Amendment No. 3 to Form S-1 Table of Contents AB ACQUISITION LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) NOTE 9—COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS Guarantees California Department of Industrial Relations: On October 24, 2012, the Office of Self-Insurance Plans, a program within the director's office of the California Department of Industrial Relations (the "DIR"), notified SuperValu that additional security was required to be posted in connection with the Company's, and certain other subsidiaries', California self-insured workers' compensation obligations pursuant to applicable regulations. The notice from the DIR stated that the additional security was required as a result of an increase in estimated future liabilities, as determined by the DIR pursuant to a review of the self-insured California workers' compensation claims with respect to the applicable businesses, and a decline in SuperValu's net worth. A security deposit of $271.0 million was demanded in addition to security of $427.0 million provided through SuperValu's participation in California's Self-Insurer's Security Fund (the "Fund"). SuperValu appealed this demand. The Fund has attempted to create a secured interest in certain assets of the Company for the total amount of the additional security deposit. The dispute with the Fund and the DIR was resolved through a settlement agreement as part of the NAI acquisition on March 21, 2013 and the primary obligation to the Fund and the DIR was retained by the Company following the NAI acquisition. Subsequent to the NAI acquisition, the Company set up a fund of $75.0 million to be used for the payment of future claims. In addition, the Company provided to the DIR a $225.0 million LOC to collateralize any of the self-insurance workers' compensation future obligations in excess of the $75.0 million fund. As of November 27, 2014, the entire fund has been used to pay claims. Pri