Document:

exv10w5

EXHIBIT 10.5

SUPERVALU INC.

2007 STOCK PLAN

STOCK APPRECIATION RIGHTS AGREEMENT

     This STOCK APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into as of
[Grant Date], which is the grant date (the “Grant Date”), by and between SUPERVALU INC., a Delaware
corporation (the “Company”) and [Name], the individual whose name appears below (“Executive”).

     The Company has established the 2007 Stock Plan (the “Plan”), under which key employees of the
Company and its Affiliates may be granted stock appreciation rights. Executive has been selected by
the Company to receive stock appreciation rights subject to the provisions of this Agreement and
the Plan. Capitalized terms that are used in this Agreement, that are not defined, shall have the
meanings ascribed to them in the Plan. See Section 18 for a list of defined terms.

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

1. Grant of Stock Appreciation Rights; Term. The Company hereby grants Executive the stock
appreciation rights (the “SAR”) with respect to [Shares] shares (the “Shares”) of Common Stock of
the Company. The grant price of the SAR is [Grant Price] per share (the “Grant Price”). The SAR is
subject to the terms and conditions set forth in this Agreement, and the terms and provisions of
the Plan. To accept the SAR, this Agreement must be delivered and accepted through an electronic
medium in accordance with procedures established by the Company or Executive must sign and return a
copy of this Agreement to the Company within sixty (60) days after the Grant Date. By so
doing, Executive acknowledges receipt of this Agreement and the Plan, and represents that he or she
has read and understands the same and agrees to be bound by this Agreement and terms and provisions
of the Plan. A copy of the Plan is available upon Executive’s request. In the event that any
provision of this Agreement 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 shall be determined by the Committee administering the Plan, and such
determination shall be final, conclusive and binding upon all parties in interest.

     The term of the SAR shall be for a period of seven (7) years from the Grant Date and shall
terminate at the close of business on the seventh anniversary of the Grant Date (the “Expiration
Date”) or such shorter period as provided for herein.

2. Vesting; Exercisability; Transferability.

	 	a)	 	Except as otherwise provided in this Agreement:

	 	i)	 	twenty-five percent (25%) of the SAR shall vest in four (4) equal annual
installments on each of the first four anniversaries of the Grant Date; and
	 
	 	ii)	 	the vested portion of the SAR may be exercised in whole or part at any time
prior to the Expiration Date.

	 	b)	 	Unless otherwise determined by the Committee, the SAR shall not be transferable other
than by will or the laws of descent and distribution. More particularly, the SAR 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 SAR
contrary to these provisions, or the levy of any execution, attachment or similar process
upon the SAR, shall be void.

 

 

3. Effect of Termination of Employment. Following the termination of Executive’s employment with
the Company or an Affiliate for any of the reasons set forth below, Executive’s right to exercise
the SAR, as well as that of Executive’s beneficiary or beneficiaries, shall be as follows:

	 	a)	 	Voluntary or Involuntary. If Executive’s employment is terminated voluntarily
or involuntarily for any reason other than retirement, death or permanent disability,
Executive may exercise the SAR prior to the Expiration Date, at any time within a period of
up to one (1) year after such termination of employment, to the full extent of the
portion of the SAR which was vested as of the date of termination of Executive’s
employment. However, the Committee may, in its sole and absolute discretion, except in the
case of the termination of Executive’s employment following the occurrence of a Change in
Control (as described in Section 4), during a period of seventy-five (75) days after such
termination of employment and following ten (10) days’ written notice to Executive, reduce
the period of time during which the SAR may be exercised to any period of time designated
by the Committee, provided such period is not less than ninety (90) days following
termination of Executive’s employment.
	 
	 	b)	 	Retirement. Executive shall be deemed to have retired, solely for purposes of
this Agreement, in the event that Executive’s employment terminates for any reason other
than death or disability and Executive is at least 55 years of age.

	 	i)	 	If Executive retires and Executive has completed ten (10) or more years of
service with the Company or an Affiliate, the unvested portion of the SAR shall
immediately vest in full. Thereafter, Executive may exercise the SAR at any time prior
to the Expiration Date, to the full extent to which the SAR was not previously
exercised.
	 
	 	ii)	 	If Executive retires and Executive has completed less than ten (10) years of
service with the Company or an Affiliate, Executive may exercise the SAR prior to the
Expiration Date, at any time within a period of up to one (1) year after the
date of Executive’s retirement, to the full extent of the portion of the SAR which was
vested as of the date of Executive’s retirement.

	 	c)	 	Death Prior to Age 55. If Executive’s death occurs before Executive attains the
age of fifty-five (55), while Executive is employed by the Company or an Affiliate, or
within three (3) months after the termination of Executive’s employment, the unvested
portion of the SAR shall immediately vest in full. Thereafter, the SAR may be exercised
prior to the Expiration Date, by Executive’s beneficiary(ies), or a legatee(s) under
Executive’s last will, or Executive’s personal representative(s) or the distributee(s) of
Executive’s estate, to the full extent to which the SAR was not previously exercised:

	 	i)	 	At any time within a period of up to one (1) year after Executive’s
death if Executive’s death occurs while Executive is employed, or
	 
	 	ii)	 	At any time within a period of up to one (1) year following the
termination of Executive’s employment if Executive’s death occurs within three
(3) months of termination of Executive’s employment.

	 	d)	 	Death After Age 55. If Executive’s death occurs after Executive attains the age
of fifty-five (55), while Executive is employed by the Company or an Affiliate, or within
three (3) months after the termination of Executive’s employment, the unvested portion of
the SAR shall immediately vest in full. Thereafter, the SAR may be exercised prior to the
Expiration Date, by Executive’s beneficiary(ies), or a legatee(s) under Executive’s last
will, or Executive’s personal representative(s) or the distributee(s) of Executive’s
estate, to the full extent to which the SAR was not previously exercised:

	 	i)	 	At any time, if Executive has completed ten (10) or more years of service with
the Company or an Affiliate; or
	 
	 	ii)	 	If Executive has completed less than ten (10) years of service with the Company
or an Affiliate, then at any time within a period of up to one (1) year after
the date of Executive’s

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	 	 	 	death if such occurs while Executive is employed, or within a period of up to one
(1) year after the date of termination of Executive’s employment if Executive’s
death occurs within three (3) months of termination of Executive’s employment.

	 	e)	 	Disability Prior to Age 55. If Executive’s employment terminates before
Executive attains the age of fifty-five (55), as a result of a permanent disability, the
unvested portion of the SAR shall immediately vest in full. Thereafter, the SAR may be
exercised prior to the Expiration Date, by Executive or by Executive’s personal
representative(s), at any time within a period of up to one (1) year after
Executive’s employment terminates due to such permanent disability, to the full extent to
which the SAR was not previously exercised.
	 
	 	 	 	Executive shall be considered permanently disabled if Executive suffers from a medically
determinable physical or mental impairment that renders Executive incapable of performing
any substantial gainful employment, and is evidenced by a certification to such effect by a
doctor of medicine approved by the Company. In lieu of such certification, the Company shall
accept, as proof of permanent disability, Executive’s eligibility for long-term disability
payments under the applicable Long-Term Disability Plan of the Company.
	 
	 	f)	 	Disability After Age 55. If Executive’s employment terminates as a result of a
permanent disability after Executive attains the age of fifty-five (55), the unvested
portion of the SAR shall immediately vest in full. Thereafter, the SAR may be exercised
prior to the Expiration Date, by Executive or by Executive’s personal representative(s), to
the full extent to which the SAR was not previously exercised:

	 	i)	 	At any time, if Executive has completed ten (10) or more years of service with
the Company or an Affiliate; or
	 
	 	ii)	 	If Executive has completed less than ten (10) years of service with the Company
or an Affiliate, then at any time within a period of one (1) year after
Executive’s employment terminates due to such permanent disability.

	 	 	 	Executive shall be considered permanently disabled if Executive suffers from a medically
determinable physical or mental impairment that renders Executive incapable of performing
any substantial gainful employment, and is evidenced by a certification to such effect by a
doctor of medicine approved by the Company. In lieu of such certification, the Company shall
accept, as proof of permanent disability, Executive’s eligibility for long-term disability
payments under the applicable Long-Term Disability Plan of the Company.
	 
	 	g)	 	Change in Duties/Leave of Absence. The SAR shall not be affected by any change
of Executive’s duties or position or by a temporary leave of absence approved by the
Company, so long as Executive continues to be an employee of the Company or of an
Affiliate.

4. Change in Control.

	 	a)	 	If, within two years after a Change in 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 SAR shall
immediately vest and the SAR shall become immediately exercisable in full and remain
exercisable for one (1) year beginning on the date of your termination of
employment. If the SAR is replaced pursuant to subsection (d) below, the protections and
rights granted under this subsection (a) shall transfer and apply to such replacement SAR.
	 
	 	b)	 	If, in the event of a Change in Control, and to the extent the SAR 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 value of the SAR at the time of the Change in Control, then the
unvested portion of the SAR shall immediately vest and the SAR shall become immediately
exercisable in full upon the Change in Control.

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	 	c)	 	In the discretion of the Committee and notwithstanding subsection (b) above or any
other provision, the SAR (whether or not exercisable) may be cancelled at the time of the
Change in 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 in Control by the holders of Common
Stock, over the Grant Price for the SAR.
	 
	 	 	 	For purposes of clarification, by operation of this provision SARs that would not yield a
gain at the time of the Change in Control under the aforementioned equation are subject to
cancellation without consideration. Furthermore, the Committee is under no obligation to
treat SARs and/or holders of SARs uniformly and has the discretionary authority to treat
SARs and/or holders of SARs disparately. 
	 
	 	d)	 	If in the event of a Change in Control and to the extent that this SAR 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
value of this SAR at the time of the Change in 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 SAR, then the assumed SAR or such substitute therefor shall remain
outstanding and be governed by its respective terms. 

5. Company Rights. If Executive exercises the SAR within six (6) months prior to or three
(3) months after the date Executive’s employment with the Company or an Affiliate terminates for
Cause or if Executive breaches any of the covenants contained in Section 6 below, Executive must
repay to the Company the amount paid by the Company to Executive pursuant to Section 7(b) hereof as
a result of the exercise of the SAR granted hereunder as more particularly described in the
following paragraph.

     The Company may exercise its rights by depositing in the United States mail a written notice
addressed to Executive at the latest mailing address for Executive on the records of the Company
(a) within thirty (30) days following the termination of Executive’s employment for the repayment
of the income realized prior to such termination, or (b) within thirty (30) days after any exercise
of the SAR after Executive’s termination of employment. Within thirty (30) days after the mailing
of such notice, Executive must repay to the Company the amount paid by the Company to Executive
pursuant to Section 7(b) hereof as a result of the exercise of the SAR granted hereunder.

     Following the occurrence of a Change in Control, the Company shall have no right to exercise
its rights as set forth in this Section 5.

6. Covenants. In consideration of benefits described elsewhere in this Agreement, and in
recognition of the fact that, as a result of Executive’s employment with the Company or any of its
Affiliates, Executive has 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, Executive agrees for the
benefit of the Company and its Affiliates, and as a material condition to Executive’s receipt of
benefits described elsewhere in this Agreement, as follows:

	 	a)	 	Non-Disclosure of Confidential Information. Executive acknowledges that
Executive 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 Executive’s possession of this special
knowledge is due solely to Executive’s employment with the Company or one or more of its
Affiliates. In recognition of the foregoing, Executive will not at any time during
employment or following termination of

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	 	 	 	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 Executive’s 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 Executive’s 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, Executive 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
Executive’s possession. Executive acknowledges and agrees that all such materials are the
sole property of the Company or its Affiliates and that Executive will certify in writing
to the Company at the time of delivery, whether upon termination or otherwise, that
Executive has complied with this obligation.
	 
	 	c)	 	Non-Solicitation of Existing or Prospective Customers, Vendors and Suppliers.
Executive specifically acknowledges that the Confidential Information described in
Section 6(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 Executive’s
employment with the Company or any of its Affiliates and for the twelve (12) months
following termination of employment for any reason, Executive agrees that Executive 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 Executive’s 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 Executive had contact or about whom Executive gained Confidential
Information during Executive’s 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 6(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. Executive specifically acknowledges that the
Confidential Information described in Section 6(a) also includes confidential data
pertaining to employees and agents of the Company or its Affiliates, and Executive further
agrees that during Executive’s employment with the Company or its Affiliates and for the
twelve (12) months following termination of employment for any reason, Executive will not,
directly or indirectly, on Executive’s 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. Executive covenants and agrees that during Executive’s
employment with the Company or any of its Affiliates and for the twelve (12) months
following termination of employment for any reason, Executive will not, in any geographic
market in which Executive

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	 	 	 	worked on behalf of the Company or any of its Affiliates, or for which Executive 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. This Section 6(e) shall not apply in the event of a Change in Control as
described in Section 4 above.

	 	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 Executive by the Company or its Affiliates at any time during
Executive’s 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. Executive agrees that Executive 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 6 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 Executive
consents 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 Company or any of its Affiliates for any breach by Executive of this
Section 6, Executive further agrees that the Company or such Affiliate shall be entitled to
recover its costs and attorneys’ fees necessary to obtain such recovery. In addition,
Executive agrees that upon Executive’s breach of any covenant in this Section 6, the SAR,
and any other unexercised stock appreciation rights issued under the Plan or any other plan
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 5.
	 
	 	(h)	 	Enforceability of These Covenants. It is further agreed and understood by
Executive and the Company that if any part, term or provision of this Agreement 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 this Agreement shall not be affected or
impaired in any way.

7. Manner of Exercise; Method of Payment; Withholding Taxes.

	 	a)	 	Except as provided in Section 3, Executive cannot exercise the SAR unless at the time
of exercise Executive is an employee of the Company or an Affiliate. Prior to Executive’s
death, only Executive may exercise the SAR. The SAR may be exercised by delivery to the
Company at its principal office, attention: Corporate Secretary, of a written notice which
shall state that Executive elects to exercise the SAR as to the number of Shares specified
in the notice as of the date specified in the notice.

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	 	 	 	In the event the SAR is exercised by any person other than Executive pursuant to any of the
provisions of Section 3 hereof, the notice of exercise must be accompanied by appropriate
proof of such person’s right to exercise the SAR.
	 
	 	b)	 	The per Share amount payable to Executive in cash upon exercise of the SAR shall be the
excess, if any, of the Fair Market Value of one Share, on the date of exercise, over the
Grant Price, and shall be payable only in cash and not in any Shares of Common Stock. The
Company shall pay Executive the amount due upon exercise of the SAR as soon as
administratively practicable after exercise, except that the Company shall withhold or
collect from Executive such amounts as are required to be withheld or collected by the
Company under any applicable federal, state, local or other tax laws or regulations for
payroll withholding, income or other tax purposes.

8. Arbitration. You and the Company agree that any controversy, claim or dispute arising out of or
relating to this Agreement or the breach of this Agreement, 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 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 6 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 8 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 6. The agreement to arbitrate shall continue in full force and
effect despite the expiration or termination of your SAR 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.

9. 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 SAR 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 this
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 SAR and the Grant Price of the SAR.

10. Severability. In the event that any portion of this Agreement shall be held to be invalid, the
same shall not affect in any respect whatsoever the validity and enforceability of the remainder of
this Agreement.

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

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12. Headings. Headings are given to the sections and subsections of this 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 this Agreement or any provision hereof.

13. 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 this Agreement.

14. No Rights of Stockholders. Neither Executive, Executive’s legal representative nor a
permissible assignee of this SAR shall have any of the rights and privileges of a stockholder of
the Company with respect to the Shares.

15. No Trust or Fund Created. Neither the Plan nor this Agreement shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between the Company or any
Affiliate and Executive or any other person.

16. Consultation With Professional Tax and Investment Advisors. The holder of the SAR acknowledges
that the grant, exercise, vesting or any payment with respect to the SAR may have tax consequences
pursuant to the Code or under local, state, federal or international tax laws. The holder further
acknowledges that such holder is relying solely and exclusively on the holder’s own professional
tax and investment advisors with respect to any and all such matters (and is not relying, in any
manner, on the Company or any of its employees or representatives). Finally, the holder understands
and agrees that any and all tax consequences resulting from the SAR and its grant, exercise,
vesting or any payment with respect thereto is solely and exclusively the responsibility of the
holder without any expectation or understanding that the Company or any of its employees or
representatives will pay or reimburse such holder for such taxes or other items.

17. Notice. For purpose of this Agreement, notices and all other communications provided for in
this Agreement or contemplated hereby shall be in writing and shall be deemed to have 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. 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 six (6) months 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.

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18. Definitions. The following terms, and terms derived from the following terms, shall have the
following meanings when used in the 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 17(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.

	 	b)	 	Change in 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 twenty percent (20%) or
more 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 in 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 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;
	 
	 	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

9

 

	 	 	 	director was not nominated by a person who has expressed an intent to effect a Change in
Control or engage in a proxy or other control contest); or
	 
	 	iv)	 	such other event or transaction as the Board shall determine constitutes a
Change in Control.

	 	c)	 	CIC Date shall mean the date on which a Change in Control occurs.
	 
	 	d)	 	Good Reason shall mean any one or more of the following events occurring during the
two-year period following the CIC Date:

	 	i)	 	your annual base salary is reduced below the higher of (A) the amount in effect
on the CIC Date or (B) the highest amount in effect at any time thereafter;
	 
	 	ii)	 	your Target Bonus is reduced below the Target Bonus as it existed before the
CIC Date;
	 
	 	iii)	 	your duties and responsibilities or the program of incentive compensation
(including without limitation long term incentive plans and equity incentive programs),
vacation, fringe benefits, perquisites, retirement and general insurance benefits
offered to your are materially and adversely diminished in comparison to the duties and
responsibilities or the program of such benefits enjoyed by you on the CIC Date; or
	 
	 	iv)	 	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 CIC Date or your
business travel obligations are significantly increased over those in effect
immediately prior to the CIC 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 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 this Agreement 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.

     IN WITNESS WHEREOF, the Company and Executive have executed this Agreement on the date set
forth in the first paragraph hereof.

	 	 	 	 	 
	 	COMPANY:

SUPERVALU INC.

 
	 	By:
	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EXECUTIVE:
 	 

	 	 	 	 	 
	 	 
	 
	 	Name: 	[Name] 	 
	 	Title: 	[Title] 	 
	 

10exv10w6

EXHIBIT 10.6

SUPERVALU INC.

LONG-TERM INCENTIVE PROGRAM

FOR THE [                    ] PERFORMANCE CYCLE

UNDER THE 2007 STOCK PLAN

PERFORMANCE STOCK UNIT AWARD

AGREEMENT (COMMON STOCK SETTLED)

     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
(“Recipient”).

     The Company has established the Long-Term Incentive Program for the [                    ] Performance Cycle
under the 2007 Stock Plan (the “Plan”), under which key employees of the Company may be granted
Awards of Performance Stock Units of the Company. Recipient has been selected by the Company to
receive an Award of Performance Stock Units 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 Recipient hereby agree as follows:

     1. Grant. The Company hereby grants to Recipient, subject to Recipient’s acceptance
hereof, an Award of Performance Stock Units for the number of Performance Stock Units indicated
below, effective as of the Grant Date.

     2. Acceptance of Award of Performance Stock Units and Performance Stock Unit Award Terms
and Conditions. The Award of Performance Stock Units is subject to and governed by the
Performance Stock Unit Award 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 Award of Performance Stock Units, this agreement must be delivered and accepted through an
electronic medium in accordance with procedures established by the Company or Recipient must sign
and return a copy of this agreement to the Company. By so doing, Recipient acknowledges receipt of
the accompanying Terms and Conditions and the Plan, and represents that Recipient 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. Earning and Vesting of Performance Stock Units. Subject to the accompanying Terms
and Conditions, the number of Performance Stock Units that shall be earned by Recipient under the
Award of Performance Stock Units shall be determined in [Month/Year] in accordance with Exhibit
A attached hereto, which is incorporated herein and made a part hereof. All such Performance
Stock Units shall vest upon earning. Upon the earning and vesting of the Performance Stock Units,
Recipient shall receive a grant of Common Stock, as more particularly described in the accompanying
Terms and Conditions.

     Grant Date:

     Number of Performance Stock Units Awarded:

	 	 	 	 	 
	SUPERVALU INC. 

 	 	RECIPIENT: 
	By:  	 	 	 
	 	David E. Pylipow 	 	 
	 	Executive Vice President, Human Resources

and Communications                                	 	SS#

 

 

SUPERVALU INC.

LONG-TERM INCENTIVE PROGRAM

FOR THE [                    ] PERFORMANCE CYCLE

UNDER THE 2007 STOCK PLAN

PERFORMANCE STOCK UNIT AWARD

TERMS AND CONDITIONS (STOCK SETTLED)

These Performance Stock Unit Award Terms and Conditions (“Terms and Conditions”) apply to the Award
of Performance Stock Units granted pursuant to the Long-Term
Incentive Program for the [___] Performance Cycle under the 2007 Stock Plan (the “Plan”), pursuant to the Performance Stock Unit
Award 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 19 for a list of defined terms.

1. Award of Performance Stock Units. SUPERVALU INC. (the “Company”) hereby grants to you an Award
of Performance Stock Units for the number of Performance Stock Units set forth in the attached
Agreement. The Award is effective as of the Grant Date. Each Performance Stock Unit represents
the right to receive a grant of Shares of the Company’s common stock, $1.00 par value (the “Common
Stock”), equal to the number of Performance Stock Units that you earn in accordance with Section 3,
Section 4 or Section 5 hereof, subject to these Terms and Conditions.

2. Rights with Respect to the Performance Stock Units. The Performance Stock Units granted
pursuant to the attached Agreement do not and shall not give you any of the rights and privileges
of a holder of Common Stock. Your rights with respect to the Performance Stock Units shall remain
forfeitable at all times prior to the date on which such rights become earned and vested and the
restrictions with respect thereto lapse in accordance with Section 3 or Section 4 hereof.

3. Earning and Vesting of Performance Stock Units. The number of the Performance Stock Units that
you earn shall be determined in April [                    ] by the Committee administering the Plan as more
particularly described in Exhibit A to the attached Agreement or as otherwise expressly
provided in these Terms and Conditions. All such Performance Stock Units shall vest upon earning.

4. Change in Control.

	 	a)	 	If, within two (2) years after a Change in 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, then you shall become immediately and
unconditionally vested in all the Performance Stock Units and the restrictions with respect
to all the Performance Stock Units shall lapse and the Performance Stock Units shall be
settled and paid to you as soon as administratively feasible following your termination of
employment but in no event later than March 15 of the year following the year of your
termination of employment. If the Award of Performance Stock Units is replaced pursuant to
subsection (c) below, the protections and rights granted under this subsection (a) shall
transfer and apply to such replacement grant.
	 
	 	b)	 	If, in the event of a Change in Control, and to the extent the Award of Performance
Stock Units 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 value of the Award of
Performance Stock Units at the time of the Change in Control, then you shall become
immediately and unconditionally vested in all the Performance Stock Units and the
restrictions with respect to all the Performance Stock Units shall lapse and the
Performance Stock Units shall be settled and paid to you as soon as administratively
feasible after the Change in Control but in no event later than March 15 of the year
following the year of the Change in Control.
	 
	 	c)	 	If in the event of a Change in Control and to the extent that this Award of Performance
Stock Units is assumed by any successor corporation, affiliate thereof, person or other
entity, or are replaced with awards that, solely in the discretionary judgment of the
Committee preserve the existing value of this Award of Performance Stock Units at the time
of the Change in Control and provide for vesting, settlement terms and performance goals
that are at least as favorable to you as the vesting and payout terms applicable to this
Award of Performance Stock Units, then the

 

 

	 	 	 	assumed Award of Performance Stock Units or such substitute therefor shall remain
outstanding and be governed by its respective terms. 

5. Forfeiture. If you cease to be an employee of the Company or any of its Affiliates prior to
the earning and vesting of the Performance Stock Units pursuant to Section 3 or Section 4 hereof
for any reason, then your rights to all of the Performance Stock Units shall be immediately and
irrevocably forfeited. However, the Committee administering the Plan may determine to accelerate
the earning and vesting of the Performance Stock Units if you cease to be an employee of the
Company or any of its Affiliates prior to the earning and vesting of the Performance Stock Units
pursuant to Section 3 or Section 4 hereof for any reason.

6. Restrictions on Transfer. Except as may otherwise be determined by the Committee administering
the Plan, none of the Performance Stock Units may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of or encumbered by you, and no attempt to transfer the
Performance Stock Units, whether voluntary or involuntary, by operation of law or otherwise, shall
vest the transferee with any interest or right in or with respect to the Performance Stock Units.

7. Issuance. No shares of Common Stock shall be issued to you prior to the date on which the
applicable Performance Stock Units vest, in accordance with these Terms and Conditions and the
attached Agreement. Furthermore, in no event shall any shares of Common Stock be issued to you
later than sixty (60) calendar days after the applicable Performance Stock Units vested. After any
Performance Stock Units vest pursuant to Section 3 or Section 4 hereof, and following payment of
the applicable withholding taxes pursuant to Section 8 hereof, the Company shall promptly cause one
share of Common Stock for each such vested Performance Stock Unit (less any shares of Common Stock
withheld to pay taxes), free of any restrictions, to be delivered, either by book-entry
registration or in the form of a certificate or certificates, registered in your name or in the
names of your legal representatives, beneficiaries or heirs, as the case may be, to you. Only
whole shares of Common Stock shall be issued to you pursuant to a certificate.

8. Taxes.

	 	a)	 	You acknowledge that you will consult with your personal tax advisor regarding the
income tax consequences of the grant of the Performance Stock Units, the earning and
vesting of the Performance Stock Units, the grant of Common Stock, and any other matters
related to these Terms and Conditions and the attached Agreement. In order to comply with
all applicable federal or state income, social security, payroll, withholding or other tax
laws or regulations, the Company may take such action, and may require you to take such
action, as it deems appropriate to ensure that all applicable federal or state income,
social security, payroll, withholding or other taxes, which are your sole and absolute
responsibility, are withheld or collected from you.
	 
	 	b)	 	You acknowledge that you are responsible for the payment of any federal, state, local
or other taxes that are required to be withheld by the Company upon vesting of the
Performance Stock Units. In order to satisfy any applicable federal, state, local or other
taxes that are required to be withheld, the Company shall withhold a portion of the shares
of Common Stock otherwise to be issued upon vesting of the Performance Stock Units having a
Fair Market Value as of the vesting date equal to the amount of federal and state income
tax required to be withheld upon such vesting (commonly referred to as a “Tax Swap” or
“Stock for Tax”).

9. Adjustments. If any Performance Stock Units are earned and vest subsequent to any change in
the number or character of the Common Stock through any 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 that affects the Performance Stock Units covered by this Award of
Performance Stock Units, you shall then receive upon such earning and vesting of the
Performance Stock Units, the number and type of securities or other consideration which you
would have received if such Performance Stock Units had been earned and vested prior to the
event changing the number or character of the outstanding Common Stock.

10. 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 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 Affiliates, as applicable, and must be returned to the Company or
such Affiliates 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 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. This
Section 10(e) shall not apply in the event of a Change in Control as described in Section 4
above.

	 	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 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, this Award of Performance Stock Units shall
be immediately and irrevocably forfeited.
	 
	 	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 and the
attached Agreement 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 and the attached Agreement shall not be affected or impaired in any way.

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 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
forfeiture of this Award of Performance Stock Units or the termination of 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. Severability. In the event that any portion of these Terms and Conditions and the attached
Agreement 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 and the attached
Agreement.

13. 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.

14. No Right to Employment. Nothing in these Terms and Conditions, 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 and the attached Agreement, unless otherwise expressly
provided in these Terms and Conditions and the attached Agreement.

15. Compensation. Any compensation realized from the receipt or payment of (or the lapse of
restrictions relating to) this Award of Performance Stock Units shall constitute a special
long-term incentive payment to you and whether or not it is taken into account as compensation in
determining the amount of any benefit under any retirement or other employee benefit plan of the
Company or any of its Affiliates will be determined solely under the terms of those benefit plans.

16. 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 and the attached Agreement or any provision hereof.

17. 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.

18. Notice. For purpose of these Terms and Conditions and the attached Agreement, notices and all
other communications provided for in the attached Agreement, these Terms and Conditions or
contemplated by either shall be in writing and shall be deemed to have 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. 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 six (6) months 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.

19. Definitions. The following terms, and terms derived from the following terms, shall have the
following meanings when used in the 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 18(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.

	 	b)	 	Change in 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 twenty percent (20%) or
more of either (A) the then outstanding shares of Common Stock 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 in 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 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;
	 
	 	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 in Control or engage in a proxy or other control contest); or
	 
	 	iv)	 	such other event or transaction as the Board shall determine constitutes a
Change in Control.

	 	c)	 	CIC Date shall mean the date on which a Change in Control occurs.
	 
	 	d)	 	Good Reason shall mean any one or more of the following events occurring during the
two-year period following the CIC Date:

	 	i)	 	Your annual base salary is reduced below the higher of (A) the amount in effect
on the CIC Date or (B) the highest amount in effect at any time thereafter;
	 
	 	ii)	 	Your duties and responsibilities or the program of incentive compensation
(including without limitation long term incentive plans and equity incentive programs),
vacation, fringe benefits, perquisites, retirement and general insurance benefits
offered to your are materially and adversely diminished in comparison to the duties and
responsibilities or the program of such benefits enjoyed by you on the CIC Date; or
	 
	 	iii)	 	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 CIC Date or your
business travel obligations are significantly increased over those in effect
immediately prior to the CIC 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 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 this Agreement 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.

Original Approval:

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