Exhibit 2.1









                            ASSET PURCHASE AGREEMENT

                                  by and among

                                FARM FRESH, INC.,

                             RICHFOOD HOLDINGS, INC.

                                       and

                             FF ACQUISITION, L.L.C.,

                                   dated as of

                                November 26, 1997





<PAGE>
<TABLE>


                            ASSET PURCHASE AGREEMENT

                                TABLE OF CONTENTS
<CAPTION>

                                                                                                               Page
                                                                                                             Number
                                                                                                             ------
<S> <C>
ARTICLE I             Definitions...............................................................................  1
         Section 1.1       Certain Definitions..................................................................  1

ARTICLE II            Commencement of Bankruptcy Case; Closing; Purchase and Sale...............................  8
         Section 2.1       Commencement of Bankruptcy Case......................................................  8
         Section 2.2       Time and Place of Closing............................................................  8
         Section 2.3       Purchase and Sale of Assets and Assumption of Liabilities............................  8
         Section 2.4       Purchase Price....................................................................... 12
         Section 2.5       Deliveries........................................................................... 13
         Section 2.6       Inventory and Supplies in Transit.................................................... 14
         Section 2.7       Allocation of Purchase Price......................................................... 15

ARTICLE III           Representations and Warranties of Seller.................................................. 15
         Section 3.1       Incorporation; Good Standing; Subsidiaries........................................... 15
         Section 3.2       Authorization........................................................................ 16
         Section 3.3       Title to and Sufficiency of Assets................................................... 17
         Section 3.4       Contracts............................................................................ 17
         Section 3.5       Litigation........................................................................... 18
         Section 3.6       Labor Matters........................................................................ 18
         Section 3.7       Employee Benefit Plans............................................................... 18
         Section 3.8       Environmental Conditions............................................................. 19
         Section 3.9       Compliance with Law.................................................................. 19
         Section 3.10      Permits.............................................................................. 19
         Section 3.11      Taxes................................................................................ 20
         Section 3.12      Books and Records.................................................................... 20
         Section 3.13      Real Property........................................................................ 20
         Section 3.14      Intangibles.......................................................................... 21
         Section 3.15      Fees and Expenses of Brokers and Others.............................................. 21
         Section 3.16      Accounts Receivable.................................................................. 22
         Section 3.17      Seller SEC Reports................................................................... 22
         Section 3.18      Insurance............................................................................ 22
         Section 3.19      Affiliated Transactions.............................................................. 23
         Section 3.20      No Adverse Change.................................................................... 23
         Section 3.21      Absence of Undisclosed Liabilities................................................... 23
         Section 3.22      No Other Representations or Warranties............................................... 23

ARTICLE IV            Representations and Warranties of Richfood and Buyer...................................... 24
         Section 4.1       Organization; Incorporation; Good Standing........................................... 24
         Section 4.2       Capitalization....................................................................... 24
         Section 4.3       Authorization........................................................................ 24

                                                        - i -

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         Section 4.4       Litigation........................................................................... 25
         Section 4.5       Approvals, Consents, Etc............................................................. 25
         Section 4.6       Availability of Financing............................................................ 25
         Section 4.7       Richfood SEC Reports; Disclosure Statement........................................... 25
         Section 4.8       Fees and Expenses of Brokers and Others.............................................. 26

ARTICLE V             Covenants of Seller and Buyer............................................................. 26
         Section 5.1       Investigation of Business; Access to Properties and Records.......................... 26
         Section 5.2       Cooperation.......................................................................... 27
         Section 5.3       Antitrust Compliance................................................................. 28
         Section 5.4       Further Assurances................................................................... 28
         Section 5.5       Conduct of Business.................................................................. 28
         Section 5.6       Public Announcements................................................................. 30
         Section 5.7       No Solicitation...................................................................... 30
         Section 5.8       Bulk Sales Laws...................................................................... 31
         Section 5.9       Subsidiaries......................................................................... 31
         Section 5.10      IBT Agreement........................................................................ 31
         Section 5.11      Environmental Testing and Remediation................................................ 31
         Section 5.12      Audited Financial Statements......................................................... 34

ARTICLE VI            Employees................................................................................. 34
         Section 6.1       Employment Matters................................................................... 34

ARTICLE VII           Tax Matters............................................................................... 35
         Section 7.1       Transfer Taxes....................................................................... 35
         Section 7.2       Withholding.......................................................................... 35

ARTICLE VIII          Conditions of Buyer's Obligation to Close................................................. 35
         Section 8.1       Representations, Warranties and Covenants of Seller.................................. 36
         Section 8.2       HSR Act Waiting Period; Governmental Consents........................................ 36
         Section 8.3       No Injunction or Government Action................................................... 36
         Section 8.4       Bankruptcy Court Confirmation; Effectiveness of Plan................................. 36

ARTICLE IX            Conditions to Seller's Obligation to Close................................................ 37
         Section 9.1       Representations, Warranties and Covenants of Buyer................................... 37
         Section 9.2       HSR Act Waiting Period; Governmental Consents........................................ 37
         Section 9.3       No Injunction or Government Action................................................... 37
         Section 9.4       Bankruptcy Court Confirmation; Effectiveness of Plan................................. 37

ARTICLE X             Termination............................................................................... 38
         Section 10.1      Termination.......................................................................... 38
         Section 10.2      Procedure and Effect of Termination.................................................. 39

ARTICLE XI            No Survival; Guarantee.................................................................... 40
         Section 11.1      No Survival.......................................................................... 40
         Section 11.2      Guarantee............................................................................ 40


                                                       - ii -

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ARTICLE XII           Miscellaneous............................................................................. 40
         Section 12.1      Brokers.............................................................................. 40
         Section 12.2      Counterparts......................................................................... 40
         Section 12.3      Governing Law........................................................................ 41
         Section 12.4      Entire Agreement..................................................................... 41
         Section 12.5      Expenses............................................................................. 41
         Section 12.6      Notices.............................................................................. 41
         Section 12.7      Successors and Assigns............................................................... 42
         Section 12.8      Headings; Definitions................................................................ 42
         Section 12.9      Amendments and Waivers............................................................... 42
         Section 12.10     Interpretation....................................................................... 42
         Section 12.11     Severability......................................................................... 43
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                                                       - iii -

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                             SCHEDULES AND EXHIBITS

EXHIBITS

Exhibit A                  Form of Richfood Warrant
Exhibit B                  Form of Assignment and Assumption Agreement

SCHEDULES

Schedule 1.1A              December Statement of Working Capital
Schedule 1.1B              Certain Matters Affecting Seller's Business
Schedule 1.1C              Permitted Exceptions
Schedule 1.1D              Stores
Schedule 2.3A              Owned Real Property
Schedule 2.3B              Leased Real Property
Schedule 2.3C              Software
Schedule 2.3D              Non-Assumed Contracts
Schedule 2.3E              Executive Agreements
Schedule 2.3F              Certain Excluded Liabilities
Schedule 2.4               Agreed Upon Accounting Principles for Preparation of
                           Final Statement of Working Capital
Schedule 2.7               Allocation of Purchase Price
Schedule 3.1               Subsidiaries
Schedule 3.2               Certain Required Filings and Consents
Schedule 3.4               Certain Matters Relating to Contracts
Schedule 3.5               Litigation
Schedule 3.6               Labor Matters
Schedule 3.7               Employee Benefit Plans
Schedule 3.8               Environmental Matters
Schedule 3.17              Seller SEC Reports
Schedule 3.19              Affiliated Transactions
Schedule 3.20              Adverse Changes
Schedule 4.2               Richfood Options, Warrants and Similar Rights
Schedule 4.7               Richfood SEC Reports
Schedule 5.5               Certain Planned Transactions
Schedule 5.11              Environmental Testing and Remediation

                                     - iv -

<PAGE>



                            ASSET PURCHASE AGREEMENT

                  THIS ASSET PURCHASE AGREEMENT (this "Agreement"),  dated as of
November 26,  1997,  is by and among Farm Fresh,  Inc.,  a Virginia  corporation
("Seller" or the "Company"),  Richfood  Holdings,  Inc., a Virginia  corporation
("Richfood"),  and FF Acquisition,  L.L.C., a Virginia limited liability company
and wholly-owned subsidiary of Richfood ("Buyer").

                  WHEREAS,  Seller  owns the  Assets and is or may be subject to
the Assumed Liabilities (as each such term is defined herein);

                  WHEREAS,  Buyer  desires to purchase the Assets and assume the
Assumed  Liabilities  from  Seller,  and  Seller  desires to sell the Assets and
assign  the  Assumed  Liabilities  to Buyer,  upon the terms and  subject to the
conditions set forth herein; and

                  WHEREAS,  in  connection  with the  transactions  contemplated
herein,  Seller,  Richfood and Buyer have agreed that Seller shall  commence the
Bankruptcy  Case in the  Bankruptcy  Court in order to effect the Asset Purchase
pursuant to a Confirmation Order (as each such term is defined herein).

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual promises contained herein, the parties hereto agree as follows:

                                    ARTICLE I

                                   Definitions

                  Section 1.1 Certain  Definitions.  As used in this  Agreement,
the following terms shall have the following respective meanings:

                  "Accounts  Receivable" shall have the meaning given in Section
2.3(a)(ix) hereof.

                  "Action" shall mean any action,  suit,  arbitration,  inquiry,
proceeding or investigation by or before any court, arbitrator,  governmental or
other regulatory or administrative agency or commission.

                  "Affiliate" shall mean, with respect to any Person,  any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or under common control with the Person specified.

                  "Asset   Purchase"   shall  mean  the   consummation   of  the
transactions contemplated by this Agreement at the Closing.

                  "Assets"  shall  have  the  meaning  given in  Section  2.3(a)
hereof.



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                  "Assumed  Liabilities" shall have the meaning given in Section
2.3(b) hereof.

                  "Bankruptcy  Case"  shall  have the  meaning  given in Section
2.1(a) hereof.

                  "Bankruptcy  Code"  shall mean 11 U.S.C  ss.ss.  101-1330,  as
amended.

                  "Bankruptcy  Court"  shall mean the United  States  Bankruptcy
Court for the District of Delaware.

                  "Books and Records"  shall mean  originals or true and correct
copies of all of the books and  records  relating to the  operation  of Seller's
business  that are in the  possession  or  control  of Seller or its  Affiliates
including,  without limitation: (a) all books of account, minute books and stock
record books; (b) surveys (boundary and topographical), fixture plans, building,
site  and  pylon  sign  drawings,   structural  drawings,  electrical  drawings,
mechanical  drawings,  as-built drawings,  warranties and guarantees relating to
the condition of the  improvements on the Properties and the Equipment;  (c) the
job title, job description,  rate of pay, hire date, job  classification  (i.e.,
full-time or part-time) and social  security number of Seller's  employees;  (d)
cost schedules for land, buildings, leaseholds and equipment (including, without
limitation,  cost, book value and date of  acquisition)  included in the Assets;
(e) the Contracts,  Leases and Permits;  and (f) copies of all in-Store pharmacy
data (including  pharmacy  customer  profile lists)  necessary for the continued
operation of the Stores.

                  "Cash" shall mean U.S. currency and coin change.

                  "Cash  Portion of the  Purchase  Price" shall have the meaning
given in Section 2.4(a) hereof.

                  "Closing"  shall  mean the  consummation  of the  transactions
contemplated by Section 2.3.

                  "Closing  Capital  Lease  Liability"  shall mean the Company's
book liability  (both current and long-term) for capital leases  included in the
Contracts  (excluding  the Capital  Lease for Store 841),  determined  as of the
Closing  Date in  accordance  with  GAAP  and in a  manner  consistent  with the
Company's past practice and the December Balance Sheet.

                  "Closing  Date"  shall have the  meaning  given in Section 2.2
hereof.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended, and any successor thereto and the regulations promulgated thereunder.

                  "Confidentiality  Agreement"  shall  mean the  confidentiality
agreement  between DLJ, on behalf of Seller,  and  Richfood,  dated  January 22,
1997.

                  "Confirmation  Order" shall have the meaning  given in Section
8.4 hereof.

                  "Contracts"   shall   have  the   meaning   given  in  Section
2.3(a)(viii) hereof.

                                      - 2 -

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                  "December  Balance Sheet" shall mean the audited  consolidated
balance  sheet of the Company as of December 28, 1996,  together  with the notes
thereto,  in the form included in the  Company's  Annual Report on Form 10-K for
the fiscal year then-ended.

                  "December Statement of Working Capital" shall mean the special
purpose statement of consolidated  working capital of the Company as of December
28, 1996, attached hereto as Schedule 1.1A.

                  "December Working Capital" shall mean  $14,411,234,  being the
amount equal to "current assets" minus "current liabilities" as reflected on the
December Statement of Working Capital.

                  "Disclosure Statement" shall have the meaning given in Section
2.1(b) hereof.

                  "DLJ"  shall  mean  Donaldson,  Lufkin &  Jenrette  Securities
Corporation, financial advisor to Seller.

                  "Environmental  Laws"  shall mean all Laws and all  applicable
decrees,  judgments,   injunctions  or  other  requirements  of  a  Governmental
Authority issued,  promulgated,  approved or entered thereunder, as the same are
generally  interpreted and enforced,  relating to the  environment,  or imposing
liability  or  standards  of  conduct  concerning  any  Hazardous  Materials  or
Petroleum  Products or environmental  protection,  as the same are now or at any
time  through  the  Closing  Date in  effect,  together  with any  amendment  or
re-authorization   thereto  or  thereof  including,   without  limitation:   the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the  Superfund  Amendments  and  Reauthorization  Act;  the  Resource
Conservation  and Recovery Act of 1976, as amended;  the Federal Water Pollution
Control  Act, as  amended;  the  Federal  Clean Air Act,  as amended;  the Toxic
Substances Control Act, as amended; the Safe Drinking Water Act, as amended; the
Pollution Control Act of 1990, as amended;  the Federal  Insecticide,  Fungicide
and Rodenticide Act, as amended; and comparable state and local Laws.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor thereto.

                  "E&Y"  shall mean Ernst & Young LLP,  independent  accountants
for Richfood and Buyer.

                  "Equipment"   shall   have  the   meaning   given  in  Section
2.3(a)(iii) hereof.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

                  "Excluded  Assets"  shall  have the  meaning  given in Section
2.3(a) hereof.

                  "Excluded Liabilities" shall have the meaning given in Section
2.3(b) hereof.


                                      - 3 -

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                  "Executive Agreements" shall have the meaning given in Section
2.3(a)(xix) hereof.

                  "Final  Statement of Working  Capital"  shall mean the special
purpose  statement  of  consolidated  working  capital of the  Company as of the
effective  time of Closing,  to be prepared  and  delivered in  accordance  with
Section 2.4(b) hereof.

                  "Final Working Capital" shall mean an amount equal to "current
assets"  minus  "current  liabilities"  as reflected  on the Final  Statement of
Working Capital.

                  "Funded  Debt"  shall  mean,  without  duplication,   (i)  all
indebtedness  for borrowed  money or which has been incurred in connection  with
the  acquisition of assets,  in each case having a final maturity of one or more
than one year  from  the  date of  origin  thereof  (or  which is  renewable  or
extendible  at the option of the obligor  for a period or periods  more than one
year from the date of origin),  including  all payments in respect  thereof that
are  required to be made within one year from the date of any  determination  of
Funded Debt to the extent the obligation to make such payments shall  constitute
a current  liability  of the obligor  under GAAP,  (ii) all accrued  interest on
Funded Debt and (iii) all guaranties of Funded Debt of others.

                  "GAAP" shall mean generally accepted accounting  principles as
in effect in the United States on the date of the subject financial statement.

                  "Governmental   Authority"  shall  mean  any  federal,  state,
municipal or other governmental department,  commission,  board, bureau, agency,
authority or instrumentality, or any court.

                  "Hazardous  Materials"  shall  mean  any  hazardous  material,
hazardous waste,  infectious medical waste, hazardous or toxic substance defined
or  regulated  as such in or under any  Environmental  Law,  including,  without
limitation,   materials   exhibiting  the   characteristics   of   ignitability,
corrosivity,  reactivity or extraction procedure toxicity, as such terms are now
or hereafter defined in connection with hazardous  materials or hazardous wastes
or hazardous or toxic substances in any Environmental Law.

                  "HSR  Act"   shall   mean  the   Hart-Scott-Rodino   Antitrust
Improvements Act of 1976, as amended.

                  "Intangibles"   shall  have  the  meaning   given  in  Section
2.3(a)(xi) hereof.

                  "Inventory" shall have the meaning given in Section 2.3(a)(iv)
hereof.

                  "JPM" shall mean J.P. Morgan & Co., Inc., financial advisor to
Richfood and Buyer.

                  "Knowledge"  shall mean, with respect to any corporation,  the
actual knowledge of the officers of such corporation after due inquiry, and with
respect to any other  Person,  the actual  knowledge  of such  Person  after due
inquiry.

                                      - 4 -

<PAGE>




                  "KPMG"  shall  mean  KPMG  Peat   Marwick   LLP,   independent
accountants for Seller.

                  "Law" shall mean any federal,  state, local or other statutory
or  common  law  or  governmental  requirement  of  any  kind,  and  the  rules,
regulations and orders promulgated thereunder.

                  "Leased  Properties"  shall mean the  Properties  that are the
subject of the Leases.

                  "Leases"  shall have the meaning  given in Section  2.3(a)(ii)
hereof.

                  "Material Adverse Effect" means any material adverse change in
the  condition  (financial  or  otherwise)  or results of  operations of Seller,
considered in the aggregate taking into account all instances in which such term
is used to qualify a representation or warranty made by Seller herein; provided,
however,  that Material  Adverse Effect (and the word  "material" and phrases of
like  import)  shall  exclude any adverse  changes or  conditions  as and to the
extent  such  changes  or  conditions  relate  to or result  from (a)  public or
industry knowledge of the transactions contemplated by this Agreement (including
but not limited to any action or inaction by Seller's  employees,  customers and
vendors),  (b) general  economic  conditions or other  conditions  affecting the
industry in which Seller competes as a whole,  including fluctuating  conditions
resulting from the cyclicality of Seller's business, (c) any operating losses of
a nature and in an amount similar to those  prevailing  prior to the date hereof
or that are attributable to Seller's business at the stores that are the subject
of the  Non-Assumed  Contracts,  (d) any action of the  Bankruptcy  Court in the
Bankruptcy  Case,  unless such actions are in  violation of or are  inconsistent
with, in any material  respect,  the terms of this  Agreement,  (e) the Excluded
Liabilities, and (f) those matters disclosed on Schedule 1.1B attached hereto.

                  "Non-Assumed  Contracts"  shall  have  the  meaning  given  in
Section 2.3(a)(xviii) hereof.

                  "Noteholders"  shall mean the record and beneficial  owners of
Seller's 12.25% Senior Notes due 2000 and Seller's  12.25% Senior Notes,  Series
A, due 2000.

                  "Owned  Properties"  shall have the  meaning  given in Section
2.3(a)(i) hereof.

                  "Partnership"  shall have the meaning given in Section  3.1(c)
hereof.

                  "Permits"  shall have the meaning  given in Section  2.3(a)(x)
hereof.

                  "Petroleum  Products" shall mean gasoline,  diesel fuel, motor
oil, waste or used oil, heating oil, kerosene and any other petroleum  products,
and their respective constituents.

                  "Permitted  Exceptions"  shall  mean,  collectively:  (a)  all
statutory or other liens for real estate taxes or assessments  which are not yet
due or delinquent or the validity of

                                      - 5 -

<PAGE>



which is being contested in good faith by Seller through appropriate proceedings
(including any interest and penalties on, in lieu of or for  noncollection of or
additions to any such taxes or assessments),  provided that in the aggregate the
foregoing amounts (to the extent constituting  Assumed  Liabilities) are accrued
for on the Final  Statement  of Working  Capital;  (b) all  non-monetary  liens,
covenants,  charges,  easements,  restrictions  and  encumbrances  contained (or
otherwise disclosed or identified in sufficient detail such that Buyer is put on
notice  regarding  the  material  facts  of  such  liens,  covenants,   charges,
easements,  restrictions  and  encumbrances)  in the  property  and lease  files
furnished  to Buyer by  Seller  prior to the  date  hereof,  including,  without
limitation  (i) all  matters,  conditions  and  states of fact so  disclosed  or
identified in title reports, surveys,  correspondence or other documents located
in such files, and (ii) all leases, subleases,  licenses, concessions or service
contracts,  common area maintenance,  reciprocal easement  agreements,  or other
operating  maintenance or development  agreements  contained (or so disclosed or
identified)  in such  files;  (c)  all  liens  and  encumbrances  arising  under
applicable  Law;  (d) with  respect to any asset  which  consists of a leasehold
estate or possessory interest in real property, all mortgages, deeds of trust or
other matters of record to which the underlying fee estate in such real property
is subject;  (e) all  mechanics',  carriers',  workers',  repairers' and similar
liens,  provided  that in the  aggregate  the  accounts  payable  related to the
matters  giving  rise to such liens are accrued  for on the Final  Statement  of
Working  Capital;  (f)  any  other  non-monetary  liens,   charges,   easements,
restrictions, encumbrances and other matters, if any, which do not, individually
or in the aggregate,  materially  adversely  interfere with the continued use of
the  property  by Buyer as  currently  conducted  by Seller;  and (g) such other
matters as are disclosed on Schedule 1.1C attached hereto.

                  "Person"  shall mean an  individual,  a  partnership,  a joint
venture, a limited liability company, a corporation,  a trust, an unincorporated
organization and a government or any department or agency thereof.

                  "Plan" shall have the meaning given in Section 2.1(b) hereof.

                  "Properties"  or  "Property"  shall  mean,  collectively,  the
Stores,  the  Warehouse  and the other real  property  Assets owned or leased by
Seller,  all of which are  identified on Schedule 2.3A or Schedule 2.3B attached
hereto.

                  "Purchase  Price"  shall  have the  meaning  given in  Section
2.4(a) hereof.

                  "Richfood  Common  Stock"  shall mean shares of common  stock,
without par value, of Richfood.

                  "Richfood SEC Reports" shall mean (a) Richfood's Annual Report
on Form 10-K for the fiscal year ended May 3, 1997, and (b) all documents  filed
by Richfood  with the SEC  pursuant to Sections  13(a) and 13(c) of the Exchange
Act,  any  definitive  proxy  statements  filed  pursuant  to  Section 14 of the
Exchange Act and any report filed  pursuant to Section 15(d) of the Exchange Act
following  the filing of  Richfood's  Annual  Report on Form 10-K for the fiscal
year ended May 3, 1997.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended.

                                      - 6 -

<PAGE>




                  "SEC" shall mean the Securities and Exchange Commission.

                  "Seller  Benefit  Plans" shall mean all  pension,  retirement,
profit-sharing,  deferred compensation,  stock option, employee stock ownership,
severance pay, vacation,  bonus or other incentive plans, and all other employee
programs,  arrangements  or agreements,  whether  arrived at through  collective
bargaining or otherwise, all medical, vision, dental and other health plans, all
life insurance  plans,  and all other  employee  benefit plans or fringe benefit
plans, including,  without limitation, any "employee benefit plan," as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed  to by Seller or any  Affiliates  thereof
for  the  benefit  of  employees,  retirees,  dependents,   spouses,  directors,
independent  contractors  or other  beneficiaries  and  under  which  employees,
retirees,  dependents,  spouses,  directors,  independent contractors,  or other
beneficiaries are eligible to participate.

                  "Seller SEC Reports" shall mean (a) Seller's  Annual Report on
Form 10-K for the fiscal year ended  December  28, 1996,  and (b) all  documents
filed by  Seller  with the SEC  pursuant  to  Sections  13(a)  and  13(c) of the
Exchange Act, any definitive  proxy  statements  filed pursuant to Section 14 of
the Exchange Act and any report filed  pursuant to Section 15(d) of the Exchange
Act following  the filing of Seller's  Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.

                  "Software" shall have the meaning given in Section 2.3(a)(xiv)
hereof.

                  "Stores" shall mean, collectively, the retail stores listed on
Schedule 1.1D.

                  "Subsidiary"  shall have the meaning  given in Section  3.1(b)
hereof.

                  "Supplies"  shall have the meaning given in Section  2.3(a)(v)
hereof.

                  "Warehouse" shall mean the dry grocery  distribution  facility
and offices located at Azalea Garden Road, Norfolk, Virginia.

                  "Warrants" shall mean warrants to purchase 1,500,000 shares of
common stock,  without par value, of Richfood,  with an exercise price of $25.00
per share and a term expiring five (5) years after the Closing Date, in the form
of Exhibit A to the Warrant Agreement.

                  "Warrant Agreement" shall mean the Warrant Agreement, dated as
of the Closing  Date,  between  Richfood  and the warrant  agent to be specified
therein,  in the form of Exhibit A attached hereto (subject only to such changes
as may be required to complete the dates  specified  therein and to identify the
warrant agent).







                                      - 7 -

<PAGE>



                                   ARTICLE II

           Commencement of Bankruptcy Case; Closing; Purchase and Sale

                  Section 2.1  Commencement  of Bankruptcy  Case. (a) As soon as
practicable  after the date hereof,  Seller shall commence a voluntary case (the
"Bankruptcy  Case")  under  Chapter  11  of  the  Bankruptcy  Code.  Subject  to
Richfood's  cooperation,  Seller  shall  use its  commercially  reasonable  best
efforts to obtain  Bankruptcy  Court  approval of the  break-up  fee and expense
reimbursement  provisions of Section  10.2(b)  hereof as early as practicable in
the Bankruptcy Case.  Except as otherwise  ordered by the Bankruptcy  Court, the
parties  hereto shall  cooperate in good faith to obtain such  Bankruptcy  Court
orders as may be  necessary  to effect  the Asset  Purchase  including,  without
limitation,  the  Confirmation  Order,  as soon  as  practicable  following  the
commencement of the Bankruptcy Case. Any solicitation by Seller of its creditors
and equity  security  holders prior to commencement of the Bankruptcy Case shall
be conducted in accordance with Section 1126(b) of the Bankruptcy Code.

                  (b)   Seller   has   delivered   to  Buyer  a  draft  plan  of
reorganization  of Seller (the "Plan") and related  draft  disclosure  statement
(the  "Disclosure  Statement") for use in connection  with the Bankruptcy  Case.
Such Plan and  Disclosure  Statement,  as the same shall be amended from time to
time and filed with the  Bankruptcy  Court in the Bankruptcy  Case,  shall be in
form and  substance  in all material  respects  reasonably  acceptable  to Buyer
insofar  as they  relate  to the  transactions  contemplated  herein,  it  being
understood  that:  (i) the most  recent  drafts  of the Plan and the  Disclosure
Statement  delivered to Buyer are acceptable to Buyer; and (ii) without limiting
the foregoing,  Seller need not seek or obtain Buyer's  acceptance of provisions
in the Plan or the Disclosure Statement relating to classification and treatment
of creditors and interest holders,  the administration of the reorganized debtor
(including  distribution  mechanisms,  corporate  governance  and  resolution of
disputed  claims and  interests),  or  release  provisions  (other  than as such
provisions relate to Buyer and its Affiliates).

                  Section 2.2 Time and Place of Closing.  The Closing shall take
place at the offices of Hunton & Williams,  Riverfront  Plaza East Tower, 951 E.
Byrd Street,  Richmond,  Virginia 23219, or such other place as Richfood,  Buyer
and Seller shall mutually agree, at 10:00 a.m., local time, on the date when the
conditions  set forth in Articles VIII and IX shall first be fully  satisfied or
duly waived (or, if such date is not a business  day,  then on the next business
day), or if Seller, Richfood and Buyer shall mutually agree on a different date,
the date upon which they shall have mutually agreed (such date being referred to
herein as the "Closing Date").

                  Section  2.3  Purchase  and Sale of Assets and  Assumption  of
Liabilities.  (a) Subject to the satisfaction or waiver of all of the conditions
set forth  herein,  on the Closing  Date,  Seller  shall sell,  convey,  assign,
transfer and deliver to Buyer, and Buyer shall purchase, acquire, accept, assume
and pay for, all of Seller's right, title and interest as of the Closing Date in
and to all of the tangible and intangible  assets,  properties and rights (other
than  the  Excluded  Assets  described   below)  of  Seller,   wherever  located
(hereinafter  collectively  referred  to as the  "Assets"),  including,  without
limitation:

                                      - 8 -

<PAGE>




                           (i) all parcels of real property owned by Seller, all
                  of which are  identified on Schedule  2.3A,  together with all
                  buildings, fixtures and improvements located on or attached to
                  such real property, and all options,  rights of first refusal,
                  licenses  and  permits (to the extent  transferable),  leases,
                  subleases,  easements and rights-of-way  which are appurtenant
                  to such real  property,  subject to the  Permitted  Exceptions
                  (the "Owned Properties");

                           (ii) all of the leases and subleases of real property
                  which are listed on Schedule 2.3B,  and the related  leasehold
                  interests,  licenses,  permits  (to the extent  transferable),
                  leases,  subleases,  easements  and  rights-of-way  which  are
                  appurtenant  to  and  subject  to  such  leasehold  interests,
                  subject  to  the  Permitted  Exceptions   (collectively,   the
                  "Leases");

                           (iii) all of the vehicles  and all of the  machinery,
                  equipment,   rolling  stock,   tools,   furniture,   fixtures,
                  leasehold improvements,  pallets,  phones, computer equipment,
                  order entry devices and other items of personal property which
                  are owned by Seller (collectively, the "Equipment");

                           (iv) all  merchandise  inventory  owned by  Seller or
                  which is in  transit  to the  Warehouse  or the  Stores on the
                  Closing Date (the "Inventory");

                           (v)  all  supplies,   containers,  labels,  packaging
                  material,  maintenance supplies, raw food materials,  fuel and
                  other  similar  items owned by Seller which are located at the
                  Properties  or at vendors of Seller on the  Closing  Date (the
                  "Supplies");

                           (vi) the amount of all transferable deposits, prepaid
                  rent and  prepaid  expenses  made by  Seller  for all  Leases,
                  Contracts  or  Permits  or  otherwise  relating  to the Assets
                  transferred to Buyer;

                           (vii)  all of  Seller's  Cash  and  cash  equivalents
                  located  at  the  Properties  or  on  deposit  in  banking  or
                  financial  institutions in any accounts or safe deposit boxes,
                  and all checks,  manufacturers'  coupons,  food-stamps and WIC
                  coupons  located  in or at  the  Properties  or  otherwise  in
                  Seller's possession or control;

                           (viii)  all  contracts   and   agreements  of  Seller
                  relating to the  operations  of the Seller at the  Properties,
                  including,  without limitation,  any purchase orders or supply
                  agreements   for  Inventory  and  Supplies   relating  to  the
                  operation  of the  Properties  to the extent  provided  herein
                  (including, without limitation, the Supply Agreement, dated as
                  of April 12, 1991, as amended,  between Richfood, Inc., Seller
                  and  certain  of  Seller's  Affiliates,  and the Milk and Meat
                  Supply  Agreement,  dated as of September  23,  1994,  between
                  Richfood,  Inc.,  Seller and certain of Seller's  Affiliates);
                  leases  of  or   agreements   relating  to  the   maintenance,
                  acquisition   or  use  of  the  Properties  or  any  vehicles,
                  machinery,   equipment,   rolling  stock,  tools,   furniture,
                  fixtures,  phones,  computer  equipment,   computer  software,
                  pallets, order entry devices

                                      - 9 -

<PAGE>



                  and other items of personal property related thereto;  and all
                  of Seller's  rights with  respect  to, and  interests  in, any
                  consigned, licensed or bailed fixtures, equipment or inventory
                  including,  without limitation,  shelf end caps, displays, ice
                  chests   and   food   and   beverage   dispensing    equipment
                  (collectively, the "Contracts");

                           (ix)  all  accounts   receivable   owned  by  Seller,
                  including,  without  limitation,  accounts  receivable  of the
                  Stores  and  the   Warehouse   (collectively,   the  "Accounts
                  Receivable");

                           (x)  all  licenses  and  permits  pertaining  to  the
                  operation  of  Seller's  business  which are  transferable  or
                  assignable to Buyer under  applicable Law  (collectively,  the
                  "Permits");

                           (xi)   all   trademarks,    trade   names,   patents,
                  servicemarks,  copyrights, logos, pending applications for the
                  foregoing   and   similar   intangibles   (collectively,   the
                  "Intangibles");

                           (xii) originals or true and complete copies of all of
                  the Books and Records that are in the possession or control of
                  Seller or its Affiliates at Closing;

                           (xiii) all computer  hardware owned by Seller or used
                  in the  operation of Seller's  business  that is not leased by
                  Seller pursuant to a Contract;

                           (xiv) all computer  software  owned by Seller or used
                  in the  operation of Seller's  business  that is not leased or
                  licensed by Seller pursuant to a Contract  including,  without
                  limitation,  the  software  listed in Schedule  2.3C  attached
                  hereto (the "Software");

                           (xv)  (A)  all  rights  of  Seller  under   insurance
                  policies  to which  Seller  is a  party,  a named  insured  or
                  otherwise  the   beneficiary   of  coverage  (the   "Insurance
                  Policies"),   except   directors'   and  officers'   liability
                  insurance   and  except   claims  for  business   interruption
                  insurance relating to pre-Closing  periods,  and (B) copies of
                  insurance  certificates  that  Seller  has  provided  to third
                  parties  pertaining  to  the  Properties  (including,  without
                  limitation,  the  identity  of the  named  insureds  and  loss
                  payees); and

                           (xvi) all  insurance  proceeds  receivable  by Seller
                  (except  proceeds  from claims for  directors'  and  officers'
                  liability  insurance  and  business   interruption   insurance
                  relating to  pre-Closing  periods) and all causes of action of
                  Seller  relating  to  Seller's  business  (including,  without
                  limitation,  any  causes of action  arising  out of any supply
                  agreements to which Seller is a party);

provided,  however, that the property, assets, contracts,  leases, and rights of
Seller  described  below  (collectively,  the  "Excluded  Assets") are expressly
excluded from the definition of

                                     - 10 -

<PAGE>



"Assets" and the terms defined in Sections  2.3(a)(i)-(xvi) hereof, and from the
Asset Purchase:

                           (xvii) the Cash Portion of the Purchase Price and the
                  Warrants;

                           (xviii) the leases and  contracts  listed on Schedule
                  2.3D attached hereto (the "Non-Assumed Contracts");

                           (xix) the  employment  agreements  listed on Schedule
                  2.3E attached hereto (the "Executive Agreements");

                           (xx) all Cash,  Inventory,  Accounts  Receivable  and
                  prepaid  expenses  owned by Seller and located at, or directly
                  relating  to,   leased   premises  that  are  the  subject  of
                  Non-Assumed Contracts;

                           (xxi) any  licenses  and  permits  pertaining  to the
                  operation   of  Seller's   business   which  are  not  legally
                  transferable and assignable to Buyer;

                           (xxii)  all  causes  of  action  of  Seller  relating
                  specifically to the Non- Assumed Contracts;

                           (xxiii)  all causes of action of Seller  relating  to
                  any  actual  or  potential  claim or  demand  against  (A) any
                  current or former shareholder,  director,  officer,  employee,
                  agent,  attorney,  advisor  or  consultant  of  Seller  or  FF
                  Holdings  or any of their  respective  Affiliates,  or (B) the
                  Noteholders,  their  steering  committee and their  respective
                  attorneys and advisors;

                           (xxiv) all causes of action of Seller relating to any
                  actual  or  potential   preferential  transfer  or  fraudulent
                  conveyance  arising under federal or state Law,  except to the
                  extent  any  such  claim  relates  to  Richfood  or any of its
                  Affiliates;

                           (xxv)  all  letters  of  credit  (including,  but not
                  limited  to,  those  posted  to  support   Seller's   workers'
                  compensation  obligations  and  general  liability  and  other
                  insurance  obligations,   policies  and  premiums),  it  being
                  understood that Buyer shall post substitute  letters of credit
                  or make other satisfactory arrangements with the beneficiaries
                  of  any  such   letters  of  credit  that  relate  to  Assumed
                  Liabilities  in order  to  permit  Seller  to  terminate  such
                  letters of credit at Closing;

                           (xxvi)  all  rights of Seller  under  directors'  and
                  officers'  liability  insurance  policies,  and all  rights of
                  Seller  with  respect  to  claims  for  business  interruption
                  insurance relating to pre-Closing periods; and

                           (xxvii)  Seller's rights under this Agreement and the
                  Plan.


                                     - 11 -

<PAGE>



                  (b) At the Closing, Buyer shall assume and agree to perform or
discharge, and indemnify,  defend and hold Seller harmless from and against, all
of the liabilities  and obligations of Seller arising out of,  resulting from or
relating to the operation, ownership, use or occupancy of the Properties and the
Assets by Seller,  whether  arising before or after Closing and whether known or
unknown,  fixed or contingent,  including,  without limitation,  liabilities and
obligations  (i) arising under the Leases,  Contracts and Permits,  (ii) arising
under  purchase  orders for  inventory  and  supplies  and  services  previously
delivered  and provided  and/or to be  delivered  or provided to the  Properties
before,  on or after the Closing Date,  (iii) that are subject to coverage under
the Insurance  Policies (whether such liabilities and obligations  relate to the
Properties  and  Assets or to  premises  that are the  subject  of Non-  Assumed
Contracts, it being understood that Buyer shall be responsible for the amount of
any retention or deductibles under such Insurance Policies and the amount of any
such  liabilities  or  obligations  in excess of such  insurance) and (iv) which
Buyer has expressly  agreed to assume pursuant to this Agreement  (collectively,
the "Assumed Liabilities"). Except as specifically set forth herein, Buyer shall
not assume any  liability or  obligation  of Seller,  whether  known or unknown,
fixed or  contingent  or  otherwise.  Without  limiting  the  generality  of the
foregoing,  the parties agree that the Assumed  Liabilities  shall  specifically
exclude:  (i) Funded Debt of Seller as of the Closing Date; (ii) liabilities and
obligations  arising  under the  Non-Assumed  Contracts;  (iii) any liability or
obligation of Seller to the extent  arising out of,  resulting  from or relating
directly to the operation,  ownership, use or occupancy of the premises that are
the subject of the Non-Assumed  Contracts under applicable  Environmental Law or
relating to Seller's use,  storage,  release,  disposal or handling of Hazardous
Materials or Petroleum Products at or from such premises;  (iv) any liability or
obligation of Seller arising out of,  resulting from or related to the Executive
Agreements;  (v) any  liability  or  obligation  of Seller for taxes,  except as
provided  in  Section  7.1  hereof  and  except  to the  extent  such  taxes are
specifically  identified  and  accrued  for on the Final  Statement  of  Working
Capital;  (vi) Seller's  obligations under this Agreement and Seller's costs and
expenses  incurred  in  connection  with  this  Agreement  and the  transactions
contemplated  herein which remain outstanding on and after the Closing Date; and
(vii) any other  liabilities or obligations  that are  specifically set forth on
Schedule 2.3F attached hereto (collectively, the "Excluded Liabilities").

                  Section  2.4  Purchase  Price.  (a) Subject to  adjustment  as
provided in subsection  (b) of this Section 2.4 and in Section  5.11(f)  hereof,
the  purchase  price for the  Assets  (the  "Purchase  Price")  shall be (i) TWO
HUNDRED FIFTY ONE MILLION THREE HUNDRED FIFTY  THOUSAND  Dollars  ($251,350,000)
plus (ii) the  Warrants  plus (iii) the  assumption  of the Assumed  Liabilities
minus  (iv)  an  amount  equal  to the  Closing  Capital  Lease  Liability  (the
difference  between the amounts described in clauses (i) and (iv) being referred
to herein as the "Cash Portion of the Purchase Price").

                  (b)(i) Within thirty (30) days after the Closing Date,  Seller
shall prepare and deliver to Buyer a draft Final  Statement of Working  Capital,
which shall be prepared in accordance with Schedule 2.4 attached hereto.

                  (ii) If Buyer has no objections  to the draft Final  Statement
of Working Capital, such draft shall be certified by Seller and shall constitute
the Final Statement of Working Capital. If Buyer has any objections to the draft
Final Statement of Working

                                     - 12 -

<PAGE>



Capital,  it will deliver a detailed  statement  describing  its  objections  to
Seller within  twenty-one (21) days after receiving the draft Final Statement of
Working  Capital.  Buyer and Seller will use their  reasonable  best  efforts to
resolve any such objections. If a final resolution is not obtained within thirty
(30) days after  Seller has  received the  statement  of  objections,  Buyer and
Seller will select a nationally-recognized  independent accounting firm mutually
acceptable to them to resolve any remaining  objections  (the  "Arbitrator")  in
accordance with subsection (iii) hereof. If Buyer and Seller are unable to agree
on the  choice  of an  Arbitrator,  they  will  select  a  nationally-recognized
independent United States accounting firm by lot (after excluding KPMG and E&Y).

                  (iii)  For  each  unresolved  objection  to  the  draft  Final
Statement  of  Working  Capital,  Buyer  and  Seller  will  each  submit  to the
Arbitrator a written  statement  setting forth such party's proposed  resolution
and any supporting data and analysis. The Arbitrator, following "baseball style"
arbitration,  will select either Buyer's or Seller's proposed resolution of each
objection.  Seller will revise the draft Final  Statement of Working  Capital as
appropriate to reflect the  resolution of Buyer's  objections (as agreed upon by
Seller and Buyer or as  determined  by the  Arbitrator)  and deliver it to Buyer
within ten (10) days  after the  resolution  of such  objections.  Such  revised
statement shall be certified by Seller and shall  constitute the Final Statement
of Working Capital.

                  (iv)  To the  extent  that  the  Final  Statement  of  Working
Capital,  as certified by Seller,  shows that Final Working Capital is less than
December  Working  Capital,  Seller  shall  pay  such  difference  to  Buyer  in
immediately  available  funds within two (2)  business  days of delivery of such
Final  Statement of Working  Capital.  To the extent that the Final Statement of
Working  Capital,  as certified by Seller,  shows that Final Working  Capital is
greater than December Working Capital,  Buyer shall pay such excess to Seller in
immediately  available  funds within two (2)  business  days of delivery of such
Final Statement of Working  Capital.  All payments made pursuant to this Section
2.4(b)(iv)  shall be  accompanied by accrued  interest  thereon from the Closing
Date at the rate of 8.0% per annum.

                  (v)  If  any   unresolved   objections  are  submitted  to  an
Arbitrator for resolution,  as provided above,  then Buyer and Seller will share
the fees and  expenses  of the  Arbitrator  on a pro rata basis  reflecting  the
dollar amount of issues resolved in each party's favor.

                  (vi) Seller  will,  and will cause KPMG to, make  available to
Buyer and its  advisors  the work  papers  used in  preparing  the  draft  Final
Statement of Working  Capital and the Final  Statement of Working  Capital,  and
will  provide  access to those  employees  of Seller  and KPMG  involved  in the
preparation  thereof, at reasonable times and upon reasonable notice at any time
during the preparation by Seller of the draft Final Statement of Working Capital
and the resolution of any objections with respect thereto.

                  Section  2.5  Deliveries.  (a) At the  Closing,  Seller  shall
deliver the following to Buyer:


                                     - 13 -

<PAGE>



                           (i)   special   warranty   deeds,   bills   of  sale,
                  endorsements,   assignments,   leases,   subleases  and  other
                  instruments of transfer and conveyance of the Assets,  in form
                  reasonably acceptable to Buyer and Seller; provided,  however,
                  that any such instruments  shall be without  representation or
                  warranty  by, or  recourse  to,  Seller,  except as  otherwise
                  specifically provided herein;

                           (ii)  possession  at the  Properties of all Books and
                  Records;

                           (iii) a  certificate  of Seller  (signed on behalf of
                  Seller  by  its  President  or  a  Vice  President)  that  the
                  conditions  set  forth  in  Section  8.1 have  been  satisfied
                  (except as waived by Buyer); and

                           (iv) a  secretary's  certificate  in customary  form,
                  including incumbency certificates with respect to the officers
                  of Seller who execute this Agreement and any other agreements,
                  certificates  or other  documents in connection with the Asset
                  Purchase.

                  (b) At the  Closing,  Buyer  shall  deliver the  following  to
                  Seller:

                           (i) the Cash Portion of the Purchase  Price,  by wire
                  transfer of immediately  available funds in such amount to the
                  bank  account  or  accounts  designated  by Seller (or by such
                  other means as are agreed upon by Buyer and Seller);

                           (ii) the  Warrants,  registered in the name of Seller
                  or such  assignees as may be  designated in or pursuant to the
                  Plan;

                           (iii) assumption agreements, leases or subleases with
                  respect to the Contracts, Leases and other obligations assumed
                  by Buyer  substantially in the form attached hereto as Exhibit
                  B or in such other form as shall be  reasonably  acceptable to
                  Buyer and Seller;

                           (iv) a  certificate  of Buyer  (signed  on  behalf of
                  Buyer  by  its  President  or  a  Vice   President)  that  the
                  conditions  set  forth  in  Section  9.1 have  been  satisfied
                  (except as waived by Seller); and

                           (v) a  secretary's  certificate  in  customary  form,
                  including incumbency certificates with respect to the officers
                  of Buyer who execute this Agreement and any other  agreements,
                  certificates  or other  documents in connection with the Asset
                  Purchase.

                  Section 2.6 Inventory  and Supplies in Transit.  Inventory and
Supplies  ordered in the ordinary  course of business,  delivery of which is not
received on or prior to the Closing Date by Seller, shall become the property of
Buyer.  Buyer shall pay the vendor for the  Inventory and Supplies in accordance
with the invoice terms and conditions  including any  applicable  transportation
charges,  and Buyer shall not be entitled to reimbursement of all or any portion
of such payment from Seller.

                                     - 14 -

<PAGE>




                  Section 2.7 Allocation of Purchase  Price.  The Purchase Price
(including  the Assumed  Liabilities to the extent such  liabilities  constitute
part of the amount  realized  by Seller for  federal  income tax  purposes,  but
excluding  any  interest  payable  upon the  adjustment  of the  Purchase  Price
pursuant to Section  2.4(b)) shall be allocated among the Assets as set forth in
Schedule 2.7 attached hereto.  Buyer,  Richfood and Seller shall each report the
federal,  state and local income and other tax  consequences of the transactions
contemplated  by this  Agreement in a manner  consistent  with such  allocation,
including  but not  limited  to the  preparation  and  filing of Form 8594 under
Section 1060 of the Code (or any  successor  form or successor  provision of any
future tax law) with their respective federal income tax returns for the taxable
year that includes the Closing Date, and none of Buyer,  Richfood or Seller will
take any position inconsistent with such allocation unless otherwise required by
applicable Law; provided,  however,  that Buyer's cost for the Assets may differ
from the  amount  so  allocated  to the  extent  necessary  to  reflect  Buyer's
capitalized acquisition costs other than the amount realized by Seller.


                                   ARTICLE III

                    Representations and Warranties of Seller

                  Seller hereby represents and warrants to Buyer and Richfood as
follows:

                  Section 3.1 Incorporation;  Good Standing;  Subsidiaries.  (a)
Seller is duly  incorporated and validly existing under the laws of Virginia and
has all requisite  corporate power and corporate authority to own its properties
and assets and to carry on its business as it is now being conducted.  Seller is
in good  standing  under the laws of Virginia and is duly  qualified to transact
business in Virginia.  Seller is duly  qualified to do business,  and is in good
standing,  in each other jurisdiction where the failure to be so qualified would
have a Material  Adverse  Effect.  Except as set forth in Schedule  3.1 attached
hereto, Seller is not the record or beneficial owner of any equity, partnership,
membership or other interest in any Person.

                  (b) With respect to each Person listed on Schedule 3.1 that is
a corporation (a "Subsidiary"), such Schedule accurately sets forth its name and
jurisdiction of  incorporation.  Each Subsidiary is duly  incorporated,  validly
existing and in good standing in its jurisdiction of incorporation,  and has all
requisite  corporate  power and corporate  authority to own its  properties  and
assets  and  to  carry  on  its  business  as it is now  being  conducted.  Each
Subsidiary is duly qualified to do business,  and is in good  standing,  in each
other  jurisdiction  where the failure to be so qualified  would have a Material
Adverse  Effect.  All of the issued and  outstanding  shares of capital stock of
each Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable,  and are owned of record and  beneficially  by  Seller,  free and
clear of any and all restrictions on transfer (other than restrictions under the
Securities  Act and state  securities  laws),  mortgages,  liens,  encumbrances,
pledges,  security interests,  options,  warrants,  purchase rights,  contracts,
commitments,  equities,  claims and demands, except Permitted Exceptions.  There
are no outstanding or authorized options, warrants,  purchase rights, conversion
rights,  exchange rights,  subscription rights or other contracts or commitments
that could require Seller to sell,

                                     - 15 -

<PAGE>



transfer or otherwise dispose of any capital stock of any of the Subsidiaries or
that could require any  Subsidiary to issue,  sell or otherwise  cause to become
outstanding  any of its  own  capital  stock.  There  are no  outstanding  stock
appreciation, phantom stock, profit participation or similar rights with respect
to any Subsidiary,  and there are no voting trusts,  proxies or other agreements
or  understandings  with  respect  to the  voting  of any  capital  stock of any
Subsidiary.

                  (c) With respect to each Person listed on Schedule 3.1 that is
a partnership (a  "Partnership"),  such Schedule  accurately  sets forth (i) its
name and  jurisdiction  of  organization,  and (ii) the  nature  and  extent  of
Seller's and its Subsidiaries'  interests in each Partnership.  Each Partnership
is duly organized,  validly existing and in good standing in its jurisdiction of
organization,  and has all requisite partnership power and partnership authority
to own its properties and assets and to carry on its business as it is now being
conducted.  Each  Partnership is duly  qualified to do business,  and is in good
standing,  in each other  jurisdiction when the failure to be so qualified would
have a Material Adverse Effect.  The interests of Seller and its Subsidiaries in
the Partnerships are owned free and clear of any restrictions on transfer (other
than  restrictions   under  the  Securities  Act  and  state  securities  laws),
mortgages, liens, encumbrances,  pledges, security interests, options, warrants,
purchase rights,  contracts,  commitments,  equities, claims and demands, except
Permitted  Exceptions.  There are no outstanding  contracts or commitments  that
could  require  any of the  Partnerships  to admit  additional  participants  or
require Seller or any Subsidiary to sell,  transfer or otherwise  dispose of its
interest  in  any  Partnership  or  contribute  any  additional  capital  to any
Partnership.

                  Section 3.2 Authorization.  All requisite corporate action has
been taken by Seller to authorize the  execution and delivery of this  Agreement
and all of the other documents,  instruments and agreements required hereby from
Seller, and the consummation of the transactions contemplated hereby and thereby
by Seller. This Agreement has been, and all of the other documents,  instruments
and agreements  required hereby from Seller will as of the Closing Date be, duly
executed  and  delivered  by  Seller  and   constitute  the  valid  and  binding
obligations  of Seller  (assuming due  authorization  and execution by the other
parties thereto), enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization,  moratorium or similar laws affecting
creditors'  rights and general  equitable  principles  (whether  enforcement  is
sought in equity  or at law).  Except as  described  on  Schedule  3.2  attached
hereto,  neither the  execution  and  delivery of this  Agreement  and the other
documents,  instruments  and agreements  required  thereby from Seller,  nor the
consummation by Seller of the transactions  contemplated hereby or thereby, will
(i) violate any provision of the Articles of  Incorporation or Bylaws of Seller,
(ii)  conflict  with or result in a breach  of any terms and  provisions  of, or
constitute a default under, any indenture, mortgage, contract or other agreement
to which Seller is a party or by which Seller is bound or (iii) violate any Law,
writ,  injunction  or decree  applicable  to Seller or any of its  properties or
assets,  except, in the case of subsection (ii) above, for violations,  breaches
or defaults that would not have a Material  Adverse  Effect.  Except for (i) any
applicable  filings or reports  under the Exchange Act and the HSR Act, (ii) any
required  consents,  approvals or  authorizations or orders of, or filings with,
the Bankruptcy Court, and (iii) those required filings, registrations,  consents
and approvals that are listed on Schedule 3.2 attached  hereto or which,  if not
obtained, would not have a Material Adverse Effect, no filing or registration

                                     - 16 -

<PAGE>



with,  and no permit,  authorization,  consent or approval of, any  Governmental
Authority is necessary or required in connection with the execution and delivery
of this Agreement or the other  documents,  instruments and agreements  required
hereby  from  Seller  by  Seller,  or for  the  consummation  by  Seller  of the
transactions contemplated herein or therein.

                  Section 3.3 Title to and Sufficiency of Assets. Seller has, or
will on the Closing Date have,  good and  marketable  fee simple title to all of
the  Owned  Properties,  and  valid  leasehold  interests  in all of the  Leased
Properties,  in each  case  free  and  clear  to  Seller's  Knowledge  from  all
mortgages,  pledges,  liens,  encumbrances  or  security  interests,  except for
Permitted  Exceptions.   Seller  has  delivered  to  Buyer,  or  otherwise  made
available,  originals or true copies of all deeds, leases and subleases relating
to the Properties that are within Seller's possession or control. Seller has, or
will on the Closing Date have, good and valid title to the other owned Assets to
be  transferred  hereunder  on the  Closing  Date,  free and  clear to  Seller's
Knowledge of all mortgages,  pledges, liens, encumbrances or security interests,
except for Permitted Exceptions.  The Assets include all tangible and intangible
assets,  contracts  and rights  necessary or required  for the  operation of the
businesses  of Seller as they are presently  conducted,  except for the Excluded
Assets.

                  Section 3.4  Contracts.  Seller has provided to Buyer true and
complete   copies  of  all  of  the  Contracts   (including  all  amendments  or
modifications  thereto)  or, in the case of oral  Contracts,  true and  complete
written  summaries of the terms  thereof,  that  constitute:  (a) a lease of any
interest  in any  real  property;  (b) a lease  of any  personal  property  with
aggregate annual rental payments in excess of $50,000;  (c) an option to acquire
or lease any interest in real  property or a right of first refusal with respect
thereto;  (d) an agreement to purchase or sell a capital asset or an interest in
any business entity for a price in excess of $50,000 or a right of first refusal
with respect thereto;  (e) an agreement  relating to the borrowing or lending of
money  or the  purchase  or sale of  securities;  (f) a  guaranty,  contribution
agreement or other agreement that includes any indemnification,  contribution or
support obligation involving an aggregate liability in excess of $50,000; (g) an
agreement with any third person limiting in any respect the ability of Seller to
compete in any line of business or with any person; (h) a supply or requirements
agreement or other  agreement  with a vendor;  (i) any  employment or consulting
agreements  to which  Seller  is a party or by  which it is bound  involving  an
amount in excess of $10,000  individually or $100,000 in the aggregate;  and (j)
any other agreement involving an amount over its term in excess of $100,000 that
cannot be  terminated  prior to an  expenditure  of $10,000  or less;  provided,
however,  that Seller  shall have no  obligation  pursuant  to this  sentence to
deliver  to Buyer  copies  of  purchase  orders  entered  into by  Seller in the
ordinary course of business. Except as set forth in Schedule 3.4 attached hereto
and  subject to Section 365 of the  Bankruptcy  Code,  each  Contract is in full
force and effect and, to Seller's  Knowledge,  is enforceable in accordance with
its terms  (except  as the  enforcement  thereof  may be  limited  or  otherwise
affected by  bankruptcy,  insolvency,  reorganization,  moratorium or other laws
generally  affecting  the rights of  creditors  and  subject  to general  equity
principles (whether considered at law or in equity)).  Seller has performed on a
timely basis each material term, covenant and condition of each of the Contracts
that is to be  performed  by it.  Except as set forth in Schedule  3.4  attached
hereto, no event has occurred that would, with the passage of time or compliance
with any applicable notice  requirements,  constitute a default by Seller or, to
Seller's Knowledge, any other party under any of the Contracts, and, to Seller's
Knowledge,

                                     - 17 -

<PAGE>



no party to any of the  Contracts  intends to cancel,  terminate or exercise any
option under any of the Contracts.  Except as set forth on Schedule 3.4 attached
hereto,  Seller  has made no prior  assignment  of the  Contracts  or any of its
rights or obligations thereunder.

                  Section 3.5  Litigation.  Except as set forth in Schedule  3.5
attached  hereto,  there  are no  Actions  pending  or, to  Seller's  Knowledge,
threatened  against Seller which could reasonably be expected to have a Material
Adverse Affect.

                  Section 3.6 Labor Matters. (a) Except as set forth in Schedule
3.6 attached  hereto:  (i) there is no unfair labor practice charge or complaint
against Seller pending or, to Seller's Knowledge, threatened before the National
Labor Relations Board or any other  comparable  authority;  (ii) no grievance or
arbitration  proceeding arising out of or under collective bargaining agreements
is pending and, to Seller's  Knowledge,  no claims  therefor  exist or have been
overtly  threatened;  and (iii)  there is no Action of any kind  pending  or, to
Seller's   Knowledge,   proposed  or  threatened   against  Seller  relating  to
employment,  employment  practices,  terms and conditions of employment or wages
and hours and which,  in the case of clause (iii)  hereof,  could  reasonably be
expected to have a Material Adverse Effect.

                  (b) Except as described in Schedule 3.6 attached  hereto:  (i)
Seller does not have any collective  bargaining  relationship or duty to bargain
with any Labor  Organization  (as such term is defined  in  Section  2(5) of the
National  Labor  Relations  Act, as amended),  and Seller has not recognized any
Labor  Organization as the collective  bargaining  representative  of any of its
employees;  (ii) Seller has not been notified by any Labor  Organization that it
intends to  organize  all or any portion of  Seller's  workforce  or the persons
employed at any Store or other Property operated by Seller; and (iii) Seller has
no Knowledge of any active organizational  attempts by any Labor Organization at
any of Seller's locations.  For purposes of clause (iii), "active organizational
attempts" shall mean actual  distribution of authorization cards to employees by
a Labor  Organization,  distribution  of  union  literature  at or in any of the
Seller's   locations,   telephone   solicitation   of  employees  by  any  union
representative, visits to employees' homes by any union representative, off-site
meetings of  employees  with a union  representative,  or the  formation  of any
employee  committees  for the  purposes  of  organizing  all or any  portion  of
Seller's workforce.

                  Section 3.7 Employee Benefit Plans. (a) No Seller Benefit Plan
is a defined  benefit plan (within the meaning of Section  3(35) of ERISA) or is
or has been  (within  any period for which the  statute  of  limitations  on the
assessment  of  withdrawal  liability  under Title IV of ERISA  remains  open) a
multiemployer  plan (within the meaning of Section  3(37) of ERISA).  All Seller
Benefit  Plans are in  compliance  with the  applicable  provisions  (including,
without limitation,  any funding requirements or limitations) of ERISA, the Code
and any other applicable Laws, other than breaches or violations which could not
reasonably be expected to have a Material Adverse Effect. Except as described in
Schedule   3.7  attached   hereto,   no  Seller   Benefit   Plan   provides  for
post-retirement medical benefit obligations (other than COBRA obligations) or is
a funded welfare benefit plan.

                  (b)  Schedule  3.7  hereto is a true and  correct  list of all
Seller Benefit Plans.  Seller has provided Buyer with access to true and correct
copies of each governing document

                                     - 18 -

<PAGE>



for each  Seller  Benefit  Plan,  together  with the most  recent  summary  plan
description,  annual report, actuarial valuation and audited financial statement
for each such plan.

                  Section 3.8 Environmental Conditions.  (a) Except as set forth
in Schedule  3.8  attached  hereto and except for such  violations  as could not
reasonably  be expected to have a Material  Adverse  Effect:  (i) Seller has not
used, stored, treated, transported,  manufactured, refined, handled, produced or
disposed of any Hazardous Materials or Petroleum Products on, under, at, from or
in any way  affecting  any  properties  or  assets  now or  previously  owned or
operated  by  Seller,  in  any  manner  which  constitutes  a  violation  of any
Environmental  Law; and (ii) to Seller's  Knowledge,  no prior owner of any such
property  or asset or any tenant,  subtenant,  prior  tenant or prior  subtenant
thereof has used Hazardous  Materials or Petroleum  Products on, under, at, from
or in any way  affecting  any  such  property  or  asset,  in any  manner  which
constitutes a violation of any Environmental Law.

                  (b) Except as set forth on Schedule  3.8  attached  hereto and
except for such matters that could not reasonably be expected to have a Material
Adverse Effect: (i) Seller does not have any obligations or liabilities, whether
absolute or contingent,  accrued or unaccrued, asserted or unasserted, that have
been  or  are  imposed  by  reason  of  or  based  upon  any  provision  of  any
Environmental Laws; (ii) to Seller's Knowledge, no pending claims have been made
against Seller or pertaining to any properties or assets now or previously owned
or  operated  by Seller that have been or are imposed by reason of or based upon
any  provision of any  Environmental  Laws;  and (iii) no presently  outstanding
citations or notices have been received by Seller pertaining to Seller or to any
properties or assets now or  previously  owned or operated by Seller that relate
to or are based upon any provision of any Environmental Laws.

                  (c) Seller has  received  all  licenses  and permits  that are
required of it under  applicable  Environmental  Laws to conduct its businesses,
and Seller is in compliance  with the terms and  conditions of all such licenses
and permits, except where the failure to receive or comply with any such license
or permit could not  reasonably be expected to have a Material  Adverse  Effect.
Seller has not received any pending,  unresolved  notices or claims that it is a
potentially  responsible  party in connection  with any claim or notice asserted
pursuant to 42 U.S.C. Section 9601 et seq., or any state superfund law.

                  (d) Except as set forth on Schedule  3.8 attached  hereto,  to
the Knowledge of Seller there are no underground  storage tanks,  and no friable
asbestos, located on any of the Properties.

                  Section  3.9  Compliance  with Law.  The  conduct of  Seller's
business and Seller's use of the Assets and performance under the Contracts does
not violate or conflict with, and has not violated or conflicted  with, any Law,
where such violation or conflict could reasonably be expected to have a Material
Adverse Effect.

                  Section  3.10  Permits.  Seller  possesses  all  licenses  and
permits  required to operate its business as it is currently  conducted,  except
where the  failure  to obtain  any such  licenses  or  permits  would not have a
Material Adverse Effect.  No  representation  or warranty is made by Seller with
respect to the transferability of such licenses and permits to

                                     - 19 -

<PAGE>



Buyer.  Seller  agrees to use its  reasonable  best  efforts  prior to and after
Closing to assist  Buyer in  effecting  the transfer of the Permits to Buyer (it
being  understood  that such best efforts shall not require  Seller to incur any
out-of-pocket  expenses in  connection  therewith,  unless  Buyer shall agree to
reimburse Seller promptly for such expenses).

                  Section 3.11 Taxes.  Seller has filed all required tax returns
and reports relating to the Assets, the Contracts and its business. All taxes of
Seller that have  become due  pursuant to the  foregoing  tax returns  have been
paid. The Books and Records to be transferred to Buyer contain,  in all material
respects, all information and documents (including, without limitation, properly
completed Forms W-9) necessary to comply with all tax information  reporting and
tax withholding  requirements relating to Seller's business or the Assets. There
are no unpaid  taxes  (including  additions  to tax,  penalties  and  interest),
withholdings  or other  governmental  charges  the  non-payment  of which  could
adversely  affect any of the Assets or the use  thereof  after  Closing or could
cause Buyer to incur any liability,  except for those tax  liabilities  (if any)
that  are  specifically  included  among  the  Assumed  Liabilities.  No  taxing
authority  has asserted any claim for the  assessment  of any such tax liability
(including  additions to tax,  penalties  and  interest),  withholding  or other
governmental  charges. The provision for taxes reflected on the December Balance
Sheet is adequate,  in all material  respects,  to cover all tax  liabilities of
Seller with  respect to any taxable year or taxable  period  ending on or before
December 28, 1996, and nothing has occurred  subsequent to that date to make any
such provision  inadequate.  All taxes related to taxable periods of the Company
ending  subsequent  to  December  28,  1996,  have been  paid or are  adequately
reserved for, in all material respects, on the Books and Records of Seller. None
of the Assets is subject to a "safe harbor lease" under former Section 168(f)(8)
of the Code.  The Assets will include all tangible  personal  property  owned by
Seller as of the Closing Date (except  inventory located at or directly relating
to leased  premises that are the subject of Non-Assumed  Contracts),  and Seller
shall not effect more than two (2) sales of tangible  personal  property  (other
than the sale of the  Assets  contemplated  hereunder  and  sales of  inventory)
between December 31, 1997, and the Closing Date.

                  Section  3.12  Books  and  Records.  The  Books  and  Records,
considered in the aggregate,  are complete and correct in all material  respects
but  subject,   in  the  case  of  accounting  and  financial  records,  to  the
requirements of GAAP.

                  Section 3.13 Real Property.  Schedules 2.3A and 2.3B set forth
true and correct lists of all real property  owned or leased,  respectively,  by
Seller,  except the Excluded Assets. With respect to each such Property,  except
as set forth on Schedules 2.3A or 2.3B or as described in Seller's  property and
lease  files  provided  to Buyer  prior to the date  hereof,  and subject to the
Permitted Exceptions:

                  (a) there are no pending or, to Seller's Knowledge, threatened
condemnation  proceedings relating to such Property,  and Seller has received no
notice of any pending or threatened lawsuits or administrative  Actions relating
to such Property or other matters affecting adversely the current use, occupancy
or value thereof;

                  (b) to  Seller's  Knowledge,  the legal  description  for such
Property contained in the deed thereof or lease therefor describes such Property
fully and adequately, the

                                     - 20 -

<PAGE>



buildings  and  improvements  are  located  within  the  boundary  lines  of the
described  Property,  are not in violation of applicable  setback  requirements,
zoning  laws  and  ordinances  (and  none  of the  properties  or  buildings  or
improvements thereon are subject to "permitted non-conforming use" or "permitted
non-conforming  structure"  classifications) and do not encroach on any easement
which may burden the  Property,  and the Property  does not serve any  adjoining
property  for any purpose  inconsistent  with the use of the  Property,  and the
Property  is not located  within any flood plain or subject to any similar  type
restriction for which any permits or licenses  necessary to the use thereof have
not been obtained;

                  (c) to Seller's  Knowledge,  Seller has received all approvals
of  governmental  authorities  (including  licenses  and  permits)  required  in
connection  with Seller's  ownership,  occupation or operation of all facilities
located on such Property,  which facilities have been operated and maintained by
Seller in accordance with applicable Law;

                  (d) there are no leases, subleases,  licenses,  concessions or
other agreements, written or oral, to which Seller or any of its Affiliates is a
party  granting to any other party or parties the right of use or  occupancy  of
any portion of the Property;

                  (e)  there  are no  outstanding  options  or  rights  of first
refusal granted by Seller or any of its Affiliates to purchase the Property,  or
any portion thereof or interest therein;

                  (f) there are no parties  (other than Seller) in possession of
the  Property,  other than tenants  under any leases or  subleases  disclosed in
Schedule  2.3A or 2.3B,  who are in  possession  only of space to which they are
entitled;

                  (g) to  Seller's  Knowledge,  all  facilities  located  on the
Property  are supplied  with  utilities  and other  services  necessary  for the
operation of such  facilities,  including gas,  electricity,  water,  telephone,
sanitary sewer and storm sewer, all of which services are adequate in accordance
with all  applicable  Laws and are provided  via public roads or via  permanent,
irrevocable, appurtenant easements benefitting the Property; and

                  (h) to  Seller's  Knowledge,  such  Property  abuts on and has
direct  vehicular  access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the Property.

                  Section 3.14 Intangibles.  Seller owns the entire right, title
and interest in and to the owned Intangibles and Software, and holds under valid
and  subsisting  licenses  (which are included among the Contracts) the licensed
Intangibles  and  Software,  except for such  defects in title or licenses  that
could not reasonably be expected to have a Material Adverse Effect. There are no
Actions instituted, pending or, to Seller's Knowledge, proposed or threatened by
any third party pertaining to or challenging Seller's use of or right to use any
of the  Intangibles or Software,  which Actions could  reasonably be expected to
have a Material Adverse Effect.

                  Section 3.15 Fees and  Expenses of Brokers and Others.  Seller
is not  committed  to any  liability  for any  brokers' or finders'  fees or any
similar fees in connection

                                     - 21 -

<PAGE>



with the  conveyance  of the Assets to Buyer and has not  retained any broker or
other  intermediary  to act on its behalf in  connection  with the  transactions
contemplated by this Agreement, except that Seller has retained DLJ to represent
it in connection with such  transactions.  Pursuant to a separate agreement with
Seller,  DLJ  will be  paid a fee  upon  the  consummation  of the  transactions
contemplated  by this  Agreement.  Such  fee and all  other  fees  and  expenses
(including,  without  limitation,  attorneys' and accountants' fees and the fees
and  expenses  of  Alliance  Capital  Group) of  Seller  and its  Affiliates  in
connection with the  transactions  contemplated  herein shall be paid in full by
Seller  or  such  Affiliates,  and  shall  not be  included  among  the  Assumed
Liabilities.

                  Section 3.16 Accounts Receivable.  The Accounts Receivable all
have arisen from bona fide  transactions  in the  ordinary  course of  business.
Seller  makes  no  representation  or  warranty  as  to  the  collectibility  or
negotiability of the Accounts Receivable.

                  Section  3.17  Seller SEC  Reports.  The  Seller  SEC  Reports
complied,  as of their respective dates of filing, in all material respects with
all  applicable  requirements  of the  Securities  Act, the Exchange Act and the
rules and  regulations  of the SEC. Each of the balance  sheets  (including  the
related notes and schedules) included in the Seller SEC Reports fairly presented
in all material respects the consolidated financial position of the Seller as of
the  respective  dates  thereof,  and the  other  related  financial  statements
(including the related notes and schedules) included therein fairly presented in
all material respects the results of operations and cash flows of Seller for the
respective  fiscal  periods  or as of the  respective  dates set  forth  therein
(subject,  in the case of any unaudited  interim  financial  statements,  to (i)
year-end and audit adjustments  consistent in scope with past practice, and (ii)
the omission of certain footnotes).  Each of the financial statements (including
the related notes and schedules) included in the Seller SEC Reports (i) complied
as to form with the applicable accounting requirements and rules and regulations
of the SEC, and (ii) was prepared in accordance with GAAP  consistently  applied
during the periods presented, except as otherwise noted therein (subject, in the
case of any unaudited  interim financial  statements,  to (i) year-end and audit
adjustments  consistent  in scope with past  practice,  and (ii) the omission of
certain footnotes).  Except as set forth on Schedule 3.17 attached hereto, since
December 28, 1996, Seller has timely filed all reports,  registration statements
and other  filings to be filed by it with the SEC; all of such  filings  through
the date hereof are listed on Schedule 3.17 attached hereto.

                  Section 3.18 Insurance.  With respect to each insurance policy
(including  policies  providing  property,   casualty,  liability  and  workers'
compensation  coverage  and bond and surety  arrangements)  to which Seller is a
party, a named insured or otherwise the beneficiary  which is still in effect or
under which Seller has any continuing  rights or obligations:  (a) the policy is
legal, valid, binding,  enforceable and in full force and effect; (b) the policy
will continue to be legal,  valid,  binding,  enforceable  and in full force and
effect  on  identical  terms  following  the  consummation  of the  transactions
contemplated  hereby; (c) neither Seller nor any other party to the policy is in
breach or default thereunder  (including with respect to the payment of premiums
or the giving of notices),  and no event has occurred  that,  with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification  or acceleration  under the policy;  and (d) no party to the policy
has repudiated any provision thereof.  Seller has been covered during the past 5
years

                                     - 22 -

<PAGE>



by insurance in scope and amount  customary and reasonable for the businesses in
which it has been engaged during such period.

                  Section 3.19 Affiliated  Transactions.  Except as set forth in
Schedule 3.19,  since December 30, 1995,  Seller has not purchased,  licensed or
leased or  otherwise  acquired  any  property or assets or obtained any services
from, or sold, licensed,  leased or otherwise disposed of any property or assets
or provided  any  services to, any  employee,  shareholder,  officer or director
involving  an amount in excess of $50,000 in any  instance  or  $250,000  in the
aggregate (except for services  provided as an employee,  officer or director of
Seller and  remuneration  therefor and except for sales of goods in the ordinary
course),  or any  Affiliate  of any of the  foregoing.  Except  as set  forth on
Schedule 3.19, Seller does not owe any amount or have any contractual obligation
or  commitment  to any of the  foregoing  (other than  compensation  for current
services not yet due and payable and  reimbursement  of expenses  arising in the
ordinary  course of business and other than  obligations  owed to employees  and
officers in their  capacities  as such in the ordinary  course of business)  and
none of the  foregoing  owes any  amount or has any  contractual  obligation  or
commitment to Seller (other than  obligations  owed by employees and officers in
their capacities as such).

                  Section  3.20  No  Adverse  Change.  Except  as set  forth  in
Schedule  3.20,  since  December  28,  1996,  there has not been:  (a) any loss,
damage,  condemnation or destruction to any of the properties of Seller that has
had a Material  Adverse  Effect  (whether  covered by insurance or not); (b) any
labor  dispute  or  disturbance,  litigation  or any event or  condition  of any
character that could have a Material Adverse Effect;  (c) any mortgage,  pledge,
lien or encumbrance  made on any of the  properties or assets of Seller,  except
for Permitted  Exceptions;  or (d) any sale,  transfer or other  disposition  of
assets  of  Seller  other  than  in  the  ordinary  course  of  business  or  as
contemplated by this Agreement.

                  Section 3.21 Absence of  Undisclosed  Liabilities.  The Seller
does not have any  liabilities  or obligations  of any kind,  whether  absolute,
accrued, asserted or unasserted, contingent or otherwise, that would be required
to be  reflected  on or accrued or reserved  against in a  consolidated  balance
sheet of Seller or  disclosed  in the notes  thereto  in  accordance  with GAAP,
except liabilities,  obligations or contingencies (a) that were (i) reflected on
or accrued or reserved  against in the December  Balance Sheet,  or disclosed in
the notes thereto,  or (ii) incurred after the date of such balance sheet in the
ordinary  course of  business  and  consistent  with past  practices  and which,
individually  or in the  aggregate,  could not  reasonably be expected to have a
Material  Adverse  Effect,  or (b)  relating  to  claims  filed  or  arising  in
connection  with the  Bankruptcy  Case.  Seller is not subject to any  judgment,
order, writ, injunction,  decree, rule or regulation,  which could reasonably be
expected  to  have  a  Material  Adverse  Effect;  provided,  however,  that  no
representation  or warranty is made with respect to the  Excluded  Assets or the
Excluded Liabilities.

                  Section 3.22 No Other  Representations  or Warranties.  Except
for the  representations  and warranties  specifically set forth in this Article
III, or  elsewhere  in this  Agreement  or in any other  agreement,  document or
instrument delivered by Seller pursuant hereto, Seller makes no other express or
implied  representations or warranties with respect to the Assets, the Contracts
or the transactions contemplated in this Agreement.


                                     - 23 -

<PAGE>




                                   ARTICLE IV

              Representations and Warranties of Richfood and Buyer

                  Each of Richfood and Buyer  jointly and  severally  represents
and warrants to Seller as follows:

                  Section 4.1 Organization;  Incorporation; Good Standing. Buyer
is a limited  liability  company duly  organized,  validly  existing and in good
standing under the laws of the  Commonwealth of Virginia,  and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.  Richfood is a corporation  duly  incorporated,
validly  existing and in good  standing  under the laws of the  Commonwealth  of
Virginia,  and has all requisite corporate power and corporate authority to own,
lease and  operate  its  properties  and to carry on its  business  as now being
conducted.

                  Section 4.2 Capitalization.  (a) Richfood's  authorized equity
capitalization  consists  of  90,000,000  shares of  Richfood  Common  Stock and
5,000,000  shares of  preferred  stock,  without  par value.  As of the close of
business on October 18, 1997,  47,521,736 shares of Richfood Common Stock and no
shares of Richfood  preferred stock were issued and outstanding.  Such shares of
Richfood Common Stock  constituted  all of the issued and outstanding  shares of
capital stock of Richfood as of such date. All issued and outstanding  shares of
Richfood Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, are not subject to and have not been issued in violation
of any preemptive rights and have not been issued in violation of any federal or
state  securities  laws.  Except as set forth on Schedule 4.2  attached  hereto,
Richfood is not a party to any outstanding options,  warrants,  subscriptions or
other  rights to purchase or acquire  any shares of its  capital  stock,  nor is
Richfood a party to any contractual obligation pursuant to which it is obligated
to sell or issue any shares of its  capital  stock.  All  outstanding  shares of
Richfood Common Stock are duly listed on the New York Stock Exchange.

                  (b) All of the shares of  Richfood  Common  Stock to be issued
upon exercise of the Warrants have been duly  authorized  for issuance and, when
issued in accordance with the Warrant Agreement,  will be validly issued,  fully
paid and  nonassessable,  and will not be  subject  to and will not be issued in
violation of any preemptive rights.

                  Section 4.3  Authorization.  (a) All requisite action has been
taken by Buyer to authorize the execution and delivery of this Agreement and all
of the other documents,  instruments and agreements  required hereby from Buyer,
and the  consummation  of the  transactions  contemplated  hereby and thereby by
Buyer. This Agreement has been, and all of the other documents,  instruments and
agreements  required  hereby from Buyer will as of the Closing be, duly executed
and delivered by Buyer and constitute the valid and binding obligations of Buyer
(assuming due execution and delivery by the other parties thereto),  enforceable
in accordance with their respective  terms,  subject to bankruptcy,  insolvency,
reorganization,  moratorium  or similar  laws  affecting  creditors'  rights and
general  equitable  principles  (whether  enforcement  is sought in equity or at
law).  Neither  the  execution  and  delivery  of this  Agreement  and the other
documents,  instruments and agreements  required hereby from Buyer by Buyer, nor
the consummation by Buyer of the transactions

                                     - 24 -

<PAGE>



contemplated  hereby or  thereby,  will (i)  violate  any  provision  of Buyer's
Articles of Organization or Operating  Agreement or (ii) conflict with or result
in a breach of any terms and provisions  of, or constitute a default under,  any
indenture,  mortgage,  contract or other  agreement to which Buyer or any of its
Affiliates is a party or by which Buyer or any of its  Affiliates are bound that
could materially interfere with the consummation of the Asset Purchase.

                  (b) All requisite  corporate action has been taken by Richfood
to  authorize  the  execution  and  delivery  of  this  Agreement,  the  Warrant
Agreement,  the  Warrants  and  all  of the  other  documents,  instruments  and
agreements   required  hereby  from  Richfood,   and  the  consummation  of  the
transactions  contemplated  hereby and thereby by Richfood.  This  Agreement has
been, and all of the other documents, instruments and agreements required hereby
from Richfood  (including,  without  limitation,  the Warrant  Agreement and the
Warrants) will as of the Closing be, duly executed and delivered by Richfood and
constitute the valid and binding obligations of Richfood (assuming due execution
and delivery by the other parties thereto), enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,  moratorium
or similar laws affecting  creditors'  rights and general  equitable  principles
(whether  enforcement is sought in equity or at law).  Neither the execution and
delivery of this Agreement and the other  documents,  instruments and agreements
required hereby from Richfood by Richfood  (including,  without limitation,  the
Warrant  Agreement and the Warrants),  nor the  consummation  by Richfood of the
transactions  contemplated hereby or thereby,  will (i) violate any provision of
Richfood's  Articles of  Incorporation or Bylaws or (ii) conflict with or result
in a breach of any terms and provisions  of, or constitute a default under,  any
indenture, mortgage, contract or other agreement to which Richfood or any of its
Affiliates is a party or by which  Richfood or any of its  Affiliates  are bound
that could materially interfere with the consummation of the Asset Purchase.

                  Section 4.4  Litigation.  There is no Action  pending,  or, to
either Richfood's or Buyer's  Knowledge,  threatened  against Richfood or Buyer,
which could reasonably be expected to prevent the Closing.

                  Section  4.5  Approvals,   Consents,   Etc.   Except  for  any
applicable  filings  or  reports  under  the  Exchange  Act and the HSR Act,  no
consent,  authorization,  waiver by or filing  with any  governmental  agency is
required in connection  with the execution or  performance  of this Agreement by
Richfood or Buyer or the  consummation by Richfood or Buyer of the  transactions
contemplated hereby.

                  Section 4.6 Availability of Financing.  Buyer has available to
it sufficient  cash funds,  from Richfood or otherwise,  to pay in full the Cash
Portion of the Purchase Price.

                  Section 4.7 Richfood SEC Reports;  Disclosure  Statement.  (a)
The Richfood SEC Reports  complied,  as of their respective dates of filing,  in
all material  respects with all applicable  requirements  of the Securities Act,
the Exchange Act and the rules and  regulations  of the SEC. Each of the balance
sheets (including the related notes and schedules)  included in the Richfood SEC
Reports fairly presented in all material respects the consolidated

                                     - 25 -

<PAGE>



financial position of Richfood as of the respective dates thereof, and the other
related  financial  statements  (including  the  related  notes  and  schedules)
included  therein  fairly  presented  in all  material  respects  the results of
operations and cash flows of Richfood for the respective fiscal periods or as of
the respective  dates set forth therein  (subject,  in the case of any unaudited
interim financial statements,  to (i) year-end and audit adjustments  consistent
in scope with past practice,  and (ii) the omission of certain footnotes).  Each
of the financial statements (including the related notes and schedules) included
in the  Richfood  SEC  Reports  (i)  complied  as to form  with  the  applicable
accounting  requirements  and rules  and  regulations  of the SEC,  and (ii) was
prepared  in  accordance  with GAAP  consistently  applied  during  the  periods
presented,  except  as  otherwise  noted  therein  (subject,  in the case of any
unaudited  interim financial  statements,  to (i) year-end and audit adjustments
consistent  in scope  with  past  practice,  and (ii) the  omission  of  certain
footnotes).   Since  May  3,  1997,  Richfood  has  timely  filed  all  reports,
registration statements and other filings to be filed by it with the SEC; all of
such filings through the date hereof are listed on Schedule 4.7 attached hereto.

                  (b) Any information  provided by Richfood to Seller in writing
specifically for inclusion in the Disclosure Statement shall be provided in good
faith within the meaning of Section 1125(e) of the Bankruptcy Code.

                  Section 4.8 Fees and  Expenses of Brokers and Others.  Neither
Richfood nor Buyer is committed  to any  liability  for any brokers' or finders'
fees or any similar  fees in  connection  with the  conveyance  of the Assets to
Buyer,  except that Richfood has retained JPM to represent it in connection with
the  transactions  contemplated  by  this  Agreement.  Pursuant  to  a  separate
agreement with  Richfood,  JPM will be paid a fee upon the  consummation  of the
transactions  contemplated  by this  Agreement.  Such fee and all other fees and
expenses  (including,  without limitation,  attorneys' and accountants' fees) of
Richfood,   Buyer  and  their  respective  Affiliates  in  connection  with  the
transactions contemplated herein shall be paid in full by Richfood.


                                    ARTICLE V

                          Covenants of Seller and Buyer

                  Section 5.1  Investigation  of Business;  Access to Properties
and  Records.  (a) After the date  hereof,  Seller shall afford to Buyer and its
authorized  representatives  reasonable  access  to the  Properties,  Books  and
Records,  officers,  employees and agents of Seller during normal business hours
and upon reasonable notice, in order that Buyer may have the opportunity to make
such  investigations  in connection  with the Asset  Purchase as it desires,  it
being understood  that: (i) Seller,  in its reasonable  discretion,  may deny or
restrict  any  access  (A) to  materials  in  Seller's  possession  that are not
primarily related to Seller's business, if such access would constitute a breach
of an existing  confidentiality  agreement between Seller and a third party, (B)
to  materials   related   exclusively  to  the  Excluded   Assets  and  Excluded
Liabilities,  and (C) in the event  Buyer is in breach of this  Agreement;  (ii)
such investigation shall not under any circumstances unreasonably interfere with
Seller's operations,  activities or employees; (iii) Buyer and Seller shall take
reasonable  action  (including  entering  into  joint  defense  agreements,   as
appropriate) to preserve any applicable

                                     - 26 -

<PAGE>



attorney-client  privileges;  and (iv) such investigations shall not involve any
"Phase II" or other environmental testing without Seller's prior consent.

                  (b) Any information  provided to Buyer or its  representatives
pursuant to this  Agreement  shall be held by Buyer and its  representatives  in
accordance  with,  and shall be  subject  to the terms of,  the  Confidentiality
Agreement,  which is hereby  incorporated  in this Agreement as though fully set
forth  herein,  and in  accordance  with such other terms and  conditions as may
otherwise be agreed upon by the parties.

                  (c) Buyer shall hold all of the Books and Records  existing on
the Closing Date in accordance with Buyer's normal record  retention policy from
time to time in effect  (copies of which will be provided to Seller),  and Buyer
shall not  destroy or  dispose of any  thereof  except in  accordance  with such
policy.  Following the Closing Date, Buyer shall afford Seller, its accountants,
counsel and other  representatives,  during normal business hours, upon at least
48 hours'  notice,  reasonable  access to the Books and Records  (including  the
right to copy such  materials at Seller's  expense) and to Buyer's  employees to
the extent that such access may be requested  (without  unreasonably  disrupting
Buyer's  personnel and operations) for any legitimate  purpose without charge to
Seller (other than for Buyer's  reasonable  out-of-pocket  expenses);  provided,
however,  that  nothing  herein  shall limit or waive any of Seller's  rights of
discovery.

                  Section 5.2 Cooperation. (a) Upon the terms and subject to the
conditions of this Agreement,  each of Richfood,  Buyer and Seller shall use its
best efforts to take, or cause to be taken, and to assist and cooperate with the
other in doing all things reasonable,  necessary,  proper or advisable under any
applicable Law to consummate and make effective in the most  expeditious  manner
practicable,  the transactions  described herein,  including without limitation,
using such best efforts to obtain all necessary or  appropriate  authorizations,
permits, consents, exemptions, orders, waivers, licenses or other approvals from
Governmental  Authorities  (it being  understood  and agreed that "best efforts"
shall in no event include (i) any material  payments to third  parties,  or (ii)
following  commencement  of the  Bankruptcy  Case,  any  actions  which  require
Bankruptcy  Court  approval  that  have  not  been  approved  or  upheld  by the
Bankruptcy Court). In addition, each of Richfood, Buyer and Seller shall use its
best  efforts  to assist  and  cooperate  with the other in  obtaining  estoppel
certificates and subordination and non-disturbance agreements from the landlords
and  mortgagees  of the  premises  that are the  subject of the Leases (it being
understood  and agreed that (i)  obtaining any such  certificates  or agreements
shall not be a  condition  to Closing  nor shall the  failure to obtain any such
certificates or agreements  constitute a breach of this Agreement by Seller, and
(ii) "best efforts" shall in no event include (A) any payments to third parties,
or (B) following  commencement of the Bankruptcy Case, any actions which require
Bankruptcy  Court  approval  that  have  not  been  approved  or  upheld  by the
Bankruptcy Court).

                  (b) Except as otherwise specified herein,  Buyer shall pay all
registration,  filing, license, permit or similar fees and charges in connection
with the  transactions  contemplated by this Agreement and the cost of all title
insurance,  title reports,  engineering  and building  inspections  and property
surveys and other tests or reports obtained by Buyer.


                                     - 27 -

<PAGE>



                  Section  5.3  Antitrust  Compliance.  Seller  and Buyer  shall
promptly  file or cause to be filed with the  Antitrust  Division  of the United
States  Department of Justice and the Federal Trade  Commission  pursuant to the
HSR Act all  requisite  documents  and  notifications  in  connection  with  the
transactions  contemplated  by this  Agreement.  Buyer  shall pay the filing fee
incurred in  connection  with such filings under the HSR Act. Each of Seller and
Buyer shall  promptly  inform the other of any material  communication  from the
Federal Trade  Commission,  the Department of Justice or any other  Governmental
Authority  regarding  any of the  transactions  contemplated  hereby.  If either
Seller or Buyer or any  Affiliate  thereof  receives  a request  for  additional
information  or  documentary  material  from any such  Governmental  Agency with
respect to the transactions  contemplated  hereby, then such party will endeavor
in good faith to make, or cause to be made,  as soon as  reasonably  practicable
and  after  consultation  with the  other  party,  an  appropriate  response  in
compliance  with such request.  Buyer and Seller will each  promptly  advise the
other in respect of any  understandings,  undertakings  or  agreements  (oral or
written)  which Buyer or Seller  proposes to make or enter into with the Federal
Trade  Commission,  the  Department  of  Justice  or  any  other  government  or
Governmental Authority in connection with the transactions contemplated hereby.

                  Section  5.4  Further  Assurances.  Each of  Seller  and Buyer
agrees that,  from time to time,  whether  before,  at or after the Closing,  it
shall  execute,  deliver and record such further  instruments  of conveyance and
transfer  and take such other  action as may be  necessary or desirable to carry
out the purposes and intents of this Agreement.

                  Section 5.5 Conduct of Business. Except as otherwise expressly
contemplated  by this  Agreement,  prior to  Closing  Seller  will  conduct  its
operations according to its ordinary and usual course of business and consistent
with past practice,  and will use its reasonable best efforts to preserve intact
its business  organization,  to keep  available the services of its officers and
employees and to maintain satisfactory relationships with licensors,  licensees,
suppliers,  contractors,  distributors,  customers  and others  having  business
relationships  with it; provided,  however,  that following  commencement of the
Bankruptcy Case, Seller's  obligations pursuant to this Section shall be subject
to its  obligations as a  debtor-in-possession  under the Bankruptcy Code and to
any orders of the  Bankruptcy  Court.  Without  limiting the  generality  of the
foregoing,  and except as otherwise expressly provided in this Agreement,  prior
to the Closing, Seller will not, without the prior written consent of Buyer:

                           (i) amend its Articles of Incorporation or bylaws;

                           (ii) authorize for issuance or issue, sell or deliver
                  (whether   through  the   issuance  or  granting  of  options,
                  warrants,  commitments,  subscriptions,  rights to purchase or
                  otherwise)  any stock of any class or any other  securities or
                  interests,  except  as  required  by the  terms of any  Seller
                  Benefit  Plan  existing on the date  hereof,  or any  options,
                  warrants,  rights or other  securities  outstanding  as of the
                  date hereof and disclosed pursuant to this Agreement;

                           (iii) split,  combine or reclassify any shares of its
                  capital  stock or  declare,  set aside or pay any  dividend or
                  other distribution (whether in cash,

                                     - 28 -

<PAGE>



                  stock or  property or any  combination  thereof) in respect of
                  its capital stock,  or redeem or otherwise  acquire any of its
                  securities;

                           (iv) except in the  ordinary  course of business  (A)
                  incur or assume  any  Funded  Debt not  currently  outstanding
                  other than  debtor-in-possession  financing,  (B) enter  into,
                  assume,  guarantee or otherwise  become liable or  responsible
                  for any  capitalized  leases not listed and identified as such
                  on Schedule  2.3B hereto,  (C) assume,  guarantee,  endorse or
                  otherwise  become liable or responsible for the obligations of
                  any   person,   (D)  make  any  loans,   advances  or  capital
                  contributions  to, or  investments  in, any other Person,  (E)
                  enter into any contract or agreement,  or alter, amend, modify
                  or exercise any option under any existing Contract, other than
                  in the ordinary  course of business or in connection  with the
                  transactions  contemplated  by this Agreement or (F) authorize
                  any single capital  expenditure which is in excess of $500,000
                  or capital expenditures which are, in the aggregate, in excess
                  of $1.0 million,  other than capital expenditures  pursuant to
                  Contracts  entered  into prior to the date hereof or reflected
                  in Seller's fiscal 1997 capital budget previously furnished to
                  Buyer;

                           (v) adopt or amend  (except as may be required by Law
                  or as provided in this  Agreement)  any Seller Benefit Plan or
                  any   bonus,   profit   sharing,   compensation,    severance,
                  termination,   stock   option,   stock   appreciation   right,
                  restricted stock, pension, retirement,  deferred compensation,
                  employment,  severance or other employee  benefit  agreements,
                  trusts,  plans, funds or other arrangements for the benefit or
                  welfare of any director,  officer or employee,  or (except for
                  normal  increases in the ordinary  course of business that are
                  consistent with past practices and that, in the aggregate,  do
                  not result in a material  increase in benefits or compensation
                  expense)  increase  in any manner the  compensation  or fringe
                  benefits  of any  director,  officer  or  employee  or pay any
                  benefit  not  required  by any  existing  plan or  arrangement
                  (including, without limitation, the granting of stock options,
                  stock  appreciation  rights,  shares  of  restricted  stock or
                  performance  units)  or enter  into any  contract,  agreement,
                  commitment or arrangement to do any of the foregoing;

                           (vi)  except as set forth on  Schedule  5.5  attached
                  hereto, acquire, sell, lease or dispose of any material assets
                  outside the ordinary course of business;

                           (vii)  take any  action  other  than in the  ordinary
                  course  of  business  and in a  manner  consistent  with  past
                  practice with respect to accounting policies or practices;

                           (viii) make any tax election or settle or  compromise
                  any  federal,  state,  local or foreign tax  liability,  which
                  election,   settlement  or  compromise   could  reasonably  be
                  expected to adversely  affect any of the Assets or Buyer's use
                  thereof  after  Closing or could  reasonably be expected to be
                  binding on Buyer after Closing;

                                     - 29 -

<PAGE>




                           (ix) settle any claims,  liabilities  or  obligations
                  (absolute, accrued or unasserted, contingent or otherwise), if
                  the terms of such settlement  could  reasonably be expected to
                  adversely  affect  any of the Assets or  Buyer's  use  thereof
                  after Closing or could reasonably be expected to be binding on
                  Buyer after Closing; or

                           (x)  take any  action  that  would  or is  reasonably
                  likely to result in any of the conditions set forth in Article
                  VIII not being satisfied as of the Closing Date; or

                           (xi) agree in writing or otherwise to take any of the
                  foregoing actions.

                  Section 5.6 Public Announcements.  (a) The parties hereto have
agreed upon the form of a joint press  release with respect to the  transactions
contemplated  in this  Agreement,  which  release  shall  be  issued  as soon as
practicable  following the execution and delivery  hereof.  From the date hereof
until the Closing Date, no party hereto (nor any of their respective Affiliates)
shall make any other public  announcements or public  disclosures  regarding the
Asset Purchase or the terms of this  Agreement  without the consent of the other
(which  consent shall not be  unreasonably  withheld)  except to the extent that
such  disclosure is required by applicable Law or legal process or by applicable
stock exchange listing agreement. Notwithstanding the foregoing, the parties may
communicate with their respective employees,  customers,  suppliers,  creditors,
shareholders,  relevant Governmental Authorities,  the Bankruptcy Court, and the
other parties in interest with respect to any reorganization or restructuring as
may be necessary and  appropriate  in  connection  with the  implementation  and
consummation of the terms of this Agreement.

                  Section  5.7 No  Solicitation.  Seller  agrees  that except as
otherwise  ordered by the Bankruptcy  Court, it shall not, after the date hereof
and before the Closing  Date,  directly  or  indirectly,  through  any  officer,
director,  employee,  agent,  Affiliate  or  otherwise,   solicit,  initiate  or
encourage  submission  of  proposals  or offers from any person  relating to any
acquisition  or  purchase  of all or  (other  than  in the  ordinary  course  of
business) a  substantial  portion of the assets of, or any equity  interest  in,
Seller or any business combination involving any Seller or, except to the extent
required by the Bankruptcy  Court or by fiduciary  obligations  under applicable
Law as advised by counsel, participate in any negotiations regarding, or furnish
to any other person any information  with respect to, or otherwise  cooperate in
any way with, or assist or participate in,  facilitate or encourage,  any effort
or attempt  by any other  person to do or seek any of the  foregoing.  Except as
otherwise ordered by the Bankruptcy Court, Seller shall promptly advise Buyer if
any such  proposal  or offer,  or any  inquiry or contact  with any person  with
respect  thereto,  is made,  shall  promptly  inform  Buyer of all the terms and
conditions  thereof,  and shall  furnish  to Buyer  copies  of any such  written
proposal or offer and the contents of any  communications  in response  thereto.
Seller shall not waive any  provisions of any  "standstill"  agreements  between
Seller and any party,  except to the extent  that such waiver is required by the
Bankruptcy Court or is, as advised by counsel, required by fiduciary obligations
under applicable Law.


                                     - 30 -

<PAGE>



                  Section 5.8 Bulk Sales Laws. Buyer hereby waives compliance by
Seller with the  requirements of any bulk sales or bulk transfer Laws applicable
to the transactions contemplated herein.

                  Section  5.9  Subsidiaries.  Prior to  Closing,  Seller  shall
either (a) subject to approval by the Bankruptcy  Court,  cause the Subsidiaries
to be merged with and into Seller,  with Seller to be the surviving  corporation
in  such  mergers,  or (b) if the  foregoing  mergers  are not  approved  by the
Bankruptcy Court, convey all assets held by the Subsidiaries,  together with all
liabilities of the Subsidiaries  that are of the type included among the Assumed
Liabilities,  to  Seller,  and  the  capital  stock  of the  Subsidiaries  shall
constitute an Excluded Asset (it being understood that any sales, use, transfer,
recording or other similar taxes and fees that result from such  conveyance that
would not otherwise arise in a merger of the  Subsidiaries  with and into Seller
shall be the responsibility of Seller).

                  Section  5.10 IBT  Agreement.  Seller  agrees  that,  prior to
Closing  and at  Buyer's  request,  Seller  shall give  notice to  International
Banking  Technologies,  Inc. ("IBT"),  in accordance with the License Agreement,
dated  February 15, 1988,  as amended,  between  Seller and IBT,  that Buyer has
declined to accept the  assignment  of Seller's  obligations  under such License
Agreement (the "IBT Notice"). Buyer agrees to indemnify and hold Seller harmless
from and against  any and all losses,  damages,  costs,  expenses,  liabilities,
obligations and claims of any kind  including,  without  limitation,  reasonable
legal  fees and  expenses,  that  Seller  may suffer or incur as a result of (a)
Seller  giving the IBT Notice at Buyer's  request,  or (b)  Buyer's  decision to
decline  to  accept  assignment  of  Seller's  obligations  under  such  License
Agreement.

                  Section 5.11      Environmental Testing and Remediation.

                  (a) Definitions. When used in this Section 5.11:

                           (i)  "Remediation"   shall  mean  the  cost-effective
clean-up,  abatement,  removal,  remediation,   operation  and  maintenance  and
on-going  monitoring  which,  consistent  with current Site use, Buyer or Seller
would be required to perform by the Virginia Department of Environmental Quality
("DEQ") under  applicable  Environmental  Laws to meet the Clean-up  Levels with
respect  to soil or  groundwater  contamination  resulting  from any  release of
Petroleum  Products  from the four  former  underground  storage  tanks owned or
operated by Seller or its  predecessors  into soil or groundwater at or near the
Stores located at 2250 Airline Boulevard, Portsmouth, Virginia ("Store 210") and
608 East Mercury  Boulevard,  Hampton,  Virginia ("Store 295" and,  collectively
with Store 210, the "Sites") as disclosed by previous sampling at the Sites, the
Phase II Study and Additional Sampling.

                           (ii)  "Costs of  Remediation"  shall  mean the direct
costs of implementing the Remediation on a net present value, after-tax basis.

                           (iii) "Third Party  Environmental  Consultant"  shall
mean a qualified  environmental  consultant  (either  nationally  recognized  or
recognized  in the  eastern  region  of the  United  States)  with an  office in
Virginia  and  experience  in  addressing  releases of Petroleum  Products  from
underground storage tanks in Virginia, the selection of which has

                                     - 31 -

<PAGE>



been mutually agreed on by the parties hereto.  If the parties hereto are unable
to mutually  agree on the selection of a Third Party  Environmental  Consultant,
the Third Party  Environmental  Consultant shall be selected by lot from a group
of four such  consultants;  two such  consultant's  names shall be  submitted by
Buyer, and two such consultant's names shall be submitted by Seller.

                  (b) Phase II Study.

                           (i) Buyer shall engage O'Brien & Gere Engineers, Inc.
("O'Brien & Gere") to conduct soil and groundwater  sampling and other tests, at
Buyer's  expense,  in accordance  with the initial  sampling  attached hereto as
Schedule 5.11 (the "Phase II Study").  The Phase II Study shall be completed and
the  results  provided  to Buyer and Seller in draft form  within 21 days of the
execution of this Agreement.

                           (ii)  If the  Third  Party  Environmental  Consultant
determines  that the Phase II Study is not  sufficient to delineate the vertical
and horizontal  extent of Petroleum  Products in the soil and groundwater (A) on
the Sites, (B) migrating  off-site from the Sites or (C) migrating from off-Site
sources onto the Sites, so as to allow the Third Party Environmental  Consultant
to perform a Risk Assessment (as defined below) and, if necessary,  to determine
the Costs of Remediation and Property Damage  Estimates (as defined below),  the
parties  hereto  agree that  additional  samples  may be  required  ("Additional
Sampling").  The parties hereto agree to use their respective good faith efforts
to  minimize  the number of samples  required  consistent  with the goals of the
Phase II Study. Any such Additional Sampling (including the locations therefor),
if  required,  must be agreed  upon by Buyer and Seller in  advance  and must be
completed  no later  than 21 days  after the  results  of the Phase II Study are
provided to Buyer and Seller in draft form.  The parties  hereto also  recognize
that  permission  from third  parties  may be  required  to sample  off-Site  if
Petroleum  Products have migrated off-Site from either or both of the Sites. The
parties  hereto  agree to use their  respective  best  efforts  to  obtain  such
permission  (it being  understood  that "best efforts" shall in no event include
any payments to third parties).  With respect to Store 295, the parties agree to
seek such permission to sample  off-Site as soon as practicable  after execution
of this  Agreement;  provided,  however,  if permission is not granted within 14
days after  receipt of the results of the Phase II Study,  the parties  agree to
proceed in reliance upon the then-available information.

                  (c) Risk Assessment/Clean-up Levels. Within five business days
after  execution of this  Agreement,  Buyer and Seller shall jointly  engage the
Third Party Environmental  Consultant to perform a site specific risk assessment
of each Site, which shall include a receptor survey ("Risk Assessment") in order
to  determine  if,  and to what  extent,  soil and  groundwater  Remediation  is
necessary to satisfy the provisions  relating to remediation of spills under the
Virginia  Underground  Storage  Tank  Regulations,  9 VAC 25-  580-210  et. seq.
("Clean-up  Levels") and, if  Remediation  is  determined  to be  necessary,  to
estimate the Costs of Remediation. The protocol for the Risk Assessment shall be
consistent with generally  accepted  industry  practice,  in accordance with the
Virginia DEQ Storage Tank Program Technical Manual (5/9/97) and the standards of
remediation  used by DEQ in assessing  Petroleum  Product  releases from similar
facilities in the vicinity of the Sites, under similar circumstances.

                                     - 32 -

<PAGE>




                  The Risk  Assessment  shall be completed  within 14 days after
the later of the  parties'  receipt  of (i) the  results  of the draft  Phase II
Study,  or (ii) the  results  of the  Additional  Sampling  in draft  form.  The
Clean-up Levels  developed by the Third Party  Consultant  shall be submitted by
the parties to the DEQ for approval.  If the DEQ imposes more stringent Clean-up
Levels, the DEQ-imposed Clean-up Levels shall be used in determining the Cost of
Remediation.  If the  parties  fail to  receive  approval  from  the DEQ for the
Clean-up  Levels  established  by the Risk  Assessment  within 14 days after the
Third Party Environmental  Consultant's  completion thereof,  and Remediation is
determined  to  be  required,  the  Clean-up  Levels  established  by  the  Risk
Assessment  will be used to develop the Costs of  Remediation,  unless the Buyer
and  Seller  agree  otherwise.   The  cost  of  the  Third  Party  Environmental
Consultant's preparation of the Risk Assessment shall be paid by Buyer.

                  (d)  Costs  of  Remediation.  The  Third  Party  Environmental
Consultant  thereafter shall prepare an estimate of the Costs of Remediation for
review by Buyer and Seller within seven days after the Clean-up Levels have been
established in accordance with paragraph (c) above.  Buyer and Seller shall have
an opportunity to review and comment in writing (with copies to the other party)
upon the  Third  Party  Environmental  Consultant's  estimates  of the  Costs of
Remediation.  Buyer or Seller may communicate with the Third Party Environmental
Consultant  only after  providing  reasonable  notice to and  allowing the other
party to participate in such communication;  provided,  however,  that the Third
Party  Environmental  Consultant's  final  estimate of the Costs of  Remediation
shall be binding  upon the  parties.  The cost of the Third Party  Environmental
Consultant's  preparation of the estimate of the Costs of  Remediation  shall be
borne equally by Buyer and Seller.

                  (e)  Property  Damage  Estimates.  If the  Phase  II  Study or
Additional Sampling demonstrates that Petroleum Products in concentrations above
the  Clean-up  Levels have  migrated  off-Site  from either or both of the Sites
impacting  off-Site  properties,  Buyer  and  Seller  shall  select,  by  mutual
agreement,  a real estate appraisal  company or other  appropriate  professional
("Real Estate  Professional")  to determine the extent of any  diminution in the
value of such  off-Site  properties  as a result  of such  migration  ("Property
Damage  Estimates").  The Real Estate  Professional shall use generally accepted
methodologies   for  quantifying  the  diminution  in  value  of  such  off-Site
properties  which results from groundwater and soils being impacted by Petroleum
Products from underground storage tank releases;  such methodologies shall, at a
minimum,  include  a  comparison  to  comparable  commercial  facilities  in the
vicinity of the Sites, under similar circumstances. If the parties are unable to
select the Real Estate  Professional by mutual agreement,  they shall select the
Real Estate  Professional  by lot from a group of four such  professionals,  two
submitted by each party.  The cost of preparing  the Property  Damage  Estimates
shall be borne  equally  Buyer and Seller.  The Real Estate  Professional  shall
prepare any Property Damage Estimates not later than February 13, 1998.

                  (f) If the sum of the aggregate Costs of Remediation  plus the
Property  Damage  Estimates  (such sum being  referred to as the  "Environmental
Claim") related to both Sites exceeds $250,000, then at Seller's election either
(i) the amount of the Environmental  Claim in excess of $250,000 shall be deemed
to constitute a current liability for purposes of the Final Statement of Working
Capital,  or (ii) Seller shall  retain  ownership of either or both of the Sites
(and the lease thereof shall be included among the Non-Assumed Contracts), so

                                     - 33 -

<PAGE>



that the  Environmental  Claim is less than  $250,000,  provided  that if Seller
retains  ownership of Store 210  pursuant to this  Section,  the Purchase  Price
shall be reduced by $4.0 million,  and if Seller retains  ownership of Store 295
pursuant to this Section, the Purchase Price shall be reduced by $2.0 million.

                  (g) In no event  shall  the  sampling,  Risk  Assessment,  DEQ
approval of the  Clean-up  Levels (or lack  thereof),  estimates of the Costs of
Remediation,  Property Damage Estimates (or the failure to receive  estimates of
the Costs of  Remediation  or Property  Damage  Estimates)  or any review period
provided hereunder delay the Closing beyond February 28, 1998.

                  (h) This  Section  5.11 shall be the sole  remedy of Buyer and
Richfood  against Seller with respect to any soil or  groundwater  contamination
resulting  from  any  release  of  Petroleum   Products  from  the  four  former
underground  storage tanks owned or operated by Seller or its predecessors  into
soil or groundwater at or near the Sites.

                  Section 5.12 Audited Financial Statements.  At Buyer's request
and at Buyer's expense, Seller shall cause KPMG to prepare and deliver to Buyer,
within 45 days  after  Seller's  January  3,  1998,  fiscal  year  end,  audited
consolidated  financial  statements  of Seller for the three fiscal years in the
period ended January 3, 1998. Seller shall cooperate in a manner consistent with
its  past  practice  in the  preparation  of  such  financial  statements.  Such
financial  statements shall comply with the requirements of Regulation S-X under
the Securities Act.


                                   ARTICLE VI

                                    Employees

                  Section 6.1       Employment Matters.

                  (a) Buyer and Seller  agree that  those  executive  employment
agreements  listed under Item 7 of Schedule 3.7 attached  hereto  (excluding the
Executive  Agreements) shall be included among the Contracts assumed by Buyer at
the Closing,  it being  understood that: (i) Seller shall be responsible for any
severance  benefit  obligations  set forth  therein  payable  to  persons  whose
employment  with Seller is terminated  prior to the Closing Date; and (ii) Buyer
shall be responsible for any severance benefit  obligations set forth therein to
persons whose employment with Seller is terminated on or after the Closing Date.

                  (b) Buyer agrees  that,  on the Closing  Date,  it shall offer
employment on an at-will basis to persons employed by Seller  immediately  prior
to such date at the  Stores  or at  Seller's  administrative  home  office  (but
excluding the parties to the Executive  Agreements)  (it being  understood  that
each offer of employment will be subject to the prospective employee agreeing to
release  Buyer  and its  Affiliates  from  any  liability  for  the  pre-closing
activities  of  Seller  and its  Affiliates).  Buyer  further  agrees  to  offer
employment on an at-will basis to persons employed by Seller on the Closing Date
at Seller's retail grocery stores that are the subject of Non-Assumed Contracts,
on a seniority basis, as positions become

                                     - 34 -

<PAGE>



available at purchased  Stores after the Closing  Date,  and Richfood  agrees to
cause Richfood, Inc. to offer employment on an at-will basis to persons employed
by Seller on the Closing Date at the Warehouse at Richfood,  Inc.'s warehouse in
Mechanicsville,  Virginia  ("Richfood's  Warehouse"),  on a seniority  basis, as
positions  become  available at Richfood's  Warehouse after the Closing Date (it
being  understood  that  each  offer  of  employment  will  be  subject  to  the
prospective  employee  agreeing  to release  Buyer and its  Affiliates  from any
liability for the pre-closing  activities of Seller and its Affiliates).  Offers
of employment at the Stores or at such administrative home office shall be based
on compensation and benefits in effect at the Stores or such administrative home
office,  as the case may be,  for  similarly-situated  employees  at the date of
employment,  as amended from time to time  thereafter.  Offers of  employment at
Richfood's  Warehouse shall be based on  compensation  and benefits in effect at
Richfood's Warehouse for similarly-situated employees at the date of employment,
as amended  from time to time  thereafter.  Former  employees  of Seller who are
employed by Buyer or Richfood, Inc. pursuant to this subsection shall be granted
past service credit for  eligibility,  vesting  (except in the case of any Buyer
defined  benefit  pension  plan in which an  employee  may  become  eligible  to
participate) and any service  qualifications  for benefits,  but not for benefit
accrual  purposes.  Except as specifically  provided in any Contract  assumed by
Buyer,  Buyer does not  undertake to retain or maintain any specific  benefit or
level of benefits for former employees of Seller after the Closing Date.


                                   ARTICLE VII

                                   Tax Matters

                  Section 7.1  Transfer  Taxes.  Except to the extent  otherwise
provided  herein,  Buyer shall pay, and shall indemnify and hold harmless Seller
from and against, all sales, use, transfer, real property transfer,  documentary
stamp,  recording and other similar taxes and fees  (including  any interest and
penalties  with  respect  to  any  such  taxes  or  fees)  arising  out of or in
connection with the transactions effected pursuant to this Agreement. Seller and
Buyer shall cooperate in filing all necessary documentation and tax returns with
respect to such taxes.

                  Section 7.2  Withholding.  For purposes of  withholding  under
Section 1445 of the Code, Seller represents that it is not a "foreign person" as
defined in Section  1445(f)(3) of the Code.  Seller shall provide to Buyer prior
to the Closing  Date any  certificate  or affidavit  necessary  to  substantiate
exemption from such withholding.


                                  ARTICLE VIII

                    Conditions of Buyer's Obligation to Close

                  Buyer's obligation to consummate the transactions contemplated
hereby shall be subject to the  satisfaction on or prior to the Closing Date, or
waiver by Buyer, of all of the following conditions:


                                     - 35 -

<PAGE>



                  Section  8.1  Representations,  Warranties  and  Covenants  of
Seller. The representations and warranties of Seller contained in this Agreement
shall be true and correct (a) in all  respects on and as of the Closing Date (as
to the  representations and warranties set forth in Section 3.6(b) hereof and as
to representations and warranties  specifically qualified or limited by the term
"Material  Adverse Effect," the word "material" or phrases of like import),  and
(b)  in  all   material   respects  on  and  as  of  the  Closing  Date  (as  to
representations  and  warranties  not qualified or limited by the term "Material
Adverse  Effect," the word  "material" or phrases of like import),  in each case
with the same effect as though such representations and warranties had been made
on and as of such date, except for  representations and warranties that speak as
of a specific  date or time other than the Closing Date (which need only be true
and correct as of such date or time), and the covenants and agreements of Seller
to be performed on or before the Closing Date in accordance  with this Agreement
shall have been duly performed in all material respects.

                  Section 8.2 HSR Act Waiting Period; Governmental Consents. The
HSR Act and the  regulations  promulgated  thereunder  shall have been  complied
with, and all waiting periods applicable under the HSR Act shall have expired or
been terminated, and all governmental filings, approvals and consents shall have
been accomplished,  transferred or obtained that are necessary in order that the
transactions contemplated hereby may be accomplished in compliance with Law.

                  Section 8.3 No Injunction or Government Action. At the Closing
Date,  there shall be in effect no Decree of  Prohibition,  and no  Governmental
Authority shall have commenced any Action or threatened, in writing, to commence
any Action,  seeking a Decree of  Prohibition.  For purposes of Sections 8.3 and
9.3  hereof,  "Decree of  Prohibition"  shall mean any  injunction,  restraining
order,  decree of any nature,  of or with any Governmental  Authority or body of
competent  jurisdiction,  that  restrains or prohibits the  consummation  of the
transactions contemplated by this Agreement.

                  Section 8.4 Bankruptcy  Court  Confirmation;  Effectiveness of
Plan.

                  (a) The sale of the Assets  contemplated  by this Agreement to
Buyer (i) shall continue, at all times prior to the Confirmation Order described
below,  to be identified and included in the Plan filed in the Bankruptcy  Case,
and (ii) shall be confirmed by the  Bankruptcy  Court in an order entered on the
docket by the Clerk of the  Bankruptcy  Court  which (A) as to the  transactions
contemplated  in this  Agreement  is in form  and  substance  acceptable  in all
material  respects to Buyer in its reasonable  discretion  (it being  understood
that the provisions of the  Confirmation  Order relating to  classification  and
treatment  of  creditors  and  interest  holders,   the  administration  of  the
reorganized debtor (including distribution mechanisms,  corporate governance and
resolution of disputed claims and interests),  or release provisions (other than
as such provisions relate to Buyer and its Affiliates) need not be acceptable to
Buyer),  (B) shall provide,  pursuant to Section 363(f) of the Bankruptcy  Code,
that the sale is free and clear of any interest in the Assets,  (C) shall by its
terms afford Buyer the protections set forth in Section 363(m) of the Bankruptcy
Code, (D) has not been reversed, stayed, modified or amended and (E) as to which
the time for filing a notice of appeal or petition  for  certiorari,  or request
for  reargument  or  further  review  or  rehearing   shall  have  expired  (the
"Confirmation Order").

                                     - 36 -

<PAGE>




                  (b) All  conditions to the  Effective  Date (as defined in the
Plan), other than consummation of the Asset Purchase  contemplated herein, shall
have been satisfied or waived in accordance with the Plan.


                                   ARTICLE IX

                   Conditions to Seller's Obligation to Close

                  Seller's    obligation   to   consummate   the    transactions
contemplated by this Agreement is subject to the satisfaction on or prior to the
Closing Date, or waiver by Seller, of all of the following conditions:

                  Section  9.1  Representations,  Warranties  and  Covenants  of
Buyer. The  representations  and warranties of Buyer contained in this Agreement
shall be true and correct (a) in all  respects on and as of the Closing Date (as
to representations and warranties  specifically qualified or limited by the word
"material" or phrases of like import),  and (b) in all material  respects on and
as of the Closing Date (as to representations and warranties not so qualified or
limited),  in each case with the same effect as though such  representations and
warranties had been made on and as of such date, except for  representations and
warranties  that speak as of a specific date or time other than the Closing Date
(which need only be true and correct as of such date or time), and the covenants
and  agreements  of Buyer to be  performed  on or  before  the  Closing  Date in
accordance  with this  Agreement  shall have been duly performed in all material
respects.

                  Section 9.2 HSR Act Waiting Period; Governmental Consents. The
HSR Act and the  regulations  promulgated  thereunder  shall have been  complied
with, and all waiting periods applicable under the HSR Act shall have expired or
been terminated, and all governmental filings, approvals and consents shall have
been accomplished,  transferred or obtained that are necessary in order that the
transactions contemplated hereby may be accomplished in compliance with Law.

                  Section 9.3 No Injunction or Government Action. At the Closing
Date,  there shall be in effect no Decree of  Prohibition,  and no  Governmental
Authority shall have commenced any Action or threatened, in writing, to commence
any Action, seeking a Decree of Prohibition.

                  Section 9.4 Bankruptcy  Court  Confirmation;  Effectiveness of
Plan.

                  (a) The sale of the Assets  contemplated  by this Agreement to
Buyer (i) shall  continue  at all times  prior to the  Confirmation  Order to be
identified and included in the Plan filed in the Bankruptcy Case, and (ii) shall
be confirmed by the Bankruptcy Court in a Confirmation Order.

                  (b) All  conditions to the  Effective  Date (as defined in the
Plan), other than consummation of the Asset Purchase  contemplated herein, shall
have been satisfied or waived in accordance with the Plan.

                                     - 37 -

<PAGE>




                                    ARTICLE X

                                   Termination

                  Section 10.1 Termination.  This Agreement may be terminated at
any time prior to the Closing by:

                  (a) the  mutual  consent of Seller and Buyer as set forth in a
written termination agreement;

                  (b) Buyer if: (i) the break-up  fee and expense  reimbursement
provisions  contemplated  in  Section  10.2(b)  hereof  are  disapproved  by the
Bankruptcy Court, or if such provisions are not approved by the Bankruptcy Court
at least five (5) days prior to confirmation of the Plan (if the Bankruptcy Case
is a "prepackaged" bankruptcy) or within forty-five (45) days after commencement
of  the  Bankruptcy  Case  (if  the  Bankruptcy  Case  is  not  a  "prepackaged"
bankruptcy),  or  if  such  approval,  once  obtained,  is  thereafter  revoked,
rescinded,  stayed or  modified  in any  material  respect;  (ii) an order  with
respect to the Bankruptcy Case shall be entered by the Bankruptcy  Court, or the
Seller shall file an  application  for an order with  respect to the  Bankruptcy
Case,  seeking  the  appointment  of (A) a  trustee  under  Section  1104 of the
Bankruptcy  Code,  or (B) an  examiner  with  enlarged  powers  relating  to the
operation  of  Seller's  business  (powers  beyond  those set  forth in  Section
1106(a)(3)  and  (4)  of the  Bankruptcy  Code)  under  Section  1106(b)  of the
Bankruptcy  Code;  (iii) an order with respect to the  Bankruptcy  Case shall be
entered by the Bankruptcy  Court  converting such case to a case under Chapter 7
of the Bankruptcy  Code; (iv) an application for any of the orders  described in
clauses (ii) and (iii) of this  subsection  shall be made by a Person other than
the Seller and such  application is not contested by the Seller in good faith or
the relief  requested is granted in an order that is not stayed pending  appeal;
(v) Seller  fails to perform its  obligations  pursuant to Section 5.5 hereof in
any  material  respect  in  reliance  upon the  proviso  set  forth in the first
sentence of such  Section;  or (vi) an event occurs that would be  prohibited by
Section 5.7 in any material  respect in the absence of a Bankruptcy  Court order
or requirement permitting or requiring such event;

                  (c) Seller if,  prior to the  commencement  of the  Bankruptcy
Case, a Person or group shall have made a bona fide proposal with respect to the
acquisition  of  all  of  Seller's   outstanding   capital  stock,   or  all  or
substantially  all of Seller's  assets,  that the Board of  Directors  of Seller
believes,  in good faith after consultation with its financial advisors, is more
favorable,  from a financial point of view, to the creditors and shareholders of
Seller than the  proposal set forth in this  Agreement (a "Superior  Proposal");
provided,  that Buyer does not make,  within  five  business  days of  receiving
notice of such third party  proposal,  an offer that the Board of  Directors  of
Seller believes,  in good faith after consultation with its financial  advisors,
is at least as favorable,  from a financial point of view, to Seller's creditors
and shareholders as such Superior Proposal; or

                  (d) either  Seller or Buyer if the Closing has not occurred by
the close of business on February 28, 1998, and if the failure to consummate the
transactions  contemplated  by this  Agreement  on or  before  such date did not
result from the failure by the

                                     - 38 -

<PAGE>



party seeking termination of this Agreement to fulfill any covenant provided for
herein that is required to be fulfilled prior to Closing.

                  Section 10.2 Procedure and Effect of  Termination.  (a) In the
event of  termination  of this  Agreement  by either or both of Seller and Buyer
pursuant to Section 10.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto,  and this Agreement shall thereupon
terminate  and become  void and have no effect,  the  transactions  contemplated
hereby  shall be abandoned  without  further  action by the parties  hereto and,
subject to subsection (b) hereof, the parties hereto waive and release any claim
or Action with respect thereto,  except that the  Confidentiality  Agreement and
any provisions of this  Agreement  relating to the  responsibility  for expenses
incurred in connection  with the  transactions  contemplated  by this  Agreement
shall survive the termination of this Agreement;  provided,  however,  that such
termination shall not relieve any party hereto of any liability for any willful,
material  breach of this Agreement  prior to such  termination  (except that the
break-up fee and expense  reimbursement  provisions  of Section  10.2(b)  hereof
shall be the sole  remedy of Buyer and  Richfood  in the event of a  termination
that is the subject of such provisions).

                  (b)      Notwithstanding the foregoing:

                           (i) in the event that this Agreement is terminated by
                  Seller pursuant to Section  10.1(c) hereof,  then Seller shall
                  pay to  Buyer  a  break-up  fee in an  amount  equal  to  $4.0
                  million;

                           (ii)  in  the  event  that  (A)  this   Agreement  is
                  terminated by Buyer pursuant to Section 10.1(b)(i), 10.1(b)(v)
                  or  10.1(b)(vi)  hereof,  (B) this  Agreement is terminated by
                  Buyer pursuant to Section 10.1(d)  hereof,  and the failure to
                  complete  the Closing by the date set forth in such Section is
                  solely  a  result  of a  material  breach  by  Seller  of  its
                  obligations  hereunder or (C) this  Agreement is terminated or
                  rejected  under  Section  365 of the  Bankruptcy  Code  in the
                  Bankruptcy  Case  (other than solely as a result of a material
                  breach by Buyer of its obligations hereunder) and, in the case
                  of (A), (B) or (C),  within one year thereafter the Bankruptcy
                  Court  approves  any  agreement  for  the  purchase  of all or
                  substantially  all of the  Assets  or  any  other  transaction
                  involving  the  acquisition  of a majority of the  outstanding
                  equity ownership of Seller by any Person or Persons other than
                  Buyer or any of its Affiliates (other than a  recapitalization
                  involving the creditors of Seller or FF Holdings), then Seller
                  shall pay to Buyer a break-up  fee in an amount  equal to $4.0
                  million; or

                           (iii)  in  the  event  that  (A)  this  Agreement  is
                  terminated by Buyer pursuant to Section  10.1(b)  hereof,  (B)
                  this  Agreement  is  terminated  by Buyer  pursuant to Section
                  10.1(d) hereof, and the failure to complete the Closing by the
                  date  set  forth in such  Section  is  solely  a  result  of a
                  material breach by Seller of its obligations  hereunder or (C)
                  this  Agreement is terminated or rejected under Section 365 of
                  the Bankruptcy  Code in the Bankruptcy Case (other than solely
                  as a result of a material  breach by Buyer of its  obligations
                  hereunder)  and,  in the case of (A),  (B) or (C),  within one
                  year thereafter the

                                     - 39 -

<PAGE>



                  Bankruptcy Court approves any  recapitalization  involving the
                  creditors   of  Seller  or  FF  Holdings   resulting   in  the
                  acquisition of a majority of the outstanding  equity ownership
                  of Seller by any Person or Persons  other than Buyer or any of
                  its  Affiliates,  then Seller  shall  reimburse  Buyer for its
                  actual out-of-pocket  expenses incurred in connection with the
                  transactions    contemplated   herein   (including,    without
                  limitation,   the  fees  and  expenses  of  Buyer's  financial
                  advisors,  environmental  consultants,  accountants  and legal
                  counsel), not to exceed $1.0 million in the aggregate.

Any amount payable pursuant to this Section shall be due two business days after
written demand by Buyer following the occurrence of any of the foregoing events,
and shall be paid by wire transfer of immediately available federal funds.


                                   ARTICLE XI

                             No Survival; Guarantee

                  Section 11.1 No Survival.  All  representations and warranties
of the parties  contained  in this  Agreement  or in any  Schedule  hereto shall
terminate as of and shall not survive  Closing.  All covenants and agreements of
the parties contained in this Agreement shall survive Closing.

                  Section  11.2  Guarantee.  By  execution  of  this  Agreement,
Richfood  hereby:  (a)  agrees to cause  Buyer to perform in full all of Buyer's
obligations under this Agreement,  and (b) unconditionally  guarantees,  jointly
and  severally  with  Buyer,  the full  performance  by Buyer of all the  terms,
provisions,  representations,  warranties  and  obligations  of Buyer under this
Agreement.


                                   ARTICLE XII

                                  Miscellaneous

                  Section  12.1  Brokers.  Except  for the  retention  of DLJ by
Seller and JPM by Richfood and Buyer,  each party represents and warrants to the
other that it has not engaged the services of any broker or finder in connection
with this  Agreement  or the  transactions  contemplated  hereby  that  would be
entitled  to a fee or  commission  from the other  party.  Each party  agrees to
indemnify  and hold the other  party  harmless  from and  against  any claim for
commissions,  finder's  fees or any  similar  payment  in  connection  with this
Agreement  or the  transactions  contemplated  hereby  asserted by any broker or
finder claiming to have been employed by or on behalf of the indemnifying  party
and its Affiliates.

                  Section 12.2  Counterparts.  This Agreement may be executed in
one or more  counterparts,  all of which  shall be  considered  one and the same
agreement,  and shall become effective when one or more  counterparts  have been
signed by each of the parties and delivered to the other parties.

                                     - 40 -

<PAGE>





                  Section 12.3 Governing  Law. This Agreement  shall be governed
by and construed in  accordance  with the laws of the  Commonwealth  of Virginia
without reference to the choice of law principles thereof.

                  Section 12.4 Entire Agreement.  This Agreement  (including any
agreements  incorporated herein) and the Schedules and Exhibits hereto, together
with the  Confidentiality  Agreement,  contain the entire agreement  between the
parties  with  respect  to the  subject  matter  hereof  and  there are no other
agreements,  understandings,  representations or warranties between the parties.
This  Agreement is not intended to confer upon any person not a party hereto (or
a party's  successors  and  assigns  permitted  by  Section  12.7) any rights or
remedies hereunder.

                  Section 12.5 Expenses. Except as otherwise expressly set forth
in this Agreement,  whether or not the Asset Purchase is consummated,  all other
costs  and  expenses   incurred  in  connection  with  this  Agreement  and  the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.

                  Section  12.6  Notices.  All notices and other  communications
hereunder shall be sufficiently  given for all purposes  hereunder if in writing
and delivered  personally,  sent by  nationally  recognized  overnight  delivery
service or, to the extent  receipt is confirmed,  facsimile or other  electronic
transmission service to the appropriate address or number as set forth below:

                  (a)      if to Seller, to:

                           Farm Fresh, Inc.
                           7530 Tidewater Drive
                           Norfolk, Virginia 23505

                           Attention:  President
                           Fax No.:    757-480-6714

                           with a copy to:

                           Dechert Price & Rhoads
                           4000 Bell Atlantic Tower
                           1717 Arch Street
                           Philadelphia, Pennsylvania 19103

                           Attention:  David E. Schulman
                           Fax No.:    215-994-2222




                                     - 41 -

<PAGE>



                  (b)      if to Richfood or Buyer, to:

                           Richfood Holdings, Inc.
                           FF Acquisition, L.L.C.
                                c/o Richfood Holdings, Inc.
                           4860 Cox Road
                           Glen Allen, Virginia 23060

                           Attention:  John E. Stokely
                                       President & Chief Executive Officer
                           Fax No.:    804-915-6010

                           with a copy to:

                           Hunton & Williams
                           Riverfront Plaza, East Tower
                           951 E. Byrd Street
                           Richmond, Virginia 23219

                           Attention:  Gary E. Thompson
                           Fax No.:    804-788-8218

or at such other  address and to the  attention  of such other person as a party
may designate by written notice to the other party.

                  Section 12.7  Successors and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors  and  assigns;  provided,  however,  that no  party  hereto  shall be
entitled to assign its rights or delegate its  obligations  under this Agreement
without the express prior written consent of the other party hereto.

                  Section 12.8 Headings;  Definitions.  This section and article
headings  contained in this Agreement are inserted for  convenience of reference
only and shall not affect the meaning or interpretation  of this Agreement.  All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.

                  Section 12.9 Amendments and Waivers. This Agreement may not be
modified or amended  except by an instrument or instruments in writing signed by
the party  against whom  enforcement  of any such  modification  or amendment is
sought. Any party hereto may, only by an instrument in writing, waive compliance
by the other party hereto with any term or  provision  of this  Agreement on the
part of such other parties  hereto to be performed or complied  with. The waiver
by any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.


                                     - 42 -

<PAGE>



                  Section 12.10 Interpretation. It is understood and agreed that
neither  the  specification  of any  dollar  amount in the  representations  and
warranties contained in this Agreement nor the inclusion of any specific item in
the  Schedules  or Exhibits is intended to imply that such  amounts or higher or
lower amounts, or the items so included or other items, are or are not material,
or are required to be included in the Schedules, and neither party shall use the
fact of the  setting of such  amounts or the fact of the  inclusion  of any such
item in the  Schedules in any dispute or  controversy  between the parties as to
whether any obligation,  item or matter is or is not material or are required to
be included in the Schedules, for purposes of this Agreement.

                  Section 12.11  Severability.  Any provision of this  Agreement
which is invalid or  unenforceable  shall be  ineffective  to the extent of such
invalidity  or  unenforceability,  without  affecting  in any way the  remaining
provisions hereof.



                                     - 43 -

<PAGE>




                  IN WITNESS  WHEREOF,  this  Agreement has been signed by or on
behalf of each of the parties as of the day first above written.

                                    FARM FRESH, INC.


                                    By:   //s// Ronald E. Johnson
                                         -------------------------------------
                                             Name:   Ronald E. Johnson
                                             Title:   Chairman, President, CEO


                                    RICHFOOD HOLDINGS, INC.


                                    By:   //s// John E. Stokely
                                         -------------------------------------
                                             Name:   John E. Stokely
                                             Title:  President and CEO


                                    FF ACQUISITION, L.L.C.


                                    By:   //s// John E. Stokely
                                         -------------------------------------
                                             Name:   John E. Stokely
                                             Title:  President


                                     - 44 -