8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 22, 2006

SUPERVALU INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-5418	41-0617000
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)
11840 Valley View Road Eden Prairie, Minnesota		55344
(Address of Principal Executive Offices)		(Zip Code)
(952) 828-4000
Registrant’s telephone number, including area code

n/a

(Former Name and Address,

If Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into Material Definitive Agreement

On January 22, 2006, SUPERVALU INC. (the “Company”), Albertson’s, Inc. (“Albertson’s”), a consortium of investors including Cerberus Capital Management, L.P., Kimco Realty Corporation, Lubert-Adler Management, Inc. and Schottenstein Stores Corporation (such investors collectively, the “Cerberus Group”), and CVS Corporation agreed to enter into a series of transactions pursuant to which, among other things, Albertson’s would transfer assets and certain liabilities that relate to its standalone drug stores to CVS Corporation (the “Standalone Drug Sale”) and would transfer assets and liabilities associated with its other operations in specified metropolitan areas to the Cerberus Group (the “Core Separation”), after which Albertson’s remaining business would be combined with the Company’s business pursuant to a merger (the “Supervalu Merger”, and, together with the Standalone Drug Sale and Core Separation, the “Transactions”). The Transactions are conditioned upon one another.

The proposed Standalone Drug Sale is subject to that certain Asset Purchase Agreement (the “Standalone Drug Sale Agreement”) by and among CVS Corporation, CVS Pharmacy, Inc., a wholly-owned subsidiary of CVS Corporation (collectively, “CVS”), the Company, Albertson’s, New Aloha Corporation and certain other entities affiliated with Albertson’s. Under the Standalone Drug Sale Agreement, CVS has agreed to purchase specified assets primarily related to Albertson’s standalone drug business, including approximately 700 standalone drugstores, certain related owned real estate interests and a distribution center in La Habra, California. In connection with the transaction, CVS has also agreed to assume certain related liabilities. In addition to being conditioned on the other Transactions, the Standalone Drug Sale is subject to the satisfaction of other customary conditions, including governmental and regulatory approvals.

The proposed Core Separation is subject to that certain Purchase and Separation Agreement (the “Separation Agreement”) by and among Albertson’s, New Aloha Corporation, a wholly-owned subsidiary of Albertson’s (“New Diamond”), the Company and AB Acquisition LLC, an affiliate of the Cerberus Group (“AB”). The Separation Agreement provides for, among other things, causing New Diamond to become a holding company for Albertsons and the division of Albertson’s assets and liabilities (other than those to be purchased and assumed, respectively, by CVS as described above) between those associated with Albertson’s core business (which would be transferred to New Diamond) and those associated with Albertson’s non-core business (which would remain with Albertson’s).

The core business includes approximately 1124 stores and related support operations for Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s, and Star Markets, as well as all Albertsons banner stores in Idaho, Southern Nevada, Utah, Southern California, and the Northwestern US. The non-core business includes approximately 655 Albertsons and Super Saver banner stores and related distribution centers and offices in Albertsons’ Dallas/Fort Worth division, and in the Florida, Northern California, Rocky Mountain and Southwestern regions. Both the core and non-core businesses include, among other things, grocery stores with in-store pharmacies as well as those without. After the consummation of the transactions contemplated by the Separation Agreement, the Cerberus Group would own the equity interests of Albertson’s, which would

own the non-core business, and New Diamond would own the core business. New Diamond would thereafter be acquired by the Company pursuant to the merger described below. In addition to being conditioned on the other Transactions, the Core Separation is subject to the satisfaction of other customary conditions, including governmental and regulatory approvals.

The proposed Supervalu Merger is subject to that certain Agreement and Plan of Merger (the “Merger Agreement” together with the Standalone Drug Sale Agreement and the Separation Agreement, the “Agreements”), by and among Albertson’s, New Diamond, New Diamond Sub, Inc., a wholly-owned subsidiary of New Diamond (“New Diamond Sub”), the Company and Emerald Acquisition Sub, Inc., a newly-organized wholly-owned subsidiary of the Company (“Merger Sub”). Under the Merger Agreement, New Diamond would become a wholly owned subsidiary of the Company as a result of the Supervalu Merger, in which each share of Albertson’s common stock would be converted into the right to receive (1) 0.182 shares of common stock of the Company and (2) $20.35 in cash. Consummation of the Supervalu Merger is subject to various conditions, including the approval of the stockholders of the Company and Albertson’s. In addition to being conditioned on the other Transactions, the Supervalu Merger is subject to the satisfaction of other customary conditions, including governmental and regulatory approvals. The Transactions are not subject to a financing condition.

In addition, the Company has divested a number of stores operating under its “CUB” banner as described more fully in Item 2.01 of this Current Report on Form 8-K.

The Agreements are filed pursuant to Item 9.01 as Exhibits 2.01, 10.01, and 10.02. The foregoing description of the Agreements and the transactions contemplated therein does not purport to be complete and is qualified in its entirety by reference to the Agreements which are filed as an exhibit hereto, and is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets

In connection with the Transactions and also on January 22, 2006, the Company completed the disposition of certain retail operations of the Company operating under the “CUB” banner to Hawk Acquisition LLC, an affiliate of AB and the Cerberus Group for $20,000,000 in cash pursuant to the terms of a definitive agreement entered into earlier the same day.

Item 2.05 Costs Associated with Exit or Disposal Activities

In connection with the transaction described in Item 2.01, the Company will incur a pre-tax loss on sale of assets of approximately $95,000,000. The Company estimates that no amount of this charge will result in future cash expenditures.

Item 8.01 Other Events

On January 23, the Company held a conference call with certain financial analysts detailing the Transactions. A copy of the transcript of this call is included herein as Exhibit 99.1, and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(a)	Not applicable.
(b)	Not applicable.
(c)	Exhibits
Exhibit No.	Document Designation
2.01	Agreement and Plan of Merger, dated January 22, 2006.
10.01	Purchase and Separation Agreement, dated January 22, 2006.
10.02	Asset Purchase Agreement, dated January 22, 2006.
99.01	Transcript of Conference Call, dated January 23, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: January 24, 2006

SUPERVALU INC.
By:	/S/ JOHN P. BREEDLOVE, ESQ.
	Name:	John P. Breedlove, Esq.
	Title:	Associate General Counsel and Corporate Secretary

EXHIBIT INDEX

Exhibit Number	Description
2.01	Agreement and Plan of Merger, dated January 22, 2006.
10.01	Purchase and Separation Agreement, dated January 22, 2006.
10.02	Asset Purchase Agreement, dated January 22, 2006.
99.01	Transcript of Conference Call, dated January 23, 2006.

EX-2.01

Exhibit 2.01

FINAL EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

ALBERTSON’S, INC.,

NEW ALOHA CORPORATION,

NEW DIAMOND SUB, INC.,

SUPERVALU INC.,

and

EMERALD ACQUISITION SUB, INC.

Dated as of January 22, 2006

TABLE OF CONTENTS

		Page
ARTICLE I        DEFINITIONS		2
SECTION 1.1	Certain Defined Terms	2
SECTION 1.2	Other Defined Terms	8
ARTICLE II      MERGERS		12
SECTION 2.1	The Diamond Merger	12
SECTION 2.2	The Emerald Merger	12
SECTION 2.3	Closing; Effective Time	12
SECTION 2.4	Effects of the Mergers	13
SECTION 2.5	Certificate of Incorporation; By-Laws	13
SECTION 2.6	Directors and Officers	14
ARTICLE III     EFFECT OF THE MERGERS ON CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS		14
SECTION 3.1	Effect of the Diamond Merger on Capital Stock	14
SECTION 3.2	Effect of the Emerald Merger on Capital Stock	15
SECTION 3.3	Treatment of Options and Other Equity Awards	15
SECTION 3.4	Adjustment of Merger Consideration	17
SECTION 3.5	Dissenting Shares	18
SECTION 3.6	Payment and Exchange of Certificates	19
ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF THE COMPANY, NEW DIAMOND, AND NEW DIAMOND MERGER SUB		21
SECTION 4.1	Organization	22
SECTION 4.2	Authority; Enforceability	23
SECTION 4.3	Non-Contravention	24

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		Page
SECTION 4.4	Governmental Consents	24
SECTION 4.5	Capitalization of the Company	25
SECTION 4.6	Company Subsidiaries	26
SECTION 4.7	SEC Reports; Financial Information	26
SECTION 4.8	No Undisclosed Liabilities	28
SECTION 4.9	Absence of Certain Changes or Events	29
SECTION 4.10	Contracts	29
SECTION 4.11	Compliance with Law and Reporting Requirements	30
SECTION 4.12	Litigation	31
SECTION 4.13	Employee Compensation and Benefit Plans; ERISA	31
SECTION 4.14	Labor Matters	33
SECTION 4.15	Properties	33
SECTION 4.16	Tangible Personal Property	34
SECTION 4.17	Intellectual Property; IT Systems	34
SECTION 4.18	Environmental Laws	35
SECTION 4.19	Taxes	36
SECTION 4.20	Insurance	37
SECTION 4.21	Rights Plan	37
SECTION 4.22	HITS	37
SECTION 4.23	Affiliate Transactions	38
SECTION 4.24	Brokers	39
SECTION 4.25	State Takeover Statutes	39
SECTION 4.26	Fairness Opinion	39
ARTICLE V      REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB		39
SECTION 5.1	Organization	40

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		Page
SECTION 5.2	Authority; Enforceability	40
SECTION 5.3	Non-Contravention	41
SECTION 5.4	Governmental Consents	41
SECTION 5.5	Capitalization	41
SECTION 5.6	SEC Reports; Financial Information	42
SECTION 5.7	No Undisclosed Liabilities	43
SECTION 5.8	Absence of Certain Changes or Events	44
SECTION 5.9	Compliance with Law and Reporting Requirements	44
SECTION 5.10	Litigation	44
SECTION 5.11	Financing	44
SECTION 5.12	Brokers	44
SECTION 5.13	Company Stock	45
SECTION 5.14	Acquisition Sub	45
SECTION 5.15	Fairness Opinion	45
SECTION 5.16	Cub Stores Divestiture	45
ARTICLE VI     ADDITIONAL AGREEMENTS		45
SECTION 6.1	Conduct of Business Prior to the Closing	45
SECTION 6.2	Stockholders Meetings	50
SECTION 6.3	Proxy Statement	52
SECTION 6.4	Access to Information	53
SECTION 6.5	Acquisition Proposals	54
SECTION 6.6	Further Action; Reasonable Best Efforts	57
SECTION 6.7	Resignations	59
SECTION 6.8	Directors’ and Officers’ Indemnification and Insurance	59
SECTION 6.9	Public Announcements	61

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		Page
SECTION 6.10	Cooperation	62
SECTION 6.11	Notification	62
SECTION 6.12	Third-Party Consents	63
SECTION 6.13	Employment and Employee Benefits Matters; Section 16	63
SECTION 6.14	Board Representation	65
SECTION 6.15	Available Cash	65
SECTION 6.16	Coordination of Dividends	65
SECTION 6.17	The Diamond Reorganization	66
SECTION 6.18	Boise Operations and Community Involvement	66
ARTICLE VII   CONDITIONS OF MERGER		66
SECTION 7.1	Mutual Conditions to Effect the Mergers	66
SECTION 7.2	Conditions to Obligations of Parent and Acquisition Sub	67
SECTION 7.3	Conditions to Obligations of the Company, New Diamond and New Diamond Merger Sub	67
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER		68
SECTION 8.1	Termination	68
SECTION 8.2	Effect of Termination	70
SECTION 8.3	Expenses	73
SECTION 8.4	Amendment	73
SECTION 8.5	Waiver	73
ARTICLE IX     GENERAL PROVISIONS		73
SECTION 9.1	Non-Survival of Representations, Warranties and Agreements	73
SECTION 9.2	Company Disclosure Letter; Parent Disclosure Letter	73
SECTION 9.3	Notices	74
SECTION 9.4	Severability	75
SECTION 9.5	Entire Agreement	75

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		Page
SECTION 9.6	Assignment	76
SECTION 9.7	No Third Party Beneficiaries	76
SECTION 9.8	No Responsibility for Other Parties	76
SECTION 9.9	Governing Law	76
SECTION 9.10	Specific Performance; Jurisdiction	76
SECTION 9.11	Waiver of Jury Trial	77
SECTION 9.12	Interpretation	77
SECTION 9.13	Counterparts	77

INDEX OF EXHIBITS

Exhibit A-1	Form of Restated Certificate of Incorporation of Old Albertson’s, Inc.
Exhibit A-2	Form of By-Laws of Old Albertson’s, Inc.
Exhibit B	Form of Amended and Restated Certificate of Incorporation of New Aloha Corporation
Exhibit C	Form of By-Laws of New Aloha Corporation
Exhibit D	Form of Amended and Restated Certificate of Incorporation of New Albertson’s Inc.
Exhibit E	Form of By-Laws of New Albertson’s Inc.
Exhibit F	Separation Agreement
Exhibit G	Standalone Drug Sale Agreement
Exhibit H	Separate Operations Data
Exhibit I	Separate Balance Sheet Data

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This AGREEMENT AND PLAN OF MERGER, dated as of January 22, 2006 (this “Agreement”), is entered into by and among SUPERVALU INC., a Delaware corporation (“Parent”), Emerald Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Acquisition Sub”), Albertson’s, Inc., a Delaware corporation (the “Company”), New Aloha Corporation, a Delaware corporation and a wholly owned subsidiary of the Company (“New Diamond”), and New Diamond Sub, Inc., a Delaware corporation and a wholly owned subsidiary of New Diamond (“New Diamond Merger Sub”).

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company (the “Company Board of Directors”) has (i) determined that it is in the best interests of the Company and the stockholders of the Company, and declared it advisable, to enter into this Agreement providing for the merger (the “Diamond Merger”) of New Diamond Merger Sub with and into the Company, with the Company as the surviving corporation, in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) and upon the terms and subject to the conditions set forth herein, (ii) determined that it is in the best interests of the Company, New Diamond and the stockholders thereof, and declared it advisable, to enter into this Agreement providing for the merger (the “Emerald Merger,” and together with the Diamond Merger, the “Mergers”) of Acquisition Sub with and into New Diamond, with New Diamond as the surviving corporation, in accordance with the DGCL and upon the terms and conditions set forth herein, (iii) approved this Agreement in accordance with the DGCL, and (iv) resolved to recommend adoption of this Agreement by the stockholders of the Company;

WHEREAS, (i) the Board of Directors of Parent (the “Parent Board of Directors”), the Board of Directors of Acquisition Sub, the Board of Directors of New Diamond, and the Board of Directors of New Diamond Merger Sub have each determined that it is in the best interests of Parent, Acquisition Sub, New Diamond and New Diamond Merger Sub and their respective stockholders, and declared it advisable, to enter into this Agreement, and have approved this Agreement in accordance with the DGCL, and (ii) Parent, as the sole stockholder of Acquisition Sub, will adopt this Agreement in accordance with the DGCL;

WHEREAS, concurrently with the execution of this Agreement, (i) the Company, New Diamond, Parent and AB Acquisition LLC are entering into that certain Purchase and Separation Agreement, dated as of the date hereof and attached as Exhibit F hereto (the “Separation Agreement”), and (ii) the Company, New Diamond, Parent, CVS Corporation (“CVS”) and certain additional parties are entering into that certain Asset Purchase Agreement, dated as of the date hereof and attached as Exhibit G hereto (the “Standalone Drug Sale Agreement”);

WHEREAS, it is intended that, after the Diamond Merger, the Company will convert into a Delaware limited liability company (such limited liability company, “Diamond LLC,” and such conversion, the “Diamond LLC Conversion”), and that Diamond LLC will then distribute its core business to New Diamond, pursuant to the terms of the Separation Agreement; and

WHEREAS, for federal income tax purposes, it is intended that the Diamond Merger and the Diamond LLC Conversion, taken together, will qualify as a reorganization under the

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provisions of Section 368(a)(1)(F) of the Code, and that this Agreement shall constitute a “plan of reorganization” with respect thereto.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, New Diamond, New Diamond Merger Sub, Parent, Acquisition Sub and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following terms have the following meanings:

“Action” means any claim, action, suit, proceeding or investigation by or before any Governmental Authority.

“Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person.

“ASC” means American Stores Company LLC.

“Average Closing Price” means the average of the closing prices for a Parent Share as reported on the NYSE Composite Transactions Reports (as reported in The Wall Street Journal or, if not reported thereby, any other authoritative source) for the ten trading days prior to, but not including, the Closing Date.

“Business Day” means any day that is not a Saturday, a Sunday or other day that is a statutory holiday under the federal Laws of the United States.

“Cash Consideration” means $20.35 in cash, without interest, per New Diamond Share.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company Material Adverse Effect” means any effect that is materially adverse to the business, financial condition or results of operations of the Company and the Company Subsidiaries (or, following the Separation, New Diamond and its Subsidiaries) taken as a whole in relation to the New Diamond Business, other than any effect to the extent resulting proximately from (i) general economic conditions or developments or changes therein, (ii) conditions in the industries in which the Company and the Company Subsidiaries operate or developments or changes therein, except to the extent that such conditions, developments or changes impact the Company in a materially disproportionate adverse manner relative to similarly situated competitors of the Company, (iii) conditions in the stock markets or other capital markets or developments or changes therein, (iv) the announcement of the Transaction Agreements or the Transactions, (v) the performance by the Company of its obligations pursuant to the Transaction Agreements (except the obligations of the Company to obtain the consents

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contemplated by Section 4.3 and Section 4.4), (vi) the announcement, consummation, termination or abandonment of the Standalone Drug Sale, (vii) any actions taken or omitted to be taken by or at the request or with the written consent of Parent or Acquisition Sub, (viii) any changes in any Laws or any accounting regulations or principles, (ix) any union organizing activities, labor disputes, strikes, work stoppages or similar labor unrest or disruption, or (x) any acts of God, war or terrorism, except to the extent that such acts impact the Company in a materially disproportionate adverse manner relative to similarly situated competitors of the Company. A failure by the Company to meet any projections, estimates or budgets for any period prior to, on or after the date of this Agreement shall not in itself constitute a Company Material Adverse Effect.

“Company Proposal” means any Acquisition Proposal relating to the acquisition of, or a business combination transaction with, the Company, any of its Subsidiaries or some or all of their respective assets, securities or other ownership interests.

“Company Subsidiaries” means the Subsidiaries of the Company.

“Confidentiality Agreements” means the reciprocal confidentiality agreements dated September 22, 2005 and November 17, 2005, between Parent and the Company.

“Control” (including the terms “Controlled by” and “under common Control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“Coordination Agreement” means that certain Coordination Agreement by and among the Company, Parent, AB Acquisition LLC, and CVS, dated as of the date hereof.

“Cub Sale Agreement” means that certain Asset Purchase Agreement by and among Parent and Hawk Acquisition LLC, dated as of the date hereof.

“Data” means all information and data, whether in printed or electronic form and whether contained in a database or otherwise, that is used in or held for use in the operation of the respective businesses of the Company or the Company Subsidiaries, or that is otherwise material to or necessary for the operation of the respective businesses of the Company or the Company Subsidiaries.

“Deferred Compensation Plans” means the Company’s 2000 Deferred Compensation Plan; the Company’s 1990 Deferred Compensation Plan; the Company’s Executive Deferred Compensation Plan; the Company’s Senior Executive Deferred Compensation Plan; any supplemental retirement benefit provided in any employment agreement; the Company’s Non-Employees Directors’ Deferred Compensation Plan; Shaw’s Supermarkets, Inc. Deferred Compensation Plan; the Company’s Executive ASRE Makeup Plan; the Company’s Executive Pension Makeup Plan; Shaw’s Supermarkets, Inc. Supplemental Savings Plan; Shaw’s Supermarkets, Inc. Supplemental Executive Retirement Plan; American Stores Company Supplemental Executive Retirement Plan; American Stores Company Retirement Plan for Non-

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Employee Directors; and American Stores Company Supplemental Long Range Retirement Plan, as any of the foregoing may have been amended or restated, and any other plan, program, agreement or arrangement providing substantially similar benefits to the Company’s current or former directors, officers or employees.

“Encumbrance” means any security interest, pledge, mortgage, lien, charge, hypothecation, option or right of first refusal to purchase or lease or otherwise acquire any interest, conditional sales agreement, adverse claim of ownership or use, title defect, easement, right of way, or other encumbrance of any kind, other than any obligation to accept returns of inventory in the ordinary course of business consistent with past practice and other than those arising by reason of restrictions on transfers under federal, state and foreign securities Laws.

“Equity Interest” means (a) with respect to a corporation, any and all classes or series of shares of capital stock, (b) with respect to a partnership, limited liability company, trust or similar Person, any and all classes or series of partnership, limited liability company, trust or similar interests or units, and (c) with respect to any other Person, any other security representing any direct equity ownership or participation in such Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authority” means any federal, state, local or foreign government (including any political or other subdivision or judicial, legislative, executive or administrative branch, agency, commission, authority or other body of any of the foregoing).

“Governmental Order” means any order, writ, judgment, injunction, decree or award entered by or with any Governmental Authority.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” means, with respect to any Person, (i) indebtedness of such Person for borrowed money, (ii) other indebtedness of such Person evidenced by notes, bonds or debentures, (iii) capitalized leases classified as indebtedness of such Person under GAAP, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) any obligation of such Person for the deferred purchase price of property or services (other than trade payables and other current liabilities), (vi) all Indebtedness of another Person referred to in clauses (i) through (v) above guaranteed directly or indirectly, jointly or severally, in any manner by such Person, (vii) all Indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including, without

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limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (viii) all reimbursement obligations of such Person with respect to letters of credit, bankers’ acceptance or similar facilities issued for the account of such Person. Notwithstanding anything to the contrary herein, the Indebtedness of the Company and the Company Subsidiaries shall not include (a) any indebtedness or obligation owed by the Company to any Company Subsidiary, by any Company Subsidiary to the Company, or between any Company Subsidiaries, or (b) any guarantee by the Company or any Company Subsidiary of any indebtedness or obligation described in clause (a) of this sentence.

“Intellectual Property” means United States or foreign intellectual property, including (i) patents and patent applications, together with all reissues, continuations, continuations-in-part, divisionals, extensions and reexaminations thereof, (ii) trademarks, service marks, logos, trade names, corporate names, Internet domain names, trade dress, including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii) copyrights and copyrightable works and all applications and registrations in connection with any of the foregoing, (iv) inventions and discoveries (whether patentable or not), industrial designs, trade secrets, confidential information and know-how, (v) computer software (including databases and related documentation), (vi) moral and economic rights of authors and inventors, and (vii) all other proprietary rights whether now known or hereafter recognized in any jurisdiction.

“IT Systems” means all electronic data processing, information, recordkeeping, communications, telecommunications, account management, inventory management and other computer systems (including all computer programs, software, databases, firmware, hardware and related documentation) and Internet websites.

“Knowledge” means (i) with respect to Parent, the actual knowledge after reasonable inquiry of the officers of Parent listed in Section 1.1 of the Parent Disclosure Letter and (ii) with respect to the Company, the actual knowledge after reasonable inquiry of the officers of the Company listed in Section 1.1 of the Company Disclosure Letter.

“Law” means any statute, law, ordinance, regulation, rule, code or other requirement of law of a Governmental Authority or any Governmental Order.

“Material Company Subsidiary” shall mean a Company Subsidiary that qualifies as a “significant subsidiary” of the Company as such term is defined in Rule 1-02(w) of Regulation S-X promulgated under the Securities Act.

“New Diamond Business” has the meaning given to it in the Separation Agreement.

“New Diamond Employee” has the meaning given to it in the Separation Agreement.

“New Diamond Entities” has the meaning given to it in the Separation Agreement.

“NYSE” means the New York Stock Exchange.

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“Option” means, subject to Section 3.3(a), each option granted by the Company to purchase Company Shares pursuant to any of the Stock Plans.

“Parent Material Adverse Effect” means any effect that is materially adverse to the business, financial condition or results of operations of Parent and its Subsidiaries taken as a whole, other than any effect to the extent resulting proximately from (i) general economic conditions or developments or changes therein, (ii) conditions in the industries in which Parent operates or developments or changes therein, except to the extent that such conditions, developments or changes impact Parent in a materially disproportionate adverse manner relative to similarly situated competitors of Parent, (iii) conditions in the stock markets or other capital markets or developments or changes therein, (iv) the announcement of the Transaction Agreements or the Transactions, (v) the performance by the Parent of its obligations pursuant to the Transaction Agreements (except the obligations of Parent to obtain the consents contemplated by Section 5.3 and Section 5.4), (vi) any actions taken or omitted to be taken by or at the request or with the written consent of the Company or (vii) any changes in any Laws or any accounting regulations or principles, any union organizing activities, labor disputes, strikes, work stoppages or similar labor unrest or disruption, or (ix) any acts of God, war or terrorism, except to the extent that such acts impact Parent in a materially disproportionate adverse manner relative to similarly situated competitors of Parent. A failure by Parent to meet any projections, estimates or budgets for any period prior to, on or after the date of this Agreement shall not in itself constitute a Parent Material Adverse Effect.

“Parent Proposal” means any Acquisition Proposal relating to the acquisition of, or a business combination transaction with, Parent, any of its Subsidiaries or some or all of their respective assets, securities or other ownership interests.

“PCX” means the Pacific Stock Exchange.

“Per Share Merger Consideration” means the Cash Consideration and the Stock Consideration.

“Permitted Encumbrances” means: (i) Encumbrances that relate to taxes, assessments and governmental charges or levies imposed upon the Company or a Company Subsidiary that are not yet due and payable or that are being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP on the most recent financial statements included in the Company SEC Reports filed prior to the date hereof, (ii) Encumbrances imposed by Law that relate to obligations that are not yet due and have arisen in the ordinary course of business and consistent with past practice, (iii) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations, (iv) mechanics’, carriers’, workers’, repairers’ and similar Encumbrances imposed upon the Company or a Company Subsidiary arising or incurred in the ordinary course of business and consistent with past practice and (v) other Encumbrances on assets which, in the case of each of clause (iv) and (v) above are, either individually or in the aggregate, not material in amount and would not reasonably be expected to materially impair the continued use, utility or value of the property to which they relate in the conduct of the business currently conducted thereon.

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“Person” means any individual, partnership, firm, corporation, association, trust, unincorporated organization, Governmental Authority, joint venture, limited liability company or other entity.

“Public Proposal” means an Acquisition Proposal (provided that all percentages included in the definition of “Acquisition Proposal” shall be increased to 50%) that shall have been publicly announced and not publicly withdrawn.

“Qualifying Parent Proposal” means any Parent Proposal that contemplates, and would not materially delay, the consummation of the Transactions and the Standalone Drug Sale and that is not otherwise inconsistent with the provisions of the Transaction Agreements and the Standalone Drug Sale Agreement.

“Reorganization” has the meaning given to it in the Separation Agreement.

“Retained Business” has the meaning given to it in the Separation Agreement.

“Retained Business Purchase” has the meaning given to it in the Separation Agreement.

“Securities Act” means the Securities Act of 1933 and the rules and regulations promulgated thereunder.

“Separation” has the meaning given to it in the Separation Agreement.

“Site” means each location where the Company or any Company Subsidiary conducts business, including each Owned Real Property and Leased Real Property.

“Standalone Drug Business” has the meaning given to the term “Business” in the Standalone Drug Sale Agreement.

“Standalone Drug Employee” has the meaning given to the word “Employee” in the Standalone Drug Sale Agreement.

“Standalone Drug RE Purchase” has the meaning given to it in the Separation Agreement.

“Standalone Drug Sale” means the sale of the Standalone Drug Business pursuant to the Standalone Drug Sale Agreement.

“Stock Consideration” means 0.182 Parent Shares for each New Diamond Share.

“Stock Plans” means the following plans, in each case as amended through the date hereof: (i) the Albertson’s, Inc. 1995 Amended and Restated Stock-Based Incentive Plan, (ii) the Albertson’s, Inc. 2004 Equity and Performance Incentive Plan, (iii) the Albertson’s, Inc. 1995 Stock Option Plan for Non-Employee Directors, (iv) the ASC 1997 Stock Option and Stock Award Plan, (v) the ASC 1997 Stock Plan for Non-Employee Directors, (vi) the ASC 1997A Stock Option and Stock Award Plan, (vii) the ASC Amended and Restated 1989 Stock Option

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and Stock Award Plan, and (viii) the ASC Amended and Restated 1985 Stock Option and Stock Award Plan.

“Stock Unit” means, subject to Section 3.3(d), a right to receive Company Shares pursuant to a stock unit award under any of the Stock Plans.

“Subsidiaries” of a Person means any and all corporations, partnerships, limited liability companies, trusts and other entities, whether incorporated or unincorporated, with respect to which such Person, directly or indirectly, legally or beneficially, owns (i) a right to a majority of the profits of such entity or (ii) securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

“Tax” or “Taxes” means all federal, state, provincial, local, territorial and foreign income, profits, franchise, license, capital, capital gains, transfer, ad valorem, wage, severance, occupation, import, custom, gross receipts, payroll, sales, employment, use, property, real estate, excise, value added, goods and services, stamp, alternative or add-on minimum, environmental, withholding and any other like governmental tax charges, together with all interest, penalties and additions imposed with respect to such amounts, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

“Tax Authority” and “Taxing Authority” means any Governmental Authority responsible for the administration or imposition of any Tax.

“Tax Return” or “Tax Returns” means all returns, declarations, reports, claims for refund or statements relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof filed or to be filed with any Tax Authority in connection with the determination, assessment or collection of Taxes.

“Transaction Agreements” means this Agreement and the Separation Agreement.

“Transactions” means the transactions contemplated by the Transaction Agreements, including the Mergers, the Reorganization, the Separation and the Retained Business Purchase.

SECTION 1.2 Other Defined Terms. The following terms have the meanings defined for such terms in the Sections set forth below:

Term	Section
ACM	4.18(a)
Acquisition Proposal	6.5(a)
Acquisition Sub	Preamble
Adjusted Option	3.3(c)
Advance Contract	4.10(c)
Agreement	Preamble
Benefits Continuation Period	6.13(a)

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Term	Section
Blackstone	4.24
Board of Directors	6.5(a)
Capitalization Date	4.5(a)
Cash Fraction	3.3(b)
Cash-Out Amount	3.3(b)
Cash-Out Price	3.3(b)
Certificate	3.6(b)
Charter Amendment	6.2(a)(i)
Closing	2.3(d)
Closing Date	2.3(d)
Company	Preamble
Company Balance Sheet Date	4.8
Company Board of Directors	Recitals
Company Board Recommendation	6.2(a)(ii)
Company Disclosure Letter	Article IV
Company Employees	4.13(a)
Company Form 10-K	Article IV
Company Intellectual Property	4.17(a)(i)
Company Plans	4.13(a)
Company SEC Reports	4.7(a)
Company Shares	3.1(a)
Company Stockholders Meeting	6.2(a)(i)
Company Termination Fee	8.2(b)
Compensation	6.13(c)
Current Employee	6.13(c)
CVS	Recitals
Debt and Purchase Contract Assumption	6.6(h)(ii)
Deferred Compensation Distribution	6.13(b)
DGCL	Recitals
Diamond Certificate of Merger	2.3(b)
Diamond LLC	Recitals

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Term	Section
Diamond LLC Conversion	Recitals
Diamond Merger	Recitals
Diamond Reorganization	6.17
Dissenting Shares	3.5(b)
Effective Time	2.3(e)
Emerald Certificate of Merger	2.3(e)
Emerald Merger	Recitals
Environmental Laws	4.18(c)
Environmental Permits	4.18(c)
Financing	5.11
Financing Commitment	5.11
First Operating Year	4.10(c)
Form S-4	6.3(a)
F Reorg	6.17
Goldman Sachs	4.24
HITS	4.5(a)
HITS Indenture	4.22(a)
HITS Purchase Contract Agreement	4.22(a)
HSR Clearance	6.6(d)
Indemnified Directors and Officers	6.8(a)
Initial Closing	2.3(a)
Initial Closing Date	2.3(a)
Initial Effective Time	2.3(b)
IRS	4.13(b)
Leased Real Property	4.15(b)
Lucky Delaware	6.17
LYONs	5.5(a)
Material Contract	4.10(a)
Materials of Environmental Concern	4.18(c)
Mergers	Recitals
Multiemployer Plan	4.13(a)

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Term	Section
New Diamond	Preamble
New Diamond Merger Sub	Preamble
New Diamond Shares	3.1(a)
Objection	6.6(d)
Owned Real Property	4.15(a)
Parent	Preamble
Parent Balance Sheet Date	5.7
Parent Board of Directors	Recitals
Parent Board Recommendation	6.2(b)
Parent Disclosure Letter	Article V
Parent Form 10-K	Article V
Parent Plan	6.13(d)
Parent Rights Plan	5.5(a)
Parent SEC Reports	5.6(a)
Parent Shares	5.5(a)
Parent Stockholders Meeting	6.2(b)
Parent Termination Fee	8.2(c)
Paying Agent	3.6(a)
PBGC	4.13(b)
Pledge Agreement	6.6(h)
Proxy Statement/Prospectus	6.3(a)
Real Property Lease	4.15(b)
Regulatory Termination Fee	8.2(d)
Remarketing Agreement	6.6(h)
Representatives	6.5(a)
Requisite Company Stockholder Vote	4.2(a)
Requisite Parent Stockholder Vote	5.2(a)
Rights Plan	4.5(a)
SEC	4.7(a)
Separate Balance Sheet Data	4.7(b)
Separate Operations Data	4.7(b)

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Term	Section
Separation Agreement	Recitals
Share Issuance	5.2(a)
Standalone Drug Sale Agreement	Recitals
Superior Proposal	6.5(a)
Surviving Corporation	2.2
Termination Date	8.1(c)
Third Party Use and Occupancy Agreement	4.15(c)
Withdrawal Liability	4.13(d)

ARTICLE II

MERGERS

SECTION 2.1 The Diamond Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Initial Effective Time (as defined below), New Diamond Merger Sub shall be merged with and into the Company. As a result of the Diamond Merger, the separate corporate existence of New Diamond Merger Sub shall cease and the Company shall continue as the surviving corporation in the Diamond Merger and as a wholly owned subsidiary of New Diamond.

SECTION 2.2 The Emerald Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as defined below), Acquisition Sub shall be merged with and into New Diamond. As a result of the Emerald Merger, the separate corporate existence of Acquisition Sub shall cease and New Diamond shall continue as the surviving corporation in the Emerald Merger (the “Surviving Corporation”) and as a wholly owned subsidiary of Parent.

SECTION 2.3 Closing; Effective Time.

(a) Subject to the provisions of Article VII, the closing of the Diamond Merger (the “Initial Closing”) shall take place at the offices of Jones Day, 222 West 41st Street, New York, New York 10017, at 9:00 a.m. local time, as soon as practicable, but in no event later than the second Business Day after the satisfaction or waiver of the conditions set forth in Article VII (excluding conditions that, by their terms, cannot be satisfied until the Closing, as defined below, but the Closing shall be subject to the satisfaction or waiver of those conditions), or at such other place or at such other date or time as Parent and the Company may mutually agree. The date on which the Initial Closing actually occurs is hereinafter referred to as the “Initial Closing Date.”

(b) Subject to the provisions of this Agreement, as soon as practicable after 9:00 a.m. local time on the Initial Closing Date, the parties hereto shall cause the Diamond Merger to be consummated by filing a certificate of merger (the “Diamond Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in

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accordance with, the relevant provisions of the DGCL (the date and time of the filing of the Diamond Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Diamond Certificate of Merger and as is agreed to by Parent and the Company, being the “Initial Effective Time”) and shall make all other filings or recordings required under the DGCL in connection with the Diamond Merger.

(c) As soon as practicable after the Initial Effective Time, but in any event before the Effective Time (as defined below), the parties hereto shall effect the Diamond LLC Conversion and then shall effect the other transactions set forth in the Separation Agreement.

(d) Subject to the provisions of Article VII, the closing of the Emerald Merger (the “Closing”) shall take place at the offices of Jones Day, 222 West 41st Street, New York, New York 10017, at 10:00 a.m. local time, on the Initial Closing Date or as promptly as practicable thereafter (and in no case more than two Business Days thereafter), or at such other place or at such other date or time as Parent and the Company may mutually agree. The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.”

(e) Subject to the provisions of this Agreement, as soon as practicable after 10:00 a.m. local time on the Closing Date, the parties hereto shall cause the Emerald Merger to be consummated by filing a certificate of merger (the “Emerald Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL (the date and time of the filing of the Emerald Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Emerald Certificate of Merger and as is agreed to by Parent and New Diamond, being the “Effective Time”) and shall make all other filings or recordings required under the DGCL in connection with the Emerald Merger.

SECTION 2.4 Effects of the Mergers. The Mergers shall have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, (i) at the Initial Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and New Diamond Merger Sub shall vest in the Company as the surviving corporation in the Diamond Merger and all debts, liabilities and duties of the Company and New Diamond Merger Sub shall become the debts, liabilities and duties of the Company as the surviving corporation in the Diamond Merger, and (ii) at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of New Diamond and Acquisition Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of New Diamond and Acquisition Sub shall become the debts, liabilities and duties of the Surviving Corporation.

SECTION 2.5 Certificate of Incorporation; By-Laws.

(a) At the Initial Effective Time, (i) the restated certificate of incorporation of the Company, as in effect immediately prior to the Initial Effective Time, shall be amended in its entirety in the form attached hereto as Exhibit A-1 and as so amended shall be the restated certificate of incorporation of the Company, as the surviving corporation in the Diamond Merger, and (ii) the by-laws of the Company shall be amended and restated to read in their entirety in the form attached hereto as Exhibit A-2 and, as so amended, shall be the amended and

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restated by-laws of the Company until thereafter amended in accordance with their terms, the restated certificate of incorporation of the Company and applicable law.

(b) Immediately prior to the Initial Effective Time, the certificate of incorporation and the by-laws of New Diamond shall be amended and restated to read in their entirety in the form attached hereto as Exhibits B and C, respectively.

(c) At the Effective Time, (i) the amended and restated certificate of incorporation of New Diamond shall be amended so as to read in its entirety in the form annexed hereto as Exhibit D, and, as so amended, shall be the amended and restated certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and applicable Law, and (ii) the restated by-laws of New Diamond shall be amended so as to read in their entirety in the form annexed hereto as Exhibit E, and, as so amended, shall be the amended and restated by-laws of the Surviving Corporation until thereafter amended in accordance with their terms, the amended and restated certificate of incorporation of the Surviving Corporation and applicable Law.

SECTION 2.6 Directors and Officers.

(a) The Company and New Diamond shall take the necessary actions to cause the directors and officers of the Company immediately prior to the Initial Effective Time to be the directors and officers of New Diamond from and after the Initial Effective Time. Immediately prior to the Retained Business Purchase, the directors of the Company shall submit resignations to be effective as of the consummation of the Retained Business Purchase.

(b) Immediately prior to the Effective Time, the directors of New Diamond shall submit their resignations to be effective as of the Effective Time. Parent shall take the necessary actions to cause the directors of Acquisition Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation from and after the Effective Time, each to hold office in accordance with the restated certificate of incorporation and by-laws of the Surviving Corporation.

(c) The officers of New Diamond immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal.

ARTICLE III

EFFECT OF THE MERGERS ON CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS

SECTION 3.1 Effect of the Diamond Merger on Capital Stock. At the Initial Effective Time, by virtue of the Diamond Merger and without any action on the part of any party hereto or any holder of any of the following securities:

(a) Each share (or fraction of a share) of Common Stock, par value $1.00 per share, of the Company (the “Company Shares”) issued and outstanding immediately prior to the Initial Effective Time (other than any Company Shares to be canceled pursuant to Section 3.1(b) and

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any Dissenting Shares (as defined in Section 3.5(b))) shall be converted into the right to receive one (1) fully paid and nonassessable share (or an equal fraction of a share, if applicable) of Common Stock, par value $0.01 per share, of New Diamond (the “New Diamond Shares”).

(b) Each Company Share held in the treasury of the Company immediately prior to the Initial Effective Time shall be canceled without any conversion thereof.

(c) Each New Diamond Share held by the Company immediately prior to the Initial Effective Time shall be canceled.

(d) Each share of common stock of New Diamond Merger Sub issued and outstanding immediately prior to the Initial Effective Time shall be converted into one share of Common Stock of the Company as the surviving corporation of the Diamond Merger.

SECTION 3.2 Effect of the Emerald Merger on Capital Stock. At the Effective Time, by virtue of the Emerald Merger and without any action on the part of Parent, Acquisition Sub, New Diamond or the holders of any of the following securities:

(a) Each New Diamond Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be canceled pursuant to Section 3.2(b)) shall be converted into the right to receive the Per Share Merger Consideration from Parent.

(b) Each New Diamond Share held in the treasury of New Diamond, or owned by Parent, the Company, New Diamond or any wholly owned direct or indirect Subsidiary of the Company, Parent or New Diamond, in each case immediately prior to the Effective Time, shall be canceled without any conversion thereof and no consideration shall be paid with respect thereto.

(c) Each share of common stock of Acquisition Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.

SECTION 3.3 Treatment of Options and Other Equity Awards. Prior to the Initial Effective Time, the Company and New Diamond, and the Company Board of Directors and the New Diamond Board of Directors, as applicable, shall take all action necessary, including a resolution of such boards (or a committee thereof), such that:

(a) Each Option that is outstanding and unexercised as of immediately prior to the Initial Effective Time shall be assumed by New Diamond at the Initial Effective Time, and shall continue to have, and be subject to, the same terms and conditions (and shall have the same date of grant) as were applicable under the Stock Plans and any applicable agreements thereunder immediately before the Initial Effective Time, except that each Option will be exercisable for a number of New Diamond Shares equal to the number of Company Shares that were issuable upon exercise of such option immediately prior to the Initial Effective Time. For the avoidance of doubt, the term “Option” after the Initial Effective Time shall mean an option to purchase New Diamond Shares pursuant to any of the Stock Plans, as assumed by New Diamond at the Initial Effective Time.

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(b) Each Option that is outstanding and unexercised as of immediately prior to the Effective Time, whether or not vested or exercisable, and that is not held by a New Diamond Employee shall be canceled by New Diamond, and the holder of such Option shall receive, in full settlement thereof, an amount of cash (the “Cash-Out Amount”), without interest, equal to the product of (i) the total number of New Diamond Shares subject to such Option multiplied by (ii) the excess, if any, of the sum of (x) (A) the number of Parent Shares represented by the Stock Consideration multiplied by (B) the Average Closing Price plus (y) the Cash Consideration (such sum, the “Cash-Out Price”) over the exercise price per New Diamond Share subject to such Option (with the aggregate amount of such payment to the holder to be rounded to the nearest cent), less applicable Taxes, if any, required to be withheld with respect to such payment; provided, however, that if the holder of such Option is a non-employee director of New Diamond, such holder shall not receive the full Cash-Out Amount in cash, but shall instead receive (x) an amount in cash (rounded to the nearest cent) equal to the product of (1) the Cash-Out Amount multiplied by (2) a fraction (the “Cash Fraction”), the numerator of which is the Cash Consideration and the denominator of which is the sum of (a) the Cash Consideration plus (b) the product of (i) the Stock Consideration multiplied by (ii) the Average Closing Price, and (y) a number of Parent Shares (rounded to the nearest share) equal to a fraction, the numerator of which is the product of (1) the Cash-Out Amount multiplied by (2) (a) 1.0 minus (b) the Cash Fraction, and the denominator of which is the Average Closing Price.

(c) Each Option that is outstanding and unexercised as of immediately prior to the Effective Time and that is held by a New Diamond Employee (whether or not vested or exercisable) shall be assumed by Parent at the Effective Time. To the extent permitted under the Stock Plans, all such outstanding Options shall accelerate and become immediately exercisable in connection with the Mergers in accordance with the terms of the Stock Plans and any applicable agreements thereunder. Except for the acceleration of the Options in accordance with the terms of the Stock Plans and any applicable agreements thereunder, at the Effective Time, each Option so assumed by Parent under this Agreement (an “Adjusted Option”) shall continue to have, and be subject to, the same terms and conditions as were applicable under the Stock Plans and any applicable agreements thereunder immediately before the Initial Effective Time, except that (i) each Adjusted Option will be exercisable for that number of Parent Shares (rounded up or down to the nearest share, and rounded up in the case of half a share) equal to the product of (x) the number of New Diamond Shares that were issuable upon exercise of such option immediately prior to the Effective Time multiplied by (y) the sum of (A) the Stock Consideration, plus (B) (1) the Cash Consideration divided by (2) the Average Closing Price, and (ii) the per share exercise price for the Parent Shares issuable upon exercise of such Adjusted Option will be equal to the quotient (rounded up or down to the nearest cent) determined by dividing (x) the per share exercise price of such Option immediately prior to the Effective Time by (y) the sum of (A) the Stock Consideration plus (B) (1) the Cash Consideration, divided by (2) the Average Closing Price. The date of grant of each Adjusted Option will be the date on which the corresponding Option was granted. In the event that the holder of an Adjusted Option would be precluded by applicable securities laws from disposing of Parent Shares acquired upon exercise of such option during the 60-day period beginning on the Closing Date, Parent will (to the extent permitted by applicable Law) make available a “cashless exercise” opportunity to such holder during such period unless such cashless exercise would result in an accounting impact for Parent that is both adverse to Parent and likely to continue beyond the 60-day period beginning on the Closing Date.

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(d) Each Stock Unit that is outstanding as of immediately prior to the Initial Effective Time shall be assumed by New Diamond at the Initial Effective Time, and shall continue to have, and be subject to, the same terms and conditions as were applicable immediately before the Initial Effective Time, except that each Stock Unit will become a right to receive a number of New Diamond Shares equal to the number of Company Shares that would be received for such Stock Unit immediately prior to the Initial Effective Time. Each Stock Unit that is outstanding as of immediately prior to the Effective Time (other than Stock Units granted pursuant to the exception provided in Section 6.1 of the Company Disclosure Letter), whether or not vested, will, as of the Effective Time, entitle the holder thereof to receive the Per Share Merger Consideration and shall continue to have, and be subject to, the same terms and conditions as were applicable immediately before the Effective Time, provided that each holder of a Stock Unit that is outstanding as of immediately prior to the Effective Time, whether or not vested, may elect, prior to the Effective Time, to receive payment of such Stock Unit upon the earlier of (1) the existing payment date under the current terms of the Stock Units (subject to any change in the existing payment date that is required to comply with Section 409A of the Code) or (2) the later of (x) the Effective Time or (y) January 1, 2007. The Company may adopt such amendments to the Stock Units as it deems necessary or appropriate to effectuate the transactions contemplated hereby.

(e) Prior to the Initial Effective Time, the Company shall use its reasonable best efforts to take or cause to be taken all actions necessary to effectuate the foregoing treatment in this Section 3.3 to the extent such treatment is not expressly provided for by the terms of the applicable equity compensation plans and related award agreements. All payments under this Section 3.3 shall be made no later than five (5) Business Days following the Closing Date.

(f) Parent shall take all corporate action necessary to reserve for issuance a sufficient number of Parent Shares for delivery upon exercise of Adjusted Options pursuant to the terms set forth in Section 3.3(c). As soon as practicable following the Effective Time, Parent shall cause the Parent Shares subject to the Adjusted Options to be covered by an effective registration statement on Form S-8 (or any successor form) or another appropriate form and Parent shall use its reasonable best efforts to maintain the effectiveness of such registration statement for so long as any Adjusted Options remain outstanding. In addition, Parent shall use its reasonable best efforts to cause the Parent Shares subject to the Adjusted Options to be listed on the NYSE.

(g) The parties will make good faith efforts to make equitable adjustments if necessary to ensure that the provisions of this Section 3.3 comply with Section 409A of the Code.

SECTION 3.4 Adjustment of Merger Consideration. Notwithstanding anything in this Agreement to the contrary, if, (a) between the date of this Agreement and the Closing Date, the issued and outstanding Company Shares (prior to the Initial Effective Time) or New Diamond Shares (after the Initial Effective Time), or the issued and outstanding Parent Shares, shall have been changed into a different number of shares or a different class by reason of any stock split, reverse stock split, stock dividend (other than dividend equivalents paid to members of the Company Board of Directors under the terms of Stock Units outstanding on the date hereof), reclassification, or redenomination, or (b) at the Initial Effective Time, the Company’s representation and warranties in Section 4.5 (Capitalization of the Company) or Parent’s

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representations and warranties in Section 5.5 (Capitalization) are not true in any non-de minimis respect relating to the number of fully diluted shares outstanding, then the Per Share Merger Consideration, the Cash-Out Price and any other dependent items (1) shall be appropriately adjusted, in the case of (a) above, to provide to the holders of New Diamond Shares the same economic effect as contemplated by this Agreement prior to such action and as so adjusted shall, from and after the date of such event, be the Per Share Merger Consideration, the Cash-Out Price or other dependent item, subject to further adjustment in accordance with this sentence, and/or (2) shall be appropriately adjusted, in the case of (b) above, to provide to New Diamond and Parent and their respective stockholders the same economic effect as contemplated by this Agreement assuming such representations and warranties are true and correct in all such respects as written and as so adjusted shall be the Per Share Merger Consideration, the Cash-Out Price or other dependent item, subject to further adjustment in accordance with this sentence.

SECTION 3.5 Dissenting Shares.

(a) No appraisal rights shall be available to holders of New Diamond Shares in connection with the Emerald Merger.

(b) In the event the Charter Amendment is approved and the Effective Time occurs, Company Shares that are issued and outstanding immediately prior to the Initial Effective Time and which are held by holders of Company Shares who have not voted in favor of or consented to the adoption of this Agreement and who have properly taken the steps required in order to demand and perfect their rights to appraisal in connection with the Diamond Merger, in accordance with Section 262 of the DGCL (the “Dissenting Shares”) shall not be converted into the right to receive New Diamond shares in accordance with Section 3.1(a), and the holders thereof instead shall be entitled to only such rights as are granted by Section 262 of the DGCL and the restated certificate of incorporation of the Company; provided, however, that if any such stockholder of the Company shall fail to perfect or shall effectively waive, withdraw or lose such stockholder’s rights under Section 262 of the DGCL, such stockholder’s Company Shares in respect of which the stockholder would otherwise be entitled to receive fair value under Section 262 of the DGCL shall thereupon be deemed to have been converted, at the Initial Effective Time, into New Diamond Shares in accordance with Section 3.1(a) (which New Diamond Shares shall be converted into the Per Share Merger Consideration in the Emerald Merger in accordance with Section 3.2(a)). In the event the Charter Amendment is not approved or the Effective Time does not occur, no appraisal rights shall be available to holders of Company Shares in connection with the Diamond Merger.

(c) Company shall give Parent (i) prompt notice of any notice received by Company of the intent of any holder of Company Shares to demand the fair value of any Company Shares in the Diamond Merger, any written demand for appraisal, any withdrawals thereof and any instruments served pursuant to Section 262 of the DGCL and received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to the exercise of dissenters’ rights under Section 262 of the DGCL. The Company shall not, except with the prior written consent of Parent or as otherwise required by an order, decree, ruling or injunction of a court of competent jurisdiction, make any payment with respect to any such exercise of dissenters’ rights or offer to settle or settle any such rights.

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(d) The parties shall cooperate to take any reasonable steps requested by another party that may be necessary to (i) provide appraisal rights to holders of Company Shares as contemplated by Section 3.5(b), and (ii) ensure that no appraisal rights are available in connection with the Emerald Merger.

SECTION 3.6 Payment and Exchange of Certificates.

(a) Following the date of this Agreement and in any event not less than three Business Days prior to the mailing of the Proxy Statement/Prospectus to the stockholders of the Company, Parent or Acquisition Sub shall designate a bank or trust company reasonably acceptable to the Company to act as Paying Agent in connection with the Mergers (the “Paying Agent”). At or prior to the Effective Time, Parent will cause to be deposited in trust with the Paying Agent the aggregate consideration to which stockholders of the Company are contemplated to become entitled under this Article III. Until used for that purpose, the portion of such aggregate consideration consisting of cash shall be invested by the Paying Agent, as directed by Parent or the Surviving Corporation, in obligations of or guaranteed by the United States of America or obligations of an agency of the United States of America which are backed by the full faith and credit of the United States of America, or in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation; provided that no such investment or losses thereon shall affect the Per Share Merger Consideration payable to former stockholders of New Diamond, and Parent shall promptly provide, or shall cause the Surviving Corporation to promptly provide, additional funds to the Paying Agent for the benefit of the former stockholders of New Diamond in the amount of any shortfall in funds payable to the former stockholders of New Diamond pursuant to this Article III.

(b) From and after the Initial Effective Time, (i) each stock certificate which immediately prior to the Initial Effective Time represented Company Shares (other than Dissenting Shares) shall be deemed to represent an equal number of New Diamond Shares (each such stock certificate, a “Certificate”), and (ii) each holder of record of Company Shares (other than Dissenting Shares) immediately prior to the Initial Effective Time shall be deemed to be a holder of record of the same number of New Diamond Shares.

(c) Promptly after the Effective Time (and in any event within two Business Days following the Effective Time), the Surviving Corporation shall cause the Paying Agent to mail to each Person who was a record holder of New Diamond Shares immediately prior to the Effective Time, whose New Diamond Shares were converted pursuant to this Article III into the right to receive the Per Share Merger Consideration, (i) a form of letter of transmittal for use in effecting the surrender of Certificates in order to receive payment of the Per Share Merger Consideration (which shall specify that delivery shall be effected, and risk of loss and title to the Certificate shall pass, only upon actual delivery of the Certificates to the Paying Agent, and shall otherwise be in customary form), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Per Share Merger Consideration. When the Paying Agent receives a Certificate, together with a properly completed and executed letter of transmittal and any other required documents, the Paying Agent shall deliver to the holder of the New Diamond Shares represented by the Certificate, or as otherwise directed in the letter of transmittal, (A) a cash amount in immediately available funds equal to the aggregate Cash Consideration into

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which all of the New Diamond Shares represented by such Certificate shall have been converted pursuant to the Emerald Merger, (B) a certificate representing that number of whole Parent Shares into which the New Diamond Shares represented by such Certificate shall have been converted pursuant to the Emerald Merger, (C) any cash in lieu of a fractional Parent Share to which such holder shall be entitled pursuant to Section 3.6(h), and (D) any dividends or other distributions to which such holder shall be entitled pursuant to Section 3.6(i). Any payment hereunder shall be less any required Tax withholdings in accordance with Section 3.6(d) below, and the Certificate shall be canceled. No interest shall be paid or accrued on the Per Share Merger Consideration payable upon the surrender of Certificates. If payment is to be made to a Person other than the Person in whose name a surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered must be properly endorsed or otherwise be in proper form for transfer, and the Person who surrenders the Certificate must provide funds for payment of any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that the Tax has been paid or is not applicable. After the Effective Time, a Certificate shall represent only the right to receive the Per Share Merger Consideration in respect of the New Diamond Shares represented by such Certificate, without any interest thereon.

(d) The Paying Agent may withhold from the sum payable to any Person as a result of the Emerald Merger, and pay to the appropriate Taxing Authorities, any amounts that the Paying Agent or the Surviving Corporation may be required (or may reasonably believe it is required) to withhold under the Code, or any provision of state, local or foreign Tax Law. Any sum that is withheld and paid to a Taxing Authority as permitted by this Section will be deemed to have been paid to the Person from whom it is withheld.

(e) In the event that any Certificate shall have been lost, stolen or destroyed, upon the holder’s compliance with the reasonable replacement requirements established by the Paying Agent, the Paying Agent shall deliver in exchange for the lost, stolen or destroyed Certificate the applicable Per Share Merger Consideration payable in respect of the New Diamond Shares represented by the Certificate pursuant to this Article III.

(f) At any time which is more than 180 days after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to it any funds and shares which had been deposited with the Paying Agent and have not been disbursed in accordance with this Article III (including interest and other income received by the Paying Agent in respect of the funds made available to it), and after the funds and shares have been delivered to Parent, Persons entitled to payment in accordance with this Article III shall be entitled to look solely to Parent (subject to abandoned property, escheat or other similar Laws) for payment of the Per Share Merger Consideration upon surrender of the Certificates held by them, without any interest thereon. Any Per Share Merger Consideration remaining unclaimed as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. Neither the Surviving Corporation, Parent nor the Paying Agent will be liable to any Person entitled to payment under this Article III for any consideration which is properly delivered to a public official pursuant to any abandoned property, escheat or similar Law.

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(g) At the Effective Time, the stock transfer books of New Diamond shall be closed and thereafter there shall be no further registration of transfers of New Diamond Shares that were outstanding prior to the Effective Time. After the Effective Time, Certificates presented to the Surviving Corporation for transfer shall be canceled and exchanged for the Per Share Merger Consideration in respect of the New Diamond Shares represented thereby.

(h) No certificates or scrip representing fractional Parent Shares will be issued upon the surrender for exchange of Certificates, no dividend or distribution of Parent will relate to such fractional share interests and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of New Diamond Shares converted pursuant to the Emerald Merger who would otherwise be entitled to receive a fraction of a Parent Share (after taking into account all New Diamond Shares held at the Effective Time by such holder) shall receive, in lieu thereof and in accordance with Section 3.6(i), an amount in cash (without interest), rounded to the nearest cent, equal to the product obtained by multiplying (i) the fractional share interest to which such former holder would otherwise be entitled by (ii) the Average Closing Price.

(i) No cash payment in lieu of fractional shares and no dividends or other distributions with respect to Parent Shares with a record date after the Effective Time will be paid to any holder of an unsurrendered Certificate until the surrender of such Certificate in accordance with this Article III. Subject to the effect of applicable escheat or similar Laws, following the surrender of any such Certificate in accordance herewith, there will be paid to the holder of the New Diamond Shares represented by such Certificate or as otherwise directed by the related letter of transmittal, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional Parent Share to which such holder is entitled pursuant to Section 3.6(h) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to whole Parent Shares to which such holder is entitled pursuant to Section 3.6(c), and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such whole Parent Shares. Pending such payment, all such amounts shall be deposited by Parent, as promptly as practicable, with the Paying Agent, to be held in trust by the Paying Agent for the benefit of the applicable holders of unsurrendered Certificates.

(j) Holders of unsurrendered Certificates shall be entitled to vote after the Effective Time at any meeting of Parent stockholders the number of whole Parent Shares the holder of such Certificates would be entitled to receive in the Emerald Merger, regardless of whether such holders have exchanged their Certificates.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY, NEW DIAMOND,

AND NEW DIAMOND MERGER SUB

Except as set forth in the corresponding sections of the disclosure letter (subject to the provisions of Section 9.2) delivered by the Company to Parent on or prior to the execution of this Agreement (the “Company Disclosure Letter”) and except as disclosed in the Form 10-K of the

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Company for the fiscal period ended February 3, 2005, as amended through the date hereof (as amended, the “Company Form 10-K”), the Proxy Statement for the Company’s 2005 Annual Meeting of Shareholders, and the Form 10-Qs and Form 8-Ks filed or furnished from the date of the filing of the Company Form 10-K to the date of this Agreement (and any amendments to any such filings which amendments are filed with the SEC prior to the date hereof) to the extent such qualifications are reasonably apparent (and which in no event shall include risk factors or other factors identified in general cautionary statements regarding reliance on forward looking statements in either case included in the Company SEC Reports); and provided that in this Article IV, except for this sentence and the representations and warranties contained in Section 4.1 (Organization), Section 4.2(a) and (c) (Authority; Enforceability), Section 4.5 (Capitalization of the Company), Section 4.7 (SEC Reports; Financial Information), Section 4.10(a)(iv), (x) and (xi) (Contracts), Section 4.13 (Employee Compensation and Benefit Plans; ERISA), Section 4.14 (Labor Matters), Section 4.19 (Tax) and Section 4.20 (Insurance), all references to the “Company” or to the “Company Subsidiaries” shall (1) prior to the Separation, be deemed to refer to the Company or to the Company Subsidiaries, as applicable, in relation to the New Diamond Business, and (2) following the Separation, be deemed to refer to New Diamond or to its Subsidiaries, as applicable, in relation to the New Diamond Business; the Company hereby represents and warrants to Parent and Acquisition Sub that:

SECTION 4.1 Organization.

(a) Each of the Company and the Company Subsidiaries is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation or other entity in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so organized, qualified or in good standing or have such power or authority would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Complete and correct copies of the certificate of incorporation and by-laws of the Company and of the certificate of incorporation and the by-laws or the equivalent organizational documents of each of the Material Company Subsidiaries as currently in effect have been made available to Parent and, as so made available, are in full force and effect, and no other organizational documents are applicable to or binding upon the Company or such Material Company Subsidiaries.

(b) New Diamond is a Delaware corporation and, as of the date hereof, a wholly owned subsidiary of the Company. It was formed solely for the purpose of engaging in the Transactions and, prior to the Initial Effective Time, has engaged in no business activities and has conducted no operations.

(c) New Diamond Merger Sub is a Delaware corporation and, as of the date hereof, a wholly owned subsidiary of New Diamond. It was formed solely for the purpose of engaging in the transactions contemplated hereby and, prior to the Initial Effective Time, has engaged in no business activities and has conducted no operations.

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SECTION 4.2 Authority; Enforceability.

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary pursuant to its governing documents or the DGCL to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Diamond Merger, the adoption of this Agreement and the Charter Amendment by the holders of a majority of the outstanding Company Shares) (the “Requisite Company Stockholder Vote”)). The Company Board of Directors has (i) approved this Agreement and the transactions contemplated hereby, (ii) determined that the terms of this Agreement are fair to and in the best interests of the Company and its stockholders, and (iii) declared the advisability of this Agreement. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(b) Attached as Exhibit G hereto is a true and correct copy of the Standalone Drug Sale Agreement. The Company has all requisite power and authority to enter into the Standalone Drug Sale Agreement and consummate the Standalone Drug Sale, and such agreement has been duly and validly executed by the Company and, to the Company’s Knowledge (without any inquiry by any officers of the Company), any other party thereto, and constitutes the valid and binding obligation of the Company and, to the Company’s Knowledge (without any inquiry by any officers of the Company), each party thereto, enforceable against such party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(c) Attached as Exhibit F hereto is a true and correct copy of the Separation Agreement. The Company has all requisite power and authority to enter into the Separation Agreement and consummate the transactions contemplated thereby, and such agreement has been duly and validly executed by the Company and, to the Company’s Knowledge (without any inquiry by any officers of the Company), any other party thereto, and constitutes the valid and binding obligation of the Company and, to the Company’s Knowledge (without any inquiry by any officers of the Company), each party thereto, enforceable against such party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

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(d) Each of New Diamond and New Diamond Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by New Diamond and New Diamond Merger Sub of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of New Diamond and New Diamond Merger Sub, and no other corporate proceedings on the part of New Diamond or New Diamond Merger Sub are necessary pursuant to their governing documents or the DGCL to authorize this Agreement or to consummate the transactions contemplated hereby (other than, with respect to the Diamond Merger, the adoption of this Agreement by New Diamond as the sole stockholder of New Diamond Merger Sub and, with respect to the Emerald Merger, the adoption of this Agreement by the Company as the sole stockholder of New Diamond). The Company has caused the directors of each of New Diamond and New Diamond Merger Sub to approve and declare advisable, and such directors have approved and declared advisable, this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by New Diamond and New Diamond Merger Sub and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of each of New Diamond and New Diamond Merger Sub enforceable against New Diamond and New Diamond Merger Sub in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

SECTION 4.3 Non-Contravention. The execution, delivery and performance of the Transaction Agreements by each of the Company, New Diamond, and New Diamond Merger Sub does not and will not (a) conflict with or violate its respective organizational documents, (b) conflict with or violate the organizational documents of any Company Subsidiary, (c) assuming that all consents, approvals and authorizations contemplated by Section 4.4 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to the Company or any of the Company Subsidiaries or by which its or any of their respective properties are bound, or (d) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation (which, in any case, is not a contract, agreement or other arrangement pursuant to which the Company or any Company Subsidiary leases real property, including the Real Property Leases) to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or its or any of their respective properties are bound, except in the case of clauses (b), (c) and (d) of this Section 4.3, for any such conflict, violation, breach, default, loss, right or other occurrence which would not (i) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect, or (ii) reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

SECTION 4.4 Governmental Consents. The execution, delivery and performance of the Transaction Agreements by the Company, New Diamond, and New Diamond Merger Sub and the consummation of the Transactions does not and will not require any consent, approval,

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authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant to (a) the HSR Act, (b) the Securities Act and the Exchange Act, (c) state securities, takeover and “blue sky” Laws, (d) the rules and regulations of the NYSE or the PCX, (e) the DGCL, (f) the applicable requirements of antitrust or other competition Laws of other jurisdictions or investment Laws relating to foreign ownership, and (g) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not (i) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect, or (ii) reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

SECTION 4.5 Capitalization of the Company.

(a) The authorized capital stock of the Company consists of 1,200,000,000 Company Shares and 10,000,000 shares of preferred stock. As of the close of business on January 19, 2006 (the “Capitalization Date”), (i) 368,970,767 Company Shares were issued and outstanding, (ii) no Company Shares were held in the treasury of the Company or by Company Subsidiaries, (iii) 49,868,600 Company Shares were reserved for issuance upon or otherwise deliverable in connection with the conversion of the Company’s 7.25% Hybrid Income Term Security Units (“HITS”), (iv) 62,300,123 Company Shares were reserved for issuance upon or otherwise deliverable in connection with the grant of equity-based awards (including Stock Units) or the exercise of outstanding Options issued pursuant to the Company Plans and (v) no shares of preferred stock were outstanding. Section 4.5 of the Company Disclosure Letter sets forth, as of the date specified thereon, a complete and accurate list of the Options granted under each Stock Plan and the exercise price of each such Option and the number of underlying Shares. As of the Capitalization Date, the Company had outstanding (1) Options to purchase 35,840,443 Company Shares, (2) 6,051,892 Company Shares underlying Stock Units, and (3) 46,000,000 HITS obligating the holders thereof to purchase Company Shares in accordance with the terms thereof. From the close of business on the Capitalization Date until the date of this Agreement, no Company Shares, Options, Stock Units or HITS have been granted or issued except for Company Shares issued pursuant to the exercise of Options, the settlement of Stock Units (and dividend equivalents thereon) or the settlement of HITS in accordance with their present terms. All of the outstanding securities of the Company are duly authorized and validly issued, and, to the extent such concepts are applicable thereto, fully paid and nonassessable. Except for the Rights Agreement, dated as of December 9, 1996, between the Company and American Stock Transfer & Trust Company, as successor to ChaseMellon Shareholder Services, LLC, as subsequently amended on August 2, 1998, March 16, 1999 and September 26, 2003 (as so amended, the “Rights Plan”) and the Rights (as defined in the Rights Plan) and except as set forth above, there are no outstanding shares, options, warrants, calls, stock appreciation rights, or other Equity Interests, rights or commitments or any other agreements of any character relating to dividend rights or to the sale, issuance or voting of, or the granting of rights to acquire, any shares of capital stock or securities of the Company, or any securities or obligations convertible into, exchangeable for or evidencing the right to purchase any shares of capital stock or securities of the Company.

(b) Except as set forth in Section 4.5(a), (i) there are no preemptive rights of any kind which obligate the Company or any Company Subsidiary to issue or deliver any shares of capital stock or securities of the Company or any securities or obligations convertible or exchangeable

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into or exercisable for, or giving any Person a right to subscribe for or acquire from the Company or any Company Subsidiary, any shares of capital stock or securities of the Company, and (ii) there is no agreement, contract, commitment or arrangement pursuant to which the Company or any Company Subsidiary is or may become obligated to repurchase or redeem any shares of capital stock or securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for any shares of capital stock or securities of the Company. Except for the HITS, neither the Company nor any Company Subsidiary has outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible, exchangeable, exercisable or can be settled for or into securities having the right to vote) with the stockholders of the Company on any matter.

(c) As of the date hereof, the authorized capital stock of New Diamond consists of 1,000 New Diamond Shares. Immediately prior to the Initial Effective Time, the certificate of incorporation of New Diamond will be amended to provide that the authorized capital stock of New Diamond will consist of 1,200,000,000 New Diamond Shares. As of the date hereof, 100 New Diamond Shares are issued and outstanding, all of which New Diamond Shares have been issued to and are held by the Company. Except for the New Diamond Shares, there are no securities of New Diamond authorized, issued or outstanding.

(d) The authorized capital stock of New Diamond Merger Sub consists of 1,000 shares of Common Stock, 100 of which shares have been issued to and are held by New Diamond. Except for such shares of Common Stock, there are no securities of New Diamond Merger Sub authorized, issued or outstanding.

SECTION 4.6 Company Subsidiaries. All of the outstanding Equity Interests, as applicable, of each Company Subsidiary are validly issued, fully paid and nonassessable and are owned, directly or indirectly, by the Company free and clear of any Encumbrances. There are no outstanding options, warrants, calls, stock appreciation rights, or other rights or commitments or any other agreements of any character (other than agreements between the Company and any Company Subsidiary) relating to the sale, issuance or voting of, or the granting of rights to acquire any Equity Interests of any such Company Subsidiary, or any securities or other instruments convertible into, exchangeable for or evidencing the right to purchase any Equity Interests of any such Company Subsidiary. Section 4.6 of the Company Disclosure Letter sets forth each Company Subsidiary. No Subsidiary of the Company owns any stock, or any option or other instrument convertible into or calculated by reference to any stock, in the Company or any HITS.

SECTION 4.7 SEC Reports; Financial Information.

(a) The Company has timely filed or furnished, as applicable, all forms, reports, statements, certifications and other documents (including all exhibits, supplements and amendments thereto) required to be filed or furnished by it with the Securities and Exchange Commission (“SEC”) since January 1, 2003 (collectively, with any amendments thereto, the “Company SEC Reports”), each of which, including any financial statements or schedules included therein, as finally amended prior to the date hereof, has complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, each as in effect on the date so filed. None of the Company SEC Reports contained, when filed

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as finally amended prior to the date hereof, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each of (i) the consolidated balance sheets included in the Company SEC Reports (including the related notes and schedules) was prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly presents, in all material respects, the consolidated financial position of the Company and the Company Subsidiaries at the respective dates thereof and (ii) the related consolidated statements of earnings, cash flows and stockholders’ equity included in the Company SEC Reports (including the related notes and schedules) were prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly present, in all material respects, the results of operations and cash flows of the Company and the Company Subsidiaries for the periods indicated (subject, in the case of each of clause (i) and (ii), to normal and/or recurring year-end adjustments and the absence of full footnote disclosure in the case of unaudited financial statements).

(b) Attached hereto are (i) unaudited selected results of operations data for each of the New Diamond Business, the Standalone Drug Business and the Retained Business for the 52 weeks ended January 29, 2004, the 53 weeks ended February 3, 2005 and the 39 weeks ended November 3, 2005 (collectively, the “Separate Operations Data,” attached hereto as Exhibit H) and (ii) unaudited selected balance sheet data for the Company and each of the Company’s operating regions as of February 3, 2005 (the “Separate Balance Sheet Data,” attached hereto as Exhibit I). The Separate Operations Data and the Separate Balance Sheet Data have been compiled from source books, records and financial reports of the Company and its Subsidiaries. Such source books, records and financial reports were prepared by the Company in the ordinary course of its business, are accurate in all material respects and were subject to the Company’s internal controls. The allocations of the Separate Operations Data among the New Diamond Business, the Standalone Drug Business and the Retained Business are consistent with Section 4.7(b)(i) of the Company Disclosure Letter and the allocations of the Separate Balance Sheet Data are allocated in the manner described in Section 4.7(b)(ii) of the Company Disclosure Letter. The Separate Balance Sheet Data and the Separate Operations Data reconcile to the Company’s historical financial statements filed with the SEC and, in the Company’s opinion, present fairly, in all material respects, the information presented in the Separate Balance Sheet Data and the Separate Operations Data, respectively. Subject to the changes in accounting principles and methodologies effected by the Company as described in the Company SEC Reports, the accounting principles and methodologies used in the preparation of the Separate Operations Data were applied on a consistent basis, in all material respects, for each of the periods presented therein.

(c) The Company has designed and maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that provide reasonable assurance that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods

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specified in the SEC’s rules and forms, and (ii) has disclosed and reported, based on its most recent evaluation of its internal control over financial reporting prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of its internal control over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. The Company has heretofore furnished to Parent complete and correct copies of the Company’s final report to the audit committee of the Company Board of Directors for fiscal 2004 and all subsequent regular quarterly updates, in each case in respect of the matters described in clause (ii) of the immediately preceding sentence.

(d) Except for matters resolved prior to the date hereof, since January 1, 2003, (i) to the Knowledge of the Company neither the Company nor any Company Subsidiary nor any director, officer, employee, auditor, accountant or representative of the Company or of any Company Subsidiary has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Company Subsidiary or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any Company Subsidiary has engaged in questionable accounting or auditing practices, and (ii) no attorney representing the Company or any Company Subsidiary, whether or not employed by the Company or any Company Subsidiary, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board of Directors or any committee thereof or to the General Counsel or Chief Executive Officer of the Company.

SECTION 4.8 No Undisclosed Liabilities. Neither the Company nor any of the Company Subsidiaries has any liabilities, claims or indebtedness of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, whether due or to become due, in each case, that are required by GAAP to be accrued, reserved against, or disclosed in a consolidated balance sheet or the notes thereto, except liabilities that (i) are accrued or reserved against in the financial statements included in the Company Form 10-K or Quarterly Report on Form 10-Q most recently filed prior to the date hereof or are disclosed in the notes thereto, (ii) were incurred in the ordinary course of business and consistent with past practice since the date of the most recent balance sheet included in the most recent quarterly report on Form 10-Q filed by the Company with the SEC prior to the date of this Agreement (the “Company Balance Sheet Date”) and would not reasonably be expected to have, individually or in the aggregate, (A) a Company Material Adverse Effect or (B) a Material Adverse Effect as that term is defined in the Standalone Drug Sale Agreement, (iii) are incurred pursuant to the transactions contemplated by this Agreement, (iv) have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business consistent with past practice or (v) were incurred outside the ordinary course of business since the Company Balance Sheet Date, but which are, and would reasonably be expected to be, individually or in the aggregate, immaterial in amount or nature.

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SECTION 4.9 Absence of Certain Changes or Events. Since the Company Balance Sheet Date, except as expressly contemplated by this Agreement, the Company and the Company Subsidiaries have conducted their businesses in the ordinary course in all material respects consistent with past practice, and, since such date, there has not been any change, event or occurrence which has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as set forth in Section 4.9 of the Company Disclosure Letter, since the Company Balance Sheet Date to the date hereof, neither the Company nor any Company Subsidiary has taken any action that, if taken after the date of this Agreement, would constitute a breach of the covenants set forth in Sections 6.1(a)(i), (ii), (iv)(B), (v)(A), (v)(B), (v)(C), (v)(D) (other than any Real Property Leases), (viii) or (xi) hereof.

SECTION 4.10 Contracts.

(a) As of the date hereof, none of the Company nor any Company Subsidiary is a party to or bound by any: (i) contract (other than this Agreement) that would be required to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K of the SEC; (ii) except as contemplated by this Agreement, contract containing covenants of the Company or any Company Subsidiary not to compete in any line of business, industry or geographical area (in each case, other than agreements with respect to real property) in any manner that is material to the Company and the Company Subsidiaries, taken as a whole; (iii) contract which creates a partnership or joint venture or similar arrangement that is material to the Company and the Company Subsidiaries, taken as a whole; (iv) contract (other than purchase orders) for the purchase of merchandise for resale with the Company’s top ten suppliers of merchandise for resale (measured by dollar volume during the fiscal year ended February 3, 2005), or requirements or output contract or any contract containing an exclusive arrangement or agreement with a Company supplier under which, in each case, the Company and the Company Subsidiaries have made or reasonably expect to make $20,000,000 of payments in any 12 month period; (v) indenture, credit agreement, loan agreement, security agreement, note, mortgage or other evidence of Indebtedness or agreement providing for Indebtedness, or capital lease or sublease of real or personal property (including synthetic leases and similar financing arrangements), in excess of $25,000,000; (vi) contract (other than the Transaction Agreements and the Standalone Drug Sale Agreement) for the sale of any of its assets after the date hereof in excess of $35,000,000 (other than in the ordinary course of business consistent with past practice); (vii) collective bargaining or employee association agreement covering in excess of 50 employees; (viii) except for HITS, contract that contains a put, call, right of first refusal or similar right pursuant to which the Company or any Company Subsidiary would be required to purchase or sell, as applicable, any Equity Interests of any Person (other than a Company Subsidiary); (ix) settlement or conciliation agreement or similar agreement with a Governmental Authority or order or consent of a Governmental Authority to which the Company or any of the Company Subsidiaries is a party involving future performance by the Company or any Company Subsidiary which is material to the Company and Company Subsidiaries taken as a whole; (x) distribution, supply, inventory purchase or private label products purchase contract under which the Company and the Company Subsidiaries are obligated to make payments in the future in excess of $10,000,000 per annum during the life of the contract and which is not cancelable (without material penalty, cost or other liability) within one year; and (xi) other contract (other than the Transaction Agreements, the Standalone Drug Sale Agreement, purchase orders for the purchase of inventory or supplies or agreements with respect to real property made in the

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ordinary course of business consistent with past practice) under which the Company and the Company Subsidiaries have made payments in the past 12 months or are obligated to make payments in the future in excess of (A) $5,000,000 per annum or $10,000,000 during the life of the contract in the case of licenses or contracts for the provision of agency, advisory or consulting services, and (B) $20,000,000 per annum or $50,000,000 during the life of the contract in the case of any other contracts. Each such contract described in clauses (i)-(xi), together with any contract of the type described in clauses (i)-(xi) above and entered into on or after the date hereof and prior to the Closing Date, is referred to herein as a “Material Contract.”

(b) (i) Neither the Company nor any Company Subsidiary is (and, to the Company’s Knowledge, no other party is) in default under any Material Contract in any material respect, (ii) each of the Material Contracts is, in all material respects, in full force and effect, and is the valid, binding and enforceable obligation of the Company and the Company Subsidiaries, and to the Company’s Knowledge, of the other parties thereto, and (iii) the Company and the Company Subsidiaries have performed all respective material obligations required to be performed by them to date under the Material Contracts and are not (with or without the lapse of time or the giving of notice, or both) in material breach thereunder. The Company has made available to Parent true and complete copies of each Material Contract, including all material amendments thereto, except to the extent such disclosure would violate the confidentiality provisions of such Material Contract.

(c) Section 4.10(c) of the Company Disclosure Letter is a complete and correct list of all distribution, supply, inventory purchase or private label products purchase contracts under which the Company has received any advance of money in excess of $10,000,000 (including advances characterized as advance payments, inducements, incentives, rebates, fees or promotional funds) subject to repayment, in whole or in part, for reasons relating to purchase volume (including minimum volume requirements, minimum number of participating stores, or repayment for early cancellation) (such contracts, “Advance Contracts”). The consummation of the Transactions and the Standalone Drug Sale will not cause any advances under the Advance Contracts to be repayable within one year of the Closing Date (the “First Operating Year”), assuming the Company’s and its Subsidiaries’ business consisted only of the New Diamond Business and generated a sales volume during the course of the First Operating Year that is consistent with the sales volume of the New Diamond Business over that past year.

SECTION 4.11 Compliance with Law and Reporting Requirements.

(a) The Company and the Company Subsidiaries are not (and have not been since the Company Balance Sheet Date) in material violation of any Law, and have not received any written notice of any material violation of Law. The Company and the Company Subsidiaries have, and are (and have been since the Company Balance Sheet Date) in compliance with, all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from Governmental Authorities required to conduct their respective businesses as now being conducted, except for any such permit, license, authorization, exemption, order, consent, approval or franchise the absence of, or the non-compliance with which, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

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(b) None of the Company Subsidiaries is, or has at any time since January 1, 2003 been, subject to the reporting requirements of Sections 13(a) or 15(d) under the Exchange Act.

SECTION 4.12 Litigation. There are no Actions pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary or, to the Knowledge of the Company, any officer, director or employee of the Company or any Company Subsidiary in such capacity, which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is a party or subject to or in default under any material Governmental Order.

SECTION 4.13 Employee Compensation and Benefit Plans; ERISA.

(a) Section 4.13(a) of the Company Disclosure Letter sets forth a correct and complete list of each material “employee benefit plan” (within the meaning of Section 3(3) of ERISA but excluding any plan that is a “multiemployer plan,” as defined in

Section 3(37) of ERISA (“Multiemployer Plan”)) and each other material director and employee plan, program, agreement or arrangement, vacation or sick pay policy, fringe benefit plan, compensation, severance or employment agreement, stock bonus, stock purchase, stock option, restricted stock, stock appreciation right or other equity-based plan, and bonus or other incentive compensation or salary continuation plan or policy contributed to, sponsored or maintained by or with respect to which the Company or any Company Subsidiary has any liability (contingent or otherwise) as of the date hereof for the benefit of any current, former or retired employee, officer, consultant, independent contractor or director of the Company or any Company Subsidiary (collectively, the “Company Employees”; such plans, programs, policies, agreements and arrangements, collectively, being the “Company Plans”).

(b) With respect to each Company Plan, the Company has made available to the Parent a current, accurate and complete copy thereof (or, if a plan is not written, a written description thereof) and, to the extent applicable, (i) any related trust or custodial agreement or other funding instrument, (ii) the most recent determination letter, if any, received from the Internal Revenue Service (“IRS”), (iii) any current summary plan description or employee handbook, (iv) for the most recent year (A) the Form 5500 and attached schedules, (B) audited financial statements, and (C) actuarial valuation reports, if any, and (v) copies of any correspondence from the IRS, SEC, Pension Benefit Guaranty Corporation (the “PBGC”) or Department of Labor (or any agency thereof) relating to any material compliance issues with respect to any Company Plan.

(c) Except as would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect, each Company Plan has been established and is being administered in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code, and other Laws.

(d) With respect to any Multiemployer Plan with respect to which the Company or any Company Subsidiary has any liability or contributes (or has at any time contributed) or has an obligation to make a contribution, (i) neither the Company nor any Company Subsidiary has incurred any withdrawal liability under Subtitle E of Title IV of ERISA (“Withdrawal Liability”) that remains unsatisfied as would reasonably be expected to have, individually or in the

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aggregate, a Company Material Adverse Effect, and (ii) neither the Company nor any Company Subsidiary has received any notification, nor has any reason to believe, that any such Multiemployer Plan is in reorganization, has been terminated, is insolvent, or prior to the Effective Time is reasonably likely to be in reorganization, to be insolvent, or to be terminated.

(e) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Company, threatened with respect to any Company Plan.

(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) neither the Company nor any Company Subsidiary has incurred any liability under Subtitle C or D of Title IV of ERISA that has not been satisfied in full, and (ii) no condition exists that presents a risk to the Company or any Company Subsidiary of incurring any such liability other than liability for premiums due the PBGC. With respect to each Company Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (A) there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not waived, (B) the fair market value of the assets of such plan equals or exceeds the actuarial present value of all accrued benefits under such plan (whether or not vested), (C) since January 1, 2003, no reportable event within the meaning of Section 4043(c) of ERISA for which the 30-day notice requirement has not been waived has occurred, and the consummation of the transactions contemplated by this agreement will not result in the occurrence of any such reportable event, (D) all premiums to the PBGC have been timely paid in full, and (E) the PBGC has not instituted proceedings to terminate any such plan and, to the Company’s Knowledge, no condition exists that presents a risk that such proceedings will be instituted or which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any such plan and the Company has not received any notice from the PBGC regarding the Transactions and/or the funded status of any Company Plan subject to Title IV of ERISA.

(g) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, each Company Plan which is intended to be qualified under Section 401(a) of the Code is so qualified and has received a determination letter to that effect from the IRS and, to the Knowledge of the Company, no circumstances exist which would reasonably be expected to materially adversely affect such qualification or exemption.

(h) The Company and the Company Subsidiaries have reserved the right to amend, terminate or modify at any time all plans or arrangements providing for retiree health or life insurance coverage, and there has been no communication to current or former employees of the Company and Company Subsidiaries which could reasonably be interpreted to promise or guarantee such individuals or their dependents retiree health or life insurance or other retiree death benefits on a permanent basis.

(i) All Company Plans subject to the laws of any jurisdiction outside of the United States (i) have been maintained in accordance with all applicable requirements, (ii) if they are intended to qualify for special tax treatment, meet all requirements for such treatment, and (iii) if

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they are intended to be funded and/or book-reserved, are fully funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions.

SECTION 4.14 Labor Matters. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any Company Subsidiary has received notice during the past two years of the intent of any Governmental Authority responsible for the enforcement of labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws to conduct an investigation of or affecting the Company or a Company Subsidiary and, to the Knowledge of the Company, no such investigation is in progress. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there are no (and have not since June 30, 2003 been any) labor disputes, strikes, organizing activities or work stoppages against the Company or Company Subsidiaries pending, or to the Knowledge of the Company, threatened. No labor organization or group of 50 or more employees of the Company or any Company Subsidiary has made a pending formal demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the Company’s Knowledge, threatened to be brought. The Company and each of the Company Subsidiaries is in compliance with all collective bargaining agreements respecting employment and employment practices, terms and conditions of employment, wages and hours and occupational safety and health (including, without limitation, classifications of service providers as employees and/or independent contractors).

SECTION 4.15 Properties.

(a) Section 4.15(a) of the Company Disclosure Letter contains a true and complete list of all real property owned by the Company or any Company Subsidiary (other than immaterial real property that is not currently used (or currently identified for future use) in connection with the operation of a grocery store, drug store and/or distribution center) (each, an “Owned Real Property,” and collectively, the “Owned Real Properties”).

(b) Section 4.15(b) of the Company Disclosure Letter contains a true and complete list of all real property leased or subleased (whether as tenant or subtenant) by the Company or any Company Subsidiary (other than immaterial real property that is not currently used (or currently identified for future use) in connection with the operation of a grocery store, drug store and/or distribution center) (each, including the improvements thereon, a “Leased Real Property,” and collectively, the “Leased Real Properties”). With respect to the Leased Real Properties and the Real Property Leases (as defined below), there are no non-disturbance agreements and declarations of covenants, restrictions, reciprocal and/or operating easements, development agreements, or agreements with municipal authorities with respect to zoning or planning, including amendments relating thereto, that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Substantially accurate (to the Company’s Knowledge) summaries prepared in the ordinary course of business of the principal economic terms of each of the leases pursuant to which the Company leases (as a lessee) real property for the operation of a grocery or drug store, distribution center, or other material operation center, as such leases have been amended to date (each lease, including all amendments thereto, a “Real Property Lease”) have been made available to Parent.

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(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company or one of the Company Subsidiaries has good and marketable fee simple title to all Owned Real Properties and valid leasehold estates in all Leased Real Properties free and clear of all Encumbrances. The Company or one of the Company Subsidiaries has exclusive use and possession of each Leased Real Property and Owned Real Property, other than any use or occupancy rights granted to third-party owners, tenants or licensees pursuant to agreements with respect to such real property entered in the ordinary course of business (each agreement, including all amendments thereto, a “Third Party Use and Occupancy Agreement”), none of which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, each Real Property Lease and each Third Party Use and Occupancy Agreement is in full force and effect and is valid and enforceable in accordance with its terms, and there is no material default under any Real Property Lease or any Third Party Use and Occupancy Agreement either by the Company or the Company Subsidiaries party thereto or, to the Company’s Knowledge, by any other party thereto, and no event has occurred that, with the lapse of time or the giving of notice or both, would constitute a default by the Company or the Company Subsidiaries thereunder.

(e) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there are no pending or, to the Company’s Knowledge, threatened condemnation or eminent domain proceedings that affect any Owned Real Property or Leased Real Property, and neither the Company nor the Company Subsidiaries have received any written notice of the intention of any Governmental Authority or other Person to take any Owned Real Property or Leased Real Property.

SECTION 4.16 Tangible Personal Property. Other than with respect to the Owned Real Properties and the Leased Real Properties and except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company or one of the Company Subsidiaries has good, valid and indefeasible title to or, in the case of leased assets, a valid, binding and enforceable leasehold interest in, all tangible assets reflected on the most recent consolidated balance sheet included in Company SEC Reports filed prior to the date hereof as being owned by the Company or one of the Company Subsidiaries or purchased or acquired by the Company or a Company Subsidiary after the date of such most recent balance sheet, in each case free and clear of any Encumbrance other than Permitted Encumbrances.

SECTION 4.17 Intellectual Property; IT Systems.

(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries own all right, title, and interest in, or have the right to use, pursuant to a license or otherwise, in each case, free and clear of all Encumbrances, all Intellectual Property required to operate their respective businesses as presently conducted (the “Company Intellectual Property”), (ii) Section 4.17 of the Company Disclosure Letter lists all registrations and applications for Intellectual Property owned by the Company and/or any of the Company Subsidiaries and material to the Company’s business, and (iii) as of the date hereof, (x) neither the Company nor any Company

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Subsidiary has received any written notice of any actual or threatened Actions alleging a violation, misappropriation or infringement of the Intellectual Property of any other Person, except for any of the foregoing that have since been resolved, (y) to the Company’s Knowledge, the operation of the business of the Company and each Company Subsidiary does not violate, misappropriate or infringe and has not previously violated, misappropriated or infringed the Intellectual Property of any other Person (except for any previous violation, misappropriation or infringement which has been fully and conclusively resolved with such other Person), and (z) to the Company’s Knowledge, no other Person has violated, misappropriated or infringed any Intellectual Property owned by the Company or any Company Subsidiary.

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the IT Systems of the Company and the Company Subsidiaries are adequate for the operation of their respective businesses as presently conducted and (ii) there has not been any material malfunction with respect to any of the material IT Systems of the Company or the Company Subsidiaries since January 31, 2002 that has not been remedied or replaced in all material respects.

(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the use of the Data by the Company or the Company Subsidiaries in the operation of their business does not infringe or violate the privacy rights of any Person or otherwise violate any Law or regulation, (ii) the Company and the Company Subsidiaries have taken reasonable and customary measures consistent with generally accepted industry practices to protect the privacy of the Data of their respective customers, and (iii) to the Company’s Knowledge, since January 31, 2002 there have been no security breaches with respect to the privacy of such Data.

SECTION 4.18 Environmental Laws.

(a) (i) Except as would not reasonably be expected to have a Company Material Adverse Effect, to the Company’s Knowledge, the Company and each Company Subsidiary comply and have complied with all applicable Environmental Laws (as defined below), and possess and comply, and have complied, with all applicable Environmental Permits (as defined below) required under such laws to operate as it currently operates; (ii) except as would not reasonably be expected to have a Company Material Adverse Effect, to the Company’s Knowledge, there are no, and there have not been any, Materials of Environmental Concern (as defined below) at any property currently or formerly owned or operated by the Company or a Company Subsidiary, under circumstances that have resulted in or are reasonably likely to result in liability of the Company or a Company Subsidiary under any applicable Environmental Laws; (iii) except as would not reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any Company Subsidiary has received any written notification alleging that it is liable for, or request for information pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act or similar foreign, state or local Law concerning, any release or threatened release of Materials of Environmental Concern at any location except, with respect to any such notification or request for information concerning any such release or threatened release, to the extent such matter has been fully resolved such that no further action is required with the appropriate foreign, federal, state or local regulatory authority or otherwise; and (iv) the reports of environmental assessments, audits and similar investigations

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previously made available to Parent are all material such reports in the possession of the Company and conducted since January 30, 2003 on any property currently or formerly owned or operated by the Company or any Company Subsidiary. There are no Actions arising under Environmental Laws pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as would not reasonably be expected to have a Company Material Adverse Effect, at each property where Asbestos-Containing Material (“ACM”) has been identified, all ACM is non-friable, encapsulated or abated and no ACM is present in any property where the Company has not implemented an Asbestos Operation and Management Plan.

(b) Notwithstanding any other representations and warranties in this Agreement, the representations and warranties in this Section 4.18 are the only representations and warranties in this Agreement with respect to Environmental Laws, Environmental Permits or Materials of Environmental Concern.

(c) For purposes of this Agreement, the following terms have the meanings assigned below:

“Environmental Laws” means all Laws relating to the protection of the environment, including the ambient air, soil, surface water or groundwater, or relating to the protection of human health from exposure to Materials of Environmental Concern.

“Environmental Permits” means all permits, licenses, registrations, and other authorizations required under applicable Environmental Laws.

“Materials of Environmental Concern” means any hazardous, acutely hazardous, or toxic substance or waste defined or regulated as such under Environmental Laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act and the federal Resource Conservation and Recovery Act.

SECTION 4.19 Taxes. (a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (1) all Tax Returns required to be filed by, or with respect to any activities of, the Company and the Company Subsidiaries have been filed (except those under valid extension), (2) all Taxes of the Company and the Company Subsidiaries have been paid or adequately provided for on the most recent financial statements included in the Company SEC Reports filed prior to the date hereof other than those Taxes accrued in the ordinary course of business since February 3, 2005, (3) neither the Company nor any Company Subsidiary has received notice in writing of any action, suit, proceeding, investigation, claim or audit against, or with respect to, any Taxes of the Company or any Company Subsidiary, (4) there are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company or any Company Subsidiary, (5) the Company and each Company Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, (6) neither the Company nor any Company Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which was the Company) or (A) has any liability for

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the Taxes of any Person (other than the Company, or any Company Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (7) neither the Company nor any Company Subsidiary has engaged in any “listed transaction” for purposes of Treasury Regulation Sections 1.6011-4(b)(2) and (c)(3), and (8) neither the Company nor any Company Subsidiary has waived any statute of limitations with respect to Taxes which has not since expired or agreed to any extension of time with respect to a Tax assessment or deficiency which has not since expired.

(b) Neither the Company nor any Company Subsidiary has distributed the stock of another company in a transaction (occurring within the past two years or that otherwise is part of the same plan or series of transactions, within the meaning of Section 355 of the Code, as the Mergers) that was purported or intended to be governed by Section 355 or Section 361 of the Code.

(c) Each of American Stores Company, LLC and American Stores Realty Company, LLC is a “disregarded” entity within the meaning of Treasury Regulation Section 301.7701-3. American Partners, LP is a partnership within the meaning of the Code. Except as set forth in Section 4.19(c) of the Company Disclosure Letter, each other Subsidiary of the Company is a corporation within the meaning of the Code.

SECTION 4.20 Insurance. All material insurance policies maintained by the Company and the Company Subsidiaries are listed in Section 4.20 of the Company Disclosure Letter. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, all such insurance policies are in full force and effect, all premiums due and payable thereon have been paid, and no written notice of cancellation or termination has been received with respect to such policy.

SECTION 4.21 Rights Plan. The Company Board of Directors has amended the Rights Plan so that (a) neither the execution, delivery or performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) cause the Rights to become exercisable, (ii) cause New Diamond, Parent or any of its Affiliates or Associates (as each such term is defined in the Rights Plan) to become an Acquiring Person (as such term is defined in the Rights Plan) or (iii) give rise to a Stock Acquisition Date or a Distribution Date (as each such term is defined in the Rights Plan), and (b) the Rights will expire immediately prior to the Initial Effective Time without any payment being made in respect thereof. The Company has made available to Parent a true and complete copy of such amendment.

SECTION 4.22 HITS.

(a) Complete and correct copies of the following documents relating to the HITS have been made available to the Parent and, as so made available, are in full force and effect: (i) the Purchase Contract Agreement dated May 7, 2004 and relating to the HITS, between the Company and U.S. Bank Trust National Association, as Purchase Contract Agent (the “HITS Purchase Contract Agreement”); (ii) the Pledge Agreement; (iii) the Remarketing Agreement; and (iv) the Indenture, dated as of May 1, 1992, between the Company and U.S. Bank Trust National Association, as successor Trustee, as supplemented by Supplemental Indenture No. 1, dated May 7, 2004, between the Company and U.S. Bank Trust National Association, as Trustee

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(as supplemented, the “HITS Indenture”). For purposes of this Section 4.22, all capitalized terms not defined in this Agreement shall have the meaning given to them in the HITS Purchase Contract Agreement.

(b) If the Surviving Corporation enters into such supplemental agreements in form reasonably satisfactory to the Purchase Contract Agent and Collateral Agent, so as to cause all obligations of the Company under the HITS Purchase Contract Agreement, the Purchase Contracts, the HITS Pledge Agreement, the HITS Remarketing Agreement, and the HITS Indenture, to become obligations of the Surviving Corporation upon consummation of the Mergers (which supplemental agreements to the HITS Purchase Contract Agreement shall provide that each Holder of a Purchase Contract shall have the rights provided by Section 5.04(b)(i) of the HITS Purchase Agreement), then the consummation of the Transactions shall not cause a breach of the covenant contained in Section 9.01 of the HITS Purchase Contract Agreement.

(c) Neither the Company nor the Surviving Corporation shall, immediately after any of the Transactions, (i) be in default of payment obligations under the HITS Purchase Contract Agreement, the Purchase Contracts, the HITS Pledge Agreement, the HITS Remarketing Agreement or the HITS Indenture, or (ii) be in material default in the performance of any other covenants under any of the foregoing agreements.

(d) If the Transactions are consummated and on the Purchase Contract Settlement Date, the Surviving Corporation, in exchange for the Purchase Price, delivers or causes the Collateral Agent to deliver to a Holder of a Purchase Contract on such date with respect to each Purchase Contract, utilizing the Settlement Rate in effect at such time based upon the Applicable Market Value of the Per Share Merger Consideration, (i) an amount in cash equal to the product obtained by multiplying the Cash Consideration by such Settlement Rate and (ii) a number of Parent Shares equal to the product obtained by multiplying the Stock Consideration by such Settlement Rate, such delivery shall be in compliance with Article 5 of the HITS Purchase Contract Agreement.

(e) If the Transactions are consummated and any Holder of a Purchase Contract effects a Cash Merger Early Settlement with respect to any Purchase Contract in accordance with Section 5.04(b)(ii) of the HITS Purchase Contract Agreement, and if the Surviving Corporation delivers or causes the Collateral Agent to deliver with respect to each Purchase Contract on the Cash Merger Early Settlement Date utilizing the Settlement Rate in effect at such time based upon the Applicable Market Value of the Per Share Merger Consideration: (i) (x) an amount in cash equal to the product obtained by multiplying the Cash Consideration by such Settlement Rate and (y) a number of Parent Shares equal to the product obtained by multiplying the Stock Consideration by such Settlement Rate; (ii) the Senior Notes, the Applicable Ownership Interests in the Treasury Portfolio or Treasury Securities, as the case may be, related to such Purchase Contract; and (iii) any prospectus required to be delivered by Section 5.04(b)(ii) of the HITS Purchase Contract Agreement, then such delivery shall be in compliance with Section 5.04(b)(ii) of the HITS Purchase Contract Agreement.

SECTION 4.23 Affiliate Transactions. There are no transactions, agreements, arrangements or understandings between (i) the Company or any of the Company Subsidiaries,

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on the one hand, and (ii) any Affiliate, stockholder, officer or director of the Company (other than the Company Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.

SECTION 4.24 Brokers. Except for Goldman, Sachs & Co. (“Goldman Sachs”) and The Blackstone Group, L.P. (“Blackstone”), no agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from the Company in connection with the Transactions. The amount of such fees and commissions payable to each of Goldman Sachs and Blackstone is set forth in Section 4.24 of the Company Disclosure Letter.

SECTION 4.25 State Takeover Statutes. No “fair price”, “moratorium”, “control share acquisition” or other similar antitakeover statute or regulation enacted under state or federal laws in the United States (with the exception of Section 203 of the DGCL) applicable to the Company, New Diamond or New Diamond Merger Sub is applicable to the transactions contemplated by this Agreement. Assuming the accuracy of the representations and warranties set forth in Section 5.13, the action of the Company Board of Directors in approving this Agreement (and the transactions contemplated hereby) is sufficient to render inapplicable to this Agreement (and the transactions contemplated hereby) the restrictions on “business combinations” (as defined in Section 203 of the DGCL) as set forth in Section 203 of the DGCL. The Company has delivered to Parent a true and complete copy of all resolutions of the Company Board of Directors relating to the applicability of such antitakeover statute or regulation to the Company or to this Agreement or the other transactions contemplated hereby. The original certificate of incorporation of each of New Diamond and New Diamond Merger Sub contains a provision expressly electing not to be governed by Section 203 of the DGCL.

SECTION 4.26 Fairness Opinion. Goldman Sachs, Blackstone and Houlihan Lokey Howard & Zukin have each delivered to the Company Board of Directors its written opinion (or oral opinion to be confirmed in writing), dated as of the date hereof, that, as of such date, the Per Share Merger Consideration is fair, from a financial point of view, to the holders of New Diamond Shares (as the former holders of Company Shares).

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB

Except as set forth in the corresponding sections of the disclosure letter (subject to the provisions of Section 9.2) delivered by Parent to the Company on or prior to the execution of this Agreement (the “Parent Disclosure Letter”) and except as disclosed in the Form 10-K of Parent for the fiscal period ended December 31, 2004, as amended through the date hereof (as amended, the “Parent Form 10-K”), the Proxy Statement for the Parent’s 2005 Annual Meeting of Stockholders, and the Form 10-Qs and Form 8-Ks filed or furnished from the date of the filing of the Parent Form 10-K to the date of this Agreement (and any amendments to any such filings which amendments are filed with the SEC prior to the date hereof) to the extent such qualifications are reasonably apparent (and which in no event shall include risk factors or other factors identified in general cautionary statements regarding reliance on forward looking statements in either case included in the Parent SEC Reports), Parent and Acquisition Sub hereby, jointly and severally, represent and warrant to the Company that:

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SECTION 5.1 Organization. Each of Parent and Acquisition Sub is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. Complete and correct copies of the certificate of incorporation and by-laws (or equivalent organizational documents) of Parent and Acquisition Sub as currently in effect, have been made available to the Company, and as so made available, are in full force and effect and no other organizational documents are applicable to or binding upon Parent and Acquisition Sub. Acquisition Sub is a direct wholly owned Subsidiary of Parent.

SECTION 5.2 Authority; Enforceability.

(a) Each of Parent and Acquisition Sub has the corporate or other power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by each of Parent and Acquisition Sub of this Agreement and the consummation by each of Parent and Acquisition Sub of the transactions contemplated hereunder have been duly authorized by all necessary action on the part of each of Parent and Acquisition Sub, and no other corporate proceedings on the part of Parent or Acquisition Sub are necessary pursuant to its governing documents or the DGCL to authorize this Agreement or to consummate the transactions contemplated hereby (other than (i) the adoption of this Agreement by Parent as the sole stockholder of Acquisition Sub and (ii) the approval of the issuance of Parent Shares in connection with the consummation of the Merger (the “Share Issuance”) by the holders of a majority of the votes cast by the holders of outstanding Parent Shares present (in person or by proxy) and entitled to vote on such matter at the Parent Stockholder Meeting, where a quorum is present (the “Requisite Parent Stockholder Vote”)). The boards of directors of Parent and Acquisition Sub have determined that it is in the best interests of Parent and Acquisition Sub and their respective stockholders, and declared it advisable, to enter into this Agreement, and have approved this Agreement in accordance with the DGCL. This Agreement has been duly executed and delivered by each of Parent and Acquisition Sub and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of each of Parent and Acquisition Sub, enforceable against each of them in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(b) Parent has all requisite power and authority to enter into the Separation Agreement and to consummate the transactions contemplated thereby, and such agreement has been duly and validly executed by Parent and, to Parent’s Knowledge (without any inquiry by any officers of Parent), any other party thereto, and constitutes the valid and binding obligation of Parent and, to Parent’s Knowledge (without any inquiry by any officers of Parent), each party thereto, enforceable against such party in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar

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Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

SECTION 5.3 Non-Contravention. The execution, delivery and performance of the Transaction Agreements, as applicable, by each of Parent and Acquisition Sub does not and will not (a) conflict with or violate its certificate of incorporation or by-laws or comparable governing documents, (b) conflict with or violate the governing documents of any other Subsidiary of Parent, (c) assuming that all consents, approvals and authorizations contemplated by Section 5.4 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Parent, Acquisition Sub or any of their Subsidiaries or by which it or any of its properties are bound or (d) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which Parent, Acquisition Sub or any of their Subsidiaries is a party or by which Parent, Acquisition Sub or any of their Subsidiaries or its or any of their properties are bound, except, in the case of clauses (b), (c), and (d) of this Section 5.3 for any such conflict, violation, breach, default, loss, right or other occurrence which would not (i) prevent or materially delay the consummation of the transactions contemplated by the Transaction Agreements, or (ii) reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.4 Governmental Consents. The execution, delivery and performance of this Agreement by each of Parent and Acquisition Sub and the consummation by each of Parent and Acquisition Sub of the Transactions do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant to (a) the HSR Act, (b) the Exchange Act, (c) state securities, takeover and “blue sky” Laws, (d) the rules and regulations of the NYSE and the PCX, (e) the DGCL, (f) the applicable requirements of antitrust or other competition Laws of other jurisdictions or investment Laws relating to foreign ownership, and (g) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.5 Capitalization. (a) The authorized capital stock of Parent consists of 400,000,000 shares of Common Stock, par value $1.00 per share (“Parent Shares”), and 1,000,000 shares of preferred stock. As of the close of business on the Capitalization Date, (i) 136,318,661 Parent Shares were issued and outstanding, (ii) 14,312,549 Parent Shares were held in the treasury of Parent or by Parent Subsidiaries, (iii) 10,159,743 Parent Shares were reserved for issuance upon or otherwise deliverable in connection with the grant of equity-based awards (including Retention Stock Units) or the exercise of outstanding stock options and (iv) 1,341 shares of preferred stock were outstanding. As of the Capitalization Date, Parent had outstanding (1) options to purchase 12,088,125 Parent Shares at a weighted average exercise price of $26.74 per share and (2) 810,750 Liquid Yield Option Notes (“LYONs”) which may be convertible into Parent Shares under certain circumstances in accordance with the terms thereof. From the close of business on the Capitalization Date until the date of this Agreement, no Parent Shares have been issued except for Parent Shares issued pursuant to the exercise of Options or to

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the settlement of the LYONs in accordance with their terms. Except for the Rights Agreement, dated as of April 12, 2000, between Parent and Wells Fargo Bank Minnesota, N.A. (formerly Norwest Bank Minnesota, N.A.) as Rights Agent (the “Parent Rights Plan”) and the Rights (as defined in the Parent Rights Plan) and except as set forth above, there are no outstanding shares, options, warrants, calls, stock appreciation rights, or other Equity Interests, rights or commitments or any other agreements of any character relating to dividend rights or to the sale, issuance or voting of, or the granting of rights to acquire, any shares of capital stock or voting securities of Parent, or any securities or obligations convertible into, exchangeable for or evidencing the right to purchase any shares of capital stock or voting securities of Parent.

(b) Except as set forth in Section 5.5(a), (i) there are no preemptive rights of any kind which obligate Parent or any Subsidiary of Parent to issue or deliver any shares of capital stock or voting securities of Parent or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire from Parent or any Subsidiary of Parent, any shares of capital stock or voting securities of Parent, and (ii) there is no agreement, contract, commitment or arrangement pursuant to which Parent or any Subsidiary of Parent is or may become obligated to repurchase or redeem any shares of capital stock or voting securities of Parent or any securities or obligations convertible or exchangeable into or exercisable for, any shares of capital stock or voting securities of Parent. Parent does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible, exchangeable or exercisable for or into securities having the right to vote) with the stockholders of the Parent on any matter.

SECTION 5.6 SEC Reports; Financial Information.

(a) Parent has timely filed or furnished, as applicable, all forms, reports, statements, certifications and other documents (including all exhibits, supplements and amendments thereto) required to be filed or furnished by it with the SEC since January 1, 2003 (collectively, with any amendments thereto, the “Parent SEC Reports”), each of which, including any financial statements or schedules included therein, as finally amended prior to the date hereof, has complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, each as in effect on the date so filed. None of the Parent SEC Reports contained, when filed as finally amended prior to the date hereof, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each of (i) the consolidated balance sheets included in the Parent SEC Reports (including the related notes and schedules) was prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly presents, in all material respects, the consolidated financial position of Parent and the Parent Subsidiaries at the respective dates thereof and (ii) the related consolidated statements of earnings, cash flows and stockholders’ equity included in the Parent SEC Reports (including the related notes and schedules) were prepared in accordance with GAAP in all material respects applied on a consistent basis throughout the periods covered and fairly present in all material respects the results of operations and cash flows of Parent and the Parent Subsidiaries for the periods indicated (subject, in the case of each of clause (i) and (ii), to normal and/or recurring year-end adjustments and the absence of full footnote disclosure in the case of unaudited financial statements).

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(b) Parent has designed and maintains a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Parent (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that provide reasonable assurance that material information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) has disclosed and reported, based on its most recent evaluation of such internal control over financial reporting prior to the date hereof, to Parent’s auditors and the audit committee of the Parent Board of Directors (A) any significant deficiencies and material weaknesses in the design or operation of its internal control over financial reporting which are reasonably likely to adversely affect in any material respect Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting. Parent has heretofore furnished to the Company complete and correct copies of all such reports (if any).

(c) Except for matters resolved prior to the date hereof, since January 1, 2003, (i) to the Knowledge of Parent neither Parent nor any Parent Subsidiary nor any director, officer, employee, auditor, accountant or representative of Parent or of any Parent Subsidiary has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Parent or any Parent Subsidiary or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Parent or any Parent Subsidiary has engaged in questionable accounting or auditing practices, and (ii) no attorney representing the Parent or any Parent Subsidiary, whether or not employed by Parent or any Parent Subsidiary, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by Parent or any of its officers, directors, employees or agents to the Parent Board of Directors or any committee thereof or to the General Counsel or Chief Executive Officer of Parent.

SECTION 5.7 No Undisclosed Liabilities. Neither Parent nor any of the Parent Subsidiaries has any liabilities, claims or indebtedness of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, whether due or to become due, in each case, that are required by GAAP to be accrued, reserved against or disclosed in a consolidated balance sheet or the notes thereto, except liabilities that (i) are accrued or reserved against in the most recent financial statements included in the Parent Form 10-K or Quarterly Report on Form 10-Q most recently filed prior to the date hereof or are disclosed in the notes thereto, (ii) were incurred in the ordinary course of business and consistent with past practice since the date of the most recent balance sheet included in the most recent quarterly report on Form 10-Q filed by Parent with the SEC prior to the date of this Agreement (the “Parent Balance Sheet Date”) and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, (iii) are incurred pursuant to the transactions contemplated by this Agreement, (iv) have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business consistent with past practice or (v) were incurred outside the

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ordinary course of business since the Company Balance Sheet Date, but which are, and would reasonably be expected to be, individually or in the aggregate, immaterial in amount or nature.

SECTION 5.8 Absence of Certain Changes or Events. Since the Parent Balance Sheet Date, except as contemplated by this Agreement, Parent and the Parent Subsidiaries have conducted their businesses in the ordinary course in all material respects consistent with past practice, and, since such date, there has not been any change, event or occurrence which has had or would reasonably be likely to have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.9 Compliance with Law and Reporting Requirements. Parent and the Parent Subsidiaries are not (and have not been since the Parent Balance Sheet Date) in violation of any Law, and have not received any written notice of any violation of Law, in each case except for any violation or possible violation that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Parent and the Parent Subsidiaries have, and are (and have been since the Parent Balance Sheet Date) in compliance with, all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from Governmental Authorities required to conduct their respective businesses as now being conducted, except for any such permit, license, authorization, exemption, order, consent, approval or franchise the absence of, or the non-compliance, with which would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

SECTION 5.10 Litigation. There are no Actions pending or, to the knowledge of Parent, threatened against Parent or any Parent Subsidiary or, to the knowledge of Parent, any officer, director or employee of Parent or any Parent Subsidiary in such capacity, which would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is a party or subject to or in default under any material Governmental Order.

SECTION 5.11 Financing. Attached hereto as Section 5.11 of the Parent Disclosure Letter is a true and complete copy of the Commitment Letter dated the date hereof, between Supervalu Inc., The Royal Bank of Scotland plc and RBS Securities Corporation (the “Financing Commitment”), pursuant to which The Royal Bank of Scotland plc has agreed, subject to the terms and conditions set forth therein, to lend the amounts set forth therein for the purposes of financing the transactions contemplated hereby (the “Financing”). As of the date hereof, the Financing Commitment has not been amended, modified, withdrawn or rescinded, and is in full force and effect. Assuming the receipt of the proceeds of the Standalone Drug Sale, and the consummation of the transactions contemplated by the Separation Agreement, Parent and Acquisition Sub will have at and after the Closing funds sufficient to consummate the Emerald Merger on the terms and conditions set forth in this Agreement.

SECTION 5.12 Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Acquisition Sub for which the Company could have any liability.

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SECTION 5.13 Company Stock. Neither Parent nor Acquisition Sub is, and at no time during the last three years has either Parent or Acquisition Sub been, an “interested stockholder” of the Company as defined in Section 203 of the DGCL. Neither Parent nor Acquisition Sub owns (directly or indirectly, beneficially or of record), or is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, any shares of capital stock of the Company (other than as contemplated by this Agreement).

SECTION 5.14 Acquisition Sub. Acquisition Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no business activities and has conducted no operations.

SECTION 5.15 Fairness Opinion. Lazard Frères has delivered to the Parent Board of Directors its written opinion (or oral opinion to be confirmed in writing) that, as of the date hereof, the Per Share Merger Consideration to be paid by Parent is fair, from a financial point of view, to Parent.

SECTION 5.16 Cub Stores Divestiture. Parent has closed, or simultaneously with the execution and delivery of this Agreement will close, the sale, pursuant to the Cub Sale Agreement, of all of Parent’s direct or indirect right, title and interest in and to all of the retail grocery stores that, immediately prior to the date hereof, were operated directly or indirectly by Parent in the Chicago, Illinois and Bloomington, Illinois metropolitan areas under the “Cub” or “Cub Foods” banners. Parent has delivered to the Company correct and complete copies of the Cub Sale Agreement and the Ancillary Agreements referred to therein, all of which constitute legal, valid and binding obligations of Parent and its Affiliates that are parties thereto, enforceable against them in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

ARTICLE VI

ADDITIONAL AGREEMENTS

SECTION 6.1 Conduct of Business Prior to the Closing. (a) The Company covenants and agrees that, during the period from the date hereof until the Closing Date, except as contemplated by this Agreement, as set forth in Section 6.1 of the Company Disclosure Letter or as required by Law, or unless Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the business of the Company and the Company Subsidiaries (in each case, with respect to the New Diamond Business or to the extent affecting New Diamond and/or the New Diamond Entities in a non-de minimis respect) and the use, operation, maintenance and repair of the Owned Real Properties and the Leased Real Properties, shall be conducted in the ordinary course of business, consistent with past practice, and the Company shall use its reasonable best efforts to preserve substantially intact its business organization and operations, including material insurance policies, material Company Intellectual Property and goodwill, and to preserve its present relationships with suppliers, lessors, licensees, distributors, wholesalers, franchisees and other Persons with which it has material business relations. Between the date of this Agreement and the Closing Date, subject to

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applicable Law and except as otherwise contemplated by this Agreement, as set forth in Section 6.1 of the Company Disclosure Letter or as required by Law or the Transaction Agreements (or, with respect to clauses (vi) or (vii) below, as required by any Material Contract disclosed in Section 4.10 of the Company Disclosure Letter), neither the Company nor any Company Subsidiary (in each case, with respect to the New Diamond Business or to the extent affecting New Diamond and/or the New Diamond Entities in a non-de minimis respect) shall, without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed):

(i) amend or otherwise change its certificate of incorporation or by-laws (or other comparable governing documents);

(ii) issue, deliver, sell, pledge, transfer, convey, dispose of or encumber any Equity Interests of the Company or any Company Subsidiary or securities convertible into or exchangeable for any such Equity Interests, or any options, warrants, convertible securities or other rights of any kind to acquire any Equity Interests of the Company or any Company Subsidiary, or any other ownership interest or security, of the Company or any Company Subsidiary (other than (A) the issuance of Shares (and the associated Rights) upon the exercise of Options, the settlement of Stock Units (and dividend equivalents thereon), or the settlement of HITS, in each case in accordance with their present terms, (B) issuances by a wholly owned Company Subsidiary of capital stock to such Company Subsidiary’s parent, and (C) issuances in accordance with the Rights Plan);

(iii) declare, set aside, make or pay any dividend or other distribution payable in cash, stock, property or otherwise with respect to any Equity Interests or any options, warrants, convertible securities or other rights to acquire any Equity Interest (except for any dividend or distribution of cash by a wholly owned Company Subsidiary, required payments made by the Company in respect of its HITS in accordance with their present terms, dividend equivalents paid by the Company or accrued on Stock Units in accordance with their present terms and regular quarterly dividends paid to holders of the Company Shares in an amount not in excess of $0.19 per share of Common Stock);

(iv) (A) reclassify, combine, split, subdivide, redeem, purchase or otherwise acquire any Equity Interests of the Company or any Company Subsidiary or any options, warrants, convertible securities or other rights to acquire any Equity Interest of the Company or any Company Subsidiary (other than the acquisition of shares tendered by directors, employees or former employees in order to pay Taxes in connection with the exercise of Options or the settlement of Stock Units pursuant to the terms of any of the Stock Plans or any redemption of the Rights pursuant to the terms of the Rights Plan), or (B) redeem, repurchase, prepay, defease or otherwise acquire any of the Company’s or the Company Subsidiaries’ Indebtedness set forth on Section 6.1(a)(iv)(B) of the Company Disclosure Letter;

(v) (A) acquire, lease or license from any Person (by merger, consolidation, acquisition of stock or assets or otherwise) or sell, dispose of, abandon, encumber (other than through the creation of a Permitted Encumbrance), lease or license (by merger,

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consolidation, sale of stock or assets or otherwise) to any corporation, partnership or other business organization or division thereof, any Equity Interests therein or any assets, including Intellectual Property, in each case, which are material to the Company and the Company Subsidiaries taken as a whole, other than acquisitions, leases, licenses, sales, dispositions and encumbrances of inventory, non-merchandise supplies, media and advertising and other assets in the ordinary course of business, (B) enter into any material joint venture, partnership or similar agreement, (C) incur or guarantee, or modify in any material respect, any Indebtedness or make any loans, advances or capital contributions to, or investments in, any other Person (other than a Company Subsidiary), in each case, other than in the ordinary course of business and consistent with past practice, (D) enter into, renew, terminate or amend in any material respect (1) any contract or agreement which is or would be a Material Contract, other than in the ordinary course of business consistent with past practice, (2) any Real Property Lease which provides for rental payments over the primary term of the lease (including percentage sales and other variable payments, as estimated by the Company in good faith) in excess of $1,200,000 in any one year (provided, that neither the Company nor any Company Subsidiary shall, without first consulting with Parent in writing, enter into, renew, terminate or amend in any material respect any Real Property Lease which provides for such rental payments in excess of $500,000 in any one year), or (3) any Advance Contract, or (E) notwithstanding anything to the contrary set forth in Section 6.1(a)(v)(D) of the Company Disclosure Letter, authorize, or enter into any commitment to make, any new capital expenditures which are, in the aggregate, in excess of the Company’s capital expenditure budget insofar as it relates to the New Diamond Business set forth on Section 6.1(a)(v)(D) of the Company Disclosure Letter or which are, individually, in excess of $15,000,000 (provided, that neither the Company nor any Company Subsidiary shall, without first consulting with Parent in writing, authorize, or enter into any commitment to make, any new capital expenditures which are, individually, in excess of $10,000,000);

(vi) except (A) to the extent required under any Company Plan, or (B) as necessary to conform to the requirements of any applicable Law that absent such conformance would impose a penalty of an additional Tax on the Company, any Company Subsidiary or any current or former director, officer, employee or consultant of the Company or any Company Subsidiary, (1) increase or decrease the compensation or fringe benefits of, or pay any bonus to, any current or former director, officer, employee or consultant of the Company or any Company Subsidiary (except in the ordinary course of business and consistent with past practice), (2) grant any severance or termination pay not required under any Company Plan (except in the ordinary course of business and consistent with past practice) or grant any equity or equity-based awards, (3) exercise any discretion to accelerate the vesting or payment or any compensation or benefit under any Company Plan, (4) except as required by GAAP, materially change any actuarial or other assumption used to calculate funding obligations with respect to any Company Plan or change the manner in which contributions to any Company Plan are made or the basis on which such contributions are determined, (5) enter into any (A) employment agreement with any present directors or employees, (B) consulting agreement or arrangement with any present directors or executive officers (as defined by Rule 3b-7 of the Exchange Act) or (C) except in the ordinary course of business consistent with past practice, consulting agreement or arrangement or change in control or severance agreement with any present

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employee, (6) without limiting the scope of the preceding clause (5), establish, adopt, enter into any new, or amend in any material respect or terminate any existing Company Plan, (7) without limiting the scope of Section 6.1(a)(v)(D), enter into, renew, or materially amend any collective bargaining or similar agreement covering in excess of 500 employees or (8) provide any funding to any rabbi trust or similar arrangement;

(vii) enter into any transaction, agreement, arrangement or understanding between (A) the Company or any Company Subsidiary, on the one hand, and (B) any Affiliate of the Company (other than the Company Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K;

(viii) (A) make any material Tax election (in a manner inconsistent with past practices), change any method of accounting or make any election with respect to the Company or any Company Subsidiary under Treasury Regulation Section 301.7701-3, (B) enter into any settlement or compromise of any material Tax liability for an amount in excess of the amount reserved for such Tax liability in the financial statements included in the Company SEC Reports as of the date hereof, (C) change any annual Tax accounting period, (D) enter into any closing agreement relating to any material Tax or (E) surrender any right to claim a material Tax refund;

(ix) make any material changes in accounting policies or procedures other than as required by GAAP or a Governmental Authority;

(x) subject to the fiduciary duties of the Company Board of Directors (as determined in good faith after consultation with outside legal counsel), amend, waive, terminate or fail to enforce its Rights Agreement or any confidentiality agreement, standstill clause or agreement or similar agreement, arrangement or understanding;

(xi) settle any litigation or other proceedings before or threatened to be brought before a Governmental Authority or arbitral proceeding for an amount payable by or on behalf of the Company or any Company Subsidiary in excess of $2,500,000 (exclusive of (A) any amounts to be received by the Company in reimbursement of such settlement amount, whether under any insurance policy or indemnity, other than such amounts that are contested, and (B) any amounts accrued or reserved for in respect of such matter in the financial statements included in the Company 10-K or the Quarterly Report on Form 10-Q most recently filed prior to the date hereof) or which would be reasonably likely to have a material adverse impact on the operations of the Company or any Company Subsidiary or on any current or future litigation or other proceeding of the Company or any Company Subsidiary;

(xii) except to the extent required for cash management in the ordinary course of business consistent with past practice, enter into, perform or undergo any internal restructuring, merger, liquidation, change in organizational status (such as conversion of any corporation to a limited liability company), intercompany transfer of assets or assumption or guarantee of liability, distribution, contribution, or creation, elimination, increase or decrease in intercompany debt or liabilities;

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(xiii) cause any Company Subsidiary that is a captive insurance company to underwrite any insurance other than in respect of the New Diamond Business;

(xiv) take any action prohibited by the restrictions described in clause (5) of Section 6.8(c) of the Separation Agreement or Section 5.01(f) of the Drug Sale Agreement; or

(xv) agree to take any of the actions described in clauses (i) through (xiii) above.

(b) Parent covenants and agrees that, during the period from the date hereof until the Closing Date, except as contemplated by this Agreement, as set forth in Section 6.1 of the Parent Disclosure Letter or as required by Law, or unless Company shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the business of the Parent and the Parent Subsidiaries shall be conducted in the ordinary course of business and consistent with past practice, and Parent shall use its reasonable best efforts to preserve substantially intact its business organization and operations, including material insurance policies, material intellectual property and goodwill, and to preserve its present relationships with suppliers, lessors, licensees, distributors, wholesalers, franchisees and other Persons with which it has material business relations. Between the date of this Agreement and the Closing Date, subject to applicable Law and except as otherwise contemplated by this Agreement, as set forth in Section 6.1 of the Parent Disclosure Letter or as required by Law, neither Parent nor any Parent Subsidiary shall, without the prior written consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed):

(i) amend or otherwise change its certificate of incorporation or by-laws (or other comparable governing documents);

(ii) declare, set aside, make or pay any dividend or other distribution payable in cash, stock, property or otherwise with respect to any Equity Interests of Parent (except for any dividend or distribution by a wholly owned Subsidiary of Parent, and any regular quarterly dividend paid to holders of Parent Shares in an amount not in excess of the amount set forth in Section

6.1(b)(ii) of the Parent Disclosure Letter);

(iii) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire any Parent Shares or any options, warrants, convertible securities or other rights to acquire any Parent Shares (other than (A) the acquisition of shares tendered by directors, employees or former employees to pay Taxes in connection with the exercise of options issued under any Parent Employee Plans and (B) open-market purchases of Parent Shares to fund Parent Employee Plans consistent with past practice);

(iv) except for any such transactions that would not materially impair or delay the consummation of the transactions contemplated by this Agreement, (A) acquire, lease or license from any Person (by merger, consolidation, acquisition of stock or assets or otherwise) or sell, dispose of, encumber (other than through the creation of a Permitted Encumbrance), lease or license (by merger, consolidation, sale of stock or assets or otherwise) any corporation, partnership or other business organization or division thereof,

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any Equity Interests therein or any assets, including Intellectual Property, in each case, which are material to the Parent and Parent Subsidiaries taken as a whole, other than acquisitions, leases, licenses, sales, dispositions and encumbrances of inventory, non-merchandise supplies, media and advertising and other assets in the ordinary course of business and consistent with past practice, (B) incur or guarantee, or modify in any material respect, any Indebtedness or make any loans, advances or capital contributions to, or investments in, any other Person (other than a Parent Subsidiary), in each case, other than loans, advances and indebtedness incurred in the ordinary course of business and consistent with past practice, or (C) enter into, renew or amend in any material respect any material contract, other than in the ordinary course of business and consistent with past practice;

(v) enter into any transaction, agreement, arrangement or understanding between (A) Parent or any Parent Subsidiary, on the one hand, and (B) any Affiliate of Parent (other than the Parent Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K;

(vi) make any material changes in accounting policies or procedures other than as required by GAAP or a Governmental Authority; or

(vii) agree to take any of the actions described in clauses (i) through (vi), above.

(c) The Company will not, without the prior written consent of Parent, agree to any modification of any term or condition of, or give any consent or waiver or exercise any right of termination under, the Standalone Drug Sale Agreement, if such modification, consent, waiver or exercise would reasonably be expected to adversely affect, or impose any cost or liability on, Parent or its Subsidiaries (including their interests following the consummation of the transactions contemplated by the Standalone Drug Sale Agreement) or adversely affect the ability to consummate the transactions contemplated hereby in a timely manner. The Company shall comply with the terms of the Standalone Drug Sale Agreement in all material respects. The Company will use reasonable best efforts to cause the conditions to the consummation of the Standalone Drug Sale to be satisfied (or waived by the other party thereto).

(d) The Company agrees that between the date hereof and the Closing Date it will take all actions it has affirmatively committed to take pursuant to Section 6.1(a)(v) or Section 6.1(a)(vi) of the Company Disclosure Letter.

SECTION 6.2 Stockholders Meetings.

(a) As soon as reasonably practicable following the date of this Agreement (and subject to the Company’s using its reasonable best efforts to hold the Company Stockholders Meeting on the same day as the Parent Stockholders Meeting), the Company, acting through the Company Board of Directors, and in accordance with applicable Law, shall (i) duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of (A) approving an amendment (the “Charter Amendment”) to the Company’s restated certificate of incorporation providing for appraisal rights to holders of Company Shares for the Diamond Merger if the

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Effective Time occurs and (B) with respect to the Diamond Merger, adopting this Agreement (the “Company Stockholders Meeting”) to be held as soon as reasonably practicable after such notice, and (ii) (A) include in the Proxy Statement/Prospectus the Company Board of Directors’ determination that the terms of this Agreement are fair to and in the best interest of the stockholders of the Company, the Company Board of Directors’ determination that this Agreement is advisable, and the Company Board of Directors’ recommendation that the stockholders of the Company, with respect to the Diamond Merger, vote in favor of the adoption of this Agreement (collectively, the “Company Board Recommendation”) and the Company Board of Directors’ recommendation that the stockholders of the Company vote in favor of the adoption of the Charter Amendment and (B) use its reasonable best efforts to obtain the necessary approval of the transactions contemplated by this Agreement by the stockholders of the Company and New Diamond, as applicable; provided, that if the Company Board of Directors determines in good faith, after consultation with outside counsel, that any of the foregoing actions in clause (ii) would be inconsistent with their fiduciary duties under applicable Law, the Company Board of Directors may fail to take any of such actions and/or may withdraw, modify or change in a manner adverse to Parent all or any portion of the Company Board Recommendation. The Company shall call and hold the Company Stockholders Meeting in accordance with clause (i) of the preceding sentence regardless of any failure to make the Company Board Recommendation pursuant to clause (ii), and regardless of any change in the Company Board Recommendation; provided, however, that nothing in this sentence shall affect the Company’s right to terminate the agreement in accordance with Section 8.1. In the event that the Requisite Company Stockholder Vote is obtained, the Company, as sole stockholder of New Diamond, shall, prior to the Initial Effective Time, adopt this Agreement in favor of the Emerald Merger.

(b) As soon as reasonably practicable following the date of this Agreement (and subject to Parent’s using its reasonable best efforts to hold the Parent Stockholders Meeting on the same day as the Company Stockholders Meeting), Parent, acting through the Parent Board of Directors, and in accordance with applicable Law, shall (i) duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of adopting this Agreement (the “Parent Stockholders Meeting”) to be held as soon as reasonably practicable after such notice and (ii)(A) include in the Proxy Statement/Prospectus the Parent Board of Directors’ recommendation that Parent’s stockholders approve the issuance of Parent Shares pursuant to this Agreement (the “Parent Board Recommendation”) and (B) use its reasonable best efforts to obtain the necessary approval of the transactions contemplated by this Agreement by the stockholders of Parent provided, that if the Parent Board of Directors determines in good faith, after consultation with outside counsel, that any of the foregoing actions in clause (ii) would be inconsistent with their fiduciary duties under applicable Law, the Parent Board of Directors may fail to take any of such actions and/or may withdraw, modify or change in a manner adverse to the Company all or any portion of the Parent Board Recommendation. Parent shall call and hold the Parent Stockholders Meeting in accordance with clause (i) of the preceding sentence regardless of any failure to make the Parent Board Recommendation pursuant to clause (ii), and regardless of any change in the Parent Board Recommendation made at any time prior to the meeting.

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SECTION 6.3 Proxy Statement.

(a) As promptly as reasonably practicable following the date of this Agreement, (i) the Company and Parent shall prepare a proxy statement to be sent to the stockholders of the Company and Parent in connection with the Company Stockholder Meeting and the Parent Stockholder Meeting (such proxy statement, as amended or supplemented, the “Proxy Statement/Prospectus”), and (ii) Parent (and, if necessary, New Diamond) shall prepare and file with the SEC a registration statement on Form S-4 (together with all amendments thereto, the “Form S-4”), in which the Proxy Statement/Prospectus will be included as a prospectus, in connection with the registration under the Securities Act of the New Diamond shares to be issued to the stockholders of the Company in connection with the Diamond Merger and the Parent Shares to be issued to the stockholders of New Diamond in connection with the payment of the aggregate Stock Consideration. Parent, New Diamond and the Company will cooperate with each other in the preparation of the Proxy Statement/Prospectus and Form S-4. Without limiting the generality of the foregoing, each of Parent, New Diamond and the Company will provide the other with a reasonable opportunity to review drafts of, and revisions to, the Proxy Statement/Prospectus and Form S-4 prepared by such party, and shall use its reasonable best efforts to furnish to the other party information relating to it and its affiliates as necessary to prepare the Proxy Statement/Prospectus and Form S-4. All of the parties hereto shall cause the Proxy Statement/Prospectus and Form S-4 to comply as to form and substance as to such party in all material respects with the applicable requirements of (i) the Exchange Act, (ii) the Securities Act and (iii) the rules and regulations of the NYSE and the PCX. The Company or New Diamond, as appropriate, shall provide audited financial statements for inclusion in the Proxy Statement/Prospectus and Form S-4 as and to the extent required under applicable Law and SEC regulations.

(b) Each of the Company and Parent shall use reasonable best efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing and to maintain the effectiveness of the Form S-4 through the Effective Time and to ensure that it complies in all material respects with the applicable provisions of the Exchange Act and the Securities Act until such time. The Company shall use its reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to the Company’s stockholders, and Parent shall use its reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to Parent’s stockholders, in each case as promptly as practicable after the Form S-4 is declared effective under the Securities Act. Parent and New Diamond shall also take any action required to be taken under any applicable state securities laws in connection with the issuance of New Diamond Shares in the Diamond Merger and Parent Shares in the Emerald Merger, as applicable, and the Company shall furnish all information concerning the Company and the holders of the Company Shares as may be reasonably requested in connection with any such action.

(c) No filing of, or amendment or supplement to, the Form S-4 will be made by New Diamond or Parent, and no filing of, or amendment or supplement to the Proxy Statement/ Prospectus will be made by the Company or Parent, in each case, without providing the other party and its respective counsel a reasonable opportunity to review and comment thereon.

(d) Each of the parties agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in the Proxy Statement/Prospectus or the Form

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S-4 will, at the date such document is first mailed to the stockholders of the relevant party and at the time of such party’s meeting of stockholders relating to the Mergers, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. For purposes of the foregoing, it is understood and agreed that information concerning or related to the Company or any Company Subsidiary will be deemed to have been supplied by the Company and information concerning or related to Parent or Acquisition Sub will be deemed to have been supplied by Parent.

(e) Each of Parent and the Company agree to correct any information provided by it for use in the Proxy Statement/Prospectus or Form S-4 which shall have become false or misleading. The parties shall as soon as reasonably practicable notify each other of the receipt of any comments from or other correspondence with the SEC staff with respect to the Proxy Statement/Prospectus or Form S-4 and any request by the SEC for any amendment to the Proxy Statement/Prospectus or Form S-4 or for additional information (and promptly deliver a copy of such comments, correspondence or request to each other). Parent will advise the Company, promptly after it receives notice thereof, of the time when the Form S-4 has become effective, the issuance of any stop order or the suspension of the qualification of the Parent Shares issuable in connection with the Mergers for offering or sale in any jurisdiction.

(f) Each of the Company and Parent shall use its reasonable best efforts to cause to be delivered to the other party a letter of its independent auditors, dated (i) the date on which the Form S-4 shall become effective and (ii) the Closing Date, and addressed to the other party, in form and substance customary for “comfort” letters delivered by independent public accountants in connection with registration statements similar to the Form S-4.

SECTION 6.4 Access to Information.

(a) During the period from the date of this Agreement through the earlier of the termination of this Agreement pursuant to its terms and the Closing, the Company shall, and shall cause each Company Subsidiary to, subject to reasonable restrictions imposed from time to time upon advice of counsel respecting applicable Law or the Confidentiality Agreements, afford representatives of Parent, following notice from Parent to the Company in accordance with this Section 6.4(a), reasonable access during normal business hours to all properties, offices, books, contracts, commitments and records and such financial (including all working papers) and operating data of the Company and the Company Subsidiaries and all other information concerning its business, properties, personnel, vendors, landlords/sublandlords, tenants, licensees and franchisees as Parent may reasonably request. Notwithstanding the foregoing, neither Parent nor any of its representatives shall (i) contact or have any discussions with any of the Company’s employees, agents, or representatives, unless in each case Parent obtains the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed, (ii) contact or have any discussions with any of the vendors, landlords/sublandlords, tenants/subtenants, licensees or franchisees of the Company or the Company Subsidiaries, unless in each case Parent obtains the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed, (iii) damage any property or any portion thereof, or (iv) perform any onsite procedure or investigation (including any onsite environmental investigation or study) without the Company’s prior written consent. Parent shall schedule and coordinate all

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inspections with the Company and shall give the Company at least three Business Days prior written notice thereof, setting forth the inspection or materials that Parent or its representatives intend to conduct. The Company shall be entitled to have representatives present at all times during any such inspection. Notwithstanding the foregoing, neither the Company nor any Company Subsidiary shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of the Company or any Company Subsidiary or contravene any Law or binding agreement entered into prior to the date of this Agreement. All information obtained pursuant to this Section 6.4(a) shall continue to be governed by the Confidentiality Agreements.

(b) During the period from the date of this Agreement through the earlier of the termination of this Agreement pursuant to its terms and the Closing, Parent shall, and shall cause each Parent Subsidiary to, subject to reasonable restrictions imposed from time to time upon advice of counsel respecting applicable Law, afford representatives of the Company, following notice from Company to the Parent in accordance with this Section 6.4(b), reasonable access during normal business hours to all properties, offices, books, contracts, commitments and records and such financial (including all working papers) and operating data of Parent and the Parent Subsidiaries and all other information concerning its business, properties, personnel, vendors, landlords/sublandlords, tenants, licensees and franchisees as the Company may reasonably request. Notwithstanding the foregoing, neither the Company nor any of its representatives shall (i) contact or have any discussions with any of Parent’s or the Parent Subsidiaries’ employees, agents, or representatives, unless in each case the Company obtains the prior written consent of Parent, which shall not be unreasonably withheld, conditioned or delayed, (ii) contact or have any discussions with any of the vendors, landlords/sublandlords, tenants/subtenants, licensees or franchisees of Parent or the Parent Subsidiaries, unless in each case the Company obtains the prior written consent of Parent, which shall not be unreasonably withheld, conditioned or delayed, (iii) damage any property or any portion thereof, or (iv) perform any onsite procedure or investigation (including any onsite environmental investigation or study) without Parent’s prior written consent. The Company shall schedule and coordinate all inspections with Parent and shall give Parent at least three Business Days prior written notice thereof, setting forth the inspection or materials that the Company or its representatives intend to conduct. Parent shall be entitled to have representatives present at all times during any such inspection. Notwithstanding the foregoing, neither Parent nor any Parent Subsidiary shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of Parent or any Parent Subsidiary or contravene any Law or binding agreement entered into prior to the date of this Agreement. The Company will keep confidential all non-public information provided to it pursuant to this Section 6.4(b), except for disclosures required by applicable Law.

SECTION 6.5 Acquisition Proposals.

(a) Each of the Company and Parent shall not, and shall not permit its Subsidiaries to, and shall direct its and its Subsidiaries’ directors, officers, investment bankers, financial advisors, attorneys, accountants and other representatives not to, (A) directly or indirectly, initiate or solicit or knowingly encourage or facilitate any inquiries or the making or submission of any proposal or offer with respect to a tender offer or exchange offer, merger, reorganization, share exchange, consolidation or other business combination involving it or any proposal or offer

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to acquire in any manner 20% or more of its Equity Interests, or the assets, securities or other ownership interests of or in it or any Subsidiary representing 20% or more of the consolidated assets, revenues or earnings of the Company and the Company Subsidiaries or of the Parent and the Parent Subsidiaries, as the case may be, other than the transactions contemplated by the Transaction Agreements and the Standalone Drug Sale Agreement (any such proposal or offer being hereinafter referred to as an “Acquisition Proposal”) or (B) directly or indirectly, engage in any negotiations or discussions concerning, or provide any confidential information or data to, any Person relating to an Acquisition Proposal or execute or enter into any agreement, understanding, letter of intent or arrangement with respect to any Acquisition Proposal (other than a confidentiality agreement described below). Subject to Section 6.5(b), neither the Company nor Parent, nor the Company Board of Directors nor the Parent Board of Directors (each, a “Board of Directors”) nor any committee thereof shall recommend to its stockholders any Acquisition Proposal or approve any agreement with respect to an Acquisition Proposal. Notwithstanding the foregoing, nothing contained in this Agreement shall prevent either of the Company or Parent or its Board of Directors from (i) taking and disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act or from making any other legally required disclosure to stockholders with regard to an Acquisition Proposal (provided that neither the Company nor the Parent nor the Board of Directors thereof may recommend any Acquisition Proposal unless permitted by Section 6.5(b) below and may not fail to include or make, or withdraw, modify or change in a manner adverse to the other party all or any portion of, the Company Board Recommendation or Parent Board Recommendation, as the case may be, unless permitted by Section 6.2 (in which case Parent or the Company shall have the right to terminate this Agreement as set forth in Section 8.1(e)(ii) or Section 8.1(d)(ii), as applicable), and provided further that, notwithstanding anything herein to the contrary, any “stop-look-and-listen” communication to its stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act shall not be considered a failure to make, or a withdrawal, modification or change in any manner adverse to the other party of, all or a portion of the Company Board Recommendation or the Parent Board Recommendation, as applicable) or (ii) (A) prior to obtaining the requisite vote of its stockholders at the Company Stockholders Meeting, in the case of a Company Proposal, providing access to its properties, books and records and providing information or data in response to a request therefor by a Person who has made a bona fide, unsolicited Acquisition Proposal that does not involve an intentional, material breach of this Section 6.5(a), if (1) the Board of Directors receives from the Person so requesting such information an executed confidentiality agreement on terms substantially similar to those contained in the Confidentiality Agreements (except for such changes specifically necessary in order for such party to be able to comply with its obligations under this Agreement and it being understood that either party may enter into a confidentiality agreement without a standstill provision or with a standstill provision less favorable to it if it waives or similarly modifies the standstill provision in the relevant Confidentiality Agreement in favor of the other party), and (2) in the case of a Parent Proposal, such Parent Proposal is, or is reasonably likely to result in, a Qualifying Parent Proposal, or (B) prior to obtaining the requisite vote of its stockholders at the Company Stockholders Meeting, in the case of a Company Proposal, engaging in any negotiations or discussions with any Person who has made a bona fide unsolicited Acquisition Proposal that does not involve an intentional, material breach of this Section 6.5(a) and, in addition, in the case of a Parent Proposal, such Parent Proposal is a Qualifying Parent Proposal, if and only to the extent, in the case of a Company Proposal, that prior to taking any of the

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actions set forth in clauses (A) or (B) of clause (ii), the Company Board of Directors shall have determined in good faith (after consultation with its outside legal and financial advisors) that such Acquisition Proposal constitutes or is reasonably likely to result in a Superior Proposal from the Person that made the applicable Acquisition Proposal, and the Company shall have informed Parent promptly following (and in no event later than 24 hours after) the taking by it of any such action. A “Superior Proposal” means, with respect to a Company Proposal, an Acquisition Proposal (with all percentages included in the definition of “Acquisition Proposal,” increased to 50% for purposes of this definition) that the Company Board of Directors determines in good faith (taking into account such factors as it deems appropriate, including any legal, financial and regulatory aspects of the proposal and the Person making the proposal) is reasonably capable of being consummated and, if consummated, would result in a transaction more favorable to the Company’s stockholders from a financial point of view than the transactions contemplated by this Agreement.

(b) If either the Company Board of Directors or the Parent Board of Directors determines in good faith, in response to an Acquisition Proposal, that such proposal is a Superior Proposal (in the case of a Company Proposal) or a Qualifying Parent Proposal (in the case of a Parent Proposal), the Company or Parent, as the case may be, shall notify the other party in writing of such determination promptly following (and in no event later than 24 hours after) the making of such determination. Prior to obtaining the requisite vote of its stockholders at the Company Stockholders Meeting, in the case of a Company Proposal, the Company Board of Directors or the Parent Board of Directors, as the case may be, may approve or recommend such Superior Proposal or Qualifying Parent Proposal, as the case may be, to its stockholders and enter into any agreement, understanding, letter of intent or arrangement with respect to such Superior Proposal or Qualifying Parent Proposal, as applicable, and the Company may terminate this Agreement; provided, however, that the Company shall not recommend any such Superior Proposal to its stockholders, enter into any definitive agreement providing for any such Superior Proposal or terminate this Agreement pursuant to this sentence (and any purported termination pursuant to this sentence shall be void and of no force or effect), unless and until (1) it has given Parent prior written notice of its intention to enter into such agreement at least two Business Days before doing so, (2) the Company Board of Directors has considered in good faith any proposed changes to this Agreement proposed by Parent, (3) the Company Board of Directors has determined in good faith, after consultation with its outside legal counsel, that the failure to make such recommendation or enter into such agreement would be inconsistent with its fiduciary duties under applicable Law, (4) prior to entering into such agreement, it has terminated this Agreement, and (5) concurrently with such termination pursuant to this Section 6.5(b), the Company pays to Parent the Company Termination Fee (as defined below) payable pursuant to Section 8.2(b).

(c) Each of the Company and Parent shall immediately cease and cause to be terminated any existing discussions or negotiations with any Persons conducted heretofore with respect to any Acquisition Proposal. Each of the Company and Parent also shall, if it has not already done so, promptly request, to the extent it has a contractual right to do so, that each Person, if any, that has heretofore executed a confidentiality agreement within the 12 months prior to the date of this Agreement in connection with its consideration of any Acquisition Proposal return or destroy all confidential information or data heretofore furnished to it by or on behalf of the Company or Parent, as the case may be.

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(d) Each of the Company and Parent shall promptly (and in no event later than 48 hours after receipt of an Acquisition Proposal) notify (which notice shall be provided orally and in writing and shall identify the Person making the Acquisition Proposal and set forth in reasonable detail its material terms and conditions) the other party after receipt of an Acquisition Proposal and thereafter shall keep the other party reasonably informed of the status and material terms and conditions of any proposals or offers. Each of the Company and Parent shall make available to the other party (to the extent it has not already done so) all material non-public information made available to any Person making an Acquisition Proposal at substantially the same time and in substantially the same form as it provides it to such other Person.

SECTION 6.6 Further Action; Reasonable Best Efforts.

(a) Subject to the terms and conditions of this Agreement, Company and Parent will use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary or desirable under applicable Laws and regulations to consummate, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

(b) Company and Parent will use reasonable best efforts to: (i) prepare, as soon as practicable, all filings and other presentations in connection with seeking any regulatory approval, exemption or other authorization from any Governmental Authority necessary to consummate the transactions contemplated hereby; (ii) prosecute such filings and other presentations with diligence; and (iii) oppose any objections to, appeals from or petitions to reconsider or reopen any such approval by Persons not party to this Agreement. Company and Parent will use reasonable best efforts to facilitate obtaining any final order or orders approving such transactions, consistent with this Agreement and/or to remove any impediment to the consummation of the transactions contemplated hereby. Company and Parent will use reasonable best efforts to furnish all information in connection with the approvals of or filings with any Governmental Authority and will promptly cooperate with and furnish information in connection with any such requirements imposed upon Parent or any of its Affiliates in connection with this Agreement and the transactions contemplated hereby. Subject to Section 6.6(c), Parent will use reasonable best efforts to obtain any consent, authorization, order or approval of, or any exemption by, and to remove any impediment imposed by any Governmental Authority to allow the consummation of the transactions contemplated hereby. Parent and Company will each advise the other party promptly of any material communication received by such party or any of its Affiliates from the Federal Trade Commission, Department of Justice, any state attorney general or any other Governmental Authority regarding any of the transactions contemplated hereby, and of any understandings, undertakings or agreements (oral or written) such party proposes to make or enter into with the Federal Trade Commission, Department of Justice, any state attorney general or any other Governmental Authority in connection with the transactions contemplated hereby. Parent and Company will each consult with the other in advance of any material meetings with the Federal Trade Commission.

(c) In furtherance and not in limitation of Sections 6.6(a) and (b), each of Parent and Company shall make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and thereafter make any other required submissions with respect to the transactions contemplated

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hereby under the HSR Act and to take all other appropriate actions reasonably necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.

(d) Notwithstanding the foregoing, Parent shall promptly take, in order to consummate the Transactions, all actions necessary (i) to secure the expiration or termination of any applicable waiting period under the HSR Act (the “HSR Clearance”) and/or to resolve any objections asserted by any Governmental Authority with respect to the Transactions under any antitrust Law or the Federal Trade Commission Act (each, an “Objection”), and (ii) to prevent the entry of, and to have vacated, lifted, reversed or overturned, any decree, judgment, injunction or other order that would prevent, prohibit, restrict or delay the consummation of the Transactions, in each case including (A) executing settlements, undertakings, consent decrees, stipulations or other agreements with any such party and (B) selling, divesting or otherwise conveying particular assets or categories of assets or businesses of Parent and its Affiliates and/or constituting part of the New Diamond Assets (as such term is defined in the Separation Agreement) or New Diamond Business. Such efforts shall include, in addition to the consummation of the transactions contemplated by the Cub Sale Agreement and the Ancillary Agreements referred to therein, taking all additional actions contemplated by the preceding sentence, subject only to a limitation that those additional actions not result in a divestiture of additional assets or businesses that, in the aggregate, produce annual revenues in excess of $4 billion. Parent shall respond to and seek to resolve as promptly as practicable any Objections that are raised. No actions taken pursuant to this Section 6.6(d) shall be considered for purposes of determining whether a Company Material Adverse Effect has occurred.

(e) Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 6.6 shall limit a party’s right to terminate this Agreement pursuant to Section 8.1 so long as such party has up to then complied in all material respects with its obligations under this Section 6.6.

(f) Parent shall use reasonable best efforts to cause the Parent Shares issuable to New Diamond’s stockholders as contemplated by this Agreement to be approved for listing on the NYSE, subject to official notice of issuance, as promptly as practicable after the date of this Agreement, and in any event prior to the Closing Date. The Company and New Diamond shall use reasonable best efforts to cause the New Diamond Shares issuable to the Company’s stockholders in the Diamond Merger as contemplated by this Agreement to be approved for listing on a national securities exchange, subject to official notice of issuance, prior to the Initial Effective Time.

(g) The Company shall deliver to Parent prior to the Closing Date a letter identifying all Persons who are, at the time this Agreement is submitted for adoption by the stockholders of the Company, “affiliates” of the Company for purposes of Rule 145 of the rules and regulations promulgated under the Securities Act. The Company shall use reasonable best efforts to cause each such Person to deliver to Parent on or prior to the Closing Date a written affiliate letter agreement in a form to be agreed by the parties.

(h) The Company shall provide, and shall cause the Company Subsidiaries to provide, and shall use commercially reasonable efforts to cause the respective officers,

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employees and Representatives, including legal and accounting, of the Company and its Subsidiaries to provide, all cooperation reasonably requested by Parent or New Diamond in connection with the Mergers and the transactions contemplated by the Separation Agreement and Standalone Drug Sale Agreement to effect the ultimate assumption by New Diamond of, and the release of the Company from, all of the rights and obligations under, (i) that certain Indenture, as supplemented, dated as of May 1, 1992, by and between the Company and U.S. Bank Trust National Association, as successor trustee, and each series of notes issued thereunder, and (ii) (w) the HITS Purchase Contract Agreement, (x) that certain Pledge Agreement dated as of May 7, 2004, by and between the Company and U.S. Bank Trust National Association, as collateral agent, custodial agent, securities intermediary and purchase contract agent (“Pledge Agreement”), (y) that certain Remarketing Agreement, dated as of May 7, 2004, by and between the Company, Banc of America Securities LLC, as the remarketing agent, and U.S. Bank Trust National Association, as purchase contract agent and as attorney-in-fact of the holders of purchase contracts (the “Remarketing Agreement”), and (z) each other agreement related thereto (the foregoing clauses (i) and (ii) together, the “Debt and Purchase Contract Assumption”). In furtherance of the foregoing, the Company shall (1) take all necessary corporate action to consummate the Debt and Purchase Contract Assumption immediately prior to or substantially simultaneous with the Closing, (2) obtain any consent of Banc of America Securities LLC required under the terms of the Remarketing Agreement to effect the assignment to and assumption by New Diamond of the rights and obligations of the Company under the Remarketing Agreement, and (3) prepare and deliver other required opinions, certificates, documents, supplemental indentures, supplemental agreements and other deliverables in connection with the Debt and Purchase Contract Assumption.

SECTION 6.7 Resignations. To the extent requested by Parent in writing at least ten Business Days prior to the Closing Date, on the Closing Date, the Company shall cause to be delivered to Parent duly signed resignations, effective immediately after the Closing, of the directors of the Company Subsidiaries designated by Parent and shall take such other action as is necessary to accomplish the foregoing.

SECTION 6.8 Directors’ and Officers’ Indemnification and Insurance.

(a) Without limiting any additional rights that any employee, officer or director may have under any employment agreement or Company Plan or under the Company’s or New Diamond’s certificate of incorporation or by-laws, after the Effective Time, Parent shall, and shall cause Surviving Corporation to, indemnify and hold harmless each person who, as of the Effective Time, is a present or former officer or director of the Company, New Diamond or any Company Subsidiary or served as a fiduciary under or with respect to any employee benefit plan (within the meaning of Section 3(3) of ERISA) at any time maintained or contributed to by the Company, New Diamond or any Company Subsidiaries (the “Indemnified Directors and Officers”), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, demand, action, suit, proceeding, inquiry or investigation, whether civil, criminal, administrative or investigative, arising out of actions taken (or failure to take action) by any of them in their capacities as officers, directors or fiduciaries at or prior to the Effective Time (including in connection with this Agreement or the transactions or actions contemplated hereby), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent

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permitted under applicable Law. Parent shall, and shall cause the Surviving Corporation to, advance the cost of any expenses incurred by each Indemnified Director and Officer in the defense of any claim, demand, action, suit, proceeding, inquiry or investigation arising out of such Indemnified Director or Officer’s service as a director, officer or fiduciary within three Business Days of receipt by the Surviving Corporation from the Indemnified Director or Officer of a request therefor; provided only that any Person to whom expenses are to be advanced provides an undertaking, if and only to the extent required by the DGCL, to repay such advances if it is determined that such person is not entitled to indemnification in a final, nonappealable determination by a Governmental Authority of competent jurisdiction. Neither Parent nor the Surviving Corporation shall settle, compromise or consent to the entry of any judgment in any actual or threatened claim, demand, action, suit, proceeding, inquiry or investigation in respect of which indemnification has been or could be sought by such Indemnified Director or Officer hereunder unless such settlement, compromise or judgment includes an unconditional release of such Indemnified Director or Officer from all liability arising out of such claim, demand, action, suit, proceeding, inquiry or investigation or such Indemnified Director or Officer otherwise consents thereto.

(b) The certificate of incorporation and by-laws of the Surviving Corporation shall continue to contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of the Indemnified Directors and Officers and former or present directors and officers than are presently set forth in the Company’s certificate of incorporation and by-laws, which provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any such individuals. The resolutions adopted by the Company Board of Directors on October 7, 2005 relating to the indemnification of certain benefit plan fiduciaries, which resolutions are set forth in Section 6.8(b) of the Company Disclosure Letter, shall continue in effect and shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any Fiduciary (as such term is defined therein) and the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, indemnify and pay any and all expenses incurred by each Fiduciary in accordance with the term of such resolutions and otherwise honor and comply with the provisions of such resolutions.

(c) Prior to the Effective Time, the Company and/or New Diamond shall (and if it is unable to, Parent shall cause the Surviving Corporation as of the Effective Time to) obtain and fully pay for “tail” insurance policies (providing only for the Side A coverage for Indemnified Directors and Officers where the existing policies also include Side B coverage for the Company) with a claims period of at least six years from the Effective Time from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to directors’ and officers’ liability insurance and fiduciary liability insurance with benefits and levels of coverage at least as favorable as the Company’s existing policies as of the date hereof with respect to matters existing or occurring at or prior to the Effective Time (including in connection with this Agreement or the transactions or actions contemplated hereby), provided, however, that in no event shall the Company expend for such policies an amount in excess of the amounts set forth in Section 6.8(c) of the Company Disclosure Letter; and, provided further that if the premiums of such insurance coverage exceeds such amount, the Company shall obtain a policy with the greatest coverage available for a cost not exceeding such amount. If the Company and the Surviving Corporation for any reason fail to obtain such “tail”

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insurance policies as of the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, continue to maintain in effect for a period of at least six years from the Effective Time the directors’ and officers’ liability insurance and fiduciary liability insurance in place as of the date hereof covering the Indemnified Directors and Officers with benefits and levels of coverage at least as favorable as provided in the Company’s existing policies as of the date hereof, or the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, purchase comparable directors’ and officers’ liability insurance and fiduciary liability insurance for such six-year period with benefits and levels of coverage at least as favorable as provided in the Company’s existing policies as of the date hereof covering the Indemnified Directors and Officers; provided, however, that in no event shall the Parent or Surviving Corporation be required to expend for such policies an annual premium amount in excess of the amounts set forth in Section 6.8(c) of the Company Disclosure Letter; and, provided further that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall obtain a policy with the greatest coverage available for a cost not exceeding such amount. Parent shall, and shall cause the Surviving Corporation to, honor and perform under all indemnification agreements entered into by the Company or any Company Subsidiary set forth in Section 6.8(c) of the Company Disclosure Letter.

(d) This covenant is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Directors and Officers and their respective heirs and legal representatives. The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Director or Officer is entitled, whether pursuant to Law, contract or otherwise.

(e) In the event that Parent or the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets as an entirety in one or a series of related transactions to any Person(s), then, and in each such case, proper provision shall be made so that such continuing or surviving corporation or entity or such

Persons(s), as the case may be, shall assume the obligations set forth in this Section 6.8; provided that neither Parent nor the Surviving Corporation shall be relieved from such obligation. In addition, neither Parent nor the Surviving Corporation shall distribute, sell, transfer or otherwise dispose of any of its assets in a manner that would reasonably be expected to render the Parent or Surviving Corporation unable to satisfy its obligations under this Section 6.8.

SECTION 6.9 Public Announcements. The initial press release relating to this Agreement shall be a joint press release the text of which has been agreed to by each of Parent and the Company. Thereafter, each of Parent and Acquisition Sub, on the one hand, and the Company, New Diamond, and New Diamond Merger Sub, on the other hand, shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Transaction Agreements or the transactions contemplated thereby, except to the extent public disclosure is required by applicable Law or the requirements of the NYSE or the PCX, in which case the issuing party shall use its reasonable best efforts to consult with the other party before issuing any such release or making any such public statement.

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SECTION 6.10 Cooperation. (a) Parent shall use its commercially reasonable efforts to obtain the Financing pursuant to the terms and conditions set forth in the Financing Commitments. Parent shall notify the Company if at any time prior to the Closing Date the Financing Commitment shall expire or be terminated, modified or amended for any reason. The Company shall provide, and shall cause the Company Subsidiaries to, and shall use commercially reasonable efforts to cause the respective officers, employees and Representatives, including legal and accounting, of the Company and its Subsidiaries to provide, all cooperation reasonably requested by Parent in connection with (i) the Financing, including providing such access and documentation and taking such action as is customary for transactions such as the Financing and (ii) the satisfaction of the conditions in the Financing Commitment that require action by the Company, including those set forth in Section 3 of the Financing Commitment and Exhibit B thereto. Parent shall promptly, upon request by the Company, reimburse the Company for all reasonable out-of-pocket third party costs incurred by the Company or any of the Company Subsidiaries in connection with such cooperation.

(b) If the Financing Commitment expires, is terminated or otherwise become unavailable prior to the Closing, in whole or in part, for any reason, Parent shall (i) immediately notify the Company of such expiration, termination or other unavailability and the reasons therefor and (ii) use its reasonable best efforts promptly to arrange for alternative financing to replace the financing contemplated by such expired, terminated or otherwise unavailable commitments or agreements in an amount sufficient to consummate the transactions contemplated by this Agreement. Without limiting the effect of the preceding sentence, if Parent is unable to obtain replacement financing from alternative sources within 25 Business Days after any expiration, termination or other unavailability of any of the Financing Commitment (provided, that in the event such 25-day period would delay the Closing, it shall be reduced to such period as would not delay the Closing but in no event less than ten Business Days), alternative financing may be proposed for Parent and Acquisition Sub by the Company (or, at the request of the Company, the Company’s advisors) with one or more financing sources and Parent shall use its reasonable best efforts to consummate such alternative financing, unless such alternative financing is on terms and conditions that are (x) materially less favorable to Parent than the terms of the Financing Commitment that expired, was terminated, or otherwise became unavailable or (y) not commercially reasonable.

SECTION 6.11 Notification. During the period commencing upon the execution and delivery of this Agreement by all of the parties hereto and terminating upon the earlier to occur of the Effective Time and the termination of this Agreement pursuant to and in accordance with Section 8.1, the Company shall promptly notify Parent, and Parent shall promptly notify the Company, in writing of any event, condition, fact or circumstance that would cause any of the conditions set forth in Section 7.1, Section 7.2 or Section 7.3 not to be met. Each such notification shall include a certification of an officer of the Company or Parent, as applicable, that such notification is being delivered in accordance with this Section 6.11. No such notification shall be deemed to supplement or amend the Company Disclosure Letter or the Parent Disclosure Letter for the purpose of (i) determining the accuracy of any of the representations and warranties made by the Company in this Agreement, or (ii) determining whether any of the conditions set forth in Section 7.1, Section 7.2 and Section 7.3 has been satisfied.

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SECTION 6.12 Third-Party Consents. Without limiting the effect of Section 6.6, each of the Company and Parent shall use reasonable best efforts to promptly obtain all authorizations, consents, approvals and waivers of, and give all notices to, each third party that may be necessary for the consummation of the Mergers and are material to such party; provided, however, that, except as expressly contemplated hereby, neither the Company nor Parent shall materially amend or agree to materially amend, or waive any material right or material economic benefit under, any Material Contract in connection with obtaining such consents, approvals and waivers without the other party’s consent (which shall not be unreasonably withheld, conditioned or delayed); provided, further, that, in connection with obtaining such authorizations, consents, approvals and waivers, or the giving of such notices, the Company shall not be required to incur any out-of-pocket costs or any other obligation or liability unless de minimis in nature and amount.

SECTION 6.13 Employment and Employee Benefits Matters; Section 16.

(a) Without limiting any additional rights that any Company Employee may have under any Company Plan, Parent shall cause the Surviving Corporation and each of its Subsidiaries, for a period commencing at the Effective Time and ending on December 31, 2007 (the “Benefits Continuation Period”), to maintain the severance-related provisions of existing Company Plans not subject to termination pursuant to the express terms hereof and to provide 100% of the severance payments and benefits required thereunder to be provided to any Current Employee whose employment is terminated during that period. For purposes of this Section 6.13 only, the term “Company Employee” shall be deemed to refer to any current, former or retired employee, officer, consultant, independent contractor or director of the Company or any Company Subsidiary, excluding employees of the Standalone Drug Business and the Retained Business.

(b) The Company shall allow each participant in the Deferred Compensation Plans to elect, prior to the Effective Time, to receive his or her account balances (in the case of account balance plans) and the present value of all accrued benefits (in the case of non-account balance plans, with the present value in the case of benefits payable pursuant to an individual agreement being determined using the assumptions required to be used in such agreement and in all other cases being determined by using the average yield to maturity for 30-year US Government Bonds and the unloaded 94 GAR mortality rates, blended 50% male and 50% female, projected to 2002), upon the earlier of (1) the existing payment date under the current terms relating to such deferred compensation (subject to any change in the existing payment date that is required to comply with Section 409A of the Code) or (2) the later of (x) the Effective Time or (y) January 1, 2007. The Company may adopt such amendments to the Deferred Compensation Plans as it deems necessary or appropriate to effectuate the transactions contemplated hereby.

(c) Without limiting any additional rights that any Company Employee not covered by a collective bargaining agreement and employed by the Company or any Company Subsidiary at the Effective Time (“Current Employee”) may have under any Company Plan, Parent shall cause the Surviving Corporation and each of its Subsidiaries, for the Benefits Continuation Period, to maintain for any Current Employees (i) salary or hourly wage rate, commissions and target cash bonus opportunities under annual and long-term incentive programs (collectively, “Compensation”), that in the aggregate are no less favorable than, and (ii) benefits provided

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under Company Plans (other than those covered by (i) above) that in the aggregate are no less favorable than, the Compensation and benefits maintained for and provided to such Current Employees immediately prior to the Effective Time; provided, however, subject to the foregoing, that nothing herein shall prevent the amendment or termination of any Company Plan or interfere with the Surviving Corporation’s right or obligation to make such changes as are necessary to conform with applicable Law. Nothing in this Section 6.13 shall limit the right of Parent, the Surviving Corporation or any of their Subsidiaries to terminate the employment of any Current Employee at any time.

(d) As of and after the Effective Time, Parent will, or will cause the Surviving Corporation to, give Current Employees full credit for purposes of eligibility and vesting (but not benefit accruals, except for vacation and severance, if applicable, under the Company Plans), under any employee compensation and incentive plans, benefit (including vacation) plans, programs, policies and arrangements maintained for the benefit of Current Employees as of and after the Effective Time by Parent, its Subsidiaries or the Surviving Corporation for the Company Employees’ service with the Company, its Subsidiaries and their predecessor entities (each, a “Parent Plan”) to the same extent recognized under the Company Plans immediately prior to the Effective Time, provided that no such credit shall be granted to the extent that it would result in a duplication of benefits or to the extent that it is not similarly granted to similarly situated employees of Parent and its Affiliates. With respect to each Parent Plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA), the Parent or its Subsidiaries shall (i) cause to be waived any pre-existing condition or eligibility limitations to the extent waived or satisfied under the applicable Company Plan in which the Current Employee participates immediately prior to the Effective Time and (ii) give effect, for the fiscal year in which the Closing occurs, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, Current Employees under similar plans maintained by the Company and its Subsidiaries immediately prior to the Effective Time.

(e) From and after the Effective Time, Parent will cause the Surviving Corporation and all of its Subsidiaries to honor, in accordance with its terms (including any right to amend or terminate), (i) each existing employment, change in control, severance and termination plan, policy or agreement of or between the Company or any Company Subsidiary and any officer, director or employee of that company, and (ii) bonus plans or programs, bonus deferral plans, vested and accrued benefits under any employee benefit plan, program or arrangement of the Company or any Company Subsidiary and similar employment compensation and benefit arrangements and agreements in effect as of the Effective Time. Without limiting the generality of the foregoing, in the event that the annual bonus for fiscal year 2005 is not yet paid to participants at the Effective Time, any participant who was employed by the Company at the end of fiscal year 2005 will be entitled to a bonus if earned pursuant to the 2005 bonus program, regardless of whether such participant is employed at the time of the payment of 2005 bonuses.

(f) Prior to the Effective Time, (i) the Company shall take all steps reasonably necessary to cause the transactions contemplated hereby and any other dispositions of Equity Interests of the Company (including derivative securities), in connection with this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act to be approved by the Company Board of Directors or a committee of two or more Non-

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Employee Directors of the Company (as such term is defined in Rule 16b-3 promulgated under the Exchange Act) and (ii) Parent shall take all steps reasonably necessary to cause the transactions contemplated hereby and any other acquisitions of Parent equity securities (including derivative securities) in connection with this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act to be approved by Parent Board of Directors or a committee of two or more Non-Employee Directors of Parent (as such term is defined in Rule 16b-3 promulgated under the Exchange Act). Such approvals shall specify: (A) the name of each officer or director, (B) the number of securities to be disposed of or acquired for each named person, and (C) that the approval is granted for purposes of exempting the transaction under Rule 16b-3 of the Exchange Act.

(g) The parties hereto will treat the consummation of the Transactions and the Standalone Drug Sale, both individually and collectively, and regardless of the order in which they actually occur, as a “change in control,” “change of control” or similar event under each of the Company Plans (to the extent such Company Plans contain provisions relating to “change in control,” “change of control” or similar event).

(h) The parties will make good faith efforts to make equitable adjustments if necessary to ensure that the provisions of this Section 6.13 comply with Section 409A of the Code.

(i) Without limiting the generality of Section 9.7, nothing in this Section 6.13, express or implied, is intended to or shall confer upon any employee or service provider of Parent, the Company, or their respective Subsidiaries any right, benefit or remedy of any nature whatsoever.

SECTION 6.14 Board Representation. Parent shall take any and all actions necessary or appropriate to cause, effective immediately following the Effective Time, the number of directors comprising the Parent Board of Directors to be no more than fourteen (14) and for there to be three (3) vacancies on such board. Parent shall use its reasonable best efforts to cause three of the independent members of the Company Board of Directors to be elected to the Parent Board of Directors. In furtherance thereto, Parent shall refer the names of three or more mutually agreeable nominees to the Director Affairs Committee of the Parent Board of Directors for nomination to fill such vacancies immediately following the Effective Time and to serve on the Parent Board of Directors, one in each of the three classes of the Parent Board of Directors.

SECTION 6.15 Available Cash. No less than two Business Days and no earlier than five Business Days prior to the Closing Date, the Company shall provide Parent with a good faith estimate, together with reasonable supporting documentation, of the amount of immediately available funds, in U.S. dollars, that the Company has available to it to be used to fund Parent’s obligation to pay the Merger Consideration without restriction.

SECTION 6.16 Coordination of Dividends. From the date of this Agreement until the Effective Time, Parent and the Company shall coordinate with each other regarding the declaration and payment of dividends in respect of the Company Shares and the Parent Shares and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Company Shares or Parent Shares shall not receive two dividends, or fail

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to receive one dividend, for any single calendar quarter, including the quarter in which the Effective Time occurs, with respect to their Company Shares or Parent Shares, as the case may be. New Diamond and New Diamond Merger Sub shall not declare or pay any dividends in respect of their Common Stock.

SECTION 6.17 The Diamond Reorganization. The parties acknowledge and agree that they desire and intend to (i) cause the Diamond Merger and the Diamond LLC Conversion, taken together (the “Diamond Reorganization”), to qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code (an “F Reorg”), (ii) treat the Retained Business Purchase (other than the purchase of Lucky Stores, Inc., a Delaware corporation (“Lucky Delaware”) and its Subsidiaries) and the Standalone Drug Sale as purchases of assets for federal income Tax purposes, (iii) treat the purchase of Lucky Delaware as a purchase of stock for federal income Tax purposes and (iv) effect the Separation in a manner that does not result in any gain, including any deferred intercompany gain, for federal income Tax purposes (other than with respect to the distribution of certain New Diamond Assets from Lucky Delaware and its Subsidiaries pursuant to the Separation Agreement). The Company shall, and shall cause New Diamond to, (x) use best efforts to cause the Diamond Reorganization to qualify as an F Reorg, (y) consult with Parent prior to taking any action that could affect the qualification of the Diamond Reorganization as an F Reorg and take, or refrain from taking, any actions reasonably requested by Emerald in order to qualify the Diamond Reorganization as an F Reorg and (z) consult with Parent prior to taking any action in connection with the Separation, the Retained Business Purchase or the Standalone Drug Sale and take, or refrain from taking, any action reasonably requested by Parent in connection with the Separation, the Retained Business Purchase or the Standalone Drug Sale in furtherance of the intentions described above in this Section 6.17. Any capitalized term used in this paragraph, but not defined in this Agreement, shall have the meaning ascribed to it in the Separation Agreement.

SECTION 6.18 Boise Operations and Community Involvement. Parent intends to maintain a significant presence in Boise, Idaho for a period of not less than three years following the Effective Time.

ARTICLE VII

CONDITIONS OF MERGER

SECTION 7.1 Mutual Conditions to Effect the Mergers. The respective obligations of each party to consummate the Mergers shall be subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) This Agreement shall have been adopted by the stockholders of the Company by the Requisite Company Stockholder Vote in accordance with the Company’s certificate of incorporation and the DGCL and the Share Issuance shall have been approved by the stockholders of Parent by the Requisite Parent Stockholder Vote in accordance with the Parent’s certificate of incorporation or other governing documents, the DGCL and applicable stock exchange regulations;

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(b) The Form S-4 shall have become effective under the Securities Act and not be the subject of any stop order or proceedings seeking a stop order;

(c) The Parent Shares issuable to the New Diamond stockholders as contemplated by this Agreement in connection with the payment of the aggregate Stock Consideration shall have been approved for listing on the NYSE, subject to official notice of issuance;

(d) With respect to the Emerald Merger only, each of the Standalone Drug Sale, the Separation and the Retained Business Purchase shall have occurred;

(e) No Law, temporary restraining order, preliminary or permanent injunction or other legal restraint shall have been enacted, entered, promulgated or enforced and no action or decision shall have been taken and remain in effect by any United States or state Governmental Authority, or any Governmental Authority of the jurisdictions listed in Section 7.1(e) of the Company Disclosure Letter, which seeks to or in fact prohibits, restrains or enjoins the consummation of the transactions contemplated by this Agreement; and

(f) The waiting period (and any extension thereof) applicable to the transactions contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.

SECTION 7.2 Conditions to Obligations of Parent and Acquisition Sub. The obligations of Parent and Acquisition Sub to consummate the Mergers shall be further subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) The representations and warranties of the Company contained in this Agreement (disregarding any Company Material Adverse Effect, materiality or similar qualifiers therein) shall be true and correct as of the date hereof and the Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct as of such specified date), except where any failure of any such representation or warranty to be so true and correct has not had and would not reasonably be expected to have a Company Material Adverse Effect; provided, however, that the representations and warranties of the Company in Section 4.2 (Authority; Enforceability) shall be true in all but de minimis respects;

(b) Each of the Company, New Diamond and New Diamond Merger Sub shall have performed in all material respects the obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by it under this Agreement at or prior to the Effective Time; provided, that the Company’s failure to comply with the notification requirements in Section 6.11 shall not cause the condition set forth in this Section 7.2(b) to fail to be satisfied; and

(c) Parent shall have received a certificate of the Chief Executive Officer and the Chief Financial Officer of the Company, certifying that the conditions set forth in Sections 7.2(a) and (b) have been satisfied.

SECTION 7.3 Conditions to Obligations of the Company, New Diamond and New Diamond Merger Sub. The obligations of the Company, New Diamond and New Diamond

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Merger Sub to consummate the Mergers shall be further subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a) The representations and warranties of Parent and Acquisition Sub contained in this Agreement (disregarding any Parent Material Adverse Effect, materiality or similar qualifiers therein) shall be true and correct in all material respects, in each case as of the date hereof and the Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct in all material respects as of such specified date), except where any failure of any such representation or warranty to be so true and correct has not had and would not reasonably be expected to have a Parent Material Adverse Effect; provided, however, that the representations and warranties of Parent in Section 5.2 (Authority; Enforceability) shall be true in all but de minimis respects;

(b) Each of Parent and Acquisition Sub shall have performed in all material respects the material obligations, and complied in all material respects with the material agreements and covenants, required to be performed by or complied with by it under this Agreement at or prior to the Effective Time; provided, that the Parent’s failure to comply with the notification requirements in Section 6.11 shall not cause the condition set forth in this Section 7.3(b) to fail to be satisfied;

(c) The New Diamond Shares issuable to the Company’s stockholders as contemplated by this Agreement in connection with the Diamond Merger shall have been approved for listing on a national securities exchange, subject to official notice of issuance; provided, that the obligations of the Company, New Diamond and New Diamond Merger Sub to consummate the Mergers shall be subject to the condition in this Section 7.3(c) only if (i) the Company and New Diamond have complied in all respects with Section 6.6(f) and (ii) it is reasonably likely that the Emerald Merger will not be consummated; and

(d) The Company shall have received a certificate of the Chief Executive Officer and the Chief Financial Officer of Parent, certifying that the conditions set forth in Sections 7.3(a) and (b) have been satisfied.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

SECTION 8.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing, whether before or after adoption of this Agreement by stockholders of the Company or of New Diamond:

(a) by mutual written consent of each party hereto;

(b) by Parent or the Company if any United States or state Governmental Authority shall have issued a final order, decree or ruling or taken any other final action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such decision, order, decree, ruling or other action is or shall have become final and nonappealable;

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(c) by Parent or the Company if the Closing shall not have occurred on or before September 22, 2006 (the “Termination Date”); provided, that the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available to the party seeking to terminate if any action of such party or the failure of such party to perform any of its obligations under this Agreement required to be performed at or prior to the Closing has been the cause of, or resulted in, the failure of the Closing to occur on or before the applicable termination date and such action or failure to perform constitutes a breach of this Agreement; provided, further, that the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available to the Company if neither the Company nor CVS shall have exercised its termination right under Section 12.01(b) of the Standalone Drug Sale Agreement;

(d) by the Company

(i) if there shall have been a material failure of any representation or warranty of Parent or Acquisition Sub to be true, or a material breach of any covenant or agreement of Parent or Acquisition Sub contained in this Agreement such that the condition set forth in Section 7.3(a) or 7.3(b) would not be satisfied and which shall not have been cured (if curable) prior to the earlier of (A) 20 Business Days following notice of such breach (it being understood that such 20 Business Day period shall not be applicable to covenants or agreements that by their terms are intended to be satisfied at the Closing) and (B) the Termination Date;

(ii) if the Parent Board of Directors (A) shall have failed to include or make or shall have publicly withdrawn, modified or changed (it being understood and agreed that any “stop-look-and-listen” communication by the Parent Board of Directors to the stockholders of the Parent pursuant to Rule 14d-9(f) of the Exchange Act shall not be deemed to constitute a withdrawal, modification or change of its recommendation of this Agreement), in a manner adverse to Company, the Parent Board Recommendation either (1) due in any meaningful respect to antitrust concerns or (2) for any other reason, or (B) shall have recommended to the stockholders of Parent an Acquisition Proposal other than the transactions contemplated by this Agreement;

(iii) if Parent fails to duly call or convene the Parent Stockholders Meeting in accordance with Section 6.2; or

(iv) prior to obtaining the requisite vote of its stockholders at the Company Stockholders Meeting, in accordance with, and subject to the terms and conditions of, Section 6.5(b);

(e) by Parent

(i) if there shall have been a material failure of any representation or warranty of the Company to be true, or a material breach of any covenant or agreement of the Company contained in this Agreement such that the condition set forth in Section 7.2(a) or 7.2(b) would not be satisfied and which shall not have been cured (if curable) prior to the earlier of (A) 20 Business Days following notice of such breach (it being understood that such 20 Business Day period shall not be applicable to covenant or agreements that by their terms are intended to be satisfied at the Closing) and (B) the Termination Date;

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(ii) if the Company Board of Directors (A) shall have failed to include or make or shall have publicly withdrawn, modified or changed (it being understood and agreed that any “stop-look-and-listen” communication by the Company Board of Directors to the stockholders of the Company pursuant to Rule 14d-9(f) of the Exchange Act shall not be deemed to constitute a withdrawal, modification or change of its recommendation of this Agreement), in a manner adverse to Parent, the Company Board Recommendation, or (B) shall have recommended to the stockholders of the Company an Acquisition Proposal other than the transactions contemplated by this Agreement; or

(iii) if the Company fails to duly call or convene the Company Stockholders Meeting in accordance with Section 6.2;

(f) by Parent or the Company if, (i) upon a vote thereon at the Company Stockholders Meeting or any postponement or adjournment thereof, this Agreement shall not have been adopted by the Requisite Company Stockholder Vote, or (ii) upon a vote thereon at the Parent Stockholders Meeting or any postponement or adjournment thereof, the Share Issuance shall not have been approved by the Requisite Parent Stockholder Vote; or

(g) by Parent or the Company if the Separation Agreement or the Standalone Drug Sale Agreement shall have been terminated in accordance with the terms thereof.

SECTION 8.2 Effect of Termination.

(a) In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto, except with respect to Section 6.4(b), this Section 8.2, Section 8.3, or Article IX, which shall survive such termination; provided, however, that nothing herein shall relieve any party from liability for any willful or intentional material breach hereof.

(b) The Company shall pay Parent, by wire transfer of immediately available funds to such accounts as Parent may designate, the sum of $276,000,000 (the “Company Termination Fee”) if this Agreement is terminated as follows:

(i) if Parent shall terminate this Agreement pursuant to Section 8.1(e)(iii), then the Company shall pay the Company Termination Fee on the business day following such termination;

(ii) if the Company shall terminate this Agreement pursuant to Section 8.1(d)(iv), the Company shall pay the Company Termination Fee concurrently with such termination;

(iii) if (A) either party shall terminate this Agreement pursuant to Section 8.1(f)(i) and (B) at any time after the date hereof and at or before the date of the Company Stockholders Meeting there shall have been a Public Proposal with respect to the Company, and if (C) within twelve months of the date of such termination of this Agreement, the Company or any of the Company Subsidiaries enters into any definitive agreement with respect to, or consummates, any Acquisition Proposal (provided that, in this instance, all percentages included in the definition of “Acquisition Proposal” shall be

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increased to 50%), then the Company shall pay the Company Termination Fee upon the date of such execution or consummation, whichever is earlier;

(iv) if (A) either party shall terminate this Agreement pursuant to Section 8.1(c) and (B) at any time after the date hereof and before such termination there shall have been a Public Proposal with respect to the Company, and if (C) within twelve months of the date of such termination of this Agreement, the Company or any of the Company Subsidiaries enters into any definitive agreement with respect to, or consummates, any Acquisition Proposal (provided that, in this instance, all percentages included in the definition of “Acquisition Proposal” shall be increased to 50%), then the Company shall pay the Company Termination Fee upon the date of such execution or consummation, whichever is earlier; and

(v) if Parent shall terminate this Agreement pursuant to Section 8.1(e)(ii) within 10 calendar days following the occurrence of the event giving rise to such termination right, then the Company shall pay the Company Termination Fee on the Business Day following such termination.

Notwithstanding anything in this Agreement to the contrary, if the Company fails to pay all amounts due to Parent on the dates specified, then the Company shall pay all costs and expenses (including legal fees and expenses) incurred by Parent in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in The Wall Street Journal, from the date such amounts were required to be paid until the date actually received by Parent.

(c) Parent shall pay the Company, by wire transfer of immediately available funds to such accounts as the Company may designate, the sum of $135,000,000 (the “Parent Termination Fee”) if this Agreement is terminated as follows:

(i) if the Company shall terminate this Agreement pursuant to Section 8.1(d)(iii) then Parent shall pay the Parent Termination Fee on the business day following such termination;

(ii) if (A) either party shall terminate this Agreement pursuant to Section 8.1(f)(ii) and (B) at any time after the date hereof and before such termination there shall have been a Public Proposal with respect to the Parent, and if (C) within twelve months of the date of such termination of this Agreement, Parent or any of Parent Subsidiaries enters into any definitive agreement with respect to, or consummates, any Acquisition Proposal (provided that, in this instance, all percentages included in the definition of “Acquisition Proposal” shall be increased to 50%), then Parent shall pay the Parent Termination Fee upon the date of such execution or consummation, whichever is earlier;

(iii) if (A) either party shall terminate this Agreement pursuant to Section 8.1(c), except in the circumstances described in Section 8.2(d)(i), and (B) at any time after the date hereof and before such termination there shall have been a Public Proposal with respect to the Parent, and if (C) within twelve months of the date of such termination

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of this Agreement, Parent or any of Parent Subsidiaries enters into any definitive agreement with respect to, or consummates, any Acquisition Proposal (provided that, in this instance, all percentages included in the definition of “Acquisition Proposal” shall be increased to 50%), then Parent shall pay the Parent Termination Fee upon the date of such execution or consummation, whichever is earlier; and

(iv) if the Company shall terminate this Agreement pursuant to Section 8.1(d)(ii) within 10 calendar days following the occurrence of the event giving rise to such termination right, except in the circumstances described in Section 8.2(d)(ii), then Parent shall pay the Parent Termination Fee on the Business Day following such termination.

Notwithstanding anything in this Agreement to the contrary, if Parent fails to pay all amounts due to the Company on the dates specified, then Parent shall pay all costs and expenses (including legal fees and expenses) incurred by the Company in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in The Wall Street Journal, from the date such amounts were required to be paid until the date actually received by the Company.

(d) Parent shall pay the Company by wire transfer of immediately available funds to such accounts as the Company may designate, the sum of $250,000,000 (the “Regulatory Termination Fee”), and shall not pay the Company the Parent Termination Fee, if this Agreement is terminated as follows:

(i) if (A) either party shall terminate this Agreement pursuant to Section 8.1(c), (B) as of the date of such termination the HSR Clearance shall not have occurred or any decree, judgment, injunction, or other order (in each case that relates to antitrust Laws) that prevents, prohibits or delays the consummation of the Transactions exists or is in effect, (C) immediately prior to such termination, the conditions set forth in Sections 7.1(a) (to the extent relating to the Requisite Company Stockholder Vote), 7.1(b) and 7.2(a) shall have been satisfied, and (D) each of the Company, New Diamond and New Diamond Merger Sub shall have performed in all material respects the obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by it under this Agreement prior to such termination (other than obligations, agreements and covenants set forth in Section 6.11), then Parent shall pay the Regulatory Termination Fee on the business day following such termination; provided, that if (1) this Agreement is terminated pursuant to Section 8.1(g) and (2) at the time of such termination this Agreement may also be terminated pursuant to Section 8.1(c), then for purposes of this Section 8.2(d)(i) this Agreement shall be deemed to have been terminated pursuant to Section 8.1(c); and

(ii) if the Company shall terminate this Agreement pursuant to Section 8.1(d)(ii)(A)(1) within 10 calendar days following the occurrence of the event giving rise to such termination right, Parent shall pay the Regulatory Termination Fee on the business day following such termination,

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Notwithstanding anything in this Agreement to the contrary, if Parent fails to pay all amounts due to the Company on the dates specified, then Parent shall pay all costs and expenses (including legal fees and expenses) incurred by the Company in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in The Wall Street Journal, from the date such amounts were required to be paid until the date actually received by the Company.

SECTION 8.3 Expenses. Except as otherwise specifically provided in this Agreement, each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby; provided, that expenses incurred in connection with the filing fee for the Proxy Statement/Prospectus and printing and mailing the Proxy Statement/Prospectus shall be shared equally by Parent and the Company.

SECTION 8.4 Amendment. Subject to applicable Law, this Agreement may be amended by the parties hereto by action taken by or on behalf of their respective boards of directors, at any time prior to the Closing Date, whether before or after adoption of this Agreement by the stockholders of the Company, New Diamond and Acquisition Sub. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

SECTION 8.5 Waiver. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (iii) subject to the requirements of applicable Law, waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.

ARTICLE IX

GENERAL PROVISIONS

SECTION 9.1 Non-Survival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, and the other agreements and documents contemplated to be delivered in connection herewith, including any rights arising out of any breach of such representations, warranties, covenants and agreements, shall, in the event Closing occurs, survive the Effective Time, except for (i) those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part at or after the Effective Time (including Section 6.8) and (ii) this Article IX.

SECTION 9.2 Company Disclosure Letter; Parent Disclosure Letter. There may have been included in the Company Disclosure Letter and the Parent Disclosure Letter and may be included elsewhere in this Agreement items which are not “material,” and such inclusion shall not be deemed to be an acknowledgment or agreement by the Company or the Parent, as appropriate, that such items are “material” or to affect the interpretation of such term for purposes of this Agreement. Disclosures included in any Section of the Company Disclosure

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Letter or the Parent Disclosure Letter shall be considered to be made for purposes of all other Sections of the Company Disclosure Letter or of the Parent Disclosure Letter, as appropriate, to the extent that the relevance of any such disclosure to any other Section of the Company Disclosure Letter or the Parent Disclosure Letter, as appropriate, is reasonably apparent from the text of such disclosure. The inclusion of any items or information in the Company Disclosure Letter or the Parent Disclosure Letter shall not be construed as an admission that such item or information (or any non-disclosed item or information of comparable or greater significance) is material or otherwise required to be scheduled as an exception from any representation, warranty or covenant. Matters reflected in the Company Disclosure Letter or the Parent Disclosure Letter are not necessarily limited to matters required by the Agreement to be disclosed in the Company Disclosure Letter or the Parent Disclosure Letter.

SECTION 9.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section 9.3 prior to 5:00 p.m. (New York time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 5:00 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on such date, (iii) when received, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

(a) if to the Company, New Diamond Merger Sub, or New Diamond:

Albertson’s, Inc.

250 East Parkcenter Boulevard

Boise, Idaho 83706

Facsimile: (208) 395-6349

Attention: Corporate Secretary

with a copy to (which shall not constitute notice):

Jones Day

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114

Facsimile: (216) 579-0212

Attention: Lyle G. Ganske, Esq.

and to:

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Jones Day

2727 North Harwood Street

Dallas, Texas 75201

Facsimile: (214) 969-5100

Attention: Mark E. Betzen, Esq.

and to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Facsimile: (212) 558-3588

Attention: James C. Morphy, Esq.

Audra D. Cohen, Esq.

(b) if to Parent, Acquisition Sub or the Surviving Corporation:

SUPERVALU INC.

11840 Valley View Road

Eden Prairie, MN 55344

Facsimile: (952) 828-8900

Attention: Corporate Secretary

with a copy to (which shall not constitute notice):

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Facsimile: (212) 403-2233

Attention: Andrew R. Brownstein, Esq.

Igor Kirman, Esq.

SECTION 9.4 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid, legal and enforceable under applicable Law. If any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein and there had been contained herein instead such valid, legal and enforceable provisions as would most nearly accomplish the intent and purpose of such invalid, illegal or unenforceable provision.

SECTION 9.5 Entire Agreement. This Agreement, the Company Disclosure Letter, the Parent Disclosure Letter, the Coordination Agreement and the Confidentiality Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof.

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SECTION 9.6 Assignment. This Agreement may not be assigned by any party or by operation of law or otherwise without the prior written consent of each of the other parties (which consent may be granted or withheld in the sole discretion of such other party). Any attempted assignment in violation of this Section 9.6 shall be void.

SECTION 9.7 No Third Party Beneficiaries. Except for Section 6.8, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 8.5 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with matters as to which the party making such representations and warranties has no knowledge or only incomplete knowledge. Consequently, Persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

SECTION 9.8 No Responsibility for Other Parties. Each party to each of the Transaction Agreements shall be responsible only for its own representations, warranties, covenants, actions or omissions under each of the Transaction Agreements. The Company, New Diamond, New Diamond Merger Sub, Parent and Acquisition Sub each acknowledges that none of the other parties shall be held liable in any way for any representation, warrant, covenant, action or omission of any other party to the Transaction Agreements. Notwithstanding anything to the contrary in this Section 9.8, however, (i) Parent shall be responsible for the representations, warranties, covenants, actions and omissions under each of the Transaction Agreements of Acquisition Sub, and (ii) the Company shall be responsible for the representations, warranties, covenants, actions and omissions, in each case prior to the Effective Time, under each of the Transaction Agreements of New Diamond and New Diamond Merger Sub.

SECTION 9.9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without giving effect to choice of law principles thereof).

SECTION 9.10 Specific Performance; Jurisdiction. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware (and, with respect to claims in which the exclusive subject matter jurisdiction of such claims is federal, the federal district court for the District of Delaware) in the event any dispute arises out of this

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Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the Court of Chancery of the State of Delaware (or, with respect to claims in which the exclusive subject matter jurisdiction of such claims is federal, the federal district court for the District of Delaware) and (iv) to the fullest extent permitted by Law, consents to service being made through the notice procedures set forth in Section 9.3. Each party hereto hereby agrees that, to the fullest extent permitted by Law, service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 9.3 shall be effective service of process for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby.

SECTION 9.11 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE SEPARATION AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SEPARATION AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

SECTION 9.12 Interpretation. When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 9.13 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, the Company, New Diamond, New Diamond Merger Sub, Acquisition Sub and Parent have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

ALBERTSON’S, INC.
By:	/S/    JOHN R. SIMS
Name:	John R. Sims
Title:	Executive Vice President and General Counsel
NEW ALOHA CORPORATION
By:	/S/    PAUL G. ROWAN
Name:	Paul G. Rowan
Title:	President
NEW DIAMOND SUB, INC.
By:	/S/    PAUL G. ROWAN
Name:	Paul G. Rowan
Title:	President
SUPERVALU INC.
By:	/S/    JEFF NODDLE
Name:	Jeff Noddle
Title:	Chairman & CEO
EMERALD ACQUISITION SUB, INC.
By:	/S/    DAVID L. BOEHNEN
Name:	David L. Boehnen
Title:	President

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EX-10.01

Exhibit 10.01

FINAL EXECUTION COPY

PURCHASE AND SEPARATION AGREEMENT

by and among

ALBERTSON’S, INC.,

NEW ALOHA CORPORATION,

SUPERVALU INC.

and

AB ACQUISITION LLC

Dated as of January 22, 2006

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	2
Section 1.1	General	2
ARTICLE II	TRANSFER OF NEW DIAMOND ASSETS AND NEW DIAMOND LIABILITIES; PURCHASE AND SALE OF THE COMPANY AND THE RETAINED ENTITIES’ STOCK	17
Section 2.1	Transfer of New Diamond Assets and New Diamond Entities	17
Section 2.2	Transfer and Assumption of New Diamond Liabilities	18
Section 2.3	Purchase and Sale of the Company’s and the Retained Entities’ Stock; Retained Assets and Retained Liabilities	18
Section 2.4	Reorganization; Consummation of the Mergers and New Diamond Liability Transfer; Retained Business Price	19
Section 2.5	The Closing	19
Section 2.6	Certain Indebtedness of the Company; Succession and Release; Indemnification	20
Section 2.7	Current Accounts	22
Section 2.8	Retained Business Price Allocation; Retained Property Proceeds	22
Section 2.9.	Insurance Proceeds	23
ARTICLE III	REPRESENTATIONS AND WARRANTIES	24
Section 3.1	Representations and Warranties of Onyx	24
Section 3.2	Representations and Warranties of the Company	28
Section 3.3	Representations and Warranties of SV	28
ARTICLE IV	TAX MATTERS	30
Section 4.1.	Liability for Taxes	30
Section 4.2.	Filing Responsibility	33
Section 4.3.	Cooperation and Exchange of Information	34
Section 4.4.	Tax Proceedings	35
Section 4.5.	Tax Sharing Agreements	37
Section 4.6.	Tax Benefits	37
Section 4.7.	Transfer Taxes	38
Section 4.8.	Taxes Governed by Article IV	38

i

Section 4.9	Survival	38
Section 4.10.	Post-Closing Dispositions	38
Section 4.11.	Reorganization Treatment	38
Section 4.12.	[Intentionally Omitted]	39
Section 4.13.	Tax Treatment of Payments	39
ARTICLE V	INDEMNIFICATION	39
Section 5.1	SV’s and New Diamond’s Agreement to Indemnify	39
Section 5.2	Onyx’s and the Company’s Agreement to Indemnify	39
Section 5.3	Reduction of Indemnifiable Losses for Insurance Benefits Received	39
Section 5.4	Procedure for Indemnification	40
Section 5.5	Pending Litigation; New Litigation	41
Section 5.6	Remedies Exclusive	42
Section 5.7	Retained Business Price Adjustment	42
Section 5.8	Exclusion of Tax Indemnities	42
ARTICLE VI	CERTAIN ADDITIONAL MATTERS	42
Section 6.1	Further Assurances; Subsequent Transfers	42
Section 6.2	Use of Names; Cross-License	45
Section 6.3	Settlement of Intercompany Accounts	46
Section 6.4	Merger Agreement Provisions	46
Section 6.5	Further Action; Reasonable Best Efforts	49
Section 6.6	Ancillary Agreements	50
Section 6.7	Sharing of Certain Payments	51
Section 6.8	Certain Restrictions Pending the Closing	51
Section 6.9	Payments by Onyx to the Exchange Fund	52
Section 6.10	Settlement of Appraisal Proceedings	52
Section 6.11	Certain Standalone Drug Sale Matters	52
Section 6.12	Proxy Statement	53
Section 6.13	Merger Agreement Termination Fee	53
ARTICLE VII	ACCESS TO INFORMATION AND SERVICES	54
Section 7.1	Access to Information	54
Section 7.2	Litigation Cooperation	54
Section 7.3	Retention of Records	55

ii

Section 7.4	Confidentiality	55
Section 7.5	Publicity	55
ARTICLE VIII	EMPLOYEE BENEFITS; LABOR MATTERS	55
Section 8.1	Locus of Employees and Company Plans	55
Section 8.2	Employee Benefits	56
Section 8.3	Other Liabilities and Obligations	56
Section 8.4	Welfare Plans	57
Section 8.5	Retirement Plans; Savings Plans	57
Section 8.6	Preservation of Rights to Amend or Terminate Plans	58
Section 8.7	Reimbursement; Indemnification	58
Section 8.8	Change In Control	58
ARTICLE IX	MISCELLANEOUS	58
Section 9.1	Conditions to Closing	58
Section 9.2	Termination Prior to the Closing	61
Section 9.3	Effect of Termination	61
Section 9.4	No Survival	62
Section 9.5	Entire Agreement; Third Party Beneficiaries	62
Section 9.6	Fees and Expenses	62
Section 9.7	No Waiver	62
Section 9.8	Amendments	62
Section 9.9.	Governing Law	63
Section 9.10	Notices	63
Section 9.11	Interpretation	64
Section 9.12	Counterparts	65
Section 9.13	Specific Performance	65
Section 9.14	Successors and Assigns	65
Section 9.15	Severability	66
Section 9.16	Jurisdiction; Venue; Consent to Service of Process	66
Section 9.17	Waiver of Jury Trial	67
Section 9.18	Company Disclosure Letter	67

iii

SCHEDULES

Schedule 1.1 – Structure Steps

Schedule 1.2 – New Diamond Assets

Schedule 1.3 – [Intentionally Omitted]

Schedule 1.4 – [Intentionally Omitted]

Schedule 1.5 – New Diamond Entities

Schedule 1.6 – New Diamond Scheduled Liabilities

Schedule 1.7 – Retained Assets

Schedule 1.8 – Retained Employees

Schedule 1.9 – [Intentionally Omitted]

Schedule 1.10 – Retained Scheduled Liabilities

Schedule 1.11 – Specified Standalone Drug Liabilities

Schedule 1.12 – Retained Actions

Schedule 1.13 – New Diamond Actions

Schedule 1.14 – Retained Names

EXHIBITS

Exhibit A – Financing Commitment

Exhibit B – Form of Transition Services Agreement

Exhibit C – Onyx Disclosure Letter

Exhibit D – Company Disclosure Letter

Exhibit E – SV Disclosure Letter

iv

THIS PURCHASE AND SEPARATION AGREEMENT (this “Separation Agreement”), dated as of January 22, 2006, is entered into by and between Albertson’s, Inc., a Delaware corporation (the “Company”), New Aloha Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“New Diamond”), SUPERVALU INC., a Delaware corporation (“SV”), and AB Acquisition LLC, a Delaware limited liability company (“Onyx”).

WHEREAS, concurrently with the execution of this Separation Agreement, the Company has entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of the date hereof, by and among the Company, New Diamond, New Diamond Sub, Inc., a Delaware corporation and wholly-owned subsidiary of New Diamond, SV, and Emerald Acquisition Sub, Inc., a Delaware corporation and wholly-owned subsidiary of SV, pursuant to which, among other things (1) the Company shall merge with New Diamond Sub Inc., with the Company surviving (the “Diamond Merger”), and (2) New Diamond shall merge with Emerald Acquisition Sub Inc., with New Diamond surviving (the “Emerald Merger,” and together with the Diamond Merger, the “Mergers”), in each case, in accordance with the General Corporation Law of the State of Delaware (the “DGCL”);

WHEREAS, upon the terms and subject to the conditions set forth herein (including as contemplated by the Reorganization (as defined herein)), (1) pursuant to the Diamond Merger, New Diamond shall acquire all of the issued and outstanding Equity Interests (as defined herein) of the Company for stock of New Diamond, (2) the Company shall immediately thereafter convert into a Delaware limited liability company, (3) the Company shall thereafter consummate the distribution and transfer of all the New Diamond Assets (as defined herein) to New Diamond, subject to the assumption by New Diamond of the New Diamond Liabilities (as defined herein), (4) thereafter the Company and its Subsidiaries shall consummate the Standalone Drug Sale (as defined herein), upon the terms and subject to the conditions set forth in the Standalone Drug Sale Agreement, (5) Onyx shall immediately thereafter acquire all of the issued and outstanding Equity Interests of the Company from New Diamond for the Retained Business Price (as defined below) and (6) thereafter the Emerald Merger shall be consummated; and

WHEREAS, concurrently with the execution of this Separation Agreement, and as a condition to the willingness of each of the Company and SV to enter into this Separation Agreement, Cerberus Capital Management, L.P., on behalf of one or more affiliated funds or managed accounts to be designated by it (the “Sponsor”), has provided a financing commitment pursuant to which the Sponsor has committed, subject to the terms and conditions set forth therein, to invest the amount set forth therein to purchase Equity Interests of Onyx and to provide debt financing to the Retained Business (as defined herein), in the form attached hereto as Exhibit A (the “Financing Commitment”).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 General. As used in this Separation Agreement, the following terms shall have the following meanings:

“338(h)(10) Election Subsidiaries” has the meaning set forth in Section 4.1(c).

“338(h)(10) Elections” has the meaning set forth in Section 4.1(c).

“ABS Indenture” has the meaning set forth in the definition of Company Indentures.

“Accountant” has the meaning set forth in Section 2.8(a).

“Action” means any claim, action, suit, proceeding or investigation by or before any Authority.

“Affected Party” has the meaning set forth in Section 4.2(d).

“Affiliate” means, with respect to any specified person, any other person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified person.

“Affiliated Group” means the consolidated group for Income Tax purposes of which New Diamond or the Company is or was the common parent, which group terminates as a result of the Mergers.

“Albertson’s Inc. Guarantee” has the meaning set forth in Section 2.6(b).

“American Stores” has the meaning set forth in the definition of Company Indentures.

“Ancillary Agreements” means (i) the Transition Services Agreement substantially in the form attached as Exhibit B and (ii) the Cross-License Agreement.

“ASC Indenture” has the meaning set forth in the definition of Company Indentures.

“Asset” means, with respect to any person, except as otherwise provided herein, any and all of its right, title and interest in and to all of the rights, properties, assets, inventories, claims, contracts and businesses of every kind, character and description, whether real, personal or mixed, tangible and intangible, whether accrued, contingent or otherwise, of every kind and description and wherever located, owned or used by such person (including in the possession of owners or third parties or elsewhere), including (i) all cash, cash equivalents, notes and accounts receivable (whether current or non-current), deposit accounts, securities accounts and other banks accounts; (ii) all certificates of deposit, banker’s acceptances and other investment

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securities; (iii) all patents, patent rights, trade dress, trademarks, service marks, trademark and service mark rights, trade names, trade name rights, domain names, copyrights, banners, logos, data rights, privacy rights, publicity rights, registrations or applications for any of the foregoing, trade secrets, works of authorship, technology and know-how (including all data bases, customer lists, confidential information, discoveries, inventions and improvements), and other proprietary rights and information; (iv) all rights existing under leases, contracts, licenses, service agreements, sales and purchase agreements, other agreements and business arrangements and all policies of insurance and proceeds, benefits and rights to coverage under insurance policies; (v) all real estate and all buildings and other improvements thereon; (vi) all leasehold improvements and all equipment (including all office equipment), fixtures, trade fixtures and furniture; (vii) all office supplies, other miscellaneous supplies and other tangible property of any kind; (viii) all computer hardware, software, computer programs and systems and documentation relating thereto, including all databases and reference and resource materials; (ix) all prepayments or prepaid expenses; (x) all claims, causes of action, rights of recovery, rights to sue for past, present and future infringement of any intellectual property rights and rights of set-off of any kind; (xi) the right to receive mail, accounts receivable payments and other communications; (xii) all customer lists and records pertaining to customers and accounts, personnel records, all lists and records pertaining to suppliers and agents, and all books, ledgers, files and business records of every kind and all minute books, stock ledgers and other corporate books and records; (xiii) all advertising materials and all other printed or written materials; (xiv) all permits, waivers, licenses, approvals and authorizations of governmental authorities or third parties relating to the ownership, possession or operation of the Assets; (xv) all goodwill as a going concern and all other intangible properties; and (xvi) all employee contracts, including the right thereunder to restrict the employee from competing in certain respects.

“Assumed Benefit Plans” means any (i) Company Plan maintained by the Retained Entities solely for the benefit of current and former employees of the Retained Business (including, for the avoidance of doubt, any such plan in which New Diamond Employees participate by virtue of past service to the Retained Business), and (ii) any Company Plan that is an employment, change-of-control, severance or similar individual agreement between the Company, a New Diamond Entity or one of their respective Affiliates and any Retained Employee, other than any such agreement providing for equity or equity-based compensation. For purposes of the preceding sentence, any award (whether a cash, restricted stock unit, or retention award) made pursuant to Section 6.1(a)(ii) of the Company Disclosure Letter to the Merger Agreement and made to a Retained Employee (and any agreement in respect of such award) shall not be considered an award and/or agreement providing for equity or equity-based compensation and shall be considered an Assumed Benefit Plan for all purposes of this Agreement.

“Authority” means any court, arbitrator, administrative or other governmental authority, agency, commission, tribunal, authority or instrumentality, domestic (including federal, state or local) or foreign or any other authority, which has authority or jurisdiction over any party hereto or any of their respective properties or assets.

“Business Day” means any day that is not a Saturday, a Sunday or other day that is a statutory holiday under the federal Laws of the United States.

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“Business Description Presentation” has the meaning set forth in the definition of New Diamond Business.

“Buyer Tax Indemnitee” has the meaning set forth in Section 4.1(a).

“Casualty” has the meaning set forth in Section 2.9(a).

“Closing” has the meaning set forth in Section 2.5(a).

“Closing Date” means the date on which the Closing occurs.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company” has the meaning set forth in the Preamble.

“Company Disclosure Letter” has the meaning set forth in Section 3.2.

“Company Form 10-K” has the meaning set forth in Section 3.2.

“Company Headquarters” has the meaning set forth in the definition of New Diamond Business.

“Company Indemnitees” has the meaning set forth in Section 5.1.

“Company Indentures” mean (i) that certain Indenture, dated as of May 1, 1992, by and between Albertson’s, Inc. and Morgan Guaranty Trust Company of New York, as trustee (the “ABS Indenture”) and (ii) that certain Indenture, dated as of May 1, 1995 (as supplemented), by and between American Stores Company, LLC (“American Stores”) and J.P. Morgan Trust Company, National Association, as successor trustee (the “ASC Indenture”).

“Company Material Adverse Effect” means any effect that is materially adverse to the business, financial condition or results of operations of the Company and the Company Subsidiaries taken as a whole in relation to the current and expected performance and value of the Retained Business, Retained Assets and Retained Liabilities, other than any effect to the extent resulting proximately from (i) general economic conditions or developments or changes therein, (ii) conditions in the industries in which the Company and the Company Subsidiaries operate or developments or changes therein, except to the extent that such conditions, developments or changes impact the Company in a materially disproportionate adverse manner relative to similarly situated competitors of the Company, (iii) conditions in the stock markets or other capital markets or developments or changes therein, (iv) the announcement of the Transaction Agreements or the Transactions (each as defined in the Merger Agreement), (v) the performance by the Company of its obligations pursuant to the Transaction Agreements (except the obligations of the Company to obtain the consents contemplated by Section 4.3 and Section 4.4 of the Merger Agreement as incorporated by reference mutatis mutandis into this Separation Agreement pursuant to Section 3.2 hereof), (vi) the announcement, consummation, termination or abandonment of the Standalone Drug Sale, (vii) any actions taken or omitted to be taken by or at the request or with the written consent of the other parties hereto, (viii) any changes in any

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Laws or any accounting regulations or principles, (ix) any union organizing activities, labor disputes, strikes, work stoppages or similar labor unrests or disruption, or (x) any acts of God, war or terrorism, except to the extent that such acts impact the Company in a materially disproportionate manner relative to similarly situated competitors of the Company. A failure by the Company to meet any projections, estimates or budgets for any period prior to, on or after the date of this Separation Agreement shall not in itself constitute a Company Material Adverse Effect. The parties hereto acknowledge their awareness of the matters set forth in Section 4.9 of the Company Disclosure Letter with respect to decline in business and financial performance.

“Company Percentage” means 15%.

“Company Plans” has the meaning set forth in the Merger Agreement, but determined without application of any materiality standard under Section 4.13(a) of the Merger Agreement.

“Company Subsidiaries” means the Subsidiaries of the Company.

“Condemnation” has the meaning set forth in Section 2.9(a).

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated August 15, 2005, by and between Sponsor and the Company.

“Control” (including the terms “Controlled by” and “under common Control with”), with respect to the relationship between or among two or more persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a person, whether through the ownership of voting securities, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such person.

“Controlling Party” has the meaning set forth in Section 4.4(b).

“Coordination Agreement” means that certain Coordination Agreement by and among the Company, SV, Onyx, and CVS, dated as of the date hereof.

“Cross-Licensing Agreement” has the meaning set forth in Section 6.2(b).

“Cub Sale Agreement” means that certain Asset Purchase Agreement, dated as of the date hereof, by and between Hawk Acquisition LLC and SV.

“CVS” has the meaning set forth in the definition of Standalone Drug Sale Agreement.

“Designated Affiliate” means, with respect to any specified person, an Affiliate of such person that (i) has been designated by such person for purposes of the appropriate section of this Separation Agreement (with such designation subject to the prior written consent of Onyx, in the case of a New Diamond Designated Affiliate, or SV, in the case of an Onyx Designated Affiliate, which consent shall not be unreasonably withheld) and (ii) has agreed in writing for the benefit of the other parties hereto to be bound by the terms of this Separation Agreement as if a

5

party hereto; provided, however, any such designation by any person hereto shall not relieve such person of any of its obligations or agreements hereunder.

“Determination” has the meaning set forth in Section 2.8(a).

“DGCL” has the meaning set forth in the Recitals.

“Diamond LLC Conversion” has the meaning set forth in Section 2.1(a).

“Diamond Merger” has the meaning set forth in the Recitals.

“Disregarded Entity” has the meaning set forth in Section 4.1(c).

“Disregarded Entity Treatment” has the meaning set forth in Section 4.1(c).

“DOJ” means the Antitrust Division of the U.S. Department of Justice.

“Effective Time” has the meaning provided for such term in the Merger Agreement.

“Emerald Merger” has the meaning set forth in the Recitals.

“Equity Interest” means (i) with respect to a corporation, any and all classes or series of shares of capital stock, (ii) with respect to a partnership, limited liability company, trust or similar person, any and all classes or series of partnership, limited liability company, trust or similar interests or units, and (iii) with respect to any other person, any other security representing any direct equity ownership or participation in such person.

“ERISA” means Employee Retirement Income Security Act of 1974.

“Excess Dissenting Shares Liability” has the meaning set forth in the definition of Shared Transaction Litigation Liabilities.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

“Exchange Fund” has the meaning set forth in Section 6.9.

“Exclusive Diamond Proceedings” has the meaning set forth in Section 4.4(b)(i).

“Exclusive Onyx Proceedings” has the meaning set forth in Section 4.4(b)(ii).

“Exclusive Tax Proceedings” has the meaning set forth in Section 4.4(b)(ii).

“Financing” has the meaning set forth in Section 3.1(g).

“Financing Commitment” has the meaning set forth in Section 3.1(g).

“Form S-4” has the meaning set forth in the Merger Agreement.

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“Former Retained Employees” means individuals who are Retained Employees by application of clause (iii) of the definition of Retained Employees.

“FTC” means the U.S. Federal Trade Commission.

“Future Debt Financing” has the meaning set forth in Section 6.4(d).

“Grantee” has the meaning set forth in Section 6.1(d).

“Grantor” has the meaning set forth in Section 6.1(d).

“Guarantee Release Date” has the meaning set forth in Section 2.6(b).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Income Taxes” means U.S. federal, state or local Taxes based upon or measured by net income or capital gain (but not any gross income Taxes and not any withholding Taxes or payroll, employment or employee Taxes).

“Indemnifiable Losses” means any and all losses, Liabilities, claims, damages, obligations, payments, costs and expenses (including the Liabilities, costs and expenses of any and all Actions, demands, assessments, Judgments, settlements and compromises relating thereto and reasonable attorneys’ fees and expenses in connection therewith) suffered or incurred by an Indemnitee; provided, that the foregoing does not include any losses, Liabilities, claims, damages, obligations, payments, costs, fees or expenses arising out of or relating to any claim for loss of profits or earnings, diminution in value or incidental, indirect, special or consequential damages unless awarded against any Indemnitee in a Third Party Claim.

“Indemnified Amounts” has the meaning set forth in Section 6.1(d)(2).

“Indemnified Directors or Officers” has the meaning set forth in the Merger Agreement.

“Indemnifying Party” means any party or other person who is required to indemnify any other person pursuant to any indemnification provisions contained in this Separation Agreement.

“Indemnitee” means any party or other person who is entitled to receive indemnification from an Indemnifying Party pursuant to any indemnification provisions contained in this Separation Agreement.

“Information” has the meaning set forth in Section 7.1(a)(1).

“Intercompany Accounts” has meaning set forth in Section 6.3.

“IRS” has the meaning set forth in Section 2.8(a).

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“Judgments” means any and all judgments, orders, writs, directives, rulings, decisions, injunctions, decrees, assessments, settlement agreements (other than settlement agreements under which there are no continuing obligations) or awards of any Authority.

“Laws” means any and all applicable (i) federal, territorial, state, local and foreign laws, ordinances and regulations, (ii) codes, standards, rules, requirements, orders and criteria issued under any federal, territorial, state, local or foreign laws, ordinances or regulations, (iii) rules, guidelines or published interpretations of any Authority and (iv) Judgments.

“Liabilities” means, with respect to any person, any and all liabilities and obligations of such person, whether absolute, accrued, contingent, reflected on a balance sheet (or in the notes thereto) or otherwise, including those arising under any Law or Action, and those arising under any contract, commitment or undertaking.

“Lien” means any lien, encumbrance, pledge, mortgage, security interest, claim under bailment, or storage contract.

“Lucky Delaware” has the meaning set forth in Section 4.1(c).

“Lucky Proprietary Name Rights” has the meaning set forth in Section 6.2(b).

“Merger Agreement” has the meaning set forth in the Recitals.

“Mergers” has the meaning set forth in the Recitals.

“New Diamond” has the meaning set forth in the Preamble.

“New Diamond Action” has the meaning set forth in Section 5.5(b).

“New Diamond Asset Transfer” has the meaning set forth in Section 2.1(b).

“New Diamond Assets” means (i) all the Assets of the Company and its Subsidiaries primarily related to the New Diamond Business, (ii) Assets set forth on Schedule 1.2 of this Separation Agreement whether or not any such Asset would fall within any category of Retained Assets as set forth in the definition thereof and (iii) all cash and cash equivalents of the Company and its Subsidiaries, other than cash and cash equivalents included in clause (iii) of the definition of Retained Assets.

“New Diamond Assumption Price” means an amount of cash equal to the difference between (i) $625,000,000 in respect of certain Liabilities to be assumed by New Diamond including Liabilities that, but for such assumption, would be Retained Liabilities and (ii) the Option Adjustment Amount.

“New Diamond Business” means (i) the business of the Company reflected as the “Core Food” business of the Company and its Subsidiaries as reflected in that certain Presentation, dated September 2005 (the “Business Description Presentation”), by The Blackstone Group L.P. and Goldman Sachs & Co. (which presentation describes the Company’s “Core Food”, “Standalone Drug” and “Underperforming Metro Areas” (or “Non-Core”)

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businesses), and (ii) the Company’s headquarters in Boise, Idaho, Phoenix, Arizona (the Scottsdale and Glendale facilities) and Salt Lake City, Utah (collectively, the “Company Headquarters”); provided, that the New Diamond Business shall not include the Springfield Stores.

“New Diamond Employees” means:

(i) all employees of the New Diamond Business as of immediately prior to the Separation;

(ii) all employees of the Company Headquarters other than those set forth on Schedule 1.8 of this Separation Agreement; and

(iii) all former employees of the New Diamond Business (other than Standalone Drug Employees) who were, immediately prior to termination of employment (with such termination occurring prior to the Closing), employed primarily in connection with the New Diamond Business;

“New Diamond Entities” means each of the entities set forth on Schedule 1.5 of this Separation Agreement.

“New Diamond Indemnitees” has the meaning set forth in Section 5.2.

“New Diamond Liabilities” means, without duplication:

(i) the obligations of New Diamond to perform and comply with its covenants and agreements contained in this Separation Agreement and Liabilities arising from or relating to any breach by New Diamond of such covenants and agreements;

(ii) all of the Liabilities of the Company and the New Diamond Entities primarily related to the New Diamond Business; provided, however, that Liabilities primarily related to the Company Headquarters shall be deemed to be only Liabilities that relate directly to the assets physically located there;

(iii) all Liabilities directly relating to all New Diamond Actions;

(iv) all obligations for dividends declared by the Company after the date hereof but not paid prior to the Effective Time;

(v) all Liabilities of Shaw’s Supermarkets, Inc., Star Markets Company, Inc., Shaw Equipment Corporation, Clifford W. Perham, Inc., Shaw’s Realty Co., Gorham Markets LLC, Shaw’s Realty Trust., Acme Markets, Inc, Jewel Food Stores, Inc., Jetco Properties, Inc., Bristol Farms Inc., Lazy Acres Market, Inc., U.S. Satellite Corporation, Lucky Stores, Inc. (NV), Scolari’s Stores Inc., Food Basket Inc., Albertson’s Liquors, Inc., American Procurement and Logistics Co., APLC Procurement, Inc., Brockton Corporation, Jewel Companies, Inc., JOAH, Inc., Meadowlane, Inc., MFC-Livonia Properties, Inc., SSM Holdings Company, Star Markets Holdings, Inc.,

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Shaw’s North Attleboro, Corp., Shaw’s Securities Corporation I, and Shaw’s Securities Corporation II;

(vi) 85% of Unallocated Liabilities;

(vii) New Diamond Scheduled Liabilities;

(viii) 50% of the Shared Transaction Liabilities;

(ix) 85% of the Shared Transaction Litigation Liabilities;

(x) all of the Specified Standalone Drug Liabilities;

(xi) Liabilities that arise from or relate to the Company Indentures and Liabilities in respect of commercial paper, revolving credit debt and long-term debt for borrowed money (other than mortgages for borrowed money secured by real estate and all capital leases and industrial revenue bonds to the extent, in each case, such matters relate to the Retained Assets) of the Company or its Subsidiaries, including any costs associated with the defeasance or prepayment of debt and release of collateral directly related thereto;

(xii) all Liabilities for Actions to the extent arising from or relating to information supplied by SV or its Affiliates specified for inclusion (or incorporation by reference) in the Proxy Statement/Prospectus (as defined in the Merger Agreement);

(xiii) all Liabilities that are express post-Closing obligations of SV, New Diamond or their Affiliates under the Standalone Drug Sale Agreement; and

(xiv) Liabilities that arise from or relate to the conduct of the New Diamond Business following the Closing.

“New Diamond Liability Transfer” has the meaning set forth in Section 2.2.

“New Diamond Merger” has the meaning set forth in the Recitals.

“New Diamond Names” has the meaning set forth in Section 6.2(a).

“New Diamond Percentage” means 85%.

“New Diamond Proprietary Name Rights” has the meaning set forth in Section 6.2(a).

“New Diamond Scheduled Liabilities” means the Liabilities set forth on Schedule 1.6 of this Separation Agreement (it being understood that such Liabilities shall be deemed to be New Diamond Liabilities and not Retained Liabilities irrespective of whether or not any such Liabilities would fall within any category of Retained Liabilities as set forth in the definition thereof).

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“New Diamond Seller Group” means New Diamond or any New Diamond Entity.

“New Welfare Plans” has the meaning set forth in Section 8.4.

“Non-Controlling Party” has the meaning set forth in Section 4.4(b).

“Non-Income Tax” means any Tax that is not an Income Tax.

“NYSE” means the New York Stock Exchange.

“Objection” has the meaning set forth in Section 6.5(d).

“Old Welfare Plans” has the meaning set forth in Section 8.4.

“Onyx” has the meaning set forth in the Preamble.

“Onyx Disclosure Letter” has the meaning set forth in Section 3.1.

“Onyx Real Estate Dropdowns” shall mean the transfer by a Retained Entity to a wholly-owned subsidiary (treated as a disregarded entity within the meaning of Treasury Regulatory Section 301.7701-3) of such Retained Entity of any real estate ground lease in which the Retained Entity is the lessee and any real property owned by the Retained Entity, in each case, associated with the Retained Business.

“Onyx Termination Fee” has the meaning set forth in Section 9.3(b).

“Option Adjustment Amount” means, in the event that the fair market value of the Per Share Merger Consideration (as defined in the Merger Agreement), valuing the Stock Consideration (as defined in the Merger Agreement) at the Average Closing Price (as defined in the Merger Agreement), is less than $24.71, an amount equal to 40% of the aggregate reduction of the Per Share Merger Consideration payable to holders of Options and Stock Units (each as defined in the Merger Agreement) as a result of the Per Share Merger Consideration being less than $24.71 per share (as compared to being $24.71 per share).

“Parent Board Recommendation” has the meaning set forth in the Merger Agreement.

“Parent Material Adverse Effect” has the meaning set forth in the Merger Agreement.

“PCX” means the Pacific Stock Exchange.

“Post-Closing Period” has the meaning set forth in Section 4.1(a)(7).

“Post-Standalone Drug Sale Cash Sweep” has the meaning set forth in Section 2.1.

“Pre-Closing Period” has the meaning set forth in Section 4.1(a)(3).

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“Pre-Existing Title Policy” has the meaning set forth in Section 6.1(d)(2).

“Prior Transferors” has the meaning set forth in Section 6.1(d)(2).

“Proxy Statement/Prospectus” has the meaning set forth in the Merger Agreement.

“Reorganization” means the Separation and the Retained Business Purchase pursuant to a series of transaction steps, substantially as reflected on Schedule 1.1 of this Separation Agreement, that are intended to further the parties’ efforts to accomplish the Separation and the Retained Business Purchase, in the manner contemplated by Section 2.4(a).

“Representatives” has the meaning set forth in Section 5.1.

“Retained Action” has the meaning set forth in Section 5.5(a).

“Retained Assets” means, following the consummation of the Standalone Drug Sale, (i) all of the Assets of the Company and its Subsidiaries, other than the New Diamond Assets, (ii) Assets set forth on Schedule 1.7 of this Separation Agreement whether or not any such Asset would fall within any category of New Diamond Assets as set forth in the definition thereof and (iii) cash and cash equivalents held directly at the store level by stores included in the Retained Business.

“Retained Assets Transfer” has the meaning set forth in Section 2.3(b).

“Retained Business” means all present and past businesses of the Company and its Subsidiaries (and their respective predecessors) other than (i) the Standalone Drug Business and (ii) the New Diamond Business, and specifically includes the Springfield Stores.

“Retained Business Allocation” has the meaning set forth in Section 2.8(a).

“Retained Business Entities” means Onyx, the Retained Entities and any Designated Affiliates of Onyx.

“Retained Business Price” means (i) $325,000,000 plus (ii) the New Diamond Assumption Price minus (iii) the Retained Property Proceeds.

“Retained Business Purchase” has the meaning set forth in Section 2.3(b).

“Retained Employees” means:

(i) employees of the Retained Business as of immediately prior to the Separation, other than the New Diamond Employees;

(ii) the individuals listed on Schedule 1.8 of this Separation Agreement; and

(iii) all former employees of the Company and its Subsidiaries (other than Standalone Drug Employees) who were, immediately prior to termination of

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employment (with such termination occurring prior to the Closing), employed primarily in connection with the Retained Business.

“Retained Entities” means the Company and all of the direct and indirect Subsidiaries of the Company, excluding New Diamond and the New Diamond Entities.

“Retained Entities Transfer” has the meaning set forth in Section 2.3(a).

“Retained Liabilities” means, without duplication:

(i) the obligations of the Company to perform and comply with its respective covenants and agreements contained in this Separation Agreement and the Transition Services Agreement and Liabilities arising from or relating to any breach by the Company of such covenants and agreements;

(ii) all Liabilities of the Company and its Subsidiaries (including Liabilities that arise from or relate to mortgages for borrowed money secured by real estate and all capital leases and industrial revenue bonds to the extent that, in each case, such matters relate to the Retained Assets, including the Springfield Stores) other than the New Diamond Liabilities;

(iii) all Liabilities directly relating to all Retained Actions;

(iv) 15% of Unallocated Liabilities;

(v) Retained Scheduled Liabilities;

(vi) 50% of the Shared Transaction Liabilities;

(vii) 15% of the Shared Transaction Litigation Liabilities;

(viii) all Liabilities for Actions to the extent arising from or relating to information supplied by Onyx or its Affiliates specified for inclusion (or incorporation by reference) in the Proxy Statement/Prospectus (as defined in the Merger Agreement);

(ix) all Liabilities that are express post-Closing obligations of the Company or its Affiliates under the Standalone Drug Sale Agreement; and

(x) Liabilities that arise from or relate to the conduct of the Retained Business following the Closing.

“Retained Names” has the meaning set forth in Section 6.2(a)(2).

“Retained Property Proceeds” has the meaning set forth in Section 2.8(b).

“Retained Proprietary Name Rights” has the meaning set forth in Section 6.2(a)(2).

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“Retained Scheduled Liabilities” means the Liabilities set forth on Schedule 1.10 of this Separation Agreement (it being understood that such Liabilities shall be deemed to be Retained Liabilities and not New Diamond Liabilities irrespective of whether or not any such Liabilities would fall within any category of New Diamond Liabilities set forth in the definition thereof).

“Return Preparer” has the meaning set forth in Section 4.2(d).

“Section 4.6 Liability” means:

(i) any New Diamond Scheduled Liability;

(ii) any Liability under Company Plans that are not Assumed Benefit Plans and any Liability that New Diamond is responsible for under Section 8.4 (other than any Liability under the Transition Services Agreement);

(iii) any obligation to make payments with respect to Options and Stock Units issued by the Company or New Diamond, in each case, to the extent set forth in the Merger Agreement; and

(iv) any Tax Liability set forth in Section 4.1(a)(4).

“Seller Tax Indemnitee” has the meaning set forth in Section 4.1(b).

“Separation” has the meaning set forth in Section 2.2.

“Separation Agreement” has the meaning set forth in the Preamble.

“Shared Non-Income Taxes” means Non-Income Taxes for any Pre-Closing Period attributable to neither the New Diamond Business, the New Diamond Assets, the Retained Business, the Retained Assets, the Standalone Drug Business nor the Standalone Drug Assets.

“Shared Transaction Liabilities” means, without duplication, Liabilities incurred by the Company and its Subsidiaries for fees and expenses of investment bankers, attorneys, accountants and other consultants and advisors and their out-of-pocket costs and expenses, in each case, to the extent incurred in connection with the transactions contemplated by this Separation Agreement, the Merger Agreement and the Standalone Drug Sale that are incurred on or prior to Closing or arise from or relate to arrangements, agreements or commitments entered into or made by the Company or its Subsidiaries prior to the Effective Time, including Liabilities for filing fees and printing and mailing costs and other expenses incurred in connection with the Proxy Statement/Prospectus and other out-of-pocket costs and expenses incurred in connection with the Company’s and its Subsidiaries’ efforts to comply with the pre-closing covenants and agreements contained in the Merger Agreement.

“Shared Transaction Litigation Liabilities” means Liabilities incurred by the Company and its Subsidiaries and arising from or relating to any Actions that arise from or relate to the execution of this Separation Agreement, the Merger Agreement or the Standalone Drug

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Sale Agreement, or the consummation of the transactions contemplated hereby and thereby, whether brought before or after the Closing and whether brought by current or former stockholders or option holders of the Company or New Diamond, any Authority or third parties, including any obligation of the Company or New Diamond to make payments to any of its dissenting stockholders (but only to the extent such Liabilities to dissenting stockholders are in excess (such excess amount, the “Excess Dissenting Shares Liability”) of the amount of Per Share Merger Consideration that would have been payable in respect of the Dissenting Shares (as defined in the Merger Agreement) held by such dissenting stockholders at the Effective Time if such appraisal proceeding had not been brought). Notwithstanding anything to the contrary in this Separation Agreement, “Shared Transaction Litigation Liabilities” shall not include Liabilities for Actions to the extent arising from or relating to information supplied by Onyx or New Diamond specifically for inclusion (or incorporation by reference) in the Proxy Statement/Prospectus.

“Solvent” has the meaning set forth in Section 3.1(h).

“Specified Standalone Drug Liabilities” means the Liabilities set forth on Schedule 1.11 of this Separation Agreement (it being understood that such Liabilities shall be deemed New Diamond Liabilities irrespective of whether or not any such Liabilities would fall under any category of Retained Liabilities set forth in the definition thereof), to the extent not paid or assumed by CVS pursuant to the Standalone Drug Sale Agreement.

“Sponsor” has the meaning set forth in the Recitals.

“Springfield Stores” means the Jewel-Osco stores of the Company located at (i) 1903 West Monroe, Springfield, Illinois (Company store number 3031), and (ii) 277 South 6th Street, Springfield, Illinois (Company store number 3180).

“Springfield Stores Date” has the meaning set forth in Section 6.14.

“Standalone Drug Assets” means the Purchased Assets (as defined in the Standalone Drug Sale Agreement).

“Standalone Drug Business” has the meaning set forth in the Standalone Drug Sale Agreement.

“Standalone Drug Employees” means all employees of Standalone Drug at the time of the Standalone Drug Sale and all former employees of Standalone Drug.

“Standalone Drug Sale” means the purchase and sale of the Standalone Drug Business, on the terms and subject to the conditions set forth in the Standalone Drug Sale Agreement.

“Standalone Drug Sale Agreement” means that certain Asset Purchase Agreement, dated as of the date hereof, by and among the Company, New Diamond, SV, and CVS Corporation (“CVS”) and certain other Sellers (as defined in the Standalone Drug Sale Agreement).

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“Straddle Period” has the meaning set forth in Section 4.1(a).

“Subsidiary” of a person means any and all corporations, partnerships, limited liability companies, trusts and other entities, whether incorporated or unincorporated, with respect to which such person, directly or indirectly, legally or beneficially, owns (i) a right to a majority of the profits of such entity or (ii) securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

“SV” has the meaning set forth in the Preamble.

“SV Disclosure Letter” has the meaning set forth in Section 3.3.

“Tax” means all (i) taxes imposed by any U.S. federal, state or local, foreign or other governmental entity or political subdivision thereof, including all income, gross receipts, gains, profits, windfall profits, gift, severance, ad valorem, capital, social security, unemployment disability, premium, recapture, credit, excise, property, sales, use, occupation, service, service use, leasing, leasing use, value added, transfer, payroll, employment, withholding, estimated, license, stamp, franchise or other taxes of any kind whatsoever, including interest, penalties or additions thereto and (ii) liabilities of a person for the payment of any amounts pursuant to any tax-sharing, tax allocation or similar agreement.

“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

“Tax Benefit” means the Tax effect of any item of loss, deduction or credit or any other item which decreases Taxes paid or payable or increases Tax basis.

“Tax Detriment” means the Tax effect of any item of income or gain or other item that increases Taxes paid or payable or decreases Tax basis.

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases or decreases Taxes paid or payable, including an adjustment under Section 481 of the Code resulting from a change in accounting method.

“Tax Proceeding” means any Tax audit, contest, litigation, defense or other proceeding with or against any Tax Authority.

“Tax Return” or “Return” means any report, return, documents, declaration or other information (and any supporting schedules or attachments thereto) required to be supplied to any Tax Authority or jurisdiction with respect to Taxes (including any returns or reports filed on a consolidated, unitary, or combined basis, amended returns and claims for refund).

“Termination Date” has the meaning set forth in the Merger Agreement.

“Third Party Claim” has the meaning set forth in Section 5.4(a).

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“Transactions” means the Mergers, the Standalone Drug Sale and the transactions contemplated by this Separation Agreement.

“Transfer Document” has the meaning set forth in Section 6.1(d)(1).

“Transfer Taxes” has the meaning set forth in Section 4.7.

“Transferred Real Property” means all real property Assets (including any fee or leasehold) to be transferred or assigned pursuant to the Separation Agreement, to New Diamond, the New Diamond Entities, Onyx or the Retained Entities, and/or one or more of the respective Designated Affiliates.

“Unallocated Action” has the meaning set forth in Section 5.5(b).

“Unallocated Liabilities” means, without duplication:

(i) Unallocated Actions;

(ii) any Liabilities incurred by the Company and/or SV under Section 6.8(a) of the Merger Agreement in respect of the Company; and

(iii) Liabilities of the Company arising out of the operation of the Standalone Drug Business prior to the Closing (other than Specified Standalone Drug Liabilities and any such Liabilities to the extent paid or assumed by CVS pursuant to the Standalone Drug Sale Agreement);

(iv) other Liabilities of the Company to the extent such Liabilities are not (a) Liabilities of the type described in any clause of the definition of New Diamond Liabilities (other than clause (vi) thereof) or (b) Liabilities of the type described in any clause of the definition of Retained Liabilities (other than clause (iv) thereof).

“Welfare Plans” has the meaning set forth in Section 8.4.

ARTICLE II

TRANSFER OF NEW DIAMOND ASSETS AND NEW DIAMOND LIABILITIES;

PURCHASE AND SALE OF THE COMPANY AND THE RETAINED ENTITIES’ STOCK

Section 2.1 Transfer of New Diamond Assets and New Diamond Entities. (a) Subject to the terms and conditions of this Separation Agreement, each of the Company, Onyx, SV and New Diamond and their respective Affiliates shall consummate, or cause to be consummated immediately following the satisfaction or waiver of the conditions to the consummation of this Separation Agreement as set forth in Section 9.1 (excluding conditions that, by their terms, cannot be satisfied until the Closing), (i) the acquisition by New Diamond of all of the capital stock of the Company in exchange for stock of New Diamond in accordance with the Merger Agreement, followed immediately by (ii) the conversion of the Company into a limited liability company (the “Diamond LLC Conversion”).

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(b) Immediately thereafter, (1) the Company shall (i) convey, assign, transfer and deliver, directly or indirectly, to New Diamond and/or one or more of its Designated Affiliates, subject to all Liens, all of the Company’s right, title and interest in and to all the New Diamond Assets of the Company and (ii) deliver, directly or indirectly, to New Diamond and/or one or more of its Designated Affiliates legal and beneficial ownership of all of the Equity Interests of the New Diamond Entities, and (2) New Diamond and/or one or more of its Designated Affiliates shall (i) acquire and accept from the Company, subject to all Liens in place with respect to such Assets immediately prior to the Closing Date, all of the Company’s right, title and interest in and to all the New Diamond Assets of the Company and (ii) acquire and accept from the Company legal and beneficial ownership of all of the Equity Interests of the New Diamond Entities directly transferred to New Diamond (such transactions, the “New Diamond Asset Transfer”). In addition to the foregoing, immediately following the consummation of the Standalone Drug Sale, the Company shall, and shall cause each of its Subsidiaries to, convey, assign, transfer or otherwise distribute all of the cash proceeds from the Standalone Drug Sale to New Diamond (the “Post-Standalone Drug Sale Cash Sweep”). By virtue of the New Diamond Asset Transfer and the Post-Standalone Drug Sale Cash Sweep, pursuant to this Separation Agreement, after the Closing, New Diamond will directly or indirectly own all of the capital stock of the New Diamond Entities and the Assets of such entities (other than the Retained Assets) as well as other Assets, including the New Diamond Proprietary Name Rights, and such Assets of the New Diamond Entities will be considered New Diamond Assets for purposes of this Separation Agreement.

Section 2.2 Transfer and Assumption of New Diamond Liabilities. Subject to the terms and conditions of this Separation Agreement, concurrently with the New Diamond Asset Transfer, (a) the Company shall convey, assign and transfer, directly or indirectly, to New Diamond and/or one or more of its Designated Affiliates, all of the New Diamond Liabilities of the Company and (b) New Diamond and/or one or more of its Designated Affiliates shall assume and agree to pay, perform and discharge when due, or cause to be assumed, paid, performed and discharged, in due course, all of the New Diamond Liabilities of the Company and the New Diamond Entities (the “New Diamond Liability Transfer,” and together with the New Diamond Asset Transfer, the “Separation”).

Section 2.3 Purchase and Sale of the Company’s and the Retained Entities’ Stock; Retained Assets and Retained Liabilities. (a) Subject to the terms and conditions of this Separation Agreement, at the Closing and following the Separation and the Standalone Drug Sale, New Diamond shall (or shall cause one or more of its Subsidiaries to) sell and deliver, directly or indirectly, to Onyx and/or one or more of its Designated Affiliates, and Onyx and/or one or more of its Designated Affiliates shall (1) purchase, acquire and accept from New Diamond, or the applicable Subsidiary or Subsidiaries of New Diamond, legal and beneficial ownership of all of the Equity Interests of the Company (such purchase, the “Retained Entities Transfer”) and (2) assume and agree to pay, perform and discharge when due, or cause to be assumed, paid, performed and discharged, in due course, all of the Retained Liabilities. By virtue of the Company’s retained ownership of all of the capital stock of the other Retained Entities after the Closing, the Company will indirectly own all of the Assets owned by such Retained Entities (other than the New Diamond Assets), including the capital stock and the Assets of such entities and such Assets will be considered Retained Assets for purposes of this Separation Agreement

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(b) Immediately following the Retained Entities Transfer, New Diamond shall (or shall cause one or more of the New Diamond Entities to) sell, convey, assign, transfer and deliver, directly or indirectly, to Onyx and/or one or more of its Designated Affiliates, subject to all Liens, all of New Diamond’s (or the New Diamond Entities’, as applicable) right, title and interest in and to all the Retained Assets of New Diamond or the New Diamond Entities, as applicable and Onyx and/or one or more of its Designated Affiliates shall purchase, acquire and accept from New Diamond (or the New Diamond Entities, as applicable) subject to all Liens in place with respect to such Asset immediately prior to the Closing Date, all of New Diamond’s (or the New Diamond Entities’, as applicable) right, title and interest in and to all the Retained Assets of New Diamond or the New Diamond Entities, as applicable (such transactions, the “Retained Assets Transfer” and together with the Retained Entities Transfer, the “Retained Business Purchase”).

Section 2.4 Reorganization; Consummation of the Mergers and New Diamond Liability Transfer; Retained Business Price. (a) Subject to the terms and conditions of this Separation Agreement and in furtherance of Sections 2.1, 2.2 and 2.3 hereof, and in furtherance of the parties’ mutual desire and intent to transfer, directly or indirectly, the Retained Entities to Onyx and/or one or more of its Designated Affiliates in a transaction treated for federal income Tax purposes as a sale of assets (except with respect to the purchase of Lucky Delaware, which the parties mutually desire and intend to be treated as a sale of stock for federal income Tax purposes), each of the Company, Onyx, SV and New Diamond and their respective Affiliates shall consummate, or cause to be consummated, the transactions contemplated by the Reorganization, substantially as provided in Schedule 1.1 and in a manner consistent with Section 4.1(c) of this Separation Agreement.

(b) Subject to the terms and conditions of this Separation Agreement, in consideration of the New Diamond Asset Transfer, each of the Company and New Diamond shall consummate, or cause to be consummated, the New Diamond Liability Transfer.

(c) Subject to the terms and conditions of this Separation Agreement, in consideration of the Retained Business Purchase, Onyx and/or one or more of its Designated Affiliates shall (1) pay to New Diamond (or such New Diamond Entity as New Diamond may designate) an amount of cash equal to the Retained Business Price and (2) assume and agree to pay, perform and discharge when due, or cause to be assumed, paid, performed and discharged, in due course, all of the Retained Liabilities assumed by Onyx and/or one or more of its Designated Affiliates pursuant to Section 2.3.

Section 2.5 The Closing. (a) Subject to the satisfaction or waiver of the conditions set forth in Section 9.1 of this Separation Agreement, each of the Diamond LLC Conversion, the Separation, the Standalone Drug Sale and the Retained Business Purchase shall take place in succession as contemplated by the Coordination Agreement, in each case, at the offices of Jones Day, 222 West 41st Street, New York, New York 10017 (the “Closing”). The parties hereto agree that (i) the sale, conveyance, assignment and transfer of the New Diamond Assets and New Diamond Entities or the Retained Assets and Retained Entities, as applicable, shall be effected at the Closing by delivery by each of the parties (A) with respect to those Assets and Equity Interests which are evidenced by capital stock certificates or similar instruments, certificates duly endorsed in blank or accompanied by stock powers or other instruments of

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assignment executed in blank and (B) with respect to all other Assets, such good and sufficient instruments of transfer and delivery as shall be necessary to vest in New Diamond or Onyx or their respective Designated Affiliates, as the case may be, all of the right, title and interest of the Company in and to such Assets, and (ii) the assumption of Liabilities shall be effected by delivery by New Diamond or Onyx or their respective Designated Affiliates, as applicable, to the appropriate counterparty of such good and sufficient instruments of assumption, as shall be necessary for the assumption by New Diamond or Onyx or their respective Designated Affiliates, as applicable, of the Liabilities to be assumed pursuant to this Separation Agreement. All of the foregoing transfer or assumption instruments or other documents shall be in such form as are reasonably satisfactory to the parties hereto.

(b) The parties hereto will cooperate with one another and with CVS in causing the Closing, the “Closing” contemplated by the Standalone Drug Sale Agreement and the “Closing” contemplated by the Merger Agreement to occur and be effected as promptly as practicable but in no event later than two (2) Business Days after the Initial Closing Date (as defined in the Merger Agreement).

Section 2.6 Certain Indebtedness of the Company; Succession and Release; Indemnification. In connection with the transactions contemplated hereby, the parties agree that:

(a) In connection with the Separation and substantially concurrent with the New Diamond Asset Transfer, with respect to the ABS Indenture, each of the Company and New Diamond shall take, or cause to be taken, all those actions specified under the ABS Indenture to (1) cause New Diamond to assume all obligations thereunder, including executing and delivering one or more supplemental indentures in accordance with the terms thereof and (2) to cause the Company to be released and discharged from any and all obligations thereunder. Following the Closing, New Diamond shall, or shall cause one of its Affiliates to, pay, perform and discharge all obligation, covenants and agreements under the ABS Indenture pursuant to the terms thereof. Any Liabilities of the Retained Entities on account of the foregoing shall be deemed Indemnifiable Losses of the Company Indemnitees under Article V of this Separation Agreement.

(b) Following the Closing, New Diamond shall, or shall cause one of its Affiliates to, pay, perform and discharge all obligations, covenants and agreements under the ASC Indenture pursuant to the terms thereof, subject only to the provisions in this Section 2.6(b) relating to the Albertson’s Inc. Guarantee. All Liabilities incurred by the Retained Entities on account of the foregoing shall be deemed Indemnifiable Losses of the Company Indemnitees under Article V of this Separation Agreement. Following the Closing and until the fifth (5^th) anniversary of the Closing Date (such date, the “Guarantee Release Date”), (i) Onyx shall cause the Company to be duly organized, validly existing and in good standing under the laws of the State of Delaware and (ii) each of Onyx and the Company shall cause to remain outstanding and in full force and effect the guarantee entered pursuant to that certain Supplemental Indenture No. 2, dated as of July 6, 2005 (the “Albertson’s Inc. Guarantee”), whereby the Company guaranteed all of the obligations under the ASC Indenture. On or prior to the Guarantee Release Date, New Diamond shall, or shall cause one of its Affiliates to, cause the Company to be released and discharged from the Albertson’s Inc. Guarantee (and the Company shall, and shall cause the other Retained Entities to, cooperate at New Diamond’s expense in seeking such release and

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discharge). Any Liabilities of the Company or any other Retained Entities on account of any payments that are required to be made under the Albertson’s Inc. Guarantee (other than Liabilities arising out of a breach by Onyx or the Company of this Section 2.6(b) or the Albertson’s Inc. Guarantee) shall be deemed Indemnifiable Losses of the Company under Article V of this Separation Agreement.

(c) Without limiting the generality of the foregoing, following the Closing, (1) with respect to any other New Diamond Liabilities that constitute obligations for money borrowed, New Diamond shall use its reasonable best efforts to cause the Company and the other Retained Entities and their respective Equity Interests, properties and assets to be released and discharged from any and all Liabilities, Liens, guarantees, and the like under such indebtedness (and Onyx and/or one of its Designated Affiliates shall, and shall cause the Company and the other Retained Entities to, cooperate in seeking such release and discharge), and New Diamond shall, or shall cause a New Diamond Entity to, (to the extent permitted by the terms of New Diamond’s financing) pay, perform and discharge such indebtedness pursuant to the terms thereof, and perform and abide by all other obligations, covenants and agreements therein, in each case, pending such release and discharge and (2) with respect to any Retained Liabilities that constitute obligations for money borrowed, Onyx and/or one of its Designated Affiliates shall, and shall cause the Company and the other Retained Entities to, use its reasonable best efforts to cause New Diamond and the New Diamond Entities and their respective Equity Interests, properties and assets to be released and discharged from any and all Liabilities, Liens, guarantees and the like under such indebtedness (and New Diamond shall, and shall cause the New Diamond Entities to, cooperate in seeking such release and discharge), and Onyx and/or one of its Designated Affiliates shall, and shall cause the Company and the other Retained Entities to (to the extent permitted by the terms of Onyx’s financing), pay, perform and discharge such indebtedness pursuant to the terms thereof, and perform and abide by all other obligations, covenants and agreements therein, in each case, pending such release and discharge; provided, that each of Onyx and New Diamond shall use commercially reasonable efforts to obtain necessary approvals from their respective financing sources to permit such performance; and

(d) Following the Closing, (1) if the Company or any other Retained Entity is a party to or bound by any agreement or instrument governing any New Diamond Liabilities contemplated by clause (c) above that constitute obligations for money borrowed or any related guaranty, security agreement or pledge, each of Onyx and/or one of its Designated Affiliates shall, or shall cause the Company or such Retained Entity to (to the extent permitted by the terms of Onyx’s financing), at the expense of New Diamond and/or one of its Designated Affiliates, perform and abide by all obligations, covenants and agreements contained therein pending the release and discharge contemplated by clause (c)(1) above and (2) if any New Diamond Entity is a party to or bound by any agreement or instrument governing any Retained Liabilities contemplated by clause (c) above that constitute obligations for money borrowed or any related guaranty, security agreement or pledge, New Diamond and/or one of its Designated Affiliates shall, or shall cause such New Diamond Entity to (to the extent permitted by the terms of New Diamond’s financing), at the expense of the Company and/or one of its Designated Affiliates, perform and abide by all obligations, covenants and agreements contained therein pending the release and discharge contemplated by clause (c)(2) above; provided, that each of Onyx and New Diamond shall use commercially reasonable efforts to obtain necessary approvals

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from their respective financing sources to permit such performance. Any expenses (including reasonable attorneys fees, administrative costs and amounts paid to third parties) incurred in connection with this Section 2.6(d) for the account of New Diamond and/or its Designated Affiliates, on the one hand, and the Company and/or its Designated Affiliates on the other hand, shall be deemed Indemnifiable Losses of the Company and New Diamond, respectively, under Article V of this Separation Agreement.

Section 2.7 Current Accounts. After the date hereof and prior to the Closing, (a) the Company shall continue its general practices and policies relating to (1) the payment and collection, as the case may be, of accounts payable and accounts receivable, (2) subject to the provisions of Section 6.1 of the Merger Agreement, the defense and settlement of Actions and (3) maintenance of inventory of a quantity (accounting for seasonal variations), quality and mix, in each case, in the ordinary course and consistent with past practice for the New Diamond Business and the Retained Business and (b) no party hereto shall, nor shall any party permit any of its Subsidiaries or Affiliates to, materially influence or otherwise alter such practices and policies.

Section 2.8 Retained Business Price Allocation; Retained Property Proceeds. (a) Within sixty (60) days following the Closing Date, Onyx shall deliver to New Diamond for its review and approval a proposed allocation of the Retained Business Price (including any adjustments made thereto) and any liabilities assumed, for Tax purposes, which shall be prepared in a manner consistent with fair market value and, as applicable, Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder (such allocation, as agreed by Onyx and New Diamond or as resolved by the Accountant, the “Retained Business Allocation”). In the event that Onyx and New Diamond are unable to reach an agreement on the Retained Business Allocation within fifty (50) days of such delivery, Onyx and New Diamond shall each set forth in writing their positions regarding any remaining disagreed items and such positions shall be submitted to a nationally recognized public accounting firm mutually acceptable to both Onyx and New Diamond (the “Accountant”) for resolution in the next forty-five (45) days. The Accountant shall be instructed to resolve such disputed items so that the Retained Business Allocation is consistent with fair market value and, as applicable, Sections 338 and 1060 of the Code and the Treasury Regulations promulgated thereunder. Each of Onyx and New Diamond shall bear all fees and costs incurred by it in connection with such dispute, except that each of Onyx and New Diamond shall pay one-half (50%) of the fees and expenses of the Accountant. The parties agree to use the Retained Business Allocation for all Tax purposes and in all filings, declarations and reports with the Internal Revenue Service (the “IRS”) in respect thereof, including any reports required to be filed under Sections 1060 and 338 of the Code. The parties shall timely file, or cause to be timely filed, IRS Form 8594 (or any comparable form under state, local, or foreign Tax law) and any required attachments thereto in accordance with the Retained Business Allocation. On any Tax Return and in any Tax Proceeding, none of (x) Onyx, the Company, their Designated Affiliates and the other Retained Entities nor (y) SV, New Diamond, their Designated Affiliates and the New Diamond Entities shall take any position inconsistent with or represent that the Retained Business Allocation is not correct, unless otherwise required to do so as a result of a determination (as defined in Section 1313(a) of the Code or any similar state or local tax provision) (a “Determination”).

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(b) (i) No less than five Business Days after each monthly anniversary of the first month end after date hereof through no later than two Business Days prior to the Closing Date and (ii) on the date that is two Business Days prior to the Closing Date, the Company shall deliver to Onyx in writing a statement providing in reasonable detail the aggregate net cash proceeds (after Tax, any reasonable transaction costs and assumption of Liabilities) actually received by the Company or any of its Subsidiaries during the time period from and after the date hereof through the most recent month end prior to the date such statement is delivered (or, in the case of the statement delivered pursuant to clause (ii), from the date hereof through the date of such statement) directly related to dispositions by the Company or any of its Subsidiaries after the date hereof (the “Retained Property Proceeds”) of “Non-Core” stores (as described in the Business Description Presentation) (or all or substantially all of the Assets located in any store in a liquidation of such store) or any underlying real property or any non-operating real property (including, without limitation, proceeds resulting from the exercise of any right of recapture by a landlord with respect to any real property lease) that, if not disposed, would qualify as Retained Assets; provided, however, that the Company shall not be required to deliver a report pursuant to clause (i) of this sentence if the amount of Retained Property Proceeds that would be set forth in such report would be less than $100,000 more than the amount of Retained Property Proceeds set forth in the most recently delivered previous report; provided, further, that nothing in this Separation Agreement shall prohibit the Company from selling or otherwise transferring to a third party (other than SV) the Springfield Stores and in no event shall any proceeds from such sale or transfer of the Springfield Stores be considered Retained Property Proceeds; provided, further, that if the Company shall sell or otherwise transfer to a third party (other than SV) the Springfield Stores at the Closing, it shall use commercially reasonable best efforts to give 30 days’ prior notice of such sale to Onyx (or such shorter period of notice as may be practicable).

Section 2.9 Insurance Proceeds. (a) In the event that, after the execution of this Agreement, but prior to the Closing Date, any New Diamond Asset or Retained Asset is subject to loss, destruction or damage to the building or other improvements thereon (a “Casualty”) or the exercise of eminent domain by a governmental authority (a “Condemnation”):

(i) Subject to Section 2.9(a)(ii), at the Closing the Company shall (A) retain, or shall transfer and convey to New Diamond or one or more of Onyx’s Designated Affiliates, as applicable, all net proceeds the Company or any of its Subsidiaries have received from any third party insurance claims, condemnation awards, compensation or other reimbursements relating to such Casualty or Condemnation (except as to proceeds of business interruption, rental and lost profits insurance for periods up to and including the Effective Time, whenever received, to the extent that such proceeds have not already been used by the Company or any of its Subsidiaries to repair any such loss, destruction or damage) and except to the extent such proceeds are used or intended to be used to reimburse the Company or such Subsidiaries for any out-of-pocket costs, expenses, damages or losses suffered or incurred by the Company or its Subsidiaries during the period up to and including the Effective Time) and (B) to the extent such proceeds have not already been used by the Company or its Subsidiaries to repair any such loss, destruction or damage, assign to New Diamond (in the case of a Casualty relating to a New Diamond Asset) or to one or

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more of Onyx’s Designated Affiliates (in the case of a Casualty relating to a Retained Asset) the right to receive any future proceeds of such Casualty or Condemnation receivable after the Effective Time, including as to business interruption insurance, rental and lost profits insurance for any period after the Effective Time).

(ii) If any such Casualty is not covered under the Company’s or any of its Subsidiaries’ third party insurance policies and in the event of a store that has suffered a Casualty where the landlord is responsible for such repairs, loss or destruction pursuant to the terms of the relevant Lease, the applicable the Company or its Subsidiary, as applicable, shall assign the applicable lease to New Diamond or one or more of Onyx’s Designated Affiliates, as applicable, and, without any additional payment from New Diamond or such Onyx Designated Affiliate(s), the Company or such Subsidiary shall assign to New Diamond or such Onyx Designated Affiliate(s) any claim they have under such lease with respect thereto.

(b) Any party receiving a notice of Casualty or Condemnation shall notify all other parties in accordance with Section 9.10. Notwithstanding anything to the contrary contained in this Separation Agreement, in no event will any Casualty or Condemnation constitute the breach of any representation, warranty or covenant of the Company contained in this Separation Agreement.

(c) Notwithstanding anything to the contrary in this Separation Agreement, under no circumstances shall (1) the Company, New Diamond or any of their respective Affiliates be responsible for any retention or deductible payable with respect to any Casualty or Condemnation and (2) any payments on account of a Casualty or Condemnation or any other loss be required after the Closing Date from Beryl American Corporation, or any other Subsidiary or Affiliate of SV or the Company that has underwritten an insurance policy with respect to any New Diamond Asset or Retained Asset.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of Onyx. Except as set forth on the corresponding sections of the disclosure letter delivered by Onyx to the Company and SV on or prior to the execution of this Separation Agreement (the “Onyx Disclosure Letter”), Onyx hereby, jointly and severally with each of its Designated Affiliates, represents and warrants to the Company and SV that:

(a) Organization and Standing. Each of Onyx and its Designated Affiliates is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each

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jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. Complete and correct copies of the certificate of incorporation and by-laws (or equivalent organizational documents) of Onyx and its Designated Affiliates (if and to the extend actually designated), as currently in effect, have been made available to the Company, and as so made available, are in full force and effect and no other organizational documents are applicable to or binding upon Onyx and its Designated Affiliates.

(b) Authority; Enforceability. Each of Onyx and its Designated Affiliates has the corporate or other power and authority to execute and deliver this Separation Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by each of Onyx and its Designated Affiliates of this Separation Agreement and the consummation by each of Onyx and its Designated Affiliates of the transactions contemplated hereunder have been duly authorized by all necessary action on the part of each of Onyx and its Designated Affiliates and the holders of any Equity Interests thereof and no other corporate or similar proceeding on the part of Onyx or its Designated Affiliates are necessary pursuant to its governing documents or applicable Law to authorize this Separation Agreement or to consummate the transactions contemplated hereby. This Separation Agreement has been duly executed and delivered by each of Onyx and, if and when applicable, its Designated Affiliates and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of each of Onyx and its Designated Affiliates, enforceable against each of them in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(c) Non-Contravention. The execution, delivery and performance of this Separation Agreement by each of Onyx and its Designated Affiliates does not and will not (1) conflict with or violate its certificate of incorporation or by-laws or comparable governing documents, (2) assuming that all consents, approvals and authorizations contemplated by Section 3.1(d) have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Onyx, its Designated Affiliates or any of their Subsidiaries or by which it or any of its properties are bound or (3) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which Onyx, its Designated Affiliates or any of their Subsidiaries is a party or by which Onyx, its Designated Affiliates or any of their Subsidiaries or its or any of their properties are bound, except, in the case of clauses (2) and (3) of this Section 3.1(c), for any such conflict, violation, breach, default, loss, right or other occurrence which would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby.

(d) Governmental Consents. The execution, delivery and performance of this Separation Agreement by each of Onyx and its Designated Affiliates and the consummation by each of Onyx and its Designated Affiliates of the transactions contemplated hereby do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant

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to (1) the HSR Act, (2) the Exchange Act, (3) state securities, takeover and “blue sky” Laws, (4) the rules and regulations of the NYSE and the PCX, (5) the DGCL, (6) the applicable requirements of antitrust or other competition Laws of other jurisdictions or investment Laws relating to foreign ownership, and (7) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby and by the Merger Agreement.

(e) Capitalization. Section 3.1(e) of the Onyx Disclosure Letter sets forth the authorized, outstanding equity of Onyx as of the date hereof. There is no agreement, contract, commitment or arrangement pursuant to which Onyx or any Subsidiary of Onyx is or may become obligated to repurchase or redeem any shares of capital stock or voting securities of Onyx or any securities or obligations convertible or exchangeable into or exercisable for, any shares of capital stock or voting securities of Onyx. Onyx does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible, exchangeable or exercisable for or into securities having the right to vote) with the members of Onyx on any matter.

(f) Litigation. There are no Actions pending or, to the knowledge of Onyx, threatened against Onyx or its Designated Affiliates or, to the knowledge of Onyx, any officer, director or employee of Onyx or its Designated Affiliates in such capacity, which would, individually or in the aggregate, prevent or materially delay Onyx or its Designated Affiliates from performing its obligations under this Separation Agreement in any material respect. Neither Onyx nor its Designated Affiliates is a party or subject to or in default under the order of any Authority which would prevent or materially delay Onyx or its Designated Affiliates from performing its obligations under this Separation Agreement in any material respect.

(g) Financing. Attached hereto as Exhibit A is a true and complete copy of the Financing Commitment (the “Financing Commitment”), pursuant to which the Sponsor thereto has committed, subject to the terms and conditions set forth therein, to invest the amounts set forth therein to purchase Equity Interests of Onyx and to provide debt financing to Onyx and its Designated Affiliates (the “Financing”). The Financing Commitment has not been amended or modified prior to the date of this Separation Agreement, no such amendment or modification is contemplated, and the commitment contained in the Financing Commitment has not been withdrawn or rescinded in any respect. The Financing Commitment is in full force and effect and is the valid, binding and enforceable obligation of the parties thereto. There are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than as set forth in or contemplated by the Financing Commitment. No event has occurred which, with or without notice, lapse of time or both, would constitute a default on the part of Onyx or its Designated Affiliates under the Financing Commitment, and Onyx has no reason to believe that any of the conditions to the Financing contemplated by the Financing Commitment will not be satisfied or that the Financing will not be made available to Onyx on the Closing Date. Onyx and its Designated Affiliates will have at and after the Closing funds sufficient to pay the aggregate Retained Business Price and any other amounts required to be paid in connection with the consummation of the transactions contemplated hereby, and to pay all related fees and expenses.

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(h) Solvency. Assuming satisfaction of the conditions to this Separation Agreement and the Merger Agreement (other than the consummation of the transactions contemplated hereby), and after giving effect to the transactions contemplated hereby and thereby, including the Financing and Future Debt Financing, any alternative financing and the payment of the aggregate Per Share Merger Consideration, the Reorganization, the assumption or retention (as applicable) of the Retained Liabilities by the Company, Onyx and its Designated Affiliates, the assumption or retention (as applicable) of the New Diamond Liabilities by New Diamond and its Designated Affiliates, payment of all amounts required to be paid in connection with the consummation of the transactions contemplated hereby and thereby, and payment of all related fees and expenses, each of the Company, Onyx and its Designated Affiliates will be Solvent as of the Effective Time and immediately after the consummation of the transactions contemplated hereby and thereby. For the purposes of this Separation Agreement the term “Solvent” when used with respect to any person, means that, as of any date of determination, (1) the amount of the “fair saleable value” of the assets of such person will, as of such date, exceed (i) the value of all “liabilities of such person, including contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance with applicable federal laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of such person on its existing debts (including contingent liabilities) as such debts become absolute and matured, (2) such person will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date, and (3) such person will be able to pay its liabilities, including contingent and other liabilities, as they mature. For purposes of this definition, “not have an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged” and “able to pay its liabilities, including contingent and other liabilities, as they mature” means that such person will be able to generate enough cash from operations, asset dispositions or refinancing, or a combination thereof, to meet its obligations as they become due.

(i) Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Separation Agreement based upon arrangements made by or on behalf of Onyx or its Designated Affiliates for which any party other than Onyx or its Designated Affiliates could have any liability.

(j) Company Stock. Neither Onyx nor any of its Designated Affiliates is, and at no time during the last three years has either Onyx or any of its Designated Affiliates been, an “interested stockholder” of the Company as defined in Section 203 of the DGCL. Neither Onyx nor any of its Designated Affiliates owns (directly or indirectly, beneficially or of record), or is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, any shares of capital stock of the Company (other than as contemplated by this Separation Agreement).

(k) Onyx Designated Affiliates. Each of the Designated Affiliates of Onyx was formed or will be formed, as the case may be, solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated by this Separation Agreement.

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Section 3.2 Representations and Warranties of the Company. Except as set forth in the corresponding sections of the disclosure letter (subject to the provisions of Section 9.18) delivered by the Company to Onyx on or prior to the execution of this Separation Agreement (the “Company Disclosure Letter”) and except as disclosed in the Form 10-K of the Company for the fiscal period ended February 3, 2005, as amended through the date hereof (as amended, the “Company Form 10-K”), the Proxy Statement for the Company’s 2005 Annual Meeting of Shareholders, and the Form 10-Qs and Form 8-Ks filed or furnished from the date of the filing of the Company Form 10-K to the date of this Separation Agreement (and any amendments to any such filings which amendments are filed with the SEC prior to the date hereof) to the extent such qualifications are reasonably apparent (and which in no event shall include risk factors or other factors identified in general cautionary statements regarding reliance on forward looking statements in either case included in the Company SEC Reports), the Company hereby represents and warrants to Onyx and its Designated Affiliates that the representations and warranties of the Company set forth in Article IV of the Merger Agreement are true and correct; provided, however, that (1) the representations and warranties contained in Article IV of the Merger Agreement are made herein by the Company (mutatis mutandis) for the benefit of Onyx and its Designated Affiliates, (2) except for purposes of the representations and warranties contained in Section 4.1 (Organization), Section 4.2(a) and (c) (Authority; Enforceability), Section 4.5 (Capitalization of the Company), Section 4.7 (SEC Reports; Financial Information), Section 4.10(a)(iv), (x) and (xi) (Contracts), Section 4.13 (Employee Compensation and Benefit Plans; ERISA), Section 4.14 (Labor Matters), Section 4.19 (Tax) and Section 4.20 (Insurance), of the Merger Agreement, all references to the “Company” or to the “Company Subsidiaries” contained in Article IV of the Merger Agreement shall be deemed to refer to the Company and its Subsidiaries in respect of the Retained Business, Retained Assets and Retained Liabilities, (3) for the avoidance of doubt, all reference to “Company Material Adverse Effect” therein shall be deemed to refer to “Company Material Adverse Effect” as defined in this Separation Agreement and (4) all references to “Parent” contained in Article IV of the Merger Agreement shall be deemed to refer to Onyx.

Section 3.3 Representations and Warranties of SV. Except as set forth on the corresponding sections of the disclosure letter delivered by SV to the Company and Onyx on or prior to the execution of this Separation Agreement (the “SV Disclosure Letter”), SV hereby, jointly and severally with each of their respective Designated Affiliates, represents and warrants to the Company and Onyx that:

(a) Organization. Each of SV and its Designated Affiliates is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. Complete and correct copies of the certificate of incorporation and by-laws (or equivalent organizational documents) of SV and its Designated Affiliates (if and to the extend actually designated) as currently in effect, have been made available to each of the Company and Onyx, and as so made available, are in full force and effect and no other organizational documents are applicable to or binding upon SV.

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(b) Authority; Enforceability. Each of SV and its Designated Affiliates has the corporate or other power and authority to execute and deliver this Separation Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by each of SV and its Designated Affiliates of this Separation Agreement and the consummation by each of SV and its Designated Affiliates of the transactions contemplated hereunder have been duly authorized by all necessary action on the part of each of SV and its Designated Affiliates and no other corporate proceedings on the part of each of SV and its Designated Affiliates are necessary pursuant to its governing documents or the DGCL to authorize this Separation Agreement or to consummate the transactions contemplated hereby. The boards of directors of each of SV and its Designated Affiliates have determined that it is in the best interests of SV to enter into this Separation Agreement, and have approved this Separation Agreement. This Separation Agreement has been duly executed and delivered by each of SV and its Designated Affiliates and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding agreement of each of SV and its Designated Affiliates, enforceable against each of them in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(c) Non-Contravention. The execution, delivery and performance of this Separation Agreement by each of SV and its Designated Affiliates does not and will not (1) conflict with or violate its certificate of incorporation or by-laws or comparable governing documents, (2) conflict with or violate the governing documents of any other Subsidiary of SV, (3) assuming that all consents, approvals and authorizations contemplated by Section 3.3(d) have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to each of SV and its Designated Affiliates or any of their Subsidiaries or by which it or any of its properties are bound or (4) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which SV and its Designated Affiliates or any of their Subsidiaries is a party or by which SV and its Designated Affiliates or any of their Subsidiaries or its or any of their properties are bound, except, in the case of clauses (2), (3), and (4) of this Section 3.3(c) for any such conflict, violation, breach, default, loss, right or other occurrence which would not (i) prevent or materially delay SV or its Designated Affiliates from performing its obligations under this Separation Agreement in any material respect or (ii) reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(d) Governmental Consents. The execution, delivery and performance of this Separation Agreement by each of SV and its Designated Affiliates and the consummation by each of SV and its Designated Affiliates of the Transactions do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant to (1) the HSR Act, (2) the Exchange Act, (3) state securities, takeover and “blue sky” Laws, (4) the rules and regulations of the NYSE and the PCX, (4) the DGCL, (5) the applicable requirements of antitrust or other competition Laws of other jurisdictions or investment Laws relating to foreign ownership, and

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(6) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

(e) Solvency. Assuming satisfaction of the conditions to this Separation Agreement and the Merger Agreement (other than the consummation of the transactions contemplated hereby), and after giving effect to the transactions contemplated hereby and thereby, the Reorganization, the assumption or retention (as applicable) of the Retained Liabilities by the Company, Onyx and its Designated Affiliates, the assumption or retention (as applicable) of the New Diamond Liabilities by New Diamond and its Designated Affiliates, payment of all amounts required to be paid in connection with the consummation of the transactions contemplated hereby and thereby, and payment of all related fees and expenses, each of SV, New Diamond and its Designated Affiliates will be Solvent as of the Effective Time and immediately after the consummation of the transactions contemplated hereby and thereby.

(f) Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Separation Agreement based upon arrangements made by or on behalf of SV for which the Company or Onyx could have any liability.

ARTICLE IV

TAX MATTERS

Section 4.1 Liability for Taxes. (a) New Diamond and SV shall (and New Diamond shall cause the New Diamond Entities to) be responsible for, pay or cause to be paid, and shall (and New Diamond shall cause the New Diamond Entities to) indemnify Onyx, its Designated Affiliates and each of its Subsidiaries and Affiliates (including the Retained Entities after the Closing Date) (each a “Buyer Tax Indemnitee”) and hold each Buyer Tax Indemnitee harmless from and against any and all of the following (including reasonable fees and expenses in connection therewith):

(1) any and all Taxes of New Diamond and each New Diamond Entity ((i) other than any Non-Income Taxes attributable to the Retained Business or the Retained Assets and (ii) limited, in the case of Shared Non-Income Taxes, to the New Diamond Percentage of such Non-Income Taxes);

(2) the New Diamond Percentage of any Shared Non-Income Taxes imposed on any Retained Entity;

(3) any and all United States federal Income Taxes for any taxable period (or portion thereof) that ends on or prior to the Closing Date (such a period, a “Pre-Closing Period”) of the Affiliated Group;

(4) any and all state, local and foreign Income Taxes for all Pre-Closing Periods of each Retained Entity;

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(5) any and all liability for Taxes of the Affiliated Group imposed on the Retained Entities as a result of the application of Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law);

(6) any and all Non-Income Taxes for Pre-Closing Periods of, imposed upon, or relating or attributable to the New Diamond Business, the New Diamond Assets or the Standalone Drug Business (regardless of whether such Taxes are imposed on any New Diamond Entity or any Retained Entity); and

(7) any and all Taxes for any taxable period (or portion thereof) that begins after the Closing Date (such a period, a “Post-Closing Period”) of, imposed upon or relating or attributable to the New Diamond Entities, the New Diamond Business or the New Diamond Assets.

If, for any state, local or foreign Income Tax purposes, any Taxable period of any Retained Entity includes but does not end on the Closing Date (any such period, a “Straddle Period”), Income Taxes, if any, attributable to such Straddle Period shall be allocated to (A) New Diamond and SV for the portion of such Straddle Period up to and including the Closing Date, and (B) Onyx for the portion of such Straddle Period subsequent to the Closing Date. For purposes of the preceding sentence, Income Taxes for the portion of each Straddle Period up to and including the Closing Date and for the portion of such Straddle Period subsequent to the Closing Date shall be determined on the basis of an interim closing of the books as of the close of business on the Closing Date as if such Straddle Period consisted of one Taxable period ending on the Closing Date followed by a Taxable period beginning on the day following the Closing Date, and exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, shall be apportioned on a daily basis.

New Diamond and SV shall be entitled to any refund of (or credit of or against) Taxes to the extent that such refund (or credit) relates to a Tax that is the responsibility of New Diamond or SV under this Section 4.1(a) and shall be entitled to any refund or credit to which New Diamond or SV is entitled under Section 4.6. For the avoidance of doubt, New Diamond and SV shall be entitled to any deposits of Income Taxes with the Internal Revenue Service made by New Diamond, SV, any New Diamond Entity or, prior to the Closing, the Company or any Retained Entity.

(b) Each of Onyx and the Company shall (and shall cause each of the Retained Entities to), be responsible for, pay or cause to be paid, and shall (and shall cause each of the Retained Entities to) indemnify New Diamond and its Subsidiaries and Affiliates (other than the Retained Entities) (each a “Seller Tax Indemnitee”) and hold each Seller Tax Indemnitee harmless from and against any and all of the following (including reasonable fees and expenses in connection therewith):

(1) any and all Non-Income Taxes of each Retained Entity ((i) other than any Non-Income Taxes attributable to the New Diamond Business, the New Diamond Assets or the Standalone Drug Business and (ii) limited, in the case of Shared Non-Income Taxes, to the Company Percentage of such Non-Income Taxes);

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(2) the Company Percentage of any Shared Non-Income Taxes imposed on New Diamond or a New Diamond Entity;

(3) any and all Non-Income Taxes for Pre-Closing Periods of, imposed upon, or relating or attributable to the Retained Business or the Retained Assets (regardless of whether such Non-Income Taxes are imposed on any Retained Entity or New Diamond or any New Diamond Entity);

(4) any and all Taxes for any Post-Closing Period of, imposed upon, or relating or attributable to the Retained Entities, the Retained Business or the Retained Assets and any and all Taxes of Onyx (or any Affiliate of Onyx that purchases a Retained Entity or Retained Asset pursuant hereto); and

(5) notwithstanding Section 4.1(a), any Taxes resulting from any extraordinary transaction taken by or with respect to the Retained Entities, the Retained Business or the Retained Assets on the Closing Date but after the Retained Business Purchase and any and all Taxes resulting from any Onyx Real Estate Dropdowns (or of any wholly-owned subsidiary referred to in the definition thereof), the Financing or any Future Debt Financing (and New Diamond and SV shall not be responsible for such Taxes described in this clause (5)).

Each of Onyx, its Designated Affiliates and the Company shall be entitled to any refund of (or credit of or against) Taxes to the extent that such refund (or credit) relates to a Tax that is the responsibility of Onyx, its Designated Affiliates, any Retained Entity or the Company under this Section 4.1(b), except for refunds (or credits) to which New Diamond may be entitled under Section 4.1(a).

(c) The parties acknowledge and agree that they desire and intend to treat (x) the Retained Business Purchase (other than the purchase of Lucky Stores, Inc., a Delaware corporation (“Lucky Delaware”), and its Subsidiaries) as a purchase of assets for federal income Tax purposes, (y) the purchase of Lucky Delaware as a purchase of stock for federal income Tax purposes and (z) the Separation as a transaction that does not result in any gain, including any deferred intercompany gain, for federal income Tax purposes (other than with respect to the distribution of certain New Diamond Assets from Lucky Delaware and its Subsidiaries pursuant to this Separation Agreement). In furtherance of the parties’ desire and intention, at the option of SV: New Diamond and Onyx shall (i) jointly make timely and irrevocable elections under Section 338(h)(10) of the Code (and any corresponding elections under state or local tax law) (the “338(h)(10) Elections”) with respect to any Retained Entities designated by New Diamond (such entities, the “338(h)(10) Election Subsidiaries”) (provided that this clause (i) shall not be available with respect to any Retained Entity designated by Onyx in writing no later than 60 days after the execution of this Separation Agreement as a Retained Entity to be purchased by an entity that is not a corporation for federal income Tax purposes), (ii) jointly cause any Retained Entities designated by New Diamond (such entities, the “Disregarded Entities”) to be treated as “disregarded” entities within the meaning of Treasury Regulation Section 301.7701-3, including by way of conversion of such Retained Entities into Delaware limited liability companies on or prior to the Closing Date (such treatment, the “Disregarded Entity Treatment”), and (iii) take such other actions as may be necessary or appropriate to further

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such desire and intention while transferring directly or indirectly the Retained Entities to Onyx and/or its Designated Affiliates. New Diamond and Onyx shall, and shall cause their respective Subsidiaries and Affiliates to, (i) treat the 338(h)(10) Elections and Disregarded Entity Treatment as valid, (ii) file all Tax Returns in a manner consistent with such 338(h)(10) Elections and Disregarded Entity Treatment and (iii) take no position or action contrary thereto, except to the extent required to do otherwise pursuant to a Determination. New Diamond and Onyx shall jointly prepare or cause to be prepared, in a manner consistent with the Retained Business Allocation, any form or document required to effect a valid and timely 338(h)(10) Election or Disregarded Entity Treatment. New Diamond and Onyx and any of their respective Subsidiaries and Affiliates shall take any and all actions reasonably necessary to effectuate the 338(h)(10) Elections and Disregarded Entity Treatment. Except as may be required by a Determination, consistent with the provisions above in this Section 4.1(c), New Diamond, Onyx and their respective Subsidiaries and Affiliates shall file, or cause to be filed, all Tax Returns in a manner consistent with the 338(h)(10) Elections and Disregarded Entity Treatment and shall treat the Retained Business Purchase (other than the purchase of Lucky Delaware and its Subsidiaries) as a purchase of assets for federal income Tax purposes, the purchase of Lucky Delaware as a purchase of stock for federal income Tax purposes and the Separation as a transaction that does not result in any gain, including any deferred intercompany gain, for federal income Tax purposes (other than with respect to the distribution of certain New Diamond Assets from Lucky Delaware and its Subsidiaries pursuant to this Separation Agreement) (and take no position or action contrary thereto). The parties agree that no election other than the 338(h)(10) Elections with respect to the 338(h)(10) Subsidiaries shall be made under Section 338 of the Code with respect to the purchase of any of the Retained Entities pursuant to this Agreement.

Section 4.2 Filing Responsibility. (a) New Diamond shall prepare and file, or cause to be prepared and filed, when due: (1) all United States consolidated federal Income Tax Returns for the Affiliated Group or the affiliated group of which SV is the common parent, (2) any Tax Return (whether filed on a consolidated, combined, unitary, separate or other basis) of, or which includes, New Diamond or any other New Diamond Entity, and (3) any Income Tax Return of any Retained Entity for any Pre-Closing Period or a Straddle Period.

(b) Onyx, its Designated Affiliates or the Company shall, except to the extent that filing such Tax Returns are the responsibility of New Diamond under Section 4.2(a), prepare and file, or cause to be prepared and filed, all Tax Returns with respect to each Retained Entity.

(c) The parties agree to prepare and file, or cause to be prepared and filed, all Pre-Closing Period Tax Returns of the Company and its Subsidiaries in a manner consistent with past practices of the Company and its Subsidiaries, except as otherwise required by Law or a Determination.

(d) In the case of any Straddle Period Income Tax Return of a Retained Entity or Non-Income Tax Return of a New Diamond Entity or a Retained Entity, in each case, on which are reportable Taxes for which both SV and New Diamond, on the one hand, and Onyx and the Company, on the other hand, are responsible under Section 4.1 (or any Non-Income Tax Return of a Retained Entity on which are reportable only Taxes that are the responsibility of New Diamond and SV under Section 4.1(a) or any Non-Income Tax Return of a

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New Diamond Entity on which are reportable only Taxes that are the responsibility of Onyx and the Company under Section 4.1(b)), the party that is responsible for preparing such Tax Return under this Section 4.2 (the “Return Preparer”) shall furnish such Tax Return required to be filed by the Return Preparer (together with making available any associated workpapers prepared in connection with such Tax Return) to the other party (the “Affected Party”) for its review and approval (which approval shall not be unreasonably delayed or withheld) at least 30 days prior to the due date for filing such Tax Return (taking into account valid extensions) and (y) the Affected Party shall provide any good faith comments it may have on such Return to the Return Preparer within 15 days of the Affected Party’s receipt of such draft Tax Return from the Return Preparer (such comments to be limited to confirming that the Tax Return is consistent with past practice as set forth in Section 4.2(c) and with the Tax treatments specified in this Separation Agreement); provided, however, that in the event that such Tax Return is required to be filed (taking into account valid extensions) within four (4) months after the Closing Date, then such time periods shall be reasonably reduced and the parties shall act expeditiously so that such Tax Return may be filed on a timely basis; provided,  further, however, that to the extent that the Return Preparer does not agree with the Affected Party’s comments, the Return Preparer and the Affected Party shall endeavor in good faith to resolve such disagreement. In the event that the Return Preparer and the Affected Party are unable to resolve such disagreement, and to the extent that the Affected Party objects that the Return Preparer has not prepared the Tax Return in question in accordance with past practices as set forth in Section 4.2(c) or consistent with the Tax treatments specified in this Separation Agreement, the Accountant shall resolve such dispute in accordance with past practices as set forth in Section 4.2(c) and consistent with the Tax treatments specified in this Separation Agreement. In such case, the Return Preparer and the Affected Party shall each bear one-half (50%) of the fees and expenses attributable to the Accountant’s resolution of such dispute. Any Tax Return that is furnished to an Affected Party pursuant to this Section 4.2(d) shall be accompanied by a statement setting forth the portion of the Tax due in connection with filing such Tax Return that is allocable to the Affected Party pursuant to Section 4.1, which statement will specify in reasonable detail the calculation of the portion of such Tax so allocable. The Affected Party shall pay to the Return Preparer the portion of such Tax so allocable no later than one Business Day prior to the date such Tax Return is to be filed.

Section 4.3 Cooperation and Exchange of Information. (a) As soon as practicable, from and after the Closing Date, SV, New Diamond and its Subsidiaries, on the one hand, and Onyx, its Designated Affiliates, the Retained Entities and their respective Subsidiaries, on the other hand, shall provide each other with such cooperation and shall deliver to each other such information and data and make available such knowledgeable employees as Onyx, its Designated Affiliates, the Retained Entities and their respective Subsidiaries, on the one hand, and New Diamond and its Subsidiaries, on the other hand, may reasonably request in order to complete and file all Tax Returns which they may be required to file or to respond to audits by any Tax Authorities, and to otherwise enable them or their Affiliates to satisfy their respective accounting, Tax and other legitimate requirements. Each of SV, New Diamond, the New Diamond Entities, Onyx, its Designated Affiliates and the Retained Entities shall make their employees and facilities available on a mutually convenient basis to provide explanation of any documents or information provided hereunder. Onyx shall, and shall cause its Designated Affiliates, the Retained Entities and their respective Subsidiaries to, take all actions reasonably necessary to facilitate New Diamond’s and SV’s exercise of their rights under this Article IV in

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respect of the Retained Entities, including preparing and filing Tax Returns, and conducting Tax Proceedings. New Diamond shall, and shall cause the New Diamond Entities to, take all actions reasonably necessary to facilitate Onyx’s and the Company’s exercise of their rights under this Article IV in respect of the New Diamond Entities, including conducting Tax Proceedings.

(b) For a period of ten (10) years after the Closing Date, New Diamond, Onyx, its Designated Affiliates and the Retained Entities shall retain all Tax Returns, books and records of, or with respect to, the Retained Entities, the Retained Assets or the Retained Business for all taxable periods ending on or prior to the Closing Date to the extent such items are in such person’s possession after the Closing. Thereafter, neither New Diamond, Onyx, any of its Designated Affiliates nor any of the Retained Entities shall dispose of any such Tax Returns, books or records unless it first offers such Tax Returns, books and records to New Diamond or Onyx, as applicable and New Diamond or Onyx, as applicable fails to accept such offer within 60 days of its being made.

(c) SV, New Diamond, Onyx, its Designated Affiliates and the Retained Entities shall, and shall cause their respective Subsidiaries to, cooperate in the preparation of all Tax Returns relating in whole or in part to taxable periods ending on or before the Closing Date that are required to be filed after such date and all Tax Returns for Straddle Periods.

Section 4.4 Tax Proceedings. (a) Each of SV, New Diamond and its Subsidiaries, on the one hand, and Onyx, its Designated Affiliates, the Retained Entities and their respective Subsidiaries, on the other hand, shall provide prompt notice to the other party of any claim, assessment or dispute of which it becomes aware related to Taxes for which it is indemnified by the other party under Section 4.1. Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters.

(b) In the case of any Tax Proceeding, the Controlling Party shall have the sole right to control, contest, resolve and defend the Tax Proceeding (including having the right to determine whether and when to settle the Tax Proceeding); provided, however, that, except in the case of Exclusive Tax Proceedings, in the case of any Tax Proceeding relating to any Pre-Closing Period or Straddle Period in which the outcome would reasonably be expected to result in an increase in liability for Taxes with respect to which the Non-Controlling Party or any Affiliate thereof is liable under this Separation Agreement or with respect to which such Non-Controlling Party or Affiliate is liable at law and with respect to which such Non-Controlling Party or Affiliate is not entitled to indemnification under this Separation Agreement, (i) the Controlling Party shall provide the Non-Controlling Party with a timely and reasonably detailed account of each phase of such Tax Proceeding, (ii) the Non-Controlling Party shall be entitled to receive copies of all correspondence and documents related to such Tax Proceeding, (iii) the Controlling Party shall consult with the Non-Controlling Party before taking any significant action in connection with such Tax Proceeding, (iv) the Controlling Party shall consult with the Non-Controlling Party and offer the Non-Controlling Party an opportunity to comment before submitting any written materials prepared or furnished in connection with such

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Tax Proceeding, (v) the Controlling Party shall defend such Tax Proceeding diligently and in good faith as if it were the only party in interest in connection with such Tax Proceeding, (vi) except in the case of a Tax Proceeding in respect of a Tax Return of a Retained Entity on which are reportable Taxes for which only SV and New Diamond are responsible under Section 4.1, the Non-Controlling Party shall be entitled to participate in (but not control) such Tax Proceeding, at its own expense, and (vii) the Controlling Party shall not settle such Tax Proceeding without the consent of the Non-Controlling Party which shall not be unreasonably withheld.

For purposes of this Section 4.4(b):

(i) New Diamond shall be the “Controlling Party” with respect to any Tax Proceeding in respect of (A) a Tax Return referred to in Section 4.4(c) (and any adjustment to a state or local Income Tax Return required as a result of the outcome of any Tax Proceeding with respect to such a Tax Return), (B) (except in the case of a Non-Income Tax Return on which Taxes for which Onyx is responsible under Section 4.1 are reportable) any Tax Return of New Diamond or a New Diamond Entity (such Tax Proceedings described in clauses (A) or (B), collectively, the “Exclusive Diamond Proceedings”) and there shall be no “Non-Controlling Party” in respect of such a Tax Proceeding,

(ii) Onyx shall be the “Controlling Party” with respect to any Tax Proceeding in respect of a Tax Return referred to in Section 4.4(d) (the “Exclusive Onyx Proceedings,” and, together with the Exclusive Diamond Proceedings, the “Exclusive Tax Proceedings”) and there shall be no “Non-Controlling Party” in respect of such a Tax Proceeding,

(iii) except in the case of Exclusive Tax Proceedings, in the case of any Tax Proceeding in respect of (A) any Income Tax Return of a Retained Entity for a Straddle Period, (B) any Tax Return of a Retained Entity on which are reportable only Taxes for which SV and New Diamond are responsible under Section 4.1 or (C) a Non-Income Tax Return on which are reportable Non-Income Taxes for which both SV and New Diamond, on the one hand, and Onyx and the Company, on the other hand, are responsible under this Separation Agreement, if Onyx and the Company are responsible under this Separation Agreement for more than half the Taxes reported on the Tax Return, then Onyx shall be the “Controlling Party” and New Diamond shall be the “Non-Controlling Party”; otherwise New Diamond shall be the “Controlling Party” and Onyx the “Non-Controlling Party” with respect to such Tax Proceeding,

(c) Notwithstanding any other provision of this Separation Agreement, neither Onyx, its Designated Affiliates, the Retained Entities nor any of their respective Subsidiaries or Affiliates shall be entitled to participate in any Tax Proceeding with respect to any Tax Return of the Affiliated Group or any United States consolidated federal Income Tax Return which includes New Diamond or SV or any other consolidated, combined or unitary Tax Return which includes New Diamond, any New Diamond Entity or any member of the New Diamond Seller Group, nor shall Onyx, its Designated Affiliates, the Retained Entities nor any of their respective Subsidiaries or Affiliates be entitled to any information (except to the extent relating solely to

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any Retained Entity, the Retained Business, or any Retained Asset, which may include pro forma information relating solely to the Retained Entities, the Retained Business or a Retained Asset) regarding any such Tax Return (or any Tax Returns of New Diamond).

(d) Notwithstanding any other provision of this Separation Agreement, neither SV, New Diamond, any New Diamond Entity nor any of their respective Subsidiaries or Affiliates shall be entitled to participate in any Tax Proceeding with respect to any Tax Return of any Retained Entity for a Post-Closing Period other than a Straddle Period (or any consolidated, combined or unitary Tax Return for a Post-Closing Period, other than a Straddle Period, which includes any Retained Entity), unless such Tax Return includes New Diamond or a New Diamond Entity, nor shall SV, New Diamond, any New Diamond Entity nor any of their respective Subsidiaries or Affiliates be entitled to any information (except to the extent relating solely to any Retained Entity, the Retained Business or any Retained Asset which may include pro forma information relating solely to the Retained Entities, the Retained Business, or a Retained Asset) regarding any such Tax Return.

Section 4.5 Tax Sharing Agreements. Anything in any other agreement to the contrary notwithstanding, all liabilities and obligations between New Diamond, any New Diamond Entity or any member of the New Diamond Seller Group, on the one hand, and the Retained Entities, on the other hand, under any Tax allocation or Tax sharing agreement in effect prior to the Closing Date (other than this Separation Agreement) shall cease and terminate as of the Closing Date.

Section 4.6 Tax Benefits. New Diamond and SV shall be entitled to any Tax Benefit arising from any deduction that results from any payment, loss, obligation, Tax or Liability arising from a Section 4.6 Liability. Neither Onyx, its Designated Affiliates, the Company nor any of their respective Subsidiaries shall claim any such deduction in respect of a Section 4.6 Liability on any Tax Return that Onyx, its Designated Affiliates or the Company are responsible for preparing under Section 4.2(b); provided, however, that if any deduction arising in respect of a payment, loss, obligation, Tax or Liability arising from a Section 4.6 Liability is not permitted by law or administrative practice to be reported on a Tax Return for which New Diamond has filing responsibility under Section 4.2(a) (or another Pre-Closing Period Tax Return) and is permitted by law or administrative practice to be reported on a Tax Return for which Onyx, its Designated Affiliates or the Company has filing responsibility under Section 4.2(b), then, at New Diamond’s request, Onyx, its Designated Affiliates, the Retained Entities or their respective Subsidiaries shall claim such deduction and pay to New Diamond the amount of any Tax Benefit actually realized in cash from such deduction (less any Tax Detriment that results from such deduction) no later than thirty (30) days after the Tax Return in which such Tax Benefit is realized or utilized is filed; provided, however, that New Diamond shall repay such amount to the extent that subsequent events occur that result in the loss or reduction of such Tax Benefit no later than thirty (30) days after Onyx notifies New Diamond, in writing as provided below, of the loss or reduction of such Tax Benefit. For purposes of this Section 4.6, such subsequent events include, but are not limited to, audit adjustments, realization of any Tax Detriment, and the recognition of a net operating loss that could have been carried over to offset income in the absence of the deduction that results from the payment, loss, obligation, Tax or Liability arising from a Section 4.6 Liability. For purposes of this Section 4.6, an increase (or reduction) in Taxes as a result of any Tax Benefit or Tax Detriment shall be deemed to be

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realized by a party to the extent the Tax liability of such party exceeds (or is less than) the Tax liability such party would have incurred without taking into account any Tax Item relating to such Tax Benefit or Tax Detriment. Any payment in respect of a net Tax Benefit or notice of a loss or reduction of such Tax Benefit shall be accompanied by a schedule prepared by Onyx in good faith setting forth in reasonable detail the amount of such Tax Benefit or such loss or reduction of Tax Benefit and the calculation of that amount. Nothing in this Section 4.6 shall require Onyx or any Retained Entity to disclose to any person any Tax Return filed by it or any material information Onyx or such Retained Entity otherwise deems confidential.

Section 4.7 Transfer Taxes. Notwithstanding anything to the contrary in this Separation Agreement, other than with respect to the Standalone Drug Sale, New Diamond and Onyx agree that New Diamond shall bear 50% of all documentary, sales, use, registration, value added, transfer, recordation stamp and similar Taxes (collectively, “Transfer Taxes”) imposed on the Reorganization or the transactions set forth in Section 2.1(a), and Onyx shall bear 50% of any such Transfer Taxes. New Diamond and Onyx, and their respective Subsidiaries and Affiliates, agree to timely sign and deliver any affidavits, certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or any other documents with respect to, such Transfer Taxes. Any party shall have the right to seek a refund of any and all Transfer Taxes paid by it for which it is responsible pursuant to this Section 4.7 at its own expense. If so requested, the other party shall use reasonable efforts to cooperate with the party seeking such refund.

Section 4.8 Taxes Governed by Article IV. Claims for indemnification with respect to Taxes shall be governed by this Article IV and Section 5.8 but not by any other provision of Article V or Article VI. For the absence of doubt, any obligations to make indemnification payments with respect to Taxes imposed under Section 4999 of the Code shall be governed by the provisions of Article VIII addressing allocation of Liabilities under Company Plans.

Section 4.9 Survival. All rights and obligations under this Article IV shall survive the Closing Date and continue until 60 days after the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or permissive).

Section 4.10 Post-Closing Dispositions. For the avoidance of doubt, the covenants of Onyx, its Designated Affiliates and the Retained Entities set forth in this Article IV shall apply to Onyx, its Designated Affiliates and the Retained Entities regardless of any post-Closing disposition of the Retained Entities by Onyx, its Designated Affiliates or any of their respective Subsidiaries or Affiliates.

Section 4.11 Reorganization Treatment. The parties agree (a) to treat the acquisition by New Diamond of all of the issued and outstanding Equity Interests of the Company for stock of New Diamond and the subsequent conversion of the Company into a Delaware limited liability company, taken together, as a mere change in identity or form of the Company qualifying as a reorganization under Section 368(a)(1)(F) of the Code and (b) to treat the Company as a “disregarded” entity within the meaning of Treasury Regulation Section 301.7701-3 for the period from and after the time of the conversion of the Company into a Delaware limited liability company and for so long as the Company is wholly owned by New

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Diamond, in each case, for all Tax purposes, unless required to do otherwise as a result of a Determination. The parties agree not to take any position on any Tax Return or in any Tax Proceeding inconsistent with such treatment described in the immediately preceding sentence.

Section 4.12 [Intentionally Omitted]

Section 4.13 Tax Treatment of Payments. The parties agree to treat any indemnity payments pursuant to this Article IV, for Tax purposes, as an adjustment to the Retained Business Price or as payments that are deductible by the payor, as appropriate, unless otherwise required by applicable Tax Law.

ARTICLE V

INDEMNIFICATION

Section 5.1 SV’s and New Diamond’s Agreement to Indemnify. In addition to any other indemnification provided hereunder, subject to the terms and conditions set forth in this Separation Agreement, from and after the Closing Date, each of SV and New Diamond shall, and New Diamond shall cause each of the New Diamond Entities to, indemnify, defend and hold harmless Onyx, the Company, the other Retained Entities and each of their respective directors, officers, partners, members, employees and other representatives, advisors and agents (collectively, “Representatives”), Subsidiaries and Affiliates (collectively, the “Company Indemnitees”) from and against any and all Indemnifiable Losses of the Company Indemnitees arising out of or resulting from, directly or indirectly, the New Diamond Liabilities and the matters contemplated as being Indemnifiable Losses by Section 2.6 of this Separation Agreement.

Section 5.2 Onyx’s and the Company’s Agreement to Indemnify. In addition to any other indemnification provided hereunder, subject to the terms and conditions set forth in this Separation Agreement, from and after the Closing Date, each of Onyx and the Company shall, and shall cause each of the Retained Entities to, indemnify, defend and hold harmless SV, New Diamond and the New Diamond Entities, and each of their respective Representatives, Subsidiaries and Affiliates (collectively, the “New Diamond Indemnitees”) from and against any and all Indemnifiable Losses of the New Diamond Indemnitees arising out of or resulting from, directly or indirectly, the Retained Liabilities and the matters contemplated as being Indemnifiable Losses by Section 2.6 of this Separation Agreement.

Section 5.3 Reduction of Indemnifiable Losses for Insurance Benefits Received. For purposes of this Article V, Section 8.2 and Section 8.7, the calculation of any Indemnifiable Loss will reflect the amount of any insurance proceeds or indemnification payments received by the Indemnitee in respect of such Indemnifiable Loss (net of all reasonable costs and expenses incurred by the Indemnitee in recovering such insurance proceeds). Each Indemnitee shall use its commercially reasonable efforts to recover from its insurers or other sources of reimbursement or recovery the maximum portion of any Indemnifiable Loss that is recoverable from such sources.

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Section 5.4 Procedure for Indemnification. (a) If an Indemnitee shall receive notice of the assertion by a person who is not a party to this Separation Agreement of any claim or of the commencement by any such person of any Action (a “Third Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification under Section 5.1 or Section 5.2, such Indemnitee shall give such Indemnifying Party prompt notice thereof after becoming aware of such Third Party Claim; provided, that the failure of any Indemnitee to give notice as provided in this Section 5.4 shall not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually and materially prejudiced by such failure to give notice. Such notice shall describe the Third Party Claim in reasonable detail, and, if practicable, shall indicate the estimated amount of the Indemnifiable Loss that has been or may be sustained or asserted by such Indemnitee.

(b) If an Indemnitee gives notice of a Third Party Claim to an Indemnifying Party, the Indemnifying Party shall have 30 days after receipt of notice to elect, at its option, to take responsibility for resolving, and assume and control the defense of, at its own expense and by its own counsel, any such Third Party Claim and shall be entitled to assert any and all defenses available to the Indemnitee to the fullest extent permitted by Law. If the Indemnifying Party shall undertake to defend and resolve any such Third Party Claim, it shall promptly notify the Indemnitee of its intention to do so, and the Indemnitee agrees to cooperate as reasonably requested by the Indemnifying Party and its counsel in the resolution of, or defense against, any such Third Party Claim; provided, however, that the Indemnifying Party shall not admit any liability with respect to such Third Party Claim without the prior written consent of the Indemnitee, and shall not resolve, settle, compromise or discharge any such Third Party Claim without the prior written consent of the Indemnitee (which consent will not be unreasonably withheld or delayed) unless the relief consists solely of the payment of money and includes a provision whereby the plaintiff or claimant in the matter releases the Indemnitees from all liability with respect thereto. Notwithstanding the foregoing, the Indemnitee shall have the right to defend (but not admit liability, compromise, settle or otherwise resolve such Third Party Claim without the prior written consent of the Indemnifying Party) any Third Party Claim as to itself by its own separate counsel, and the Indemnifying Party shall pay the reasonable fees, costs and expenses of such separate counsel, as incurred, if the Indemnitee shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel or the counsel selected by the Indemnifying Party inappropriate. Further, the Indemnitee shall have the right to employ separate counsel and to participate in the defense of any Third Party Claim (though such separate counsel shall not appear of record), at the expense of the Indemnitee (unless the Indemnifying Party agrees to pay the fees and expenses of such separate counsel). In any event, the Indemnitee and Indemnifying Party and their counsel shall cooperate in the defense of any Third Party Claim and keep such persons informed of all developments relating to any such Third Party Claim, and provide copies of all relevant correspondence and documentation relating thereto consistent with applicable rules of privilege and legal ethics. All costs and expenses incurred in connection with the Indemnitee’s cooperation shall be paid by the Indemnifying Party, as incurred. If the Indemnifying Party receiving a notice of Third Party Claim does not elect timely to take responsibility for resolving, and defend, such Third Party Claim or does not defend such Third Party Claim in good faith, the Indemnitee shall have the right, in addition to any other right or remedy it may have hereunder, at the Indemnifying Party’s expense, to defend such Third Party Claim; provided, however, that (1) the Indemnitee shall not have any obligation to participate in the defense of, or defend, any such Third Party Claim; (2)

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the Indemnitee’s defense of or participation in the defense of any such claim shall not in any way diminish or lessen the obligations of the Indemnifying Party under this Article V; and (3) the Indemnitee shall not resolve, settle, compromise or discharge any such Third Party Claim without the prior written consent of the Indemnifying Party.

Section 5.5 Pending Litigation; New Litigation. Following the Closing Date, (a) Onyx and/or one or more if its Designated Affiliates shall have exclusive authority and control over the investigation, prosecution, defense and appeal of (1) all Actions brought against the Company or its Subsidiaries listed on Schedule 1.12 of this Separation Agreement and all pending Actions brought against the Company or its Subsidiaries exclusively relating to the Retained Business and (2) all Actions brought against the Company or its Subsidiaries brought after the date hereof that primarily relate to the Retained Business (the Actions described in the foregoing clauses (1) and (2) each, a “Retained Action”), and may settle or compromise, or consent to the entry of any Judgment with respect to, any such Action without the consent of any other party, provided, that in the event that such Retained Action involves the potential indemnification of an Indemnified Director or Officer, Onyx or one or more of its Designated Affiliates, as applicable, shall not settle, compromise or consent to the entry of any judgment in any actual or threatened claim, demand, action, suit, proceeding, inquiry or investigation in connection with a Retained Action in respect of which indemnification has been or could be sought by such Indemnified Director or Officer under the Transaction Agreements unless such settlement, compromise or judgment includes an unconditional release of such Indemnified Director or Officer from all liability arising out of such claim, demand, action, suit, proceeding, inquiry or investigation or such Indemnified Director or Officer otherwise consents thereto, and (b) New Diamond and/or one or more of its Designated Affiliates shall have exclusive authority and control over the investigation, prosecution, defense and appeal of (1) all pending Actions brought against the Company or its Subsidiaries listed on Schedule 1.13 of this Separation Agreement, (2) all of the Actions brought against the Company or its Subsidiaries as of the date hereof that are not Retained Actions (the Actions described in the foregoing clauses (1) and (2) each, a “New Diamond Action”) (3) all Shared Transaction Litigation Liabilities, (4) all Unallocated Actions (as defined below) and (5) all Actions that constitute Specified Standalone Drug Liabilities, and may settle or compromise, or consent to the entry of any Judgment with respect to, any such Action without the consent of any other party; provided, that, notwithstanding anything to the contrary, neither Onyx nor New Diamond (nor any of their respective Subsidiaries or Affiliates) may settle or compromise, or consent to the entry of any Judgment with respect to, any Retained Action, New Diamond Action, Unallocated Action, Shared Transaction Litigation Liability or any Action that constitutes a Specified Standalone Drug Liability, without the prior written consent of the other party if such settlement, compromise or consent to such Judgment (i) includes any form of relief binding upon such other party or its Affiliates or their respective businesses or assets, (ii) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such other party (and any Affiliate of such other party subject to such Action) of a full and final release from all Liability in respect of such claim or litigation or (iii) in the case of a Shared Transaction Litigation Liability, requires any cash payment for damages or otherwise by any party to this Separation Agreement other than the settling party. If, after the date hereof, any Action other than those Retained Actions, New Diamond Actions and Shared Transaction Litigation Liabilities as described above shall be brought against the Company or any of its Subsidiaries, such Action

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shall be deemed to be “Unallocated Actions” for purposes of this Separation Agreement unless such Action shall constitute a Specified Standalone Drug Liability.

Section 5.6 Remedies Exclusive. From and after the Closing and except as otherwise specifically provided herein (including Articles IV and VIII), the rights to indemnification provided in this Article V shall be the exclusive monetary remedy for any New Diamond Liabilities or Retained Liabilities; provided that nothing herein shall preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party in the event of fraud or in the event of an Indemnifying Party’s failure to comply with its indemnification obligations hereunder.

Section 5.7 Retained Business Price Adjustment. The parties agree to treat any indemnity payments pursuant to this Separation Agreement for Tax purposes, as an adjustment to the Retained Business Price, as applicable, or as payments that are deductible by the payor, as appropriate, unless otherwise required by applicable Tax Law.

Section 5.8 Exclusion of Tax Indemnities. Notwithstanding anything to the contrary in this Article V or in Article VI, the provisions of Article V and Article VI shall not apply to Tax indemnification matters and indemnification shall not be provided under Article V or Article VI for Taxes, all such matters and any such indemnification being governed by Article IV.

ARTICLE VI

CERTAIN ADDITIONAL MATTERS

Section 6.1 Further Assurances; Subsequent Transfers. (a) Each of the parties hereto will execute and deliver such further instruments of transfer, distribution and assumption and will take such other actions as the other parties hereto may reasonably request in order to effectuate the purposes of this Separation Agreement and to carry out the terms hereof. Without limiting the generality of the foregoing, at any time and from time to time after Closing, at the request of any party the other party will execute and deliver such other instruments of transfer and distribution, and take such action as the requesting party may reasonably deem necessary or desirable in order to more effectively transfer, convey and assign to such requesting party (or any of its Subsidiaries and/or Designated Affiliates) and to confirm such requesting party’s (or any of its Subsidiaries and/or Designated Affiliates, as the case may be) right, title to or interest in, all of the New Diamond Assets or Equity Interests in the New Diamond Entities, the Retained Assets or Equity Interests in the Retained Entities, as applicable, to put the requesting party (or any of its Subsidiaries and/or Designated Affiliates, as the case may be) in actual possession and operating control thereof and to permit the requesting party (or any of its Subsidiaries and/or Designated Affiliates, as the case may be) to exercise all rights with respect thereto (including rights under contracts and other arrangements as to which the consent of any third party to the transfer thereof shall not have previously been obtained) and to properly assume and discharge the related New Diamond Liabilities, or the Retained Liabilities, as applicable.

(b) In furtherance of the foregoing, in the event and to the extent that a transferring party is unable to obtain any consents required to transfer and assign to the other

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party (or such other party’s Designated Affiliate), and a release of a transferor from, any agreements, licenses and other rights included in the New Diamond Assets or Retained Assets, as applicable, such transferor (1) shall continue to be bound thereby pending assignment to the other party or its Designated Affiliate and (2) shall, at the direction and expense of the other party, pay, perform and discharge fully all of its obligations thereunder from and after the Closing and prior to assignment to the other party or its Designated Affiliate, and the other party will indemnify the transferor for any Liabilities of the transferor arising out of such Assets or its compliance with the documentation and agreement relating to, any reasonable out-of-pocket expenses associated with any attempt to transfer or failure to transfer such Asset or any Liabilities arising out of or resulting from the transferor’s actions taken in accordance with any such directions of the other party or its Designated Affiliate. The transferor shall, without further consideration therefor, pay, assign and remit to the other party or its Designated Affiliate promptly all monies, rights and other consideration received in respect of such agreements. Following the Closing, the transferor shall exercise or exploit its rights and options under all such agreements, leases, licenses and other rights and commitments referred to in this Section 6.1(b) when and only as reasonably directed by, and at the expense of, the other party or its Designated Affiliate. If and when any such consent shall be obtained or such agreement, lease, license or other right shall otherwise become assignable, the transferor shall promptly assign all its rights and obligations thereunder to the other party or its Designated Affiliate without payment of further consideration and the other party or its Designated Affiliate shall, without the payment of any further consideration therefor, assume such rights and obligations. Notwithstanding the foregoing, if the arrangement described in this Section 6.1(b) is impracticable or will cause (or is likely to cause) a default under any real estate lease (whether due to the intended change of the store brand under which such property will be operated or for other reasons), then the parties will work in good faith to establish a mutually satisfactory arrangement for the operation of such leased real property during the period subsequent to the Closing and pending receipt of the required consent, including a fair and equitable arrangement (under the applicable circumstances) for allocating income and expenses with respect to such property during such period.

(c) In the event that, subsequent to the Closing Date, the Company or Onyx shall either (1) receive written notice from New Diamond that certain specified Assets of the Company or any Subsidiary of the Company which properly constitute New Diamond Assets were not transferred to New Diamond on or prior to the Closing Date or (2) determine that certain Assets of the Company or any Subsidiary of the Company which properly constitute New Diamond Assets were not transferred to New Diamond on or prior to the Closing Date, then (assuming the accuracy of such notice or demand) as promptly as practicable thereafter, the Company or Onyx, as appropriate, shall take all steps reasonably necessary to transfer and deliver any and all of such Assets to New Diamond without the payment by New Diamond of any further consideration therefor. In the event that, subsequent to the Closing Date, New Diamond shall either (i) receive written notice from the Company or Onyx that certain specified Assets which properly constitute Retained Assets were transferred to New Diamond or included with the New Diamond Entities or (ii) determine that certain Assets of New Diamond which properly constitute Retained Assets were transferred to New Diamond or included with the New Diamond Entities, then (assuming the accuracy of such notice or demand) as promptly as practicable thereafter, New Diamond shall, and shall cause its Subsidiaries to, take all steps reasonably necessary to transfer and deliver any and all of such Assets to the Company or its

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Subsidiaries in each case without the payment by Onyx, the Company of any further consideration therefor.

(d) Without limiting the provisions of this Section 6.1 or any other provision of this Separation Agreement, each of the parties for itself and its respective Subsidiaries and Affiliates, as appropriate, agrees to execute, acknowledge and deliver all documents and to take all actions reasonably necessary to effectuate the following:

(1) Each Transferred Real Property shall be conveyed by means of a warranty deed and/or assignment of lease with warranties, in recordable form (as modified as appropriate in the particular jurisdiction in which the real property is located (each a “Transfer Document”), and

(2) Each Transfer Document executed by a party transferring or otherwise assigning Transferred Real Property that conveys Transferred Real Property to any other party shall state on the face thereof the following:

(i) In the case of any breach of any transferor (each, a “Grantor”) warranties herein contained, whether expressed or implied, the liability of Grantor shall be limited to its interest in the real property hereby conveyed and all amounts (collectively, “Indemnified Amounts”) which are recovered from the prior non-affiliated transferors in the chain of title (“Prior Transferors”) or pursuant to any real property title policies existing prior to the date of this instrument (“Pre-Existing Title Policy”).

(ii) Grantor irrevocably assigns to each transferee (each, a “Grantee”) all of Grantor’s right, title and interest in and to all Indemnity Amounts including without limitation all claims, actions, rights of recovery and indemnity, losses, damages, expenses and fees (including reasonable attorneys’ fees and court costs), at law, in equity or by contract, which Grantor may now or hereafter have against any and all Prior Transferors or under any Pre-Existing Title Policy, and Grantor hereby irrevocably designates and appoints the transferee its attorney in fact, coupled with an interest, with respect to all Indemnity Amounts.

(iii) The warranties and covenants contained herein shall be solely for the benefit of and enforceable by Grantee hereunder and for no other party including heirs, successors and assigns of Grantee and under no circumstances shall such warranties and covenants be deemed to run with the real property conveyed by this instrument.

(iv) Without limiting the foregoing provisions of this Section 6.1(d), if any claim is made by Grantee against Grantor as the result of any alleged breach of any covenants or warranties in any Transfer Document, upon Grantee’s written notice Grantor shall either (A) make and diligently pursue all claims against the Prior Transferors, and against any title insurance company under any applicable Pre-Existing Title Policy, or (B) permit Grantee, in the name of Grantor, to make any or all such claims, in all cases at the sole cost and expense of Grantee, including counsel selected and retained by Grantee as is

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reasonably acceptable to Grantor. If Grantor shall be named by any third-party in any proceeding in connection with any such claim, Grantee (at Grantee’s sole cost) shall with counsel reasonably acceptable to Grantor defend and procure the dismissal of Grantor (subject to the requirements of law in connection with pursuing the claims against the Prior Transferors and the title insurance company, as applicable).

Section 6.2 Use of Names; Cross-License. (a) Following the Closing Date, the Company and the other Retained Entities shall have the sole and exclusive ownership of and right to use, as between the Company and the other Retained Entities, on the one hand, and New Diamond and its Subsidiaries, on the other hand, each of the names that are (1) set forth in Schedule 1.14 of this Separation Agreement or (2) used solely in connection with the Retained Business (the “Retained Names”), and each of the trade marks, trade names, trade dress, service marks, banners, logos and other proprietary rights related to such Retained Names (the “Retained Proprietary Name Rights”). Following the Closing Date, New Diamond and its Subsidiaries shall have the sole and exclusive ownership of and right to use, as between New Diamond and its Subsidiaries, on the one hand, and the Company and the other Retained Entities, on the other hand, all names used by the Company and its Subsidiaries other than the Retained Names (the “New Diamond Names”), and all other trade marks, trade names, trade dress, service marks, banners, logos and other proprietary rights related to such New Diamond Names (the “New Diamond Proprietary Name Rights”). In connection with the Separation, the Company shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to vest New Diamond and it Subsidiaries with full and undivided ownership in the New Diamond Proprietary Name Rights. Notwithstanding the foregoing, following the Closing, neither the Company and the other Retained Entities, nor New Diamond and its Subsidiaries, shall use any names that are confusingly similar to the Retained Names or the New Diamond Names, as applicable, without the prior written consent of the other party, provided that the parties agree that none of the names set forth on Schedule 1.14, on the one hand, and the New Diamond Names, on the other hand, shall be deemed to be “confusingly similar.” As promptly as practicable following the Closing Date but in no event later than one hundred eighty (180) days following the Closing Date, the parties hereto shall, and shall cause their respective Subsidiaries and other Affiliates to, take all action necessary to cease using, and change (including by amending any charter documents), any corporate or other names which are the same as or confusingly similar to any of the New Diamond Names and the New Diamond Proprietary Name Rights or the Retained Names and the Retained Proprietary Name Rights, as the case may be.

(b) Notwithstanding the foregoing, on the Closing Date, the Company and New Diamond shall enter into a Cross-Licensing Agreement (the “Cross-Licensing Agreement”), reasonably acceptable to both parties, which shall provide for, among other things, the grant of a limited, royalty-free cross-license to each of the Company and its Subsidiaries, on the one hand and to each of New Diamond and its Subsidiaries, on the other hand, to use certain Retained Proprietary Name Rights and New Diamond Proprietary Name Rights, in each case, for so long as and to the extent that each of the Company and its Subsidiaries, on the one hand, and New Diamond and its Subsidiaries, on the other hand, own the Retained Assets or the New Diamond Assets, respectively. The Cross-Licensing Agreement shall also provide for the grant of a limited, royalty-free, license to the Company and its Subsidiaries of the Lucky New

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Diamond Proprietary Name Rights set forth on Schedule 1.16 of this Separation Agreement (collectively, the “Lucky Proprietary Name Rights”) for use in Northern California and Nevada for a period of three years from the Closing Date. The exclusive right of the Company and its Subsidiaries to use the Lucky Proprietary Name Rights in Northern California and Nevada shall continue and shall become perpetual if the Company or its Subsidiaries (or their transferees) use any of the Lucky Proprietary Name Rights in Northern California and Nevada during such three-year period. If the Company or its Subsidiaries (or their transferees) do not use any of the Lucky Proprietary Name Rights in Northern California and Nevada during any portion of such three-year period, the license to use the Lucky Proprietary Name Rights shall cease and all right, title and interest in and to the Lucky Proprietary Name Rights shall revert to New Diamond and its Subsidiaries. The Cross-Licensing Agreement shall further provide that, except as provided above with respect to the Lucky Proprietary Name Rights if such rights are used during the three-year period from the Closing Date, in the event that Retained Assets or the New Diamond Assets, as the case may be, are transferred or assigned to a third party, such third party shall obtain the benefit of the license contained therein for up to one hundred eighty (180) days following the transfer of such Assets to such third party; provided, however, that if such third party is a national competitor of the New Diamond Business the expiration of such license for such third party’s benefit shall expire no later than ninety (90) days following the transfer of such Assets to such third party.

Section 6.3 Settlement of Intercompany Accounts. All intercompany leases, receivables, payables, loans and other accounts (collectively, “Intercompany Accounts”) in existence immediately prior to the Separation between the Company or the other Retained Entities, on the one hand, and New Diamond or the New Diamond Entities, on the other hand, shall be contributed, distributed or otherwise transferred or assumed at or prior to the Closing such that, as of the Closing, there are no Intercompany Accounts outstanding between New Diamond or any New Diamond Entity, on the one hand, and any Retained Entity, on the other hand.

Section 6.4 Merger Agreement Provisions. (a) Each of the parties hereto that is also a party to the Merger Agreement shall provide Onyx with as much prior written notice as is reasonably practicable (which, if the circumstances permit, shall be not less than two Business Days’ notice) of any proposed agreement or consent by any or all of them to any modifications of the terms and conditions of, or proposed delivery by both or either of them of any consent or waiver or any exercise of any right of termination under, the Merger Agreement. Each of the parties hereto that is also a party to the Merger Agreement shall (1) allow Onyx to participate directly in any negotiations or discussions relating to any such proposed modification, consent, waiver or termination unless such action would not reasonably be expected to have a material adverse effect on the Retained Business, Retained Assets or Retained Liabilities and (2) keep Onyx reasonably informed of the status and any developments with respect to any such proposed modification, consent, waiver or termination. None of the parties hereto that is also a party to the Merger Agreement shall, without the prior written consent of Onyx, terminate the Merger Agreement pursuant to Section 8.1(a) thereof or agree to any modification of any of the terms or conditions of, or give any consent or waiver under, any provision of the Merger Agreement if such modification, consent or waiver would reasonably be expected to have an adverse effect on the Retained Business, Retained Assets or Retained Liabilities. SV shall not, without the prior written consent of Onyx, terminate the Merger Agreement pursuant to Section 8.1(e)(2)(B).

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(b) Prior to the Closing, each party hereto will promptly notify each other party hereto in the event that such party becomes aware of (1) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which could reasonably be expected to cause (i) any representation or warranty of any party to the Merger Agreement to be untrue or inaccurate or (ii) any covenant, condition or agreement of any party to the Merger Agreement contained in the Merger Agreement to not be complied with or satisfied and (2) any failure of any party to the Merger Agreement to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement.

(c) During the period from the date of this Separation Agreement through the earlier of the termination of this Separation Agreement pursuant to its terms and the Closing Date, the Company shall, and shall cause each Company Subsidiary to, subject to reasonable restrictions imposed from time to time upon advice of counsel respecting applicable Law or the Confidentiality Agreement, afford representatives of Onyx and its Designated Affiliates, following notice from Onyx to the Company in accordance with this Section 6.4(c), reasonable access during normal business hours to all properties, offices, books, contracts, commitments and records and such financial (including all working papers) and operating data of the Company and the Company Subsidiaries and all other information concerning its business, properties, personnel, vendors, landlords/sublandlords, tenants, licensees and franchisees as Onyx or its Designated Affiliates may reasonably request, including access to distribution centers and stores to conduct field audits at Onyx’s expense, and shall instruct the employees, counsel, financial advisors and auditors of the Company to cooperate with Onyx in connection with the foregoing. Onyx shall schedule and coordinate all inspections with the Company and shall give the Company at least two Business Days prior notice thereof, setting forth the inspection or materials that Onyx or its representatives intend to conduct. The Company shall be entitled to have representatives present at all times during any such inspection. Notwithstanding the foregoing, neither Onyx nor any of its representatives shall (i) contact or have any discussions with any of the Company’s employees below the level of division vice president (or, if no such position exists with respect to any particular area of the Company, division leader or its equivalent), agents, or representatives, unless in each case Onyx obtains the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed, (ii) contact or have any discussions with any of the vendors, licensees or franchisees of the Company or the Company Subsidiaries, unless in each case Onyx obtains the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed, (iii) contact or have any discussions with any of the landlord/sublandlords, tenants/subtenants of the Company or the Company Subsidiaries if, within two Business Days after receipt of notice from Onyx of its intention to have such a discussion, the Company shall raise a reasonable objection to such contact or discussion, (iv) damage any property or any portion thereof, or (v) perform any onsite procedure or investigation (including any onsite environmental investigation or study) that involves physical disturbance or damage to any property or any portion thereof. Within ten (10) Business Days after the date hereof, the Company shall appoint a representative for the purpose of coordination of inspections and providing approvals of contact with employees, vendors, landlords/sublandlords, tenants/subtenants, licensees or franchisees of the Company or its Subsidiaries. Notwithstanding the foregoing, neither the Company nor any Company Subsidiary shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of the Company or any Company Subsidiary or contravene any Law or binding

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agreement entered into prior to the date of this Separation Agreement. All information obtained pursuant to this Section 6.4(c) shall continue to be governed by the Confidentiality Agreement.

(d) Onyx shall use its commercially reasonable efforts to obtain the Financing pursuant to the terms and conditions set forth in the Financing Commitment. Onyx shall notify the Company if at any time prior to the Closing Date the Financing Commitment shall expire or be terminated, modified or amended for any reason. The Company shall (i) provide and shall cause the Company Subsidiaries to, and use commercially reasonable efforts to cause the respective officers, employees and Representatives, including legal and accounting, of the Company and its Subsidiaries to provide, all cooperation reasonably requested by Onyx in connection with any debt financing that Onyx may determine to arrange (any such debt financing, a “Future Debt Financing”), including providing such access and documentation and taking such action as is customary for transactions such as the Financing or Future Debt Financing and facilitating the production of any due diligence items that the prospective lenders may reasonably request, including current Phase I Environmental Site Assessments, field audits, appraisals and title insurance with respect to the real property, and (ii) satisfy the conditions in the Financing Commitment or Future Debt Financing that require action by the Company. Onyx shall promptly, upon request by the Company, reimburse the Company for all reasonable out-of-pocket third party costs incurred by the Company or any of the Company Subsidiaries in connection with such cooperation.

(e) During the period from the date of this Separation Agreement through the earlier of the termination of this Separation Agreement pursuant to its terms and the Closing Date, Onyx shall, and shall cause each Subsidiary of Onyx to, subject to reasonable restrictions imposed from time to time upon advice of counsel respecting applicable Law or the Confidentiality Agreement, afford representatives of the Company and its Subsidiaries such information as they may reasonably require concerning the capitalization, liquidity and financial resources of Onyx and its Subsidiaries after giving effect to the transactions contemplated by this Separation Agreement. Notwithstanding the foregoing, neither Onyx nor any Onyx Subsidiary shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of Onyx or any Subsidiary of Onyx or contravene any Law or binding agreement entered into prior to the date of this Separation Agreement. The Company shall hold, and shall cause its officers, employees, agents, consultants, advisors and other Representatives to hold, in strict confidence, unless compelled to disclose by judicial or administrative process or at the direction of any Authority or, in the opinion of its counsel, by other requirements of Law, all non-public information concerning Onyx furnished it pursuant to this Section 6.4(e) or its Representatives or otherwise in its possession (except to the extent that such information can be shown to have been (x) in the public domain through no fault of the party to which it was furnished or (y) later lawfully acquired on a nonconfidential basis from other sources by the party to which it was furnished), and the Company shall not, without the prior written consent of the party that furnished such information, release or disclose such information to any other person, except its auditors, attorneys, financial advisors, financing sources, bankers and other consultants, advisors and other representatives who have a need to know such information and who agree to be bound by the provisions of this sentence. The Company shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by any other party if it exercises the same care as it takes to preserve confidentiality for its own similar confidential information.

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Section 6.5 Further Action; Reasonable Best Efforts. (a) Subject to the terms and conditions of this Separation Agreement, each of the parties hereto will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, or desirable under applicable Law and regulations to consummate, in the most expeditious manner practicable, the transactions contemplated by this Separation Agreement. In furtherance of the foregoing, from the date hereof until Closing (and except as contemplated by the Cub Sale Agreement), Onyx agrees, and shall cause each of its Affiliates and each holder of its Equity Interests, not to enter into any transaction which would impair or delay the parties’ ability to receive approval of the transactions contemplated hereby under the HSR Act, including, without limitation, any acquisition of or merger with any entity that derived revenues in the following NAICS Codes: 44561, 44611 and any NAIC codes that begin with 44511 or 44611. Onyx hereby represents that no person that is the ultimate parent entity of Onyx derives any revenues in such NAICS Codes, otherwise than as a result of the Cub Sale Agreement.

(b) The Company and Onyx will use reasonable best efforts to: (i) prepare, as soon as practicable, all filings and other presentations in connection with seeking any regulatory approval, exemption or other authorization from any Authority necessary to consummate the transactions contemplated hereby; (ii) prosecute such filings and other presentations with diligence; and (iii) oppose any objections to, appeals from or petitions to reconsider or reopen any such approval by persons not party to this Agreement. The Company and Onyx will use reasonable best efforts to facilitate obtaining any final order or orders approving such transactions, consistent with this Separation Agreement and/or to remove any impediment to the consummation of the transactions contemplated hereby. The Company and Onyx will use reasonable best efforts to furnish all information in connection with the approvals of or filings with any Authority and will promptly cooperate with and furnish information in connection with any such requirements imposed upon Onyx or any of its Affiliates in connection with this Agreement and the transactions contemplated hereby. Subject to Sections 6.5(c) and 6.5(d), Onyx will use reasonable best efforts to obtain any consent, authorization, order or approval of, or any exemption by, and to remove any impediment imposed by any Authority to allow the consummation of the transactions contemplated hereby. Onyx and the Company will each advise the other party promptly of any material communication received by such party or any of its Affiliates from the FTC, DOJ, any state attorney general or any other Authority regarding any of the transactions contemplated hereby, and of any understandings, undertakings or agreements (oral or written) such party proposes to make or enter into with the FTC, DOJ, any state attorney general or any other Authority in connection with the transactions contemplated hereby. Onyx and the Company will each consult with the other in advance of any material meetings with the FTC.

(c) In furtherance and not in limitation of Sections 6.5(a) and (b), each of Onyx and the Company shall make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and thereafter make any other required submissions with respect to the transactions contemplated hereby under the HSR Act and shall take all other actions reasonably necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.

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(d) In furtherance and not in limitation of Sections 6.5(a) and (b), Onyx shall, in order to consummate the Retained Business Purchase contemplated by this Separation Agreement, use its reasonable best efforts (i) to secure the expiration or termination of any applicable waiting period under the HSR Act, (ii) to resolve any objections asserted with respect to the Retained Business Purchase contemplated hereby under any antitrust law or the Federal Trade Commission Act raised by any governmental authority (“Objections”), and (iii) to prevent the entry of, and to have vacated, lifted, reversed or overturned, any decree, judgment, injunction or other order that would prevent, prohibit, restrict or delay Closing. For purposes of this Section 6.5(d), “reasonable best efforts” include (A) executing settlements, undertakings, consent decrees, stipulations or other agreements, (B) selling, divesting or otherwise conveying particular assets or categories of assets or businesses of Onyx, (C) agreeing to sell, divest or otherwise convey any particular assets or categories of assets or businesses of the Company contemporaneously with or subsequent to the Closing, and (D) permitting the Company to sell, divest or otherwise convey any particular assets or categories of assets or businesses of the Company prior to the Closing; provided, that in no event shall Onyx be required (or shall the Company be permitted pursuant to this Section 6.5(d)) to take any actions pursuant to this Section 6.5(d) that, individually or when aggregated with all other actions taken pursuant to this Section 6.5(d), could reasonably be expected to have a material adverse effect on Onyx and the Company, taken as a whole, after giving effect to the consummation of the Retained Business Purchase. No actions taken pursuant to this Section 6.5(d) shall be considered for purposes of determining whether a Company Material Adverse Effect has occurred. Onyx shall respond to and seek to resolve any Objection as promptly as practicable after such Objection is raised.

(e) Subject to the terms and conditions of the Merger Agreement, each of the Company and SV shall comply with their obligations under Section 6.6(a)-(d) of the Merger Agreement.

(f) Notwithstanding the foregoing or any other provision of this Separation Agreement, nothing in this Section 6.5 shall limit a party’s right to terminate this Separation Agreement pursuant to Section 9.2 so long as such party has up to then complied in all material respects with its obligations under this Section 6.5.

Section 6.6 Ancillary Agreements. On the Closing Date, the parties shall execute (and/or cause their respective Subsidiaries party thereto to execute) the Ancillary Agreements; it being agreed that (i) Onyx may request that the schedules to the Transition Services Agreement include any service that the Company Headquarters currently provides to the Retained Business and (ii) prior to the Closing Date, SV and Onyx shall review and negotiate in good faith to agree upon the appropriate service levels to be set forth in the Transition Services Agreement with respect to services to be provided under the Transition Services Agreement to Onyx after the Closing Date. Notwithstanding anything to the contrary contained in this Separation Agreement, (i) the nonperformance by any party with the agreements and covenants set forth in Section 6.2(b) or this Section 6.6 (including any related failure of any party to certify as to the performance thereof) shall not constitute a failure of any condition to the obligation of any party to consummate the transactions contemplated by this Separation Agreement to be satisfied or grounds for any party to terminate this Separation Agreement and (ii) if and to the extent of a conflict between the terms and provisions of this Separation Agreement and any Ancillary Agreement, the terms of the Ancillary Agreement shall govern.

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Section 6.7 Sharing of Certain Payments. In the event that SV receives a Company Termination Fee (as defined in the Merger Agreement), SV and Onyx shall share in such fee (a) first, in an amount equal to each party’s actual out-of-pocket third party expenses incurred in connection with this Separation Agreement and the Merger Agreement and (b) second, on a 85%/15% basis. Such amount shall be paid within five (5) Business Days of the receipt by SV of such Company Termination Fee.

Section 6.8 Certain Restrictions Pending the Closing. (a) Each of Onyx and SV agrees that, from and after the date hereof and prior to the Closing, except (1) as otherwise expressly permitted by this Separation Agreement or the Merger Agreement, (2) for any action that constitutes an exercise of their respective rights under Section 6.4, Section 9.1 or Section 9.2 or (3) as agreed in writing by the other parties hereto, each of Onyx and SV shall not, and shall not permit any of its Subsidiaries to, take or agree, in writing or otherwise, to take any action which could reasonably be expected to materially impair its ability to perform its obligations under this Separation Agreement or to prevent, impede or materially delay the consummation of the transactions contemplated under this Separation Agreement or result in the failure to satisfy any condition to the consummation of the transactions hereunder.

(b) The Company agrees that, from and after the date hereof and prior to the Closing, except (1) as otherwise expressly permitted by this Separation Agreement or the Merger Agreement, (2) for any action that constitutes an exercise of the Company’s rights under Section 9.1 or Section 9.2 of this Separation Agreement or (3) as agreed in writing by the other parties hereto, the Company shall not, and shall not permit any of its Subsidiaries to, take or agree, in writing or otherwise, to take any action which could reasonably be expected to materially impair the Company’s ability to perform its obligations under this Separation Agreement or to prevent, impede or materially delay the consummation of the transactions contemplated under this Separation Agreement or result in the failure to satisfy any condition to the consummation of the transactions hereunder.

(c) In furtherance, and not limitation of the foregoing, Section 6.1(a) (Conduct of Business Prior to the Closing) of the Merger Agreement is incorporated herein by reference (mutatis mutandis); provided, however, for purposes of this Section 6.8(c) of the Separation Agreement (1) ”Onyx” shall be substituted for any reference to “Parent” contained in such section, (2) “this Separation Agreement” shall be substituted for any reference to “this Agreement” in such section, (3) the references to “(in each case, with respect to the New Diamond Business or to the extent affecting New Diamond and/or the New Diamond Entities in a non-de minimis respect)” shall be deemed to read “(in each case, in relation to the Retained Business, the Retained Assets and the Retained Liabilities),” (4) Section 6.1(a)(v)(D)(2) shall be deemed to read “any Real Property Lease (other than any amendment or termination in connection with the disposition of the Springfield Stores) which provides for monthly base rental payments over the primary term of the lease in excess of $10,000, on average or which provides for a term in excess of two years,”, (5) Section 6.1(a)(v)(E) shall be deemed to read “vary capital expenditures upward or downward in any material respect from the capital expenditure budget insofar as it relates to the Retained Business as set forth on Section 6.8(c) of the Company Disclosure Letter authorize, or enter into, any new capital expenditures which are in the aggregate, in excess of the Company’s capital expenditure budget insofar as it relates to the Retained Business or authorize, or enter into any commitment to make any capital expenditures

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that related to the Retained Business which are, individually, in excess of $2,500,000.”, and (6) the following shall be inserted at the end of Section 6.1(a)(vi) as a new number (9): “(9) hire (except in the case of replacing a departing executive or employee) any executive officer (as defined by Rule 3b-7 of the Exchange Act) or other employee earning annual compensation in excess of $250,000, or terminate more than two such executive officers or employees earning in excess of $250,000 in any 6 month period, other than termination for cause.”

Section 6.9 Payments by Onyx to the Exchange Fund. Under the Merger Agreement, SV has agreed to deposit in trust (the “Exchange Fund”) with the Paying Agent (as defined in the Merger Agreement) any amounts payable under Article III of the Merger Agreement. In furtherance of the foregoing and Onyx’s obligations under Section 2.4(c) of this Separation Agreement, Onyx and/or one or more of its Designated Affiliates shall pay, or cause to be paid, by wire transfer of immediately available funds to the account designated by the Paying Agent as the Exchange Fund, an amount without duplication equal to the Retained Business Price (which amount New Diamond intends to treat as having been loaned from New Diamond to SV).

Section 6.10 Settlement of Appraisal Proceedings. In the event any appraisal proceeding brought under Section 262 of the DGCL results in the payment of an amount per share in respect of shares of the Common Stock (as defined in the Merger Agreement) of the Company outstanding prior to the Effective Time that is less than the Per Share Merger Consideration (after taking into account the costs and expenses of defending such Action), the difference between the amount of such payment and the Per Share Merger Consideration shall be split between the Company and New Diamond on a 15%/85% basis. Each of Onyx and SV shall, or shall cause the Company or New Diamond, respectively, to make such payments when and if due.

Section 6.11 Certain Standalone Drug Sale Matters. (a) The Company shall not, without the prior written consent of the other parties hereto, voluntarily terminate the Standalone Drug Sale Agreement or agree to any modification of any of the terms or conditions of, or give any consent or waiver under, or enter into any settlement of any Action or dispute under any provision of the Standalone Drug Sale Agreement, if such modification, consent, waiver, settlement or termination would reasonably by expected to adversely affect, or impose any cost or liability on, Onyx or its Subsidiaries (including their interests following the consummation of the transactions contemplated by the Standalone Drug Sale Agreement) or adversely affect the ability to consummate the transactions contemplated hereby in a timely manner. The Company shall comply with the terms of the Standalone Drug Sale Agreement in all material respects. The Company will use reasonable best efforts to cause the conditions to the consummation of the Standalone Drug Sale Agreement to be satisfied (or waived by the other party thereto).

(b) Prior to the Closing, the Company will promptly notify each other party hereto in the event that the Company becomes aware of (1) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which could reasonably be expected to cause (i) any representation or warranty of any party to the Standalone Drug Sale Agreement to be untrue or inaccurate or (ii) any covenant, condition or agreement of any party to the Standalone Drug Sale Agreement contained in the Standalone Drug Sale Agreement to not be

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complied with or satisfied or (2) any failure of any party to the Standalone Drug Sale Agreement to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Standalone Drug Sale Agreement, in each case, to the extent that any of the foregoing matters would reasonably be expected to result in the failure of a closing condition to the Standalone Drug Sale Agreement.

Section 6.12 Proxy Statement. Onyx will cooperate with SV and the Company in the preparation of the Proxy Statement/Prospectus and Form S-4. Each of Parent and the Company will provide Onyx with a reasonable opportunity to review drafts of, and revisions to, the Proxy Statement/Prospectus and Form S-4 prepared by such party, and Onyx shall use its reasonable best efforts to furnish to SV and the Company information relating to it and its affiliates as necessary to prepare the Proxy Statement/Prospectus and Form S-4. Onyx agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in the Proxy Statement/Prospectus or the Form S-4 will, at the date such document is first mailed to the stockholders of the relevant party and at the time of such party’s meeting of stockholders relating to the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. For purposes of the foregoing, it is understood and agreed that information concerning or related to Onyx or any of its Designated Subsidiaries will be deemed to have been supplied by Onyx.

Section 6.13 Merger Agreement Termination Fee. In the event that (i) SV is required to make a payment to the Company pursuant to Section 8.2(d)(i) of the Merger Agreement or (ii)(A) SV is required to make a payment to the Company pursuant to Section 8.2(d)(ii) of the Merger Agreement and (B) the board of directors of SV shall have failed to include or make or shall have publicly withdrawn, modified or changed, in a manner adverse to the Company, the Parent Board Recommendation for reasons primarily related to antitrust concerns, Onyx shall be responsible for the payment to the Company of (or shall reimburse SV for) an amount equal to $70,000,000 of such $250,000,000 payment.

Section 6.14 Springfield Stores Sale.

(a) Onyx shall act in good faith and use its reasonable best efforts to sell the Springfield Stores to a third party (other than SV) prior to the date that is the one year anniversary of the Closing Date (the “Springfield Stores Date”) and shall consider in good faith any prospective purchaser of the Springfield Stores proposed to Onyx by SV; provided, that such one year limitation shall be extended if Onyx is in discussions with any third party to sell the Springfield Stores on the Springfield Stores Date until such discussions have terminated in good faith.

(b) To the extent Onyx shall have entered into an agreement to sell one or both of the Springfield Stores within the timeline contemplated by paragraph (a) above, it shall, upon the closing of such sale, pay to Jewel Food Stores, Inc. eighty per cent (80%), and shall be entitled to keep twenty percent (20%), of the consideration (net of tax and costs of sale) for such store or stores. Any such payment to Jewel Food Stores, Inc. shall be allocable to the Springfield Stores.

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(c) SV shall be entitled to see, at its request, all documentation with respect to the sales or prospective sales contemplated by this Section 6.14.

ARTICLE VII

ACCESS TO INFORMATION AND SERVICES

Section 7.1 Access to Information. From and after the Closing (a) each of the parties hereto shall (1) afford to the other parties and their respective authorized accountants, counsel and other designated Representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing Information) and duplicating rights during normal business hours and upon reasonable advance notice to all records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) within the each other party’s possession insofar as such access is reasonably required by Onyx or SV, as the case may be, or their respective Designated Affiliates and (2) at the request and expense of Onyx, SV or their respective Designated Affiliates, as applicable, use its reasonable efforts to cooperate with the other parties and their respective accountants and other Representatives in connection with the preparation of any audits (and related financial statement preparation) and with the transition of the Retained Business and the New Diamond Business to “stand-alone” businesses following the Closing, including by assisting in connection with any efforts to obtain insurance coverage for the Retained Business and the New Diamond Business, as applicable. Information may be requested under this Section 7.1 for, without limitation, audit, accounting, claims, litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations.

Section 7.2 Litigation Cooperation. Following the Closing, with respect to any Action that involves any of the parties to this Separation Agreement or any of the Retained Entities or New Diamond Entities and relates to (a) the transactions contemplated by this Separation Agreement or the Merger Agreement or (b) the Company or any current or former Subsidiary of the Company or any Liabilities or current or former Assets, employees or businesses thereof, whether or not such Action is subject to indemnification hereunder, each of the parties hereto shall, upon written request by any other party hereto, and at the expense of the requesting party (subject to the indemnification and expense-sharing provisions of this Separation Agreement, to the extent applicable), provide all cooperation and assistance, and shall furnish such records and information, as may be reasonably requested by the other in connection therewith, including, by using reasonable efforts to make available to the other, its officers, directors, employees and agents as witnesses and to attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the other in connection therewith. With respect to (1) any such Action involving Shared Transaction Liabilities or (2) any Action initiated by any Authority or private party pursuant to the HSR Act or any similar Law and relating to the transactions contemplated by this Separation Agreement or the Merger Agreement, the parties agree, consistent with applicable rules of privilege and legal ethics, to provide each other with timely and reasonably detailed updates with respect to all material developments, consult with each other before taking any significant actions in connection therewith and offer each other the opportunity to comment before submitting to any Authority or adverse party any written materials prepared or furnished in connection with such Action.

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Section 7.3 Retention of Records. Except as otherwise required by Law or agreed to in writing, the parties hereto and/or one or more of their Designated Affiliates shall each retain, for a period of at least seven years following the Closing Date, all Information in their possession relating to (a) in the case of New Diamond and its Affiliates, the Retained Assets, the Retained Entities and the Retained Business, the Retained Liabilities, and (b) in the case of the Company and its Affiliates, the New Diamond Assets, the New Diamond Entities, the New Diamond Business and the New Diamond Liabilities. Notwithstanding the foregoing, except as otherwise required by Law, any party may destroy or otherwise dispose of any of such Information at any time, provided, that prior to such destruction or disposal, (1) such party provides no less than 90 or more than 120 days’ prior written notice to the other parties, specifying the Information proposed to be destroyed or disposed of and (2) if the other party shall request in writing prior to the scheduled date for such destruction or disposal that any of the Information proposed to be destroyed or disposed of be delivered to such party, the responsive party shall promptly arrange for the delivery of such of the Information as was requested, at the expense of the requesting party.

Section 7.4 Confidentiality. From and after the Closing, each party shall hold, and shall cause its officers, employees, agents, consultants, advisors and other Representatives to hold, in strict confidence, unless compelled to disclose by judicial or administrative process or at the direction of any Authority or, in the opinion of its counsel, by other requirements of Law, all non-public Information concerning the other parties furnished it by any such other party or its representatives or otherwise in its possession (except to the extent that such Information can be shown to have been (a) in the public domain through no fault of the party to which it was furnished or (b) later lawfully acquired on a nonconfidential basis from other sources by the party to which it was furnished), and each party shall not, without the prior written consent of the party that furnished such Information, release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, financing sources, bankers and other consultants, advisors and other representatives who have a need to know such Information and who agree to be bound by the provisions of this Section 7.4. Each party shall be deemed to have satisfied its obligation to hold confidential Information concerning or supplied by any other party if it exercises the same care as it takes to preserve confidentiality for its own similar confidential Information.

Section 7.5 Publicity. The parties shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Separation Agreement or the transactions contemplated hereby, except to the extent public disclosure is required by applicable Law or the requirements of the NYSE or the PCX, in which case the issuing party shall use its reasonable best efforts to consult with the other party before issuing any such release or making any such public statement.

ARTICLE VIII

EMPLOYEE BENEFITS; LABOR MATTERS

Section 8.1 Locus of Employees and Company Plans. No later than immediately prior to the Separation, the employment of any New Diamond Employees who are employed by a Retained Entity shall be transferred to a New Diamond Entity, and the

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employment of any Retained Employees who are employed by a New Diamond Entity shall be transferred to a Retained Entity. The New Diamond Employees who are employed by a New Diamond Entity immediately prior to the Separation shall be retained as employees of such entity, and the Retained Employees who are employed by a Retained Entity immediately prior to the Separation shall be retained as employees of such entity. Prior to the Separation the Company shall cause the real estate leases and real property assets associated with the Retained Business held in trust in a Company Plan to be removed from such trust. Concurrently with the Separation, New Diamond shall assume or retain sponsorship of all Company Plans (other than Assumed Benefit Plans), all assets held in trust (other than such real estate leases and real property assets) to fund such plans and all insurance policies funding such plans shall be New Diamond Assets, and the Retained Entities and Retained Employees shall cease to actively participate in such plans as of the Closing Date (it being understood that Retained Employees shall still be eligible for benefits in accordance with the terms of such plans, provided that no additional rights or benefits shall accrue under any such plans in respect of service of the Retained Employees subsequent to the Closing Date), and, except to the extent provided elsewhere herein, New Diamond shall assume and be solely responsible for all Liabilities and obligations whatsoever in respect of such plans. Without limiting the generality of Section 9.5, nothing in this Article VIII, express or implied, is intended to or shall confer upon any current or former employee or service provider of New Diamond, the Company, and their respective Affiliates any right, benefit or remedy of any nature whatsoever.

Section 8.2 Employee Benefits. After the Closing, each of the Company, Onyx and/or one or more of its Designated Affiliates shall, and shall cause each Retained Entity to, as the case may be, take such action as may be necessary to honor the applicable obligations under the last sentence of Section 6.8(c) and Section 6.13(a), (c), (d) and (e) of the Merger Agreement with respect to the Retained Employees (other than Former Retained Employees) as if the “Surviving Corporation” as referenced therein was the Company and “Parent” as referenced therein was Onyx, and including without limitation an obligation to establish and maintain as of the Effective Time such plans, policies and arrangements in such form as Onyx may determine to provide such benefits. For purposes of this Section 8.2, the last sentence of Section 6.13(a) of the Merger Agreement shall be deemed to read: “For purposes of this Section 6.13 only, the term “Company Employee” shall be deemed to refer to any current employee, officer, consultant, independent contractor or director of the Company or any Subsidiary of the Company after giving effect to the Standalone Drug Sale and the Separation.”

Section 8.3 Other Liabilities and Obligations. As of the Closing Date, with respect to claims relating to any employee Liability or obligations not otherwise allocated in this Separation Agreement, (a) New Diamond shall assume, and be solely responsible for, all Liabilities and obligations whatsoever of the Company and its Affiliates for such claims made by all New Diamond Employees and (b) the Company shall retain or assume, and be solely responsible for, all Liabilities and obligations whatsoever for claims made by all Retained Employees whether arising out of events, occurrences or services performed before or following the Closing Date. As of the Closing Date, the Company shall assume (subject to the definition of Shared Transaction Litigation Liabilities) and be solely responsible for all Liabilities and obligations whatsoever in respect of Assumed Benefit Plans, and all assets held in trust to fund such plans and all insurance policies funding such plans shall be Retained Assets. Without limiting the generality of the foregoing, as of the Closing Date, New Diamond shall assume and

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be solely responsible for any collective bargaining agreement or obligation covering New Diamond Employees as of the Closing Date and the Company shall retain or assume and be solely responsible for any collective bargaining agreement or obligation covering Retained Employees as of the Closing Date.

Section 8.4 Welfare Plans. Effective as of the Closing Date, Retained Employees shall cease to participate in plans providing for the type of benefits described in Section 3(1) of ERISA (other than retiree medical plans under which Former Retained Employees shall continue to participate (but not to actively accrue credit for service) following the Closing Date) (“Welfare Plans”) that are sponsored by the New Diamond Entities (“Old Welfare Plans”) and shall commence participation in Welfare Plans sponsored by Retained Entities (“New Welfare Plans”). New Diamond will provide administrative services and support to the New Welfare Plans following the Closing Date, as set forth in the Transition Services Agreement. Effective as of the Closing Date, the Company shall assume all responsibility for, and all Liabilities in respect of, accrued but unused vacation days of Retained Employees, and New Diamond shall assume all responsibility for, and all Liabilities in respect of, accrued but unused vacation days of New Diamond Employees. As of the Closing Date, (a) New Diamond shall assume or retain liability for all workman’s compensation claims with respect to New Diamond Employees and Retained Employees that arose directly out of injuries or illness that occurred prior to the Closing Date and disability claims with respect to New Diamond Employees and Retained Employees that arose prior to the Closing Date, (b) New Diamond shall assume or retain liability for all workman’s compensation claims with respect to New Diamond Employees that arise out of injuries or illness that arise on or after the Closing Date and disability claims with respect to New Diamond Employees that arise on or after the Closing Date and (c) the Company shall assume or retain liability for all workman’s compensation claims with respect to Retained Employees that arise directly out of injuries or illness that arise on or after the Closing Date and disability claims with respect to Retained Employees that arise on or after the Closing Date. For purposes of the preceding sentence, under no circumstances will a workman’s compensation claim be deemed to have arisen out of an injury occurring prior to the Closing Date or will a claim for disability benefits be deemed to have arisen prior to the Closing Date, in each case, if the applicable claim is not filed prior to, or within 180 days following, the Closing Date.

Section 8.5 Retirement Plans; Savings Plans. (a) At Closing New Diamond and its Affiliates shall assume or retain sponsorship of, and responsibility for all Liabilities in respect of, Company Plans (other than Assumed Benefit Plans) that are qualified or nonqualified retirement, retiree medical, or deferred compensation plans, whether with respect to New Diamond Employees, Retained Employees or Standalone Drug Employees. All assets held in trust to fund such plans (other than the real estate leases and real property assets associated with the Retained Business which shall be removed from any such trust prior to the Separation and shall be Retained Assets) and all insurance policies funding such plans shall be New Diamond Assets.

(b) As soon as practicable after the Closing Date, New Diamond shall cause the account balances of all employees of the Company (other than New Diamond Employees and Former Retained Employees) in the Company Plans that are account balance plans qualified under Section 401(a) of the Code to be available for distribution in accordance

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with the terms of such plans, and the Company shall permit Retained Employees (other than Former Retained Employees) who are participants in such plans to rollover such distributions (including a rollover of outstanding participant loans) into a defined contribution plan established by the Company that satisfies the qualification requirements of Section 401(a) of the Code.

Section 8.6 Preservation of Rights to Amend or Terminate Plans. No provision of this Separation Agreement shall be construed as a limitation on the right of the Company or New Diamond to amend any plan or terminate its participation therein which the Company or New Diamond would otherwise have under the terms of such plan or otherwise, and no provision of this Separation Agreement shall be construed to create a right in any employee or beneficiary of such employee under a plan that such employee or beneficiary would not otherwise have under the terms of such plan itself.

Section 8.7 Reimbursement; Indemnification. New Diamond and the Company acknowledge that the Company, on the one hand, and New Diamond, on the other hand, and their respective Subsidiaries, may incur costs and expenses (including contributions to plans and the payment of insurance premiums) pursuant to any of the employee benefit or compensation plans, programs or arrangements which are, as set forth in this Separation Agreement, the responsibility of the other. Accordingly, the Company and New Diamond agree to reimburse each other, as soon as practicable but in any event within five Business Days of receipt from the other party of appropriate verification, for all such costs and expenses reduced by the amount of any Tax reduction or recovery of Tax benefit realized by the Company or New Diamond or any such Subsidiary, as the case may be, in respect of the corresponding payment made by it. Liabilities retained, assumed or indemnified by New Diamond pursuant to this Article VIII shall in each case be deemed to be New Diamond Liabilities, and Liabilities retained, assumed or indemnified by the Company pursuant to this Article VIII shall in each case be deemed to be Retained Liabilities, and, in each case, shall be subject to the indemnification provisions set forth in Article V.

Section 8.8 Change In Control. The parties hereto will treat the consummation of the Transactions, both individually and collectively, and regardless of the order in which they actually occur, as a “change in control,” “change of control” or similar event under each of the Company Plans (to the extent such Company Plans contain provisions relating to “change in control,” “change of control” or similar event).

ARTICLE IX

MISCELLANEOUS

Section 9.1 Conditions to Closing.

(a) Mutual Conditions to Consummate the Separation Agreement. The respective obligations of each party to consummate the transactions contemplated by this Separation Agreement shall be subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

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(1) each of the conditions to the Merger, as set forth in Article VII of the Merger Agreement (other than the condition that the Standalone Drug Sale, the Separation and the Retained Business Purchase shall have occurred), and each of the conditions of the Standalone Drug Sale, as set forth in Article IX of the Standalone Drug Sale Agreement, shall have been satisfied or waived (excluding conditions of the Merger Agreement and the Standalone Drug Sale Agreement that, by their terms, cannot be satisfied until the closing of the Merger Agreement or the Standalone Drug Sale Agreement, as applicable);

(2) the waiting period (and any extension thereof) applicable to the transactions contemplated by this Separation Agreement under the HSR Act shall have been terminated or shall have expired; and

(3) no Law, temporary restraining order, preliminary or permanent injunction or other legal restraint shall have been enacted, entered, promulgated or enforced and no action or decision shall have been taken and remain in effect by any Authority which prohibits, restrains or enjoins the consummation of the transactions contemplated by this Separation Agreement.

(b) Conditions to Obligations of Onyx. The obligations of Onyx to consummate the transactions contemplated hereby shall be further subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(1) The representations and warranties of the Company contained in Section 3.2(a) of this Separation Agreement (disregarding any Company Material Adverse Effect, materiality or similar qualifiers therein) shall be true and correct as of the date hereof and the Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct as of such specified date), except where any failure of any such representation or warranty to be so true and correct has not had and would not reasonably be expected to have a Company Material Adverse Effect, provided, however, that the representations and warranties of the Company in Section 4.2 of the Merger Agreement (Authority, Enforceability), as modified pursuant to Section 3.2(a) of this Separation Agreement, shall be true in all but de minimis respects;

(2) The Company shall have performed in all material respects the obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by it under this Separation Agreement at or prior to the Closing;

(3) The representations and warranties of SV and its Designated Affiliates set forth in this Separation Agreement (disregarding any Parent Material Adverse Effect, materiality or similar qualifiers therein) shall be true and correct as of the date hereof and the Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct as of such specified date),

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except where any failure of such representation or warranty to be so true and correct has not had and would not reasonably be expected to have a Parent Material Adverse Effect;

(4) Each of SV and its Designated Affiliates shall have performed in all material respects the material obligations, and complied in all material respects with the material agreements and covenants, required to be performed by or complied with by it under this Separation Agreement at or prior to the Closing; and

(5) Onyx shall have received a certificate of an executive officer of (i) the Company, certifying that the conditions set forth in Sections 9.1(b)(1) and (2) have been satisfied and (ii) SV, certifying that the conditions set forth in Section 9.1(b)(3) and (4) have been satisfied.

(6) Notwithstanding the foregoing, Onyx shall not, without the prior written consent of SV, amend, modify or waive any provision of this Separation Agreement if such amendment, modification or waiver would reasonably be expected to have an adverse effect on the New Diamond Business, New Diamond Assets or New Diamond Liabilities.

(c) Conditions to the Obligations of the Company and SV. The obligations of each of the Company and SV to consummate the transactions contemplated hereby shall be further subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(1) The representations and warranties of Onyx and its Designated Affiliates set forth in this Separation Agreement shall be true and correct in all material respects, in each case as of the date hereof and the Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct in all material respects as of such specified date);

(2) Each of Onyx and its Designated Affiliates shall have performed in all material respects the material obligations, and complied in all material respects with the material agreements and covenants, required to be performed by or complied with by it under this Separation Agreement at or prior to the Closing;

(3) Each of the Company and SV shall have received a certificate of an executive officer of Onyx, certifying that the conditions set forth in Sections 9.1(c)(1) and (2) have been satisfied.

(d) Additional Conditions to the Obligation of the Company. The obligations of the Company to consummate the transactions contemplated hereby shall be further subject to the Company having received, at Onyx’s expense, an opinion in form and substance reasonably acceptable to the Company, of a nationally recognized independent valuation firm reasonably acceptable to the Company, addressed to the Company’s Board of Directors and dated as of the Closing Date, to the effect that immediately after giving effect to the transactions contemplated by this Separation Agreement, the Standalone Drug Sale Agreement and the Merger Agreement, including the Financing, any alternative financing, any other repayment or

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refinancing of debt contemplated in this Separation Agreement, payment of all amounts required to be paid in connection with the consummation of the transactions contemplated by the Separation Agreement, the Standalone Drug Sale Agreement and the Merger Agreement, and payment of all related fees and expenses, each of Onyx and the Company are Solvent.

Section 9.2 Termination Prior to the Closing. (a) Termination by Mutual Consent. This Separation Agreement may be terminated at any time prior to the Closing upon the mutual written consent of the Company, SV and Onyx.

(b) Automatic Termination. This Separation Agreement shall terminate automatically upon any termination of the Merger Agreement or the Standalone Drug Sale Agreement in accordance with the terms thereof.

(c) Termination by Onyx. This Separation Agreement may be terminated at any time prior to the Closing by written notice from Onyx to each other party if the Closing shall not have been consummated by the Termination Date (as defined in the Merger Agreement).

(d) Termination by Any Party. This Separation Agreement may be terminated at any time prior to the Closing by written notice from any party to each other party if (1) any Authority of competent jurisdiction shall have issued a final order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the transactions contemplated by this Separation Agreement and such order, decree or ruling or other action shall have become final and nonappealable or (2) there shall have been a material failure of any representation or warranty of any other party to be true or a material breach of any covenant or agreement of another party contained in this Separation Agreement such that the conditions set forth in Section 9.1(b) or (c) would not be satisfied, and such breach or failure to be true is not cured (if curable) prior to the earlier of (i) 20 Business Days following notice of such breach (it being understood that such 20 Business Day period shall not be applicable to covenants or agreements that by their terms are intended to be satisfied at Closing) and (ii) the Termination Date; provided that the right to terminate this Separation Agreement pursuant to this Section 9.2(d)(2) shall not be available to the party seeking to terminate if any action of such party or the failure of such party to perform any of its obligations under this Separation Agreement required to be performed at or prior to the Closing has been the cause of, or resulted in, the failure of the Closing to occur on or before the Termination Date and such action or failure to perform constitutes a breach of this Separation Agreement.

Section 9.3 Effect of Termination. (a) Except as provided below, in the event of the termination of this Separation Agreement pursuant to Section 9.2, this Separation Agreement shall forthwith become void and there shall be no liability or obligation on the part of any party hereto, except with respect to this Article IX and Section 6.7, which shall survive such termination; provided, however, that nothing herein shall relieve any party from liability for any willful or intentional material breach of this Separation Agreement.

(b) Onyx agrees that, if the Company, New Diamond or SV shall terminate this Separation Agreement pursuant to Section 9.2(d)(2) on account of a breach of this Separation Agreement by Onyx then Onyx shall be liable for damages equal in the aggregate to

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$100,000,000 (one hundred million dollars) (the “Onyx Termination Fee”), two-thirds of which shall be paid to the Company and one-third of which shall be paid to SV. The Onyx Termination Fee shall be paid promptly in immediately available funds no later than two Business Days after such termination by the Company, New Diamond or SV. Subject to the rights of the Company and SV as third-party beneficiaries under the Financing Commitment in respect of the Onyx Termination Fee, the obligation of Onyx to make such payment to SV and the Company shall be the sole remedy and recourse of the Company, New Diamond or SV arising out of such breach by Onyx of this Separation Agreement. The Company and SV agree that any claim that SV has or may have against Onyx or the Sponsor relating to the Onyx Termination Fee or otherwise under the Financing Commitment shall be subordinated in right of payment to the payment in full of any claim that the Company has or may have against Onyx or the Sponsor under the Financing Commitment relating to the payment of the Onyx Termination Fee.

Section 9.4 No Survival. None of the representations and warranties in this Separation Agreement or in any instrument delivered pursuant to this Separation Agreement, and the other agreements and documents contemplated to be delivered in connection herewith, including any rights arising out of any breach of such representations and warranties shall, in the event Closing occurs, survive the Effective Time.

Section 9.5 Entire Agreement; Third Party Beneficiaries. This Separation Agreement (together with the documents and instruments referred to herein, including the Merger Agreement, the Ancillary Agreements, including the Transition Services Agreement) (a) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) is not intended to confer upon any person other than the parties hereto and thereto any rights or remedies; provided, however, that the Indemnified Directors or Officers and the Indemnitees are intended to be third party beneficiaries of the provisions of Articles IV and V and each of such persons shall have the right to enforce such provisions as if they were parties hereto.

Section 9.6 Fees and Expenses. Except as otherwise specifically provided in this Separation Agreement, all costs, expenses incurred by the parties hereto in connection with this Separation Agreement, the Merger Agreement and the transactions contemplated hereunder and thereunder shall be paid by the party hereto or thereto incurring such costs or expenses.

Section 9.7 No Waiver. No waiver by any party hereto of any breach of any covenant, agreement, representation or warranty hereunder shall be deemed a waiver of any preceding or succeeding breach of the same. The exercise of any right granted to any party in this Separation Agreement shall not operate as a waiver of any default or breach on the part of the other parties hereto. Each and all of the several rights and remedies of any party hereto under this Separation Agreement shall be construed as cumulative and no one right as exclusive of the others.

Section 9.8 Amendments. No change, modification, alteration, amendment or agreement to discharge in whole or in part, or waiver of, any of the terms and conditions of this Separation Agreement, shall be binding upon any party, unless the same shall be made by a written instrument signed and executed by the authorized representatives of each party, with the same formality as the execution of this Separation Agreement.

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Section 9.9 Governing Law. This Separation Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without giving effect to choice of law principles thereof).

Section 9.10 Notices. (a) All notices, requests and demands to or upon the respective parties hereto, and all statements and accountings given or required to be given hereunder, shall be made by personal service, or sent by certified mail, return receipt requested, postage prepaid, or by facsimile addressed as follows, or to such other address as may hereafter be designated in writing by the respective parties hereto, and shall be deemed received when delivered to the designated address (and only if confirmed if delivered by facsimile):

(1) if to the Company, to

Albertson’s, Inc.

250 East Parkcenter Boulevard

Boise, ID 83706

Attn: Corporate Secretary

Facsimile: (208) 395-6349

with a copy to

Jones Day

North Point

901 Lakeside Avenue

Cleveland, OH 44114

Attn: Lyle G. Ganske, Esq.

Facsimile: (216) 579-0212

and

Jones Day

2727 North Harwood Street

Dallas, TX 75201

Attn: Mark E. Betzen, Esq.

Facsimile: (214) 969-5100

and

(2) if to Onyx, to

AB Acquisition LLC

c/o Cerberus Capital Management, L.P.

299 Park Avenue

New York, NY 10171

Attn: Lenard Tessler

Facsimile: (212) 755-3009

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with a copy to

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attn: Stuart D. Freedman, Esq.

Facsimile: (212) 593-5955

and

(3) if to SV, to

SUPERVALU, Inc.

11840 Valley View Road

Eden Prairie, MN 55344

Attn: Corporate Secretary

Facsimile: (952) 828-8900

with a copy to

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

Attn: Andrew R. Brownstein, Esq.

          Igor Kirman, Esq.

Facsimile: (212) 403-2393

(b) To the extent not otherwise to be provided under the Merger Agreement, each of SV and the Company agrees to deliver to each of Onyx and New Diamond copies of all notices, requests and demands to or from the parties to the Merger Agreement, and all certificates, statements and accountings delivered or given or required to be delivered or given under the Merger Agreement, each such delivery to be made in accordance with the procedures set forth in Section 9.10(a); provided, however, that if SV or the Company elects to deliver any such notice, request, demand or certificate, statement or accounting by certified mail as permitted by Section 9.10(a), a copy thereof will also be delivered to each of Onyx and New Diamond by personal service or by confirmed facsimile in accordance with Section 9.10(a).

Section 9.11 Interpretation. The headings contained in this Separation Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Separation Agreement. In this Separation Agreement, unless a contrary intention appears, (a) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Separation Agreement as a whole and not to any particular Article, Section, Schedule, Exhibit or other subdivision, (b) whenever the words “include,” “includes” or “including” are used in this Separation Agreement, they shall be deemed to be followed by the words “without limitation,” (c) reference to any Article, Section, Schedule or Exhibit is reference to such Article or Section of, or Schedule or Exhibit to, this Separation Agreement, (d) “days” means calendar days, (e) all defined terms in this Separation Agreement have the defined meaning when used in any certificate or other document made or delivered pursuant to this

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Separation Agreement, unless otherwise indicated therein, (f) all defined terms in this Separation Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term, and in each case, vice versa, (g) references in this Separation Agreement to specific Laws (such as the Code, HSR Act and ERISA) or to specific provisions of Laws include all rules and regulations promulgated thereunder, (h) “person” means any natural person or any corporation, association, partnership, joint venture, limited liability, joint stock or other company or trust, (i) references to the “Company and each of its Subsidiaries,” the “Subsidiaries of the Company,” and other similar phrases, with respect to any time prior to the Closing, shall be deemed to include reference to each of the Subsidiaries of the Company without giving effect to the transfer of ownership of the New Diamond Entities at Closing, (j) items listed or included within a definition are so listed or included without duplication, (k) any statute defined or referred to herein or in any agreement or instrument referred to herein means such statute as from time to time amended, modified or supplemented, including by succession of comparable successor statutes, and (l) if and to the extent any party designates a Designated Affiliate pursuant to the terms hereof, such Designated Affiliate shall be deemed to be a party to this Separation Agreement and to have made any representations and warranties contained in this Separation Agreement as of the time of such designation, and any action or undertaking required of such Designated Affiliate pursuant to the terms of this Separation Agreement shall become an obligation of such Designated Affiliate as of the time of such designation. No provisions of this Separation Agreement shall be interpreted or construed against any party hereto solely because such party or its legal representative drafted such provision.

Section 9.12 Counterparts. This Separation Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

Section 9.13 Specific Performance. The parties agree that if for any reason any of the provisions of this Separation Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each party agrees that, in addition to any other available remedy at law or equity, each party shall be entitled to an injunction restraining any violation or threatened violation of the provisions of this Separation Agreement without the necessity of posting a bond or other form of security. In the event that any Action should be brought in equity to enforce the provisions of this Separation Agreement, no party will allege, and each party hereby waives the defense, that there is an adequate remedy at law.

Section 9.14 Successors and Assigns. (a) This Separation Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties hereto, but any such assignment by any party hereto shall not relieve such assigning party of any of its obligations or agreements hereunder unless expressly agreed to in writing by each other party hereto in its sole discretion; provided, however, that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Separation Agreement without the consent of each other party hereto, except that from and after the Closing Date this Separation Agreement may be assigned to a lender of a party as collateral for indebtedness, provided that the party making such assignment shall not be released from its obligations hereunder and the

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non-assigning party shall have no obligation to pursue remedies against any assignee before proceeding against assignor for any breach of any of its obligations hereunder; provided, further, that nothing contained in this Section 9.14(a) shall prevent Onyx, New Diamond, SV or the Company (but, in the case of the Company, only after the Effective Time) from assigning from transferring or assigning this Separation Agreement or its rights and obligations hereunder to a Designated Affiliate, in either case, so long as such assignment or transfer does not purport to relieve the assignee of its obligations hereunder. Any attempted assignment in violation of the foregoing shall be null and void.

(b) To the extent that the Company, Onyx and/or one of more its Designated Affiliates or any of their respective Subsidiaries, directly or indirectly, whether by merger, transfer of assets, transfer of stock, operation of law, license or otherwise, transfers, licenses or otherwise disposes of, in one or more transactions, to any other person all or substantially all of the Retained Assets each owns immediately after the Closing or the Retained Business, Onyx or such Designated Affiliate or such Subsidiary will cause the transferee of such Retained Assets to assume specifically such transferor’s and the Company’s obligations under this Separation Agreement with respect thereto. Such assumption will not relieve the transferor of its obligations in respect thereof. To the extent that New Diamond and/or one or more of their Designated Affiliates or any of their respective Subsidiaries, directly or indirectly, whether by merger, transfer of assets, transfer of stock, operation of law, license or otherwise, transfers, licenses or otherwise disposes of, in one or more transactions, to any other person all or substantially all of the New Diamond Assets or the New Diamond Business, the transferor will cause the transferee of such New Diamond Assets or New Diamond Business to assume specifically its obligations under this Separation Agreement with respect thereto. Such assumption will not relieve the transferor of its obligations in respect thereof. The parties agree that such transferee may exercise all of the transferring party’s rights hereunder, as the case may be, with respect to such Assets or businesses.

Section 9.15 Severability. If any term or other provision of this Separation Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced, all other terms and provisions of this Separation Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Separation Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner.

Section 9.16 Jurisdiction; Venue; Consent to Service of Process. (a) Except as otherwise provided in Section 2.7, 2.8 or 4.9, each of the parties hereto (a) consents to submit itself to the exclusive personal jurisdiction of the Delaware Court of Chancery and any Federal court located in the State of Delaware in the event of any Action arising out of or relating to this Separation Agreement or any of the transactions contemplated by this Separation Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) agrees that it will not bring any Action arising out of or relating to this Separation Agreement or any of the transactions contemplated by this Separation Agreement in any court other than the Delaware Court of Chancery or a Federal court sitting in the State of Delaware. In any Action arising out of or relating to this Separation Agreement or any of the transactions contemplated by this Separation Agreement, each party

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irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claims that it is not subject to the jurisdiction of the above courts, that such Action is brought in an inconvenient forum or that the venue of such Action is improper. Each of the parties also hereby agrees that any final and unappealable Judgment against a party in connection with any such Action shall be conclusive and binding on such party and that such award or Judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such Judgment shall be conclusive evidence of the fact and amount of such Judgment.

(b) Each party hereto irrevocably consents to service of process in the manner provided for the giving of notices pursuant to Section 9.10 of this Separation Agreement. Nothing in this Section 9.16 shall affect the right of any party to serve process in any other manner permitted by applicable Law.

Section 9.17 Waiver of Jury Trial. To the fullest extent permitted by Law, each of the parties irrevocably waives all right to trial by jury in any Action or counterclaim arising out of or relating to this Separation Agreement or any of the transactions contemplated by this Separation Agreement.

Section 9.18 Company Disclosure Letter. There may have been included in the Company Disclosure Letter and may be included elsewhere in this Separation Agreement items which are not “material,” and such inclusion shall not be deemed to be an acknowledgment or agreement by the Company that such items are “material” or to affect the interpretation of such term for purposes of this Separation Agreement. Disclosures included in any Section of the Company Disclosure Letter shall be considered to be made for purposes of all other Sections of the Company Disclosure Letter to the extent that the relevance of any such disclosure to any other Section of the Company Disclosure Letter is reasonably apparent from the text of such disclosure. The inclusion of any items or information in the Company Disclosure Letter shall not be construed as an admission that such item or information (or any non-disclosed item or information of comparable or greater significance) is material or otherwise required to be scheduled as an exception from any representation, warranty or covenant. Matters reflected in the Company Disclosure Letter are not necessarily limited to matters required by the Agreement to be disclosed in the Company Disclosure Letter.

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IN WITNESS WHEREOF, the parties have caused this Separation Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

ALBERTSON’S, INC.
By:	/S/    JOHN R. SIMS
	Name: John R. Sims
	Title: Executive Vice President and General Counsel
NEW ALOHA CORPORATION
By:	/S/    PAUL G. ROWAN
	Name: Paul G. Rowan
	Title: President
SUPERVALU INC.
By:	/S/    JEFF NODDLE
	Name: Jeff Noddle
	Title: Chairman & CEO
AB ACQUISITION LLC
By:	/S/    LEN TESSLER
	Name: Len Tessler
	Title: Authorized Signatory

EX-10.02

Exhibit 10.02

ASSET PURCHASE AGREEMENT

dated as of

January 22, 2006

among

CVS CORPORATION

CVS PHARMACY, INC.

ALBERTSON’S, INC.

SUPERVALU INC.

NEW ALOHA CORPORATION

and

THE SELLERS LISTED ON ANNEX A ATTACHED HERETO

TABLE OF CONTENTS

		Page
ARTICLE 1       Purchase and Sale		1
Section 1.01.	Purchase and Sale	1
Section 1.02.	Excluded Assets	3
Section 1.03.	Assumed Liabilities	5
Section 1.04.	Excluded Liabilities	6
Section 1.05.	Consents; Assignment of Contracts and Rights	7
Section 1.06.	Purchase Price	8
Section 1.07.	Closing	9
Section 1.08.	Prorations	10
Section 1.09.	Removal of Equipment and Signage	11
Section 1.10	La Habra Inventory Adjustment	11
ARTICLE 2       Representations and Warranties of Albertson’s		11
Section 2.01.	Organization	11
Section 2.02.	Authority; Enforceability	12
Section 2.03.	Non-Contravention; Assigned Contracts	12
Section 2.04.	Governmental Consents	13
Section 2.05.	Litigation;	13
Section 2.06.	Compliance with Law	13
Section 2.07.	Real Property	14
Section 2.08.	Title to the Purchased Assets	14
Section 2.09.	IT Systems	14
Section 2.10.	Sufficiency of Assets	15
Section 2.11.	Labor Relations	15
Section 2.12.	Environmental Compliance	15
Section 2.13.	Financial Schedules	16
Section 2.14.	No Undisclosed Liabilities	17
Section 2.15.	Absence of Certain Changes or Events	17
Section 2.16.	Finders’ Fees	17
Section 2.17.	Healthcare Regulatory	18
ARTICLE 3       Representations and Warranties of Parent and Buyer		19
Section 3.01.	Organization	19
Section 3.02.	Authority; Enforceability	19
Section 3.03.	Non-Contravention	19

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TABLE OF CONTENTS

		Page
Section 3.04.	Governmental Consents	20
Section 3.05.	Financing	20
Section 3.06.	Brokers	20
ARTICLE 4       Representations and Warranties of SUPERVALU		20
Section 4.01.	Organization	20
Section 4.02.	Authority; Enforceability	20
Section 4.03.	Non-Contravention	21
Section 4.04.	Governmental Consents	21
Section 4.05.	Brokers	21
ARTICLE 5       Covenants of The Sellers		21
Section 5.01.	Conduct of the Standalone Drug Business	21
Section 5.02.	Access to Information; Confidentiality	23
Section 5.03.	Notices of Certain Events	25
Section 5.04.	Noncompetition; Cooperation	25
Section 5.05.	Prescription Files	26
Section 5.06.	Casualty and Condemnation	26
Section 5.07.	Assistance in Transfer of Licenses, Permits and Registrations	27
Section 5.08.	Controlled Substances Inventory	28
Section 5.09.	Updated Store List	28
Section 5.10.	Financial Reports; Audited Financials	28
Section 5.11.	Intercompany Leases	29
Section 5.12.	Merger Agreement; Separation Agreement	29
ARTICLE 6       Covenants of Buyer		29
Section 6.01.	Confidentiality	29
Section 6.02.	Access	30
Section 6.03.	Guarantee Releases under Certain Contracts	30
Section 6.04.	Contractual Overpayments	30
Section 6.05.	Medicare And Medicaid Provider Numbers	31
ARTICLE 7       Covenants of Buyer and the Sellers		31
Section 7.01.	Reasonable Best Efforts; Further Assurances	31
Section 7.02.	HSR Clearance	31
Section 7.03.	Certain Filings	32
Section 7.04.	Public Announcements	32

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TABLE OF CONTENTS

		Page
Section 7.05.	Trademarks; Tradenames	33
Section 7.06.	Accounts Receivables; Gift Cards and Gift Certificates; Prepaid Expenses	34
Section 7.07.	Transition Services Agreement	34
Section 7.08.	HIPAA Privacy Standards	34
Section 7.09.	Solicitation of Employees	34
Section 7.10.	Kodak and Qualex Photo Processing Equipment	34
Section 7.11.	“As Is” Condition; Waiver and Release	35
Section 7.12.	Payments for Pharmacy Services	35
Section 7.13.	Confidentiality Agreement	35
ARTICLE 8       Tax Matters		36
Section 8.01.	Tax Matters	36
Section 8.02.	Tax Cooperation	36
ARTICLE 9       Employee Benefits		37
Section 9.01.	ERISA Representations	37
Section 9.02.	Employees and Offers of Employment	38
Section 9.03.	The Sellers’ Employee Benefit Plans	38
Section 9.04.	Buyer Benefit Plans	39
Section 9.05.	Labor Agreements	39
Section 9.06.	Employee Compensation	41
Section 9.07.	Employee Indemnity	42
Section 9.08.	No Third Party Beneficiaries	42
ARTICLE 10     Conditions to Closing		42
Section 10.01.	Conditions to Each Party’s Obligations	42
Section 10.02.	Conditions to Obligation of Buyer	43
Section 10.03.	Conditions to Obligation of the Sellers	43
ARTICLE 11     Survival; Indemnification		43
Section 11.01.	Survival	43
Section 11.02.	Indemnification	44
Section 11.03.	Procedures	45
ARTICLE 12     Termination		47
Section 12.01.	Grounds for Termination	47
Section 12.02.	Effect of Termination	48

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TABLE OF CONTENTS

		Page
ARTICLE 13     Miscellaneous		48
Section 13.01.	Definitions	48
Section 13.02.	Notices	54
Section 13.03.	Amendments and Waivers	55
Section 13.04.	Expenses	55
Section 13.05.	Successors and Assigns	56
Section 13.06.	Governing Law	56
Section 13.07.	Specific Performance; Jurisdiction	56
Section 13.08.	WAIVER OF JURY TRIAL	56
Section 13.09.	Counterparts; Effectiveness; Third Party Beneficiaries	57
Section 13.10.	Other Definitional and Interpretative Provisions	57
Section 13.11.	Entire Agreement	57
Section 13.12.	Severability	57
Section 13.13.	Bulk Transfer Laws	57
Section 13.14.	Guaranty	58

Annex A	Sellers
Exhibit A	List of Owned Stores
Exhibit B	List of Ground Lease Stores
Exhibit C	List of Leased Stores
Exhibit D	Form of Assignment and Assumption Agreement
Exhibit E	Forms of Lease Assignment and Assumption Agreement
Exhibit F	Form of Standalone Drug Business Transition Services Agreement
Exhibit G	Distribution Center Transition Services Agreement Term Sheet

Schedule 1.01(f)	Assumed Labor Agreements
Schedule 1.01(g)	Assigned Contracts
Schedule 1.02(a)	Excluded Equipment
Schedule 5.01(b)(i)	Lease Optional Extensions to be Exercised
Schedule 5.01(b)(ii)	Stores to be Closed
Schedule 5.02(a)	Transition Planning Related Activities
Schedule 7.09	Employees Buyer May Solicit
Schedule 9.02(a)	Offers of Employment
Schedule 9.02(b)	Divisional Pharmacy Managers

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ASSET PURCHASE AGREEMENT

AGREEMENT dated as of January 22, 2006, among CVS Pharmacy, Inc., a Rhode Island corporation (“Buyer”), CVS Corporation, a Delaware corporation (“Parent”), Albertson’s, Inc., a Delaware corporation (“Albertson’s”), New Aloha Corporation, a Delaware corporation and wholly owned subsidiary of Albertson’s (“New Diamond”), SUPERVALU INC., a Delaware corporation (“SUPERVALU”), and the entities listed on Annex A, each of which is directly or indirectly wholly owned by Albertson’s as of the date hereof (such entities listed on Annex A together with Albertson’s, the “Sellers”).

W I T N E S S E T H :

WHEREAS, the Sellers conduct retail drug store and pharmacy businesses in freestanding Stores (as defined below) through the operation of the Owned Stores, the Ground Lease Stores, the Leased Stores and the Distribution Center (as each term is defined below) (such business, the “Standalone Drug Business”; for the avoidance of doubt, the parties acknowledge and agree that the Standalone Drug Business excludes Seller’s retail drug store and pharmacy businesses located in the same building as, and with common entrances to, grocery stores (the “Retained Combo Drug Stores”);

WHEREAS, Buyer desires to purchase the Purchased Assets (as defined below) relating to the Standalone Drug Business from the Sellers and to assume certain related liabilities, and the Sellers desire to sell such Purchased Assets to Buyer, upon the terms and subject to the conditions set forth herein; and

WHEREAS, the Sellers (i) own the drug stores and the real property associated with the drug stores listed on Exhibit A hereto (the “Owned Stores”); (ii) own the drug stores and lease the real property associated with the drug stores listed on Exhibit B hereto (the “Ground Lease Stores”); (iii) lease the drug stores listed on Exhibit C hereto (the “Leased Stores” and collectively with the Owned Stores and the Ground Lease Stores, the “Stores” and each individually, a “Store”); and (iv) own the Distribution Center (collectively with the Stores, the “Facilities”).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE 1

PURCHASE AND SALE

Section 1.01. Purchase and Sale. Except as otherwise provided below, upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from the Sellers and the Sellers agree to sell, convey, transfer, assign and deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to Buyer at the Effective Time, all of the Sellers’ right, title and interest in, to and under the assets primarily related to the Standalone Drug Business including the following assets and properties, wherever located, real, personal or mixed, tangible or intangible, as the same shall exist at the Effective Time, including all such assets acquired by

the Sellers between the date hereof and the Effective Time (the “Purchased Assets”), but excluding the Excluded Assets:

(a) the real property owned by the Sellers and associated with the Owned Stores or the Distribution Center (the “Owned Real Property”) and the tenants’ interests in the ground leases associated with the Ground Lease Stores (the real property associated with the Ground Lease Stores being referred to as the “Ground Leased Real Property”), together with all buildings, structures, installations, fixtures, trade fixtures, building equipment and other improvements owned by the Sellers located on or attached to the Owned Real Property or Ground Leased Real Property (and all title documents, surveys, related construction plans and documents and related real estate files with respect to the Owned Real Property and Ground Leased Real Property);

(b) the Store Leases (the real property leased pursuant to the Store Leases is referred to collectively as the “Leased Real Property” and together with the Owned Real Property and the Ground Leased Real Property, the “Real Property”), and all Store Lease documents, related construction plans and documents and related real estate files;

(c) all fixed assets and tangible personal property (other than the Inventory) at the Facilities and owned by the Sellers, including fixtures, trade fixtures, building equipment, fittings, furniture, computer hardware, office equipment, and other tangible property, but excluding the Excluded Equipment;

(d) all pharmaceutical and non-pharmaceutical inventories at the Facilities and owned by the Sellers (including private label inventory) and supplies (including containers, labels and packaging items) (collectively, the “Inventory”);

(e) except to the extent prohibited by Law, all prescription files owned and used by the Sellers that are associated with the Stores (it being understood that Sellers will retain the prescription files that are associated with the Retained Combo Drug Stores) (the “Prescription Files”) and all customer data and information derived from branded customer loyalty promotions, co-branded credit card programs and other similar programs related to customer purchases at the Stores;

(f) the Labor Agreements set forth on Schedule 1.01(f) (such Labor Agreements, the “Assumed Labor Agreements”);

(g) all Real Property Documents, Construction Contracts, and all contracts, agreements, leases, licenses, commitments, sales and purchase orders and other instruments listed on Schedule 1.01(g) (collectively with the Assumed Labor Agreements, the “Assigned Contracts”);

(h) to the extent assignable or transferable, all guarantees and warranties of third parties to the extent that they relate to the ownership or operation of the Standalone Drug Business or the Purchased Assets;

(i) subject to Section 7.06(c), all of the Sellers’ security deposits, prepaid rent and prepaid expenses previously paid by the Sellers to fulfill the Sellers’ obligations

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under the Store Leases and the Ground Leases where (if and to the extent such consent is expressly required by the applicable Store Lease or Ground Lease) the landlord thereunder has consented in writing to the transfer of the deposits to Buyer and, to the extent transferable, all vendor, utility and other deposits relating to the Facilities (“Prepaid Expenses”);

(j) all transferable or assignable telephone and facsimile numbers associated with phone lines terminating at the Facilities;

(k) all transferable or assignable licenses, permits or other governmental authorizations that are exclusively related to the Facilities or the Purchased Assets, including pharmacy, liquor, tobacco and similar licenses (“Licenses”; for the avoidance of doubt the parties acknowledge and agree that “Licenses” shall not include any licenses, permits or other governmental authorizations that relate to operation of Retained Combo Drug Stores);

(l) cash in cash registers at each Store in an amount equal to $2,000 for each Store (“Petty Cash”);

(m) all forklifts and motor vehicles (trucks, vans, and autos) primarily related to the Distribution Center and all motor vehicles exclusively used by field management transferred to Buyer immediately following the Closing (the “Transferred Vehicles”);

(n) all trailers and tractors relating to the Distribution Center and the distribution centers located at Brea, California and Irvine, California (approximately 845 trailers, 117 tractors) will be equitably assigned to these three facilities based on mutually agreed upon operating metrics;

(o) all reimbursements on account of Prorated Charges (as defined herein) due and owing to Buyer pursuant to Section 1.08; and

(p) all books, records, files and papers, whether in hard copy or computer format, located at the Facilities or relating primarily to the Purchased Assets (and copies of any other relevant books, records, files and papers to the extent relating to the Purchased Assets).

Section 1.02. Excluded Assets. Buyer and the Sellers expressly understand and agree that, notwithstanding anything to the contrary contained herein, the following assets and properties of the Sellers prior to the Closing (the “Excluded Assets”) shall be excluded from the Purchased Assets and, except as otherwise provided in the Separation Agreement, shall be assets and properties of New Diamond following the Closing:

(a) all (i) motor vehicles (trucks, vans, and autos) and rail, truck and sea containers other than the Transferred Vehicles or as otherwise allocated pursuant to Section 1.01(m) and (ii) all other fixed assets and tangible personal property set forth on Schedule 1.02(a) (collectively, the “Excluded Equipment”);

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(b) all of the cash and cash equivalents of the Sellers on hand (including all cash, cash equivalents and working funds in cash registers at each Store) and in banks other than Petty Cash;

(c) all accounts receivable relating to the Standalone Drug Business owed to the Sellers or any of their Affiliates prior to the Effective Time, including delinquent rent payments, tenant reimbursements and refunds of insurance premiums accruing to, or held for, the benefit of the Sellers (the “Accounts Receivable”);

(d) except as provided under Section 5.06, all insurance policies relating to the Standalone Drug Business or the Purchased Assets;

(e) any refund or credit of Taxes to the extent attributable to any Pre-Closing Tax Period or to any Taxes for which Sellers, New Diamond or SUPERVALU are responsible;

(f) all equipment owned by third parties who are not affiliated with Sellers and all leased equipment located at or used in the Facilities, in each case in such categories of excluded equipment as are set forth in Schedule 1.02(a);

(g) all computer software owned or used by the Sellers or their Affiliates;

(h) all contracts, agreement, leases, licenses, commitments, sales and purchase orders and other instruments (which may include tax indemnity agreements) other than the Assigned Contracts;

(i) all trademarks, service marks, trade names, logos, patents and similar intangibles owned by the Sellers or used in connection with the operation of the Facilities;

(j) all rebates and refunds arising from the operation of the Facilities prior to the Effective Time;

(k) all undeposited or uncollected checks and food stamps held by the Sellers prior to the Effective Time;

(l) all signs or personal property that contain the name (or trade derivative thereof), trademarks, servicemarks, trade names or logo of the Sellers or any of their Affiliates, including all uniforms supplied to the Sellers’ employees;

(m) any Purchased Assets sold or otherwise disposed of without violating any provisions of this Agreement during the period from the date hereof until the Effective Time;

(n) all world wide web or other internet addresses, sites and domain names and internet protocol address spaces;

(o) the Sellers’ phone networks, internet mail and computer networks;

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(p) all customer data and information derived from branded customer loyalty promotions, co-branded credit card programs and other similar programs other than such customer data and information relating to customer purchases at the Stores;

(q) all provider agreements for the Medicare and Medicaid programs, including all applicable provider numbers;

(r) any lease, sublease, license, sublicense or other contract relating to the installation, use or operation of ATM’s or similar banking machines, in-store banking facilities, or slot machines or other gaming devices located at the Stores (and any interest of the Sellers in such equipment), except to the extent assignment to Buyer is required by the applicable agreement; provided, however, that Buyer shall allow each bank operating ATM’s or other in-store banking facilities and licensees of any kind to continue to operate in the relevant Store for up to 180 days (or such greater time as required by Law) after receipt of notice from the Sellers informing each such bank or licensee of the transfer of the relevant Store to Buyer;

(s) all assets primarily related to the sale of inventory conducted through any website operated by or on behalf of Albertson’s or any of its Affiliates;

(t) all reimbursements on account of Prorated Charges (as defined herein) due and owing to Sellers pursuant to Section 1.08;

(u) all books and records to the extent relating to any Excluded Asset; provided, however, that Buyer will be entitled to copies of any other relevant books, records, files and papers to the extent relating to the Purchased Assets or to the extent relevant for normal course accounting after the Closing;

(v) all firearms or any merchandise related to firearms, ammunition or similar items, in each case to the extent non-transferable under applicable Law; and

(w) all audiotapes, videotapes or DVDs available for rental and not owned by Sellers.

Section 1.03. Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, Buyer hereby assumes, effective at the Effective Time, and shall thereafter pay, perform or otherwise discharge when due, the following liabilities and obligations (the “Assumed Liabilities”):

(a) all liabilities and obligations of the Sellers under each Store Lease, Ground Lease and Assigned Contract;

(b) all amounts allocated to Buyer under Section 1.08 and all Apportioned Obligations and Transfer Taxes allocated to Buyer pursuant to Section 8.02;

(c) all liabilities or obligations for Taxes with respect to the Standalone Drug Business or the Purchased Assets related to a Post-Closing Tax Period (except for Taxes set forth in Section 1.04(iv)(B) below);

5

(d) all liabilities and obligations expressly assumed by Buyer under Article 9;

(e) liabilities and obligations directly arising from, or in connection with, the validity of the real estate interest in any Owned Real Property or from or in connection with the right to occupy any Owned Real Property (excluding for avoidance of doubt any personal injury tort liability, any liability arising from operation of the Standalone Drug Business, or any liability or amount prorated under Section 1.08); and

(f) all Environmental Liabilities.

Section 1.04. Excluded Liabilities. Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of any Seller of whatever nature (fixed or contingent, known or unknown), whether presently in existence or arising hereafter. All such other liabilities and obligations shall be retained by and remain obligations and liabilities of the Sellers (all such liabilities and obligations not being assumed being herein referred to as the “Excluded Liabilities”). For the avoidance of doubt (but without overriding the Assumed Liabilities in Section 1.03), Excluded Liabilities include the following:

(i) any liability or obligation resulting from or arising out of the conduct of the supermarket business of the Sellers (including the operation of pharmacy counters in supermarkets), any other business of the Sellers other than the Standalone Drug Business, or any Excluded Asset;

(ii) all amounts allocated to Sellers under Section 1.08 and all Apportioned Obligations and Transfer Taxes allocated to Sellers pursuant to Section 8.02;

(iii) all accounts payable arising prior to Closing with respect to the Standalone Drug Business or the Purchased Assets;

(iv) (A) any liability or obligation for Taxes with respect to the Standalone Drug Business or the Purchased Assets related to a Pre-Closing Tax Period, and (B) any liability or obligation for Taxes of any Seller, or any member of any consolidated, affiliated, combined or unitary group of which any Seller is or has been a member, for Taxes (if any) attributable to the transactions, occurring on or prior to the Closing Date, pursuant to this Agreement, the Merger Agreement or the Purchase and Separation Agreement (including the Reorganization as defined therein); provided that Transfer Taxes incurred in connection with the transfer of the Purchased Assets pursuant to this Agreement and Apportioned Obligations shall be allocated and paid in the manner set forth in Section 8.02 hereof;

(v) all liabilities and obligations relating to or arising with respect to (A) any Employee, that arise, exist, accrue or are attributable to the period as of or prior to Closing, other than any liability or obligation expressly assumed by Buyer pursuant to Article 9, or (B) any employee of any Seller or any of its Affiliates who is not an Employee; and

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(vi) all other liabilities and obligations (other than any Assumed Liabilities) of any kind, fixed or contingent, known or unknown, resulting from or arising out of the conduct of the Standalone Drug Business, the use, non-use or ownership (whether by leasehold or fee) of the Purchased Assets, or the operation of the Facilities, in each case under this clause (vi), only to the extent such other liabilities and obligations arise during, accrue during, or are attributable to the period prior to Closing or as of the Closing.

Section 1.05. Consents; Assignment of Contracts and Rights.

(a) Sellers shall use: (i) commercially reasonable efforts to obtain all material consents of third parties that are identified in writing by Buyer to the transfer of the Purchased Assets; and (ii) reasonable best efforts to obtain consents from landlords under those Leases that require a landlord’s consent to an assignment that are identified in writing by Buyer; provided, however, neither Sellers nor Buyer shall be required to pay any consideration or incur any additional liability in order to obtain such consents, subject to the provisions of Section 1.05(d).

(b) Subject to Section 1.05(a), Sellers agree, in connection with requests for consents to landlords for assignments of Leases requiring the same, to make requests as soon as practicable after the date hereof and to pursue such requests in a good faith and diligent manner. Sellers further agree to provide Buyer with detailed progress reports on such requested consents on at least a weekly basis. Buyer agrees to cooperate with Sellers’ efforts and to use reasonable best efforts to obtain such consents, by supplying any commercially reasonable information requested by the landlords who are considering such requests. In addition, in connection with those Leases that merely require that the tenant provide notices before or after an assignment, Sellers agree to send such notices to those landlords identified in writing by Buyer in the form prepared by Buyer and within the timeframes identified by Buyer.

(c) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Assigned Contract or any claim or right or any benefit arising thereunder or resulting therefrom if and for so long as such assignment, without the consent of a third party thereto, would constitute a breach or other contravention of such Assigned Contract or in any way adversely affect the rights of Buyer or the Sellers thereunder. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of any Seller thereunder so that Buyer would not in fact receive all such rights, Buyer and each Seller will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and perform and discharge the obligations thereunder in accordance with this Agreement, or under which such Seller would enforce for the benefit of Buyer at Buyer’s sole cost and expense, with Buyer being responsible for the performance and discharge of such Seller’s obligations, any and all rights of the Sellers against a third party.

(d) If any landlord that has the right to consent to an assignment of a Lease refuses or fails to give its consent to the assignment of such Lease, or if any right of sublease, recapture or termination by any landlord would be triggered by the request for

7

consent to assignment (collectively, “Landlord Rights”) and Sellers or any of its Affiliates are permitted to sublease, license or otherwise arrange for Buyer to occupy the premises demised by the Lease for the permitted use under such Lease (an “Occupancy Agreement”), then in all such cases upon the written request of Buyer, Seller shall enter into a sublease, license or Occupancy Agreement with Buyer for such Store on a fully net basis and on such terms as will generally confer and impose on Buyer all of Sellers’ rights and obligations under the Lease for such Store until such landlord consents to the assignment of the Lease to Buyer and Buyer will indemnify Sellers for any and all liabilities, costs and expenses of Sellers arising out of the respective Lease and any related Occupancy Agreement, any reasonable out-of-pocket expenses associated with any attempt to transfer or failure to transfer such Lease or any other liabilities, costs and expenses arising out of or resulting from the Sellers’ actions taken in accordance with any reasonable directions of Buyer in connection with such Lease. If and when any such consent shall be obtained or such Lease shall otherwise become assignable, the respective Occupancy Agreement shall be terminated with no further obligations of the Sellers, Sellers shall promptly assign all their rights and obligations under the respective Lease to the Buyer without payment of further consideration (subject to the foregoing indemnity by Buyer of Sellers) and the Buyer shall, without the payment of any further consideration therefor, assume such all rights and obligations. Notwithstanding the foregoing, if the arrangement described in the immediately preceding clauses of this Section 1.05(d) is impracticable or will cause (or is likely to cause) a default under any Lease or the triggering of any Landlord Rights (whether due to the change or intended change of the store brand under which such property will be operated or for other reasons), then the parties will work in good faith to establish a mutually satisfactory arrangement for the operation by Buyer of such leased real property during the period subsequent to the Closing and pending receipt of the required consent, including a fair and equitable arrangement (under the applicable circumstances) to ensure that Sellers are fully reimbursed for all costs and expenses with respect to such Lease during such period. Sellers shall not be obligated to take or refrain from taking any actions which could reasonably be expected to trigger or cause the exercise of any Landlord Rights, subject to the further provisions of this Section 1.05(d). In the event a landlord wrongfully refuses or fails to consent to an assignment or a request for an assignment would trigger any Landlord Rights, and a sublease, license or Occupancy Agreement is not permitted under the terms of the applicable Lease, Seller agrees, upon written request from Buyer and at Buyer’s sole cost and expense, to institute litigation against such landlord with counsel selected by Buyer (and reasonably acceptable to Seller) to enforce Sellers’ rights under such Lease and Buyer agrees to indemnify and hold harmless Seller with respect to all such litigation and all costs, expenses, losses and damages resulting therefrom under or in connection with any affected Lease. The Standalone Drug Transition Services Agreement shall provide that in the event that Sellers’ rights under any Leases have been transferred to New Diamond or any Affiliate through the Merger Agreement or otherwise, that the obligations of Sellers under this paragraph shall be assumed by New Diamond or its relevant Affiliate.

Section 1.06. Purchase Price. The purchase price for the Purchased Assets is $3,930,000,000 in cash (the “Purchase Price”). The Purchase Price shall be subject to adjustment as provided in Section 1.08.

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Section 1.07. Closing.

(a) Closing. The closing (the “Closing”) of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder shall take place at the offices of Jones Day, at 222 East 41^st Street, New York, New York 10017, at 9:00 a.m. local time, as soon as practicable, but in no event later than the second Business Day after the satisfaction or waiver of the conditions set forth in Article 10 (excluding conditions that, by their terms, cannot be satisfied until the Closing, but the Closing shall be subject to the satisfaction of those conditions), or at such other time or place as Buyer and Albertson’s may agree (the “Closing Date”). On the Closing Date:

(i) Buyer shall pay, in immediately available funds by wire transfer, an amount equal to the Purchase Price.

(ii) Buyer and the Sellers, as applicable (and Parent, SUPERVALU and their Affiliates where applicable in the relevant agreements or instruments) shall execute and deliver to the other the following documents:

(A) Quitclaim deeds (or equivalent deeds without covenants or warranties) necessary to convey fee simple title to the Owned Real Property to Buyer;

(B) one or more deeds, bills of sale, endorsements, assignments and other instruments of conveyance and assignment (without covenant or warranty except as provided hereunder) as the parties and their respective counsel shall deem reasonably necessary or appropriate to vest in Buyer all right, title and interest in, to and under the Purchased Assets in form and substance reasonably satisfactory to Albertson’s and Buyer;

(C) one or more Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit D (the “Assignment and Assumption Agreements”);

(D) instruments of assignment and assumption (the “Lease Assignment and Assumption Agreements”) substantially in the forms attached hereto as Exhibit E, pursuant to which the Sellers shall assign the Leases to Buyer and Buyer shall assume all obligations thereunder and Parent will guarantee to New Diamond, Albertson’s and their respective Affiliates all obligations of Buyer thereunder in a separate agreement with SUPERVALU; provided that there shall be no liability of or to Sellers under the Assignment and Assumption Agreements except as provided hereunder;

(E) subject to Section 7.07, a Transition Services Agreement substantially in the form attached hereto as Exhibit F (the “Standalone Drug Business Transition Services Agreement”), providing for the provision by SUPERVALU or its Affiliates to Buyer of transition services relating to the Standalone Drug Business after Closing;

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(F) subject to Section 7.07, a Transition Services Agreement substantially on the terms set forth on Exhibit G (the “Distribution Center Transition Services Agreement”), providing for the provision by Buyer to New Diamond, SUPERVALU or their respective Affiliates of transition services relating to the Distribution Center after Closing; and

(G) a certificate from each Seller (or, if such Seller is a “disregarded entity” within the meaning of Section 1.1445-2(b)(2)(iii) of the Treasury Regulations promulgated under the Code, the Seller that is treated as the transferor of property for U.S. tax purposes) stating that such Seller is not a “foreign person” as defined in Section 1445 of the Code.

(b) Risk of Loss; Title. Risk of loss to the Purchased Assets will transfer to Buyer at the Effective Time. Transfer of title to the Purchased Assets will be deemed to have occurred at the Effective Time. All sales at a Store after the Effective Time shall be for the account of Buyer.

(c) Purchased Assets Are Indivisible. Subject to Section 1.05, the rights to purchase and sell the Purchased Assets are indivisible. Such Purchased Assets may not be individually purchased or sold without all of the others, unless expressly permitted or required pursuant to the provisions of this Agreement.

Section 1.08. Prorations. (a) On the Closing Date all rent, common area charges, utility charges, real estate taxes, sales taxes on rent and other obligations under the Leases transferred at the Closing shall be prorated as of the Effective Time (collectively, the “Prorated Charges”). Whenever possible, such prorations shall be based on actual, current payments by the Sellers or their Affiliates and to the extent such actual amounts are not available, such prorations shall be estimated as of the Effective Time based on actual amounts for the most recent comparable billing period. When the actual amounts become known, such prorations shall be recalculated by Buyer and the Sellers, and Buyer or the Sellers, as the case may be, promptly (but not later than 10 Business Days after notice of payment due and delivery of reasonable supporting documentation with respect to such amounts) shall make any additional payment or refund so that the correct prorated amount is paid by each of Buyer and the Sellers.

(b) Percentage rent payable under each Lease shall be prorated at the end of the current lease year for each Lease, and the percentage rent payable, if any, shall be paid by Buyer when due and the Sellers shall promptly reimburse Buyer a portion thereof determined by multiplying (A) a fraction, the numerator of which is the amount of the Sellers’ or their Affiliates’ gross annual sales at such Store from the first day of such lease year to (and excluding) the Closing Date, and the denominator of which is the sum of Buyer’s and its Affiliates’ and the Sellers’ and their Affiliates’ gross annual sales at such Store for the entire lease year, times (B) the amount of percentage rent actually due under the Lease for such Store. The Sellers, upon the request of Buyer, shall promptly provide Buyer with such information as Buyer shall be required to submit to landlords under the Leases in connection with the payment of percentage rent with respect to the Stores.

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(c) Buyer and the Sellers shall cooperate in good faith to resolve any dispute with respect to prorations. In the event Buyer and the Sellers are unable to resolve such dispute within 20 Business Days after the date such dispute arose, Buyer and the Sellers shall submit the items remaining for resolution in writing, together with such written evidence as Buyer or the Sellers may elect to include, to an Independent Accounting Firm. The Independent Accounting Firm shall, within 20 Business Days of such submission, resolve any differences between Buyer and the Sellers and such resolution shall, in the absence of manifest error, be final, binding and conclusive upon each of the parties. The costs, fees and expenses of the Independent Accounting Firm shall be borne equally by Buyer and New Diamond. For purposes of this Agreement the “Independent Accounting Firm” means a nationally recognized accounting firm agreed upon by Buyer and the Sellers.

Section 1.09. Removal of Equipment and Signage. Within the applicable time periods specified in Section 7.05, Buyer shall remove at its expense all of the Sellers’ signage and equipment that are not Purchased Assets and are located at the Facilities; provided, however, if requested by the Sellers, Buyer shall arrange transportation of such signage and equipment to a location designated by the Sellers at the Sellers’ expense.

Section 1.10. La Habra Inventory Adjustment. Buyer (through RGIS Inventory Specialists (“RGIS”)) will conduct a physical count of the inventory at the La Habra warehouse as of a time as close as possible to the Closing. Representatives of Buyer and SUPERVALU will be permitted to be present during the count. Sellers will cooperate and give access to representatives of Buyer and SUPERVALU for this purpose. For purposes of this count, the inventory will be valued at cost using Albertson’s cost method then in effect. SUPERVALU will be entitled to receive a copy of the electronic UPC item-level physical inventory file for the inventory taken by RGIS. Buyer, Parent and SUPERVALU agree that, absent manifest error, the physical inventory counts of RGIS shall be final and binding on each of the parties. SUPERVALU will be entitled to an economic credit equal to 30% of such inventory value so counted, and Buyer and SUPERVALU will in good faith mutually determine the manner in which such credit will be transferred to SUPERVALU.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF ALBERTSON’S

Subject to the exceptions set forth in the corresponding sections of the letter from Albertson’s, dated as of the date of this Agreement, addressed to Buyer (the “Disclosure Letter”), to the extent such exceptions are reasonably apparent, Albertson’s represents and warrants to Buyer that:

Section 2.01. Organization. Each Seller is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and has the requisite corporate power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified or in good standing as a foreign corporation or have such power or

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authority would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Complete and correct copies of the certificate of incorporation and by-laws of each Seller as currently in effect have been made available to Parent and, as so made available, are in full force and effect, and no other organizational documents are applicable to or binding upon any Seller.

Section 2.02. Authority; Enforceability. Each Seller has all necessary corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each Seller of this Agreement and the Ancillary Agreements to which it is a party and the consummation by each Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of each Seller and no other corporate proceedings on the part of any Seller are necessary pursuant to its governing documents or the laws of its jurisdiction of incorporation to authorize this Agreement or the Ancillary Agreements to which it is a party or to consummate the transactions contemplated hereby or thereby. Each Seller’s Board of Directors has (i) approved this Agreement and the transactions contemplated hereby, (ii) determined that the terms of this Agreement are fair to and in the best interests of such Seller and its stockholders, and (iii) declared the advisability of this Agreement. This Agreement has been duly executed and delivered by the Sellers, and each Ancillary Agreement will be duly executed and delivered by each Seller party thereto, and, assuming due authorization, execution and delivery by the other parties hereto and thereto, constitutes or will constitute a legal, valid and binding agreement of each Seller enforceable against each Seller in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

Section 2.03. Non-Contravention; Assigned Contracts. (a) The execution, delivery and performance by each Seller of this Agreement and the Ancillary Agreements to which it is a party does not and will not (i) conflict with or violate such Seller’s governing documents, (ii) assuming that all consents, approvals and authorizations contemplated by Section 2.04 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to any Seller or by which any Seller or any of their respective properties are bound, or (iii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation (which, in any case, is not a contract, agreement or other arrangement pursuant to which Sellers or any Subsidiary leases real property, including the Leases) to which such Seller is a party or by which such Seller or any of its properties are bound, except, in the case of clauses (ii) and (iii) of this Section 2.03(a), for any such conflict, violation, breach, default, loss, right or other occurrence which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) (i) The Sellers are not (and, to the Sellers’ Knowledge, no other party is) in default under any Assigned Contract, (ii) each of the Assigned Contracts is in full force and

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effect, and is the valid, binding and enforceable obligation of the Sellers, and to the Seller’s Knowledge, of the other parties thereto, and (iii) the Sellers have performed all respective obligations required to be performed by them to date under the Assigned Contracts and are not (with or without the lapse of time or the giving of notice, or both) in breach thereunder, except, in the case of clauses (i), (ii) and (iii) of this Section 2.03(b), for any such default, failure, invalidity, unenforceability, non-performance, breach or other occurrence which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 2.04. Governmental Consents. The execution, delivery and performance by each Seller of this Agreement and the Ancillary Agreements to which it is a party and the consummation by each Seller of the transactions contemplated hereby and thereby does not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except as required under or pursuant to (a) the HSR Act, (b) consents or approvals in connection with the transfer of Licenses, and (c) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 2.05. Litigation. There are no Actions pending or, to the Knowledge of Albertson’s, threatened against the Sellers or, to the Knowledge of Albertson’s, any officer, director or employee of any Seller in such capacity, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. No Seller is a party or subject to or in default under any Governmental Order which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 2.06. Compliance with Law. (a) The Sellers and their Affiliates are not (and have not been since February 3, 2005) in violation of any Law, and have not received any written notice of any violation of Law, in each case except for any violation or possible violation that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Sellers and their Affiliates are (and have been since February 3, 2005) in compliance with, all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from Governmental Authorities required to conduct their respective businesses as now being conducted, except for any such permit, license, authorization, exemption, order, consent, approval or franchise the absence of, or the non-compliance, with which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Albertson’s has designed and maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Albertson’s (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that provides reasonable assurance that material information required to be disclosed by Albertson’s in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) has disclosed and reported, based on its most recent evaluation of its internal controls over financial reporting prior to the date hereof, to Albertson’s auditors and the audit committee of the Albertson’s Board of

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Directors (A) any significant deficiencies and material weaknesses in the design or operation of its internal control over financial reporting that are reasonably likely to adversely affect in any material respect Albertson’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Albertson’s internal control over financial reporting. Albertson’s has heretofore furnished to Buyer complete and correct copies of Albertson’s final report to the audit committee of Albertson’s Board of Directors for fiscal 2004 and all subsequent quarterly updates, in each case in respect of the matters in clause (ii) of the immediately preceding sentence.

Section 2.07. Real Property. The Real Property is all of the real property which the Sellers own, lease, operate or sublease in connection with the Standalone Drug Business. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

(a) The Sellers have good and marketable fee simple title to all Owned Real Property and valid leasehold estates in all Leased Real Property free and clear of all Liens, except Permitted Liens. The Sellers or one of their respective Subsidiaries has exclusive use and possession of each Leased Real Property and Owned Real Property, other than any use or occupancy rights granted to third-party owners, tenants or licensees pursuant to agreements with respect to such real property entered in the ordinary course of business (each agreement, including all amendments thereto, a “Third Party Use and Occupancy Agreement”), none of which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each Ground Lease and Store Lease and each Third Party Use and Occupancy Agreement is in full force and effect and is valid and enforceable in accordance with its terms, and there is no material default under any Ground Lease or Store Lease or any Third Party Use and Occupancy Agreement either by the Sellers party thereto or, to the Sellers’ Knowledge, by any other party thereto, and no event has occurred that, with the lapse of time or the giving of notice or both, would constitute a default by any Seller thereunder.

(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there are no pending or, to any Seller’s Knowledge, threatened condemnation or eminent domain proceedings that affect any Owned Real Property or Leased Real Property, and no Seller has received any written notice of the intention of any Governmental Authority or other Person to take any Owned Real Property or Leased Real Property.

Section 2.08. Title to the Purchased Assets. Sellers have valid title to all of the Purchased Assets that are owned by Sellers free and clear of all Liens except for Permitted Liens. Sellers have a valid leasehold interest or valid rights to use all of the other Purchased Assets, except where the failure to have a valid leasehold interest or valid rights have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

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Section 2.09. IT Systems. (a) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) the IT Systems of the Sellers are adequate for the operation of the Standalone Drug Business as presently conducted and (ii) there has not been any material malfunction with respect to any of the material IT Systems of the Sellers since January 31, 2002 that has not been remedied or replaced in all material respects.

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) the use of the information and data that is used or held for use in the operation of the Standalone Drug Business or that is otherwise material to or necessary for the operation of the Standalone Drug Business (the “Data”) by the Sellers does not infringe or violate the privacy rights of any Person or otherwise violate any Law or regulation, (ii) the Sellers have taken reasonable and customary measures consistent with generally accepted industry practices to protect the privacy of the Data of their respective customers, and (iii) to the Sellers’ Knowledge, since January 31, 2002 there have been no security breaches with respect to the privacy of such Data.

Section 2.10. Sufficiency of Assets. Assuming the due execution of and performance under the Standalone Drug Transition Services Agreement, the continued employment of all Employees immediately after the Effective Time and other than with respect to the Excluded Assets, and subject to the provisions of Section 1.05(d), the Purchased Assets immediately after the Effective Time shall constitute assets sufficient in all material respects to conduct the Standalone Drug Business as conducted immediately prior to the Effective Time.

Section 2.11. Labor Relations. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, no Seller has received notice during the past two years of the intent of any Governmental Authority responsible for the enforcement of labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws to conduct an investigation of or affecting any Seller with respect to any Facility and, to the Knowledge of any Seller, no such investigation is in progress. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there are no (and have not since March 30, 2004 been any) labor disputes, strikes, organizing activities or work stoppages against any Seller pending, or to the Knowledge of any Seller, threatened with respect to any Facility. No labor organization or group of 50 or more employees of any Seller has made a pending formal demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the knowledge of any Seller, threatened to be brought with respect to any Facility.

Section 2.12. Environmental Compliance. (a) (i) In connection with or relating to the Facilities or Purchased Assets, except as would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect, to the Sellers’ Knowledge, the Sellers and their Affiliates comply and have complied with all applicable Environmental Laws (as defined below), and possess and comply, and have complied, with all applicable Environmental Permits (as defined below) required under such laws to operate as it currently operates, in each case in connection with or relating to the Facilities or Purchased Assets; (ii) except as would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect, to the Sellers’ Knowledge, there are no, and there have not been any, Materials of Environmental

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Concern (as defined below) at any of the Facilities or Purchased Assets under circumstances that have resulted in or are reasonably likely to result in liability of the Sellers or any of their Affiliates under any applicable Environmental Laws; (iii) in connection with or relating to the Facilities or Purchased Assets, except as would not reasonably be expected to have a Material Adverse Effect, none of the Sellers or their Affiliates has received any written notification alleging that it is liable for, or request for information pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act or similar foreign, state or local Law concerning, any release or threatened release of Materials of Environmental Concern at any location except, with respect to any such notification or request for information concerning any such release or threatened release, to the extent such matter has been fully resolved such that no further action is required with the appropriate foreign, federal, state or local regulatory authority or otherwise; and (iv) the reports of environmental assessments, audits and similar investigations previously made available to Parent are all material such reports in the possession of the Sellers and conducted since January 30, 2003 in connection with or relating to the Facilities or Purchased Assets. There are no Actions arising under Environmental Laws pending or, to the Knowledge of the Sellers, threatened against the Sellers or any of their Affiliates which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. In connection with or relating to the Facilities or Purchased Assets, except as would not reasonably be expected to have a Material Adverse Effect, at each property where Asbestos-Containing Material (“ACM”) has been identified, all ACM is non-friable, encapsulated or abated and no ACM is present in any property where the Sellers have not implemented an Asbestos Operation and Management Plan.

(b) Notwithstanding any other representations and warranties in this Agreement, the representations and warranties in this Section 2.12 are the only representations and warranties in this Agreement with respect to Environmental Laws, Environmental Permits or Materials of Environmental Concern.

“Materials of Environmental Concern” means: any hazardous, acutely hazardous, or toxic material, substance or waste defined or regulated as such under Environmental Laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act and the federal Resource Conservation and Recovery Act.

Section 2.13. Financial Schedules. Set forth in Section 2.13(a) of the Disclosure Letter are (i) unaudited selected results of operations data for each of the New Diamond Business (as defined in the Separation Agreement), the Standalone Drug Business and the Retained Business (as defined in the Separation Agreement) for the 52 weeks ended January 29, 2004, the 53 weeks ended February 3, 2005 and the 39 weeks ended November 3, 2005 (collectively, the “Separate Operations Data”) and (ii) unaudited selected balance sheet data for Albertson’s and each of Albertson’s operating regions as of February 3, 2005 ( the “Separate Balance Sheet Data”). The Separate Operations Data and the Separate Balance Sheet Data have been compiled from source books, records and financial reports of Albertson’s and its Subsidiaries. Such source books, records and financial reports were prepared by Albertson’s in the ordinary course of its business, are accurate in all material respects and were subject to Albertson’s internal controls. The allocations of the Separate Operations Data among the New Diamond Business, the Standalone Drug Business and the Retained Business are consistent with Section 2.13(a)(i) of the Disclosure Letter and the allocations of the Separate Balance Sheet Data are allocated in the

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manner described in Section 2.13(a)(ii) of the Disclosure Letter. The Separate Balance Sheet Data and the Separate Operations Data reconcile to Albertson’s historical financial statements filed with the SEC and, in Albertson’s opinion, present fairly, in all material respects, the information presented in the Separate Balance Sheet Data and the Separate Operations Data, respectively. Subject to the changes in accounting principles and methodologies effected by Albertson’s as described in the Company SEC Reports (as defined in the Merger Agreement), the accounting principles and methodologies used in the preparation of the Separate Operations Data were applied on a consistent basis, in all material respects, for each of the periods presented therein. Set forth in Section 2.13(a)(iii) of the Disclosure Letter are selected assets and liabilities included in the Purchased Assets and Assumed Liabilities, which schedule was prepared by Sellers and was compiled from source books, records and financial reports of Albertson’s and its Subsidiaries. Such source books, records and financial reports were prepared by Albertson’s in the ordinary course of its business, are accurate in all material respects and were subject to Albertson’s internal controls.

Section 2.14. No Undisclosed Liabilities. No Seller has any liabilities, claims or indebtedness related to the Standalone Drug Business of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, whether due or to become due, in each case, that are required by GAAP to be set forth, reserved against, disclosed or otherwise reflected in a consolidated balance sheet or the notes thereto, except liabilities that (i) are set forth in the financial schedules set forth in Section 2.13 of the Disclosure Letter or disclosed in the notes thereto, (ii) were incurred in the ordinary course of business and consistent with past practice since the date of the financial schedules set forth in Section 2.13 of the Disclosure Letter and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (iii) are incurred pursuant to the transactions contemplated by this Agreement, (iv) have been discharged or paid in full prior to the date of this Agreement in the ordinary course of business consistent with past practice or (v) were incurred outside the ordinary course of business since the date of the financial schedules set forth in Section 2.13 of the Disclosure Letter, but which are, and would reasonably be expected to be, individually or in the aggregate, immaterial in amount or nature.

Section 2.15. Absence of Certain Changes or Events. Since November 3, 2005, except as expressly contemplated by this Agreement, the Sellers have conducted their businesses in the ordinary course in all material respects consistent with past practice, and, since such date, there has not been any change, event or occurrence which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Except as set forth in Section 2.15 of the Seller Disclosure Letter, since November 3, 2005, the Sellers have not taken any action that, if taken after the date of this Agreement, would constitute a breach of Sections 5.01(a), (b), (d), (g) or (j) hereof, other than with respect to Real Property.

Section 2.16. Finders’ Fees. Except for Goldman, Sachs & Co., Houlihan Lokey Howard & Zukin and The Blackstone Group, L.P., there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Sellers who is entitled to any fee or commission in connection with the transactions contemplated by this Agreement.

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Section 2.17. Healthcare Regulatory. (a) Sellers are qualified for participation in the Medicare and Medicaid programs. No Seller has received any notice indicating that such qualification may be terminated or withdrawn nor has any reason to believe that such qualification may be terminated or withdrawn. Sellers have timely filed all claims or other reports required to be filed with respect to the purchase of products or services by third-party payors (including, without limitation, Medicare and Medicaid), except where the failure to file such claims and reports would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, and all such claims or reports are complete and accurate in all material respects. Sellers have no material liability to any payor with respect thereto, except for liabilities incurred in the ordinary course of business consistent with past practice.

(b) Sellers have complied in all material respects with all applicable “Healthcare Laws”, i.e., The Social Security Act, as amended, Sections 1128, 1128A and 1128B, 42 U.S.C. Sections 1320a-7, 7(a) and 7(b), including, without limitation, Criminal Penalties Involving Medicare or State Health Care Programs, commonly referred to as the “Federal Anti-Kickback Statute” and The Social Security Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as the “Stark Statute,” the statute commonly referred to as the “Federal False Claims Act,” the Health Insurance Portability and Accountability Act of 1996, and the regulations issued pursuant thereto and all statutes and regulations relating to the possession, distribution, maintenance and documentation of controlled substances.

(c) No personnel of the Sellers during such person’s employment with Sellers have been convicted of, charged with or investigated for a Medicare, Medicaid or other Federal Health Care Program (as defined in 42 U.S.C. § 1320a-7b(f)) related offense, or convicted of, charged with or investigated for a violation of federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, obstruction of an investigation or controlled substances. No personnel of the Sellers during such person’s employment with Sellers have been excluded or suspended from participation in Medicare, Medicaid or any other Federal Health Care Program, or have been debarred, suspended or are otherwise ineligible to participate in federal programs. No personnel of the Sellers during such person’s employment with Sellers has, to Sellers’ Knowledge, committed any offense which may reasonably serve as the basis for any such exclusion, suspension, debarment or other ineligibility. The Sellers, to their Knowledge, have not arranged or contracted with any individual or entity that is suspended, excluded or debarred from participation in, or otherwise ineligible to participate in, a Federal Health Care Program or other federal program.

(d) Except as specifically excluded hereunder or not legally permitted to be transferred to Buyer, the Purchased Assets include all permits, licenses, provider numbers, authorizations, exemptions, orders, consents, approvals, registrations, franchises or the like held by the Sellers and necessary for the lawful conduct of the Standalone Drug Business under and pursuant to all applicable statutes, laws, ordinances, rules and regulations of all Governmental Authorities having, asserting or claiming jurisdiction over it or any part of the Standalone Drug Business (“Permits”). All Permits have been legally obtained and maintained and are valid and in full force and effect. The

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Sellers are in compliance in all material respects with all of the terms and conditions of the Permits. No outstanding material violations are or have been recorded in respect of any of the Permits. No proceeding is pending or, to the Sellers’ knowledge, threatened, to suspend, revoke, withdraw, modify or limit any of the Permits, and, to the Sellers’ knowledge, there is no fact, error or admission relevant to any Permit that would permit the suspension, revocation, withdrawal, modification or limitation or result in the threatened suspension, revocation, withdrawal, modification or limitation, or any loss of any Permit.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

Parent and Buyer hereby jointly and severally represent and warrant to the Sellers that:

Section 3.01. Organization. Each of Parent and Buyer is duly organized, validly existing and in good standing under the laws of the state of its organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary. Complete and correct copies of the certificate of incorporation and by-laws (or equivalent organizational documents) of Parent and Buyer as currently in effect, have been made available to Albertson’s, and as so made available, are in full force and effect and no other organizational documents are applicable to or binding upon Parent and Buyer. Buyer is a direct or indirect wholly owned subsidiary of Parent.

Section 3.02. Authority; Enforceability. Each of Parent and Buyer has the corporate or other power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of Parent and Buyer of this Agreement and the Ancillary Agreements to which it is a party and the consummation by each of Parent and Buyer of the transactions contemplated hereunder and thereunder have been duly authorized by all necessary action on the part of each of Parent and Buyer and the holders of any equity interests thereof. This Agreement and each Ancillary Agreement to which each is a party has been or will be duly executed and delivered by each of Parent and Buyer and, assuming due authorization, execution and delivery by the other parties hereto and thereto, constitutes or will constitute a legal, valid and binding agreement of each of Parent and Buyer, enforceable against each of them in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

Section 3.03. Non-Contravention. The execution, delivery and performance by each of Parent and Buyer of this Agreement and the Ancillary Agreements to which each is a party does not and will not (a) conflict with or violate its certificate of incorporation or by-laws or comparable governing documents, (b) assuming that all consents, approvals and authorizations

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contemplated by Section 3.04 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Parent or Buyer or by which Parent or Buyer or any of their respective properties are bound or (c) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which Parent or Buyer is a party or by which Parent or Buyer or any of their respective properties are bound, except, in the case of clauses (b) and (c), for any such conflict, violation, breach, default, loss, right or other occurrence which would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby.

Section 3.04. Governmental Consents. The execution, delivery and performance by Parent and Buyer of this Agreement and the Ancillary Agreements to which each is a party and the consummation by each of Parent and Buyer of the transactions contemplated hereby and thereby do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except (a) as required under or pursuant to the HSR Act and (b) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby.

Section 3.05. Financing. As of Closing, Buyer will have sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make payment of the Purchase Price and any other amounts to be paid by it hereunder. At and after the Closing, Buyer will have cash in an aggregate amount sufficient for Buyer to perform all of its obligations hereunder and with respect to the transactions contemplated hereby.

Section 3.06. Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Buyer for which any Seller could have any liability.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SUPERVALU

SUPERVALU hereby represents and warrants to the Buyer that:

Section 4.01. Organization. SUPERVALU is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the requisite corporate or similar power and authority to own its properties and to carry on its business as presently conducted and is duly qualified to do business and is in good standing (where such concept exists) as a foreign corporation in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary.

Section 4.02. Authority; Enforceability. SUPERVALU has the corporate or other power and authority to execute and deliver this Agreement and to perform its obligations hereunder.

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The execution and delivery by SUPERVALU of this Agreement have been duly authorized by all necessary action on the part of SUPERVALU. This Agreement has been duly executed and delivered by SUPERVALU and, assuming due authorization, execution and delivery by the other parties hereto, constitutes or will constitute a legal, valid and binding agreement of SUPERVALU, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

Section 4.03. Non-Contravention. The execution, delivery and performance by SUPERVALU of this Agreement does not and will not (a) conflict with or violate its organizational documents, (b) assuming that all consents, approvals and authorizations contemplated by Section 4.04 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable to SUPERVALU or by which SUPERVALU or its respective properties are bound, or (c) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, recapture, amendment or acceleration of, or performance under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which SUPERVALU is a party, except in the case of clauses (b) and (c), for any such conflict, violation, breach, default, loss, right or other occurrence which would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby.

Section 4.04. Governmental Consents. The execution, delivery and performance by SUPERVALU of this Agreement and the Ancillary Agreements to which it is a party and the consummation by SUPERVALU of the transactions contemplated hereby and thereby do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except (a) as required under or pursuant to the HSR Act and (b) any other consent, approval, authorization, permit, action, filing or notification the failure of which to be made or obtained would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby.

Section 4.05. Brokers. No agent, broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of SUPERVALU for which Buyer could have any liability.

ARTICLE 5

COVENANTS OF THE SELLERS

The Sellers agree that:

Section 5.01. Conduct of the Standalone Drug Business. From the date hereof until the Effective Time, the Sellers shall conduct the Standalone Drug Business in the ordinary course consistent with past practice, including using commercially reasonable efforts to (i) maintain Inventory of a quantity (including seasonal variations), quality and mix consistent with past

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practices, (ii) maintain employment of employees (including pharmacists and store managers) at levels consistent with the needs of the business of each Store consistent with past practices at the posted hours of the Store and its pharmacy as of the date of this Agreement, (iii) maintain the Real Property in a physical condition consistent with past practice, (iv) maintain the validity of existing pharmacy and other federal, state or local licenses, permits or registrations, certifications and Medicare and Medicaid provider status, including any renewals or extensions thereof, consistent with past practices and (v) preserve intact the business organizations and relationships with third parties. Without limiting the generality of the foregoing, subject to applicable Law and Section 5.01 of the Disclosure Letter, from the date hereof until the Effective Time, the Sellers will not (in each case, to the extent it relates to the Standalone Drug Business), without the prior written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed (in each case, to the extent it relates to the Standalone Drug Business):

(a) sell, lease, license, purchase or enter into a contract to sell, remove or otherwise dispose of any Purchased Assets except (i) pursuant to existing contracts or commitments disclosed to Buyer in writing prior to the date hereof, (ii) sales of inventory in the ordinary course consistent with past practice or (iii) purchases, lease-related expenditures and equipment leases in the ordinary course of business consistent with the levels contemplated in the capital expenditure budget set forth in Section 5.01(a) of the Disclosure Letter (the “Capex Budget”);

(b) unless required by the terms of the applicable Store Lease or Ground Lease, modify materially, renew, extend or terminate any of the Store Leases or Ground Leases; provided that optional extensions of lease terms provided for in Store Leases or Ground Leases may be exercised by Sellers in the ordinary course of business consistent with past practices and provided further that, notwithstanding anything to the contrary herein, the Sellers (i) shall exercise any existing optional extensions for and/or renew (in accordance with the applicable time periods) (or, in the case of Stores subject to month-to-month lease arrangements, use reasonable best efforts to continue those arrangements for) those Store Leases or Ground Leases listed in Schedule 5.01(b)(i) and (ii) have advised Buyer that they are to close or sell the Stores listed in Schedule 5.01(b)(ii);

(c) terminate or permit termination or expiration of, any existing pharmacy or other federal, state or local licenses, permits, registrations, certifications and Medicare and Medicaid provider numbers, except in the ordinary course of business, consistent with past practices;

(d) incur, assume or guarantee any indebtedness for borrowed money with respect to the Purchased Assets, or mortgage or pledge any Purchased Asset or create or suffer to exist any Lien other than Permitted Liens on any Purchased Assets, other than in the ordinary course of business consistent with past practices; provided, however, no Lien on Real Property securing indebtedness will be created;

(e) enter into any (i) employment, deferred compensation, severance, retirement or other similar agreement with any officer or employee of the Standalone Drug Business (or amend any such existing agreement), (ii) grant any severance or termination pay to any officer or employee of the Standalone Drug Business (other than

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any severance or termination pay that is required to be paid under any of Albertson’s or its Affiliates’ severance plans as in effect on the date hereof) or (iii) increase any compensation or other benefits payable to any officer or employee of the Standalone Drug Business, other than any compensation increases that are in the ordinary course of business consistent with past practice;

(f) make or commit to any capital expenditure for additions or improvements to any plant, property or equipment relating primarily to the Standalone Drug Business in excess of the Capex Budget, except to the extent that such excess does not exceed $1,000,000 in the aggregate;

(g) enter into, modify, extend or cancel any third-party payor contracts (which contracts are for amounts in excess of $250,000 per annum), except in the ordinary course of business consistent with past practices;

(h) make any material changes in accounting policies or procedures other than as required by GAAP or a Governmental Authority;

(i) enter into any real estate lease or lease commitment (or change the status of any commitment), enter into or materially modify any Construction Contract, or purchase or acquire or enter into any agreement to purchase or acquire any real estate, in each case relating primarily to the Standalone Drug Business, other than as expressly contemplated hereby or in the ordinary course of business consistent with past practice as determined in accordance with Section 5.01 of the Disclosure Letter;

(j) in any material respect, amend, waive, modify, supplement, extend, terminate, allow to lapse, assign, encumber or otherwise transfer, in whole or in part, its rights and interests in or under any Assigned Contracts, other than as expressly contemplated hereby or in the ordinary course of business consistent with past practice as determined in accordance with Section 5.01 of the Disclosure Letter; or

(k) agree or commit to do any of the foregoing.

Section 5.02. Access to Information; Confidentiality. (a) From the date hereof until the Effective Time, Albertson’s will (i) give Buyer, its counsel, financial advisors, auditors and other authorized representatives reasonable access during normal business hours and upon reasonable notice to the offices, properties, books, records and personnel of the Sellers relating to the Facilities and the Purchased Assets, (ii) furnish to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Facilities and the Purchased Assets as Buyer may reasonably request (including affording Buyer and its representatives access to the Stores and the Distribution Center during the pre-Closing period to enable Buyer, at Buyer’s expense, to conduct a physical count of all inventory at such locations, (iii) co-operate and prioritize and allocate its resources as reasonably necessary to construct a data bridge and the data file transfers to ensure that Sellers will commence providing, immediately as of Closing, the information technology services to Buyer as specified in the Standalone Drug Transition Services Agreement, (iv) deliver to Buyer (in electronic form where available) commencing promptly after the date hereof the data reasonably

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requested by Buyer in order to commence and progress item match and other transition related planning activities as specified in Schedule 5.02(a) and (v) instruct the employees, counsel, financial advisors and auditors of the Sellers to cooperate with Buyer in connection with the foregoing; provided that (x) Buyer and its representatives shall not have the right, without the prior approval of Albertson’s (which shall not be unreasonably withheld, delayed or conditioned, so long as Buyer provides Sellers with an appropriate indemnity), to perform any investigative procedures that involve physical disturbance or damage to the Facilities, the real property upon which the Facilities are situated or any of the Purchased Assets or Excluded Assets and (y) it is understood and agreed that Buyer has informed Sellers that the access and conduct that is required by this Section 5.02(a) is critical to its ability to operate the Stores, and to conduct business and service customers at the Stores, at Closing, but that such access and conduct must be provided or performed in a form or manner or pursuant to a process that complies with applicable Law and any medical privacy policy of Albertson’s maintained for the benefit of third parties that imposes a legally binding obligation on Albertson’s or is required to be complied with order to be in accordance with applicable Law. Accordingly, to the extent that providing access to certain information or personnel or taking certain action under this Section 5.02(a) would not so comply in a given form or manner or pursuant to a given process, the parties shall agree on a form or manner of access or conduct that will both enable Buyer to operate the Stores, and conduct business and service customers at the Stores, at Closing and will comply with applicable Law and any such policy (e.g., pricing information may be redacted from the item files and pharmacy reimbursement rates may be redacted from third party plan information). To the extent that any Seller incurs any incremental out-of-pocket costs in processing, retrieving or transmitting any such information pursuant to this Section 5.02(a), the Buyer shall reimburse the appropriate Seller for the reasonable out-of-pocket costs thereof promptly upon the submission to the Buyer of an invoice therefor accompanied by supporting documentation in reasonable detail.

(b) During the period preceding the Closing Date, the Sellers shall permit Buyer access to each Facility after normal business hours (unless other times are permitted by the Sellers) in order to (i) prepare as-built surveys, and (ii) install wiring for communication devices and other store systems (including computers and other systems) and take other similar action at such Facility, all at Buyer’s cost and without causing damage to such Facility; provided that Buyer shall not be permitted to install any equipment in the Facilities until immediately following the Effective Time. Buyer agrees to repair any damage which may be caused due to the exercise of its rights pursuant to this Section 5.02(b) and to indemnify, defend and hold harmless the Seller Indemnitees from any and all Damages arising out of or in any way connected with Buyer’s exercise of its rights pursuant to this Section 5.02(b). The Sellers’ obligation to provide the foregoing access shall be conditioned on the requirement that Buyer shall not unreasonably interfere with the Sellers’ Standalone Drug Business.

(c) After the Effective Time, the Sellers and their Affiliates will hold, and will use their commercially reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless required to disclose by judicial or administrative process or by other requirements of Law or by the rules, regulations or policies of any United States or foreign securities exchange, all documents and information concerning the Purchased Assets and Assumed Liabilities, except to the extent that such information can be shown to have been (i) in the

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public domain prior to the Effective Time, (ii) in the public domain at or after the Effective Time through no fault of the Sellers or their Affiliates or (iii) later lawfully acquired by the Sellers from sources other than those related to its prior ownership of the Standalone Drug Business; provided that the Sellers may disclose such information to their officers, directors, employees, successors, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such Persons are informed by the Sellers of the confidential nature of such information and are directed by the Sellers to treat such information confidentially. The obligation of the Sellers and their Affiliates to hold any such information in confidence shall be satisfied if Sellers exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. For so long as such information remains subject to the foregoing confidentiality obligations, the Sellers shall not use the same for any purpose other than tax, accounting and regulatory and other compliance purposes and evaluating, enforcing and performing their rights and obligations under this Agreement and the Ancillary Agreements or otherwise in connection with the transactions contemplated hereby and thereby.

(d) Subject to Section 8.02(a), after the Effective Time, the Sellers will afford promptly to Buyer and its agents reasonable access (with an opportunity to make copies) (subject, however, to confidentiality and similar non-disclosure obligations) during normal business hours and upon reasonable notice, to the Sellers’ properties, books, records (whether in hard copy or computer format), workpapers, contracts, commitments, Tax Returns, personnel and records relating to the Facilities or the Purchased Assets as Buyer shall reasonably request for any reasonable business purpose relating to the Facilities or the Purchased Assets; provided that any such access by Buyer shall not unreasonably interfere with the conduct of the business of the Sellers. Buyer shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing.

Section 5.03. Notices of Certain Events. From the date hereof until the Closing Date, each party shall promptly notify the other party of:

(a) any written notice or other written communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(b) any written notice or other written communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

(c) any change or fact of which it is aware that will or is reasonably likely to result in any of the conditions set forth in Article 10 becoming incapable of being satisfied.

Section 5.04. Noncompetition; Cooperation. (a) SUPERVALU agrees that neither it nor any of its controlled Affiliates shall:

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(i) until eighteen months after the Closing Date, either directly or indirectly, for its own account or jointly with others, open any freestanding drug store within a 2.5-mile radius of any of the Stores;

(ii) (X) until six months after the Closing Date, open any new pharmacy counter in any supermarket owned or operated either directly or indirectly for its own account or jointly with others by any Seller or any of its Affiliates within a .25-mile radius of any of the Stores or (Y) for the following twelve months after such initial six month period, open more than five new pharmacy counters in a supermarket within a .25-mile radius of any of the Stores.

(iii) Notwithstanding anything to the contrary contained in this Section 5.04, neither SUPERVALU nor any of its controlled Affiliates shall be prohibited from (X) entering into or consummating any agreement or transaction providing for the acquisition or disposition of any assets, securities or businesses so long and to the extent that such acquisitions or dispositions are not specifically intended to circumvent the restrictions set forth in this Section 5.04 or (Y) the purchase, acquisition or possession of 5% or less of any class of securities of any Person in the ordinary course of SUPERVALU’s or any of its Affiliates’ passive investment activities.

(b) SUPERVALU agrees that, until 18 months after the Closing Date, neither it nor any of its controlled Affiliates, on the one hand, and Parent agrees that neither it nor any of its controlled Affiliates, on the other hand, shall solicit any prescription drug customer of the other party to the extent that such customer’s prescription file is associated with a store of the other party; provided that the foregoing shall not be deemed to prohibit generalized solicitations through media advertisements that are not targeted at such customers. For the avoidance of doubt, nothing in this Section 5.04(b) shall limit any party’s ability to solicit any customer whose name independently appears on such party’s prescription files.

(c) For a period of 180 days from the Closing Date, SUPERVALU and Parent agree not to disparage each other or to communicate that a prescription file has been “transferred” or “transferred away” (or a message using similar language) from the other’s branded store in communications with prescription drug customers.

Section 5.05. Prescription Files. Commencing on the Closing Date and in accordance with a schedule to be provided by Buyer, the Sellers will deliver the Prescription Files to Buyer in an electronic format mutually agreeable to Buyer and the Sellers in accordance with all applicable state board of pharmacy regulations; provided that Sellers shall preserve and maintain original hard copies of the Prescription Files at the applicable Stores in accordance with all applicable state board of pharmacy regulations; provided further, the cost of any conversion into such mutually agreed upon electronic format shall be at Buyer’s sole cost and expense.

Section 5.06. Casualty and Condemnation. (a) In the event that, after the execution of this Agreement, but prior to the Effective Time, any Facility is subject to loss, destruction or

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damage to the building or other improvements thereon (a “Casualty”) or the exercise of eminent domain by a Governmental Authority (a “Condemnation”):

(i) Subject to Section 5.06(a)(ii), at the Closing the Sellers shall assign to Buyer all proceeds the Sellers have received from any third party insurance claims, condemnation awards, compensation or other reimbursements relating to such Casualty or Condemnation (except as to business interruption insurance to the extent that such proceeds are used or intended to be used to reimburse Seller for any out-of-pocket costs, expenses, damages or losses suffered or incurred by Seller up to and including the Effective Time) to the extent such proceeds have not already been used by a Seller to repair any such loss, destruction or damage (or are required to reimburse any Seller for any such repair), and shall assign to Buyer the right to receive any future proceeds of such Casualty or Condemnation receivable after the Effective Time, including as to business interruption insurance.

(ii) If any such Casualty is not covered under the Sellers’ insurance policies and in the event of a Leased Store that has suffered a Casualty where the landlord is responsible for such repairs, loss or destruction pursuant to the terms of the relevant Lease, the applicable Seller shall assign the applicable Lease to Buyer at the Closing and, without any additional payment from the Sellers, the Sellers shall assign to Buyer any claim they have under such Lease with respect thereto.

(b) Any party receiving a notice of Casualty or Condemnation shall notify all other parties in accordance with Section 12.02. Notwithstanding anything to the contrary contained in this Agreement, in no event will any Casualty or Condemnation constitute the breach of any representation, warranty or covenant of the Sellers contained in this Agreement if the Sellers comply with this Section 5.06.

(c) Notwithstanding anything to the contrary in this Agreement, under no circumstances shall (i) SUPERVALU, New Diamond, Sellers or any of their respective Affiliates be responsible for any retention or deductible payable with respect to any Casualty or Condemnation and (ii) any payments on account of a Casualty or Condemnation or any other loss be required from Beryl American Corporation, or any other Subsidiary or Affiliate of SUPERVALU or the Sellers that has underwritten an insurance policy with respect to any Purchased Asset.

Section 5.07. Assistance in Transfer of Licenses, Permits and Registrations. (a) The Sellers will use commercially reasonable efforts to assist Buyer in obtaining the transfer of the Licenses, including directing its employees to cooperate with such transfer and making any notifications required to be sent by the Sellers to the U.S. Drug Enforcement Administration (“DEA”) and applicable state pharmacy boards prior to the Effective Time. It is understood that Buyer is responsible for any expenses associated with any of the foregoing transfers or assignments.

(b) With respect to any liquor license or liquor or other alcoholic beverage inventory conveyed hereunder, the parties shall comply with applicable Law, including the creation of any necessary escrow and the disbursement or release of any funds held in

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such escrow, with the related escrow fees being paid by Buyer; provided, however, if a state liquor control authority refuses to consent to the transfer or issuance of a liquor license with respect to any Store to Buyer, the liquor inventory at such Store shall be deemed Excluded Inventory. The parties shall cooperate in executing and delivering any documentation necessary to effect the foregoing. Buyer or a designee of Buyer will file, or cause to be filed, all necessary pharmacy and liquor permit applications with the appropriate governmental authorities and will use its commercially reasonable efforts to obtain such permits as soon as practicable (including any controlled substance licenses required under state law and DEA numbers). In the event that any liquor, alcoholic beverage, pharmacy, controlled substances, DEA, Medicare, Medicaid or other permit, license, registration, provider number, approval, consent, certification or the like issued by any Governmental Authority necessary for the Buyer’s ownership and/or operation of the Purchased Assets, Standalone Drug Business or any Store shall not have been issued or transferred to Buyer as of the Closing, at the request of Buyer and without any additional consideration, the Sellers shall execute such powers of attorney, instruments and agreements as are reasonably necessary to allow Buyer to utilize the Sellers’ liquor, alcoholic beverage, pharmacy, controlled substances, DEA, Medicare, Medicaid or other permits, licenses, registrations, provider numbers, approvals, consents, certifications or the like, to the extent permitted under applicable Law, in Buyer’s ownership and/or operation of the Purchased Assets, Standalone Drug Business or any Store, until the issuance of such liquor, alcoholic beverage, pharmacy, controlled substances, DEA, Medicare, Medicaid or other permits, licenses, registrations, provider numbers, approvals, consents, certifications or the like to Buyer; provided that as a condition precedent to the Sellers’ execution of any such power of attorney, instrument or agreement, Buyer shall also agree that (i) during the period of Buyer’s use of the Sellers’ liquor, alcoholic beverage, pharmacy, controlled substances, DEA, Medicare, Medicaid or other permits, licenses, registrations, provider numbers, approvals, consents, certifications or the like thereunder, Buyer shall own and/or operate the Purchased Assets, Standalone Drug Business or any Store in accordance with applicable Law and (ii) Buyer shall indemnify the Sellers against all losses arising out of Buyer’s use of such power of attorney, instrument or agreement.

Section 5.08. Controlled Substances Inventory. To the extent required by applicable Law or DEA regulations in context of the transactions contemplated by this Agreement, the Sellers will undertake and deliver to Buyer at each Store an inventory of “controlled substances” located at such Store, as close as practicable prior to the Effective Time.

Section 5.09. Updated Store List. No later than thirty Business Days prior to the Closing, Sellers shall provide to Buyer updated copies of Exhibits A, B and C to this Agreement (the “Updated Store List”), which shall set forth the final and definitive list of the Stores, and which shall be identical to the Exhibits A, B and C attached to this Agreement except for, in accordance with Section 5.01 (i) the addition of new or replacement retail drug stores associated with the Standalone Drug Business which are opened by Sellers between the date of this Agreement and the date of Sellers’ delivery of the Updated Store List to Buyer, and (ii) the removal of any Stores due to operational closings consistent with past practice or expirations of Store Leases or Ground Leases in accordance with their terms. The Updated Store List shall be

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deemed to be Exhibits A, B and C to this Agreement for all purposes under this Agreement as of the Effective Time.

Section 5.10. Financial Reports; Audited Financials. (a) Between the date of this Agreement and the Closing Date, subject to applicable Law, Sellers shall deliver to Buyer on a monthly basis interim, unaudited financial reports for the Standalone Drug Business, prepared by Sellers in the ordinary course of business consistent with past practices and in accordance with Sellers’ customary reporting format for Sellers’ internal use in overseeing and managing the operations of the Standalone Drug Business and the Stores.

(b) Sellers will cooperate and use commercially reasonable efforts to prepare for Parent (and in the event required to be obtained by Parent under Regulation S-X under the Exchange Act, shall prepare for Parent), commencing promptly after the date hereof, audited financial statements for the Standalone Drug Business, the Purchased Assets and the Assumed Liabilities for Albertson’s then most recently completed and reported fiscal year (and unaudited reviewed financial statements for any historical or subsequent fiscal quarter required to be obtained by Parent under such Regulation S-X) in each case fairly presented in accordance with GAAP on a basis consistent with Albertson’s historical financial statements. Sellers shall deliver all such financial statements to Parent at least 30 days prior to the latest time such financial statements are required to be filed by Parent with the Securities and Exchange Commission under the Exchange Act.

Section 5.11. Intercompany Leases. On or prior to the Closing Date, the Sellers shall deliver the Purchased Assets free and clear of any lease or sublease agreements between any Seller or any Affiliate of a Seller, on the one hand, and Albertson’s or any Affiliate of Albertson’s, on the other hand.

Section 5.12. Merger Agreement; Separation Agreement. Neither Albertson’s nor SUPERVALU shall, without the prior written consent of Buyer agree to any modification of any of the terms or conditions of, or give any consent or waiver under, any provision of the Merger Agreement or Separation Agreement if such modification, consent or waiver would reasonably be expected to have a material and adverse effect on the Standalone Drug Business, Purchased Assets or Assumed Liabilities.

ARTICLE 6

COVENANTS OF BUYER

Buyer agrees that:

Section 6.01. Confidentiality. Prior to the Effective Time and after any termination of this Agreement, Buyer and its Affiliates will hold, and will use their commercially reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law or by the rules, regulations or policies of any United States or foreign securities exchange, all documents and information concerning the Standalone Drug Business that the Sellers have furnished to Buyer or any of its Affiliates in

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connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) in the public domain through no fault of Buyer or any of its Affiliates or (ii) later lawfully acquired by Buyer or any of its Affiliates from sources other than the Sellers; provided that Buyer may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of Buyer and its Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information. If this Agreement is terminated, Buyer and its Affiliates will, and will use their commercially reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Sellers, upon request, all documents and other materials, and all copies thereof, obtained by Buyer or any of its Affiliates or on their behalf from the Sellers in connection with this Agreement that are subject to such confidence.

Section 6.02. Access. After the Effective Time, Buyer will afford promptly to each of the Sellers and New Diamond and their agents reasonable access (with an opportunity to make copies) (subject, however, to confidentiality and similar non-disclosure obligations) during normal business hours and upon reasonable notice, to Buyer’s properties, books, records (whether in hard copy or computer format), workpapers, contracts, commitments, Tax Returns, personnel and records relating to the Facilities or the Purchased Assets as the Sellers and/or New Diamond shall reasonably request for any reasonable business purpose relating to the Facilities or the Purchased Assets; provided that any such access by the Sellers and/or New Diamond, as applicable, shall not unreasonably interfere with the conduct of the business of Buyer. Each of the Sellers and New Diamond shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing.

Section 6.03. Guarantee Releases under Certain Contracts. Following the Effective Time, the Buyer will use its reasonable best efforts to procure the release by the applicable counterparty of any guarantee of Albertson’s or their respective Affiliates in place with respect to any Store Lease, Ground Lease or Assigned Contract by offering a replacement guarantee of Buyer or its Affiliates, but Buyer shall have no further obligation to procure such release. If and to the extent that Buyer shall be unable to procure any such release, Buyer and its Affiliates shall jointly and severally indemnify and hold harmless the Sellers, New Diamond or their respective Affiliates, as applicable, against any damages, losses, liabilities and expenses (including reasonable attorneys’ fees) suffered or incurred by any of them with respect to any such Store Lease, Ground Lease or Assigned Contract.

Section 6.04. Contractual Overpayments. If at any time in the one-year period following the Effective Time, the Buyer or any of its Affiliates receives a refund amount or a reduction in an amount payable from a vendor that relates to a contractual overpayment under any of the Assigned Contracts, Store Leases or Ground Leases by the Sellers or their Affiliates prior to the Effective Time, the Buyer shall promptly pay to New Diamond an amount equal to the amount of such refund or reduction.

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Section 6.05. Medicare And Medicaid Provider Numbers. The Buyer shall promptly make (and thereafter diligently pursue) all filings, notifications and applications required for participating as a provider in Medicare and Medicaid reimbursement programs with respect to the Stores.

ARTICLE 7

COVENANTS OF BUYER AND THE SELLERS

Section 7.01. Reasonable Best Efforts; Further Assurances. (a) Subject to the terms and conditions of this Agreement (including, but not limited to, Section 7.2), Buyer and the Sellers will use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary or desirable under applicable Laws and regulations to consummate, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

(b) Buyer and the Sellers will use reasonable best efforts to: (i) prepare, as soon as practicable, all filings and other presentations in connection with seeking any regulatory approval, exemption or other authorization from any Governmental Authority necessary to consummate the transactions contemplated hereby; (ii) prosecute such filings and other presentations with diligence; and (iii) oppose any objections to, appeals from or petitions to reconsider or reopen any such approval by Persons not party to this Agreement. Buyer and the Sellers will use reasonable best efforts to facilitate obtaining any final order or orders approving such transactions, consistent with this Agreement and/or to remove any impediment to the consummation of the transactions contemplated hereby. Buyer and the Sellers will use reasonable best efforts to furnish all information in connection with the approvals of or filings with any Governmental Authority and will promptly cooperate with and furnish information in connection with any such requirements imposed upon Buyer or any of its Affiliates in connection with this Agreement and the transactions contemplated hereby. Subject to Section 6.02, Buyer will use reasonable best efforts to obtain any consent, authorization, order or approval of, or any exemption by, and to remove any impediment imposed by any Governmental Authority to allow the consummation of the transactions contemplated hereby. Buyer and the Sellers will each advise the other party promptly of any material communication received by such party or any of its Affiliates from the Federal Trade Commission, Department of Justice, any state attorney general or any other Governmental Authority regarding any of the transactions contemplated hereby, and of any understandings, undertakings or agreements (oral or written) such party proposes to make or enter into with the Federal Trade Commission, Department of Justice, any state attorney general or any other Governmental Authority in connection with the transactions contemplated hereby. Buyer and Sellers will each consult with the other in advance of any material meetings with the Federal Trade Commission.

Section 7.02. HSR Clearance. (a) In furtherance and not in limitation of Section 7.01, each of Buyer and Albertson’s shall make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and thereafter make any other required submissions with respect to the transactions contemplated hereby under the HSR Act and to take all other appropriate actions

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reasonably necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.

(b) Notwithstanding the foregoing, Buyer shall promptly take, in order to consummate the transactions contemplated hereby, all actions necessary to (A) secure the expiration or termination of any applicable waiting period under the HSR Act (the “HSR Clearance”) and (B) to resolve any objections asserted with respect to the transactions contemplated under this Agreement under any antitrust Law or the Federal Trade Commission Act, raised by any Governmental Authority, and to prevent the entry of any court order and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order that would prevent, prohibit, restrict or delay Closing, including (i) executing settlements, undertakings, consent decrees, stipulations or other agreements with any Governmental Authority (or with any private party, but only in this latter case, in order to vacate, lift, reverse, overturn, settle or otherwise resolve any decree, judgment, injunction or other order that prevents, prohibits, restricts or delays Closing that may be issued by any court or other Governmental Authority in favor of that third party), (ii) selling, divesting or otherwise conveying particular assets or categories of assets or businesses of Parent and its Affiliates, (iii) agreeing to sell, divest or otherwise convey any particular assets or categories of assets or businesses of the Purchased Assets contemporaneously with or subsequent to the Closing, and (iv) permitting the Sellers to sell, divest or otherwise convey any particular assets or categories of assets or businesses of the Purchased Assets prior to the Closing. All such efforts shall be unconditional and shall not be qualified by best efforts and no actions taken pursuant to this Section 7.02 shall be considered for purposes of determining whether a Material Adverse Effect has occurred. Buyer shall respond to and seek to resolve as promptly as reasonably practicable any objections asserted by any Governmental Authority with respect to the transactions contemplated under this Agreement. In the event in connection with such efforts Buyer or Seller sell or otherwise dispose of any of the Purchased Assets and the Closing occurs, the Buyer will be entitled to retain all net proceeds received from the applicable sale or disposition to a third party.

Section 7.03. Certain Filings. Buyer and the Sellers shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement, and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Each of Buyer and the Sellers shall use their respective reasonable best efforts to obtain Tax clearance certificates (pursuant to Laws with respect to bulk transfers) from any state in which failure to obtain such certificate may result in Buyer or any of its Affiliates being liable for Taxes as transferee in connection with the consummations of the transactions contemplated hereby.

Section 7.04. Public Announcements. From the date hereof through the Closing Date, no public release or announcement concerning the transactions contemplated hereby shall be issued by Parent, SUPERVALU or Albertson’s (or their respective Affiliates or representatives) without the prior consent of each of the other such parties (which consent shall not be

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unreasonably withheld or delayed), except, in each case, as such release or announcement may be required by Law or the rules, regulations or policies of any United States or foreign securities exchange, in which case the party required to make the release or announcement shall use its commercially reasonable efforts to allow the other parties reasonable time to comment on such release or announcement in advance of such issuance; provided that SUPERVALU, Parent and Sellers may make internal announcements to their respective employees after reasonable prior notice to, and consultation with, the other; provided, however, that no prior notice or consultation will be required for communications concerning status or other factual matters concerning the transaction.

Section 7.05. Trademarks; Tradenames. Except as otherwise set forth in this Section 7.05, after the Effective Time, Buyer and its Affiliates shall not use the Tradenames and Trademarks.

(a) Buyer agrees to use commercially reasonable efforts to re-brand (including changing signage), and Sellers agree, at Buyer’s expense, to use commercially reasonable efforts to assist Buyer in re-branding, each Store in the greater Chicago metropolitan area and Southern California (San Diego and Orange County) markets within 90 days after the Closing Date (and each other Store within 180 days after the Closing Date), and Buyer and its Affiliates shall have the right to use the “Albertson’s” (to the extent used for private label product), “Osco” or “Sav-on” names (the “Tradenames and Trademarks”) in connection with each Store until such Store has been re-branded; provided that such time periods shall be extended to the extent necessary if such re-branding is not permitted by Law before the expiration of such period.

(b) After the Effective Time, Buyer and its Affiliates and its resellers shall have the right to sell existing inventory and to use existing packaging, labeling, containers, supplies, advertising materials and any similar materials bearing the Tradenames and Trademarks for 180 days following the Closing Date. Buyer and its Affiliates and resellers shall have the right to use the Tradenames and Trademarks in advertising that cannot be changed by Buyer or its Affiliates or resellers using commercially reasonable efforts for a period not to exceed 180 days after the applicable Effective Time. Buyer and its Affiliates and resellers shall comply with all applicable Laws or regulations in any use of packaging or labeling containing the Tradenames and Trademarks. Buyer and its Affiliates and resellers shall not be obligated to change the Tradenames and Trademarks on goods in the hands of dealers, distributors and customers at the time of the expiration of the time period set forth herein.

Section 7.06. Accounts Receivables; Gift Cards and Gift Certificates; Prepaid Expenses. (a) Buyer shall promptly deposit in one or more accounts designated by New Diamond within 10 days of receipt any monies paid to Buyer with respect to Accounts Receivable and shall furnish the information that New Diamond may reasonably request from time to time with respect to such Accounts Receivable.

(b) Following the Closing Date for a period of four months thereafter, with respect to each Store, Buyer shall (i) accept in full any original proprietary gift cards

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issued by Sellers for use at their retail locations from customers who present gift cards at such Store and (ii) Buyer shall redeem at full face value any original proprietary gift certificates issued by Sellers for use at their retail locations to customers who present such gift certificates at such Store.

(c) Buyer shall reimburse New Diamond at the Closing for the full amount of all documented Prepaid Expenses.

Section 7.07. Transition Services Agreement. Buyer and SUPERVALU and its Affiliates shall cooperate and use their respective best efforts to enter into at Closing the Standalone Drug Business Transition Services Agreement and the Distribution Center Transition Services Agreement; provided, however, in no event shall the execution and delivery of the Standalone Drug Business Transition Services Agreement or the Distribution Center Transition Services Agreement pursuant to Section 1.07 be a condition to Closing.

Section 7.08. HIPAA Privacy Standards. (a) After the Effective Time, Buyer shall make the Prescription Files available for access and amendment to individuals in accordance with the Health Insurance Portability and Accountability Act of 1996 privacy standards (the “HIPAA Privacy Standards”) and other applicable Laws. Buyer shall respond to individuals’ requests for accountings of disclosures of protected health information for periods prior to the Effective Time in accordance with the HIPAA Privacy Standards.

(b) In addition, Buyer shall maintain the Prescription Files and all protected health information transferred by the Sellers in accordance with the Health Insurance Portability and Accountability Act of 1996 security standards governing electronic protected health information.

(c) All inquiries and responses by Buyer relating to patient rights under HIPAA Privacy Standards relating to uses or disclosures of health information made prior to the Effective Time shall be forwarded to the Sellers and New Diamond pursuant to Section 12.02.

Section 7.09. Solicitation of Employees. Each of Parent and SUPERVALU mutually agree that (i) neither it nor any of its Affiliates shall, until the end of the 18 month period immediately following the Closing Date, except as contemplated in Article 9 and except with respect to any employees listed on Schedule 7.09, solicit the services of any personnel at the level of field management or above (i.e., not including any pharmacist or store managers) that is employed by the other party or its Affiliates pertaining to a drug store (including a pharmacy counter in a supermarket) and (ii) until six months after the Closing Date, solicit any pharmacist that is employed in a drug store (including a pharmacy counter in a supermarket) by the other party, in each case, in any market which the Sellers operate a Store immediately prior to the Effective Time.

Section 7.10. Kodak and Qualex Photo Processing Equipment. The Sellers and Buyer shall each use commercially reasonable efforts, and shall reasonably cooperate with each other in such efforts, to obtain the consent of each of Kodak and Qualex to the (a) (i) transfer of the photo processing equipment leased by the Sellers or their Affiliates from Kodak and Qualex and

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located at the Stores (the “Photo Equipment”) to Buyer and (ii) the assumption by Buyer of the obligations of the Sellers with respect to such Photo Equipment, or (b) buyout by Buyer of the Photo Equipment.

Section 7.11. “As Is” Condition; Waiver and Release. Except for the express representations and warranties contained in this Agreement (and without limiting the conditions to Closing in Article 10), the Purchased Assets to be transferred hereunder will be transferred “as is, where is,” in their present condition and state of repair, with all faults, limitations and defects (hidden and apparent). Without limitation, each of Buyer and Parent, on the one hand, and the Sellers and New Diamond, on the other hand, acknowledge that, except as specifically set forth to the contrary in this Agreement, no warranties or representations, expressed or implied, of any kind whatsoever (including any implied warranty of merchantability or fitness for a particular purpose) have been made by the other party, any of its Affiliates or any other Person, or will be relied upon.

Section 7.12. Payments for Pharmacy Services. Buyer agrees to forward to New Diamond any sums of money received by Buyer for pharmacy services rendered by the Sellers prior to the Effective Time. New Diamond and the Sellers agree to forward to Buyer any sums of money received by New Diamond or the Sellers, as applicable, for pharmacy services rendered by Buyer following the Effective Time. Further, upon reasonable notice from New Diamond and/or the Sellers, Buyer agrees to afford reasonable access to allow New Diamond and the Sellers access to the Prescription Files for the sole purpose of third party rebilling and reconciliation with respect to periods prior to the Effective Time.

Section 7.13. Confidentiality Agreement. Parent and Albertson’s agree that the terms and provisions of the Confidentiality Agreement (as amended by this Section 7.13) shall continue to bind the parties; provided, however, that, in the event the Closing occurs, the Confidentiality Agreement (as amended by this Section 7.13) will terminate on the Closing Date except that the confidentiality obligations therein will continue in effect in accordance with the terms thereof with respect to information of Albertson’s not related to the Standalone Drug Business, the Purchased Assets or the Assumed Liabilities. Parent and Albertson’s further agree that, until the earlier of the Closing and the termination of Section 6(c) of the Confidentiality Agreement in accordance with its terms, the scope of Section 6(c) of the Confidentiality Agreement (No Solicitation) shall be expanded to apply reciprocally to each of Parent and its Affiliates, on the one hand, and Albertson’s and its Affiliates, on the other hand, and the terms in that Section 6(c) shall be expanded to apply to their respective directors, officers, management level employees, in-store managers and in-store pharmacists (and will not be limited by any reference to the evaluation or discussions described in that Section 6(c)); provided that in no event shall anything in the foregoing or the Confidentiality Agreement prohibit or limit in any way the ability of Parent and its affiliates to solicit, or make offers of employment to, Kevin Tripp, the Employees and/or the individuals who are described in Section 9.02, but only in relation to post-Closing employment with Parent or its affiliates (which solicitations and offers shall, for the sake of clarity, be conditioned on the Closing occurring).

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ARTICLE 8

TAX MATTERS

Section 8.01. Tax Matters. Except as specified in Section 8.01 of the Disclosure Letter, or as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, Albertson’s hereby represents and warrants to Buyer that the Sellers have timely paid, or made provision to pay, all Taxes that include or relate to the Standalone Drug Business and the Purchased Assets that will have been required to be paid on or prior to the date hereof, the non-payment of which would (a) result in a Lien on any Purchased Asset, (b) otherwise adversely affect the Standalone Drug Business or (c) result in Buyer becoming liable or responsible therefor.

Section 8.02. Tax Cooperation. (a) Notwithstanding any other provision in this Agreement, this Section 8.02 shall govern cooperation with respect to Tax matters. Buyer, the Sellers, New Diamond and SUPERVALU agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Standalone Drug Business and the Purchased Assets (including access to books and records) as is reasonably necessary for the filing of all Tax Returns, the making of any election relating to Taxes, the preparation for any audit by any Taxing Authority, and the prosecution or defense of any Action relating to any Tax. Except with respect to information that is generally available to the public, the party requesting such information shall treat such information so obtained in a manner consistent with the way in which it treats its own records. Buyer, the Sellers, New Diamond and SUPERVALU shall retain all books and records with respect to Taxes pertaining to the Purchased Assets for a period of at least seven years following the Effective Time. Buyer, the Sellers, New Diamond and SUPERVALU shall cooperate with each other in the conduct of any audit or other proceeding relating to Taxes involving the Purchased Assets or the Standalone Drug Business.

(b) All real property taxes (other than real estate Taxes referred to in Section 1.08), personal property taxes and similar ad valorem obligations (other than Transfer Taxes, which shall be governed by Section 8.02(c)) levied with respect to the Purchased Assets for a Straddle Tax Period (collectively, the “Apportioned Obligations”) shall be apportioned between the Sellers and Buyer based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period included in the Post-Closing Tax Period. The Sellers shall be liable for the proportionate amount of such taxes that is attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount of such taxes that is attributable to the Post-Closing Tax Period.

(c) All excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, property, transfer, gains, transaction privilege tax and similar Taxes, levies, charges and fees (collectively, “Transfer Taxes”) incurred in connection with the transfer of the Purchased Assets pursuant to this Agreement shall be borne equally by Buyer on the one hand, and Sellers, on the other hand. Buyer and the Sellers shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation.

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(d) Apportioned Obligations and Transfer Taxes described in this Section 8.02 shall be timely paid, and all applicable Tax Returns shall be filed, as provided by applicable Law. The paying party shall provide to the non-paying party drafts of all Tax Returns described in the preceding sentence and a statement setting forth the amount of reimbursement to which the paying party is entitled under Section 8.02(b) and Section 8.02(c), as the case may be, together with appropriate supporting information and schedules at least 30 calendar days prior to the due date for the filing of such Tax Return (including extensions), or such shorter period as is necessary to allow for the timely filing of such Tax Return. The non-paying party shall have the right, at its expense, to review all work papers and procedures used to prepare any such Tax Return. If the non-paying party, within 10 Business Days after delivery of any such Tax Return, notifies the paying party in writing that it objects to any items in such Tax Return, the parties will use their reasonable best efforts, acting in good faith, to resolve such disputed items between themselves. If the parties fail to resolve such disputed items within 5 Business Days, such disputed items shall be resolved (within a reasonable time, taking into account the deadline for filing such Tax Return) by the Independent Accounting Firm. Upon resolution of all such items, the relevant Tax Return shall be adjusted, if necessary, to reflect such resolution and shall be binding upon the parties without further adjustment. The costs, fees and expenses of the Independent Accounting Firm shall be borne equally by the parties. The non-paying party shall make reimbursement promptly pursuant to this Section 8.02(d) but in no event later than 10 days after the resolution of the relevant Tax Return. Any payment not made within such time shall bear interest at the Applicable Rate until paid.

ARTICLE 9

EMPLOYEE BENEFITS

Section 9.01. ERISA Representations. Albertson’s hereby represents and warrants to Buyer that Section 9.01 of the Disclosure Letter contains a correct and complete list identifying each material “employee benefit plan,” as defined in Section 3(3) of ERISA, each material employment, severance or similar contract, plan, arrangement or policy and each other material plan or arrangement (written or oral) providing for compensation, bonuses, profit-sharing, stock option or other stock-related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance program, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by the Sellers or any of their ERISA Affiliates and covers any Employee as of the date hereof. Copies of such plans (and, if applicable, related trust or funding agreements or insurance policies) and all amendments thereto (other than the Taft Hartley Plan Documents) have been made available to Buyer together with, if applicable, the most recently filed annual report (Form 5500 including, if applicable, Schedule B thereto) and tax return (Form 990) prepared in connection with any such plan or trust. Such plans are referred to collectively herein as the “Employee Plans.” Albertson’s agrees to use its commercially reasonable efforts to furnish Buyer with a copy of each Taft Hartley Plan Document prior to the Closing Date. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each Employee Plan which is intended to be qualified

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under Section 401(a) of the Code is so qualified and has received a determination letter to that effect from the IRS and, to the Knowledge of any Seller, no circumstances exist which would reasonably be expected to materially adversely affect such qualification or exemption. With respect to any Surviving Plan (as defined below) (i) Sellers have not incurred any withdrawal liability under Subtitle E of Title IV of ERISA (“Withdrawal Liability”) that remains unsatisfied, as would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) Sellers have not received any notification, that any such Surviving Plan is in reorganization or has been terminated.

Section 9.02. Employees and Offers of Employment. Effective as of the Effective Time, Buyer shall (i) offer employment to each Employee, at a base salary or wage that is at least equal to that provided the applicable Employee immediately prior to the Effective Time; (ii) have the right to offer employment to each Albertson’s corporate employee, field manager, field-based marketing manager and divisional pharmacy manager, in each case to the extent dedicated solely to the Standalone Drug Business, including, without limitation, those employees specified in Schedule 9.02(a) (so long as they are so dedicated) at a base salary or wage that is at least equal to that provided to such Albertson’s corporate employee, field manager, field-based marketing manager or divisional pharmacy manager immediately prior to the Effective Time and (iii) have a right to hire certain of the category managers, real estate personnel, field-based marketing managers and divisional pharmacy managers in each case who have shared responsibilities between the Standalone Drug Business and the New Diamond Business (as defined in the Separation Agreement) (collectively, the “Shared Personnel”) to the extent specified in Schedule 9.02(b) as determined in cooperation between Sellers and Buyer by allocating a proportionate number of Shared Personnel to Buyer based on the ratio of (x) the total number of pharmacy counters in Stores covered by such Shared Personnel to (y) the total number of pharmacy counters in Stores and grocery stores operated by Sellers collectively covered by such Shared Personnel as set forth on such Schedule 9.02(b). Sellers may update, and deliver to Buyer, Schedule 9.02(a) and Schedule 9.02(b) within fourteen days following the date of this Agreement. SUPERVALU and Buyer shall cooperate in good faith to determine the accuracy of Schedule 9.02(a) and Schedule 9.02(b) and agree to update each such Schedule as appropriate. The term “Employee” includes any Person who, immediately prior to the Effective Time, is actively employed by any Seller at a Facility or who is on short-term disability leave, authorized leave of absence, military service or lay-off with recall rights as of the Effective Time (such inactive employees shall be offered employment by Buyer as of the date they return to active employment but only if such employee returns to active service within 180 days after the Effective Time or such later time as their reemployment rights are protected by applicable Laws), but shall exclude any other inactive or former employee including any Person who is on long-term disability leave or unauthorized leave of absence as of the Effective Time. The employees who accept and commence employment with Buyer (including the employees described in this Section 9.02 and the employees set forth on Schedule 7.09) are hereinafter collectively referred to as the “Transferred Employees.”

Section 9.03. The Sellers’ Employee Benefit Plans. Except as expressly set forth herein, no assets or liabilities of any Employee Plan shall be transferred to Buyer or any of its Affiliates or to any plan of Buyer or any of its Affiliates. Buyer shall agree to assume the obligations under any agreement providing for the grant of any restricted stock units or any cash awards to the Transferred Employees or Employees (but only to the extent they remain eligible for such

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awards) which are granted to such Transferred Employees or Employees following the date hereof but prior to the Effective Time, but solely with respect to the Employees, only to the extent such awards are set forth and described in Section 9.03 of the Disclosure Letter.

Section 9.04. Buyer Benefit Plans. Buyer will cause all plans and programs of Buyer and its Affiliates to recognize all service of the Transferred Employees with the Sellers or any of their Affiliates prior to the Closing Date for purposes of vesting and eligibility and for purposes of determining the amount of benefits under Buyer’s applicable sick leave, vacation, severance or other welfare plan. Buyer will assume, and be solely responsible for, all sick leave, vacation or other paid time off accrued by Employees prior to the Effective Time; provided, however, that Buyer will not assume any accrued sick leave, vacation or other paid time off to the extent Sellers are required by Law to pay any Transferred Employee the appropriate accrued amounts of sick leave, vacation or other paid time off, but will instead reimburse and hold harmless Sellers and their Affiliates in respect of any such payments. Buyer shall or shall cause its Affiliates to offer enrollment in, effective as of the Effective Time, all health and welfare and 401(k) plans of the Buyer and its Affiliates to each Transferred Employee who participates in an equivalent type of plan of Sellers or their Affiliates immediately prior to the Effective Time, and, so long as such Transferred Employees remain employed by Buyer shall continue such enrollment for no less than 12 months following the Effective Time (so long as the applicable employee remains eligible under the terms of the program, except that solely for purposes of Buyer’s health care plans such eligibility will be determined without regard to minimum number of hour requirements during the first 90 days following the Closing Date). Buyer shall (i) cause to be waived all limitations as to preexisting condition limitations, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Transferred Employees under any plan of Buyer or its Affiliates that is a healthcare plan, to the extent such limitation or exclusion was waived or such waiting period was satisfied as of the Effective Time under any healthcare plan maintained for such employees immediately prior to the Effective Time and (ii) cause applicable healthcare plans of Buyer or its Affiliates to provide each Transferred Employee with credit for any co-payments, deductibles and any other out-of-pocket expenses paid during the plan year or other appropriate period commencing immediately prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any healthcare plan(s) of Buyer or its Affiliates for such plan year (so long as Buyer is provided the applicable information). If within 12 months following the Closing Date Buyer terminates the employment of any Transferred Employee without cause, Buyer shall provide the Transferred Employee severance benefits in an amount no less than the severance benefits the Transferred Employee would have been entitled to under Albertson’s applicable severance plans (but excluding any individual employment or change in control agreements).

Section 9.05. Labor Agreements. (a) Buyer shall (i) assume the Assumed Labor Agreements, (ii) recognize and comply with any legal duty to bargain or negotiate with any labor organization lawfully entitled to represent any Transferred Employees, (iii) fully comply with Sections 9.02 and 9.04 of this Agreement with respect to such Transferred Employees and credit such Transferred Employees with full seniority gained while employed by Sellers and their Affiliates, and (iv) indemnify the Seller Indemnitees against and hold each of them harmless from any and all damages, losses, liabilities and expenses (including reasonable attorneys’ fees and expenses, indirect, consequential, incidental, exemplary or special damages, punitive damages, lost profits, lost revenues and diminution in value or benefits) arising out of or in any

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way connected with Buyer’s failure to assume and comply with the terms of the Labor Agreements (or Seller’s failure to require Buyer to assume the Labor Agreements) or recognize and comply with any legal duty to bargain or negotiate with any labor organizations lawfully entitled to represent any Transferred Employees, including any such damages arising from any claims, including but not limited to grievances, unfair labor practice charges, lawsuits, injunction actions or contractual, administrative or legal actions of any kind, alleging a breach of a Labor Agreement or the violation of any labor law, or any action by a labor organization at any location as a result thereof. Buyer may seek before Closing to modify the terms of the Labor Agreements; provided, however, that such modification shall not be a condition to Closing under this Agreement.

(b) It is expressly agreed and understood that neither Buyer nor any Seller has any right, power or authority to control, direct or regulate the labor relations and human resources policies and procedures of the other, that neither is deemed to constitute the agent or representative of the other, and that neither is liable in any manner whatsoever for the acts or omissions of the other, its agents, representatives or employees.

(c) At all times prior to the Effective Time, the Sellers shall have sole and exclusive responsibility for the operation and management of the Facilities and the Purchased Assets related thereto, for the employment and control of the Employees, for compliance with all Laws governing the employment relationship, and for compliance with the terms of any Labor Agreement, employment contract or employee benefit plan covering the Employees or any of Sellers’ former employees. At all times subsequent to the Effective Time, Buyer shall have sole and exclusive responsibility for the operation and management of the Facilities and the Purchased Assets related thereto, for the employment and control of its employees, for compliance with all Laws governing the employment relationship, and for compliance with the terms of any collecting bargaining agreement, employment contract or employee benefit plan covering its employees.

(d) With respect to any Multiemployer Plan for which contributions were required to be made pursuant to a Labor Agreement (the “Surviving Plans”), Buyer and Sellers shall take all steps necessary under Section 4204 of ERISA so that the transaction contemplated by this Agreement will not constitute a partial or complete withdrawal under Section 4201 of ERISA. The parties hereto acknowledge and agree that the sale of assets under this Agreement constitutes a bona fide, arm’s length sale of assets between unrelated parties, and the parties intend that this Agreement be covered by and satisfy all of the requirements of Section 4204 of ERISA. With respect to the Surviving Plans, Buyer and Sellers agree to the following:

(i) Contributions. Buyer agrees to contribute to the Surviving Plans, with respect to the covered operations, for substantially the same number of contribution base units for which Seller had an obligation to contribute to the Surviving Plans.

(ii) Security. Buyer agrees that, if it does not qualify for an exemption pursuant to PBGC Regulation Section

4204.11(a), it will provide a bond or place an amount in escrow in accordance with Section 4204(a)(1)(B) of ERISA.

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(iii) Seller’s Secondary Liability. In the event Buyer withdraws from the Surviving Plans in a complete withdrawal, or a partial withdrawal with respect to the covered operations, during the five plan years commencing with the first plan year beginning after the Closing Date, Seller shall be secondarily liable, but only to the extent required by Section 4204 of ERISA with respect to the covered operations if Buyer’s primary liability to the Surviving Plans is not paid. If Buyer withdraws from the Surviving Plans before the last day of the fifth plan year beginning after the Closing Date, and fails to make any withdrawal liability payment when due, then Seller shall pay to the Surviving Plans an amount determined in accordance with the requirements of Section 4204 of ERISA and the law, reduced, as permitted under the law, by the amounts paid by the Buyer.

(iv) Reduction of Liability. The liability of a party furnishing a bond or escrow shall be reduced, upon payment of any bond or escrow to the Surviving Plans, by the amount thereof in accordance with Section 4204(a)(4) of ERISA.

(v) Buyer’s Indemnification. Buyer agrees that, to the extent Buyer is required to contribute to the Surviving Plans pursuant to this Agreement and, with respect to the Surviving Plans, for the five plan years beginning after the Closing Date, Buyer will make such contributions on a timely basis. Buyer further agrees that it shall be liable to Seller and shall defend, indemnify, and hold Seller and its shareholders, officers, directors, employees and agents harmless from any withdrawal liability, claims, costs, damages, expenses, taxes, penalties or fines arising solely out of any failure by the Buyer to satisfy the requirements of this Section and with respect to any actions Buyer may take after the Closing Date which results in any Withdrawal Liability under any Multiemployer Plan for which Buyer has a contribution obligation. Seller agrees to provide Buyer with reasonable advance notice of any action or event which could result in the imposition of withdrawal liability by the Surviving Plans against Seller and for which Seller asserts Buyer may be liable. In any event Seller shall immediately furnish Buyer with a copy of any notice of withdrawal liability it may receive with respect to the Surviving Plans, together with all the pertinent details. If any such withdrawal liability shall be assessed against Seller, Seller further agrees to provide Buyer with reasonable advance notice of any intention on the part of Seller not to make full payment of any withdrawal liability when the same shall become due. For purposes of this Section 9.05(d)(v), the term Seller shall include Seller Indemnitees.

Section 9.06. Employee Compensation. No later than 15 days after the date hereof, Albertson’s shall provide Buyer with, or cause to be provided to Buyer, a true and complete list, organized by Facility, of the name, title, position pay rate, position effective date, full-time/part-time status, continuous service date, all paid time off eligibility and balances, status under the Fair Labor Standards Act, benefit eligibility and enrollment status (including defined contribution plan information) of each Employee as of the date hereof. Such list shall be updated as necessary to reflect new hires or other personnel changes occurring between the date delivered to Buyer and the Effective Time.

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Section 9.07. Employee Indemnity. In addition to and not in limitation of any of the foregoing provision of this Article 9, from and after the Effective Time, Buyer shall indemnify the Seller Indemnitees against and hold each of them harmless from any and all damages, losses, liabilities and expenses (including reasonable attorneys’ fees and expenses), incurred or suffered by the Sellers or any of their Affiliates arising from the failure to hire or the employment or termination of any Employee or Transferred Employee by Buyer or any of its Affiliates (or as a result of non-acceptance of an offer, to the extent any such non-acceptance results in severance payments under the applicable Sellers’ severance plan) on or after the Effective Time pursuant to the applicable Albertson’s severance plans (but excluding any individual employment or change in control agreements) or pursuant to the Worker Adjustment and Retraining Notification Act or any similar state Laws.

Section 9.08. No Third Party Beneficiaries. No provision of this Article 9 shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Sellers, New Diamond or of any of their respective Subsidiaries in respect of continued employment (or resumed employment) with either Buyer or any of its Affiliates or the Standalone Drug Business and no provision of this Article 9 shall create any such rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or any plan or arrangement which may be established by Buyer or any of its Affiliates. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Effective Time any such plans or arrangements of Buyer or any of its Affiliates.

ARTICLE 10

CONDITIONS TO CLOSING

Section 10.01. Conditions to Each Party’s Obligations. The obligations of each party hereto to consummate the transactions contemplated hereby are subject to the satisfaction or waiver of the following conditions:

(a) Any applicable waiting period under the HSR Act relating to the transactions contemplated hereby shall have expired or been terminated.

(b) No provision of any applicable Law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the transactions contemplated hereby.

(c) (i) The satisfaction or waiver at or prior to the Closing of the conditions to the Merger (as defined in that certain Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”), by and among Albertson’s, New Aloha Corporation, SUPERVALU, New Diamond Sub, Inc. and Emerald Acquisition Sub, Inc.), shall have occurred as set forth in Article VII of the Merger Agreement (other than the condition that the Standalone Drug Sale and Retained Business Purchase (each as defined in the Merger Agreement) shall have occurred); and (ii) the satisfaction or waiver at or prior to the Closing of the conditions to closing to the Retained Business Purchase shall have occurred.

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Section 10.02. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the transactions contemplated hereby are subject to the satisfaction or waiver of the following further conditions:

(a) (i) The Sellers shall have performed in all material respects all of their obligations hereunder required to be performed by them on or prior to the Closing Date, (ii) the representations and warranties of Albertsons’ or SUPERVALU contained in this Agreement (disregarding any Material Adverse Effect, materiality or similar qualifiers therein) shall be true and correct as of the date hereof and Closing Date as though made on and as of such date (unless any such representation or warranty is made only as of a specific date, in which event such representation and warranty shall be true and correct as of such specified date), except where any failure of such representations or warranties to be so true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect, and (iii) Buyer shall have received a certificate signed by an officer of Albertson’s or SUPERVALU, as applicable, to the foregoing effect.

(b) The applicable Sellers shall have duly executed and delivered each of the Ancillary Agreements.

Section 10.03. Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions contemplated hereby is subject to the satisfaction or waiver of the following further conditions:

(a) (i) Buyer shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in this Agreement and in any certificate or other writing delivered by Buyer pursuant hereto shall be true in all material respects at and as of the Closing Date, as if made at and as of such date (except to the extent that any representation or warranty speaks as of an earlier date, in which case it must be true and correct only as of that earlier date) and (iii) the Sellers shall have received a certificate signed by an officer of each of Parent and Buyer to the foregoing effect.

(b) Buyer shall have duly executed and delivered each of the Ancillary Agreements.

ARTICLE 11

SURVIVAL; INDEMNIFICATION

Section 11.01. Survival. All representations and warranties in this Agreement of any party or in any instrument delivered pursuant to this Agreement shall terminate at the Effective Time. The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing Date indefinitely or for the shorter period explicitly specified therein, except that to the extent any covenant provides for performance prior to Closing, such covenant to such extent shall not survive Closing.

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Section 11.02. Indemnification. (a) From and after the Closing Date, SUPERVALU shall indemnify Buyer and its Affiliates (each, a “Buyer Indemnitee” and collectively, the “Buyer Indemnitees”) against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including reasonable attorneys’ fees and expenses in connection with any Action whether involving a third-party claim or a claim solely between the parties hereto) (“Damages”) incurred or suffered by Buyer or any of its Affiliates arising out of:

(i) any breach after the Closing of any covenant or agreement of SUPERVALU or its Affiliates contained in this Agreement or a breach by SUPERVALU or its applicable Affiliates of Section 1.07(a)(ii)(E);

(ii) any Excluded Liability;

regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of Law or equity.

(b) From and after the Closing Date, Parent shall indemnify the Sellers, New Diamond and their respective Affiliates (each, a “Seller Indemnitee” and collectively, the “Seller Indemnitees”) against and hold each of them harmless from any and all Damages incurred or suffered by the Sellers, New Diamond or any of their respective Affiliates arising out of:

(i) any breach after the Closing of any covenant or agreement of Buyer or its Affiliates contained in this Agreement or a breach by Buyer or its applicable Affiliates of Section 1.07(a)(ii)(F);

(ii) the conduct of the Standalone Drug Business by Buyer after the Closing Date or the ownership, operation, occupancy or use by Buyer after the Closing Date of the Facilities or Purchased Assets; or

(iii) any Assumed Liabilities;

regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of Law or equity.

(c) Following the Closing, except as to injunctive relief, the sole and exclusive remedy for each of the Indemnified Parties with respect to any and all claims relating to a breach of this Agreement shall be pursuant to the indemnification provisions set forth in this Article 11. In furtherance of the foregoing, each of the Indemnified Parties hereby waives, to the fullest extent permitted under applicable Law, any and all rights, claims and causes of action it may have against the other parties hereto, arising under or based upon any Federal, state, local or foreign Law, other than the right to seek indemnity pursuant to this Article 11. Notwithstanding the foregoing, the provisions of this Article 11 shall in no way limit any other express indemnification rights of any party set forth in this Agreement.

(d) The amount of any Damages subject to indemnification hereunder shall be calculated net of any insurance proceeds or other third-party payments received by the

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Indemnitee on account of such Damages. In the event that the Indemnitor reimburses the Indemnitee for any Damages prior to the receipt or realization of any proceeds, payments or benefits referred to in the immediately preceding sentence, the Indemnitee shall remit to the Indemnitor an amount equal to the amount of such proceeds, payments or benefits, as the case may be. In the event any payment is made in respect of Damages pursuant to this Article 11, the Indemnitor who made such payment shall be subrogated to the extent of such payment to any related rights of recovery of the Indemnitee receiving such payment against any third party.

(e) Without limitation of their respective rights and obligations as set forth elsewhere in this Article 11, and subject to the procedures for indemnification claims set forth in this Article 11, the Indemnitee shall act in good faith, shall use commercially reasonable efforts to mitigate any Damages.

(f) All indemnity payments, except those in respect of Prorated Charges, shall be treated as additional adjustments to the amount of the total consideration paid for the Purchased Assets (or as amounts that are deductible by the payor, if in accordance with applicable law) for all Tax purposes, except as otherwise required by applicable Tax law or by a “determination” within the meaning of Section 1313 of the Code.

(g) Notwithstanding anything to the contrary contained herein, the indemnification provided for in this Article 11 shall not cover, and in no event shall any party hereto be liable for, any indirect, consequential, incidental, exemplary or special damages, punitive damages, lost profits, lost revenues or diminution in value.

Section 11.03. Procedures.

(a) Third Party Claims.

(i) If any Indemnitee shall desire to assert any claim for indemnification provided under this Article 11 in respect of, arising out of or involving a claim or demand made by any Person (other than a Buyer Indemnitee or a Seller Indemnitee) against the Indemnitee (a “Third Party Claim”), such Indemnitee shall notify the Indemnitor in writing, and in reasonable detail (taking into account the information then available to such Indemnitee), of the Third Party Claim; provided, however, that the failure of an Indemnitee to notify the Indemnitor shall relieve the Indemnitor from its obligation to indemnify only to the extent that the Indemnitor is actually prejudiced as a result of such failure. The Indemnitee shall deliver to the Indemnitor, promptly after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim; provided, however, that the failure to deliver such copies shall relieve the Indemnitor from its obligation to indemnify only to the extent that the Indemnitor is actually prejudiced as a result of such failure.

(ii) Upon receipt of notification of a Third Party Claim, the Indemnitor shall be entitled to participate in the defense of the Third Party Claim and, if it so

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chooses, to assume the defense thereof with counsel selected by the Indemnitor and reasonably satisfactory to the Indemnitee. Should the Indemnitor so elect to assume the defense of a Third Party Claim, the Indemnitor shall not be liable to the Indemnitee for legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof, unless the Third Party Claim involves potential conflicts of interest or substantially different defenses for the Indemnitee and the Indemnitor. If the Indemnitor assumes such defense, the Indemnitee shall have the right to participate in defense thereof and to employ counsel, at its own expense (except as provided in the immediately preceding sentence), separate from the counsel employed by the Indemnitor, it being understood that the Indemnitor shall control such defense. The Indemnitor shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnitor has not assumed the defense thereof and as otherwise contemplated by the two immediately preceding sentences. If the Indemnitor chooses to defend any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the Indemnitor’s request) the provision to the Indemnitor of records and information that are reasonably relevant to such Third Party Claim, and the use of commercially reasonable efforts to make employees available on a mutually convenient basis to provide additional information and explanation of any material provided thereunder.

(iii) Whether or not the Indemnitor shall have assumed the defense of a Third Party Claim, the Indemnitee shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnitor’s prior written consent, which shall not be unreasonably withheld or delayed. The Indemnitor may settle, compromise or discharge such Third Party Claim with the written consent of the Indemnitee, which shall not be unreasonably withheld or delayed, or without such consent if such settlement, compromise or discharge (A) includes an unconditional release of the Indemnitee from all liability in respect of such Third Party Claim, (B) does not subject the Indemnitee to any injunctive relief or other equitable remedy, and (C) does not include a statement or admission of fault or culpability on the part of any Indemnitee.

(iv) Notwithstanding the foregoing, (A) if a Third Party Claim relates to Apportioned Obligations, Buyer shall be entitled to control the defense of such Third Party Claim and (B) if a Third Party Claim relates to Transfer Taxes, New Diamond and SUPERVALU shall be entitled to control the defense of such Third Party Claim (any Third Party Claim referred to above in this clause (iv), a “Tax Claim”). In the case of any Tax Claim, the party not entitled to control such Tax Claim (the “Non-Controlling Party”) shall be entitled to participate fully (at the Non-Controlling Party’s sole expense) in the conduct of such Tax Claim and the party controlling the defense of such Tax Claim shall not settle such Tax Claim without the consent of the Non-Controlling Party (which consent shall not be unreasonably withheld). The costs and expenses of conducting the defense of such Tax Claim shall be reasonably apportioned in the same manner as the Apportioned Obligations or the Transfer Taxes or other Taxes, as the case may

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be, to which the Tax Claim relates. Notwithstanding any other provision, New Diamond and SUPERVALU shall be entitled to control in all respects any proceedings relating to Taxes based on or related to income (“Income Taxes”) of Sellers, New Diamond, SUPERVALU, Albertsons or any of their Affiliates and, except as provided above in this Section 11.03(a)(iv), all other proceedings relating to Taxes of Sellers, New Diamond, SUPERVALU, Albertsons or any of their Affiliates, and Buyer shall be entitled to control in all respects any proceedings relating to Income Taxes of Buyer or any of its Affiliates and, except as provided above in this Section 11.03(a)(iv), all other proceedings relating to Taxes of Buyer or any of its Affiliates.

(b) Direct Claims. If any Indemnitee shall desire to assert any claim for indemnification provided for under this Article 11 other than a claim in respect of, arising out of or involving a Third Party Claim, such Indemnitee shall notify the Indemnitor in writing, and in reasonable detail (taking into account the information then available to such Indemnitee), of such claim promptly after becoming aware of the existence of such claim; provided, however, that the failure of an Indemnitee to notify the Indemnitor shall relieve the Indemnitor from its obligation to indemnify only to the extent that the Indemnitor is actually prejudiced as a result of such failure.

ARTICLE 12

TERMINATION

Section 12.01. Grounds for Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by mutual written agreement of Albertson’s and Buyer;

(b) by either Albertson’s or Buyer if the Closing shall not have been consummated on or before September 22, 2006 (the “Termination Date”); provided that the right to terminate this Agreement pursuant to this Section 12.01(b) shall not be available to the party seeking to terminate if any action of such party or the failure of such party to perform any of its obligations under this Agreement required to be performed at or prior to the Closing has been the cause of, or resulted in, the failure of the Closing to occur on or before the Termination Date and such action or failure to perform constitutes a breach of this Agreement; provided, further, that the right to terminate this Agreement pursuant to this Section 12.01(b) shall not be available to Albertson’s if neither Albertson’s nor SUPERVALU shall have exercised its termination right under Section 8.1(c) of the Merger Agreement;

(c) by either Albertson’s or Buyer if there shall be any Law, regulation or nonappealable final order, decree or judgment of any court or governmental body having competent jurisdiction that would make the consummation of the transactions contemplated hereby illegal or otherwise prohibited;

(d) by Albertson’s if there shall have been a material breach of any representation, warranty, covenant or agreement on the part of Buyer contained in this

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Agreement such that the condition set forth in Section 10.03(a) would not be satisfied and which shall not have been cured prior to the earlier of (i) 20 Business Days following notice of such breach and (ii) the Termination Date;

(e) by Buyer if there shall have been a material breach of any representation, warranty, covenant or agreement on the part of any Seller contained in this Agreement such that the condition set forth in Section 10.02(a) would not be satisfied and which shall not have been cured prior to the earlier of (i) 20 Business Days following notice of such breach and (ii) the Termination Date; or

(f) by Albertson’s or Buyer if the Merger Agreement is terminated.

The party desiring to terminate this Agreement pursuant to clauses 12.01(b), (c), (d), (e) or (f) shall give notice of such termination to the other party.

Section 12.02. Effect of Termination. If this Agreement is terminated as permitted by Section 12.01, such termination shall be without liability of either party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party to this Agreement; provided that nothing herein shall relieve any party from liability for any willful and material breach hereof. The provisions of Section 6.01, 7.13, 12.01, 13.02, 13.03, 13.04, 13.05, 13.06, 13.07 and 13.08 shall survive any termination hereof pursuant to Section 11.01.

ARTICLE 13

MISCELLANEOUS

Section 13.01. Definitions. (a) The following terms, as used herein, have the following meanings:

“Action” means any claim, action, suit, proceeding or investigation by or before any Governmental Authority.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person.

“Ancillary Agreements” means the Assignment and Assumption Agreements to be dated as of the Closing Date.

“Applicable Rate” means a rate per annum equal to the “prime rate” as set forth on the Closing Date in The Wall Street Journal “Money Rates” column.

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to close.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” means the Confidentiality Agreement, dated September 27, 2005, between Albertson’s and Parent, as amended by Section 7.13 hereof.

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“Construction Contracts” means all construction contracts, architectural contracts, engineering contracts, and fixture purchase orders primarily related to the Standalone Drug Business (a Schedule of all material contracts of such types will be provided to Buyer within 45 days after the date hereof) and any contracts and purchase orders approved under Section 5.01.

“Distribution Center” means the distribution center owned by Sellers and located at 777 South Harbor Boulevard, La Habra, CA 90631, including building No. 1111 and all real estate and improvements associated therewith.

“Effective Time” means 12:01 a.m., local time on the Closing Date.

“Environmental Laws” means any federal, state, local or foreign Law (including common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Authority or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Environmental Liabilities” means any and all liabilities arising in connection with or in any way relating to the Facilities, the Purchased Assets or any activities or operations occurring or conducted at the Real Properties (including offsite disposal), whether accrued, contingent, absolute, determined, determinable or otherwise, which arise under or relate to any applicable Environmental Law, including any matter disclosed or required to be disclosed in Section 2.12 of the Disclosure Letter and any and all litigation arising out of or in any way related to any such matter.

“Environmental Permits” means all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities relating to or required by applicable Environmental Laws and affecting, or relating in any way to, the operation of the Facilities or the Purchased Assets.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” of any entity means any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Code.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

“GAAP” means United States generally accepted accounting principles.

“Governmental Authority” means any federal, state, local or foreign government (including any political or other subdivision or judicial, legislative, executive or administrative branch, agency, commission, authority or other body of any of the foregoing).

“Governmental Order” means any order, writ, judgment, injunction, decree or award entered by or with any Governmental Authority.

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“Ground Lease” means any lease or sublease of, or any other interest in, real property occupied by a Ground Lease Store.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indemnitee” means a Seller Indemnitee or a Buyer Indemnitee, as the case may be.

“Indemnitor” means any Person required to provide indemnification under Article 11 of this Agreement.

“IT Systems” means all electronic data processing, information, recordkeeping, communications, telecommunications, account management, inventory management and other computer systems (including all computer programs, software, databases, firmware, hardware and related documentation) and Internet websites.

“Knowledge” means the actual knowledge, with respect to any Seller, of any person listed in Section 13.01 of the Disclosure Letter, and with respect to Buyer, of any officer of Buyer or Parent.

“Labor Agreements” mean any and all union contracts, collective bargaining agreements and other labor agreements relating to persons employed at, or in connection with, the Facilities to the extent they relate to the Facilities or the operation of the Standalone Drug Business.

“Law” means any statute, law, ordinance, regulation, rule, code or other requirement of law of a Governmental Authority or any Governmental Order.

“Lease” means a Store Lease or a Ground Lease.

“Lien” means any security interest, pledge, mortgage, lien, charge, hypothecation, option to purchase or lease or otherwise acquire any interest, conditional sales agreement, adverse claim of ownership or use, title defect, easement, right of way, or other encumbrance of any kind, other than any obligation to accept returns of inventory in the ordinary course of business and other than those arising by reason of restrictions on transfers under federal, state and foreign securities Laws.

“Material Adverse Effect” means any effect that (a) is materially adverse to the business, financial condition or results of operations of the Standalone Drug Business, other than any effect to the extent resulting proximately from (i) general economic conditions or developments or changes therein, (ii) conditions in the industries in which the Standalone Drug Business operates or developments or changes therein, except to the extent that such conditions, developments or changes impact the Standalone Drug Business in a materially disproportionately adverse manner relative to similarly situated competitors of the Standalone Drug Business, (iii) conditions in the stock markets or other capital markets or developments or changes therein, (iv) the announcement of this Agreement or the transactions contemplated hereby, (v) the performance by the Sellers of their obligations pursuant to this Agreement (except the obligations of the Sellers to obtain the consents contemplated by Section 2.04), (vi) the

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announcement, consummation, termination or abandonment of the Merger Agreement, (vii) any actions taken or omitted to be taken by or at the request or with the written consent of Parent or Buyer, (viii) any changes in any Laws or any accounting regulations or principles, or (b) would prevent or materially delay the consummation of the transactions contemplated by this Agreement. A failure by Albertson’s to meet any projections, estimates or budgets for any period prior to, on or after the date of this Agreement shall not in itself constitute a Material Adverse Effect.

“Multiemployer Plan” means any “multiemployer plan,” as defined in Section 3(37) of ERISA.

“Permitted Liens” means (i) Liens that relate to taxes, assessments and governmental charges or levies imposed upon the Purchased Assets that are not yet due and payable or that are being contested in good faith by appropriate proceedings, (ii) Liens imposed by Law that relate to obligations that are not yet due and have arisen in the ordinary course of business and consistent with past practice, (iii) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations, (iv) mechanics’, carriers’, workers’, repairers’ and similar Liens imposed upon the Purchased Assets arising or incurred in the ordinary course of business and consistent with past practice, (v) other Liens on assets which, in the case of each of clause (iv) and (v) above are, either individually or in the aggregate, not material in amount and would not reasonably be expected to materially impair the continued use, utility or value of the property to which they relate in the conduct of the business currently conducted thereon.

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

“Pre-Closing Tax Period” means a taxable period or portion thereof that ends on or prior to the Effective Time; if a taxable period begins on or prior to the Effective Time and ends after the Effective Time, then the portion of the taxable period that ends on and includes the Effective Time shall constitute a Pre-Closing Tax Period.

“Post-Closing Tax Period” means any taxable period that begins after the Effective Time; if a taxable period begins on or prior to the Effective Time and ends after the Effective Time, then the portion of the taxable period that begins immediately after the Effective Time shall constitute a Post-Closing Tax Period.

“Real Property Documents” means easements, reciprocal easements, assignments, leases, subleases, termination agreements, subordination agreements, nondisturbance agreements, estoppel certificates, declarations of covenants, conditions and restrictions, municipal development agreements, agreements with local planning or zoning authorities, and amendments or supplements to any of the foregoing, and recorded memoranda of any of the foregoing, all with respect to the Facilities.

“Sellers” has the meaning set forth in the Recitals; provided, however, that following the Closing (i) any right of Sellers hereunder shall be deemed to be the right of New Diamond and (ii) any obligation of Sellers hereunder shall be deemed to be the obligation of New Diamond or

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the Sellers, as applicable, to the extent that such obligation is within the control of New Diamond or the Sellers, respectively.

“Separation Agreement” means that certain Purchase and Separation Agreement, dated as of the date hereof, by and between Albertson’s, New Aloha Corporation, SUPERVALU INC. and AB Acquisition LLC.

“Store Lease” means any lease or sublease of, or any other interest in, real property occupied by a Leased Store.

“Straddle Tax Period” means any taxable period that begins before the Effective Time and ends after the Effective Time.

“Subsidiaries” of a Person means any and all corporations, partnerships, limited liability companies, trusts and other entities, whether incorporated or unincorporated, with respect to which such Person, directly or indirectly, legally or beneficially, owns (i) a right to a majority of the profits of such entity or (ii) securities having the power to elect a majority of the board of directors or similar body governing the affairs of such entity.

“Taft-Hartley Plan Documents” means each Employee Plan which is identified on Section 9.01(a) of the Disclosure Letter as being formed under the Taft-Hartley Labor Act of 1947, and all amendments and other documents related thereto.

“Tax” means all taxes, fees, levies or other assessments, imposed by any Governmental Authority responsible for the administration or imposition of any Tax (a “Taxing Authority”), including income, gross receipts, excise, real and personal property, municipal, capital, sales, use, transfer, license, payroll and franchise taxes and including Taxes imposed on a consolidated, combined, unitary or affiliated group, and such term shall include any interest, penalties, or additions to tax attributable to such taxes, fees, levies or other assessments.

“Tax Returns” means any return, report or other information required to be supplied to any Taxing Authority in connection with Taxes.

(b) Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Accounts Receivable	1.02
Albertson’s	Introduction
Apportioned Obligations	8.02
Assigned Contracts	1.01
Assignment and Assumption Agreement	1.07
Assumed Labor Agreements	1.01
Assumed Liabilities	1.03
Buyer	Introduction
Buyer Indemnitee	11.02
Capex Budget	5.01

52

Term	Section
Casualty	5.06
Closing	1.07
Closing Date	1.07
Condemnation	5.06
Damages	11.02
DEA	5.07
Data	2.09
Disclosure Letter	Article 2
Distribution Center	Recitals
Distribution Center Transition Services Agreement	1.07
Employee	9.02
Employee Plans	9.01
Excluded Assets	1.02
Excluded Equipment	1.02
Excluded Liabilities	1.04
Facilities	Recitals
Ground Lease Stores	Recitals
Ground Leased Real Property	1.01
HIPAA Privacy Standards	7.08
HSR Clearance	7.02
Income Taxes	11.03
Independent Accounting Firm	1.08
Inventory	1.01
Landlord Rights	1.05
Lease Assignment and Assumption Agreement	1.07
Leased Real Property	1.01
Leased Stores	Recitals
Licenses	1.01
Materials of Environmental Concern	2.12
Merger Agreement	10.03
Non-Controlling Party	11.03
Occupancy Agreement	1.05
Owned Real Property	1.01
Owned Stores	Recitals
Parent	Introduction
Permits	2.17
Petty Cash	1.01
Photo Equipment	7.10
Prepaid Expenses	1.01
Prescription Files	1.01
Prorated Charges	1.08
Purchase Price	1.06
Purchased Assets	1.01
Real Property	1.01
Retained Combo Drug Stores	Recitals

53

Term	Section
RGIS	1.10
Seller Indemnitee	11.02
Sellers	Introduction
Shared Personnel	9.02
Standalone Drug Business	Recitals
Standalone Drug Business Transition Services Agreement	1.07
Stores	Recitals
SUPERVALU	Recitals
Surviving Plans	9.05
Tax Claims	11.03
Termination Date	12.01
Third Party Claim	11.03
Third Party Use and Occupancy Agreement	2.07
Tradenames and Trademarks	7.05
Transfer Taxes	8.02
Transferred Employees	9.02
Transferred Vehicles	1.01
Updated Store List	5.09
Withdrawal Liability	9.01

Section 13.02. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

if to Buyer or Parent, to:

CVS Corporation

One CVS Drive

Woonsocket, RI 02895

Attention: Douglas A. Sgarro

Fax: 401-770-3663

with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attention: Louis Goldberg

Fax: 212-450-3539

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if to the Sellers, to:

Albertson’s

P.O. Box 20

250 Parkcenter Boulevard

Boise, Idaho 83726 (street zip – 83706)

Attention: Corporate Secretary

Facsimile No.: (208) 395-6575

with a copy to:

Jones Day

2727 North Harwood Street

Dallas, Texas 75201

Attention: Mark V. Minton

Phone: (214) 969-3763

Facsimile: (214) 969-5100

if to SUPERVALU, to:

SUPERVALU Inc.

11840 Valley View Road

Eden Prairie, Minnesota 55344

Attention: Corporate Secretary

Facsimile No.: (952) 828-8900

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 13.03. Amendments and Waivers. (a) Any provision of this Agreement (including the Exhibits and Schedules hereto) may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) 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.

Section 13.04. Expenses. (a) General. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

55

(b) Closing Costs. Costs incurred in connection with the Closing will be allocated as follows:

(i) The Sellers shall pay the Sellers’ attorneys’ fees;

(ii) Buyer shall pay (A) Buyer’s attorneys’ fees and (B) the cost of updating any existing survey or obtaining any new surveys of the Real Property or the Facilities.

Section 13.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto; except that Buyer may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates the right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer or Parent of its obligations hereunder.

Section 13.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 13.07. Specific Performance; Jurisdiction. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware (and, with respect to claims in which the exclusive subject matter jurisdiction of such claims is federal, the federal district court for the District of Delaware) in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the Court of Chancery of the State of Delaware (or, with respect to claims in which the exclusive subject matter jurisdiction of such claims is federal, the federal district court for the District of Delaware) and (iv) to the fullest extent permitted by Law, consents to service being made through the notice procedures set forth in Section 13.02. Each party hereto hereby agrees that, to the fullest extent permitted by Law, service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 13.02 shall be effective service of process for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby.

Section 13.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

56

Section 13.09. Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The facsimile transmission of any signed original counterpart of this Agreement shall be deemed to be the delivery of an original counterpart of this Agreement. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto, their respective successors and assigns and the Indemnitees.

Section 13.10. Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits, Annexes and Schedules are to Articles, Sections, Exhibits, Annexes and Schedules of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.

Section 13.11. Entire Agreement. This Agreement and the Ancillary Agreements constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement, including, at the Closing (to the extent set forth in Section 7.13), the Confidentiality Agreement.

Section 13.12. Severability. Whenever possible, each provision of this Agreement will be interpreted so as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction, then such invalidity, illegality or unenforceability will not affect the validity, legality or enforceability of any other provision or portion of any provision of this Agreement, and this Agreement will be re-formed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purposes and intent of such invalid, illegal or unenforceable provision.

Section 13.13. Bulk Transfer Laws. The Sellers and Buyer waive the requirements of any Laws (including Tax Laws, it being understood that Sellers and Buyer shall use their respective reasonable best efforts to obtain Tax clearance certificates as provided in Section 8.03) with respect to bulk transfers, and the Sellers agree to pay and discharge when due all claims of creditors which could be asserted against Buyer by reason of such waiver. The Sellers jointly and severally shall indemnify, defend and hold harmless Buyer from any and all Damages

57

resulting from the claims of creditors of the Sellers arising out of or connected with their failure to comply with the requirements of any Laws relating to bulk transfers or the failure of the Sellers to discharge such claims.

Section 13.14. Guaranty. Parent hereby guarantees to each of the Sellers and New Diamond the prompt and full discharge by Buyer of all of Buyer’s payment and performance obligations under this Agreement in accordance with the terms hereof. SUPERVALU hereby guarantees to Parent the prompt and full discharge by each Seller controlled by SUPERVALU and by New Diamond of all their payment and performance obligations under this Agreement in accordance with the terms hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

58

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

CVS PHARMACY, INC.
By:	/s/    TOM RYAN
	Name: Tom Ryan
	Title: President and CEO
CVS CORPORATION
By:	/s/    TOM RYAN
	Name: Tom Ryan
	Title: Chairman, President and Chief Executive Officer
ALBERTSON’S, INC.
By:	/S/    JOHN R. SIMS
	Name: John R. Sims
	Title: Executive Vice President and General Counsel
SUPERVALU, INC.
By:	/S/    JEFF NODDLE
	Name: Jeff Noddle
	Title: Chairman & CEO
NEW ALOHA CORPORATION
By:	/S/    PAUL G. ROWAN
	Name: Paul G. Rowan
	Title: President

EX-99.01

Exhibit 99.01

Filed by SUPERVALU INC.

Pursuant to Rule 425 under the Securities Act of 1933

Subject Company: SUPERVALU INC., File #1-5418

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Conference Call Transcript

SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Event Date/Time: Jan. 23. 2006 / 8:30AM ET

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

CORPORATE PARTICIPANTS

Yolanda Scharton

SUPERVALU, Inc. - VP Corporate Communications and IR

Jeff Noddle

SUPERVALU, Inc. - Chairman and CEO

Pam Knous

SUPERVALU, Inc. - EVP & CFO

CONFERENCE CALL PARTICIPANTS

Mark Husson

HSBC - Analyst

Jason Whitmer

FTN Midwest Research - Analyst

Eric Larson

Piper Jaffray - Analyst

Tom O’Neill

Barclays Capital - Analyst

Bryan Hunt

Wachovia Securities - Analyst

John Heinbockel

Goldman Sachs - Analyst

Louis Stark

Chesapeake Partners - Analyst

Filippe Goossens

Credit Suisse First Boston - Analyst

David Freedman

Bear Stearns - Analyst

Anton Deaner

Brean Murray - Analyst

Steve Chick

JPMorgan - Analyst

Fred Taylor

Lord Abbett - Analyst

Eric Miller

Piper Jaffray - Analyst

PRESENTATION

Operator

Good day and welcome to the SUPERVALU investment community conference call. Today’s call is being recorded. At this time, I would like to turn the call over to Yolanda Scharton. Please go ahead.

Yolanda Scharton - SUPERVALU, Inc. - VP Corporate Communications and IR

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Thank you. Good morning and thanks for joining us on this very special day. I am Yolanda Scharton, Vice President of Corporate Communications and Investor Relations for SUPERVALU. Leading our call today will be Jeff Noddle, Chairman and Chief Executive Officer of SUPERVALU; also Pam Knous, SUPERVALU’s Executive Vice President and Chief Financial Officer.

Before the market opened, we announced that we reached an agreement to acquire the key retail operations from Albertsons. This is a very exciting strategic move and we are very pleased to share this news with you this morning. If you have additional questions following this call, we will do our best to make ourselves available to you throughout the day and going forward.

Please be aware that we can only comment on the properties that SUPERVALU has purchased in this transaction. We are not going to be commenting on the purchase made by other businesses in the consortium.

Before we begin, I must note that some of the comments made today will be forward-looking and involve business risks and uncertainty, and these factors are referred to under the Safe Harbor provisions that were filed in our Company’s report in the 10-K.

I would like to turn it over to Jeff.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Thank you, Yolanda, and good morning to everybody. Thank you for joining us early in the morning on very short notice. As Yolanda indicated, this is a very exciting and historic day for SUPERVALU. Over the next few minutes we’re going to share with you as much as we can about this very transformational transaction that is occurring and we will leave adequate time for your questions.

As Yolanda indicated, SUPERVALU, CVS, and Cerberus led investment group are acquiring all of Albertsons for 17.4 billion in cash, stock and assumption of debt. SUPERVALU specifically is acquiring ACME Markets in Philadelphia, the Bristol Farms stores in California, Jewel-Osco in Chicago, Shaw’s in New England, and Star Markets in New England, and 569 Albertsons named stores that are primarily in Idaho in the inter-mountain area of Idaho, Nevada, Utah, and the northwestern part of the United States. We also are acquiring the in-store pharmacies under the name Osco and Savon that are co-located with their supermarkets. CVS is acquiring the stand-alone pharmacy operations of Savon and Osco. Cerberus and its partners, Kimco Realty and Scottenstein Realty, are acquiring the remaining retail markets that we did not discuss. Those markets being Florida, Texas, Arizona, Northern California and the Rocky Mountain area.

SUPERVALU’s consideration in this transaction equals 12.4 billion, which is made up of 3.8 billion in cash, 2.5 billion in stock, and we are assuming Albertsons debt of 6.1 billion. I am hopeful that everybody is able to follow along. That is page 3 and I will note those pages as we proceed.

From page four, this depicts what I have said to you in the markets that we are acquiring and again importantly those that we are not acquiring. The total markets that we are acquiring bring to us 1126 stores and annualized revenue of about $24 billion and annualized EBITDA of about $1.77 billion. The margin, the EBITDA margin on the businesses that we are acquiring, are 7.2%, which if you note that to what Albertsons’ overall historical EBITDA is, this is quite a bit higher because again we are acquiring certain markets only and not acquiring other markets.

On page five, depicts that this deal really for us really comes at really the right time for us. We have talked to you quite often over the last five years about how we have been preparing ourselves and getting our balance sheet in condition; giving ourselves what we described as headroom and flexibility to look at opportunities as they came along in the industry. We have been preparing ourselves and talked often about the strong regional and the local market strategy that we pursue and of course we’ve worked very hard to continue to improve our supply chain backbone. We knew that would be an important part of any transaction we did no matter what part of the industry it was in.

We very much have worked hard on empowering or local management teams to be close to the customer and really close to the market. We believe that we have proven that we have a good track record in managing a variety of retail formats. Of course we have managed today everything from Sav-A-Lot and limited assortment stores to upscale chains. And through our distribution business, we interact with retailers of all sizes and shapes.

We have a very good track record of successful integration of acquisitions. In the 1990s we did two major transactions, Wetterau in the early ‘90s and Richfood in the late ‘90s. We intend to approach this in the same thoughtful and careful manner.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

On page six, we talk about a little bit some of the metrics as we begin to break this transaction down for you. This will double SUPERVALU’s revenue to over $44 billion on an annualized basis. It triples our retail food revenues to 35 billion pro forma, again annualized. Most importantly it triples SUPERVALU’s EBITDA to 2.7 billion pro forma annualized. This would elevate us to the number two spot in the grocery industry measured by revenue and it also would mean we would have the largest grocery network of any operator in the country with 2,653 stores. And that of course includes Sav-A-Lot and all of our Sav-A-Lot licensed stores.

One of the most attractive things to us through this whole thought process has been the leading markets where Albertsons has had excellent share of markets. These markets being Boston, Chicago, Las Vegas, Los Angeles, Orange County, Philadelphia and San Diego. Obviously most of these markets are new to us and in almost every one of these markets they have number one or two share. So the attractive thing to us was to add significant size and scale but more importantly to us was add leading market positions and many of these are excellent branded or as we call them banner locations and fit very nicely into our portfolio. We will talk more about that in a moment.

Obviously this expands SUPERVALU’s supply chain footprint. We will run a supply chain that is truly coast-to-coast, border-to-border and does business in all 48 states. We have estimated synergies of approximately 150 to 175 million pretax in the new SUPERVALU and we will break those down in a moment for you. This obviously changes our business model substantially as 89% of the Company’s EBITDA will be in the higher growth retail segment as opposed to today.

On the next page, on seven, you can see the growth of our current retail revenue from 53% in supply chain to 47% to about an 80/20 split in the new SUPERVALU pro forma. Also you can see the effect on our EBITDA going from about two-thirds/one-third to 89% being retail and supply chain being 11%. But having said that, one of the key reasons that we do these transactions is that we can utilize our supply chain across our entire retail network as we continue to support our independent retail business as well.

On page eight, depicts the current SUPERVALU footprint previous to this transaction and it highlights the various operations which you can see of all of our operations indicated, our retail and distribution and also indicates the TLC-owned and managed facilities are included in this map as well. Then when you add the footprint of the acquired Albertsons businesses and markets, you can obviously see those fill in very nicely in markets where we did not have presence and also enhances markets where we did have presence already.

Then if you go to page 10, you see the new combined company and as I said, it does business and all 48 states and it is a significant supply chain business that operates all over the country. We’ve even talked about the fact that we run probably one of the largest transportation networks in the country. And going forward, we will be coming up and looking at strategies and ideas to not only enhance that but improve a profitability model just looking at the transportation network in and of itself carries a whole series of transactions and strategies that we might be able to do.

On page 11, these begin to highlight now the acquired companies and I assume many of you are familiar with them. I’m going to talk a little bit about each one in the next few pages, so if you want to follow along with that, we will start on page 12 with ACME. ACME is number one in the Philadelphia market with 134 stores. It is well over 100-year company and they just have key shares in not only the Philadelphia market but in New Jersey, Delaware and Maryland, but largely concentrated in the Philadelphia metropolitan area. I think ACME has improved significantly under Albertsons’ stewardship and we are very excited to have those people join us. We have met the leadership of that group as well as all the others and we feel very good about that.

On page 13, we highlight Bristol Farms, which was acquired last year by Albertsons. There are now 11 stores all in Southern California. We are very excited to learn more about Bristol Farms. It clearly is on the upscale side of retailing. I know Albertsons had some very strong plans for Bristol Farms which we will be excited to share and learn more about and see what kind of strategy we would have going forward.

On the next page, highlights one of the key components certainly of this transaction for us, and that is the Chicago position of Jewel-Osco. That is about 200 stores and they are number one in Chicago and their market share is well over 40% and obviously most of you know we have operated in Chicago for quite some time. We did announce this morning the sale of our Cub Stores in Chicago to Cerberus and I will be talking a little more about that later.

Larry Wahlstrom serves as its president and I didn’t mean to exclude the others. I think Kevin Davis is with Bristol Farms and Carl Jablonski is with ACME. I apologize I didn’t have those right in front of me. We have met all the leadership teams and are very comfortable how they fit into our portfolio style of business. We will be talking a lot about that in the months ahead.

On page 15, we talk about the inter-mountain and northwestern part of Albertsons. This makes up about 250 stores in the key markets of Idaho, Montana, Nevada, Oregon, Utah and Washington, but their shares are largely concentrated in Boise and Portland, Salt Lake City and the Seattle metropolitan areas. It is led by Mike Clawson and that of course, Albertsons is originally founded and based out of Idaho and that is a very important key part of the country for them; very strong network of stores.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Moving to 16, we talk about New England. That of course is highlighted by Shaw’s and also Star Market, 210 stores, number two in New England and they operate in six New England states but the concentration of stores are in the Boston, Hartford, and Providence metropolitan areas. Nicola DiFelice is the Division President there and a great addition to our Company and a return to us if you will to the New England market which we are very pleased about.

On 17 we begin to highlight Las Vegas and Orange County. There are 311 stores in Southern California including Las Vegas. They are number one in Las Vegas and Orange County, obviously too very fast growing parts. I have visited some of the Las Vegas stores and they have a very excellent new fleet of stores in that very fast growing market. The stores are concentrated as I said in Las Vegas, Orange County, San Diego where they have leading very top shares. And then in Los Angeles, where they have a little lower share there, but one of the leading shares as well. Pete Van Helden is President of Southern California, which includes Las Vegas, and again we welcome Pete and his team to our Company.

Now let me move into some of the key financial highlights and SUPERVALU’s consideration as I mentioned is 12.4 billion; to repeat, it’s 3.8 billion in cash, 2.5 in stock, and then we are assuming all of their debt of 6.1 billion. The EBITDA multiple of this transaction is right at seven times. We think that was a very fair price, again we went in and selected those markets and those assets that we wished to acquire and we think this is a very good price and a very fair price for the assets that we are acquiring. The EBITDA multiple we will come to shortly for the acquired properties is 7.2%, and that compared to the EBITDA multiple of what would didn’t acquire, which is around 3.5%. So you can see that these markets were certainly the key contributors in the total corporation.

The new Company, the new SUPERVALU, will be capitalized approximately 65% with SUPERVALU shareholders and approximately 35% for Albertsons shareholders. We will continue to pay dividends and we expect that this transaction to close by summer of 2006.

On page 19, we give the highlight, the transaction and obviously this sets us up for very significant future growth and it is immediate accretion absent onetime costs on our diluted earnings per share. We expect in fact this transaction to be double-digit accretive excluding the onetime items which we estimate at this point to be around 125 million going forward over the next fiscal years.

Our pro forma EBITDA for fiscal ‘06 would increase 140 basis points under this transaction, which moves SUPERVALU’s EBITDA from 4.8% to 6.2% through this combination. And over time and we estimate that to be about a three-year journey, our EBITDA margins would increase an additional 30 to 40 basis points, taking our projected pro forma EBITDA to 6.5 to 6.6 after the combined entity realizes a 150 to 175 million in synergies that I mentioned.

A couple additional comments here. The onetime cost of 125 million excludes the loss that we will incur on the sale of the 26 Cub stores in Chicago. That transaction is effective today, so that transaction will affect our fourth quarter and I will make more comment about that in a moment. The onetime costs primarily relate to retention bonuses as well as transfer taxes and filing fees related to the acquisition and other upfront costs involved in achieving our synergies. The potential for new SUPERVALU to be viewed as a pure retail play is obviously a substantial mix of high-performing retail earnings and the financial metrics that are more aligned with the retail industry.

On the next page, on page 20, this is somewhat depicted here in saying that the new SUPERVALU would generate a 6.2% EBITDA and that is just the current combining of the two organizations and remember just combining those key markets within Albertsons that we are acquiring. You can see that compares to the First Call analyst estimates of EBITDA for this fiscal 2006 for Safeway at 5.9; Kroger 5.4; and the current SUPERVALU at 4.8. So just the combination alone actually takes us ahead if you will of the EBITDA margins of some of the prime competitors.

On the next page, we talk about the synergies and break them down a little further for you. You can see the various buckets that they are in. Synergies are across a number of areas. We think they are very deliverable and again we have mapped out a three-year journey to accomplish it. And we are very, very confident. We think we can do that over three years and we hope certainly to get many of these loaded in the first two years particularly.

Retail leverage and efficiency synergies are 75 to 85 million. We’re bringing two large retail organizations together, which allows us to leverage our scale principally in procurement leverage and a lot of best practice sharing across the network. There are many things within Albertsons that we feel we can benefit within SUPERVALU, and obviously we feel that we have the same things going the other way as well.

We anticipate corporate synergies of 50 to 60 million and that’s simply consolidating functions and eliminating redundant public company overhead. And also supply chain optimization we estimate at 25 to 30 million. That is just our really high-level first look in my mind of

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

leveraging the best logistics expertise across this much broader network through productivity and efficiencies and through technology and scale. You know this is one of our strongest core competencies. I happen to believe over time that we will generate as I mentioned just looking for example to transportation alone, offers us some opportunities that we haven’t yet begun to quantify.

On the next page, we start to depict our accretion and I’m going to ask Pam Knous to take us through this slide.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Okay, maybe I’ll just pause for a moment here because this is the first slide where we are actually putting together the combination for you. You can see in the first column we have SUPERVALU First Call for fiscal ‘06. We have included the combination adjustments for the specific assets and results that we are acquiring and the third column is simply just the mathematical addition of those two columns.

So Jeff has already reviewed with you the EBITDA numbers. You can see that we are obviously adding a sizable interest load here, as well as we will be issuing approximately 78 million more shares on a fully diluted basis. But even despite the higher interest cost and the higher number of shares outstanding, you can see that on a combined basis without synergies that this transaction will still be double-digit accretive.

Then we provided a fourth column for you so that if you wanted to add in 150 million of synergies you could see the impact that that would have delivering 35% increase.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

I would just highlight a few things and again these are without onetime charges. As you can see just even without the synergies combining the two companies does even with the higher share count does provide a 17% accretion and with synergies that should develop over the first three years just taking today’s numbers, that is a 35% accretion. So you can see why we feel this was a very compelling transaction for us to do.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Okay on this next slide working the same way, we’ve put together what the combined leverage would look like. You can see with the assumption of debt of 6.1 billion as well as the borrowings that we will have to execute this transaction; the combined companies’ debt at closing would approximate 9.7 billion. If you look at our credit statistics there, you can see that our debt to EBITDA leverage has increased significantly to 3.6, but we clearly believe that this is a manageable level.

For this type of transformational event, we did use a combination of stock and debt. The mix is about 20% stock 80% debt including the assumption of debt and clearly we utilized a greater portion of debt as it is the most cost-effective way to affect this transaction. We clearly believe that this leverage is manageable. The combined entity generates strong EBITDA cash flow, allowing for at least 400 million of annual debt pay down after year one. So we believe that we will be able to steadily improve our financial position in the near term. And as Jeff always says, we are going to apply the same disciplines we always have that positions SUPERVALU to the position that it is at today and we’ll bring that focus to the new combined entity as we focus on balance sheet management and return on invested capital. We clearly have a goal to return back to investment-grade.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Yes, and I want to just reiterate the fact that the same things that you have seen this management do over the last five years as we significantly delevered our balance sheet to get ready for a really transformational transaction hopefully such as this, we are going to do those same things going forward with the same discipline, the same capital discipline. And as Pam stated, our goal will be to return to investment-grade. We recognize we will not be investment-grade at the closing of this transaction, but over the next years we will return to investment-grade and we’ll apply the same principles we had to getting to this point.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

And so then we also to just put together a simple little page for you to give you a sense of what the free cash flow will be. This does exclude the onetime transaction costs and again, we have recapped for you the major cash items, EBITDA, cash interest, income taxes, dividends, and cash capital expenditures. And looking at that combined entity, you can see that there is still sizable free cash flow that will be available to us and as we said, we fully expect that after the first year we will have the ability to reduce debt by at least 400 million annually.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

That was page 24 and moving to page 25, we tried to give you on one page all of the key financial metrics combined for the current SUPERVALU, the businesses to be acquired, and the new SUPERVALU. I think we talked about almost all of these with a few exceptions. We will be adding 700 in-store pharmacies. We will be up to almost 900 pharmacies in SUPERVALU. I think that makes us the eighth largest pharmacy operator in the country. Obviously we are adding a significant number of employees. We will go to 198,000 from our current 54,000; and in the acquired businesses are 144,000 employees.

We’ve mentioned 44 billion in revenue and the EBITDA numbers. I would point out to you the capital spending estimated at 1.1 billion, which really is just a combination of the trend line and capital spend line for the two entities separately and the debt to capital ratio reaches to 65%. Obviously that is a very high number for us than recent history and that is what we estimate it to be at closing. At the end of the first year, we think as Pam mentioned with the kind of cash flows we anticipate, we should be able to get that number down at the end of the first year down to about 62%, which also happens to be about the same place the Company was if you go back just prior to the Richfood acquisition. We have worked that down to below 30.

And as you see also the new share count fully diluted is 224 million shares.

So let me highlight on page 26 our next steps. Obviously we have quite a road of approvals to gain, regulatory approvals. We of course will be issuing a proxy and gain shareholder approval. Transition planning will get underway immediately. It will be a very collaborative process between the two companies. We intend to have this as an open process. We intend to have the highlights -- the best out of both companies, people from both companies. I will be very much an integration planned for and executed by people from both companies.

We have hoped (technical difficulty) that transition immediately post close. (technical difficulty) not sure how long it will be as we talked about having it in summer. We would hope that it would be four to five months, no longer than that. We will obviously keep you informed on that.

Very paced and very thoughtful. We have assumed and you saw the synergies (technical difficulty) timelines for synergies. We, a lot of the early decisions that will be done with as many integrations deal around systems and processes and technologies and we have said we intend to do this over a three-year period of time. We think those that are done immediately sometimes are mistaken and that the core businesses don’t operate and are impacted to greatly. Yet on the other hand, letting them drag on too many years is not a good decision as well.

We will do this on a very measured and paced basis over three years. We will analyze the technology is the best for the combined entity. There is no assumption that it will all come from one side or the other, but it will very definitely be a combination of technologies and systems and processes of both companies. Because we will do it on a very paced, very measured, and very thoughtful basis (technical difficulty) journey. Synergies should be fully implemented as we said by the end of the third year.

Just to recap, SUPERVALU now, the new SUPERVALU becomes a retail (technical difficulty) being the finest distribution powerhouse in its history. We become the number two grocery retailer in the country. We will leverage the size and scale of our supply chain enterprise across this new business and be truly the only national supply chain that exists in the food business. We will be expanding our broad portfolio of some of the industry’s best regional nameplates. And of course the assets that we are acquiring are great brands with great locations and certainly a number of great people in the Albertsons organization.

We will realize synergies potentially through a better procurement scale and the optimized supply chain I mentioned. Obviously we gain a tremendous amount of retail expertise and add significantly to our bench, maximize our growth that is exceptional and deliverable.

On the next page, you see the new combined SUPERVALU and some of the nameplates and banners that it uses. I would just conclude before we take your questions in saying I know many of you will say this is a very sizable transaction for SUPERVALU. We acknowledge that and many of you would say maybe this is too large. Why would you do something of this size? And I will tell you that the opportunity to (technical difficulty) into a company, a great company like Albertsons and be able to select out the markets (technical difficulty) in your geography, fit your style of operation and your brand is a compelling opportunity.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

The past five years when asked, people said would you ever do a transaction of this size, they’ve asked a lot about the investment-grade and we always said it was our intent to remain investment-grade but we said we would only consider doing a transaction of this size if it would (technical difficulty) very compelling opportunity. We think this is a once-in-a-lifetime very compelling opportunity to be able to flex great parts of this Company, our portfolio and our supply chain.

Obviously we are excited and we think that our shareholders long-term are better served by us doing this transaction, by taking ourselves to the size and scope and scale that we’ll be able to compete as we look out and look at the food industry in the future. We recognize that you’re going to need to be a certain size and you need to have a certain scale and we think that doing this rather in one transaction rather over an extended period of time is the right decision for our shareholders. What this does is it accelerates the plans that we had for 10 years. It accelerates the plan and does it upfront. We recognize that there is a great integration that has to be done and there is always risk in integration. But we will proceed against that in the same thoughtful and careful manner that you have seen us do our business.

So with that, I will be happy to begin the question-and-answer.

QUESTION AND ANSWER

Operator

(OPERATOR INSTRUCTIONS) Mark Husson, HSBC.

Mark Husson - HSBC - Analyst

Good morning and congratulations on an audacious bid.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Well said as always, Mark.

Mark Husson - HSBC - Analyst

Just a strategic question. There’s lots of nuts and bolts that we will get to over next couple of months, but strategically your analyst presentation a couple of months ago or probably three months ago, it focused on just how great the return on invested capital was in the distribution business, the logistics business, and in Sav-A-Lot. The implication was that general retailing had a somewhat lower return than some of those other businesses, yet this transaction takes you very firmly into the field of regular retailing in America.

Could you just talk about how you’re able to get the returns up inside of this business over a period of time?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Well, I don’t know that we should have specifically led you previously to think that our ROIC in retail was not a reasonable return for us, because in our view it most definitely was and very much made up an important component of the track we were on of now having gone over 15 and heading toward an 18. In our minds, remember when we look at these opportunities, Mark, we look at them not only from a retail opportunity and a market scope but we also look at it from a supply chain and distribution network too. And we aggregate those activities when we analyze our returns on capital.

We think having this kind of size and scale across the United States, yes, we are resetting the clock if you will on our invested capital goal, but having this kind of size and scale across the Company, we think there are unlimited number of opportunities to improve return on invested capital for the new combined entity. We intend to again proceed against that, Mark, in the same way you have seen us proceed against it with our other asset basis. By the way, we are going to continue to harvest the higher returns on capital in those existing businesses that you mentioned; in the logistics business; in the Sav-A-Lot business; and the distribution business. Those will continue to improve on our return on capital. But now when we introduce new synergies and new scale across it, frankly I don’t -- from even longer-term than we’re talking here -- I am not satisfied with our synergy numbers that we are using and longer-term I expect better returns and better returns on capital.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

So we are going to take those same disciplines to it. The marketshares that we are acquiring are just too compelling for us not to approach it. But we will continue to approach this from a return on invested capital basis.

Mark Husson - HSBC - Analyst

Just one final detailed area. If you’ve taken the best bits and certainly the most profitable bits of the Albertsons empire but we don’t have any visibility on the momentum inside of the bits you’ve taken. If they are making 7% to EBITDA margins now or 7.2%, that presumably was rather higher in the past. How do you address this kind of decelerating momentum inside of the business? How do you arrest it and how do you turn it around?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Well, I remind you once again as you just stated that the properties we’re buying, your historical reference may not be true on the properties we are buying. They have been high performers. They have been excellent. Obviously they are impacted by Southern California quite a bit. But that is a very sharply improving metric. We got more and more comfortable as we looked in at Southern California and the pace of recovery particularly on the EBITDA margin and the revenue margins since the strike.

We think a business that is performing at 7.2% is a very strong and competitive EBITDA business today and we did not see anything in the historical basis that gave us pause. Obviously they have been on a trajectory to do certain things in certain markets and we will be learning more about those. And we will be studying the capital allocation and making those decisions. But I think what has been very important in this market is the Southern California trajectory and as I said, the more time we spent on it, the more comfortable we got with the way that is headed and we are willing to be a part of that.

Mark Husson - HSBC - Analyst

Great. Of course Pam has been there before.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Very true.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Very true.

Mark Husson - HSBC - Analyst

All right, thank you very much.

Operator

Jason Whitmer, FTN Midwest Research.

Jason Whitmer - FTN Midwest Research - Analyst

Jeff, how would you address your current distribution capabilities particularly with the core business you’ve had with your independent supermarkets? How do you anticipate dealing with the potential conflicts there? And I guess long-term would you still consider that a core part of your business and do not only internal distribution but external distribution and would you consider selling that piece or selling any piece of the assets you’re acquiring either?

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Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Jason, first there are no plans to divest any of this. As I said, we will go through in time the same kind of disciplines and approaches that we have taken. But we have no current plans to sell any of these businesses and we certainly have no plan to remove ourselves from the distribution business. We think that is an important backbone of the Company, whether we are supplying our own stores or supplying those owned by others. So we do not have any plans on the horizon to divest that business.

Your question also relates what about the overlaps and conflicts? And I will tell you we have heard from many customers as this very non-public transaction seemed to stay very much public. We heard from a lot of our retailers who frankly were very encouraging because I think good independent retailers today understand what they are up against in terms of supply chain and scale and procurement and all those important things. And a lot of them were encouraging us to do this transaction because they knew down the line that they would benefit directly from the size and scale and scope that we would be able to do. There are some overlaps and conflicts. We have always had these before in SUPERVALU. We have managed our way through them quite well. We will use the same approach in those markets.

There frankly are not as many overlaps as you might expect. We do have some out in Pennsylvania. But of course in New England we don’t have any overlap in New England, as that business was sold some years ago. We do have a little bit of overlap out in the Pacific Northwest, but in the inter-mountain areas we really don’t operate much. And of course California other than a few limited Sav-A-Lot stores is almost entirely new to us. In Chicago, we have very limited amount of independent business. In Chicago, we do have more independent business in the Greater Midwest and Greater Illinois, but hardly any of it conflicts with Jewel.

So there are limited overlaps and we will be dealing with those. But I think retailers today understand that they have got to have tremendous backbone today to compete and I’m hopeful that they will be very understanding and excited about that.

Jason Whitmer - FTN Midwest Research - Analyst

With your current initiatives for your retail banners particularly on the big box side, what are your initial thoughts of transferring some of those learnings to Albertsons and vice versa? I guess ultimately where do you think you might be able to head in terms of finding differentiation in traditional supermarket land?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Well, we have identified already a number of key learnings from each organization and best practices. Very much ingrained in our whole transition plan will be a sharing of best practices. Albertsons I think over the last few years has put a lot of focus on process and technology and in-store technology. And we saw a lot of things that we think that we could bring across into our -- we’ve spent a lot of money on technology, but we have not stressed the particular areas that Albertsons has stressed, particularly some of the in-store technology and the processes, as I mentioned. So we are going to take a lot from Albertsons from that.

On the other hand, I think we have been more focused maybe on the end market, local merchandising and local marketing, and we think we’ve got some great ideas and things to share with our Albertsons associates in that regard. Believe me, Jason, we will -- this deal will be successful because we will be sharing the best practices and there won’t be one size fits all, nor will there be one side of this that has all the answers. So we are very excited to get on that journey and do that.

Just things like our distribution competency and expertise; we go about a little bit different. It’s kind of science to us if you will and as you know, we’ve got t-squared what we call today which is the transformational new technology going into the Minneapolis distribution center. We will be looking -- we will be rethinking our network of those in the future now incorporating these Albertsons’ assets into it.

We just opened two weeks ago our Sunflower store, our first organic and natural value priced chain in Indianapolis, and it is off to a very strong start. There may be ideas there that we can cross fertilize. Private-label, they have a terrific upscale line of private-label products. We do not. And we are developing a very solid line of organic private labels which they do not have yet. So we have got many, many opportunities. I could spend the rest of the morning going through those. But we will be cross fertilizing them as an important part of our transaction.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Jason Whitmer - FTN Midwest Research - Analyst

Great. Thank you and congratulations.

Operator

Eric Larson, Piper Jaffray.

Eric Larson - Piper Jaffray - Analyst

Congratulations, everyone. A quick question just on the double-digit accretion to earnings. In running through the numbers here we are just at the first stages of that, but would it be a onetime double-digit step up and then a growth rate that would be a little bit less than that? Or how would you characterize that?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Well you are going to have to build a model. You can see that in the combination that there is potentially a onetime step up of the 17 basis points that’s on the slide. As we said, the synergies would come in over time. So I think that is just going to be -- you would have to assess how quickly you think those synergies will come to fruition. We clearly are not giving any specific guidances. We do not know when this transaction will close. It will be a midyear event of some sort or other. And clearly we will be planning to share more specific guidance with you as it relates to any given fiscal year. But at this point, we’re really just saying on an annualized basis this is what the combination looks like.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

I would add, Eric, that page 22 if you look that that Pam is discussing, that is really taking today’s numbers and adding three year’s worth of synergies and then looking at what that accretion would be. There will have to be assumptions made on where the synergies are going to lay in and how they would come. As we get closer to the transaction, we will give more information and of course as the transaction closes and go forward we will give guidance at that time.

But we’re going to be reluctant as Pam said to give specific guidance by year. We’re going to have a stub year here. We’re going to have onetime charges. But you can clearly see that by any measure this is going to be a highly accretive transaction.

Eric Larson - Piper Jaffray - Analyst

Yes, absolutely. Thank you, everyone.

Operator

Bill [Nonamil], Barclays Capital.

Tom O’Neill - Barclays Capital - Analyst

This is actually [Tom O’Neill] from Barclays Capital. Three quick fixed-income questions. Do you anticipate having secured financing to fund the cash portion of the acquisition? Secondly the American stores bonds, are you going to assume those as well? Lastly, are you going to have a guarantee or cross guarantee for Albertsons’ bondholders?

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Okay, as far as the actual revolver and financing that we’re going to be putting in place, that facility will be secured with a pledge of the stock of our U.S. subsidiaries. We would anticipate there is a mechanism in place that depending on the actual rating that we receive from the rating agencies that there is the potential that our current assets would also be pledged to that facility.

We do intend to assume the American store’s debt. That is part of the 6.1 billion that we have said that we would be assuming as part of this transaction. The guarantee will remain outstanding. That is the guarantee of the Albertsons’ component of the structure and that guarantee will remain outstanding.

Tom O’Neill - Barclays Capital - Analyst

How about SUPERVALU? Will SUPERVALU guarantee Albertsons’ debt?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

No.

Tom O’Neill - Barclays Capital - Analyst

Okay, you’ll just assume it?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Yes.

Tom O’Neill - Barclays Capital - Analyst

Okay, thank you.

Operator

Filippe Goossens, Credit Suisse First Boston. Filippe, your line is open.

Operator

Bryan Hunt, Wachovia Securities.

Bryan Hunt - Wachovia Securities - Analyst

Looking at the total debt on the company post acquisition, and the cash portion of the financing, it looks like there is a shortfall of roughly 1.4, $1.5 billion. I was wondering if you could talk to us about where those funds will come from?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

I guess I am confused as to what you’re looking at that says that there is a shortfall.

Bryan Hunt - Wachovia Securities - Analyst

Well, it looks like the total debt is going to be 9.7 billion and based on the slides and that’s 1.7 billion of SUPERVALU debt, 6.1 billion of Albertsons debt. So that implies additional debt to $1.9 billion. The cash portion of the transaction is 3.8 billion.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Okay, but there is cash available as a result of the transaction. You have got to recognize that we are -- the drug assets are being sold and so you can’t look at this transaction just in isolation to come up with the total cash that is for the entire Albertsons transaction.

Bryan Hunt - Wachovia Securities - Analyst

Okay, that’s where my question lies — comes from.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

(multiple speakers) other assets being sold also there’s available cash in each corporation as well.

Bryan Hunt - Wachovia Securities - Analyst

Do you plan on doing any sales leasebacks of any of the facilities you were buying to help fund the transaction?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

We do not.

Bryan Hunt - Wachovia Securities - Analyst

You do not. Okay, and then looking at potential additional synergies and I know you kind of soft stepped to that issue -- based on your historical transactions in this space, what do you think the upside is on the transaction side of the equation? In terms of cost savings?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We’re not going to give out anything at this stage, Bryan, other than what we have in the $150 million to $175 million range. I have spoken descriptively that I think longer-term I believe that there are more opportunities. Like I said, even looking at the supply chain I think we only had 25 to 30 million at this point. I think over time I will be disappointed if we don’t harvest more than that. But I don’t want to commit further than that because then people want to know by when and how much and we’re not yet prepared for that.

Bryan Hunt - Wachovia Securities - Analyst

Then lastly looking at the relationship with the unions in this transaction is there any sizable negotiations that are pending with the Albertsons stores you’re acquiring?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

I don’t have that in front of me. Obviously they have a number of contracts so there’s always going to be some contracts coming up. I do not recall any that are of significance that are pending at the moment. I think they had a couple open contracts that I think got settled just recently and I’m sorry, I’m not going to quote the market. So the answer to your question is no, there aren’t any that are of significance or concern that are pending. But a company that size they are always going to have some every year.

Bryan Hunt - Wachovia Securities - Analyst

All right, thank you.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Operator

John Heinbockel, Goldman Sachs.

John Heinbockel - Goldman Sachs - Analyst

Two things. One, now with this enlarged size of the retail operation, how does the organizational structure on the retail side have to change? You have been very decentralized. Can you still be -- do you need to be more centralized, more management, or beef up -- how will that change so you can manage this better? Then I have one other.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

All right. Well, John, that is going to be a very key part of this transaction without a doubt, how we organized ourselves around the retail organization. I think I stated earlier one of the attractive things for us is we add significant retail bench strength into the Company. We haven’t decided on a final design of how we will manage it, but we have some organization structures in mind. We will utilize the talent from both organizations. It will be a very open, very interactive process between the two.

But I think, John, one of the key things that really incented us to do this transaction is that the way their divisions run today, the way they are organized, the leadership, the kind of leadership that they have, we’re very comfortable with the division management, the people we did spend some very quality time with those people. And we very much think they fit into our portfolio style of management. That doesn’t mean that we’re not going to organize differently and need more and deeper retail bench to manage this, because we will. And we will utilize both companies to do that.

But we would not have done this transaction if we did not feel that there was a cultural fit with the businesses that we’re acquiring now, Jewel, ACME, Shaw’s in Southern California, the inter-mountain and Northwest; if we didn’t feel that those fit into that very much emphasized local merchandising marketing kind of approach, we would not have done this transaction. But at the same time, they do have some centralized activities that leverage some size and scale and we will analyze those very carefully.

We have always strived toward a balance between leveraging our scale yet staying very local and close to the customer. We think now we have got even tenfold more capacity to do that than we had before. That is a good question and there are key decisions to be made for, but frankly that is one of the key reasons we’re doing this.

John Heinbockel - Goldman Sachs - Analyst

And you are pretty confident you’ll be able to retain whatever people corporately that you want to retain and they will go with the new SUPERVALU?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Well, we obviously haven’t spoken to those people about that. We are hopeful that there will be people who are interested in staying with the new SUPERVALU, and we intend to spend time with those people and get to know them better. We’re very hopeful that they will have interest in us and that we will have interest in them.

So that is all work to be done. But again we would not have done this transaction if we did not feel we were going to add significantly to our retail capability.

John Heinbockel - Goldman Sachs - Analyst

Finally, losing dual branding, does that hurt you particularly in Chicago and Southern California? Is there a safeguard against CVS, from going out and trying to poach pharmacy files?

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Good question, John. Let me make it clear we’re not losing dual branding. We will retain the Jewel-Osco name, and we will retain the Savon names in the supermarkets that they are with. I believe both in California and Philadelphia they use the Savon, and in Boston and Chicago they use the Osco. Those names will be retained by us.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Jeff, I would add that these assets are comprised of great brands, great locations, and great people. Our intent is to really bring the best forward of these two powerful organizations. And that goes beyond people. It applies to system and processes, and it will be a very planned and paced effort over the three years.

John Heinbockel - Goldman Sachs - Analyst

So you think there is no risk on the pharmacy side from breaking the business apart, as it had been?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

There are some impacts. We have included those in our pro formas and projections. Obviously we lose scale on the pharmaceutical side of the business, prescription drug. We think we might have some ways hopefully to offset that. But we have not included those.

Hopefully CVS has been a good partner in this transaction, and we will see what help they might be to us. We have a very good relationship with them. John, I don’t think you’re going to say anymore that we’re too conservative, are you?

John Heinbockel - Goldman Sachs - Analyst

No, you certainly found a use of your cash, so congratulations.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

I’m glad you didn’t ask me that question today.

John Heinbockel - Goldman Sachs - Analyst

No reason to.

Operator

Louis Stark, Chesapeake Partners.

Louis Stark - Chesapeake Partners - Analyst

Could you go over the pro forma debt numbers again, please?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Yes, on our slide 23, SUPERVALU’s estimate of outstanding debt at the end of fiscal ’06 was 1.6 billion, 1.683. We say through the assumption of debt and affecting the transaction we will be adding 8.035 billion for a combined, at closing, of approximately 9.7 billion.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Louis Stark - Chesapeake Partners - Analyst

Thank you very much.

Operator

Meredith Adler, Lehman Brothers.

Unidentified Speaker

This is [Ivy] for Meredith. She is currently sitting on a plane right now. We just have a quick question. I wanted to know what is going to happen to or who is going to assume all the other liabilities, for example the severance, the pension, the multi-employer collective bargaining pension plans for Northern California? If you could provide any color, that would be great.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

We can provide some color on that, but clearly there we do have partners in this transaction and just as we have analyzed all the assets, we have analyzed the liabilities and which liabilities will be assumed by which party. There are cases where certain of these liabilities are being shared among the partners. So there’s probably no set answer that works for any specific items. But I guess I would say in general that part of the benefits of the structure of this transaction is that SUPERVALU and the new combined entity will primarily be primarily carry the liabilities of the assets that it has acquired. And Cerberus will be carrying the liabilities for the operations that it has acquired.

Unidentified Speaker

Okay, thank you very much.

Operator

Filippe Goossens, Credit Suisse.

Filippe Goossens - Credit Suisse First Boston - Analyst

Congratulations on the transaction as well. A question for Pam specifically. Pam, can you perhaps share with us the rationale for not guaranteeing the Albertsons’ debt that you will be taking on?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Well, we believe that this transaction is in compliance with the requirements of the indenture arrangement and that no guarantee is required.

Filippe Goossens - Credit Suisse First Boston - Analyst

Okay, because obviously the people that will own or that currently own the Albertsons debt and based on the press release that Moody’s put out, these bonds could theoretically be rated as a single B, so obviously you’re going to have very unhappy owners of that debt. And particularly since you will have to go to the market to raise new debt, I’m sure that those people would have liked for the debt to be guaranteed in order to lessen the pain a little bit and make them a little bit happier campers. But no chance of you guys changing that view, no?

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Pam Knous - SUPERVALU, Inc. - EVP & CFO

That is correct.

Filippe Goossens - Credit Suisse First Boston - Analyst

Okay. Thanks very much and best of luck.

Operator

David Freedman, Bear Stearns.

David Freedman - Bear Stearns - Analyst

This is a deal where there are two other parties buying. Can you talk about what happens if one of those parties does not move forward with their piece of the transaction, how that affects you? Are you acquiring the entire of Albertsons and reselling this or are these three simultaneous transactions? If you could explain that please?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

It is set up to be a simultaneous transaction. There are a number of agreements that affect the condition or the rare event that you described. I am frankly not going to go into detail on that this morning. It is a simultaneous transaction. This thing has been worked on for months and months and most of that is thought through. I consider that a very low probability. Obviously there were some concerns around antitrust and things and we think those things have practically been eliminated. So we see no reason why this wouldn’t close and I am probably not the best qualified one to go through those in great detail with you. In our filings, when we make our filings obviously you will have all that information available to you, and that will probably be a better source than me trying to describe it to you.

David Freedman - Bear Stearns - Analyst

Okay, but from what you’re saying there is no what risk that SVU would end up with more assets than what is being described on this call because of the failure of one of the other parties to come forward?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

That is correct.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

That is correct.

David Freedman - Bear Stearns - Analyst

But is the merger going directly between you and Albertsons or is it amongst all the parties together?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

There is a consortium that is represented by the three parties and there is an agreement between Albertsons and the consortium.

David Freedman - Bear Stearns - Analyst

Okay, thank you very much.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Operator

Gary Giblin, Brean Murray.

Anton Deaner - Brean Murray - Analyst

Actually it’s [Anton Deaner] for Gary. Just one point of clarification. You did not acquire any of the northern Albertsons stores? Is that correct?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

The Northern California Albertsons stores?

Anton Deaner - Brean Murray - Analyst

Yes.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We did not.

Anton Deaner - Brean Murray - Analyst

Okay, thanks. Just a second question, would you or do you plan to reformat any of the stores to the Cub format?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We have no current plans to reformat or rebrand. Over time we will always look at the markets and the demographics and make decisions. We think it is an advantage that we have many banners to choose from between both companies. There could be opportunities for example I talked earlier about Sunflower stores. Maybe there are some stores that could be converted to Sunflower stores. Maybe there are some Albertsons brands that might make more sense with SUPERVALU brands down the road. But we’re not approaching this transaction this way, but we think it’s really one of the assets and inherent synergies in this transaction that we have those things available to us. But no, there are no current plans to do that.

Anton Deaner - Brean Murray - Analyst

Thank you.

Operator

Steve Chick, JPMorgan.

Steve Chick - JPMorgan - Analyst

I apologize but I missed the first part of your call with the CVS overlap. So I guess my question, the pro forma EBITDA for the company of 2.7 billion, what is that? What is the EBITDA dollar number that you are actually buying? And is that net of your planned costs and net of the Cub write-off that you are taking, which I guess looks pretty material at 61 million or so?

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Right, what we’re using is the 9.35 EBITDA for SUPERVALU which is per First Call. That does not include the charges associated with the announcement today of the charges that we would take with Cub East. And as far as the numbers that we are using for the properties that we’re acquiring, that is an estimate that we have gotten from Albertsons as an estimate of what those results are for the current year.

Steve Chick - JPMorgan - Analyst

Okay, so just by the math, it’s a 1.765 billion?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Correct.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We have got a deck that you should be able to -- we just went through that has all that in, Steve.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

It is Page 22 specifically what you’re asking for the detail on.

Steve Chick - JPMorgan - Analyst

Okay, I apologize. Now you mentioned -- I don’t know if it is in the deck -- but you indicated that this is excluding any onetime costs related to the transaction. What about -- roughly what are you thinking about in terms of those costs?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Our estimate was approximately 125 million pretax.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Without Chicago.

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Right, Chicago will close in the fourth quarter, SUPERVALU, and will not be reflected in the combined entity.

Steve Chick - JPMorgan - Analyst

Okay, that’s fair. 125 million pretax. Are those cash costs?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Primarily cash costs.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Steve Chick - JPMorgan - Analyst

And they will be incurred over the course of I guess after it closes in the first full year?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Right. We would expect more of it to occur in the first year but as Jeff did describe, or plans roll out over three years and so some of those costs could potentially trail off into some of the later years because they are costs related to implementing some of the synergies.

Jeff Noddle - SUPERVALU, Inc. - - Chairman and CEO

Certainly heavily weighted in the first 1.5 years by all means.

Steve Chick - JPMorgan - Analyst

The first 1.5 years, all right. Lastly, you probably already said this too, but at this point are you -- you’re not planning any store closures or exits or have you spoken to that?

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We did, but I will be happy to repeat it for you, Steve. We do not plan any market exits certainly and store closings we’re going to go through the same process we do at any time, as did they to look at stores and markets. Inherent in the transaction there aren’t store closings, but in the normal course of business that is probably going to occur. We were obviously, Steve, very careful in the markets that we selected to purchase. We purchased those exact assets that we felt fit with us and our geography and our portfolio and again, we did not acquire certain other markets. So we are not faced with that as a compelling decision on the front end of this.

Steve Chick - JPMorgan - Analyst

Okay, so if you do decide any normal operating closings as part of this deal, that is not factored into the 125 million of planned costs?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

No, it is not.

Steve Chick - JPMorgan - Analyst

Very good, congratulations.

Yolanda Scharton - SUPERVALU, Inc. - VP Corporate Communications and IR

I’m just going to add one thing with regard to the prior caller’s question and that has to do at the agreements. We will be filing all of the agreements if they have not ready been filed on an 8-K today. So you can refer to those.

Steve Chick - JPMorgan - Analyst

Thank you.

Operator

Fred Taylor, Lord Abbett.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Fred Taylor - Lord Abbett - - Analyst

I think most of mine have been answered except, can you just tell me about either the 1.9 or the 3.8 billion facility Royal Bank of Scotland is providing? You talked about secured and unsecured, but what type of amortization, what type of pricing?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Well, that again will be something that is filed as we speak. We would say to you that this is a facility that is a market-based facility. It does have several tranches and there are different collateral requirements depending on the ratings that we would receive from the rating agencies. So that will be something that is going to evolve over the next several four or five months as we move towards the closing of that transaction. But it is a fully underwritten commitment for us at the $4 billion level.

Fred Taylor - Lord Abbett - Analyst

At the $4 billion level. And if things happen simultaneously you hopefully don’t need to drawn on that except for maybe a day or so?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Well, thought we will be drawing on that facility at closing to facilitate the close. So there will be approximately 2 billion drawn at the closing.

Fred Taylor - Lord Abbett - Analyst

Okay, thank you.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

We have time for one more question.

Yolanda Scharton - SUPERVALU, Inc. - VP Corporate Communications and IR

We’ll take one more call.

Operator

Eric Miller, Lehman Brothers.

Eric Miller - Piper Jaffray - Analyst

Just a couple questions actually. One, if you look at the covenant in Albertsons debt, are you planning to structure around your liens covenant or do you plan on equally and ratably securing any or all of the Albertsons and American Store’s debt?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

As I’ve said before, we believe that our structure is compliant with the requirements of the indenture and so that no additional requirements are necessary for the Diamond debt.

Eric Miller - Piper Jaffray - Analyst

Okay, if you look at your total debt, I’m still having a tough time coming up with that shortfall in terms of that 3.8 billion -- I know you said there’s a number of pieces of the puzzle that are moving here, but --

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

Pam Knous - SUPERVALU, Inc. - EVP & CFO

I would suggest that you read the CVS press release as a key indicator of where that number is coming from.

Eric Miller - Piper Jaffray - Analyst

Okay, but just to be clear, your part of the transaction of 12.4 billion, all that 3.8 billion of cash is coming from SUPERVALU?

Pam Knous - SUPERVALU, Inc. - EVP & CFO

Our component of the cash, let me just go back and recap that for you is 3.8 is in cash; 2.5 is in stock; and 6.1 in the assumption of debt. As Jeff added to my comments, there is also cash that exists in the companies and there is also cash that is available as a result of affecting this transaction that will be used to close the transaction.

Eric Miller - Piper Jaffray - Analyst

All right, thanks very much.

Jeff Noddle - SUPERVALU, Inc. - Chairman and CEO

Thank you.

Yolanda Scharton - SUPERVALU, Inc. - VP Corporate Communications and IR

Thank you for calling today and as always, we will be available after the call for additional questions. Have a great day and we will be in ongoing dialogue with you as this moves forward. Thank you and have a great day.

Operator

This does conclude today’s conference call. You may disconnect at this time. Thank you for participating.

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FINAL TRANSCRIPT

Jan. 23. 2006 / 8:30AM, SVU - SUPERVALU, CVS and Cerberus-led investment group to acquire Albertsons

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CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for the historical and factual information contained herein, the matters set forth in this filing, including statements as to the expected benefits of the acquisition such as efficiencies, cost savings, market profile and financial strength, and the competitive ability and position of the combined company, and other statements identified by words such as “estimates,” “expects,” “projects,” “plans,” and similar expressions are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including required approvals by SUPERVALU and Albertsons stockholders and regulatory agencies, the possibility that the anticipated benefits from the acquisition cannot be fully realized or may take longer to realize than expected, the possibility that costs or difficulties related to the integration of Albertsons operations into SUPERVALU will be greater than expected, the impact of competition and other risk factors relating to our industry as detailed from time to time in each of SUPERVALU’s and Albertsons’s reports filed with the SEC. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, SUPERVALU undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

ADDITIONAL INFORMATION

SUPERVALU and Albertsons will file a joint proxy statement/prospectus with the Securities and Exchange Commission (SEC). INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain the joint proxy statement/prospectus, as well as other filings containing information about SUPERVALU and Albertsons, free of charge, at the website maintained by the SEC at www.sec.gov. Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, free of charge, by directing a request to SUPERVALU INC., 11840 Valley View Road, Eden Prairie, Minnesota, 55344, Attention: Corporate Secretary, or to Albertsons, Inc., 250 East Parkcenter Boulevard, Boise, Idaho, 83706-3940, Attention: Corporate Secretary.

The respective directors and executive officers of SUPERVALU and Albertsons and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding SUPERVALU’s directors and executive officers is available in its proxy statement filed with the SEC by SUPERVALU on May 12, 2005, and information regarding Albertsons directors and executive officers is available in its proxy statement filed with the SEC by Albertsons on May 6, 2005. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions.

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