company, the underwriting arrangements for
the Offering must be made in compliance with certain requirements of Rule 2720
(the "Rule") of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD"). In this regard, Donaldson, Lufkin & Jenrette
Securities Corporation will act as "qualified independent underwriter" within
the meaning of the Rule and is assuming the responsibilities of acting as a
qualified independent underwriter in pricing the Offering and conducting due
diligence. As compensation for the services of Donaldson, Lufkin & Jenrette
Securities Corporation as a qualified independent underwriter, the Company has
agreed to pay the amount of $5,000. Certain employees of

55
<PAGE> 56

Donaldson, Lufkin & Jenrette Securities Corporation are limited partners in
Yucaipa Chicago Partners, L.P., which beneficially owns 253,470 shares of Common
Stock. In the aggregate, the proportionate ownership of such employees
represents less than 1% of the outstanding Common Stock.

Affiliates of BT Securities Corporation and Chase Securities Inc. are
co-arrangers and lenders under the Old Credit Facility and will be co-arrangers
and lenders under the New Credit Facility for which they have received and will
receive customary fees. A portion of the proceeds of the Offering is being used
to repay amounts outstanding under the Old Credit Facility and such affiliates
will receive their proportionate share of such repayment. See "Use of Proceeds."
From time to time the Representatives and their affiliates have provided, and
may in the future provide, financial advisory, investment banking or banking
services to the Company and its affiliates.

Pursuant to the requirements of the Rule, the Underwriters will not confirm
sales of Common Stock to any accounts over which they exercise discretionary
authority without the prior specific written approval of the transaction by the
customer.

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price has been determined by
negotiations between the Company and the Underwriters. Among the factors
considered in determining the initial public offering price were the history of,
and prospects for, the Company and the supermarket industry generally, an
assessment of the Company's management, its past and present operations and
financial performance, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the Offering, and the
market prices of and demand for publicly traded common stock of comparable
companies in recent periods.

No action has been taken in any jurisdiction by the Company or the
Underwriters that would permit a public offering of Common Stock offered
pursuant to the Offering in any jurisdiction where action for that purpose is
required, other than the United States. The distribution of this Prospectus and
the offering or sale of Common Stock offered hereby may not be offered or sold,
directly or indirectly, and neither this Prospectus nor any other offering
material or advertisements in connection with the Common Stock may be
distributed or published, in or from any jurisdiction, except under
circumstances that will result in compliance with applicable rules and
regulations of any such jurisdiction. Such restrictions may be set out in
applicable Prospectus supplements. Persons into whose possession this Prospectus
comes are required by the Company and the Underwriters to inform themselves
about and to observe any applicable restrictions. This Prospectus does not
constitute an offer of, or an invitation to subscribe for purchase, any shares
of Common Stock and may not be used for the purpose of an offer to, or
solicitation by, anyone in any jurisdiction or in any circumstances in which
such offer or solicitation is not authorized or is unlawful.

No underwriter may offer or sell and, prior to the date six months after
the latest closing date, offer or sell any Common Stock in the United Kingdom by
means of any document other than to persons whose ordinary activity is to buy
and sell securities or debentures, whether as principal or agent, or in
circumstances that do not constitute an offer to the public within the meaning
of the public offers of Securities Regulations 1996. Each underwriter will (i)
comply with all applicable provisions of The Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom and (ii) only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
common stock to any person of a kind described in article II(3) of The Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or to any
person to whom the document may otherwise lawfully be issued or passed on.

The Common Stock has been approved for listing on the New York Exchange,
subject to official notice of issuance. In order to meet the requirements for
listing on the New York Stock Exchange, the Underwriters have undertaken to sell
lots of 100 or more shares of Common Stock to a minimum of 2,000 beneficial
holders. The Company has also applied to list the Common Stock on the Chicago
Stock Exchange.

56
<PAGE> 57

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Latham & Watkins, Los Angeles, California. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York.

EXPERTS

The consolidated financial statements of Dominick's Supermarkets, Inc. as
of October 28, 1995 and October 29, 1994 (Predecessor Company) and for the
period October 30, 1994 through March 21, 1995 (Predecessor Company), the period
March 22, 1995 through October 28, 1995, and for the two years in the period
ended October 29, 1994 (Predecessor Company) appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-1 under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Company will provide without charge to each person to whom a prospectus is
delivered a copy of any information incorporated by reference herein (not
including exhibits thereto), upon written or oral request of such person to the
Company, 505 Railroad Avenue, Northlake, Illinois 60164 (telephone (708)
562-1000). For further information with respect to the Company and the Common
Stock, reference is hereby made to the Registration Statement and the exhibits
and schedules thereto. The Registration Statement may be inspected, without
charge, and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a World Wide Web site that
contains registration statements, reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system. This World Wide Web site can be
accessed at http://www.sec.gov.

57
<PAGE> 58

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets as of October 29, 1994 (Predecessor Company), October 28,
1995 and August 3, 1996 (unaudited)................................................. F-3
Consolidated Statements of Operations for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-4
Consolidated Statements of Stockholders' Equity for the 52 weeks ended October 30,
1993, the 52 weeks ended October 29, 1994, the 20 weeks ended March 21, 1995
(Predecessor Company), the 32 weeks ended October 28, 1995 and the 40 weeks ended
August 3, 1996 (unaudited).......................................................... F-5
Consolidated Statements of Cash Flows for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-6
Notes to Consolidated Financial Statements............................................ F-7
Unaudited Pro Forma Financial Statements.............................................. P-1
</TABLE>

F-1
<PAGE> 59

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Dominick's Supermarkets, Inc.

We have audited the accompanying consolidated balance sheets of Dominick's
Supermarkets, Inc. as of October 28, 1995 and October 29, 1994 (Predecessor
Company), and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period October 30, 1994 through March 21, 1995
(Predecessor Company), the period March 22, 1995 through October 28, 1995, and
for the two years in the period ended October 29, 1994 (Predecessor Company).
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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Dominick's
Supermarkets, Inc. at October 28, 1995 and October 29, 1994 (Predecessor
Company), and the results of its operations and its cash flows for the period
October 30, 1994 through March 21, 1995 (Predecessor Company), the period March
22, 1995 through October 28, 1995, and for the two years in the period ended
October 29, 1994 (Predecessor Company), in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1994,
the Predecessor Company changed its method of accounting for income taxes.

/s/ ERNST & YOUNG LLP
Chicago, Illinois
January 5, 1996
except for Note 12, as to which
the date is October 24, 1996

F-2
<PAGE> 60

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY PRO FORMA
----------- --------------------------- -----------
OCTOBER 29, OCTOBER 28, AUGUST 3, AUGUST 3,
1994 1995 1996 1996
----------- ----------- ----------- -----------
(UNAUDITED) (NOTE 1)
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 18,094 $ 55,551 $ 66,827
Receivables, net......................... 24,051 25,314 11,787
Inventories.............................. 168,241 182,880 179,962
Prepaid expenses & other................. 17,622 10,573 14,166
-------- ---------- ----------
Total current assets............. 228,008 274,318 272,742
Property and equipment, net.............. 429,699 353,015 350,789
Other assets:
Deferred financing costs, net............ 942 22,567 20,667
Goodwill, net............................ -- 419,298 422,707
Other, net............................... 10,316 31,011 28,031
-------- ---------- ----------
Total other assets............... 11,258 472,876 471,405
-------- ---------- ----------
Total assets............................... $668,965 $1,100,209 $1,094,936
======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $147,588 $ 171,209 $ 141,062
Accrued payroll and related
liabilities........................... 37,431 31,579 29,668
Taxes payable............................ 25,623 7,958 23,150
Other accrued liabilities................ 34,404 83,422 75,048
Current portion of long-term debt........ 862 9,771 2,108
Current portion of capital lease
obligations........................... 4,381 4,565 7,738
-------- ---------- ----------
Total current liabilities........ 250,289 308,504 278,774
Long-term debt:
Term loans............................... 141,977 281,109 273,789
Senior Subordinated Notes................ -- 200,000 200,000
Capital lease obligations.................. 108,486 103,921 121,075
Deferred income taxes and other
liabilities.............................. 51,540 66,730 78,291
Redeemable Exchangeable Cumulative
Preferred Stock Series A preferred stock,
$.01 par value, 40,000 shares authorized,
40,000 issued and outstanding,
liquidation and redemption at $1,000 per
share plus accumulated and unpaid
dividends................................ -- 43,722 48,951 $ --
Stockholders' equity:
Common Stock - $.10 par value, 300,000
shares authorized, 263,600 shares
issued and outstanding at October 29,
1994.................................. 26 -- -- --
Common Stock - $.01 par value 36,594,895
shares authorized, 6,996,505 shares
issued and outstanding at October 28,
1995, 7,012,607 shares issued and
outstanding at August 3, 1996......... -- 70 70 70
Class B Common Stock - $.01 par value,
36,594,895 shares authorized,
8,434,392 shares issued and
outstanding at October 28, 1995,
8,434,392 shares issued and
outstanding at August 3, 1996......... -- 84 84 84
Additional paid-in capital............... 334 107,739 107,688 107,688
Retained earnings (deficit).............. 116,313 (11,670) (13,786) (13,786)
-------- ---------- ----------
Total stockholders' equity....... 116,673 96,223 94,056 94,056
-------- ---------- ----------
Total liabilities and stockholders'
equity................................... $668,965 $1,100,209 $1,094,936
======== ========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE> 61

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------ COMPANY
52 WEEKS -------------------------------------------
ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
--------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Sales..................... $ 2,330,231 $ 2,409,911 $958,742 $ 1,474,982 $ 930,351 $1,900,550
Cost of sales............. 1,814,951 1,871,535 747,561 1,136,600 719,738 1,463,514
---------- ---------- -------- ---------- ---------- ----------
Gross profit.............. 515,280 538,376 211,181 338,382 210,613 437,036
Selling, general and
administrative
expenses................ 469,499 484,288 191,999 293,872 185,152 372,376
SARs termination costs.... -- -- 26,152 -- -- --
---------- ---------- -------- ---------- ---------- ----------
Operating income (loss)... 45,781 54,088 (6,970) 44,510 25,461 64,660
Interest expense:
Interest expense,
excluding amortization
of deferred financing
costs................. 33,811 29,857 11,238 44,480 24,789 51,272
Amortization of deferred
financing costs....... 351 135 69 1,460 1,361 2,137
---------- ---------- -------- ---------- ---------- ----------
34,162 29,992 11,307 45,940 26,150 53,409
Income (loss) before
income taxes,
extraordinary loss and
cumulative effect of
accounting change....... 11,619 24,096 (18,277) (1,430) (689 ) 11,251
Income tax expense
(benefit)............... 4,026 9,236 (7,135) 1,933 1,373 8,138
---------- ---------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change....... 7,593 14,860 (11,142) (3,363) (2,062 ) 3,113
Extraordinary loss on
extinguishment of debt,
net of applicable tax
benefit of $3,896 in
fiscal 1994 and $2,824
in the 1995 periods..... -- (6,324) -- (4,585) (4,585 ) --
Cumulative effect of
accounting change....... -- (1,019) -- -- -- --
---------- ---------- -------- ---------- ---------- ----------
Net income (loss)......... $ 7,593 $ 7,517 $(11,142) (7,948) (6,647 ) 3,113
========== ========== ========
Preferred stock
accretion............... 3,722 2,265 5,229
---------- ---------- ----------
Net loss available to
common stockholders..... $ (11,670) $ (8,912 ) $ (2,116 )
========== ========== ==========
PER SHARE DATA
Loss before extraordinary
loss.................... $ (0.46) $ (0.29 ) $ (0.14 )
Extraordinary loss........ (0.30) (0.30 ) --
---------- ---------- ----------
Loss per common share..... $ (0.76) $ (0.59 ) $ (0.14 )
========== ========== ==========
Average number of shares
outstanding............. 15,411,793 15,360,811 15,488,574
========== ========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE> 62

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------- PAID-IN EARNINGS
PREDECESSOR COMPANY SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1992.............. 265,300 $ 26 $ 573 $102,896 $103,495
Net income............................... -- -- -- 7,593 7,593
Cash dividend -- $2.00 per share......... -- -- -- (531) (531)
Common stock purchased and retired....... (1,000) -- (177) (136) (313)
--------- --- -------- -------- --------
BALANCE AT OCTOBER 30, 1993.............. 264,300 26 396 109,822 110,244
Net income............................... -- -- -- 7,517 7,517
Cash dividend -- $3.00 per share......... -- -- -- (793) (793)
Common stock purchased and retired....... (700) -- (62) (233) (295)
--------- --- -------- -------- --------
BALANCE AT OCTOBER 29, 1994.............. 263,600 26 334 116,313 116,673
Net loss................................. -- -- -- (11,142) (11,142)
Cash dividend -- $3.00 per share......... -- -- -- (791) (791)
--------- --- -------- -------- --------
BALANCE AT MARCH 21, 1995................ 263,600 $ 26 $ 334 $104,380 $104,740
========= === ======== ======== ========
COMPANY
BALANCE AT MARCH 22, 1995
Issuance of common stock................. 14,985,610 $150 $ 104,850 $ -- $105,000
Net income (loss)........................ -- -- -- (7,948) (7,948)
Preferred stock accretion................ -- -- -- (3,722) (3,722)
Other.................................... 445,287 4 2,889 -- 2,893
--------- --- -------- -------- --------
BALANCE AT OCTOBER 28, 1995.............. 15,430,897 154 107,739 (11,670) 96,223
--------- --- -------- -------- --------
Net income (unaudited)................... -- -- -- 3,113 3,113
Preferred stock accretion (unaudited).... -- -- -- (5,229) (5,229)
Other (unaudited)........................ 16,102 -- (51) -- (51)
--------- --- -------- -------- --------
BALANCE AT AUGUST 3, 1996 (UNAUDITED).... 15,446,999 $154 $ 107,688 $(13,786) $ 94,056
========= === ======== ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 63

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------------------------- ---------------------------------------
52 WEEKS
ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................... $ 7,593 $ 7,517 $(11,142) $ (7,948) $ (6,647) $ 3,113
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Extraordinary loss on debt
extinguishment......................... -- -- -- 7,409 7,409 --
Depreciation and amortization............ 51,075 52,862 20,499 25,364 17,740 34,722
Amortization of deferred financing
costs.................................. 351 135 69 1,460 1,361 2,137
Stock appreciation rights................ 369 1,966 26,825 -- -- --
Deferred income taxes.................... (2,194) (645) (3,890) 7,625 -- --
Cumulative effect of accounting change... -- 1,019 -- -- -- --
Loss (gain) on disposal of capital
assets................................. 1,948 74 1,149 (25) -- 5
Changes in operating assets and
liabilities, net of acquisition:
Receivables............................ (788) 6,794 2,546 (5,218) (775) 13,427
Inventories............................ 8,862 (10,780) 7,209 (683) 21,493 2,918
Prepaid expenses....................... (643) 1,072 (1,890) 2,783 279 (2,063)
Accounts payable....................... 13,623 10,296 (10,217) 31,246 (7,698) (30,148)
Accrued liabilities and taxes
payable.............................. 9,659 2,848 (11,147) (241) 7,799 8,324
------- ------- -------- ---------- -------- --------
Total adjustments...................... 82,262 65,641 31,153 69,720 47,608 29,322
------- ------- -------- ---------- -------- --------
Net cash provided by operating
activities............................... 89,855 73,158 20,011 61,772 40,961 32,435
CASH FLOWS FROM INVESTING ACTIVITIES
Construction advances...................... 2,560 1,949 -- -- -- --
Proceeds from sale of capital assets....... 929 3,995 380 1,317 -- 293
Capital expenditures....................... (31,100) (60,056) (22,423) (23,125) (9,479) (25,264)
Proceeds from sale of investments.......... -- -- 7,300 -- -- --
Business acquisition cost, net of cash
acquired................................. -- -- -- (442,777) (442,777) --
Other -- net............................... (272) (1,406) 116 (31) 34 --
------- ------- -------- ---------- -------- --------
Net cash (used in) investing activities.... (27,883) (55,518) (14,627) (464,616) (452,222) (24,971)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments for long-term debt and
capital lease obligations................ (49,509) (68,303) (5,363) (131,145) (129,300) (20,052)
Proceeds from sale-leaseback of assets..... -- -- -- -- -- 24,702
Proceeds from debt issuances............... -- 40,214 -- 480,000 480,000 --
Proceeds from issuance of capital stock.... -- -- -- 100,000 100,000 --
Debt issuance costs and other.............. (1,049) (1,329) (791) (7,784) (7,905) (838)
------- ------- -------- ---------- -------- --------
Net cash (used in) provided by financing
activities............................... (50,558) (29,418) (6,154) 441,071 442,795 3,812
------- ------- -------- ---------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 11,414 (11,778) (770) 38,227 31,534 11,276
Cash and cash equivalents at beginning of
period................................... 18,458 29,872 18,094 17,324 17,324 55,551
------- ------- -------- ---------- -------- --------
Cash and cash equivalents at end of
period................................... $29,872 $18,094 $ 17,324 $ 55,551 $ 48,858 $ 66,827
======= ======= ======== ========== ========= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Acquisition of business:
Fair value of assets acquired, net of
cash acquired.......................... $1,056,627 $1,056,627
Net cash paid in acquisition............. (442,777) (442,777)
Exchange of capital stock................ (40,000) (40,000)
Management equity investment............. (5,000) (5,000)
---------- ----------
Liabilities assumed...................... $ 568,850 $ 568,850
========== ==========
Contribution of capital in exchange for
debt financing fees...................... $ 2,647 $ 2,647
========== ==========
Preferred stock accretion.................. $ 3,722 $ 2,265 $ 5,229
========== ========== =========
</TABLE>

See accompanying notes.

F-6
<PAGE> 64

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Dominick's Supermarkets, Inc. (the "Company") acquired Dominick's Finer
Foods, Inc. ("Dominick's") on March 22, 1995 for total consideration of
approximately $692.9 million (excluding the Company's fees and expenses of
approximately $41.2 million) in a transaction accounted for as a purchase (the
"Acquisition"). The Company effected the Acquisition by acquiring 100% of the
capital stock of Dominick's parent, DFF Supermarkets, Inc. ("DFF"), formerly
known as Dodi Inc. ("Dodi") for $346.6 million in cash and $40 million of the
Company's 15% Redeemable Exchangeable Cumulative Preferred Stock ("Redeemable
Preferred Stock"). In addition, the Company repaid $34.3 million of secured
promissory notes issued by Dominick's prior to the Acquisition to discharge all
obligations under its stock appreciation rights ("SARs") plan and to repurchase
shares of Dominick's restricted stock held by certain management employees. In
connection with the Acquisition, the Company refinanced $135.7 million of
Dominick's existing indebtedness (including premiums and accrued interest)
assumed $124.5 million of existing capital leases and other indebtedness and
paid $11.8 million of employment termination, seller advisory and other seller
fees and expenses. The principal sources of cash to finance the Acquisition were
(i) $330 million in term loans consisting of $140 million of six-year amortizing
Tranche A Loans, $60 million of seven-year amortizing Tranche B Loans, $65
million of eight-year amortizing Tranche C Loans and $65 million of eight and
one-half year amortizing Tranche D Loans (collectively, the "Term Loan
Facilities); (ii) a $150 million unsecured senior subordinated credit facility;
and (iii) a $105 million equity investment in Company common stock by certain
affiliates of The Yucaipa Companies ("Yucaipa"), certain institutional and
private investors and certain members of the Dominick's management. On May 4,
1995, Dominick's used the proceeds of an offering (the "Note Offering") of $200
million of 10.875% Senior Subordinated Notes due 2005 (the "Senior Subordinated
Notes") to repay the $150 million unsecured senior subordinated credit facility
and to prepay $50 million of the Term Loan Facilities. In addition, Dominick's
obtained a $100 million revolving credit facility (the "Revolving Credit
Facility") available for working capital and general corporate purposes
(together with the Term Loan Facilities, the "Credit Facility").

The Acquisition was accounted for as a purchase of Dominick's by the
Company. As a result, all financial statements for periods subsequent to March
22, 1995, the date the Acquisition was consummated, will reflect Dominick's
assets and liabilities at their estimated fair market values as of March 22,
1995. The purchase price in excess of the fair market value of the Company's
assets was recorded as goodwill and is being amortized over a 40-year period.
For purposes of the financial statement presentation set forth herein, the
Predecessor Company refers to Dominick's prior to the consummation of the
Acquisition.

F-7
<PAGE> 65

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A summary of the assets acquired and liabilities assumed as of March 22,
1995 is as follows (dollars in thousands):

<TABLE>
<S> <C>
Assets
Inventory.............................................................. $ 182,439
Other current assets................................................... 37,632
Property and equipment, net............................................ 345,303
Goodwill............................................................... 438,150
Deferred financing costs............................................... 22,722
Other intangible assets................................................ 30,381
----------
Total Assets........................................................ $1,056,627
==========
Liabilities
Accounts payable and accrued expenses.................................. $ 299,198
Long-term debt......................................................... 237,511
Other liabilities...................................................... 32,141
----------
Total Liabilities................................................... $ 568,850
==========
</TABLE>

The following unaudited pro forma information presents the results of the
Company's operations adjusted primarily to reflect interest expense and
depreciation and amortization, as though the Acquisition had been made at the
beginning of each period (dollars in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED
---------------------------
OCTOBER 29, OCTOBER 28,
1994 1995
----------- -----------
<S> <C> <C>
Sales......................................................... $ 2,409.9 $ 2,433.7
Loss before extraordinary loss and
cumulative effect of accounting change...................... (8.9) (6.0)
Net loss...................................................... (16.2) (10.6)
Net loss available to common stockholders..................... (22.5) (16.9)
</TABLE>

The Company uses a 52-53 week fiscal year ending on the Saturday closest to
October 31. The Company operates supermarkets in Chicago, Illinois, and its
suburbs. The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.

Pro Forma Balance Sheet (unaudited)

Pursuant to the rules and regulations of the Securities and Exchange
Commission, the accompanying pro forma balance sheet information presents the
change in capitalization resulting from the Company's initial public offering
(excluding the effects of the offering proceeds).

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost, primarily using the last-in,
first-out (LIFO) method, or market. If inventories had been valued using
replacement cost, inventories would have been higher by $22,511,000 at October
28, 1994 and $1,937,000 at October 28, 1995, and gross profit and operating
income would have been greater by $435,000, $1,089,000, $750,000 and $1,694,000
for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995, and
the 32 weeks ended October 28, 1995, respectively.

F-8
<PAGE> 66

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pre-Opening Costs

The costs associated with opening new and remodeled stores are deferred and
amortized over one year following the opening of each new store.

Property and Equipment

Property and equipment, including buildings capitalized under capital
leases, are recorded at cost. Depreciation and amortization is computed on the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements.............................. 10-33 years
Fixture and equipment................................... 3-12 years
Property under capital leases and lease rights.......... 15-25 years
</TABLE>

Deferred Financing Costs

Costs incurred in connection with the issuance of debt are amortized over
the term of the related debt using the effective interest method.

Goodwill and Trademarks

The excess of the purchase price over the fair value of the net assets
acquired is amortized on a straight-line basis over 40 years beginning at the
date of acquisition. Current and undiscounted future operating cash flows are
compared to current and undiscounted future goodwill amortization on a periodic
basis (not less than annually) to determine if an impairment of goodwill has
occurred. Trademarks, which are included in other assets, are amortized on a
straight-line basis over 40 years. Accumulated amortization related to goodwill
and trademarks at October 28, 1995 was $6,342,000 and $523,000, respectively.

Income Taxes

The Company changed its method of accounting for income taxes from the
deferred method to the liability method as required by the Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes. As permitted by
Statement 109, prior-year financial statements have not been restated to reflect
the change in accounting method. The cumulative effect on prior years of
adopting Statement 109 as of October 31, 1993 was to decrease 1994 net income by
$1,019,000. Under Statement 109, deferred income taxes reflect the net tax
effect of temporary differences between the carrying amounts of assets and
liabilities used for financial reporting purposes and the amounts used for
income tax purposes.

Closed Store Reserves

The Company provides a reserve for the net book value of any store assets,
net of salvage value, and the net present value of the remaining lease
obligation, net of estimated sublease income for stores that have closed or are
expected to close. Included in liabilities assumed in the purchase price
allocation are certain closed store reserves. Such reserves were $24.2 million
at October 28, 1995.

Self-Insurance Reserves

The Company is self-insured for its workers' compensation and general
liability claims. The Company establishes reserves based on an independent
actuary's review of claims filed and an estimate of claims incurred but not yet
filed.

F-9
<PAGE> 67

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Discounts and Promotional Allowances

Promotional allowances and vendor discounts are recorded as a reduction of
cost of sales in the accompanying consolidated statements of operations.
Allowance proceeds received in advance are deferred and recognized over the
period earned.

Extraordinary Loss

During fiscal year 1994, the Predecessor Company retired $60 million of its
11.78% Senior Notes, which resulted in a net loss on early extinguishment of
debt of $6,324,000 net of applicable tax benefit of $3,896,000. During fiscal
year 1995, the Company used the proceeds from the Note Offering to repay in full
the $150 million senior subordinated credit facility and to prepay $50 million
of its Term Loan Facilities which resulted in a net loss on early extinguishment
of debt of $4,585,000, net of tax benefit of $2,824,000. The accompanying
financial statements reflect both of these charges as extraordinary items.

Advertising

The Company expenses its advertising costs as incurred. Advertising
expenses were $29,252,000, $30,086,000, $11,472,000 and $16,540,000 for fiscal
year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks
ended October 28, 1995, respectively.

Income (Loss) Per Common Share

Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. Income (loss) per common share
is computed based upon net income or loss adjusted for accretion on preferred
stock.

In accordance with the rules of the Securities and Exchange Commission,
85,998 shares of common stock issued after March 21, 1995 and 29,499 equivalent
shares using the treasury stock method for outstanding stock options granted
after March 21, 1995 have been treated as outstanding for all subsequent periods
in calculating earnings per share because such shares were issued and such
options are exercisable at prices below the assumed initial public offering
price.

Supplemental Cash Flow Disclosure

Cash paid for income taxes was $6,936,000, $5,555,000, $3,115,000 and
$4,230,000 for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21,
1995 and the 32 weeks ended October 28, 1995, respectively. Interest payments
were $37,625,000, $37,704,000, $15,835,000 and $35,638,000 for fiscal year 1993,
fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks ended
October 28, 1995, respectively. Capital lease obligations of $3,422,000 and
$235,000 were entered into in fiscal year 1993 and fiscal year 1994,
respectively. None were entered into in fiscal year 1995.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the 1993 and 1994 consolidated financial statements have
been reclassified to conform to the October 28, 1995 presentation.

F-10
<PAGE> 68

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

New Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in fiscal 1997 and, based on current
circumstances, does not believe the effect of the adoption will be material.

The Financial Accounting Standards Board issued Statement No. 123
Accounting for Stock Based Compensation, which allows the adoption of a fair
value based method of expense recognition for stock based compensation awards
granted to employees or allows companies to continue to apply APB 25 and
disclose pro forma net income and earnings per share calculated as if the
recognition and measurement provisions on a fair value basis of Statement 123
had been adopted. The Company intends to continue to apply APB 25 and make the
appropriate pro forma disclosure beginning in fiscal 1997.

Unaudited Interim Financial Statements

The accompanying consolidated balance sheet and the consolidated statements
of stockholders' equity as of August 3, 1996 (Company) and the consolidated
statements of operations and cash flows for the 20 week period ended August 5,
1995 (Predecessor Company) and the 40-week period ended August 3, 1996 (Company)
are unaudited and have been prepared on the same basis as the audited
consolidated financial statements included herein. In the opinion of management,
such unaudited consolidated financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim period are not necessarily indicative of results for the full year.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ 27,500 $ 37,795 $ 35,952
Buildings and leasehold improvements..................... 146,870 72,518 71,693
Fixtures and equipment................................... 411,311 113,733 119,092
Capital leases........................................... 141,473 94,501 94,941
Construction in progress................................. 18,716 2,471 23,449
Lease rights............................................. 12,650 50,229 46,465
--------- -------- --------
758,520 371,247 391,592
Less: Accumulated depreciation and amortization.......... (328,821) (18,232) (40,803)
--------- -------- --------
$ 429,699 $ 353,015 $ 350,789
========= ======== ========
</TABLE>

Accumulated depreciation and amortization related to capital leases,
primarily for certain buildings, was $57,086,000 at October 29, 1994, $5,072,584
at October 28, 1995 and $13,056,000 at August 3, 1996. Accumulated amortization
related to lease rights was $6,001,000 at October 29, 1994, $1,667,722 at
October 28, 1995 and $3,386,000 at August 3, 1996.

F-11
<PAGE> 69

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT

Long-term senior debt consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Tranche A Loans, principal due quarterly through 2001,
with interest payable quarterly........................ $ -- $ 105,574 $ 98,478
Tranche B Loans, principal due quarterly through March
2002, with interest payable quarterly.................. -- 54,807 54,012
Tranche C Loans, principal due quarterly through March
2003, with interest payable quarterly.................. -- 59,374 58,629
Tranche D Loans, principal due quarterly through
September 2003, with interest payable quarterly........ -- 59,374 58,680
Revolving Credit Facility................................ 40,000 -- --
11.78% Senior Notes...................................... 90,000 -- --
Other.................................................... 12,839 11,751 6,098
-------- -------- --------
142,839 290,880 275,897
Less: Current portion.................................... 862 9,771 2,108
-------- -------- --------
$ 141,977 $ 281,109 $ 273,789
======== ======== ========
</TABLE>

In connection with the Acquisition, the Company and its subsidiaries
entered into the Credit Facility with a syndicate of financial institutions. The
Credit Facility initially provided for (i) term loans in the aggregate amount of
$330 million, comprised of the $140 million Tranche A Loans, the $60 million
Tranche B Loans, the $65 million Tranche C Loans, and the $65 million Tranche D
Loans; and (ii) the $100 million Revolving Credit Facility under which working
capital loans may be made and commercial or standby letters of credit in the
maximum aggregate amount of up to $30 million may be issued. At October 28,
1995, no amount was outstanding under the Revolving Credit Facility and $19.2
million of standby letters of credit had been issued on behalf of the Company.

Borrowings under (i) the Revolving Credit Facility and the Tranche A Loans
bear interest at a rate equal to the Base Rate (as defined in the loan
agreement) plus a 1.50% per annum or the reserve adjusted Euro-Dollar Rate (as
defined in the loan agreement) plus 2.75% per annum; (ii) the Tranche B Loans
bear interest at the Base Rate plus 2.00% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.25% per annum; (iii) the Tranche C Loans bear interest
at the Base Rate plus 2.50% per annum or the reserve adjusted Euro-Dollar Rate
plus 3.75% per annum; and (iv) the Tranche D Loans bear interest at the Base
Rate plus 2.75% per annum or the reserve adjusted Euro-Dollar Rate plus 4.00%
per annum, in each case as selected by the Company. The Company will pay the
issuing bank a fee of 0.25% per annum (but not less than $500) on each standby
letter of credit and commercial letter of credit and will pay the lenders under
the Credit Facility a letter of credit fee of 2.25% per annum for standby
letters of credit and a fee equal to 1.25% per annum for commercial letters of
credit. In addition, the Company will pay a commitment fee of 0.50% per annum on
the unused portions of the Revolving Credit Facility.

In connection with the original issuance of the Senior Subordinated Notes,
the Company entered into certain amendments to the Credit Facility (the "Credit
Facility Amendments") in order to, among other things, modify the mandatory
prepayment provisions of the Credit Facility. After giving effect to these
modifications, $50 million of proceeds from the Note Offering were applied to
prepay $34.4 million of the

F-12
<PAGE> 70

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Tranche A Loans, $4.9 million of the Tranche B Loans, $5.3 million of the
Tranche C Loans and $5.3 million of the Tranche D Loans.

The Tranche A Loans mature on March 31, 2001 and are subject to
amortization on a quarterly basis, commencing on June 30, 1996, in aggregate
annual amounts of $4.6 million in the second year of the facility, $9.2 million
in the third year, $23.0 million in the fourth year, $27.5 million in the fifth
year, and $41.3 million in the sixth year. The Tranche B Loans mature on March
31, 2002 and are subject to amortization on a quarterly basis, commencing on
June 30, 1995, in aggregate annual amounts of $551,000 for the first six years
and $51.8 million in the seventh year. The Tranche C Loans mature on March 31,
2003 and are subject to amortization on a quarterly basis, commencing on June
30, 1995, in aggregate annual amounts of $597,000 for the first seven years and
$55.5 million in the eighth year. The Tranche D Loans mature on September 30,
2003 and are subject to amortization on a quarterly basis in aggregate annual
amounts of $597,000 for the first eight years and $54.9 million in the ninth
year. The amortization requirements described above give effect to the Credit
Facility Amendments and the application of $50 million of Note Offering proceeds
to prepay the Term Loan Facilities. The Revolving Credit Facility will mature on
March 31, 2001.

The debt agreements, among other things, require the Company to maintain
minimum levels of net worth (as defined), to maintain minimum levels of earnings
(as defined), to maintain a hedge agreement to provide interest rate protection,
and to comply with certain ratios related to interest expense (as defined),
fixed charges (as defined) and indebtedness (as defined). In addition, the debt
agreements limit, among other things, additional borrowings, dividends on, and
redemption of, capital stock, certain other payments to DFF and Supermarkets,
capital expenditures, incurrence of lease obligations, and the acquisition and
disposition of assets. At October 28, 1995, the Company was in compliance with
the financial covenants of its debt agreements. At October 28, 1995, the Company
was restricted from paying dividends on its capital stock under the terms of the
debt agreements.

Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the Credit Facility or other long-term debt.

Maturities of long-term debt at October 28, 1995, excluding capital lease
obligations, for each of the next five fiscal years are as follows (dollars in
thousands):

For the period ended October 28, 1995, the Company's effective interest
rate was 10.5%.

Senior Subordinated Notes

On May 4, 1995, the Company issued $200 million principal amount of Senior
Subordinated Notes in connection with the Acquisition. The Senior Subordinated
Notes bear interest, payable semi-annually on May 1 and November 1, at an annual
rate of 10.875%. The Senior Subordinated Notes, which are due on May 1, 2005,
are subordinated to all Senior Indebtedness (as defined) of the Company, and may
be redeemed beginning in fiscal year 2000 at a redemption price of 104.833%. The
redemption price declines ratably to 100% in fiscal 2004. In addition, on or
prior to May 1, 1998, the Company may, at its option, use the net cash proceeds
of one or more Public Equity Offerings (as defined) to redeem up to an aggregate
of 33 1/3% of the principal amount of the originally issued Senior Subordinated
Notes at redemption prices of 110.875% in 1995, declining ratably to 108.458% in
1997.

F-13
<PAGE> 71

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LEASES

The Company leases land, retail stores, and equipment. Many of the property
leases obligate the Company to pay real estate taxes, insurance, and maintenance
costs and contain multiple renewal options generally covering additional periods
ranging from 15 to 30 years. Many of the leases require contingent rental
payments, which are based primarily upon sales at the various retail stores,
adjusted for certain expenses paid by the Company. Rent expense totaled
$17,188,000 including $263,000 for contingent rentals, for fiscal year 1993,
$17,704,000 and $275,000 respectively for fiscal year 1994, $6,511,000 and
$167,000, respectively for the 20 weeks ended March 21, 1995 and $10,419,000 and
$271,000, respectively for the 32 weeks ended October 28, 1995.

The future minimum lease payments under noncancelable operating and capital
leases, as of October 28, 1995 for each of the next five fiscal years and
thereafter, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- ---------
<S> <C> <C>
1996.......................................................... $ 16,300 $ 18,440
1997.......................................................... 16,001 18,414
1998.......................................................... 16,017 18,354
1999.......................................................... 16,001 18,301
2000.......................................................... 16,361 17,945
Thereafter.................................................... 126,831 129,079
-------- --------
Total minimum lease payments.................................. $ 207,511 220,533
========
Less: Amount representing interest............................ (112,047)
--------
Present value of net minimum lease payments................... $ 108,486
========
</TABLE>

The present value of net minimum lease payment includes $29,419,000 due to
related parties.

5. CAPITAL STOCK

The authorized capital stock of the Company consists of 36,594,895 shares
of Common Stock $.01 par value common stock and 36,594,895 shares of Class B
$.01 par value common stock. All common stock is entitled to dividends, if any,
as may be declared by the Board of Directors. Certain dividend restrictions
exist as more fully described in Note 3. The Common Stock is voting, and the
Class B Common Stock is non-voting. Additionally, the Class B Common Stock is
convertible at the option of the holder, on a one-for-one basis, into Common
Stock if certain conditions are met.

Each member of management holding shares of common stock or holding stock
options (collectively the "Management Stockholders") have signed a stockholders
agreement (the "Agreement"). The Agreement, among other things, provides the
company with a right of first refusal to purchase stock subject to a proposed
sale by a Management Stockholder. The Agreement also provides the Company with
an option, in certain events as defined, to repurchase stock owned by Management
Stockholders under a company stock option. The Agreement will terminate upon an
initial public offering of the Company's Common Stock if certain conditions are
met.

Stock Option Plans

The Company maintains a stock option plan (the "Plan") for the officers and
key employees which provides for non-qualified and incentive options. The Board
of Directors determines the option price (not to be less than fair value for
incentive options) at the date of grant. The options generally expire on the
tenth

F-14
<PAGE> 72

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

anniversary of their respective grant date and become exercisable over a
specified vesting period. The total number of shares that may be issued under
the Plan is 1,116,144.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Grants at March 22, 1995.......................................... 926,473
Granted......................................................... 43,914
Exercised....................................................... --
Cancelled....................................................... --
--------
Outstanding at October 28, 1995................................... 970,387
========
</TABLE>

Of the options outstanding at October 28, 1995, 459,516 were non-qualified
options and 510,871 were incentive options. All of the incentive options have an
option price per share of $6.83 and all of the non-qualified options have an
option price per share of $1.71. As of October 28, 1995 459,516 shares were
exercisable and 145,757 shares were available for future grants under the Plan.

The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in
accounting for its stock options. Under APB 25, when the exercise price of
employee stock options equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

Warrant

At the time of the Acquisition, the Company issued to Yucaipa a warrant
(the "Warrant") to purchase up to 3,874,492 shares of Common Stock at an
exercise price of $20.732 per share. The Warrant is exercisable only in the
event of an initial public offering that meets certain conditions or in
connection with certain sales transactions (collectively the "Trigger Events")
on or prior to March 22, 2000.

The Warrant terminates on March 22, 2000. In the event that certain
financial performance conditions are met, however, both the termination date and
the deadline for a Trigger Event may be extended. Additionally, the Warrant is
exercisable without the payment of cash consideration, pursuant to which the
Company will withhold from the shares otherwise issuable upon exercise thereof,
the number of shares having a market value as of the exercise date equal to the
exercise price.

The Predecessor Company had a SARs plan for certain officers and key
management employees. The plan provided for additional compensation to be
accrued on the difference between the book value per share of common stock at
the end of each fiscal year and the book value per share at the later of the
grant date or the last day of the prior fiscal year. As a result of the
Acquisition, the SARs became fully vested and were valued at market value.
Compensation expense incurred related to all SARs outstanding was $369,000 in
fiscal year 1993, $1,966,000 in fiscal year 1994 and $673,000 during the 20
weeks ended March 21, 1995. In connection with the Acquisition, all obligations
under the Company's stock appreciation rights plan were discharged and the plan
was terminated. As a result of the Acquisition, the Company recorded a charge of
$26,152,000, reflecting the difference in fair market value and book value of
the SARs at March 21, 1995.

6. REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK

The Company has designated 40,000 of its 200,000 authorized preferred
shares as 15% Redeemable Exchangeable Cumulative Preferred Stock Series A (the
"Preferred Stock"). The remaining 160,000 shares have not been designated.

F-15
<PAGE> 73

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In connection with the Acquisition, the Company issued 40,000 shares of the
Preferred Stock. The holders of the Preferred Stock are entitled to cumulative
dividends, when and if declared by the Board of Directors, and preference in
liquidation over holders of common stock at $1,000 per share plus accrued but
unpaid dividends, if any. Except in limited circumstances, the holders of the
Preferred Stock have no voting rights.

The Company is required to redeem the Preferred Stock at the earlier of a
change in control (as defined) and March 22, 2007 at $1,000 per share plus
accrued but unpaid dividends, if any (the "Redemption Price"). Prior to the
mandatory redemption, the Company may redeem all or any portion of the preferred
stock at the Redemption Price.

The Company, at its sole option, may exchange the Preferred Stock for 15%
Junior Subordinated Debentures due 2007 having such terms and conditions as
shall be first approved by a majority of the holders of the Preferred Stock. In
addition, the holders of the Preferred Stock are entitled to certain demand
registration rights commencing March 22, 1997.

7. INCOME TAXES

The provision (benefit) for income taxes consists of the following (dollars
in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
----------------------------------------- -----------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Current:
Federal..................................... $ 5,188 $ 8,296 $(2,543) $(4,539)
State....................................... 1,032 1,585 (702) (1,153)
------- ------ ------- -------
6,220 9,881 (3,245) (5,692)
Deferred:
Federal..................................... (1,718) (300) (3,027) 6,214
State....................................... (476) (345) (863) 1,411
------- ------ ------- -------
(2,194) (645) (3,890) 7,625
------- ------ ------- -------
$ 4,026 $ 9,236 $(7,135) $ 1,933
======= ====== ======= =======
</TABLE>

A reconciliation of the provision for income taxes to amounts computed at the
federal statutory rates of 34.83% for fiscal 1993, and 35% for fiscal 1994 and
fiscal 1995 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
----------------------------------------- -----------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Federal income taxes at statutory rate on
income before provision for income taxes,
extraordinary loss and cumulative effect of
accounting change........................... $ 4,047 $ 8,434 $(6,397) $ (501)
Non-tax deductible goodwill amortization...... -- -- -- 2,417
State income taxes, net of federal income tax
benefit..................................... 363 805 (828) 10
Other, net.................................... (384) (3) 90 7
------ ------ ------- ------
Total income tax expense............ $ 4,026 $ 9,236 $(7,135) $ 1,933
====== ====== ======= ======
</TABLE>

F-16
<PAGE> 74

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Significant components of the Company's deferred income tax liabilities and
assets as of October 29, 1994 and October 28, 1995 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- -------
1994 1995
----------- -------
<S> <C> <C>
Deferred income tax liabilities:
Inventory............................................ $ 2,663 $10,773
Property and equipment............................... 49,508 25,972
State income taxes................................... 5,532 1,989
Trademarks........................................... -- 8,917
Other................................................ 776 3,521
------- -------
Total deferred income tax liabilities.................. 58,479 51,172
Deferred income tax assets:
Accrued vacation..................................... 2,798 2,830
Capital leases....................................... 8,240 3,937
Alternative minimum tax.............................. 6,677 6,386
Accrued self-insurance............................... 10,313 15,245
Capitalized inventory................................ 2,183 2,111
Accrued stock appreciation rights.................... 1,006 --
Other accrued liabilities............................ -- 20,963
Other................................................ 2,812 4,775
------- -------
Total deferred income tax assets....................... 34,029 56,247
------- -------
Net deferred income tax liabilities (assets)........... 24,450 (5,075)
Less valuation allowance............................. -- 11,120
------- -------
Net deferred income tax liabilities.................... $24,450 $ 6,045
======= =======
</TABLE>

At October 29, 1994, the Predecessor Company did not record a valuation
allowance as the estimated amount of deferred income tax assets were deemed to
be fully realizable.

8. PROFIT-SHARING AND RETIREMENT PLANS

The Company has trusteed, contributory, profit-sharing plans (the "Plans")
covering substantially all full-time employees. Plan participants are allowed to
contribute a specified percentage of their compensation into the Plans. The
amount of the Company's contribution is at the discretion of the Board of
Directors, subject to limitations of the Plans.

Under the provisions of several collective bargaining agreements covering
hourly paid employees, the Company is required to make pension contributions to
multi-employer retirement plans based primarily on hours worked by such
employees.

Retirement and profit-sharing plan expenses included in the consolidated
statements of operations were $14,217,000 for the fiscal year 1993, $14,572,000
for fiscal year 1994, and $5,950,000 for the 20 weeks ended March 21, 1995 and
$8,638,000 for the 32 weeks ended October 28, 1995.

9. RELATED PARTY TRANSACTIONS

The Company has a five-year consulting agreement with Yucaipa effective
March 22, 1995 for management and financial services. The agreement is
automatically renewed on April 1 of each year for the five-year term unless 90
days notice is given by either party. The agreement provides for annual
management

F-17
<PAGE> 75

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

fees equal to 2% of EBITDA (as defined in the consulting agreement). In
addition, the Company may retain Yucaipa in an advisory capacity in connection
with certain acquisition or sale transactions and in such case will pay an
advisory fee equal to 1% of the transaction value. Pursuant to the agreement,
Yucaipa received a fee of $14 million for advisory and other services provided
in connection with the Acquisition. Fees paid or accrued associated with
management services were $1,490,000 during the 32 weeks ended October 28, 1995.

10. COMMITMENTS AND CONTINGENCIES

On March 16, 1995, a lawsuit was filed against Dominick's by two former
employees of Dominick's. The plaintiffs' original complaint asserted allegations
of gender discrimination and sought compensatory and punitive damages in an
unspecified amount. The Company plans to vigorously defend this lawsuit. Based
upon the current state of the proceedings, the Company's assessment to date of
the underlying facts and circumstances and the other information currently
available, and although no assurances can be given, the Company does not believe
that the resolution of this litigation will have a material adverse effect on
the Company's overall liquidity. As additional information is gathered and the
litigation proceeds, the Company will continue to assess its potential impact.

The Company is also a defendant in other cases currently in litigation or
potential claims encountered in the normal course of business which are being
vigorously defended. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.

Certain of the Company's facilities have had or may have had releases of
hazardous materials associated with Dominick's operations or those of current or
prior occupants that may require remediation. Accordingly, the Company has
accrued $4.3 million to reflect its estimated liability for environmental
remediation. The Company does not believe that the ultimate liability related to
remediation will have a material adverse affect on the Company's financial
position or results of operations.

The Company self-insures its workers' compensation and general liability.
During fiscal year 1993, fiscal year 1994, and the 20 weeks ended March 21,
1995, the Company discounted its workers' compensation self-insurance liability
using a 7.5% discount rate. During the 32 weeks ended October 28, 1995, all
self-insurance liabilities were discounted using a 7.5% discount rate.
Management believes that this rate approximates the time value of money over the
anticipated payout period (approximately 12 years) for essentially risk-free
investments.

The Company's historical self-insurance liability for the three most recent
fiscal years is as follows (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
--------------------------- -----------
OCTOBER 30, OCTOBER 29, OCTOBER 28,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Self-insurance liability.................. $30,826 $33,235 $55,898
Less: Discount............................ (3,717) (3,985) (8,231)
------- ------- -------
Net self-insurance liability.............. $27,109 $29,250 $47,667
======= ======= =======
</TABLE>

The Company expects that cash payments for claims will aggregate
approximately $19 million, $12 million, $9 million, $6 million and $4 million
for its fiscal years 1996, 1997, 1998, 1999 and 2000, respectively.

F-18
<PAGE> 76

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
OCTOBER 28, 1995
-----------------------
CARRYING
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 55,551 $ 55,551
Short-term notes and other receivables................. 25,314 25,314
Long-term debt for which it is:
-- Practical to estimate fair values................. 479,129 485,562
-- Not Practical..................................... 11,751 11,751
</TABLE>

The fair value of the Senior Subordinated Notes and the Senior Credit
Facilities are based on quoted market prices. Market quotes for the fair value
of the remainder of the Company's debt are not available. Additional information
pertinent to the value of the unquoted debt is provided in Note 3.

12. SUBSEQUENT EVENT

In August 1996, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission relating to an initial public offering of
its common stock. In connection with the offering, the Company will record a
pre-tax charge of approximately $10.5 million related to the planned termination
of the consulting agreement with Yucaipa and an extraordinary loss of
approximately $6.4 million (net of applicable income tax benefit of $4.2
million) related to the write-off of deferred financing costs in connection with
the planned extinguishment of debt.

The Company also intends to split each share of its Common Stock and Class
B Common Stock into 14.638 shares of common stock to be effected immediately
prior to the effective date of the Registration Statement. The accompanying
financial statements are presented as if the stock split had occurred at the
date of the Acquisition.

F-19
<PAGE> 77

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements of the Company for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995, give
effect to the Acquisition and certain related events as if such transactions
occurred on October 30, 1994. See "The Acquisition."

The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable. The
Acquisition has been accounted for as a purchase by the Company. The unaudited
pro forma financial statements are not necessarily indicative of either future
results of operations or results that might have been achieved if the foregoing
transactions had been consummated as of the indicated dates. The unaudited pro
forma financial statements should be read in conjunction with the historical
consolidated financial statements of the Company and the Predecessor Company,
together with the related notes thereto, included elsewhere in this Prospectus.

For purposes of the presentation of the unaudited pro forma consolidated
statements of operations, the "Predecessor Company" refers to Dominick's prior
to the consummation of the Acquisition.

P-1
<PAGE> 78

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

52 WEEKS ENDED OCTOBER 28, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
PREDECESSOR COMPANY COMPANY PRO FORMA
------------------- --------------- -----------
20 WEEKS 32 WEEKS 52 WEEKS
ENDED ENDED ENDED
MARCH 21, OCTOBER 28, PRO FORMA OCTOBER 28,
1995 1995 ADJUSTMENTS 1995
------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................................. $ 958.8 $ 1,475.0 $ -- $ 2,433.8
Cost of sales......................... 747.6 1,136.6 (2.5)(a) 1,881.7
------ -------- ------ --------
Gross profit.......................... 211.2 338.4 2.5 552.1
Selling, general and administrative
expenses............................ 191.9 287.6 (6.7)(a) 471.2
(1.6)(b)
SARs termination costs................ 26.2 -- (26.2) --
Amortization of goodwill.............. 6.3 4.7(c) 11.0
------ -------- ------ --------
Operating income (loss)............... (6.9) 44.5 32.3 69.9
Interest expense...................... 11.2 44.5 14.3(d) 70.0
Amortization of deferred financing
costs............................... 0.1 1.5 0.8(e) 2.4
------ -------- ------ --------
Income (loss) before income taxes and
extraordinary loss.................. (18.2) (1.5) 17.2 (2.5)
Income tax expense (benefit).......... (7.1) 1.9 8.7(f) 3.5
------ -------- ------ --------
Income (loss) before extraordinary
loss................................ $ (11.1) $ (3.4) $ 8.5 $ (6.0)
====== ======== ====== ========
</TABLE>

See accompanying notes.

P-2
<PAGE> 79

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

40 WEEKS ENDED AUGUST 5, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
PREDECESSOR COMPANY COMPANY PRO FORMA
------------------- -------- ---------
20 WEEKS 20 WEEKS 40 WEEKS
ENDED ENDED ENDED
MARCH 21, AUGUST 5, PRO FORMA AUGUST 5,
1995 1995 ADJUSTMENTS 1995
------------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Sales................................... $ 958.8 $930.3 $ -- $1,889.1
Cost of sales........................... 747.6 719.7 (1.9)(a) 1,465.4
------ ------ ------ --------
Gross profit............................ 211.2 210.6 1.9 423.7
Selling, general and administrative
expenses.............................. 191.9 181.2 (5.0)(a) 366.5
(1.6)(b)
SARs termination costs.................. 26.2 -- (26.2) --
Amortization of goodwill................ -- 4.0 4.4 (c) 8.4
------ ------ ------ --------
Operating income (loss)................. (6.9) 25.4 30.3 48.8
Interest expense........................ 11.2 24.8 18.3 (d) 54.3
Amortization of deferred financing
costs................................. 0.1 1.3 0.4 (e) 1.8
------ ------ ------ --------
Income (loss) before income taxes and
extraordinary loss.................... (18.2) (0.7) 11.6 (7.3)
Income tax expense (benefit)............ (7.1) 1.3 6.5 (f) 0.7
------ ------ ------ --------
Income (loss) before extraordinary
loss.................................. $ (11.1) $ (2.0) $ 5.1 $ (8.0)
====== ====== ====== ========
</TABLE>

See accompanying notes.

P-3
<PAGE> 80

DOMINICK'S SUPERMARKETS, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)

(a) The purchase price allocation resulted in a reduction of the carrying value
of the Company's property and equipment. As a result, depreciation expense
on a pro forma basis is lower than the historical basis.

(b) Reflects the following adjustments:

<TABLE>
<CAPTION>
52 WEEKS ENDED 40 WEEKS ENDED
OCTOBER 28, 1995 AUGUST 5, 1995
---------------- --------------
<S> <C> <C>
Yucaipa management fees............................... $ 0.6 $ 0.6
Reduction of compensation expense resulting from
differences in management salaries and bonuses paid
to certain former management employees.............. (0.8) (0.8)
Reversal of SARs expense.............................. (0.7) (0.7)
Elimination of seller transaction expenses............ (0.8) (0.8)
Increased rent expense relating to the Excluded
Properties Leases entered into in connection with
the Acquisition..................................... 0.1 0.1
----- -----
$ (1.6) $ (1.6)
===== =====
</TABLE>

(c) Reflects the amortization, on a straight-line basis, of goodwill over a
40-year period. Current and undiscounted future operating cash flows will be
compared to current and future goodwill amortization to determine if an
impairment of goodwill has occurred.

(d) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The Senior Subordinated Credit
Facility was assumed to have a fixed interest rate of 12.25% and be
outstanding for one month after the consummation of the Acquisition. One
month after the closing date, the Senior Subordinated Credit Facility is
assumed to have been refinanced with a portion of the proceeds from the
Senior Subordinated Notes being offered with a fixed interest rate of
10 7/8%. Pro forma interest expense on the Term Loan Facilities was
calculated on a monthly basis using an interest rate of 6.25% (LIBOR) plus
2.75% for Tranche A Loans, 3.25% for Tranche B Loans, 3.75% for Tranche C
Loans and 4.0% for Tranche D Loans.

(e) Reflects the net increase in amortization due to additional deferred
financing fees related to the increased levels of debt added in connection
with the Acquisition.

(f) Reflects elimination of income taxes as a result of the pro forma decrease
in pre-tax income. The pro forma income tax rate differs from the statutory
rate because goodwill amortization is not deductible for income tax
purposes.

P-4
<PAGE> 81

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE 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
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE 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 MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

-------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 9
Use of Proceeds............................ 13
Dividend Policy............................ 13
Dilution................................... 14
Capitalization............................. 15
Selected Historical and Pro Forma Financial
Data..................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 18
Business................................... 25
Management................................. 34
Principal and Selling Stockholders......... 42
Certain Transactions....................... 44
Description of Capital Stock............... 45
Shares Eligible for Future Sale............ 49
The Acquisition............................ 50
Description of Certain Indebtedness........ 51
Underwriting............................... 54
Legal Matters.............................. 57
Experts.................................... 57
Available Information...................... 57
Index to Financial Statements.............. F-1
Unaudited Pro Forma Financial Statements... P-1
</TABLE>

------------------------

UNTIL NOVEMBER 23, 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

8,000,000 SHARES

DOMINICK'S LOGO

DOMINICK'S
SUPERMARKETS, INC.

COMMON STOCK

OMNI SUPERSTORE LOGO

------------------------

PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MORGAN STANLEY & CO.
INCORPORATED

BT SECURITIES CORPORATION

CHASE SECURITIES INC.
OCTOBER 29, 1996

- ------------------------------------------------------
- ------------------------------------------------------