Exhibit 10.1

SUPERVALU INC.
2012 STOCK PLAN

STOCK OPTION AGREEMENT

This agreement is made and entered into as of the grant date indicated below
(the “Grant Date”), by and between SUPERVALU INC. (the “Company”) and the
individual whose name appears below (“Optionee”).
 
The Company has established the 2012 Stock Plan (the “Plan”), under which
directors and key employees of the Company and its Affiliates may be granted
Options to purchase shares of the Company’s common stock. Optionee has been
selected by the Company to receive an Option subject to the provisions of this
agreement. Capitalized terms that are used in this agreement, that are not
defined, shall have the meanings ascribed to them in the Plan.

In consideration of the foregoing, the Company and Optionee hereby agree as
follows:

1.
Option Grant. The Company hereby grants to Optionee, subject to Optionee’s
acceptance hereof, the right and option to purchase the number of Shares
indicated below at the exercise price per Share indicated below (the “Exercise
Price”), effective as of the Grant Date. The Option has been designated as a
Non-Qualified Stock Option (“NQ”) for tax purposes, the consequences of which
are set forth in the prospectus that describes the Plan.

2.
Acceptance of Option and Stock Option Terms and Conditions. The Option is
subject to and governed by the Stock Option Terms and Conditions (“Terms and
Conditions”) attached hereto, which is incorporated herein and made a part
hereof, and the terms and provisions of the Plan. To accept the Option, this
agreement must be delivered and accepted through an electronic medium in
accordance with procedures established by the Company or Optionee must sign and
return a copy of this agreement to the Company within sixty (60) days after the
Grant Date. By so doing, Optionee acknowledges receipt of the accompanying Terms
and Conditions and the Plan, and represents that Optionee has read and
understands the same and agrees to be bound by the accompanying Terms and
Conditions and the terms and provisions of the Plan. In the event that any
provision of this agreement or the accompanying Terms and Conditions is
inconsistent with the terms and provisions of the Plan, the terms and provisions
of the Plan shall govern. Any question of administration or interpretation
arising under this agreement or the accompanying Terms and Conditions shall be
determined by the Committee administering the Plan, and such determination shall
be final, conclusive and binding upon all parties in interest.

3.
Vesting, Exercise Rights and Expiration. Except as otherwise provided in the
accompanying Terms and Conditions: (i) the Option shall vest according the
schedule below, (ii) the vested portion of the Option may be exercised in whole
or part, and (iii) the Option will expire on the expiration date indicated below
(the “Expiration Date”).

Option Number:         OPTION_NUMBER -
Grant Date:         OPTION_DATE,’Month DD, YYYY’ -
Number of Shares:    TOTAL_SHARES_GRANTED,’999,999,999’ -
Exercise Price:         OPTION_PRICE,’$999,999,999.99’ -
Expiration Date:         EXPIRE_DATE_PERIOD1,’Month DD, YYYY’ -
Vesting Schedule:    34%, 33% and 33% on each anniversary of the Grant Date

SUPERVALU INC.        RECIPIENT:

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SUPERVALU INC.
 
RECIPIENT:
 
 
 
 
 
 
 
 
By:
 
 
 
 
Michele A. Murphy
 
FIRST_NAME_MIDDLE_NAME_LAST_NAME
 
Executive Vice President
 
EMPLOYEE_IDENTIFIER
 
Human Resources & Corporate Communications
 
 

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SUPERVALU INC.
2012 STOCK PLAN

STOCK OPTION TERMS AND CONDITIONS
(FOR EMPLOYEES)

These Stock Option Terms and Conditions (“Terms and Conditions”) apply to the
Option granted to you under the Plan, pursuant to the Stock Option Agreement
(the “Agreement”) to which this document is attached. Capitalized terms that are
used in this document, but are not defined, shall have the meanings ascribed to
them in the Plan or the attached Agreement. See Section 21 for a list of defined
terms.

1.
Vesting and Exercisability. The Option shall vest on the date or dates and in
the amount or amounts set forth in the attached Agreement, or at such earlier
time or times as may be provided in Sections 6 or 8 below.

The vested portion of the Option may be exercised at any time, or from time to
time, during the term of the Option to purchase Shares. If in any year the full
amount of Shares that may be purchased pursuant to the vested portion of the
Option is not purchased, the remaining amount of such Shares shall be available
for purchase during the remainder of the term of the Option. The term of the
Option shall be for a period of ten (10) years from the Grant Date, terminating
at the close of business on the Expiration Date, or such shorter period as is
provided for herein.

2. Manner of Exercise. Except as provided in Section 6 or 8 below, you cannot
exercise the Option unless at the time of exercise you are an employee of the
Company or an Affiliate. Prior to your death or Disability (as set forth in
Section 8 below), only you may exercise the Option. You may exercise the Option
as follows:

a)
By delivering a “Notice of Exercise of Stock Option” to the Company at its
principal office, attention: Vice President, Compensation, stating the number of
Shares being purchased and accompanied by payment of the full purchase price for
such Shares (determined by multiplying the Exercise Price by the number of
Shares to be purchased). Note: In the event the Option is exercised by any
person other than you pursuant to any of the provisions of Section 7 below, the
Notice must be accompanied by appropriate proof of such person’s right to
exercise the Option; or

b)
By entering an order to exercise the Option using E*TRADE’s website.

3. Method of Payment. The full purchase price for the Shares to be purchased
upon exercise of the Option must be paid as follows:
a)
By delivering directly to the Company, cash or its equivalent (personal check,
bank draft or money order) payable to the Company;

b)
By delivering indirectly to the Company, cash or its equivalent payable to the
Company through E*TRADE under a broker-assisted sale and remittance program
approved by the Company;

c)
By delivering directly to the Company Shares having a Fair Market Value as of
the exercise date equal to the purchase price (commonly known as a “Stock
Swap”);

d)
By delivering directly to the Company the full purchase price in a combination
of cash and Shares; or

e)
By the Company delivering to you a number of Shares having an aggregate Fair
Market Value (determined as of the date of exercise) equal to the excess, if
positive, of the Fair Market Value (on the date of exercise) of the Shares as to
which the Option is being exercised, over the aggregate exercise price for such
Shares under the Option (commonly known as a “net exercise”).

If you pay all or a portion of the purchase price by means of a Stock Swap, you
shall represent and warrant in writing that you are the owner of the Shares so
delivered, free and clear of all liens, encumbrances, security interests and
restrictions. To the extent that you possess Shares in certificated form, you
shall duly endorse in blank all certificates delivered to the Company.

4. Delivery of Shares. You shall not have any of the rights of a stockholder
with respect to any Shares subject to the Option until such Shares are purchased
by you upon exercise of the Option. Such Shares shall then be issued and
delivered to you by the Company as follows:
a)
In the form of a stock certificate registered in your name or your name and the
name of another adult person (twenty-one (21) years of age or older) as joint
tenants, and mailed to your address;

b)
In “book entry” form, that is, registered with the Company’s stock transfer
agent, in your name or your name and the name of another adult person
(twenty-one (21) years of age or older) as joint tenants, with a notice of
issuance provided to you; or

c)
sent by electronic delivery to your brokerage account.

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The Company will not deliver any fractional Share but will pay, in lieu thereof,
the Fair Market Value of such fractional Share. Delivery of Shares upon exercise
of this Option is subject to the satisfaction of applicable withholding tax
obligations and to Section 17 below.

5. Withholding Taxes. You are responsible for the payment of any federal, state,
local or other taxes that are required to be withheld by the Company upon
exercise of the Option and you must promptly remit such taxes to the Company.
You may elect to remit these taxes by:
a)
Delivering directly to the Company, cash or its equivalent payable to the
Company;

b)
Delivering indirectly to the Company, cash or its equivalent payable to the
Company through E*TRADE’s website;

c)
Having the Company withhold a portion of the Shares to be issued upon exercise
of the Option having a Fair Market Value as of the exercise date equal to the
amount of taxes required to be withheld upon such exercise; or

d)
Delivering directly to the Company, Shares, other than the Shares issuable upon
exercise of the Option, having a Fair Market Value as of the exercise date equal
to the amount of taxes required to be withheld upon such exercise. You shall
represent and warrant in writing that you are the owner of the Shares so
delivered, free and clear of all liens, encumbrances, security interests and
restrictions. To the extent that you possess Shares in certificated form, you
shall duly endorse in blank all certificates delivered to the Company.

The Company shall be under no obligation to withhold taxes in excess of your
minimum required tax withholding rate if you elect to satisfy your obligation to
pay withholding taxes by either of the means specified in clauses 5(c) and 5(d)
above.
6.    Change of Control.
a)
If, within two (2) years after a Change of Control, you experience an
involuntary termination of employment initiated by the Company for reasons other
than Cause, or a termination of employment for Good Reason, the unvested portion
of the Option shall immediately vest and the Option shall become immediately
exercisable in full and remain exercisable for one (1) year beginning on the
date of your termination of employment. If the Option is replaced pursuant to
subsection (d) below, the protections and rights granted under this subsection
(a) shall transfer and apply to such replacement option.

b)
If, in the event of a Change of Control described in clause (ii) of Section
21(b) below, and to the extent the Option is not assumed by a successor
corporation (or affiliate thereto) or other successor entity or person, or
replaced with an award or grant that, solely in the discretionary judgment of
the Committee preserves the existing intrinsic value of the Option at the time
of the Change of Control, then the Option shall become fully vested and
exercisable for such period of time prior to the effective time of the Change of
Control as is deemed fair and equitable by the Committee to provide you with the
opportunity to participate as a stockholder in the Change of Control
transaction, and shall terminate at the effective time of the Change of Control.
The Company will provide written notice of of the period of accelerated vesting
and exercisability to you, and the exercise of this Option pursuant to such
accelerated vesting and exercisability shall be conditioned upon the
consummation of the Change of Control and shall be effective only immediately
before such consummation.

c)
In the discretion of the Committee and notwithstanding subsection (b) above or
any other provision, the Option (whether or not exercisable) may be cancelled at
the time of the Change of Control in exchange for cash, property or a
combination thereof that is determined by the Committee to be at least equal to
the excess (if any) of the value of the consideration that would be received in
such Change of Control by a holder of the number of Shares remaining subject to
the Option (or the Fair Market Value of such number of Shares immediately prior
to the Change of Control if the holders of Company common stock will not receive
consideration in such Change of Control), over the aggregate Exercise Price
under the Option for that number of Shares. For purposes of clarification, if
application of the formula in the preceding sentence does not result in a
positive number, then this Option is subject to cancellation without
consideration. Furthermore, the Committee is under no obligation to treat
Options and/or holders of Options uniformly and has the discretionary authority
to treat Options and/or holders of Options disparately.

d)
If in the event of a Change of Control and to the extent that this Option is
assumed by any successor corporation, affiliate thereof, person or other entity,
or is replaced with awards that, solely in the discretionary judgment of the
Committee preserve the existing intrinsic value of this Option at the time of
the Change of Control and provide for vesting and settlement terms that are at
least as favorable to you as the vesting and payout terms applicable to this
Option, then the assumed Option or such substitute therefore shall remain
outstanding and be governed by its respective terms.

7. Transferability. The Option shall not be transferable other than by will or
the laws of descent and distribution. More particularly, the Option may not be
assigned, transferred, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition of the Option contrary to these provisions, or the levy of an
execution, attachment or similar process upon the Option, shall be void.

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8. Effect of Termination of Employment. Subject to Section 6(a) above, following
the termination of your employment with the Company and its Affiliates for any
of the reasons set forth below, your right to exercise the Option, as well as
that of your beneficiary or beneficiaries, shall be as follows:

a)
Voluntary. If you voluntarily terminate your employment, you may exercise the
portion of the Option that was vested and exercisable as of the date of
termination of your employment at any time until the earlier of (i) ninety (90)
days after such termination of employment, or (ii) the Expiration Date.

b)
Involuntary. If your employment is terminated involuntarily for any reason other
than death, Disability or Cause, you may exercise the portion of the Option that
was vested and exercisable as of the date of termination of your employment at
any time until the earlier of (i) one (1) year after such termination of
employment, or (ii) the Expiration Date.

c)
Retirement. Notwithstanding paragraphs (a) and (b) above, if your employment
terminates on or after reaching age 60 for any reason other than death or
Disability, your termination shall be considered a “retirement” and the
following provisions will apply:

(i)
If at the time of your retirement you have completed at least fifteen (15) years
of service with the Company or an Affiliate, you may exercise the portion of the
Option that was vested and exercisable as of the date of your retirement at any
time until the earlier of (i) five (5) years after the date of your retirement,
or (ii) the Expiration Date.

(ii)
If at the time of your retirement you have completed fewer than fifteen (15)
years of service with the Company or an Affiliate, you may exercise the portion
of the Option that was vested and exercisable as of the date of your retirement
at any time until the earlier of (i) one (1) year after your retirement, or (ii)
the Expiration Date.

 
d)
Death.

(i)
Prior to Age 60. If your employment terminates as a result of your death prior
to reaching age 60, the unvested portion of the Option shall immediately vest
and become exercisable in full. Thereafter, the Option may be exercised by your
beneficiary(ies), or a legatee(s) under your last will, or your personal
representative(s) or the distributee(s) of your estate, to the full extent of
the Shares covered by the Option that were not previously purchased, until the
earlier of (i) one (1) year after the date of your death, or (ii) the Expiration
Date.

(ii)
On or After Age 60. If your employment terminates as a result of your death on
or after you have reached age 60, the unvested portion of your Option shall
immediately vest and become exercisable in full. Thereafter, the Option may be
exercised by your beneficiary(ies), or a legatee(s) under your last will, or
your personal representative(s) or the distributee(s) of your estate, to the
full extent of the Shares covered by the Option that were not previously
purchased, until the earlier of (i) five (5) years after the date of your death,
or (ii) the Expiration Date.

e)
Disability.

(i)
Prior to Age 60. If your employment terminates prior to reaching age 60 as a
result of your Disability, the unvested portion of the Option shall immediately
vest and become exercisable in full. Thereafter, the Option may be exercised by
you or by your personal representative(s), to the full extent of the Shares
covered by the Option that were not previously purchased, until the earlier of
(i) one (1) year after your employment terminates due to such Disability, or
(ii) the Expiration Date.

(ii)
On or After Age 60. If your employment terminates on or after reaching age 60 as
a result of your Disability, the unvested portion of the Option shall
immediately vest and become exercisable in full. Thereafter, the Option may be
exercised by you or by your personal representative(s), to the full extent of
the Shares covered by the Option that were not previously purchased, until the
earlier of (i) five (5) years after your employment terminates due to such
Disability, or (ii) the Expiration Date.

You shall be considered subject to a “Disability” if you suffer from a medically
determinable physical or mental impairment that renders you incapable of
performing any substantial gainful employment, and is evidenced by a
certification to such

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effect by a doctor of medicine approved by the Company. In lieu of such
certification, the Company shall accept, as proof of permanent disability, your
eligibility for long-term disability payments under the applicable Long-Term
Disability Plan of the Company.

f)
Cause. If your employment is terminated for Cause, or if you are determined to
have engaged in conduct during a post-termination exercise period that would
constitute Cause or be in violation of Section 10, any unexercised or unvested
portion of this Option shall be immediately forfeited without consideration.

g)
Change in Duties/Leave of Absence. The Option shall not be affected by any
change of your duties or position or by a temporary leave of absence approved by
the Company, so long as you continue to be an employee of the Company or of an
Affiliate.

9. Repurchase Rights. If your employment with the Company and its Affiliates is
terminated for Cause, or if you breach any of the covenants contained in Section
10 below, the Company shall have the right and option to repurchase from you any
Shares purchased by you upon any exercise of this Option that occurred within
six (6) months prior to the date on which your employment with the Company and
its Affiliates ended, or at any time thereafter, and you agree to sell such
Shares to the Company.

The Company may exercise its repurchase rights by depositing in the United
States mail a written notice addressed to you at the latest mailing address for
you on the records of the Company within thirty (30) days following the
termination of your employment for the repurchase of Shares purchased prior to
such termination, and within thirty (30) days after the Company’s discovery of
any breach of the covenants contained in Section 10. Within thirty (30) days
after the mailing of such notice, you shall deliver to the Company the number of
Shares the Company has elected to repurchase and the Company shall pay to you in
cash, as the repurchase price for such Shares upon their delivery, an amount
which shall be equal to the purchase price paid by you for the Shares. If you
have disposed of the Shares, then in lieu of delivering an equivalent number of
Shares to the Company, you must pay to the Company the difference between the
amount realized by you from the disposition of the Shares (or the Fair Market
Value of the Shares on the disposition date if greater) and the amount you
originally paid for the Shares, exclusive of any taxes due and payable or
commissions or fees arising from such disposition.

If the Company exercises its repurchase option prior to the actual issuance and
delivery to you of any Shares pursuant to the exercise of the Option, no Shares
need be issued or delivered. In lieu thereof, the Company shall return to you
the purchase price you tendered upon the exercise of the Option to the extent
that it was actually received from you by the Company.

10. Employee Covenants. In consideration of benefits described elsewhere in
these Terms and Conditions and the attached Agreement, and in recognition of the
fact that, as a result of your employment with the Company or any of its
Affiliates, you have had or will have access to and gain knowledge of highly
confidential or proprietary information or trade secrets pertaining to the
Company or its Affiliates, as well as the customers, suppliers, joint ventures,
licensors, licensees, distributors or other persons and entities with whom the
Company or any of its Affiliates does business (“Confidential Information”),
which the Company or its Affiliates have expended time, resources and money to
obtain or develop and which have significant value to the Company and its
Affiliates, you agree for the benefit of the Company and its Affiliates, and as
a material condition to your receipt of benefits described elsewhere in these
Terms and Conditions and the attached Agreement, as follows:

a)
Non-Disclosure of Confidential Information. You acknowledge that you will
receive access or have received access to Confidential Information about the
Company or its Affiliates, that this information was obtained or developed by
the Company or its Affiliates at great expense and is zealously guarded by the
Company and its Affiliates from unauthorized disclosure, and that your
possession of this special knowledge is due solely to your employment with the
Company or one (1) or more of its Affiliates. In recognition of the foregoing,
you will not at any time during employment or following termination of
employment for any reason, disclose, use or otherwise make available to any
third party, any Confidential Information relating to the Company’s or any
Affiliate’s business, products, services, customers, vendors, or suppliers;
trade secrets, data, specifications, developments, inventions and research
activity; marketing and sales strategies, information and techniques; long and
short term plans; existing and prospective client, vendor, supplier and employee
lists, contacts and information; financial, personnel and information system
information and applications; and any other information concerning the business
of the Company or its Affiliates which is not disclosed to the general public or
known in the industry, except for disclosure necessary in the course of your
duties or with the express written consent of the Company. All Confidential
Information, including all copies, notes regarding and replications of such
Confidential Information will remain the sole property of the Company or its
Affiliate, as applicable, and must be returned to the Company or such Affiliate
immediately upon termination of your employment.

b)
Return of Property. Upon termination of employment with the Company or any of
its Affiliates, or at any other time at the request of the Company, you shall
deliver to a designated Company representative all records, documents, hardware,
software and all other property of the Company or its Affiliates and all copies
of such property in your possession. You

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acknowledge and agree that all such materials are the sole property of the
Company or its Affiliates and that you will certify in writing to the Company at
the time of delivery, whether upon termination or otherwise, that you have
complied with this obligation.
c)
Non-Solicitation of Existing or Prospective Customers, Vendors and Suppliers.
You specifically acknowledge that the Confidential Information described in
Section 10(a) includes confidential data pertaining to existing and prospective
customers, vendors and suppliers of the Company or its Affiliates; that such
data is a valuable and unique asset of the business of the Company or its
Affiliates; and that the success or failure of their businesses depends upon
their ability to establish and maintain close and continuing personal contacts
and working relationships with such existing and prospective customers, vendors
and suppliers and to develop proposals which are specific to such existing and
prospective customers, vendors and suppliers. Therefore, during your employment
with the Company or any of its Affiliates and for the twelve (12) months
following termination of employment for any reason, you agree that you will not,
except on behalf of the Company or its Affiliates, or with the Company’s express
written consent, solicit, approach, contact or attempt to solicit, approach or
contact, either directly or indirectly, on your own behalf or on behalf of any
other person or entity, any existing or prospective customers, vendors or
suppliers of the Company or its Affiliates with whom you had contact or about
whom you gained Confidential Information during your employment with the Company
or its Affiliates for the purpose of obtaining business or engaging in any
commercial relationship that would be competitive with the “Business of the
Company” (as defined below in Section 10(e)(i)) or cause such customer, supplier
or vendor to materially change or terminate its business or commercial
relationship with the Company or its Affiliates.

d)
Non-Solicitation of Employees. You specifically acknowledge that the
Confidential Information described in Section 10(a) also includes confidential
data pertaining to employees and agents of the Company or its Affiliates, and
you further agree that during your employment with the Company or its Affiliates
and for the twelve (12) months following termination of employment for any
reason, you will not, directly or indirectly, on your own behalf or on behalf of
any other person or entity, solicit, contact, approach, encourage, induce or
attempt to solicit, contact, approach, encourage or induce any of the employees
or agents of the Company or its Affiliates to terminate their employment or
agency with the Company or any of its Affiliates.

e)
Non-Competition. You covenant and agree that during your employment with the
Company or any of its Affiliates and for the twelve (12) months following
termination of employment for any reason, you will not, in any geographic market
in which you worked on behalf of the Company or any of its Affiliates, or for
which you had any sales, marketing, operational, logistical or other management
or oversight responsibility, engage in or carry on, directly or indirectly, as
an owner, employee, agent, associate, consultant, partner or in any other
capacity, a business competitive with the Business of the Company.

i)
The “Business of the Company” shall mean any business or activity involved in
grocery or general merchandise retailing and supply chain logistics, including
but not limited to grocery distribution, business-to-business portal, retail
support services and third-party logistics, of the type provided by the Company
or its Affiliates, or presented in concept to you by the Company or its
Affiliates at any time during your employment with the Company or any of its
Affiliates.

ii)
To “engage in or carry on” shall mean to have ownership in such business
(excluding ownership of up to one percent (1%) of the outstanding shares of a
publicly-traded company) or to consult, work in, direct or have responsibility
for any area of such business, including but not limited to operations,
logistics, sales, marketing, finance, recruiting, sourcing, purchasing,
information technology or customer service.

f)
No Disparaging Statements. You agree that you will not make any disparaging
statements about the Company, its Affiliates, directors, officers, agents,
employees, products, pricing policies or services.

g)
Remedies for Breach of These Covenants. Any breach of the covenants in this
Section 10 likely will cause irreparable harm to the Company or its Affiliates
for which money damages could not reasonably or adequately compensate the
Company or its Affiliates. Accordingly, the Company or any of its Affiliates
shall be entitled to all forms of injunctive relief (whether temporary,
emergency, preliminary, prospective or permanent) to enforce such covenants, in
addition to damages and other available remedies, and you consent to the
issuance of such an injunction without the necessity of the Company or any such
Affiliate posting a bond or, if a court requires a bond to be posted, with a
bond of no greater than $500 in principal amount. In the event that injunctive
relief or damages are awarded to the Company or any of its Affiliates for any
breach by you of this Section 10, you further agree that the Company or such
Affiliate shall be entitled to recover its costs and attorneys’ fees necessary
to obtain such recovery. In addition, you agree that upon your breach of any
covenant in this Section 10, the Option, and any other unexercised options
issued under the Plan or any other stock option plans of the Company will
immediately terminate and the Company shall have the right to exercise any and
all of the rights described above including the provisions articulated in
Section 9.

h)
Enforceability of These Covenants. It is further agreed and understood by you
and the Company that if any part, term or provision of these Terms and
Conditions should be held to be unenforceable, invalid or illegal under any
applicable law or rule, the offending term or provision shall be applied to the
fullest extent enforceable, valid or lawful under such law or rule, or, if that
is not possible, the offending term or provision shall be struck and the
remaining provisions of these Terms and Conditions shall not be affected or
impaired in any way.

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11. Arbitration. You and the Company agree that any controversy, claim or
dispute arising out of or relating to the attached Agreement or the breach of
any of these Terms and Conditions, or arising out of or relating to your
employment relationship with the Company or any of its Affiliates, or the
termination of such relationship, shall be resolved by final and binding
arbitration under the Employment Arbitration Rules and Mediation Procedures of
the American Arbitration Association, or other neutral arbitrator and rules as
mutually agreed to by you and the Company, except for claims by the Company
relating to your alleged breach of any of the employee covenants set forth in
Section 10 above. This agreement to arbitrate specifically includes, but is not
limited to, discrimination claims under Title VII of the Civil Rights Act of
1964 and under state and local laws prohibiting employment discrimination.
Nothing in this Section 11 shall preclude the Company from pursuing a court
action to obtain a temporary restraining order or a preliminary injunction
relating to the alleged breach of any of the covenants set forth in Section 10.
The agreement to arbitrate shall continue in full force and effect despite the
expiration or termination of your Option or your employment relationship with
the Company or any of its Affiliates. You and the Company agree that any award
rendered by the arbitrator must be in writing and include the findings of fact
and conclusions of law upon which it is based, shall be final and binding and
that judgment upon the final award may be entered in any court having
jurisdiction thereof. The arbitrator may grant any remedy or relief that the
arbitrator deems just and equitable, including any remedy or relief that would
have been available to you or the Company or any of its Affiliates had the
matter been heard in court. All expenses of arbitration, including the required
travel and other expenses of the arbitrator and any witnesses, and the costs
relating to any proof produced at the direction of the arbitrator, shall be
borne equally by you and the Company unless otherwise mutually agreed or unless
the arbitrator directs otherwise in the award. The arbitrator’s compensation
shall be borne equally by you and the Company unless otherwise mutually agreed
or the law provides otherwise.

12. Adjustments. In the event that any dividend or other distribution (whether
in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Shares
or other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company or other similar corporate
transaction or event affects the Shares covered by the Option such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under these Terms
and Conditions and the attached Agreement, then the Committee administering the
Plan shall, in such manner as it may deem equitable, adjust any or all of the
number and type of Shares (or other securities or other property) covered by the
Option and the Exercise Price of the Option.

13. Severability. In the event that any portion of these Terms and Conditions
shall be held to be invalid, the same shall not affect in any respect whatsoever
the validity and enforceability of the remainder of these Terms and Conditions.

14. Interpretations. These Terms and Conditions and the attached Agreement are
subject in all respects to the Plan. A copy of the Plan is available upon your
request. In the event that any provision of these Terms and Conditions or the
attached Agreement is inconsistent with the terms of the Plan, the terms and
provisions of the Plan shall govern. Any question of administration or
interpretation arising under these Terms and Conditions or the attached
Agreement shall be determined by the Committee administering the Plan, and such
determination shall be final, conclusive and binding upon all parties in
interest.

15. No Right to Employment. Nothing in these Terms and Conditions or the
attached Agreement or the Plan shall be construed as giving you the right to be
retained as an employee of the Company. In addition, the Company may at any time
dismiss you from employment, free from any liability or any claim under these
Terms and Conditions or the attached Agreement, unless otherwise expressly
provided in these Terms and Conditions or the attached Agreement.

16. Reservation of Shares. The Company shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of these Terms and Conditions and the attached
Agreement.

17. Securities Matters. The Company shall not be required to deliver any Shares
until the requirements of any federal or state securities or other laws, rules
or regulations (including the rules of any securities exchange) as may be
determined by the Company to be applicable are satisfied.

18. Headings. Headings are given to the sections and subsections of these Terms
and Conditions and the attached Agreement solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or relevant to
the construction or interpretation of these Terms and Conditions or the attached
Agreement or any provision hereof or thereof.

19. Governing Law. The internal law, and not the law of conflicts, of the State
of Delaware will govern all questions concerning the validity, construction and
effect of these Terms and Conditions and the attached Agreement.

20. Notices. For purpose of the Agreement and these Terms and Conditions,
notices and all other communications provided for in the Agreement, these Terms
and Conditions or contemplated by either shall be in writing and shall be deemed
to have

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been duly given when personally delivered or when mailed United States certified
or registered mail, return receipt requested, postage prepaid, and addressed, in
the case of the Company, to the Company at:
P.O. Box 990
Minneapolis, MN 55440
Attention: Corporate Secretary

and in the case of you, to you at the most current address shown on your
employment records. Either party may designate a different address by giving
notice of change of address in the manner provided above, except that notices of
change of address shall be effective only upon receipt.
a)
Notice of Termination by Company. Any purported termination of employment of you
by the Company (whether for Cause or without Cause) shall be communicated by a
Notice of Termination to you. No purported termination of employment of you by
the Company shall be effective without a Notice of Termination having been
given.

b)
Good Reason Notice by You. Any purported termination of employment by you for
Good Reason shall be communicated by a Notice of Termination to the Company or
successor. Your termination of employment will not be for Good Reason unless (i)
you give the Company written notice of the event or circumstance which you claim
is the basis for Good Reason within ninety (90) days of such event or
circumstance first occurring, and (ii) the Company is given thirty (30) days
from its receipt of such notice within which to cure or resolve the event or
circumstance so noticed. If the circumstance is cured or resolved within said
thirty (30) days, your termination of employment will not be for Good Reason.

21. Definitions. The following terms, and terms derived from the following
terms, shall have the following meanings when used in these Terms and Conditions
or the attached Agreement with initial capital letters unless, in the context,
it would be unreasonable to do so.
a)
Cause shall mean:     

i)
your continued failure to perform your duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to you by the Board or
an officer of the Company which specifically identifies the manner in which the
Board or the officer believes that you have not substantially performed your
duties;

ii)
the conviction of, or plea of guilty or nolo contendere to, a felony or the
willful engaging by you in conduct which is materially and demonstrably
injurious to the Company;

iii)
your commission of a material act or material acts of personal dishonesty
intended to result in your substantial personal enrichment at the expense of the
Company; or

iv)
your material violation of Company policies relating to Code of Business
Conduct, Equal Employment Opportunities and Harassment or Workplace Violence;

provided, however, that in no event shall Cause exist by virtue of any action
taken by you (A) in compliance with express written directions of the Board, the
Company's Chief Executive Officer or the officer to whom you report, or (B) in
reliance upon the express written consent of the Company's counsel.
In each case above, for a termination of employment to be for Cause, you must be
provided with a Notice of Termination (as described in Section 20(a)) within six
(6) months after the Company has actual knowledge of the act or omission
constituting Cause. Whether a termination of employment is for Cause as provided
above will be determined by the Company in its sole discretion based on all the
facts and circumstances. For purposes hereof, the term “Company” shall include
an Affiliate.
b)
Change of Control shall be deemed to have occurred upon any of the following
events:

i)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of either (A) the then outstanding shares of common
stock of the Company, or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors; provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company, or (B) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company;

ii)
the consummation of any merger or other business combination of the Company,
sale or lease of all or substantially all of the Company's assets or combination
of the foregoing transactions (the "Transactions") other than a Transaction
immediately following which the stockholders of the Company and any trustee or
fiduciary of any Company employee benefit plan immediately prior to the
Transaction own at least sixty percent (60%) of the

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voting power, directly or indirectly, of (A) the surviving corporation in any
such merger or other business combination; (B) the purchaser or lessee of the
Company's assets, or (C) both the surviving corporation and the purchaser or
lessee in the event of any combination of Transactions; or
iii)
within any 24‑month period, the persons who were directors immediately before
the beginning of such period (the "Incumbent Directors") shall cease (for any
reason other than death) to constitute at least a majority of the Board or the
board of directors of a successor to the Company. For this purpose, any director
who was not a director at the beginning of such period shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on the
recommendation of or with the approval of, at least three‑fourths of the
directors who then qualified as Incumbent Directors (so long as such director
was not nominated by a person who has expressed an intent to effect a Change of
Control or engage in a proxy or other control contest).

c)
Change of Control Date shall mean the date on which a Change of Control occurs.

d)
Good Reason shall mean any one (1) or more of the following events occurring
during the two-year period following the Change of Control Date:

i)
your annual base salary is reduced below the amount in effect on the Change of
Control Date;

ii)
your Target Bonus is reduced below the Target Bonus as it existed on the Change
of Control Date;

iii)
your title is reduced from the title that you had on the Change of Control Date,
or your duties and responsibilities are materially and adversely diminished in
comparison to the duties and responsibilities that you had on the Change of
Control Date other than in a general reduction of the number or scope of
personnel for which you are responsible for supervising which reduction occurs
in connection with a restructuring or recapitalization of the Company or the
division of the Company in which you work;

iv)
the program of long term incentive compensation is materially and adversely
diminished in comparison to the program of long term incentive compensation as
it existed for you on the Change of Control Date (for purposes of this clause
(iv), a reduction of fifteen percent (15%) or more of the target dollar amount
of your long term incentive compensation as it existed for you on the Change of
Control Date based on your most recent award of long term incentive compensation
prior to the Change of Control Date shall be considered to be material and
adverse); or

v)
you are required to be based at a location more than forty-five (45) miles from
the location where you were based and performed services on the Change of
Control Date;

 
provided, however, that any diminution of duties or responsibilities that occurs
solely as a result of the fact that the Company ceases to be a public company or
that the size of the Company has been reduced as a result of the Change of
Control shall not, in and of itself, constitute Good Reason.

e)
Notice of Termination shall mean a written notice which shall indicate the
specific provision in these Terms and Conditions relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
your termination of employment under the provisions so indicated.

f)
Target Bonus shall mean the target amount of bonus established under the annual
bonus plan for you for the year in which the termination of employment occurs.
When the context requires, it shall also mean the target amount of bonus
established for any earlier or later year.

Original Approval