<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

                                   FORM 10-K/A

                                 AMENDMENT NO. 1
(MARK ONE)

      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 1998

      [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM ____________TO __________

                          COMMISSION FILE NUMBER 0-6544


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

                                  BRUNO'S, INC.
                  (Debtor-in-Possession as of February 2, 1998)
             (Exact name of registrant as specified in its charter)


              ALABAMA                                       63-0411801
  (State or other jurisdiction of                        (I.R.S. Employer
   incorporation or organization)                       Identification No.)



                800 LAKESHORE PARKWAY, BIRMINGHAM, ALABAMA 35211
               (Address of principal executive office) (zip code)

                                  205-940-9400
               (Registrant's telephone number including area code)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                  COMMON STOCK
                                 $.01 Par Value

         The Registrant hereby files this Report on Form 10-K/A to amend its
Annual Report on Form 10-K for the fiscal year ended January 31, 1998 to include
the information required by Part III (Items 10, 11, 12 and 13) in lieu of
incorporation thereof by reference from the Registrant's definitive proxy
statement for its 1998 Annual Meeting of Shareholders.


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<PAGE>   2



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

MEMBERS OF THE BOARD OF DIRECTORS

         The Board of Directors of Bruno's, Inc. (the "Company") consists of
eight members, six of whom are associated with Kohlberg Kravis Roberts & Co. L.
P. ("KKR") or its affiliates. SEE "OWNERSHIP OF COMPANY STOCK BY CERTAIN
HOLDERS." The following is a brief description of the business experience for at
least the past five years of the current members of the Board of Directors of
the Company:

         JAMES A. DEMME, age 57, has been Chairman of the Board of Directors and
Chief Executive Officer of the Company since September 1997. He was elected to
the position of President of the Company in January 1998. Mr. Demme served as
Chairman, Chief Executive Officer and President of Homeland Stores, Inc., a
supermarket chain headquartered in Oklahoma City, Oklahoma, from November 1994
to September 1997 and as Executive Vice President of Retail Operations of
Scrivner Company, a major food wholesaler and retailer, from May 1991 to
September 1994.

         HENRY R. KRAVIS, age 54, has served as a director of the Company since
August 1995. He is a Founding Partner of KKR and a managing member of the
Executive Committee of the limited liability company which serves as the general
partner of KKR. Mr. Kravis serves as a member of the Board of Directors of
Accuride Corporation, Amphenol Corporation, Borden, Inc., Evenflo & Spalding
Holdings Corporation, The Gillette Company, IDEX Corporation, KinderCare
Learning Centers, Inc., KSL Recreation Group, Inc., Newsquest Capital plc,
Owens-Illinois, Inc., Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food
Markets, Inc., Regal Cinemas, Inc., RELTEC Corporation, Safeway Inc., Sotheby's
Holdings Inc., Union Texas Petroleum Holdings, Inc., and World Color Press, Inc.

         GEORGE R. ROBERTS, age 54, has been a director of the Company since
August 1995. He is a Founding Partner of KKR and a managing member of the
Executive Committee of the limited liability company which serves as the general
partner of KKR. Mr. Roberts serves as a member of the Board of Directors of
Accuride Corporation, Amphenol Corporation, Borden, Inc., Evenflo & Spalding
Holdings Corporation, IDEX Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Newsquest Capital plc, Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food Markets, Inc., Regal
Cinemas, Inc., RELTEC Corporation, Safeway Inc., Union Texas Petroleum Holdings,
Inc., and World Color Press, Inc.

         PAUL E. RAETHER, age 51, has been a director of the Company since
August 1995. He is a member of the limited liability company which serves as the
general partner of KKR. Mr. Raether serves as a member of the Board of Directors
of IDEX Corporation, KSL Recreation Group, Inc., and Randall's Food Markets,
Inc.


                                       1
<PAGE>   3

         JAMES H. GREENE, JR., age 47, has been a director of the Company since
August 1995. He is a member of the limited liability company which serves as the
general partner of KKR. Mr. Greene serves as a member of the Board of Directors
of Accuride Corporation, Owens-Illinois, Inc., Owens-Illinois Group, Inc.,
Randall's Food Markets, Inc., RELTEC Corporation, Safeway Inc., and Union Texas
Petroleum Holdings, Inc.

         RONALD G. BRUNO, age 46, has been a director of the Company since 1983.
He served as Chairman of the Board of the Company from December 1991 to August
1995, Chief Executive Officer of the Company from October 1990 to August 1995
and President of the Company from 1986 to 1994. Mr. Bruno is a member of the
Board of Directors of SouthTrust Bank, N.A., Books-A-Million, Inc., and Russell
Corp.


         NILS P. BROUS, age 33, has been a director of the Company since August
1995. He has served as an Executive with KKR since November 1992. Prior to
November 1992, Mr. Brous was an Associate with Goldman, Sachs & Co. He is a
member of the Board of Directors of KinderCare Learning Centers, Inc. and
Randall's Food Markets, Inc.


         ROBERT R. ONSTEAD, age 67, has been a director of the Company since
April 1998. He is a co-founder of Randall's Food Markets, Inc., a supermarket
chain headquartered in Houston, Texas. Mr. Onstead has served as Chairman of the
Board of Randall's Food Markets, Inc. for all 31 years of its existence.
Affiliates of KKR own approximately 62% (on a fully diluted basis) of the
outstanding shares of capital stock of Randall's Food Markets, Inc.


         Directors are elected by the shareholders at each Annual Meeting of
Stockholders and hold office until the next Annual Meeting of Stockholders. The
Company's officers serve at the pleasure of the Board of Directors.

         Mr. Bruno has agreed to serve as a member of the Board of Directors of
the Company until August 18, 1998 (subject to the customary right of a director
to resign) pursuant to a Stockholders Agreement executed in connection with the
acquisition of 20,833,333 shares of the Company's Common Stock by affiliates of
KKR on August 18, 1995. SEE "OWNERSHIP OF COMPANY STOCK BY CERTAIN HOLDERS."

         Messrs. Kravis and Roberts are first cousins.

EXECUTIVE OFFICERS

         Certain information concerning the executive officers of the Company is
set forth in Part I of the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1998 (the "Form 10-K Report") under the caption
"EXECUTIVE OFFICERS OF THE REGISTRANT". Such information is incorporated herein
by reference. Five of the persons who are identified as executive officers in
the Form 10-K Report were serving as executive officers of the Company when the
Company and its 11 subsidiaries each filed a petition for reorganization under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). See
Part I,


                                       2
<PAGE>   4

Item 1 of the Form 10-K Report under the caption "PROCEEDINGS UNDER CHAPTER 11
OF THE BANKRUPTCY CODE" and Part I, Item 3 of the Form 10-K Report under the
caption "LEGAL PROCEEDINGS." The existing executive officers who were serving as
executive officers when the Company filed its petition under the Bankruptcy Code
are James A. Demme, James J. Hagan, Walter M. Grant, John Butler, and Laura
Hayden. Mr. Demme also was serving as Chairman, Chief Executive Officer and
President of Homeland Stores, Inc. on May 14, 1995 when it filed a petition
under chapter 11 of title 11 of the Bankruptcy Code.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of the Company's Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by the regulations of the Securities and Exchange Commission to
furnish the Company with copies of all reports that they file under Section
16(a). To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than 10% beneficial owners were
complied with by such persons during the fiscal year ended January 31, 1998.


ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

         In December 1995, the Company changed its fiscal year from a 52-week or
53-week period ending on the Saturday closest to June 30 to a 52-week or 53-week
period ending on the Saturday closest to January 31. In order to implement this
change, the Company had a 30-week fiscal year beginning on July 2, 1995 and
ending on January 27, 1996 (the "Transition Period").

         The following table sets forth the compensation paid or accrued during
the Transition Period, the fiscal year ended February 1, 1997 (which is referred
to in the table as "Fiscal 1996"), and the fiscal year ended January 31, 1998
(which is referred to in the table as "Fiscal 1997") for the Chairman of the
Board and Chief Executive Officer of the Company, the former Chairman of the
Board and Chief Executive Officer, and the four most highly compensated
executive officers of the Company (other than the Chief Executive Officer) who
were serving as executive officers of the Company as of January 31, 1998 (the
"Named Executive Officers"). None of the Named Executive Officers was employed
by the Company prior to the Transition Period.


                                       3
<PAGE>   5


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                      Annual Compensation               
                                                      -------------------------------------------------- 

                                                                                                         
            Name and                                                                      Other Annual   
       Principal Position                Year         Salary ($) (1)   Bonus ($)(2)   Compensation ($)(3)
       ------------------                ----         --------------   ------------   -------------------

<S>                                <C>                <C>              <C>            <C>
James A. Demme (5)                    Fiscal 1997          $146,158      $1,200,000         $ 19,280
   Chairman of the Board
   and Chief Executive Officer

William J. Bolton (6)                 Fiscal 1997          $261,537             -0-              -0-
   Former Chairman of the Board       Fiscal 1996          $407,689      $  148,330         $ 27,197
   and Chief Executive Officer     Transition Period       $176,606      $  392,300              -0-

James J. Hagan (7)                    Fiscal 1997          $275,002             -0-              -0-
   Executive Vice President           Fiscal 1996          $206,251      $   58,833         $ 79,511
   and Chief Financial Officer

David B. Clark (8)                    Fiscal 1997          $266,669             -0-              -0-
   Former Executive Vice              Fiscal 1996          $246,639      $   76,067              -0-
   President - Merchandising       Transition Period       $ 47,518      $   55,965              -0-

Walter M. Grant                       Fiscal 1997          $240,006             -0-              -0-
   Senior Vice President,             Fiscal 1996          $152,311      $   43,447         $119,882
   General Counsel
   and Secretary

John Butler                           Fiscal 1997          $207,579      $   18,174         $  7,480
   Senior Vice President -
   Operations


<CAPTION>
                                          Long-Term                               
                                          ---------                               
                                     Compensation Awards                          
                                     -------------------                          
                                               
                                         Securities                              
                                         Underlying             All Other        
                                      Stock Options (#)    Compensation ($) (4)  
                                      -----------------    --------------------  
<S>                                  <C>                   <C> 
James A. Demme (5)                          250,000             $ 42,997  
   Chairman of the Board                                                  
   and Chief Executive Officer                                            
                                                                          
William J. Bolton (6)                           -0-             $  2,481  
   Former Chairman of the Board             250,000             $123,816  
   and Chief Executive Officer                  -0-                  -0-  
                                                                          
James J. Hagan (7)                              -0-             $    968  
   Executive Vice President                  66,667             $ 36,929  
   and Chief Financial Officer                                            
                                                                          
David B. Clark (8)                              -0-             $  6,002  
   Former Executive Vice                     62,500             $ 64,196  
   President - Merchandising                    -0-                  -0-  
                                                                          
Walter M. Grant                                 -0-             $  3,968  
   Senior Vice President,                    56,250             $ 56,435  
   General Counsel                                                       
   and Secretary                                                         
                                                                          
John Butler                                  62,500             $ 49,618  
   Senior Vice President -                                                
   Operations                                                   
</TABLE>


         (1) The amounts in this column reflect compensation for services
provided (i) during a portion of the Transition Period and a portion of Fiscal
1997 for Mr. Bolton, (ii) a portion of the Transition Period for Mr. Clark,
(iii) a portion of Fiscal 1996 for Mr. Hagan and Mr. Grant, and (iv) a portion
of Fiscal 1997 for Mr. Demme and Mr. Butler. The Named Executive Officers began
employment with the Company on the following dates: August 21, 1995 for Mr.
Bolton, November 13, 1995 for Mr. Clark, May 6, 1996 for Mr. Hagan, June 17,
1996 for Mr. Grant, February 6, 1997 for Mr. Butler, and September 19, 1997 for
Mr. Demme. Mr. Bolton's employment with the Company was terminated on September
19, 1997.
           
         (2) The amounts listed in this column include signing bonuses paid by
the Company during Fiscal 1997 to each of Mr. Demme and Mr. Butler and signing
bonuses paid by the Company during the Transition Period to each of Mr. Bolton
and Mr. Clark. SEE "EMPLOYMENT AGREEMENT WITH JAMES A. DEMME" AND "EMPLOYMENT
AGREEMENTS WITH OTHER NAMED EXECUTIVE OFFICERS." 

         (3) The amounts in this column include (i) the dollar value of the
difference between the price paid by Mr. Hagan and Mr. Grant for shares of the
Company's Common Stock purchased from the Company during Fiscal 1996 and the
fair market value of such shares on the date of purchase, (ii) amounts paid by
the Company to reimburse Mr. Hagan and Mr. Grant for taxes on the difference
between the price paid by them for shares of the Company's Common Stock and the
fair market value of such shares on the date of purchase, and (iii) amounts paid
by the Company to reimburse the Named Executive Officers for taxes on the
relocation expenses or allowances reported in the column entitled "All Other


                                       4
<PAGE>   6

Compensation." The amounts in this column do not include the value of other
perquisites and personal benefits provided by the Company to the Named Executive
Officers. The value of the perquisites and benefits provided to each Named
Executive Officer during Fiscal 1997, Fiscal 1996 and the Transition Period did
not exceed the lesser of $50,000 or 10% of such Named Executive Officer's salary
plus annual bonus.

         (4) The amounts in this column include (i) relocation expenses or
allowances paid by the Company on behalf of each Named Executive Officer, (ii)
the dollar value of insurance premiums paid by the Company for term life
insurance policies providing death benefits to the beneficiaries of the Named
Executive Officers, and (iii) matching contributions made by the Company to the
Named Executive Officers under the Company's Retirement Savings Plan.

         (5) Mr. Demme was elected Chairman of the Board and Chief Executive
Officer of the Company on September 19, 1997. SEE "EMPLOYMENT AGREEMENT WITH
JAMES A. DEMME."

         (6) Mr. Bolton resigned his position as Chairman of the Board and Chief
Executive Officer of the Company on September 19, 1998. In connection with his
resignation, Mr. Bolton entered into a Settlement Agreement and General Release
with the Company under which Mr. Bolton was entitled to receive severance
compensation from the Company. SEE "SETTLEMENT AGREEMENT WITH WILLIAM J.
BOLTON." The severance compensation paid to Mr. Bolton is not included in the
Summary Compensation Table.

         (7) Mr. Hagan was elected to the position of Executive Vice President
and Chief Financial Officer of the Company on January 29, 1997. Prior to January
29, 1997, Mr. Hagan served as Senior Vice President and Chief Financial Officer
of the Company.

         (8) Mr. Clark was elected to the position of Executive Vice President -
Merchandising of the Company on January 29, 1997. Prior to January 29, 1997, Mr.
Clark served as the Company's Senior Vice President - Operations. Mr. Clark
resigned his position with the Company on February 13, 1998.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

         During the fiscal year ended January 31, 1998, the Company granted
stock options to two of the Named Executive Officers under the 1996 Stock
Purchase and Option Plan for Key Employees of Bruno's, Inc. and Subsidiaries
(the "Option Plan"). No stock appreciation rights were granted to any of the
Named Executive Officers during the last fiscal year. The Named Executive
Officers to whom options were granted were required to purchase shares of the
Company's Common Stock from the Company in order to be eligible to receive stock
options under the Option Plan. SEE "EMPLOYMENT AGREEMENT WITH JAMES A. DEMME,"
"EMPLOYMENT AGREEMENTS WITH OTHER NAMED EXECUTIVE OFFICERS" AND "CERTAIN
RELATIONSHIPS BETWEEN THE COMPANY AND OFFICERS AND DIRECTORS."

         The following table contains information regarding the stock options
granted by the Company to the Named Executive Officers during the last fiscal
year:


                                       5
<PAGE>   7

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                   POTENTIAL REALIZABLE VALUE
                                                                                    AT ASSUMED ANNUAL RATES
                                                                                  OF STOCK PRICE APPRECIATION
                          INDIVIDUAL GRANTS                                              FOR OPTION TERM
---------------------------------------------------------------------------    ---------------------------
                                                     
                            NUMBER OF    % OF TOTAL
                           SECURITIES     OPTIONS                
                           UNDERLYING    GRANTED TO    EXERCISE
                             OPTIONS     EMPLOYEES      OR BASE                 
                           GRANTED (#)   IN FISCAL       PRICE      EXPIRATION                                    
NAME                           (1)          YEAR        ($/SH)         DATE       5% ($) (2)      10% ($) (2)
-------------------------------------------------------------------------------------------------------------
<S>                       <C>            <C>          <C>           <C>           <C>             <C> 
James A. Demme               250,000        39%       $12.00 (3)    9/19/07         -0-              $242,178

John Butler                  62,500        9.8%       $12.00 (4)    4/21/07       $426,876         $1,123,979
</TABLE>


         (1) All of the stock options granted to the Named Executive Officers
are non-qualified options and have a term of ten years from the date of grant.
One-half of the options granted to each Named Executive Officer become
exercisable based on the Named Executive Officer's length of service with the
Company (the "Time Options"), and the remaining one-half of the options become
exercisable based on the Company's financial performance (the "Performance
Options"). The Time Options granted to each Named Executive Officer become
exercisable in equal installments of 20% per year over a five-year period. The
Performance Options become exercisable with respect to 20% of the underlying
shares on each August 18 following the completion of a fiscal year of the
Company in which the Company meets the annual and cumulative performance targets
specified by the Board of Directors of the Company. If the performance targets
specified by the Board of Directors are not met for a given year but the Company
meets both its annual and cumulative performance targets in a subsequent year,
then the Performance Options will become exercisable with respect to all of the
shares that would have been exercisable if the performance targets had been met
as scheduled. All Performance Options will become exercisable after seven years
from the date of grant, regardless of whether the Company's performance targets
have been met.

         (2) The dollar gains shown in these columns result from calculations
using assumed annual growth rates of 5% and 10% in the value of the Company's
Common Stock measured from the market value at the date of grant through the
expiration date of the ten-year life of the stock options granted to the Named
Executive Officers. These assumed rates of growth were selected by the
Securities and Exchange Commission for illustration purposes only and are not
intended to forecast future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. The dollar gains
shown in these columns reflect a future value based upon growth at the
prescribed rates.

         (3) The fair market value of the Company's Common Stock on the date on
which options were granted to Mr. Demme was $5.00 per share.

         (4) The fair market value of the Company's Common Stock on the date on
which options were granted to Mr. Butler was $11.56 per share.



                                       6
<PAGE>   8



OPTION EXERCISES AND HOLDINGS

         No options were exercised by the Named Executive Officers during the
last fiscal year. The following table contains information with respect to the
unexercised options to purchase shares of the Company's Common Stock held by the
Named Executive Officers as of January 31, 1998:


                OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
                             YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                                            VALUE OF UNEXERCISED
                                   NUMBER OF SECURITIES UNDERLYING              IN-THE-MONEY
                                         UNEXERCISED OPTIONS                 OPTIONS AT FISCAL
                                        AT FISCAL YEAR END (#)                 YEAR END ($)(1)
                                        ---------------------                 ---------------
             NAME                   EXERCISABLE       UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
             ----                   -----------       -------------     -----------    -------------
             <S>                   <C>                <C>               <C>            <C>
             James A. Demme             -0-              250,000            -0-             -0-

             William J. Bolton          -0-                -0-              -0-             -0-

             James J. Hagan            6,666             60,001             -0-             -0-

             David B. Clark           18,750             43,750             -0-             -0-

             John Butler                -0-              62,500             -0-             -0-

             Walter M. Grant           5,625             50,625             -0-             -0-
</TABLE>


         (1) An option is "in-the-money" if the fair market value of the
Company's Common Stock exceeds the exercise price. None of the options held by
the Named Executive Officers were "in-the-money" on January 31, 1998. All of the
options held by the Named Executive Officers have an exercise price of $12.00
per share. The fair market value of the Company's Common Stock on January 31,
1998 was $2.625 per share based on trading in the over-the-counter market. See
Part II, Item 5 of the Form 10-K Report under the caption "MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."

COMPENSATION OF DIRECTORS

         Members of the Board of Directors who are not employees of the Company
receive an annual retainer from the Company in the amount of $30,000. Directors
do not receive separate fees for attending meetings of the Board of Directors or
for serving on committees of the Board of Directors. Mr. Demme, who is an
employee of the Company, does not receive any additional compensation for
serving on the Board of Directors.

         On April 30, 1997, the Board of Directors adopted the Bruno's, Inc.
Directors' Deferred Compensation Plan (the "Deferred Compensation Plan"). The
Deferred Compensation Plan permits non-employee directors to defer all or any
part of the fees that they receive for serving on the Board of Directors.
Amounts deferred will be credited, at the election of the director, to an
unfunded cash account (the "Cash Account") or to an account under which the
director will receive compensation in the form of shares of the Company's Common
Stock (the "Stock Account"). Amounts credited to the Cash Account will accrue


                                       7
<PAGE>   9

interest based on the Company's average borrowing rate from time to time.
Amounts credited to the Stock Account will be converted into the number of
shares of the Company's Common Stock which the amounts would have purchased
based on the fair market value of a share of the Company's Common Stock on the
date the amounts otherwise would have been paid. When an individual ceases to be
a director of the Company, all amounts credited under the Deferred Compensation
Plan are paid in one lump sum or in installments based on the election made by
the director. Amounts credited to a director's Stock Account will be paid, in
the Company's sole discretion, in the form of shares of the Company's Common
Stock or in cash, with the amount of cash to be determined by multiplying the
number of shares in the Stock Account by the then fair market value of a share
of the Company's Common Stock.

         Five of the members of the Board of Directors elected to participate in
the Deferred Compensation Plan for the period commencing on June 1, 1997. The
participating directors are Messrs. Kravis, Roberts, Raether, Greene, and Brous.
All of such participating directors elected to have all of their fees for
serving on the Board of Directors credited to a Stock Account. For the period
from June 1, 1997 through January 31, 1998, the amounts credited to the Stock
Account of each participating director were converted into the equivalent of
5,314 shares of the Company's Common Stock.

         On May 26, 1998, the Board of Directors of the Company voted to suspend
the Deferred Compensation Plan effective as of May 3, 1998. Accordingly, all of
the directors who were participating in the Deferred Compensation Plan will
receive their fees for serving on the Board of Directors in cash commencing on
May 3, 1998. The amounts previously credited to the Stock Accounts of each
participating director will continue to be held by the Company and will be
distributed to such participating director on the first day of the year
following such director's retirement or separation from the Board of Directors.

EMPLOYMENT AGREEMENT WITH JAMES A. DEMME

         On September 19, 1997, the Board of Directors of the Company elected
Mr. Demme to the position of Chairman of the Board and Chief Executive Officer
of the Company. Mr. Demme succeeded William J. Bolton, who had served as
Chairman of the Board and Chief Executive Officer of the Company since August
21, 1995. In conjunction with his election, Mr. Demme entered into an Employment
Agreement with the Company dated as of September 19, 1997. Mr. Demme's
Employment Agreement was amended on January 31, 1998.

         The Employment Agreement with Mr. Demme provided that he would receive
a signing bonus of $1,200,000 as soon as practicable after commencement of his
employment with the Company. The Employment Agreement further provided that Mr.
Demme and the Company would enter into a Management Stockholder's Agreement
under which Mr. Demme would purchase the number of shares of Common Stock of the
Company having a current market value equal to $1,000,000. Accordingly, on
September 19, 1997, the Company and Mr. Demme entered into a Management
Stockholder's Agreement under which Mr. Demme purchased 200,000 shares of the
Company's Common Stock at a price of $5.00 per share or an aggregate price of
$1,000,000. In conjunction with the purchase of these shares, the Company made a
loan to Mr. Demme in the amount of $1,000,000 subject to the condition that the
loan would be prepaid in an amount equal to the after-tax proceeds of the
signing bonus paid to Mr.

                                       8
<PAGE>   10

Demme. The after-tax proceeds of the signing bonus were $625,354, and this
amount was paid by Mr. Demme to the Company. Mr. Demme executed a promissory
note in favor of the Company in the principal amount of $374,646, which
represents the difference between the aggregate purchase price for the shares of
the Company's Common Stock purchased by Mr. Demme and the after-tax proceeds of
Mr. Demme's signing bonus. SEE "INDEBTEDNESS OF MANAGEMENT." In connection with
his purchase of shares of the Company's Common Stock, the Company granted to Mr.
Demme the stock options described above in the table entitled "OPTION GRANTS IN
LAST FISCAL YEAR."

         Mr. Demme's Employment Agreement provides that he is entitled to
receive an annual base salary of $400,000 and an annual performance bonus with a
target amount equal to not less than 50% of his base salary and a maximum amount
equal to 100% of his base salary. The performance bonus is based on the
satisfaction of performance criteria established by the Board of Directors of
the Company. The Employment Agreement also provided for the Company to pay Mr.
Demme's relocation expenses. The relocation payments incurred by Mr. Demme
during the fiscal year ended January 31, 1998 are reported above in the table
entitled "SUMMARY COMPENSATION TABLE."

         The term of the Employment Agreement for Mr. Demme will continue until
the termination of Mr. Demme's employment pursuant to his Employment Agreement.
The Company has the right to terminate Mr. Demme's employment at any time and
for any reason. If Mr. Demme's employment is terminated by the Company without
cause or by Mr. Demme for "good reason," then Mr. Demme will be entitled to
receive a termination amount payable in 24 monthly installments equal to two
times the sum of Mr. Demme's annual base salary plus target bonus as in effect
immediately prior to the event giving rise to such termination. Mr. Demme also
will be entitled to receive payment for accrued but unused vacation days and to
continued coverage for 24 months under any employee medical, disability and life
insurance plans in accordance with the terms of such plans. Mr. Demme may
terminate his employment for "good reason" in the event of (i) a material breach
by the Company of any provision of his Employment Agreement, including a
material reduction by the Company in Mr. Demme's duties, authority, support or
responsibilities, (ii) a decision by the Company requiring Mr. Demme to perform
his duties and responsibilities for the Company at a location other than
Birmingham, Alabama, or (iii) a reduction by the Company in Mr. Demme's base
salary, other than a reduction that is part of a general salary reduction
program affecting at least 90% of the officers of the Company and not exceeding
10% of Mr. Demme's base salary.

EMPLOYMENT AGREEMENTS WITH OTHER NAMED EXECUTIVE OFFICERS

         In addition to the Employment Agreement with Mr. Demme, the Company
also has entered into Employment Agreements with each of Messrs. Hagan, Grant,
and Butler. All of these Employment Agreements were amended on January 31, 1998.
These Employment Agreements, as so amended, are hereinafter referred to as the
"Employment Agreements."

         The Employment Agreements provide that the executive officer is
entitled to receive a base salary, which may be increased in the reasonable
discretion of the Company, and an annual bonus with a target amount equal to 50%
of the executive officer's base salary and a maximum amount equal to 100% of the
executive officer's base salary. The initial base

                                        9
<PAGE>   11

salaries specified in the Employment Agreements are $275,000 for Mr. Hagan,
$240,000 for Mr. Grant, and $210,000 for Mr. Butler.

         The Employment Agreements provide that each executive officer would be
given the opportunity to purchase a specified number of shares of the Company's
Common Stock at a price of $12.00 per share and would be granted options to
purchase additional shares of the Company's Common Stock at an exercise price of
$12.00 per share. Pursuant to the Employment Agreements, the Company sold 25,000
shares of the Company's Common Stock to each of Mr. Hagan and Mr. Grant and
20,833 shares of the Company's Common Stock to Mr. Butler. The Company also
granted to the executive officers the stock options described above in the
tables entitled "OPTION GRANTS IN LAST FISCAL YEAR," AND "OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES."

         The Employment Agreements also provided for the Company to pay
relocation expenses or allowances for the executive officers and to pay a
signing bonus to Mr. Butler. The relocation payments and Mr. Butler's signing
bonus are reported above in the table entitled "SUMMARY COMPENSATION TABLE."

         The Employment Agreement for each executive officer will continue until
his or her employment is terminated either voluntarily or involuntarily. The
Company has the right to terminate an executive officer's employment at any time
and for any reason. If an executive officer's employment is terminated by the
Company without cause or if the executive officer's employment is terminated by
the executive officer for "good reason," then the executive officer is entitled
to receive a severance payment equal to his or her base salary plus target bonus
for one year and to continued coverage for 12 months under any employee medical,
disability and life insurance plans in accordance with the terms of such plans.
An executive officer may terminate his or her employment for "good reason" in
the event of (i) a material breach by the Company of any provision of the
Employment Agreement, including a demotion by the Company in the executive
officer's position or the assignment to the executive officer of duties or
responsibilities which are materially inconsistent with the duties or
responsibilities contemplated by the Employment Agreement, (ii) a reduction by
the Company in the executive officer's base salary or bonus opportunity, other
than a reduction that is part of a general salary reduction program affecting
all senior executives of the Company and that does not exceed 10% of the
executive officer's base salary, or (iii) a change in the executive officer's
work location to a location other than Birmingham, Alabama.

SETTLEMENT AGREEMENT WITH WILLIAM J. BOLTON

         Mr. Bolton resigned his position as Chairman of the Board and Chief
Executive Officer of the Company on September 19, 1997. Prior to his
resignation, Mr. Bolton was a party to an Employment Agreement with the Company
dated as of August 17, 1995. Under the terms of the Employment Agreement, the
Company had the right to terminate Mr. Bolton's employment at any time and for
any reason. The Employment Agreement provided that if Mr. Bolton's employment
were terminated by the Company without cause or by Mr. Bolton for "good reason,"
then Mr. Bolton would be entitled to receive a termination amount payable in 18
monthly installments equal to the greater of (i) an amount equal to Mr. Bolton's
base salary for 18 months at its then current monthly rate plus 1.5 times the
amount of Mr. Bolton's target

                                       10
<PAGE>   12

bonus for the year in which the termination occurred or (ii) the amount of the
base salary plus target bonus that Mr. Bolton would have received for the
remaining term of his Employment Agreement. In addition, the Employment
Agreement provided that Mr. Bolton, upon the termination of his employment
without cause or for "good reason," would be entitled to receive payment for
accrued but unused vacation days and to continued coverage for 18 months under
any employee medical, disability and life insurance plans in accordance with the
terms of such plans.

         In connection with his resignation, Mr. Bolton entered into a
Settlement Agreement and General Release with the Company dated as of October
29, 1997 (the "Settlement Agreement"). Under the Settlement Agreement, the
Company agreed to treat Mr. Bolton's resignation as a termination without cause
by the Company for purposes of Mr. Bolton's Employment Agreement. The Settlement
Agreement provided that the Company would pay to Mr. Bolton the gross amount of
$960,000 in 39 bi-weekly installments of $24,615.38 each. The Company also
agreed to pay an additional $24,615.38 to Mr. Bolton to compensate him for his
accrued but unused vacation days. In addition, the Company agreed to continue
Mr. Bolton's coverage under the Company's medical, dental, disability and life
insurance plans through March 20, 1999.

         On February 2, 1998, the Company and its 11 subsidiaries each filed a
petition for reorganization under the Bankruptcy Code. The petitions were filed
in the United States Bankruptcy Court for the District of Delaware under case
numbers 98-212(SLR) through 98-223(SLR) (the "Chapter 11 Cases"). Prior to the
commencement of the Chapter 11 Cases, the Company had paid $233,842.88 to Mr.
Bolton (including $24,615.38 for accrued but unused vacation pay) pursuant to
the Settlement Agreement. As a result of the commencement of the Chapter 11
Cases, the Company discontinued its payments to Mr. Bolton under the Settlement
Agreement and terminated Mr. Bolton's coverage under the Company's medical,
dental, disability and life insurance plans. The Company's unpaid obligations to
Mr. Bolton under the Settlement Agreement represent an unsecured liability of
the Company to be resolved in connection with the Chapter 11 Cases.

         On February 15, 1996, Mr. Bolton purchased 83,333 shares of Common
Stock from the Company at a price of $12.00 per share or an aggregate price of
$999,996. In connection with this purchase, the Company made a loan to Mr.
Bolton in the amount of $443,253. Under the Settlement Agreement, Mr. Bolton
agreed to sell his shares of the Company's Common Stock and to cause the
proceeds from the sale of such shares to be paid to the Company to be applied
against Mr. Bolton's indebtedness to the Company. The Company, in turn, agreed
to cancel Mr. Bolton's remaining indebtedness to the Company upon completion of
the sale of all of Mr. Bolton's shares of the Company's Common Stock and upon
the transfer to the Company of the proceeds from the sale of such shares. Prior
to the commencement of the Chapter 11 Cases, Mr. Bolton had sold 45,834 shares
of the Company's Common Stock and had remitted $147,070, the proceeds from the
sale of such shares, to the Company. Mr. Bolton's remaining indebtedness to the
Company is $296,183.


                                       11
<PAGE>   13


BRUNO'S, INC. RETENTION PLAN

         On January 30, 1998, the Compensation Committee of the Board of
Directors of the Company approved and adopted the Bruno's, Inc. Retention Plan
(the "Retention Plan"). The Retention Plan was ratified and approved by the full
Board of Directors on April 23, 1998. The Retention Plan is designed to
supplement temporarily the salaries of key employees of the Company in order to
maintain competitive compensation levels for such employees during their
continued employment with the Company. The Retention Plan will expire on January
29, 2000, but the Compensation Committee of the Board of Directors may extend
the Retention Plan for an additional year in its sole discretion.

         Participants in the Retention Plan are designated by the Compensation
Committee of the Board of Directors. There are currently 22 key employees
participating in the Retention Plan, including the Named Executive Officers
(except for Mr. Bolton and Mr. Clark who are no longer employed by the Company).
Each participant is entitled to receive an annual retention bonus in an amount
equal to a percentage of the participant's annual base salary, but such
percentage may not exceed 125% for any senior officer of the Company and 55% for
any other key employee of the Company. The bonus percentages specified by the
Compensation Committee for the Named Executive Officers are 125% for Mr. Demme,
75% for Mr. Hagan, 65% for Mr. Grant, and 50% for Mr. Butler. Each participant
who is employed by the Company for the first six months of a fiscal year is
entitled to receive 25% of his or her retention bonus for such fiscal year. If
such participant remains employed for the last six months of the fiscal year,
then such participant is entitled to receive the remaining 75% of his or her
retention bonus for such fiscal year.

         The Retention Plan provides that a participant is entitled to receive a
pro rata portion of the full amount of his or her retention bonus for any fiscal
year, less any retention bonus already received for such fiscal year, if the
participant's employment is terminated by the Company without cause or by the
participant for "good reason." A participant may terminate his or her employment
for "good reason" upon the occurrence of any of the following events with
respect to such participant: (i) any reduction in the participant's base salary
or target bonus opportunity; (ii) any material reduction by the Company of the
participant's duties, authority, support or responsibilities (except in
connection with the participant's termination for cause, disability or
resignation for good reason); (iii) any change of more than 35 miles in the
participant's principal work location; or (iv) any reduction in the
participant's employee benefits other than changes approved in writing by the
Chief Executive Officer of the Company.

         If a participant's employment is terminated without cause or for "good
reason" in contemplation of, on or after a change in control of the Company, the
Retention Plan provides that the participant is entitled to receive an amount
equal to the retention bonuses that would have been payable (and have not yet
been paid) if the participant had remained employed throughout the term of the
Retention Plan. A termination of employment without cause or a resignation for
good reason within three months prior to a change in control of the Company
shall be treated as being in contemplation of such change in control. Unless
otherwise determined by a unanimous vote of the Continuing Directors (as defined
below) prior to any change in control, a "change in control of the Company"
shall mean and be deemed to have

                                       12
<PAGE>   14

occurred if: (i) the Board of Directors of the Company shall adopt a resolution
of a plan of liquidation with respect to the Company; (ii) at any time
Continuing Directors (as defined below) shall not constitute a majority of the
Board of Directors of the Company; or (iii) KKR and its affiliates shall at any
time not own directly or indirectly, beneficially and of record, a majority of
the outstanding voting stock of the Company. The term "Continuing Director"
means, at any determination date, an individual (i) who was a member of the
Board of Directors of the Company on January 28, 1998, (ii) who, at such
determination date, has been a member of the Board of Directors for at least the
twelve preceding months, (iii) who has been nominated to be a member of the
Board of Directors, directly or indirectly, by KKR or persons nominated by KKR,
or (iv) who has been nominated to be a member of the Board of Directors by a
majority of the other Continuing Directors then in office.

         The Retention Plan cannot be amended or terminated except with respect
to a participant who has consented in writing to any such amendment or
termination. The Compensation Committee of the Board of Directors is responsible
for the administration of the Retention Plan.

RETIREMENT SAVINGS PLAN

         The Company maintains a profit sharing and retirement savings plan
pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. To
be eligible to participate in the plan, an employee must be at least 21 years
old, must have at least one year of service with the Company, and must not be
eligible to participate in a union-sponsored or co-sponsored qualified
retirement plan.

         Subject to certain limitations, participants in the plan are permitted
to make voluntary contributions to their accounts in the plan through payroll
deductions. The Company makes matching contributions with respect to the
voluntary contributions made by plan participants. Prior to April 1, 1997, the
Company made matching contributions on a dollar-for-dollar basis with respect to
a participant's contributions on the first two percent of his or her
compensation. The plan was amended effective April 1, 1997 to provide that the
Company will make matching contributions in the future in an amount equal to 50%
of a participant's contributions on the first five percent of his or her
compensation.

         The plan permits the Company to make discretionary profit sharing
contributions to the accounts of eligible participants in an amount determined
annually by the Board of Directors of the Company. The Company did not make
discretionary contributions to the plan during the Transition Period or during
the fiscal years ended February 1, 1997 and January 31, 1998.

         All voluntary contributions made by plan participants and all matching
contributions made by the Company are fully vested at all times. Any
discretionary contributions made by the Company are vested after a plan
participant has completed five years of service with the Company or upon the
participant's death, disability or normal retirement. A participant is entitled
to receive a distribution of his vested account in the plan 90 days after the
participant's termination of employment with the Company, except that immediate
distributions are available if the termination of employment occurs as a result
of retirement, disability or death. Payments generally are made in the form of a
lump sum.


                                       13
<PAGE>   15

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT.

OWNERSHIP OF COMPANY STOCK BY CERTAIN HOLDERS

         On August 18, 1995, Crimson Acquisition Corp. was merged into and with
the Company (the "Merger"). Since the date of the Merger, Crimson Associates,
L.P. and KKR Partners, II, L.P. (the "Partnerships") have owned 20,833,333
shares of the Company's Common Stock. The shares owned by the Partnerships
represent approximately 81.7% of the outstanding shares of Common Stock as of
May 15, 1998. The Partnerships also own warrants under which they have the right
to purchase an additional 10,000,000 shares of Common Stock at an exercise price
of $12.00 per share, subject to adjustment (the "Warrants"). The Partnerships
were organized by KKR.

         The following table sets forth, as of the close of business on May 15,
1998, information as to those stockholders (other than the executive officers
and directors of the Company) known to the Company to be the beneficial owners
of more than 5% of the outstanding shares of the Company's Common Stock:

<TABLE>
<CAPTION>
                                                            COMMON STOCK                        PERCENTAGE OF
                                                         BENEFICIALLY OWNED                     COMMON STOCK
        NAME AND ADDRESS                                  ON MAY 15, 1998                        OUTSTANDING
        ----------------                                  ---------------                        -----------
        <S>                                              <C>                                    <C>
        KKR Associates, L.P. (1)                           30,833,333 (2)                         87.3% (3)
        9 West 57th Street
        New York, NY 10019
</TABLE>


         (1) The shares of Common Stock shown as owned by KKR Associates are
owned of record by the Partnerships. KKR Associates is the sole general partner
of the Partnerships and possesses the sole voting and investment power of the
Partnerships. Messrs. Kravis, Roberts, Raether and Greene (all of whom are
members of the Board of Directors of the Company) are general partners of KKR
Associates. Messrs. Kravis and Roberts are also the members of the Executive
Committee of KKR Associates. The other general partners of KKR Associates are
Robert I. MacDonnell, Michael W. Michelson, Michael T. Tokarz, Perry Golkin,
Clifton S. Robbins, Scott M. Stuart and Edward A. Gilhuly. Mr. Brous, who is a
member of the Board of Directors of the Company, is a limited partner of KKR
Associates.

         (2) This amount includes 10,000,000 shares of Common Stock subject to
purchase within the next 60 days pursuant to exercise of the Warrants.

         (3) For purposes of computing the percentage of outstanding shares held
by KKR Associates, the shares which KKR Associates has the right to acquire upon
exercise of the Warrant are deemed to be outstanding, but the shares that the
executive officers and directors of the Company have the right to acquire within
the next 60 days pursuant to the exercise of stock options (as shown in the
following table) are not deemed to be outstanding.

                                       14
<PAGE>   16

OWNERSHIP OF COMPANY STOCK BY DIRECTORS AND OFFICERS

         The members of the Company's Board of Directors, the Named Executive
Officers and all directors and executive officers of the Company as a group have
beneficial ownership of the number of shares of the Company's Common Stock
indicated in the following table and its footnotes. Unless otherwise indicated
in the footnotes, each such individual has sole voting and investment power with
respect to the shares set forth in the table.


<TABLE>
<CAPTION>
                                                         COMMON STOCK BENEFICIALLY                 PERCENTAGE OF COMMON
NAME                                                       OWNED ON MAY 15, 1998                   STOCK OUTSTANDING (1)
----                                                       ---------------------                   ---------------------
<S>                                                      <C>                                       <C>
James A. Demme.................................                       200,000                             *
Henry R. Kravis................................                    30,833,333 (2)                     87.3%
George R. Roberts..............................                    30,833,333 (2)                     87.3%
Paul E. Raether................................                    30,833,333 (2)                     87.3%
James H. Greene, Jr............................                    30,833,333 (2)                     87.3%
Ronald G. Bruno................................                        80,874 (3)                       *
Nils P. Brous..................................                         -0-                             *
Robert R. Onstead..............................                         -0-                             *
James J. Hagan.................................                        38,332 (4)                       *
Walter M. Grant................................                        36,250 (4)                       *
John Butler....................................                        27,083 (4)                       *
William J. Bolton..............................                        37,499 (5)                       *
David B. Clark.................................                         -0-                             *

All Executive Officers and Directors as a group
(14 persons)...................................                    31,233,791 (6)                     87.9%
</TABLE>

-------------------
     *Holdings do not exceed 1% of the total outstanding shares of Common Stock.

         (1) For the purposes of this table, a person or group of persons is
deemed to have "beneficial ownership" of any shares which such person has the
right to acquire within the next 60 days. For purposes of computing the
percentage of outstanding shares held by each person or group of persons within
the next 60 days, any shares which such person or group of persons has the right
to acquire within the next 60 days are deemed to be outstanding but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person.

         (2) This amount includes 20,833,333 shares owned of record by the
Partnerships. Messrs. Kravis, Roberts, Raether and Greene are general partners
of KKR Associates, which is the sole general partner of each of the
Partnerships. Under regulations adopted by the Securities and Exchange
Commission, Messrs. Kravis, Roberts, Raether and Greene, along with the other
general partners of KKR Associates, may be deemed to share beneficial ownership
of the shares beneficially owned by KKR Associates, but they disclaim any such
beneficial ownership. This amount also includes 10,000,000 shares of Common
Stock subject to purchase within the next 60 days pursuant to exercise of the
Warrants.

         (3) This amount includes 37,510 shares owned directly by Mr. Bruno, 176
shares owned by Mr. Bruno's wife, 1,325 shares held by Mr. Bruno as a Trustee
for his minor son, 25,089 shares held by Mr. Bruno as co-trustee for various
family members, and 16,774 shares held by Mr. Bruno as executor for an estate.


                                       15
<PAGE>   17

        (4) These amounts include shares subject to purchase within the next 60
days pursuant to the exercise of stock options as follows: Mr. Hagan, 13,322
shares; Mr. Grant, 11,250 shares; and Mr. Butler, 6,250 shares.

         (5) Pursuant to the Settlement Agreement, Mr. Bolton agreed to sell
these shares and to cause the proceeds from the sale of the shares to be paid to
the Company to be applied against Mr. Bolton's indebtedness to the Company. SEE
"SETTLEMENT AGREEMENT WITH WILLIAM J. BOLTON."

         (6) The number of shares shown for directors and executive officers as
a group includes an aggregate of 10,040,206 shares which are subject to purchase
by members of the group within the next 60 days pursuant to the exercise of
stock options and pursuant to the exercise of the Warrants.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

CERTAIN RELATIONSHIPS BETWEEN THE COMPANY AND ITS OFFICERS AND DIRECTORS

         During the fiscal year ended January 31, 1998, the Company sold shares
of its Common Stock to two of the Named Executive Officers pursuant to the
Employment Agreements with such Named Executive Officers. SEE "EMPLOYMENT
AGREEMENTS WITH JAMES A. DEMME" AND "EMPLOYMENT AGREEMENTS WITH OTHER NAMED
EXECUTIVE OFFICERS." The Company sold 200,000 shares to Mr. Demme at a price of
$5.00 per share and 20,833 shares to Mr. Butler at a price of $12.00 per share.
In connection with the purchase of such shares, Mr. Demme and Mr. Butler each
entered into a Management Stockholder's Agreement with the Company (the
"Stockholder's Agreements"). The Stockholder's Agreements impose restrictions on
the transfer of the shares of Common Stock purchased by Mr. Demme and Mr.
Butler. With certain exceptions, the shares purchased by Mr. Demme and Mr.
Butler cannot be transferred prior to the fifth anniversary of the purchase date
of such shares. In addition, the Company has the option to repurchase such
shares in the event of the termination of the employment of Mr. Demme or Mr.
Butler.

         The Partnerships hold an aggregate of 20,833,333 shares of the
Company's Common Stock as well as the Warrants. These shares of Common Stock and
the Warrants were acquired pursuant to the Merger. The Warrants are exercisable
at a price of $12.00 per share, subject to adjustment. The general partner of
the Partnerships is KKR Associates, a New York limited partnership. KKR
Associates has sole voting and investment power with respect to the shares of
the Company's Common Stock held by the Partnerships. Messrs. Kravis, Roberts,
Raether, and Greene are general partners of KKR Associates. Messrs. Kravis and
Roberts are also members of the Executive Committee of KKR Associates. The other
general partners of KKR Associates are Robert I. MacDonnell, Michael W.
Michelson, Michael T. Tokarz, Perry

                                       16
<PAGE>   18

Golkin, Clifton S. Robbins, Scott M. Stuart and Edward A. Gilhuly. Mr. Brous is
a limited partner of KKR Associates.

         The Partnerships have the right, under certain circumstances and
subject to certain conditions, to require the Company to register under the
Securities Act of 1933, as amended, the shares of Common Stock and the Warrants
held by them. The Partnerships have both demand and "piggyback" registration
rights. Under the agreements providing for registration rights, the Company will
pay all expenses in connection with any such registration. The Partnerships have
informed the Company that they have no present intention of exercising their
registration rights.

         KKR, which is an affiliate of KKR Associates, may receive investment
banking fees for services rendered to the Company in connection with certain
transactions. During the fiscal year ended January 31, 1998, the Company paid
$1,000,000 in fees to KKR for management, consulting and financial services
provided by KKR to the Company. The Company also reimbursed KKR for its expenses
incurred in providing such services. Messrs. Kravis, Roberts, Raether, and
Greene are members of the limited liability company which serves as the general
partner of KKR, and Mr. Brous is an executive of KKR.

INDEBTEDNESS OF MANAGEMENT

         The Company made loans to certain of its executive officers in
connection with their purchase of shares of the Company's Common Stock. Each
loan bears interest at the applicable federal rate as determined under the
Internal Revenue Code of 1986, as amended, at the time the loan was made. The
outstanding principal amounts under these loans as of May 15, 1998 are shown
below:
<TABLE>
<CAPTION>

         NAME AND TITLE                                      AMOUNT OF INDEBTEDNESS                 APPLICABLE
         OF EXECUTIVE OFFICER                                      TO COMPANY                      INTEREST RATE
         --------------------                                      ----------                      -------------
         <S>                                                 <C>                                   <C>    
         James A. Demme                                                 $374,646                       6.14%
         Chairman of the Board and
         Chief Executive Officer

         John Butler                                                    $125,000                       6.39%
         Senior Vice President - Operations

         Laura Hayden                                                   $ 93,750                       6.53%
         Senior Vice President - Human Resources
</TABLE>

         Each loan is secured by the shares of the Company's Common Stock held
by the executive officer to whom the loan was made. Interest is due on June 30
and December 31 of each year. The principal amount of the loan made to each
executive officer is due upon the earliest to occur of (i) one year following
the termination of the executive officer's employment with the Company without
cause or for "good reason," (ii) immediately upon the termination of the
executive officer's employment with the Company for cause or without "good
reason," (iii) the disposition by the executive officer of all or any part of
the shares of

                                       17
<PAGE>   19

the Company's Common Stock purchased by the executive officer from the Company
with the proceeds of the loan, or (iv) seven years from the date on which the
loan was made.

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Bruno's, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                             BRUNO'S, INC.
                                             (Registrant)

                                             By  /s/ James A. Demme
                                                 -------------------------------
                                                 James A. Demme
                                                 Chairman of the Board and
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)


Dated:  May 29, 1998


                                       18