DOMINICKS SUPERMARKETS INC, S-1/A, 1996-10-25

DOMINICKS SUPERMARKETS INC
S-1/A, 1996-10-25
GROCERY STORES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1996

REGISTRATION NO. 333-11177

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 3 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 CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</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
================================================================================
PROPOSED
TITLE OF EACH MAXIMUM AMOUNT OF
CLASS OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE(1)(2) FEE(3)
- --------------------------------------------------------------------------------
Common Stock, par value $.01.............. $132,480,000 $40,146
================================================================================

(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 25, 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.

- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
Per Share......... $ $ $ $
Total (3)......... $ $ $ $
- --------------------------------------------------------------------------------

(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 November 1, 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.

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

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

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

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

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<PAGE> 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
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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 in
connection with the repurchase of 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>

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

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

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

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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>

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<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. There can be no
assurance, however, that the Company's business will continue to generate cash
flow at or above current levels or that anticipated growth will materialize. If
the Company is unable to meet its obligations from such sources, the Company may
be required to refinance all or a portion of its existing indebtedness, sell
assets or obtain additional financing. There can be no assurance that any such
refinancing would be possible or that any such sales of assets or additional
financing could be completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

LABOR RELATIONS; EXPIRED UNION CONTRACTS

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

POTENTIAL ADVERSE EFFECTS OF PENDING LITIGATION

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

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 $4.3 million. To the extent that
the prior owners of Dominick's fail to reimburse the Company for such
remediation costs as they have agreed, the Company would be required to bear
this entire expense and pursue its remedies against such former owners. See
"Business -- Environmental Matters."

CONTROL BY MAJOR STOCKHOLDERS

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

10
<PAGE> 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 in connection with the repurchase of 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 holder of the Redeemable Preferred Stock, the Company
will repurchase such shares on January 2, 1997. Pending application of the net
proceeds for the purposes specified above, they will be invested in short-term,
interest-bearing obligations or be used to temporarily reduce borrowings under
the New Revolving Facilities (as defined).

DIVIDEND POLICY

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

13
<PAGE> 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
$603 million on the date of the Acquisition. As a result of these changes, the
Company's results of operations in periods subsequent to the Acquisition reflect
reduced levels of depreciation and significantly increased levels of
amortization and interest expense. In connection with the Acquisition, the
Company established a closed store reserve in the amount of approximately $26.4
million to cover costs of stores closed, or expected to be closed, at the time
of the Acquisition. For a discussion of certain fees and expenses and other
amounts paid in connection with the Acquisition (which were accounted for as
part of the purchase price), see "The Acquisition" and the Notes to Consolidated
Financial Statements included elsewhere herein.

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

19
<PAGE> 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 in connection with the repurchase of 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 Term Facility will be used to repay all outstanding borrowings
under the Old Credit Facility. The remaining $10.5 million of

22
<PAGE> 24

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

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

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

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

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

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

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

23
<PAGE> 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.
The plaintiffs' motion for class certification is currently pending before the
court, and the Company anticipates that the court will rule on such motion
before the end of the year. Due to the numerous legal and factual issues which
must be resolved during the course of this litigation, the Company is unable to
predict the ultimate outcome of this lawsuit. If Dominick's were held liable for
the alleged discrimination (or otherwise concludes that it is in the Company's
best interest to settle the matter), it could be required to pay monetary
damages (or settlement payments) which, depending on the outcome of the class
certification motion (and the size of any class certified), the theory of
recovery or the resolution of the plaintiffs' claims for compensatory and
punitive damages, could be substantial and could have a material adverse effect
on the Company. Based upon the current state of the proceedings, the Company's
assessment to date of the underlying facts and circumstances and the other
information currently available, and although no assurances can be given, the
Company does not believe that the resolution of this litigation will have a
material adverse effect on the Company's overall liquidity. As additional
information is gathered and the litigation proceeds, the Company will continue
to assess its potential impact. See "Risk Factors -- Potential Adverse Effects
of Pending Litigation" and "Business -- Legal Proceedings."

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

EFFECTS OF INFLATION

The Company does not believe that inflation has had any significant impact
on the Company's operations. The Company's primary costs, inventory and labor,
are affected by a number of factors that are beyond its control, including, in
addition to inflation, the availability and price of merchandise, the
competitive climate and general and regional economic conditions. As is typical
of the supermarket industry, the Company has generally been able to maintain
gross profit margins by adjusting its retail prices, but competitive conditions
may from time to time render it unable to do so while maintaining its market
share.

24
<PAGE> 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

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

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. The plaintiffs'
motion for class certification is currently pending before the court, and the
Company anticipates that the court will rule on such motion prior to the end of
the year. The parties are conducting discovery with respect to the pending
motion for class certification. The Company plans to vigorously defend this
lawsuit. Due to the numerous legal and factual issues which must be resolved
during the course of this litigation, the Company is unable to predict the
ultimate outcome of this lawsuit. If Dominick's were held liable for the alleged
discrimination (or otherwise concludes that it is in the Company's best interest
to settle the matter), it could be required to pay monetary damages (or
settlement payments) which, depending on the outcome of the class certification
motion (and the size of any class certified), the theory of recovery or the
resolution of the plaintiffs' claims for compensatory and punitive damages,
could be substantial and could have a material adverse effect on the Company.
Based upon the current state of the proceedings, the Company's assessment to
date of the underlying facts and circumstances and the other information
currently available, and although no assurances can be given, the Company does
not believe that the resolution of this litigation will have a material adverse
effect on the Company's overall liquidity. As additional information is gathered
and the litigation proceeds, the Company will continue to assess its potential
impact.

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

33
<PAGE> 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 outstanding common equity consists of Common Stock and Class
B Common Stock (together, the "Company Common Stock"). Except as otherwise
described herein, all shares of Common Stock and Class B Common Stock are
identical and entitle the holders thereof to the same rights and privileges
(except with respect to voting privileges). Holders of Class B Common Stock may
elect at any time to convert any or all of such shares into Common Stock, on a
share-for-share basis, to the extent the holder thereof is not prohibited from
owning additional voting securities by virtue of regulatory restrictions. The
holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders of the Company. Except as required by law,
holders of Class B Common Stock do not have the right to vote on any matters to
be voted upon by the stockholders.

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

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING
----------------------- SHARES -----------------------
NUMBER OF BEING NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
--------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS:
Yucaipa and affiliates:
Yucaipa Blackhawk Partners, L.P. ........ 2,018,106 13.1% -- 2,018,106 9.4%
Yucaipa Chicago Partners, L.P. .......... 253,470 1.6 -- 253,470 1.2
Yucaipa Dominick's Partners, L.P. ....... 663,333 4.3 -- 663,333 3.1
The Yucaipa Companies(2)................. -- -- -- -- --
Yucaipa Management L.L.C.(3)............. -- -- -- -- --
Ronald W. Burkle(4)...................... 2,934,909 19.0 -- 2,934,909 13.7
Linda McLoughlin Figel(2)(5)............. -- -- -- -- --
Patrick L. Graham(2)(6).................. -- -- -- -- --
Darren W. Karst(2)(7).................... 14,637 * -- 14,367 *
Mark A. Resnik(2)(8)..................... -- -- -- -- --
Total............................. 2,949,546 19.0 -- 2,949,546 13.8
Robert A. Mariano(9)....................... 219,568 1.4 -- 219,568 1.0
Robert E. McCoy(10)........................ 97,591 * -- 97,591 *
Herbert R. Young(11)....................... 97,591 * -- 97,591 *
Apollo and affiliates:
Peter P. Copses(12)...................... 5,855,181 37.9 -- 5,855,181 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 Equity Associates, L.P.(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 Blackhawk Partners, L.P. and Yucaipa Dominick's
Partners, L.P. See notes (2) and (3).

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

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

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

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

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

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

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

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

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

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

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

(17) All shares held by the Other Selling Stockholders (other than 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
Non-Voting Common Stock, par value $0.01 per share (the "Non-Voting Common
Stock"), 8.5 million shares of which will be designated as Class B Common Stock,
and 4 million shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"). Upon completion of the Offering and the application of the
net proceeds therefrom, 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 Non-Voting Common Stock, the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.

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

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

NON-VOTING COMMON STOCK

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

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<PAGE> 47

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

Class B Common Stock

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

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

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

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

PREFERRED STOCK

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

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<PAGE> 48

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

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

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

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

SECTION 203 OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly-held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the transaction
in which the person became an "interested stockholder" or the business
combination is approved by the Board of Directors prior to the date the
interested stockholder obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer or (iii) on or subsequent to such date the "business
combination" is approved by the Board of Directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within three years, did own) 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

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

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<PAGE> 49

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

STOCKHOLDERS AGREEMENTS

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

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

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<PAGE> 50

YUCAIPA WARRANT

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

SHARES ELIGIBLE FOR FUTURE SALE

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

RULE 144

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

After the expiration of the lock-up period, 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

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<PAGE> 51

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

REGISTRATION RIGHTS

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

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."

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<PAGE> 52

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

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

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

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

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

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

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

DESCRIPTION OF CERTAIN INDEBTEDNESS

NEW CREDIT FACILITY

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

General

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

Interest Rate; Fees

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

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<PAGE> 53

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

Amortization Prepayments

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

Guarantees and Collateral

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

Covenants

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

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

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<PAGE> 54

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

Events of Default

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

SENIOR SUBORDINATED NOTES DUE 2005

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

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

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

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

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

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

53
<PAGE> 55

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

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and Chase
Securities Inc. are acting as representatives (the "Representatives") have
severally agreed to purchase from the Company and the Selling Stockholders an
aggregate of 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.

54
<PAGE> 56

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., which beneficially owns 253,470 shares of Common Stock. In the
aggregate, the proportionate ownership of such employees represents less than 1%
of the outstanding Common Stock.

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

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

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price 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.

55
<PAGE> 57

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

LEGAL MATTERS

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

EXPERTS

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

AVAILABLE INFORMATION

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

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.

/s/ ERNST & YOUNG LLP

Chicago, Illinois
January 5, 1996
except for Note 12, as to which

the date is October 24, 1996

F-2
<PAGE> 60

DOMINICK'S SUPERMARKETS, INC.

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

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

See accompanying notes.

F-3
<PAGE> 61

DOMINICK'S SUPERMARKETS, INC.

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

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

See accompanying notes.

F-4
<PAGE> 62

DOMINICK'S SUPERMARKETS, INC.

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

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

See accompanying notes.

F-5
<PAGE> 63

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

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

See accompanying notes.

F-6
<PAGE> 64

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

F-7
<PAGE> 65

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

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

Pro Forma Balance Sheet (unaudited)

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

Cash Equivalents

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

Inventories

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

F-8
<PAGE> 66

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pre-Opening Costs

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

Property and Equipment

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

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

Deferred Financing Costs

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

Goodwill and Trademarks

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

Income Taxes

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

Closed Store Reserves

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

Self-Insurance Reserves

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

F-9
<PAGE> 67

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Discounts and Promotional Allowances

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

Extraordinary Loss

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

Advertising

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

Income (Loss) Per Common Share

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

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

Supplemental Cash Flow Disclosure

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

Use of Estimates

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

Reclassifications

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

F-10
<PAGE> 68

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

New Accounting Pronouncements

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

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

Unaudited Interim Financial Statements

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

2. PROPERTY AND EQUIPMENT

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

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

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

F-11
<PAGE> 69

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT

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

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

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

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

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

F-12
<PAGE> 70

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

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

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

Senior Subordinated Notes

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

F-13
<PAGE> 71

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LEASES

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

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

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

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

5. CAPITAL STOCK

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

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

Stock Option Plans

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

F-14
<PAGE> 72

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

A summary of stock option activity is as follows:

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

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

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

Warrant

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

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

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

6. REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK

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

F-15
<PAGE> 73

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

7. INCOME TAXES

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

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

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

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

F-16
<PAGE> 74

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

8. PROFIT-SHARING AND RETIREMENT PLANS

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

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

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

9. RELATED PARTY TRANSACTIONS

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

F-17
<PAGE> 75

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

10. COMMITMENTS AND CONTINGENCIES

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

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

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

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

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

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

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

F-18
<PAGE> 76

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

12. SUBSEQUENT EVENT

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

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

F-19
<PAGE> 77

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

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

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

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

P-1
<PAGE> 78

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

See accompanying notes.

P-2
<PAGE> 79

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

See accompanying notes.

P-3
<PAGE> 80

DOMINICK'S SUPERMARKETS, INC.

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

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

(b) Reflects the following adjustments:

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

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

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

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

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

P-4
<PAGE> 81

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

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 9
Use of Proceeds............................ 13
Dividend Policy............................ 13
Dilution................................... 14
Capitalization............................. 15
Selected Historical and Pro Forma Financial
Data..................................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 18
Business................................... 25
Management................................. 34
Principal and Selling Stockholders......... 42
Certain Transactions....................... 44
Description of Capital Stock............... 45
Shares Eligible for Future Sale............ 49
The Acquisition............................ 50
Description of Certain Indebtedness........ 51
Underwriting............................... 54
Legal Matters.............................. 56
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 24, 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 24, 1996
- -----------------------------------------------
Ronald W. Burkle

* President, Chief Executive October 24, 1996
- ----------------------------------------------- Officer, Director
Robert A. Mariano

/s/ DARREN W. KARST Executive Vice President, October 24, 1996
- ----------------------------------------------- Finance and Administration,
Darren W. Karst Chief Financial Officer
(Principal Accounting
Officer), Secretary,
Director

* Director October 24, 1996
- -----------------------------------------------
Linda McLoughlin Figel

* Director October 24, 1996
- -----------------------------------------------
Patrick L. Graham

* Director October 24, 1996
- -----------------------------------------------
Mark A. Resnik

* Director October 24, 1996
- -----------------------------------------------
Peter P. Copses

* Director October 24, 1996
- -----------------------------------------------
David B. Kaplan

* Director October 24, 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 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 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 1.1

6,400,000 Shares

DOMINICK'S SUPERMARKETS, INC.

Common Stock

UNDERWRITING AGREEMENT

October , 1996

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
BT SECURITIES CORPORATION
CHASE SECURITIES INC.
As representatives of the
several underwriters
named in Schedule I hereto
(the "Representatives")
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172

Dear Sirs:

Dominick's Supermarkets, Inc., a Delaware corporation (the
"Company"), and the stockholders of the Company named in Schedule II hereto,
(collectively, the "Selling Stockholders"), severally propose to sell an
aggregate of 6,400,000 shares of Common Stock, par value $.01 per share, of the
Company (the "Firm Shares"), to the several underwriters named in Schedule I
hereto (the "Underwriters"). The Firm Shares consist of 5,900,000 shares to be
issued and sold by the Company and 500,000 outstanding shares to be sold by the
Selling Stockholders in the respective amounts set forth in Schedule II under
the caption "Firm Shares." The Selling Stockholders also severally propose to
issue and sell to the several Underwriters not more than 960,000 additional
shares of Common Stock, par value $.01 per share, of the Company (the
"Additional Shares") up to the respective amounts set forth in Schedule II
under the caption "Additional Shares", if requested by the Underwriters as
provided in Section 2 hereof. The Firm Shares and the Additional Shares are
herein collectively called the "Shares." The
<PAGE> 2
-2-

shares of Common Stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common
Stock." The Company and the Selling Stockholders are hereinafter collectively
called the "Sellers."

1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively called the "Act"), a registration statement on Form S-1 (File No.
333-11177) including a prospectus relating to the Shares, which may be amended.
The registration statement as amended at the time when it becomes effective,
including a registration statement (if any) filed pursuant to Rule 462(b) under
the Act increasing the size of the offering registered under the Act and
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "Registration Statement"; and the prospectus in the form
first used to confirm sales of Shares is hereinafter referred as the
"Prospectus."

2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, (i) the Company agrees to issue and sell 5,900,000 Firm
Shares, (ii) each Selling Stockholder agrees, severally and not jointly, to
sell the number of Firm Shares set forth opposite such Selling Stockholder's
name in Schedule II hereto and (iii) each Underwriter agrees, severally and not
jointly, to purchase from each Seller at a price per share of $[ ] (the
"Purchase Price") the number of Firm Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) which bears
the same proportion to the total number of Firm Shares to be sold by such
Seller as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto bears to the total number of Firm Shares.

On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, (i) each Selling
Stockholder agrees, severally and not jointly, to sell up to the number of
Additional Shares set forth opposite such Selling Stockholder's name in
Schedule II hereto and (ii) the Underwriters shall have the right to purchase,
severally and not jointly, up to an aggregate of 960,000 Additional Shares from
the Selling Stockholders at the Purchase
<PAGE> 3
-3-

Price. Additional Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole or
in part from time to time by giving written notice thereof to the Company
within 30 days after the date of this Agreement. The Representatives shall
give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof. The date
specified in any such notice shall be a business day (i) no earlier than the
Closing Date (as hereinafter defined), (ii) no later than ten business days
after such notice has been given and (iii) no earlier than two business days
after such notice has been given. If any Additional Shares are to be
purchased, (i) each Underwriter, severally and not jointly, agrees to purchase
from each Selling Stockholder the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may
determine) which bears the same proportion to the total number of Additional
Shares to be sold by such Selling Stockholder as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares and (ii) each Selling Stockholder agrees, severally and
not jointly, to sell the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may
determine) which bears the same proportion to the total number of Additional
Shares being purchased by the Underwriters as the number of Additional Shares
set forth opposite the name of such Selling Stockholder in Schedule II hereto
bears to the total number of Additional Shares which the Underwriters have the
right to purchase pursuant to this Section 2.

The Sellers hereby agree, severally and not jointly, and the
Company shall, concurrently with the execution of this Agreement, deliver an
agreement executed by (i) each of the directors and officers of the Company and
(ii) each stockholder listed on Annex I hereto, pursuant to which each such
person agrees, not to, directly or indirectly, offer, sell, contract to sell,
grant any option to purchase, or otherwise dispose of any common stock of the
Company or any securities convertible into or exercisable or exchangeable for
such common stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any such common stock,
except to the Underwriters pursuant to this Agreement, for a period of 180 days
after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette
<PAGE> 4
-4-

Securities Corporation ("DLJ"). Notwithstanding the foregoing, during such
period (i) the Company may grant stock options pursuant to the Company's
existing stock option plan, (ii) the Company may issue shares of its common
stock upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and (iii) each Selling Stockholder may transfer
shares of Common Stock to an affiliate of such Selling Stockholder or an
immediate family member or a trust for the sole benefit of the foregoing,
provided that any such transferee agrees to be bound by the restrictions set
forth in this paragraph.

The Company hereby confirms its engagement of DLJ as, and DLJ
hereby confirms its agreement with the Company to render services as, a
"qualified independent underwriter," within the meaning of Section (b)(15) of
Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") with respect to the offering and sale of the Shares.
DLJ, solely in its capacity as qualified independent underwriter and not
otherwise, is referred to herein as the "QIU." As compensation for the
services of the QIU hereunder, the Company agrees to pay the QIU $5,000 on the
Closing Date. The price at which the Shares will be sold to the public shall
not be higher than the maximum price recommended by DLJ acting as QIU.

3. Terms of Public Offering. The Sellers have been advised by
the Representatives that the Underwriters propose (i) to make a public offering
of their respective portions of the Shares as soon after the effective date of
the Registration Statement as in the judgment of the Representatives is
advisable and (ii) initially to offer the Shares upon the terms set forth in
the Prospectus.

4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at 9:00 A.M., New York City time, on
[ ], 1996 (the "Closing Date") at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005. The Closing Date and the
location of delivery of and the form of payment for the Firm Shares may be
varied by agreement between the Representatives and the Sellers.

Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as the
Representatives shall designate at 9:00 A.M., New York City time, on the date
specified in the
<PAGE> 5
-5-

applicable exercise notice given by the Representatives pursuant to Section 2
(an "Option Closing Date"). Any such Option Closing Date and the location of
delivery of and the form of payment for such Additional Shares may be varied by
agreement between the Representatives and the Company.

Certificates for the Shares shall be registered in such names and
issued in such denominations as the Representatives shall request in writing
not later than two full business days prior to the Closing Date or an Option
Closing Date, as the case may be. Such certificates shall be made available to
the Representatives for inspection not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or an Option Closing
Date, as the case may be. Certificates in definitive form evidencing the
Shares shall be delivered to the Representatives on the Closing Date or an
Option Closing Date, as the case may be, with any transfer taxes thereon duly
paid by the respective Sellers, for the respective accounts of the several
Underwriters, against payment of the Purchase Price therefor by wire transfer
or certified or official bank checks payable in federal funds to the order of
the applicable Sellers.

5. Agreements of the Company. The Company agrees with the
Representatives:

(a) If the Registration Statement has not been declared effective
prior to the execution of this Agreement, to use its best efforts to
cause the Registration Statement to become effective at the earliest
possible time.

(b) To advise the Representatives and the Selling Stockholders
promptly and, if requested by the Representatives, to confirm such advice
in writing, (i) when the Registration Statement has become effective and
when any post-effective amendment to it becomes effective, (ii) of any
request by the Commission, before or after the Registration Statement has
become effective, for amendments to the Registration Statement or
amendments or supplements to the Prospectus or any preliminary or
supplemental prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of the suspension of qualification of
the Shares for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purposes, and (iv) of the happening of any event
<PAGE> 6
-6-

during the period referred to in paragraph (e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus or any supplemental prospectus untrue or which requires the
making of any additions to or changes in the Registration Statement or
the Prospectus or any supplemental prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, the Company will make every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.

(c) To furnish to the Representatives, without charge, 5 signed
copies of the Registration Statement as first filed with the Commission
and of each amendment to it, including all exhibits, and to furnish to
the Representatives, each Underwriter designated by the Representatives
and each Selling Stockholder such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as the Representatives or the Selling Stockholders may
reasonably request.

(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus or any preliminary
or supplemental prospectus of which the Representatives shall not
previously have been advised or to which the Representatives shall
reasonably object; and to prepare and file with the Commission, promptly
upon the reasonable request of the Representatives, any amendment to the
Registration Statement or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Shares
by the Underwriters, and to use its best efforts to cause the same to
become promptly effective.

(e) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period as in the opinion of
counsel for the Underwriters a prospectus is required by law to be
delivered in connection with sales by an Underwriter or a dealer, to
furnish to each Underwriter and dealer as many copies of the Prospectus
(and of any amendment or supplement to the Prospectus) as such
Underwriter or dealer may reasonably request.

<PAGE> 7
-7-

(f) If during the period specified in paragraph (e) any event
shall occur as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus
(or any amendment or supplement thereto) in order to make the statements
therein, in the light of the circumstances when the Prospectus (or any
such amendment or supplement thereto) is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
(or any amendment or supplement thereto) to comply with any law,
forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus (or any such amendment or
supplement thereto) so that the statements in the Prospectus (or any such
amendment or supplement thereto), as so amended or supplemented, will not
in the light of the circumstances when it is so delivered, be misleading,
or so that the Prospectus (or any such amendment or supplement thereto)
will comply with law, and to furnish to each Underwriter and to such
dealers as the Representatives shall specify, such number of copies
thereof as such Underwriter or dealers may reasonably request.

(g) Prior to any public offering of the Shares, to cooperate with
the Representatives and counsel for the Underwriters in connection with
the registration or qualification of the Shares for offer and sale by the
several Underwriters and by dealers under the state securities or Blue
Sky laws of such jurisdictions as the Representatives may request, to
continue such qualification in effect so long as required for
distribution of the Shares and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that the Company shall
not be required to register or qualify the Shares in any jurisdiction
where such registration or qualification would require the Company to
qualify as a foreign corporation or to execute a general consent to
service of process in such jurisdiction.

(h) To mail and make generally available to its stockholders as
soon as reasonably practicable an earnings statement covering a period of
at least twelve months after the effective date of the Registration
Statement (but in no event commencing later than 90 days after such date)
which shall satisfy the provisions of Section 11(a)
<PAGE> 8
-8-

of the Act, and to advise the Representatives in writing when such
statement has been so made available.

(i) During the period of five years after the date of this
Agreement, (i) to mail as soon as reasonably practicable after the end of
each fiscal year to the record holders of its Common Stock a financial
report of the Company and its subsidiaries on a consolidated basis (and a
similar financial report of all unconsolidated subsidiaries, if any), all
such financial reports to include a consolidated balance sheet, a
consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of stockholders' equity as of the end
of and for such fiscal year, together with comparable information as of
the end of and for the preceding year, certified by independent certified
public accountants, and (ii) to make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such
period, and for the period from the beginning of such year to the close
of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.

(j) During the period of five years after the date of this
Agreement, to furnish to the Representatives as soon as available a copy
of each report or other publicly available information of the Company
mailed to the holders of Common Stock or filed with the Commission and
such other publicly available information concerning the Company and its
subsidiaries as the Representatives may reasonably request.

(k) To pay all costs, expenses, fees and taxes incident to (i)
the preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any of
them prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing
and delivery of this Agreement, the Preliminary and
<PAGE> 9
-9-

Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection
with the offering of the Shares (including in each case any disbursements
of counsel for the Underwriters relating to such printing and delivery),
(iv) the registration or qualification of the Shares for offer and sale
under the securities or Blue Sky laws of the several states (including in
each case the fees and disbursements of counsel for the Underwriters
relating to such registration or qualification and memoranda relating
thereto), (v) filings and clearance with the NASD in connection with the
offering of the Shares, (vi) the listing of the Shares on the New York
Stock Exchange (the "NYSE"), (vii) furnishing such copies of the
Registration Statement, the Prospectus and all amendments and supplements
thereto as may be requested for use in connection with the offering or
sale of the Shares by the Underwriters or by dealers to whom Shares may
be sold, (viii) the performance by the Sellers of their other obligations
under this Agreement, and (ix) the paying of a fee of $5,000 to the QIU.

(l) To use its best efforts to maintain the listing of the Common
Stock on the NYSE for a period of five years after the effective date of
the Registration Statement.

(m) To use its best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the Shares.

(n) The Company will, for so long as any of the Common Stock is
outstanding and if, in the reasonable judgment of any Underwriter, such
Underwriter or any of its affiliates (as defined in the rules and
regulations under the Act) is required to deliver a prospectus in
connection with sales of Common Stock (i) periodically amend the
Registration Statement so that the information contained in the
Registration Statement complies with the requirements of Section 10(a) of
the Act, (ii) amend the Registration Statement or supplement the
Prospectus when necessary to reflect any material changes in the
information provided therein, (iii) provide such Underwriter with copies
of each amendment or supplement filed and such other documents, including
opinions of counsel and "comfort"
<PAGE> 10
-10-

letters, as such Underwriter may reasonably request and (iv) agree to
indemnify such Underwriter and if applicable, contribute to any amount
paid or payable by such Underwriter in a manner substantially identical
to that specified in Section 8 hereof (with appropriate modifications).

6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:

(a) The Registration Statement has become, or prior to the
Closing Date will become, effective; no stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the
Commission.

(b) (i) Each part of the Registration Statement, when such part
became or becomes effective, did not or will not contain and each such
part, as amended or supplemented, if applicable, did not or will not
contain any 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 not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Act and (iii) the
Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein.

(c) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as it is currently being conducted
and to own, lease and operate its properties, and each is duly qualified
and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
<PAGE> 11
-11-

ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

(d) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and except as otherwise described in
the Registration Statement and Prospectus, are owned by the Company free
and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature.

(e) All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights,
except as set forth in the Stockholders Agreement of Dominick's
Supermarkets, Inc., dated as of March 22, 1995, by and among the parties
named therein (the "Stockholders Agreement"); and the Shares to be issued
and sold by the Company hereunder have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights except as set forth in the Stockholders
Agreement.

(f) The authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof
contained in the Prospectus.

(g) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
other agreement, indenture or instrument material to the conduct of the
business of the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which it or any
of its subsidiaries or their respective property is bound.

(h) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, and the Company has all requisite corporate power
and authority to issue
<PAGE> 12
-12-

and deliver the Shares to be issued and sold by it hereunder. This
Agreement has been duly authorized, executed and delivered by the
Company.

(i) The execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not require any
consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (except as such
may be required under the securities or Blue Sky laws of the various
states) and will not conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any agreement, indenture or other
instrument to which it or any of its subsidiaries is a party or by which
it or any of its subsidiaries or their respective property is bound, or
violate or conflict with any laws, administrative regulations or rulings
or court decrees applicable to the Company, any of its subsidiaries or
their respective property.

(j) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated. No contract or document
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
is not so described or filed as required.

(k) Except as otherwise set forth in the Prospectus, neither the
Company nor any of its subsidiaries has violated any foreign, federal,
state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), nor any
federal or state law relating to discrimination in the hiring, promotion
or pay of employees nor any applicable federal or state wages and hours
laws, nor any provisions of the Employee Retirement Income Security Act
or the rules and regulations promulgated thereunder, which in each case
might result in any material adverse change in the business, prospects,
financial condition or
<PAGE> 13
-13-

results of operation of the Company and its subsidiaries, taken as a
whole.

(l) The Company and each of its subsidiaries owns or possesses
adequate licenses or other rights to use all patents, trademarks, service
marks, trade names, copyrights and know-how necessary to conduct the
businesses now or proposed to be operated by it as described in the
Prospectus, and none of the Company or the subsidiaries has received any
notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with respect
to any patents, trademarks, service marks, trade names, copyrights or
know-how which, if such assertion of infringement or conflict were
sustained, could have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(m) Except as otherwise set forth in the Prospectus or such as
are not material to the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a
whole, the Company and each of its subsidiaries has good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions
except liens for taxes not yet due and payable, to all property and
assets described in the Registration Statement as being owned by it. All
leases to which the Company or any of its subsidiaries is a party are
valid and binding and no default has occurred or is continuing
thereunder, which might result in any material adverse change in the
business, prospects, financial condition or results of operation of the
Company and its subsidiaries taken as a whole, and the Company and its
subsidiaries enjoy peaceful and undisturbed possession under all such
leases to which any of them is a party as lessee with such exceptions as
do not materially interfere with the use made by the Company or such
subsidiary.

(n) The Company and each of its subsidiaries maintains reasonably
adequate insurance for the business in which it is engaged.

(o) Ernst & Young LLP are independent public accountants with
respect to the Company as required by the Act.

(p) The financial statements, together with related schedules and
notes forming part of the Registration
<PAGE> 14
-14-

Statement and the Prospectus (and any amendment or supplement thereto),
present fairly the consolidated financial position, results of operations
and changes in cash flows of the Company and its subsidiaries on the
basis stated in the Registration Statement at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; the other financial and
statistical information and data set forth in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) is, in all
material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
the Company; and the pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus have
been prepared in accordance with the applicable requirements of the Act
and on the basis described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred
to therein.

(q) The statistical and market-related data included in the
Registration Statement and the Prospectus are based on or derived from
sources which the Company believes to be reliable and accurate in all
material respects.

(r) Except as otherwise set forth in the Prospectus or except as
would not, singly or in the aggregate, have a material adverse effect on
the Company and its subsidiaries, taken as a whole, the Company and each
of its subsidiaries has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits"),
including, without limitation, under any applicable Environmental Laws,
as are necessary to own, lease and operate its respective properties and
to conduct its business in the manner described in the Prospectus,
subject to such qualifications as may be set forth in the Prospectus; the
Company and each of its subsidiaries has fulfilled and performed all of
its material obligations with respect to such permits and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit, subject in
each case to such
<PAGE> 15
-15-

qualification as may be set forth in the Prospectus; and, except as
described in the Prospectus, such permits contain no restrictions that
are materially burdensome to the Company or any of its subsidiaries.

(s) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

(t) Except as otherwise disclosed in the Prospectus, no holder of
any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company.

(u) The Company has complied with all applicable provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).

(v) The Company has filed a registration statement pursuant to
Section 12(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to register the Common Stock, has filed an application
to list the Shares on the NYSE, and has received notification that the
listing has been approved, subject to notice of issuance.

(w) Except as otherwise disclosed in the Prospectus, there are no
outstanding subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or liens related to or entitling any
person to purchase or otherwise to acquire any shares of the capital
stock of, or other ownership interest in, the Company or any subsidiary
thereof.

(x) Except as otherwise disclosed in the Prospectus, there is (i)
no unfair labor practice complaint pending against the Company or any of
its subsidiaries or, to the best knowledge of the Company, threatened
against any of them, before the National Labor Relations Board or any
state or local labor relations board, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is
pending against the Company or any of its subsidiaries or, to the best
knowledge of the Company, threatened against any of them, and (ii) no
strike, labor dispute, slowdown or stoppage pending against the Company
or any of its subsidiaries or, to the best knowledge of the Company,
threatened against it or any of its subsidiaries except for such actions
specified
<PAGE> 16
-16-

in clause (i) or (ii) above, which, singly or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company
and its subsidiaries, taken as a whole. There has been no material
adverse development in the negotiations with the unions representing the
Dominick's retail clerks and Omni meatcutters.

(y) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(z). All material tax returns required to be filed by the Company
and each of its subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees
and other charges due pursuant to such returns or pursuant to any
assessment received by the Company or any of its subsidiaries have been
paid, other than those being contested in good faith and for which
adequate reserves have been provided.

(aa) The offering of the Shares by the Underwriters pursuant to
this Agreement is a "Qualified IPO" as defined in the Stockholders
Agreement.

7. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder severally represents and warrants to each Underwriter
that:

(a) Such Selling Stockholder is the lawful owner of the Shares to
be sold by such Selling Stockholder pursuant to this Agreement and has,
and on the Closing Date (and Option Closing Date, if applicable) will
have, good and clear title to such Shares.

<PAGE> 17
-17-

(b) Upon delivery of and payment for the Shares to be sold by
such Selling Stockholder pursuant to this Agreement, good and clear title
to such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims whatsoever.

(c) Such Selling Stockholder has, and on the Closing Date (and on
any Option Closing Date, if applicable) will have, full legal right,
power and authority to enter into this Agreement and the Custody
Agreement between the Selling Stockholders and First Chicago Trust
Company of New York, as Custodian (the "Custody Agreement") and to sell,
assign, transfer and deliver such Shares in the manner provided herein
and therein, and this Agreement and the Custody Agreement have been duly
authorized by all necessary corporate or other action, executed and
delivered by such Selling Stockholder and the Custody Agreement is a
valid and binding agreement of such Selling Stockholder enforceable in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought.

(d) The power of attorney signed by such Selling Stockholder
appointing Robert A. Mariano and Darren W. Karst, or either one of them,
as its attorney-in-fact to the extent set forth therein with regard to
the transactions contemplated hereby and thereby and by the Registration
Statement and the Custody Agreement has been duly authorized, executed
and delivered by or on behalf of such Selling Stockholder and is a valid
and binding instrument of such Selling Stockholder enforceable in
accordance with its terms.

(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Shares pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Act, such Selling Stockholder has not
distributed and will not
<PAGE> 18
-18-

distribute any prospectus or other offering material in connection with
the offering and sale of the Shares.

(f) The execution, delivery and performance of this Agreement and
the Custody Agreement by such Selling Stockholder, compliance by such
Selling Stockholder with all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will not
require any consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body (except
as such may be required under the Act, state securities laws or Blue Sky
laws) and will not conflict with or constitute a breach of any of the
terms or provisions of, or a default under, organizational documents of
such Selling Stockholder or any agreement, indenture or other instrument
to which such Selling Stockholder is a party or by which such Selling
Stockholder or property of such Selling Stockholder is bound, or violate
or conflict with any laws, administrative regulation or ruling or court
decree applicable to such Selling Stockholder or property of such Selling
Stockholder, except in each such case as would not have a material
adverse effect on such Selling Stockholder's abilities to perform its
obligations hereunder.

(g) Such parts of the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relate to such
Selling Stockholder do not, and will not on the Closing Date (and any
Option Closing Date, if applicable), 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, in light of
circumstances under which they were made, not misleading.

(h) At any time during the period described in paragraph 5(e)
hereof, if there is any change in the information referred to in
paragraph 7(g) above which relate to such Selling Stockholder, such
Selling Stockholder will immediately notify the Representatives of such
change.

8. Indemnification. a. (i) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and
<PAGE> 19
-19-

judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by 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 such losses, claims, damages, liabilities or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Underwriters furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives
expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages and liabilities and judgments purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment, unless such failure to
deliver the Prospectus (as so amended and supplemented) was a result of
noncompliance by the Company of Section 5(e) hereof;

(ii) Each Selling Stockholder, severally and not jointly, agrees
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
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 such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriters furnished in
writing to the Company by or on behalf of
<PAGE> 20
-20-

any Underwriter through the Representatives expressly for use therein;
provided, however, that each Selling Stockholder shall be liable only with
reference to information relating to such Selling Stockholder furnished to the
Company in writing by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus
or any amendment or supplement thereto. Notwithstanding the foregoing, the
aggregate liability of any Selling Stockholder pursuant to the provisions of
this paragraph shall be limited to an amount equal to the total net proceeds
(before deducting expenses but after deducting underwriting discounts and
commissions) received by such Selling Stockholder from the sale of such Selling
Stockholder's Shares hereunder; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages and liabilities and judgments purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment, unless such failure to
deliver the Prospectus (as so amended and supplemented) was a result of
noncompliance by the Company of Section 5(e) hereof.

(b) In case any action shall be brought against any Underwriter
or any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto and with respect to which indemnity may be sought against
the Company and the Selling Stockholders, such Underwriter shall promptly
notify the Company and the Selling Stockholders in writing and the Company
shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses. Any Underwriter or any such controlling person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Underwriter or such controlling person unless (i) the employment of such
counsel has been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel reasonably
satisfactory to such indemnified party or (iii) the
<PAGE> 21
-21-

named parties to any such action (including any impleaded parties) include both
such Underwriter or such controlling person and the Company or any Selling
Stockholder, as the case may be, and such Underwriter or such controlling
person shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company or the Selling Stockholders, as the case may be, (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Underwriter or such controlling person, it being
understood, however, that the Company and the Selling Stockholders shall not,
in connection with any one such action or separate but substantially similar or
related 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 (in addition to any local counsel) for all such
Underwriters and controlling persons, which firm shall be designated in writing
by DLJ and that all such fees and expenses shall be reimbursed as they are
incurred). A Seller shall not be liable for any settlement of any such action
effected without the written consent of such Seller but if settled with the
written consent of such Seller, such Seller agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the indemnifying party and an indemnified party
shall have requested the indemnifying party to reimburse the indemnified party
for such fees and expenses of counsel as incurred, such indemnifying party
agrees that it shall be liable for any settlement of any action effected
without its written consent if (i) such settlement is entered into more than 30
business days after the receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall have failed to reimburse the
indemnified party in accordance with such request for reimbursement prior to
the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement (i) includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding and (ii) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of such
indemnified party.

<PAGE> 22
-22-

(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
Selling Stockholder and each person, if any, controlling such Selling
Stockholder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Sellers to
each Underwriter, but only with reference to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter through
the Representatives expressly for use in the Registration Statement, the
Prospectus or any preliminary prospectus. In case any action shall be brought
against the Company, any of its directors, any such officer or any person
controlling the Company or any Selling Stockholder or any person controlling
such Selling Stockholder based on the Registration Statement, the Prospectus or
any preliminary prospectus and in respect of which indemnity may be sought
against any Underwriter, the Underwriter shall have the rights and duties given
to the Sellers (except that if any Seller shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees
and expenses of such counsel shall be at the expense of such Underwriter), and
the Company, its directors, any such officers and any person controlling the
Company and the Selling Stockholders and any person controlling such Selling
Stockholders shall have the rights and duties given to the Underwriter, by
Section 8(b) hereof.

(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, 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 losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Sellers on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Sellers and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The
<PAGE> 23
-23-

relative benefits received by the Sellers and the Underwriters shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses but after deducting underwriting discounts and
commissions) received by the Sellers, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Sellers and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

The Sellers and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) 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 losses, claims, damages, liabilities or judgments 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 8, (i) no
Selling Stockholder shall be required to contribute any amount in excess of the
amount of total net proceeds received by such Selling Stockholders from the
sale of Shares by such Selling Stockholder hereunder and (ii) no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares 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. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
number of Shares purchased by each of the Underwriters hereunder and not joint.
The Selling Stockholders' respective obligations to
<PAGE> 24
-24-

contribute pursuant to this Section 8(d) are several in proportion to the total
net proceeds they have received from the sale of Shares hereunder and not
joint.

9. Indemnification of Qualified Independent Underwriter.

(a) The Company and each Selling Stockholder, severally and not
jointly, agree to indemnify and hold harmless the QIU and each person, if any,
who controls the QIU within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments relating to, based upon or arising out of (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that each Selling Stockholder shall be liable only with reference to
information relating to such Selling Stockholder furnished to the Company in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto; and provided, further, that neither the
Company nor the Selling Stockholders shall be liable with reference to
information relating to the QIU furnished by or on behalf of the QIU expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto; or (ii) the QIU's
activities as a QIU under its engagement pursuant to Section 2 hereof;
provided, however, that to the extent that any such loss, claim, damage,
liability or judgment is found in a final judgment by a court of competent
jurisdiction, not subject to further appeal, to have resulted from the willful
misconduct or gross negligence of the QIU, neither the Company nor the Selling
Stockholders shall be liable to that extent. Notwithstanding the foregoing,
the aggregate liability of any Selling Stockholder pursuant to the provisions
of this paragraph shall be limited to an amount equal to the total net proceeds
(before deducting expenses but after deducting underwriting discounts and
commissions) received by such Selling Stockholder from the sale of such Selling
Stockholder's Shares hereunder.

(b) In case any action shall be brought against the QIU or any
person controlling the QIU, based upon (i) any
<PAGE> 25
-25-

preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement thereto or (ii) the QIU's activities as a QIU under its
engagement pursuant to Section 2 hereof, and with respect to which indemnity
may be sought against the Company and the Selling Stockholders, the QIU shall
promptly notify the Company and the Selling Stockholders in writing and the
Company shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses. The QIU or any such controlling persons shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the QIU or such controlling person unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Company, (ii) the
Company shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any impleaded parties) include both
the QIU or such controlling person and the Company or any Selling Stockholder,
as the case may be, and the QIU or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
or any Selling Stockholder, as the case may be, (in which case the Company
shall not have the right to assume the defense of such action on behalf of the
QIU or such controlling persons, it being understood, however, that the Company
and the Selling Stockholders shall not, in connection with any one such action
or separate but substantially similar or related 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
(in addition to any local counsel) for the QIU and the controlling persons,
which firm shall be designated in writing by the QIU and that all such fees and
expenses shall be reimbursed as they are incurred). The Company and the
Selling Stockholder shall not be liable for any settlement of any such action
effected without the written consent of the Company and the Selling
Stockholders but if settled with the written consent of the Company and the
Selling Stockholders, the Company and the Selling Stockholders agree to
indemnify and hold harmless the QIU and any such controlling persons from and
against any loss or liability by reason of such settlement. Notwithstanding
the immediately preceding sentence, if in any case where the fees and expenses
of counsel are at the expense of the indemnifying party and an indemnified
party shall have requested the indemnifying party to reimburse the indemnified
party for such fees and expenses of counsel as
<PAGE> 26
-26-

incurred, such indemnifying party agrees that it shall be liable for any
settlement of any action effected without its written consent if (i) such
settlement is entered into more than 30 business days after the receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall have failed to reimburse the indemnified party in accordance with such
request for reimbursement prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any 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 on claims that are the subject matter of such proceeding.

(c) The QIU agrees to indemnify and hold harmless the Company and
the Selling Stockholders and directors of the Company, the officers of the
Company who sign the Registration Statement and each person, if any, who
controls the Company or the Selling Stockholders within the meaning of Section
15 of the Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company and the Selling Stockholders, but only
with reference to information relating to the QIU furnished by or on behalf of
the QIU expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto. In the
case any action shall be brought against the Company, any of its directors, any
such officers or any person controlling the Company or any Selling Stockholder
or any person controlling such Selling Stockholder based on the Registration
Statement, the Prospectus or any preliminary prospectus and in respect of which
indemnity may be sought against the QIU, the QIU shall have the rights and
duties given to the Company and the Selling Stockholders (except that if the
Company and the Selling Stockholders have assumed the defense thereof the QIU
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of the QIU), and the Company, its directors, any such
officers and any person controlling the Company and the Selling Stockholders
and any person controlling such Selling Stockholders shall have the rights and
duties given to the QIU, by Section 9(b).

(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to
<PAGE> 27
-27-

therein, 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 losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Selling Stockholders on the one hand and the QIU on the
other hand from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, the Selling Stockholders,
the Underwriters and the QIU in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders and the QIU shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses but after deducting underwriting discounts and
commissions) received by the Company and the Selling Stockholders, as set forth
in the cover page of the Prospectus, and the total fee received by the QIU, as
set forth in the "Underwriting" section of the Prospectus, bear to the total
price to the public of the Shares. The relative fault of the Company and the
Selling Stockholders and the QIU shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the QIU and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission and whether the QIU's recommendations, advice or services
as QIU pursuant to Section 2 hereof involved any willful misconduct or gross
negligence on the part of the QIU.

The Company and the Selling Stockholders and the QIU agree that it
would not be just and equitable if contribution pursuant to this Section 9(d)
were determined by pro rata allocation or 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 losses, claims, damages, liabilities or judgments
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.
<PAGE> 28
-28-

Notwithstanding the provisions of this Section 9, (i) no Selling Stockholder
shall be required to contribute any amount in excess of the amount of total net
proceeds received by such Selling Stockholder from the sale of Shares by such
Selling Stockholder hereunder and (ii) the QIU shall not be required to
contribute any amount in excess of the amount by which its fee received for
acting as QIU exceeds the amount of any damages which the QIU has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission or by reason of alleged willful misconduct or
gross negligence. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Selling
Stockholders' respective obligations to contribute pursuant to this Section
8(d) are several in proportion to the total net proceeds they have received
from the sale of Shares hereunder and not joint.

10. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:

(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date.

(b) The Registration Statement shall have become effective not
later than 5:00 P.M.(and in the case of a Registration Statement filed
under Rule 462(b) of the Act, not later than 10:00 P.M.), New York City
time, on the date of this Agreement or at such later date and time as the
Representatives may approve in writing, and at the Closing Date no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or contemplated by the Commission.

(c) (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have been
any material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in
the ordinary course of business, of the Company, (ii) except as
contemplated by the Prospectus,
<PAGE> 29
-29-

since the date of the latest balance sheet included in the Registration
Statement and the Prospectus there shall not have been any change, or any
development involving a prospective material adverse change, in the
capital stock or in the long-term debt of the Company from that set forth
in the Registration Statement and Prospectus, (iii) the Company and its
subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole,
other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date the Representatives shall have
received a certificate dated the Closing Date, signed by Robert A.
Mariano and Darren W. Karst, in their capacities as the President and
Chief Executive Officer and the Chief Financial Officer of the Company,
respectively, confirming the matters set forth in paragraphs (a), (b),
and (c) of this Section 10.

(d) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date and the Representatives shall have received a certificate to
such effect, dated the Closing Date, from each Selling Stockholder.

(e) The Representatives shall have received on the Closing Date
an opinion (satisfactory to the Representatives and counsel for the
Underwriters), dated the Closing Date, of Latham & Watkins, counsel for
the Company, to the effect that:

(i) the Company and each "significant subsidiary" of the
Company (as defined in Rule 1-02(w) of the Commission's Regulation
S-X) (each such subsidiary, a "Significant Subsidiary") has been
duly incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and
has the corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease and
operate its properties;

(ii) the Company is duly qualified and is in good standing as
a foreign corporation authorized to do business in Illinois.
Dominick's Finer Foods, Inc. is duly qualified and is in good
standing as a
<PAGE> 30
-30-

foreign Corporation authorized to do business in Illinois and
Indiana;

(iii) all of the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and
issued and are fully paid and non-assessable, and to such counsel's
knowledge are owned by the Company, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any
nature other than the pledge of all such Shares pursuant to the New
Credit Facility (as defined in the Prospectus);

(iv) all the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;

(v) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when issued and delivered
to the Underwriters against payment therefor as provided by this
Agreement, will have been validly issued and will be fully paid and
non-assessable, and the issuance of such Shares is not subject to
any preemptive or similar rights;

(vi) this Agreement has been duly authorized, executed and
delivered by the Company;

(vii) the authorized capital stock of the Company, including
the Common Stock, conforms as to legal matters to the description
thereof contained in the Prospectus;

(viii) the Registration Statement has become effective under
the Act, no stop order suspending its effectiveness has been issued
and no proceedings for that purpose are, to the knowledge of such
counsel, pending before or contemplated by the Commission;

(ix) the execution, delivery and performance of this
Agreement by the Company, and the consummation of the sale of the
Shares to the Underwriters contemplated hereby will not require any
consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except as such may be required under the Act or
<PAGE> 31
-31-

other securities or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of its
subsidiaries or any agreement, indenture or other instrument
identified to such counsel as material to the conduct of the
business of the Company and its subsidiaries and to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective properties
are bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees known to such counsel as
applicable to the Company or any of its subsidiaries or their
respective properties;

(x) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; and

(xi) the Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus
and any supplement or amendment thereto (except for financial
statements and the related notes thereto and the other financial
and statistical data contained therein as to which no opinion need
be expressed) comply as to form in all material respects with the
Act.

At the time the foregoing opinion is delivered, such counsel shall
also state that it believes that (except for financial statements and the
related notes thereto and the other financial and statistical data contained
therein) the Registration Statement and the prospectus included therein at the
time the Registration Statement became effective did not contain any 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 not misleading, and
that the Prospectus, as amended or supplemented, if applicable (except for
financial statements and the related notes thereto and the other financial and
statistical data contained therein) does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. In making such statement such counsel may state that
their belief is based upon their participation in the preparation of the
Registration Statement
<PAGE> 32
-32-

and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but is without independent check or
verification except as specified.

The opinion of Latham & Watkins described in paragraph (e) above
shall be rendered to the Representatives at the request of the Company and
shall so state therein.

(f) The Representatives shall have received on the Closing Date
an opinion (satisfactory to the Representatives and counsel for the
Underwriters), dated the Closing Date, of Tom Roti, General Counsel of
the Company, to the effect that:

(i) such counsel does not know of any legal or governmental
proceeding pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of their respective
properties is subject which is required to be described in the
Registration Statement or the Prospectus and is not so described,
or of any contract or other document which is required to be
described in the Registration Statement or the Prospectus or is
required to be filed as an exhibit to the Registration Statement
which is not described or filed as required; and

(ii) to such counsel's knowledge, no holder of any security
of the Company has any right to require registration of shares of
Common Stock or any other security of the Company except as
described in the Registration Statement or Prospectus.

(g) The Representatives shall have received on the Closing Date
an opinion, dated the Closing Date, of Cahill Gordon & Reindel, counsel
for the Underwriters, as to the matters referred to in clauses (v), (vi),
(viii), (ix) (but only with respect to the statements under the captions
"Description of Capital Stock" and "Underwriting") and a statement to the
effect of the paragraph immediately following clause (xix) of paragraph
(e) above. In making such statement, such counsel may state that their
belief is based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but is without
independent check or verification except as specified.

<PAGE> 33
-33-

(h) The Representatives shall have received on the Closing Date
an opinion, dated the Closing Date, of counsel for each Selling
Stockholder, which counsel shall be reasonably satisfactory to the
Representatives, to the effect that:

(i) this Agreement has been duly authorized, executed and
delivered by such Selling Stockholders;

(ii) the execution, delivery and performance of this
Agreement by such Selling Stockholder, compliance by such Selling
Stockholder with all the provisions hereof and the consummation of
the transactions contemplated hereby will not require any consent,
approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (except as
such may be required under the Act or other securities or Blue Sky
laws) and will not conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the charter or
by-laws of such Selling Stockholder or any agreement, indenture or
other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or its respective properties is
bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to such Selling
Stockholder or its respective properties;

(iii) the Custody Agreement has been duly authorized, executed
and delivered by such Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder enforceable in
accordance with its terms;

(iv) such Selling Stockholder has full legal right, power and
authority, and any approval required by law (other than any
approval imposed by the Act or the applicable state securities and
Blue Sky laws) to sell, assign, transfer and deliver the Shares to
be sold by it in the manner provided in this Agreement and the
Custody Agreement;

(v) such Selling Stockholder has good and clear title to the
certificates for the Shares to be sold by it and upon delivery
thereof, pursuant hereto and payment therefor, good and clear title
will pass to
<PAGE> 34
-34-

the Underwriters, severally, free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever; and

(vi) the power of attorney signed by such Selling Stockholder
appointing Robert A. Mariano and Darren W. Karst, or either of
them, as its attorney-in-fact to the extent set forth therein with
regard to the transactions contemplated hereby and by the
Registration Statement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and is a
valid and binding instrument of such Selling Stockholder
enforceable in accordance with its terms, and pursuant to such
power of attorney, such Selling Stockholder has authorized Robert
A. Mariano and Darren W. Karst, or either of them, to execute and
deliver on its behalf this Agreement and any other document
necessary or desirable in connection with transactions contemplated
hereby and to deliver the Shares to be sold by it pursuant to this
Agreement.

(i) The Representatives shall have received a letter on and as of
the Closing Date, in form and substance satisfactory to the
Representatives, from Ernst & Young LLP, independent public accountants,
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus
and substantially in the form and substance of the letter delivered to
the Representatives by Ernst & Young LLP on the date of this Agreement.

(j) The Company and the Selling Stockholders shall not have
failed at or prior to the Closing Date to perform or comply with any of
the agreements herein contained and required to be performed or complied
with by the Company at or prior to the Closing Date.

(k) The Company shall have entered into the New Credit Facility
(as defined in the Registration Statement).

(l) The Yucaipa Warrant Agreement shall have been amended in a
manner satisfactory to the Representatives.

(m) The Representatives shall have received from each Selling
Stockholder, on the Closing Date, either
<PAGE> 35
-35-

(x) a certification of such Selling Stockholder that complies in all
respects with the requirements of U.S. Treasury Regulations section
1.1445-2(b)(2), stating that the Selling Stockholder is not a foreign
person (within the meaning of Section 1445(f)(3) of U.S. Internal Revenue
Code of 1986, as amended (the "Code")) for purposes of Section 1445(b)(2)
of the Code; or (y) a copy of a statement that complies in all respects
with the requirements of Treasury Regulations section 1.1445-2(c) (3),
issued by the Company pursuant to Treasury Regulations section
1.897-2(h), certifying that the Firm Shares and the Additional Shares do
not constitute a United States real property interest (within the meaning
of Section 897(c)(1) of the Code) for purposes of Section 1445(b)(3) of
the Code.

The several obligations of the Underwriters to purchase any Additional Shares
hereunder are subject to the delivery to the Representatives on the applicable
Option Closing Date of such documents as the Representatives may reasonably
request with respect to the good standing of the Company, the due authorization
and issuance of such Additional Shares and other matters related to the
issuance of such Additional Shares.

11. Effective Date of Agreement and Termination. This Agreement
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statement has
been released by the Commission.

This Agreement may be terminated at any time prior to the Closing
Date by the Representatives by written notice to the Company (with a copy to
the attorney-in-fact appointed by the Selling Stockholders pursuant to the
power of attorney signed by each of them) if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Company and subsidiaries, taken as a whole, or
the earnings, affairs, or business prospects of the Company and its
subsidiaries, taken as a whole, whether or not arising in the ordinary course
of business, which would, in the judgment of the Representatives, make it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (ii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in
<PAGE> 36
-36-

economic conditions or in the financial markets of the United States or
elsewhere that, in the judgment of the Representatives, is material and adverse
and would, in the judgment of the Representatives, make it impracticable to
market the Shares on the terms and in the manner contemplated in the
Prospectus, (iii) the suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market System or limitation on prices for securities on any
such exchange or National Market System, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the opinion of
the Representatives materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company or any subsidiary,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
opinion of the Representatives has a material adverse effect on the financial
markets in the United States.

If on the Closing Date or on an Option Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase
the Firm Shares or Additional Shares, as the case may be, which it or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused
to purchase is not more than one-tenth of the total number of Shares to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule I bears to the total number of Firm
Shares which all the non-defaulting Underwriters, as the case may be, have
agreed to purchase, or in such other proportion as the Representatives may
specify, to purchase the Firm Shares or Additional Shares, as the case may be,
which such defaulting Underwriter or Underwriters, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the number of Firm Shares or Additional Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 11 by an amount in excess of one-ninth of such number
of Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date or on an Option Closing
Date,
<PAGE> 37
-37-

as the case may be, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares, or Additional Shares, as the case may be, and the
aggregate number of Firm Shares or Additional Shares, as the case may be, with
respect to which such default occurs is more than one-tenth of the aggregate
number of Shares to be purchased on such date by all Underwriters and
arrangements satisfactory to the Representatives and the applicable Sellers for
purchase of such Shares are not made within 48 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter and the applicable Sellers. In any such case which does not result
in termination of this Agreement, either the Representatives or the Sellers
shall have the right to postpone the Closing Date or the applicable Option
Closing Date, as the case may be, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of any such Underwriter under this
Agreement.

12. Agreements of the Selling Stockholders. Each Selling
Stockholder severally agrees with the Representatives and the Company:

(a) To pay or to cause to be paid all transfer taxes, if any,
with respect to the Shares to be sold by such Selling Stockholder; and

(b) To take all reasonable actions in cooperation with the
Company and the Underwriters to cause the Registration Statement to
become effective at the earliest possible time, to do and perform all
things to be done and performed under this Agreement by such Selling
Stockholder prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Shares pursuant to this Agreement
applicable to such Selling Stockholder.

13. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (a) if to the Company, to
Dominick's Supermarkets, Inc., 505 Railroad Avenue, Northlake, Illinois 60164,
(b) if to a Selling Stockholder, to it at the address listed on Annex II hereto
and (c) if to any Underwriter or to the Representatives, to the Representatives
c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New
York, New York 10172, Attention: Syndicate Department, or in any case to such
other
<PAGE> 38
-38-

address as the person to be notified may have requested in writing.

The respective indemnities, contribution agreements,
representations, warranties and other statements of the Selling Stockholders,
the Company, its officers and directors and of the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter or by or on behalf of the Sellers, the
officers or directors of the Company or any controlling person of the Sellers,
(ii) acceptance of the Shares and payment for them hereunder and (iii)
termination of this Agreement.

If this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Sellers to comply with the terms
or to fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the several Underwriters for all out-of-pocket expenses (including
the reasonable fees and disbursements of counsel) reasonably incurred by them.

Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Sellers, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.

This Agreement shall be governed and construed in accordance with
the laws of the State of New York.

This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
<PAGE> 39
-39-

Please confirm that the foregoing correctly sets forth the
agreement between the Company, the Selling Stockholders and the several
Underwriters.

Very truly yours,

DOMINICK'S SUPERMARKETS, INC.

By
------------------------------------
Name:
Title:

THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE II HERETO

By
------------------------------------
Name:
Title: Attorney-in-fact

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

Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto

By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By
--------------------------
Name:
Title:
<PAGE> 40
SCHEDULE I

<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
------------ ---------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation
Morgan Stanley & Co. Incorporated
BT Securities Corporation
Chase Securities Inc.

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

Total
</TABLE>
<PAGE> 41
SCHEDULE II

Selling Stockholders

<TABLE>
<CAPTION>
Firm Additional
Name Shares Shares
---- ------ ----------
<S> <C> <C>
BT Investment Partners, Inc.

Bankers Trust New York Corporation

Chase Manhattan Investment
Holdings, Inc.

Bahrain International Bank, E.C.

BHF-Bank Aktiengesellschaft

Continental Casualty Company

Crescent/Mach I Partners, L.P.

Crescent Shared Opportunities Fund

FSC Corporation

Indosuez Dominick's Partners

International Nederlanden (US)
Capital Corp.

Midland Montagu Private Equity Inc.

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

Total
</TABLE>
<PAGE> 42
ANNEX I

Required Stockholder Lock-ups

Ronald W. Burkle
Robert A. Mariano
Darren W. Karst
Robert E. McCoy
John W. Boyle
Robert R. DiPiazza
Donald G. Fitzgerald
Donald S. Rosanova
Herbert R. Young
Peter P. Copses
Linda McLoughlin Figel
Patrick L. Graham
David B. Kaplan
Mark A. Resnik
Anthony P. Ressler

Yucaipa Blackhawk Partners, L.P.
Yucaipa Chicago Partners, L.P.
Yucaipa Dominick's Partners, L.P.
The Yucaipa Companies
Yucaipa Management L.L.C.

Apollo Investment Fund, L.P.
Apollo Investment Fund, III, L.P.
Apollo Overseas Partners III, L.P.
Apollo (U.K.) Partners III, L.P.

BT Investment Partners, Inc.
Bankers Trust New York Corporation
Chase Manhattan Investment Holdings, Inc.
Bahrain International Bank, E.C.
BHF-Bank Aktiengesellschaft
Continental Casualty Company
Crescent/Mach I Partners, L.P.
Crescent Shared Opportunity Fund
FSC Corporation
Indosuez Dominick's Partners
International Nederlanden (US) Capital Corp.
Midland Montagu Private Equity Inc.

<PAGE> 1
EXHIBIT 4.1

TEMPORARY CERTIFICATE
EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY

COMMON STOCK COMMON STOCK
NUMBER SHARES
T

PAR VALUE $0.01
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 257159 10 3

DOMINICK'S SUPERMARKETS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

- --------------------------------------------------------------------------------
THIS CERTIFIES THAT

IS THE OWNER OF
- --------------------------------------------------------------------------------

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

DOMINICK'S SUPERMARKETS, INC., transferable on the books of the Corporation by
the holder in person or by attorney upon surrender of this Certificate properly
endorsed.

This Certificate is not valid until countersigned and registered
by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile
signatures of its authorized officers.

Dated:

C E R T I F I C A T E O F S T O C K

[ SEAL ]

Countersigned and Registered:
FIRST CHICAGO TRUST COMPANY OF NEW YORK -------------------------
TRANSFER AGENT AND REGISTRAR, Chairman of the Board

By
-------------------------
Authorized Signature President and Chief Executive Officer

<PAGE> 2
DOMINICK'S SUPERMARKETS, INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST
IS TO BE ADDRESSED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR TO THE TRANSFER AGENT.

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

TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ --------
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors

JT TEN - as joint tenants with Act
right of survivorship -------------------------
and not as tenants in (State)
common

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

For value received hereby sell, assign and transfer unto
------------------------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------

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

- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE

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

- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
--------------------------------------------

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

Dated,
-------------------------------------

AFFIX MEDALLION SIGNATURE X
GUARANTEE IMPRINT BELOW ----------------------------------
(SIGNATURE)

X
----------------------------------
(SIGNATURE)

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

ABOVE SIGNATURE(S) TO THE
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE
WHATEVER.

THE SIGNATURE(S) BE MUST GUARANTEED
BY AN ELIGIBLE GUARANTOR
INSTITUTION SUCH AS A SECURITIES
BROKER/DEALER, COMMERCIAL BANK &
TRUST COMPANY, SAVINGS AND LOAN
ASSOCIATION OR A CREDIT UNION
PARTICIPATING IN A MEDALLION
PROGRAM APPROVED BY THE SECURITIES
TRANSFER ASSOCIATION, INC.

<PAGE> 1

Exhibit 5.1

[LATHAM & WATKINS LETTERHEAD]

October 24, 1996

Dominick's Supermarkets, Inc.
505 Railroad Avenue
Northlake, Illinois 60164

Re: Dominick's Supermarkets, Inc.
Registration Statement on Form S-1 (File No. 333-11177)

Ladies and Gentlemen:

In connection with the Registration Statement on Form S-1 (File
No. 333-11177) originally filed with the Securities and Exchange Commission on
August 30, 1996 (as amended or supplemented, the "Registration Statement") by
Dominick's Supermarkets, Inc., a Delaware corporation (the "Company"), with
respect to 6,400,000 shares of its common stock, par value $.01 per share (the
"Common Stock"), you have requested our opinion with respect to the matters set
forth below. Capitalized terms used herein without definition have the meanings
given to them in the Registration Statement.

In our capacity as counsel to you in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization, issuance and sale of
the Common Stock, and for purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed. In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have determined necessary or appropriate for purposes of
rendering this opinion.

In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all persons executing documents, the
authenticity of all documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as copies.

We are opining herein as to the effect on the subject
transaction only of the federal laws of the United States, the internal laws of
the State of New York and the General Corporation Law of the

<PAGE> 2
Dominick's Supermarkets, Inc.
October 24, 1996
Page 2

State of Delaware, and we express no opinion with respect to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction or, in
the case of the United States or Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state. The
opinions contained herein are as of the date hereof and assume the consummation
of the Offering and all related transactions as they are contemplated to occur
on the Closing Date (as defined in the Underwriting Agreement).

Based upon the foregoing, and in reliance thereon, and subject
to the limitations, qualifications, exceptions and assumptions set forth
herein, we are of the opinion that, as of the date hereof, the shares of Common
Stock issued, or to be issued in the Offering, have been duly authorized and
are, or when issued (upon delivery and payment therefor in the manner
contemplated by the Underwriting Agreement) will be, validly issued, fully paid
and non-assessable.

We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters."

Very truly yours,

/s/ Latham & Watkins

<PAGE> 1

Exhibit 10.1

O'MM DRAFT
10/23/96

================================================================================

CREDIT AGREEMENT

DATED AS OF NOVEMBER __, 1996

AMONG

DOMINICK'S SUPERMARKETS, INC.,
AS GUARANTOR,

DOMINICK'S FINER FOODS, INC.,
AS BORROWER,

THE LENDERS LISTED HEREIN,
AS LENDERS,

BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT,

THE CHASE MANHATTAN BANK,
AS SYNDICATION AGENT,

AND

BANKERS TRUST COMPANY
AND
THE CHASE MANHATTAN BANK,
AS ARRANGERS

================================================================================

<PAGE> 2
DOMINICK'S SUPERMARKETS, INC.
AND
DOMINICK'S FINER FOODS, INC.

CREDIT AGREEMENT

TABLE OF CONTENTS
<TABLE>
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----
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement . . . . . . . . . . . . . . 39
1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.1 Commitments; Making of Loans; the Register; Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
2.4 Repayments, Prepayments and Reductions in Revolving Term Loan Commitments and Revolving Loan Commitments;
General Provisions Regarding Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
2.6 Special Provisions Governing Eurodollar Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
2.7 Increased Costs; Taxes; Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
2.8 Obligation of Lenders and Issuing Lenders to Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
2.9 Replacement of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
2.10 Certain Matters Relating to Senior Subordinated Note Indenture . . . . . . . . . . . . . . . . . . . . . . . . 77

SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
3.1 Issuance of Letters of Credit and Revolving Lenders' Purchase of Participations Therein . . . . . . . . . . . 78
3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of Credit. . . . . . . . . . . . . . . . . . . . . . 82
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
3.6 Increased Costs and Taxes Relating to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
4.1 Conditions to Term Loans and Initial Revolving Term Loans, Revolving Loans and Swing Line Loans . . . . . . . 89
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
</TABLE>

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----
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SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries . . . . . . . . . . . . . . . . 99
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
5.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
5.4 No Material Adverse Change; No Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 104
5.5 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
5.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
5.7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.8 Performance of Agreements; Materially Adverse Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.9 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.10 Securities Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
5.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
5.12 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
5.13 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
5.14 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
5.15 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.16 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.18 Related Transaction Documents; Specified Existing Documents . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.19 Workmen's Compensation Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.20 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.21 Parent Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

6.1 Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
6.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.4 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
6.5 Inspection; Lender Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
6.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
6.7 Environmental Disclosure and Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
6.8 Loan Parties' Remedial Action Regarding Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . 122
6.9 Execution of Subsidiary Guaranty and Collateral Documents by Future Subsidiaries . . . . . . . . . . . . . . . 122
6.10 Additional Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
6.11 Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
6.12 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
6.13 Designation of Replacement Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
</TABLE>

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7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.7 Restriction on Fundamental Changes; Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
7.8 Consolidated Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
7.9 Restriction on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
7.10 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
7.11 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
7.12 Transactions with Shareholders and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
7.13 Disposal of Subsidiary Stock; Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 146
7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
7.15 Amendments of Certain Documents; Designation of Designated Senior Indebtedness . . . . . . . . . . . . . . . . 147
7.16 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
8.1 Failure to Make Payments When Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
8.2 Default in Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
8.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
8.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
8.5 Other Defaults Under Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
8.8 Judgments and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
8.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
8.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
8.11 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
8.12 Invalidity of Any Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
8.13 Failure of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
8.14 Action Relating to Certain Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
8.15 Failure to Consummate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

SECTION 9. HOLDINGS GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
9.1 Guarantied Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
9.2 Terms of Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154

SECTION 10. AGENT, SYNDICATION AGENT AND ARRANGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
10.2 Powers; General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
10.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness . . . . . . . . . . . . . 160
</TABLE>

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10.4 Right to Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
10.5 Successor Agent and Swing Line Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
10.6 Guaranties and Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
11.1 Assignments and Participations in Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 162
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
11.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
11.4 Set Off; Security Interest in Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
11.5 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
11.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
11.7 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
11.9 Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
11.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
11.11 Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
11.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.13 Obligations Several; Independent Nature of Lenders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.15 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.16 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.17 Consent to Jurisdiction and Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
11.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
11.19 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
11.20 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Signature pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
</TABLE>

(iv)
<PAGE> 6
EXHIBITS

I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TERM NOTE
V-A FORM OF REVOLVING TERM NOTE
V-B FORM OF REVOLVING NOTE
VI FORM OF SWING LINE NOTE
VII FORM OF COMPLIANCE CERTIFICATE
VIII-A FORM OF OPINION OF LATHAM & WATKINS
VIII-B FORM OF OPINION OF THOMAS ROTI, ESQ.
IX FORM OF OPINION OF O'MELVENY & MYERS
X FORM OF ASSIGNMENT AGREEMENT
XI FORM OF AUDITOR'S LETTER
XII FORM OF CERTIFICATE RE NON-BANK STATUS
XIII FORM OF COLLATERAL ACCOUNT AGREEMENT
XIV FORM OF COMPANY PLEDGE AGREEMENT
XV FORM OF COMPANY SECURITY AGREEMENT
XVI FORM OF COMPANY TRADEMARK SECURITY AGREEMENT
XVII FORM OF SUBSIDIARY GUARANTY
XVIII FORM OF SUBSIDIARY PLEDGE AGREEMENT
XIX FORM OF SUBSIDIARY SECURITY AGREEMENT
XX FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT
XXI FORM OF MORTGAGE
XXII FORM OF HOLDINGS PLEDGE AGREEMENT
XXIII FORM OF HOLDINGS SECURITY AGREEMENT
XXIV FORM OF FINANCIAL CONDITION CERTIFICATE

(v)
<PAGE> 7
SCHEDULES

2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
4.1B REAL PROPERTY ASSETS
5.1 SUBSIDIARIES OF COMPANY
5.2C GOVERNMENTAL CONSENTS
5.3 CERTAIN ACCOUNTING MATTERS
5.6 LITIGATION
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
5.12 BROKER'S OR FINDER'S FEES
5.13 ENVIRONMENTAL MATTERS
5.17 INTELLECTUAL PROPERTY MATTERS
5.18 AMENDMENTS TO SPECIFIED EXISTING DOCUMENTS
5.20 CERTAIN MATTERS RELATING TO PERMITS
6.13 EXCLUDED REAL PROPERTY ASSETS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.7 CERTAIN ASSETS TO BE SOLD

(vi)

<PAGE> 8

DOMINICK'S SUPERMARKETS, INC.
AND
DOMINICK'S FINER FOODS, INC.

CREDIT AGREEMENT

This CREDIT AGREEMENT is dated as of November __, 1996 and
entered into by and among DOMINICK'S SUPERMARKETS, INC., a Delaware corporation
("HOLDINGS"), DOMINICK'S FINER FOODS, INC., a Delaware corporation ("COMPANY"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "LENDER" and collectively as "LENDERS"),
BANKERS TRUST COMPANY ("BANKERS"), as administrative agent for Lenders (in such
capacity, "AGENT"), THE CHASE MANHATTAN BANK ("CHASE"), as syndication agent
for Lenders (in such capacity, "SYNDICATION AGENT"), and BANKERS and CHASE, as
arrangers for Lenders (in such capacity, each individually referred to herein
as an "ARRANGER" and collectively as "ARRANGERS").

R E C I T A L S

WHEREAS, Holdings, and Company propose to engage in a series
of transactions, including the issuance by Holdings of Holdings Common Stock
(this and other capitalized terms used in these recitals without definition
being used as defined in subsection 1.1) pursuant to the IPO;

WHEREAS, Company desires that Lenders extend certain credit
facilities to Company to provide a portion of the financing necessary to
consummate the Transactions and to provide financing for working capital
requirements and other general corporate purposes of Company and its
Subsidiaries;

WHEREAS, Company proposes to use a portion of the proceeds
from the Loans, from the issuance of Holdings Common Stock pursuant to the IPO
and from cash on hand to refinance all amounts outstanding under the Existing
Credit Agreement and to pay a termination fee in connection with the
termination of the Consulting Agreement, and Holdings proposes to use a portion
of the proceeds from the Loans, from the issuance of Holdings Common Stock
pursuant to the IPO and from cash on hand to redeem all outstanding Holdings
Preferred Stock and to pay all accrued and unpaid dividends with respect to
Holdings Preferred Stock;

WHEREAS, immediately prior to the funding of the initial Loans
hereunder, pursuant to the Parent Merger Certificate, Parent proposes to merger
with

1
<PAGE> 9
and into Company, with Company being the surviving corporation (the "PARENT
MERGER");

WHEREAS, Holdings has agreed to guaranty the Obligations of
Company hereunder and under the other Loan Documents and to secure such
guaranty by granting to Agent, on behalf of Lenders, a first priority Lien on
all property of Holdings (including without limitation all of the outstanding
shares of the capital stock of Company);

WHEREAS, each of Company's Subsidiaries (including without
limitation BDI and BPI) has agreed to guaranty the Obligations of Company
hereunder and under the other Loan Documents and to secure such guaranty by
granting to Agent, on behalf of Lenders, a first priority Lien on all
unencumbered real, personal and mixed property of such Subsidiary; and

WHEREAS, Company desires to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Agent, on behalf of
Lenders, a first priority Lien on substantially all unencumbered real, personal
and mixed property of Company;

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Holdings, Company,
Lenders, Agent, Syndication Agent and Arrangers agree as follows:

SECTION 1. DEFINITIONS

1.1 CERTAIN DEFINED TERMS.

The following terms used in this Agreement shall have the
following meanings:

"ACQUISITION DATE" means March 22, 1995.

"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate
Determination Date with respect to an Interest Period for a Eurodollar Rate
Loan, the rate per annum obtained by dividing (i) the arithmetic average
(rounded upward to the nearest 1/16 of one percent) of the offered quotation,
if any, to first class banks in the interbank Eurodollar market by each of the
Reference Lenders for U.S. Dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of that
Reference Lender for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such Interest Period as of
approximately 10:00 A.M. (New York time) on such Interest Rate Determination
Date by (ii) a percentage equal to 100% minus the stated maximum rate of all

2
<PAGE> 10
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D); provided that if any Reference
Lender fails to provide Agent with its aforementioned quotation then the
Adjusted Eurodollar Rate shall be determined based on the quotation(s) provided
to Agent by the other Reference Lender(s).

"AFFECTED LENDER" has the meaning assigned to that term in
subsection 2.6C.

"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise, or (ii) the ownership of more than 10%
of the voting securities of that Person; provided that Bankers, Chase and each
of their respective Affiliates (as defined above) shall not be considered to be
an "Affiliate" of Holdings or any of its Subsidiaries.

"AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
administrative agent appointed pursuant to subsection 10.5A.

"AGGREGATE TERM LOANS" means one or more of the Term Loans,
Revolving Term Loans or any combination thereof.

"AGREEMENT" means this Credit Agreement dated as of November
__, 1996, as it may be amended, amended and restated, supplemented or otherwise
modified from time to time.

"AMOUNT OF UNFUNDED BENEFIT LIABILITY" means, with respect to
any Pension Plan, (i) if set forth on the most recent actuarial valuation
report with respect to such Pension Plan, the amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA) and (ii) otherwise,
the excess of (a) the greater of the current liability (as defined in Section
412(l)(7) of the Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the market value of the assets of
such Pension Plan.

"APPLICABLE BASE RATE MARGIN" has the meaning assigned to that
term in subsection 2.2A(i)(a).

3
<PAGE> 11
"APPLICABLE COMMITMENT FEE PERCENTAGE" has the meaning
assigned to that term in subsection 2.3A.

"APPLICABLE EURODOLLAR RATE MARGIN" has the meaning assigned
to that term in subsection 2.2A(i)(b).

"ARRANGERS" has the meaning assigned to that term in the
introduction to this Agreement.

"ASSET SALE" means the sale, lease (other than any lease in
the ordinary course of business consistent with past practices), assignment or
other transfer for value (collectively, a "transfer") by Company or any of its
Subsidiaries to any Person other than Company or any of its wholly-owned
Subsidiaries of (i) any of the stock of any of Company's Subsidiaries, (ii)
substantially all of the assets of any division or line of business of Company
or any of its Subsidiaries, or (iii) any other assets (whether tangible or
intangible) of Company or any of its Subsidiaries excluding (a) any Cash
Equivalents or inventory sold in the ordinary course of business, (b) any such
transfer to the extent that the aggregate value of the stock or assets
transferred in any single transaction or related series of transaction is equal
to $100,000 or less; provided that such exclusion shall be limited to transfers
of stock and assets with a cumulative aggregate value not exceeding $1,000,000
in any Fiscal Year, and (c) any transfer in an arm's-length transaction by
Company or a Subsidiary of Company to a Developer of a Development Site
constituting a Development Investment permitted under subsection 7.3(vi).

"ASSET TRANSFER AGREEMENT" means that certain Asset Transfer
Agreement dated as of March 21, 1995 by and among Dodi Developments L.L.C.,
Parent, Company, BDI, BPI, Dodi L.L.C., Dodi Family L.L.C., Dodi Broadway
L.L.C. and Dodi Northfield L.L.C., as in effect on the Closing Date and as such
Asset Transfer Agreement may be amended from time to time to the extent
permitted under subsection 7.15.

"ASSIGNMENT AGREEMENT" means an Assignment Agreement in
substantially the form of Exhibit X annexed hereto.

"AUDITOR'S LETTER" means a letter, substantially in the form
of Exhibit XI annexed hereto, from Ernst & Young delivered to Agent pursuant to
subsection 4.1M.

"BANKERS" has the meaning assigned to that term in the
introduction to this Agreement.

"BANKERS TRUST NEW YORK" means Bankers Trust New York
Corporation.

4
<PAGE> 12
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.

"BASE RATE" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate.

"BASE RATE LOANS" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection 2.2A.

"BDI" means Blackhawk Developments, Inc., a Delaware
corporation.

"BPI" means Blackhawk Properties, Inc., a Delaware
corporation.

"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New York or the
State of Illinois or is a day on which banking institutions located in the
State of New York or the State of Illinois are authorized or required by law or
other governmental action to close.

"CAPITAL LEASE", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person as lessee that,
in conformity with GAAP, is required to be accounted for as a capital lease on
the balance sheet of that Person.

"CASH" means money, currency or a credit balance in a Deposit
Account.

"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after
such date and having, at the time of the acquisition thereof, the highest
rating obtainable from either Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and having, at the time of
the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than

5
<PAGE> 13
$100,000,000; (v) shares of any money market mutual fund that (a) has at least
95% of its assets invested continuously in the types of investments referred to
in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's; and (vi) repurchase agreements with respect to, and which are fully
secured by a perfected security interest in, obligations of a type described in
clause (i) or clause (ii) above and are with any commercial bank described in
clause (iv) above.

"CASH PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to,
or monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.

"CERTIFICATE RE NON-BANK STATUS" means a certificate
substantially in the form of Exhibit XII annexed hereto delivered by a Lender
to Agent pursuant to subsection 2.7B(iii).

"CHANGE OF CONTROL" means any of (i) any Person (other than a
Permitted Holder) or any group (within the meaning of Section 13(d)(3) of the
Exchange Act) of Persons (other than any Permitted Holders), shall have
acquired beneficial ownership, directly or indirectly, in one or more
transactions, of Securities of Holdings (or other Securities convertible into
such Securities) representing 25% or more of the combined voting power of all
Securities of Holdings entitled to vote in the election of directors, other
than Securities having such power only by reason of the happening of a
contingency, (ii) a change in the composition of the Board of Directors of
Holdings or Company has occurred such that a majority of the members of any
such Board of Directors are not Continuing Directors, (iii) the failure at any
time of Holdings to legally and beneficially own and control 100% of the issued
and outstanding shares of capital stock of Company or the failure at any time
of Holdings to have the ability to elect all of the Board of Directors of
Company, or (iv) the occurrence of any "Change of Control" as defined in the
Senior Subordinated Note Indenture or the Holdings Certificate of Designation.
As used herein, the term "beneficially own" or "beneficial ownership" shall
have the meaning set forth in the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

"CHASE" has the meaning assigned to that term in the
introduction to this Agreement.

"CLOSING DATE" means the date on or before ____________ __,
1996, on which the initial Loans are made.

"COLLATERAL" means, collectively, all real, personal and mixed
property collateral securing the Obligations pursuant to the Collateral
Documents.

6
<PAGE> 14
"COLLATERAL ACCOUNT" has the meaning assigned to that term in
the Collateral Account Agreement.

"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account
Agreement executed and delivered by Company and Agent on the Closing Date,
substantially in the form of Exhibit XIII annexed hereto, pursuant to which
Company may pledge cash to Agent to secure the obligations of Company to
reimburse Issuing Lenders for payments made under one or more Letters of Credit
as provided in Section 8, as such Collateral Account Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.

"COLLATERAL DOCUMENTS" means the Pledge Agreements, the
Holdings Security Agreement, the Company Security Agreement, the Company
Trademark Security Agreement, the Collateral Account Agreement, the Subsidiary
Security Agreements, the Subsidiary Trademark Security Agreements, the
Mortgages and all other instruments or documents delivered by any Loan Party
pursuant to this Agreement or any of the other Loan Documents in order to grant
to Agent, on behalf of Lenders, Liens in real, personal or mixed property of
that Loan Party as security for the Obligations.

"COLLATERAL RELEASE CONDITIONS" has the meaning assigned to
that term in subsection 6.11.

"COLLATERAL RELEASE DATE" has the meaning assigned to that
term in subsection 6.11.

"COMMERCIAL LETTER OF CREDIT" means any letter of credit or
similar instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or services
by Company or any of its Subsidiaries in the ordinary course of business of
Company or such Subsidiary.

"COMMITMENTS" means the commitments of Lenders to make Loans
as set forth in subsection 2.1A.

"COMPANY" has the meaning assigned to that term in the
introduction to this Agreement.

"COMPANY PLEDGE AGREEMENT" means the Pledge Agreement executed
and delivered by Company on the Closing Date, substantially in the form of
Exhibit XIV annexed hereto, as such Pledge Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.

"COMPANY SECURITY AGREEMENT" means the Security Agreement
executed and delivered by Company on the Closing Date, substantially in the
form of Exhibit

<PAGE> 15
XV annexed hereto, as such Security Agreement may hereafter be amended,
supplemented or otherwise modified from time to time.

"COMPANY TRADEMARK SECURITY AGREEMENT" means the Trademark
Collateral Security Agreement and Conditional Assignment executed and delivered
by Company on the Closing Date, substantially in the form of Exhibit XVI
annexed hereto, as such Trademark Collateral Security Agreement and Conditional
Assignment may hereafter be amended, supplemented or otherwise modified from
time to time.

"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of Exhibit VII annexed hereto delivered to Agent and Lenders by
Company pursuant to subsection 6.1(iv).

"CONSOLIDATED ADJUSTED EBITDA" means, without duplication, for
any period, the sum of the amounts for such period of (i) Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on
income, (iv) total depreciation expense, (v) total amortization expense, and
(vi) other non-cash items reducing Consolidated Net Income less other non-cash
items increasing Consolidated Net Income, all of the foregoing as determined on
a consolidated basis for Company and its Subsidiaries in conformity with GAAP.

"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, an
amount equal to (i) the sum of (a) the aggregate of all expenditures (whether
paid in cash or other consideration or accrued as a liability and including
that portion of Capital Leases which is capitalized on the consolidated balance
sheet of Company and its Subsidiaries) by Company and its Subsidiaries during
that period that, in conformity with GAAP, are included in "property, plant or
equipment" or comparable items reflected in the consolidated balance sheets of
Company and its Subsidiaries, plus (b) to the extent not covered by clause
(i)(a) of this definition, the aggregate of all expenditures by Company and its
Subsidiaries during that period to acquire (by purchase or otherwise) the
business, property or fixed assets of any Person, or the stock or other
evidence of beneficial ownership of any Person that, as a result of such
acquisition, becomes a Subsidiary of Company, plus (c) to the extent the
purchase price thereof has been deducted from "Consolidated Capital
Expenditures" during such period or any prior period pursuant to clause
(ii)(a)(2) below, the aggregate purchase price of any Store Land Property for
which a notice has been given during such period pursuant to clause (b) of the
proviso in the definition of "Store Land Properties", minus (ii) the sum of (a)
all Consolidated Capital Expenditures (as defined in clause (i) above)
constituting (1) Development Investments permitted under subsection 7.3(vi) or
(2) the purchase price of Store Land Properties constituting undeveloped land
or land with improvements thereon existing as of the date of acquisition
thereof permitted under subsection 7.8, (b) the proceeds of Indebtedness
permitted under subsections 7.1(iii) and 7.1(viii), (c) an amount equal to

8
<PAGE> 16
the proceeds received by Company or any of its Subsidiaries from a
sale-leaseback transaction of a store or equipment permitted under subsection
7.10 so long as such transaction occurs within 270 days of the completion of
such store and to the extent prior expenditures, up to an equivalent amount for
the asset so sold and leased back, constituted Consolidated Capital
Expenditures (as defined above), and (d) expenditures in an amount not to
exceed the proceeds of insurance, condemnation awards (or payments in lieu
thereof) or indemnity payments received from third parties, so long as such
expenditures were made for purposes of replacing or repairing the assets in
respect of which such proceeds, awards or payments were received and so long as
such expenditures are made within 18 months of the occurrence of the damage to
or loss of the assets being replaced or repaired.

"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
total interest expense net of any interest income received in Cash by Company
or any of its Subsidiaries (including that portion attributable to Capital
Leases in accordance with GAAP and capitalized interest) of Company and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Company and its Subsidiaries, including, without limitation,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under
Interest Rate Agreements, plus all dividends on capital stock of Company paid
or payable in cash but excluding, however, (i) any amounts referred to in
subsection 2.3 payable to Agent and Lenders on or before the Closing Date and
(ii) any interest expenses not payable in cash (including amortization of
discounts and amortization of debt issuance costs).

"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year, an
amount equal to (i) the sum (without duplication) of the amounts for such
Fiscal Year of (a) Consolidated Net Income, (b) any after-tax gains
attributable to returned surplus assets of any Pension Plan, (c) the amount of
Net Cash Proceeds of Asset Sale received in such Fiscal Year that are not
otherwise included in Consolidated Net Income and that are required to be used
to prepay the Term Loans and/or permanently reduce the Revolving Term Loan
Commitments and/or the Revolving Loan Commitments pursuant to subsection
2.4B(iii)(a), (d) the aggregate amount of Cash proceeds (net of underwriting
discounts, similar placement fees and commissions and other reasonable costs
and expenses associated therewith) from the issuance after the Closing Date of
any debt Securities of Holdings or any of its Subsidiaries that are required to
be used to prepay the Loans pursuant to subsection 2.4B(iii)(d), (e)
consolidated depreciation and amortization expense for such Fiscal Year, (f)
other non-cash charges reducing Consolidated Net Income, (g) (to the extent not
included in Consolidated Net Income) any cash extraordinary gains, (h) any Cash
payments received by Holdings or any of its Subsidiaries pursuant to the
indemnification provisions set forth in the Stock Purchase Agreement, the Tax
Matters Agreement, the Asset Transfer Agreement or the Stock Exchange Agreement
to the extent that Holdings or any such Subsidiary did not incur an expense or
a payment obligation

9
<PAGE> 17
corresponding to such Cash payment so received, (i) an amount equal to the
proceeds of Asset Sales excluded from mandatory prepayments required to be made
under subsection 2.4B(iii)(a) pursuant to clauses (i), (ii) and (iv) of the
first proviso thereof and (j) all Cash proceeds received by Company or any of
its Subsidiaries in payment or repayment of any Development Investment
previously made by Company or such Subsidiary minus (ii) the sum (without
duplication) of the amounts for such Fiscal Year of (a) Consolidated Capital
Expenditures permitted under subsection 7.8 made during such Fiscal Year, (b)
payments of principal made in respect of any outstanding Indebtedness of
Company or any of its Subsidiaries to the extent such payments are permanent
reductions in Funded Debt and not prohibited under subsection 7.5, other than
payments made pursuant to subsection 2.4B(iii)(a), which payments would have
been excluded from the mandatory prepayment provisions pursuant to clauses (ii)
and (iii) of the first proviso thereof but for the expiration of the time
periods set forth in such clauses, (c) the amount of all Development
Investments paid or payable in cash permitted under subsection 7.3(vi) made
during such Fiscal Year, (d) the purchase price of all Store Land Properties
paid or payable in cash as permitted under subsection 7.8 acquired during such
Fiscal Year, (e) other non-cash charges increasing Consolidated Net Income, (f)
the cash portion of purchases of Holdings Common Stock by Company and its
Subsidiaries as permitted under subsection 7.3(xii), and (g) $15,000,000, all
of the foregoing as determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP.

"CONSOLIDATED FIXED CHARGES" means, without duplication, for
any period, the sum of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) Consolidated Rental Payments, and (iii) scheduled
principal payments on all Indebtedness of Company and its Subsidiaries, all of
the foregoing as determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP.

"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
interest expense net of any interest income received by Company or any of its
Subsidiaries (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements, but
excluding, however, any amounts referred to in subsection 2.3 payable to Agent
and Lenders on or before the Closing Date.

"CONSOLIDATED NET INCOME" means, for any period, the net
income (or loss) of Company and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
Person (other than a Subsidiary of Company) in which any other Person (other
than Company or any of its Subsidiaries)

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<PAGE> 18
has a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to Company or any of its Subsidiaries by such
Person during such period, (ii) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary of Company or is merged into or
consolidated with Company or any of its Subsidiaries or that Person's assets
are acquired by Company or any of its Subsidiaries, (iii) the income of any
Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.

CONSOLIDATED NET WORTH" means, as at any date of
determination, the capital stock and additional paid-in capital plus retained
earnings (or minus accumulated deficits) of Company and its Subsidiaries on a
consolidated basis determined in conformity with GAAP.

"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the
aggregate amount of all rents paid or payable by Company and its Subsidiaries
on a consolidated basis during that period under all Operating Leases to which
Company or any of its Subsidiaries is a party as lessee (net of sublease
income).

"CONSOLIDATED TOTAL DEBT" means, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.

"CONSULTING AGREEMENT" means the Consulting Agreement dated as
of March 22, 1995 among Yucaipa, Holdings, and Company, as such Consulting
Agreement has been amended from time to time prior to the Closing Date.

"CONTINGENT OBLIGATION", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Interest Rate Agreements and Currency Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the

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<PAGE> 19
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to
make take-or-pay or similar payments if required regardless of non-performance
by any other party or parties to an agreement, and (c) any liability of such
Person for the obligation of another through any agreement (contingent or
otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (Y) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case
of any agreement described under subclauses (X) or (Y) of this sentence, the
primary purpose or intent thereof is as described in the preceding sentence.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if less, the amount to
which such Contingent Obligation is specifically limited.

"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of Holdings or Company who (i) was a
member of such Board of Directors on the Closing Date (after the consummation
of the Transactions) or (ii) was nominated for election or elected to such
Board of Directors with the affirmative vote of a majority of the directors who
were either members of such Board of Directors on the Closing Date or whose
nomination or election was previously so approved or (iii) in the case of the
Board of Directors of Company, was nominated for election or elected to such
Board of Directors with the affirmative written consent of all of the then
Continuing Directors of Holdings.

"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.

"CUMULATIVE CONSOLIDATED NET INCOME" means, at any time for
the determination thereof, Consolidated Net Income for the period (taken as one
accounting period) commencing on November 3, 1996 and ending on the last day of
the most recently ended Fiscal Quarter.

"CUMULATIVE INCOME AMOUNT" means, at any time for the
determination thereof (i) the product of (A) 0.25 multiplied by (B) Cumulative
Consolidated Net Income at such time minus (ii) the aggregate amount of cash
dividends theretofore paid pursuant to subsection 7.5A(v), it being understood
that the Cumulative Income Amount shall be reduced at the time of, and after
giving effect to, the events described in this clause (ii).

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<PAGE> 20
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement designed to protect Company or any of
its Subsidiaries against fluctuations in currency values.

"DEFERRED TRADE PAYABLES" means promissory notes (whether
interest bearing or non-interest bearing) executed by Company or any of its
Subsidiaries in favor of such entity's suppliers to finance the purchase price
and delivery costs of inventory in connection with such entity's opening or
acquisition of new stores or remodeling of existing stores.

"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.

"DEVELOPER" means any Person which owns, leases or otherwise
controls or intends to acquire an interest in a Development Site.

"DEVELOPMENT INVESTMENT" means (a) a loan by Company or a
Subsidiary of Company to a Developer, the proceeds of which are to be used to
finance a Development Project of such Developer, (b) a cash contribution by
Company or a Subsidiary of Company to the capital of a Developer, the proceeds
of which are to be used to finance a Development Project of such Developer, or
(c) a contribution by Company or a Subsidiary of Company to the capital of a
Developer of an interest of Company or such Subsidiary in a Development Site.
The amount of any Development Investment shall be the amount of cash loaned or
contributed to a Developer for the purpose specified above or the fair market
value of the interest of a Development Site contributed to the capital of a
Developer, which fair market value shall be determined, without regard to the
proposed investment, at the time of such contribution in good faith by
resolution of the Board of Directors of Company, in each case minus the amount
of cash received by Company or any of its Subsidiaries in repayment of such
Development Investment.

"DEVELOPMENT PROJECT" means a project for the development by
or at the direction of a Developer of a Development Site, including the
construction, remodeling, expansion or renovation of a store thereon, which
store is to be leased to and operated by Company or one of its Subsidiaries.

"DEVELOPMENT SITE" means real property which is identified by
Company or one of its Subsidiaries as the intended location for a store or a
shopping center and related improvements to be constructed, remodeled, expanded
or renovated by or at the direction of the Developer thereof, which in each
case shall include a store intended to be leased to and operated by Company or
one of its Subsidiaries.

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<PAGE> 21
"DOLLARS" and the sign "$" mean the lawful money of the United
States of America.

"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country, or a political subdivision thereof; provided that (x) such bank
is acting through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including, but not limited to,
insurance companies, mutual funds and lease financing companies, in each case
(under clauses (i) through (iv) above) that is reasonably acceptable to Agent;
and (B) any Lender and any Affiliate of any Lender; provided that no Affiliate
of Company shall be an Eligible Assignee.

"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA (i) which is, or, at any time within the five
calendar years immediately preceding the date hereof, was at any time,
maintained or contributed to by any of the Loan Parties or any of their
respective ERISA Affiliates or (ii) with respect to which any Loan Party
retains any liability, including any potential joint and several liability as a
result of an affiliation with an ERISA Affiliate or a party that would be an
ERISA Affiliate except for the fact the affiliation ceased more than five
calendar years prior to the date hereof.

"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice
of violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any of
its Subsidiaries, any of their respective Affiliates or any Facility.

"ENVIRONMENTAL LAWS" means all statutes, ordinances, orders,
rules, regulations, plans, policies or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to fines,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials, (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal

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<PAGE> 22
health or welfare, in any manner applicable to Company or any of its
Subsidiaries or any of their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act ( 33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq.), each as amended or supplemented, and any
analogous future or present local, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of
determination.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.

"ERISA AFFILIATE", as applied to any Person, means (i) any
corporation which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that Person is, or was at any time within
the five calendar years immediately preceding the date hereof, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is, or was at any time within the five calendar years
immediately preceding the date hereof, a member. The term "ERISA Affiliate"
shall not include any Land Trustee.

"ERISA EVENT" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Internal Revenue Code) or the failure to make by its due date a
required installment under Section 412(m) of the Internal Revenue Code with
respect to any Pension Plan or the failure to make any required contribution to
a Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by any of the Loan Parties or any of their

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<PAGE> 23
respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in liability
pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on any of the Loan Parties or
any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by any of the Loan Parties or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
liability therefor, or the receipt by any of the Loan Parties or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on any of the Loan Parties or any of their
respective ERISA Affiliates of fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or
(l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the
assertion of a material claim (other than routine claims for benefits) against
any Employee Benefit Plan other than a Multiemployer Plan or the assets
thereof, or against any of the Loan Parties or any of their respective ERISA
Affiliates in connection with any such Employee Benefit Plan; (x) receipt from
the Internal Revenue Service of notice of the failure of any Pension Plan (or
any other Employee Benefit Plan intended to be qualified under Section 401(a)
of the Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan to
qualify for exemption from taxation under Section 501(a) of the Internal
Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29)
or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any
Pension Plan.

"ESCROW ACCOUNT" means that certain account, Account No.
_____, maintained at _____________, described in Section ___ of the Escrow
Agreement.

"ESCROW AGREEMENT" means that certain Escrow Agreement, dated
as of the Closing Date, by and among [Holdings], each Preferred Stock Holder
and _______________ pursuant to which up to $__________ shall be held in an
escrow account until the Redemption Date in order to redeem the Holdings
Preferred Stock pursuant to the Preferred Stock Redemption Agreement, as such
Escrow Agreement may be amended to the extent permitted under subsection 7.15.

"EURODOLLAR RATE LOANS" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.

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<PAGE> 24
"EVENT OF DEFAULT" means each of the events set forth in
Section 8.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.

"EXCLUDED PROPERTIES" means, as of any date, provided that
there shall not then exist a Potential Event of Default or an Event of Default,
any interest in any Real Property Asset (excluding any fee interest in Real
Property Assets on which Agent shall have been granted a Lien in accordance
with the terms hereof and excluding any Replacement Properties) acquired or
constructed by Company or any of its Subsidiaries after the Closing Date for an
aggregate purchase price not exceeding $20,000,000 for any such Real Property
Asset.

"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated
as of March 22, 1995, as amended, by and among Holdings, Parent, Company, the
lenders parties thereto, Bankers and Chase, as arrangers, and Bankers, as
administrative agent.

"EXISTING FUNDED DEBT" means the Indebtedness of Company
described in items ____________ of Part I of Schedule 7.1 annexed hereto (and
any refinancings, renewals or extensions thereof to the extent permitted under
subsection 7.1(vi)), which Indebtedness has an aggregate outstanding principal
amount equal to approximately [$6,200,000] as of immediately prior to the
Closing Date.

"EXISTING LETTERS OF CREDIT" means the letters of credit
listed under the heading "Existing Letters of Credit" in Schedule 7.4 annexed
hereto (but not any refinancings, renewals or extensions thereof).

"FACILITIES" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by any of
the Loan Parties or any of their respective predecessors or Affiliates.

"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by Agent from three Federal funds
brokers of recognized standing selected by Agent.

"FISCAL PERIOD" means a fiscal period of Company and its
Subsidiaries, consisting of a four-week period or five-week period, as the case
may be.

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<PAGE> 25
"FISCAL QUARTER" means a fiscal quarter of Company and its
Subsidiaries, consisting of, in the case of each of the first two Fiscal
Quarters of each Fiscal Year, a 12-week period, in the case of the third Fiscal
Quarter of each Fiscal Year, a 16-week period, and in the case of the fourth
Fiscal Quarter of each Fiscal Year, a 12-week or 13-week period.

"FISCAL YEAR" means the fiscal year of the Loan Parties (other
than Land Trusts) ending on the Saturday closest to October 31 of each calendar
year. For purposes of this Agreement, any particular Fiscal Year shall be
designated by reference to the calendar year in which such Fiscal Year ends.

"FLOOD HAZARD PROPERTIES" has the meaning assigned to that
term in subsection 4.1B to this Agreement.

"FUNDED DEBT", as applied to any Person, means all
Indebtedness of that Person which by its terms or by the terms of any
instrument or agreement relating thereto matures more than one year from, or is
directly renewable or extendable at the option of the debtor to a date more
than one year from (including an option of the debtor under a revolving credit
or similar agreement obligating the lender or lenders to extend credit over a
period of one year or more from), the date of the creation thereof.

"FUNDING AND PAYMENT OFFICE" means the office of Agent and
Swing Line Lender located at One Bankers Trust Plaza, New York, New York.

"FUNDING DATE" means the date of the funding of a Loan.

"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.

"GOVERNMENTAL AUTHORIZATION" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from any
federal, state or local governmental authority, agency or court.

"GUARANTOR" has the meaning assigned to that term in Section
9.

"HAZARDOUS MATERIALS" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", "restricted

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<PAGE> 26
hazardous waste", "infectious waste", "toxic substances" or any other
formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any
flammable substances or explosives; (v) any radioactive materials; (vi)
asbestos in any form; (vii) urea formaldehyde foam insulation; (viii)
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million; (ix)
pesticides; and (x) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority or
which may or could pose a hazard to the health and safety of the owners,
occupants or any Persons in the vicinity of the Facilities.

"HOLDINGS" has the meaning assigned to that term in the
introduction to this Agreement.

"HOLDINGS CERTIFICATE OF DESIGNATION" means the Certificate of
Designations, Preferences, and Relative, Participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of 15% Redeemable Exchangeable Cumulative Preferred Stock
of Holdings, as in effect on the Closing Date (and which has not been amended
or otherwise modified since the Acquisition Date) and as such Holdings
Certificate of Designation may be amended from time to time to the extent
permitted under subsection 7.15.

"HOLDINGS COMMON STOCK" means the Class A Common Stock of
Holdings, par value $0.01 per share and the Class B Common Stock of Holdings,
par value $0.01 per share.

"HOLDINGS GUARANTY" has the meaning assigned to that term in
Section 9.

"HOLDINGS PLEDGE AGREEMENT" means the Pledge Agreement
executed and delivered by Holdings on the Closing Date, substantially in the
form of Exhibit XXII annexed hereto, as such Pledge Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.

"HOLDINGS PREFERRED STOCK" means the 15% Redeemable
Exchangeable Cumulative Preferred Stock, Series A, of Holdings, par value $0.01
per share.

"HOLDINGS SECURITY AGREEMENT" means the Security Agreement
executed and delivered by Holdings on the Closing Date, substantially in the
form of

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<PAGE> 27
Exhibit XXIII annexed hereto, as such Security Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.

"HOLDINGS VOTING STOCK" means the Holdings Common Stock and
any additional class of capital stock of Holdings entitled (without regard to
the occurrence of any contingency) to vote for the election of members of the
Board of Directors of Holdings.

"INDEBTEDNESS", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
in conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money, (iv) any obligation owed for all or any part of the deferred purchase
price of property or services (excluding any such obligations incurred under
ERISA), which purchase price is (a) due more than six months (or a longer
period of up to one year, if such terms are available from suppliers in the
ordinary course of business) from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, and
(v) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is nonrecourse to the credit of that
Person. Obligations under Interest Rate Agreements and Currency Agreements
constitute Contingent Obligations and not Indebtedness.

"INDEMNITEE" has the meaning assigned to that term in
subsection 11.3.

"INTELLECTUAL PROPERTY" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in or necessary
for the conduct of the business of the Loan Parties as currently conducted that
are material to the condition (financial or otherwise), business or operations
of Company or any of its Subsidiaries.

"INTEREST PAYMENT DATE" means (i) with respect to any Base
Rate Loan, each February 28, May 31, August 31 and November 30 of each year,
commencing on the first such date to occur after the Closing Date, and (ii)
with respect to any Eurodollar Rate Loan, the last day of each Interest Period
applicable to such Loan; provided that in the case of each Interest Period of
six months, "Interest Payment Date" shall also include the date that is three
months after the commencement of such Interest Period.

"INTEREST PERIOD" has the meaning assigned to that term in
subsection 2.2B.

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<PAGE> 28
"INTEREST RATE AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect Company or any of its
Subsidiaries against fluctuations in interest rates.

"INTEREST RATE EXCHANGERS" has the meaning assigned to that
term in subsection 9.1.

"INTEREST RATE DETERMINATION DATE" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.

"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.

"INVESTMENT" means (i) any direct or indirect purchase or
other acquisition by any of the Loan Parties of, or of a beneficial interest
in, any Securities of any other Person or (ii) any direct or indirect loan,
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by any of the Loan Parties, to any other
Person, including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write- downs or write-offs with respect to such Investment.

"IPO" means the initial public offering of Holdings Common
Stock substantially as described in the Registration Statement.

"ISSUING LENDER" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).

"JOINT VENTURE" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that in no event shall any corporate Subsidiary of any Person be
considered to be a Joint Venture to which such Person is a party.

"LAND TRUSTEE" means the trustee of any Land Trust.

"LAND TRUST" means each land trust of which one or more Loan
Parties are the sole beneficiaries and which land trust is party to a Loan
Document.

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"LENDER" and "LENDERS" means the persons identified as
"Lenders" and listed on the signature pages of this Agreement, together with
their successors and permitted assigns pursuant to subsection 11.1, and the
term "Lenders" shall include Swing Line Lender unless the context otherwise
requires; provided that the term "Lenders", when used in the context of a
particular Commitment, shall mean Lenders having that Commitment.

"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued by
Issuing Lenders for the account of Company pursuant to subsection 3.1 and the
Existing Letters of Credit.

"LETTER OF CREDIT USAGE" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under Letters
of Credit honored by Issuing Lenders and not theretofore reimbursed by Company
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).

"LEVERAGE RATIO" means, for any period, the ratio of
Consolidated Total Debt as of the last day of such period to Consolidated
Adjusted EBITDA for such period; provided that (a) the Leverage Ratio for the
four-Fiscal Quarter period for which the Margin Determination Certificate is
being delivered pursuant to subsection 4.1A(vi) shall be the ratio of
Consolidated Total Debt as of the last day of the Fiscal Quarter immediately
prior to the Closing Date (but calculated on a pro forma basis after giving
effect to the Transactions) to Consolidated Adjusted EBITDA for the four-Fiscal
Quarter period ended as of such last day, and (b) the Leverage Ratio for the
four-Fiscal Quarter period for which an Officers' Certificate is being
delivered pursuant to subsection 7.5A(v) shall be the ratio of Consolidated
Total Debt as of the date of payment of the applicable dividends (calculated on
a pro forma basis after giving effect to any Loans or other Indebtedness
borrowed or incurred on or prior to such date) to Consolidated Adjusted EBITDA
for the four-Fiscal Quarter period ended as of the last day of the most
recently ended Fiscal Quarter.

"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.

"LOAN" or "LOANS" means one or more of (i) the Term Loans,
(ii) the Revolving Term Loans, (iii) Revolving Loans, or (iv) the Swing Line
Loans, or any combination thereof, and each of the different types of Loans
identified in clauses (i) through (iv) above shall be a "TYPE" of Loan.

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<PAGE> 30
"LOAN DOCUMENTS" means this Agreement (including without
limitation the Holdings Guaranty set forth in Section 9), the Notes, the
Letters of Credit (and any applications for or other documents or certificates
executed by any Loan Party in favor of an Issuing Lender relating to, the
Letters of Credit), the Subsidiary Guaranty and the Collateral Documents.

"LOAN PARTY" means each of Holdings, Company, and any of their
respective Subsidiaries from time to time executing a Loan Document, and any
Land Trust (but not any Land Trustee, except solely in its capacity as trustee
of a Land Trust), and "LOAN PARTIES" means all such Persons, collectively.

"MANAGEMENT AGREEMENT" means the Management Agreement dated as
of _____________, 1996 among [Yucaipa, Holdings, and Company] as such
Management Agreement is in effect on the Closing Date and as such Management
Agreement may be amended from time to time after the Closing Date to the extent
permitted under subsection 7.15.

"MARGIN DETERMINATION CERTIFICATE" means an Officers'
Certificate of Company delivered pursuant to subsection 4.1A(vi) or 6.1(iv)
setting forth in reasonable detail the Leverage Ratio for the four-Fiscal
Quarter period ending as of the last day of the Fiscal Quarter immediately
preceding the Fiscal Quarter during which such Officers' Certificate is
delivered.

"MARGIN STOCK" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.

"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Loan Parties, taken as a whole, or (ii) the
material impairment of the ability of any Loan Party to perform, or the
impairment of the ability of Agent or Lenders to enforce, the Obligations.

"MATERIAL SUBSIDIARY" means, with respect to any accounting
period, any Subsidiary of Company (i) whose sales constitute greater than 10%
of the aggregate dollar value of the sales of Company and its Subsidiaries,
taken as a whole, for such accounting period or (ii) the fair market value of
whose assets at any time during such accounting period is greater than 10% of
the fair market value of all of the assets of Company and its Subsidiaries at
such time.

"MORTGAGE" means an instrument (whether designated as a deed
of trust, a trust deed or a mortgage or by any similar title) executed and
delivered by (i) Company, and (ii) with respect to property to which title is
held in a Subsidiary of Company, such Subsidiary, and (iii) with respect to
property to which title is held in a

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<PAGE> 31
Land Trust, such Land Trust, substantially in the form of Exhibit XXI annexed
hereto encumbering a fee or leasehold interest in Real Property Assets, as such
instrument may be amended, supplemented or otherwise modified from time to
time, and "MORTGAGES" means all such instruments, including the Mortgages
delivered to Agent pursuant to subsection 4.1B and any other Mortgages
delivered to Agent pursuant to subsection 6.10, collectively.

"MULTIEMPLOYER PLAN" means a "multiemployer plan", as defined
in Section 3(37) of ERISA, (i) to which any of the Loan Parties or any of their
respective ERISA Affiliates is contributing, or at any time within the five
calendar years immediately preceding the date hereof has contributed, (ii) to
which any of the Loan Parties or any of their respective ERISA Affiliates has,
or, at any time within the five calendar years immediately preceding the date
hereof, has had, an obligation to contribute or (iii) with respect to which any
of the Loan Parties retains any liability, including any potential joint and
several liability as a result of an affiliation with an ERISA Affiliate or a
party that would be an ERISA Affiliate except for the fact the affiliation
ceased more than five calendar years prior to the date hereof.

"NET CASH PROCEEDS OF ASSET SALE" means, with respect to any
Asset Sale, Cash Proceeds of such Asset Sale net of bona fide direct costs of
sale including (i) income taxes reasonably estimated to be actually payable as
a result of such Asset Sale within two years of the date of such Asset Sale and
(ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on, any Indebtedness (other than the Loans) that is secured
by a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.

"NON-RECOURSE INDEBTEDNESS" means, as applied to any Person,
all Indebtedness of that Person secured by Liens on specified assets of that
Person under the terms of which (i) no recourse may be had against that or any
other Person for the payment of the principal of or interest or premium on such
Indebtedness or for any claim based thereon and (ii) the enforcement of all
obligations relating to such Indebtedness is limited to foreclosure or other
actions with respect to such specified assets.

"NOTES" means one or more of the Term Notes, Revolving Term
Notes, Revolving Notes or Swing Line Note or any combination thereof.

"NOTICE OF BORROWING" means a notice substantially in the form
of Exhibit I annexed hereto delivered by Company to Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.

"NOTICE OF CONVERSION/CONTINUATION" means a notice
substantially in the form of Exhibit II annexed hereto delivered by Company to
Agent pursuant to

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<PAGE> 32
subsection 2.2D with respect to a proposed conversion or continuation of the
applicable basis for determining the interest rate with respect to the Loans
specified therein.

"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of Exhibit III annexed hereto delivered by Company to
Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a
Letter of Credit.

"OBLIGATIONS" means all obligations of every nature of each
Loan Party from time to time owed to Agent, Syndication Agent, Arrangers,
Lenders or any of them under the Loan Documents, whether for principal,
interest, reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnification or otherwise.

"OFFICERS' CERTIFICATE" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its chairman or vice
chairman of the board (if an officer) or its president or one of its executive
or senior vice presidents and by its chief financial officer or its treasurer;
provided that every Officers' Certificate with respect to the compliance with a
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with,
and (iii) a statement as to whether, in the opinion of the signers, such
condition has been complied with; and provided further that any Officers'
Certificate required pursuant to subsection 2.4B(iii) may be executed by any
one of the officers referred to in this definition.

"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.

"PARENT" means DFF Supermarkets, Inc., a Delaware corporation.

"PARENT MERGER" has the meaning assigned to that term in the
recitals to this Agreement.

"PARENT MERGER CERTIFICATE" means that certain [Agreement of
Merger] dated as of November __, 1996, by and between Parent and Company,
pursuant to which the Parent Merger shall occur, as in effect on the Closing
Date and as such agreement may be amended from time to time to the extent
permitted under subsection 7.15.

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"PARENT INTERCOMPANY NOTE" means that certain promissory note
dated as of March 22, 1995 issued by Parent to Company in the original
principal amount of $344,865,000 evidencing the loan made by Company to Parent
in such amount on March 22, 1995, as such Parent Intercompany Note has been
amended from time to time prior to the Closing Date.

"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).

"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.

"PERMITTED ENCUMBRANCES" means the following types of Liens
(other than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or by ERISA):

(i) Liens for taxes, assessments or governmental charges
or claims the payment of which is not, at the time, required by
subsection 6.3;

(ii) statutory Liens of landlords and banks and rights of
offset, and Liens of carriers, warehousemen, workmen, repairmen,
mechanics and materialmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;

(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, trade contracts,
utility payments, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);

(iv) any attachment or judgment Lien not constituting an
Event of Default under subsection 8.8;

(v) leases or subleases granted to others not interfering
in any material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries;

(vi) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other similar
charges or encumbrances not

26
<PAGE> 34
interfering in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries;

(vii) any (a) interest or title of a lessor or sublessor
(other than any Loan Party) under any lease permitted by subsection
7.9, (b) restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to (including without limitation
ground leases or other prior leases of the demised premises,
mortgages, mechanics liens, tax liens, and easements), or (c)
subordination of the interest of the lessee or sublessee under such
lease to any restrictions or encumbrance referred to in the preceding
clause (b);

(viii) Liens arising from filing UCC financing statements
for precautionary purposes relating solely to true leases of personal
property permitted by this Agreement under which Company or any of its
Subsidiaries is a lessee;

(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;

(x) any zoning or similar law or right reserved to or
vested in any governmental office or agency to control or regulate the
use of any real property;

(xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the ordinary
course of business of Company and its Subsidiaries;

(xii) any other title exception with respect to Real
Property Assets disclosed by the preliminary title report, title
commitment report or other search of title provided to Agent in
accordance with subsection 4.1B or subsection 6.10, unless disapproved
by Agent prior to the Closing Date, with respect to the Mortgaged
Properties listed in Schedule 4.1B annexed hereto, or unless
disapproved by Agent within 30 days after Company receives written
acknowledgement from Agent of its receipt of such report, commitment
or other search, together with all copies of all documents reflected
therein, with respect to any other Real Property Assets; and

(xiii) with respect to Real Property Assets constituting
leasehold interests, any other title exception disclosed by any search
of title previously provided to and approved by Agent.

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"PERMITTED HOLDERS" means (i) Yucaipa or any entity controlled
thereby or any of the partners thereof, (ii) Apollo Advisors, L.P. or any
entity controlled thereby or (iii) any of the Permitted Transferees of any
Person in clauses (i) and (ii) hereof.

"PERMITTED TRANSFEREES" means, with respect to any Person, (i)
any Affiliate of such Person, (ii) the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any such Person or (iii) a
trust, the beneficiaries of which, or a corporation or partnership, the
stockholders of general or limited partners of which, include only such Person
or his or her spouse or lineal descendants, in each case to whom such Person
has transferred the beneficial ownership of any Securities of Holdings.

"PERSON" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, Joint
Ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

"PLEDGE AGREEMENTS" means the Holdings Pledge Agreement, the
Company Pledge Agreement, the Subsidiary Pledge Agreements or any combination
thereof.

"POTENTIAL EVENT OF DEFAULT" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default.

"PREFERRED STOCK HOLDERS" means ___________________________.

"PREFERRED STOCK REDEMPTION AGREEMENT" means that certain
[Preferred Stock Redemption Agreement], dated as of the Closing Date by and
between [Holdings] and each Preferred Stock Holder pursuant to which the
parties thereto agree to the redemption of all of the issued and outstanding
Holdings Preferred Stock on the Redemption Date, as such agreement may be
amended from time to time to the extent permitted under subsection 7.15.

"PRIME RATE" means the rate that Bankers announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Bankers or any other Lender may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.

"PRO RATA SHARE" means, on any date of determination, (i) with
respect to all payments, computations and other matters relating to the Term
Loan Commitment or the Term Loan of any Lender, the percentage obtained by
dividing

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<PAGE> 36
(x) the Term Loan Exposure of that Lender on such date by (y) the aggregate
Term Loan Exposure of all Lenders on such date, (ii) with respect to all
payments, computations and other matters relating to the Revolving Term Loan
Commitment or the Revolving Term Loans of any Lender, the percentage obtained
by dividing (x) the Revolving Term Loan Exposure of that Lender on such date by
(y) the aggregate Revolving Term Loan Exposure of all Lenders on such date,
(iii) with respect to all payments, computations and other matters relating to
the Revolving Loan Commitment or the Revolving Loans of any Lender or any
Letters of Credit issued under the Revolving Loan Commitment or participations
therein purchased by any Lender or any participations in any Swing Line Loans
made under the Revolving Loan Commitment purchased by any Lender, the
percentage obtained by dividing (x) the Revolving Loan Exposure of that Lender
on such date by (y) the aggregate Revolving Loan Exposure of all Lenders on
such date, and (iv) for all other purposes with respect to each Lender, the
percentage obtained by dividing (x) the sum of the Term Loan Exposure of that
Lender on such date plus the Revolving Term Loan Exposure of that Lender on
such date plus the Revolving Loan Exposure of that Lender on such date by (y)
the sum of the aggregate Term Loan Exposure of all Lenders on such date plus
the aggregate Revolving Term Loan Exposure of all Lenders on such date plus the
aggregate Revolving Loan Exposure of all Lenders on such date, in any such case
as the applicable percentage may be adjusted by assignments permitted pursuant
to subsection 11.1. The initial Pro Rata Share of each Lender for purposes of
each of clauses (i) through (iv) of the preceding sentence is set forth
opposite the name of that Lender in Schedule 2.1 annexed hereto.

"RATING AGENCIES" means Standard & Poor's Ratings Group,
Moody's Investors Service, Inc. and Duff & Phelps Credit Rating Co.

"REAL PROPERTY ASSETS" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation thereof,
in each case owned or leased (as lessee) by any Loan Party.

"REDEMPTION DATE" means January 2, 1997.

"REDEMPTION DOCUMENTS" means the Preferred Stock Redemption
Agreement, [describe other documents, if any, pursuant to which the Holdings
Preferred Stock will be redeemed.]

"REFERENCE LENDERS" means Bankers and Chase.

"REFUNDED SWING LINE LOANS" has the meaning assigned to that
term in subsection 2.1A(iv).

"REGISTER" has the meaning assigned to that term in subsection
2.1D.

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<PAGE> 37
"REGISTRATION STATEMENT" means the Registration Statement of
Holdings on Form S-1 (Registration No. 333-11177) filed with the Securities and
Exchange Commission on August 30, 1996, as amended by Amendment Nos. ______
thereto.

"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.

"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.

"RELATED TRANSACTION DOCUMENTS" means, collectively, the
Escrow Agreement, the Management Agreement, the Redemption Documents, the
Termination Agreement, the Parent Merger Certificate, [OTHERS], and all other
agreements or instruments delivered pursuant to or in connection with any of
the foregoing including any purchase agreement or registration rights
agreement.

"RELEASE" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or disposal
of any barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.

"REPLACEMENT PROPERTY" means any Real Property Asset which is
designated by Company as a "Replacement Property" in accordance with subsection
6.13.

"REQUISITE LENDERS" means Lenders having or holding more than
50% of the sum of the aggregate Term Loan Exposure of all Lenders plus the
aggregate Revolving Term Loan Exposure of all Lenders plus the aggregate
Revolving Loan Exposure of all Lenders.

"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Holdings or Company now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that class,
(ii) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock of Holdings or Company now or hereafter outstanding, (iii) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of Holdings or
Company now or hereafter outstanding, and (iv) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,

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<PAGE> 38
retirement, defeasance (including in-substance or legal defeasance), sinking
fund or similar payment with respect to, any Subordinated Indebtedness.

"REVOLVING LENDER" or "REVOLVING LENDERS" means the Lender or
Lenders having a Revolving Loan Commitment or having a Revolving Loan
outstanding.

"REVOLVING LOAN COMMITMENT" means the commitment of a
Revolving Lender to make Revolving Loans pursuant to subsection 2.1A(iii), to
issue and/or purchase participations in Letters of Credit pursuant to Section 3
and, except for Swing Line Lender, to purchase participations in Swing Line
Loans pursuant to subsection 2.1A(iv), and "REVOLVING LOAN COMMITMENTS" means
such commitments of all Revolving Lenders in the aggregate.

"REVOLVING LOAN COMMITMENT TERMINATION DATE" means [April 30,]
2003.

"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of that Lender plus (b) in
the event that Lender is an Issuing Lender, the aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender under the
Revolving Loan Commitment (in each case net of any participations purchased by
other Lenders in such Letters of Credit or any unreimbursed drawings
thereunder) plus (c) the aggregate amount of all participations purchased by
that Lender in any outstanding Letters of Credit issued under the Revolving
Loan Commitment or any unreimbursed drawings under any Letters of Credit issued
under the Revolving Loan Commitment plus (d) in the case of Swing Line Lender,
the aggregate outstanding principal amount of all Swing Line Loans made under
the Revolving Loan Commitment (net of any participations therein purchased by
other Lenders) plus (e) the aggregate amount of all participations purchased by
that Lender in any outstanding Swing Line Loans made under the Revolving Loan
Commitment.

"REVOLVING LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(iii).

"REVOLVING NOTES" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E on the Closing Date to evidence the
Revolving Loans of any Lender and (ii) any promissory notes issued by Company
pursuant to the last sentence of subsection 11.1B(i) in connection with
assignments of the Revolving Loan Commitments and Revolving Loans of any
Lenders, in each case substantially in the form of Exhibit V-B annexed hereto,
as they be amended, supplemented or otherwise modified from time to time.

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<PAGE> 39
"REVOLVING TERM LENDER" or "REVOLVING TERM LENDERS" means the
Lender or Lenders having a Revolving Term Loan Commitment or a Revolving Term
Loan outstanding.

"REVOLVING TERM LOAN COMMITMENT" means the commitment of a
Revolving Term Lender to make Revolving Term Loans pursuant to subsection
2.1A(ii), and "REVOLVING TERM LOAN COMMITMENTS" means such commitments of all
Revolving Term Lenders in the aggregate.

"REVOLVING TERM LOAN COMMITMENT TERMINATION DATE" means [April
30], 2003.

"REVOLVING TERM LOAN EXPOSURE" means, with respect to any
Lender as of any date of determination (i) prior to the termination of the
Revolving Term Loan Commitments, that Lender's Revolving Term Loan Commitment
and (ii) after the termination of the Revolving Term Loan Commitments, the
aggregate outstanding principal amount of the Revolving Term Loans of that
Lender.

"REVOLVING TERM LOANS" means the Loans made by Lenders to
Company pursuant to subsection 2.1A(ii).

"REVOLVING TERM NOTES" means (i) the promissory notes of
Company issued pursuant to subsection 2.1E on the Closing Date to evidence the
Revolving Term Loans of any Lender and (ii) any promissory notes issued by
Company pursuant to the last sentence of subsection 11.1B(i) in connection with
assignments of the Revolving Term Loan Commitments and Revolving Term Loans of
any Lenders, in each case substantially in the form of Exhibit V-A annexed
hereto, as they be amended, supplemented or otherwise modified from time to
time.

"SECURITIES" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing; provided,
however, that, solely for purposes of subsection 2.4B(iii)(d), notes issued by
Company to evidence any of the Obligations or to evidence Indebtedness incurred
after the Closing Date pursuant to subsection 7.1 shall not be deemed
"Securities".

"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and any successor statute.

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"SENIOR SUBORDINATED NOTE INDENTURE" means the indenture dated
as of May 4, 1995, among Company, certain subsidiaries of Company, as
subsidiary guarantors, and United States Trust Company of New York, as trustee,
pursuant to which the Senior Subordinated Notes were issued, as such indenture
is in effect on the Closing Date and as such indenture may be amended from time
to time to the extent permitted under subsection 7.15.

"SENIOR SUBORDINATED NOTES" means (i) the $200,000,000 10-7/8%
Senior Subordinated Notes due 2005 issued by Company pursuant to the Senior
Subordinated Note Indenture, as such notes are in effect on the Closing Date
and as such notes may be amended from time to time to the extent permitted
under subsection 7.15, and (ii) the Series B 10-7/8% Senior Subordinated Notes
due 2005, if any, issued by Company pursuant to the Senior Subordinated Note
Indenture in exchange for the equivalent principal amount of the notes
described in clause (i) above, which Series B notes are in the form of Exhibit
B to the Senior Subordinated Note Indenture, as such Series B notes may be
amended from time to time to the extent permitted under subsections 7.15.

"SHAREHOLDERS AGREEMENT" means that certain Stockholders
Agreement dated as of March 22, 1995 by and among Holdings, Yucaipa, the
Yucaipa Investors and the other equity investors named therein, constituting
all of the holders of the issued and outstanding capital stock of Holdings as
of the Acquisition Date (other than minority stockholders who received shares
of Holdings Common Stock in exchange for common stock of Company prior to the
Acquisition Date), as in effect on the Closing Date and as such Shareholders
Agreement may be amended from time to time to the extent permitted under
subsection 7.15.

"SOLVENT" means, with respect to any Person, that as of the
date of determination both (A)(i) the then fair saleable value of the property
of such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to such Person;
(ii) such Person's capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such Person
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(B) such Person is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

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<PAGE> 41
"SPECIFIED EXISTING DOCUMENTS" means, collectively, the Stock
Purchase Agreement, the Shareholders Agreement, the Holdings Certificate of
Designation, the Tax Matters Agreement, the Tax Sharing Agreement, the Yucaipa
Warrant, the Stock Exchange Agreement, the Asset Transfer Agreement, the Senior
Subordinated Note Indenture and the Senior Subordinated Notes, and all other
agreements or instruments delivered pursuant to or in connection with any of
the foregoing including any purchase agreement or registration rights
agreement.

"STANDBY LETTER OF CREDIT" means any standby letter of credit
issued for the purpose of supporting (i) Indebtedness of Company or any of its
Subsidiaries in respect of industrial revenue or development bonds or
financings, (ii) workers' compensation liabilities of Company or any of its
Subsidiaries, (iii) the obligations of third party insurers of Company or any
of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring
third party insurers, (iv) obligations with respect to Capital Leases or
Operating Leases of Company or any of its Subsidiaries, and (v) performance,
payment, deposit or surety obligations of Company or any of its Subsidiaries,
in any case if required by law or governmental rule or regulation or in
accordance with custom and practice in the industry; provided that Standby
Letters of Credit may not be issued for the purpose of supporting (a) trade
payables or (b) any Indebtedness constituting "antecedent debt" (as that term
is used in Section 547 of the Bankruptcy Code).

"STOCK EXCHANGE AGREEMENT" means that certain Stock Exchange
Agreement dated as of January 17, 1995 by and between Holdings and Dodi L.L.C.,
as in effect on the Closing Date and as such Stock Exchange Agreement may be
amended from time to time after the Closing Date to the extent permitted under
subsection 7.15.

"STOCK PURCHASE AGREEMENT" means that certain Stock Purchase
Agreement dated as of January 17, 1995, and as amended as of March 21, 1995, by
and among Holdings, DFF Acquisition Sub, Inc., Dodi L.L.C., Dodi Family L.L.C.
and Dodi Developments L.L.C., as in effect on the Closing Date and as such
agreement may be amended from time to time after the Closing Date to the extent
permitted under subsection 7.15.

"STORE LAND PROPERTY" means any Real Property Asset in
Illinois, Indiana or Wisconsin acquired after the Closing Date by Company or
any Subsidiary of Company in the form of undeveloped land or land with
improvements thereon existing as of the date of acquisition (i) which is
identified in good faith by the chief financial officer of Company and
evidenced by an Officers' Certificate of Company at the time of acquisition
thereof as the intended location for a grocery store or other facility to be
constructed for and owned and operated by Company or one of its Subsidiaries
within five years of the effective date of acquisition thereof and (ii) with
respect to which Company gives notice to Agent in accordance with subsection

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<PAGE> 42
6.1(iv)(c); provided that any such Store Land Property shall no longer be a
"Store Land Property" (a) on the date of sale by Company or any of its
Subsidiaries (other than to any Loan Party or any other Affiliate) of any Store
Land Property consisting of undeveloped land or land with improvements thereon
existing as of the date of acquisition or (b) if Company or any of its
Subsidiaries constructs a grocery store or other facility thereon, then on the
date (which date shall be the first date after the completion of the grocery
store or other facility on which the Company is required to deliver to Agent
and Lenders financial statements pursuant to subsection 6.1(ii)) that Company
gives a written notice to Agent indicating that Company shall on and after such
date include the aggregate purchase price incurred in connection with the
acquisition of such Store Land Property as "Consolidated Capital Expenditures"
pursuant to clause (i)(c) of the definition thereof (it being understood that
such aggregate purchase price shall be deemed to be Consolidated Capital
Expenditures incurred during the Fiscal Year in which such notice is given). A
Store Land Property shall continue to be a "Store Land Property" hereunder
whether or not such Real Property Asset continues to be undeveloped land or
land with improvements thereon existing as of the date of acquisition and
whether or not such Real Property Asset continues to be owned by a Loan Party
and such Store Land Property shall no longer be a "Store Land Property" only if
the conditions set forth in clause (a) or clause (b) in the immediately
preceding sentence are satisfied. The purchase price with respect to any Store
Land Property shall be the amount paid (whether paid in cash or other
consideration) for such Store Land Property.

"SUBORDINATED INDEBTEDNESS" means (i) the Indebtedness of
Company evidenced by the Senior Subordinated Notes and (ii) any other
Indebtedness of Company subordinated in right of payment to the Obligations
pursuant to documentation containing maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material
terms in form and substance satisfactory to Agent and Requisite Lenders.

"SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and
policies thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof.

"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed
and delivered by each Subsidiary of Company on the Closing Date and to be
executed and delivered by Subsidiaries of Company from time to time in
accordance with subsection 6.9, substantially in the form of Exhibit XVII
annexed hereto, as such

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<PAGE> 43
Subsidiary Guaranty may be amended, supplemented or otherwise modified from
time to time.

"SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge
Agreement executed and delivered by each Subsidiary of Company on the Closing
Date and to be executed and delivered by Subsidiaries of Company from time to
time in accordance with subsection 6.9, substantially in the form of Exhibit
XVIII annexed hereto, as such Subsidiary Pledge Agreement may be amended,
supplemented or otherwise modified from time to time, and "SUBSIDIARY PLEDGE
AGREEMENTS" means all such Subsidiary Pledge Agreements, collectively.

"SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security
Agreement executed and delivered by each Subsidiary of Company on the Closing
Date and to be executed and delivered by Subsidiaries of Company from time to
time in accordance with subsection 6.9, substantially in the form of Exhibit
XIX annexed hereto, as such Subsidiary Security Agreement may be amended,
supplemented or otherwise modified from time to time, and "SUBSIDIARY SECURITY
AGREEMENTS" means all such Subsidiary Security Agreements, collectively.

"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means each
Subsidiary Trademark Collateral Security Agreement and Conditional Assignment
executed and delivered by each Subsidiary of Company on the Closing Date and to
be executed and delivered by Subsidiaries of Company from time to time in
accordance with subsection 6.9, substantially in the form of Exhibit XX annexed
hereto, as such Subsidiary Trademark Collateral Security Agreement and
Conditional Assignment may be amended, supplemented or otherwise modified from
time to time, and "SUBSIDIARY TRADEMARK SECURITY AGREEMENTS" means all such
Subsidiary Trademark Collateral Security Agreements and Conditional
Assignments, collectively.

"SWING LINE LENDER" means Bankers, or any Person serving as a
successor Agent hereunder, in its capacity as Swing Line Lender hereunder and
under the other Loan Documents.

"SWING LINE LOAN COMMITMENT" means the commitment of Swing
Line Lender to make Swing Line Loans to Company pursuant to subsection
2.1A(iv).

"SWING LINE LOANS" means the Loans made by Swing Line Lender
to Company pursuant to subsection 2.1A(iv).

"SWING LINE NOTE" means (i) the promissory note of Company
issued pursuant to subsection 2.1E on the Closing Date to evidence the Swing
Line Loans of Swing Line Lender and (ii) any promissory note issued by Company
to any successor Agent and Swing Line Lender pursuant to the last sentence of
subsection 10.5B, in

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<PAGE> 44
each case substantially in the form of Exhibit VI annexed hereto, as it may be
amended, supplemented or otherwise modified from time to time.

"SYNDICATION AGENT" has the meaning assigned to that term in
the introduction to this Agreement.

"TAX" or "TAXES" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied, collected,
withheld or assessed; provided that "TAX ON THE OVERALL INCOME" of a Person
shall be construed as a reference to a tax imposed by the jurisdiction in which
that Person's principal office (and/or, in the case of a Lender, its lending
office) is located or in which that Person is organized or is deemed to be
doing business on all or part of the net income, profits, gains or receipts of
that Person (whether worldwide, or only insofar as such income, profits, gains
or receipts are considered to arise in or to relate to a particular
jurisdiction, or otherwise).

"TAX MATTERS AGREEMENT" means that certain Tax Matters
Agreement dated as of March 22, 1995 among Holdings, Parent, Company, Dodi
L.L.C., Dodi Family L.L.C., Dodi Developments L.L.C., BDI, BPI, 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, as in effect on the Closing Date and as such Tax Matters Agreement
may be amended from time to time to the extent permitted under subsection 7.15.

"TAX SHARING AGREEMENT" means that certain Tax Sharing
Agreement dated as of March 22, 1995 among Holdings, Parent, BDI, BPI, Company,
Dominick's Finer Foods, Inc. of Illinois, Dodi Hazelcrest, Inc., Kohl's of
Bloomingdale, Inc., Save-It Discount Foods Corporation and Jerry's Deep
Discount Centers, Inc., as in effect on the Closing Date and as such Tax
Sharing Agreement may be amended from time to time to the extent permitted
under subsection 7.15.

"TERM LENDER" or "TERM LENDERS" means the Lender or Lenders
having a Term Loan Commitment or having a Term Loan outstanding.

"TERM LOAN COMMITMENT" means the commitment of a Term Lender
to make a Term Loan to Company pursuant to subsection 2.1A(i), and "TERM LOAN
COMMITMENTS" means such commitments of all Term Lenders in the aggregate.

"TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Term Loans, that
Lender's Term Loan Commitment and (ii) after the funding of the Term Loans, the
outstanding principal amount of the Term Loan of that Lender.

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<PAGE> 45
"TERM LOANS" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(i).

"TERM NOTES" means (i) the promissory notes of Company issued
pursuant to subsection 2.1E on the Closing Date to evidence Term Loans of any
Lender and (ii) any promissory notes issued by Company pursuant to the last
sentence of subsection 11.1B(i) in connection with assignments of the Term Loan
Commitments and Term Loans of any Lenders, in each case substantially in the
form of Exhibit IV annexed hereto, as they may be amended, supplemented or
otherwise modified from time to time.

"TERMINATION AGREEMENT" means [describe agreement, if any,
pursuant to which the Consulting Agreement is terminated].

"TITLE INSURANCE POLICIES" means ALTA loan title insurance
policies issued by a title insurance company reasonably satisfactory to Agent
and Arrangers, in the amounts reasonably satisfactory to Agent with respect to
any particular Real Property Assets subject to a Mortgage, assuring Agent that
the applicable Mortgage creates a valid and enforceable first priority lien on
the respective Real Property Asset subject to such Mortgage, free and clear of
all defects and encumbrances except Permitted Encumbrances, which Title
Insurance Policies shall be in form and substance reasonably satisfactory to
Agent and Arrangers and shall include endorsements for any matters that Agent
may reasonably request and for future advances under this Agreement, the Notes
and the other Loan Documents, and shall provide for affirmative insurance and
such reinsurance as Agent may request, all of the foregoing in form and
substance reasonably satisfactory to Agent and Arrangers.

"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at
any date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans made under the Revolving Loan Commitment
or reimbursing the applicable Issuing Lender for any amount drawn under any
Letter of Credit issued under the Revolving Loan Commitment but not yet so
applied) plus (ii) the aggregate principal amount of all outstanding Swing Line
Loans made under the Revolving Loan Commitment plus (iii) the Letter of Credit
Usage with respect to all Letters of Credit issued under the Revolving Loan
Commitment.

"TRANSACTION COSTS" means the fees, costs and expenses paid or
payable by any Loan Party pursuant hereto and other fees, costs, premiums and
expenses paid or payable by any Loan Party in connection with the Transactions.

"TRANSACTIONS" means the transactions contemplated under this
Agreement and the other Loan Documents, the IPO, the refinancing of the

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<PAGE> 46
indebtedness of Company under the Existing Credit Agreement, the entering into
the Escrow Agreement, the Preferred Stock Redemption Agreement and the
Management Agreement, the termination of the Consulting Agreement, the
consummation of the Parent Merger pursuant to the Parent Merger Certificate,
and other transactions related to any of the foregoing.

"YUCAIPA" means The Yucaipa Companies, a California general
partnership, or any successor thereto (i) which is an Affiliate of Ronald W.
Burkle, (ii) which has been established for the sole purpose of changing the
form of The Yucaipa Companies from that of a partnership to that of a limited
liability company or such other form acceptable to Arrangers in their sole
discretion and (iii) the form and structure of which has been approved by
Arrangers in their sole discretion.

"YUCAIPA INVESTORS" means Yucaipa Blackhawk Partners L.P.,
Yucaipa Chicago Partners L.P. and Yucaipa Dominick's Partners L.P.

"YUCAIPA WARRANTS" has the meaning assigned to that term in
subsection 7.12(viii).

1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT.

For purposes of this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with GAAP. Financial statements and other information required to be delivered
by Company to Lenders pursuant to clauses (i), (ii) and (iii) of subsection 6.1
shall be prepared in accordance with GAAP as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize (i) accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3, or (ii) if any amendments to the
provisions set forth in Sections 1, 6 or 7 are made pursuant to negotiations
conducted by operation of the following sentence, accounting principles and
policies in effect at the time of the effectiveness of such amendments.
Notwithstanding the foregoing, if any changes in accounting principles from
those used in the preparation of the financial statements referred to in
subsection 5.3 hereafter occasioned by the promulgation of rules, regulations,
pronouncements or opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in the method of
calculation of financial covenants, standards or terms found in Sections 1, 6
and 7 hereof, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating Holdings' and each of its Subsidiaries'
financial condition shall be the same after such changes

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<PAGE> 47
as if such changes had not been made. During the period of such negotiations,
but in no event for a period longer than 60 days, Company shall not be required
to deliver the additional financial statements required pursuant to subsection
6.1(v). After the parties agree on amendments to the provisions of Sections 1,
6 and 7 necessitated by such changes, Company shall not be required to deliver
the additional financial statements required pursuant to subsection 6.1(v) with
respect to such changes.

1.3 OTHER DEFINITIONAL PROVISIONS.

References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural,
depending on the reference.

SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.

A. COMMITMENTS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Holdings
and Company herein set forth, each Lender hereby severally agrees to make the
Loans described in subsections 2.1A(i), 2.1A(ii) and 2.1(A)(iii), as
applicable, and Swing Line Lender hereby agrees to make the Loans described in
subsection 2.1A(iv).

(i) Term Loans. Each Term Lender severally agrees to
lend to Company on the Closing Date an amount not exceeding its Pro
Rata Share of the aggregate amount of the Term Loan Commitments to be
used for the purposes identified in subsection 2.5A. The amount of
each Term Lender's Term Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the Term
Loan Commitments is $100,000,000; provided that the Term Loan
Commitments of Term Lenders shall be adjusted to give effect to any
assignments of the Term Loan Commitments pursuant to subsection 11.1B.
Each Term Lender's Term Loan Commitment shall expire immediately and
without further action on the earlier of the date of consummation of
the IPO and November 15, 1996 if the Term Loans are not made on or
before such earlier date. Company may make only one borrowing under
the Term Loan Commitments and such borrowing may be made only on the
Closing Date. Amounts borrowed under this subsection 2.1A(i) and
subsequently repaid or prepaid may not be reborrowed.

(ii) Revolving Term Loans. Each Revolving Term Lender
severally agrees, subject to the limitations set forth below with
respect to the maximum amount of Revolving Term Loans permitted to be
outstanding from time to

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<PAGE> 48
time, to lend to Company from time to time during the period from the
Business Day immediately succeeding the Closing Date to but excluding
the Revolving Term Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Term Loan Commitments to be used for the purposes identified
in subsection 2.5B. The original amount of each Revolving Term
Lender's Revolving Term Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate original amount of
the Revolving Term Loan Commitments is $105,000,000; provided that the
Revolving Term Loan Commitments of Revolving Term Lenders shall be
adjusted to give effect to any assignments of the Revolving Term Loan
Commitments pursuant to subsection 11.1B; and provided further that
the amount of the Revolving Term Loan Commitments shall be reduced
from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4B(ii) and 2.4B(iii). Each Revolving Term
Lender's Revolving Term Loan Commitment shall expire on the Revolving
Term Loan Commitment Termination Date and all Revolving Term Loans and
all other amounts owed hereunder with respect to the Revolving Term
Loans and the Revolving Term Loan Commitments shall be paid in full no
later than that date; provided that each Revolving Term Lender's
Revolving Term Loan Commitment shall expire immediately and without
further action on the earlier of the date of consummation of the IPO
and November 15, 1996 if the Term Loans are not made on or before such
earlier date. Amounts borrowed under this subsection 2.1A(ii) may be
repaid and reborrowed to but excluding the Revolving Term Loan
Commitment Termination Date.

Anything contained in this Agreement to the contrary
notwithstanding, in no event shall the aggregate principal amount of
all outstanding Revolving Term Loans at any time exceed the Revolving
Term Loan Commitments then in effect.

(iii) Revolving Loans. Each Revolving Lender severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Revolving Loans permitted to be outstanding from
time to time, to lend to Company from time to time during the period
from the Business Day immediately succeeding the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Revolving Lender's
Revolving Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate original amount of the Revolving
Loan Commitments is $120,000,000; provided that the Revolving Loan
Commitments of Revolving Lenders shall be adjusted to give effect to
any assignments of the Revolving Loan Commitments pursuant to
subsection

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11.1B; and provided further that the amount of the Revolving Loan
Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to subsections 2.4B(ii) and
2.4B(iii). Each Revolving Lender's Revolving Loan Commitment shall
expire on the Revolving Loan Commitment Termination Date and all
Revolving Loans and all other amounts owed hereunder with respect to
the Revolving Loans and the Revolving Loan Commitments shall be paid
in full no later than that date; provided that each Revolving Lender's
Revolving Loan Commitment shall expire immediately and without further
action on the earlier of the date of consummation of the IPO and
November 15, 1996 if the Term Loans are not made on or before such
earlier date. Amounts borrowed under this subsection 2.1A(iii) may be
repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.

Anything contained in this Agreement to the contrary
notwithstanding, in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments
then in effect.

(iv) Swing Line Loans. Swing Line Lender hereby agrees,
subject to the limitations set forth below with respect to the maximum
amount of Swing Line Loans permitted to be outstanding from time to
time, to make a portion of the Revolving Loan Commitments available to
Company from time to time during the period from the Business Day
immediately succeeding the Closing Date to but excluding the Revolving
Loan Commitment Termination Date by making Swing Line Loans to Company
in an aggregate amount not exceeding the amount of the Swing Line Loan
Commitment to be used for the purposes identified in subsection 2.5B,
notwithstanding the fact that such Swing Line Loans, when aggregated
with Swing Line Lender's outstanding Revolving Loans and other Swing
Line Loans and Swing Line Lender's Pro Rata Share of the Letter of
Credit Usage then in effect, may exceed Swing Line Lender's Revolving
Loan Commitment. The original amount of the Swing Line Loan
Commitment is $20,000,000; provided that any reduction of the
Revolving Loan Commitments made pursuant to subsection 2.4B(ii) or
2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an
amount less than the then current amount of the Swing Line Loan
Commitment shall result in an automatic corresponding reduction of the
Swing Line Loan Commitment to the amount of the Revolving Loan
Commitments, as so reduced, without any further action on the part of
Company, Agent or Swing Line Lender. The Swing Line Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all
Swing Line Loans and all other amounts owed hereunder with respect to
the Swing Line Loans shall be paid in full no later than that date;
provided that the Swing Line Loan Commitment shall expire immediately
and without further action on the earlier of the date of consummation
of the IPO and November 15, 1996 if the Term Loans are

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<PAGE> 50
not made on or before such earlier date. Amounts borrowed under this
subsection 2.1A(iv) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.

With respect to any Swing Line Loans which have not been
voluntarily prepaid by Company pursuant to subsection 2.4B(i), Swing
Line Lender (i) may, at any time in its sole and absolute discretion,
and (ii) shall, at least once every seven days, deliver to Agent (with
a copy to Company), no later than 12:00 Noon (New York time) on the
first Business Day in advance of the proposed Funding Date, a notice
requesting Revolving Lenders to make applicable Revolving Loans that
are Base Rate Loans on such Funding Date in an amount equal to the
amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS")
outstanding on the date such notice is given which Swing Line Lender
requests Revolving Lenders to prepay. Anything contained in this
Agreement to the contrary notwithstanding, (i) the proceeds of such
Revolving Loans made by Revolving Lenders other than Swing Line Lender
shall be immediately delivered by Agent to Swing Line Lender (and not
to Company) and applied to repay a corresponding portion of the
Refunded Swing Line Loans and (ii) on the day such Revolving Loans are
made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan
made by Swing Line Lender and such portion of the Swing Line Loans
deemed to be so paid shall no longer be outstanding as Swing Line
Loans and shall no longer be due under the Swing Line Note of Swing
Line Lender but shall instead constitute a part of Swing Line Lender's
outstanding Revolving Loans and shall be due under the applicable
Revolving Note of Swing Line Lender. Company hereby authorizes Agent
and Swing Line Lender to charge Company's accounts with Agent and
Swing Line Lender (up to the amount available in each such account) in
order to immediately pay Swing Line Lender the amount of the Refunded
Swing Line Loans to the extent the proceeds of such Revolving Loans
made by Revolving Lenders, including the Revolving Loan deemed to be
made by Swing Line Lender, are not sufficient to repay in full the
Refunded Swing Line Loans. If any portion of any such amount paid (or
deemed to be paid) to Swing Line Lender should be recovered by or on
behalf of Company from Swing Line Lender in bankruptcy, by assignment
for the benefit of creditors or otherwise, the loss of the amount so
recovered shall be ratably shared among all Revolving Lenders in the
manner contemplated by subsection 11.5.

Immediately upon the funding of each Swing Line Loan by Swing
Line Lender, each Revolving Lender shall be deemed to, and hereby
agrees to, have

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purchased, under its Revolving Loan Commitment, a participation in
such outstanding Swing Line Loans in an amount equal to its Pro Rata
Share (calculated without giving effect to clauses (d) and (e) of the
definition of Revolving Loan Exposure) of the unpaid amount together
with accrued interest thereon. Upon one Business Day's notice from
Swing Line Lender, each Revolving Lender shall deliver to Swing Line
Lender an amount equal to its respective participation in same day
funds at the office of Swing Line Lender located at the Funding and
Payment Office. In order to evidence such participation each
Revolving Lender agrees to enter into a participation agreement at the
request of Swing Line Lender in form and substance reasonably
satisfactory to all parties. In the event any Revolving Lender fails
to make available to Swing Line Lender the amount of such Revolving
Lender's participation as provided in this paragraph, Swing Line
Lender shall be entitled to recover such amount on demand from such
Revolving Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors
among banks for three Business Days and thereafter at the Base Rate.
In the event Swing Line Lender receives a payment of any amount in
which other Revolving Lenders have purchased participations as
provided in this paragraph, Swing Line Lender shall promptly
distribute to each such other Revolving Lender its Pro Rata Share of
such payment.

Anything contained herein to the contrary notwithstanding, (i)
each Revolving Lender's obligation to make Revolving Loans for the
purpose of repaying any Refunded Swing Line Loans pursuant to the
second preceding paragraph and each Revolving Lender's obligation to
purchase a participation in any unpaid Swing Line Loans pursuant to
the immediately preceding paragraph shall be absolute and
unconditional and shall not be affected by any circumstance, including
without limitation (a) any set-off, counterclaim, recoupment, defense
or other right which such Revolving Lender may have against Swing Line
Lender, Company or any other Person for any reason whatsoever; (b) the
occurrence or continuation of an Event of Default or a Potential Event
of Default; (c) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Holdings or any of its Subsidiaries; (d) any breach of this Agreement
or any other Loan Document by any party thereto; or (e) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided that such obligations of each Revolving
Lender are subject to the satisfaction of one of the following: (X)
Swing Line Lender believed in good faith that all conditions under
Section 4 to the making of the applicable Swing Line Loans to be
refunded were satisfied at the time such Swing Line Loans were made,
(Y) such Revolving Lender had actual knowledge, by receipt of any
notices required to be delivered to Revolving Lenders pursuant to
subsection 6.1(ix) or otherwise, that any such condition had not been
satisfied and such Revolving

44
<PAGE> 52
Lender failed to notify Swing Line Lender and Agent in writing that it
had no obligation to make Revolving Loans until such condition was
satisfied (any such notice to be effective as of the date of receipt
thereof by Swing Line Lender and Agent), or (Z) the satisfaction of
any such condition not satisfied had been waived in accordance with
subsection 11.6; and (ii) Swing Line Lender shall not be obligated to
make any Swing Line Loans if it has elected not to do so after the
occurrence and during the continuation of a Potential Event of Default
or Event of Default.

B. BORROWING MECHANICS. Term Loans, Revolving Term Loans or
Revolving Loans made on any Funding Date (other than Revolving Loans made
pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(iv) for
the purpose of repaying any Refunded Swing Line Loans or Revolving Loans made
pursuant to subsection 3.3B for the purpose of reimbursing any Issuing Lender
for the amount of a drawing under a Letter of Credit issued by it) that are
made as (i) Eurodollar Rate Loans shall be in an aggregate minimum amount of
$5,000,000 and integral multiples of $1,000,000 in excess of that amount or
(ii) Base Rate Loans shall be in an aggregate minimum amount of $2,000,000 and
integral multiples of $500,000 in excess of that amount. Swing Line Loans made
on any Funding Date shall be in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of that amount. Whenever Company
desires that Lenders make Term Loans, Revolving Term Loans or Revolving Loans
under subsection 2.1A, it shall deliver to Agent a Notice of Borrowing no later
than 12:00 Noon (New York time) at least three Business Days in advance of the
proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one
Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line
Loan under subsection 2.1A(iv), it shall deliver to Agent a Notice of Borrowing
no later than 12:00 Noon (New York time) on the proposed Funding Date. The
Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be
a Business Day), (ii) the amount and Type of Loans requested, (iii) in the case
of Swing Line Loans, that such Loans shall be Base Rate Loans, (iv) whether
such Loans shall be Base Rate Loans or Eurodollar Rate Loans, and (v) in the
case of any Loans requested to be made as Eurodollar Rate Loans, the initial
Interest Period requested therefor. Term Loans, Revolving Term Loans and
Revolving Loans may be continued as or converted into Base Rate Loans and
Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of
delivering the above-described Notice of Borrowing, Company may give Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1B; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Agent on or before the
applicable Funding Date.

45
<PAGE> 53
on behalf of Company or for otherwise acting in good faith under this
subsection 2.1B, and upon funding of Loans by Lenders in accordance with this
Agreement pursuant to any such telephonic notice Company shall have effected
Loans hereunder.

Company shall notify Agent prior to the funding of any Loans
in the event that any of the matters to which Company is required to certify in
the applicable Notice of Borrowing is no longer true and correct as of the
applicable Funding Date, and the acceptance by Company of the proceeds of any
Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.

Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in
lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in
accordance therewith.

C. DISBURSEMENT OF FUNDS. All Term Loans, Revolving Term Loans
and Revolving Loans under this Agreement shall be made by Lenders
simultaneously and proportionately to their respective Pro Rata Shares of the
Commitments for the particular Type of Loans requested, it being understood
that no Lender shall be responsible for any default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder nor shall the
Commitment of any Lender to make the particular Type of Loan requested be
increased or decreased as a result of a default by any other Lender in that
other Lender's obligation to make a Loan requested hereunder. Promptly after
receipt by Agent of a Notice of Borrowing pursuant to subsection 2.1B (or
telephonic notice in lieu thereof), Agent shall notify each Lender or Swing
Line Lender, as the case may be, of the proposed borrowing. Each Lender shall
make the amount of its Loan available to Agent not later than 1:00 P.M. (New
York time) on the applicable Funding Date, and Swing Line Lender shall make the
amount of its Swing Line Loan available to Agent not later than 1:00 P.M. (New
York time) on the applicable Funding Date, in each case in same day funds in
Dollars, at the Funding Payment Office. Except as provided in subsection
2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to repay
Refunded Swing Line Loans or to reimburse any Issuing Lender for the amount of
a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of
the conditions precedent specified in subsections 4.1 (in the case of Loans
made on the Closing Date) and 4.2 (in the case of all Loans), Agent shall make
the proceeds of such Loans available to Company on the applicable Funding Date
by causing an amount of same day funds in Dollars equal to the proceeds of all
such Loans received by Agent from Lenders or Swing Line Lender, as the case may
be, to be credited to the account of Company at the Funding and Payment Office.

46
<PAGE> 54
Unless Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Agent the amount of such Lender's Loan requested on such Funding
Date, Agent may assume that such Lender has made such amount available to Agent
on such Funding Date and Agent may, in its sole discretion, but shall not be
obligated to, make available to Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Agent, at the customary rate
set by Agent for the correction of errors among banks for three Business Days
and thereafter at the Base Rate. If such Lender does not pay such
corresponding amount forthwith upon Agent's demand therefor, Agent shall
promptly notify Company and Company shall immediately pay such corresponding
amount to Agent together with interest thereon, for each day from such Funding
Date until the date such amount is paid to Agent, at the rate payable under
this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be
deemed to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Company may have against any Lender
as a result of any default by such Lender hereunder.

D. THE REGISTER.

(i) Agent shall maintain, at its address referred to in
subsection 11.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from
time to time (the "REGISTER"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from
time to time upon reasonable prior notice.

(ii) Agent shall record in the Register the Term Loan
Commitment, the Revolving Term Loan Commitment and the Revolving Loan
Commitment and the Term Loan, the Revolving Term Loans and the
Revolving Loans from time to time of each Lender, the Swing Line Loan
Commitment and the Swing Line Loans made under the Revolving Loan
Commitment from time to time of Swing Line Lender, and each repayment
or prepayment in respect of the principal amount of the Term Loan, the
Revolving Term Loans or the Revolving Loans of each Lender or the
Swing Line Loans made under the Revolving Loan Commitment of Swing
Line Lender. Any such recordation shall be conclusive and binding on
Company and each Lender, absent manifest error; provided that failure
to make any such recordation, or any error in such recordation, shall
not affect Company's Obligations in respect of the applicable Loans.

(iii) Each Lender shall record on its internal records
(including, without limitation, the Notes held by such Lender) the
amount of the Term

47
<PAGE> 55
Loan, each Revolving Term Loan and each Revolving Loan made by it and
each payment in respect thereof. Any such recordation shall be
conclusive and binding on Company, absent manifest error; provided
that failure to make any such recordation, or any error in such
recordation, shall not affect Company's Obligations in respect of the
applicable Loans; and provided, further that in the event of any
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.

(iv) Company, Agent and Lenders shall deem and treat the
Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all
purposes hereof, and no assignment or transfer of any such Commitment
or Loan shall be effective, in each case unless and until an
Assignment Agreement effecting the assignment or transfer thereof
shall have been accepted by Agent and recorded in the Register as
provided in subsection 11.1B(ii). Prior to such recordation, all
amounts owed with respect to the applicable Commitment or Loan shall
be owed to the Lender listed in the Register as the owner thereof, and
any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding
Commitments or Loans.

(v) Company hereby designates Bankers to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Company hereby agrees that, to
the extent Bankers serves in such capacity, Bankers and its officers,
directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 11.3.

E. NOTES. Company shall execute and deliver on the Closing Date
(i) to each Term Lender (or to Agent for that Lender) a Term Note substantially
in the form of Exhibit IV annexed hereto to evidence that Lender's Term Loan,
in the principal amount of that Lender's Term Loan and with other appropriate
insertions, (ii) to each Revolving Term Lender (or to Agent for that Lender) a
Revolving Term Note substantially in the form of Exhibit V-A annexed hereto to
evidence that Lender's Revolving Term Loans, in the principal amount of that
Lender's Revolving Term Loan Commitment and with other appropriate insertions,
(iii) to each Revolving Lender (or to Agent for that Lender) a Revolving Note
substantially in the form of Exhibit V-B annexed hereto to evidence that
Lender's Revolving Loans in the principal amount of that Lender's Revolving
Loan Commitment and with other appropriate insertions, and (iv) to Swing Line
Lender a Swing Line Note substantially in the form of Exhibit VI annexed hereto
to evidence Swing Line Lender's Swing Line Loans, in the principal amount of
the Swing Line Loan Commitment and with other appropriate insertions.

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<PAGE> 56
2.2 INTEREST ON THE LOANS.

A. RATE OF INTEREST. Subject to the provisions of subsections
2.6 and 2.7, each Term Loan, each Revolving Term Loan and each Revolving Loan
shall bear interest on the unpaid principal amount thereof from the date made
through maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate or the Adjusted Eurodollar Rate, as the case may be.
Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear
interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate. The applicable basis for determining the rate of
interest with respect to any Loan shall be selected by Company initially at the
time a Notice of Borrowing is given with respect to such Loan pursuant to
subsection 2.1B. The basis for determining the interest rate with respect to
any Term Loan, Revolving Term Loan or any Revolving Loan may be changed from
time to time pursuant to subsection 2.2D. If on any day a Term Loan, Revolving
Term Loan or Revolving Loan is outstanding with respect to which notice has not
been delivered to Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base
Rate.

(i) Subject to the provisions of subsections 2.2E and
2.7, the Term Loans, Revolving Term Loans and the Revolving Loans
shall bear interest through maturity as follows:

(a) if a Base Rate Loan, then at the sum of the
Base Rate plus the Base Rate margin (the "APPLICABLE BASE RATE
MARGIN") set forth in the table below opposite the Leverage
Ratio for the four-Fiscal Quarter period for which the
applicable Margin Determination Certificate is being delivered
pursuant to subsection 4.1A(vi) or 6.1(iv); or

(b) if a Eurodollar Rate Loan, then at the sum of
the Adjusted Eurodollar Rate plus the Eurodollar Rate margin
(the "APPLICABLE EURODOLLAR RATE MARGIN") set forth in the
table below opposite the Leverage Ratio for the four-Fiscal
Quarter period for which the applicable Margin Determination
Certificate is being delivered pursuant to subsection 4.1A(vi)
or 6.1(iv):

49
<PAGE> 57
<TABLE>
<CAPTION>
Applicable Applicable
Leverage Eurodollar Rate Base Rate
Ratio Margin Margin
------------------------------------------- ------------------ ----------
<S> <C> <C> <C>
Greater than or
equal to: 4.25:1.00 1.50% 0.50%
Greater than or
equal to: 3.75:100
but less than: 4.25:1.00 1.25% 0.25%

Greater than or
equal to: 3.25:1.00
but less than: 3.75:1.00 1.00% 0.00%

Less than: 3.25:1.00 0.75% 0.00%
</TABLE>

Upon delivery of the Margin Determination Certificate by Company to
Agent pursuant to subsection 4.1A(vi) or 6.1(iv), the Applicable Base
Rate Margin and the Applicable Eurodollar Rate Margin shall
automatically be adjusted in accordance with such Margin Determination
Certificate, such adjustment to become effective on the Closing Date
with respect to the Margin Determination Certificate delivered
pursuant to subsection 4.1A(vi) and on the next succeeding Business
Day following the receipt by Agent of such Margin Determination
Certificate with respect to each Margin Determination Certificate
delivered pursuant to subsection 6.1(iv); provided that at any time a
Margin Determination Certificate is not delivered at the time required
pursuant to subsection 4.1A(vi) or 6.1(iv), from the time such Margin
Determination Certificate was required to be delivered until delivery
of such Margin Determination Certificate, the Applicable Eurodollar
Rate Margin shall be 1.50% per annum and the Applicable Base Rate
Margin shall be 0.50% per annum; provided further that if a Margin
Determination Certificate erroneously indicates an applicable margin
more favorable to Company than would be afforded by the actual
calculation of the Leverage Ratio, Company shall promptly pay such
additional interest and letter of credit fees as shall correct for
such error.

(ii) Subject to the provisions of subsection 2.2E and 2.7,
the Swing Line Loans shall bear interest (computed as described in
subsection 2.2F) through maturity at the sum of the Base Rate plus the
Applicable Base Rate Margin less the Applicable Commitment Fee
Percentage.

B. INTEREST PERIODS. In connection with each Eurodollar Rate
Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an

50
<PAGE> 58
"INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall
be, at Company's option, either a one, two, three or six month period; provided
that:

(i) the initial Interest Period for any Eurodollar Rate
Loan shall commence on the Funding Date in respect of such Loan, in
the case of a Loan initially made as a Eurodollar Rate Loan, or on the
date specified in the applicable Notice of Conversion/ Continuation,
in the case of a Loan converted to a Eurodollar Rate Loan;

(ii) in the case of immediately successive Interest
Periods applicable to a Eurodollar Rate Loan continued as such
pursuant to a Notice of Conversion/Continuation, each successive
Interest Period shall commence on the day on which the next preceding
Interest Period expires;

(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;

(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;

(v) no Interest Period with respect to any portion of the
Term Loans, Revolving Term Loans or the Revolving Loans shall extend
beyond the Revolving Loan Commitment Termination Date;

(vi) no Interest Period with respect to any portion of the
Term Loans shall extend beyond a date on which Company is required to
make a scheduled payment of principal of the Term Loans unless the sum
of (1) the aggregate principal amount of Term Loans that are Base Rate
Loans plus (2) the aggregate principal amount of Term Loans that are
Eurodollar Rate Loans with Interest Periods expiring on or before such
date equals or exceeds the principal amount required to be paid on the
Term Loans on such date;

(vii) there shall be no more than twenty Interest Periods
outstanding at any time; and

(viii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of

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<PAGE> 59
Conversion/Continuation, Company shall be deemed to have selected an
Interest Period of one month.

C. INTEREST PAYMENTS. Subject to the provisions of subsection
2.2E, interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Swing Line Loans or any Revolving
Loans that are Base Rate Loans or any Revolving Term Loans that are Base Rate
Loans are prepaid pursuant to subsection 2.4B(i), interest accrued on such
Swing Line Loans, Revolving Loans or Revolving Term Loans through the date of
such prepayment shall be payable on the next succeeding Interest Payment Date
applicable to Base Rate Loans (or, if earlier, at final maturity).

D. CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Term Loans, Revolving Term Loans or Revolving
Loans, in each case equal to $5,000,000 and integral multiples of $1,000,000 in
excess of that amount from Loans bearing interest at a rate determined by
reference to one basis to Loans bearing interest at a rate determined by
reference to an alternative basis, or (ii) upon the expiration of any Interest
Period applicable to a Eurodollar Rate Loan, to continue all or any portion of
such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of
that amount as a Eurodollar Rate Loan; provided, however, that a Eurodollar
Rate Loan may only be converted into a Base Rate Loan on the expiration date of
an Interest Period applicable thereto; and provided further that no Loan may be
made as or converted into a Base Rate Loan during the period from December 24
of any year to and including January 7 of the immediately succeeding year for
the purpose of investing in securities bearing interest at a rate determined by
reference to any other basis for the purpose of arbitrage or speculation.

Company shall deliver an originally executed Notice of
Conversion/Continuation to Agent, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of Company or by any
executive officer or cash management personnel of Company designated by any of
the above-described officers on behalf of Company in a writing delivered to
Agent, no later than 12:00 Noon (New York time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation shall specify
(i) the proposed conversion/continuation date (which shall be a Business Day),
(ii) the amount and Type of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of,
a Eurodollar Rate Loan, that no

52
<PAGE> 60
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/ Continuation,
Company may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date.

Neither Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to act on behalf of Company or for otherwise acting in good
faith under this subsection 2.2D, and upon conversion or continuation of the
applicable basis for determining the interest rate with respect to any Loans in
accordance with this Agreement pursuant to any such telephonic notice Company
shall have effected a conversion or continuation, as the case may be,
hereunder.

Except as otherwise provided in subsections 2.6B, 2.6C and
2.6G, a Notice of Conversion/Continuation for conversion to, or continuation
of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to effect a conversion or continuation in accordance
therewith.

E. DEFAULT RATE. Upon the occurrence and during the continuation
of any Event of Default, the outstanding principal amount of all Loans and, to
the extent permitted by applicable law, any interest payments thereon not paid
when due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and shall thereafter bear interest payable upon demand at a
rate which is 2% per annum in excess of the interest rate otherwise payable
under this Agreement for Base Rate Loans. Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Agent or any Lender.

F. COMPUTATION OF INTEREST. Interest on the Loans shall be
computed on the basis of a 360-day year, in each case for the actual number of
days elapsed in the period during which it accrues. In computing interest on
any Loan, the date of the

53
<PAGE> 61
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base
Rate Loan, as the case may be, shall be included, and the date of payment of
such Loan or the Interest Payment Date with respect to which such interest
payment is being made or, with respect to a Base Rate Loan being converted to a
Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such
Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a
Loan is repaid on the same day on which it is made, one day's interest shall be
paid on that Loan.

2.3 FEES.

A. COMMITMENT FEES. Company agrees to pay (i) to Agent, for
distribution to each Revolving Lender in proportion to such Revolving Lender's
Pro Rata Share of the Revolving Loan Commitments, commitment fees for the
period from and including the Closing Date to and excluding the Revolving Loan
Commitment Termination Date equal to the average of the daily excess of the
Revolving Loan Commitments over the aggregate principal amount of Revolving
Loans outstanding (but not any Swing Line Loans outstanding) plus the Letter of
Credit Usage then in effect multiplied by the commitment fee percentage (the
"APPLICABLE COMMITMENT FEE PERCENTAGE") set forth in the table below opposite
the Leverage Ratio for the four-Fiscal Quarter period for which the applicable
Margin Determination Certificate is being delivered pursuant to subsection
4.1A(vi) or 6.1(iv), and (ii) to Agent, for distribution to each Revolving Term
Lender in proportion to such Revolving Term Lender's Pro Rata Share of the
Revolving Term Loan Commitments, commitment fees for the period from and
including the Closing Date to and excluding the Revolving Term Loan Commitment
Termination Date equal to the average of the daily excess of the Revolving Term
Loan Commitments over the aggregate principal amount of the Revolving Term
Loans outstanding multiplied by the Applicable Commitment Fee Percentage:

<TABLE>
<CAPTION>
Applicable Commitment
Leverage Ratio Fee Percentage
--------------------- --------------------------
<S> <C> <C>
Greater than
or equal to: 3.75:1.00 0.375%

Greater than or
equal to: 3.25:1.00
but less than: 3.75:1.00 0.30%

Less than: 3.25:1.00 0.25%,
</TABLE>

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<PAGE> 62
such commitment fees to be calculated on the basis of a 360-day year and the
actual number of days elapsed and to be payable quarterly in arrears on and to
(but excluding) February 28, May 31, August 31 and November 30 of each year,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date or Revolving Term Loan Commitment
Termination Date, as applicable.

Upon delivery of the Margin Determination Certificate by
Company to Agent pursuant to subsection 4.1A(vi) or 6.1(iv), the Applicable
Commitment Fee Percentage shall automatically be adjusted in accordance with
such Margin Determination Certificate, such adjustment to become effective on
the Closing Date with respect to the Margin Determination Certificate delivered
pursuant to subsection 4.1A(vi) and on the next succeeding Business Day
following the receipt by Agent of such Margin Determination Certificate with
respect to each Margin Determination Certificate delivered pursuant to
subsection 6.1(iv); provided that in the event that Company fails to deliver a
Margin Determination Certificate timely in accordance with the provisions of
subsection 4.1A(vi) or 6.1(iv), from the time such Margin Determination
Certificate should have been delivered until such date as such a Margin
Determination Certificate is actually delivered, the Applicable Commitment Fee
Percentage shall be 0.375% per annum.

B. OTHER FEES. Company agrees to pay to Agent, Syndication Agent
and Arrangers such other fees in the amounts and at the times as have been
separately agreed upon among Company, Agent, Syndication Agent and Arrangers.
After receipt of such other fees from Company, Agent, Syndication Agent and
Arrangers agree to pay to each Lender such portion of such other fees in the
amounts and at the times as have been separately agreed upon in writing among
Agent, Syndication Agent, Arrangers and such Lender.

2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING TERM LOAN
COMMITMENTS AND REVOLVING LOAN COMMITMENTS; GENERAL PROVISIONS
REGARDING PAYMENTS.

A. SCHEDULED PAYMENTS OF TERM LOANS. Company shall make
principal payments on the Term Loans in installments on the dates and in the
amounts set forth below:

<TABLE>
<CAPTION>
Scheduled Repayment
Date of Term Loans
------ -----------------------
<S> <C>
[February 28, 1998 $ 2,500,000
May 31, 1998 2,500,000
August 30, 1998 2,500,000
November 30, 1998 2,500,000
</TABLE>

55
<PAGE> 63
<TABLE>
<S> <C>
February 28, 1999 $ 2,500,000
May 31, 1999 2,500,000
August 30, 1999 2,500,000
November 30, 1999 2,500,000

February 28, 2000 $ 3,750,000
May 31, 2000 3,750,000
August 30, 2000 3,750,000
November 30, 2000 3,750,000

February 28, 2001 $ 5,000,000
May 31, 2001 5,000,000
August 30, 2001 5,000,000
November 30, 2001 5,000,000

February 28, 2002 $ 7,500,000
May 31, 2002 7,500,000
August 30, 2002 7,500,000
November 30, 2002 7,500,000

February 28, 2003 $ 7,500,000
April 30, 2003] 7,500,000

==============

Total: $100,000,000
</TABLE>

; provided that the scheduled installments of principal of the
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance
with subsection 2.4B(iv); and provided, further that the Term
Loans and all other amounts owed hereunder with respect to the
Term Loans shall be paid in full no later than [April 30], 2003,
and the final installment payable by Company in respect of the
Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all
amounts owing by Company under this Agreement with respect to the
Term Loans.

B. PREPAYMENTS AND REDUCTIONS IN COMMITMENTS.

(i) Voluntary Prepayments.

(a) Company may, upon written or
telephonic notice to Agent on or prior to 12:00
Noon (New York time) on the date of prepayment,
which notice, if telephonic, shall be promptly

56
<PAGE> 64
confirmed in writing, at any time and from time
to time prepay any Swing Line Loan on any
Business Day in whole or in part in an aggregate
minimum amount of $500,000 and integral multiples
of $100,000 in excess of that amount. Company
may, upon not less than one Business Day's prior
written or telephonic notice, in the case of Base
Rate Loans, and three Business Days' prior
written or telephonic notice, in the case of
Eurodollar Rate Loans, in each case given to
Agent by 12:00 Noon (New York time) on the date
required and, if given by telephone, promptly
confirmed in writing to Agent (which original
written or telephonic notice Agent will promptly
transmit by telefacsimile or telephone to each
Lender), at any time and from time to time prepay
any Term Loans, Revolving Term Loans or Revolving
Loans on any Business Day in whole or in part in
an aggregate minimum amount of $5,000,000 and
integral multiples of $1,000,000 in excess of
that amount for Eurodollar Rate Loans or an
aggregate minimum amount of $2,000,000 and
integral multiples of $500,000 in excess of that
amount for Base Rate Loans; provided, however,
that a Eurodollar Rate Loan may only be prepaid
on the expiration of the Interest Period
applicable thereto. Notice of prepayment having
been given as aforesaid, the principal amount of
the Loans specified in such notice shall become
due and payable on the prepayment date specified
therein. Any such voluntary prepayment shall be
applied as specified in subsection 2.4B(iv).

(b) In the event Company is entitled
to replace a non-consenting Lender pursuant to
subsection 11.6B, Company shall have the right,
upon five Business Days' written notice to Agent
(which notice Agent shall promptly transmit to
each of the Lenders), to prepay all Loans,
together with accrued and unpaid interest, fees
and other amounts owing to such Lender in
accordance with subsection 11.6B so long as (1)
in the case of the prepayment of the Revolving
Term Loans or Revolving Loans of any Lender
pursuant to this subsection 2.4B(i)(b), the
Revolving Term Loan Commitment or Revolving Loan
Commitment of such Lender, as applicable, is
terminated concurrently with such prepayment
pursuant to subsection 2.4B(ii)(b) (at which time
Schedule 2.1 shall be deemed modified to reflect
the changed Revolving Term Loan Commitments or
Revolving Loan Commitments, as applicable), and
(2) in the case of the prepayment of the Loans of
any Lender, the consents required by subsection
11.6B in connection with the prepayment pursuant
to this subsection 2.4B(i)(b) shall have been
obtained, and at such

57
<PAGE> 65
time, such Lender shall no longer constitute a
"Lender" for purposes of this Agreement, except
with respect to indemnifications under this
Agreement (including, without limitation,
subsections 2.6D, 2.7, 3.6, 11.2 and 11.3), which
shall survive as to such Lender.

(ii) Voluntary Reductions of Revolving Loan
Commitments and Revolving Term Loan Commitments.

(a) Company may, upon not less than
three Business Days' prior written or telephonic
notice confirmed in writing to Agent (which
original written or telephonic notice Agent will
promptly transmit by telefacsimile or telephone
to each Lender), at any time and from time to
time terminate in whole or permanently reduce in
part, without premium or penalty, (1) the
Revolving Term Loan Commitments in an amount up
to the amount by which the Revolving Term Loan
Commitments exceed the aggregate principal amount
of the Revolving Term Loans at the time of such
proposed termination or reduction or (2) the
Revolving Loan Commitments in an amount up to the
amount by which the Revolving Loan Commitments
exceed the Total Utilization of Revolving Loan
Commitments at the time of such proposed
termination or reduction; provided that any such
partial reduction of the Revolving Term Loan
Commitments or the Revolving Loan Commitments, as
applicable, shall be in an aggregate minimum
amount of $2,000,000 and integral multiples of
$500,000 in excess of that amount. Company's
notice to Agent shall designate (1) the date
(which shall be a Business Day) of such
termination or reduction, (2) whether such
termination or reduction applies to the Revolving
Term Loan Commitments or the Revolving Loan
Commitments, and (3) the amount of any partial
reduction, and such termination or reduction of
the Revolving Term Loan Commitments or the
Revolving Loan Commitments, as applicable, shall
be effective on the date specified in Company's
notice and shall reduce the Revolving Term Loan
Commitment or the Revolving Loan Commitments, as
applicable, of each Lender proportionately by its
Pro Rata Share of such reduction.

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<PAGE> 66
and the entire Revolving Term Loan Commitment of
such Lender so long as (1) all Loans, together
with accrued and unpaid interest, fees and other
amounts owing to such Lender are repaid,
including without limitation amounts owing to
such Lender pursuant to subsection 2.6D, pursuant
to subsection 2.4B(i)(b) concurrently with the
effectiveness of such termination (at which time
Schedule 2.1 shall be deemed modified to reflect
such changed amounts), and (2) the consents
required by subsection 11.6B in connection with
the prepayment pursuant to subsection 2.4B(i)(b)
shall have been obtained, and at such time, such
Lender shall no longer constitute a "Lender" for
purposes of this Agreement, except with respect
to indemnifications under this Agreement
(including, without limitation, subsections 2.6D,
2.7, 3.6, 11.2 and 11.3), which shall survive as
to such Lender.

(iii) Mandatory Prepayments of Loans and Mandatory
Reductions of Revolving Term Loan Commitments and Revolving Loan
Commitments.

(a) Prepayments and Reductions from Asset
Sales. No later than the earliest to occur of (A) the
third Business Day following the date of receipt by
Company or any of its Subsidiaries of Cash Proceeds of
any Asset Sale in an aggregate cumulative amount equal to
or exceeding $2,500,000, (B) the 270th day following the
date of any Asset Sale the Net Cash Proceeds of Asset
Sale of which have not been applied to the prepayment of
Loans pursuant to the preceding clause (A) or this clause
(B), and (C) the date of the occurrence of any Event of
Default or Potential Event of Default, (1) Company shall
prepay the Term Loans in an amount equal to the Net Cash
Proceeds of Asset Sale of such Asset Sale, (2) to the
extent the Net Cash Proceeds of Asset Sale of such Asset
Sale exceed the aggregate outstanding principal amount of
the Term Loans, Company shall prepay in an amount equal
to such excess (the "FIRST EXCESS AMOUNT") the Revolving
Term Loans, and the Revolving Term Loan Commitments shall
be permanently reduced in an amount equal to the First
Excess Amount; provided that if the aggregate amount of
Revolving Term Loan Commitment so permanently reduced
exceeds the Revolving Term Loans so prepaid (the "SECOND
EXCESS AMOUNT"), (x) to the extent that there are
Revolving Loans outstanding, the parties hereto agree
that Revolving Loans in an aggregate amount equal to the
Second Excess Amount shall be automatically converted
without any further action on the part of any Person into
Revolving Term Loans, and (y) to the extent the Second
Excess Amount exceeds the amount of Revolving Loans so
converted to Revolving Term Loans (the "THIRD EXCESS
AMOUNT") and to the extent that there are Swing Line
Loans outstanding, Agent shall

59
<PAGE> 67
request Revolving Lenders to make applicable Revolving
Loans to prepay Swing Line Loans in accordance with the
third paragraph of subsection 2.1A(iv) in an amount equal
to the Third Excess Amount, and such Revolving Loans
shall be automatically converted without any further
action on the part of any Person into Revolving Term
Loans, and (z) Company shall prepay in an amount equal to
the Second Excess Amount such Revolving Term Loans, and
(3) to the extent the First Excess Amount exceeds the
Revolving Term Loan Commitments so permanently reduced,
Company shall prepay (in addition to any Swing Line Loans
and Revolving Loans which were converted and prepaid
pursuant to clause (2) above) in an amount equal to such
excess (the "FOURTH EXCESS AMOUNT") first the Swing Line
Loans to the full extent thereof, and second the
Revolving Loans, and the Revolving Loan Commitments shall
be permanently reduced in an amount equal to the Fourth
Excess Amount; provided, however, that, so long as no
Event of Default or Potential Event of Default shall have
occurred and be continuing, the following Net Cash
Proceeds of Asset Sale received by Company and its
Subsidiaries from and after the date hereof need not be
applied to the mandatory prepayment of the Loans pursuant
to this subsection 2.4B(iii)(a): (i) Net Cash Proceeds
of Asset Sale from the sale of any store to the extent
that such Net Cash Proceeds of Asset Sale are reinvested
in new stores or the construction or remodeling of stores
within 270 days of such sale; (ii) Net Cash Proceeds of
Asset Sale from the sale of a store to the extent that
such Net Cash Proceeds of Asset Sale do not exceed the
Consolidated Capital Expenditures made to acquire or
build a replacement store in the general vicinity of the
store sold within 270 days preceding the date of such
sale and, so long as, in the case of clauses (i) and (ii)
above, the aggregate amount of such Net Cash Proceeds of
Asset Sale so excluded from the mandatory prepayment
provisions does not exceed $10,000,000 in any Fiscal
Year; (iii) Net Cash Proceeds of Asset Sale from the sale
and concurrent lease-back of any store opened or acquired
after the Acquisition Date or any equipment acquired
after the Acquisition Date, in each case within 270 days
of the completion of such store or the acquisition of
such equipment, in each case to the extent and only to
the extent of Consolidated Capital Expenditures made with
respect to such store or such equipment; and (iv) Net
Cash Proceeds of Asset Sale from the sale of worn-out or
obsolete equipment, to the extent that such Net Cash
Proceeds of Asset Sale are reinvested in the same or
similar equipment within 90 days of such sale; provided
that the Net Cash Proceeds of Asset Sale which are not
being applied to the payment of the Term Loans pursuant
to clauses (ii) and (iii) above shall be applied first
to the Swing Line Loans then outstanding, second, to the
Revolving Loans then outstanding and third to the
Revolving Term Loans then

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<PAGE> 68
outstanding, but the Revolving Term Loan Commitments and
Revolving Loan Commitments shall not be reduced by the
amount of such Net Cash Proceeds of Asset Sale; provided
still further that Company shall, within three Business
Days of the receipt by Company or any of its Subsidiaries
of any Net Cash Proceeds of Asset Sale referred to in
clauses (i) through (iv) above, deliver to Agent an
Officers' Certificate setting forth (A) the amount of
such Net Cash Proceeds of Asset Sale and the amount of
the mandatory prepayment to be made, if any, pursuant to
this subsection 2.4B(iii)(a) and setting forth in
reasonable detail the calculations from which such
amounts were derived, (B) with respect to the receipt of
Net Cash Proceeds of Asset Sale referred to in clauses
(i) and (iv) above, in reasonable detail the intended
application of such Net Cash Proceeds of Asset Sale and
the estimated costs of the reinvestment referred to in
such clauses and (C) with respect to the receipt of Net
Cash Proceeds of Asset Sale referred to in clauses (ii)
and (iii) above, in reasonable detail the Consolidated
Capital Expenditures made by Company which accounts for
the exclusion of any such Net Cash Proceeds of Asset Sale
from the mandatory prepayment requirements of this
subsection 2.4B(iii)(a), which Officers' Certificate, in
the case of clauses (i) and (iv), may be amended by
Company during the 270-day or 90-day period, as
applicable, following receipt of such Net Cash Proceeds
of Asset Sale. In the event that any portion of any Net
Cash Proceeds of Asset Sale received by Company or any of
its Subsidiaries which are excluded from the mandatory
prepayment requirement of this subsection 2.4B(iii)(a) by
operation of clauses (i) and (iv) above are not expended
for the purposes specified in the Officers' Certificate,
as amended, delivered by Company in connection therewith
within the time periods specified in such clauses,
Company shall, immediately upon the expiration of the
applicable time period, make a mandatory prepayment of
the Loans as specified in the first sentence of this
subsection 2.4B(iii)(a) in an amount equal to such
unexpended portion, but only to the extent such amount
has not been previously applied as a mandatory prepayment
under subsection 2.4B(iii)(c). In the event that Company
shall, at any time after receipt of Cash Proceeds of any
Asset Sale requiring a prepayment or a reduction of the
Revolving Term Loan Commitments or Revolving Loan
Commitments pursuant to this subsection 2.4B(iii)(a),
determine that the prepayments and/or reductions of the
Revolving Term Loan Commitments or Revolving Loan
Commitments, as applicable, previously made in respect of
such Asset Sale were in an aggregate amount less than
that required by the terms of this subsection
2.4B(iii)(a), Company shall promptly make an additional
prepayment of the Term Loans, Revolving Term Loans, Swing
Line Loans or Revolving Loans, as the case may be (and,
if applicable, the Revolving

61
<PAGE> 69
Term Loan Commitments or Revolving Loan Commitments, as
applicable, shall be permanently reduced), in the manner
described above in an amount equal to the amount of any
such deficit, and Company shall concurrently therewith
deliver to Agent an Officers' Certificate demonstrating
the derivation of the additional Net Cash Proceeds of
Asset Sale resulting in such deficit. If, following the
receipt by Company or any of its Subsidiaries of Cash
Proceeds of any Asset Sale, Company is required to apply
or cause to be applied any portion of such Cash Proceeds
to prepay any Funded Debt (other than any Funded Debt
required to be prepaid as contemplated by clause (ii) of
the definition of Net Cash Proceeds of Asset Sale) of any
Loan Party pursuant to the applicable documents pursuant
to which such Funded Debt was issued, then,
notwithstanding anything contained in this subsection
2.4B(iii)(a), Company shall prepay the Loans and/or
reduce the Revolving Term Loan Commitments or Revolving
Loan Commitments, as applicable, in the order set forth
in this subsection 2.4B(iii)(a) so as to eliminate any
obligation to prepay such Funded Debt. Any mandatory
prepayments pursuant to this subsection 2.4B(iii)(a)
shall be applied as specified in subsection 2.4B(iv).

(b) Prepayments and Reductions Due to
Reversion of Surplus Assets of Pension Plans or Due to
Return of Amounts in Escrow Account. On the date of
return to Company or any of its Affiliates of any surplus
assets of any pension plan of Holdings or any of its
Subsidiaries or the return to Holdings or any of its
Subsidiaries in an aggregate cumulative amount exceeding
$500,000 of any amount in the Escrow Account for any
reason, (1) Company shall prepay the Term Loans in an
amount (the "NET REVERSION AMOUNT") equal to 100% of such
returned surplus assets or such returned amount in excess
of $500,000, as the case may be, in each case net of
transaction costs and expenses incurred in obtaining such
return, including incremental taxes payable as a result
thereof, (2) to the extent the Net Reversion Amount
exceeds the aggregate outstanding principal amount of the
Term Loans, Company shall prepay in an amount equal to
such excess (the "FIRST EXCESS AMOUNT") the Revolving
Term Loans to the full extent thereof, and the Revolving
Term Loan Commitments shall be permanently reduced in an
amount equal to the First Excess Amount; provided that if
the aggregate amount of Revolving Term Loan Commitment so
permanently reduced exceeds the Revolving Term Loans so
prepaid, Company shall prepay in an amount equal to such
excess first the Swing Line Loans to the full extent
thereof and second the Revolving Loans, and (3) to the
extent the First Excess Amount exceeds the Revolving Term
Loan Commitments so permanently reduced, Company shall
prepay (in addition to any Swing Line Loans and Revolving
Loans

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<PAGE> 70
prepaid pursuant to clause (2) above) in an amount equal
to such excess (the "SECOND EXCESS AMOUNT") first the
Swing Line Loans to the full extent thereof, and second
the Revolving Loans, and the Revolving Loan Commitments
shall be permanently reduced in an amount equal to the
Second Excess Amount. Any such mandatory prepayments
shall be applied as specified in subsection 2.4B(iv).

(c) Prepayments and Reductions from
Consolidated Excess Cash Flow. In the event that there
shall be Consolidated Excess Cash Flow for any Fiscal
Year (commencing with Fiscal Year 1997) and in the event
that the Leverage Ratio for such Fiscal Year is greater
than 3.50:1.0, within 100 days after the last day of such
Fiscal Year (1) Company shall prepay the Term Loans in an
amount equal to 50% of such Consolidated Excess Cash Flow
and (2) to the extent such amount equal to 50% of such
Consolidated Excess Cash Flow exceeds the aggregate
outstanding principal amount of the Term Loans, Company
shall prepay in an amount equal to such excess (the
"FIRST EXCESS AMOUNT") the Revolving Term Loans to the
full extent thereof, and the Revolving Term Loan
Commitments shall be permanently reduced in an amount
equal to the First Excess Amount; provided that if the
aggregate amount of Revolving Term Loan Commitment so
permanently reduced exceeds the Revolving Term Loans so
prepaid, Company shall prepay in an amount equal to such
excess first the Swing Line Loans to the full extent
thereof and second the Revolving Loans, and (3) to the
extent the First Excess Amount exceeds the Revolving Term
Loan Commitments so permanently reduced, Company shall
prepay (in addition to any Swing Line Loans and Revolving
Loans prepaid pursuant to clause (2) above) in an amount
equal to such excess (the "SECOND EXCESS AMOUNT") first
the Swing Line Loans to the full extent thereof, and
second the Revolving Loans, and the Revolving Loan
Commitments shall be permanently reduced in an amount
equal to the Second Excess Amount. If Company is
required to apply or cause to be applied any portion of
Consolidated Excess Cash Flow for any Fiscal Year to
prepay any Funded Debt of any Loan Party pursuant to the
applicable documents pursuant to which such Funded Debt
was issued, then, notwithstanding anything contained in
this subsection 2.4B(iii)(c), Company shall prepay the
Loans and/or reduce the Revolving Term Loan Commitments
and/or Revolving Loan Commitments, as applicable, in the
order set forth in this subsection 2.4B(iii)(c) so as to
eliminate any obligation to prepay such Funded Debt. Any
such mandatory prepayments shall be applied as specified
in subsection 2.4B(iv).

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<PAGE> 71
(d) Prepayments and Reductions Due to
Issuance of Debt Securities. No later than the first
Business Day following the date of receipt by Holdings or
any of its Subsidiaries of the Cash proceeds (net of
underwriting discounts, similar placement fees and
commissions and other reasonable costs and expenses
associated therewith) from the issuance of any debt
Securities of Holdings or any such Subsidiary, (1)
Company shall prepay the Term Loans in an amount equal to
the Applicable Prepayment Percentage of such net Cash
proceeds and (2) to the extent the amount of the
Applicable Prepayment Percentage of such net Cash
proceeds exceeds the aggregate outstanding principal
amount of the Term Loans, Company shall prepay in an
amount equal to such excess (the "FIRST EXCESS AMOUNT")
the Revolving Term Loans to the full extent thereof, and
the Revolving Term Loan Commitments shall be permanently
reduced in an amount equal to the First Excess Amount;
provided that if the aggregate amount of Revolving Term
Loan Commitment so permanently reduced exceeds the
Revolving Term Loans so prepaid, Company shall prepay in
an amount equal to such excess first the Swing Line Loans
to the full extent thereof and second the Revolving
Loans, and (3) to the extent the First Excess Amount
exceeds the Revolving Term Loan Commitments so
permanently reduced, Company shall prepay (in addition to
any Swing Line Loans and Revolving Loans prepaid pursuant
to clause (2) above) in an amount equal to such excess
(the "SECOND EXCESS AMOUNT") first the Swing Line Loans
to the full extent thereof, and second the Revolving
Loans, and the Revolving Loan Commitments shall be
permanently reduced in an amount equal to the Second
Excess Amount. For purposes of this subsection
2.4B(iii)(d), the term "APPLICABLE PREPAYMENT PERCENTAGE"
shall mean, as of any date of receipt by Holdings or any
of its Subsidiaries of any Cash proceeds from the
issuance of any debt Securities of Holdings or any such
Subsidiary, (i) 100% if the Leverage Ratio for the four-
Fiscal Quarter period ending on the last day of the
Fiscal Quarter immediately preceding such date of receipt
is greater than or equal to 2.50:1.0 and (ii) 50% if the
Leverage Ratio for such four-Fiscal Quarter period is
less than 2.50:1.00. Any such mandatory prepayments
shall be applied as specified in subsection 2.4B(iv).

(e) Prepayments Due to Reductions or
Restrictions of Revolving Loan Commitments and Revolving
Term Loan Commitments. Company shall from time to time
(i) prepay first the Swing Line Loans and second the
Revolving Loans to the extent necessary so that the Total
Utilization of Revolving Loan Commitments shall not at
any time exceed the Revolving Loan Commitments then in
effect and (ii) prepay the Revolving Term Loans to the
extent necessary

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<PAGE> 72
so that the aggregate principal amount of Revolving Term
Loans shall not at any time exceed the Revolving Term
Loan Commitments then in effect. Any such mandatory
prepayments shall be applied as specified in subsection
2.4B(iv).

(iv) Application of Prepayments.

(a) Application of Voluntary Prepayments by
Type of Loans and Order of Maturity. Any voluntary
prepayments pursuant to subsection 2.4B(i) shall be
applied as specified by Company in the applicable notice
of prepayment; provided that in the event Company fails
to specify the Loans to which any such prepayment shall
be applied, such prepayment shall be applied first to
repay outstanding Swing Line Loans to the full extent
thereof, second to repay outstanding Revolving Loans to
the full extent thereof, third to repay outstanding
Revolving Term Loans to the full extent thereof, and
fourth to repay outstanding Term Loans to the full extent
thereof, to be applied pro rata to each scheduled
installment of principal of the Term Loans set forth in
subsection 2.4A that is unpaid at the time of such
prepayment.

(b) Application of Mandatory Prepayments of
Term Loans by Order of Maturity. Any mandatory
prepayments of the Term Loans pursuant to subsection
2.4B(iii) shall be applied to reduce each scheduled
installment of principal of the Term Loans set forth in
subsection 2.4A that is unpaid at the time of such
prepayment first in forward order of maturity for
scheduled installments of principal occurring within the
twenty four-month period following the month in which
such prepayment occurs and second, to the extent of any
excess, on a pro rata basis.

(c) Application of Prepayments to Base Rate
Loans and Eurodollar Rate Loans. Considering Term Loans,
Revolving Term Loans and Revolving Loans being prepaid
separately, any prepayment thereof shall be applied first
to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments
required to be made by Company pursuant to subsection
2.6D. To the extent that Company is required to make a
mandatory prepayment of the Loans which is required to be
applied to Eurodollar Rate Loans (following the operation
of the immediately preceding sentence) on a date other
than the last day of an Interest Period applicable to a
Eurodollar Rate Loan, Agent shall hold the amount of such
prepayment in an account in the Agent's sole dominion and
control. Agent shall, in its sole discretion, invest the
amounts held by it in such account in Cash Equivalents.
On

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<PAGE> 73
the last day of the Interest Period relating to the
next-maturing Eurodollar Rate Loan, Agent shall apply the
amounts held by it in such account to the prepayment of
such maturing Eurodollar Rate Loan and Agent shall notify
Company of the application of such amounts. Upon the
direction of Company, Agent may apply any earnings on
amounts held in such account to the payment of accrued
interest on such Eurodollar Rate Loan or shall release
such earnings to Company.

C. GENERAL PROVISIONS REGARDING PAYMENTS.

(i) Manner and Time of Payment. All payments by
Company of principal, interest, fees and other Obligations
hereunder, under the Notes and under the other Loan Documents
shall be made in Dollars in same day funds, without defense,
setoff or counterclaim, free of any restriction or condition, and
delivered to Agent not later than 1:00 P.M. (New York time) on the
date due at its office located at the Funding and Payment Office
for the account of Lenders; funds received by Agent after that
time on such due date shall be deemed to have been paid by Company
on the next succeeding Business Day. Company hereby authorizes
Agent to charge its accounts with Agent in order to cause timely
payment to be made to Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being
available in its accounts for that purpose).

(ii) Application of Payments to Principal and
Interest. Except as otherwise provided in subsection 2.2C, all
payments in respect of the principal amount of any Loan shall
include payment of accrued interest on the principal amount being
repaid or prepaid, and all such payments shall be applied to the
payment of interest before application to principal.

(iii) Apportionment of Payments. Aggregate principal
and interest payments in respect of Term Loans, Revolving Term
Loans and Revolving Loans shall be apportioned among all
outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Agent
shall promptly distribute to each Lender, at its primary address
set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request, its Pro Rata
Share of all such payments received by Agent and the commitment
fees of such Lender when received by Agent pursuant to subsection
2.3. Notwithstanding the foregoing provisions of this subsection
2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any
Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of
its Pro Rata Share of any Eurodollar Rate Loans, Agent shall give
effect thereto in apportioning payments received thereafter.

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<PAGE> 74
(iv) Payments on Business Days. Whenever any payment
to be made hereunder shall be stated to be due on a day that is
not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be
included in the computation of the payment of interest hereunder
or of the commitment fees hereunder, as the case may be.

(v) Notation of Payment. Each Lender agrees that
before disposing of any Note held by it, or any part thereof
(other than by granting participations therein), that Lender will
make a notation thereon of all Loans evidenced by that Note and
all principal payments previously made thereon and of the date to
which interest thereon has been paid; provided that the failure to
make (or any error in the making of) a notation of any Loan made
under such Note shall not limit or otherwise affect the
obligations of Company hereunder or under such Note with respect
to any Loan or any payments of principal or interest on such Note.

2.5 USE OF PROCEEDS.

A. AGGREGATE TERM LOANS. The proceeds of the Term Loans,
together with up to $100,000,000 in proceeds of the initial Revolving Term
Loans and other funds available to Company, including, without limitation, the
proceeds of the IPO and approximately [$45,000,000] of cash on hand, shall be
applied by Company to (i) deposit funds in the Escrow Account in an aggregate
amount not to exceed $__________, (ii) refinance all indebtedness outstanding
under the Existing Credit Agreement (which indebtedness as of the Closing Date
is an aggregate principal amount of approximately [$270,000,000] plus accrued
interest), (iii) pay a termination fee in an aggregate amount not to exceed
$11,000,000 in connection with the termination of the Consulting Agreement, and
(iv) pay for the Transaction Costs in an aggregate amount of approximately
$10,000,000.

B. REVOLVING TERM LOANS; REVOLVING LOANS; SWING LINE LOANS.
The proceeds of the initial Revolving Term Loans of up to $100,000,000 shall be
applied by Company as provided in subsection 2.5A. The proceeds of any other
Revolving Term Loans, the proceeds of any Revolving Loans and the proceeds of
any Swing Line Loans shall be applied by Company after (and excluding) the
Closing Date for working capital or general corporate purposes of Company and
its Subsidiaries, which may include the repayment of the Swing Line Loans
pursuant to subsection 2.1A(iv), the reimbursement to any Issuing Lender of any
amounts drawn under any Letters of Credit issued by such Issuing Lender as
provided in subsection 3.3, the making of intercompany loans to any of
Company's wholly-owned Subsidiaries, in accordance with subsection 7.1(iv), for
their own working capital and general corporate purposes, the redemption,
repurchase or prepayments of principal in respect of Senior Subordinated Notes
(together with premium, if any, and accrued interest relating thereto) in
accordance with subsection 7.5A(vi), and the prepayments of principal in

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respect of Existing Funded Debt (together with the premium, if any, and accrued
interest relating thereto) in accordance with subsection 7.5B(iii).

C. MARGIN REGULATIONS. No portion of the proceeds of any
borrowing under this Agreement shall be used by Company or any of its
Subsidiaries in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board or to violate the Exchange Act, in each case as in
effect on the date or dates of such borrowing and such use of proceeds.

2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS.

Notwithstanding any other provision of this Agreement to
the contrary, the following provisions shall govern with respect to Eurodollar
Rate Loans as to the matters covered:

A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as
practicable after 10:00 A.M. (New York time) on each Interest Rate
Determination Date, Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the interest
rate that shall apply to the Eurodollar Rate Loans for which an interest rate
is then being determined for the applicable Interest Period and shall promptly
give notice thereof (by telefacsimile or by telephone confirmed in writing) to
Company and each Lender.

B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the
event that Agent shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the interest rate applicable to such Loans
on the basis provided for in the definition of Adjusted Eurodollar Rate, Agent
shall on such date give notice (by telefacsimile or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Agent notifies Company and Lenders that the circumstances giving rise to such
notice no longer exist and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by
Company.

C. ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS.
In the event that on any date any Lender shall have determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Agent) that the
making, maintaining or continuation

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of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance
by such Lender in good faith with any law, treaty, governmental rule,
regulation, guideline or order (or would conflict with any such treaty,
governmental rule, regulation, guideline or order not having the force of law
even though the failure to comply therewith would not be unlawful) or (ii) has
become impracticable, or would cause such Lender material hardship, as a result
of contingencies occurring after the date of this Agreement which materially
and adversely affect the interbank Eurodollar market or the position of such
Lender in that market, then, and in any such event, such Lender shall be an
"AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by
telephone confirmed in writing) to Company and Agent of such determination
(which notice Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to Eurodollar Rate Loans shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or
convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected
Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the
"AFFECTED LOANS"), shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into Base Rate Loans on the date of such termination. Notwithstanding
the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company
pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation,
Company shall have the option, subject to the provisions of subsection 2.6D, to
rescind such Notice of Borrowing or Notice of Conversion/Continuation as to all
Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Agent of such rescission on the date on which the Affected Lender
gives notice of its determination as described above (which notice of
rescission Agent shall promptly transmit to each other Lender). Except as
provided in the immediately preceding sentence, nothing in this subsection 2.6C
shall affect the obligation of any Lender other than an Affected Lender to make
or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in
accordance with the terms of this Agreement.

D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST
PERIODS. Company shall compensate each Lender, upon written request by that
Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts), for all reasonable losses, expenses and liabilities
(including, without limitation, any interest paid by that Lender to lenders of
funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by that Lender in connection with the
liquidation or re-employment of such funds) which that Lender will sustain or
has sustained: (i) if for any reason (other than a default by that Lender) a
borrowing of any Eurodollar Rate Loan does not occur on a

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date specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Conversion/Continuation
or a telephonic request for conversion or continuation, (ii) if any prepayment
or other principal payment or any conversion of any of its Eurodollar Rate
Loans occurs on a date prior to the last day of an Interest Period applicable
to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is
not made on any date specified in a notice of prepayment given by Company, or
(iv) as a consequence of any other default by Company in the repayment of its
Eurodollar Rate Loans when required by the terms of this Agreement.

E. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of any of
its branch offices or the office of an Affiliate of that Lender.

F. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6 and
under subsection 2.7A shall be made as though that Lender had actually funded
each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such Eurodollar deposit from an offshore
office of that Lender to a domestic office of that Lender in the United States
of America; provided, however, that each Lender may fund each of its Eurodollar
Rate Loans in any manner it sees fit and the foregoing assumptions shall be
utilized only for the purposes of calculating amounts payable under this
subsection 2.6 and under subsection 2.7A.

G. EURODOLLAR RATE LOANS AFTER DEFAULT. After the
occurrence of and during the continuation of a Potential Event of Default or an
Event of Default, unless waived in accordance with the provisions of subsection
11.6, (i) Company may not elect to have a Loan be made or maintained as, or
converted to, a Eurodollar Rate Loan after the expiration of any Interest
Period then in effect for that Loan and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation
given by Company with respect to a requested borrowing or
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Company.

2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY.

A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to
the provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change

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therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental
authority, in each case that is promulgated and becomes effective after the
date hereof, or the compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force
of law):

(i) subjects such Lender (or its applicable lending
office) to any additional Tax (other than any Tax on the overall
income of such Lender) with respect to this Agreement or any of
its obligations hereunder or any payments to such Lender (or its
applicable lending office) of principal, interest, fees or any
other amount payable hereunder;

(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency,
supplemental, special or other reserve), special deposit,
compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the
account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender
(other than any such reserve or other requirements with respect to
Eurodollar Rate Loans that are reflected in the definition of
Adjusted Eurodollar Rate); or

(iii) imposes any other condition (other than with
respect to a Tax matter) on or affecting such Lender (or its
applicable lending office) or its obligations hereunder, or the
interbank Eurodollar market;

and the result of any of the foregoing is to increase the cost to such Lender
of agreeing to make, making or maintaining Loans hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to
such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder; provided that a Lender shall not be entitled to avail itself of the
benefit of this subsection 2.7A to the extent that any such increased cost or
reduction in amounts was incurred more than one year prior to the time it gives
notice to Company (as provided in the next sentence) of the relevant
circumstance, unless such circumstance arose or became applicable
retrospectively, in which case such Lender shall not be limited to such one
year period so long as such Lender has given such notice to Company no later
than one year from the time such circumstance became applicable to such Lender.
Such Lender shall deliver to Company (with a copy to Agent) a written
statement, setting forth in reasonable

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detail the basis for calculating the additional amounts owed to such Lender
under this subsection 2.7A, which statement shall be conclusive and binding
upon all parties hereto absent manifest error.

B. WITHHOLDING OF TAXES.

(i) Payments to Be Free and Clear. Except as
provided specifically to the contrary in paragraphs (ii) and (iii)
below, all sums payable by Company or any other Loan Party to
Agent, either Arranger or any Lender under this Agreement or the
other Loan Documents shall be paid free and clear of and (except
to the extent required by law) without any deduction or
withholding on account of any Tax (other than a Tax on the overall
income of any Lender) imposed, levied, collected, withheld or
assessed by or within the United States of America or any
political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on
behalf of Company or by any federation or organization of which
the United States of America or any such jurisdiction is a member
at the time of payment.

(ii) Grossing-up of Payments. If Company or any other
Person is required by law to make any deduction or withholding on
account of any such Tax from any sum paid or payable by Company to
Agent or any Lender under any of the Loan Documents:

(a) Company shall notify Agent of any such
requirement or any change in any such requirement as soon
as Company becomes aware of it;

(b) Company shall pay any such Tax before the
date on which penalties attach thereto, such payment to
be made (if the liability to pay is imposed on Company)
for its own account or (if that liability is imposed on
Agent or such Lender, as the case may be) on behalf of
and in the name of Agent or such Lender;

(c) the sum payable by Company in respect of
which the relevant deduction, withholding or payment is
required shall be increased to the extent necessary to
ensure that, after the making of that deduction,
withholding or payment, Agent or such Lender, as the case
may be, receives on the due date and retains (free from
any liability in respect of any such deduction,
withholding or payment) a net sum equal to what it would
have received and so retained had no such deduction,
withholding or payment been required or made; and

(d) within 30 days after paying any sum from
which it is required by law to make any deduction or
withholding, and within 30

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days after the due date of payment of any Tax which it is
required by clause (b) above to pay, Company shall
deliver to Agent evidence satisfactory to the other
affected parties of such deduction, withholding or
payment and of the remittance thereof to the relevant
taxing or other authority;

provided that no such additional amount shall be required to be
paid to any Lender under clause (c) above except to the extent
that any change after the date hereof (in the case of each Lender
listed on the signature pages hereof) or after the date of the
Assignment Agreement pursuant to which such Lender became a Lender
(in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned therein shall
result in an increase in the rate of such deduction, withholding
or payment from that in effect at the date of this Agreement or at
the date of such Assignment Agreement, as the case may be, in
respect of payments to such Lender.

(iii) Evidence of Exemption from U.S. Withholding Tax.

(a) Each Lender that is organized under the
laws of any jurisdiction other than the United States or
any state or other political subdivision thereof (for
purposes of this subsection 2.7B(iii), a "NON-US LENDER")
shall deliver to Agent for transmission to Company, on or
prior to the Closing Date (in the case of each Lender
listed on the signature pages hereof) or on the date of
the Assignment Agreement pursuant to which it becomes a
Lender (in the case of each other Lender), and at such
other times as may be necessary in the determination of
Company or Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue
Service Form 1001 or 4224 (or any successor forms),
properly completed and duly executed by such Lender,
together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such
Lender is not subject to deduction or withholding of
United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or
other amounts payable under any of the Loan Documents or
(2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue
Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (1) above, a
Certificate re Non-Bank Status together with two original
copies of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by
such Lender, together with any other certificate or
statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or
withholding of United

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States federal income tax with respect to any payments to
such Lender of interest payable under any of the Loan
Documents.

(b) Each Lender required to deliver any
forms, certificates or other evidence with respect to
United States federal income tax withholding matters
pursuant to subsection 2.7B(iii)(a) hereby agrees, from
time to time after the initial delivery by such Lender of
such forms, certificates or other evidence, whenever a
lapse in time or change in circumstances renders such
forms, certificates or other evidence obsolete or
inaccurate in any material respect, such Lender shall (1)
deliver to Agent for transmission to Company two new
original copies of Internal Revenue Service Form 1001 or
4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as
the case may be, properly completed and duly executed by
such Lender, together with any other certificate or
statement of exemption required in order to confirm or
establish that such Lender is not subject to deduction or
withholding of United States federal income tax with
respect to payments to such Lender under the Loan
Documents or (2) immediately notify Agent and Company of
its inability to deliver any such forms, certificates or
other evidence.

(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c)
of subsection 2.7B(ii) if such Lender shall have failed
to satisfy the requirements of subsection 2.7B(iii)(a);
provided that if such Lender shall have satisfied such
requirements on the Closing Date (in the case of each
Lender listed on the signature pages hereof) or on the
date of the Assignment Agreement pursuant to which it
became a Lender (in the case of each other Lender),
nothing in this subsection 2.7B(iii)(c) shall relieve
Company of its obligation to pay any additional amounts
pursuant to clause (c) of subsection 2.7B(ii) in the
event that, as a result of any change after the date of
such satisfaction in any applicable law, treaty or
governmental rule, regulation or order, or any change
after the date of such satisfaction in the
interpretation, administration or application thereof,
such Lender is no longer properly entitled to deliver
forms, certificates or other evidence at a subsequent
date establishing the fact that such Lender is not
subject to withholding as described in subsection
2.7B(iii)(a).

C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have
determined that the adoption, effectiveness, phase-in or applicability after
the date hereof of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or, after the date hereof, any change therein or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the

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interpretation or administration thereof, or compliance by any Lender (or its
applicable lending office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall
pay to such Lender such additional amount or amounts as will compensate such
Lender or such controlling corporation on an after-tax basis for such
reduction; provided that a Lender shall not be entitled to avail itself of the
benefit of this subsection 2.7C to the extent that any such reduction in return
was incurred more than one year prior to the time it gives notice to Company
(as provided in the next sentence) of the relevant circumstance, unless such
circumstance arose or became applicable retrospectively, in which case such
Lender shall not be limited to such one year period so long as such Lender has
given such notice to Company no later than one year from the time such
circumstance became applicable to such Lender. Such Lender shall deliver to
Company (with a copy to Agent) a written statement, setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent manifest error.

2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE.

A. Each Lender and Issuing Lender agrees that, as promptly
as practicable after the officer of such Lender or Issuing Lender responsible
for administering the Loans or Letters of Credit of such Lender or Issuing
Lender, as the case may be, becomes aware of the occurrence of an event or the
existence of a condition that would cause such Lender to become an Affected
Lender or that would entitle such Lender or Issuing Lender to receive payments
under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent
with the internal policies of such Lender or Issuing Lender and any applicable
legal or regulatory restrictions, use reasonable efforts (i) to make, issue,
fund or maintain the Commitments of such Lender or the affected Loans or
Letters of Credit of such Lender or Issuing Lender through another lending or
letter of credit office of such Lender or Issuing Lender, or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an
Affected Lender would cease to exist or the additional amounts which would
otherwise be required to be paid to such Lender or Issuing Lender pursuant to
subsection 2.7 or subsection 3.6

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would be materially reduced and if, as determined by such Lender or Issuing
Lender in its sole discretion, the making, issuing, funding or maintaining of
such Commitments or Loans or Letters of Credit through such other lending or
letter of credit office or in accordance with such other measures, as the case
may be, would not otherwise materially adversely affect such Commitments or
Loans or Letters of Credit or the interests of such Lender or Issuing Lender;
provided that such Lender or Issuing Lender will not be obligated to utilize
such other lending or letter of credit office pursuant to this subsection 2.8
unless Company agrees to pay all incremental expenses incurred by such Lender
or Issuing Lender as a result of utilizing such other lending or letter of
credit office as described in clause (i) above. A certificate as to the amount
of any such expenses payable by Company pursuant to this subsection 2.8
(setting forth in reasonable detail the basis for requesting such amount)
submitted by such Lender or Issuing Lender to Company (with a copy to Agent)
shall be conclusive absent manifest error.

B. If Company receives a notice pursuant to subsection 2.7A,
2.7C or 3.6, so long as (i) no Potential Event of Default or Event of Default
shall have occurred and be continuing and Company has obtained a commitment
from another Lender or an Eligible Assignee to purchase at par such Lender's
Loans, Commitments and other Obligations and to assume all obligations of the
Lender to be replaced, (ii) at such time the Lender to be replaced is not an
Issuing Lender with respect to any Letters of Credit outstanding and (iii) such
Lender to be replaced is unwilling to withdraw the notice delivered to Company,
upon 30 days prior written notice to such Lender and Agent, Company may require
the Lender giving such notice to assign all of its Loans, Commitments and other
Obligations to such other Lender or Eligible Assignee pursuant to the
provisions of subsection 11.1B; provided that, prior to or concurrently with
such replacement (i) Company has paid to the Lender giving such notice all
amounts under subsections 2.7A, 2.7C and 3.6 through such date of replacement,
(ii) Company has paid to Agent the processing and recordation fee required to
be paid by subsection 11.1B(i) and (iii) all of the requirements for such
assignment contained in subsection 11.1B, including, without limitation, the
consent of Agent (if required) and the receipt by Agent of an executed
Assignment Agreement and other supporting documents, have been fulfilled.

2.9 REPLACEMENT OF LENDER.

In the event that Company receives a notice pursuant to
subsection 2.7A, 2.7C or 3.6 or in the event of a refusal by a Lender to
consent to a proposed change, waiver, discharge or termination with respect to
this Agreement which has been approved by the Requisite Lenders as provided in
subsection 11.6, Company shall have the right, if no Potential Event of Default
or Event of Default then exists, to replace such Lender (a "REPLACED LENDER")
with one or more Eligible Assignees (collectively, the "REPLACEMENT LENDER")
acceptable to Agent, provided that (i) at the time of any replacement pursuant
to this subsection 2.9, the Replacement Lender

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shall enter into one or more Assignment Agreements pursuant to subsection 11.1B
(and with all fees payable pursuant to such subsection 11.1B to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all
of the outstanding Loans and Commitments of, and in each case participations in
Letters of Credit and Swing Line Loans by, the Replaced Lender and, in
connection therewith, shall pay to (x) the Replaced Lender in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Lender, (B) an
amount equal to all unpaid drawings with respect to Letters of Credit that have
been funded by (and not reimbursed to) such Replaced Lender, together with all
then unpaid interest with respect thereto at such time and (C) an amount equal
to all accrued, but theretofore unpaid, fees owing to the Replaced Lender with
respect thereto, (y) the appropriate Issuing Lender an amount equal to such
Replaced Lender's Pro Rata Share of any unpaid drawings with respect to Letters
of Credit (which at such time remains an unpaid drawing) issued by it to the
extent such amount was not theretofore funded by such Replaced Lender, and (z)
Swing Line Lender an amount equal to such Replaced Lender's Pro Rata Share of
any Refunded Swing Line Loans to the extent such amount was not theretofore
funded by such Replaced Lender, and (ii) all obligations (including without
limitation all such amounts, if any, owing under subsection 2.6D) of Company
owing to the Replaced Lender (other than those specifically described in clause
(i) above in respect of which the assignment purchase price has been, or is
concurrently being, paid), shall be paid in full to such Replaced Lender
concurrently with such replacement. Upon the execution of the respective
Assignment Agreements, recordation of such assignment in the Register by Agent
pursuant to subsection 2.1D, the payment of amounts referred to in clauses (i)
and (ii) above and delivery to the Replacement Lender of the appropriate Note
or Notes executed by Company, the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to constitute a Lender hereunder
except with respect to indemnification provisions under this Agreement which by
the terms of this Agreement survive the termination of this Agreement, which
indemnification provisions shall survive as to such Replaced Lender.
Notwithstanding anything to the contrary contained above, no Issuing Lender may
be replaced hereunder at any time while it has Letters of Credit outstanding
hereunder unless arrangements satisfactory to such Issuing Lender (including
the furnishing of a Standby Letter of Credit in form and substance, and issued
by an issuer, satisfactory to such Issuing Lender or the furnishing of cash
collateral in amounts and pursuant to arrangements satisfactory to such Issuing
Lender) have been made with respect to such outstanding Letters of Credit.

2.10 CERTAIN MATTERS RELATING TO SENIOR SUBORDINATED NOTE INDENTURE.

Each party hereto hereby agrees that the Term Loans and
the Revolving Term Loans shall constitute "Term Loans" as such term is used in
the

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definition of the term "Permitted Indebtedness" in the Senior Subordinated Note
Indenture and in Sections 5.17 and 11.04 of the Senior Subordinated Note
Indenture.

SECTION 3. LETTERS OF CREDIT

3.1 ISSUANCE OF LETTERS OF CREDIT AND REVOLVING LENDERS' PURCHASE OF
PARTICIPATIONS THEREIN.

A. LETTERS OF CREDIT. In addition to Company requesting
that Revolving Lenders make Revolving Loans pursuant to subsection 2.1A(iii)
and that Swing Line Lender make Swing Line Loans pursuant to subsection
2.1A(iv), Company may request, in accordance with the provisions of this
subsection 3.1, (a) on the Closing Date solely for purposes of issuing Letters
of Credit to replace or support certain of the existing letters of credit of
Company and (b) from time to time during the period from the Business Day
immediately succeeding the Closing Date to but excluding the Revolving Loan
Commitment Termination Date, that one or more Revolving Lenders issue Letters
of Credit for the account of Company for the purposes specified in the
definitions of Commercial Letters of Credit and Standby Letters of Credit.
Subject to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Company herein set forth, any one or more
Revolving Lenders may, but (except as provided in subsection 3.1B(ii)) shall
not be obligated to, issue such Letters of Credit in accordance with the
provisions of this subsection 3.1; provided that Company shall not request that
any Revolving Lender issue (and no Revolving Lender shall issue):

(i) any Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving Loan Commitments
would exceed the Revolving Loan Commitments then in effect;

(ii) any Letter of Credit if, after giving effect to
such issuance, the Letter of Credit Usage would exceed
$50,000,000;

(iii) any Standby Letter of Credit having an expiration
date later than the earlier of (a) the date which is 30 days prior
to the Revolving Loan Commitment Termination Date and (b) the date
which is one year from the date of issuance of such Standby Letter
of Credit; provided that the immediately preceding clause (b)
shall not prevent any Issuing Lender from agreeing that a Standby
Letter of Credit will automatically be extended for one or more
successive periods not to exceed one year each unless such Issuing
Lender elects not to extend for any such additional period;
provided, further that such Issuing Lender shall deliver a written
notice to Agent setting forth the last day on which such Issuing
Lender may give notice that it will not extend such Standby Letter
of Credit (the "NOTIFICATION DATE" with respect to

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such Standby Letter of Credit) at least ten Business Days prior to
such Notification Date; and provided, further that, unless
Requisite Lenders otherwise consent, such Issuing Lender shall
give notice that it will not extend such Standby Letter of Credit
if it has knowledge that an Event of Default has occurred and is
continuing on such Notification Date, unless such Event of Default
has been waived in accordance with the provisions of subsection
11.6;

(iv) any Commercial Letter of Credit having an
expiration date (a) later than the earlier of (X) the date which
is 30 days prior to the Revolving Loan Commitment Termination Date
and (Y) the date which is 180 days from the date of issuance of
such Commercial Letter of Credit or (b) that is otherwise
unacceptable to the applicable Issuing Lender in its reasonable
discretion; or

(v) any Letter of Credit denominated in a currency
other than Dollars.

B. MECHANICS OF ISSUANCE.

(i) Notice of Issuance. Whenever Company desires the
issuance of a Letter of Credit, it shall deliver to the proposed
Issuing Lender (with a copy to Agent if Agent is not the proposed
Issuing Lender) a Notice of Issuance of Letter of Credit
substantially in the form of Exhibit III annexed hereto no later
than 10:00 A.M. (New York time) at least five Business Days (or
such shorter period as may be agreed to by the Issuing Lender in
any particular instance) in advance of the proposed date of
issuance. The Notice of Issuance of Letter of Credit shall
specify (a) the Revolving Lender requested to issue the Letter of
Credit, (b) the proposed date of issuance (which shall be a
Business Day), (c) the face amount of the Letter of Credit, (d)
the expiration date of the Letter of Credit, (e) whether the
Letter of Credit is to be a Standby Letter of Credit or a
Commercial Letter of Credit, (f) the name and address of the
beneficiary, and (g) either the verbatim text of the proposed
Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents and the verbatim
text of any certificates to be presented by the beneficiary which,
if presented by the beneficiary prior to the expiration date of
the Letter of Credit, would require the Issuing Lender to make
payment under the Letter of Credit; provided that the Issuing
Lender, in its reasonable discretion, may require changes in the
text of the proposed Letter of Credit or any such documents or
certificates; and provided, further that no Letter of Credit shall
require payment against a conforming draft to be made thereunder
on the same business day (under the laws of the jurisdiction in
which the office of the Issuing Lender to which such draft is
required to be presented is located) that such draft is presented
if such

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presentation is made after 10:00 A.M. (in the time zone of such
office of the Issuing Lender) on such business day.

Company shall notify the applicable Issuing
Lender (and Agent, if Agent is not such Issuing Lender) prior to
the issuance of any Letter of Credit in the event that any of the
matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of
Credit, and upon the issuance of any Letter of Credit Company
shall be deemed to have re-certified, as of the date of such
issuance, as to the matters to which Company is required to
certify in the applicable Notice of Issuance of Letter of Credit.

(ii) Determination of Issuing Lender. Upon receipt by
a proposed Issuing Lender of a Notice of Issuance of Letter of
Credit pursuant to subsection 3.1B(i) requesting the issuance of a
Letter of Credit, (a) in the event Agent is the proposed Issuing
Lender, Agent shall be the Issuing Lender with respect to such
Letter of Credit, notwithstanding the fact that the Letter of
Credit Usage with respect to such Letter of Credit and with
respect to all other Letters of Credit issued by Agent, when
aggregated with Agent's outstanding Revolving Loans, may exceed
Agent's Revolving Loan Commitment then in effect; and (b) in the
event any other Revolving Lender is the proposed Issuing Lender,
such Revolving Lender shall promptly notify Company and Agent
whether or not, in its sole discretion, it has elected to issue
such Letter of Credit, and (1) if such Lender so elects to issue
such Letter of Credit it shall be the Issuing Lender with respect
thereto and (2) if such Revolving Lender fails to so promptly
notify Company and Agent or declines to issue such Letter of
Credit, Company may request Agent or another Revolving Lender to
be the Issuing Lender with respect to such Letter of Credit in
accordance with the provisions of this subsection 3.1B.

(iii) Issuance of Letter of Credit. Upon satisfaction
or waiver (in accordance with subsection 11.6) of the conditions
set forth in subsection 4.3, the Issuing Lender shall issue the
requested Letter of Credit in accordance with the Issuing Lender's
standard operating procedures.

(iv) Notification to Revolving Lenders. Upon the
issuance of any Letter of Credit the applicable Issuing Lender
shall promptly notify Agent and each other Revolving Lender of
such issuance, which notice shall be accompanied by a copy of such
Letter of Credit or any amendment to any Letter of Credit.
Promptly after receipt of such notice, Agent shall notify each
Revolving Lender of the amount of such Revolving Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.

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(v) Reports to Revolving Lenders. Within 15 days
after the end of each month ending after the Closing Date, so long
as any Letter of Credit shall have been outstanding during such
month, each Issuing Lender shall deliver to each other Revolving
Lender and Agent a report setting forth the average for such month
of the daily maximum amount available to be drawn under the
Letters of Credit issued by such Issuing Lender that were
outstanding during such month.

C. REVOLVING LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS
OF CREDIT. Immediately upon the issuance of each Letter of Credit, each
Revolving Lender shall be deemed to, and hereby agrees to, have irrevocably
purchased, under its Revolving Loan Commitment, from the Issuing Lender a
participation in such Letter of Credit and drawings thereunder in an amount
equal to such Revolving Lender's Pro Rata Share of the maximum amount which is
or at any time may become available to be drawn thereunder. Upon satisfaction
of the conditions set forth in subsection 4.1, the Existing Letters of Credit
shall, effective as of the Closing Date, become Letters of Credit under this
Agreement to the same extent as if initially issued hereunder under the
Revolving Loan Commitment and each Revolving Lender shall be deemed to have
irrevocably purchased, under its Revolving Loan Commitment, from the Issuing
Lender(s) of such Existing Letters of Credit a participation in such Letters of
Credit and drawings thereunder in an amount equal to such Revolving Lender's
Pro Rata Share of the maximum amount which is or at any time may become
available to be drawn thereunder. All such Existing Letters of Credit which
become Letters of Credit under this Agreement shall be fully secured by the
Collateral commencing on the Closing Date to the same extent as if initially
issued hereunder on such date.

3.2 LETTER OF CREDIT FEES.

Company agrees to pay the following amounts to Agent (in
the case of the fees described in clauses (i)(b) and (ii)(b) below) and to each
Issuing Lender with respect to Letters of Credit issued by it (in the case of
all other amounts described in clauses (i), (ii) and (iii) below):

(i) with respect to each Standby Letter of Credit,
(a) a fronting fee equal to 0.25% per annum of the daily maximum
amount available to be drawn under such Standby Letter of Credit;
provided that in any event the minimum fronting fee for any
Standby Letter of Credit shall be $500; and (b) a letter of credit
fee equal to the Applicable Eurodollar Rate Margin multiplied by
the daily maximum amount available to be drawn under such Standby
Letter of Credit, in each case payable in arrears on and to (but
excluding) each February 28, May 31, August 31 and November 30 of
each year and computed on the basis of a 360-day year for the
actual number of days elapsed;

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(ii) with respect to each Commercial Letter of Credit,
(a) a fronting fee equal to 0.25% per annum of the daily maximum
amount available to be drawn under such Commercial Letter of
Credit (or such lower fronting fee as may be agreed to by the
applicable Issuing Lender with respect to such Commercial Letter
of Credit); and (b) a letter of credit fee equal to (x) the
Applicable Eurodollar Rate Margin minus (y) 0.25% per annum
multiplied by the daily maximum amount available to be drawn under
such Commercial Letter of Credit, in each case payable in arrears
on and to (but excluding) each February 28, May 31, August 31 and
November 30 of each year and computed on the basis of a 360-day
year for the actual number of days elapsed; and

(iii) with respect to the issuance, amendment,
assignment or transfer of each Letter of Credit and each drawing
made thereunder (without duplication of the fees payable under
clauses (i) and (ii) above), documentary and processing charges in
accordance with such Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment,
assignment transfer or drawing, as the case may be.

Promptly upon receipt by Agent of any amount described in clause (i)(b) or
(ii)(b) of this subsection 3.2, Agent shall distribute to each Revolving Lender
its Pro Rata Share of such amount. With respect to Existing Letters of Credit,
the fees described in clauses (i) and (ii) above shall accrue from and
including the Closing Date.

3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER LETTERS OF
CREDIT.

A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO
DRAWINGS. In determining whether to honor any drawing under any Letter of
Credit by the beneficiary thereof, the Issuing Lender shall be responsible only
to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they substantially comply on
their face with the requirements of such Letter of Credit.

B. REIMBURSEMENT BY COMPANY OF AMOUNTS DRAWN UNDER LETTERS
OF CREDIT. In the event an Issuing Lender has determined to honor a drawing
under a Letter of Credit issued by it, such Issuing Lender shall immediately
notify Company and Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "REIMBURSEMENT DATE") in an amount in Dollars in same day funds
equal to the amount of such drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Agent and such Issuing Lender prior to 11:00 A.M. (New York time) on
the date of such drawing that Company intends to reimburse such Issuing Lender
for the amount of such drawing with funds other than the proceeds of Revolving
Loans, Company shall be deemed to

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have given a timely Notice of Borrowing to Agent requesting Revolving Lenders
to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in
an amount in Dollars equal to the amount of such drawing and (ii) subject to
satisfaction or waiver of the conditions specified in subsection 4.2C,
Revolving Lenders shall, on the Reimbursement Date, make such Revolving Loans
that are Base Rate Loans in the amount of such drawing, the proceeds of which
shall be applied directly by Agent to reimburse such Issuing Lender for the
amount of such drawing; and provided, further that if for any reason proceeds
of Revolving Loans are not received by such Issuing Lender on the Reimbursement
Date in an amount equal to the amount of such drawing, Company shall reimburse
such Issuing Lender, on demand, in an amount in same day funds equal to the
excess of the amount of such drawing over the aggregate amount of such
Revolving Loans, if any, which are so received. Nothing in this subsection
3.3B shall be deemed to relieve any Revolving Lender from its obligation to
make the applicable Revolving Loans on the terms and conditions set forth in
this Agreement, and Company shall retain any and all rights it may have against
any Revolving Lender resulting from the failure of such Revolving Lender to
make such Revolving Loans under this subsection 3.3B.

C. PAYMENT BY REVOLVING LENDERS OF UNREIMBURSED DRAWINGS
UNDER LETTERS OF CREDIT.

(i) Payment by Revolving Lenders. In the event that
Company shall fail for any reason to reimburse any Issuing Lender
as provided in subsection 3.3B in an amount equal to the amount of
any drawing honored by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify
each other Revolving Lender of the unreimbursed amount of such
drawing and of such other Revolving Lender's respective
participation therein based on such Revolving Lender's Pro Rata
Share. Each Revolving Lender shall make available to such Issuing
Lender an amount equal to its respective participation, in Dollars
and in same day funds, at the office of such Issuing Lender
specified in such notice, not later than 1:00 P.M. (New York time)
on the first business day (under the laws of the jurisdiction in
which such office of such Issuing Lender is located) after the
date notified by such Issuing Lender. In the event that any
Revolving Lender fails to make available to such Issuing Lender on
such business day the amount of such Revolving Lender's
participation in such Letter of Credit as provided in this
subsection 3.3C, such Issuing Lender shall be entitled to recover
such amount on demand from such Revolving Lender together with
interest thereon at the rate customarily used by such Issuing
Lender for the correction of errors among banks for three Business
Days and thereafter at the Base Rate. Nothing in this subsection
3.3C shall be deemed to prejudice the right of any Revolving
Lender to recover from any Issuing Lender any amounts made
available by such Revolving Lender to such Issuing Lender pursuant
to this subsection 3.3C in the event that it is determined by the
final judgment of a court of

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competent jurisdiction that the payment with respect to a Letter
of Credit by such Issuing Lender in respect of which payment was
made by such Revolving Lender constituted gross negligence or
willful misconduct on the part of such Issuing Lender.

(ii) Distribution to Revolving Lenders of
Reimbursements Received From Company. In the event any Issuing
Lender shall have been reimbursed by other Revolving Lenders
pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by such Issuing Lender under a Letter of Credit
issued by it, such Issuing Lender shall distribute to each other
Revolving Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such drawing such other
Revolving Lender's Pro Rata Share of all payments subsequently
received by such Issuing Lender from Company in reimbursement of
such drawing when such payments are received. Any such
distribution shall be made to a Revolving Lender at its primary
address set forth below its name on the appropriate signature page
hereof or at such other address as such Revolving Lender may
request.

D. INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.

(i) Payment of Interest by Company. Company agrees
to pay to each Issuing Lender, with respect to drawings made under
any Letters of Credit issued by it, interest on the amount paid by
such Issuing Lender in respect of each such drawing from the date
of such drawing to but excluding the date such amount is
reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate
equal to (a) for the period from the date of such drawing to but
excluding the Reimbursement Date, the rate then in effect under
this Agreement with respect to Revolving Loans that are Base Rate
Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement
with respect to Revolving Loans that are Base Rate Loans.
Interest payable pursuant to this subsection 3.3D(i) shall be
computed on the basis of a 360-day year for the actual number of
days elapsed in the period during which it accrues and shall be
payable on demand or, if no demand is made, on the date on which
the related drawing under a Letter of Credit is reimbursed in
full.

(ii) Distribution of Interest Payments by Issuing
Lender. Promptly upon receipt by any Issuing Lender of any
payment of interest pursuant to subsection 3.3D(i) with respect to
a drawing under a Letter of Credit issued by it, (a) such Issuing
Lender shall distribute to each other Revolving Lender, out of the
interest received by such Issuing Lender in respect of the period
from the date of such drawing to but excluding the date on which
such Issuing Lender is reimbursed for the amount of such drawing
(including any such

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reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B), the amount that such other Revolving Lender
would have been entitled to receive in respect of the letter of
credit fee that would have been payable in respect of such Letter
of Credit for such period pursuant to subsection 3.2 if no drawing
had been made under such Letter of Credit, and (b) in the event
such Issuing Lender shall have been reimbursed by other Revolving
Lenders pursuant to subsection 3.3C(i) for all or any portion of
such drawing, such Issuing Lender shall distribute to each other
Revolving Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such drawing such other
Revolving Lender's Pro Rata Share of any interest received by such
Issuing Lender in respect of that portion of such drawing so
reimbursed by other Revolving Lenders for the period from the date
on which such Issuing Lender was so reimbursed by other Revolving
Lenders to and including the date on which such portion of such
drawing is reimbursed by Company. Any such distribution shall be
made to a Revolving Lender at its primary address set forth below
its name on the appropriate signature page hereof or at such other
address as such Revolving Lender may request.

3.4 OBLIGATIONS ABSOLUTE.

The obligation of Company to reimburse each Issuing
Lender for drawings made under the Letters of Credit issued by it and to repay
any Revolving Loans made by Revolving Lenders pursuant to subsection 3.3B and
the obligations of Revolving Lenders under subsection 3.3C(i) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation,
any of the following circumstances:

(i) any lack of validity or enforceability of any
Letter of Credit;

(ii) the existence of any claim, set-off, defense or
other right which Company or any Revolving Lender may have at any
time against a beneficiary or any transferee of any Letter of
Credit (or any Persons for whom any such transferee may be
acting), any Issuing Lender or other Revolving Lender or any other
Person or, in the case of a Revolving Lender, against Company,
whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between Company or one of its Subsidiaries
and the beneficiary for which any Letter of Credit was procured)
other than the defense of payment in accordance with the terms of
this Agreement;

(iii) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;

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(iv) payment to the beneficiary of such Letter of
Credit by the applicable Issuing Lender under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of
Credit;

(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or
prospects of Holdings or any of its Subsidiaries;

(vi) any breach of this Agreement or any other Loan
Document by any party thereto (other than a breach by the
applicable Issuing Lender relating to the Letter of Credit in
question);

(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or

(viii) the fact that an Event of Default or a Potential
Event of Default shall have occurred and be continuing;

provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).

3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.

A. INDEMNIFICATION. In addition to amounts payable as
provided in subsection 3.6, Company hereby agrees to protect, indemnify, pay
and save harmless each Issuing Lender from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable fees, expenses and disbursements of counsel and of internal counsel)
which such Issuing Lender may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful
misconduct of such Issuing Lender as determined by a final judgment of a court
of competent jurisdiction or (b) subject to the following clause (ii), the
wrongful dishonor by such Issuing Lender of a proper demand for payment made
under any Letter of Credit issued by it or (ii) the failure of such Issuing
Lender to honor a drawing under any such Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or future de jure
or de facto government or governmental authority (all such acts or omissions
herein called "GOVERNMENTAL ACTS").

B. NATURE OF ISSUING LENDERS' DUTIES. As between Company
and any Issuing Lender, Company assumes all risks of the acts and omissions of,
or misuse of

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the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, such Issuing Lender shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) failure of the beneficiary
of any such Letter of Credit to comply fully with any conditions required in
order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond
the control of such Issuing Lender, including without limitation any
Governmental Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of such Issuing Lender's rights or powers hereunder.

In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this subsection 3.5B,
any action taken or omitted by any Issuing Lender under or in connection with
the Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to Company.

Notwithstanding anything to the contrary contained in
this subsection 3.5, Company shall retain any and all rights it may have
against any Issuing Lender for any liability arising solely out of the gross
negligence or willful misconduct of such Issuing Lender, as determined by a
final judgment of a court of competent jurisdiction.

3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.

In the event that any Issuing Lender or any Revolving
Lender shall determine (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto) that any law, treaty
or governmental rule, regulation or order, or any change therein or in the
interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that is
promulgated and becomes effective after the date hereof, or the

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compliance by any Issuing Lender or any Revolving Lender with any guideline,
request or directive issued or made after the date hereof by any central bank
or other governmental or quasi-governmental authority (whether or not having
the force of law):

(i) subjects such Issuing Lender or such Revolving
Lender (or its applicable lending or letter of credit office) to
any additional Tax (other than any Tax on the overall income of
such Issuing Lender or Revolving Lender) with respect to the
issuing or maintaining of any Letters of Credit or the purchasing
or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such
being imposed on or suffered by any particular Issuing Lender;

(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency,
supplemental, special or other reserve), special deposit,
compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or
participations therein purchased by any Revolving Lender; or

(iii) imposes any other condition (other than with
respect to a Tax matter) on or affecting such Issuing Lender or
such Revolving Lender (or its applicable lending or letter of
credit office) regarding this Section 3 or any Letter of Credit or
any participation therein;

and the result of any of the foregoing is to increase the cost to such Issuing
Lender or such Revolving Lender of agreeing to issue, issuing or maintaining
any Letter of Credit or agreeing to purchase, purchasing or maintaining any
participation therein or to reduce any amount received or receivable by such
Issuing Lender or such Revolving Lender (or its applicable lending or letter of
credit office) with respect thereto; then, in any case, Company shall promptly
pay to such Issuing Lender or such Revolving Lender, upon receipt of the
statement referred to in the next sentence, such additional amount or amounts
as may be necessary to compensate such Issuing Lender or such Revolving Lender
for any such increased cost or reduction in amounts received or receivable
hereunder; provided that a Lender shall not be entitled to avail itself of the
benefit of this subsection 3.6 to the extent that any such increased cost or
reduction in amounts was incurred more than one year prior to the time it gives
notice to Company (as provided in the next sentence) of the relevant
circumstance, unless such circumstance arose or became applicable
retrospectively, in which case such Lender shall not be limited to such one
year period so long as such Lender has given such notice to Company no later
than one year from the time such circumstance became applicable to such Lender.
Such Issuing Lender or such Revolving Lender shall deliver to Company a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Issuing Lender or such

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Revolving Lender under this subsection 3.6, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.

SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT

The obligations of Lenders to make Loans and the issuance
of Letters of Credit hereunder are subject to the satisfaction of the following
conditions.

4.1 CONDITIONS TO TERM LOANS AND INITIAL REVOLVING TERM LOANS,
REVOLVING LOANS AND SWING LINE LOANS.

The obligations of Lenders to make the Term Loans,
Revolving Term Loans and any Revolving Loans and Swing Line Loans to be made on
the Closing Date are, in addition to the conditions precedent specified in
subsection 4.2, subject to prior or concurrent satisfaction of the following
conditions:

A. LOAN PARTY DOCUMENTS. On or before the Closing Date,
Company shall deliver or cause to be delivered to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following with respect to Holdings, Company and
each Subsidiary of Company, each, unless otherwise noted, dated the Closing
Date:

(i) Certified copies of its Certificate or Articles
of Incorporation (including, in the case of Holdings, the Holdings
Certificate of Designation), together with a good standing
certificate from the Secretary of State of the jurisdiction of its
incorporation and each other state in which it is qualified as a
foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such states, each dated a
recent date prior to the Closing Date;

(ii) Copies of its Bylaws, certified as of the Closing
Date by its corporate secretary or an assistant secretary;

(iii) Resolutions of its Board of Directors (a)
approving and authorizing the execution, delivery and performance
of each of the Loan Documents to which it is a party, (b)
approving and authorizing the execution, delivery and performance
of the Related Transaction Documents to which it is a party and,
(c) to the extent applicable, approving and authorizing the
Transactions in accordance with and in the manner contemplated by
the Loan Documents and the Related Transaction Documents, in each
case, certified as of the Closing Date by its corporate secretary
or an assistant secretary as being in full force and effect
without modification or amendment;

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(iv) Signature and incumbency certificates of its
officers executing each of the Loan Documents to which it is a
party;

(v) Executed originals of this Agreement, the Notes
(duly executed in accordance with subsection 2.1E, drawn to the
order of each Lender and the Swing Line Lender and with
appropriate insertions) and the other Loan Documents, including,
without limitation, the Holdings Pledge Agreement, the Holdings
Security Agreement, the Company Security Agreement, the Company
Trademark Security Agreement, the Company Pledge Agreement, the
Collateral Account Agreement, the Subsidiary Guaranty executed by
each of Company's Subsidiaries, the Subsidiary Security Agreements
executed by each of Company's Subsidiaries, the Subsidiary
Trademark Security Agreements executed by each of Company's
Subsidiaries, and the Subsidiary Pledge Agreements executed by
each of Company's Subsidiaries;

(vi) A Margin Determination Certificate demonstrating
in reasonable detail the Leverage Ratio for the four consecutive
Fiscal Quarters ended as of the last day of the Fiscal Quarter
ended immediately prior to the Closing Date; and

(vii) Such other documents as Agent or either Arranger
may reasonably request.

B. DELIVERY OF MORTGAGES; TITLE INSURANCE POLICIES.
Schedule 4.1B annexed hereto shall set forth all Real Property Assets of the
Loan Parties as of the Closing Date. On or before the Closing Date, Agent
shall have received from the Loan Parties (i) fully executed Mortgages
encumbering the fee interest and/or leasehold interest of the Loan Parties in
each Real Property Asset designated as a "Mortgaged Property" on Schedule 4.1B
annexed hereto (each a "MORTGAGED PROPERTY" and collectively the "MORTGAGED
PROPERTIES"), together with evidence (which may be in the form of recording
instructions accepted by the title insurer) that counterparts of the Mortgages
have been or will promptly be recorded in all places to the extent necessary or
desirable, in the reasonable judgment of Agent, so as to effectively create a
valid and enforceable first priority lien (subject only to Permitted
Encumbrances) on each Mortgaged Property in favor of Agent (or such other
trustee as may be required or desired under local law) for the benefit of
Lenders; (ii) in the case of each Real Property Asset constituting a fee
Mortgaged Property, a preliminary title report, title commitment, or other
search of title satisfactory to Agent obtained by the Loan Parties in respect
of each Mortgaged Property; (iii) an opinion of Latham & Watkins with respect
to the enforceability of the Mortgages and such other matters as Agent may
request, in form and substance satisfactory to Agent; (iv) in the case of each
real property leasehold interest of the Loan Parties constituting Mortgaged
Property, such consents from the landlords on such real property as may be
obtained by Agent with the cooperation of Loan Parties, which consents shall be
in

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form and substance reasonably satisfactory to Agent; (v) with respect to each
Real Property Asset constituting fee property, Title Insurance Policies, with
respect to the Mortgaged Properties so designated in Schedule 4.1B annexed
hereto, in amounts not less than the respective amounts designated on such
Schedule 4.1B with respect to any particular Mortgaged Property; (vi)
information sufficient for Agent to determine whether (1) any Mortgaged
Property is in an area designated by the Federal Emergency Management Agency as
having special flood or mudslide hazards (a "FLOOD HAZARD PROPERTY") and (2)
the community in which each Flood Hazard Property is located is participating
in the National Flood Insurance Program; (vii) if there are any Flood Hazard
Properties, such Loan Party's written acknowledgment of receipt of written
notification from Agent (a) as to the existence of each such Flood Hazard
Property and (b) as to whether the community in which each such Flood Hazard
Property is located is participating in the National Flood Insurance Program;
(viii) the evidence of insurance with respect to the Mortgaged Properties
required to be provided to Agent pursuant to the Mortgages, including flood
insurance with respect to each Flood Hazard Property located in a community
which is participating in the National Flood Insurance Program; and (ix)
certified copies of the land trust agreement and all related documentation with
respect to any Land Trust by which title to any of the Real Property Assets is
held, including evidence of the release of any collateral assignments of
beneficial interests with respect thereto and certified copies of authorization
by Company for execution of all Loan Documents by the Land Trustee. Pursuant
to Section 90/4(b) of the Illinois Responsible Property Transfer Act of 1988,
the parties hereto acknowledge that they understand the purpose and intent of
the environmental disclosure required pursuant to such statute and hereby waive
the 30-day time periods with respect to notice of such disclosure.

C. SECURITY INTERESTS. To the extent not otherwise
satisfied pursuant to subsection 4.1B, on or prior to the Closing Date, each
Loan Party shall have taken or caused to be taken (and Agent shall have
received satisfactory evidence thereof) such actions (other than the filing or
recording of items described in clauses (ii), (iii) and (iv) below) in such a
manner so that Agent has a valid and perfected first priority security interest
as of such date in the entire Collateral (subject to Liens permitted under
subsection 7.2 and except to the extent any such security interest cannot be
granted under applicable laws), including, without limitation, a lien on the
Escrow Account and all of the funds and any other assets deposited therein.
Such actions shall include, without limitation, (i) delivery to Agent of
certificates (which certificates shall be registered in the name of Agent or
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock powers duly endorsed in blank, all in form and substance satisfactory to
Agent) representing the capital stock pledged pursuant to the Pledge Agreements
and promissory notes duly endorsed and delivery to Agent of all other
instruments (duly endorsed where appropriate) evidencing the Collateral, (ii)
delivery to Agent of Uniform Commercial Code financing statements as to the
Collateral for all jurisdictions as may be necessary or desirable to perfect
the security interests in the Collateral, (iii) delivery to Agent of the
Company Trademark Security

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Agreement and the Subsidiary Trademark Security Agreements together with the
cover sheet required for filing with the United States Patent and Trademark
Office and (iv) delivery to Agent of such other documents and instruments that
Agent deems necessary or advisable to establish, preserve and perfect the first
priority Liens granted to Agent on behalf of Lenders under the Collateral
Documents.

D. INITIAL PUBLIC OFFERING. On or prior to the Closing Date, (i)
Holdings shall have issued and sold Holdings Common Stock pursuant to the IPO,
the aggregate gross cash proceeds of Holdings Common Stock issued on the
Closing Date received by Holdings shall be not less than $100,000,000, and (ii)
Holdings shall have used such proceeds to (x) irrevocably deposit approximately
$____________ into the Escrow Account so that the Holdings Preferred Stock can
be redeemed and all accrued and unpaid dividends with respect thereto through
and including __________, 1996 and all accrued and unpaid interest with respect
thereto through and including the Redemption Date can be paid pursuant to the
Preferred Stock Redemption Agreement, (y) pay Transaction Costs, and (z) to
contribute the remaining proceeds to Company (the "CONTRIBUTION AMOUNT"), and
the IPO shall have been consummated pursuant to terms and conditions
satisfactory to Arrangers. Holdings shall have issued and sold not more than
[30%] (on a fully diluted basis) of Holdings Common Stock in the IPO and upon
consummation of the IPO, no person or group (other than Yucaipa and Yucaipa
Investors) shall own or control, directly or indirectly, more than ___% of the
issued and outstanding Holdings Voting Stock. The Registration Statement shall
have been declared effective under the Securities Act of 1933, as amended, and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued or threatened by the Securities and Exchange Commission.
[Holdings shall have delivered to Agent an Officers' Certificate in form and
substance reasonably satisfactory to Agent setting forth in reasonable detail
the percentage of the issued and outstanding Holdings Common Stock (on a fully
diluted basis) issued and sold on the Closing Date.] [INFORMATION REGARDING
OWNERSHIP OF HOLDING'S COMMON STOCK ON A PRO FORMA BASIS WILL ALSO BE REQUIRED
TO THE EXTENT SUCH INFORMATION IS NOT DISCLOSED IN THE REGISTRATION STATEMENT.]

E. ARRANGEMENTS REGARDING REDEMPTION OF HOLDINGS PREFERRED
STOCK. On the Closing Date, (a) [Holdings] and each Preferred Stock Holder
shall have entered into the Preferred Stock Redemption Agreement, pursuant to
which Holdings shall redeem, on the Redemption Date, all of the issued and
outstanding Holdings Preferred Stock for an aggregate amount not to exceed
$40,000,000, and pay, on the Redemption Date, all accrued and unpaid dividends
with respect to the Holdings Preferred Stock through and including ________,
1996 in an aggregate amount not to exceed $_________ and all accrued and unpaid
interest with respect thereto through and including the Redemption Date in an
aggregate amount not to exceed $_________, (b) [Holdings], each Preferred Stock
Holder and _________ shall have entered into the Escrow Agreement, pursuant to
which Holdings shall deposit approximately $_________ to redeem the Holdings
Preferred Stock pursuant to the

<PAGE> 100

Preferred Stock Redemption Agreement and to make all related dividend and
interest payments, in each case all on terms satisfactory to the Arrangers. On
the Closing Date, Agent shall have received evidence in form and substance
satisfactory to Agent that (i) dividends on the Holdings Preferred Stock will
stop accruing on November __, 1996, and (ii) the aggregate amount of funds
contained in the Escrow Account does not exceed $___________.

F. REFINANCING OF EXISTING CREDIT AGREEMENT; EXISTING LETTERS OF
CREDIT. On the Closing Date, Company shall have repaid in full all amounts
outstanding under the Existing Credit Agreement and shall have terminated any
commitments to lend or make other extensions of credit thereunder. Company
shall have delivered to Agent all termination statements, assignment documents,
satisfactions and releases as to any financing statements, mortgages, deeds of
trust and assignments which shall release all liens securing any and all
indebtedness under the Existing Credit Agreement. Company shall have furnished
to Agent copies of all Existing Letters of Credit and all amendments to such
Existing Letters of Credit. Company shall have paid to the lenders with
respect to such Existing Letters of Credit all fees and other amounts owing
with respect thereto to but excluding the Closing Date.

G. EVIDENCE OF REMAINING INDEBTEDNESS. On the Closing Date,
Agent shall have received an Officers' Certificate of Company stating that
after giving effect to the transaction described in subsection 4.1F, the
Indebtedness of the Loan Parties (other than Indebtedness under the Loan
Documents and the Senior Subordinated Note Indenture) shall consist of (i)
approximately [$6,200,000] of outstanding principal amount of Existing Funded
Debt described in Part I of Schedule 7.1 annexed hereto and (ii) obligations
under existing Capital Leases of all Loan Parties as of the Closing Date (which
shall be described in Part I of Schedule 7.1 annexed hereto) and reflected as
capital lease obligations on the consolidated balance sheets of Holdings
prepared in accordance with GAAP do not exceed $[160,000,000]. The terms and
conditions of all such remaining Indebtedness shall be in form and in substance
satisfactory to Agent and Arrangers.

H. TERMINATION OF CONSULTING AGREEMENT; MANAGEMENT AGREEMENT. On
or prior to the Closing Date, (i) Holdings and Company shall have terminated
the Consulting Agreement and shall have paid to Yucaipa all amounts owing
thereunder or owing in connection with the termination thereof (including
without limitation a termination fee) in an aggregate amount not to exceed
$11,000,000, all on terms and conditions satisfactory to Arrangers, and (ii)
Holdings and Company shall have entered into the Management Agreement with
Yucaipa, which Management Agreement shall be in form and substance satisfactory
to Arrangers.

I. RELATED TRANSACTION DOCUMENTS; SPECIFIED EXISTING DOCUMENTS.
(i) Agent shall have received a fully executed copy of each Related Transaction
Document and each Specified Existing Document, in each case as amended,

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supplemented, restated or otherwise modified on or prior to the Closing Date,
and each of the Related Transaction Documents and each of the Specified
Existing Documents, in each case as so amended, supplemented, restated or
otherwise modified, shall be in full force and effect and shall be in form and
substance satisfactory to Agent and shall not have been modified or waived in
any respect without the consent of Agent, (ii) none of Holdings and its
Subsidiaries shall have failed in any material respect to perform any material
obligation or covenant required by any Related Transaction Documents to be
performed or complied with by it on or before the Closing Date, (iii) all
conditions to the Transactions (including without limitation any necessary
third party consents and approvals) shall have been satisfied or waived
pursuant to all applicable terms and proceedings and by Agent, and (iv) Agent
shall have received an Officers' Certificate from Company in form and substance
satisfactory to Agent to the effect set forth in this sentence, which Officers'
Certificate shall have attached thereto a copy of each such Related Transaction
Document (together with a copy of any amendment, supplement, restatement or
other modification thereof entered into on or prior to the Closing Date) as in
effect on the Closing Date and a copy of each Specified Existing Document
(together with a copy of any amendment, supplement, restatement or other
modification thereof listed on Schedule 5.18 annexed hereto), as in effect on
the Closing Date.

J. OPINIONS OF COUNSEL. On the Closing Date, Lenders and their
respective counsel shall have received (i) originally executed copies of one or
more favorable written opinions of Latham & Watkins, counsel for the Loan
Parties, and Thomas Roti, General Counsel of Company, in form and substance
reasonably satisfactory to Agent and Arrangers and their counsel, dated as of
the Closing Date and setting forth substantially the matters in the opinions
designated in Exhibit VIII-A and Exhibit VIII-B, respectively, annexed hereto
and as to such other matters as Agent acting on behalf of Lenders or either
Arranger may reasonably request, together with evidence satisfactory to Agent
and Arrangers that Company has requested such counsel to deliver such opinions
to Lenders, and (ii) copies of all opinions issued by counsel to any Loan Party
or issued to any Loan Party relating to the Transactions (whether pursuant to
any of the Related Transaction Documents or otherwise), each of which opinions
shall be accompanied by a written authorization from counsel issuing such
opinion stating that Agent, Arrangers and Lenders may rely on such opinions as
though such opinions were addressed to Agent, Arrangers and Lenders.

K. OPINIONS OF AGENT'S AND ARRANGERS' COUNSEL. On the Closing
Date, Lenders shall have received originally executed copies of one or more
favorable written opinions of O'Melveny & Myers, counsel to Agent and
Arrangers, dated as of the Closing Date, substantially in the form of Exhibit
IX annexed hereto and as to such other matters as Arrangers and Agent acting on
behalf of Lenders may reasonably request.

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L. PARENT MERGER. On the Closing Date, the Parent Merger
Certificate shall be in full force and effect and none of the terms thereof
(including any conditions to the consummation of the Parent Merger contained
therein) shall have been modified or waived in any material respect without the
consent of Agent, Arrangers and Requisite Lenders. On the Closing Date,
Company shall have provided evidence in form and substance satisfactory to
Agent and Arrangers that the Parent Merger has been consummated and has become
effective in all respects in accordance with the Parent Merger Certificate. On
the Closing Date, Company shall have provided evidence in form and substance
satisfactory to Agent and Arrangers that after giving effect to the Parent
Merger, Holdings owns 100% of the outstanding capital stock of Company. On the
Closing Date, Company shall have cancelled the Parent Intercompany Note.

M. AUDITOR'S LETTER. On or prior to the Closing Date, Agent
shall have received an executed Auditor's Letter.

N. FEES. On or prior to the Closing Date, Company shall have
paid to Agent and Arrangers, for distribution (as appropriate) to Agent,
Arrangers and Lenders, the fees payable on the Closing Date referred to in
subsection 2.3.

O. NO MATERIAL ADVERSE CHANGE. Since October 28, 1995, no
material adverse change (in the sole opinion of Agent) in the business, assets,
liabilities, results of operations, properties, condition (financial or
otherwise) or prospects of Holdings and its Subsidiaries, taken as a whole,
shall have occurred.

P. NO DISRUPTION OF FINANCIAL AND CAPITAL MARKETS. There shall
have been no material adverse change after September __, 1996 to the
syndication markets for credit facilities similar in nature to the credit
facilities provided herein and there shall not have occurred and be continuing
a material disruption of or material adverse change in financial, banking or
capital markets that would have an adverse effect on such syndication market,
in each case as determined by Arrangers in their sole discretion.

Q. FINANCIAL STATEMENTS. On or prior to the Closing Date, Agent,
Arrangers and Lenders shall have received (i) the audited consolidated balance
sheets of Holdings and its Subsidiaries as of October 28, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows of
Holdings and its Subsidiaries for the Fiscal Year then ended, (ii) the
unaudited consolidated balance sheets of Holdings and its Subsidiaries as of
January 20, 1996, April 13, 1996, and August 3, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows of
Holdings and its Subsidiaries for the Fiscal Quarters then ended, (iii) the
unaudited consolidated balance sheets of Holdings and its Subsidiaries as at
the last day of each of the three most recently ended Fiscal Periods that ended
more than 30 days prior to the Closing Date and the related consolidated
statements

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of income and cash flows of Holdings and its Subsidiaries for each such Fiscal
Period then ended and for the fiscal year-to-date fiscal period ended on the
last day of the most recent of such Fiscal Periods, (iv) projected consolidated
financial statements (including balance sheets and statements of operations and
cash flows) of Holdings and its Subsidiaries for the seven-year period after
the Closing Date, and (v) a pro forma consolidated balance sheet of Holdings
and its Subsidiaries as of the Closing Date after giving effect to the IPO and
the other Transactions to be consummated on the Closing Date, each of which
shall be (a) substantially consistent with any financial statements for the
same periods delivered to Arrangers prior to September 5, 1996 and, in the case
of any such projected financial statements for subsequent periods,
substantially consistent with any projected financial results for such periods
delivered to Arrangers prior to September 5, 1996, and (b) otherwise in form
and substance satisfactory to the Arrangers.

R. SOLVENCY ASSURANCES. On or prior to the Closing Date, Agent,
Arrangers and Lenders shall have received a certificate from the chief
financial officer of Company substantially in the form of Exhibit XXIV annexed
hereto, in each case supporting the conclusions that, after giving effect to
the IPO and the other Transactions, Company will not be insolvent or will not
be rendered insolvent by the indebtedness incurred in connection therewith, or
be left with unreasonably small capital with which to engage in its businesses
or have incurred debts beyond its ability to pay such debts as they mature.

S. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.
Each of Holdings and Company shall have delivered to Agent an Officers'
Certificate, in form and substance satisfactory to Agent, to the effect that
the representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date and that each Loan Party shall
have performed in all material respects all agreements and satisfied all
conditions which this Agreement provides shall be performed or satisfied by it
on or before the Closing Date except as otherwise disclosed to and agreed to in
writing by Agent, Arrangers and Requisite Lenders.

T. GOVERNMENTAL AUTHORIZATIONS. Loan Parties shall have obtained
all Governmental Authorizations, if any, required under any applicable law
(including without limitation the Illinois Responsible Property Transfer Act).

U. CONSENTS. On or prior to the Closing Date, Company shall have
delivered to Agent such other consents, waivers, amendments or approvals as any
of the Loan Parties is required to obtain in connection with any material
agreement in order to enter into and carry out its obligations under this
Agreement, the other Loan Documents and the Related Transaction Documents and
to consummate the Transactions, including, without limitation, consents from
the holders of the Existing

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Funded Debt, and each other lender to any of the foregoing Persons as may be
required, in each case in form and substance satisfactory to Agent.

V. TRANSACTION COSTS. On or prior to the Closing Date, Agent and
Arrangers shall have received evidence in form and substance satisfactory to
Agent and Arrangers that the aggregate amount of all Transaction Costs paid or
payable by Loan Parties is approximately $10,000,000.

W. INSURANCE CERTIFICATES. On or prior to the Closing Date,
Agent shall have received insurance certificates (or other satisfactory
evidence of endorsements) naming Agent as loss payee or additional insured
under all insurance policies of each Loan Party, in each case in form and
substance satisfactory to Agent.

X. COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby, by the other Loan Documents and by the Related Transaction
Documents and all documents incidental thereto not previously found acceptable
by Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Agent and such counsel, and Agent and such counsel shall
have received all such counterpart originals or certified copies of such
documents as Agent may reasonably request.

4.2 CONDITIONS TO ALL LOANS.

The obligations of Lenders to make Loans on each Funding Date
(other than any Funding Date relating to any Refunded Swing Line Loans) are
subject to the following further conditions precedent:

A. Agent shall have received before that Funding Date, in
accordance with the provisions of subsection 2.1B, an originally executed
Notice of Borrowing, in each case signed by the chief executive officer, the
chief financial officer or the treasurer of Company or by any executive officer
or cash management personnel of Company designated by any of the
above-described officers on behalf of Company in a writing delivered to Agent.

B. In the case of the initial Revolving Term Loans in an
aggregate principal amount not exceeding $100,000,000, on or prior to the
Funding Date for such Revolving Term Loans, the Term Loans shall have been
made, and at least one Business Day prior to the Funding Date for any other
Revolving Term Loans, Revolving Loans or the initial Swing Line Loans, the Term
Loans shall have been made.

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C. As of that Funding Date:

(i) The representations and warranties contained herein
and in the other Loan Documents shall be true, correct and complete in
all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except to the extent
such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall have
been true, correct and complete in all material respects on and as of
such earlier date;

(ii) No event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by
such Notice of Borrowing that would constitute an Event of Default or
a Potential Event of Default;

(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before
that Funding Date;

(iv) No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any
Lender from making the Loans to be made by it on that Funding Date;

(v) The making of the Loans requested on such Funding
Date shall not violate any law including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X of the Board
of Governors of the Federal Reserve System; and

(vi) There shall not be pending or, to the knowledge of
any of the Loan Parties (other than Land Trusts), threatened, any
action, suit, proceeding, governmental investigation or arbitration
against or affecting any of the Loan Parties or any property of any of
the Loan Parties that has not been disclosed by Company in writing
pursuant to subsection 5.6 or 6.1(x) prior to the making of the last
preceding Loans (or, in the case of the initial Loans, prior to the
execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in
either event, in the opinion of Agent or of Requisite Lenders, would
be expected to have a Material Adverse Effect; and no injunction or
other restraining order shall have been issued and no hearing to cause
an injunction or other restraining order to be issued shall be pending
or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, the Transactions, the

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transactions contemplated by this Agreement or the making of Loans
hereunder.

4.3 CONDITIONS TO LETTERS OF CREDIT.

The issuance of any Letter of Credit hereunder (whether or not
the applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:

A. On or before the date of issuance of the initial Letter of
Credit pursuant to this Agreement, the Term Loans shall have been made.

B. On or before the date of issuance of such Letter of Credit,
Agent shall have received, in accordance with the provisions of subsection
3.1B(i), an originally executed Notice of Issuance of Letter of Credit, in each
case signed by the chief executive officer, the chief financial officer or the
treasurer of Company or by any executive officer or cash management personnel
of Company designated by any of the above-described officers on behalf of
Company in a writing delivered to Agent, together with all other information
specified in subsection 3.1B(i) and such other documents or information as the
applicable Issuing Lender may reasonably require in connection with the
issuance of such Letter of Credit.

C. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsection 4.2C shall be satisfied to the
same extent as if the issuance of such Letter of Credit were the making of a
Loan and the date of issuance of such Letter of Credit were a Funding Date.

SECTION 5. REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Agreement and to
make the Loans, to induce Issuing Lenders to issue Letters of Credit and to
induce other Lenders to purchase participations therein, each of Holdings,
Parent and Company represents and warrants to each Lender, on the date of this
Agreement, on each Funding Date and on the date of issuance of each Letter of
Credit, that the following statements are true, correct and complete:

5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.

A. ORGANIZATION AND POWERS. Each Loan Party (other than Land
Trusts) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Each Land Trust is an
Illinois land trust duly formed and validly existing under the laws of the
State of Illinois. Each Loan Party has all

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requisite corporate or trust power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Loan Documents and the Related Transaction
Documents, and to carry out the transactions contemplated thereby, in each case
to the extent it is a party thereto.

B. QUALIFICATION AND GOOD STANDING. Each Loan Party (other than
Land Trusts) is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its present business and operations, except in jurisdictions where the failure
to be so qualified or in good standing has not had and will not have, either
individually or in the aggregate for all such jurisdictions, a Material Adverse
Effect.

C. CONDUCT OF BUSINESS. Each Loan Party is engaged only in the
businesses permitted to be engaged in pursuant to subsection 7.14.

D. SUBSIDIARIES. All of the Subsidiaries of Holdings as of the
Closing Date are identified in Schedule 5.1 annexed hereto, as said Schedule
5.1 may be supplemented from time to time pursuant to the provisions of
subsection 6.1 (xvii). The capital stock of each of the Subsidiaries of
Holdings identified in Schedule 5.1 annexed hereto is duly authorized, validly
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Each of the Subsidiaries of Holdings identified in Schedule 5.1
annexed hereto is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or to have such corporate power and authority
has not had and will not have, either individually or in the aggregate for all
such failures, a Material Adverse Effect. Schedule 5.1 annexed hereto
correctly sets forth for Holdings and each of its Subsidiaries (i) the
ownership interest of Holdings and each of its Subsidiaries in each of the
Subsidiaries of Holdings identified therein, (ii) the jurisdiction of
incorporation of Holdings and each such Subsidiary, (iii) the number of issued
and outstanding shares of capital stock of Holdings and each such Subsidiary
(both before and after giving effect to the Transactions), and (iv) whether any
such Subsidiary is inactive. The aggregate assets and the annual revenues of
all Subsidiaries identified as inactive on Schedule 5.1 annexed hereto does and
will not exceed $750,000 and $750,000, respectively.

5.2 AUTHORIZATION OF BORROWING, ETC.

A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents and the Related Transaction Documents have
been duly

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authorized by all necessary corporate or trust action on the part of each Loan
Party a party thereto.

B. NO CONFLICT. The execution, delivery and performance by each
Loan Party of the Loan Documents and the Related Transaction Documents to which
such Loan Party is a party, and the consummation of the Transactions and the
other transactions contemplated by the Loan Documents and the Related
Transaction Documents do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to any of the Loan Parties,
the Certificate or Articles of Incorporation or Bylaws of any of the Loan
Parties or any order, judgment or decree of any court or other agency of
government binding on any of the Loan Parties, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of any of the Loan Parties which could
reasonably be expected to result in a Material Adverse Effect, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of any of the Loan Parties (other than any Liens created under any of
the Loan Documents in favor of Agent on behalf of Lenders), or (iv) require any
approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of any of the Loan Parties, except for such approvals or
consents which will be obtained on or before the Closing Date (or, in the case
of any Loan Document executed and delivered after the Closing Date, on or
before such date of execution and delivery) and disclosed in writing to Lenders
or such approvals or consents the failure to obtain could not reasonably be
expected to individually or in the aggregate result in a Material Adverse
Effect.

C. GOVERNMENTAL CONSENTS. The execution, delivery and
performance by each Loan Party of the Loan Documents and the Related
Transaction Documents to which such Loan Party is a party, and the consummation
of the Transactions and the other transactions contemplated by the Loan
Documents and the Related Transaction Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body, except for (i) filings and recordings required in connection with the
perfection of the security interests granted pursuant to the Loan Documents and
(ii) such registrations, consents, approvals, notices or other actions which
have been obtained on or before the Closing Date and are described on Schedule
5.2C annexed hereto.

D. BINDING OBLIGATION. Each of the Loan Documents and the
Related Transaction Documents to which any Loan Party is a party has been duly
executed and delivered by each Loan Party thereto and is the legally valid and
binding obligation of such Loan Party, enforceable against such Loan Party in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.

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E. VALID ISSUANCE OF HOLDINGS COMMON STOCK, HOLDINGS PREFERRED
STOCK AND THE SENIOR SUBORDINATED NOTES.

(i)(A) Holdings Common Stock. As of the Closing Date, after
giving effect to the Transactions, there are _______ shares of issued and
outstanding Class A Holdings Common Stock and _______ shares of issued and
outstanding Class B Holdings Common Stock. Such shares of Holdings Common
Stock have been duly and validly issued, fully paid and nonassessable. Except
as provided in the Shareholders Agreement with respect to the Holdings Common
Stock and except as provided in the Holdings Certificate of Designation with
respect to the Holdings Preferred Stock, no stockholder of Holdings has or will
have any preemptive rights to subscribe for any additional equity Securities of
Holdings. Any issuance and sale of Holdings Common Stock, upon such issuance
and sale, will either (a) have been registered or qualified under applicable
federal and state securities laws or (b) be exempt therefrom.

(B) Holdings Preferred Stock. As of the Closing Date,
after giving effect to the Transactions, there are 40,000 shares of issued and
outstanding Holdings Preferred Stock. Such shares of Holdings Preferred Stock
have been duly and validly issued, fully paid and nonassessable. Except as
provided in the Shareholders Agreement with respect to the Holdings Common
Stock and except as provided in the Holdings Certificate of Designation with
respect to the Holdings Preferred Stock, no stockholder of Holdings has or will
have any preemptive rights to subscribe for any additional equity Securities of
Holdings. Any issuance and sale of Holdings Preferred Stock, upon such
issuance and sale, will either (a) have been registered and qualified under
applicable federal and state securities laws or (b) be exempt therefrom.

(ii) Senior Subordinated Notes. Company had the corporate
power and authority to issue the Senior Subordinated Notes outstanding as of
the Closing Date at the time of issuance thereof and has the corporate power
and authority to issue the Senior Subordinated Notes described in clause (ii)
of the definition thereof. The Senior Subordinated Notes are, and the Senior
Subordinated Notes described in clause (ii) of the definition thereof, when
issued and paid for, will be, the legally valid and binding obligations of
Company, enforceable against Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability. The subordination provisions
of the Senior Subordinated Notes and of the Senior Subordinated Note Indenture
are, and the subordination provisions of the Senior Subordinated Notes
described in clause (ii) of the definition thereof, when such Senior
Subordinated Notes are issued and paid for, will be, enforceable against the
holders thereof in accordance with their respective terms and the Loans and all
other monetary Obligations hereunder are and will be within clauses (a)(i) and
(a)(ii) of the definition of "Permitted Indebtedness", within the definition of
"Senior Indebtedness"

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and within clause (i) of the definition of "Designated Senior Indebtedness", in
each case included in such provisions or otherwise included in the Senior
Subordinated Note Indenture. The Term Loans, the Revolving Term Loans and all
other monetary Obligations relating thereto or to the Revolving Term
Commitments are and will be within clause (a)(i) of the definition of
"Permitted Indebtedness", as defined in the Senior Subordinated Note Indenture
and the Revolving Loans and all other monetary Obligations relating thereto or
to the Revolving Loan Commitments, Swing Line Loans, Swing Line Loan
Commitments or the Letters of Credit are and will be within clause (a)(ii) of
the definition of "Permitted Indebtedness", as defined in the Senior
Subordinated Note Indenture. The monetary Obligations of the Company's
Subsidiaries under the Loan Documents are within the definition of "Guarantor
Senior Indebtedness", within the definition of "Designated Senior
Indebtedness", and within clauses (a)(i) and (a)(ii) of the definition of
"Permitted Indebtedness", in each case included in the subordination provisions
of the Senior Subordinated Notes and of the Senior Subordinated Note Indenture
or otherwise included in the Senior Subordinated Note Indenture. The Senior
Subordinated Notes either (a) have been registered or qualified under
applicable federal and state securities laws or (b) are exempt therefrom.

5.3 FINANCIAL CONDITION.

Company has heretofore delivered to Lenders, at Lenders'
request, the following financial statements and information: (i) the audited
consolidated balance sheets of Holdings and its Subsidiaries as at October 28,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows of Holdings and its Subsidiaries for the Fiscal Year then ended,
(ii) the unaudited consolidated balance sheets of Holdings and its Subsidiaries
as of January 20, 1996, April 13, 1996, and August 3, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows of
Holdings and its Subsidiaries for the Fiscal Quarters then ended, and (iii) the
unaudited consolidated balance sheets of Holdings and its Subsidiaries as at
the last day of each of the three most recently ended Fiscal Periods that ended
more than 30 days prior to the Closing Date and the related consolidated
statements of income and cash flows of Holdings and its Subsidiaries for each
such Fiscal Period then ended and for the fiscal year-to-date fiscal period
ended on the last day of the most recent of such Fiscal Periods. All such
statements were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated basis) of the entities described in such
financial statements as at the respective dates thereof and the results of
operations and cash flows (on a consolidated basis) of the entities described
therein for each of the periods then ended, subject, in the case of any such
unaudited financial statements, to changes resulting from audit and normal
year-end adjustments. As of the Closing Date, none of the Loan Parties has
(and will not following the funding of the initial Loans) any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the foregoing
financial statements or the notes

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thereto and which in any such case is material in relation to the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Loan Parties, taken as a whole, other than the incurrence of the
Obligations and (ii) contingent obligations or liabilities for taxes, long-term
leases or forward or long-term commitments disclosed on Schedule 5.3 annexed
hereto. Immediately prior to and immediately after the Transactions, BDI and
BPI own no assets other than Cash and Cash Equivalents or promissory notes
issued by Company, which Cash and Cash Equivalents or promissory notes are in
amounts not less than $90,000 for BDI and not less than $260,000 for BPI.

5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS.

Since October 28, 1995, no event or change has occurred that
has caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect. Since October 28, 1995, none of the Loan Parties has directly
or indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so except as permitted by
subsection 7.5.

5.5 TITLE TO PROPERTIES; LIENS.

Each Loan Party has (i) good, sufficient and legal title,
subject only to Liens permitted under subsection 7.2, to (in the case of fee
interests in real property), (ii) valid leasehold interests in (in the case of
leasehold interests in real or personal property), or (iii) good title to (in
the case of all other personal property) all of its properties and assets
reflected in the financial statements referred to in subsection 5.3 or in the
most recent financial statements delivered pursuant to subsection 6.1, in each
case except for assets disposed of since the date of such financial statements
in the ordinary course of business or as otherwise permitted under subsection
7.7. Except as permitted by this Agreement, all such properties and assets are
free and clear of Liens.

5.6 LITIGATION; ADVERSE FACTS.

Except as described in Schedule 5.6 annexed hereto, there are
no actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of any of the Loan Parties) at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, pending or, to the knowledge of any Loan Party (other than Land
Trusts), threatened against or affecting any of the Loan Parties or any
property of any of the Loan Parties that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. No Loan
Party is (i) in violation of any applicable laws that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
or (ii) subject to or in default with respect to any final judgments, writs,
injunctions,

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decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.

5.7 PAYMENT OF TAXES.

Except to the extent permitted by subsection 6.3, all material
tax returns and reports of the Loan Parties required to be filed by any of them
have been timely filed, and all material taxes, assessments, fees and other
governmental charges upon the Loan Parties and upon their respective
properties, assets, income, businesses and franchises which are due and payable
have been paid when due and payable. No Loan Party (other than Land Trusts)
knows of any material proposed tax assessment against any of the Loan Parties
which is not being actively contested by such Loan Party in good faith and by
appropriate proceedings; provided that such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have
been made or provided therefor.

5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.

A. No Loan Party is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
of its Contractual Obligations, and no condition exists that, with the giving
of notice or the lapse of time or both, would constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if
any, individually or in the aggregate, would not have a Material Adverse
Effect.

B. No Loan Party is a party to or is otherwise subject to any
agreements or instruments or any charter or other internal restrictions which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.

5.9 GOVERNMENTAL REGULATION.

No Loan Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or the Investment Company Act of 1940 or under any other federal
or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the
Obligations unenforceable.

5.10 SECURITIES ACTIVITIES.

A. No Loan Party is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.

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B. Following application of the proceeds of each Loan, not more
than 25% of the value of the assets (either of Holdings only or of the Loan
Parties on a consolidated basis) subject to the provisions of subsection 7.2 or
7.7 or subject to any restriction contained in any agreement or instrument,
between Holdings or any other Loan Party and any Lender or any Affiliate of any
Lender, relating to Indebtedness and within the scope of subsection 8.2, will
be Margin Stock.

5.11 EMPLOYEE BENEFIT PLANS.

A. Each of the Loan Parties and each of their respective ERISA
Affiliates are in material compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed all
their material obligations under each Employee Benefit Plan.

B. No ERISA Events have occurred or are reasonably expected to
occur which individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of any of the Loan Parties or any of their
respective ERISA Affiliates in excess of $1,500,000 during the term of this
Agreement.

C. Except as disclosed on Schedule 5.11 annexed hereto and except
to the extent required under Section 4980B of the Internal Revenue Code, no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employees of any of the
Loan Parties or any of their respective ERISA Affiliates.

D. As of the most recent valuation date for any Pension Plan, the
Amount of Unfunded Benefit Liabilities individually or in the aggregate for all
Pension Plans (excluding for purposes of such computation any Pension Plans
which have a negative Amount of Unfunded Benefit Liabilities), does not exceed
$3,000,000.

5.12 CERTAIN FEES.

Except as disclosed on Schedule 5.12 annexed hereto, no
broker's or finder's fee or commission will be payable with respect to this
Agreement or any of the transactions contemplated hereby or by the other
Transactions, and each of Holdings and Company hereby indemnifies Lenders
against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.

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5.13 ENVIRONMENTAL PROTECTION.

Except as set forth in Schedule 5.13 annexed hereto:

(i) the operations of each of the Loan Parties
(including, without limitation, all operations and conditions at or in
the Facilities) comply in all material respects with all Environmental
Laws;

(ii) each of the Loan Parties has obtained all
Governmental Authorizations under Environmental Laws necessary to
their respective operations, and all such Governmental Authorizations
are in good standing, and each of the Loan Parties is in compliance
with all material terms and conditions of such Governmental
Authorizations;

(iii) no Loan Party has received (a) any notice or claim to
the effect that it is or may be liable to any Person as a result of or
in connection with any Hazardous Materials except as would not
reasonably be expected to have a Material Adverse Effect or (b) any
letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. Section 9604) or comparable state laws regarding any
matter which could reasonably be expected to result in a Material
Adverse Effect, and, to the best of Holdings' or Company's knowledge,
none of the operations of any of the Loan Parties is the subject of
any federal or state investigation relating to or in connection with
any Hazardous Materials at any Facility or at any other location;

(iv) none of the operations of any of the Loan Parties is
subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which if
adversely determined could reasonably be expected to have a Material
Adverse Effect;

(v) none of the Loan Parties or any of their respective
Facilities or operations are subject to any outstanding written order
or agreement with any governmental authority or private party relating
to (a) any Environmental Laws or (b) any Environmental Claims which
could reasonably be expected to result in a liability to Company or
any of its Subsidiaries without giving effect to any indemnification
provided pursuant to Section 5.9 of the Stock Purchase Agreement in
excess of $10,000,000 individually or in the aggregate;

(vi) none of the Loan Parties has any contingent liability
in connection with any Release of any Hazardous Materials by any of
the Loan Parties which could reasonably be expected to result in a
liability to Company or any of its Subsidiaries without giving effect
to any indemnification provided

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pursuant to Section 5.9 of the Stock Purchase Agreement in excess of
$10,000,000 individually or in the aggregate;

(vii) none of the Loan Parties or to the best knowledge of
Holdings or Company, any predecessor of any of the Loan Parties has
filed any notice under any Environmental Law indicating past or
present treatment or Release of Hazardous Materials at any Facility
except as would not reasonably be expected to have a Material Adverse
Effect, and none of Loan Parties' operations involves the generation,
transportation, treatment, storage or disposal of hazardous waste, as
defined under 40 C.F.R. Parts 260-270 or any state equivalent other
than in compliance in all material respects with all Environmental
Laws;

(viii) no Hazardous Materials exist on, under or about any
Facility in a manner that has a reasonably possibility of giving rise
to an Environmental Claim having a Material Adverse Effect, and no
Loan Party has filed any notice or report of a Release of any
Hazardous Materials that has a reasonable possibility of giving rise
to an Environmental Claim having a Material Adverse Effect;

(ix) none of the Loan Parties or, to the best knowledge of
Holdings or Company, any of their respective predecessors has disposed
of any Hazardous Materials in a manner that has a reasonable
possibility of giving rise to an Environmental Claim having a Material
Adverse Effect;

(x) no unpermitted underground storage tanks or surface
impoundments are on or at any Facility; and

(xi) no material Lien in favor of any Person relating to
or in connection with any Environmental Claim has been filed or has
been attached to any Facility.

Notwithstanding anything in this subsection 5.13 to the contrary, no event or
condition has occurred with respect to any of the Loan Parties relating to any
Environmental Laws or any Release of Hazardous Materials at any Facility or any
other location, including, without limitation, any matter disclosed on Schedule
5.13 annexed hereto, which, individually, or in the aggregate, has had a
Material Adverse Effect.

5.14 EMPLOYEE MATTERS.

There is no strike or work stoppage in existence or threatened
involving any of the Loan Parties that could reasonably be expected to have a
Material Adverse Effect.

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5.15 SOLVENCY.

Each of the Loan Parties (other than Land Trusts) is and, upon
the incurrence of any Obligations by Company on any date on which this
representation is made, will be, Solvent.

5.16 DISCLOSURE.

No representation or warranty of any of the Loan Parties
contained in any Loan Document, or in any other document, certificate or
written statement furnished to Lenders by or at the direction of any Loan Party
for use in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact (known to Holdings or Company, in the case of any document not furnished
by it) necessary in order to make the statements contained herein or therein
not misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Holdings or
Company, as the case may be, to be reasonable at the time made, it being
recognized by Lenders that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections may differ from the projected results. There are no facts
known (or which should upon the reasonable exercise of diligence be known) to
Holdings or Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such
other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby. Without limiting the
generality of the foregoing, as of the Closing Date, the financial condition of
Company and its Subsidiaries is in all material respects as set forth on the
pro forma balance sheet of Holdings and its Subsidiaries dated as of the
Closing Date delivered to Agent, Arrangers and Lenders pursuant to subsection
4.1Q.

5.17 INTELLECTUAL PROPERTY.

A. All Intellectual Property as of the Closing Date is identified
on Schedule 5.17 annexed hereto. Except as set forth on Schedule 5.17 annexed
hereto, Company and its Subsidiaries own, or are licensed to use, the
Intellectual Property and all such Intellectual Property is fully protected and
duly and properly registered, filed or issued in the appropriate office and
jurisdictions for such registrations, filing or issuances, and the Loan Parties
own all of the right, title and interest in and to the "Dominick's" trademark,
other trademarks set forth on Schedule A to the Company Trademark Security
Agreement or the Subsidiary Trademark Security Agreements, as the case may be,
and all of the other Intellectual Property under the applicable laws

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of the United States free and clear of any Lien (other than the Liens created
in favor of Agent on behalf of Lenders pursuant to the Loan Documents).

B. Except as disclosed in Schedule 5.17, no material claim has
been asserted by any Person with respect to the use of any such Intellectual
Property, or challenging or questioning the validity or effectiveness of any
such Intellectual Property. Except as disclosed in Schedule 5.17, the use of
such Intellectual Property by Company or any of its Subsidiaries does not
infringe on the rights of any Person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liabilities on the part of
Company or any of its Subsidiaries that are material to Company or any of its
Subsidiaries. The consummation of the transactions contemplated by this
Agreement or the other Transactions will not in any material manner or to any
material extent impair the ownership of (or the license to use, as the case may
be) any of such Intellectual Property by Company or any of its Subsidiaries.

5.18 RELATED TRANSACTION DOCUMENTS; SPECIFIED EXISTING DOCUMENTS.

Company has delivered to Lenders complete and correct copies
of the Related Transaction Documents, in each case as in effect as of the
Closing Date, and of all exhibits and schedules thereto. Except as set forth
in Schedule 5.18 annexed hereto, none of the Specified Existing Documents have
been amended, supplemented, restated or otherwise modified on or before the
Closing Date since the date any such Specified Existing Document was first
entered into. Company has delivered to Lenders complete and correct copies of
the Specified Existing Documents (together with each amendment, supplement,
restatement or modification of Specified Existing Documents as set forth in
Schedule 5.18 annexed hereto), in each case as in effect as of the Closing
Date, and of all exhibits and schedules thereto.

5.19 WORKMEN'S COMPENSATION CLAIMS.

There are no workmen's compensation claims against or relating
to any Loan Party that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.

5.20 PERMITS.

Except as disclosed in Schedule 5.20 annexed hereto, each of
the Loan Parties, prior to and after giving effect to the Transactions, has
such certificates, permits, licenses, franchises, consents, approvals,
authorizations and clearances that are material to the condition (financial or
otherwise), business or operations of any Loan Party ("PERMITS") and is (and
will be immediately after the consummation of the Transactions) in compliance
in all material respects with all applicable laws as are necessary to own,
lease or operate its properties and to conduct its businesses in the

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manner as presently conducted and to be conducted immediately after the
consummation of the Transactions, and all such Permits are valid and in full
force and effect and will be valid and in full force and effect immediately
upon consummation of the Transactions. Each of the Loan Parties, prior to and
after giving effect to the Transactions, is and will be in compliance in all
material respects with its obligations under such Permits and no event has
occurred that allows, or after notice or lapse of time would allow, revocation
or termination of such Permits, except for any such revocation or termination
which could not reasonably be expected to individually or in the aggregate have
a Material Adverse Effect.

5.21 PARENT MERGER.

Upon the filing of the Certificate of the Merger with the
Secretary of State of the State of Delaware, the Parent Merger shall become
effective and (i) as a result of the Parent Merger, Company, as the surviving
corporation of the Parent Merger, by operation of law (with no further action
required), will succeed to all of the rights, assets, properties, obligations
and liabilities of Parent as of the effective date of the Parent Merger, which
date shall be the date of filing of such certificate.

SECTION 6. AFFIRMATIVE COVENANTS

Each of Holdings and Company covenants and agrees that, so
long as any of the Commitments hereunder shall remain in effect and until
payment in full of all of the Loans and other Obligations and the cancellation
or expiration of all Letters of Credit, unless Requisite Lenders shall
otherwise give prior written consent, each of Holdings and Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.

6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

Holdings will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Agent and Lenders:

(i) Fiscal Period Financials: as soon as practicable and
in any event within 30 days (or (a) in the case of the first Fiscal
Period of each Fiscal Year, 50 days (provided that such delivery shall
be within 30 days if Company's management information system permits),
(b) in the case of the last Fiscal Period in any Fiscal Quarter (other
than the last Fiscal Quarter in any Fiscal Year), 45 days or (c) in
the case of the last Fiscal Period in any Fiscal Year, 90 days) after
the end of each Fiscal Period ending after the Closing Date, (1) the
consolidated balance sheets of Company and its Subsidiaries as at the

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end of such Fiscal Period, (2) the related consolidated statements of
operations, stockholders' equity and cash flows of Company and its
Subsidiaries, and (3) a schedule containing a summary of sales and a
summary of comparable store sales growth, in each case for each of
Company and its Subsidiaries on a consolidated basis, the Dominick's
division and the Omni division, in each case for such Fiscal Period
and for the period from the beginning of the then current Fiscal Year
to the end of such Fiscal Period, setting forth in each case in
comparative form the corresponding figures for the corresponding
periods of the previous Fiscal Year and the corresponding figures from
the consolidated plan and financial forecast for the current Fiscal
Year delivered pursuant to subsection 6.1(xiii), all in reasonable
detail and certified by the chief financial officer of Company that
they fairly present the financial condition of such entities as at the
dates indicated and the results of its operations and its cash flows
for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments;

(ii) Quarterly Financials: as soon as practicable and in
any event within 45 days after the end of each of the first three
Fiscal Quarters of each Fiscal Year and within 90 days after the end
of the fourth Fiscal Quarter of each Fiscal Year, the consolidated
balance sheets of each of Holdings and its Subsidiaries and of Company
and its Subsidiaries, in each case as at the end of such Fiscal
Quarter and the related consolidated statements of operations,
stockholders' equity and cash flows of each of Holdings and its
Subsidiaries and Company and its Subsidiaries, as applicable, for such
Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, setting forth
in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the
corresponding figures from the consolidated plan and financial
forecast for the current Fiscal Year delivered pursuant to subsection
6.1(xiii), all in reasonable detail and certified by the chief
financial officer of Company that they fairly present the financial
condition of each of Holdings and its Subsidiaries and Company and its
Subsidiaries, as the case may be, as at the dates indicated and the
results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments;

(iii) Year-End Financials: as soon as practicable and in
any event within 90 days after the end of each Fiscal Year, (a) the
consolidated balance sheets of each of Holdings and its Subsidiaries
and Company and its Subsidiaries, in each case as at the end of such
Fiscal Year and the related consolidated statements of operations,
stockholders' equity and cash flows of each of Holdings and its
Subsidiaries and Company and its Subsidiaries, as applicable, for such
Fiscal Year, setting forth in each case in comparative form the
corresponding figures for the previous Fiscal Year and the
corresponding

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figures from the consolidated plan and financial forecast for the
current Fiscal Year delivered pursuant to subsection 6.1(xiii) for the
Fiscal Year covered by such financial statements, all in reasonable
detail and certified by the chief financial officer of Company that
they fairly present the financial condition of each of Holdings and
its Subsidiaries and Company and its Subsidiaries, as the case may be,
as at the dates and the results of their operations and their cash
flows for the periods indicated, and (b) in the case of such
consolidated financial statements, (1) a report thereon of Ernst &
Young LLP or other independent certified public accountants of
recognized national standing selected by Company and satisfactory to
Agent, which report shall be unqualified as to scope of audit, shall
express no doubts about the ability each of Holdings and its
Subsidiaries and of Company and its Subsidiaries to continue as a
going concern, and shall state that such consolidated financial
statements fairly present the consolidated financial position of each
of Holdings and its Subsidiaries and Company and its Subsidiaries as
at the dates indicated and the results of their operations and their
cash flows for the periods indicated in conformity with GAAP applied
on a basis consistent with prior years (except as otherwise disclosed
in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards
and (2) a letter from Ernst & Young LLP or other independent certified
public accountants, substantially in the form of Exhibit XI annexed
hereto with such changes as are approved by Agent, acknowledging that
Lenders will receive such consolidated financial statements and such
report and will use such financial statements and report in their
credit analyses of Holdings and its Subsidiaries and Company and its
Subsidiaries;

(iv) Officers', Margin Determination and Compliance
Certificates: (a) together with each delivery of financial statements
of Holdings and its Subsidiaries and Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above, (1) an Officers'
Certificate of Company stating that the signers have reviewed the
terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions
and condition of each of Holdings and its Subsidiaries and Company and
its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such
Officers' Certificate, of any condition or event that constitutes an
Event of Default or Potential Event of Default, or, if any such
condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; (2) a Margin Determination
Certificate demonstrating in reasonable detail the Leverage Ratio for
the four consecutive

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Fiscal Quarters ending on the last day of the accounting period
covered by such financial statements; and (3) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of
the applicable accounting periods with the restrictions contained in
Section 7; (b) together with each delivery of financial statements of
Holdings and its Subsidiaries and Company and its Subsidiaries
pursuant to subdivision (ii) above, (x) a written notice of the
acquisition of any Store Land Property during the Fiscal Quarter
covered by such financial statements, which notice shall include the
purchase price of each such Store Land Property, and (y) a written
notice of any sale of any Store Land Property during such Fiscal
Quarter, which notice shall include the sale price and the purchase
price of each such Store Land Property; and (c) within 100 days after
the beginning of each Fiscal Year (other than Fiscal Year 1997) and in
any event on or prior to the date of any mandatory prepayments made
pursuant to subsection 2.4B(iii)(c) during such Fiscal Year, an
Officers' Certificate of Company setting forth the Consolidated Excess
Cash Flow for the Fiscal Year covered by such financial statements and
the Leverage Ratio for such Fiscal Year and demonstrating in
reasonable detail the derivation of such Consolidated Excess Cash Flow
and such Leverage Ratio;

(v) Reconciliation Statements: if, as a result of any
change in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 5.3, the consolidated financial statements of Holdings and
its Subsidiaries or Company and its Subsidiaries delivered pursuant to
subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1 will
differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies
been made, then, subject to subsection 1.2, (a) together with the
first delivery of financial statements pursuant to subdivision (i),
(ii), (iii) or (xiii) of this subsection 6.1 following such change,
consolidated financial statements of Holdings and its Subsidiaries or
Company and its Subsidiaries for the current Fiscal Year to the
effective date of such change, in each case prepared on a pro forma
basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1
following such change, such financial statements prepared on a basis
consistent with the accounting principles and policies used in the
preparation of the financial statements delivered immediately prior to
such change;

(vi) Accountants' Certification: together with each
delivery of consolidated financial statements of each of Holdings and
its Subsidiaries and Company and its Subsidiaries pursuant to
subdivision (iii) above, a written statement by the independent
certified public accountants giving the report

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thereon (a) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of
Default or Potential Event of Default that relates to accounting
matters has come to their attention and, if such a condition or event
has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable
by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in
the course of their audit examination, and (b) stating that based on
their audit examination nothing has come to their attention that
causes them to believe that the information contained in the
certificates delivered therewith pursuant to subdivision (iv) above is
not correct;

(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of
all reports (other than reports of a routine or ministerial nature
which are not material) submitted to Holdings or Company by
independent certified public accountants in connection with each
annual, interim or special audit of the financial statements of
Holdings and its Subsidiaries or Company and its Subsidiaries, as the
case may be, made by such accountants, including, without limitation,
any comment letter submitted by such accountants to management in
connection with their annual audit;

(viii) SEC Filings and Press Releases: promptly upon the
sending or filing thereof, copies of (a) all financial statements,
reports, notices and proxy statements sent or made available generally
by Holdings or Company to its security holders or by any Subsidiary of
Company to its security holders other than Holdings, Company or
another Subsidiary of Company, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Holdings or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority (other than reports of a routine or ministerial nature which
are not material), and (c) all press releases and other statements
made available generally by Holdings or any of its Subsidiaries to the
public concerning material developments in the business of Holdings or
any of its Subsidiaries;

(ix) Events of Default, etc.: promptly upon any officer
of any Loan Party (other than Land Trusts) obtaining knowledge (a)
that a condition or event that constitutes an Event of Default or
Potential Event of Default has occurred and is continuing, or becoming
aware that any Lender or Agent has given any notice (other than to
Agent) or taken any other action with respect to a claimed Event of
Default or Potential Event of Default, (b) that any Person has given
any notice to Holdings or any of its Subsidiaries or taken any other
action with respect to a claimed default or event or condition of the
type

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referred to in subsection 8.2, (c) of any condition or event that
would be required to be disclosed in a current report filed by any
Loan Party with the Securities and Exchange Commission on Form 8-K
(Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof)
if such Loan Party were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officers' Certificate specifying the
nature and period of existence of such condition, event or change, or
specifying the notice given or action taken by any such Person and the
nature of such claimed Event of Default, Potential Event of Default,
default, event or condition, and what action such Loan Party has
taken, is taking and proposes to take with respect thereto;

(x) Litigation or Other Proceedings: promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Holdings or any of its Subsidiaries
or any property of Holdings or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:

(1) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or

(2) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions to occur or which have occurred
pursuant to the Loan Documents or any of the Related
Transaction Documents;

written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;

(xi) ERISA Events: promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Holdings or any of
its Subsidiaries or any of their respective ERISA Affiliates has
taken, is taking or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto;

(xii) ERISA Notices: with reasonable promptness, copies of
(a) each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by Holdings or any of its Subsidiaries or any of
their respective ERISA

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Affiliates with the Internal Revenue Service with respect to each
Pension Plan; (b) all notices received by Holdings or any of its
Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (c) such
other documents or governmental reports or filings relating to any
Employee Benefit Plan as Agent shall reasonably request;

(xiii) Financial Plans: as soon as practicable and in any
event no later than 60 days after the beginning of each Fiscal Year,
in the case of Company and its Subsidiaries, a consolidated and, in
the case of Company and its Material Subsidiaries, a consolidating,
plan and financial forecast for such Fiscal Year, including, without
limitation, (a) forecasted consolidated balance sheets and forecasted
consolidated statements of operations and cash flows of Company and
its Subsidiaries, in each case for such Fiscal Year, together with pro
forma Compliance Certificates for such Fiscal Year and an explanation
of the assumptions on which such forecasts are based, (b) forecasted
consolidated statements of operations and cash flows of Company and
its Subsidiaries, in each case for each Fiscal Period of such Fiscal
Year, together with an explanation of the assumptions on which such
forecasts are based, and (c) such other information and projections as
either Arranger may reasonably request;

(xiv) Insurance: as soon as practicable and in any event
by the last day of each Fiscal Year, an Officers' Certificate or other
report, in each case in form and substance satisfactory to Agent
outlining all material insurance coverage maintained as of the date of
such Officers' Certificate or report by Holdings and its Subsidiaries
and all material insurance coverage planned to be maintained by
Holdings and its Subsidiaries in the immediately succeeding Fiscal
Year;

(xv) Environmental Audits and Reports: as soon as
practicable following receipt thereof, copies of all environmental
audits and reports (other than routine follow-up reports to matters
previously disclosed to Lenders), whether prepared by personnel of
Holdings or any of its Subsidiaries or by independent consultants,
with respect to significant environmental matters at any Facility or
which relate to an Environmental Claim which could reasonably be
expected to result in a Material Adverse Effect;

(xvi) Board of Directors: with reasonable promptness,
written notice of any change in the Board of Directors of Holdings or
Company;

(xvii) Additional Subsidiaries: promptly upon any Person
becoming Subsidiary of Holdings, a written notice setting forth with
respect to such Person (a) the date on which such Person became a
Subsidiary of Holdings and (b) all of the data required to be set
forth in Schedule 5.1 annexed hereto with respect to all Subsidiaries
of Holdings (it being understood that such

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written notice shall be deemed to supplement Schedule 5.1 annexed
hereto for all purposes of this Agreement);

(xviii) Requirements under Collateral Documents. on or prior
to the date required to be delivered under the applicable Collateral
Documents, such reports, certificates and other documents as are
required to be delivered by any Loan Party under the Collateral
Documents;

(xix) Notice Under the Stock Purchase Agreement. within
five Business Days of receipt thereof any, notice received by any Loan
Party pursuant to Section 12.3(i) of the Stock Purchase Agreement or
any certificate, other confirmation or any written agreements received
by any Loan Party pursuant to any other provisions of Section 12.3 of
the Stock Purchase Agreement; and

(xx) Other Information: with reasonable promptness, such
other information and data with respect to Holdings or any of its
Subsidiaries as from time to time may be reasonably requested by any
Lender.

6.2 CORPORATE EXISTENCE, ETC.

Except as permitted under subsection 7.7, each of Holdings and
Company will, and will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect its corporate existence and all rights and
franchises material to its business; provided that the corporate existence and
rights and franchises of those Subsidiaries of Holdings identified on Schedule
5.1 annexed hereto as inactive (so long as such Subsidiary owns assets in an
aggregate fair market value (without netting any such fair market value against
any liabilities of such Subsidiary) not exceeding $200,000) may be terminated.

6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.

A. Each of Holdings and Company will, and will cause each of its
Subsidiaries to, pay all material taxes, assessments and other governmental
charges imposed upon it or any of its material properties or assets or in
respect of any of its income, businesses or franchises before any material
penalty accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any material penalty or fine shall be incurred
with respect thereto; provided that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made
therefor.

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B. Each of Holdings and Company will not, nor will it permit any
of its Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than Holdings so long as the filing of
such consolidated income tax return is required by applicable law and other
than Company or any of its Subsidiaries).

6.4 MAINTENANCE OF PROPERTIES; INSURANCE.

Each of Holdings and Company will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all of the Collateral
(without limiting any obligations under the Collateral Documents) and all other
material properties used or useful in the business of Holdings and its
Subsidiaries (including, without limitation, Intellectual Property) and from
time to time will make or cause to be made all appropriate repairs, renewals
and replacements thereof. Each of Holdings and Company will maintain or cause
to be maintained, with financially sound and reputable insurance companies or
associations or with self-insurance programs, in each case to the extent
consistent with prudent business practices and customary in their respective
industries, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage of the
kinds (including, in any event, business interruption insurance) and in the
amounts customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses and owning
similar properties in the same general areas in which Holdings Company or any
of their respective Subsidiaries, as the case may be, operates. In addition,
each of Holdings and Company will maintain or cause to be maintained flood
insurance with respect to each Flood Hazard Property included in the Collateral
and located in a community that participates in the National Flood Insurance
Program. All insurance relating to the Collateral shall comply with the
insurance provisions of the Collateral Documents.

6.5 INSPECTION; LENDER MEETING.

Each of Holdings and Company shall, and shall cause each of
its Subsidiaries to, permit any authorized representatives designated by any
Lender to visit and inspect any of the properties of Holdings or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (provided that representatives of Holdings or any of its
Subsidiaries may, if it so chooses, be present at or participate in any such
discussion), all upon reasonable notice and at such reasonable times during
normal business hours and as often as may be reasonably requested. Without in
any way limiting the foregoing, each of Holdings and Company will, upon the
request of Agent or Requisite Lenders, participate in a meeting of Agent and
Lenders once during each Fiscal Year to be held at Company's corporate offices
(or such other

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location as may be agreed to by Company and Agent) at such time as may be
agreed to by Company and Agent.

6.6 COMPLIANCE WITH LAWS, ETC.

Each of Holdings and Company shall, and shall cause each of
its Subsidiaries to, comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, noncompliance with
which could reasonably be expected to cause a Material Adverse Effect.

6.7 ENVIRONMENTAL DISCLOSURE AND INSPECTION.

A. Each of Holdings and Company shall, and shall cause each of
its Subsidiaries to, exercise all due diligence in order to comply and cause
(i) all tenants under any leases or occupancy agreements affecting any portion
of the Facilities and (ii) all other Persons on or occupying such property, to
comply with all Environmental Laws.

B. Each of Holdings and Company agrees that Agent may, from time
to time and in its sole and absolute discretion, retain, at Company's expense,
an independent professional consultant to review any report relating to
Hazardous Materials prepared by or for Holdings or any of its Subsidiaries and
to conduct its own investigation of any Facility currently owned, leased,
operated or used by Holdings or any of its Subsidiaries, and each of Holdings
and Company agrees to use its best efforts to obtain permission for Agent's
professional consultant to conduct its own investigation of any Facility
previously owned, leased, operated or used by Holdings or any of its
Subsidiaries. Each of Holdings and Company hereby grants (to the extent it is
authorized to do so) to Agent and its agents, employees, consultants and
contractors the right to enter into or on to the Facilities currently owned,
leased, operated or used by Holdings or any of its Subsidiaries to perform such
tests on such property as are reasonably necessary to conduct such a review
and/or investigation. Any such investigation of any Facility shall be
conducted, unless otherwise agreed to by such Person and Agent, during normal
business hours and, to the extent reasonably practicable, shall be conducted so
as not to interfere with the ongoing operations at any such Facility or to
cause any damage or loss to any property at such Facility. Each of Holdings
and Company and Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Agent pursuant to this subsection
6.7B will be obtained and shall only be used by Agent and Lenders for the
purposes of Lenders' internal credit decisions, to monitor and police the Loans
and to protect Lenders' security interests, if any, created by the Loan
Documents. Agent agrees to deliver a copy of any such report to Company with
the understanding that Company acknowledges and agrees that (i) it will
indemnify and hold harmless Agent and each Lender from any costs, losses or
liabilities relating to Holdings' or any of its Subsidiaries' use of or
reliance on such report, (ii) neither Agent nor any Lender

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makes any representation or warranty with respect to such report, and (iii) by
delivering such report to Company, neither Agent nor any Lender is requiring or
recommending the implementation of any suggestions or recommendations contained
in such report.

C. Company shall promptly advise Lenders in writing and in
reasonable detail of (i) any Release of any Hazardous Materials required to be
reported to any federal, state or local governmental or regulatory agency under
any applicable Environmental Laws, (ii) any and all written communications with
any governmental authority or any adverse party with respect to any
Environmental Claims that have a reasonable possibility of giving rise to a
Material Adverse Effect or with respect to any Release of Hazardous Materials
at any Facility required to be reported to any federal, state or local
governmental or regulatory agency, (iii) any remedial action taken by Holdings
or any of its Subsidiaries or any other Person in response to (x) any Hazardous
Materials on, under or about any Facility, the existence of which has a
reasonable possibility of resulting in an Environmental Claim having a Material
Adverse Effect, or (y) any Environmental Claim that could reasonably be
expected to result in a Material Adverse Effect, (iv) Holdings' or any of its
Subsidiaries' discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that could cause such Facility or
any part thereof to be subject to any material restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws, and (v)
any request for information from any governmental agency that suggests such
agency is investigating whether Holdings or any of its Subsidiaries may be
potentially responsible for a Release of Hazardous Materials.

D. Company shall promptly notify Lenders of (i) any proposed
acquisition of stock, assets, or property by Holdings or any of its
Subsidiaries that could reasonably be expected to expose Holdings or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Holdings or any of its
Subsidiaries and (ii) any proposed action to be taken by Holdings or any of its
Subsidiaries to commence manufacturing, industrial or other operations that
could reasonably be expected to subject Holdings or any of its Subsidiaries to
additional laws, rules or regulations which could reasonably be expected to
have a Material Adverse Effect, including, without limitation, laws, rules and
regulations requiring additional environmental permits or licenses.

E. Each of Holdings and Company shall, at its own expense,
provide copies of such documents or information as Agent may reasonably request
in relation to any matters disclosed pursuant to this subsection 6.7.

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6.8 LOAN PARTIES' REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS.

Each of Holdings and Company shall promptly take, and shall
cause each of its Subsidiaries promptly to take, any and all necessary remedial
action in connection with the presence, storage, use, disposal, transportation
or Release of any Hazardous Materials on, under or about any Facility in order
to comply with all applicable Environmental Laws and Governmental
Authorizations. In the event Holdings or any of its Subsidiaries undertakes
any remedial action with respect to any Hazardous Materials on, under or about
any Facility, Holdings or such Subsidiary shall conduct and complete such
remedial action in compliance with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all federal, state and
local governmental authorities except when, and only to the extent that,
Holdings' or such Subsidiary's liability for such presence, storage, use,
disposal, transportation or discharge of any Hazardous Materials is being
contested in good faith by Holdings or such Subsidiary.

6.9 EXECUTION OF SUBSIDIARY GUARANTY AND COLLATERAL DOCUMENTS BY FUTURE
SUBSIDIARIES.

In the event that any Person becomes a Subsidiary of Company
after the date hereof, Company will promptly notify Agent of that fact and
cause such Subsidiary to execute and deliver to Agent a counterpart of the
Subsidiary Guaranty and, if such Person becomes a Subsidiary of Company before
the Collateral Release Date, cause (i) such Subsidiary to execute and deliver
to Agent a counterpart of a Subsidiary Security Agreement, a Subsidiary Pledge
Agreement, a Subsidiary Trademark Security Agreement and Mortgages and to take
all such further action and execute all such further documents and instruments
as may be required to grant and perfect in favor of Agent, for the benefit of
Lenders, a first-priority security interest in all of the real, personal and
mixed property assets of such Subsidiary (other than with respect to Excluded
Properties, and other than any such assets which are subject to Liens permitted
under subsection 7.2A(vi) and other Real Property Assets that such Subsidiary
would not be obligated to pledge to Agent pursuant to subsection 6.10 (it being
understood and agreed that all of the requirements of subsection 6.10 are
applicable to the Real Property Assets of such Subsidiary, with the date such
Subsidiary became a Subsidiary of the Company being treated for purposes of
subsection 6.10 as the date on which such Subsidiary acquired all of its Real
Property Assets)) and (ii) the parent of such Subsidiary to execute and deliver
to Agent a counterpart of the Pledge Agreement or a Pledge Amendment to the
Pledge Agreement previously executed by such parent effecting the pledge by
such parent to Agent on behalf of Lenders of all of the capital stock of such
Subsidiary. Company shall deliver to Agent, together with such counterpart of
the Subsidiary Guaranty and/or such Collateral Documents, (i) certified copies
of such Subsidiary's Articles or Certificate of Incorporation, together with a
good standing certificate from the Secretary of State of the jurisdiction of
its incorporation, each to be dated a recent

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date prior to their delivery to Agent, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant corporate secretary as of
a recent date prior to their delivery to Agent, (iii) a certificate executed by
the secretary or an assistant secretary of such Subsidiary as to (a) the
incumbency and signatures of the officers of such Subsidiary executing the
Subsidiary Guaranty and, if such Person becomes a Subsidiary of Company before
the Collateral Release Date, the Collateral Documents to which such Subsidiary
is a party and (b) the fact that the attached resolutions of the Board of
Directors of such Subsidiary authorizing the execution, delivery and
performance of the Subsidiary Guaranty and, if such Person becomes a Subsidiary
of Company before the Collateral Release Date, such Collateral Documents are in
full force and effect and have not been modified or rescinded, (iv) if such
Person becomes a Subsidiary of Company before the Collateral Release Date, the
certificate or certificates evidencing all of the capital stock of such
Subsidiary, and (v) a favorable opinion of counsel to Company and such
Subsidiary, in form and substance satisfactory to Agent and its counsel, as to
(a) the due organization and good standing of such Subsidiary, (b) the due
authorization, execution and delivery by such Subsidiary of the Subsidiary
Guaranty and, if such Person becomes a Subsidiary of Company before the
Collateral Release Date, such Collateral Documents, (c) the enforceability of
the Subsidiary Guaranty and, if such Person becomes a Subsidiary of Company
before the Collateral Release Date, such Collateral Documents against such
Subsidiary, and (d) such other matters as Agent may reasonably request, all of
the foregoing to be satisfactory in form and substance to Agent and its
counsel.

6.10 ADDITIONAL REAL PROPERTY.

After the Closing Date, each of Holdings and Company shall,
and shall cause its Subsidiaries to,

(i) with respect to each leasehold interest in Real
Property Assets hereafter acquired by such Person prior to the
Collateral Release Date (whether directly or through a land trust or
other vehicle) (the holder of such leasehold interest being referred
to herein as the "LESSEE"), use its reasonable efforts (which shall
not be deemed to include the payment of monetary consideration other
than nominal monetary consideration and out-of-pocket expenses
incurred by any lessor in connection with obtaining the items listed
below, but shall include efforts to include each of the items listed
below in the terms of the lease itself) to obtain and deliver to Agent
within three months after such Real Property Asset is designated by
Company prior to Collateral Release Date as Replacement Property:

(A) the agreement of the lessor (if required
under the lease) to the encumbrancing of such Lessee's
leasehold interest under the lease pursuant to a Mortgage and
to the assignment of such leasehold interest to Agent or its
Affiliate following a default hereunder, and if

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the lease allows the lessor to unreasonably withhold consent
to an assignment of the leasehold interest by Agent or its
Affiliate to a subsequent third party assignee, the agreement
of the lessor not to unreasonably withhold such consent, and

(B) an original memorandum of the lease executed
and acknowledged by the lessor thereunder (or, in the case of
an existing leasehold interest which is of record and which is
acquired by the Lessee by assignment, a memorandum of or a
recordable duplicate original of such assignment, executed and
acknowledged by the assigning Lessee), in form sufficient to
give constructive notice (when recorded) of the Lessee's
leasehold interest under the lease to third-party purchasers
and encumbrancers of the affected real property and otherwise
in form reasonably satisfactory to Agent, together with
evidence of its recordation in all places necessary or
desirable, in the reasonable judgment of Agent, to give
constructive notice of the Lessee's leasehold interest to
third parties, and

(II) with respect to each leasehold interest in Real Property
Assets listed in Parts I and II of Schedule 4.1B annexed hereto (to
the extent the items listed below in this clause (ii) of this
subsection 6.10 have not been obtained or delivered to Agent on the
Closing Date) and each Real Property Asset in which Holdings or any of
its Subsidiaries acquires fee title or a leasehold interest after the
Closing Date but before the Collateral Release Date (in each case
other than Excluded Properties, parcels number 4 and 5 of location
number 851, leasehold interests as to which encumbrancing requires the
consent of the lessor or fee interests listed on Schedule 4.1B annexed
hereto as to which encumbrancing requires the consent of a senior
lienholder, where Holdings and its Subsidiaries have been unable to
obtain the applicable lessor's or senior lienholder's consent thereto,
and assets subject to Liens permitted under subsection 7.2A(iv) and
(vi)) (collectively, "COVERED REAL PROPERTY"), as soon as practicable
and in any event within one month after the applicable Real Property
Asset becomes Covered Real Property (it being understood that any Real
Property Asset which is (1) designated by Company as a Replacement
Property (to the extent it was not already Covered Real Property)
shall become Covered Real Property as of the date of such designation
and (2) an Excluded Property shall become Covered Real Property as of
the date of the occurrence of a Potential Event of Default or an Event
of Default), deliver:

(A) fully executed counterparts of a Mortgage, or
an amendment to a Mortgage, in form satisfactory to Agent,
which Mortgage or amendment shall encumber such Covered Real
Property, together with evidence that counterparts of such
Mortgage or

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amendment have been recorded in all places to the extent
necessary or desirable, in the reasonable judgment of Agent,
so as to effectively create a valid and enforceable first
priority lien (subject only to Permitted Encumbrances) on such
Covered Real Property in favor of Agent (or such other trustee
as may be required or desired under local law) for the benefit
of Lenders,

(B) in the case of a Mortgage encumbering Covered
Real Property located outside the State of Illinois, if
requested by Agent, an opinion of counsel (which counsel shall
be reasonably satisfactory to Agent) in the state in which
such Covered Real Property is located with respect to the
enforceability of the Mortgage recorded in such state and such
other matters as Agent may reasonably request, in form and
substance reasonably satisfactory to Agent,

(C) in the case of each such Covered Real
Property consisting of a leasehold interest, a copy of the
lease (including all amendments thereto), together with such
consents and agreements from the lessor on such real property
as were obtained pursuant to clause (i) above,

(D) with respect to Real Property Assets
constituting fee property, environmental audits prepared by
professional consultants mutually acceptable to Company and
Agent, in form, scope and substance satisfactory to Agent in
its reasonable discretion,

(E) with respect to Real Property Assets
constituting fee property, if requested by Agent, a Title
Insurance Policy, in an amount reasonably satisfactory to
Agent, with respect to Agent's lien thereon,

(F) information sufficient for Agent to determine
whether (1) any such Real Property Asset is Flood Hazard
Property and (2) the community in which each Flood Hazard
Property is located is participating in the National Flood
Insurance Program, and

(G) upon Company's or such Subsidiary's receipt
of written notification from Agent (1) as to the existence of
each such Flood Hazard Property and (2) as to whether the
community in which each such Flood Hazard Property is located
is participating in the National Flood Insurance Program,
written acknowledgment of the receipt of such notification;
and

(H) the evidence of insurance with respect to
such Real Property Asset required to be provided to Agent
pursuant to the terms of the Mortgages, including flood
insurance with respect to each Flood

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Hazard Property located in a community that is participating
in the National Flood Insurance Program.

Company shall, and shall cause each of its Subsidiaries to,
permit any authorized representatives designated by Agent to visit and inspect
any Real Property Asset for the purpose of obtaining an appraisal of value,
conducted by consultants retained by Agent in compliance with all applicable
banking regulations; provided, however, that pursuant to subsection 11.2
hereof, Holdings and Company shall be obligated to pay for all actual costs and
reasonable expenses of obtaining and reviewing any appraisal provided for under
this subsection 6.10 for not more than one appraisal each year for each Real
Property Asset.

6.11 RELEASE OF COLLATERAL.

If, as of the first Business Day of any Fiscal Quarter, (i)
the actual or implied rating established and publicly announced or provided in
a private letter from the Rating Agencies or published by at least two of the
Rating Agencies with respect to senior, unsecured, non-credit enhanced long
term debt of Company is BBB- or Baa3, as applicable, or higher as of such date
and the actual or implied rating established and publicly announced or provided
in a private letter from the Rating Agencies or published by the same two
Rating Agencies with respect to senior, unsecured, non-credit enhanced long
term debt of Company has continuously been BBB- or Baa3, as applicable, or
higher during the two consecutive Fiscal Quarters immediately preceding such
date, (ii) Company shall not have been on credit watch with negative
implications by either of the same two Rating Agencies, and (iii) no Event of
Default or Potential Event of Default has occurred and is continuing (the
conditions set forth in clauses (i), (ii) and (iii) above being referred to
herein as the " COLLATERAL RELEASE CONDITIONS"), then Company may on such date
request that Agent execute and deliver to Company reconveyance documents and
releases (including without limitation UCC termination statements) releasing
all Liens on the Collateral that were granted in favor of Agent on behalf of
the Lenders and the Interest Rate Exchangers pursuant to the Collateral
Documents (other than the Collateral Account Agreement). Company shall make
such request in writing and shall concurrently deliver to Agent evidence in
form and substance satisfactory to Agent showing that the Collateral Release
Condition set forth in clauses (i) and (ii) above has been satisfied and an
Officers' Certificate certifying that each of the Collateral Release Conditions
has been satisfied as of such date and that no Event of Default or Potential
Event of Default has occurred and is continuing or will be caused by such
release of Collateral. The date on which each Collateral Release Condition has
been satisfied and on which each such delivery has been made is referred to
herein as the "COLLATERAL RELEASE DATE". Upon receiving such request, Agent
shall, at Company's expense, promptly execute and deliver to Company such
reconveyance documents and releases, in recordable form, and deliver to Company
upon Company's request and at its expense, against receipt and without recourse
to Agent, such of stock certificates

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(together with stock powers that were delivered to Agent by the Loan Parties)
and promissory notes pledged by the Loan Parties pursuant to the Pledge
Agreements as shall not have been sold or applied pursuant to the terms of the
Pledge Agreements; provided that, at the time of Agent's execution and delivery
of such reconveyance documents and releases and delivery of such stock powers
and promissory notes, no Event of Default or Potential Event of Default shall
have occurred and be continuing or shall be caused by such release of
Collateral.

6.12 CERTAIN PAYMENTS.

Each of Holdings and Company shall, and shall cause each of
its Subsidiaries to, immediately upon receipt by such Person of any payments
pursuant to the Stock Purchase Agreement, the Tax Matters Agreement or any
other Specified Existing Document (including without limitation pursuant to
indemnification provisions contained therein), notify Agent of such receipt and
provide Agent with information relating thereto as Agent may request and, in
the case of Holdings, contribute, or cause to be contributed, immediately upon
receipt thereof, all of such payments to Company.

6.13 DESIGNATION OF REPLACEMENT PROPERTIES.

If, on any date after the Closing Date, Agent no longer has a
Lien on any Real Property Asset ("REPLACED PROPERTY") which Agent had prior to
such date (whether due to an Asset Sale relating to such Real Property Asset,
due to a termination of lease relating to such Real Property Asset or
otherwise), then Company shall designate on or before such date a Real Property
Asset (other than any Real Property Asset existing as of the Closing Date)
which is not subject to any Liens as a "Replacement Property" for such Replaced
Property; provided, however, that Company shall not be required to designate
any Replacement Property with respect to the Real Property Assets listed on
Schedule 6.13 annexed hereto [NOTE: NUMBER OF REAL PROPERTY ASSETS LISTED
THEREON TO BE IMMATERIAL]; provided, further, that Company shall not be
required to designate any Replacement Property for any Replaced Property to the
extent the Net Cash Proceeds of Asset Sale relating to such Replaced Property
are actually applied to (a) repay Term Loans or (b) permanently reduce
Revolving Term Loan Commitments or Revolving Loan Commitments pursuant to
subsection 2.4B(iii)(a). If the Replaced Property is a leasehold interest in a
grocery store, then the Replacement Property for such Replaced Property shall
be a leasehold interest in a grocery store and shall have annual sales that are
equal to or greater than the Replaced Property. If the Replaced Property is a
fee interest, then the Replacement Property for such Replaced Property shall be
a fee interest and shall have a fair market value (as determined in good faith
by the chief financial officer of Company and evidenced by an Officers'
Certificate of Company certifying as to the fair market value thereof) that is
equal to or greater than the fair market value (also as determined in the same
manner) of the Replaced Property; provided, that if such

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Replacement Property has a fair market value greater than the fair market value
of the Replaced Property, then such excess fair market value (i) may be applied
as fair market value of Replacement Property for another Real Property Asset
which concurrently becomes a Replaced Property or (ii) shall be reserved and
may be applied as fair market value of Replacement Property for any Real
Property Asset which subsequently becomes a Replaced Property. If the Replaced
Property is a leasehold interest in a Real Property Asset which is not a
grocery store, then the Replacement Property for such Replaced Property shall
be a Real Property Asset which has a collateral value (as determined in good
faith by chief financial officer of Company and evidenced by an Officers'
Certificate of Company certifying as to the fair market value thereof) that is
greater than or equal to the collateral value (also as determined in the same
manner) of such Replaced Property. Concurrently with the designation of any
Replacement Property, Company shall deliver to Agent an Officers' Certificate
(i) setting forth all such information as Agent may reasonably request with
respect to such Replacement Property and the related Replaced Property
(including without limitation the fair market value thereof (if a fee interest)
and annual sales figures with respect thereto (if a leasehold interest in a
grocery store)) as Agent may reasonably request, (ii) certifying that the
Replacement Property complies with each of the requirements set forth in this
subsection 6.13, and (iii) setting forth a summary report of all Replacement
Properties theretofore designated by Company and the related Replaced
Properties (including without limitation the aggregate fair market value
thereof (if fee interests) and aggregate annual sales figures with respect
thereto (if leasehold interests in grocery stores)).

SECTION 7. NEGATIVE COVENANTS

7.1 INDEBTEDNESS.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
guaranty, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:

(i) Company may become and remain liable with respect to
Indebtedness which is included among the Obligations;

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(ii) Holdings and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
7.4 and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished;

(iii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness in respect of Capital Leases;
provided that such Capital Leases are permitted under the terms of
subsection 7.9;

(iv) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any
wholly-owned Subsidiary of Company may become and remain liable with
respect to Indebtedness to Company or any other wholly-owned
Subsidiary of Company incurred by such wholly-owned Subsidiary in the
ordinary course of its business provided that (a) all such
intercompany Indebtedness shall be evidenced by promissory notes that
are, until the Collateral Release Date, pledged to Agent pursuant to
the terms of the applicable Collateral Document, (b) all such
intercompany Indebtedness owed by Company to any of its Subsidiaries
shall be subordinated in right of payment to the payment in full of
the Obligations pursuant to the terms of the applicable promissory
notes or an intercompany subordination agreement, in each case
approved by Agent, and (c) any payment by any Subsidiary of Company
under any guaranty of the Obligations shall result in a pro tanto
reduction of the amount of any intercompany Indebtedness owed by such
Subsidiary to Company or to any of its Subsidiaries for whose benefit
such payment is made;

(v) BDI and BPI may remain liable with respect to
existing Indebtedness described in Part II of Schedule 7.1 annexed
hereto, so long as (A) Company is indemnified from and against any and
all costs, expenses, losses, damages, fines, penalties or liabilities
arising from such Indebtedness pursuant to the indemnity set forth in
Section 6 of the Asset Transfer Agreement and (B) none of Holdings or
any of its Subsidiaries (other than BDI or BPI) has any liability to
any Person in respect of such Indebtedness;

(vi) Company and its Subsidiaries, as applicable, may
remain liable with respect to each of the items of existing
Indebtedness described in Part I of Schedule 7.1 annexed hereto and
any Indebtedness incurred to refinance such existing Indebtedness;
provided that after giving effect to such refinancing Indebtedness and
the repayment of the corresponding existing Indebtedness with the
proceeds thereof, (a) the aggregate principal amount of the
refinancing Indebtedness and the corresponding existing Indebtedness
so refinanced shall not be greater than the outstanding principal
amount of such existing Indebtedness immediately prior to such
refinancing, (b) the weighted average life to maturity of such
refinancing Indebtedness shall be no shorter

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than the existing Indebtedness being refinanced and (c) such
refinancing Indebtedness shall not be secured by any additional
property than that which secures the existing Indebtedness being
refinanced;

(vii) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Notes in an
aggregate principal amount not exceeding $200,000,000 minus the
aggregate principal amount thereof from time to time repurchased,
redeemed or prepaid;

(viii) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness incurred to finance (a) the
purchase price of equipment, fixtures and any other similar property
or the remodeling or other improvement costs of any facility of
Company or any of its Subsidiaries or (b) the purchase price of any
Real Property Assets consisting of fee interests in stores; provided
that the aggregate principal amount of such Indebtedness when incurred
shall not be less than 80% or more than 100% of the fair market value
of (a) the equipment, fixtures and any other similar property acquired
plus the reasonable installation and delivery charges associated
therewith or the remodeling or other improvement costs relating to
such facility or (b) such Real Property Assets, as applicable;
provided further that (1) the aggregate principal amount of all such
Indebtedness incurred during any Fiscal Year, together with all
Indebtedness incurred in such Fiscal Year under subsection 7.1(iii)
above (other than Indebtedness in respect of Specified Equipment
Capital Leases), shall not exceed the sum of $30,000,000 plus, in the
case of any Fiscal Year other than the Fiscal Year during which the
Closing Date occurs, the lesser of (x) the excess of $30,000,000 over
the amount of Indebtedness incurred under subsections 7.1(iii) and
7.1(viii) in the immediately prior Fiscal Year and (y) $5,000,000, and
(2) the aggregate principal amount of all Indebtedness incurred to
finance the purchase price of any such Real Property Assets shall not
exceed $25,000,000 at any time;

(ix) Subsidiaries of Company acquired after the Closing
Date, the acquisition of which is permitted under subsection 7.3(v)
and subsection 7.7(ii), may remain liable with respect to Indebtedness
existing immediately prior to the time any such entity became a
Subsidiary of Company in an aggregate amount for all such Subsidiaries
not to exceed $5,000,000 at any time outstanding; provided that such
Indebtedness is not incurred in contemplation of such acquisition;

(x) Company and its Subsidiaries may become and remain
liable with respect to Indebtedness represented by Deferred Trade
Payables in an aggregate amount for all such Indebtedness not to
exceed $10,000,000 at any time outstanding;

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(xi) Company may become and remain liable with respect to
Indebtedness evidenced by promissory notes subordinated to the
Obligations and issued to employees or former employees of Company and
its Subsidiaries in lieu of cash payments for stock of Holdings
required to be repurchased pursuant to Company's stock option or other
stock plans; provided that the aggregate amount of such Indebtedness
does not exceed $5,000,000 at any time outstanding; and

(xii) Company may become and remain liable with respect to
Indebtedness to BDI and BPI in an aggregate principal amount not to
exceed $350,000; provided that (a) all such Indebtedness shall be
evidenced by promissory notes that are, until the Collateral Release
Date, pledged to Agent pursuant to the terms of the applicable
Subsidiary Pledge Agreement and (b) all such Indebtedness owed by
Company shall be subordinated in right of payment to the payment in
full of the Obligations pursuant to the terms of the applicable
promissory notes or an intercompany subordination agreement, in each
case approved by Agent; and

(xiii) Company and its Subsidiaries may become and remain
liable with respect to other Indebtedness in an aggregate principal
amount not to exceed $15,000,000 at any time outstanding.

7.2 LIENS AND RELATED MATTERS.

A. PROHIBITION ON LIENS. Each of Holdings and Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly,
create, incur, assume or permit to exist any Lien on or with respect to any
property or asset of any kind (including any document or instrument in respect
of goods or accounts receivable) of Holdings or any of its Subsidiaries,
whether now owned or hereafter acquired, or any income or profits therefrom, or
file or permit the filing of, or permit to remain in effect, any financing
statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, except:

(i) Permitted Encumbrances;

(ii) Liens granted pursuant to the Collateral Documents,
including Liens granted in favor of a Lender or an Affiliate of such
Lender which is a counterparty to an Interest Rate Agreement permitted
under subsection 7.4 (iii);

(iii) existing Liens described in Schedule 7.2 annexed
hereto;

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(iv) Liens on (a) Real Property Assets consisting of fee
interests in stores or (b) equipment, fixtures and other similar
property of Company and any of its Subsidiaries, in each case securing
Indebtedness described in subsections 7.1(iii) and 7.1(viii), and
Liens on inventory of Company and its Subsidiaries, securing
Indebtedness described in subsection 7.1(x); provided that such Liens
shall extend only to the equipment, fixtures, and other similar
property and inventory so financed and the proceeds thereof; provided,
further, that with respect to any such Lien described in clause (a)
above, (1) no Event of Default or Potential Event of Default shall
have occurred and be continuing at the time of incurrence of such
Lien, (2) such Lien is limited to such Real Property Assets, (3) the
Indebtedness secured by such Lien is Non-Recourse Indebtedness, and
(4) the aggregate principal amount of all Indebtedness secured by all
such Liens shall not at any time exceed $25,000,000;

(v) Liens in favor of third parties as consignors (or as
creditors of such consignors) in goods which are delivered to Company
or any of its Subsidiaries by such third parties on consignment in the
ordinary course of business and consistent with past practices, the
value of which goods so held on consignment shall at no time exceed
$10,000,000 in the aggregate for Company and its Subsidiaries;

(vi) Liens securing Indebtedness permitted under
subsection 7.1(ix), which Liens are existing prior to the time the
entity which incurred such Indebtedness became a Subsidiary of
Company; provided that such Liens were not incurred in connection
with, or in contemplation of, the acquisition of such Subsidiary and
such Liens extend or cover only the property and assets of such entity
which were covered by such Liens and which were owned by such entity,
in each case at the time such entity became a Subsidiary of Company;

(vii) Liens not otherwise permitted by clauses (i) through
(vi) above securing Indebtedness of Company or any of its
Subsidiaries; provided that (a) the aggregate principal amount of
Indebtedness secured by Liens permitted by this clause (vii) shall not
exceed $5,000,000 at any time outstanding, (b) any such Indebtedness
shall be permitted under subsection 7.1 and (c) such Liens shall not
attach to any Collateral; and

(viii) the replacement, extension or renewal of any Lien
permitted by this subsection 7.2A upon or in the same property subject
to such Lien and as security for the same obligations or any
refinancings thereof to the extent such refinancings are permitted
under subsection 7.1; provided that such Lien does not extend to or
cover any property other than the property covered by such Lien
immediately prior to such replacement, extension or renewal of such
Lien and the principal of the obligations secured thereby is not
increased.

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B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Holdings or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.

C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither
Holdings nor any of its Subsidiaries shall enter into any agreement except as
provided in the Senior Subordinated Note Indenture prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired. The foregoing shall not prohibit the execution or
renewal of a store lease which by its terms prohibits the hypothecation of the
leasehold interest thereunder (but does not prohibit the incurrence of liens on
any property of Holdings and its Subsidiaries other than such leasehold
interest and equipment related thereto) if, despite the best efforts of
Holdings and its Subsidiaries in accordance with subsection 6.10, the lessor
will not agree to permit such hypothecation.

7.3 INVESTMENTS; JOINT VENTURES.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, make or own any Investment
in any Person, including any Joint Venture, except:

(i) Holdings and its Subsidiaries may make and own
Investments in Cash Equivalents to the extent, in the case of
Holdings, BDI and BPI, permitted under subsection 7.14;

(ii) Company and its Subsidiaries may make intercompany
loans to the extent permitted under subsection 7.1(iv) and BDI and BPI
may make intercompany loans to Company to the extent permitted under
subsection 7.1(xii);

(iii) Holdings and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries
of Holdings and described on Schedule 5.1 annexed hereto as in effect
on the Closing Date;

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(iv) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed
hereto;

(v) Company and its Subsidiaries may create or acquire
new Subsidiaries to the extent otherwise permitted under this
Agreement; provided that (a) any such new Subsidiary is wholly-owned
by Company or one of its wholly-owned Subsidiaries and the provisions
of subsections 6.9 and 6.10 have been complied with and (b) to the
extent such creation or acquisition constitutes a Consolidated Capital
Expenditure, such Consolidated Capital Expenditure is permitted under
subsection 7.8;

(vi) Company or any of its Subsidiaries may, so long as no
Potential Event of Default or Event of Default has occurred and is
continuing or occurs as a result thereof, make Development Investments
in or to any Developer; provided that (a) no such Development
Investment shall be permitted unless, at the time of the making of
such Development Investment, the Development Site and the store
located or to be located at the Development Site have been leased or
irrevocably committed by the Developer to be leased to Company or one
of its Subsidiaries, (b) neither Company nor any of its Subsidiaries
may be or become a general partner of any Developer or otherwise be
liable in any manner for any Indebtedness or any other obligations of
any Developer (other than pursuant to customary provisions contained
in any lease pertaining to a Development Site or a store leased to
Company or one of its Subsidiaries) and (c) the aggregate Development
Investments shall not exceed $30,000,000 at any time outstanding;

(vii) Company and its Subsidiaries may accept promissory
notes received in consideration of, or the deferral of a portion of
the sales price accepted with respect to, any Asset Sale permitted
under subsection 7.7(viii); provided that (a) the aggregate principal
amount of such promissory notes and the deferred portion of such sales
prices shall not at any time exceed $7,000,000 and (b) any such
promissory notes so accepted shall be pledged as security for the
Obligations pursuant to the Company Security Agreement, the applicable
Subsidiary Security Agreement or the applicable Pledge Agreement, as
the case may be, until the Collateral Release Date;

(viii) Company and its Subsidiaries may make and own
Investments received in connection with the bankruptcy of suppliers
and customers or received pursuant to a plan of reorganization of any
supplier or customer, in each case in settlement of delinquent
obligations or disputes with such suppliers or customers;

(ix) Company and its Subsidiaries may make and own
Investments (a) in suppliers in anticipation of becoming a customer of
such suppliers and

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in lieu of deposits, cash discounts or concessions and (b) in
connection with joint ventures with suppliers entered into in the
ordinary course of business; provided that the aggregate amount of all
such Investments under clauses (a) and (b), together with the amount
of guarantees permitted under subsection 7.4(v) shall not exceed
$5,000,000 at any time outstanding;

(x) Company may make and maintain loans to the extent
permitted under subsection 7.1(vi) to Holdings (a) for the purposes
described in subsection 7.5A(ii)(b) in an aggregate amount made in any
Fiscal Year which, together with the amount of Restricted Junior
Payments made for such purposes, shall not exceed the amount of
Restricted Junior Payments Company may make to Holdings under
subsection 7.5A(ii)(b) during such Fiscal Year, and (b) for the
purposes described in subsection 7.5A(v) in an aggregate amount made
in any Fiscal Year which, together with the amount of Restricted
Junior Payments made for such purposes, shall not exceed the amount of
Restricted Junior Payments Company may make to Holdings under
subsection 7.5A(v) during such Fiscal Year;

(xi) So long as no Potential Event of Default or Event of
Default shall have occurred and be continuing, Company or any of its
Subsidiaries may make loans to its employees for the purpose of
purchasing Holdings Common Stock; provided that the aggregate amount
of such loans shall not exceed $5,000,000 at any time outstanding;

(xii) Company and its Subsidiaries may purchase Holdings
Common Stock (a) from a stock option or other stock plan of any Loan
Party as required pursuant to the applicable plan or agreement, (b)
from participants in any such plan or from any employee of any Loan
Party as required pursuant to the applicable plan or agreement or (c)
from any former employee of any Loan Party (or any employee of any
Loan Party who will become a former employee within 10 days of
entering into an agreement to so purchase Holdings Common Stock so
long as such purchase does not become effective until such employee
becomes a former employee of Loan Parties); provided that the cash
portion of such purchases and the cash payments with respect to
promissory notes issued to such participants, holders, former
employees and employees shall not exceed the sum of (1) $3,500,000 in
any Fiscal Year plus (2) the aggregate amount of cash proceeds
received by Holdings in such Fiscal Year from its sale of shares of
Holdings Common Stock to a stock option or other stock plan of any
Loan Party or to participants in any such plan or to any employee of
any Loan Party during such Fiscal Year; and

(xiii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time
$10,000,000.

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7.4 CONTINGENT OBLIGATIONS.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, create or become or remain
liable with respect to any Contingent Obligation, except:

(i) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit; provided that
no Loan Party shall have granted any Lien securing any obligations
(including any reimbursement obligations) relating to any Existing
Letters of Credit (other than pursuant to the Loan Documents);

(ii) Holdings may become and remain liable with respect to
Contingent Obligations under the Holdings Guaranty and Subsidiaries of
Company may become and remain liable with respect to Contingent
Obligations under the Subsidiary Guaranty, including Contingent
Obligations thereunder for the benefit of a Lender or an Affiliate of
such Lender which is a counterparty to an Interest Rate Agreement
permitted under subsection 7.4(iii);

(iii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements with respect to
Indebtedness, which Interest Rate Agreements are in form and substance
satisfactory to Agent and Arrangers;

(iv) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such assets for the purpose of financing such acquisition;
provided that the maximum assumable liability in respect of all such
obligations shall at no time exceed the gross proceeds actually
received by Company and its Subsidiaries in connection with such Asset
Sales and other sales;

(v) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations under guarantees in the
ordinary course of business of the obligations of suppliers,
customers, franchisees and licensees of Company and its Subsidiaries
in an aggregate amount which, together with the amount of Investments
permitted under subsection 7.3(ix), shall not exceed at any time
$5,000,000;

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(vi) Company and its Subsidiaries, as applicable, may
remain liable with respect to existing Contingent Obligations
described in Schedule 7.4 annexed hereto;

(vii) Holdings and its Subsidiaries (other than BDI, BPI
and Company) may become and remain liable with respect to Contingent
Obligations under guaranties made under Article Eleven of the Senior
Subordinated Note Indenture;

(viii) Company may become and remain liable with respect to
Contingent Obligations under guarantees in respect of Capital Leases
and Operating Leases entered into by Company's Subsidiaries which are
permitted under subsection 7.9;

(ix) BDI and BPI may each remain liable with respect to
existing Contingent Obligations of such Person to mortgage lenders in
connection with existing mortgage loans in an aggregate principal
amount not exceeding $45,000,000, secured by BDI Property or BPI
Property (as each is defined in the Asset Transfer Agreement), or any
portion thereof (the "BDI/BPI MORTGAGE LOANS"), so long as (A) Company
is indemnified from and against any and all costs, expenses, losses,
damages, fines, penalties, or liabilities arising from such Contingent
Obligations pursuant to the indemnity set forth in Section 6 of the
Asset Transfer Agreement, (B) except with respect to Indebtedness
described in Part II of Schedule 7.1 annexed hereto, neither BDI nor
BPI has any liability, contingent or otherwise, for the payment of
principal or interest on any of the BDI/BPI Mortgage Loans and (C)
none of Holdings or any of its Subsidiaries (other than BDI and BPI)
has any liability in respect of the BDI/BPI Mortgage Loans to any
Person; and

(x) Company and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided that the
maximum aggregate liability, contingent or otherwise, of Company and
its Subsidiaries in respect of all such Contingent Obligations shall
at no time exceed $10,000,000.

7.5 RESTRICTED JUNIOR PAYMENTS.

A. Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, declare, order, pay, make
or set apart any sum for any Restricted Junior Payment; provided that so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing or shall be caused thereby, (i) Company may make payments of
regularly scheduled interest in respect of the Senior Subordinated Notes in
accordance with the terms of, to the extent required by and subject to the
subordination provisions contained in the Senior Subordinated Note Indenture,
(ii) Company may make cash dividends to Holdings for

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the sole purposes of (a) allowing Holdings to pay its obligations in respect of
the Illinois franchise tax in an amount not to exceed $_______ per Fiscal Year
and (b) allowing Holdings to pay for its general operating expenses, franchise
tax obligations, accounting, legal, corporate reporting and administrative
expenses incurred in the ordinary course of its business in an amount not to
exceed, together with the loans made for such purposes pursuant to subsection
7.3(x)(a), $1,000,000 in the aggregate in any Fiscal Year, (iii) Company and
its Subsidiaries may purchase shares of Holdings Common Stock (a) from a stock
option or other stock plan of any Loan Party as required pursuant to the
applicable agreement or plan permitted under subsection 7.12, (b) from
participants in such plan and from employees of any Loan Party as required
pursuant to the applicable agreement or plan permitted under subsection 7.12 or
(c) from any former employee of any Loan Party (or any employee of any Loan
Party who will become a former employee within 10 days of entering into an
agreement to so purchase Holdings Common Stock so long as such purchase does
not become effective until such employee becomes a former employee of Loan
Parties), in each case in an aggregate amount not to exceed the amount
permitted under subsection 7.3(xii) in any Fiscal Year, (iv) Company and its
Subsidiaries may make cash dividends to Holdings for the sole purpose of paying
Holdings' and its Subsidiaries' income tax obligations, in each case to the
extent and at the times required by the Tax Sharing Agreement, (v) Company may
make cash dividends to Holdings, provided that Holdings promptly thereafter
uses such cash proceeds, together with cash proceeds of loans by Company
pursuant to subsection 7.3(x)(b), to pay cash dividends to the holders of
Holdings Common Stock so long as (x) the aggregate amount of cash dividends
paid in any Fiscal Year of Company pursuant to this clause (v), together with
the loans made for such purposes pursuant to subsection 7.3(x)(b) during such
Fiscal Year, shall not exceed the sum of (1) $3,000,000 and (2) the lesser of
(A) the Cumulative Income Amount at such time and (B) $2,000,000, (y) the
Leverage Ratio for the four-Fiscal Quarter period ending as of the last day of
the most recently ended Fiscal Quarter (which Leverage Ratio shall be evidenced
by an Officers' Certificate of Holdings delivered to Agent at least three
Business Days prior to declaration of such dividends) does not exceed
3.00:1.00, and (z) Company is permitted to make such cash dividends under
Section 5.03 of the Senior Subordinated Note Indenture, and (vi) in addition to
the foregoing, Company may redeem, repurchase or make prepayments of principal
in respect of Senior Subordinated Notes (together with the premium, if any, and
accrued interest relating thereto) in an aggregate amount not to exceed
$70,000,000 (plus the premium, if any, and accrued interest relating thereto);
provided, further that Holdings may redeem the Holdings Preferred Stock in
accordance with the terms of the Preferred Stock Redemption Agreement on the
Redemption Date.

B. Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, declare, order, pay, make
or set apart any sum for any payment or prepayment of principal of, premium, if
any, or interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal

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defeasance), sinking fund or similar payment with respect to, any of the
Existing Funded Debt; provided that, so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing or occurs as a
result thereof, (i) Company may make payments of regularly scheduled interest
and regularly scheduled payments of principal in respect of the Existing Funded
Debt, in each case in accordance with the terms of and to the extent required
by the agreements relating to the Existing Funded Debt, as the case may be,
(ii) Company may refinance Existing Funded Debt so long as such refinancing is
permitted under subsections 7.1(vi) and 7.15A; and (iii) in addition to the
foregoing, Company may make prepayments of principal in respect of Existing
Funded Debt (together with the premium, if any, and accrued interest relating
thereto) in an aggregate amount not to exceed $10,000,000 (plus, the premium,
if any, and accrued interest relating thereto).

7.6 FINANCIAL COVENANTS.

A. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit
the ratio of (i) Consolidated Adjusted EBITDA plus Consolidated Rental Payments
to (ii) Consolidated Fixed Charges for any four-Fiscal Quarter period ending as
of the last day of any Fiscal Quarter occurring during any of the periods set
forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
MINIMUM FIXED
PERIOD CHARGE COVERAGE RATIO
------ ---------------------
<S> <C>
1st Fiscal Quarter 1997 1.30:1.00

2nd Fiscal Quarter, 1997
through and including
1st Fiscal Quarter, 1999 1.35:1.00

2nd Fiscal Quarter, 1999
through and including
3rd Fiscal Quarter, 1999 1.40:1.00

4th Fiscal Quarter, 1999
through and including
3rd Fiscal Quarter, 2000 1.45:1.00

4th Fiscal Quarter, 2000
through and including
3rd Fiscal Quarter, 2001 1.50:1.00

4th Fiscal Quarter, 2001
through and including
3rd Fiscal Quarter, 2002 1.55:1.00
</TABLE>

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<TABLE>
<S> <C>
4th Fiscal Quarter, 2002
through and including
2nd Fiscal Quarter, 2003
and each Fiscal Quarter
thereafter 1.60:1.00
</TABLE>

B. MAXIMUM LEVERAGE RATIO. Company shall not permit the ratio of
(i) Consolidated Total Debt as of the last day of any Fiscal Quarter occurring
during any of the periods set forth below to (ii) Consolidated Adjusted EBITDA
for the four-Fiscal Quarter period ending on such last day, to exceed the
correlative ratio indicated:
<TABLE>
<CAPTION>
PERIOD MAXIMUM LEVERAGE RATIO
------ ----------------------
<S> <C>
1st Fiscal Quarter, 1997 5.30:1.00
2nd Fiscal Quarter, 1997 5.20:1.00
3rd Fiscal Quarter, 1997 5.00:1.00
4th Fiscal Quarter, 1997 4.80:1.00

1st Fiscal Quarter, 1998 4.50:1.00
2nd Fiscal Quarter, 1998 4.30:1.00
3rd Fiscal Quarter, 1998 4.00:1.00
4th Fiscal Quarter, 1998 4.00:1.00

1st Fiscal Quarter, 1999 3.80:1.00
2nd Fiscal Quarter, 1999 3.70:1.00
3rd Fiscal Quarter, 1999 3.50:1.00
4th Fiscal Quarter, 1999 3.30:1.00

1st Fiscal Quarter, 2000 3.20:1.00

2nd Fiscal Quarter, 2000
through and including
2nd Fiscal Quarter, 2003
and each Fiscal Quarter
thereafter 3.00:1.00
</TABLE>

C. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit
Consolidated Net Worth at any time during any of the periods set forth below to
be less than the correlative amount indicated:

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<PAGE> 148
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
PERIOD NET WORTH
------ --------------------
<S> <C>
Closing Date through and
including 2nd Fiscal Quarter, 1997 $130,000,000

3rd Fiscal Quarter, 1997 $135,000,000
4th Fiscal Quarter, 1997 $140,000,000

1st Fiscal Quarter, 1998 $140,000,000
2nd Fiscal Quarter, 1998 $140,000,000
3rd Fiscal Quarter, 1998 $145,000,000
4th Fiscal Quarter, 1998 $150,000,000

1st Fiscal Quarter, 1999 $160,000,000
2nd Fiscal Quarter, 1999 $165,000,000
3rd Fiscal Quarter, 1999 $175,000,000
4th Fiscal Quarter, 1999 $185,000,000

1st Fiscal Quarter, 2000 $190,000,000
2nd Fiscal Quarter, 2000 $200,000,000
3rd Fiscal Quarter, 2000 $210,000,000
4th Fiscal Quarter, 2000 $220,000,000

1st Fiscal Quarter, 2001 $230,000,000
2nd Fiscal Quarter, 2001 $245,000,000
3rd Fiscal Quarter, 2001 $260,000,000
4th Fiscal Quarter, 2001 $275,000,000

1st Fiscal Quarter, 2002 $280,000,000
2nd Fiscal Quarter, 2002 $295,000,000
3rd Fiscal Quarter, 2002 $315,000,000
4th Fiscal Quarter, 2002 $340,000,000

1st Fiscal Quarter, 2003 $350,000,000

2nd Fiscal Quarter, 2003
and thereafter $360,000,000
</TABLE>

7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES.

Holdings shall not, and shall not permit any of its
Subsidiaries to, alter the corporate, capital or legal structure of Holdings or
any of its Subsidiaries, including the creation or acquisition of any
Subsidiaries, or enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, sub-lease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or any part of its
business,

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property or fixed assets, whether now owned or hereafter acquired, or acquire
by purchase or otherwise all or a substantial portion of the business, property
or fixed assets of, or stock or other evidence of beneficial ownership of, any
Person or any division or line of business of any Person, except:

(i) Holdings may consummate the IPO;

(ii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted under subsection 7.8 and Development
Investments (to the extent such Development Investments do not
constitute Consolidated Capital Expenditures) permitted under
subsection 7.3(vi);

(iii) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof;

(iv) Company and its Subsidiaries may sell or otherwise
dispose of damaged, worn-out or obsolete assets that are no longer
necessary for the proper conduct of their respective business for fair
market value in the ordinary course of business;

(v) Company and its Subsidiaries may sell grocery stores
(including equipment therein acquired after the Closing Date) opened or
acquired after the Closing Date and grocery store equipment, warehouse
equipment, distribution equipment and office equipment, in each case
acquired after the Closing Date, in connection with a concurrent
lease-back of such grocery stores (including such equipment) and such
grocery store equipment, warehouse equipment, distribution equipment
and office equipment to the extent such transactions are permitted
under subsection 7.10;

(vi) Company and its Subsidiaries may lease or sublease any
of their respective real or personal property in the ordinary course of
business;

(vii) (A) any wholly-owned Subsidiary of Company may be
merged or consolidated with or into Company or any wholly-owned
Subsidiary of Company, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
or, in one transaction or a series or transactions, to Company or any
wholly-owned Subsidiary of Company; provided that, in the case of such
a merger or consolidation involving Company, Company shall be the
continuing or surviving corporation; and (B) the corporate existence of
those Subsidiaries of Holdings identified as inactive on Schedule 5.1
annexed hereto may be terminated to the extent permitted under
subsection 6.2;

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<PAGE> 150
(viii) subject to subsection 7.13, Company and its
Subsidiaries may (a) sell (1) either or both the warehouse facility
located at 4404 West 42nd Street, Chicago, Illinois and the garage
connected to Donna's Meat Facility located at 7445 Franklin Street,
Forest Park, Illinois and (2) either or both the warehouse described in
Schedule 7.7 annexed hereto or the office building described in
Schedule 7.7 annexed hereto, (b) sell and concurrently lease-back the
equipment described in Schedule 7.7 annexed hereto and (c) make
additional Asset Sales of assets having an aggregate fair market value
not in excess of $5,000,000 in the aggregate for all such Asset Sales
in any Fiscal Year; provided that in each case for clauses (a), (b) and
(c) above, (1) the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof and (2) not
less than 50% of the consideration received therefor shall be cash; and

(ix) Company and its Subsidiaries may make Asset Sales of
stores which are no longer useful to the business of Company and its
Subsidiaries; provided that the aggregate number of any stores sold
pursuant to this clause (ix) shall not exceed five in any Fiscal Year
plus, for Fiscal Year 1998 and each Fiscal Year thereafter, a number of
stores equal to the difference between five and the number of stores
sold under this clause (ix) in the immediately preceding Fiscal Year.

7.8 CONSOLIDATED CAPITAL EXPENDITURES.

Holdings shall not make or incur any Consolidated Capital
Expenditures and Company shall not, and shall not permit its
Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal Year indicated below, in an aggregate amount in excess of
the corresponding amount (the "MAXIMUM CONSOLIDATED CAPITAL
EXPENDITURES AMOUNT") set forth below opposite such Fiscal Year;
provided that the Maximum Consolidated Capital Expenditures Amount (i)
for any Fiscal Year (other than Fiscal Year 1997) may be increased by
an amount equal to the excess, if any, (but in no event more than 30%
of the Maximum Consolidated Capital Expenditures Amount for the
immediately preceding Fiscal Year, as set forth in the table below) of
the Maximum Consolidated Capital Expenditures Amount for the previous
Fiscal Year (as adjusted in accordance with this proviso) over the
actual amount of Consolidated Capital Expenditures for such previous
Fiscal Year, (ii) for any Fiscal Year may be increased by an amount up
to, but in no event greater than, 30% of the Maximum Consolidated
Capital Expenditures Amount for the immediately following Fiscal Year,
as set forth in the table below, which amount described in this clause
(ii) shall reduce the Maximum Consolidated Capital Expenditures Amount
for the immediately following Fiscal Year and (iii) for any Fiscal Year
may be increased by an amount equal to (but in no event greater than
$10,000,000 for any Fiscal Year) the aggregate amount of

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Net Cash Proceeds (other than insurance proceeds, condemnation awards
and indemnity payments) received by Company and its Subsidiaries from
Asset Sales of stores during such Fiscal Year to the extent such Net
Cash Proceeds have been reinvested in new stores or the construction or
remodeling of stores of Company and its Subsidiaries within 270 days of
receipt in accordance with subsection 2.4B(iii)(a)(i); provided,
however, that the amount which may be added to the Maximum Consolidated
Capital Expenditures Amount for any Fiscal Year pursuant to clauses (i)
and (ii) of the immediately preceding proviso shall not exceed 30% of
the Maximum Consolidated Capital Expenditures Amount for such Fiscal
Year as set forth in the table below:

<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED CAPITAL
FISCAL YEAR EXPENDITURES AMOUNT
----------- ----------------------------
<S> <C>
Fiscal Year 1997 $75,000,000
Fiscal Year 1998 $70,000,000
Fiscal Year 1999 $70,000,000
Fiscal Year 2000 $75,000,000
Fiscal Year 2001 $75,000,000
Fiscal Year 2002 $80,000,000
Fiscal Year 2003 $38,000,000
</TABLE>

Notwithstanding anything to the contrary contained herein, (i) the
aggregate cumulative amount of purchase price with respect to all Store
Land Properties shall not exceed at any time $25,000,000 minus the
aggregate cumulative amount of losses incurred by Loan Parties after
the Closing Date with respect to any Store Land Property acquired after
the Closing Date (which losses shall be calculated on or after the date
of the sale or other disposition of such Store Land Property as the
purchase price of such Store Land Property minus the Cash Proceeds
received by the applicable Loan Party on or before such date of
calculation in connection with such sale or other disposition); and
(ii) Company and its Subsidiaries shall not acquire any Store Land
Properties so long as a Potential Event of Default or Event of Default
has occurred and is continuing or occurs as a result thereof.

7.9 RESTRICTION ON LEASES.

Holdings shall not become liable in any way, whether directly
or by assignment or as a guarantor or other surety, for the obligations of the
lessee under any lease, whether an Operating Lease or a Capital Lease, and
Company shall not, and shall not permit any of its Subsidiaries to, become
liable in any way, whether directly or by assignment or as a guarantor or other
surety, for the obligations of the

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lessee under any lease, whether an Operating Lease or a Capital Lease (other
than intercompany leases between Company and its wholly-owned Subsidiaries),
unless, immediately after giving effect to the incurrence of liability with
respect to such lease, all amounts paid or payable under all Capital Leases and
Operating Leases at the time in effect during the then current Fiscal Year
shall not exceed the corresponding amount set forth below opposite such Fiscal
Year:

<TABLE>
<CAPTION>
MAXIMUM LEASE
FISCAL YEAR PAYMENTS
---------------------------------- ------------------
<S> <C>
Fiscal Year 1997 $82,000,000
Fiscal Year 1998 $100,000,000
Fiscal Year 1999 $115,000,000
Fiscal Year 2000 $130,000,000
Fiscal Year 2001 $135,000,000
Fiscal Year 2002 $140,000,000
Fiscal Year 2003 $75,000,000
and each Fiscal
Year thereafter
</TABLE>

7.10 SALES AND LEASE-BACKS.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, become or remain liable as
lessee or as a guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether real, personal or
mixed), whether now owned or hereafter acquired, (i) which Holdings or any of
its Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Holdings or any of its Subsidiaries) or (ii) which Holdings
or any of its Subsidiaries intends to use for substantially the same purpose as
any other property which has been or is to be sold or transferred by Holdings
or any of its Subsidiaries to any Person (other than Holdings or any of its
Subsidiaries) in connection with such lease; provided that Company and its
Subsidiaries may become and remain liable as lessee, guarantor or other surety
with respect to any such lease if and to the extent that Company or any of its
Subsidiaries would be permitted to enter into, and remain liable under, such
lease under subsection 7.9.

7.11 SALE OR DISCOUNT OF RECEIVABLES.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes receivable or accounts receivable.

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7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.

Each of Holdings and Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any Affiliate
of such Person, on terms that are less favorable to such Person or that
Subsidiary, as the case may be, than those that might be obtained at the time
from Persons who are not such an Affiliate; provided that the foregoing
restriction shall not apply to (i) any transaction between Company and any of
its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries,
(ii) transactions relating to the termination of the Consulting Agreement and
the payment of a termination fee thereunder as described in subsection 4.1H,
(iii) reasonable and customary fees paid to members of the Boards of Directors
of Holdings and its Subsidiaries, (iv) issuances of stock, payments of bonuses
and other transactions pursuant to employment or compensation agreements, stock
option agreements, indemnification agreements and other arrangements, in each
case satisfactory in form and in substance to Agent and Arrangers and as in
effect as of the Closing Date and unamended, and substantially similar
agreements as may hereafter become effective, in each case with officers or
directors who are Affiliates of Holdings or any of its Subsidiaries, (v)
payment of consulting and other fees and expenses under the Management
Agreement, as amended to the extent permitted pursuant to subsection 7.15, and
in form and substance satisfactory to Agent and Arrangers, (vi) to the extent
permitted under subsection 7.3(xii), any repurchase of stock of Holdings from
Company's stock option or other stock plan or participants in such plan, in
each case to the extent such repurchases are required by the terms of such
plan, (vii) payments by Holdings and its Subsidiaries pursuant to the Tax
Sharing Agreement, and (viii) the issuance by Holdings of Holdings Common Stock
to Yucaipa pursuant to Yucaipa's warrant issued to it on the Acquisition Date
by Holdings (as in effect on the Acquisition Date, the "YUCAIPA WARRANTS").

7.13 DISPOSAL OF SUBSIDIARY STOCK; RESTRICTIONS ON SUBSIDIARIES.

A. Except for any sale of 100% of the capital stock or other
equity Securities of any of Company's Subsidiaries in compliance with the
provisions of subsection 7.7(vii) and except pursuant to the Collateral
Documents, Holdings will not and will not permit any of its Subsidiaries to
directly or indirectly sell, assign, pledge or otherwise encumber or dispose of
any shares of capital stock or other equity Securities of any of its
Subsidiaries, except to qualify directors if required by applicable law, or in
the case of Company's Subsidiaries, to Company or to a wholly-owned Subsidiary
of Company.

B. Except as provided herein or in any other Loan Document,
Holdings will not, and will not permit any of its Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any

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kind on the ability of any Subsidiary of Company to (i) pay dividends or make
any other distributions on any of such Subsidiary's capital stock owned by
Company or any other Subsidiary of Company, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to Company or any other Subsidiary of
Company, (iii) make loans or advances to Company or any other Subsidiary of
Company, or (iv) transfer any of its property or assets to Company or any other
Subsidiary of Company.

7.14 CONDUCT OF BUSINESS.

From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than (i) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related businesses and (ii) such other lines of business as may be
consented to by Requisite Lenders. From and after the Closing Date, Holdings
shall not engage in any business other than owning the capital stock of Company
and entering into and performing its obligations under and in accordance with
the Loan Documents, the Related Transaction Documents and the Specified
Existing Documents to which it is a party, and shall not own any assets other
than (a) the capital stock of Company, (b) Cash and Cash Equivalents in an
amount not to exceed $500,000 at any one time for the purpose of paying general
operating expenses of Holdings, and (c) Cash which has been paid to Holdings
for the purpose of allowing Holdings to make the payments described in clause
(iv) of subsection 7.5A; provided that Holdings shall make such payments
immediately upon (and in any event on the date of) receipt of such Cash. From
and after the Closing Date, neither BDI nor BPI shall engage in any business
other than (i) owning the Cash and Cash Equivalents or promissory notes issued
by Company required to be owned by them in amounts less than $90,000 and
$260,000, respectively, and (ii) entering into and performing its obligations
under and in accordance with the Loan Documents, the Related Transaction
Documents and the Specified Existing Documents to which it is a party, and
neither BDI nor BPI shall own any assets other than such Cash and Cash
Equivalents or promissory notes.

7.15 AMENDMENTS OF CERTAIN DOCUMENTS; DESIGNATION OF DESIGNATED SENIOR
INDEBTEDNESS.

A. Holdings shall not, and shall not permit any of its
Subsidiaries to, amend or otherwise change the terms of any Subordinated
Indebtedness (including without limitation the Senior Subordinated Notes, the
Senior Subordinated Note Indenture and each of the exhibits thereto), any of
the guaranties entered into by any Loan Party in connection with any
Subordinated Indebtedness or any agreements relating to the Existing Funded
Debt (collectively, the "RESTRICTED AGREEMENTS"), or make any payment
consistent with an amendment thereof or change thereto, if the effect of such
amendment or change is to increase the interest rate on such Subordinated
Indebtedness, such guaranties, or any such Restricted Agreement, change any
dates upon which payments of principal or interest are due thereon, change any
of the

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covenants with respect thereto in a manner which is more restrictive to
Holdings or any of its Subsidiaries, change any event of default or condition
to an event of default with respect thereto, change the redemption, prepayment
or defeasance provisions thereof, change the subordination provisions (if any)
thereof (or of any guaranty thereof), or change any collateral therefor (other
than to release such collateral), or if the effect of such amendment or change,
together with all other amendments or changes made, is to increase the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Subordinated Indebtedness, such guaranties, or any such
Restricted Agreement (or a trustee or other representative on their behalf)
which would be adverse to any Loan Party or Lenders.

B. Holdings shall not, and shall not permit any of its
Subsidiaries to, amend, waive any of its rights under, or otherwise change the
terms of any of the Management Agreement, the Redemption Documents, the
Termination Agreement, the Escrow Agreement, [SPECIFY OTHER RELATED TRANSACTION
DOCUMENTS], the Stock Purchase Agreement, the Stock Exchange Agreement, the
Holdings Certificate of Designation, the Asset Transfer Agreement, the Tax
Matters Agreement, the Yucaipa Warrants or the Shareholders Agreement, in each
case as in effect on the Closing Date, without the prior written consent of the
Requisite Lenders, if such amendment, waiver or change would increase
materially the obligations of Holdings or any of its Subsidiaries or confer
additional rights on any other party to any such agreement which would be
adverse to Holdings or any of its Subsidiaries or to Lenders (it being
understood that any amendment of the Preferred Stock Redemption Agreement or
the Escrow Agreement which extends the Redemption Date shall be deemed to be
adverse to Lenders).

C. Neither Holdings nor Company shall amend or otherwise change
the terms of the Parent Merger Certificate or the Tax Sharing Agreement without
the prior written consent of Requisite Lenders.

D. None of the Loan Parties shall designate any Indebtedness as
"Designated Senior Indebtedness" (as defined in the Senior Subordinated Note
Indenture) for purposes of the Senior Subordinated Note Indenture without the
prior written consent of Requisite Lenders.

7.16 FISCAL YEAR.

No Loan Party (other than Land Trusts) shall change its Fiscal
Year-end from the Saturday closest to October 31 of each calendar year.

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SECTION 8. EVENTS OF DEFAULT

If any of the following conditions or events ("EVENTS OF
DEFAULT") shall occur:

8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.

Failure by Company to pay any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; failure by Company
to pay when due any amount payable to an Issuing Lender in reimbursement of any
drawing under a Letter of Credit; or failure by Company to pay any interest on
any Loan or any fee or any other amount due under this Agreement within five
days after the date due; or

8.2 DEFAULT IN OTHER AGREEMENTS.

(i) Failure of any of Holdings or any of its Subsidiaries
to pay when due (a) any principal of or interest on any Indebtedness (other
than Indebtedness referred to in subsection 8.1) in an individual principal
amount of $5,000,000 or more or any items of Indebtedness with an aggregate
principal amount of $10,000,000 or more or (b) any Contingent Obligation in an
individual principal amount of $5,000,000 or more or any Contingent Obligations
with an aggregate principal amount of $10,000,000 or more, in each case beyond
the end of any grace period provided therefor; or (ii) breach or default by any
of Holdings or any of its Subsidiaries with respect to any other material term
of (a) any evidence of any Indebtedness in an individual principal amount of
$5,000,000 or more or any items of Indebtedness with an aggregate principal
amount of $10,000,000 or more or any Contingent Obligation in an individual
principal amount of $5,000,000 or more or any Contingent Obligations with an
aggregate principal amount of $10,000,000 or more or (b) any loan agreement,
mortgage, indenture or other agreement relating to such Indebtedness or
Contingent Obligation(s), if the effect of such breach or default is to cause,
or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse
of time, both, or otherwise); or

8.3 BREACH OF CERTAIN COVENANTS.

Failure of Holdings or Company to perform or comply with any
term or condition contained in subsection 2.5, 6.2 or 6.13 or Section 7 of this
Agreement; or

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8.4 BREACH OF WARRANTY.

Any representation, warranty, certification or other statement
made by any of the Loan Parties in any Loan Document or in any statement or
certificate at any time given by any of the Loan Parties in writing pursuant
hereto or thereto or in connection herewith or therewith shall be false in any
material respect on the date as of which made; or

8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.

Any Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the receipt by Company of notice from Agent or any Lender of such
default; or

8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) A court having jurisdiction in the premises shall
enter a decree or order for relief in respect of any of Holdings or any of its
Subsidiaries (other than an inactive Subsidiary identified as such in Schedule
5.1 annexed hereto (other than BDI and BPI) whose aggregate assets and annual
revenues do not exceed $500,000 and $500,000, respectively, and whose financial
condition does not adversely affect any other Loan Party ("INSIGNIFICANT
SUBSIDIARY")) in an involuntary case under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief shall
be granted under any applicable federal or state law; or (ii) an involuntary
case shall be commenced against any of Holdings or any of its Subsidiaries
(other than an Insignificant Subsidiary) under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over any of Holdings or any of its
Subsidiaries (other than an Insignificant Subsidiary), or over all or a
substantial part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or other
custodian of any of Holdings or any of its Subsidiaries (other than an
Insignificant Subsidiary) for all or a substantial part of its property; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of any of Holdings or any of its
Subsidiaries (other than an Insignificant Subsidiary), and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or

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8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) any of Holdings or any of its Subsidiaries shall have
an order for relief entered with respect to it or commence a voluntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or any of Holdings or any of its
Subsidiaries shall make any assignment for the benefit of creditors; or (ii)
any of Holdings or any of its Subsidiaries shall be unable or shall fail,
generally, or shall admit in writing its inability, to pay its debts as such
debts become due; or the Board of Directors of any of Holdings or any of its
Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in clause (i)
above or this clause (ii); or

8.8 JUDGMENTS AND ATTACHMENTS.

Any money judgment, writ or warrant of attachment or similar
process involving (i) in any individual case an amount in excess of $5,000,000
or (ii) in the aggregate at any time an amount in excess of $10,000,000 (in
either case not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against any of Holdings or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days (or in any event later than five days prior to
the date of any proposed sale thereunder); or

8.9 DISSOLUTION.

Any order, judgment or decree shall be entered against any of
Holdings or any of its Subsidiaries decreeing the dissolution or split up of
such Person and such order shall remain undischarged or unstayed for a period
in excess of 30 days; or

8.10 EMPLOYEE BENEFIT PLANS.

There shall occur one or more ERISA Events which individually
or in the aggregate results in or could reasonably be expected to result in
liability of any of the Loan Parties or any of their respective ERISA
Affiliates in excess of $5,000,000 during the term of this Agreement; or there
shall exist an Amount of Unfunded Benefit Liabilities, individually or in the
aggregate for all Pension Plans (excluding for purposes of such computation any
Pension Plans which have a negative Amount of Unfunded Benefit Liabilities),
which exceeds $10,000,000; or

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8.11 CHANGE IN CONTROL.

A Change of Control shall have occurred; or

8.12 INVALIDITY OF ANY GUARANTY.

Either the Holdings Guaranty or, upon execution and delivery
thereof, the Subsidiary Guaranty for any reason, other than the satisfaction in
full of all Obligations, ceases to be in full force and effect (other than in
accordance with its terms) or is declared to be null and void, or any Loan
Party denies that it has any further liability, including without limitation
with respect to future advances by Lenders, under any Loan Document to which it
is a party, or gives notice to such effect; or

8.13 FAILURE OF SECURITY.

Any Collateral Document shall, at any time, cease to be in full
force and effect (other than by reason of a release of Collateral in accordance
with the terms hereof or thereof) or shall be declared null and void, or the
validity or enforceability thereof shall be contested by any Loan Party, or
Agent shall not have or cease to have a valid and perfected first priority
security interest in any significant part of the Collateral (other than by
reason of any release of Collateral in accordance with the terms hereof or
thereof); or

8.14 ACTION RELATING TO CERTAIN SUBORDINATED INDEBTEDNESS.

Any holder of any Subordinated Indebtedness evidenced by the
Senior Subordinated Notes shall file an action seeking the rescission thereof
or damages or injunctive relief relating thereto; or any event shall occur
which, under the terms of the Senior Subordinated Note Indenture, shall require
Holdings or any of its Subsidiaries to purchase, redeem or otherwise acquire or
offer to purchase, redeem or otherwise acquire all or any portion of any such
Subordinated Indebtedness; or Holdings or any of its Subsidiaries shall for any
other reason purchase, redeem or otherwise acquire or offer to purchase, redeem
or otherwise acquire, or make any other payments in respect of, all or any
portion of any such Subordinated Indebtedness, except to the extent expressly
permitted by subsection 7.5; or

8.15 FAILURE TO CONSUMMATE TRANSACTIONS.

(i) Any of the Transactions shall not be consummated in
accordance with the Loan Documents and the Related Transaction Documents prior
to or concurrently with the making of the Term Loans, (ii) the redemption of
all of the Holdings Preferred Stock shall not be consummated in accordance with
the terms of the Preferred Stock Redemption Agreement and Escrow Agreement on
or prior to

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the Redemption Date, or (iii) any of the Transactions or such redemption shall
be unwound, reversed or otherwise rescinded or modified in whole or in part for
any reason:

THEN (i) upon the occurrence of any Event of Default described in subsection
8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on
the Loans, (b) an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Holdings and Company, and the obligation of each Lender to
make any Loan (including the obligation of Swing Line Lender to make any Swing
Line Loan), the obligation of Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate, and (ii) upon the occurrence and during the continuation of any
other Event of Default, Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to Company, declare all
or any portion of the amounts described in clauses (a) through (c) above to be,
and the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan (including the obligation of Swing
Line Lender to make any Swing Line Loan), the obligation of Agent to issue any
Letter of Credit and the right of any Lender to issue any Letter of Credit
hereunder shall thereupon terminate; provided that the foregoing shall not
affect in any way the obligations of Revolving Lenders to purchase
participations in Letters of Credit as provided in subsection 3.3C or the
obligations of Revolving Lenders to purchase participations in any unpaid Swing
Line Loans as provided in subsection 2.1A(iv).

Any amounts described in clause (b) above, when received by
Agent, shall be held by Agent pursuant to the terms of the Collateral Account
Agreement and shall be applied as therein provided.

Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to such paragraph Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as
a result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this
Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 11.6, then Requisite Lenders, by
written notice to Company, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or

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Potential Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Lenders to a decision
which may be made at the election of Requisite Lenders and are not intended to
benefit Company and do not grant Company the right to require Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth
herein are met.

SECTION 9. HOLDINGS GUARANTY

Holdings (for purposes of this Section 9, a "GUARANTOR") hereby
consents to and confirms its guaranty of all Obligations of Company and all
obligations of Company under Interest Rate Agreements permitted under
subsection 7.4(iii) to which a Lender or an Affiliate of such Lender is a
counterparty (such guaranty being the "HOLDINGS GUARANTY"). In furtherance of
the foregoing, Guarantor hereby agrees as follows:

9.1 GUARANTIED OBLIGATIONS.

As consideration for Lenders agreeing to enter into this
Agreement and extend the Commitments, make the Loans hereunder and issue the
Letters of Credit, Guarantor hereby unconditionally and irrevocably guaranties,
as primary obligor and not merely as a surety, the due and punctual payment
when due (whether at stated maturity, by required prepayment, declaration,
demand or otherwise) (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)) of all Obligations of Company (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to Company would accrue on such Obligations) and all obligations of
Company under Interest Rate Agreements (collectively, the "LENDER INTEREST RATE
AGREEMENTS") permitted under subsection 7.4(iii) to which a Lender or an
Affiliate of such Lender (in such capacity, collectively, "INTEREST RATE
EXCHANGERS") is a counterparty (the "GUARANTIED OBLIGATIONS"). Lenders and
Interest Rate Exchangers are each referred to herein as a "GUARANTEED PARTY"
and collectively as the "GUARANTIED PARTIES".

9.2 TERMS OF HOLDINGS GUARANTY.

Guarantor agrees that the Guarantied Obligations may be
extended or renewed, and the Loans repaid and reborrowed in whole or in part,
without notice or further assent from it, and that it will remain bound upon
this Holdings Guaranty notwithstanding any extension, renewal or other
alteration of any such Guarantied Obligation or repayment and reborrowing of
the Loans.

Guarantor waives presentation of, demand of, payment from and
protest of any Guarantied Obligation and also waives notice of protest for
nonpayment. The

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obligations of Guarantor under this Holdings Guaranty shall not be affected by,
and Guarantor hereby waives its rights (to the extent permitted by law) in
connection with:

(a) the failure of Agent or any Guarantied Party to assert
any claim or demand or to enforce any right or remedy against Company
under the provisions of this Agreement, any Loan Documents or the
Lender Interest Rate Agreements or any other agreement or otherwise,

(b) any extension or renewal of any provision thereof,

(c) any rescission, waiver, amendment or modification of
any of the terms or provisions of this Agreement or any instrument
executed pursuant hereto or the Lender Interest Rate Agreements,

(d) the release of any of the security held by Agent for
any of the Guarantied Obligations,

(e) the failure of Agent or any Guarantied Party to
exercise any right or remedy against any other guarantor of any of the
Guarantied Obligations,

(f) Agent or any Guarantied Party taking and holding
security or collateral for the payment of this Holdings Guaranty, any
other guaranties of the Guarantied Obligations or other liabilities of
the Company, and exchanging, enforcing, waiving and releasing any such
security or collateral,

(g) Agent or any Guarantied Party applying any such
security or collateral and directing the order or manner of sale
thereof as Agent in its discretion may determine, or

(h) Agent or any Guarantied Party settling, releasing,
compromising, collecting or otherwise liquidating the Guarantied
Obligations and any security or collateral therefor in any manner
determined by Agent or such Guarantied Party .

Guarantor further agrees that this Holdings Guaranty
constitutes a guaranty of payment when due and not of collection and waives any
right to require that any resort be had by Agent or any other Person to any
security held for payment of the Guarantied Obligations or to any balance of
any deposit account or credit on the books of Agent or any other Person in
favor of Company or any other Person.

The obligations of Guarantor under this Holdings Guaranty shall
not be subject to any reduction, limitation, impairment or termination for any
reason, including, without limitation, any claim of waiver, release, surrender,
alteration or

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compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Guarantied Obligations, discharge of Company from such
Guarantied Obligations in a bankruptcy or similar proceeding or otherwise.
Without limiting the generality of the foregoing, the obligations of Guarantor
under this Holdings Guaranty shall not be discharged or impaired or otherwise
affected by the failure of Agent or any Guarantied Party to assert any claim or
demand or to enforce any remedy under this Agreement or any other agreement, by
any waiver or modification of any provision thereof, by any default, failure or
delay, willful or otherwise, in the performance of the Guarantied Obligations,
or by any other act or thing or omission or delay to do any other act or thing
that may or might in any manner or to any extent vary the risk of Guarantor or
would otherwise operate as a discharge of Guarantor as a matter of law or
equity.

Agent may, at its election, foreclose on any security held by
Agent by one or more judicial or nonjudicial sales, or exercise any other right
or remedy Agent may have against Company or any security without affecting or
impairing in any way the liability of Guarantor hereunder except to the extent
the Guarantied Obligations have been paid. Guarantor waives any defense
arising out of such election by Agent, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of Guarantor against Company or any security, so long as Agent has
acted in a commercially reasonable manner.

Guarantor further agrees that this Holdings Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Guarantied
Obligation is rescinded or must otherwise be restored by Agent upon the
bankruptcy or reorganization of Company or otherwise.

Guarantor hereby further agrees, in furtherance of the
foregoing and not in limitation of any other right that Agent may have at law
or in equity against Guarantor by virtue hereof, upon the failure of Company to
pay any of its Guarantied Obligations when and as the same shall become due
(whether by required prepayment, declaration, demand or otherwise), Guarantor
will forthwith pay, or cause to be paid, in cash, to Agent an amount equal to
the sum of the unpaid principal amount of such Guarantied Obligations, accrued
and unpaid interest on such Guarantied Obligations and all other Obligations of
Company to Agent.

Until the Guarantied Obligations shall have been indefeasibly
paid in full and the Commitments shall have terminated and all Letters of
Credit shall have expired or been cancelled and all Lender Interest Rate
Agreements shall have terminated, expired or been cancelled, Guarantor shall
withhold exercise of (i) any claim, right or remedy, direct or indirect, that
Guarantor now has or may hereafter have against Company or any of its assets in
connection with this Holdings Guaranty

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or the performance by Guarantor of its obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that Guarantor now has
or may hereafter have against Company, (b) any right to enforce, or to
participate in, any claim, right or remedy that Agent or any Guarantied Party
now has or may hereafter have against Company, and (c) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by
Agent or any Guarantied Party, and (ii) any right of contribution Guarantor may
have against any other guarantor of any of the Guarantied Obligations.
Guarantor further agrees that, to the extent the agreement to withhold the
exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification Guarantor may have against Company or against any collateral
or security, and any rights of contribution Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights Agent or
Guarantied Parties may have against Company, to all right, title and interest
Agent or Guarantied Parties may have in any such collateral or security, and to
any right Agent or Guarantied Parties may have against such other guarantor.
Agent, on behalf of Guarantied Parties, may use, sell or dispose of any item of
collateral or security as it sees fit without regard to any subrogation rights
Guarantor may have, and upon any such disposition or sale any rights of
subrogation Guarantor may have shall terminate. If any amount shall be paid to
Guarantor on account of any such subrogation, reimbursement or indemnification
rights at any time when all Guarantied Obligations shall not have been paid in
full, such amount shall be held in trust for Agent on behalf of Guarantied
Parties and shall forthwith be paid over to Agent for the benefit of Guarantied
Parties to be credited and applied against the Guarantied Obligations, whether
matured or unmatured, in accordance with the terms hereof.

In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon failure of
Company to pay its Guarantied Obligations when due (whether by required
prepayment, declaration, demand or otherwise) and consequent acceleration of
the Obligations pursuant to Section 8, Agent is hereby authorized by Guarantor
at any time or from time to time, without notice to Guarantor or to any other
Person, any such notice being hereby expressly waived to the extent permitted
by applicable law, to set off and to appropriate and to apply any and all
deposits (general or special, including, not limited to, Indebtedness evidenced
by certificates of deposit, whether matured or unmatured, but not including
trust accounts) and any other Indebtedness at any time owing by Agent to or for
the credit or the account of Guarantor against and on account of the
obligations and liabilities of Guarantor to Agent under this Holdings Guaranty,
including, but not limited to, all such obligations and liabilities with
respect to all claims of any nature or description arising out of or connected
with this Agreement, this Holdings Guaranty or the Letters of Credit or any of
the other Loan

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Documents, irrespective of whether or not Agent, with respect to any Obligation
owed under the Letters of Credit or this Agreement, shall have made any demand
hereunder. Agent agrees promptly to notify Guarantor after any such set-off
and application is made by Agent.

Notwithstanding anything contained in this Section 9 to the
contrary, this Holdings Guaranty shall not be effective or in full force and
effect until the Closing Date.

SECTION 10. AGENT, SYNDICATION AGENT AND ARRANGERS

10.1 APPOINTMENT.

Each Lender and, by its acceptance of the benefits hereof and
of the other Loan Documents, each Interest Rate Exchanger hereby appoints
Bankers as Agent hereunder and under the other Loan Documents and each Lender
and, by its acceptance of the benefits hereof and of the other Loan Documents,
each Interest Rate Exchanger hereby authorizes Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents. Each
Lender and, by its acceptance of the benefits hereof and of the other Loan
Documents, each Interest Rate Exchanger hereby appoints Chase as Syndication
Agent hereunder. Each Lender and, by its acceptance of the benefits hereof and
of the other Loan Documents, each Interest Rate Exchanger hereby appoints
Bankers and Chase as Arrangers hereunder. Agent agrees to act upon the express
conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 10 are solely for the benefit of
Agent, Syndication Agent, Arrangers, Lenders and Interest Rate Exchangers and
no Loan Party shall have any rights as a third party beneficiary of any of the
provisions thereof. In performing its functions and duties under this
Agreement and other than as expressly provided for in subsection 2.1D(v), Agent
shall act solely as an agent of Lenders and Interest Rate Exchangers and does
not assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for any Loan Party. Each Lender named
as an Arranger hereunder or as the Syndication Agent shall have no duties or
responsibilities under this Agreement or any other Loan Document (other than as
specifically set forth herein) to any Person, other than as a Lender hereunder
and thereunder, and in the case of Bankers, other than as Agent hereunder and
thereunder.

10.2 POWERS; GENERAL IMMUNITY.

A. DUTIES SPECIFIED. Each Lender and, by its acceptance of the
benefits hereof and of the other Loan Documents, each Interest Rate Exchanger
irrevocably authorizes Agent, Syndication Agent and Arrangers to take such
action on such Lender's behalf or such Interest Rate Exchanger's behalf and to
exercise such powers

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hereunder and under the other Loan Documents as are specifically delegated to
Agent, Syndication Agent and Arrangers, by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. Agent,
Syndication Agent and Arrangers shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents and each of them may perform such duties by or through its
agents or employees. Agent, Syndication Agent and Arrangers shall not have, by
reason of this Agreement or any of the other Loan Documents, a fiduciary
relationship in respect of any Lender or any Interest Rate Exchanger; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon Agent,
Syndication Agent or Arrangers any obligations in respect of this Agreement or
any of the other Loan Documents except as expressly set forth herein or
therein.

B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Agent, Syndication
Agent and Arrangers shall not be responsible to any Lender or any Interest Rate
Exchanger for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any
other documents furnished or made by Agent, Syndication Agent or Arrangers to
Lenders and Interest Rate Exchangers or by or on behalf of any Loan Party to
Agent, Syndication Agent, Arrangers or any Lender or any Interest Rate
Exchanger in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of any
Loan Party or any other Person liable for the payment of any Obligations, nor
shall Agent or Arrangers be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Loan Documents or as to the use
of the proceeds of the Loans or the use of the Letters of Credit or as to the
existence or possible existence of any Event of Default or Potential Event of
Default. Anything contained in this Agreement to the contrary notwithstanding,
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.

C. EXCULPATORY PROVISIONS. Neither Agent nor Syndication Agent
nor any Arranger nor any of their respective officers, directors, employees or
agents shall be liable to Lenders or Interest Rate Exchangers for any action
taken or omitted by Agent, Syndication Agent or Arrangers under or in
connection with any of the Loan Documents except to the extent caused by such
Person's gross negligence or willful misconduct. If Agent, Syndication Agent
or Arrangers shall request instructions from Lenders with respect to any act or
action (including the failure to take an action) in connection with this
Agreement or any of the other Loan Documents, Agent, Syndication Agent and
Arrangers shall be entitled to refrain from such act or taking such action
unless and until Agent, Syndication Agent or Arrangers, as the case may

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be, shall have received instructions from Requisite Lenders. Without prejudice
to the generality of the foregoing, (i) each of Agent, Syndication Agent and
Arrangers shall be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Loan Parties), accountants,
experts and other professional advisors selected by it; and (ii) no Lender or
Interest Rate Exchanger shall have any right of action whatsoever against
Agent, Syndication Agent or Arrangers, as the case may be, as a result of
Agent, Syndication Agent or Arrangers, as the case may be, acting or (where so
instructed) refraining from acting under this Agreement or any of the other
Loan Documents in accordance with the instructions of Requisite Lenders. Each
of Agent, Syndication Agent and Arrangers shall be entitled to refrain from
exercising any power, discretion or authority vested in it under this Agreement
or any of the other Loan Documents unless and until it has obtained the
instructions of Requisite Lenders.

D. AGENT, SYNDICATION AGENT AND ARRANGER ENTITLED TO ACT AS
LENDER. The agency hereby created shall in no way impair or affect any of the
rights and powers of, or impose any duties or obligations upon, Agent,
Syndication Agent or either Arranger in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit, each of Agent, Syndication Agent and each Arranger shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include each of Agent, Syndication
Agent and each Arranger in its individual capacity. Each of Agent, Syndication
Agent and each Arranger and each of their respective Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking,
trust, financial advisory or other business with Holdings or any of its
Affiliates as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Loan Party for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders or Interest Rate Exchangers.

10.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.

Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the Loan
Parties in connection with the making of the Loans and the issuance of Letters
of Credit hereunder and that it has made and shall continue to make its own
appraisal of the creditworthiness of the Loan Parties. Neither Agent, nor
Syndication Agent nor any Arranger shall have any duty or responsibility,
either initially or on a continuing basis,

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to make any such investigation or any such appraisal on behalf of Lenders or to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any
time or times thereafter, and neither Agent, nor Syndication Agent, nor any
Arranger shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to Lenders.

10.4 RIGHT TO INDEMNITY.

Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify each of Agent, Syndication Agent and each Arranger, to the
extent that Agent, Syndication Agent, or such Arranger shall not have been
reimbursed by any Loan Party, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent, Syndication Agent or such Arranger in
performing its duties hereunder or under the other Loan Documents or otherwise
in its capacity as Agent, Syndication Agent or Arranger, as the case may be, in
any way relating to or arising out of this Agreement or the other Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's, Syndication
Agent's or such Arranger's gross negligence or willful misconduct. If any
indemnity furnished to Agent, Syndication Agent or either Arranger, as the case
may be, for any purpose shall, in the opinion of Agent, Syndication Agent or
such Arranger, as the case may be, be insufficient or become impaired, Agent,
Syndication Agent or such Arranger may call for additional indemnity and cease,
or not commence, to do the acts indemnified against until such additional
indemnity is furnished.

10.5 SUCCESSOR AGENT AND SWING LINE LENDER.

A. SUCCESSOR AGENT. Agent may resign at any time by giving 30
days' prior written notice thereof to Lenders and Company, and Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Company and Agent and signed by Requisite
Lenders. Upon any such notice of resignation or any such removal, Requisite
Lenders shall have the right, upon five Business Days' notice to Company, to
appoint a successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent and the retiring or removed Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Agent's resignation or removal hereunder as Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.

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B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of
Agent pursuant to subsection 10.5A shall also constitute the resignation or
removal of Bankers or its successor as Swing Line Lender, and any successor
Agent appointed pursuant to subsection 10.5A shall, upon its acceptance of such
appointment, become the successor Swing Line Lender for all purposes hereunder.
In such event (i) Company shall prepay any outstanding Swing Line Loans made by
the retiring or removed Agent in its capacity as Swing Line Lender, (ii) upon
such prepayment, the retiring or removed Agent and Swing Line Lender shall
surrender the Swing Line Note held by it to Company for cancellation, and (iii)
Company shall issue a new Swing Line Note to the successor Agent and Swing Line
Lender substantially in the form of Exhibit VI annexed hereto, in the principal
amount of the Swing Line Loan Commitment then in effect and with other
appropriate insertions.

10.6 GUARANTIES AND COLLATERAL DOCUMENTS.

Each Lender and, by its acceptance of the benefits hereof and
of the other Loan Documents, each Interest Rate Exchanger hereby further
authorizes Agent to enter into the Collateral Documents as secured party on
behalf of and for the benefit of Lenders and Interest Rate Exchangers and
agrees to be bound by the terms of the Collateral Documents; provided that,
except as otherwise provided in subsection 6.11 or 11.6, Agent shall not enter
into or consent to any amendment, modification, termination or waiver of any
provision contained in the Collateral Documents without the prior consent of
Requisite Lenders. Anything contained in the Loan Documents to the contrary
notwithstanding, each Lender and, by its acceptance of the benefits hereof and
of the other Loan Documents, each Interest Rate Exchanger agrees that (i) no
Lender or Interest Rate Exchanger shall have any right individually to realize
upon the Holdings Guaranty, the Subsidiary Guaranty or any of the Collateral
under the Collateral Documents, it being understood and agreed that all rights
and remedies under the Collateral Documents may be exercised solely by Agent
for the benefit of Lenders and Interest Rate Exchangers and the other
beneficially interested parties under the Collateral Documents and the other
Loan Documents in accordance with the terms thereof, and (ii) Agent may release
all Liens on the Collateral in accordance with subsection 6.11 without the
prior consent of any Lender or Interest Rate Exchanger.

SECTION 11. MISCELLANEOUS

11.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.

A. GENERAL. Each Lender shall have the right at any time to (i)
sell, assign or transfer to any Eligible Assignee, or (ii) sell participations
to any Person in, all or any part of its Commitments or any Loan or Loans made
by it or its Letters of Credit or participations therein or any other interest
herein or in any other Obligations owed

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to it; provided that no such sale, assignment, transfer or participation shall,
without the consent of Company, require Company to file a registration
statement with the Securities and Exchange Commission or apply to qualify such
sale, assignment, transfer or participation under the securities laws of any
state; provided, further that no such sale, assignment or transfer described in
clause (i) above shall be effective unless and until an Assignment Agreement
effecting such sale, assignment or transfer shall have been accepted by Agent
and recorded in the Register as provided in subsection 11.1B(ii); provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided, further that,
anything contained herein to the contrary notwithstanding, the Swing Line Loan
Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described in clause (i) above to any Person other
than a successor Agent and Swing Line Lender to the extent contemplated by
subsection 10.5. Except as otherwise provided in this subsection 11.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment or transfer of, or
any granting of participations in, all or any part of its Commitments or the
Loans, the Letters of Credit or participations therein, or the other
Obligations owed to such Lender.

B. ASSIGNMENTS.

(i) Amounts and Terms of Assignments. Each Commitment,
Loan, Letter of Credit or participation therein, or other Obligation
may (a) be assigned in any amount to another Lender, or to an Affiliate
of the assigning Lender or another Lender, with the giving of notice to
Company and Agent or (b) be assigned in an aggregate amount of not less
than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, Letters of Credit and
participations therein, and other Obligations of the assigning Lender)
to any other Eligible Assignee with the giving of notice to Company
and, with the consent of Company and Agent (which consent of Company
and Agent shall not be unreasonably withheld); provided that any such
assignment in accordance with either (a) or (b) above shall effect a
pro rata assignment of all of (i) the Revolving Term Loan Commitment
and Revolving Term Loans of the assigning Lender, on the one hand, and
(ii) the Revolving Loan Commitment and Revolving Loans of the assigning
Lender, on the other hand. To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender
shall be relieved of its obligations with respect to its Commitments,
Loans, Letters of Credit or participations therein, or other
Obligations or the portion thereof so assigned. The parties to each
such assignment shall execute and deliver to Agent, for its acceptance
and recording in the Register, an Assignment Agreement, together

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with a processing and recordation fee of, in the case of assignments to
a Lender or an Affiliate of a Lender, $1,500 and, in the case of
assignments to any other Eligible Assignee, $2,500 and such forms,
certificates or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Agent pursuant to
subsection 2.7B(iii)(a). Upon such execution, delivery, and acceptance
and recordation, from and after the effective date specified in such
Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment Agreement, shall have
the rights and obligations of a Lender hereunder and (z) the assigning
Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a
party hereto). The Commitments hereunder shall be modified to reflect
the Commitment of such assignee and any remaining Commitment of such
assigning Lender and, if any such assignment occurs after the issuance
of the Notes hereunder, the assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as
practicable, surrender its applicable Notes to Agent for cancellation,
and thereupon new Notes shall be issued to the assignee and/or to the
assigning Lender, substantially in the form of Exhibit IV, Exhibit V-A
or Exhibit V-B annexed hereto, as the case may be, with appropriate
insertions, to reflect the new Commitments and/or outstanding Term
Loans, as the case may be, of the assignee and/or the assigning Lender.

(ii) Acceptance by Agent; Recordation in Register. Upon
its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together
with the processing and recordation fee referred to in subsection
11.1B(i) and any forms, certificates or other evidence with respect to
United States federal income tax withholding matters that such assignee
may be required to deliver to Agent pursuant to subsection
2.7B(iii)(a), Agent shall, if such Assignment Agreement has been
completed and is in substantially the form of Exhibit X hereto and if
Agent and Company have consented to the assignment evidenced thereby
(in each case to the extent such consent is required pursuant to
subsection 11.1B(i)), (a) accept such Assignment Agreement by executing
a counterpart thereof as provided therein (which acceptance shall
evidence any required consent of Agent to such assignment), (b) record
the information contained therein in the Register, and (c) give prompt
notice thereof to Company. Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in
this subsection 11.1B(ii).

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C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of
any Loan allocated to such participation, (ii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated to such
participation, (iii) the release of the Liens held by Agent on behalf of
Lenders with respect to all or substantially all of the Collateral or (iv) a
reduction of the amount of any fees payable hereunder to the extent subject to
such participation, and all amounts payable by Company hereunder (including
without limitation amounts payable to such Lender pursuant to subsections 2.6D,
2.7 and 3.6) shall be determined as if such Lender had not sold such
participation. Company and each Lender hereby acknowledge and agree that,
solely for purposes of subsections 11.4 and 11.5, (a) any participation will
give rise to a direct obligation of Company to the participant and (b) the
participant shall be considered to be a "Lender".

D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 11.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a
result of any such assignment and pledge and (ii) in no event shall such
Federal Reserve Bank be considered to be a "Lender" or be entitled to require
the assigning Lender to take or omit to take any action hereunder.

E. INFORMATION. Each Lender may furnish any information
concerning Holdings and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees and
participants), subject to subsection 11.19.

11.2 EXPENSES.

Whether or not the transactions contemplated hereby shall be
consummated, each of Holdings and Company agrees to pay promptly (i) all the
actual and reasonable costs and expenses of preparation of the Loan Documents;
(ii) all the costs of furnishing all opinions by counsel for Holdings and its
Subsidiaries (including without limitation any opinions requested by Lenders as
to any legal matters arising hereunder) and of each Loan Party's performance of
and compliance with all agreements and conditions on its part to be performed
or complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental
and insurance requirements; (iii) the reasonable fees, expenses and
disbursements of counsel to Agent and Arrangers (including internal counsel) in
connection with the negotiation,

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preparation, execution and administration of the Loan Documents and the Loans
and any consents, amendments, waivers or other modifications hereto or thereto
and any other documents or matters requested by any Loan Party; (iv) all the
actual costs and reasonable expenses of creating and perfecting Liens in favor
of Agent on behalf of Lenders pursuant to any Loan Document, including filing
and recording fees and expenses, title insurance, fees and expenses of counsel
for providing such opinions as Agent or Requisite Lenders may reasonably
request and fees and expenses of legal counsel to Agent, Syndication Agent and
Arrangers; (v) all the actual costs and reasonable expenses of obtaining and
reviewing any appraisals provided for under subsection 6.10 and any
environmental audits or reports provided for under subsection 6.10; (vi) the
reasonable fees, expenses and disbursements of any accountants retained by
Agent in its reasonable discretion in connection with the review and analysis
of any financial statements of Holdings and its Subsidiaries or any other
reports furnished to Agent by or on behalf of Holdings or any of its
Subsidiaries pursuant to or for use in connection with this Agreement; (vii)
all other actual and reasonable costs and expenses incurred by Agent,
Syndication Agent and Arrangers in connection with the syndication of the
Commitments and the negotiation, preparation and execution of the Loan
Documents and the transactions contemplated hereby and thereby; and (viii)
after the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including internal counsel) and costs of
settlement, incurred by Agent, Syndication Agent, Arrangers and Lenders in
enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.

11.3 INDEMNITY.

In addition to the payment of expenses pursuant to subsection
11.2, whether or not the transactions contemplated hereby shall be consummated,
each of Holdings and Company agrees to defend, indemnify, pay and hold harmless
Agent, Syndication Agent, Arrangers and Lenders and any holder of any of the
Notes, and the officers, directors, employees, agents and affiliates of Agent,
Syndication Agent, Arrangers, Lenders and such holders (collectively called the
"INDEMNITEES") from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including without
limitation the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including without
limitation securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common

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law or equitable cause or on contract or otherwise, that may be imposed on,
incurred by, or asserted against any such Indemnitee, in any manner relating to
or arising out of this Agreement or the other Loan Documents or any Related
Transaction Documents or the transactions contemplated hereby or thereby
(including without limitation Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds of any of the Loans or the issuance of
Letters of Credit hereunder or the use or intended use of any of the Letters of
Credit) or the statements contained in the commitment letter delivered by any
Lender to any Loan Party with respect thereto (collectively called the
"INDEMNIFIED LIABILITIES"); provided that each of Holdings and Company shall
not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, each of Holdings and Company shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.

11.4 SET OFF; SECURITY INTEREST IN DEPOSIT ACCOUNTS.

In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by each of
Holdings and Company at any time or from time to time, without notice to
Holdings or Company or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender to or for the credit or the account of Holdings or Company
against and on account of the obligations and liabilities of Holdings or
Company to that Lender under this Agreement, the Notes, the Letters of Credit
and participations therein and the other Loan Documents, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Notes, the Letters of Credit and participations
therein or any other Loan Document, irrespective of whether or not (i) that
Lender shall have made any demand hereunder or (ii) the principal of or the
interest on the Loans or any amounts in respect of the Letters of Credit or any
other amounts due hereunder shall have become due and payable pursuant to
Section 8 and although said obligations and liabilities, or any of them, may be
contingent or unmatured. Company hereby further grants to Agent and each
Lender a security interest in all deposits and accounts maintained with Agent
or such Lender as security for the Obligations.

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11.5 RATABLE SHARING.

Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment, by realization upon security, through the
exercise of any right of set-off or banker's lien, by counterclaim or cross
action or by the enforcement of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder
or under the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the
other Lenders so that all such recoveries of Aggregate Amounts Due shall be
shared by all Lenders in proportion to the Aggregate Amounts Due to them;
provided that if all or part of such proportionately greater payment received
by such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy or reorganization of Holdings or any of its Subsidiaries or
otherwise, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Each of Holdings and its
Subsidiaries expressly consents to the foregoing arrangement and agrees that
any holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies owing
by Holdings or any of its Subsidiaries to that holder with respect thereto as
fully as if that holder were owed the amount of the participation held by that
holder.

11.6 AMENDMENTS AND WAIVERS.

A. No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, or consent to any departure by
Holdings or Company therefrom, shall in any event be effective without the
written concurrence of Requisite Lenders; provided that no such amendment,
modification, termination, waiver or consent shall, without the consent of each
Lender (with Obligations directly affected in the case of the following clause
(i)): (i) extend the scheduled final maturity of any Loan or Note, or extend
the stated expiration date of any Letter of Credit beyond the Revolving Loan
Commitment Termination Date, or reduce the rate of interest (other than any
waiver of any increase in the interest rate applicable to any of the Loans
pursuant to subsection 2.2E) or fees thereon, or extend the time of payment of
interest or fees thereon, or reduce the principal amount thereof, (ii) release
all or

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substantially all of the Collateral, release all or substantially all of the
Loan Parties that are party to the Subsidiary Guaranty from the Subsidiary
Guaranty or release Holdings from the Holdings Guaranty, in each case except as
expressly provided in the Loan Documents, (iii) amend, modify, terminate or
waive any provision of this subsection 11.6, (iv) reduce the percentage
specified in the definition of Requisite Lenders (it being understood that,
with the consent of the Requisite Lenders, additional extensions of credit
pursuant to this Agreement may be included in the determination of the
Requisite Lenders on substantially the same basis as the extensions of Term
Loans, Revolving Term Loans and Revolving Loan Commitments are included on the
Closing Date) or (v) consent to the assignment or transfer by Holdings or
Company of any of their respective rights and obligations under this Agreement;
provided further that no such amendment, modification, termination or waiver
shall (1) increase the Commitments of any Lender over the amount thereof then
in effect without the consent of such Lender (it being understood that
amendments, modifications or waivers of conditions precedent, covenants,
Potential Events of Default or Events of Default or of a mandatory reduction in
the Commitments shall not constitute an increase of the Commitment of any
Lender, and that an increase in the available portion of any Commitment of any
Lender shall not constitute an increase in the Commitment of such Lender); (2)
without the consent of the Swing Line Lender, amend, modify, terminate or waive
any provision of subsection 2.1A(iv) or any other provision of this Agreement
relating to the Swing Line Loan Commitment or the Swing Line Loans; (3) amend,
modify, terminate or waive any obligations of Revolving Lenders relating to the
purchase of participations in Letters of Credit shall be effective without the
written concurrence of each Issuing Lender having a Letter of Credit then
outstanding or which has not been reimbursed for a drawing under a Letter of
Credit issued by it and of Agent; or (4) without the consent of Agent,
Syndication Agent or the applicable Arranger, as the case may be, amend,
modify, terminate or waive any provision of Section 10 as the same applies to
Agent, Syndication Agent or any Arranger or of any other provision of this
Agreement as the same applies to the rights or obligations of Agent,
Syndication Agent or any Arranger.

B. If, in connection with any proposed amendment, modification,
termination or waiver to any of the provisions of this Agreement or the Notes
as contemplated by clauses (i) through (v) of the first proviso of subsection
11.6A, the consent of the Requisite Lenders is obtained but the consent of one
or more of such other Lenders whose consent is required is not obtained, then
Company shall have the right, so long as all non-consenting Lenders whose
individual consent is required are treated as described in either clause (i) or
(ii) below, to either (i) replace each such non-consenting Lender or Lenders
with one or more Replacement Lenders pursuant to subsection 2.9 so long as at
the time of such replacement, each such Replacement Lender consents to the
proposed amendment, modification, termination or waiver, or (ii) terminate such
non-consenting Lender's Commitments and repay in full its outstanding Loans in
accordance with subsections 2.4B(i)(b) and 2.4B(ii)(b);

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provided that unless the Commitments that are terminated and the Loans that are
repaid pursuant to the preceding clause (ii) are immediately replaced in full
at such time through the addition of new Lenders or the increase of the
Commitments and/or outstanding Loans of existing Lenders (who in each case must
specifically consent thereto), then in the case of any action pursuant to the
preceding clause (ii), the Requisite Lenders (determined before giving effect
to the proposed action) shall specifically consent thereto; provided further
that Company shall not have the right to terminate such non-consenting Lender's
Commitment and repay in full its outstanding Loans pursuant to clause (ii) of
this subsection 11.6B if, immediately after the termination of such Lender's
Revolving Loan Commitment or such Lender's Revolving Term Loan Commitment in
accordance with subsection 2.4B(ii)(b), (a) the Revolving Loan Exposure of all
Lenders would exceed the Revolving Loan Commitments of all Lenders, or (b) the
Revolving Term Loan Exposure of all Lenders would exceed the Revolving Term
Loan Commitments of all Lenders; provided still further that Company shall not
have the right to replace a Lender solely as a result of the exercise of such
Lender's rights (and the withholding of any required consent by such Lender)
pursuant to the second proviso to subsection 11.6A.

C. Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Holdings or Company in any case shall entitle
Holdings or Company, as the case may be, to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 11.6
shall be binding upon each Lender at the time outstanding, each future Lender
and, if signed by Holdings or Company, on Holdings or Company as the case may
be.

11.7 INDEPENDENCE OF COVENANTS.

All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would
otherwise be within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.

11.8 NOTICES.

Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in
writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile
or telex, or three Business Days after

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depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Agent shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or (i) as to
Holdings, Company and Agent, such other address as shall be designated by such
Person in a written notice delivered to the other parties hereto and (ii) as to
each other party, such other address as shall be designated by such party in a
written notice delivered to Agent.

11.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of
the Loans and the issuance of the Letters of Credit hereunder.

B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Holdings and Company set forth in subsections
2.6D, 2.7, 3.5A, 3.6, 11.2, 11.3 and 11.4 and the agreements of Lenders set
forth in subsections 10.2C, 10.4 and 11.5 shall survive the payment of the
Loans, the cancellation or expiration of the Letters of Credit and the
reimbursement of any amounts drawn thereunder, and the termination of this
Agreement.

11.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.

No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

11.11 MARSHALLING; PAYMENTS SET ASIDE.

Neither Agent nor any Lender shall be under any obligation to
marshal any assets in favor of Holdings, Company or any other party or against
or in payment of any or all of the Obligations. To the extent that any Loan
Party makes a payment or payments to Agent or Lenders (or to Agent for the
benefit of Lenders), or Agent or Lenders enforce any security interests or
exercise their rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the obligation or part thereof originally intended

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to be satisfied, and all Liens, rights and remedies therefor or related
thereto, shall be revived and continued in full force and effect as if such
payment or payments had not been made or such enforcement or setoff had not
occurred.

11.12 SEVERABILITY.

In case any provision in or obligation under this Agreement or
the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

11.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.

The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.

11.14 HEADINGS.

Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or be given any substantive effect.

11.15 APPLICABLE LAW.

THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

11.16 SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon the parties hereto and
their respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of Lenders (it being understood
that Lenders' rights of assignment are subject to subsection 11.1). The terms
and provisions of this Agreement shall inure to the benefit of any assignee or
transferee of any of the Loans, and

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in the event of any such transfer or assignment the rights and privileges
herein conferred upon Lenders shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
None of Holdings', or Company's rights or obligations hereunder nor any
interest therein may be assigned or delegated by Holdings or Company without
the prior written consent of all Lenders.

11.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDINGS OR COMPANY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT EACH OF HOLDINGS AND COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN DOCUMENT OR SUCH OBLIGATION.
Each of Holdings and Company hereby agrees that service of all process in any
such proceeding in any such court may be made by registered or certified mail,
return receipt requested, to Holdings or Company, as the case may be, at its
address provided in subsection 11.8, such service being hereby acknowledged by
Holdings and Company, as the case may be, to be sufficient for personal
jurisdiction in any action against Holdings or Company, as the case may be, in
any such court and to be otherwise effective and binding service in every
respect. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of any Lender to bring
proceedings against Holdings or Company in the courts of any other
jurisdiction.

11.18 WAIVER OF JURY TRIAL.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of
this waiver is intended to be all- encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business

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relationship, that each has already relied on this waiver in entering into this
Agreement, and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.

11.19 CONFIDENTIALITY.

Each Lender shall hold all non-public information obtained
pursuant to the requirements of or in connection with this Agreement which has
been identified as confidential by Company in accordance with such Lender's
customary procedures for handling confidential information of this nature and
in accordance with safe and sound banking practices, it being understood and
agreed by Holdings and Company that in any event a Lender may make disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participation therein or as required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall notify Company of any request by any governmental agency or
representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure
of such information; and provided, further that in no event shall any Lender be
obligated or required to return any materials furnished by Holdings or any of
its Subsidiaries.

11.20 COUNTERPARTS; EFFECTIVENESS.

This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties

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hereto and receipt by Company and Agent of written or telephonic notification
of such execution and authorization of delivery thereof.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

GUARANTOR: DOMINICK'S SUPERMARKETS, INC.

By:
------------------------------
Title:
---------------------------

Notice Address:

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

S-1
<PAGE> 184
COMPANY:

DOMINICK'S FINER FOODS, INC.

By:
------------------------------
Title:
---------------------------

Notice Address:

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

S-2
<PAGE> 185

LENDERS:

BANKERS TRUST COMPANY,
individually and as Agent and Arranger

By:
------------------------------
Title:
--------------------------

Notice Address:

Bankers Trust Company
One Bankers Trust Plaza
130 Liberty St., 14th Floor
New York, NY 10006
Attention: ________________

with a copy to:

Bankers Trust Company
300 South Grand Avenue,
41st Floor
Los Angeles, CA 90071
Attention: _________________

S-3
<PAGE> 186

THE CHASE MANHATTAN BANK,
individually and as Syndication Agent
and Arranger

By:
------------------------------
Title:
--------------------------

Notice Address:

The Chase Manhattan Bank
One Chase Plaza, 8th Floor
New York, New York 10081
Attention: ___________________

with a copy to:

The Chase Manhattan Bank
One Chase Plaza, 8th Floor
New York, New York 10081
Attention: ___________________

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

By:
------------------------------
Title:
--------------------------

Notice Address:

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

S-4
<PAGE> 187

ABN AMRO

By:
------------------------------
Title:
--------------------------

Notice Address:

ABN AMRO
135 S. LaSalle
Chicago, IL 60603

BANK OF AMERICA

By:
------------------------------
Title:
--------------------------

Notice Address:

Bank of America
335 Madison Avenue, 6th Floor
New York, NY 10017

BANK OF NOVA SCOTIA

By:
------------------------------
Title:
--------------------------

Notice Address:

Bank of Nova Scotia
181 W. Madison, Suite 3700
Chicago, Illinois 60602

S-5
<PAGE> 188

BANK OF NOVA SCOTIA

By:
------------------------------
Title:
--------------------------

Notice Address:

Bank of Nova Scotia
600 Peachtree Street,
Suite 2700
Atlanta, Georgia 30308

BANK OF NOVA SCOTIA

By:
------------------------------
Title:
--------------------------

Notice Address:

Bank of Nova Scotia
Corporate Banking West
44 King Street West
Toronto, Ontario, Canada M5H 1H1

BANQUE PARIBAS

By:
------------------------------
Title:
--------------------------

Notice Address:

Banque Paribas
2029 Century Park East
Suite 3900
Los Angeles, CA 90067

S-6
<PAGE> 189

CHASE SECURITIES, INC.

By:
------------------------------
Title:
--------------------------

Notice Address:

Chase Securities, Inc.
270 Park Avenue
New York, NY 10017

CIC

By:
------------------------------
Title:
--------------------------

Notice Address:

CIC
520 Madison Avenue, 37th Floor
New York, NY 10022

CREDIT AGRICOLE

By:
------------------------------
Title:
--------------------------

Notice Address:

Credit Agricole
55 East Monroe, Suite 4700
Chicago, IL 60603

S-7
<PAGE> 190

DAI-ICHI KANGYO BANK

By:
------------------------------
Title:
--------------------------

Notice Address:

Dai-Ichi Kangyo Bank
10 S. Wacker, 26th Floor
Chicago, IL 60606

CREDIT LYONNAIS

By:
------------------------------
Title:
--------------------------

Notice Address:

Credit Lyonnais
1301 Avenue of the Americas
New York, NY 10019

EATON VANCE

By:
------------------------------
Title:
--------------------------

Notice Address:

Eaton Vance
24 Federal Street, 6th Floor
Boston, MA 02110

S-8
<PAGE> 191

FIRST CHICAGO

By:
------------------------------
Title:
--------------------------

Notice Address:

First Chicago
1 First National Plaza,
14th Floor
Suite 0086
Chicago, IL 60670

FUJI BANK

By:
------------------------------
Title:
--------------------------

Notice Address:

Fuji Bank
225 W. Wacker Drive, Suite 2000
Chicago, IL 60606

HSBC (Formerly Midland Bank)

By:
------------------------------
Title:
--------------------------

Notice Address:

HSBC (Formerly Midland Bank)
140 Broadway, 5th Floor
New York, NY 10005

S-9
<PAGE> 192

MITSUBISHI TRUST & BANKING

By:
------------------------------
Title:
--------------------------

Notice Address:

Mitsubishi Trust & Banking
520 Madison Avenue, 26th Floor
New York, NY 10002

MITSUI LEASING

By:
------------------------------
Title:
--------------------------

Notice Address:

Mitsui Leasing
200 Park Avenue, Suite 3124
New York, NY 10166

NORTHERN TRUST

By:
------------------------------
Title:
--------------------------

Notice Address:

Northern Trust
50 S. LaSalle, 11th Floor
Chicago, IL 60675

S-10
<PAGE> 193

ROYAL BANK OF SCOTLAND

By:
------------------------------
Title:
--------------------------

Notice Address:

Royal Bank of Scotland
88 Pine Street 26F
New York, NY 10005

SAKURA BANK

By:
------------------------------
Title:
--------------------------

Notice Address:

Sakura Bank
227 W. Monroe, Suite 4700
Chicago, Il 60606

SUMITOMO TRUST

By:
------------------------------
Title:
--------------------------

Notice Address:

Sumitomo Trust
527 Madison Avenue, 6th Floor
New York, NY 10022

S-11
<PAGE> 194

UNION BANK

By:
------------------------------
Title:
--------------------------

Notice Address:

Union Bank
350 California Street, 11th Floor
San Francisco, CA 94104

VAN KAMPEN MERRITT

By:
------------------------------
Title:
--------------------------

Notice Address:

Van Kampen Merritt
1 Parkview Plaza
Oakbrook Terrace, IL 60181

S-12

<PAGE> 1

Exhibit 10.7

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of November 1, 1996 by and between THE YUCAIPA COMPANIES, a
California general partnership ("Yucaipa"), DOMINICK'S SUPERMARKETS, INC., a
Delaware corporation (the "Company"), and DOMINICK'S FINER FOODS, INC., a
Delaware corporation ("Dominick's").

W I T N E S S E T H:

WHEREAS, Dominick's is a wholly owned subsidiary of the
Company and is in the business of operating supermarkets;

WHEREAS, the Company and Dominick's entered into that certain
Consulting Agreement with Yucaipa dated as of March 22, 1995 (the "Consulting
Agreement") and such parties intend to terminate the Consulting Agreement
concurrently with the consummation of an initial public offering of the common
stock of the Company which shall be a "Qualified IPO" (as defined in that
certain Stockholders Agreement dated as of March 22, 1995 among the Company and
the stockholders named therein);

WHEREAS, the Company and Dominick's desire to have continued
access to the services of Yucaipa following the termination of the Consulting
Agreement; and

WHEREAS, Yucaipa has the ability to provide certain general
business and financial consultation and advice and management services to the
Company and Dominick's in connection with the operation of their businesses;

NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto and other good and valuable
consideration paid and received by each of the parties to this Agreement, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

SECTION 1. ENGAGEMENT.

The Company and Dominick's hereby engage Yucaipa as an
independent contractor and consultant to provide general business consultation
and advice and management services to the Company, Dominick's and its
subsidiaries in connection with the operation of their respective businesses.

SECTION 2. MANAGEMENT SERVICES.

Yucaipa, through its partners and/or employees, shall provide
the Company and Dominick's with consultation and advice, when and as reasonably
requested by the Company or Dominick's, in such fields as supermarket
operations, planning and development, budgeting, accounting, general business
management and such other fields as Yucaipa may offer from time to time. All
partners and employees of Yucaipa or any of its affiliates (other than the
Company and its subsidiaries or any operating companies managed by Yucaipa) who
serve the Company or Dominick's or any of their respective subsidiaries as an
officer, director or employee shall do so without charge during the term of
this Agreement, except for (a) the fees and expenses provided for herein, (b)
customary compensation and expense reimbursement arrangements between the

<PAGE> 2
Company or Dominick's and Darren W. Karst in his capacity as an officer or
employee of the Company or Dominick's, (c) customary fees (or reimbursement of
expenses) payable to members of the Board of Directors, in their capacity as
such, or (d) any other agreement or arrangement approved by a majority of the
disinterested members of the Board of Directors.

SECTION 3. MANAGEMENT FEES.

Commencing on the date hereof (the "Effective Date"),
Dominick's shall pay to Yucaipa an annual management fee, in consideration of
the services rendered by Yucaipa pursuant to Section 2 above, equal to
$1,000,000, payable in 13 equal installments in advance on the first day of
each of Dominick's 13 four-week fiscal periods and past due on the fifteenth
day of such fiscal period; provided that such fee will be payable in advance on
the Effective Date for the partial fiscal period beginning on the Effective
Date and ending on the last day of the current fiscal period.

SECTION 4. OTHER CONSULTING SERVICES.

The Company, Dominick's and their respective subsidiaries (or
any one of them) may retain or employ Yucaipa as a financial advisor and/or
consultant in connection with any acquisition or disposition transaction by the
Company, Dominick's or any of their respective subsidiaries, other than a sale
of all of the outstanding capital stock of, or all or substantially all of the
assets of, the Company or Dominick's. The parties expressly agree that the
services contemplated by this Section 4 shall not include financial advisory or
consulting services in connection with debt or equity financings or equipment
lease arrangements. If any retention of Yucaipa by the Company, Dominick's or
any of their respective subsidiaries pursuant to this Section 4 is made
pursuant to a retention or engagement agreement containing terms varying from
or in addition to the terms contained in this Agreement, such agreement shall
be reasonably acceptable to a majority of the members of the Board of Directors
of the Company or Dominick's, as the case may be, that are neither affiliates
of Yucaipa nor designated or nominated to such Board of Directors by Yucaipa or
any of its affiliates.

SECTION 5. OTHER CONSULTING FEES.

The Company or Dominick's, as applicable, shall pay to Yucaipa
a cash fee for providing any financial advisory or consulting services pursuant
to Section 4 above in connection with the acquisition or disposition
transactions specified therein (other than disposition transactions with
respect to any stores designated for divestiture or closing in the ordinary
course of business), equal to one percent (1.0%) of the amount or value of all
cash and noncash consideration actually paid or received (including assumed
indebtedness) by the Company, Dominick's or any of their respective
subsidiaries, as the case may be, in connection therewith.

SECTION 6. REIMBURSEMENT OF EXPENSES.

Dominick's shall reimburse Yucaipa for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its obligations under this Agreement. Yucaipa shall bill Dominick's for the
amount of all such expenses monthly, and shall provide Dominick's with a
reasonable itemization of such expenses. Notwithstanding the foregoing, the
aggregate amount of such costs and expenses for which Yucaipa may be reimbursed
in connection with the rendering of management services under Section 2 hereof
shall not exceed $300,000 in

2
<PAGE> 3
any fiscal year of Dominick's (which maximum amount shall be prorated for the
period beginning on the Effective Date and ending on the last day of Dominick's
current fiscal year). In addition to the foregoing, Dominick's shall reimburse
Yucaipa for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the rendering by Yucaipa of financial advisory or consulting
services to the Company, Dominick's and/or their respective subsidiaries, in
connection with any acquisition or disposition transaction, debt or equity
financing or equipment leasing arrangement, whether or not Yucaipa is obligated
to render such services or has a right to be paid any fee relating thereto
under Sections 4 or 5 of this Agreement.

SECTION 7. TERM OF AGREEMENT.

The term of this Agreement shall be for a period of five (5)
years commencing on the Effective Date; provided, however, that the term shall
be automatically renewed annually for a term of five (5) years on April 1 of
each year, unless at least ninety (90) days prior notice is given by either
party electing not to so renew this Agreement.

SECTION 8. TERMINATION.

8.1 Termination at Will. Dominick's and the Company,
acting jointly, may terminate this Agreement at any time by giving Yucaipa at
least ninety (90) days written notice of such termination.

8.2 Termination for Cause.

(a) Dominick's and the Company on the one hand, or
Yucaipa on the other hand, may terminate this Agreement if the other party
shall fail to reasonably perform any material covenant, agreement, term or
provision of this Agreement to be kept, observed or performed by it and such
failure shall continue for a period of sixty (60) days after written notice
from the other party, which notice shall describe the alleged failure with
particularity; provided that Yucaipa shall use its best efforts to cause
Dominick's and the Company to perform each material covenant, agreement, term
and provision of this Agreement. Notwithstanding the foregoing, any failure or
alleged failure of the Company, Dominick's, or Yucaipa to perform any material
covenant, agreement, term or provision of this Agreement shall not constitute
cause for termination of this Agreement if the same shall be occasioned by or
result from force majeure, directly or indirectly.

(b) Yucaipa may terminate this Agreement if Dominick's or
the Company shall fail to make any payment due to Yucaipa hereunder, if such
payment is not made in full within twenty (20) days after written notice of
such failure; provided that Yucaipa shall use its best efforts to cause
Dominick's and the Company to make all such payments in a timely manner.

8.3 Termination for Change of Control. This Agreement
may be terminated, at the election of Yucaipa or Dominick's, if during the term
hereof there shall have been a change in control of the Company or Dominick's,
which for purposes of this Agreement shall be deemed to have occurred upon any
of the following events: (a) the acquisition after the Effective Date, in one
or more transactions, of "beneficial ownership" (within the meaning of Rule
13d-3(a)(1) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) by any person (other than Yucaipa or any of its partners or
affiliates) or any group of persons (excluding any group which includes Yucaipa
or any of its partners or affiliates) who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act) of any securities of the
Company or Dominick's such

3
<PAGE> 4
that, as a result of such acquisition, such person or group beneficially owns
(within the meaning of Rule 13d-3(a)(1) under the Exchange Act) 51% or more of
the Company or Dominick's then outstanding voting securities entitled to vote
on a regular basis for a majority of the Board of Directors of the Company or
Dominick's; (b) the sale of all or substantially all of the assets of the
Company or Dominick's (including, without limitation, by way of merger,
consolidation, lease or transfer) in a transaction where the Company or
Dominick's or the beneficial owners of common stock of the Company or
Dominick's do not receive (i) voting securities representing a majority of the
voting power entitled to vote on a regular basis for the Board of Directors of
the acquiring entity or of an affiliate which controls the acquiring entity, or
(ii) securities representing a majority of the equity interest in the acquiring
entity or of an affiliate which controls the acquiring entity, if other than a
corporation; or (c) at any time the Continuing Directors (as defined below) do
not constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided, however, that
no change in control shall be deemed to have occurred under (a) or (b) above
upon any transfer, sale or disposition of shares of common stock of the Company
or Dominick's in any transaction between the Company or Dominick's and any
person or persons who are affiliates of the Company or Dominick's on the date
hereof. For purposes of this Section 8.3, "Continuing Directors" shall mean,
as of any date of determination, any member of the Board of Directors who (i)
was a member of the Board of Directors on the date of this Agreement or (ii)
was nominated for election or elected to the Board of Directors with the
approval of a majority of the Continuing Directors who were members of the
Board of Directors at the time of such nomination or election.

8.4 Payments upon Termination.

(a) In the event of any termination pursuant to (i) Section
8.1, (ii) Section 8.2(a) (if Yucaipa has elected to terminate because of a
material failure of performance by Dominick's or the Company), or (iii) Section
8.2(b) (if Yucaipa has elected to terminate because of a failure to pay by
Dominick's or the Company), Dominick's shall pay to Yucaipa an amount equal to
the total management fees that would have been earned by Yucaipa under Section
3 hereof during the remaining term of this Agreement as if the Agreement had
not been terminated; provided that a discount rate of 10% shall be applied in
valuing, for purposes of such payment, the management fees otherwise payable
during the remaining term of this Agreement.

(b) In the event of any termination pursuant to Section
8.2(a) (if Dominick's and the Company have elected to terminate because of a
material failure of performance by Yucaipa), Yucaipa promptly shall refund to
Dominick's a prorated portion of the management fee received by it under
Section 3 for the four-week fiscal period in which such termination occurs.

(c) In the event of any termination pursuant to Section 8.3,
Dominick's shall pay to Yucaipa an amount equal to the total management fees
that would have been earned by Yucaipa under Section 3 hereof during the period
commencing on the date of such change of control and ending on the fifth
anniversary of the Effective Date, as if the Agreement had not been terminated;
provided that (i) a discount rate of 10% shall be applied in valuing, for
purposes of such payment, the management fees otherwise payable during such
period and (ii) if such termination occurs on or after the fifth anniversary of
the Effective Date, no payment shall be due to Yucaipa as a result of such
termination.

(d) Such amount, if any, which shall be due Yucaipa pursuant
to this Section 8.4 in the event of any such termination shall be due and
payable to Yucaipa, in full, as of the date of

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<PAGE> 5
such termination. The parties intend that should the foregoing payments be
determined to constitute liquidated damages, such payments shall in all events
be deemed reasonable.

SECTION 9. NOTICES.

9.1 Manner of Notice. All notices, statements or other
documents which any party shall be required or shall desire to give to the
others hereunder shall be in writing and shall be given by the parties hereto
only as follows: (a) by personal delivery, (b) by addressing it as indicated
below, and by depositing it certified mail, postage prepaid, in the U.S. mail,
first class (airmail if the address is outside of the country in which such
notice is deposited), or (c) by addressing it as indicated below, and by
delivering it toll prepaid to a telegraph, cable company or courier service
(e.g., Federal Express).

9.2 Delivery of Notice; Addresses. If so delivered,
mailed, telegraphed, cabled or couriered, each such notice, statement or other
document shall, except as herein expressly provided, be conclusively deemed to
have been given when personally delivered, or on the third business day after
the date of mailing, or on the date of delivery to a telegraph or cable company
or on the first business day after delivery to a courier service, as the case
may be. The addresses of the parties shall be those of which the other parties
actually receives written notice pursuant to this Section 9 and until further
notice are:

If to Yucaipa: The Yucaipa Companies
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, CA 90067
Attention: Mark A. Resnik

If to the Company: Dominick's Supermarkets, Inc.
505 Railroad Avenue
Northlake, IL 60164
Attention: President and Chief Executive Officer

If to Dominick's: Dominick's Finer Foods, Inc.
505 Railroad Avenue
Northlake, IL 60164
Attention: President and Chief Executive Officer

SECTION 10. MISCELLANEOUS.

10.1 Entire Agreement; Amendments. This Agreement contains
all of the terms and conditions agreed upon by the parties hereto in connection
with the subject matter hereof. This Agreement may not be amended, modified or
changed except by written instrument signed by all of the parties hereto.

5
<PAGE> 6
10.2 Assignment; Successors. This Agreement shall not be
assigned and is not assignable by any party without the prior written consent
of each of the other parties hereto; provided, however, that Yucaipa may
assign, without the prior consent of Dominick's or the Company, its rights and
obligations under this Agreement to any of its affiliates controlled by Ronald
Burkle, and provided further, that Yucaipa may assign the right to receive any
payment hereunder to any other person or entity. Subject to the preceding
sentence, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective permitted successors and assigns.

10.3 Captions. All captions and headings are inserted for
the convenience of the parties, and shall not be used in any way to modify,
limit, construe or otherwise affect this Agreement.

10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal domestic laws of the State of
California, without reference to the choice of law principles thereof.

10.5 Attorneys' Fees. If any legal action is brought
concerning any matter relating to this Agreement, or by reason of any breach of
any covenant, condition or agreement referred to herein, the prevailing party
shall be entitled to have and recover from the other party to the action all
costs and expenses of suit, including attorneys' fees.

10.6 Severability. If any term, provision or condition of
this Agreement is determined by a court or other judicial or administrative
tribunal to be illegal, void or otherwise ineffective or not in accordance with
public policy, the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect.

10.7 Interpretation. In the event of a dispute hereunder,
this Agreement shall be interpreted in accordance with its fair meaning and
shall not be interpreted for or against any party hereto on the ground that
such party drafted or caused to be drafted this Agreement or any part hereof.

10.8 Indemnity. The parties to this Agreement shall
indemnify and hold one another and their respective officers, directors,
employees and agents, harmless from any and all loss, cost, liability and
damage (including attorneys' fees) arising out of or connected with, or claimed
to arise out of or be connected with, any act performed or omitted to be
performed under this Agreement, provided such act or omission was taken in good
faith, and in the event of criminal proceedings, that the indemnitee had no
reasonable cause to believe his conduct was unlawful. An adverse judgment or
plea of nolo contendere shall not, of itself, create a presumption that the
indemnitee did not act in good faith or that he had reasonable cause to believe
his conduct was unlawful. Expenses incurred in defending a civil or criminal
action shall be paid by the indemnitor upon receipt of an undertaking by or on
behalf of the indemnitee to repay such amount if it be later shown that such
person was not entitled to indemnification.

(signature page follows)

6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Management Agreement to be duly executed as of the date first above written.

THE YUCAIPA COMPANIES

By:
--------------------------------
Name:
Title: General Partner

DOMINICK'S SUPERMARKETS, INC.

By:
--------------------------------
Name: Robert A. Mariano
Title: President and
Chief Executive Officer

DOMINICK'S FINER FOODS, INC.

By:
--------------------------------
Name: Robert A. Mariano
Title: President and
Chief Executive Officer

<PAGE> 1

Exhibit 10.8

______________________________________________________

AMENDED AND RESTATED

STOCKHOLDERS AGREEMENT

DOMINICK'S SUPERMARKETS, INC.

Dated as of

November 1, 1996

______________________________________________________
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II RESTRICTIONS ON TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 2.1 Transfers in Accordance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Agreement to be Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.4 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.5 Transfer of Pecuniary Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Tag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Rights to Compel Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.8 Offering Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.9 Deliveries at Closing; Method of Payment of Purchase Price . . . . . . . . . . . . . . . 16

ARTICLE III SCOPE OF BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 3.1 Scope of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.2 Business Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE IV ADDITIONAL RIGHTS AND OBLIGATIONS OF
INVESTORS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 4.1 Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2 Investment Banking Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.3 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.4 Furnishing of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 Regulatory Problems, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE V CORPORATE GOVERNANCE AND VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Section 5.1 Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Action by the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.4 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.5 Board Visitation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE VI TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Section 6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Section 7.1 No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.2 No Other Affiliate Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.3 Recapitalization, Exchanges, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.5 No Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.7 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.9 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.13 Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.14 Consistency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.15 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>

ii
<PAGE> 4
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement")
dated as of November 1, 1996, by and among (i) each of the purchasers listed on
the signature pages attached hereto (together with their Permitted Transferees
(defined below), the "Purchasers"), (ii) each of the investors listed on the
signature pages attached hereto, (iii) The Yucaipa Companies, a California
general partnership, Yucaipa Blackhawk Partners, L.P., a California limited
partnership, Yucaipa Chicago Partners, L.P., a California limited partnership,
Yucaipa Dominick's Partners, L.P., a California limited partnership and Ronald
W. Burkle (collectively, the "Yucaipa Affiliates"), (iv) Dominick's
Supermarkets, Inc., a Delaware corporation (the "Company"), (v) Dominick's
Finer Foods, Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Dominick's"), and (vi) each other Person (defined below) who becomes
a party to this Agreement in accordance with the terms hereof.

W I T N E S S E T H:

WHEREAS, the parties hereto have entered into that certain
Stockholders Agreement dated as of March 22, 1995 (the "Stockholders
Agreement"), and desire to amend and restate such Stockholders Agreement in
conjunction with the Qualified IPO (as defined in the Stockholders Agreement)
of the Company being consummated on the date hereof;

WHEREAS, this Agreement shall become effective (the "Effective
Date") on the date of, and simultaneously with, the closing under the
Underwriting Agreement, dated as of October [29], 1996, among the Company, the
stockholders of the Company named therein, Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co. Incorporated, BT Securities
Corporation and Chase Securities, Inc., as the representatives of the several
underwriters named therein (the "Underwriting Agreement");

WHEREAS, on the Effective Date after giving effect to the
transactions contemplated by the Underwriting Agreement (i) the authorized
capital stock of the Company will consist of 50,000,000 shares of voting common
stock, $.01 par value (the "Common Stock"), 10,000,000 shares of non-voting
common stock, $.01 par value, of which 8,500,000 shares will be designated as
Class B Common Stock (the "Class B Common Stock"), and 4,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock") of which 40,000 shares
have been designated as 15% Redeemable Exchangeable Cumulative Preferred Stock,
Series A, $.01 par value (the "Redeemable Preferred Stock"), and (ii) the
issued and outstanding capital stock of the Company will consist of __________
shares of Common Stock, ______________ shares of Class B Common Stock and
40,000 shares of Redeemable Preferred Stock, with 996,835 shares of Common
Stock reserved for issuance upon the exercise of certain outstanding stock
options, 1,000,000 shares reserved for issuance pursuant to the Company's 1996
Equity Participation Plan and 3,874,492 shares of Common Stock reserved for
issuance upon the exercise of the Yucaipa Warrant (defined below);

WHEREAS, on the Effective Date after giving effect to the
transactions contemplated by the Underwriting Agreement (i) each Yucaipa
Affiliate shall beneficially own the number of shares of Common Stock set forth
under its name on the signature pages attached hereto, and the Yucaipa
Affiliates shall collectively beneficially own 2,934,909 shares of Common
Stock, (ii) each Purchaser shall beneficially own the number and kind of Shares
(defined below)

1
<PAGE> 5
set forth under its name on the signature pages attached hereto, and the
Purchasers shall collectively beneficially own _____________ shares of Common
Stock and _____________ shares of Class B Common Stock; and (iii) Dodi L.L.C.
shall beneficially own 40,000 shares of Redeemable Preferred Stock (which the
Company has agreed to repurchase on January 2, 1997); and

WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Shares, including
both issued and outstanding Shares as well as Shares that may be issued or
otherwise acquired hereafter, to provide for certain rights and obligations in
respect of the Shares and the Company as hereinafter provided.

NOW THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the
following terms have the following meanings:

"Acquisition Date" shall mean March 22, 1995 (after giving
effect to the Company's acquisition of Dominick's on such date).

"Additional Shares" shall have the meaning set forth in
Section 2.6(c).

"Affiliate," as applied to any specified Person, shall mean
any other Person directly or indirect controlling or controlled by or under
direct or indirect common control with such specified Person and, in the case
of a Person who is an individual, shall include (i) members of such specified
Person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified Person or members of such Person's
immediate family as determined in accordance with the foregoing clause (i).
Notwithstanding, the foregoing, the Purchasers and their respective Affiliates
shall not be deemed Affiliates of the Company.

"Affiliate Transaction" shall mean (i) any sale, lease,
transfer or other disposition by the Company or its Subsidiaries of any of
their respective properties or assets to, (ii) any purchase of property or
assets by the Company or its Subsidiaries from, (iii) any investment by the
Company or its Subsidiaries in, (iv) any agreement by the Company or its
Subsidiaries with or for the benefit of, or (v) any other transaction between
the Company or its Subsidiaries and, an Affiliate of the Company or of any
Subsidiary of the Company.

"Apollo" shall mean Apollo Investment Fund, L.P. and any of
its Permitted Transferees to which Apollo has Transferred Shares.

"Apollo Nominees" shall have the meaning set forth in Section
5.1(a).

"Appraisal Notice" shall have the meaning set forth in Section
2.7(c)(i).

2
<PAGE> 6
"Appraisal Request" shall mean a written request for an
appraisal pursuant to Section 2.7(i) sent by Other Purchasers holding a least
65% of the Shares then held by the Other Purchasers to Yucaipa and Apollo on or
prior to the fifth business day following delivery of the Compelled Sale
Notice, which request shall identify five proposed Appraisers that are
independent from the Company, the stockholders of the Company or any of their
respective Affiliates; provided, that the right to deliver an Appraisal Request
shall terminate on the first date on which the Other Purchasers beneficially
own fewer than 50% of the Shares held by the Other Purchasers on the
Acquisition Date.

"Appraised Value" shall mean, with respect to any Compelled
Sale, the per Share value of the Company immediately prior to such Compelled
Sale (without giving effect thereto or to the rights of Apollo contained in
Section 2.7(c)(ii) hereof), as determined in good faith by the Appraiser.

"Appraiser" shall mean a nationally recognized investment
bank, appraisal firm or other Person with experience in valuing businesses
chosen pursuant to Section 2.7(i).

"beneficial owner" of a security shall mean any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has (i) the power to vote, or to direct the voting
of, such security and (ii) the power to dispose, or to direct the disposition
of, such security. "Beneficially own" shall have a correlative meaning.
Ownership of the Yucaipa Warrant shall not constitute beneficial ownership of
the Shares issuable upon the exercise thereof.

"Board of Directors" shall mean the Board of Directors of the
Company.

"Business Day" shall mean each day other than Saturdays,
Sundays and days when commercial banks are authorized to be closed for business
in New York, New York.

"Business Opportunity" shall have the meaning set forth in
Section 3.2.

"Capitalized Lease Obligation," as applied to any Person,
means obligations under any lease of any property (whether real, personal or
mixed) by that Person as lessee, that, in conformity with GAAP, is accounted
for as a capital lease on the balance sheet of that Person, and the amount of
Indebtedness represented by such obligations shall be the capitalized amount of
such obligations, determined in accordance with GAAP.

"Charter Documents" shall mean the Certificate of
Incorporation and Bylaws of the Company, each as amended or restated, attached
hereto as Exhibits A and B, respectively.

"Class B Common Stock" shall have the meaning set forth in the
recitals.

"Commission" shall mean the United States Securities and
Exchange Commission.

"Common Stock" shall have the meaning set forth in the
recitals.

"Compelled Sale" shall have the meaning set forth in Section
2.7(a).

"Company" shall have the meaning set forth in the preamble.

3
<PAGE> 7
"Compelled Sale Acceptance" shall have the meaning set forth
in Section 2.7(c).

"Compelled Sale Agreement" shall have the meaning set forth in
Section 2.7(c).

"Compelled Sale Closing" shall have the meaning set forth in
Section 2.7(a).

"Compelled Sale Date" shall have the meaning set forth in
Section 2.7(b).

"Compelled Sale Notice" shall have the meaning set forth in
Section 2.7(b).

"Compelled Sale Transaction Date" shall have the meaning set
forth in Section 2.7(c).

"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 "controlling" and "controlled" have meanings
correlative to the foregoing.

"Controlling Stockholders" shall mean the Yucaipa Affiliates
and any of their Permitted Transferees to which any Yucaipa Affiliate or any
other Controlling Stockholder has Transferred Shares.

"Credit Agreement" shall mean the Credit Agreement, dated as
of the date hereof, among Dominick's, the Company, the guarantors named
therein, and the lenders, arrangers, administrative agent and syndication agent
named therein.

"Disqualified Indebtedness" shall have the meaning set forth
in Section 2.7(h).

"Dominick's" shall have the meaning set forth in the preamble.

"Dominick's Board" shall mean the board of directors of
Dominick's.

"Dominick's Stock Purchase Agreement" means the Stock Purchase
Agreement, dated January 17, 1995, by and among the Company, DFF Acquisition
Sub, Inc., Dodi, L.L.C., Dodi Family L.L.C. and Dodi Developments, L.L.C.

"EBITDA" shall mean with respect to any Person for any period,
the net income (or loss) of such Person and its subsidiaries on a consolidated
basis for such period, determined in accordance with GAAP, excluding (to the
extent included therein), without duplication, (i) all net extraordinary gains
(or losses), (ii) total interest expense of such Person and its subsidiaries on
a consolidated basis with respect to outstanding indebtedness of such Person
and its subsidiaries, including without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under interest rate swap, cap, collar or
similar agreements, (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, all of the foregoing as determined on a consolidated
basis for such Person and its subsidiaries in accordance with GAAP; provided,
that EBITDA of the Company for any period shall be calculated to give pro forma
effect to all acquisitions and divestitures during such period as if such
acquisitions and divestitures had

4
<PAGE> 8
occurred on the first day of such period, such calculations to be made in
accordance with GAAP and Rule 11-02 of Regulation S-X of the Commission.

"Effective Date" shall have the meaning set forth in the
recitals.

"Employee Plans" shall mean the Company's 1995 Stock Option
Plan, under which 966,835 shares of Common Stock are reserved for issuance upon
exercise of options granted thereunder, the Company's 1996 Equity Participation
Plan, under which 1,000,000 shares of Common Stock are reserved for issuance,
and any employee or similar plans set forth in Schedule 3.23 to the Dominick's
Stock Purchase Agreement or approved by a majority of the Board of Directors
then in office.

"Enterprise Value" with respect to any proposed Compelled
Sale, shall mean (without duplication) the sum of (a) the aggregate value of
the fully diluted common equity of the Company, based on the price per Share
proposed to be paid in such Compelled Sale, 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 hereof on or prior to the date of the
Compelled Sale Notice, less (c) all cash and cash equivalents of the Company
and its consolidated Subsidiaries as reflected on such balance sheet.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.

"Exchange Agreement" means the Stock Exchange Agreement, dated
as of March 22, 1995, by and between the Company and Apollo.

"GAAP" shall mean generally accepted accounting principles,
consistently applied.

"Indebtedness" shall mean with respect to any Person, without
duplication, all liabilities of such Person (a) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (b) evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property (other than any such balance that represents an
account payable or any other monetary obligation to a trade creditor (whether
or not an Affiliate)), or (c) for the payment of money relating to a
Capitalized Lease Obligation.

"Independent Nominator" shall mean (a) Apollo until Apollo
ceases to beneficially own at least 1,463,795 Shares (25% of the Shares
beneficially owned by Apollo on the Acquisition Date) and (b) thereafter,
Yucaipa.

"Investor Nominees" shall have the meaning set forth in
Section 5.1 (a).

"Investors" shall mean each of the parties to the Agreement
(other than the Company and Controlling Stockholders), together with such
party's Permitted Transferees, including (without limitation) any Person who
shall become a party to or agree to be bound by the

5
<PAGE> 9
terms of this Agreement after the date hereof. For purposes of determining the
number of Shares held by any Investor, such Investor shall be deemed to hold
all Shares held by such Investor's Permitted Transferees.

"MD&A" shall mean a management's discussion and analysis of
the Company's financial condition and results of operation comparable to the
discussion that is required to be included in periodic reports filed under the
Exchange Act.

"Management Agreement" shall mean that certain Management
Agreement, dated as of the date hereof, by and among the Company, Dominick's
and Yucaipa, attached hereto as Exhibit D.

"Notices" shall have the meaning set forth in Section 7.6.

"Other Investors" shall mean the Investors other than the
Purchasers.

"Other Purchasers" shall mean the Purchasers other than
Apollo.

"Other Nominees" shall have the meaning set forth in Section
5.1(a).

"pecuniary interest" in any security shall mean the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in such security, and shall include securities owned by an
individual's spouse or issue or any trust solely for the benefit of such
individual, spouse or issue.

"Permitted Transferee" shall mean:

(a) in the case of any Purchaser (i) any officer,
director or partner of, or Person controlling, such Purchaser or any other
Purchaser, or (ii) any other Person that is (x) an Affiliate of the general
partner(s), investment manager(s) or investment advisor(s) of such Purchaser on
the date hereof, (y) an Affiliate of such Purchaser or a Permitted Transferee
of such Purchaser or (z) an investment fund, investment account or investment
entity whose investment manager, investment advisor or general partner thereof
is such Purchaser or a Permitted Transferee of such Purchaser, in each case in
a bona fide distribution or other transaction not intended to avoid the
provisions of this Agreement;

(b) in the case of any Controlling Stockholder, (i) any
Person that is controlled by Ronald W. Burkle, (ii) upon a bona fide
liquidation of, or a bona fide withdrawal from, such Controlling Stockholder,
in each case, not intended to avoid the provisions of this Agreement, the
shareholders, partners or principals, as the case may be, of such Controlling
Stockholder, (iii) upon a bona fide reduction (not intended to avoid the
provisions of this Agreement) in such Controlling Stockholder's interest in
another Controlling Stockholder (a "Specified Person"), and a corresponding
increase in a Yucaipa Individual's interest in such Specified Person, such
Yucaipa Individual; provided, that immediately after such Transfer, Ronald W.
Burkle continues to control such Specified Person, or (iv) if such Controlling
Stockholder is an individual, (x) any spouse or issue of such individual, or
any trust solely for the benefit of such individual, spouse or issue, and (y)
upon such individual's death, any Person to whom Shares are transferred in
accordance with the laws of the descent and/or testamentary distribution; and

6
<PAGE> 10
(c) in the case of any Other Investor, (i) any Subsidiary
of such Other Investor, (ii) any Person of which such Other Investor is a
Subsidiary, (iii) any Subsidiary of a Person described in the foregoing clause
(ii), or (iv) if such Other Investor is an individual, (x) any spouse or issue
of such Other Investor or any trust for the benefit of such individual, spouse
or issue, and (y) upon such Other Investor's death, any Person to whom Shares
are transferred in accordance with the laws of descent and/or testamentary
distribution.

"Person" shall mean an individual or a corporation,
partnership, limited liability company, trust, or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

"Preferred Stock" shall have the meaning set forth in the
recitals.

"Proposed Purchaser" shall mean a Person or group of Persons
to which any Controlling Stockholder proposes to Transfer Shares in accordance
with Section 2.6.

"Public Offering" shall mean any bona fide underwritten public
distribution of equity securities of the Company pursuant to an effective
registration statement under the Securities Act.

"Purchasers" shall have the meaning set forth in the preamble.

"Redeemable Preferred Stock" shall have the meaning set forth
in the recitals.

"Registration Rights Agreements" shall mean (i) that certain
Registration Rights Agreement, dated as of March 22, 1995, by and among the
Company, the Purchasers and the other parties thereto and (ii) that certain
Registration Rights Agreement, dated as of the date hereof, by and among the
Company, certain Yucaipa Affiliates and the other parties thereto.

"Regulatory Problem" shall have the meaning set forth in
Section 4.5.

"Remaining Holders" shall have the meaning set forth in
Section 2.7(a).

"Requisite Holders" on any date shall mean the Other
Purchasers that own at least 65% of the Shares beneficially owned by the Other
Purchasers on such date.

"ROFO Acceptance" shall have the meaning set forth in Section
5.1(g).

"ROFO Closing Date" shall have the meaning set forth in
Section 5.1(g).

"ROFO Notice" shall have the meaning set forth in Section
5.1(g).

"ROFO Shares" shall have the meaning set forth in Section
5.1(g).

"RPHC" shall mean any Person, if an interest in such Person is
treated as a "United States real property interest" within the meaning of
section 897 of the Internal Revenue Code of 1986, as amended.

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<PAGE> 11
"Rule 144 Open Market Transaction" shall mean any bona fide
public sale of Shares in an open market transaction under Rule 144 of the
Securities Act (or any successor rule) if such sale is in compliance with the
requirements of paragraphs (c), (d), (e), (f) and (g) of such Rule
(notwithstanding the provisions of paragraph (k) of such Rule).

"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.

"Shares" shall mean, collectively, the Common Stock and the
Class B Common Stock. Whenever this Agreement refers to a number or percentage
of Shares, such number or percentage shall be calculated as if each of the
Shares had been exchanged or converted into shares of Common Stock immediately
prior to such calculation regardless of the existence of any restrictions on
such exchange or conversion.

"Stock Purchase Agreement" shall mean the stock purchase
agreement, dated as of March 22, 1995, among the Company, Yucaipa and the
Purchasers.

"Subsidiary" shall mean, with respect to any Person, (a) a
corporation a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person, or by such Person and one or
more Subsidiaries of such Person, (b) a partnership in which such Person or a
Subsidiary, of such Person is, at the date of determination, a general partner
of such partnership, or (c) any other Person (other than a corporation) in
which such Person, a Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (i) at least a majority ownership interest or (ii)
the power to elect or direct the election of the directors or other governing
body of such Person.

"Tag-Along Notice" shall have the meaning set forth in Section
2.6(c).

"Tag-Along Sale" shall mean a bona fide Transfer of a
Controlling Stockholder's pecuniary interest in any Shares (except in
accordance with Section 2.7), including, without limitation, (a) by means of
such Controlling Stockholder's Transfer of an interest in any Person owning
such Shares or (b) a Transfer of a pecuniary interest in any Shares by such
Controlling Stockholder's spouse or issue, or by any trust solely for the
benefit of such Controlling Stockholder's spouse or issue.

"Tag-Along Stockholder" shall have the meaning set forth in
Section 2.6(a).

"Third Party" shall mean any prospective purchaser of Shares
(that is not an Affiliate or Permitted Transferee of the transferor or of any
Yucaipa Affiliate) in an arm's length purchase from such transferor.

"Transfer" shall mean (i) when used as a noun: any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or
other disposition and (ii) when used as a verb: to directly or indirectly
transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of.

"Transferee" shall mean any Person to whom Shares have been
Transferred in compliance with the terms of this Agreement.

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<PAGE> 12
"Transfer Allotment" of any Tag-Along Stockholder with respect
to any Tag-Along Sale shall mean the product of (i) the total number of Shares
proposed to be Transferred in such Tag-Along Sale multiplied by (ii) a
fraction, the numerator of which is the total number of Shares owned by such
Tag-Along Stockholder as of the close of business on the second day immediately
preceding the mailing date of the Transfer Notice and the denominator of which
is the total number of Shares then owned by the Controlling Stockholders, the
Investors, and all other stockholders of the Company having tag-along or other
contractual rights to participate in the proposed Transfer.

"Transfer Date" shall have the meaning set forth in Section
2.6(b).

"Transfer Notice" shall have the meaning set forth in Section
2.6(b).

"Yucaipa" shall mean The Yucaipa Companies, a California
general partnership, until a successor controlled by Ronald W. Burkle replaces
such Person, and thereafter means such successor; provided that the rights set
forth in Section 5.1 of this Agreement as belonging to Yucaipa initially shall
be exercisable personally by Yucaipa Management L.L.C., a California limited
liability company, or Ronald W. Burkle and neither The Yucaipa Companies nor
any other Yucaipa Affiliate shall have any right or interest in the exercise of
such rights; provided further that Ronald W. Burkle may assign such rights to
any successor controlled by him, and for purposes of Section 5.1, "Yucaipa"
thereafter shall mean such successor so long as it remains controlled by Ronald
W. Burkle.

"Yucaipa Affiliate" shall have the meaning set forth in the
preamble.

"Yucaipa Individual" shall mean (a) a full-time employee of a
Yucaipa Affiliate or the Company or (b) a partner of a Yucaipa Affiliate who
devotes substantially all of his business efforts to such Yucaipa Affiliate.

"Yucaipa Nominees" shall have the meaning set forth in Section
5.1(a).

"Yucaipa Warrant" shall mean the warrant to purchase up to
3,874,492 shares of Common Stock issued by the Company to Yucaipa on March 22,
1995, as amended.

ARTICLE II

RESTRICTIONS ON TRANSFERS

Section 2.1 Transfers in Accordance with this Agreement.
Any attempt to Transfer, or purported Transfer of, any Shares in violation of
the terms of this Agreement shall be null and void and neither the Company nor
any transfer agent shall register upon its books any such Transfer. A copy of
this Agreement shall be filed with the Secretary of the Company and kept with
the records of the Company.

Section 2.2 Agreement to be Bound. No party hereto shall
Transfer any Shares (other than Transfers to the Company, Transfers
constituting a bona fide public distribution pursuant to (i) the registration
rights included in the Registration Rights Agreements, (ii) any shelf
registration pursuant to Rule 415 under the Securities Act or any Public
Offering or (iii) Rule 144 Open Market Transactions, or Transfers constituting
a bona fide pledge to a broker-dealer or other institutional lender), unless
(x) the certificates representing such Shares issued to the Transferee

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<PAGE> 13
bear the legend provided in Section 2.3, if required by such Section, and (y)
the Transferee (if not already a party hereto) has executed and delivered to
each other party hereto, as a condition precedent to such Transfer, an
instrument or instruments, reasonably satisfactory to such parties, confirming
that the Transferee agrees to be bound by the terms of this Agreement in the
same manner as such Transferee's transferor, except as otherwise specifically
provided in this Agreement.

Section 2.3 Legend. Each Investor and Controlling
Stockholder hereby agrees that each outstanding certificate representing Shares
issued to any of them, or any certificate issued in exchange for or upon
conversion of any similarly legended certificate, shall, unless sold in a
transaction exempted from the operation of Section 2.2 above, bear a legend
reading substantially as follows:

THE SHARES REPRESENTED BY THIS CERTIFICATE 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 THESE 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 THESE SHARES THAT HAS NOT BEEN SO REGISTERED (OR QUALIFIED).

THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND OBLIGATIONS, TO WHICH ANY TRANSFEREE
AGREES BY HIS ACCEPTANCE HEREOF, AS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT, DATED AS OF NOVEMBER 1, 1996, COPIES OF WHICH MAY BE
OBTAINED FROM THE COMPANY. NO TRANSFER OF SUCH SHARES WILL BE MADE ON THE
BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE
TERMS OF SUCH AGREEMENT AND BY AN AGREEMENT OF THE TRANSFEREE TO BE BOUND BY
THE RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT.

Section 2.4 [Intentionally Left Blank].

Section 2.5 Transfer of Pecuniary Interests. Prior to a
Transfer of a pecuniary interest in any Shares by Ronald W. Burkle or any
Controlling Stockholder controlled by Ronald W. Burkle to a Permitted
Transferee (including, without limitation, by means of a Transfer of an
interest in any Person owning Shares) Ronald W. Burkle shall provide each of
the Purchasers with a written notice specifying the number of Shares in which a
pecuniary interest is being Transferred.

Without the prior written consent of (a) the holders of a
majority of the Shares held by the Purchasers and (b) at least two unrelated
Purchasers, neither Ronald W. Burkle nor any Controlling Stockholder controlled
by Ronald W. Burkle shall Transfer a pecuniary interest in any Shares to a
Permitted Transferee (including, without limitation, by means of a Transfer of
an interest in any Person owning Shares), if immediately after giving effect to
such Transfer Ronald W. Burkle would have a pecuniary interest in a number of
Shares less than (i) 85% of the number

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<PAGE> 14
of Shares in which Ronald W. Burkle had a pecuniary interest on the Acquisition
Date minus (ii) any Shares as to which Ronald W. Burkle had a pecuniary
interest on the Acquisition Date that are Transferred in a Tag-Along Sale
exempt from the provisions of Section 6.2 pursuant to Section 2.6(e)(v).

The provisions of this Section 2.5 shall not apply to any
Transfer to (x) any spouse or issue of Ronald W. Burkle, or any trust solely
for the benefit of Ronald W. Burkle or any such spouse or issue, and (y) upon
Ronald W. Burkle's death, any Person to whom Shares are transferred in
accordance with the laws of descent and/or testamentary distribution.

Section 2.6 Tag-Along Rights. (a) Each Controlling
Stockholder who proposes to effect a Tag-Along Sale shall afford each of the
Investors (each, a "Tag-Along Stockholder") the opportunity to participate
therein in accordance with this Section 2.6.

Each Controlling Stockholder represents to the Investors that
it has not entered into any agreement providing for any rights inconsistent
with the rights provided to the Investors in this Section 2.6 and that it has
not otherwise directly or indirectly granted any such rights. No Controlling
Stockholder shall enter into any agreement providing for, or otherwise directly
or indirectly grant, any tag-along or other contractual rights (other than
customary registration rights) to participate, directly or indirectly, in any
Tag-Along Sale without the prior unanimous written approval of the Investor
Nominees and, so long as the Other Purchasers, in the aggregate, beneficially
own at least 33% of the Shares beneficially owned by the Other Purchasers on
the Acquisition Date, the Requisite Holders.

(b) With respect to each Tag-Along Sale, each Tag-Along
Stockholder shall have the right to Transfer, at the same price and upon
identical terms and conditions as such proposed Transfer (except as set forth
below), the number of Shares owned by such Tag-Along Stockholder equal to such
Tag-Along Stockholder's Transfer Allotment; provided, however, that (i) a
Tag-Along Stockholder may Transfer Shares of a different kind than those
transferred by a Controlling Stockholder pursuant to a Tag-Along Sale; and (ii)
in the event of a Tag-Along Sale pursuant to a Transfer by a Controlling
Stockholder of an interest in a Person that directly or indirectly owns Shares,
the price and other terms and conditions of such Tag-Along Sale applicable to
each Tag-Along Stockholder and the Shares to be sold by such Tag-Along
Stockholder, shall as closely approximate those of the proposed Transfer as is
reasonably practicable.

At the time any Tag-Along Sale is proposed, the Controlling
Stockholders shall give written notice to each Tag-Along Stockholder of its
right to sell Shares hereunder (the "Transfer Notice"), which notice shall
identify the Proposed Purchaser and state the number of Shares proposed to be
Transferred, the proposed offering price (including the form and terms of any
non-cash consideration to be received in connection therewith), the proposed
date of any such Transfer (the "Transfer Date") and any other material terms
and conditions of the proposed Transfer. The Transfer Notice shall also
contain a complete and correct copy of any offer to, or agreement with, the
Controlling Stockholders by the Proposed Purchaser to purchase such Shares.
The Controlling Stockholders shall use their best efforts to deliver the
Transfer Notice at least 30 days prior to the Transfer Date and in no event
shall the Controlling Stockholders provide such Transfer Notice later than 21
days prior to the Transfer Date.

(c) Each Tag-Along Stockholder that wishes to participate
in the Tag-Along Sale shall provide written notice (or oral notice confirmed in
writing) (the "Tag-Along Notice")

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<PAGE> 15
to the Controlling Stockholders no less than 7 days prior to the Transfer Date.
The Tag-Along Notice shall set forth the number and kind of Shares that such
Tag-Along Stockholder elects to include in the Transfer, which shall not exceed
such Tag-Along Stockholder's Transfer Allotment; provided that the failure of a
Tag-Along Stockholder to correctly specify a number or kind of Shares not
exceeding its Transfer Allotment shall not affect the rights such Tag-Along
Stockholder may otherwise have under this Section 2.6 (and any specified Shares
in excess of such Tag-Along Stockholder's Transfer Allotment shall be treated
as Additional Shares). The Tag-Along Notice shall also specify the aggregate
number and kind of additional Shares owned of record by such Tag-Along
Stockholder as of the close of business on the second day immediately preceding
the date on which the Tag-Along Notice is given by such Tag-Along Stockholder,
if any, which such Tag-Along Stockholder desires also to include in the
Transfer ("Additional Shares") in the event there is any under-subscription for
the entire amount of all Tag-Along Stockholders' Transfer Allotments. In the
event there is an under-subscription by the Tag-Along Stockholders for any
portion of the aggregate Tag-Along Stockholders' Transfer Allotments, the
Controlling Stockholders shall apportion the unsubscribed Tag-Along
Stockholders' Transfer Allotments to Tag-Along Stockholders whose Tag-Along
Notices specified an amount of Additional Shares, which apportionment shall be
on a pro rata basis among such Tag-Along Stockholders in accordance with the
number of Additional Shares specified by all such Tag-Along Stockholders in
their Tag-Along Notices. The Tag-Along Notices given by the Tag-Along
Stockholders shall constitute their binding agreements to sell such Shares on
the terms and conditions applicable to the Transfer.

If a Tag-Along Notice is not received by the Controlling
Stockholders from a Tag-Along Stockholder prior to the 7-day period specified
above, the Controlling Stockholders shall have the right to sell or otherwise
Transfer the number of Shares specified in the Transfer Notice to the Proposed
Purchaser specified in the Transfer Notice without any participation by such
Tag-Along Stockholder (subject to the right of other Tag-Along Stockholders to
sell Additional Shares in the event of an under-subscription by Tag-Along
Stockholders, as described above), but only on terms and conditions with
respect to the consideration paid by the Proposed Purchaser no more favorable
(and other material terms and conditions which a reasonable investor would
consider significant to the decision to include Shares in the Transfer no more
favorable in any material respect) to the Controlling Stockholders than as
stated in the Transfer Notice to the Tag-Along Stockholders, and only if such
Transfer occurs on a date within 45 Business Days of the Transfer Date.

(d) No Tag-Along Stockholder shall be required to make
any representations and warranties to any Person in connection with such
Tag-Along Sale except as to (i) good title and the absence of liens with
respect to such Tag-Along Stockholder's Shares, (ii) the corporate or other
existence of such Tag-Along Stockholder and (iii) the authority for and the
validity and binding effect of, and the absence of any conflicts under the
charter documents and material agreements of such Tag-Along Stockholder as to,
any agreements entered into by such Tag-Along Stockholder in connection with
such Transfer. No Tag-Along Stockholder shall be required to provide any
indemnities in connection with such Tag-Along Sale except for a breach of such
representations and warranties.

(e) The provisions of this Section 2.6 shall not apply to
any Transfers (i) by a Controlling Stockholder to a Permitted Transferee of
such Controlling Stockholder (provided that such Permitted Transferee has
agreed to be bound by this Agreement as contemplated by Section 2.9 hereof),
(ii) pursuant to a Public Offering, (iii) pursuant to a Rule 144 Open Market
Transaction of which each of the Investor Nominees and each Purchaser who
beneficially owns at

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<PAGE> 16
least 731,897 Shares, has been provided at least two Business Days prior
written notice, (iv) on or after March 22, 1996, by Ronald W. Burkle or
Controlling Stockholders controlled by Ronald W. Burkle; provided, that the
aggregate number of Shares transferred pursuant to this clause (iv) by all such
Persons does not exceed 73,365 (2.5% of the number of Shares beneficially owned
by the Yucaipa Affiliates on the Acquisition Date), (v) of limited partnership
interests in Yucaipa Dominick's Partners, L.P. by Ronald W. Burkle as of the
Acquisition Date and representing an indirect pecuniary interest in not more
than 178,583 Shares, (vi) of limited partnership interests in Crescent Shared
Opportunity Fund II, L.P., or (vii) constituting a bona fide pledge to a
broker-dealer or other institutional lender.

Section 2.7 Rights to Compel Sale. (a) If at any time
the Controlling Stockholders shall enter into a written agreement with a Third
Party to acquire solely for cash all, but not less than all, of the issued and
outstanding Shares in a bona fide transaction (a "Compelled Sale Agreement"),
the Controlling Stockholders shall have the right, subject to the terms and
conditions set forth below, to require each of the Investors (the "Remaining
Holders") to sell all, but not less then all, of the Shares held by each such
Remaining Holder (a "Compelled Sale"). Subject to the terms and conditions set
forth below, the Remaining Holders shall (and hereby agree to) sell such Shares
on the same terms and conditions and for the same per Share consideration as
the Controlling Stockholders sell their Shares.

As soon as is reasonably practicable after the commencement of
material discussions regarding a proposed sale of the Company (whether through
a merger, sale of stock or assets or otherwise), business combination, or
similar transaction, the Controlling Stockholders shall provide each of the
Investor Nominees with notice thereof, which shall include reasonable details
with respect thereto. The Controlling Stockholders shall provide each of the
Investor Nominees with prompt notice of all material developments in such
discussions.

(b) Within two Business Days following execution of any
Compelled Sale Agreement, the Controlling Stockholders shall provide each
Remaining Holder with written notice thereof (the "Compelled Sale Notice").
The Compelled Sale Notice shall attach a copy of the Compelled Sale Agreement
and shall set forth: (i) the name and address of the Third Party; (ii) the
amount of consideration to be paid per Share and the terms and conditions of
payment offered by the Third Party; and (iii) all other material terms of such
Compelled Sale, including the proposed date of the Compelled Sale (the
"Compelled Sale Date"), which shall be not less than 20 days following the
delivery of the Compelled Sale Notice, and the outside termination date of the
Compelled Sale Agreement (the "Compelled Sale Termination Date"), which shall
be not more than 150 days following the delivery of the Compelled Sale Notice.

(c) The provisions of this Section 2.7(c) shall only
apply if the aggregate consideration to be paid for all outstanding Shares in
such Compelled Sale implies an Enterprise Value on the date of delivery of the
Compelled Sale Notice of less than the product of (x) 6.5 times (y) EBITDA of
the Company for the latest four fiscal quarters of the Company for which
information was (or was required to be) provided to Investors pursuant to
Section 4.4 hereof.

(i) If the Other Purchasers holding at least 65%
of the Shares then held by the Other Purchasers deliver an Appraisal
Request, Apollo and Yucaipa shall choose an Appraiser from the list of
proposed Appraisers contained in the Appraisal Request, and notify
such Other Purchasers of such choice on or prior to the fifth Business
Day following delivery of the Appraisal Request. Such Other
Purchasers shall retain such

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<PAGE> 17
Appraiser and cause the Appraiser to calculate an Appraised Value as
promptly as practicable (but in any event prior to the 20th Business
Day following selection of the Appraiser) and to provide written
notice thereof to the Controlling Stockholders and the Purchasers (the
"Appraisal Notice").

If the per Share consideration to be paid in such
Compelled Sale is less than the Appraised Value, then (A) the
Controlling Stockholders shall pay all fees and expenses of the
Appraiser arising in connection with the calculation of the Appraised
Value and (B) no Purchaser shall be required to sell its Shares in the
Compelled Sale. Otherwise, the Other Purchasers shall pay all fees
and expenses of the Appraiser arising in connection with the
calculation of the Appraised Value and shall be required to sell their
Shares in the Compelled Sale subject to the terms and conditions of
this Section 2.7.

(ii) If (A) an Appraisal Request is not delivered
on or prior to the fifth Business Day following delivery of the
Compelled Sale Notice or the per Share consideration to be paid in
such Compelled Sale is not less than the Appraised Value and (B)
Apollo delivers to Yucaipa a written notice (a "Compelled Sale
Acceptance") within 15 days following the delivery of the Compelled
Sale Notice (or, if an Appraisal Request was delivered, within 15 days
following delivery of the Appraisal Notice), which Compelled Sale
Acceptance sets forth the binding commitment of Apollo (or its
designee) to purchase all of the issued and outstanding Shares at the
price per Share and on all of the other terms and subject to all of
the conditions set forth in the Compelled Sale Agreement and the other
terms and conditions set forth herein (including, without limitation,
the condition that Apollo (or its designee) obtains financing, within
the time periods set forth below, on terms and conditions satisfactory
to Apollo (or such designee)), then the Controlling Stockholders and
such Remaining Holders shall, and the Controlling Stockholders shall
cause the other participating stockholders to, sell, and Apollo (or
its designee) shall purchase, such Shares on the terms and subject to
the conditions set forth therein as if Apollo (or its designee) is
(and for purposes of this Section 2.7 will be deemed to be) the Third
Party, and the Compelled Sale Date is (and for purposes of this
Section 2.7 will be deemed to be) the later of (1) 60 days following
the delivery of the Compelled Sale Notice or the Appraisal Notice, as
the case may be, (2) if on the date of the Compelled Sale Notice, the
Company and its Subsidiaries have, in the aggregate, greater than $100
million of outstanding Disqualified Indebtedness, 90 days following
the delivery of the Compelled Sale Notice or the Appraisal Notice, as
the case may be, and (3) the Compelled Sale Date specified in the
Compelled Sale Notice; provided, that (A) the right of Apollo (or its
designee) to purchase Shares pursuant to this Section 2.7(c) shall
terminate if (x) it has not satisfied or waived its financing
contingencies on or prior to the date all financing contingencies
contained in the Compelled Sale Agreement were required to be so
satisfied or waived (or, if later, on or prior to the date set forth
in clause (1) or (2) above, as applicable) or (y) such purchase has
not been consummated on or prior to the Compelled Sale Termination
Date (or, if later, the date set forth in clause (1) or (2) above, as
applicable) and (B) subject to its ability to obtain financing on
satisfactory terms and conditions within the time periods set forth
above, the obligation of Apollo (or its designee) to purchase Shares
shall terminate only in accordance with the terms of the Compelled
Sale Agreement (or similar agreement by which Apollo (or such
designee) has become bound).

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<PAGE> 18
(d) Notwithstanding anything contained in this Agreement
to the contrary in connection with a Transfer (which otherwise complies with
the terms of this Agreement) of at least 66 2/3% of the Shares held by Apollo
on the Acquisition Date to a single Transferee (whether by a single transaction
or a series of transactions) Apollo may, by written notice to the Company,
assign all of its rights under this Section 2.7 to such Transferee including,
without limitation, the right to purchase all of the issued and outstanding
Shares under Section 2.7(c).

(e) Subject to the satisfaction or waiver of the terms
and conditions of the Compelled Sale Agreement (other than any condition
relating to the delivery of Shares by the Remaining Holders), the Compelled
Sale shall occur at a closing (the "Compelled Sale Closing") on the Compelled
Sale Date during normal business hours at a time and place reasonable
designated by the Controlling Stockholders and the Third Party; provided, that
if the Compelled Sale Closing has not occurred on or prior to the Compelled
Sale Termination Date, the Remaining Holders will be released from their
obligations under this Section 2.7, unless and until the Controlling
Stockholders deliver a new Compelled Sale Notice in compliance with this
Section 2.7.

(f) If any Person fails to deliver certificates
representing its Shares as required by this Section 2.7 and the Compelled Sale
in question is consummated, then such Person (i) shall not be entitled to the
consideration it is to receive under this Section 2.7 until it cures such
failure (provided, that after curing such failure it shall be so entitled to
such consideration without interest), (ii) shall for all purposes be deemed no
longer to be a stockholder of the Company and have no voting rights with
respect to such Shares, (iii) shall not be entitled to any dividends or other
distributions with respect to the Shares held by it, (iv) shall have no other
rights or privileges granted to stockholders under this or any other agreement
and (v) in the event of liquidation of the Company, shall have rights
subordinate to the rights of any equity holder with respect to any
consideration it would have received if it had complied with this Section 2.7,
if any, until it cures such failure (provided, that after curing such failure
it shall be so entitled to such consideration without interest). If any party
so fails to deliver such certificates as so required it shall execute,
acknowledge and deliver all such further agreements and take all such further
actions as may be necessary or desirable to give effect to the provisions of
this Section 2.7(f).

(g) No Remaining Holder shall be required to make any
representations and warranties to any Person in connection with such Transfer
except as to (i) good title and the absence of liens with respect to such
Remaining Holder's Shares, (ii) the corporate or other existence of such
Remaining Holder and (iii) the authority for and the validity and binding
effect of, and the absence of any conflicts under the charter documents and
material agreements of such Remaining Holder as to, any agreements entered into
by such Remaining Holder in connection with such Transfer. The Remaining
Holders shall not be required to provide any indemnities in connection with
such Transfer except for a breach of a such representations and warranties.

(h) The Company shall, and shall cause its Subsidiaries
to, use their respective best efforts to ensure that the terms of all
Indebtedness and preferred stock created, incurred, assumed or guaranteed by
the Company or any of its Subsidiaries after the Effective Date (and all
agreements and instruments relating thereto) do not (directly or indirectly)
prohibit, or provide for a default, right to accelerate, acceleration, put,
mandatory redemption, repurchase or repayment, or similar event, directly or
indirectly, due to, upon, in anticipation of, or following, Apollo's exercise
of its rights pursuant to this Section 2.7 or any other transaction pursuant to
which Apollo obtains or may obtain control of the Company. Any Indebtedness or
preferred stock (including,

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<PAGE> 19
without limitation, the Redeemable Preferred Stock) containing any of such
terms is referred to herein as "Disqualified Indebtedness."

Section 2.8 Offering Memorandum. The Company shall
cooperate with the Investors and make available on a timely basis such
information as the Investors may reasonably request (to the extent that such
information can be provided without unreasonable expense or disruption of the
Company's affairs) to facilitate (i) Transfer of 5% or more of the issued and
outstanding Shares to a Third Party or (ii) in the case of Apollo, the
financing of a Compelled Sale, including, in the case of (A) any Transfer of 5%
or more of the issued and outstanding Shares not registered pursuant to the
Securities Act or (B) in the case of Apollo, the financing of a Compelled Sale,
(x) at any time the Company is not filing periodic reports under the Exchange
Act, prompt preparation of an offering memorandum relating to the Shares, the
financing (if applicable) and the Company and its Subsidiaries that contains
such information as is required by the Securities Act and other applicable laws
to be provided to "accredited investors" and such other information reasonably
requested by the Investors, and (y) making available to any proposed purchaser
of such Shares or proposed source of financing reasonable access to management
of the Company and its Subsidiaries.

The Company shall provide customary representations and
warranties to the selling Investors and any purchaser of such Shares or source
of financing, as the case may be, to the effect that the information contained
in any such offering memorandum that has been provided by the Company does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and shall indemnify
each of the Investors, the purchaser or source of financing, as the case may
be, and their respective representatives and agents from and against any loss,
claim, damage, liability or expense incurred by any of them as a result of any
breach of such representation and warranty.

Section 2.9 Deliveries at Closing; Method of Payment of
Purchase Price. Each Tag-Along Stockholder, Controlling Stockholder and
Remaining Holder, as applicable, shall deliver to the Proposed Purchaser,
Apollo or the Third Party, as applicable, against delivery of the purchase
price for the Shares being sold by it, (i) certificates appropriately endorsed
and representing the Shares being sold, free and clear of any lien, claim or
encumbrance, and (ii) such other documents, including, without limitation,
executed stock powers and evidence of ownership and authority, as the
purchasers may reasonably request. The purchase price shall be paid by wire
transfer of immediately available funds to the bank account designated by each
Tag-Along Stockholder, Controlling Stockholder and Remaining Holder, or by
certified check if the amount payable to the recipient thereof is less than
$1,000,000.

ARTICLE III

SCOPE OF BUSINESS OF THE COMPANY

Section 3.1 Scope of Business. As of the Effective Date,
the Company legally and beneficially will own 100% of the outstanding shares of
capital stock of Dominick's. Dominick's and its Subsidiaries are engaged
primarily in the operation of conventional retail supermarkets, warehouse
format supermarkets and grocery warehouse facilities located principally in
Illinois and Indiana.

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Section 3.2 Business Opportunities. None of Yucaipa, its
partners nor any Person controlled by any of them (other than the Company or
its Subsidiaries) shall, directly or indirectly, enter into, or agree or commit
to enter into, any material investment in or otherwise exploit any business
opportunity primarily related to the operation of conventional retail
supermarkets, warehouse format supermarkets and grocery warehouse facilities
within the States of Illinois, Indiana, Iowa or Wisconsin or in any other
market in which the Company or any of its Subsidiaries does business (other
than an investment in the shares of any public company representing less than
5% of such company's fully diluted common equity) (a "Business Opportunity")
except with the approval of Apollo and the holders of a majority of the Shares
held by the Other Purchasers, so long as the Other Purchasers beneficially own
at least 50% of the Shares owned by the Other Purchasers as of the Acquisition
Date.

ARTICLE IV

ADDITIONAL RIGHTS AND OBLIGATIONS OF
INVESTORS AND THE COMPANY

Section 4.1 Management Fees. Neither the Company nor any
of its Subsidiaries shall pay to Yucaipa or any of its Affiliates compensation
for providing services to the Company and its Subsidiaries (or reimbursement of
expenses in connection therewith) other than pursuant to (a) the Management
Agreement, (b) customary compensation and expense reimbursement arrangements
between the Company and Darren W. Karst in his capacity as an officer or
employee of the Company, or (c) any similar agreement or arrangement approved
by a majority of the disinterested members of the Board of Directors with
respect to such agreement or arrangement.

Section 4.2 Consulting Services. Neither the Company nor
any of its Subsidiaries may retain or employ Yucaipa or any of its Affiliates
as a financial advisor or consultant other than solely in accordance with the
terms of the Management Agreement or any similar agreement or arrangement
approved by the Board of Directors and a majority of the Investor Nominees.

Section 4.3 Access to Information; Confidentiality. Upon
the request of any single Investor owning more than 10% of the outstanding
Shares or of any Purchaser, the Company shall afford such Person and its
accountants, counsel and other representatives reasonable access to all of the
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) of the Company and its Subsidiaries that are
reasonably requested. Such Person will, and will cause its agents to, conduct
any such investigations on reasonable advance notice, during normal business
hours, with reasonable numbers of persons and in such a manner as not to
interfere unreasonably with the normal operations of the Company and its
Subsidiaries.

Except as otherwise required by applicable law, neither the
Company nor any of its Subsidiaries shall be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of any customer or other Person, would jeopardize the
attorney-client privilege of the Person in possession or control of such
information, or would contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date
hereof. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.

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The Investors shall, and shall use their best efforts to cause
their representatives to, keep confidential all such information to the same
extent such information is treated as confidential by the Company, and shall
not directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
not apply to (i) any information that (x) was already in the investors'
possession prior to the disclosure thereof by the Company (other than through
disclosure by any other Person subject to a duty of confidentiality), (y) was
then generally known to the public, or (z) was disclosed to the investors by a
third party not bound by an obligation of confidentiality or (ii) disclosures
made as required by law or legal or regulatory process. If in the absence of a
protective order or the receipt of a waiver hereunder the investors are
nonetheless, in the opinion of their counsel, compelled to disclose information
concerning the Company to any tribunal or governmental body or agency or else
stand liable for contempt or suffer other censure or penalty, the Investors may
disclose such information to such tribunal or governmental body or agency
without liability hereunder.

Section 4.4 Furnishing of Information. (a) The Company
shall deliver to each Investor, as long as such Investor shall own any Shares:

(i) as promptly as practical, but in no event
later than 60 days after the close of each of its first three
quarterly accounting periods during any fiscal year of the Company,
the consolidated balance sheet of the Company as at the end of such
quarterly period, and the related consolidated statements of
operations, stockholders' equity and cash flows for such quarterly
period, and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, and in each case setting forth
comparative figures for the related periods in the prior fiscal year
(if such comparative figures are available without unreasonable
expense), all of which shall be certified by the chief financial
officer of the Company, to have been prepared in accordance with
generally accepted accounting principles, subject to year-end audit
adjustments, together with an MD&A;

(ii) as promptly as practical, but in no event
later than 105 days after the close of each fiscal year of the
Company, the consolidated balance sheet of the Company as of the end
of such fiscal year and the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal year,
in each case setting forth comparative figures for the preceding
fiscal year, and certified by independent certified public accountants
of recognized national standing, together with an MD&A; and

(iii) all reports, if any, filed by the Company or
any Subsidiary of the Company with the Commission under the Exchange
Act, as promptly as practical, but in no event later than 15 days
after filing any such reports with the Commission.

(b) The provisions of Sections 4.4(a)(i) and (ii) above
shall be deemed to have been satisfied if the Company delivers the reports
timely filed by the Company with the Commission on Form 10-Q or 10-K, as
applicable, for such periods promptly, but in no event later than 15 days after
filing any such Form with the Commission.

(c) The Company shall deliver to Apollo and each Other
Purchaser holding not less than 1,397,925 Shares a copy of all notices,
statements and information sent to the Agent or the Lenders pursuant to Section
6.1 of the Credit Agreement, but in no event later than 15 days after each such
delivery to the Agent or Lenders, as the case may be.

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Section 4.5 Regulatory Problems, Etc. (a) Each Investor
that has a potential Regulatory Problem shall notify the Company of the
existence thereof and of the percentage amount of the Company's equity
securities that would cause it to have such Regulatory Problem. A Person shall
be deemed to have a "Regulatory Problem" when such Person and its Affiliates
would own, control or have the power over a greater number or percentage of
securities of any kind issued by the Company or any other Person than are
permitted under any requirement of any governmental authority.

(b) Before the Company or any of its Subsidiaries
redeems, purchases or otherwise acquires, directly or indirectly, or converts
or takes any action with respect to the voting rights of, any shares of any of
its capital stock or any securities convertible into or exchangeable for any
shares of any class of its capital stock, the Company shall give prompt written
notice of such pending action to any Investor that would, according to the
terms of any such prior notice, have a Regulatory Problem as a result of such
action.

(c) Before the Company or any of its Subsidiaries
directly or indirectly takes any action that would result in the Company being
treated as a RPHC, the Company shall give prompt written notice to each
Purchaser that has advised the Company it desires to receive such notice.

(d) Upon the written request of any Investor so notified
pursuant to clauses (b) or (c), above, made within 10 days after its receipt
thereof, the Company shall (or shall cause its Subsidiaries to) defer taking
such action for such period (not to extend beyond 45 days after such investor's
receipt of the Company's original notice) as such Investor requests.

ARTICLE V

CORPORATE GOVERNANCE AND VOTING

Section 5.1 Boards of Directors. (a) The Board of
Directors and the Dominick's Board shall each be composed of 11 members (or
such lesser number of members as actually shall have been designated by the
parties hereto in accordance with the provisions of this Section 5.1). Yucaipa
shall be entitled, but not required, to designate 6 members to each such board
of directors (collectively, the "Yucaipa Nominees"). Apollo (or any
representative thereof designated by Apollo) shall be entitled to designate two
members to each such board of directors (collectively, the "Apollo Nominees")
and the Independent Nominator shall be entitled to designate one member to each
such board of directors (the "Other Nominees" and, together with the Apollo
Nominees, the "Investor Nominees"). The remaining two members of each such
board of directors shall be selected by the Board of Directors and shall be
"independent directors" as required by the rules and regulations of the New
York Stock Exchange, Inc. (each, an "Independent Director").

On the Effective Date, the Board of Directors shall be divided
into three classes designated as "Class I", "Class II" and "Class III."
Subject to the provisions of this Section 5.1, Class I shall be comprised of
two Yucaipa Nominees and one Apollo Nominee; Class II shall be comprised of two
Yucaipa Nominees, one Apollo Nominee and one Independent Director; and Class
III shall be comprised of two Yucaipa Nominees, one Other Nominee and one
Independent Director. 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

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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 for a three-year term (i.e., from the time of election
until the third annual meeting following such election).

If Yucaipa is the Independent Nominator, each Other Nominee
shall be an individual who has no other relationship with the Company, any
stockholder of the Company or any of their respective Affiliates and who is
qualified by reason of such individual's expertise in financial and investment
matters (as distinct from the operation of business concerns) to serve as a
member of such Board; provided, that any Other Purchaser that holds not less
than 35% of the Shares then held by the Other Purchasers may assert to Yucaipa
that any individual so appointed as an Other Nominee does not meet the
qualifications set forth in this sentence, and any dispute as to such matter
shall be resolved by arbitration upon terms reasonably acceptable to Yucaipa
and the Requisite Holders, and such individual shall continue to serve as an
Other Nominee during the pendency of such dispute.

(b) The Investors and the Controlling Stockholders shall
vote all of the Shares (other than shares of Class B Common Stock) owned or
held of record by them at all regular and special meetings of the stockholders
of the Company called or held for the purpose of filling positions on the Board
of Directors, and in each written consent executed in lieu of such a meeting of
stockholders, and each party hereto shall take all actions otherwise necessary,
to ensure (to the extent within the parties' collective control) the election
to the Board of Directors and the Dominick's Board of the Yucaipa Nominees and
the Investor Nominees.

(c) The Company, Dominick's, the Controlling Stockholders
and the Investors shall use their respective best efforts to call, or cause the
appropriate officers and directors of the Company or Dominick's, as applicable,
to call, a special meeting of stockholders of the Company or Dominick's, as
applicable, and to vote all of the Shares (other than shares of Class B Common
Stock) or shares of capital stock of Dominick's, as applicable, owned or held
of record by them for, or to take all actions by written consent in lieu of any
such meeting necessary to cause, the removal (with or without cause) of (A) any
Yucaipa Nominee if Yucaipa requests such director's removal in writing for any
reason, (B) any Apollo Nominee if Apollo requests such director's removal in
writing for any reason and (C) any Other Nominee if the Independent Nominator
requests such director's removal in writing for any reason. Yucaipa, Apollo
and the Independent Nominator, respectively, shall have the right to designate
a new nominee in the event any Yucaipa Nominee, Apollo Nominee or Other
Nominee, respectively, shall be so removed under this Section 5.1(c) or shall
vacate his directorship for any reason.

Except as provided in this Section 5.l(c), each party hereto
agrees that at any time that it is then entitled to vote for the election or
removal of directors, it will not vote in favor of the removal of any Yucaipa
Nominee or Investor Nominee unless (i) such removal shall be at the request of
the party who nominated such director pursuant to the provisions of Section
5.1(a) or (ii) the right of the party who nominated such director to do so has
terminated in accordance with Section 5.1(f).

(d) The Company shall not, and shall not permit any of
its Subsidiaries to, without the consent of holders of a majority of the Shares
(other than shares of Class B Common Stock) held by Yucaipa, Apollo or the
Independent Nominator, as the case may be, take any action that under the
Charter Documents or this Agreement requires the approval of one or more
Yucaipa Nominees, Apollo Nominees or Other Nominee, as the case may be, if any
of the Yucaipa

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Nominees, Apollo Nominees or Other Nominee, as the case may be, approving such
action are Persons whose removal from the Board of Directors has been requested
at or prior to the time of such action by the party who nominated such director
pursuant to Section 5.1(a). Each party hereto shall use reasonable efforts to
prevent any action from being taken by the Board of Directors or the Dominick's
Board, as the case may be, during the pendency of any vacancy due to death,
resignation or removal of a director, unless the Person entitled to have a
person nominated by it elected to fill such vacancy shall have failed, for a
period of 10 days after notice of such vacancy, to nominate a replacement;
provided that the provisions of this Section 5.1(d) shall not apply in
circumstances in which action must be taken by the Board of Directors or the
Dominick's Board, as the case may be, to protect the best interests of the
Company or Dominick's, as the case may be. If such vacancy relates to an Other
Nominee, the Independent Nominator shall use its best efforts to nominate a
replacement Other Nominee during such 10- day period.

(e) As of the Effective Date, the Yucaipa Nominees shall
be Ronald W. Burkle, Linda McLoughlin Figel, Patrick L. Graham, Darren W.
Karst, Robert A. Mariano and Mark A. Resnik; the Apollo Nominees shall be Peter
P. Copses and David B. Kaplan; and the Other Nominee shall be Antony P.
Ressler.

(f) (i) The right of Yucaipa to designate members to
the Board of Directors and the Dominick's Board under this Section 5.1 shall
(A) be decreased by three with respect to each Board (which, in the case of the
Board of Directors, shall mean one director in each of the three classes) if
Ronald W. Burkle ceases to beneficially own at least 978,298 Shares (33 1/3% of
the Shares beneficially owned by the Yucaipa Affiliates on the Acquisition
Date) and (B) shall terminate if Ronald W. Burkle ceases to beneficially own at
least 733,727 Shares (25% of the Shares beneficially owned by the Yucaipa
Affiliates on the Acquisition Date); provided, that if the termination of
Yucaipa's rights pursuant to this Section 5.1(f) is due to the death of Ronald
W. Burkle, such termination will not become effective until 60 days after the
date thereof.

(ii) The right of Apollo to designate members to
the Board of Directors and the Dominick's Board under this Section 5.1
shall (A) be decreased by one with respect to each Board if Apollo
ceases to beneficially own at least 1,951,722 Shares (33 1/3% of the
Shares beneficially owned by Apollo on the Acquisition Date) and (B)
shall terminate if Apollo ceases to beneficially own at least
1,463,795 Shares (25% of the Shares beneficially owned by Apollo on
the Acquisition Date).

(iii) The right of the Independent Nominator to
designate a member to the Board of Directors and the Dominick's Board
under this Section 5.1 shall terminate if the Other Purchasers cease
to beneficially own at least 1,949,278 Shares (33 1/3% of the Shares
beneficially owned by the Other Purchasers on the Acquisition Date).

(g) (i) Notwithstanding anything in this Agreement to
the contrary, in connection with a Transfer of at least 66 2/3% of the Shares
held by Apollo on the Acquisition Date to a single Transferee (other than any
of the Yucaipa Affiliates) whether by a single transaction or a series of
transactions, Apollo may, by written notice to the Company, assign all of its
rights under this Section 5.1 (other than any such rights it may have as an
Independent Nominator) to such Transferee and, without limiting the foregoing,
such Transferee's rights to designate directors under this Section 5.1 shall
not be reduced until such Transferee and its Permitted Transferees collectively
cease to beneficially own at least 33 1/3% or 25%, as the case may be, of the
number of Shares beneficially owned by Apollo on the Acquisition Date;
provided, that such directors shall

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not be deemed Investor Nominees unless Apollo has provided Yucaipa the
opportunity to purchase such Shares pursuant to clause (ii) below and such
Shares are transferred to a Transferee other than any of the Yucaipa
Affiliates.

(ii) Apollo may (but shall not be required to)
provide Yucaipa with written notice of its desire to effect a proposed
Transfer of at least 66 2/3% of the Shares beneficially owned by
Apollo on the Acquisition Date (the "ROFO Notice"), which notice shall
set forth: (1) the proposed price to be paid per Share; (2) the
minimum number of Shares proposed to be Transferred (the "ROFO
Shares"); and (3) the names of up to five proposed Transferees. If
Apollo delivers a ROFO Notice and Yucaipa delivers to Apollo, within
15 days following the delivery thereof, a written acceptance setting
forth the binding commitment (subject to the receipt of all required
governmental approvals and financing on terms and conditions
satisfactory to Yucaipa) of Yucaipa to purchase all (but not less than
all) of the ROFO Shares at the price per Share set forth in the ROFO
Notice (a "ROFO Acceptance"), then Apollo shall sell, and Yucaipa
shall purchase, all the ROFO Shares on a date no later than 90 days
after deliver of the ROFO Notice (the "ROFO Closing Date"). If
Yucaipa timely elects not to purchase the ROFO Shares, fails to
deliver a ROFO Acceptance within 15 days following delivery of the
ROFO Notice, or fails to purchase the ROFO Shares on or prior to the
ROFO Closing Date (which failure shall not relieve Yucaipa of its
binding commitment, subject to the receipt of all required
governmental approvals and financing on terms and conditions
satisfactory to Yucaipa, to purchase such Shares), then in connection
with a Transfer by Apollo of a number of Shares not less than the
number of ROFO Shares to any one of the Transferees specified in the
ROFO Notice for a price per Share not less than that specified in the
ROFO Notice. Apollo may assign its rights to designate directors in
accordance with the terms of clause (i) above, and thereafter
directors designated by such Transferee under Section 5.1 shall be
deemed Investor Nominees; provided that, if Yucaipa has timely elected
not to purchase the ROFO Shares or failed to deliver a ROFO Acceptance
within 15 days following delivery of the ROFO Notice, such Transfer is
consummated on or before the later of (i) the 90th day following
delivery of the ROFO Notice and (ii) if Apollo and such Transferee
have entered into a binding agreement with respect to such Transfer on
or prior to such 90th day, the date on which all regulatory approvals
with respect to such Transfer have been obtained.

(h) (i) The Bylaws of each of the Company and
Dominick's shall authorize the establishment of an Executive Committee of the
Board of Directors and the Dominick's Board, and may authorize the
establishment of other committees of the Board of Directors or the Dominick's
Board, as the case may be, comprised in any case of such persons as a majority
of the Board of Directors or the Dominick's Board, as the case may be, shall
approve, and having authority, subject to applicable law, to take all actions
that (A) are ancillary to or arise in the normal course of the businesses of
the Company or Dominick's, as the case may be, (B) implement and are consistent
with resolutions of the Board of Directors or the Dominick's Board, as the case
may be, or (C) in the case of any Compensation Committee or Audit Committee,
are customary for such committee of a public company to perform. Any other
delegations of authority to the Executive Committee or any other committee of
the Board of Directors or the Dominick's Board, as the case may be, shall
require the prior written approval of a majority of the Investor Nominees. At
least one of the Apollo Nominees shall be entitled to be a member of any Audit
Committee.

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(ii) Each committee of the Board of Directors or
the Dominick's Board, as the case may be, to which authority has been
delegated, shall keep complete and accurate minutes and records of all
actions taken by such committee, prepare such minutes and records in a
timely fashion and promptly distribute such minutes and records to
each member of the Board of Directors or the Dominick's Board, as the
case may be.

Section 5.2 Action by the Board of Directors. All
decisions of the Board of Directors shall require the affirmative vote of a
majority of the directors of the Company then in office, or a majority of the
members of an Executive Committee, or any other committee, of the Board of
Directors, to the extent such decisions may be lawfully delegated to an
Executive Committee, or any other committee, pursuant to Section 5.1(h).

Section 5.3 Charter Documents. (a) Exhibits A and B set
forth copies of the Charter Documents, each in the form in which it is to be in
effect on the Effective Date.

(b) The Company covenants that it will act, and each
Controlling Stockholder and Investor agrees to use its best efforts to cause
the Company to act, in accordance with its Charter Documents in all material
respects. Each Controlling Stockholder and Investor shall vote all the Shares
(other than shares of Class B Common Stock) owned or held of record by it at
any regular or special meeting of stockholders of the Company or in any written
consent executed in lieu of such a meeting of stockholders, and shall take all
action necessary, to ensure (to the extent within the parties' collective
control) that (i) the Charter Documents of the Company do not, at any time,
conflict with the provisions of this Agreement, and (ii) unless an amendment is
approved by the Board of Directors, the Charter Documents of the Company
continue to be in effect in the form attached hereto as Exhibits A and B.

Section 5.4 Appointment of Representative. Until the
termination of this Agreement, each Other Investor shall and shall cause its
Permitted Transferees (jointly with the transferor, if it retains any Shares)
to appoint one proxy to vote all Shares owned by such Other Investor and its
Permitted Transferees. If requested by the Company, each of Apollo, the
Yucaipa Affiliates and the Controlling Stockholders shall designate one Person
(which designated Person may be changed from time to time by notice to the
Company) to make, on their respective behalf, any and all elections and
designations and to give and receive any and all notices required or permitted
hereunder.

Section 5.5 Board Visitation Rights. The Company shall
(a) provide notice of each meeting of the Board of Directors and of the
Dominick's Board concurrently with, and in the same manner as, the notice of
such meeting provided to the members of such board (but not less than one
Business Day prior to such meeting) to (i) each Purchaser, as long as such
Purchaser shall beneficially own at least 698,962 Shares and (ii) each Investor
owning more than 10% of the outstanding Shares, (b) provide each such Person a
copy of all materials and written information provided to members of each such
board and any committee thereof in connection with any such meeting
concurrently with the distribution thereof to such members, and (c) permit a
single representative of each such Person to attend and observe each such board
meeting (in person or telephonically); provided, that (x) the Company may
redact or withhold all or any portion of such materials and/or (y) exclude any
such representative from all or any portion of any such meeting, if the members
of such board or committee reasonably determine in good faith that such
redaction, withholding or exclusion is required in order to preserve the
attorney-client privilege with respect to any matter before the Board of
Directors or the Dominick's Board, as the case may be.

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ARTICLE VI

TERMINATION

Section 6.1 Termination. Except as otherwise provided
herein with respect to certain specific provisions, this Agreement shall
terminate upon the earlier to occur of:

(i) the mutual agreement of the parties hereto,

(ii) with respect to any party hereto other than the
Company, such party (or its Permitted Transferees) ceasing to own any
Shares,

(iii) such time as less than 10% of the Shares continue to
be subject to the provisions of this Agreement, or

(iv) March 22, 2005.

If this Agreement has not otherwise terminated prior to March
22, 2003, the Investors and the Controlling Stockholders shall undertake to
renew provisions of this Agreement relating to the voting of Shares for a
successive 10-year period, or such shorter period as this Agreement is in
effect. Notwithstanding the foregoing, Section 4.3 shall survive to the later
of March 22, 2005 or the termination of this Agreement.

ARTICLE VII

MISCELLANEOUS

Section 7.1 No Inconsistent Agreements. Each party
hereto hereby consents to the termination of any other prior written or oral
agreement or understanding restricting, conditioning or limiting the ability of
any party to transfer or vote Shares and of any registration rights agreements
entered into pursuant to or in connection therewith, other than the
Registration Rights Agreements.

Each of the Company and the Controlling Stockholders represent
and agree that, as of the Effective Date, there is no (and from and after the
Effective Date they will not, and will cause their respective Subsidiaries and
Affiliates not to, enter into any) agreement with respect to any securities of
the Company or any of its Subsidiaries (and from and after the Effective Date
neither the Company nor any Controlling Stockholder shall take, or permit any
of their Subsidiaries or Affiliates to take, any action) that is inconsistent
in any material respect with the rights granted to the Investors in this
Agreement.

Without limiting the foregoing, the Company represents that,
(a) except for (i) this Agreement, (ii) the Company's 1995 Stock Option Plan,
(iii) the Company's 1995 Management Equity Plan and those certain Management
Stockholders Agreements entered into thereunder, (iv) the Company's 1996 Equity
Participation Plan, and (v) the Registration Rights Agreements dated as of
November 1, 1996 between the Company and certain Yucaipa Affiliates, there are
no other existing agreements relating to the voting or registration of any
equity securities of the Company or any of its Subsidiaries and (b) except for
(i) the agreements specified in clause (a), above, there

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are no other existing agreements between the Company and any other holder of
Shares relating to the transfer of any equity securities of the Company or any
of its Subsidiaries.

Section 7.2 No Other Affiliate Stockholders. Each
Yucaipa Affiliate represents to the Investors that, as of the Acquisition Date,
except for 2,934,909 shares of Common Stock owned collectively by the Yucaipa
Affiliates, the Yucaipa Warrant, limited partnership interests in Crescent
Shared Opportunity Fund II, L.P., and options to purchase 109,784 shares of
Common Stock owned collectively by Darren W. Karst and George G. Golleher, no
Yucaipa Affiliate or Affiliate of any Yucaipa Affiliate is the beneficial or
record owner of (or has any pecuniary interest in) any Shares or any rights,
options or warrants to purchase Shares or securities convertible into Shares.

Section 7.3 Recapitalization, Exchanges, Etc. If any
capital stock or other securities are issued in respect of, in exchange for, or
in substitution of, any Shares by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Shares or any other change in capital
structure of the Company, then appropriate adjustments shall be made with
respect to the relevant provisions of this Agreement so as to fairly and
equitably preserve, as far as practicable, the original rights and obligations
of the parties hereto under this Agreement and the terms "Common Stock, "Class
B Common Stock," and "Shares," each as used herein, shall be deemed to include
shares of such capital stock or other securities, as appropriate. Without
limiting the foregoing, whenever a particular number of Shares is specified
herein, such number shall be adjusted to reflect stock dividends, stock-splits,
combinations or other reclassifications of stock or any similar transactions.

Section 7.4 Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns; provided that (i) neither this
Agreement nor any rights or obligations hereunder may be transferred or
assigned by the Company (except by operation of law in any merger); (ii)
neither this Agreement nor any rights or obligations hereunder may be
transferred or assigned by the Controlling Stockholders or any Investor except
to any Person to whom it has Transferred Shares in compliance with this
Agreement and who has become bound by this Agreement pursuant to Section 2.2
hereof; and (iii) the rights of the parties under Article V hereof may not be
assigned to any Person except as explicitly provided therein. If any party
hereto shall acquire additional Shares, such Shares shall, except as otherwise
expressly provided herein, be held subject to (and entitled to all the benefits
of) all of the terms of this Agreement.

Section 7.5 No Waivers; Amendments. (a) No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

(b) This Agreement may not be amended or modified, nor
may any provision hereof be waived, other than by a written instrument signed
by (x) Yucaipa, (y) the holders of a majority of the Shares held by the
Purchasers and (z) so long as the Other Purchasers beneficially own at least
50% of the Shares beneficially owned by them as of the Acquisition Date, at
least two unrelated Purchasers; provided, however, that

25
<PAGE> 29
(i) so long as Apollo beneficially owns at least 25% of
the Shares beneficially owned by Apollo on the Acquisition Date,
without the consent of Apollo, no amendment, modification or waiver
that adversely affects the rights or duties of Apollo hereunder may be
effected,

(ii) so long as Apollo beneficially owns at least 10% of
the Shares beneficially owned by Apollo on the Acquisition Date,
without the consent of Apollo, no amendment, modification or waiver of
Section 2.7, 6.1 or this Section 7.5 that adversely affects the rights
or duties of Apollo thereunder may be effected,

(iii) so long as any Other Purchaser beneficially owns at
least 25% of the Shares beneficially owned by it on the Acquisition
Date and not less than 698,962 Shares without the consent of such
Other Purchaser, no amendment, modification or waiver that adversely
affects the rights or duties of such Other Purchaser hereunder may be
effected.

(iv) so long as the Investors, in the aggregate,
beneficially own at least 25% of the Shares beneficially owned by such
Persons on the Acquisition Date, without the consent of a majority of
the Shares then held by the Investors no amendment, modification or
waiver that adversely affects the rights or duties of the Investors
hereunder may be effected, and

(v) without the consent of each Investor adversely
affected thereby, no amendment, modification or waiver of Sections 4.5
or 7.15 may be effected.

The parties hereto shall use their best efforts not to effect
any amendments to the Charter Documents that would circumvent the provisions of
this Section 7.5(b).

Section 7.6 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 mailed, registered or certified,
return receipt requested, postage prepaid (or by a substantially similar
method), 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 (and with such other copy)
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
third Business Day following the date mailed or on the next Business Day
following delivery of such notice to a reputable overnight courier service.

To the Company, Dominick's or the Controlling Stockholders:

505 Railroad Avenue
Northlake, Illinois 60164
Attention: Robert Mariano
Fax: (708) 409-6000

with a copy (which shall not constitute notice) to:

c/o The Yucaipa Companies

26
<PAGE> 30
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 the Purchasers:

To the address specified on the signature page
executed by each such Purchaser.

with a copy (which shall not constitute notice) to:

Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attn: Michael A. Woronoff, Esq.
Fax: (213) 687-5600

To the Other Investors:

To the address specified on the signature page
executed by each such Other Investor.

Section 7.7 Inspection. So long as this Agreement shall
be in effect, this Agreement and, amendments hereto and waivers hereof shall be
distributed to all parties hereto after becoming effective and shall be
available upon the request of any Investor.

SECTION 7.8 GOVERNING LAW. THIS AGREEMENT SHALL GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS, EXCEPT AS TO MATTERS OF CORPORATE
GOVERNANCE, WHICH SHALL BE INTERPRETED IN ACCORDANCE WITH THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE.

Section 7.9 Section Headings. The section headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.

27
<PAGE> 31
Section 7.10 Entire Agreement. This Agreement, together
with the Stock Purchase Agreement and the Registration Rights Agreements
attached as Exhibit C hereto, constitutes the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof and thereof and supersedes any and all prior agreements and
understandings, written or oral, relating, to the subject matter hereof.

Section 7.11 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdictions, it
being intended that all rights and obligations of the panics hereunder shall be
enforceable to the fullest extent permitted by law.

Section 7.12 Counterparts. This Agreement may be signed
in counterparts, each of which shall constitute an original and which together
shall constitute one and the same agreement.

Section 7.13 Required Approvals. If approval of this
Agreement or any of the transactions contemplated hereby shall be required by
any governmental or supra-governmental agency or instrumentality or is
considered to be necessary or advisable to all the parties hereto, all parties
hereto shall use their best efforts to obtain such approval. If any required
approval is not obtained or it becomes clear that such approval will not be
granted, any party shall immediately give the other parties hereto notice and
the parties hereto shall promptly meet and negotiate in good faith to modify
their respective obligations as necessary.

Section 7.14 Consistency. In the event of a conflict
between this Agreement on the one hand and the Charter Documents or any
agreement relating to the securities of the Company, or its Subsidiaries on the
other hand, the terms and provisions of this Agreement shall be deemed to set
forth the true intentions of the parties (to the extent permitted by applicable
law) and shall supersede the terms of any other agreement.

Section 7.15 Public Disclosure. The Company shall not,
and shall not permit any of its Subsidiaries to, make any public announcements
or disclosures relating or referring to any Investor, any of its affiliates, or
any of their respective directors, officers, partners, employees or agents
(including, without limitation, any Person designated as a director of the
Company or Dominick's pursuant to the terms hereof) unless such Investor has
consented to the form and substance thereof, which consent shall not be
unreasonably withheld except to the extent such disclosure is, in the opinion
of counsel, required by law or by stock exchange regulation, provided that (i)
any such required disclosure shall only be made, to the extent consistent with
law, after consultation with such Investor and (ii) no such announcement or
disclosure (except as required by law or by stock exchange regulation) shall
identify any such Person without such Investor's prior consent.

(signature pages follow)

28
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

DOMINICK'S SUPERMARKETS, INC.

By:
--------------------------------
Name: Robert A. Mariano
Title: President and
Chief Executive Officer

DOMINICK'S FINER FOODS, INC.

By:
--------------------------------
Name: Robert A. Mariano
Title: President and
Chief Executive Officer

S-1
<PAGE> 33
THE YUCAIPA AFFILIATES

YUCAIPA BLACKHAWK PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

Number of Shares of
Common Stock: 2,018,106

YUCAIPA CHICAGO PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

Number of Shares of
Common Stock: 253,470

YUCAIPA DOMINICK'S PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

Number of Shares of
Common Stock: 663,333

-----------------------------------
Ronald W. Burkle

S-2
<PAGE> 34
THE PURCHASERS

APOLLO INVESTMENT FUND, L.P.

By: Apollo Advisors II, L.P.
Its General Partner

By: Apollo Capital Management II, Inc.
Its General Partner

By:
--------------------------------
Name:
Title:

Address for notice:

c/o Apollo Advisors II, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attn:
Fax:

Number of Shares of
Common Stock:

Number of Shares of
Class B Common Stock:

S-3
<PAGE> 35

APOLLO INVESTMENT FUND III, L.P.

By: Apollo Advisors II, L.P.
Its General Partner

By: Apollo Capital Management II, Inc.
Its General Partner

By:
--------------------------------
Name:
Title:

Address for notice:

c/o Apollo Advisors II, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attn:
Fax:

Number of Shares of
Common Stock:

Number of Shares of
Class B Common Stock:

S-4
<PAGE> 36

APOLLO OVERSEAS PARTNERS III, L.P.

By: Apollo Advisors II, L.P.
Its Managing General Partner

By: Apollo Capital Management II, Inc.
Its General Partner

By:
--------------------------------
Name:
Title:

Address for notice:

c/o Apollo Advisors II, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attn:
Fax:

Number of Shares of
Common Stock:

Number of Shares of
Class B Common Stock:

S-5
<PAGE> 37

APOLLO (UK) PARTNERS III, L.P.

By: Apollo Advisors II, L.P.
Its Managing General Partner

By: Apollo Capital Management II, Inc.
Its General Partner

By:
--------------------------------
Name:
Title:

Address for notice:

c/o Apollo Advisors II, L.P.
2 Manhattanville Road
Purchase, New York 10577
Attn:
Fax:

Number of Shares of
Common Stock:

Number of Shares of
Class B Common Stock:

S-6
<PAGE> 38
BT INVESTMENT PARTNERS, INC.

By:
--------------------------------
Name:
Title:

Address for Notice:

130 Liberty Street
New York, New York 10006
Attn: James Dworkin
Fax: (212) 250-7651

Number of Shares of
Class B Common Stock:

S-7
<PAGE> 39

CHASE EQUITY ASSOCIATES, L.P.

By:
--------------------------------
Name:
Title:

Address for Notice:

One Chase Plaza
8th Floor
New York, New York 10081
Attn: Michael T. McLaughlin
Fax: (212) 552-1159

Number of Shares of
Class B Common Stock:

S-8
<PAGE> 40

CRESCENT/MACH I PARTNERS, L.P.

By:
--------------------------------
Name:
Title:

Address for Notice:

11100 Santa Monica Boulevard
Suite 2050
Los Angeles, California 90025
Attn: Robert Beyer
Fax: (310) 575-1997

Number of Shares of Common Stock:
Number of Shares of Class B Common Stock:

CRESCENT SHARED OPPORTUNITY
FUND II, L.P.

By:
--------------------------------
Name:
Title:

Address for Notice:

11100 Santa Monica Boulevard
Suite 2050
Los Angeles, California 90025
Attn: Robert Beyer
Fax: (310) 575-1997

Number of Shares of Common Stock:
Number of Shares of Class B Common Stock:

S-9
<PAGE> 41
INVESTORS

BAHRAIN INTERNATIONAL BANK, E.C.

By:
--------------------------------
Name:
Title:

Address for Notice:

c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, Connecticut 06902
Attn: Maryann Hansen
Fax: (203) 353-5711

Number of Shares of
Class B Common Stock:

S-10
<PAGE> 42

BANKERS TRUST NEW YORK CORPORATION

By:
--------------------------------
Name:
Title:

Address for Notice:

130 Liberty Street
33rd Floor
New York, NY 10006
Attn: James Dworkin
Fax: (212) 250-7651

Number of Shares of
Class B Common Stock:

S-11
<PAGE> 43
BHF-BANK AKTIENGESELLSCHAFT

By:
--------------------------------
Name:
Title:

Address for Notice:

55 East 59th Street
New York, New York 10022
Attn: Paul Travers
Fax: (212) 756-5911

Number of Shares of
Class B Common Stock:

S-12
<PAGE> 44

CONTINENTAL CASUALTY COMPANY

By:
--------------------------------
Name:
Title:

Address for Notice:

c/o Loews Holding Corp.
667 Madison Avenue, 7th Floor
New York, NY 10021
Attn: Hillel Weinberger
Fax: (212) 935-6797

Number of Shares of
Class B Common Stock:

S-13
<PAGE> 45

FLEET NATIONAL BANK

By:
--------------------------------
Name:
Title:

Address for Notice:

Fleet National Bank
1 Federal Street
Mail Stop MAOFD03C
Boston, MA 022110
Attention: Guy G. Smith
Tel: (617) 346-4400
Fax: (617) 346-4806

Number of Shares of
Class B Common Stock:

S-14
<PAGE> 46

FSC CORP.

By:
--------------------------------
Name:
Title:

Address for Notice:

c/o Bank of Boston
100 Federal Street, MS 01-09-01
Boston, MA 02110
Attn: Mary Josephs Reilly
Fax: (617) 434-4929

Number of Shares of
Class B Common Stock:

S-15
<PAGE> 47

INDOSUEZ DOMINICK'S PARTNERS, L.P.

By:
--------------------------------
Name:
Title:

Address for Notice:

c/o Indosuez Capital
1211 Avenue of the Americas, 7th Floor
New York, New York 10036
Attn: Michael Walsh, Esq.
Fax: (212) 278-2201

Number of Shares of
Class B Common Stock:

S-16
<PAGE> 48

INTERNATIONAL NEDERLANDEN
(U.S.) CAPITAL CORPORATION

By:
--------------------------------
Name:
Title:

Address for Notice:

135 East 57th Street
New York, New York 10022
Attn: Barry Iseley
Fax: (212) 750-8936

Number of Shares of
Class B Common Stock:

S-17
<PAGE> 49

MIDLAND MONTAGU PRIVATE EQUITY INC.

By:
--------------------------------
Name:
Title:

Address for Notice:

140 Broadway - 5th Floor
New York, New York 10005
Attn: James W. Marley
Fax: (212) 658-2586

Number of Shares of
Class B Common Stock:

S-18
<PAGE> 50

OKGBD & CO.

By:
--------------------------------
Name:
Title:

Address for Notice:

One Sun America Center
Los Angeles, California 90067
Attn: Lynn Hopton
Fax: (310) 772-6078

Number of Shares of
Class B Common Stock:

S-19

<PAGE> 1

Exhibit 10.12

DOMINICK'S SUPERMARKETS, INC.
1996 EQUITY PARTICIPATION PLAN

Dominick's Supermarkets, Inc., a Delaware corporation (the
"Company"), has adopted its 1996 Equity Participation Plan (the "Plan"),
effective October ___, 1996, for the benefit of its eligible employees,
consultants and directors.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for employees,
consultants and directors to further the growth, development and financial
success of the Company by personally benefiting through the ownership of
Company stock and/or rights which recognize such growth, development and
financial success.

(2) To enable the Company to obtain and retain the
services of employees, consultants and directors considered essential to the
long-term success of the Company by offering them an opportunity to own stock
in the Company and/or rights which will reflect the growth, development and
financial success of the Company.

ARTICLE I

DEFINITIONS

1.1 General. Wherever the following terms are used in
this Plan they shall have the meanings specified below, unless the context
clearly indicates otherwise.

1.2 Award Limit. "Award Limit" shall mean 500,000 shares
of Common Stock.

1.3 Board. "Board" shall mean the Board of Directors of
the Company.

1.4 Change in Control. "Change in Control" shall mean a
change in ownership or control of the Company effected through either of the
following transactions:

(a) any person or related group of persons (other than
the Company or a person that, as of the date of this Plan, directly or
indirectly possesses the ability to elect, or cause the election of, a
majority of members of the Board) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board does not recommend such
stockholders accept; or

(b) there is a change in the composition of the Board
over a period of thirty-six (36) consecutive months (or less) such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since
the beginning of such period or (ii) have been elected or nominated
for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still
in office at the time such election or nomination was approved by the
Board.

<PAGE> 2
1.5 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended.

1.6 Committee. "Committee" shall mean the Board, or a
committee thereof appointed as provided in Section 9.1.

1.7 Common Stock. "Common Stock" shall mean the voting
common stock of the Company, par value $.01 per share, and any equity security
of the Company issued or authorized to be issued in the future, but excluding
any preferred stock and any warrants, options or other rights to purchase
Common Stock. Debt securities of the Company convertible into Common Stock
shall be deemed equity securities of the Company.

1.8 Company. "Company" shall mean Dominick's
Supermarkets, Inc., a Delaware corporation, or any successor thereto.

1.9 Corporate Transaction. "Corporate Transaction" shall
mean any of the following stockholder-approved transactions to which the
Company is a party:

(a) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose
of which is to change the State in which the Company is incorporated,
form a holding company or effect a similar reorganization as to form,
whereupon this Plan and all Options are assumed by the successor
entity;

(b) the sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction not covered
by the exceptions to clause (a), above; or

(c) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred or issued to a person or
persons different from those who held such securities immediately
prior to such merger.

1.10 Deferred Stock. "Deferred Stock" shall mean Common
Stock awarded under Article VII of this Plan.

1.11 Director. "Director" shall mean a member of the
Board.

1.12 Dividend Equivalent. "Dividend Equivalent" shall
mean a right to receive the equivalent value (in cash or Common Stock) of
dividends paid on Common Stock, awarded under Article VII of this Plan.

1.13 Employee. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.

1.14 Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.

1.15 Fair Market Value. "Fair Market Value" of a share of
Common Stock as of a given date shall be (i) the closing price of a share of
Common Stock on the principal exchange on which

2
<PAGE> 3
shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day previous
to such date, then on the next preceding date on which a trade occurred, or
(ii) if Common Stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day previous to such date as
reported by NASDAQ or such successor quotation system; or (iii) if Common Stock
is not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) acting in good faith.

1.16 Grantee. "Grantee" shall mean an Employee or
consultant granted a Performance Award, Dividend Equivalent, Stock Payment or
Stock Appreciation Right, or an award of Deferred Stock, under this Plan.

1.17 Incentive Stock Option. "Incentive Stock Option"
shall mean an option which conforms to the applicable provisions of Section 422
of the Code and which is designated as an Incentive Stock Option by the
Committee.

1.18 Independent Director. "Independent Director" shall
mean a member of the Board who is not an Employee of the Company.

1.19 Non-Qualified Stock Option. "Non-Qualified Stock
Option" shall mean an Option which is not designated as an Incentive Stock
Option by the Committee (or the Board, in the case of Options granted to
Independent Directors).

1.20 Option. "Option" shall mean a stock option granted
under Article III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option; provided, however, that Options granted to Independent
Directors and consultants shall be Non-Qualified Stock Options.

1.21 Optionee. "Optionee" shall mean an Employee,
consultant or Independent Director granted an Option under this Plan.

1.22 Performance Award. "Performance Award" shall mean a
cash bonus, stock bonus or other performance or incentive award that is paid in
cash, Common Stock or a combination of both, awarded under Article VII of this
Plan.

1.23 Plan. "Plan" shall mean the 1996 Equity
Participation Plan of Dominick's Supermarkets, Inc.

1.24 QDRO. "QDRO" shall mean a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder.

1.25 Restricted Stock. "Restricted Stock" shall mean
Common Stock awarded under Article VI of this Plan.

1.26 Restricted Stockholder. "Restricted Stockholder"
shall mean an Employee or consultant granted an award of Restricted Stock under
Article VI of this Plan.

3
<PAGE> 4
1.27 Rule 16b-3. "Rule 16b-3" shall mean that certain
Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to
time.

1.28 Stock Appreciation Right. "Stock Appreciation Right"
shall mean a stock appreciation right granted under Article VIII of this Plan.

1.29 Stock Payment. "Stock Payment" shall mean (i) a
payment in the form of shares of Common Stock, or (ii) an option or other right
to purchase shares of Common Stock, as part of a deferred compensation
arrangement, made in lieu of all or any portion of the compensation including,
without limitation, salary, bonuses and commissions, that would otherwise
become payable to a key Employee or consultant in cash, awarded under Article
VII of this Plan.

1.30 Subsidiary. "Subsidiary" shall mean any corporation
in an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

1.31 Termination of Consultancy. "Termination of
Consultancy" shall mean the time when the engagement of an Optionee, Grantee or
Restricted Stockholder as a consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including, without
limitation, by resignation, discharge, death or retirement; but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary. The Committee, in its absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy, including, without limitation, the question of whether a
Termination of Consultancy resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Consultancy. Notwithstanding any other provision of this Plan, the Company or
any Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.

1.32 Termination of Directorship. "Termination of
Directorship" shall mean the time when an Optionee who is an Independent
Director ceases to be a Director for any reason, including, without limitation,
a termination by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship with respect to
Independent Directors.

1.33 Termination of Employment. "Termination of
Employment" shall mean the time when the employee-employer relationship between
an Optionee, Grantee or Restricted Stockholder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including,
without limitation, a termination by resignation, discharge, death, disability
or retirement; but excluding (i) at the discretion of the Committee,
terminations where there is a simultaneous reemployment or continuing
employment of an Optionee, Grantee or Restricted Stockholder by the Company, a
Subsidiary, an affiliate of the Company or any other company managed by The
Yucaipa Companies ("Yucaipa"), (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company, a Subsidiary, an affiliate of the Company or any other company
managed by Yucaipa with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Employment, including, without limitation, the question of
whether a Termination of Employment resulted from a discharge for good cause,
and all questions of whether particular leaves of absence

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constitute Terminations of Employment; provided, however, that with respect to
Incentive Stock Options, a leave of absence, change in status from an employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for
any reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

ARTICLE II

SHARES SUBJECT TO PLAN

2.1 Shares Subject to Plan.

(a) The shares of stock subject to Options, awards of
Restricted Stock, Performance Awards, Dividend Equivalents, awards of Deferred
Stock, Stock Payments or Stock Appreciation Rights shall be Common Stock. The
aggregate number of such shares which may be issued upon exercise of such
options or rights or upon any such awards under the Plan shall not exceed one
million (1,000,000). The shares of Common Stock issuable upon exercise of such
Options or rights or upon any such awards may be either previously authorized
but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to
Options or Stock Appreciation Rights granted under the Plan to any individual
in any fiscal year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are canceled
continue to be counted against the Award Limit and if, after grant of an
Option, the price of shares subject to such Option is reduced, the transaction
is treated as a cancellation of the Option and a grant of a new Option and both
the Option deemed to be canceled and the Option deemed to be granted are
counted against the Award Limit. Furthermore, to the extent required by
Section 162(m) of the Code, if, after grant of a Stock Appreciation Right, the
base amount on which stock appreciation is calculated is reduced to reflect a
reduction in the Fair Market Value of the Common Stock, the transaction is
treated as a cancellation of the Stock Appreciation Right and a grant of a new
Stock Appreciation Right and both the Stock Appreciation Right deemed to be
canceled and the Stock Appreciation Right deemed to be granted are counted
against the Award Limit.

2.2 Add-back of Options and Other Rights. If any Option,
or other right to acquire shares of Common Stock under any other award under
this Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Options or other awards
which are adjusted pursuant to Section 10.3 and become exercisable with respect
to shares of stock of another corporation shall be considered cancelled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
Grantee or withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. If any share of Restricted Stock is forfeited by the Grantee or
repurchased by the Company pursuant to Section 6.6 hereof, such share may again
be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Notwithstanding the

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provisions of this Section 2.2, no shares of Common Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an incentive stock option under Section 422 of the
Code.

ARTICLE III

GRANTING OF OPTIONS

3.1 Eligibility. Any Employee or consultant selected by
the Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 3.4(d).

3.2 Disqualification for Stock Ownership. No person may
be granted an Incentive Stock Option under this Plan if such person, at the
time the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.

3.3 Qualification of Incentive Stock Options. No
Incentive Stock Option shall be granted to any person who is not an Employee.

3.4 Granting of Options

(a) The Committee shall from time to time, in its
absolute discretion, and subject to applicable limitations of this Plan:

(i) Determine which Employees are key
Employees and select from among the key Employees or consultants
(including Employees or consultants who have previously received
Options or other awards under this Plan) such of them as in its
opinion should be granted Options;

(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Options granted to the selected
key Employees or consultants;

(iii) Subject to Section 3.3, determine whether
such Options are to be Incentive Stock Options or Non-Qualified Stock
Options and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and

(iv) Determine the terms and conditions of such
Options, consistent with this Plan; provided, however, that the terms
and conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.

(b) Upon the selection of a key Employee or consultant
to be granted an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such terms as
it deems appropriate,

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require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him or her under this Plan
or otherwise. An Option, the grant of which is conditioned upon such
surrender, may have an option price lower (or higher) than the exercise price
of such surrendered Option or other award, may cover the same (or a lesser or
greater) number of shares as such surrendered Option or other award, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option or other award.

(c) Any Incentive Stock Option granted under this Plan
may be modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

(d) The Board shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:

(i) Determine whether, in its opinion, the
Independent Directors (or any of them) should be granted Non- Qualified Stock
Options;

(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Non-Qualified Stock Options granted to
selected Independent Directors; and

(iii) Determine the terms and conditions of such
Non-Qualified Stock Options, consistent with this Plan.

ARTICLE IV

TERMS OF OPTIONS

4.1 Option Agreement. Each Option shall be evidenced by
a written stock option agreement, which shall be executed by the Optionee and
an authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock
option agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable provisions
of Section 162(m) of the Code. Stock option agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 422 of the Code.

4.2 Option Price. The price per share of the shares
subject to each Option shall be set by the Committee (or the Board, in the case
of Options granted to Independent Directors); provided, however, that such
price shall be no less than the par value of a share of Common Stock, unless
otherwise permitted by applicable state law, and (i) in the case of Incentive
Stock Options and Non-Qualified Stock Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; (ii) in the case of
Incentive Stock Options granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting

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<PAGE> 8
power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code) such price
shall not be less than 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted; and (iii) in the case of Options granted to
Independent Directors, such price shall equal 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted.

4.3 Option Term. The term of an Option shall be set by
the Committee (or the Board, in the case of Options granted to Independent
Directors) in its discretion; provided, however, that in the case of Incentive
Stock Options, the term shall not be more than ten (10) years from the date the
Incentive Stock Option is granted, or five (5) years from such date if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by the requirements of Section 422 of the Code and regulations and
rulings thereunder applicable to Incentive Stock Options, the Committee may
extend the term of any outstanding Option in connection with any Termination of
Employment or Termination of Consultancy of the Optionee, or amend any other
term or condition of such Option relating to such a termination.

4.4 Option Vesting

(a) The period during which the right to exercise an
Option in whole or in part vests in the Optionee shall be set by the Committee
(or the Board, in the case of Options granted to Independent Directors) and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted; provided, however, that unless
the Committee (or the Board, in the case of Options granted to Independent
Directors) otherwise provides in the terms of the Option or otherwise, no
Option shall be exercisable by any Optionee who is then subject to Section 16
of the Exchange Act within the period ending six months and one day after the
date the Option is granted. At any time after grant of an Option, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may, in its sole and absolute discretion and subject to whatever
terms and conditions it selects, accelerate the period during which an Option
vests.

(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as may
be otherwise provided by the Committee (or the Board, in the case of Options
granted to Independent Directors) in the case of Options granted to Employees
or consultants either in the Stock Option Agreement or by action of the
Committee (or the Board, in the case of Options granted to Independent
Directors) following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value
of stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options into account in
the order in which they were granted. For purposes of this Section 4.4(c), the
Fair Market Value of stock shall be determined as of the time the Option with
respect to such stock is granted.

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4.5 Consideration. In consideration of the granting of
an Option, the Optionee shall agree, in the written stock option agreement, to
remain in the employ of (or to consult for or to serve as an Independent
Director of, as applicable) the Company or any Subsidiary for a period of at
least one year (or such shorter period as may be fixed in the stock option
agreement or by action of the Committee (or the Board, in the case of Options
granted to Independent Directors) following grant of the Option) after the
Option is granted (or, in the case of an Independent Director, until the next
annual meeting of stockholders of the Company). Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without good cause.

ARTICLE V

EXERCISE OF OPTIONS

5.1 Partial Exercise. An exercisable Option may be
exercised in whole or in part. However, an Option shall not be exercisable
with respect to fractional shares and the Committee (or the Board, in the case
of Options granted to Independent Directors) may require that, by the terms of
the Option, a partial exercise be with respect to a minimum number of shares.

5.2 Manner of Exercise. All or a portion of an
exercisable Option shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company or his office:

(a) A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;

(b) Such representations and documents as the Committee
(or the Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may,
in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;

(c) In the event that the Option shall be exercised
pursuant to Section 10.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option; and

(d) Full cash payment to the Secretary of the Company
for the shares with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board, in the case of Options
granted to Independent Directors), may in its discretion (i) allow a delay in
payment up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (iii) allow payment,
in whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or
exercised

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portion thereof; (iv) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in
whole or in part, through the delivery of a notice that the Optionee has placed
a market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note.
The Option may not be exercised, however, by delivery of a promissory note or
by a loan from the Company when or where such loan or other extension of credit
is prohibited by law.

5.3 Conditions to Issuance of Stock Certificates. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;

(b) The completion of any registration or other
qualification of such shares under any state or federal law, or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Board shall, in its absolute discretion,
deem necessary or advisable;

(c) The obtaining of any approval or other clearance
from any state or federal governmental agency which the Committee (or Board, in
the case of Options granted to Independent Directors) shall, in its absolute
discretion, determine to be necessary or advisable;

(d) The lapse of such reasonable period of time
following the exercise of the Option as the Committee (or Board, in the case of
Options granted to Independent Directors) may establish from time to time for
reasons of administrative convenience; and

(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.

5.4 Rights as Stockholders. The holders of Options
shall not be, nor have any of the rights or privileges of, stockholders of the
Company in respect of any shares purchasable upon the exercise of any part of
an Option unless and until certificates representing such shares have been
issued by the Company to such holders.

5.5 Ownership and Transfer Restrictions. The Committee
(or Board, in the case of Options granted to Independent Directors), in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of granting such
Option to such Employee

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or (ii) one year after the transfer of such shares to such Employee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.

ARTICLE VI

AWARD OF RESTRICTED STOCK

6.1 Award of Restricted Stock

(a) The Committee may from time to time, in its absolute
discretion:

(i) Select from among the key Employees or
consultants (including Employees or consultants who have previously
received other awards under this Plan) such of them as in its opinion
should be awarded Restricted Stock; and

(ii) Determine the purchase price, if any, and
other terms and conditions applicable to such Restricted Stock,
consistent with this Plan.

(b) The Committee shall establish the purchase price, if
any, and form of payment for Restricted Stock; provided, however, that such
purchase price shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all cases,
legal consideration shall be required for each issuance of Restricted Stock.

(c) Upon the selection of a key Employee or consultant
to be awarded Restricted Stock, the Committee shall instruct the Secretary of
the Company to issue such Restricted Stock and may impose such conditions on
the issuance of such Restricted Stock as it deems appropriate.

6.2 Restricted Stock Agreement. Restricted Stock shall
be issued only pursuant to a written restricted stock agreement, which shall be
executed by the selected key Employee or consultant and an authorized officer
of the Company and which shall contain such terms and conditions as the
Committee shall determine, consistent with this Plan.

6.3 Consideration. As consideration for the issuance of
Restricted Stock, in addition to payment of any purchase price, the Restricted
Stockholder shall agree, in the written Restricted Stock Agreement, to remain
in the employ of, or to consult for, the Company or any Subsidiary for a period
of at least one year after the Restricted Stock is issued (or such shorter
period as may be fixed in the Restricted Stock Agreement or by action of the
Committee following grant of the Restricted Stock). Nothing in this Plan or in
any Restricted Stock Agreement hereunder shall confer on any Restricted
Stockholder any right to continue in the employ of, or as a consultant for, the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Restricted Stockholder at any time for any reason whatsoever,
with or without good cause.

6.4 Rights as Stockholders. Upon delivery of the shares
of Restricted Stock to the escrow holder pursuant to Section 6.7, the
Restricted Stockholder shall have, unless otherwise provided by the Committee,
all the rights of a stockholder with respect to said shares, subject to the
restrictions in his Restricted Stock Agreement, including the right to receive
all dividends and other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the Committee, any extra-

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ordinary distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.5.

6.5 Restriction. All shares of Restricted Stock issued
under this Plan (including any shares received by holders thereof with respect
to shares of Restricted Stock as a result of stock dividends, stock splits or
any other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with the Company, Company performance and individual performance;
provided, however, that unless the Committee otherwise provides in the terms of
the Restricted Stock Agreement or otherwise, no share of Restricted Stock
granted to a person subject to Section 16 of the Exchange Act shall be sold,
assigned or otherwise transferred until at least six months and one day have
elapsed from the date on which the Restricted Stock was issued, and provided,
further, that by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company.

6.6 Repurchase of Restricted Stock. The Committee shall
provide in the terms of each individual Restricted Stock Agreement that the
Company shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable, upon
a Termination of Consultancy between the Restricted Stockholder and the
Company, at a cash price per share equal to the price paid by the Restricted
Stockholder for such Restricted Stock; provided, however, that provision may be
made that no such right of repurchase shall exist in the event of a Termination
of Employment or Termination of Consultancy without cause, or following a
change in control of the Company or because of the Restricted Stockholder's
retirement, death or disability, or otherwise.

6.7 Escrow. The Secretary of the Company or such other
escrow holder as the Committee may appoint shall retain physical custody of
each certificate representing Restricted Stock until all of the restrictions
imposed under the Restricted Stock Agreement with respect to the shares
evidenced by such certificate expire or shall have been removed.

6.8 Legend. In order to enforce the restrictions
imposed upon shares of Restricted Stock hereunder, the Committee shall cause a
legend or legends to be placed on certificates representing all shares of
Restricted Stock that are still subject to restrictions under Restricted Stock
Agreements, which legend or legends shall make appropriate reference to the
conditions imposed thereby.

ARTICLE VII

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS

7.1 Performance Awards. Any key Employee or consultant
selected by the Committee may be granted one or more Performance Awards. The
value of such Performance Awards may be linked to the market value, book value,
net profits or other measure of the value of Common Stock or

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other specific performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee, or may be based upon the appreciation in the market value,
book value, net profits or other measure of the value of a specified number of
shares of Common Stock over a fixed period or periods determined by the
Committee. In making such determinations, the Committee shall consider (among
such other factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the particular
key Employee or consultant.

7.2 Dividend Equivalents. Any key Employee or
consultant selected by the Committee may be granted Dividend Equivalents based
on the dividends declared on Common Stock, to be credited as of dividend
payment dates, during the period between the date an Option, Stock Appreciation
Right, Deferred Stock or Performance Award is granted, and the date such
Option, Stock Appreciation Right, Deferred Stock or Performance Award is
exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Committee. With respect to Dividend Equivalents granted with
respect to Options intended to be qualified performance-based compensation for
purposes of Section 162(m) of the Code, such Dividend Equivalents shall be
payable regardless of whether such Option is exercised.

7.3 Stock Payments. Any key Employee or consultant
selected by the Committee may receive Stock Payments in the manner determined
from time to time by the Committee. The number of shares shall be determined
by the Committee and may be based upon the Fair Market Value, book value, net
profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, determined on the
date such Stock Payment is made or on any date thereafter.

7.4 Deferred Stock. Any key Employee or consultant
selected by the Committee may be granted an award of Deferred Stock in the
manner determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked to the
market value, book value, net profits or other measure of the value of Common
Stock or other specific performance criteria determined to be appropriate by
the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Deferred Stock
award will not be issued until the Deferred Stock award has vested, pursuant to
a vesting schedule or performance criteria set by the Committee. Unless
otherwise provided by the Committee, a Grantee of Deferred Stock shall have no
rights as a Company stockholder with respect to such Deferred Stock until such
time as the award has vested and the Common Stock underlying the award has been
issued.

7.5 Performance Award Agreement, Dividend Equivalent
Agreement, Deferred Stock Agreement, Stock Payment Agreement. Each Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall
be evidenced by a written agreement, which shall be executed by the Grantee and
an authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.

7.6 Term. The term of a Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be set by the
Committee in its discretion.

7.7 Exercise Upon Termination of Employment. A
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is exercisable or payable only while the

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Grantee is an Employee or consultant; provided that the Committee may determine
that the Performance Award, Dividend Equivalent, award of Deferred Stock and/or
Stock Payment may be exercised or paid subsequent to Termination of Employment
or Termination of Consultancy without cause, or following a change in control
of the Company, or because of the Grantee's retirement, death or disability, or
otherwise.

7.8 Payment on Exercise. Payment of the amount
determined under Section 7.1 or 7.2 above shall be in cash, in Common Stock or
a combination of both, as determined by the Committee. To the extent any
payment under this Article VII is effected in Common Stock, it shall be made
subject to satisfaction of all provisions of Section 5.3.

7.9 Consideration. In consideration of the granting of
a Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment, the Grantee shall agree, in a written agreement, to remain in the
employ of, or to consult for, the Company or any Subsidiary for a period of at
least one year after such Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is granted (or such shorter period as may
be fixed in such agreement or by action of the Committee following such grant).
Nothing in this Plan or in any agreement hereunder shall confer on any Grantee
any right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without good cause.

ARTICLE VIII

STOCK APPRECIATION RIGHTS

8.1 Grant of Stock Appreciation Rights. A Stock
Appreciation Right may be granted to any key Employee or consultant selected by
the Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with this Plan
as the Committee shall impose and shall be evidenced by a written Stock
Appreciation Right Agreement, which shall be executed by the Grantee and an
authorized officer of the Company. The Committee, in its discretion, may
determine whether a Stock Appreciation Right is to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code and Stock
Appreciation Right Agreements evidencing Stock Appreciation Rights intended to
so qualify shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code. Without limiting the
generality of the foregoing, the Committee may, in its discretion and on such
terms as it deems appropriate, require as a condition of the grant of a Stock
Appreciation Right to an Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock Appreciation
Right, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or
any other term or condition of such surrendered Option or other award.

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8.2 Coupled Stock Appreciation Rights

(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.

(b) A CSAR may be granted to the Grantee for no more
than the number of shares subject to the simultaneously or previously granted
Option to which it is coupled.

(c) A CSAR shall entitle the Grantee (or other person
entitled to exercise the Option pursuant to this Plan) to surrender to the
Company unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the Company
in exchange therefor an amount determined by multiplying the difference
obtained by subtracting the Option exercise price from the Fair Market Value of
a share of Common Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR shall have been
exercised, subject to any limitations the Committee may impose.

8.3 Independent Stock Appreciation Rights

(a) An Independent Stock Appreciation Right ("ISAR")
shall be unrelated to any Option and shall have a term set by the Committee.
An ISAR shall be exercisable in such installments as the Committee may
determine. An ISAR shall cover such number of shares of Common Stock as the
Committee may determine; provided, however, that unless the Committee otherwise
provides in the terms of the ISAR or otherwise, no ISAR granted to a person
subject to Section 16 of the Exchange Act shall be exercisable until at least
six months have elapsed from (but excluding) the date on which the Option was
granted. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Committee. An ISAR is exercisable only while the Grantee
is an Employee or consultant; provided that the Committee may determine that
the ISAR may be exercised subsequent to Termination of Employment or
Termination of Consultancy without cause, or following a change in control of
the Company, or because of the Grantee's retirement, death or disability, or
otherwise.

(b) An ISAR shall entitle the Grantee (or other person
entitled to exercise the ISAR pursuant to this Plan) to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR
from the Fair Market Value of a share of Common Stock on the date of exercise
of the ISAR by the number of shares of Common Stock with respect to which the
ISAR shall have been exercised, subject to any limitations the Committee may
impose.

8.4 Payment and Limitations on Exercise

(a) Payment of the amount determined under Section
8.2(c) and 8.3(b) above shall be in cash, in Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Committee. To the extent such
payment is effected in Common Stock it shall be made subject to satisfaction of
all provisions of Section 5.3 above pertaining to Options.

(b) Grantees of Stock Appreciation Rights may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a window-period
limitation, as may be imposed in the discretion of the Board or Committee.

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8.5 Consideration. In consideration of the granting of
a Stock Appreciation Right, the Grantee shall agree, in the written Stock
Appreciation Right Agreement, to remain in the employ of, or to consult for,
the Company or any Subsidiary for a period of at least one year after the Stock
Appreciation Right is granted (or such shorter period as may be fixed in the
Stock Appreciation Right Agreement or by action of the Committee following
grant of the Restricted Stock). Nothing in this Plan or in any Stock
Appreciation Right Agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without good cause.

ARTICLE IX

ADMINISTRATION

9.1 Committee. The Committee shall consist of the
entire Board until such time as the Board shall, in its sole discretion,
appoint a committee of the Board to administer the Plan. Any such committee
shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is a "non-employee
director" as defined by Rule 16b-3 and, to the extent that Incentive Stock
Options and Stock Appreciation Rights granted under the Plan are intended to
qualify as performance-based compensation under Section 162(m) of the Code
after the expiration of the transition period specified in Treasury Regulation
Section 1.162- 27(f), an "outside director" for purposes of Section 162(m) of
the Code. Appointment of Committee members shall be effective upon acceptance
of appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

9.2 Duties and Powers of Committee. It shall be the
duty of the Committee to conduct the general administration of this Plan in
accordance with its provisions. The Committee shall have the power to
interpret this Plan and the agreements pursuant to which Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments are granted or awarded, and to
adopt such rules for the administration, interpretation, and application of
this Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options granted to Independent Directors. Any such
grant or award under this Plan need not be the same with respect to each
Optionee, Grantee or Restricted Stockholder. Any such interpretations and
rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its absolute discretion, the Board
may at any time and from time to time exercise any and all rights and duties of
the Committee under this Plan except with respect to matters which under Rule
16b-3 or Section 162(m) of the Code, or any regulations or rules issued
thereunder, are required to be determined in the sole discretion of the
Committee.

9.3 Majority Rule; Unanimous Written Consent. The
Committee shall act by a majority of its members in attendance at a meeting at
which a quorum is present or by a memorandum or other written instrument signed
by all members of the Committee.

9.4 Compensation; Professional Assistance; Good Faith
Actions. Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The

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Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.

ARTICLE X

MISCELLANEOUS PROVISIONS

10.1 Not Transferable. Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of
descent and distribution or pursuant to a QDRO, unless and until such rights or
awards have been exercised, or the shares underlying such rights or awards have
been issued, and all restrictions applicable to such shares have lapsed. No
Option, Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the
Optionee, Grantee or Restricted Stockholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by the preceding
sentence.

During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion thereof) granted to
him under the Plan, unless it has been disposed of pursuant to a QDRO. After
the death of the Optionee or Grantee, any exercisable portion of an Option or
other right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Optionee's or Grantee's will or under the
then applicable laws of descent and distribution.

10.2 Amendment, Suspension or Termination of this Plan.
Except as otherwise provided in this Section 10.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board. However, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, except as
provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the
Award Limit, and no action of the Board or the Committee may be taken that
would otherwise require stockholder approval as a matter of applicable law,
regulation or rule. No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, alter or impair any rights or obligations under
any Options, Restricted Stock awards, Deferred Stock Awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments
theretofore granted or awarded, unless the award itself otherwise expressly so
provides. No

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Options, Restricted Stock, Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:

(a) The expiration of ten years from the date the Plan
is adopted by the Board; or

(b) The expiration of ten years from the date the Plan
is approved by the Company's stockholders under Section 10.4.

10.3 Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.

(a) Subject to Section 10.3(d), in the event that the
Committee (or the Board, in the case of Options granted to Independent
Directors) determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of Common
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or in the
case of Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan or with
respect to an Option, Restricted Stock Award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock Award or Stock Payment,
then the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or all of

(i) the number and kind of shares of Common
Stock (or other securities or property) with respect to which Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments may be granted under the Plan, or which may be granted
as Restricted Stock or Deferred Stock (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum number
and kind of shares which may be issued and adjustments of the Award
Limit),

(ii) the number and kind of shares of Common
Stock (or other securities or property) subject to outstanding
Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, or Stock Payments, and in the number and kind of shares
of outstanding Restricted Stock or Deferred Stock, and

(iii) the grant or exercise price with respect to
any Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment.

(b) Subject to Section 10.3(d), in the event of any
Change in Control, Corporate Transaction or other transaction or event
described in Section 10.3(a) or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable laws,
regulations, or accounting principles, the Committee (or the Board, in the case
of Options granted to Independent Directors) in its discretion

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is hereby authorized to take any one or more of the following actions whenever
the Committee (or the Board, in the case of Options granted to Independent
Directors) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:

(i) in its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of the agreement or by action taken
prior to the occurrence of such transaction or event and either
automatically or upon the optionee's request, for either the purchase
of any such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or any Restricted Stock or
Deferred Stock for an amount of cash equal to the amount that could
have been attained upon the exercise of such option, right or award or
realization of the optionee's rights had such option, right or award
been currently exercisable or payable or fully vested or the
replacement of such option, right or award with other rights or
property selected by the Committee (or the Board, in the case of
Options granted to Independent Directors) in its sole discretion;

(ii) in its sole and absolute discretion, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may provide, either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or
Stock Payment, or Restricted Stock or Deferred Stock or by action
taken prior to the occurrence of such transaction or event that it
cannot be exercised after such event;

(iii) in its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that immediately prior to the
occurrence of such transaction or event, each outstanding Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent,
Stock Payment, Restricted Stock, or Deferred Stock Award shall become
fully exercisable for all of the shares of Common Stock at the time
subject to such rights or fully vested, as applicable, and may be
exercised for any or all of those shares as fully-vested shares of
Common Stock for a specified period of time prior to such transaction
or event, notwithstanding anything to the contrary in (a) Section 4.4
or (b) the provisions of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock;

(iv) in its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that upon such event, such
option, right or award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices;

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<PAGE> 20
(v) in its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors)
may make adjustments in the number and type of shares of Common Stock
(or other securities or property) subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents,
or Stock Payments, and in the number and kind of outstanding
Restricted Stock or Deferred Stock and/or in the terms and conditions
of (including the grant or exercise price), and the criteria included
in, outstanding options, rights and awards and options, rights and
awards which may be granted in the future; and

(vi) in its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee may
provide either by the terms of a Restricted Stock award or Deferred
Stock award or by action taken prior to the occurrence of such event
that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement or a Deferred
Stock Agreement upon some or all shares of Restricted Stock or
Deferred Stock may be terminated, and, in the case of Restricted
Stock, some or all shares of such Restricted Stock may cease to be
subject to repurchase under Section 6.6 or forfeiture under Section
6.5 after such event.

(c) Subject to Section 10.3(d) and 10.8, the Committee
(or the Board, in the case of Options granted to Independent Directors) may, in
its discretion, include such further provisions and limitations in any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock agreement or certificate, as it
may deem equitable and in the best interests of the Company.

(d) With respect to Incentive Stock Options and
Non-Qualified Stock Options and Stock Appreciation Rights intended to qualify
as performance-based compensation under Section 162(m) of the Code, no
adjustment or action described in this Section 10.3 or in any other provision
of the Plan shall be authorized to the extent that such adjustment or action
would cause the Plan to violate Section 422(b)(1) of the Code or would cause
such option or stock appreciation right to fail to so qualify under Section
162(m) of the Code, as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability under
Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board, in the case of Options granted to Independent
Directors) determines that the option or other award is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any
option, right or award shall always be rounded to the next whole number.

10.4 Approval of Plan by Stockholders. This Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of this Plan. Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted and Restricted Stock or Deferred Stock may be awarded
prior to such stockholder approval, provided that such Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall
not be exercisable and such Restricted Stock or Deferred Stock shall not vest
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments previously granted and all
Restricted Stock or Deferred Stock previously awarded under this Plan shall
thereupon be canceled and become null and void.

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10.5 Tax Withholding. The Company shall be entitled to
require payment in cash or deduction from other compensation payable to each
Optionee, Grantee or Restricted Stockholder of any sums required by federal,
state or local tax law to be withheld with respect to the issuance, vesting or
exercise of any Option, Restricted Stock, Deferred Stock, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment. The Committee
(or the Board, in the case of Options granted to Independent Directors) may in
its discretion and in satisfaction of the foregoing requirement allow such
Optionee, Grantee or Restricted Stockholder to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Option or other
award (or allow the return of shares of Common Stock) having a Fair Market
Value equal to the sums required to be withheld.

10.6 Loans. The Committee may, in its discretion, extend
one or more loans to key Employees in connection with the exercise or receipt
of an Option, Performance Award, Stock Appreciation Right, Dividend Equivalent
or Stock Payment granted under this Plan, or the issuance of Restricted Stock
or Deferred Stock awarded under this Plan. The terms and conditions of any
such loan shall be set by the Committee.

10.7 Forfeiture Provisions. Pursuant to its general
authority to determine the terms and conditions applicable to awards under the
Plan, the Committee (or the Board, in the case of Options granted to
Independent Directors) shall have the right (to the extent consistent with the
applicable exemptive conditions of Rule 16b-3) to provide, in the terms of
Options or other awards made under the Plan, or to require the recipient to
agree by separate written instrument, that (i) any proceeds, gains or other
economic benefit actually or constructively received by the recipient upon any
receipt or exercise of the award, or upon the receipt or resale of any Common
Stock underlying such award, must be paid to the Company, and (ii) the award
shall terminate and any unexercised portion of such award (whether or not
vested) shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in
any activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee
(or the Board, as applicable).

10.8 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan, Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents, Stock
Payments, Restricted Stock and Deferred Stock granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of this Plan,
any Option or Stock Appreciation Right intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.

10.9 Effect of Plan Upon Options and Compensation Plans.
The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any

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Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company (i) to establish any other forms of incentives or compensation for
Employees, Directors or Consultants of the Company or any Subsidiary or (ii) to
grant or assume options or other rights otherwise than under this Plan in
connection with any proper corporate purpose including, without limitation, the
grant or assumption of options in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or association.

10.10 Compliance with Laws. This Plan, the granting and
vesting of Options, Restricted Stock Awards, Deferred Stock Awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments under
this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments granted or
Restricted Stock or Deferred Stock awarded hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including,
but not limited to, state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under this Plan
shall be subject to such restrictions, and the person acquiring such securities
shall, if requested by the Company, provide such assurances and representations
to the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent permitted by
applicable law, this Plan and the Options, Restricted Stock Awards, Deferred
Stock Awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.

10.11 Titles. Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Plan.

10.12 Governing Law. This Plan and any agreements
hereunder shall be administered, interpreted and enforced under the internal
laws of the State of Illinois without regard to conflicts of laws thereof.

* * *

I hereby certify that the foregoing Plan was duly adopted by
Dominick's Supermarkets, Inc. on October ___, 1996.

Executed on this ___ day of October, 1996.

-----------------------------------
Secretary

<PAGE> 1
Exhibit 10.13

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
November 1, 1996, by and among Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), and each other person executing this Agreement
(the "Investors").

WHEREAS, the Company and Dominick's Finer Foods, Inc.
("Dominick's") and The Yucaipa Companies are parties to a Consulting Agreement
dated as of March 22, 1995 which the Company and Dominick's intend to terminate
concurrently with the consummation of an initial public offering of the common
stock of the Company;

WHEREAS, the Company, in order to induce The Yucaipa Companies
to enter into a new management agreement upon termination of such Consulting
Agreement, desires to grant to certain affiliates of The Yucaipa Companies the
registration rights provided herein;

NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
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 Amended
and Restated Stockholders Agreement (the "Stockholders Agreement"), dated as of
the date hereof, among the Company, 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).

"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.

<PAGE> 2
"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
Holders.

"Selling Holder" means a Holder who sells or proposes to sell
Registrable Securities pursuant to a registration statement under the
Securities Act.

"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 after the
date hereof, the Holders 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
Holders; provided, that the Company shall in no event be obligated to effect
more than two Demand Registrations in any 12-month period. 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 any Holder, which request complies with this Section 2.1(a), within
10 days after the receipt thereof, to each other Holder who did not initially
join in such request. Within 20 days after receipt of such notice, any such
other Holder 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 Holder requested to be so included,
subject to the provisions of Section 2.4. 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 Selling
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.

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

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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), 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 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).

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<PAGE> 4
Section 2.3 Shelf Registration. (a) At any time prior to
March 22, 1998, upon the written request of one or more Yucaipa Affiliates, the
Company shall cause to be filed with the Commission as promptly as practicable
after such request, but in no event later than 60 days thereafter, a shelf
registration statement pursuant to Rule 415 under the Securities Act (a "Shelf
Registration" or a "Shelf Registration Statement"), which Shelf Registration
Statement shall provide for resales of all Registrable Securities held by such
Yucaipa Affiliate(s). The Company shall use its best efforts to have such
Shelf Registration declared effective and to keep such Shelf Registration
Statement continuously effective, supplemented and amended to the extent
necessary to ensure that it is available for resales of Registrable Securities
by such Yucaipa Affiliate(s), and to ensure that it conforms with the
requirement of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least 12 months following the date on which such Shelf Registration
Statement becomes effective under the Securities Act.

(b) Effective Registration. A registration will not be
deemed to have been effected as a Shelf 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 omission of the Holders)
such registration will be deemed not to have been effected. If (i) the Shelf
Registration is deemed not to have been effected in accordance with the
provisions of the preceding sentence or (ii) the Shelf Registration does not
remain continuously effective for the period described in Section 2.3(a)
hereof, then such Shelf Registration Statement shall not count as a Shelf
Registration and the Company shall continue to be obligated to a effect a
registration pursuant to this Section 2.3.

Section 2.4 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

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<PAGE> 5
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 2.4(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.

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 or Section 2.3 hereof, 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 set forth in Section 2.3 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 hereof 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 24-month period. If the Company postpones the filing of
a

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<PAGE> 6
registration statement, it shall promptly notify each Selling Holder 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 the
period specified in Section 2.1, Section 2.2 or Section 2.3 hereof, as
applicable, 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 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)

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<PAGE> 7
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.

(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)

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<PAGE> 8
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 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, the first Piggy-Back Registration or the Shelf Registration,
whichever shall occur first, (i) provide the transfer agent with

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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.

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, any registration statement
filed pursuant to Section 2.2 hereof and the Shelf Registration pursuant to
Section 2.3 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

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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 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

10
<PAGE> 11
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 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

11
<PAGE> 12
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 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

12
<PAGE> 13
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 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

13
<PAGE> 14
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 hereof 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 and (b) the holders of a
majority of the Registrable Securities held by the Investors. 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) Yucaipa 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.

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<PAGE> 15
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.
505 Railroad Avenue
Northlake, Illinois 60164
Attn: Chief Executive Officer
Fax: (708) 409-3979

with a copy (which shall not constitute notice) to:

Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071
Attn: Thomas C. Sadler, Esq.
Fax: (213) 891-8763

To the Investors:

To the address specified on the signature page hereto
executed by such Investor.

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.

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.

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<PAGE> 16
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) November 1, 2011.

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.

(signature page follows)

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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

DOMINICK'S SUPERMARKETS, INC.

By:
--------------------------------
Name: Robert A. Mariano
Title: President and
Chief Executive Officer

YUCAIPA BLACKHAWK PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

YUCAIPA CHICAGO PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

YUCAIPA DOMINICK'S PARTNERS, L.P.

By: Yucaipa Management L.L.C., its
General Partner

By:
--------------------------------
Name: Ronald W. Burkle
Title: Managing Member

S-1

<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

DFF Equipment Leasing Company

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 October 24, 1996), in
the Registration Statement (Form S-1) and related Prospectus of Dominick's
Supermarkets, Inc. for the registration of its common stock.

/s/ Ernst & Young LLP

Chicago, Illinois

October 24, 1996