<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1996
REGISTRATION NO. 333-11177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DOMINICK'S SUPERMARKETS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5411 94-3220603
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
THOMAS D. ROTI, ESQ.
GENERAL COUNSEL
DOMINICK'S SUPERMARKETS, INC.
505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
THOMAS C. SADLER, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET
LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
MICHAEL A. BECKER, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
(212) 701-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH MAXIMUM AMOUNT OF
CLASS OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE(1)(2) FEE(3)
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<S> <C> <C>
Common Stock, par value $.01.............................. $132,480,000 $40,146
</TABLE>
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(1) Includes an amount relating to shares that the Underwriters have the option
to purchase to cover over-allotments, if any.
(2) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933.
(3) Previously paid in connection with the original filing of the Registration
Statement on August 30, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
PROSPECTUS
, 1996
6,400,000 SHARES
LOGO
DOMINICK'S SUPERMARKETS, INC.
COMMON STOCK
Of the 6,400,000 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 500,000 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. It is currently anticipated that the initial public offering price of the
Common Stock will be between $16.00 and $18.00 per share. 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.
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<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.................... $ $ $ $
Total (3).................... $ $ $ $
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</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $1,100,000.
(3) The Selling Stockholders have granted to the Underwriters a 30-day option to
purchase up to 960,000 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
$ , $ , $ and $ , 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 , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
BT SECURITIES CORPORATION
CHASE SECURITIES, INC.
<PAGE> 3
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> 4
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 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 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, average selling square feet
per store has increased by approximately 27%.
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.
3
<PAGE> 5
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> 6
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> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered:
By the Company......................... 5,900,000 shares
By the Selling Stockholders............ 500,000 shares(1)
---------
Total.......................... 6,400,000 shares(1)
=========
Common Stock to be Outstanding After the
Offering............................... 21,359,035 shares(2)
Use of Proceeds.......................... Of the estimated net proceeds to the Company of
$92.7 million (based on an assumed initial public
offering price of $17.00 per share, the midpoint
of the estimated offering price range),
approximately $51.7 million will be used to
repurchase the Company's outstanding 15%
Redeemable Exchangeable Cumulative Preferred
Stock (the "Redeemable Preferred Stock");
approximately $30.5 million will be used,
together with approximately $45.0 million of
available cash and approximately $193.8 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>
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(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 -- Class B Common Stock."
6
<PAGE> 8
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.
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR 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..................... 58.6 61.3 45.4 44.0
Net income (loss).................... (2.3) 8.9 (6.2) 8.7
Income (loss) per common share(d).... $ (0.11) $ 0.42 $ (0.29) $ 0.41
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......................................................... 599.4 604.7 528.9
Redeemable preferred stock......................................... 43.7 49.0 --
Stockholders' equity............................................... 96.2 94.1 174.0
</TABLE>
7
<PAGE> 9
- ------------------------------
(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 estimated 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.
8
<PAGE> 10
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 estimated net proceeds therefrom, the Company's consolidated
total indebtedness and total stockholders' equity would have been $528.9 million
and $174.0 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 $131 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. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." 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.
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. There are
currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. 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."
9
<PAGE> 11
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 $2.4 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. The
Company believes that any noncompliance or liability under current Environmental
Laws will not have a material adverse effect on its business, financial
condition or results of operations. 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> 12
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> 13
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 will be
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 $30.41 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
6,400,000 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 14,959,035 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 14,525,411 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 14,525,411 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> 14
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) are estimated to be approximately $92.7 million, assuming an initial
public offering price of $17.00 per share (the midpoint of the estimated
offering price range). The actual net proceeds will vary if the actual initial
public offering price or the estimated expenses are different. 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 to repurchase all of the Company's outstanding Redeemable Preferred
Stock. Approximately $30.5 million of net proceeds, together with approximately
$45.0 million of available cash and approximately $193.8 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 holders 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> 15
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
of 6,400,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $17.00 per share (the midpoint of the estimated offering price
range) and the receipt and application of the estimated net proceeds therefrom,
the pro forma deficit in net tangible book value of the Company at August 3,
1996 would have been $286.3 million, or $13.41 per share. This represents an
immediate decrease in the deficit in net tangible book value of $10.83 per share
to the existing stockholders and an immediate dilution of $30.41 per share to
new stockholders purchasing shares in the Offering. The following table
illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $ 17.00
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.............. 10.83
Pro forma deficit in net tangible book value per share
after the Offering..................................... (13.41)
Dilution per share to new stockholders................... $ 30.41
=======
</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 (assuming an initial public
offering price of $17.00 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 51.3% $ 6.83
New stockholders(1).................. 5,900,000 27.6 100,300,000 48.7 17.00
---------- ----- ------------ -----
Total...................... 21,346,967 100.0% $205,852,000 100.0%
========== ===== ============ =====
</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 the issuance of 14,996
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 14,946,967 or approximately 70.0%
(13,986,967 shares or approximately 65.5% if the Underwriters'
over-allotment option is exercised in full) and will increase the number of
shares to be purchased by new stockholders to 6,400,000 or approximately
30.0% (7,360,000 shares or approximately 34.5% 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> 16
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......................................... -- 94.0
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 $ 520.8
-------- --------
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.......................................... 107.6 200.3
Retained earnings (deficit)(d)...................................... (13.8) (26.5)
-------- --------
Total stockholders' equity(d).................................... 94.0 174.0
-------- --------
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> 17
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)...... $ (0.11 ) $ 0.41
========== =========
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> 18
- ------------------------------
(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 estimated 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):
<TABLE>
<CAPTION>
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> 19
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> 20
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
$602 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> 21
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> 22
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> 23
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 estimated net
proceeds of the Offering to repurchase all of its outstanding Redeemable
Preferred Stock. Approximately $30.5 million of the Offering proceeds, together
with approximately $45.0 million of available cash and approximately $193.8
million of borrowings under the New Term Loan and the New Revolving Facility
will be used to repay all outstanding borrowings under the Old Credit Facility.
The remaining $10.5 million of net proceeds of the Offering will be
22
<PAGE> 24
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 $2.4
million, after contributions by the prior owners of the Predecessor Company
pursuant to the terms of the stock purchase agreement associated with the
Acquisition (the "Stock Purchase Agreement"), 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. 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> 25
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.
Several motions in the case are currently pending before the court, including a
motion for class certification. 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. However, 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. See "Risk Factors -- Potential Adverse
Effects of Pending Litigation."
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
Facility 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> 26
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> 27
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
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
26
<PAGE> 28
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, 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> 29
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> 30
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> 31
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> 32
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.
31
<PAGE> 33
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.
32
<PAGE> 34
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. There are
currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. 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. However, 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.
The Company, in its ordinary course of business, is party to various legal
actions. Management believes these are routine in nature and incidental to its
operations. Management believes that the outcome of any such 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.
33
<PAGE> 35
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) 44
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> 36
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> 37
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. and Zale Corporation.
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> 38
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 $100,000 for services rendered in all capacities to the Company and its
subsidiaries for the same period.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(2)
---------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
FISCAL YEAR -------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION(1) ENDED SALARY($) 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> 39
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> 40
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> 41
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> 42
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> 43
PRINCIPAL AND SELLING STOCKHOLDERS
The Company's authorized 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 13.7
David B. Kaplan(12)...................... 5,855,181 37.9 -- 5,855,181 13.7
Antony P. Ressler(12).................... 5,855,181 37.9 -- 5,855,181 13.7
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 8.6 107,354 1,224,700 5.7
Bankers Trust New York
Corporation(14)(15)...................... 193,733 1.3 15,613 178,120 *
Chase Manhattan Investment
Holdings, Inc.(15)(16)................... 2,272,996 14.7 183,187 2,089,809 9.8
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% 47,189 538,329 2.5%
BHF-Bank Aktiengesellschaft(18)............ 15,647 * 1,261 14,386 *
Continental Casualty Company(18)........... 15,647 * 1,261 14,386 *
Crescent/Mach I Partners, L.P.(19)......... 235,216 1.4 18,957 216,259 1.0
Crescent Shared Opportunity Fund(20)....... 36,594 * 2,949 33,645 *
FSC Corporation(18)........................ 15,647 * 1,261 14,386 *
Indosuez Dominick's Partners............... 878,277 5.7 70,783 807,494 3.8
International Nederlanden (US) Capital
Corp.(18)................................ 15,647 * 1,261 14,386 *
Midland Montagu Private Equity Inc.(18).... 607,050 3.9 48,924 558,126 2.6
</TABLE>
42
<PAGE> 44
- ------------------------------
* 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 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. 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 Manhattan Investment Holdings, Inc. is One Chase
Manhattan Plaza, New York, New York 10006. Affiliates of Chase Manhattan
Investment Holdings, Inc. 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 Crescent
Shared Opportunity Fund 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> 45
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> 46
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
Class B Common Stock, par value $0.01 per share, 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,
13,404,009 shares of Common Stock will be issued and outstanding, 7,955,026
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 Class B 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 transfer agent and registrar for the Common Stock will be First Chicago
Trust Company of New York.
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. Upon the consummation of the
Offering, 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,
45
<PAGE> 47
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.
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. 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
46
<PAGE> 48
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 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
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<PAGE> 49
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.
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
48
<PAGE> 50
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, 14,525,411 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 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 Yucaipa prior to the
consummation of the Offering. Upon the consummation of the Offering, there will
be 14,525,411 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.
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<PAGE> 51
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."
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.
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<PAGE> 52
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 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.
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<PAGE> 53
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 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
52
<PAGE> 54
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 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.
53
<PAGE> 55
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 6,400,000 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.............
Morgan Stanley & Co. Incorporated...............................
BT Securities Corporation.......................................
Chase Securities, Inc. .........................................
---------
Total................................................. 6,400,000
=========
</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 $ per
share. The Underwriters may allow, and such dealers may re-allow, discounts not
in excess of $ 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 960,000 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 Donaldson, Lufkin &
Jenrette Securities Corporation are limited partners in Yucaipa Chicago
Partners, L.P.,
54
<PAGE> 56
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. 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 will be determined by
negotiations between the Company and the Underwriters. Among the factors to be
considered in determining the initial public offering price will be 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.
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.
55
<PAGE> 57
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. 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.
56
<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.
Chicago, Illinois
January 5, 1996
except for Note 12, as to which
the date is , 1996
- --------------------------------------------------------------------------------
The foregoing is in the form that will be signed when the stock split
becomes effective prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.
/s/ ERNST & YOUNG LLP
August 30, 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............. 15,414,721 15,360,811 15,491,502
========== ========== ==========
</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):
<TABLE>
<S> <C>
1996............................................... $ 9,771
1997............................................... 9,005
1998............................................... 18,187
1999............................................... 27,308
2000............................................... 36,517
</TABLE>
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.
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 effect on the Company's financial position or
results of operations.
The Company self-insures its worker' 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............ 48
The Acquisition............................ 49
Description of Certain Indebtedness........ 51
Underwriting............................... 54
Legal Matters.............................. 55
Experts.................................... 56
Available Information...................... 56
Index to Financial Statements.............. F-1
Unaudited Pro Forma Financial Statements... P-1
</TABLE>
------------------------
UNTIL , 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
6,400,000 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.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 12. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES AND
ACT LIABILITIES
See Item 17 below.
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are the estimated expenses to be incurred by the Company in
connection with the sale of the Common Stock (exclusive of underwriting
discounts):
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 51,725
NASD Filing Fee.................................................. 15,500
Stock Exchange Listing Fees...................................... 155,100
Accounting Fees and Expenses..................................... 160,000
Legal Fees and Expenses.......................................... 375,000
Blue Sky Fees and Expenses....................................... 20,000
Transfer Agent's and Registrar's Fee............................. 15,000
Printing and Engraving Expenses.................................. 275,000
Miscellaneous Expenses........................................... 32,675
----------
Total.................................................. $1,100,000
==========
</TABLE>
- ------------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions; gives a director or
officer who successfully defends an action the right to be so indemnified; and
permits a corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article V of
the Amended and Restated Bylaws of the Company provides for the indemnification
by the Company of its directors, officers, employees and agents against
liabilities and expenses incurred in connection with actions, suits or proceeds
brought against them by a third party or in the right of the corporation, by
reason of the fact that they were or are such directors, officers, employees or
agents.
Article VI of the Company's Amended and Restated Certificate of
Incorporation provides that to the fullest extent permitted by the Delaware
Corporation Law as the same exists or may hereafter be amended, a director of
the Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.
The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Restated Certificate of Incorporation and
Bylaws. These agreements, among other things, will indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees) and all losses, claims, liabilities, judgments, fines and settlement
amounts incurred by such person arising out of or in connection with such
person's service as a director or officer of the Company to the fullest extent
permitted by applicable law.
II-1
<PAGE> 83
Policies of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
The form of Underwriting Agreement, filed as Exhibit 1.1 hereto, provides
for the indemnification of the Registrant, its controlling persons, its
directors and certain of its officers by the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 17, 1995 (the date of incorporation of the Registrant), the
Registrant has sold and issued the following securities which were not
registered under the Securities Act:
(a) Pursuant to a Stock Purchase Agreement dated as of March 22, 1995
among the Company, certain affiliates of The Yucaipa Companies and certain
other institutional investors, the Company issued an aggregate of 450,270
shares of Common Stock and an aggregate of 549,730 shares of Class B Common
Stock, in each case at a purchase price of $100 per share.
(b) On March 22, 1995, the Company issued an aggregate of 23,750
shares of Common Stock to certain management employees of the Company in
exchange for an aggregate of 3,100 restricted shares of common stock of
Dominick's Finer Foods, Inc.
(c) Between September 15, 1995 and February 22, 1996, the Company sold
an aggregate of 51,050 shares of Common Stock, at a purchase price of $100
per share, to a total of 26 employees of the Company pursuant to the terms
of the Dominick's Supermarkets, Inc. Management Equity Program.
(d) On May 4, 1995, the Company issued an aggregate of 26,470 shares
of Class B Common Stock to affiliates of BT Securities Corporation and
Chase Securities, Inc. as partial consideration for certain investment
banking services.
(e) On August 23, 1996, the Company sold an aggregate of 1,025 shares
of Common Stock, at a purchase price of $200 per share, to a total of 10
employees of the Company pursuant to the terms of the Dominick's
Supermarkets, Inc. Management Equity Program.
Any sale of securities described herein and under such captions in the
Prospectus were carried out in reliance on the exemptions from registration
contained in Section 4(2) of the Securities Act of 1933 as transactions not
involving any public offering, except that transactions involving the management
equity program were carried out in reliance upon Rule 701 of the Securities Act
of 1933. The recipients in each case represented their intention to acquire the
securities for investment only and not with a view of the distribution thereof.
All recipients had adequate access, through employment or other relationships,
to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
See Index to Exhibits.
(b) FINANCIAL STATEMENT SCHEDULES.
None.
II-2
<PAGE> 84
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Exchange Act of 1934, and is, therefore, unenforceable in the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Exchange Act of 1934 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Dominick's Supermarkets, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Northlake, State of Illinois, on October 21, 1996.
DOMINICK'S SUPERMARKETS, INC.
By: /s/ DARREN W. KARST
------------------------------------
Darren W. Karst
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* Chairman of the Board October 21, 1996
- -----------------------------------------------
Ronald W. Burkle
* President, Chief Executive October 21, 1996
- ----------------------------------------------- Officer, Director
Robert A. Mariano
/s/ DARREN W. KARST Executive Vice President, October 21, 1996
- ----------------------------------------------- Finance and Administration,
Darren W. Karst Chief Financial Officer
(Principal Accounting
Officer), Secretary,
Director
* Director October 21, 1996
- -----------------------------------------------
Linda McLoughlin Figel
* Director October 21, 1996
- -----------------------------------------------
Patrick L. Graham
* Director October 21, 1996
- -----------------------------------------------
Mark A. Resnik
* Director October 21, 1996
- -----------------------------------------------
Peter P. Copses
* Director October 21, 1996
- -----------------------------------------------
David B. Kaplan
* Director October 21, 1996
- -----------------------------------------------
Antony P. Ressler
</TABLE>
*By: /s/ DARREN W. KARST
---------------------------------
Darren W. Karst
Attorney-in-Fact
II-4
<PAGE> 86
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement dated as of , 1996 among
the Company and Donaldson Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and
Chase Securities, Inc. .............................................
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company.............................................................
3.2 Form of Amended and Restated Bylaws of the Company..................
*4.1 Specimen Common Stock certificate...................................
4.2 Warrant dated as of March 22, 1995 issued by the Company to The
Yucaipa Companies, as amended.......................................
*5.1 Opinion of Latham & Watkins regarding the validity of the Common
Stock, including consent............................................
*10.1 Form of Credit Agreement, dated as of , 1996, by and
among Dominick's Finer Foods, Inc. as Borrower, the Company as
Guarantor, the lenders listed therein, Bankers Trust Company and The
Chase Manhattan Bank, as Co-Arrangers, and Bankers Trust Company, as
Administrative Agent................................................
+10.2 Stock Purchase Agreement dated as of January 17, 1995 by and among
DFF Holdings, Inc., DFF Sub, Inc., Dodi L.L.C., Dodi Family L.L.C.
and Dodi Developments L.L.C.........................................
+10.3 Tax Matters Agreement, dated as of March 22, 1995, by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., Dodi
L.L.C., Dodi Family L.L.C., Dodi Developments L.L.C., Dodi, Inc.,
Blackhawk Developments, Inc., Blackhawk Properties, Inc., Dominick's
Finer Foods, Inc. of Illinois, Dodi Hazelcrest, Inc., Kohl's of
Bloomingdale, Inc., Jerry's Deep Discount Centers, Inc. and Save-It
Discount Foods Corporation..........................................
+10.4 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert A. Mariano.............................
+10.5 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert E. McCoy...............................
+10.6 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Herbert R. Young..............................
*10.7 Form of Management Agreement among The Yucaipa Companies, the
Company and Dominick's Finer Foods, Inc. ...........................
*10.8 Form of Amended and Restated Stockholders Agreement by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., and
the stockholders of the Company named therein.......................
10.9 Registration Rights Agreement, dated as of March 22, 1995, by and
among the Company, DFF Supermarkets, Inc., Dominick's Finer Foods,
Inc., and the stockholders of the Company named therein.............
+10.10 Dominick's Supermarkets, Inc. 1995 Stock Option Plan, as adopted
March 19, 1995......................................................
</TABLE>
E-1
<PAGE> 87
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ---------------------------------------------------------------------------------
<C> <S> <C>
+10.11 Indenture, dated as of May 4, 1995, by and among Dominick's Finer
Foods, Inc., Dodi Hazelcrest, Inc., Dominick's Finer Foods, Inc. of
Illinois, Jerry's Deep Discount Centers, Inc., Kohl's of
Bloomingdale, Inc. and Save-It Discount Foods Corporation, as
Subsidiary Guarantors, and United States Trust Company of New York,
as Trustee, with respect to Dominick's 10 7/8% Senior Subordinated
Notes due 2005......................................................
*10.12 Dominick's Supermarkets, Inc. 1996 Equity Participation Plan........
*10.13 Form of Registration Rights Agreement by and between the Company and
Yucaipa Blackhawk Partners, L.P., Yucaipa Chicago Partners, L.P. and
Yucaipa Dominick's Partners, L.P....................................
21.1 Subsidiaries of the Company.........................................
23.1 Consent of Ernst & Young LLP, independent auditors..................
*23.2 Consent of Latham & Watkins (included in the opinion filed as
Exhibit 5.1 to the Registration Statement)..........................
+24.1 Power of Attorney of the Company....................................
+27.1 Financial Data Schedule (32 weeks ended October 28, 1995)...........
+27.2 Financial Data Schedule (40 weeks ended August 3, 1996).............
</TABLE>
- ------------------------------
* To be filed by amendment.
+ Previously filed.
E-2
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOMINICK'S SUPERMARKETS, INC.
___________________________________
Dominick's Supermarkets, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
(a) The name of the Corporation is Dominick's Supermarkets, Inc.
and the original Certificate of Incorporation was filed with the Secretary of
State of the State of Delaware on January 17, 1995 under the name DFF Holdings,
Inc.
(b) Pursuant to and in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware, this
Amended and Restated Certificate of Incorporation amends and restates the
provisions of the Certificate of Incorporation of this Corporation, and the
consents of the stockholders of the Corporation have been given in accordance
with the provisions of Section 228 and Section 242 of the General Corporation
Law of the State of Delaware.
(c) The text of the Certificate of Incorporation of the
Corporation as heretofore amended or supplemented is hereby amended and
restated to read in its entirety as follows:
ARTICLE I. NAME
The name of the Corporation is Dominick's Supermarkets, Inc.
ARTICLE II. REGISTERED OFFICE
The address of its registered office in the State of Delaware is 32
Loockerman Square, Suite L-100, in the City of Dover, County of Kent, 19904.
The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III. BUSINESS
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware as from time to time
amended.
ARTICLE IV. AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is Sixty Four Million (64,000,000)
shares, divided into the three following classes:
(i) Fifty Million (50,000,000) shares of Common Stock, par value
$.01 per share ("Common Stock");
<PAGE> 2
(ii) Ten Million (10,000,000) shares of Non-Voting Common Stock,
par value $.01 per share ("Non-Voting Common Stock"); and
(iii) Four Million (4,000,000) shares of Preferred Stock, par value
$.01 per share ("Preferred Stock").
Such stock may be issued by the Corporation from time to time for such
consideration as may be fixed from time to time by the Board of Directors of
the Corporation (the "Board of Directors"). The Corporation shall have the
power to issue fractions of shares of its capital stock.
The powers, preferences and rights of each class of stock and the
qualifications, limitations and restrictions thereof, and the express grant of
authority to the Board of Directors to fix by resolution the designations and
the powers, preferences and rights of each share of Non-Voting Common Stock or
Preferred Stock and the qualifications, limitations and restrictions thereof
which are not fixed by this Amended and Restated Certificate of Incorporation,
are as set forth below.
A. Stock Split.
Upon the effectiveness of this Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, (i) each
share of "Class A Common Stock," par value $0.01 per share, of the Corporation
outstanding immediately prior to the effectiveness hereof shall automatically be
converted into 14.6379584508 shares of Common Stock, (ii) each share of "Class B
Common Stock," par value $0.01 per share, of the Corporation outstanding
immediately prior to the effectiveness hereof shall automatically be converted
into 14.6379584508 shares of Class B Common Stock, and (iii) the Corporation
shall not issue fractional shares of Common Stock or Class B Common Stock in
connection with the foregoing, and in lieu thereof, the Company shall pay to
each holder otherwise entitled to a fractional share the fair value thereof as
determined by the Board of Directors in accordance with applicable law.
B. Non-Voting Common Stock.
Shares of Non-Voting Common Stock may be issued from time to time in
one or more series as may from time to time be determined by the Board of
Directors, each of said series to be distinctly designated. The preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, if any, of each such
series may differ from those of any and all other series of Non-Voting Common
Stock at any time outstanding, and the Board of Directors is hereby expressly
granted authority to fix or alter, by resolution or resolutions, the
designation, number, preferences, and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, of each such class or series, including, but without limiting the
generality of the foregoing, the following:
1. The distinctive designation of, and the number of
shares of Non-Voting Common Stock that shall constitute, such series, which
number (except where otherwise provided by the Board of Directors in the
resolution establishing such series) may be increased (but not above the number
of authorized but undesignated shares of Non-Voting Common Stock) or decreased
(but not below the number of shares of such series then outstanding) from time
to time by like action of the Board of Directors;
2. The rights in respect of dividends, if any, of such
series of Non-Voting Common Stock, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other class or classes
or any other series of the same or other class or classes of capital stock of
the Corporation and whether such dividends shall be cumulative or
noncumulative;
2
<PAGE> 3
3. The right, if any, of the holders of such series of
Non-Voting Common Stock to convert the same into, or exchange the same for,
shares of any other series of the same or any other class or classes of capital
stock of the Corporation, and the terms and conditions of such conversion or
exchange;
4. The rights, if any, of the holders of such series of
Non-Voting Common Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation or in the event of any merger or
consolidation of or sale of assets by the Corporation; and
5. Such other powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, as the Board of Directors shall
determine.
Upon such designation, the Secretary of the Corporation shall cause a
Certificate of Designations setting forth a copy of such resolution and the
number of shares of the Non-Voting Common Stock as to which the resolution
applies to be executed, acknowledged, filed and recorded in accordance with
Section 103 of the General Corporation Law of the State of Delaware.
C. Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. The voting powers,
preferences, and relative, participating, optional and other special rights,
and the qualifications, limitations or restrictions thereof, if any, of each
such series may differ from those of any and all other series of Preferred
Stock at any time outstanding, and the Board of Directors is hereby expressly
granted authority to fix or alter, by resolution or resolutions, the
designation, number, voting powers, preferences, and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions thereof, of each such series, including but without limiting the
generality of the foregoing, the following:
1. The distinctive designation of, and the number of
shares of Preferred Stock that shall constitute, such series, which number
(except where otherwise provided by the Board of Directors in the resolution
establishing such series) may be increased (but not above the number of
authorized but undesignated shares of Preferred Stock) or decreased (but not
below the number of shares of such series then outstanding) from time to time by
like action of the Board of Directors;
2. The rights in respect of dividends, if any, of such
series of Preferred Stock, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or classes or any
other series of the same or other class or classes of capital stock of the
Corporation and whether such dividends shall be cumulative or noncumulative;
3. The right, if any, of the holders of such series of
Preferred Stock to convert the same into, or exchange the same for, shares of
any other class or classes or of any other series of the same or any other
class or classes of capital stock of the Corporation or other securities, and
the terms and conditions of such conversion or exchange;
4. Whether or not shares of such series of Preferred
Stock shall be subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on which, shares of
such series of Preferred Stock may be redeemed;
3
<PAGE> 4
5. The rights, if any, of the holders of such series of
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation or in the event of any merger or consolidation of
or sale of assets by the Corporation;
6. The terms of any sinking fund or redemption or
repurchase or purchase account, if any, to be provided for shares of such
series of Preferred Stock;
7. The voting powers, if any, of the holders of any
series of Preferred Stock generally or with respect to any particular matter,
which may be less than, equal to or greater than one vote per share, and which
may, without limiting the generality of the foregoing, include the right,
voting as a series by itself or together with the holders of any other series
of Preferred Stock or all series of Preferred Stock as a class, to elect one or
more directors of the Corporation generally or under such specific
circumstances and on such conditions, as shall be provided in the resolution or
resolutions of the Board of Directors adopted pursuant hereto, including,
without limitation, in the event there shall have been a default in the payment
of dividends on or redemption of any one or more series of Preferred Stock; and
8. Such other powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, as the Board of Directors shall
determine.
Upon such designation, the Secretary of the Corporation shall cause a
Certificate of Designations setting forth a copy of such resolution and the
number of shares of the Preferred Stock as to which the resolution applies to
be executed, acknowledged, filed and recorded in accordance with Section 103 of
the General Corporation Law of the State of Delaware.
The Certificate of Designations with respect to the Corporation's 15%
Redeemable Cumulative Exchangeable Preferred Stock, Series A, as filed with the
Secretary of State of the State of Delaware on March 20, 1995 and attached
hereto as Annex A, is hereby incorporated by reference and made a part hereof.
D. General Provisions
1. After the provisions with respect to preferential
dividends on any series of Preferred Stock (fixed in accordance with the
provisions of Section C of this Article IV), if any, shall have been satisfied
and after the Corporation shall have complied with all the requirements, if
any, with respect to redemption of, or the setting aside of sums as sinking
funds or redemption or purchase accounts with respect to, any series of
Preferred Stock (fixed in accordance with the provisions of Section C of this
Article IV), if applicable, and subject further to any other conditions that
may be fixed in accordance with the provisions of Section C of this Article IV,
then and not otherwise the holders of Common Stock and Non-Voting Common Stock
shall, subject to the provisions of Section B.4 and B.5 of this Article IV, be
entitled to receive such dividends as may be declared from time to time by the
Board of Directors.
2. In the event of the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after distribution
in full of the preferential amounts, if any (fixed in accordance with the
provisions of Section C of this Article IV), to be distributed to the holders
of Preferred Stock by reason thereof, the holders of Common Stock and
Non-Voting Common Stock shall, subject to the provisions of Sections B.4 and
B.5 of this Article IV and the additional rights, if any (fixed in accordance
with the provisions of Section C of this Article IV), of the holders of any
outstanding shares of Preferred
4
<PAGE> 5
Stock, be entitled to receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock or
Non-Voting Common Stock held by them respectively.
3. Except as may otherwise be required by law, and
subject to the provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to Section C of this Article IV granting the
holders of one or more series of Preferred Stock exclusive voting powers with
respect to any matter, each holder of Common Stock shall have one vote in
respect of each share of Common Stock held on all matters voted upon by the
stockholders.
4. The authorized amount of shares of Common Stock,
Non-Voting Common Stock and Preferred Stock may, without a class or series
vote, be increased or decreased from time to time by the affirmative vote of
the holders of a majority of the combined voting power of the then-outstanding
shares of Voting Stock, voting together as a single class. As used herein,
"Voting Stock" means all outstanding shares of capital stock of the Corporation
that pursuant to or accordance with this Amended and Restated Certificate of
Incorporation are entitled to vote generally in the election of directors of
the Corporation, and each reference herein, where appropriate, to a percentage
or portion of shares of Voting Stock shall refer to such percentage or portion
of the voting power of such shares entitled to vote. The outstanding shares of
Voting Stock shall not include any shares of Voting Stock that may be issuable
by the Corporation pursuant to any agreement or upon the exercise or conversion
of any right, warrants or options or otherwise.
5. Except as set forth herein or in the Certificate of
Designations specifying the rights, preferences and privileges of a particular
class or series of Non-Voting Common Stock, each share of Common Stock and
Non-Voting Common Stock shall be identical in all respects and shall have equal
powers, preferences, rights and privileges (including, without limitation, the
right to equal consideration per share in any merger, consolidation or other
business combination).
6. Subject to the rights of any outstanding series of
Preferred Stock, the holders of Common Stock issued and outstanding, except
where otherwise provided by law or pursuant to this Amended and Restated
Certificate of Incorporation, shall have and possess the right to notice of
stockholders' meetings and shall have exclusive voting rights and powers, and
the holders of Non-Voting Common Stock shall be entitled to notice of
stockholders' meetings but shall not be entitled to vote upon the election of
directors or upon any other matter, except where such notice or vote is
required by law or as otherwise expressly provided herein. Each holder of
Common Stock shall be entitled to one vote for each share of Common Stock
standing in such holder's name on the books of the Corporation. If, and only
if, the holders of Non-Voting Common Stock are required by law or as expressly
provided herein to vote upon a particular matter, each holder of Non- Voting
Common Stock shall be entitled to one vote for each share of Non-Voting Common
Stock standing in such holder's name on the books of the Corporation and shall
vote as a single class with the holders of Common Stock on such matter, except
as otherwise required by law or as expressly provided herein, in which case the
holders of Non-Voting Common Stock shall vote as a separate class on such
matter.
7. All shares of Common Stock and Non-Voting Common
Stock shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges.
5
<PAGE> 6
E. Reissuance of Stock.
Shares of Common Stock, Non-Voting Common Stock or Preferred Stock
that have been issued and reacquired in any manner, including shares purchased,
converted, redeemed or exchanged, shall (upon compliance with any applicable
provisions of the General Corporation Law of the State of Delaware) have the
status of authorized and unissued shares of Common Stock, Non-Voting Common
Stock or Preferred Stock, respectively.
F. Class B Common Stock.
1. Designation of Class B Common Stock. Of the
10,000,000 authorized shares of Non-Voting Common Stock, 8,500,000 shall be
designated a series thereof as "Class B Common Stock" (the "Class B Common
Stock"). The Board of Directors is authorized to increase (but not above the
number of authorized but undesignated shares of Non-Voting Common Stock) or
decrease (but not below the number of shares of Class B Common Stock then
outstanding) the authorized number of shares of Class B Common Stock.
2. Powers and Rights of Holders of Class B Common Stock.
(a) Notwithstanding anything in this Amended and
Restated Certificate of Incorporation to the contrary, 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, shall be required for any capital reorganization or
other reclassification of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into another entity or entities, or
any sale of all or substantially all the Corporation'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, except that, without such a
class vote, holders of shares of Class B Common Stock may receive, or such
shares may be exchanged for or converted into, non-voting securities which are
otherwise identical on a per share basis in amount and form to any voting
securities received with respect to or exchanged for Common Stock so long as
(i) such non-voting securities are convertible into such voting securities on
the same terms as Class B Common Stock is convertible into Common Stock and
(ii) all other consideration is equal on a per share basis.
(b) The Corporation may not effect a stock split
(whether by dividend or otherwise), reverse stock split, reclassification or
other similar event with respect to the Corporation's 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 Corporation's Class
B Common Stock.
(c) Subject to the rights of holders of Preferred
Stock, when, as and if dividends are declared on the Common Stock, whether
payable in cash, in property or in securities of the Corporation, the holders
of shares of Class B Common Stock shall be entitled to share equally, share for
share, with the holders of shares of Common Stock in such dividends; provided
that if dividends or distributions are declared which are payable in shares of,
or in subscription or other rights to acquire shares of, Common Stock or Class
B Common Stock, dividends or distributions shall be declared which are payable
at the same rate on all classes or series of Common Stock, and the dividends or
distributions payable in shares of, or in subscription or other rights to
acquire shares of, any particular class or series
6
<PAGE> 7
of Common Stock shall be made available to each holder of Common Stock, in such
class or series of Common Stock as such holder shall request.
3. Conversion of Class B Common Stock.
(a) Definitions. Unless the context otherwise
requires, the following terms shall have, for purposes of this Article, the
meanings set forth below:
"Affiliate" shall mean, with respect to any person,
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the purposes
of this definition, "control" when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
"person" shall mean any natural person and any
corporation, partnership, limited liability company, joint venture, trust,
unincorporated organization and any other entity or organization.
"Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(b) Conversion.
(1) Subject to and in compliance with
the provisions of this Section 3(b), shares of Class B Common Stock shall be
convertible at the option of the holder thereof into an equal number of fully
paid and nonassessable shares of Common Stock at any time following the initial
issuance by the Corporation of such shares.
(2) Immediately following the conversion
of any shares of Class B Common Stock into shares of Common Stock, on the
Conversion Date (as defined below) (i) such converted shares of Class B Common
Stock shall be deemed no longer outstanding and shall be returned to the status
of authorized but unissued shares of Non-Voting Common Stock, (ii) all rights
whatsoever with respect to such converted shares of Class B Common Stock shall
terminate (other than the right to receive certificates representing the Common
Stock into which such shares of Class B Common Stock were converted), and (iii)
the persons receiving shares of Common Stock upon the conversion of such shares
of Class B Common Stock shall be treated for all purposes as having become the
owners of such shares of Common Stock.
(3) To convert shares of Class B Common
Stock into shares of Common Stock at the option of the holder pursuant to
Section 3(b)(1), a holder must (i) surrender the certificate or certificates
evidencing the shares of Class B Common Stock to be converted, duly endorsed in
a form reasonably satisfactory to the Corporation, at the office of the
Corporation or of the transfer agent for such Class B Common Stock, (ii) give
written notice to the Corporation at such office that such holder elects to
convert such shares of Class B Common Stock into shares of Common Stock and the
number of shares the holder
7
<PAGE> 8
wishes to convert, (iii) state in writing the name or names to whom the
certificate or certificates for shares of Class B Common Stock are to be issued,
(iv) provide evidence reasonably satisfactory to the Corporation that such
holder has satisfied any conditions, contained in any agreement or any legend on
the certificates representing such shares of Class B Common Stock being
converted, in connection with any transfer thereof, and (v) pay any transfer or
similar tax if required as provided in Section 3(b)(8) below. In the event that
a holder fails to notify the Corporation of the number of shares of Class B
Common Stock which such holder wishes to convert, such holder shall be deemed to
have elected to convert all shares represented by the certificate or
certificates surrendered for conversion or all shares which such holder has
requested to transfer, as applicable. Such conversion, to the extent permitted
by law, regulation, rule or other requirement of any governmental authority
(collectively, "Laws") and the provisions hereof, shall be deemed to have been
effected as of the close of business on the date on which the holder satisfies
all of the foregoing requirements with respect to such conversion (the
"Conversion Date"). As soon as practical on or following the Conversion Date,
the Corporation shall deliver at such office, to the person specified in clause
(iii) of the first sentence of this Section 3(b)(3), a certificate representing
the shares of Common Stock issued upon the conversion, together with a new
certificate representing the unconverted portion, if any, of the shares of Class
B Common Stock formerly represented by the certificate or certificates
surrendered for conversion. Upon issuance in accordance with this Section
3(b)(3), such shares of Common Stock shall be deemed to be duly authorized,
validly issued, fully paid and nonassessable. Notwithstanding anything to the
contrary in this Section 3(b)(3), any holder of shares of Class B Common Stock
may convert such shares in accordance with Section 3(b)(1) on a conditional
basis, such that such conversion will not take effect unless a transfer,
disposition or sale is consummated, and the Corporation shall make such
arrangements as may be necessary or appropriate to allow such conditional
conversion and to enable the holder to effect such transfer, disposition or
sale.
(4) Notwithstanding any right of
conversion of Class B Common Stock provided for above, no shares of Class B
Common Stock beneficially owned by a bank holding company (as defined in 17
U.S.C. Section 1841) or an Affiliate of a bank holding company shall be
converted into shares of Common Stock by the initial holder thereof or any
direct or indirect transferee of such holder such that immediately after such
conversion such person and its affiliates would own more than 4.9% of any class
of voting securities of the Corporation, unless such shares are being
distributed, disposed of or sold in any one of the following transactions (each
a "Conversion Event"):
(i) such shares are being sold in a
public offering of such shares registered under the Securities Act or
a sale pursuant to Rule 144 promulgated under the Securities Act or
any similar rule then in force;
(ii) such shares are being sold
(including by virtue of a merger, consolidation or similar transaction
involving the Corporation) to a person or group (within the meaning of
the Exchange Act) and, after such sale, such person or group in the
aggregate would own or control securities of the Corporation
(excluding any Common Stock to be issued upon such conversion and sold
to such person or group in connection with such Conversion Event)
which possess in the aggregate the ordinary voting power to elect a
majority of the Corporation's directors;
(iii) such shares are being sold to a
person or group (within the meaning of the Exchange Act) and after
such sale such person or group in the
8
<PAGE> 9
aggregate would not own, control or have the right to acquire more
than two percent of the outstanding securities of any class of voting
securities of the Corporation; or
(iv) such shares are being sold in
any other manner permitted by the Federal Reserve Board.
For purposes of this Section 3(b)(4), percentages of the Corporation's
outstanding voting securities shall include shares issuable upon exercise or
conversion of Class B Common Stock and other convertible securities, options,
warrants or other similar instruments owned by such bank holding company, its
transferees and their respective affiliates, but shall not include shares
issuable upon exercise or conversion of convertible securities, options,
warrants or other similar instruments owned by any other person.
(5) If there shall occur any capital
reorganization or any reclassification of the Common Stock of the Corporation,
consolidation or merger of the Corporation with or into another entity, or the
conveyance of all or substantially all of the assets of the Corporation to
another person or entity, each share of Class B Common Stock shall thereafter
be convertible into the number of shares or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such shares of Class B Common Stock would have
been entitled upon such reorganization, reclassification, consolidation, merger
or conveyance; and, in any such case, appropriate adjustment (as determined in
good faith in the sole discretion of the Board of Directors) shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of the Class B Common Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustments of the conversion ratio) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares or other
property thereafter deliverable upon the conversion of the Class B Common
Stock.
(6) The Corporation shall at all times
reserve and keep available, out of its authorized but unissued shares of Common
Stock or treasury shares thereof, solely for the purpose of issuance upon the
conversion of Class B Common Stock into Common Stock, the full number of shares
of Common Stock deliverable upon the conversion of all shares of Class B Common
Stock from time to time outstanding. The Corporation shall from time to time,
in accordance with the laws of the State of Delaware, increase the authorized
amount of its Common Stock if at any time the authorized number of shares of
Common Stock remaining unissued shall not be sufficient to permit the
conversion of all shares of Class B Common Stock at the time outstanding.
(7) The Corporation shall not take any
action that would cause the total number of shares of Common Stock then
outstanding or issuable upon conversion of shares of Class B Common Stock then
outstanding or reserved for issuance for any other purpose to exceed the total
number of shares of Common Stock authorized.
(8) The Corporation shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon conversion of shares of Class B Common Stock into such
Common Stock. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of Common Stock in a name other than that in which the Class B Common
Stock so converted was registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of any such tax, or has established to the reasonable satisfaction
of the Corporation that such tax has been paid.
9
<PAGE> 10
ARTICLE V. ELECTION OF DIRECTORS
A. The business and affairs of the Corporation shall be conducted
and managed by, or under the direction of, the Board of Directors. Excepts as
otherwise provided for or fixed pursuant to the provisions of Article IV of
this Amended and Restated Certificate of Incorporation relating to the rights
of the holders of any series of Preferred Stock to elect directors, the total
number of directors constituting the entire Board of Directors shall be fixed
from time to time by or pursuant to a resolution passed by the Board of
Directors.
B. The Board of Directors, other than those directors elected by
the holders of any series of Preferred Stock as provided for or fixed pursuant
to the provisions of Article IV of this Amended and Restated Certificate of
Incorporation, shall be divided into three classes, as nearly equal in number
as the then-authorized number of directors constituting the Board of Directors
permits, with the term of office of one class expiring each year and with each
director serving for a term ending at the third annual meeting of stockholders
of the Corporation following the annual meeting at which such director was
elected. One class of directors shall be initially elected for a term expiring
at the annual meeting of stockholders to be held in 1997, another class shall
be initially elected for a term expiring at the annual meeting of stockholders
to be held in 1998, and another class shall be initially elected for a term
expiring at the annual meeting of stockholders to be held in 1999. Members of
each class shall hold office until their successors are elected and qualified.
At each succeeding annual meeting of the stockholders of the Corporation, the
successors of the class of directors whose term expires at that meeting shall
be elected by a plurality vote of all votes cast at such meeting to hold office
for a term expiring at the annual meeting of stockholders held in the third
year following the year of their election.
C. Except as otherwise provided for or fixed pursuant to the
provisions of Article IV of this Amended and Restated Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock to elect additional directors, and subject to the provisions hereof,
newly created directorships resulting from any increase in the authorized
number of directors, and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal, or other cause, may be filled
only by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or in which the vacancy occurred, and until such
director's successor shall have been duly elected and qualified, subject to
such director's earlier death, disqualification, resignation or removal.
Subject to the provisions of this Amended and Restated Certificate of
Incorporation, no decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
D. During any period when the holders of any series of Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to the provisions of Article IV of this Amended and Restated
Certificate of Incorporation, then upon commencement and for the duration of
the period during which such right continues (i) the then otherwise total
authorized number of directors of the Corporation shall automatically be
increased by such specified number of directors, and the holders of such
Preferred Stock shall be entitled to elect the additional directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional
director shall serve until such director's successor shall have been duly
elected and qualified, or until such director's right to hold such office
terminates pursuant to said provisions, whichever occurs earlier, subject to
such director's death, disqualification, resignation or removal. Except as
otherwise provided by the Board of Directors in the resolution or resolutions
establishing such series, whenever the holders of any series of Preferred Stock
having such right to elect
10
<PAGE> 11
additional directors are divested of such right pursuant to the provisions of
such stock, the terms of office of all such additional directors elected by the
holders of such stock, or elected to fill any vacancies resulting from death,
resignation, disqualification or removal of such additional directors, shall
forthwith terminate and the total and authorized number of directors of the
Corporation shall be reduced accordingly. Notwithstanding the foregoing,
whenever, pursuant to the provisions of Article IV of this Amended and Restated
Certificate of Incorporation, the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a series or together
with the holders of other such series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation and the
Certificate of Designations applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Section D unless expressly
provided by such terms.
E. Except for such additional directors, if any, as are elected
by the holders of any series of Preferred Stock as provided for or fixed
pursuant to the provisions of Article IV of this Amended and Restated
Certificate of Incorporation, any director may be removed from office (i) for
cause only by the affirmative vote of the holders of a majority of the combined
voting power of the then-outstanding shares of Voting Stock at a meeting of
stockholders called for that purpose, voting together as a single class, or
(ii) without cause only by the affirmative vote of the holders of 66 2/3% or
more of the combined voting power of the then-outstanding shares of Voting
Stock at a meeting of stockholders called for that purpose, voting together as
a single class.
ARTICLE VI. LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any repeal
or modification of this Article VI shall not adversely affect any right or
protection of a director of the Corporation existing hereunder with respect to
acts or omissions occurring prior to such repeal or modification.
ARTICLE VII. MEETINGS OF STOCKHOLDERS
Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws of the Corporation may provide.
Unless otherwise prescribed by statute or except as otherwise provided for or
fixed pursuant to the provisions of Article IV of this Amended and Restated
Certificate of Incorporation relating to the rights of the holders of any
series of Preferred Stock, meetings of stockholders of the Corporation may be
called only by (i) the Chief Executive Officer, (ii) the Board of Directors or
(iii) the Chief Executive Officer upon the written request of the holders of a
majority of the Corporation's then-outstanding Common Stock. Meetings of
stockholders may not be called by any other person or person or in any other
manner. Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII. STOCKHOLDER CONSENT
Except as otherwise provided for or fixed pursuant to the provisions
of Article IV of this Amended and Restated Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock, no
action that is required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders may be effected by
written consent of stockholders in
11
<PAGE> 12
lieu of a meeting of stockholders, unless the action to be effected by written
consent of stockholders and the taking of such action by such written consent
have expressly been approved in advance by the Board of Directors.
ARTICLE IX. AMENDMENT OF CORPORATE DOCUMENTS
A. Restated Certificate of Incorporation. Whenever any vote of
the holders of Voting Stock is required by law to amend, alter, repeal or
rescind any provision of this Amended and Restated Certificate of
Incorporation, then in addition to any affirmative vote required by applicable
law and in addition to any vote of the holders of any series of Preferred Stock
provided for or fixed pursuant to the provisions of Article IV of this Amended
and Restated Certificate of Incorporation, such alteration, amendment, repeal
or rescission of any provision of this Amended and Restated Certificate of
Incorporation must be approved by the Board of Directors and by the affirmative
vote of the holders of at least a majority of the combined voting power of the
then-outstanding shares of Voting Stock, voting together as a single class;
provided, however, that if any such alteration, amendment, repeal or rescission
relates to a provision hereof requiring approval by the affirmative vote of the
holders of at least 66 2/3% of the combined voting power of the
then-outstanding shares of Voting Stock, then such alteration, amendment,
repeal or rescission must also be approved by the affirmative vote of the
holders of at least 66 2/3% of the combined voting power of the
then-outstanding shares of Voting Stock, voting together as a single class.
Subject to the provisions hereof, the Corporation reserves the right
at any time, and from time to time, to amend, alter, repeal or rescind any
provision contained in this Amended and Restated Certificate of Incorporation
in the manner now or hereafter prescribed by law; and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed by law; and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Amended and Restated Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article.
B. Bylaws. In addition to any affirmative vote required by law,
any alteration, amendment, repeal or rescission of the Bylaws of the
Corporation may be adopted either (i) by the Board of Directors or (ii) by the
stockholders by the affirmative vote of the holders of at least 66 2/3% of the
combined voting power of the then-outstanding shares of Voting Stock, voting
together as a single class.
12
<PAGE> 13
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed under the seal of the Corporation this _____ day
of October, 1996.
-----------------------------------
Robert A. Mariano
President and Chief Executive Officer
[Seal]
Attest:
- ----------------------------------
Darren W. Karst
Secretary
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EXHIBIT 3.2
================================================================================
AMENDED AND RESTATED BYLAWS
OF
DOMINICK'S SUPERMARKETS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Registered Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. MEETINGS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Annual Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.4 Notice of Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.5 Quorum; Adjourned Meetings and Notice Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.6 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.7 Notice of Stockholder Business and Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.8 Procedure for Election of Directors; Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.9 Inspectors of Elections; Opening and Closing the Polls . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.10 No Stockholder Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.11 Maintenance and Inspection of Stockholder List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III. DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.5 Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.6 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.7 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.8 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.9 Committees of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.10 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.11 Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4 Compensation of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.5 Term of Office; Removal and Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.7 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.8 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.9 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<TABLE>
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Section 4.10 Assistant Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.11 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.12 Assistant Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V. INDEMNIFICATION AND INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI. CERTIFICATES OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.1 Stock Certificates and Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.2 Signatures on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.3 Statement of Stock Rights, Preferences, Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.4 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.5 Fixed Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.6 Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.2 Payment of Dividends; Directors' Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.3 Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.5 Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.6 Manner of Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.7 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.8 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.9 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.11 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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AMENDED AND RESTATED BYLAWS
OF
DOMINICK'S SUPERMARKETS, INC.
ARTICLE I.
OFFICES
SECTION 1.1 REGISTERED OFFICES. The principal office of the
Corporation in the State of Delaware shall be located in the City of Dover,
County of Kent, and the name and address of its registered agent is The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100,
Dover, Delaware, 19904.
SECTION 1.2 OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or the business of the Corporation may require.
SECTION 1.3 BOOKS AND RECORDS. The books and records of the
Corporation may be kept outside the State of Delaware at such place or places
as may from time to time be designated by the Board of Directors.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders of the Corporation shall be held on such date and at such time as
may be fixed by resolution of the Board of Directors.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, as amended or restated or
supplemented from time to time (the "Certificate of Incorporation"), may be
called only by (i) the Chief Executive Officer, (ii) the Board of Directors or
(iii) the Chief Executive Officer upon the written request of the holders of a
majority of the Corporation's then-outstanding voting Common Stock. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
SECTION 2.3 PLACE OF MEETINGS. Meetings of stockholders of the
Corporation shall be held at any place within or outside the State of Delaware
as may be fixed by resolution of the Board of Directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the Corporation.
SECTION 2.4 NOTICE OF STOCKHOLDERS' MEETINGS. Written or printed
notice, stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be delivered by the Corporation
not less than 10 days nor more than 60 days before the date of the meeting,
either personally or by mail, to each stockholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail with
1
<PAGE> 5
postage thereon prepaid, addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation. Such further notice
shall be given as may be required by law. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Meetings
may be held without notice if all stockholders entitled to vote are present, or
if notice is waived by those not present in accordance with Section 7.7 of
these Bylaws.
SECTION 2.5 QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. Except as
otherwise provided by law or by the Certificate of Incorporation, a majority of
the holders of the outstanding shares of the Corporation entitled to vote
generally in the election of directors who are present in person or represented
by proxy shall constitute a quorum for the transaction of business at a meeting
of stockholders of the Corporation. A quorum, once established, shall not be
broken by the withdrawal of enough votes to leave less than a quorum and the
votes present may continue to transact business until adjournment. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, a majority of the voting stock represented in person or by proxy
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
SECTION 2.6 PROXIES. At all meetings of the stockholders of the
Corporation, a stockholder having the right to vote may vote by proxy executed
in writing (or in such manner prescribed by the General Corporation Law of the
State of Delaware) by the stockholder or by his duly authorized
attorney-in-fact. All proxies must be filed with the Secretary of the
Corporation at the beginning of each meeting in order to be counted in any vote
at the meeting.
SECTION 2.7 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at
the direction of the Board of Directors, or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on
the 60th day nor earlier than the close of business on the 90th day prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall
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the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement by the Corporation naming all of the nominees for director
or specifying the size of the increased Board of Directors at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
Corporation.
(B) Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant
to the Corporation's notice of meeting (a) by or at the direction of the Board
of Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Bylaw. In the event
the Corporation calls for a special meeting of stockholders for the purpose of
electing one or more directors to the board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 90th day prior to
such special meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the 10th day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Bylaw shall be eligible to
serve as directors and only such business shall
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be conducted at a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Bylaw. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws,
the Chairman of the meeting shall have the power and duty to determine whether
a nomination or any business proposed to be brought before the meeting was made
or proposed, as the case may be, in accordance with the procedures set forth in
this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any
rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a- 8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 2.8 PROCEDURE FOR ELECTION OF DIRECTORS; REQUIRED VOTE.
When a quorum is present at any meeting, in all matters other than the election
of directors, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes, or the Certificate of Incorporation, or these
Bylaws, a different vote is required in which case such express provision shall
govern and control the decision of such question. Election of directors at all
meetings of the stockholders at which directors are to be elected shall be by
ballot. Subject to the rights of the holders of any series of Preferred Stock
to elect directors under specified circumstances, directors shall be elected by
a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors.
SECTION 2.9 INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.
The Board of Directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the Corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives, to act at the meetings of stockholders and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act or is able to act at a meeting of
stockholders, the Chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by law. The Chairman of the
meeting shall fix and announce at the meeting the date and time of the opening
and the closing of the polls for each matter upon which the stockholder will
vote at a meeting.
SECTION 2.10 NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Subject to
the rights of the holders of any series of Preferred Stock with respect to such
series of Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
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SECTION 2.11 MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The
officer who has charge of the stock ledger of the Corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III.
DIRECTORS
SECTION 3.1 GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these Bylaws required to be exercised or
done by the stockholders.
SECTION 3.2 REGULAR MEETINGS. The Board of Directors may, by
resolution, provide the time and place for the holding of regular meetings
without notice other than such resolution.
SECTION 3.3 SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors then in office. The person
or persons authorized to call special meetings of the Board of Directors may
fix the place and time of the meetings.
SECTION 3.4 NOTICE. Notice of any special meeting of directors shall
be given to each director at his business or residence in writing by hand
delivery, first-class or overnight mail or courier service, telegram or
facsimile transmission, or orally by telephone. If mailed by first-class mail,
such notice shall be deemed adequately delivered when deposited in the United
Stats mails so addressed, with postage thereon prepaid, at least 5 days before
such meeting. If by telegram, overnight mail or courier service, such notice
shall be deemed adequately delivered when the telegram is delivered to the
telegraph company or the notice is delivered to the overnight mail or courier
service company at least 48 hours before such meeting. If by facsimile
transmission, such notice shall be deemed adequately delivered when the notice
is transmitted at least 24 hours before such meeting. If by telephone or by
hand delivery, the notice shall be given at least 24 hours prior to the time
set for the meeting. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice of such meeting, except for amendments to these Bylaws, as
provided under Section 8.1. A meeting may be held at any time without notice
if all the directors are present or if those not present waive notice of the
meeting in accordance with Section 7.7 of these Bylaws.
SECTION 3.5 ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
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the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
SECTION 3.6 TELEPHONIC MEETINGS. Members of the Board of Directors,
or any committee thereof, may participate in a meeting of the Board of
Directors, or any committee thereof, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.7 QUORUM. Subject to Section 3.8, a whole number of
directors equal to at least a majority of the authorized number of directors
shall constitute a quorum for the transaction of business, but if at any
meeting of the Board of Directors there shall be less than a quorum present, a
majority of the directors present may adjourn the meeting from time to time
without further notice. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors. The directors present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum.
SECTION 3.8 VACANCIES. Subject to applicable law and the rights of
the holders of any series of Preferred Stock with respect to such Preferred
Stock, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office, or otherwise, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, although less than a
quorum of the Board of Directors, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. No decrease in the
number of authorized directors constituting the whole Board of Directors shall
shorten the term of any incumbent director.
SECTION 3.9 COMMITTEES OF DIRECTORS. The Board of Directors may by
resolution designate one or more committees, each such committee to consist of
one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to the following
matters: (1) approving or adopting, or recommending to the stockholders any
action or matter expressly required by the General Corporation Law of the State
of Delaware to be submitted to stockholders for approval or (2) adopting,
amending or repealing any Bylaw of the Corporation.
SECTION 3.10 RECORDS. The Board of Directors shall keep, or cause to
be kept, a record containing the minutes of the proceedings of the meetings of
the Board of Directors and of the
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stockholders, appropriate stock books and registers and such books of records
and accounts as may be necessary for the proper conduct of the business of the
Corporation.
SECTION 3.11 COMPENSATION OF DIRECTORS. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors. The directors
may be paid their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV.
OFFICERS
SECTION 4.1 OFFICERS. The officers of this Corporation shall be
chosen by the Board of Directors and shall include a Chairman of the Board or a
President, or both, and a Secretary. The Corporation may also have at the
discretion of the Board of Directors such other officers as are desired,
including a Vice Chairman, a Chief Executive Officer, a Treasurer, one or more
Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers,
and such other officers as may be appointed in accordance with the provisions
of Section 4.3 hereof. In the event there are two or more Vice Presidents,
then one or more may be designated as Executive Vice President, Senior Vice
President, Group Vice President or other similar or dissimilar title. At the
time of the election of officers, the directors may by resolution determine the
order of their rank. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
SECTION 4.2 ELECTION OF OFFICERS. The Board of Directors, at its
first meeting after each annual meeting of stockholders, shall choose the
officers of the Corporation.
SECTION 4.3 SUBORDINATE OFFICERS. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
SECTION 4.4 COMPENSATION OF OFFICERS. The salaries of all officers
and agents of the Corporation shall be fixed by the Board of Directors.
SECTION 4.5 TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of
the Corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
SECTION 4.6 CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 4.7 of this Article IV.
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SECTION 4.7 PRESIDENT. Subject to such supervisory powers, if any,
as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the Corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of
the Corporation. He shall preside at all meetings of the stockholders and, in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He shall be an ex-officio member of all committees
and shall have the general powers and duties of management usually vested in
the office of President and Chief Executive Officer of corporations, and shall
have such other powers and duties as may be prescribed by the Board of
Directors or these Bylaws.
SECTION 4.8 VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to
time may be prescribed for them, respectively, by the Board of Directors.
SECTION 4.9 SECRETARY. The Secretary shall attend all sessions of
the Board of Directors and all meetings of the stockholders and record all
votes and the minutes of all proceedings in a book to be kept for that purpose;
and shall perform like duties for the standing committees when required by the
Board of Directors. He shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or these
Bylaws. He shall keep in safe custody the seal of the Corporation, and when
authorized by the Board of Directors, affix the same to any instrument
requiring it, and when so affixed it shall be attested by his signature or by
the signature of an Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature.
SECTION 4.10 ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
SECTION 4.11 TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond, in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors, for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
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SECTION 4.12 ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE V.
INDEMNIFICATION AND INSURANCE
SECTION 5.1 INDEMNIFICATION AND INSURANCE. (A) Each person who was or
is made a party or is threatened to be made a party to or is involved in any
threatened, pending or contemplated action, suit, or proceeding, whether civil,
criminal administrative or investigative (hereinafter a "proceeding"), by reason
of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (C) of this Bylaw, the Corporation
shall be required to indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) commenced by such person only if
the commencement of such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Bylaw shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition, such advances to be paid by the Corporation within 20 days after
the receipt by the Corporation of a statement or statements from the claimant
requesting such advance or advances from time to time; provided, however, that
if the General Corporation Law of the State of Delaware requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
(B) To obtain indemnification under this Bylaw, a claimant shall
submit to the Corporation a written request, including therein or therewith
such documentation and information as is reasonably available to the claimant
and is reasonably necessary to determine whether and to what extent the
claimant is entitled to indemnification. Upon written request by a claimant
for indemnification
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pursuant to the first sentence of this paragraph (B), a determination, if
required by applicable law, with respect to the claimant's entitlement thereto
shall be made as follows: (1) if requested by the claimant, by Independent
Counsel (as hereinafter defined), or (2) if no request is made by the claimant
for a determination by Independent Counsel, (i) by a majority vote of the
Disinterested Directors (as hereinafter defined), or (ii) if the Disinterested
Directors so direct, by Independent Counsel in a written opinion to the Board
of Directors, a copy of which shall be delivered to the claimant, or (iii) if
the Disinterested Directors so direct, by the stockholders of the Corporation.
In the event the determination of entitlement to indemnification is to be made
by Independent Counsel, the Independent Counsel shall be selected by the Board
of Directors unless there shall have occurred within two years prior to the
date of the commencement of the action, suit or proceeding for which
indemnification is claimed a "Change of Control" as defined in the
Corporation's 1995 Stock Option Plan, in which case the Independent Counsel
shall be selected by the claimant unless the claimant shall request that such
selection be made by the Board of Directors. If it is so determined that the
claimant is entitled to indemnification, payment to the claimant shall be made
within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid in full
by the Corporation within 30 days after a written claim pursuant to paragraph
(B) of this Bylaw has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an
actual determination by the Corporation (including its Board of Directors,
Independent Counsel or stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B)
of this Bylaw that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this Bylaw that the
procedures and presumptions of this Bylaw are not valid, binding and
enforceable and shall stipulate in such proceeding that the Corporation is
bound by all the provisions of this Bylaw.
(F) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
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<PAGE> 14
(G) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware. To the extent that
the Corporation maintains any policy or policies providing such insurance, each
such director or officer, and each such agent or employee to which rights to
indemnification have been granted as provided in paragraph (H) of this Bylaw,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
(H) The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification, and rights to be
paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the Corporation
to the fullest extent of the provisions of this Bylaw with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
(I) If any provision or provisions of this Bylaw shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provisions held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent
possible, the provisions of this Bylaw (including, without limitation, each
such portion of any paragraph of this Bylaw containing any such provision held
to be invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the matter in respect of
which indemnification is sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters
of corporation law and shall include any person who, under the
applicable standards of professional conduct then prevailing, would
not have a conflict of interest in representing either the Corporation
or the claimant in an action to determine the claimant's rights under
this Bylaw.
(K) Any notice, request or other communication required or permitted
to be given to the Corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
ARTICLE VI.
CERTIFICATES OF STOCK
SECTION 6.1 STOCK CERTIFICATES AND TRANSFERS. The interest of each
stockholder of the Corporation shall be evidenced by certificates for shares of
stock in such form as the appropriate officers of the Corporation may from time
to time prescribe. The shares of the stock of the
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<PAGE> 15
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for at least the same number of shares to the Corporation or the
transfer agent of the Corporation, with an assignment and power of transfer
endorsed thereon or attached thereto, duly executed, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require.
SECTION 6.2 SIGNATURES ON CERTIFICATES. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent,
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
SECTION 6.3 STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES. If
the Corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualification, limitations or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise provided in
section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 6.4 LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 6.5 FIXED RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting. In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date which shall not be more
than ten days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors.
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<PAGE> 16
SECTION 6.6 REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VII.
GENERAL PROVISIONS
SECTION 7.1 DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 7.2 PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment
of any dividend there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interests of the Corporation, and the directors may
abolish any such reserve.
SECTION 7.3 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
SECTION 7.4 FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 7.5 CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7.6 MANNER OF GIVING NOTICE. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid, and such
notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail. Notice to directors may also be given by telegram.
SECTION 7.7 WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Law of the State of Delaware or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at, nor the
purpose of, any annual or special meeting of the stockholders or the Board of
Directors or committee thereof need be specified in any waiver of notice of
such meeting.
SECTION 7.8 AUDITS. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board
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<PAGE> 17
of Directors, and it shall be the duty of the Board of Directors to cause such
audit to be done annually.
SECTION 7.9 RESIGNATIONS. Any director or any officer, whether
elected or appointed, may resign at any time by giving written notice of such
resignation to the Chairman of the Board, the President, or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President,
or the Secretary, or at such later date as is specified therein. No formal
action shall be required of the Board of Directors or the stockholders to make
any such resignation effective.
SECTION 7.10 CONTRACTS. Except as otherwise required by law, the
Certificate of Incorporation or these Bylaws, any contracts or other
instruments may be executed and delivered in the name and on the behalf of the
Corporation by such officer or officers of the Corporation as the Board of
Directors may from time to time direct. Such authority may be general or
confined to specific instances as the Board of Directors may determine. The
Chairman of the Board, the President or any Vice President may execute bonds,
contracts, deeds, leases and other instruments to be made or executed for or on
behalf of the Corporation. Subject to any restrictions imposed by the Board of
Directors or the Chairman of the Board, the President or any Vice President of
the Corporation may delegate contractual powers to others under his
jurisdiction, it being understood, however, that any such delegation of power
shall not relieve such officer of responsibility with respect to the exercise
of such delegated power.
SECTION 7.11 PROXIES. Unless otherwise provided by resolution
adopted by the Board of Directors, the Chairman of the Board, the President or
any Vice President may from time to time appoint an attorney or attorneys or
agent or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to case as
the holder of stock or other securities in any other corporation, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE VIII.
AMENDMENTS
SECTION 8.1 AMENDMENTS. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the stockholders, or by the Board of
Directors when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or
of the Board of Directors or at any special meeting of the stockholders or of
the Board of Directors if notice of such alteration, amendment, repeal or
adoption of new Bylaws be contained in the notice of such special meeting. If
the power to adopt, amend or repeal Bylaws is conferred upon the Board of
Directors by the Certificate of Incorporation it shall not divest or limit the
power of the stockholders to adopt, amend or repeal Bylaws.
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<PAGE> 18
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of
Dominick's Supermarkets, Inc., a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of
said corporation as duly adopted by the written consent of the Board of
Directors of said corporation as of October ___, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
____th day of October, 1996.
-----------------------------------
Darren W. Karst
Secretary
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<PAGE> 1
EXHIBIT 4.2
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. THE HOLDER OF THIS WARRANT OR ANY
SUCH SHARES MAY BE REQUIRED TO DELIVER TO THE COMPANY, IF THE COMPANY SO
REQUESTS, AN OPINION OF COUNSEL (REASONABLY SATISFACTORY IN FORM AND SUBSTANCE
TO THE COMPANY) TO THE EFFECT THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT (OR QUALIFICATION UNDER STATE SECURITIES LAWS) IS AVAILABLE WITH
RESPECT TO ANY TRANSFER OF THIS WARRANT OR THESE SHARES THAT HAS NOT BEEN SO
REGISTERED (OR QUALIFIED).
THIS WARRANT AND ANY SHARES OF THE COMPANY ACQUIRED UPON THE EXERCISE OF THIS
WARRANT ALSO ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND
OBLIGATIONS, TO WHICH ANY TRANSFEREE AGREES BY HIS ACCEPTANCE HEREOF, AS SET
FORTH HEREIN AND IN THE STOCKHOLDERS AGREEMENT OF THE COMPANY, DATED AS OF
MARCH 22, 1995, COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY. NO TRANSFER
OF THIS WARRANT OR SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS
ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS HEREOF AND OF SUCH
STOCKHOLDERS AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY THE
RESTRICTIONS SET FORTH HEREIN AND IN THE STOCKHOLDERS AGREEMENT.
DOMINICK'S SUPERMARKETS, INC.
Class A Common Stock Purchase Warrant
No. W-1 264,688 shares
March 22, 1995
DOMINICK'S SUPERMARKETS, INC., a Delaware corporation
(together with any corporation that shall succeed to or assume the obligations
of the Company hereunder in compliance with Section 4, the "Company"), for
value received, hereby certifies that THE YUCAIPA COMPANIES, a California
general partnership, or its registered permitted assigns (the "Holder"), is
entitled to purchase from the Company an aggregate of 264,688 shares of Class A
Common Stock (as defined below), at the Exercise Price (as defined below) per
share, subject to the terms, conditions and adjustments set forth below, (i) in
whole or in part, at any time or from time to time from and after the
occurrence of a Qualified IPO (as defined below) and on or prior to 5:00 P.M.,
New York
<PAGE> 2
City time, on the Expiration Date (as defined below) or (ii) in whole,
concurrently with any Qualified Sale Event occurring on or prior to the
Expiration Date.
1. Definitions. Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Stockholders
Agreement (the "Stockholders Agreement"), dated as of March 22, 1995, among the
Company, DFF Supermarkets, Inc., a Delaware corporation, Dominick's Finer
Foods, Inc., a Delaware corporation, and certain stockholders of the Company.
In addition, the following terms shall have the meanings ascribed to them
below:
"Class A Common Stock" shall mean the Class A Common
Stock, par value $.01 per share, of the Company and any stock into which such
Class A Common Stock shall have been changed or any stock resulting from any
reclassification of such Class A Common Stock.
"Enterprise Value" shall mean (without duplication)
the sum of (a) the aggregate value of the fully diluted common equity of the
Company, based on an assumed price per Share equal to the Exercise Price, net
of the exercise, exchange or conversion price, if any, with respect to any
security exercisable or exchangeable for or convertible into Common Stock of
the Company, plus (b) the aggregate principal amount of all Indebtedness of the
Company and its consolidated Subsidiaries and the aggregate liquidation
preference of all preferred stock of the Company (other than preferred stock
included in clause (a) above), in each case as reflected on the most recent
balance sheet of the Company and its consolidated Subsidiaries that was (or was
required to be) provided pursuant to Section 4.4 of the Stockholders Agreement
on or prior to March 22, 2000, less (c) all cash and cash equivalents of the
Company and its consolidated Subsidiaries as reflected on such balance sheet.
"Expiration Date" initially shall mean March 22,
2000; provided, that if, on such date, the product of (i) 6 times (ii) EBITDA
for the latest four fiscal quarters of the Company for which information was
(or was required to be) provided pursuant to Section 4.4 of the Stockholders
Agreement exceeds the Enterprise Value, then "Expiration Date" shall mean March
22, 2002.
"Market Price" shall mean the average closing sale
price of a share of Class A Common Stock, regular way, for the period of 20
consecutive trading days ending on the trading day immediately preceding the
date of such exercise or, in case no such sale takes place on any such day, the
average of the reported closing bid and asked prices, regular way, in each case
on a Permitted Exchange or, if not so available, as such Market Price may be
determined by a nationally recognized investment bank selected by a majority of
the disinterested members of the Board of Directors of the Company that are
neither Affiliates of the Holder nor designated or nominated by the Holder or
any of its Affiliates (the "Disinterested Directors"); provided, that if the
Warrant is exercised (i) on or prior to the 20th trading day following
consummation of a Qualified IPO, "Market Price" shall mean the price for the
public in such Qualified IPO or (ii) concurrently with a Qualified
<PAGE> 3
Sale Event, "Market Price" shall mean the price per share of Class A Common
Stock paid in such Qualified Sale Event.
"Qualified Sale Event" shall mean a sale of all, but
not less than all, of the issued and outstanding shares of capital stock of the
Company to a Third Party in a bona fide transaction; provided, that from and
after March 22, 2000, such term shall only include a Compelled Sale.
2. Exercise of Warrant.
2.1. Manner of Exercise. Subject to the
foregoing, this Warrant may be exercised by the Holder hereof, in whole or in
part, during normal business hours on any day other than a Saturday or a Sunday
or a day on which commercial banking institutions in the City of New York are
authorized by law to be closed (a "Business Day"), by surrender of this Warrant
to the Company at its office maintained pursuant to Section 9.2, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof), duly executed by such Holder. Payment of the
aggregate Exercise Price of the number of shares of Class A Common Stock
designated in such subscription shall be made by the Company withholding
therefrom that number of shares of Class A Common Stock with an aggregate
Market Price as of the date of exercise equal to such aggregate Exercise Price.
2.2. When Exercise Effective. Each exercise of
this Warrant shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which this Warrant and the
accompanying subscription shall have been duly surrendered to the Company as
provided in Section 2.1, and at such time the Holder shall be deemed to have
become the holder or holders of record of a number of shares of Class A Common
Stock equal to the number of shares designated in such subscription less the
number of shares withheld by the Company as payment therefor.
2.3. Delivery of Stock Certificates, etc. As soon
as practicable after each exercise of this Warrant, in whole or in part, in
accordance with the terms of Section 2.1, the Company will cause to be issued
in the name of, and delivered to the Holder hereof,
(a) a certificate or certificates for
the number of duly authorized, validly issued, fully paid and
nonassessable shares of Class A Common Stock to which such Holder
shall be entitled upon such exercise plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash in an
amount equal to the same fraction of the Market Price per share on the
date of such exercise, and
(b) in case such exercise is in part
only, a new Warrant of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Class A Common Stock
equal to the number of such shares called for on the face of this
Warrant (after giving effect to any adjustment thereof after the date
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<PAGE> 4
hereof) minus the number of such shares designated by the Holder upon
such exercise as provided in Section 2.1.
3. Adjustments.
3.1. General. (a) The number of shares of Class
A Common Stock that the Holder shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Class A
Common Stock that would otherwise (but for the provisions of this Section 3) be
issuable upon such exercise, by a fraction (i) the numerator of which is the
Warrant Price (as defined below) and (ii) the denominator of which is the
Exercise Price, in each case in effect on the date of such exercise.
Each of the "Exercise Price" and the "Warrant Price"
shall initially be $303.48 per share; provided, that the Exercise Price shall
be adjusted and readjusted from time to time as provided in Section 3 and the
Warrant Price shall be adjusted and readjusted from time to time as provided in
Section 3.1(b).
(b) From and after March 22, 2000, the
Exercise Price and the Warrant Price shall each be increased daily at
a rate of 25% per annum, compounded annually.
3.2. Treatment of Stock Dividends. If, after the
date hereof, the Company shall declare or pay any dividend on the Class A
Common Stock payable in Class A Common Stock, then, and in each such case, the
Exercise Price in effect immediately after the close of business on the record
date for the determination of holders entitled to receive such dividend, shall
be reduced by multiplying such Exercise Price by a fraction (a) the numerator
of which shall be the number of shares of Class A Common Stock outstanding at
the close of business on such record date and (b) the denominator of which
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution.
3.3. Adjustments for Stock-Splits, Combinations.
If, after the date hereof, the outstanding shares of Class A Common Stock shall
be subdivided into a greater number of shares of Class A Common Stock or
combined into a smaller number of shares of Class A Common Stock by stock
split, combination, reclassification or otherwise, the Exercise Price in effect
immediately prior to such subdivision or combination shall, concurrently with
the effectiveness of such subdivision or combination, be proportionately
reduced or increased.
3.4. Minimum Adjustment of Warrant Price. If the
amount of any adjustment of the Exercise Price required pursuant to Sections
3.2 or 3.3 would be less than one percent (1%) of the Exercise Price in effect
at the time such adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto made at the time
of and together with any subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall aggregate at least
one percent (1%) of such Exercise Price, provided, that all such adjustments
required
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<PAGE> 5
pursuant to Sections 3.2 and 3.3 and carried forward under this Section 3.4
shall be made upon (and in connection with) any exercise of the Warrant.
3.5. Form of Warrants. Irrespective of any
adjustments in the Exercise Price or the number of shares of Class A Common
Stock purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrant initially issued.
4. Consolidation, Merger, etc.
If, after the date hereof, the Company shall
(a) consolidate with or merge into any
other Person and shall not be the continuing or surviving corporation
of such consolidation or merger, or
(b) permit any other Person to
consolidate with or merge into the Company and the Company shall be
the continuing or surviving Person but, in connection with such
consolidation or merger, the Class A Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or
cash or any other property, or
(c) effect a capital reorganization or
reclassification of the Class A Common Stock
(other than (i) a Qualified Sale Event or (ii) in the cases for which an
adjustment has been or is to be made pursuant to Section 3), then proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the holder of this Warrant, upon the exercise hereof
after the consummation of such transaction, shall be entitled to receive, in
lieu of the Class A Common Stock issuable upon such exercise, the kind and
amount of securities, cash or other property to which such holder would
actually have been entitled upon such consummation if such holder had exercised
the rights represented by this Warrant in full (giving effect to the payment of
the aggregate Exercise Price) immediately prior thereto.
5. Certain Covenants. The Company (a) will not permit
the par value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (b) will take
all such reasonable action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time outstanding.
6. Accountants' Report as to Adjustments. Upon the
occurrence of any event requiring adjustment or readjustment in the Exercise
Price (other than by operation of Section 3.1(b)) or the shares of Class A
Common Stock issuable upon the exercise of this Warrant, the Company will
promptly compute such adjustment or readjustment in
5
<PAGE> 6
accordance with the terms of this Warrant and cause independent certified
public accountants of recognized national standing (which may be the regular
auditors of the Company) selected by a majority of the Disinterested Directors
to verify such computation and prepare a report setting forth such adjustment
or readjustment and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment or readjustment is based. The
Company will promptly mail a copy of each such report to the Holder.
7. Restrictions on Transfer.
(a) Legends. Each Warrant shall be stamped or
otherwise imprinted with a legend in substantially the form set forth
hereon. Each certificate for shares of Class A Common Stock issued
upon the exercise of any Warrant, and each certificate issued upon the
transfer of any such Class A Common Stock, shall be stamped or
otherwise imprinted with a legend in substantially the form set forth
in Section 2.3 of the Stockholders Agreement.
(b) No Transfer. Neither this Warrant nor any
interest herein may be directly or indirectly transferred or assigned
by the Holder other than to Ronald W. Burkle or a Controlling
Stockholder controlled by Ronald W. Burkle and, the equity holders of
which consist solely of Ronald W. Burkle and Yucaipa Individuals.
8. Reservation of Stock, etc. The Company will at all
times reserve and keep available, solely for issuance and delivery upon
exercise of the Warrants, the number of shares of Class A Common Stock from
time to time issuable upon exercise of this Warrant. All shares of Class A
Common Stock issuable upon exercise of this Warrant shall be duly authorized
and, when issued upon such exercise in accordance with the terms hereof, shall
be validly issued and fully paid and nonassessable with no liability on the
part of the holders thereof.
9. Ownership and Transfer.
9.1. Ownership of Warrants. The Company shall
treat the person in whose name any Warrant is registered on the register kept
at the office of the Company maintained pursuant to Section 9.2(a) as the owner
and holder thereof for all purposes, notwithstanding any notice to the
contrary.
9.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office
at 333 N. Northwest Avenue, Northlake, Illinois 60164, until such time
as the Company shall notify the Holder of the Warrant of any change of
location of such office.
(b) Subject to Section 7, upon the
surrender of any Warrant, properly endorsed, for registration of
transfer or for exchange at the office of the Company maintained
pursuant to Section 9.2(a), the Company will execute and
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<PAGE> 7
deliver to or upon the order of the Holder thereof a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder
(upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Class A Common Stock called for on the face or
faces of the Warrant or Warrants so surrendered.
10. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the Holder any
rights as a stockholder of the Company or as imposing any obligation on such
holder to purchase any securities or as imposing any liabilities on such holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
11. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder
or which are given with respect to this Warrant shall be in writing and shall
be personally served or delivered by a reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed (a) if to any holder of any Warrant, at the registered address of
such holder as set forth in the register kept at the principal office of the
Company, or (b) if to the Company, to the attention of its Chief Executive
Officer at its office maintained pursuant to Section 9.2(a), provided that the
exercise of any Warrant shall be effective only in the manner provided in
Section 2. Notice shall be deemed given on the date of service or confirmation
of receipt of transmission if personally served or transmitted by telegram,
telex or facsimile. Notice otherwise sent as provided herein shall be deemed
given on the next Business Day following delivery of such notice to a reputable
air courier service.
12. Miscellaneous. This Warrant and any term hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. THIS WARRANT SHALL BE GOVERNED BY, INTERPRETED
UNDER, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF. Titles and
headings of sections of this Warrant are for convenience only and shall not
affect the construction of any provision of this Warrant.
13. Expiration. The right to exercise this Warrant shall
expire at 5:00 P.M., New York City time, on the Expiration Date.
DOMINICK'S SUPERMARKETS, INC.
By: /s/ Mark A. Resnik
------------------------------------
Name: Mark A. Resnik
Title: Vice President
7
<PAGE> 8
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To: DOMINICK'S SUPERMARKETS, INC.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, ____* shares
of Class A Common Stock of DOMINICK'S SUPERMARKETS, INC. and requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is set forth below. In payment therefor, the
Company may withhold therefrom, and the undersigned holder hereby surrenders
its right to, that number of shares of Class A Common Stock with an aggregate
Market Price as of the date of exercise equal to the aggregate Exercise Price
for the shares designated for purchase in the preceding sentence.
Dated:
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
__________________________________
* Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as
to which the Warrant is being exercised), in either case after making
any adjustment for additional shares of Class A Common Stock which,
pursuant to the adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder surrendering the
Warrant.
8
<PAGE> 9
DOMINICK'S SUPERMARKETS, INC.
AMENDMENT TO CLASS A COMMON STOCK PURCHASE WARRANT
This AMENDMENT TO CLASS A COMMON STOCK PURCHASE WARRANT, dated
as of October ___, 1996, between Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), and The Yucaipa Companies, a California general
partnership ("Yucaipa"), amends that certain Class A Common Stock Purchase
Warrant No. W-1 dated as of March 22, 1995 of the Company entitling Yucaipa to
purchase 264,688 shares (subject to adjustment) of Class A Common Stock of the
Company (the "Warrant"). Capitalized terms used herein without definition
shall have the meanings assigned to them in the Warrant.
WHEREAS, the parties hereto have entered into the Warrant and
desire to amend certain provisions thereof, as more fully described herein;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. Manner of Exercise. Section 2.1 of the Warrant shall be
amended to read in its entirety as follows:
2.1. Manner of Exercise. Subject to the foregoing,
this Warrant may be exercised by the Holder hereof, in whole or in
part, during normal business hours on any day other than a Saturday or
a Sunday or a day on which commercial banking institutions in the City
of New York are authorized to be closed (a "Business Day"), by
surrender of this Warrant to the Company at its office maintained
pursuant to Section 9.2, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable
facsimile thereof), duly executed by such Holder. Payment of the
aggregate Exercise Price of the number of shares of Class A Common
Stock designated in such subscription may be made, at the Holder's
option, either (i) in cash or by certified or bank check in the amount
of the aggregate Exercise Price at the office of the Company
designated for such purpose or by wire transfer of immediately
available funds in the amount of such aggregate Exercise Price to an
account designated by the Company or (ii) by the Company withholding
therefrom that number of shares of Class A Common Stock with an
aggregate Market Price as of the date of exercise equal to such
aggregate Exercise Price.
2. When Exercise Effective. Section 2.2 of the Warrant shall
be amended to read in its entirety as follows:
2.2. When Exercise Effective. Each exercise of this
Warrant shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which this Warrant and the
accompanying
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<PAGE> 10
subscription shall have been duly surrendered to the Company as
provided in Section 2.1, and at such time the Holder shall be deemed
to have become the holder or holders of record of a number of shares
of Class A Common Stock equal to (a) in the case of "cash exercise"
pursuant to clause (i) of Section 2.1, the number of shares designated
in such subscription or (b) in the case of "cashless exercise"
pursuant to clause (ii) Section 2.1, the number of shares designated
in such subscription less the number of shares withheld by the Company
as payment therefor.
3. Form of Subscription. The sole paragraph of the Form of
Subscription attached to the Warrant shall be amended to read in its entirety
as follows:
The undersigned registered holder of the within
Warrant hereby irrevocably exercises such Warrant for, and purchases
thereunder, _______* shares of Class A Common Stock of DOMINICK'S
SUPERMARKETS, INC. and requests that the certificates for such shares
be issued in the name of, and delivered to the undersigned, whose
address is set forth below. In payment therefor, the undersigned
registered holder elects (check one):
[ ] the "cash exercise" pursuant to clause (i) of Section 2.1 of
the Warrant, and the undersigned registered holder herewith tenders
payment for such shares to the order of DOMINICK'S SUPERMARKETS, INC.
in the amount of $__________ in accordance with the terms of the
Warrant; or
[ ] the "cashless exercise" pursuant to clause (ii) of Section 2.1
of the Warrant, and the undersigned registered holder hereby
surrenders its right to, and authorizes the Company to withhold
therefrom, that number of shares of Class A Common Stock with an
aggregate Market Price as of the date of exercise equal to the
aggregate Exercise Price for the shares designated for the purchase in
the preceding sentence.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to Class A Common Stock Purchase Agreement to be duly executed and
delivered as of the day and year first above written.
DOMINICK'S SUPERMARKETS, INC.
By:_____________________________________
Name: Robert A. Mariano
Title: President and Chief Executive
Officer
THE YUCAIPA COMPANIES
By:_____________________________________
Name:
Title: General Partner
3
<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
March 22, 1995, by and among Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), and each other person executing this Agreement
(the "Investors").
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used herein and
not otherwise defined herein have the meanings ascribed to them in the
Stockholders Agreement (the "Stockholders Agreement"), dated as of the date
hereof, among the Company, DFF Supermarkets, Inc., a Delaware corporation,
Dominick's Finer Foods, Inc., the Investors and certain other stockholders of
the Company. In addition, the following terms shall have the meanings ascribed
to them below:
"Demanding Holder" means any Holder who has initiated a
registration request in compliance with Section 2.1(a); provided, that if such
request was initiated by Other Purchasers or their transferees, (i) "Demanding
Holders" shall include each Other Purchaser and each such transferee who has
requested to have included in a Demand Registration Registrable Securities
pursuant to the notice provision of Section 2.1(a) and (ii) any action required
or permitted to be taken under this Agreement by any Demanding Holders shall be
taken by action of the holders of a majority of the Registrable Securities held
by such Demanding Holders.
"Demand Registration" means a registration of Registrable
Securities under the Securities Act pursuant to a request made under Section
2.1.
"Holder" means each Investor that holds Registrable Securities
and any party who shall hereafter acquire from an investor and hold Registrable
Securities pursuant to the provisions of, and subject to the rights and
restrictions set forth in, the Stockholders Agreement.
"Registrable Security" means each Share until (i) it has been
effectively registered under the Securities Act and disposed of pursuant to an
effective registration statement, (ii) it is sold under circumstances in which
all of the applicable conditions of Rule 144 (or any similar provisions then in
force) under the Securities Act are met, including a sale pursuant to the
provisions of Rule 144(k) or (iii) it has been otherwise Transferred and the
certificate or other evidence of ownership for it is not required to bear the
legend required pursuant to the Stockholders Agreement and it may be resold by
the person receiving such certificate without registration under the Securities
Act.
"Requisite Share Number" on any date means a number of
Registrable Securities representing not less than 35% of the issued and
outstanding Registrable Securities held in the aggregate on such date by the
Other Purchasers and their transferees.
"Selling Holder" means a Holder who sells or proposes to sell
Registrable Securities pursuant to a registration statement under the
Securities Act.
<PAGE> 2
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as part
of such dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Demand Registration. (a) Request for
Registration by the Purchasers. At any time and from time to time on or after
the earlier of (i) the second anniversary of the Effective Date and (ii) the
consummation of a Qualified IPO, (A) the Other Purchasers and transferees of
Other Purchasers owning, individually or in the aggregate, at least the
Requisite Share Number may make a total of two written requests for a Demand
Registration of not less than 10% of the Registrable Securities held by all
Other Purchasers and transferees of Other Purchasers and (B) Apollo may make a
total of two written requests for a Demand Registration of not less than 10% of
its Registrable Securities; provided, that (1) the Company shall in no event be
obligated to effect more than two Demand Registrations in any 12-month period,
and (2) if any request for a Demand Registration pursuant to (A) or (B) above
shall be made prior to the earliest to occur of an Initial Public Offering or a
Qualified IPO, then the Company shall not be obligated to effect such Demand
Registration unless the Shares to be included therein (including those sold for
the account of the Company, any Piggy-Back Holders and all other Persons)
equals or exceeds 5% (on a fully diluted basis) of the outstanding Shares.
Each such request will specify the number of Registrable Securities proposed to
be sold and will also specify the intended method of disposition thereof.
The Company shall give written notice of any registration
request by Other Purchasers and transferees of Other Purchasers, which request
complies with this Section 2.1(a), within 10 days after the receipt thereof, to
each Other Purchaser and transferee of an Other Purchaser who did not initially
join in such request. Within 20 days after receipt of such notice, any such
Other Purchaser or transferee may request in writing that Registrable
Securities be included in such registration, and the Company shall include in
the Demand Registration the Registrable Securities of each such Other Purchaser
and transferee of an Other Purchaser requested to be so included, subject to
the provisions of Section 2.3. Each such request shall specify the number of
shares of Registrable Securities proposed to be sold and the intended method of
disposition thereof.
(b) Effective Registration. A registration will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the Commission and the Company has complied in all
material respects with its obligations under this Agreement with respect
thereto; provided that if, after it has become effective, the offering of
Registrable Securities pursuant to such registration is or becomes the subject
of any Stop order, injunction or other order or requirement of the Commission
or any other governmental or administrative agency, or if any court prevents or
otherwise limits the sale of Registrable Securities pursuant to the
registration (for any reason other than the acts or omissions of the Holders),
such registration will be deemed not to have been effected. If (i) a
registration requested pursuant to this Section 2.1 is deemed not to have been
effected or (ii) the registration requested pursuant to this Section 2.1 does
not remain effective for a period of at least 200 days beyond the effective
date thereof or until the consummation of the distribution by the Holders of
the Registrable Securities included in such registration statement, then such
registration statement shall not count as one of the two Demand Registrations
that may be requested by the Demanding Holder(s) in question and the Company
shall continue to be obligated to effect a registration pursuant to this
Section 2.1.
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<PAGE> 3
The Demanding Holders may withdraw all or any part of the
Registrable Securities from a Demand Registration at any time (whether before
or after the filing or effective date of such Demand Registration), and if all
such Registrable Securities are withdrawn, to withdraw the demand related
thereto. If at any time a registration statement is filed pursuant to a Demand
Registration, and subsequently a sufficient number of Registrable Securities
are withdrawn from the Demand Registration so that such registration statement
does not cover at least the required amounts specified by Section 2.1(a), and
an additional number of Registrable Securities is not so included, the Company
may (or shall, if requested by the Demanding Holders) withdraw the registration
statement, provided that if the Demanding Holders bear the expenses associated
with such withdrawn registration statement, such registration statement will
not count as a Demand Registration and the Company shall continue to be
obligated to effect a registration pursuant to this Section 2.1. If the
Demanding Holders determine to bear such expenses, such expenses shall be borne
by the Demanding Holder(s) whose withdrawal of Registrable Securities resulted
in such registration statement not covering the specified required amounts.
(c) Selection of Underwriter. If the Demanding Holders
so elect, the offering of Registrable Securities pursuant to a Demand
Registration shall be in the form of an underwritten offering. The Demanding
Holders shall select one or more nationally recognized firms of investment
bankers to act as the book-running managing Underwriter or Underwriters in
connection with such offering and shall select any additional investment
bankers and managers to be used in connection with the offering; provided that
such investment bankers and managers must be reasonably satisfactory to the
Company.
Section 2.2 Piggy-Back Registration. If at any time the
Company proposes to file a registration statement under the Securities Act with
respect to an offering by the Company for its own account or for the account of
any securityholders of any class of its equity securities (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the Commission) or (ii) a registration statement filed in connection
with an exchange offer or offering of securities solely to the Company's
existing securityholders), including a registration statement relating to a
Demand Registration, then the Company shall give written notice of such
proposed filing to the Holders as soon as practicable (but in no event less
than 20 days before the anticipated filing date), and such notice shall offer
such Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration").
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested by the Holders thereof to be included in a
Piggy-Back Registration (the "Piggy-Back Holders") to be included on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof. Any Holder shall have the right to withdraw its request
for inclusion of its Registrable Securities in any registration statement
pursuant to this Section 2.2 by giving written notice to the Company of its
request to withdraw. Subject to the provisions of Section 2.1, the Company may
withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective, provided that the Company shall reimburse the Piggy-Back Holders for
all reasonable out-of-pocket expenses (including counsel fees and expenses)
incurred prior to such withdrawal.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligations pursuant to Section 2.1, and no failure to effect a
registration under this Section 2.2 and to complete the sale of Shares in
connection therewith
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<PAGE> 4
shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2
and 4.1).
Section 2.3 Reduction of Offering. (a) Demand Registration.
The Company may include in a Demand Registration shares of Common Stock for the
account of the Company and Registrable Securities for the account of the
Piggy-Back Holders and Shares for the account of other holders thereof
exercising contractual piggy-back rights, on the same terms and conditions as
the Registrable Securities to be included therein for the account of the
Demanding Holders; provided, however, that (i) if the managing Underwriter or
Underwriters of any underwritten offering described in Section 2.1 have
informed the Company in writing that it is their opinion that the total number
of shares which the Demanding Holders, the Company, any Piggy-Back Holders and
any such other holders intend to include in such offering is such as to
materially and adversely affect the success of such offering, then (x) the
number of Shares to be offered for the account of the Company (if any) shall be
reduced (to zero, if necessary) and (y) thereafter, if necessary, the number of
Shares to be offered for the account of such Piggy-Back Holders and such other
holders shall be reduced (to zero, if necessary), in the case of this clause
(Y) pro rata in proportion to the respective number of Shares requested to be
registered, to the extent necessary to reduce the total number of Shares
requested to be included in such offering to the number of Shares, if any,
recommended by such managing Underwriters (and if the number of Shares to be
offered for the account of each such Person has been reduced to zero, and the
number of Shares requested to be registered by the Demanding Holders exceeds
the number of Shares recommended by such managing Underwriters, then the number
of Shares to be offered for the account of the Demanding Holders shall be
reduced pro rata in proportion to the respective number of Shares requested to
be registered by the Demanding Holders) and (ii) if the offering is not
underwritten, no other party (other than Piggy-Back Holders and any other
holders exercising contractual piggy-back rights not subject to the reduction
contemplated by this clause (ii)), including the Company, shall be permitted to
offer securities under any such Demand Registration unless a majority of the
Shares held by the Demanding Holder or Holders consent to the inclusion of such
shares therein.
(b) Piggy-Back Registration. Notwithstanding anything
contained herein, if the managing Underwriter or Underwriters of any
underwritten offering described in Section 2.2 have informed, in writing, the
Piggy-Back Holders that it is their opinion that the total number of Shares
that the Company and Holders of Registrable Securities and any other Persons
desiring to participate in such registration intend to include in such offering
is such as to materially and adversely affect the success of such offering,
then the number of Shares to be offered for the account of the Piggy-Back
Holders and all such other Persons (other than the Company) participating in
such registration shall be reduced (to zero if necessary) or limited pro rata
in proportion to the respective number of Shares requested to be registered to
the extent necessary to reduce the total number of Shares requested to be
included in such offering to the number of Shares, if any, recommended by such
managing Underwriters; provided, however, that (A) if such offering is effected
for the account of Demanding Holders pursuant to Section 2.1, then the number
of Shares to be offered for the account of each Person shall be reduced in
accordance with Section 2.3(a), and (B) if such offering is effected for the
account of any other securityholder of the Company pursuant to the demand
registration rights of such securityholder, then (x) the number of Shares to be
offered for the account of the Company (if any) shall be reduced (to zero, if
necessary) and (y) thereafter, if necessary, the number of Shares to be offered
for the account of the Piggy-Back Holders and any other holders that have
requested to include Shares in such registration (but not such securityholders
who have exercised their demand registration rights) shall be reduced (to zero,
if necessary), in the case of this clause (y) pro rata in proportion to the
respective number of Shares requested to be registered, to the extent necessary
to reduce the total number of Shares requested to be included in such offering
to the number of Shares, if any, recommended by such managing Underwriters.
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<PAGE> 5
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1 Filings; Information. Whenever the Company is
required to effect or cause the registration of Registrable Securities pursuant
to Section 2.1, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in
connection with any such request:
(a) The Company will as expeditiously as possible prepare
and file with the Commission a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
and which form shall be available for the sale of the Registrable Securities to
be registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 200 days (or such
shorter period as is required to complete the distribution of the shares);
provided that the Company may postpone the filing of a registration statement
for a period of not more than 135 days from the date of receipt of the request
in accordance with Section 2.1 if the Company reasonably determines that such a
filing would adversely affect any proposed financing or acquisition by the
Company and furnishes to the Demanding Holder a certificate signed by an
executive officer of the Company to such effect; provided that the Company
shall only be entitled to postpone any such filing one time in any twenty-four
month period. If the Company postpones the filing of a Registration Statement,
it shall promptly notify the Purchasers in writing when the events or
circumstances permitting such postponement have ended.
(b) The Company will as expeditiously as possible prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement continuously effective for a
period of not less than 200 days or such shorter period which will terminate
when all securities covered by such registration statement have been sold (but
not before the expiration of the 90-day period referred to in Section 4(3) of
the Securities Act and Rule 174 thereunder, if applicable) and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by each Selling Holder
thereof set forth in such registration statement.
(c) The Company will, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
Selling Holder, counsel representing such Selling Holders, and each
Underwriter, if any, of the Registrable Securities covered by such registration
statement copies of such registration statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review and
comment by the foregoing within five days after delivery, and thereafter
furnish to such Selling Holder, counsel and Underwriter, if any, for their
review and comment such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents or information as such Selling Holder, counsel or Underwriter
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder.
(d) After the filing of the registration statement, the
Company will promptly notify each Selling Holder of Registrable Securities
covered by such registration statement, and (if requested
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<PAGE> 6
by any such Selling Holder) confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission or any other Federal or state governmental authority for amendments
or supplements to a registration statement or related prospectus or for
additional information, (iii) of the issuance by the Commission or any other
Federal or state governmental authority of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities the representations and warranties of the Company contained in any
agreement contemplated by Section 3.1(h) (including any underwriting agreement)
cease to be true and correct in all material respects, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any event which makes any
statement made in such registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or which requires the making of any changes in a
registration statement, prospectus or documents incorporated therein by
reference so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (vii) of the Company's reasonable determination
that a post-effective amendment to a registration statement would be necessary.
(e) The Company will use its best efforts to (i) register
or qualify the Registrable Securities under such other securities or blue sky
laws of such jurisdictions in the United States as any Selling Holder
reasonably (in light of such Selling Holder's intended plan of distribution)
requests, and (ii) cause such Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United
States as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (e), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(f) The Company will take all reasonable actions required
to prevent the entry, or obtain the withdrawal, of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any Registrable
Securities for sale in any jurisdiction, at the earliest moment.
(g) Upon the occurrence of any event contemplated by
paragraph 3.1(d)(vi) or 3.1(d)(vii) above, the Company will (i) prepare a
supplement or post-effective amendment to such registration statement or a
supplement to the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) promptly make available to each Selling Holder any
such supplement or amendment.
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<PAGE> 7
(h) The Company will enter into customary agreements
(including, if applicable, an underwriting agreement in customary form and
which is reasonably satisfactory to the Company) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities (the Selling Holders may, at their option, require
that any or all of the representations, warranties and covenants of the Company
to or for the benefit of such Underwriters also be made to and for the benefit
of such Selling Holders).
(i) The Company will make available to each Selling
Holder (and will deliver to their counsel) and each Underwriter, if any,
subject to restrictions imposed by the United States federal government or any
agency or instrumentality thereof, copies of all correspondence between the
Commission and the Company, its counsel or auditors and will also make
available for inspection by any Selling Holder, any Underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the disclosure or release of such Records
is requested or required pursuant to oral questions, interrogatories, requests
for information or documents or a subpoena or other order from a court of
competent jurisdiction or other process; provided that prior to any disclosure
or release pursuant to clause (ii), the Inspectors shall provide the Company
with prompt notice of any such request or requirement so that the Company may
seek an appropriate protective order or waive such Inspectors' obligation not
to disclose such Records; and, provided further, that if failing the entry of a
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the
Records which counsel has advised the Inspectors that the Inspectors are
compelled to disclose. Each Selling Holder agrees that information obtained by
it solely as a result of such inspections (not including any information
obtained from a third party who, insofar as is known to the Selling Holder
after reasonable inquiry, is not prohibited from providing such information by
a contractual, legal or fiduciary obligation to the Company) shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or its Affiliates unless and
until such information is made generally available to the public. Each Selling
Holder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
(j) The Company will furnish to each Selling Holder and
to each Underwriter, if any, a signed counterpart, addressed to such Selling
Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company,
and (ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case may be, as
the Selling Holders or the managing Underwriter therefor reasonably requests.
(k) The Company will otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its securityholders, as soon as reasonably practicable, an
earnings statement covering a period of 12 months, beginning within three
months after
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<PAGE> 8
the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
(l) The Company will use its best efforts (a) to cause
any class of Registrable Securities to be listed on a national securities
exchange (if such shares are not already so listed) and on each additional
national securities exchange on which similar securities issued by the Company
are then listed (if any), if the listing of such Registrable Securities is then
permitted under the rules of such exchange or (b) to secure designation of all
such Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register as such with respect to
such Registrable Securities with the National Association of Securities
Dealers, Inc. (the "NASD").
(m) The Company will appoint a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
(n) Prior to the effective date of the first Demand
Registration or the first Piggy-Back Registration, whichever shall occur first,
(i) provide the transfer agent with printed certificates for the Registrable
Securities in a form eligible for deposit with The Depository Trust Company,
and (ii) provide a CUSIP number for the Registrable Securities.
(o) In connection with an underwritten offering, the
Company will participate, to the extent reasonably requested by the managing
Underwriter for the offering or the Selling Holders, in customary efforts to
sell the securities under the offering, including, without limitation,
participating in "road shows"; provided that the Company shall not be obligated
so to participate in more than one such offering in any 12-month period.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution
of the Registrable Securities by such Selling Holder as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration including, without limitation,
all such information as may be requested by the Commission or the NASD. The
Company may exclude from such registration any Holder who fails to provide such
information.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Sections 3.1(d)(iii), (v), (vi) and (vii) hereof, such Selling Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Selling
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(g) hereof, and, if so directed by the Company, such
Selling Holder will deliver to the Company all copies, other than permanent
file copies, then in such Selling Holder's possession of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(d)(iii), (v), (vi) or (vii) hereof to the date
when the Company shall make available to the Selling Holders a prospectus
supplemented or amended to conform with the requirements of Section 3.1(g)
hereof.
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In connection with any registration of Registrable Securities
pursuant to Section 2.2, the Company will take the actions contemplated by
paragraphs (c), (d), (e), (i), (j), (k), (l) and (n) above.
Section 3.2 Registration Expenses. In connection with the
Demand Registrations pursuant to Section 2.1 hereof, and any registration
statement filed pursuant to Section 2.2 hereof, the Company shall pay the
following registration expenses incurred in connection with the registration
hereunder (the "Registration Expenses"): (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) printing expenses,
(iv) the Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties) and all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any comfort letters or costs associated with
the delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 3.1(i) hereof), (vii) the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration, and (viii) reasonable fees and expenses of
one firm of counsel for the Holders (together with necessary local counsel fees
and expenses), which counsel shall be chosen by the Demanding Holders or, if
none, by the Holders of a majority of the Registrable Securities being included
in such Registration Statement. The Company shall have no obligation to pay
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Selling Holder, its partners,
officers, directors, employees and agents, and each Person, if any, who
controls such Selling Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, together with the partners, officers,
directors, employees and agents of such controlling Person (collectively, the
"Controlling Persons"), from and against any loss, claim, damage, liability,
reasonable attorneys' fee, cost or expense and costs and expenses of
investigating and defending any such claim (collectively, the "Damages"), joint
or several, and any action in respect thereof to which such Selling Holder, its
partners, officers, directors, employees and agents, and any such Controlling
Person may become subject under the Securities Act or otherwise, insofar as
such Damages (or proceedings in respect thereof) arise out of, or are based
upon, any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities or any preliminary prospectus, or arises out of, or are
based upon, any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based upon information furnished in
writing to the Company by a Selling Holder or Underwriter expressly for use
therein, and shall reimburse each Selling Holder, its partners, officers,
directors, employees and agents, and each such Controlling Person for any legal
and other expenses reasonably incurred by that Selling Holder, its partners,
officers, directors, employees and agents, or any such Controlling Person in
investigating or defending or preparing to defend against any such Damages or
proceedings; provided, however, that the Company shall not be liable to any
Selling Holder to the extent that (a) any such Damages arise out of or are
based upon an untrue statement or omission made in any preliminary prospectus
if (i) such Holder failed to send or
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<PAGE> 10
deliver a copy of the final prospectus with or prior to the delivery of written
confirmation of the sale by such Selling Holder to the Person asserting the
claim from which such Damages arise, and (ii) the final prospectus would have
corrected such untrue statement or such omission; or (b) any such Damages arise
out of or are based upon an untrue statement or omission in any prospectus if
(x) such untrue statement or omission is corrected in an amendment or
supplement to such prospectus, and (y) having previously been furnished by or
on behalf of the Company with copies of such prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such prospectus as so
amended or supplemented prior to or concurrently with the sale of a Registrable
Security to the Person asserting the claim from which such Damages arise. The
Company also agrees to indemnify any Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Selling Holders provided in this Section 4.1.
Section 4.2 Indemnification by Holders of Registrable
Securities. Each Selling Holder agrees, severally but not jointly, to
indemnify and hold harmless the Company, its officers, directors, employees and
agents and each Person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, together
with the partners, officers, directors, employees and agents of such
controlling Person, to the same extent as the foregoing indemnity from the
Company to such Selling Holder, but only with reference to information related
to such Selling Holder, or its plan of distribution, furnished in writing by
such Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus. In case
any action or proceeding shall be brought against the Company or its officers,
directors, employees or agents or any such controlling Person or its partners,
officers, directors, employees or agents, in respect of which indemnity may be
sought against such Selling Holder, such Selling Holder shall have the rights
and duties given to the Company, and the Company or its officers, directors,
employees or agents, controlling Person, or its partners, officers, directors,
employees or agents, shall have the rights and duties given to such Selling
Holder, under Section 4.1. Each Selling Holder also agrees to indemnify and
hold harmless each other Selling Holder and any Underwriters of the Registrable
Securities, and their respective officers and directors and each Person who
controls each such other Selling Holder or Underwriter on substantially the
same basis as that of the indemnification of the Company provided in this
Section 4.2. The Company shall be entitled to receive indemnities from
Underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above, with respect to information so furnished in writing by such Persons
specifically for inclusion in any prospectus or registration statement. In no
event shall the liability of any Selling Holder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by such
Selling Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
Section 4.3 Conduct of Indemnification Proceedings. Promptly
after receipt by any Person in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim
or the commencement of any action, the Indemnified Party shall, if a claim in
respect thereof is to be made against the Person against whom such indemnity
may be sought (an "Indemnifying Party") notify the Indemnifying Party in
writing of the claim or the commencement of such action, provided that the
failure to notify the Indemnifying Party shall not relieve it from any
liability except to the extent of any material prejudice resulting therefrom.
If any such claim or action shall be brought against an Indemnified Party, and
it shall notify the Indemnifying Parry thereof, the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party;
provided, that the Indemnifying Party acknowledges, in a writing in form and
substance reasonably satisfactory to such Indemnified Party, such Indemnifying
Party's
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<PAGE> 11
liability for all Damages of such Indemnified Party to the extent specified in,
and in accordance with this Article IV. After notice from the Indemnifying
Party to the Indemnified Party of its election to assume the defense of such
claim or action, the Indemnifying Party shall not be liable to the Indemnified
Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party shall have the right to
employ separate counsel to represent the Indemnified Party and its controlling
Persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Indemnified Party against the Indemnifying
Party, but the fees and expenses of such counsel shall be for the account of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in
the reasonable judgment of the Indemnifying Party and such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest between them, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties, or for fees and expenses that are not reasonable. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any claim or pending or threatened proceeding
in respect of which the Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably withheld.
Section 4.4 Contribution. If the indemnification provided for
in this Article IV is unavailable to the Indemnified Parties in respect of any
Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages (i) as between the
Company and the Selling Holders on the one hand and the Underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such Damages, as well as any other relevant equitable
considerations, and (ii) as between the Company on the one hand and each Selling
Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of each Selling Holder in connection with such
statements or omissions, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Holders on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and the Selling Holders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Company and the Selling
Holders on the one hand and of the Underwriters on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and the Selling
Holders or by the Underwriters. The relative fault of the Company on the one
hand and of each Selling Holder on the other shall be determined by reference
to, among other things, whether the untrue or alleged
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<PAGE> 12
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 4.4 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the Damages referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered
to the public (less underwriting discounts and commissions) exceeds the amount
of any damages which such Selling Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. Each
Selling Holder's obligations to contribute pursuant to this Section 4.4 is
several and not joint.
The indemnity, contribution and expense reimbursement
obligations contained in this Article IV are in addition to any liability any
Indemnifying Party may otherwise have to an Indemnified Party or otherwise.
The provisions of this Article IV shall survive, notwithstanding any transfer
of the Registrable Securities by any Holder or any termination of this
Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1 Participation in Underwritten Registrations. No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements and these registration rights;
provided that (i) no Selling Holder shall be required to make any
representations or warranties except those which relate solely to such Holder
and its intended method of distribution, and (ii) the liability of each such
Holder to any Underwriter under such underwriting agreement will be limited to
liability arising from misstatements or omissions regarding such Holder and its
intended method of distribution and any such liability shall not exceed an
amount equal to the amount of net proceeds such Holder derives from such
registration; provided, however, that in an offering by the Company in which any
Holder requests to be included in a Piggy-Back Registration, the Company shall
use its best efforts to arrange the terms of the offering such that the
provisions set forth in clauses (i) and (ii) of this Section 5.1 are true;
provided further, that if the Company fails in its best efforts to so arrange
the terms, the Holder may withdraw all or any part of its Registrable Securities
from the Piggy-Back
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<PAGE> 13
Registration and the Company shall reimburse such Holder for all reasonable
out-of-pocket expenses (including counsel fees and expenses) incurred prior to
such withdrawal.
Section 5.2 Rule 144 and 144A. The Company covenants that it
will file any reports required to be filed by it under the Securities Act and
the Exchange Act and that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
or Rule 144A under the Securities Act, as such Rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements.
Section 5.3 Holdback Agreements. (a) Restrictions on Public
Sale by Holder of Registrable Securities. Each Holder agrees not to effect any
public sale or distribution of the issue being registered or of a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 or Rule
144A under the Securities Act, during the 14 days prior to, and during the
90-day period beginning on, the effective date of any registration statement
filed by the Company (except as pan of such registration), in the case of an
underwritten public offering, if, and to the extent, requested by the managing
underwriter or underwriters.
The foregoing provisions shall not apply to any Holder that is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that any such Holder shall undertake not to
effect any public sale or distribution of the class of securities covered by
such registration statement (except as pan of such underwritten offering)
during such period unless it has provided 60 days' prior written notice of such
sale or distribution to the managing underwriter.
(b) Restrictions on Sale by the Company and Others. The
Company agrees and it shall use its best efforts to cause its Affiliates to
agree (i) not to effect any public sale or distribution of any securities
similar to those being registered in accordance with Section 2.1 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 14 days prior to, and during the 90-day period beginning on, the
effective date of any registration statement (except as part of such
registration statement), in the case of an underwritten offering, if, and to
the extent, reasonably requested by the managing Underwriter or Underwriters,
and (ii) to use its best efforts to ensure that any agreement entered into
after the date of the Stockholders Agreement pursuant to which the Company
issues or agrees to issue any privately placed securities (other than to
officers or employees) shall contain a provision under which holders of such
securities agree not to effect any sale or distribution of any such securities
during the periods described in (i) above, in each case including a sale
pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of
any such registration, if permitted); provided, however, that the provisions of
this paragraph (b) shall not prevent (x) the conversion or exchange of any
securities pursuant to their terms into or for other securities or (y) the
issuance of any securities to employees of the Company or pursuant to any
employee plan.
Section 5.4 Amendment and Modification. Any provision of
this Agreement may be waived, provided that such waiver is set forth in a
writing executed by the party against whom the enforcement of such waiver is
sought. This Agreement may not be amended, modified or supplemented other than
by a written instrument signed by (a) the Company, (b) the holders of a
majority of the Registrable Securities held by the Purchasers and (c) at least
two unrelated Purchasers; provided, however, that (i) so long as Apollo
beneficially owns at least 25% of the Registrable Securities held by
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<PAGE> 14
Apollo on the Effective Date, without the consent of Apollo, no amendment or
modification which adversely affects the rights or duties of Apollo hereunder
may be effected, (ii) so long as any Other Purchaser beneficially owns at least
25% of the Registrable Securities held by it on the Effective Date and not less
than 47,750 Shares (which number shall be adjusted to reflect stock dividends,
stock-splits, combinations or other reclassifications of stock), without the
consent of such Other Purchaser, no amendment or modification which adversely
affects the rights or duties of such Other Purchaser hereunder may be effected
and (iii) so long as the investors beneficially own at least 25% of the Shares
beneficially owned by such Persons on the Effective Date, without the consent
of a majority of the Registrable Securities held by the Investors, no amendment
or modification which adversely affects the rights or duties of such Investors
hereunder may be affected. No course of dealing between or among any Persons
having any interest in this Agreement will be deemed effective to modify, amend
or discharge any part of this Agreement or any rights or obligations of any
Person under or by reason of this Agreement.
Section 5.5 Successors and Assigns; Entire Agreement. (a)
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns and executors, administrators and heirs; provided, that (i) except as
otherwise specifically permitted pursuant to this Agreement, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by the Company without the prior written consent of each of the
Holders and (ii) Apollo may assign a right to request a Demand Registration
solely in connection with a Transfer to any single Person or group of
affiliated Persons (in a single transaction or series of related transactions)
of at least 25% of the Registrable Securities held by it on the date hereof.
(b) This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any and
every nature among them.
Section 5.6 Separability. In the event that any provision of
this Agreement or the application of any provision hereof is declared to be
illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected except to
the extent necessary to delete such illegal, invalid or unenforceable provision
unless that provision held invalid shall substantially impair the benefits of
the remaining portions of this Agreement.
Section 5.7 Notices. All notices, demands, requests,
consents or approvals (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally delivered or delivered by a reputable overnight
courier service with charges prepaid, or transmitted by hand delivery,
telegram, telex or facsimile, addressed as set forth below, or such other
address as such party shall have specified most recently by written notice.
Notice shall be deemed given or delivered on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given or
delivered on the next business day following delivery of such notice to a
reputable overnight courier service.
To the Company:
Dominick's Supermarkets, Inc.
333 N. Northwest Avenue
Northlake, Illinois 60164
Attn: Chief Executive Officer
Fax: (708) 409-3979
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with a copy (which shall not constitute notice) to:
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attn: Mark A. Resnik, Esq.
Fax: (310) 789-7201
and
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
Attn: Thomas C. Sadler, Esq.
Fax: (213) 891-8763
To Apollo:
Apollo Advisors, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Attn: Peter Copses
Fax: (310) 201-4166
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
34th Floor
Los Angeles, California 90071
Attn: Michael A. Woronoff, Esq.
Fax: (213) 687-5600
To the Other Purchasers or the Other Investors:
To the address specified on the signature page of the
Stockholders Agreement executed by such Other
Purchaser.
Section 5.8 Governing Law. This Agreement shall be governed
by and construed in accordance with the internal law of the State of New York,
without giving effect to principles of conflicts of law.
Section 5.9 Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
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Section 5.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute one and the same
instrument.
Section 5.11 Further Assurances. Each party shall cooperate
and take such action as may be reasonably requested by another party in order
to carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 5.12 Termination. Unless sooner terminated in
accordance with its terms or as otherwise herein provided, this Agreement shall
terminate upon the earlier to occur of (i) the mutual agreement by the parties
hereto, (ii) with respect to any Holder, such Holder ceasing to own any
Registrable Securities or (iii) the fifteenth anniversary of the Effective
Date.
Section 5.13 Remedies. ln the event of a breach or a
threatened breach by any party to this Agreement of its obligations under this
Agreement, any party injured or to be injured by such breach will be entitled
to specific performance of its rights under this Agreement or to injunctive
relief, in addition to being entitled to exercise all rights provided in this
Agreement and granted by law. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties
that the remedy at law, including monetary damages, for breach of any such
provision will be inadequate compensation for any loss and that any defense or
objection in any action for specific performance or injunctive relief that a
remedy at law would be adequate is waived.
Section 5.14 Pronouns. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
16
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Dominick's Finer Foods, Inc.
Blackhawk Developments, Inc.
Blackhawk Properties, Inc.
Dodi Hazelcrest, Inc.
Dominick's Finer Foods, Inc. of Illinois
Dominick's Equipment Leasing, Inc.
Kohl's of Bloomingdale, Inc.
Save-It Discount Foods Corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Historical
and Pro Forma Financial Data" and "Experts" and to the use of our report dated
January 5, 1996 (except Note 12, as to which the date is , 1996), in
the Registration Statement (Form S-1) and related Prospectus of Dominick's
Supermarkets, Inc. for the registration of its common stock.
Chicago, Illinois
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion of
the stock split prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.
/s/ Ernst & Young LLP
Chicago, Illinois
October 18, 1996
