Safeway (SWY)

CONSULTANTS AND NON-EMPLOYEE DIRECTORS

4.1. Eligibility. Any Employee or Consultant selected by the Administrator pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each Non-Employee Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Section 4.5 and as provided in Section 4.6.

4.2. Disqualification for Stock Ownership. No person may be granted an Incentive Stock Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary Corporation or parent corporation (as defined in Section 424(e) of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code.

4.3. Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or a Subsidiary Corporation.

4.4. Granting of Options to Employees and Consultants.

(a) The Administrator shall from time to time, in its discretion, and, subject to applicable limitations of the Plan:

(i) Select from among the Employees or Consultants (including Employees or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be granted Options;

(ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Employees or Consultants;

(iii) Subject to Section 4.2 and Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code); and

(iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

(b) Upon the selection of an Employee or Consultant to be granted an Option, the Administrator shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate.

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(c) Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code.

4.5. Granting of Options to Non-Employee Directors. The Administrator shall from time to time, in its discretion, and subject to applicable limitations of the Plan:

(a) Select from among the Non-Employee Directors (including Non-Employee Directors who have previously received Awards under the Plan) such of them as in its opinion should be granted Options;

(b) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Non-Employee Directors; and

(c) Subject to the provisions of Article V, determine the terms and conditions of such Options, consistent with the Plan.

4.6. Automatic Grants to Non-Employee Directors.

(a) During the term of the Plan, a person who first becomes a Non-Employee Director shall automatically, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted an Option to purchase 20,000 shares of Common Stock (an “Initial Option”). A member of the Board who is also a former Employee will not be eligible to receive an Initial Option.

(b) The following provisions shall govern the terms of each Initial Option granted pursuant to this Section 4.6. Each Initial Option shall have an exercise price per share of Common Stock equal to 100% of the Fair Market Value of a share of Common Stock on the date such Initial Option is granted. Each Initial Option shall vest and become exercisable for the shares of Common Stock subject to such Initial Option in a series of cumulative annual installments of one-third on each of the first, second and third anniversaries of the grant date of such Initial Option, subject to the Non-Employee Director’s continued service on the Board. The term of each Initial Option shall be 10 years from the date of grant. No Option granted to a Non-Employee Director under this Section 4.6 may be exercised after the first to occur of the following events:

(i) the expiration of twelve (12) months from the date of the Holder’s death;

(ii) the expiration of twelve (12) months from the date of the Holder’s Termination of Directorship by reason of his or her permanent and total disability (within the meaning of Section 22(e)(3) of the Code);

(iii) the expiration of three (3) months from the date of the Holder’s Termination of Directorship for any reason other than such Holder’s death or his or her permanent and total disability, unless the Holder dies within such three-month period; or

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(iv) the expiration of ten (10) years from the date the Option was granted.

Unless otherwise determined by the Administrator on or after the date of grant of such Initial Option, no portion of an Initial Option granted under this Section 4.6 which is not exercisable at the time of a Non-Employee Director’s termination of service on the Board shall thereafter become exercisable.

CONSULTANTS AND NON-EMPLOYEE DIRECTORS

4.1. Eligibility. Any Employee or Consultant selected by the Administrator pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each Non-Employee Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Section 4.5 and as provided in Section 4.6.

4.2. Disqualification for Stock Ownership. No person may be granted an Incentive Stock Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary Corporation or parent corporation (as defined in Section 424(e) of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code.

4.3. Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or a Subsidiary Corporation.

4.4. Granting of Options to Employees and Consultants.

(a) The Administrator shall from time to time, in its discretion, and, subject to applicable limitations of the Plan:

(i) Select from among the Employees or Consultants (including Employees or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be granted Options;

(ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Employees or Consultants;

(iii) Subject to Section 4.2 and Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code); and

(iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

(b) Upon the selection of an Employee or Consultant to be granted an Option, the Administrator shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate.

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(c) Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code.

4.5. Granting of Options to Non-Employee Directors. The Administrator shall from time to time, in its discretion, and subject to applicable limitations of the Plan:

(a) Select from among the Non-Employee Directors (including Non-Employee Directors who have previously received Awards under the Plan) such of them as in its opinion should be granted Options;

(b) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Non-Employee Directors; and

(c) Subject to the provisions of Article V, determine the terms and conditions of such Options, consistent with the Plan.

4.6. Automatic Grants to Non-Employee Directors.

(a) During the term of the Plan, a person who first becomes a Non-Employee Director shall automatically, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted an Option to purchase 20,000 shares of Common Stock (an “Initial Option”). A member of the Board who is also a former Employee will not be eligible to receive an Initial Option.

(b) The following provisions shall govern the terms of each Initial Option granted pursuant to this Section 4.6. Each Initial Option shall have an exercise price per share of Common Stock equal to 100% of the Fair Market Value of a share of Common Stock on the date such Initial Option is granted. Each Initial Option shall vest and become exercisable for the shares of Common Stock subject to such Initial Option in a series of cumulative annual installments of one-third on each of the first, second and third anniversaries of the grant date of such Initial Option, subject to the Non-Employee Director’s continued service on the Board. The term of each Initial Option shall be 10 years from the date of grant. No Option granted to a Non-Employee Director under this Section 4.6 may be exercised after the first to occur of the following events:

(i) the expiration of twelve (12) months from the date of the Holder’s death;

(ii) the expiration of twelve (12) months from the date of the Holder’s Termination of Directorship by reason of his or her permanent and total disability (within the meaning of Section 22(e)(3) of the Code);

(iii) the expiration of three (3) months from the date of the Holder’s Termination of Directorship for any reason other than such Holder’s death or his or her permanent and total disability, unless the Holder dies within such three-month period; or

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(iv) the expiration of ten (10) years from the date the Option was granted.

Unless otherwise determined by the Administrator on or after the date of grant of such Initial Option, no portion of an Initial Option granted under this Section 4.6 which is not exercisable at the time of a Non-Employee Director’s termination of service on the Board shall thereafter become exercisable.