Safeway (SWY)

DEFERRAL ELECTIONS

3.1 Elections to Defer Compensation.

(a) Elections under Prior Plan. The elections made by Participants under the Prior Plan are deemed to be elections under this Plan to the extent such deferrals applied to amounts earned or deferred after December 31, 2004.

6

(b) Annual Election.

(1) Base Salary Deferrals. An Eligible Employee may make a Deferral Election no later than the last day of the Plan Year preceding the Plan Year in which the Base Salary is earned, and such Deferral Election shall be irrevocable on the first day of the Plan Year for deferrals pertaining to that Plan Year. In the event an Eligible Employee fails to timely file an election, he shall be deemed to have elected not to have deferred any Base Salary for any relevant period. Participant’s Deferral Election shall continue to be applied to each subsequent Plan Year until modified or revoked; provided that any such modification or cancellation shall apply to the Plan Year following the year in which Participant files the modification or revokes his or her election.

(2) Bonus Deferrals. An Eligible Employee may make a Deferral Election no later than the last day of the Plan Year preceding the Plan Year in which the Bonuses are earned, and such Deferral Election shall be irrevocable on the first day of the Plan Year to which it pertains. In the event an Eligible Employee fails to timely file an election, he shall be deemed to have elected not to have deferred any Bonuses for the relevant period.

(3) 401(k) Excess Deferrals. Prior to January 1, 2007, an Eligible Employee may make a Deferral Election no later than the last day of the Plan Year preceding the Plan Year in which the 401(k) Excess is earned, and such Deferral Election shall be irrevocable on the first day of the Plan Year to which it pertains. In the event an Eligible Employee fails to timely file an election, he shall be deemed to have elected not to have deferred any 401(k) Excess for the relevant period.

(c) Performance-Based Compensation. Notwithstanding the foregoing, the Company, in its discretion, may permit a separate election to defer performance-based compensation as defined in treasury regulation section 1.409A-1(e) of the Code, and such election may be made no later than six months prior to the end of the applicable performance period; provided, however, that such election shall be made prior to the date that such performance-based compensation is readily ascertainable. Any election made under this paragraph (c) shall be irrevocable on the first day of such six-month period described in the preceding sentence, or such earlier date as the Company provides in the election form.

(d) Initial Election Period. Notwithstanding the foregoing, each newly Eligible Employee may defer Base Salary, and prior to January 1, 2007 may defer Base Salary, Bonuses and/or 401(k) Excess, by making an election that conforms to the requirements of this Section 3.1, in the manner prescribed by the Committee, no later than the last day of his or her Initial Election Period. Such Initial Election shall be irrevocable on the first day following the Initial Election Period, unless the Company in its discretion requires an earlier date of irrevocability. The Initial Election submitted pursuant to this paragraph (d) shall apply only to compensation earned from the date that such Initial Election is irrevocable.

7

(e) General Rule. The amount of Compensation which a Participant may elect to defer is such Compensation earned on or after the time at which the Participant elects to defer and shall be a flat dollar amount or a percentage of Base Salary and/or Bonus which shall not exceed 100% of the Participant’s Base Salary and/or 100% or his Bonus; provided that the total amount deferred by a Participant shall be limited in any Plan Year, if necessary, to satisfy the Employee’s withholding tax obligations (including income, Social Security, unemployment and Medicare taxes), as determined in the sole and absolute discretion of the Committee. The minimum deferral which may be elected to be made in any Plan Year by a Participant shall not be less than $5,000, which shall be based on a Participant’s Base Salary and target Bonus on the last day of the Enrollment Period.

(f) Special Election(s). Notwithstanding the foregoing and during the transition period provided in the regulations promulgated or notices issued under Section 409A of the Code, the Company may provide a special election(s) with respect to amounts deferred in 2005, 2006 and 2007; provided that the election is made at least 12 months prior to the originally scheduled distribution date and the election is made not later than December 31, 2007. An election made pursuant to this paragraph (f) shall be treated as an initial deferral election and shall be subject to any administrative rules imposed by the Company including rules intended to comply with Section 409A of the Code, the Treasury Regulations promulgated thereunder and applicable notices. No election under this paragraph (f) shall (i) change the payment date of any distribution otherwise scheduled to be paid in 2007 or cause a payment to be paid in 2007, or (ii) be permitted after December 31, 2007.

(g) Cancellation of an Election. A Participant’s election to defer Base Salary or Bonuses shall be cancelled during the Plan Year only if such Participant is faced with an Unforeseeable Emergency or receives a hardship distribution under a Participating Company’s 401(k) Plan and Participant will be suspended from making additional deferrals under the Plan. Such suspension shall continue through the end of Plan Year in which the Participant is faced with an Unforeseeable Emergency and the Participant must submit a new election to defer Base Salary or Bonuses, effective the Plan Year after the Plan Year in which the Unforeseeable Emergency occurred, to resume participation in the Plan. If a Participant receives a hardship distribution under a Participating Company’s 401(k) Plan, such Participant must submit a new election to defer Base Salary or Bonuses, effective for the next Plan Year that is at least six months after the date in which such Participant receives a hardship distribution.

3.2 Investment Elections.

(a) At the time of making the deferral elections described in Section 3.1, the Participant shall designate, on a form provided by the Committee, the types of investment funds the Participant’s Account will be deemed to be invested in for purposes of determining the amount of earnings to be credited to that Account. In making the designation pursuant to this Section 3.2, the Participant may specify that all or any multiple of his Deferral Account shall be deemed to be invested in one or more of the types of investment funds provided under the Plan. If a Participant fails to elect a type of fund under this Section 3.2, he or she shall be deemed to have elected the money market type of investment fund.

8

(b) Although the Participant may designate the type of investment funds in Section 3.2(a) above, the Committee shall not be bound by such designation. The Committee shall select from time to time, in its sole discretion, such investment funds to be the Funds available under the Plan. The Interest Rate of each such investment fund shall be used to determine the amount of earnings or losses to be credited to Participant’s Account under Article IV.