Exhibit 10.1

BLACKHAWK MARKETING SERVICES, INC.

2006 RESTRICTED STOCK PLAN

FOR ELIGIBLE EMPLOYEES OF SAFEWAY INC.

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BLACKHAWK MARKETING SERVICES, INC.

2006 RESTRICTED STOCK PLAN

FOR ELIGIBLE EMPLOYEES OF SAFEWAY INC.

Table of Contents

 

          Page ARTICLE I. DEFINITIONS    1

1.1.

   ADMINISTRATOR    1

1.2.

   AWARD    1

1.3.

   AWARD AGREEMENT    1

1.4.

   BLACKHAWK    1

1.5.

   BOARD    1

1.6.

   CODE    1

1.7.

   COMMITTEE    1

1.8.

   COMMON STOCK    1

1.9.

   COMPANY    1

1.10.

   EMPLOYEE    2

1.11.

   EXCHANGE ACT    2

1.12.

   FAIR MARKET VALUE    2

1.13.

   HOLDER    2

1.14.

   PLAN    2

1.15.

   RESTRICTED STOCK    2

1.16.

   SECURITIES ACT    2

1.17.

   SUBSIDIARY    2

1.18.

   STOCKHOLDERS’ AGREEMENT    2

1.19.

   TERMINATION OF EMPLOYMENT    2 ARTICLE II. SHARES SUBJECT TO PLAN    3

2.1.

   SHARES SUBJECT TO PLAN    3

2.2.

   ADD-BACK OF CERTAIN SHARES    3 ARTICLE III. AWARD OF RESTRICTED STOCK    3

3.1.

   ELIGIBILITY    3

3.2.

   AWARD OF RESTRICTED STOCK    3

3.3.

   AWARD AGREEMENT    3

3.4.

   RESTRICTION    3

3.5.

   REPURCHASE OF RESTRICTED STOCK    4

3.6.

   STOCKHOLDERS’ AGREEMENT    4

3.7.

   CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES    4

3.8.

   INVESTMENT INTENT    5

3.9.

   ESCROW    5

3.10.

   RIGHTS AS STOCKHOLDERS    5

3.11.

   LEGEND    5

3.12.

   SECTION 83(B) ELECTION    5 ARTICLE IV. ADMINISTRATION    6

4.1.

   ADMINISTRATOR    6

4.2.

   POWERS OF THE ADMINISTRATOR    6

4.3.

   MAJORITY RULE; UNANIMOUS WRITTEN CONSENT    7

4.4.

   COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS    7

 

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BLACKHAWK MARKETING SERVICES, INC.

2006 RESTRICTED STOCK PLAN

FOR ELIGIBLE EMPLOYEES OF SAFEWAY INC.

Table of Contents

 

          Page

ARTICLE V. MISCELLANEOUS PROVISIONS

   8

5.1.

   NOT TRANSFERABLE.    8

5.2.

   AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN    8

5.3.

   CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR LIQUIDATION
OF THE COMPANY AND OTHER CORPORATE EVENTS    8

5.4.

   TAX WITHHOLDING    10

5.5.

   AT-WILL EMPLOYMENT    10

5.6.

   EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS    10

5.7.

   COMPLIANCE WITH LAWS    10

5.8.

   TITLES    11

5.9.

   GOVERNING LAW    11

 

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BLACKHAWK MARKETING SERVICES, INC.

2006 RESTRICTED STOCK PLAN

FOR ELIGIBLE EMPLOYEES OF SAFEWAY INC.

Safeway Inc., a Delaware corporation (the “Company”), adopted this Blackhawk
Marketing Services, Inc. 2006 Restricted Stock Plan for Eligible Employees of
Safeway Inc. (the “Plan”) for the benefit of its eligible Employees (as defined
herein), effective as of February 22, 2006 (the “Effective Date”). The purpose
of the Plan is to provide an additional incentive for Employees (as defined
below) to further the growth, development and financial success of Blackhawk
(and thereby further the growth, development and financial success of the
Company) by personally benefiting through the ownership of Blackhawk stock.

ARTICLE I.

DEFINITIONS

Wherever the following terms are used in the Plan they shall have the meanings
specified below, unless the context clearly indicates otherwise.

1.1. Administrator. “Administrator” shall mean the Executive Compensation
Committee, except that, if a Committee is appointed under Section 4.1, the term
“Administrator” shall mean the Committee as to those duties, powers and
responsibilities specifically conferred upon the Committee.

1.2. Award. “Award” shall mean a Restricted Stock award granted under the Plan.

1.3. Award Agreement. “Award Agreement” shall mean a written agreement executed
by an authorized officer of the Company and the Holder which shall contain such
terms and conditions with respect to an Award as the Administrator shall
determine, consistent with the Plan.

1.4. Blackhawk. “Blackhawk” shall mean Blackhawk Marketing Services, Inc., an
Arizona corporation.

1.5. Board. “Board” shall mean the Board of Directors of the Company.

1.6. Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.7. Committee. “Committee” shall mean the Executive Compensation Committee or a
subcommittee of the Board appointed as provided in Section 4.1.

1.8. Common Stock. “Common Stock” shall mean the common stock of Blackhawk, par
value $0.001 per share.

1.9. Company. “Company” shall mean Safeway Inc., a Delaware corporation.

 

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1.10. Employee. “Employee” shall mean any officer or other employee (as defined
in accordance with Section 3401(c) of the Code) of the Company, or of any
corporation which is a Subsidiary.

1.11. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended.

1.12. Executive Compensation Committee. “Executive Compensation Committee” shall
mean the Executive Compensation Committee of the Board.

1.13. Fair Market Value. “Fair Market Value” shall have the meaning assigned to
such term in the Stockholders’ Agreement.

1.14. Holder. “Holder” shall mean a person who has been granted an Award.

1.15. Plan. “Plan” shall mean the Blackhawk Marketing Services, Inc. 2006
Restricted Stock Plan for Eligible Employees of Safeway Inc.

1.16. Restricted Stock. “Restricted Stock” shall mean Common Stock granted
pursuant to the Plan.

1.17. Securities Act. “Securities Act” shall mean the Securities Act of 1933, as
amended.

1.18. Subsidiary. “Subsidiary” shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

1.19. Stockholders’ Agreement. “Stockholders’ Agreement” shall mean that certain
Stockholders’ Agreement dated as of February 24, 2006, by and among Blackhawk,
the Company and certain stockholders of Blackhawk, as amended from time to time.

1.20. Termination of Employment. “Termination of Employment” shall mean the time
when the employee-employer relationship between a Holder and the Company or any
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding (a) terminations where there is a
simultaneous reemployment or continuing employment of a Holder by the Company or
any Subsidiary, and (b) at the discretion of the Administrator, terminations
which result in a temporary severance of the employee-employer relationship. The
Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, all questions of whether a particular leave of absence
constitutes a Termination of Employment.

 

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ARTICLE II.

SHARES SUBJECT TO PLAN

2.1. Shares Subject to Plan. The shares of stock subject to Awards shall be
shares of Blackhawk common stock, par value $0.001 per share. The aggregate
number of such shares which may be transferred pursuant to Awards under the Plan
shall not exceed Two Million Five Hundred Thousand (2,500,000). The shares of
Common Stock to be transferred in connection with an Award shall consist of
shares of issued and outstanding Common Stock held by the Company.

2.2. Add-back of Certain Shares. Shares of Common Stock which are delivered by
the Holder in payment of the tax withholding with respect to any Award may again
be granted hereunder, subject to the limitations of Section 2.1. If any shares
of Restricted Stock are repurchased by the Company pursuant to Section 3.5, such
shares may again be granted hereunder, subject to the limitations of
Section 2.1.

ARTICLE III.

AWARD OF RESTRICTED STOCK

3.1. Eligibility. Restricted Stock may be granted to any Employee who the
Administrator determines should receive such an Award.

3.2. Award of Restricted Stock

(a) The Administrator may from time to time, in its absolute discretion:

(i) Select from among the Employees (including Employees who have previously
received other Awards under the Plan) such of them as in its opinion should be
granted Restricted Stock; and

(ii) Determine the purchase price, if any, and other terms and conditions
applicable to such Restricted Stock, consistent with the Plan.

(b) The Administrator shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law. In all cases, legal consideration
shall be required for each issuance of Restricted Stock.

3.3. Award Agreement. Each Award shall be evidenced by an Award Agreement. The
Award Agreement evidencing an Award shall contain such terms, provisions and
conditions not inconsistent with the Plan as may be determined by the
Administrator in its discretion.

3.4. Restriction. All shares of Restricted Stock (including any shares received
by holders thereof with respect to shares of Restricted Stock as a result of
stock dividends, stock splits or any other form of recapitalization) shall, in
the terms of each individual Award Agreement, be

 

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subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company or any Subsidiary, Blackhawk performance, Company performance and
individual performance; provided, however, that, by action taken after the
Restricted Stock is transferred to a Holder, the Administrator may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Award Agreement. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.

3.5. Repurchase of Restricted Stock. The Administrator may provide in the terms
of each individual Award Agreement that the Company shall have the right to
repurchase from the Holder the Restricted Stock then subject to restrictions
under the Award Agreement at the time of such Holder’s Termination of
Employment, at a price per share equal to the lesser of (i) the price paid by
the Holder for such Restricted Stock or (ii) the then current Fair Market Value
of such Restricted Stock, as determined by the Administrator in good faith. The
repurchase price for any such shares of Restricted Stock shall be paid in cash
(or cash equivalent).

3.6. Stockholders’ Agreement. Except as otherwise provided by the Administrator,
all shares of Restricted Stock shall be subject to the Stockholders’ Agreement.
As a condition of acquiring Restricted Stock, the Administrator may require a
Holder to execute, deliver and deposit with the Secretary of the Company, or
such other person designated by the Administrator, the Stockholders’ Agreement.

3.7. Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
Common Stock transferred to a Holder pursuant to an Award prior to fulfillment
of all of the following conditions:

(a) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax; or

(b) Holder’s execution of such documentation (if any) as the Administrator may
deem necessary or advisable to evidence Holder’s agreement to be bound by the
terms of the Stockholders’ Agreement with respect to the such shares.

(c) The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed (if any);

(d) The completion of any registration or other qualification of such shares
under any state or federal law, or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body
which the Administrator shall, in its absolute discretion, deem necessary or
advisable;

(e) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its absolute discretion,
determine to be necessary or advisable; and

(f) The lapse of such reasonable period of time (as may be established by the

 

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Administrator from time to time for reasons of administrative convenience)
following execution of an Award Agreement and such other documentation as the
Administrator may require consistent with the terms of the Plan (including,
without limitation, any investment representation letter required pursuant to
Section 3.8).

3.8. Investment Intent. As a condition of acquiring Common Stock under the Plan,
the Administrator may require a Holder to give written assurances satisfactory
to the Company as to (i) the Holder’s knowledge and experience in financial and
business matters, (ii) the Holder’s capability of evaluating, alone or together
with a professional advisor employed by the Holder, the merits and risks of
acquiring such Common Stock, and (iii) the Holder’s investment intent (and
intent to acquire the Common Stock for the Holder’s own account and not with any
present intention of selling or otherwise distributing the Common Stock). In the
event the services of a professional advisor are necessary to provide the
foregoing written assurances, the professional advisor shall be unaffiliated
with Blackhawk or any of its affiliates or the Company or any of its affiliates,
and shall be knowledgeable and experienced in financial and business matters.
The Holder alone shall be responsible for the cost of employing any professional
advisor. The requirements of this Section 3.8 shall be inoperative if the shares
to be transferred to the Holder have been registered under a then currently
effective registration statement under the Securities Act, or as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.

3.9. Escrow. The Secretary of the Company or such other escrow holder as the
Administrator may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.

3.10. Rights as Stockholders. Subject to Section 3.4, upon delivery of the
shares of Restricted Stock to the Holder, or to the escrow holder pursuant to
Section 3.9, as applicable, the Holder shall have, unless otherwise provided by
the Administrator, all the rights of a stockholder with respect to said shares,
subject to the restrictions, if any, in his or her Award Agreement and the
Stockholders’ Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Administrator, any dividends or other distributions
with respect to the Common Stock shall be subject to the restrictions imposed
pursuant to Sections 3.4 and 3.5.

3.11. Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Administrator shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.

3.12. Section 83(b) Election. If a Holder makes an election under Section 83(b)
of the Code, or any successor section thereto, to be taxed with respect to the
Restricted Stock as of the date of transfer of the Restricted Stock rather than
as of the date or dates upon which the Holder would otherwise be taxable under
Section 83(a) of the Code, the Holder shall deliver a copy of such

 

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election to the Company immediately after filing such election with the Internal
Revenue Service.

ARTICLE IV.

ADMINISTRATION

4.1. Administrator. The Plan shall initially be administered by the Executive
Compensation Committee; provided, however, that the Board, in its absolute
discretion, may at any time and from time to time terminate the administrative
authority of the Executive Compensation Committee and exercise any and all
rights and duties of the Executive Compensation Committee under the Plan. The
Executive Compensation Committee may delegate administration of the Plan to a
committee or committees of one or more members of the Board, and the term
“Committee” shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Executive Compensation Committee, including the power to
delegate to a subcommittee any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Executive
Compensation Committee shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Executive Compensation
Committee. Within the scope of such authority, the Executive Compensation
Committee or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Awards under the Plan to eligible Employees.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Executive Compensation Committee may only
be filled by the Board.

4.2. Powers of the Administrator. Subject to the provisions of the Plan and the
specific duties delegated to any Committee, and subject to the approval of any
relevant authorities, the Administrator shall have the authority in its
discretion:

(a) to determine the Fair Market Value of the Common Stock for all purposes of
the Plan or any Award granted hereunder;

(b) to select the Employee to whom Awards may from time to time be granted
hereunder;

(c) to determine the number of shares of Common Stock to be covered by each
Award granted hereunder, subject to the limitations of Section 2.1 above;

(d) to approve forms of agreement for use under the Plan;

(e) to determine the terms and conditions of any Awards granted hereunder (such
terms and conditions include, but are not limited to, the purchase price to be
paid, the time or times when Award may vest (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any

 

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Award or the Common Stock relating thereto, based in each case on such factors
as the Administrator, in its discretion, shall determine);

(f) to prescribe, amend and rescind rules and regulations relating to the Plan;

(g) to allow Holders to satisfy withholding tax obligations by electing to have
the Company withhold shares of Common Stock otherwise subject to an Award, or to
allow the repurchase of shares of Common Stock by the Company, having a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such obligations based on the minimum amount required to be withheld
using the statutory withholding rates for federal, state, local and foreign
income tax and payroll tax purposes that are applicable to such supplemental
taxable income. The Fair Market Value of the shares of Common Stock to be
withheld or repurchased shall be determined on the date that the amount of tax
to be withheld is to be determined. All elections by Holders to have shares of
Common Stock withheld or repurchased for this purpose shall be made in such form
and under such conditions as the Administrator may deem necessary or advisable;

(h) to amend the Plan or any Award granted under the Plan as provided in
Section 5.2; and

(i) to construe and interpret the terms of the Plan and Awards granted pursuant
to the Plan and to exercise such powers and perform such acts as the
Administrator deems necessary or desirable to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

4.3. Majority Rule; Unanimous Written Consent. The Administrator shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Board or Committee, as applicable.

4.4. Compensation; Professional Assistance; Good Faith Actions. Members of the
Board or Committee shall receive such compensation, if any, for their services
as members as may be determined by the Board. All expenses and liabilities which
members of the Board or Committee incur in connection with the administration of
the Plan shall be borne by the Company. The Administrator may employ attorneys,
consultants, accountants, appraisers, brokers, or other persons. The
Administrator, the Company and the Company’s officers and members of the Board
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Holders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

 

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ARTICLE V.

MISCELLANEOUS PROVISIONS

 

5.1. Not Transferable.

(a) No Award under the Plan, or the shares underlying such Award, may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or the laws of descent and distribution, unless and until the
shares underlying such Award have been issued, and all restrictions applicable
to such shares have lapsed. No Award or interest or right therein shall be
liable for the debts, contracts or engagements of the Holder or his or her
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.

5.2. Amendment, Suspension or Termination of the Plan. Except as otherwise
provided in this Section 5.2, the Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Executive Compensation Committee or the Board. No amendment, suspension or
termination of the Plan shall, without the consent of the Holder alter or impair
any rights or obligations under any Award theretofore granted, unless the Award
itself otherwise expressly so provides. No Awards may be granted during any
period of suspension or after termination of the Plan, and in no event may any
Awards be granted under the Plan after the expiration of ten years from the date
the Plan is adopted by the Executive Compensation Committee.

5.3. Changes in Common Stock or Assets of Blackhawk, Acquisition or Liquidation
of the Blackhawk and Other Corporate Events.

(a) In the event that the Administrator determines that any dividend or other
distribution (whether in the form of cash, Common Stock, other securities, or
other property), recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of Blackhawk, or exchange
of Common Stock or other securities of Blackhawk, issuance of warrants or other
rights to purchase Common Stock or other securities of Blackhawk, or other
similar corporate transaction or event, in the Administrator’s discretion,
affects the Common Stock such that an adjustment is determined by the
Administrator to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or with respect to an Award, then the Administrator shall, in such manner as it
may deem equitable, adjust any or all of

(i) the number and kind of shares of Common Stock (or other securities or
property) with respect to which Awards may be granted (including, but not
limited to,

 

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adjustments of the limitation in Section 2.1 on the maximum number and kind of
shares which may be issued); and

(ii) the number and kind of shares of Common Stock (or other securities or
property) subject to outstanding Awards.

(b) In the event of any transaction or event described in Section 5.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Administrator, in its discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event and either
automatically or upon the Holder’s request, is hereby authorized to take any one
or more of the following actions whenever the Administrator determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under the Plan, to facilitate such transactions or
events, or to give effect to such changes in laws, regulations or principles:

(i) To provide for either the purchase of any such Award or shares of Common
Stock issued thereunder for an amount of cash equal to the amount that could
have been attained upon the realization of the Holder’s rights had such Award
been fully vested or the replacement of such Award with other rights or property
selected by the Administrator in its discretion;

(ii) To provide that some or all shares of Restricted Stock may cease to be
subject to repurchase under Section 3.5, or such other restrictions as may be
imposed under Section 3.4, after such event;

(iii) To provide that the Award cannot vest after such event;

(iv) To provide that the Company’s repurchase rights may be assigned to the
successor or survivor corporation, or a parent or subsidiary thereof, or
otherwise continued in effect;

(v) To provide that such Award shall be substituted for by similar awards
covering the stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices; and

(vi) To make adjustments in the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Awards, or Awards which may
be granted in the future.

(c) The Administrator may, in its discretion, include such further provisions
and limitations in any Award, agreement or certificate, as it may deem equitable
and in the best interests of the Company.

(d) The existence of the Plan, the Award Agreement and the Awards granted
hereunder shall not affect or restrict in any way the right or power of the
Company or Blackhawk

 

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or the stockholders of the Company or Blackhawk to make or authorize any
adjustment, recapitalization, reorganization or other change in capital
structure or business of the Company or Blackhawk, any merger or consolidation
of the Company or Blackhawk, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or the rights
thereof or which are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company or Blackhawk, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

5.4. Tax Withholding. The Company shall be entitled to require payment in cash
or deduction from other compensation payable to each Holder of any sums required
by federal, state or local tax law to be withheld with respect to the grant,
transfer or vesting of any Award or shares of Restricted Stock subject thereto.
The Administrator may in its discretion and in satisfaction of the foregoing
requirement allow such Holder to elect to have the Company withhold shares of
Common Stock otherwise issuable under such Award (or allow the return of shares
of Common Stock) having a Fair Market Value equal to the sums required to be
withheld. Notwithstanding any other provision of the Plan, the number of shares
of Common Stock which may be withheld with respect to the transfer, vesting, or
payment of any Award (or which may be repurchased from the Holder of such Award
within six months after such shares of Common Stock were acquired by the Holder
from the Company) in order to satisfy the Holder’s federal, state and local
income tax and payroll tax liabilities with respect to the transfer, vesting, or
payment of the Award shall be limited to the number of shares which have a Fair
Market Value on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory withholding rates for
federal, state and local income tax and payroll tax purposes that are applicable
to such supplemental taxable income.

5.5. At-Will Employment. Nothing in the Plan or in any Award Agreement hereunder
shall confer upon any Holder any right to continue in the employ of the Company
or any Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company or any Subsidiary, which rights
are hereby expressly reserved, to discharge any Holder at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in a written agreement between the Holder and the Company or
any Subsidiary.

5.6. Effect of Plan Upon Options and Compensation Plans. The adoption of the
Plan shall not affect any other compensation or incentive plans in effect for
the Company or any Subsidiary. Nothing in the Plan shall be construed to limit
the right of the Company (a) to establish any other forms of incentives or
compensation for Employees or other service providers of the Company or any
Subsidiary or (b) to grant or assume options or other rights or awards in
connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

5.7. Compliance with Laws. The Plan, the granting and vesting of Awards under
the Plan and the transfer and delivery of shares of Common Stock and the payment
of money under the Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and

 

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state laws, rules and regulations and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted hereunder shall
be deemed amended to the extent necessary to conform to such laws, rules and
regulations.

5.8. Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Plan.

5.9. Governing Law. The Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of Arizona without
regard to conflicts of laws thereof.

* * *

I hereby certify that the foregoing Plan was duly adopted by the Compensation
Committee of the Board of Directors of Safeway Inc. on February 22, 2006.

Executed on this 24 day of February, 2006

 

Safeway Inc.

By:

 

/S/    ROBERT A. GORDON

Title:

 

Senior Vice President, Secretary and General Counsel

 

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