Safeway (SWY)

Bonus Awards

Eligibility.   Our executive officers and key employees who are responsible for making capital investment decisions are eligible to receive bonus awards under the Capital Bonus Plan. The maximum bonus amount for each executive officer for each fiscal year is equal to a pre-established percentage (up to 30%), determined in the discretion of the Committee, of such executive officer’s annual base compensation, up to a maximum bonus of $350,000 ($500,000 in the case of the CEO).

Business Criteria.   Each executive officer’s bonus under the Capital Bonus Plan is contingent on the achievement of one or more objectively determinable performance goals, such as operating profit, as well as certain recent capital investments, such as new stores or remodel capital investment projects, achieving targeted rates of return on invested capital. Capital performance generally is measured in periods occurring during the first and third fiscal years following completion of a particular project.

Bonus Amount.   The actual bonus amount for each executive officer is based on the achievement of specified levels at or above the performance target, but we have retained the discretion to reduce or eliminate the bonus amount otherwise payable to an executive officer (including the CEO). Prior to the payment of a bonus award to an executive officer, the Committee must certify in writing the level of the performance goals attained.

Bonus Awards

Eligibility.  Our executive officers and key employees who are responsible for making capital investment decisions are eligible to receive bonus awards under the Capital Bonus Plan. The maximum bonus amount for each executive officer for each fiscal year is equal to a pre-established percentage (up to 30%), determined in the discretion of the Committee, of such executive officer’s annual base compensation, up to a maximum bonus of $350,000 ($500,000 in the case of the CEO).

Business Criteria.  Each executive officer’s bonus under the Capital Bonus Plan is contingent on the achievement of one or more objectively determinable performance goals, such as operating profit, as well as certain recent capital investments, such as new stores or remodel capital investment projects, achieving targeted rates of return on invested capital. Capital performance generally is measured in periods occurring during the first and third fiscal years following completion of a particular project.

Bonus Amount.  The actual bonus amount for each executive officer is based on the achievement of specified levels at or above the performance target, but we have retained the discretion to reduce or eliminate the bonus amount otherwise payable to an executive officer (including the CEO). Prior to the payment of a bonus award to an executive officer, the Committee must certify in writing the level of the performance goals attained.

BONUS AWARDS

Section 2.1 - Bonus Awards.    Any executive officer or key employee selected by the Committee may be granted one or more bonus awards under the Plan for one or more Performance Periods. For each Performance Period established by the Committee, the Committee shall establish one or more objectively determinable Performance Goals. At the time a bonus award is granted pursuant to this Section 2.1, the Committee shall specify the maximum bonus amount (“Bonus Amount”) to be paid upon the achievement of one or more of the Performance Goals established by the Committee for the Performance Period, which maximum

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Bonus Amount may not exceed 30% of the Participant’s Base Compensation payable during the Performance Period.

Section 2.2 - Maximum Bonus Amounts.  Notwithstanding anything to the contrary in Section 2.1, the maximum aggregate amount payable pursuant to all bonus awards granted to the CEO under the Plan during any calendar year shall not exceed $500,000 and the maximum aggregate amount payable pursuant to all bonus awards granted to a Participant (other than the CEO) under the Plan during any calendar year shall not exceed $350,000.

Section 2.3 - Certification; Negative Discretion.  Following the completion of each Performance Period and prior to payment of any bonus award granted under the Plan with respect to such Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining a Participant’s actual bonus amount, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account the recommendations of the CEO and such additional factors, if any, that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.

SECTION 2.4 - Other Incentive Awards.  The Plan shall not be the exclusive means for the Company to award incentive compensation to Participants. No executive officer or key employee of the Company has a guaranteed right to any discretionary bonus as a substitute for a bonus award under the Plan in the event that Performance Goals are not met or that the Company’s stockholders fail to approve or reapprove the Plan.

ARTICLE III

BONUS AWARDS

Section 2.1 - Bonus Awards.    Any executive officer or key employee selected by the Committee may be granted one or more bonus awards under the Plan for one or more Performance Periods. For each Performance Period established by the Committee, the Committee shall establish one or more objectively determinable Performance Goals. At the time a bonus award is granted pursuant to this Section 2.1, the Committee shall specify the maximum bonus amount (“Bonus Amount”) to be paid upon the achievement of one or more of the Performance Goals established by the Committee for the Performance Period, which maximum

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Bonus Amount may not exceed 30% of the Participant’s Base Compensation payable during the Performance Period.

Section 2.2 - Maximum Bonus Amounts.  Notwithstanding anything to the contrary in Section 2.1, the maximum aggregate amount payable pursuant to all bonus awards granted to the CEO under the Plan during any calendar year shall not exceed $500,000 and the maximum aggregate amount payable pursuant to all bonus awards granted to a Participant (other than the CEO) under the Plan during any calendar year shall not exceed $350,000.

Section 2.3 - Certification; Negative Discretion.  Following the completion of each Performance Period and prior to payment of any bonus award granted under the Plan with respect to such Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining a Participant’s actual bonus amount, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account the recommendations of the CEO and such additional factors, if any, that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.

SECTION 2.4 - Other Incentive Awards.  The Plan shall not be the exclusive means for the Company to award incentive compensation to Participants. No executive officer or key employee of the Company has a guaranteed right to any discretionary bonus as a substitute for a bonus award under the Plan in the event that Performance Goals are not met or that the Company’s stockholders fail to approve or reapprove the Plan.

ARTICLE III

BONUS AWARDS

Section 2.1 - CEO. The CEO is eligible for a bonus award under this Section 2.1. For each fiscal year of the Company, the Section 162(m) Committee of the Board (the “Committee”) shall establish an objectively determinable performance target under this Section 2.1, which shall include one or more of the following components of overall Company

performance: (i) identical store sales, (ii) operating profit, and (iii) working capital, in each case as determined in accordance with the Company’s accounting practices, as in effect on the first day of such fiscal year, and which may also provide for adjustments in accordance with Section 2.4. Achievement of specified levels above the performance target will result in a bonus award to the CEO not to exceed a percentage of Base Compensation determined by the Committee, up to a maximum bonus award of $3.0 million, paid in accordance with Article III. The Committee shall establish such specified levels above the performance target and the bonus award to be paid at each such specified level. Prior to the payment of a bonus award, the Committee shall certify in writing the level of performance attained by the Company for the fiscal year to which such bonus award relates.

Section 2.2 - Executive Officers. Each Executive Officer (including the Senior Vice President – Supply, but excluding the CEO) is eligible for a bonus award under this Section 2.2. Achievement of specified levels above the performance target described under Section 2.1 will result in a bonus award to an Executive Officer not to exceed a percentage of such Executive Officer’s Base Compensation determined by the Committee, up to a maximum bonus award of $1.5 million, paid in accordance with Article III. For each Executive Officer, the Committee shall establish such specified levels above the performance target and the bonus award to be paid at each such specified level. At the discretion of the Committee, however, the Committee may reduce the bonus amount payable to any Executive Officer. Prior to the payment of a bonus award, the Committee shall certify in writing the level of performance attained by the Company for the fiscal year to which such bonus award relates.

Section 2.3 - Senior Vice President – Supply. The Senior Vice President – Supply is eligible for a bonus award under this Section 2.3. For each fiscal year of the Company, the Committee shall establish an objectively determinable performance target under this Section 2.3, which shall include one or more of the following components of performance for the Supply Division: (i) Supply Division operating income, (ii) plant performance, (iii) third party sales income contribution, (iv) working capital, and (v) identical store sales, in each case as determined in accordance with the Company’s accounting practices, as in effect on the first day of such fiscal year, and which may also provide for adjustments in accordance with Section 2.4. Achievement of specified levels above the performance target will result in a bonus award not to exceed a percentage of Base Compensation determined by the Committee, up to a maximum bonus award of $550,000, paid in accordance with Article III. The Committee shall establish such specified levels above the performance target and the bonus award to be paid at each such specified level. Prior to the payment of a bonus award, the Committee shall certify in writing the level of performance attained by the Supply Division for the fiscal year to which such bonus award relates.

Section 2.4 - Adjustments to Performance Components. For each fiscal year of the Company, the Committee may provide for objectively determinable adjustments, as determined in accordance with generally accepted accounting principles (“GAAP”), to any of the performance components under Section 2.1, 2.3 or 5.3 for one or more of the items of gain, loss, profit or expense: (i) determined to be extraordinary or unusual in nature or infrequent in occurrence, (ii) related to the disposal of a segment of a business, (iii) related to a change in accounting principle under GAAP, (iv) related to discontinued operations that do not qualify as a segment of a business under GAAP, and (v) attributable to the business operations of any entity acquired by the Company during the fiscal year.

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