Exhibit 10.2





                                       December 22, 2000


Gary G. Michael
Albertson's, Inc.
250 E. Parkcenter Blvd.
Boise, Idaho 83706

Dear Gary:

     This will confirm  your  retirement  from the  positions of Chairman of the
Board and Chief Executive Officer of Albertson's,  Inc. (the "Company") and sets
forth our mutual  understanding  of the terms of your  severance  agreement  and
general  release.  This agreement will become  effective on the eighth (8th) day
after the date of its execution by you (the "Effective Date").

     1.   Your employment as Chairman of the Board and Chief  Executive  Officer
          of the Company will end on the Termination Date. (As used herein,  the
          term  "Termination  Date" shall mean (i) the date the Company asks you
          to resign,  or (ii) the close of business on the date of the Company's
          Annual  Meeting of  Stockholders  in 2001,  or (iii) June 30, 2001, or
          (iv) your death, whichever date shall first occur.

     2.   Conditioned  upon your  agreement to the terms set forth  herein,  the
          Company agrees to pay to you within 10 days after the Termination Date
          a lump sum, in cash,  equal to  $3,000,000  less any legally  required
          payroll tax  withholdings and deductions  ("Termination  Pay"). In the
          event  of  your  death,  the  Termination  Pay  will  be  paid to your
          surviving spouse, or in the event of her death, to your estate.

     3.   Notwithstanding  anything to the contrary  contained in this agreement
          but conditioned upon your agreement to the terms set forth herein, you
          shall be entitled to the compensation, benefits and perquisites listed
          below during the period from the Effective  Date until the  Retirement
          Date. (As used herein, the term "Retirement Date" shall mean the close
          of  business  on  the  date  of  the  Company's   Annual   Meeting  of
          Stockholders in 2001 or June 30, 2001, whichever shall first occur.)




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Gary G. Michael
December 22, 2000
Page 2

          (a)  To  receive  salary at the rate in effect on the  Effective  Date
               from the Effective Date until the Retirement Date (whether or not
               the  Termination  Date occurs  prior to the  Retirement  Date) in
               accordance with practices and policies in effect on the Effective
               Date;

          (b)  To receive any bonus  earned for fiscal year 2000 under the terms
               of the Company's  fiscal year 2000  Officer's  Bonus Program (but
               not for any period  thereafter),  payable in accordance  with the
               terms of such Program;

          (c)  To  participate  in  the  Company's  medical,  dental,  and  life
               insurance plans;

          (d)  To  be  eligible  to  defer  salary   under  the  2000   Deferred
               Compensation Plan;

          (e)  To be treated in the same manner as officers of the Company  with
               regard to the Company automobile  policy,  subject to any changes
               in the existing policy;

          (f)  To receive  benefits in accordance  with the terms and provisions
               of the Company's  qualified and  non-qualified  retirement  plans
               accrued with respect to your service through the Retirement Date;

          (g)  In the event of your death prior to the payment of all monies and
               benefits  to which you are  entitled  under this  agreement,  any
               remaining payments and/or benefits,  including a lump-sum payment
               of your salary through the Retirement  Date, will be paid to your
               surviving  spouse,  or in the event of her death, to your estate;
               and

          (h)  If the Company asks you to resign,  you will be  classified  as a
               special  employee of the Company from the date you resign through
               the Retirement Date. As a special employee,  you will continue to
               receive your salary at the rate in effect on the  Effective  Date


<PAGE>

Gary G. Michael
December 22, 2000
Page 3

               until the Retirement  Date and accrue  vesting  service as if you
               were a regular full-time employee.

     4.   Within 10 days of the Termination Date you shall return to the Company
          all of the Company's personal  property,  including without limitation
          all computers, books, records, documents,  videos, cards, keys, credit
          cards  issued to you,  and all other such  personal  property of every
          nature and kind.

     5.   It is agreed and understood  that nothing in this  agreement  shall be
          construed as an  admission of liability by the Company or you;  rather
          we are  resolving  any and all matters  and  disputes  regarding  your
          employment and separation from the Company.

     6.   You agree  that you shall not  publish  or cause to be  published  any
          public or private statement  disparaging the Company or its present or
          former  officers,  directors or employees.  The Company  agrees not to
          make any public or private statements disparaging you.

     7.   You shall  cooperate  with the Company,  its  affiliates,  and each of
          their   respective   attorneys   or   other   legal    representatives
          (collectively,  the "Company attorneys") in connection with any claim,
          litigation, or judicial or arbitral proceeding which is now pending or
          may  hereinafter be brought  against the Company and/or its affiliates
          by  any  third  party,  including  your  appearance  as a  witness  at
          depositions or trials,  without  necessity of a subpoena,  in order to
          state truthfully your knowledge of matters at issue. The Company shall
          promptly  reimburse you for your actual and reasonable travel or other
          expenses  that you may incur in  cooperating  with the Company in this
          Paragraph 7. You shall provide such other  cooperation  as the Company
          may reasonably  request to assist the Company in the administration of
          its  business,  it  being  expressly  agreed  that  requests  for such
          cooperation which do not require more than four (4) hours of your time
          in any 30-day period are  reasonable.  You further agree that you will
          immediately  forward to the  Company's  Chief  Executive  Officer  any
          business  information  related to the Company that  inadvertently  has


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Gary G. Michael
December 22, 2000
Page 4

          been  directed  to you.  The Company  agrees that it will  immediately
          forward  to you any mail  addressed  to you at the  Company's  offices
          which does not relate to the Company's business or affairs.

     8.   Without the express  prior written  consent of the Company,  you shall
          never disclose, communicate,  divulge, furnish, make accessible to any
          person,  firm,  partnership,  corporation or other entity,  or use for
          your own benefit or purposes,  any  information of a  confidential  or
          proprietary  nature  obtained from or  pertaining to the Company,  its
          assets or business,  including  information  concerning  the Company's
          current or future  proposed  business  plans,  processes,  operational
          methods,   customer  lists,  trade  secrets,   suppliers,   employees'
          personnel  files and  compensation,  financial  affairs  or  marketing
          strategies.

     9.   Without the express  prior written  consent of the Company,  you shall
          not, at any time during the two-year period immediately  following the
          Termination  Date,  directly or indirectly,  own,  manage,  control or
          participate in the ownership,  management or control of, or be related
          or otherwise  affiliated in any manner with, any business identical or
          similar to that engaged in by the Company on the  Termination  Date in
          any  Metropolitan  Statistical  Area ("MSA") in which such business is
          carried  on at the  Termination  Date;  provided,  however,  that  the
          forgoing shall not prohibit you from owning as a passive investment 5%
          or  less of the  equity  of any  publicly-traded  entity.  During  the
          two-year period immediately  following the Termination Date, you shall
          not,  directly  or  indirectly,  solicit  for  employment  or hire any
          employee of the Company or any  subsidiary of the Company  without the
          prior express written consent of the Company.

     10.  You agree that  during the period  commencing  on the date you execute
          this  agreement  and  ending on the  fifth  (5th)  anniversary  of the
          Retirement Date, you will not, directly or indirectly:

          (a)  Make, or in any way participate in any Solicitation of Proxies to
               vote,  solicit any consent or communicate  with or seek to advise
               or  influence  any person or entity with respect to the voting of


<PAGE>

Gary G. Michael
December 22, 2000
Page 5

               any Common Stock or become a Participant in any Election  Contest
               with respect to the Company;

          (b)  Solicit,   seek  to  effect,   negotiate   with  or  provide  any
               information  to any  other  party  with  respect  to, or make any
               statement or proposal,  whether  written or oral, to the Board of
               Directors  of the  Company  or any  director  or  officer  of the
               Company or  otherwise  make any public  announcement  or proposal
               whatsoever  with  respect  to, any form of  business  combination
               transaction involving the Company, including, without limitation,
               a merger,  exchange offer or liquidation of the Company's assets,
               or any  restructuring,  recapitalization  or similar  transaction
               with respect to the Company; or

          (c)  Otherwise  act to seek  to  control,  disrupt  or  influence  the
               management,  policies or affairs, of the Company, or instigate or
               encourage  any third party to take any action  described  in this
               Paragraph 10.

          Defined  terms  used in this  Paragraph  10 shall  have the  following
          meanings:

          "Common  Stock" shall mean the common stock of the Company,  par value
          $1.00 per share; "Election Contest" shall have the meaning ascribed to
          it in Rule  14a-11  under  the 1934 Act;  "1934  Act"  shall  mean the
          Securities Exchange Act of 1934, as amended;  "Participant" shall have
          the meaning  ascribed to it in Rule 14a-11 under the 1934 Act; "Proxy"
          shall have the  meaning  ascribed  to it in Rule 14a-1  under the 1934
          Act;  "Solicitation"  shall have the  meaning  ascribed  to it in Rule
          14a-1 under the 1934 Act.

     11.  In consideration of the payment made pursuant to Paragraph 2 above and
          the Company's other covenants and agreements contained herein:

          (a)  You do  hereby  knowingly  and  voluntarily,  fully  and  finally
               release and forever discharge the Company,  including its related
               or  affiliated  companies,  partnerships,  subsidiaries  or other


<PAGE>

Gary G. Michael
December 22, 2000
Page 6

               business   entities,   and  its  and  their  present  and  former
               respective officers,  directors,  shareholders,  members, owners,
               agents,  consultants,   employees,   representatives,   insurers,
               successors and assigns  (hereinafter  referred to collectively as
               the  "Released  Parties"),  from  any  and all  claims,  charges,
               complaints,   liens,  demands,  causes  of  action,  obligations,
               damages  and   liabilities,   known  or  unknown,   suspected  or
               unsuspected  that you had, now have,  or may  hereafter  claim to
               have against the Released Parties,  arising out of or relating in
               any way to your employment with or separation from the Company or
               otherwise  relating  to any  of the  Released  Parties  from  the
               beginning of time through the date you sign this agreement.  This
               release  specifically  extends to, without limitation,  claims or
               causes  of  action  under  any  local,  state  and  federal  laws
               governing  employment  relations,  including  but not  limited to
               federal equal  employment  opportunity laws and federal and state
               labor statutes and  regulations,  including,  but not limited to,
               Title VII of the Civil Rights Act of 1964, the Age Discrimination
               in Employment  Act of 1967,  and the Employee  Retirement  Income
               Security Act of 1974, all as amended from time to time.

          With respect to the Released  Parties,  you expressly waive all rights
          afforded by any  provision  under Idaho law which  generally  provides
          that a general  release  does not extend to claims  which the creditor
          does  not  know or  suspect  to  exist  in his  favor  at the  time of
          executing  the  release,  which if known by him must  have  materially
          affected  his  settlement  with the debtor.  Notwithstanding  any such
          forgoing provision or comparable  provision,  you understand and agree
          that this  agreement is intended to include all claims,  if any, which
          you may have and which you do not now know or suspect to exist in your
          favor against the Released Parties and that this release  extinguishes
          those claims.

          (b)  Notwithstanding  anything  to  the  contrary  contained  in  this
               agreement,  you  are not  releasing  any of  your  rights  to the
               following:


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Gary G. Michael
December 22, 2000
Page 7

               (i)  To  indemnification  as an officer or  director  pursuant to
                    Section 145 of the Delaware General Corporation Law;

               (ii) To exercise and obtain, in accordance with the terms of such
                    options, any and all the benefits appurtenant to the options
                    to purchase  the  Company's  common stock held by you on the
                    Effective Date and listed on Exhibit A hereto;

               (iii)To  continuation  coverage,  at the  Company's  expense,  as
                    provided    under   the    Consolidated    Omnibus    Budget
                    Reconciliation   Act  of  1985   (COBRA)   and   any   other
                    continuation  coverage as provided  under  applicable  state
                    law; or

               (iv) Any of your rights to enforce this agreement.

          (c)  You  acknowledge  that the  Company  has advised you that you may
               consult,  at the  Company's  expense,  with an  attorney  of your
               choosing  prior to signing this  agreement and that you have been
               given  at least  twenty-one  days  during  which  to  review  and
               consider  the  provisions  of  this  agreement   before  signing,
               although you may sign and return it sooner if you so desire.  You
               further  acknowledge  that you have been  advised by the  Company
               that you have the right to revoke this  agreement for a period of
               seven days after  signing  it and that this  agreement  shall not
               become effective or enforceable  until such seven-day  revocation
               period has expired. You acknowledge and agree that if you wish to
               revoke this agreement,  you must do so in writing,  and that such
               revocation must be signed by you and received by Steven D. Young,
               Executive Vice President,  Human  Resources at Albertson's  Inc.,
               250 E. Parkcenter,  Blvd.,  Boise, Idaho 83706 no later than 5:00
               p.m.  Pacific  Standard  Time on the  seventh  day after you have
               signed this  agreement.  You  acknowledge  and agree that, in the


<PAGE>

Gary G. Michael
December 22, 2000
Page 8

               event that you revoke this agreement,  you shall have no right to
               receive the payment described in Paragraph 2 above.

     12.  You  represent  and agree that  neither you nor anyone  acting on your
          behalf  has  assigned  or  transferred,  or  attempted  to  assign  or
          transfer, to any person or entity, any of the claims you are releasing
          in this agreement.

     13.  All  controversies,  claims,  or disputes arising out of or related to
          this  agreement,  or to any  prior  or  subsequent  oral  promises  or
          assurances  relating to this agreement,  shall be settled by a binding
          arbitration   in  Boise,   Idaho  under  the  rules  of  the  American
          Arbitration  Association  then in effect in the State of Idaho, as the
          sole and  exclusive  remedy of either  party,  and judgment  upon such
          award  rendered  by the  arbitrator(s)  may be entered in any court of
          competent jurisdiction.

     14.  Any notices or other  communications  permitted or required  hereunder
          shall be in  writing  and  shall be deemed  conclusively  to have been
          given upon personal  delivery at, two (2) business days  following the
          date of mailing by first class,  registered or certified mail, postage
          prepaid, and return receipt requested to:

          To you:           Mr. Gary G. Michael
                            2010 Silvercreek Lane
                            Boise, Idaho 83606

          To the Company:   Albertson's, Inc.
                            250 E. Parkcenter Blvd.
                            Boise, Idaho 83706
                            Attn: General Counsel

     15.  If  any  provision  of  this  agreement  shall  be  determined   under
          applicable law to be overly broad in duration,  geographical coverage,
          substantive  scope,  or  otherwise,  such  provision  shall be  deemed
          narrowed to the broadest term permitted by applicable law and shall be
          enforced  as  so  narrowed.   If  any  provision  of  this   agreement
          nevertheless  shall be unlawful,  void, or unenforceable,  it shall be


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Gary G. Michael
December 22, 2000
Page 9

          deemed  severable  from and shall in no way  affect  the  validity  or
          enforceability  of the remaining  provisions of this  agreement.  This
          agreement will survive the  performance  of the specific  arrangements
          herein. This agreement is binding on and shall inure to the benefit of
          the  Company  and you and  each of our  respective  heirs,  executors,
          administrators, successors and assigns.

     16.  This agreement and Exhibit A provide the entire agreement  relating to
          the matters set forth  herein  between us and  supercedes  any and all
          other agreements, understandings, negotiations, or discussions, either
          oral or writing,  express or implied,  between us. We each acknowledge
          that  no  representations,   inducements,   promises,   agreements  or
          warranties,  oral or otherwise, have been made by us, or anyone acting
          on our behalf,  which are not embodied in this agreement,  and that we
          have  not   executed   this   agreement   in   reliance  on  any  such
          representation,  inducement,  promise, agreement or warranty, and that
          no such representation, inducement, promise, agreement or warranty not
          contained  in this  agreement,  including,  but not  limited  to,  any
          purported supplements,  modifications, waivers or terminations of this
          agreement,  shall be valid or binding,  unless  executed in writing by
          both you and the Company.

     17.  This  agreement  is made and  entered  into in the  State of Idaho and
          shall in all respects be interpreted,  enforced and governed under the
          laws  of  said  state  without   respect  to  its  conflicts  of  laws
          principles.

     18.  This  agreement  may  be  executed  in one or  more  counterparts,  or
          duplicates  of  originals,   all  of  which,  taken  together,   shall
          constitute one and the same instrument.




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Gary G. Michael
December 22, 2000
Page 10

     If  this  statement  of  the  Company's   understanding  conforms  to  your
understanding,  please execute and return the enclosed copy of this letter to me
no later than December 31, 2000.

                                       Very truly yours,

                                       ALBERTSON'S, INC.


                                       /s/  Michael F. Reuling
                                       -----------------------
                                       Michael F. Reuling
                                       Vice Chairman of the Company


     By signing this letter,  I acknowledge  that I have had the  opportunity to
seek the advice of an attorney in connection  with the negotiation and execution
of this  agreement;  that I have read this  agreement and  understand its terms;
that I have had sufficient  time within which to consider the provisions of this
agreement,  and that I entered  into this  agreement  freely,  voluntarily,  and
without coercion.

Agreed and accepted this 22nd day of December, 2000 in Boise, Idaho.



/s/  Gary G. Michael
     ---------------
     Gary G. Michael






<PAGE>



                                    EXHIBIT A


A list of Gary G. Michael's  options to purchase the common stock of Albertson's
Inc.  held by him on the date of his  execution  of this  agreement is set forth
below:



<TABLE>
<CAPTION>
Date Granted            Number of Shares    Price per Share
------------            ----------------    ---------------
<S>                         <C>                <C>
12/04/95                     50,000            $31.8750

12/01/97                    100,000            $45.6875

06/24/99                    390,721            $51.1875

12/06/99                    550,820            $30.5000

12/06/00                    645,534            $21.6875

</TABLE>