-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wv2wqQNGYCvF/aFLRrTo8Nd4qXx6hzU/5b72xjN3b/rw/e6T8wtg+Gq/B4r73ozs rki22BMTGVrq+xh8ZtT6Fw== /in/edgar/work/20000721/0000912057-00-032781/0000912057-00-032781.txt : 20000920 0000912057-00-032781.hdr.sgml : 20000920 ACCESSION NUMBER: 0000912057-00-032781 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000617 FILED AS OF DATE: 20000721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASH FINCH CO CENTRAL INDEX KEY: 0000069671 STANDARD INDUSTRIAL CLASSIFICATION: [5140 ] IRS NUMBER: 410431960 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00785 FILM NUMBER: 676678 BUSINESS ADDRESS: STREET 1: 7600 FRANCE AVE STREET 2: PO BOX 355 CITY: SOUTH MINNEAPOLIS STATE: MN ZIP: 55435-0355 BUSINESS PHONE: 6128320534 FORMER COMPANY: FORMER CONFORMED NAME: NASH CO DATE OF NAME CHANGE: 19710617 10-Q 1 a10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) /X/ OF THE SECURITIES EXCHANGE ACT OF 1934 For the twenty four weeks ended June 17, 2000 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) / / OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-785 NASH-FINCH COMPANY (Exact Name of Registrant as Specified in its Charter) DELAWARE 41-0431960 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7600 France Ave. South, Edina, Minnesota 55435 (Address of principal executive offices) (Zip Code) (952) 832-0534 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- As of July 17, 2000, 11,483,918 shares of Common Stock of the Registrant were outstanding. PART I - FINANCIAL INFORMATION This report is for the twenty-four week interim period beginning January 2, 2000, through June 17, 2000. The accompanying financial information has been prepared in conformity with generally accepted accounting principles and practices, and methods of applying accounting principles and practices, (including consolidation practices) as reflected in the financial information included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission for the preceding fiscal year. The financial statements included in this quarterly report include all adjustments which are, in the opinion of management, necessary to fairly present the Company's financial position and results of operations for the interim period. The information contained herein has not been audited by independent auditors and is subject to any adjustments which may develop in connection with the annual audit of its accounts by the Company's independent auditors. 2 NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) (In thousands, except per share amounts)
Twelve Weeks Ended Twenty-four Weeks Ended -------------------------- --------------------------- June 17, June 19, June 17, June 19, 2000 1999 2000 1999 ----------- ------------ ------------ ------------- Total sales and revenues $ 917,662 935,950 1,810,335 1,870,747 Cost and expenses: Cost of sales 810,554 841,695 1,600,526 1,686,771 Selling, general and administrative 81,593 74,001 162,652 144,943 Depreciation and amortization 10,296 9,429 20,455 19,155 Interest expense 7,651 6,882 15,224 13,865 ----------- ------------ ------------ ------------- Total costs and expenses 910,094 932,007 1,798,857 1,864,734 Earnings before income taxes 7,568 3,943 11,478 6,013 Income taxes 3,209 1,671 4,867 2,549 ----------- ------------ ------------ ------------- Net earnings $ 4,359 2,272 6,611 3,464 =========== ============ ============ ============= Basic earnings per share: $ 0.38 0.20 0.58 0.31 Diluted earnings per share: $ 0.38 0.20 0.58 0.31 Weighted average number of common shares outstanding and common equivalent shares outstanding: Basic 11,408 11,333 11,407 11,332 Diluted 11,413 11,342 11,412 11,342
- ------------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 3 NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except per share amounts)
June 17, January 1, ASSETS 2000 2000 -------------- ------------ (unaudited) Current assets: Cash $ 1,419 16,389 Accounts and notes receivable, net 127,419 154,066 Inventories 252,485 264,232 Prepaid expenses 13,478 11,137 Deferred tax assets 18,675 19,739 -------------- ------------ Total current assets 413,476 465,563 Investments in affiliates 738 508 Notes receivable, net 31,262 20,712 Property, plant and equipment: Land 25,278 23,898 Buildings and improvements 136,032 136,119 Furniture, fixtures and equipment 300,923 288,156 Leasehold improvements 73,724 70,071 Construction in progress 18,211 11,073 Assets under capitalized leases 26,186 25,233 -------------- ------------ 580,354 554,550 Less accumulated depreciation and amortization (332,886) (318,924) -------------- ------------ Net property, plant and equipment 247,468 235,626 Goodwill, net 114,364 101,751 Other intangible assets, net 19,313 13,652 Investment in direct financing leases 15,058 15,444 Deferred tax asset, net 9,262 9,187 -------------- ------------ Total assets $ 850,941 862,443 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Outstanding checks $ 38,744 54,974 Current maturities of long-term debt and capitalized lease obligations 3,641 3,117 Accounts payable 185,286 191,749 Accrued expenses 68,321 72,681 Income taxes 7,981 4,806 -------------- ------------ Total current liabilities 303,973 327,327 Long-term debt 319,628 314,091 Capitalized lease obligations 33,803 33,718 Deferred compensation 4,453 4,545 Other 9,391 10,088 Minority interest in subsidiary 2,424 - Stockholders' equity: Preferred stock - no par value Authorized 500 shares; none issued - - Common stock of $1.66 2/3 par value Authorized 25,000 shares, issued 11,641 shares in 2000 and 1999 19,402 19,402 Additional paid-in capital 18,248 18,247 Restricted stock (46) (57) Retained earnings 141,461 136,905 -------------- ------------ 179,065 174,497 Less cost of 228 and 231 shares of common stock in treasury, respectively (1,796) (1,823) -------------- ------------ Total stockholders' equity 177,269 172,674 -------------- ------------ Total liabilities and stockholders' equity $ 850,941 862,443 ============== ============
- --------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 4 NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Twenty-four Weeks Ended ---------------------------- June 17, June 19, 2000 1999 ------------ ------------ Operating activities: Net earnings $ 6,611 3,464 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,455 19,155 Provision for bad debts 4,167 1,487 Provision for losses (recovery from) closed lease locations 216 (506) Deferred income tax expense 988 4,166 Deferred compensation (92) (696) Earnings of equity investments (135) (485) Other 205 (839) Changes in operating assets and liabilities: Accounts and notes receivable 33,836 5,427 Inventories 16,980 44,273 Prepaid expenses (2,162) (4,305) Accounts payable (9,375) 4,475 Accrued expenses (7,760) (1,926) Accrued expenses - special charges (2,342) (3,338) Income taxes 3,175 (1,209) -------- -------- Net cash provided by operating activities 64,767 69,143 -------- -------- Investing activities: Disposal of property, plant and equipment 2,126 4,349 Additions to property, plant and equipment (23,999) (20,558) Business acquired, net of cash (20,431) (57,261) Loans to customers (20,121) (20,541) Payments from customers on loans 6,534 13,007 (Repurchase) sale of receivables (10,920) 327 Other (792) (579) -------- -------- Net cash used for investing activities (67,603) (81,256) -------- -------- Financing activities: Proceeds from long-term debt - 449 Proceeds from revolving debt 6,000 30,000 Dividends paid (2,055) (2,042) Proceeds of short-term debt 400 175 Payments of long-term debt (456) (2,947) Payments of capitalized lease obligations (756) (765) Decrease in outstanding checks (16,230) (9,948) Other 963 697 -------- -------- Net cash (used by) provided for financing activities (12,134) 15,619 -------- -------- Net (decrease) increase in cash $(14,970) 3,506 ======== ========
- --------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 5 NASH FINCH COMPANY AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity - ------------------------------------------------------------------------------ Fiscal period ended June 17, 2000 January 1, 2000 and January 2, 1999 (In thousands, except per share amounts)
Common stock Additional --------------------- paid-in Retained Shares Amount capital earnings - ---------------------------------------------------------------------------------------------------------------------- Balance at January 3, 1998 11,575 $ 19,292 17,648 190,984 Net earnings (loss) - - - (61,637) Dividend declared of $.72 per share - - - (8,162) Treasury stock issued upon exercise of options - - 47 - Amortized compensation under restricted stock plan - - - - Repayment of notes receivable from holders of restricted stock - - - - Distribution of stock pursuant to performance awards - - 246 - Treasury stock purchased - - - - Other 3 -------- -------- -------- -------- Balance at January 2, 1999 11,575 19,292 17,944 121,185 Net earnings (loss) - - - 19,803 Dividend declared of $.36 per share - - - (4,083) Common stock issued for employee stock purchase plan 66 110 294 - Amortized compensation under restricted stock plan - - - - Repayment of notes receivable from holders of restricted stock - - - - Distribution of stock pursuant to performance awards - - 9 - -------- -------- -------- -------- Balance at January 1, 2000 11,641 19,402 18,247 136,905 Net earnings (loss) - - - 6,611 Dividend declared of $.18 per share - - - (2,055) Common stock issued for employee stock purchase plan - - - - Amortized compensation under restricted stock plan - - - - Repayment of notes receivable from holders of restricted stock - - - - Distribution of stock pursuant to performance awards - - 1 - -------- -------- -------- -------- Balance at June 17, 2000 11,641 $ 19,402 18,248 141,461 ======== ======== ======== ======== Treasury stock Total Restricted -------------------- stockholders' stock Shares Amount equity - --------------------------------------------------------------------------------------------------------------------------- Balance at January 3, 1998 (391) (252) $ (1,915) 225,618 Net earnings (loss) - - - (61,637) Dividend declared of $.72 per share - - - (8,162) Treasury stock issued upon exercise of options - 4 21 68 Amortized compensation under restricted stock plan 72 - - 72 Repayment of notes receivable from holders of restricted stock 206 - - 206 Distribution of stock pursuant to performance awards - 15 75 321 Treasury stock purchased - (1) (16) (16) Other - - 3 -------- -------- -------- -------- Balance at January 2, 1999 (113) (234) (1,835) 156,473 Net earnings (loss) - - - 19,803 Dividend declared of $.36 per share - - - (4,083) Common stock issued for employee stock purchase plan - - - 404 Amortized compensation under restricted stock plan 13 - - 13 Repayment of notes receivable from holders of restricted stock 43 - - 43 Distribution of stock pursuant to performance awards - 3 12 21 -------- -------- -------- -------- Balance at January 1, 2000 (57) (231) (1,823) 172,674 Net earnings (loss) - - - 6,611 Dividend declared of $.18 per share - - - (2,055) Common stock issued for employee stock purchase plan - - - - Amortized compensation under restricted stock plan 2 - - 2 Repayment of notes receivable from holders of restricted stock 9 - - 9 Distribution of stock pursuant to performance awards - 3 27 28 -------- -------- -------- -------- Balance at June 17, 2000 (unaudited) (46) (228) $ (1,796) 177,269 ======== ======== ======== ========
- --------------------------------------------------- See accompanying notes to condensed consolidated financial statements. 6 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 17, 2000 NOTE 1 The accompanying financial statements include all adjustments which are, in the opinion of management, necessary to fairly present the financial position of the Company and its subsidiaries at June 17, 2000, and January 1, 2000, and the results of operations for the 12 and 24-weeks ended June 17, 2000 and June 19, 1999, and the changes in cash flows for the 24-weeks ended June 17, 2000 and June 19, 1999, respectively. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Revenues for the food distribution and military segments are recognized when product is shipped and retail revenues are recognized at the point of sale. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended, which is required to be adopted for fiscal years beginning after June 15, 2000. Because of its limited use of derivatives, the Company does not expect adoption of the new Statement to have a significant effect on earnings or financial position. NOTE 2 The Company uses the LIFO method for valuation of a substantial portion of inventories. If the FIFO method had been used, inventories would have been approximately $45.4 million and $46.2 million higher at June 17, 2000 and January 1, 2000, respectively. NOTE 3 The following table sets forth the computation of basic and diluted earnings per share.
Twelve Weeks Ended Twenty-four Weeks Ended ----------------------------- ------------------------------- June 17, June 19, June 17, June 19, 2000 1999 2000 1999 ------------ ------------- ------------- ------------ Numerator: Net income $ 4,359 2,272 6,611 3,464 ------------ ------------- ------------- ------------ Denominator: Denominator of basic earnings per share (weighted-average shares) 11,408 11,333 11,407 11,332 Effect of dilutive contingent shares 5 9 5 10 ------------ ------------- ------------- ------------ Denominator for diluted earnings per share (adjusted weighted average shares) 11,413 11,342 11,412 11,342 ============ ============= ============= ============ Basic earnings per share $ .38 .20 .58 .31 ============ ============= ============= ============ Diluted earnings per share $ .38 .20 .58 .31 ============ ============= ============= ============
7 NOTE 4 On January 30, 2000 the Company acquired Hinky Dinky Supermarkets, Inc. ("HDSI") through a cash purchase of all of HDSI's outstanding capital stock. HDSI is the majority owner of twelve supermarkets located in Nebraska with annual sales of approximately $90 million. The acquisition was accounted for as a purchase, for a cash amount subject to purchase price adjustments, and pending final determination of certain acquired asset and liability valuations. NOTE 5 On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was executed by the Company, Nash Finch Funding Corporation (NFFC), a wholly owned subsidiary of the Company, and a certain third party purchaser (the "Purchaser") pursuant to a securitization transaction. The Agreement is a five-year, $50 million revolving receivable purchase facility allowing the Company to sell additional receivables to NFFC, and NFFC to sell, from time to time, variable undivided interests in these receivables to the Purchaser. NFFC maintains a variable undivided interest in these receivables and is subject to losses on its share of the receivables and, accordingly, maintains an allowance for doubtful accounts. As of June 17, 2000 and January 1, 2000 the Company had sold $37.5 million and $50.5 million, respectively, of accounts receivable on a non-recourse basis to NFFC. NFFC sold $30.9 million and $41.8 million, respectively, of its undivided interest in such receivables to the Purchaser, subject to specified collateral requirements. NOTE 6 1998 SPECIAL CHARGES During the fourth quarter of 1998, the Company recorded special charges totaling $71.4 million (offset by $2.9 million of 1997 special charge adjustments) as a result of the Company's revitalization plan designed to redirect its technology efforts, optimize warehouse capacity through consolidation, and to close, sell or reassess underperforming businesses and investments. In connection with the implementation of the Company's 1998 revitalization plan, the 1998 special charges included $17.0 million to streamline the Company's food distribution operations. The charges provided for post-employment and pension benefit costs, write-down to fair value of tangible assets to be disposed of, and other costs to exit three warehouse facilities. The Company believed the strategy of closing underutilized warehouses and concentrating sales volume into existing warehouses would improve operational efficiency and lower distribution costs. In accordance with the 1998 revitalization plan, the Company completed the closure of its Appleton, Wisconsin distribution center during 1999. During the fourth quarter of 1999, after considering both internal and external factors, the Company decided to indefinitely defer the closure of the remaining two distribution centers scheduled for closing in the 1998 plan. The Company continues to incur costs for the Appleton facility which has not been sold or subleased. Certain of these costs are charged to accrued expenses. 8 The following table details the activity during the first half of 2000, associated with the 1998 special charges relative to the food distribution component of the charge (in thousands):
1998 Food Distribution Rollforward ---------------------------------- Post Employment Benefits Exit Costs Total ---------------- -------------- ---------------- Balance 1/1/00 $ 1,743 670 2,413 Used in 2000 (2) (233) (235) ---------------- -------------- ---------------- Balance 6/17/00 $ 1,741 437 2,178 ================ ============== ================
Under the 1998 special charge, twelve under-performing corporately operated retail stores and one store jointly developed with a food distribution customer were designated for closure and a $9.5 million charge was recorded. During the first half of 2000, three of four remaining stores were closed, while the Company continues to market one other location. In the fourth quarter of 1999, the Company recorded charges of $4.7 million, including $1.0 million to write down assets to fair value, related to four additional corporately operated stores which have been identified for closure. During the first half of 2000, the Company closed two stores, with the remaining two locations closing before the end of the third quarter. Accordingly, the Company recorded charges of $.7 million, in costs related to the closures, to accrued expenses. The following table details 1998 special charge activity during the first half of 2000, relative to the retail component of the charge (in thousands):
1998 Retail Rollforward ----------------------- Lease Commitment Exit Costs Total ---------------- -------------- ---------------- Balance 1/1/00 $ 5,807 1,323 7,130 Used in 2000 (492) (159) (651) ---------------- -------------- ---------------- Balance 6/17/00 $ 5,315 1,164 6,479 ================ ============== ================
The aggregate 1998 special charges included $44.7 million for the abandonment of assets primarily related to an information systems project which was terminated, asset impairments related to ten owned retail stores and the write-off of an equity investment in a joint venture with an independent retailer it continues to service. No additional charges are anticipated in the future periods related to these matters. The impact of suspending depreciation on assets to be disposed of is not material. At June 17, 2000, special charge costs have been included in accrued expenses on the balance sheet. 1997 SPECIAL CHARGES In 1997 the Company accelerated its plan to strengthen its competitive position. Coincident with the implementation of the plan, the Company recorded special charges totaling $31.3 million impacting the Company's food distribution and retail segments, as well as the produce growing and marketing segment discontinued during 1998. 9 The aggregate special charges included $14.5 million for the consolidation or downsizing of seven underutilized warehouses. The following table details 1997 special charge activity during the first half of 2000 relative to the food distribution component of the charge (in thousands):
1997 Food Distribution Rollforward ---------------------------------- Post Lease Employment Commitments Benefits Exit Costs Total ------------------ ------------------ --------------- --------------- Balance 1/1/00 $ 1,590 274 1,106 2,970 Used in 2000 (593) (270) (501) (1,364) ------------------ ------------------ --------------- --------------- Balance 6/17/00 $ 997 4 605 1,606 ================== ================== =============== ===============
The Company has completely executed its 1997 food distribution consolidation plan. During the first half of 2000, continuing costs totaling $1.4 million related to the closures, were charged to accrued expenses. The Company continues to incur costs for those distribution centers that have not been sold or subleased. Certain of these costs are charged to accrued expenses. In retail operations, the special charge of $5.2 million related to the closing of fourteen, principally leased, stores. The following table details special charge activity during the first quarter, relative to the retail component of the charge (in thousands):
1997 Retail Rollforward ----------------------- Lease Commitments Exit Costs Total ------------------ -------------- --------------- Balance 1/1/00 $ 800 267 1,067 Used in 2000 (77) (14) (91) ------------------ -------------- --------------- Balance 6/17/00 $ 723 253 976 ================== ============== ===============
Ten of the fourteen identified retail stores were closed during 1998 and 1999, one store was closed during the first half of 2000, and one of the remaining stores is scheduled to close in the third quarter. One of the remaining two stores identified for closure was subleased in 1999, to another party, while management decided in 1999 to keep another location open. The aggregate 1997 special charges included $9.2 million for impairment of seven retail stores, impairment of agriculture assets of Nash-De Camp Company (the Company's former produce growing and marketing subsidiary which was divested during 1999), and other charges related to abandonment of system software, loss on the sale of an equity investment in a foreign operation, and the write-down of idle real estate to fair value. The 1997 special charges also included $2.5 million of integration costs associated with a business acquisition. No additional charges are anticipated in future periods relative to these matters. The impact of suspending depreciation on assets to be disposed of is not material. At June 17, 2000, special charge costs have been included in accrued expenses on the balance sheet. 10 NOTE 7 A summary of the major segments of the business is as follows (in thousands):
Twelve Weeks Ended June 17, 2000 -------------------------------- Food All Distribution Retail Military Other Totals - --------------------------------------------------------------------------------------------------------------------------------- Revenue from external customers $ 451,915 245,279 216,904 1,212 915,310 Intra segment revenue 135,724 -- -- 799 136,523 Segment profit and (loss) 13,919 6,368 5,035 (4) 25,318 Twelve Weeks Ended June 19, 1999 -------------------------------- Food All Distribution Retail Military Other Totals - --------------------------------------------------------------------------------------------------------------------------------- Revenue from external customers $ 537,363 175,333 219,050 891 932,637 Intra segment revenue 105,668 -- -- 1,025 106,693 Segment profit and (loss) 12,523 3,580 4,835 (140) 20,798 Twenty-four Weeks Ended June 17, 2000 ------------------------------------- Food All Distribution Retail Military Other Totals - --------------------------------------------------------------------------------------------------------------------------------- Revenue from external customers $ 896,525 470,292 432,824 2,686 1,802,327 Intra segment revenue 264,438 -- -- 1,810 266,248 Segment profit and (loss) 25,043 9,419 9,560 (8) 44,014 Twenty-four Weeks Ended June 19, 1999 ------------------------------------- Food All Distribution Retail Military Other Totals - --------------------------------------------------------------------------------------------------------------------------------- Revenue from external customers $ 1,080,618 337,854 443,225 1,459 1,863,156 Intra segment revenue 205,441 -- -- 2,202 207,643 Segment profit and (loss) 22,693 4,720 9,889 (321) 36,981
11 Reconciliation to statements of operations: (In thousands)
Twelve Weeks Ended June 17, 2000 and June 19, 1999 - -------------------------------------------------- 2000 1999 -------------- ---------------- PROFIT AND LOSS Total profit for segments $ 25,318 20,798 Unallocated amounts: Adjustment of inventory to LIFO 313 -- Unallocated corporate overhead (18,063) (16,855) -------------- ---------------- Income from continuing operations before income taxes $ 7,568 3,943 ============== ================ Twenty-four Weeks Ended June 17, 2000 and June 19, 1999 - ------------------------------------------------------- 2000 1999 -------------- ---------------- PROFIT AND LOSS Total profit for segments $ 44,014 36,981 Unallocated amounts: Adjustment of inventory to LIFO 813 (300) Unallocated corporate overhead (33,349) (30,668) -------------- ---------------- Income from continuing operations before income taxes $ 11,478 6,013 ============== ================
Prior year segment information has been restated to reflect a change in method of allocation of marketing revenues. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Total revenues for the twelve week second quarter were $917.7 million compared to $936.0 million, a decrease of 2.0%. The change reflects the declining year over year impact of closing five distribution centers in 1999 as part of the Company's strategic plan. For the twenty-four weeks, total revenues were $1.810 billion compared to $1.871 billion last year. Beside the effect of warehouse closings, revenues were affected by an industry wide downturn in retail grocery sales following Year 2000 stockpiling of food products by consumers. Food distribution revenues during the second quarter were $451.9 million compared to $537.4 million, a decrease of 15.9%. The change is largely attributed to the acquisitions of two former customers, the Erickson's stores in June, 1999 and Hinky Dinky Supermarkets, Inc., in January, 2000, which resulted in revenues being reported in the retail segment rather than the food distribution segment. During the quarter, however, the Company did experience lower revenues due to competitive pressures in both its Ohio and Southeast market areas. Recent management changes in both areas are expected to result in a more aggressive approach toward growing the Company's market share. Year over year comparisons are also affected by the closing of distribution centers since last year. For the twenty-four weeks, food distribution revenues were $896.5 compared to $1.081 billion last year, again, largely reflecting the shift in business from food distribution to the retail segment. Retail segment revenues for the second quarter were $245.3 million compared to $175.3 million last year. The increase of 39.9% reflects the Company's strategy to grow the retail segment in key regions. The improvement in revenues is attributed to the acquisitions of 18 Erickson's stores in Minnesota and Wisconsin, 12 Hinky Dinky stores in Nebraska and six stores in other market areas since last year. During the quarter, revenues were also increased by the construction and opening of a larger replacement store in Marshalltown, Iowa, and a newly constructed second store in Rochester, Minnesota, which opened in the first quarter of the year. The Company is also testing two alternative store formats which have already contributed to revenue increases but may offer greater growth opportunities going forward. Same store sales for the quarter increased .70% compared to last year. On a year to date basis same store sales declined .61% reflecting the industry wide decline in retail sales following Year 2000. Retail segment sales for the twenty-four weeks were $470.3 compared to $337.9, an increase of 39.2%. With the Company's continued emphasis on retail segment growth, segment revenues for the twenty-four weeks now represent 26.1 % of total Company revenues compared to 18.1 % last year. Military segment revenues decreased 1.0% for the quarter and 2.3% year to date compared to last year. The decreases reflect a general decline in revenues and is not specifically attributed to any loss of commissaries serviced or product lines carried. The Company expects improvement during the remainder of the year. 13 GROSS MARGIN Gross margin for the quarter and year to date was 11.7% and 11.6%, respectively, compared to 10.1% and 9.8%, respectively, last year. The increases largely reflect the growing proportion of higher margin retail revenues to total revenues. In addition, efficiencies in warehousing and transportation resulting from facility consolidations and operational improvements have lowered cost of sales. The Company monitors costs by closely analyzing key indicators of operating performance such as trailer capacity utilization, on-time delivery rate and non-procurement costs per case of product handled and shipped. This process has been successful in lowering logistical costs compared to last year. Margins were also favorably affected by a LIFO credit of $.3 million for the quarter and $.8 million for the year to date compared to no LIFO impact for the quarter and a charge of $.3 million year to date last year. Retail segment margins continue to increase as a greater proportion of revenues are derived from higher margin specialty departments within the stores. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling , general and administrative expenses for the first quarter, as a percent of total revenues, were 8.9% compared to 7.9% a year ago. On a year to date basis, expenses were 9.0% compared to 7.7% last year. The increase primarily results from the growing proportion of retail business which typically operates at higher operating expense levels than the food distribution segment. During the quarter the Company recorded an additional provision for bad debts of $1.4 million, increasing the total for the year to $4.2 million, compared to $1.5 million last year. This increase is based on the Company's ongoing assessment of customer credit relationships, and relates primarily to accounts in the highly competitive Michigan and Ohio market areas. DEPRECIATION AND AMORTIZATION EXPENSE Depreciation and amortization expense increased 9.2% for the quarter and 6.8 % year to date over last year. The increases primarily result from the acquisitions of Erickson's, Hinky Dinky and six other retail stores. In addition, expansion of the Lumberton distribution center, completed construction of the store in Rochester, Minnesota and several other store improvement projects, since last year, have contributed to the increased depreciation expense. Amortization of goodwill and other intangibles was $2.0 and $4.0 million, for the current quarter and year to date, respectively, compared to $1.5 million and $3.0 million, last year. The additional expense results primarily from amortization of goodwill related to the Erickson's and Hinky Dinky acquisitions. INTEREST EXPENSE Interest expense increased $.8 million or 11.2% for the quarter and $1.4 million or 9.8% year to date compared to last year. The increased interest costs are directly attributed to higher average debt levels due to acquisitions which occurred since last year, partially offset by successful management of inventories and accounts receivable. In addition, average variable borrowing rates for the twenty-four weeks were 6.8% this year compared to 6.3% last year, further contributing to the higher interest costs. 14 EARNINGS BEFORE INCOME TAXES Earnings before income taxes for the quarter were $7.6 million compared to $3.9 million last year. The improvement over last year is largely attributed to the contribution of the retail segment which increased its profitability by 77.9%. The successful integration of the Hinky Dinky stores and the continued improvement in the Erickson's stores since acquisition, were significant factors contributing to the increase. Productivity gains from consolidations and operational improvements, primarily in the Midwest, contributed to an increase of 11.1% in food distribution segment earnings for the quarter. The military segment also recognized profit increases in the quarter compared to last year. This trend is expected to continue for the remainder of the year. INCOME TAXES The effective income tax rate for 2000 is estimated at 42.4%, unchanged from 1999. Income tax expense increased due to higher pretax earnings for the quarter and year to date compared to last year. SPECIAL CHARGES 1998 SPECIAL CHARGES During the fourth quarter of 1998, the Company announced a five-year revitalization plan to streamline wholesale operations and build retail operations resulting in the Company recording special charges totaling $71.4 million (offset by $2.9 million of 1997 charge adjustments). The new strategic plan's objectives are to: leverage Nash Finch's scale by centralizing operations; improve operational efficiency; and develop a strong retail competency. The Company also redirected technology efforts and set out to close, sell or reassess underperforming businesses and investments. In connection with the implementation of the Company's 1998 revitalization plan, the 1998 special charges included $17.0 million to streamline the Company's wholesale operations by closing three warehouses. The charges provided for post-employment and pension benefit costs, write-down to fair value of tangible assets to be disposed of, and other costs to exit the facilities. The Company believed the strategy of closing underutilized warehouses and concentrating sales volume into existing warehouses would improve operational efficiency and lower distribution costs. In accordance with the 1998 revitalization plan, the Company completed the closure of its Appleton, Wisconsin distribution center during 1999. During the fourth quarter of 1999, after considering both internal and external factors, the Company decided to indefinitely defer the closure of the remaining two distribution centers scheduled for closing in the 1998 plan. Under the 1998 revitalization plan 12 under-performing corporately operated retail stores and one store jointly developed with a food distribution customer were designated for closure and a $9.5 million charge was recorded. The stores were primarily located in geographic areas where the Company could not attain a strong market presence. The Company's focus is to develop corporate stores that can dominate their primary trade areas. At June 17, 2000, twelve stores have been closed and the Company continues to market one other location with the expectation of completing a sale during the third quarter. 15 In the fourth quarter of 1999, the Company also recorded an additional accrual of $4.7 million related to four corporately operated stores which have been announced for closure. Three stores are located in the highly competitive Iowa market and the fourth is in North Carolina. The accrual consists of $3.3 million of non-cancelable lease obligations and related costs required under lease agreements, $1.0 million to write-down to fair value assets held for disposal, and $.4 million of post-closing facility exit costs. During the first half of 2000, two stores were closed with two remaining locations to be closed by the end of the third quarter. The aggregate 1998 special charges included $34.4 million for the abandonment of assets primarily related to the Company's HORIZONS information system project. The abandoned assets related to purchased software and internal and external in-process software development. The remainder of the 1998 special charges consisted of a $10.3 million provision for asset impairment primarily related to ten owned retail stores. Increased competition resulting in declining market share, deterioration of operating performance and inadequate projected cash flows were the factors indicating impairment. The impaired assets, which include leasehold improvements and store equipment, were measured based on a comparison of the assets' net book value to the present value of the stores' estimated cash flows. The tables included in Note (6) of Notes to Condensed Consolidated Financial Statements contain a rollforward of 1998 special charges activity for the first half of 2000 relative to food distribution and retail operations through June 17, 2000. 1997 SPECIAL CHARGES In 1997, the Company accelerated its plan to strengthen its competitive position. Coincident with the implementation of the plan, the Company recorded special charges totaling $31.3 million impacting the Company's food distribution and retail segments, as well as the produce growing and marketing segment discontinued during 1998. The aggregate special charges included $14.5 million for the consolidation or downsizing of seven underutilized warehouses. The charges provided for non-cancelable lease obligations, write-down to fair value of tangible assets to be disposed of, and other costs to exit the facilities. Also included are post-employment benefit costs consistent with existing practice and the unamortized portion of goodwill for one of the locations. As a result of management changes during 1998, all actions to be taken under the 1997 plan were reevaluated by the Company's new management team. Substantially all actions contemplated by the 1997 plan were reaffirmed in 1998 and implemented. However, some actions included in the 1997 plan were modified. In 1999, the Company completed closure of the remaining distribution centers included in the original 1997 special charges, as modified in 1998. These included Grand Island, Nebraska; Liberal, Kansas; Denver, Colorado and Rocky Mount, North Carolina. The Company continues to incur costs for those distribution centers that have not been sold or subleased. Certain of these costs are charged to accrued expenses. In 1999 the Company completed closure of the remaining distribution centers included in the original 1997 special charges, as modified in 1998. 16 In retail operations, the special charge of $5.2 million related to the closing of fourteen, principally leased, stores. The charge covers provisions for continuing non-cancelable lease obligations, anticipated losses on disposals of tangible assets, including abandonment of leasehold improvements, and the write-off of intangible assets. The aggregate 1997 special charges contained a provision of $5.4 million for impaired assets of seven retail stores. Declining market share due to increasing competition, deterioration of operating performance and forecasted future results that were less than previously planned were the factors leading the impairment determination. The remaining 1997 special charge included $2.5 million of integration costs, associated with the acquisition of the business and certain assets from Untied A.G. Cooperative, Inc., an asset impairment charge of $1.0 million relating to agriculture assets of Nash-De Camp, the Company's produce growing and marketing subsidiary, and $2.8 million in other asset write-downs. The tables included in Note (6) of Notes to Condensed Consolidated Financial Statements contain a rollforward of 1997 special charges activity for the first half of 2000 relative to food distribution and retail operations through June 17, 2000. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its capital needs through a combination of internal and external sources. These sources include cash flow from operations, short-term bank borrowings, various types of long-term debt and lease financing. Cash flow provided from operations during the first half of 2000 totaled $64.8 million compared to $69.1 million last year. The decrease in operating cash flow is attributed to changes in the components of working capital, in particular, decreases in accounts payable and accrued expenses. Working capital declined $28.7 million to $109.5 million largely due to reductions in inventories and accounts receivable, the proceeds of which were used to pay down the revolving credit facility. The current ratio at the end of the first half of 2000 was 1.36 compared to 1.42 reported at the end of 1999. During the first half of 2000 the Company acquired Hinky Dinky Supermarkets, Inc. and two other retail stores in separate transactions for cash totaling $20.4 million. The acquisitions were financed from the revolving credit facility. Excluding acquisitions, capital expenditures for the first half were $24.0 million, primarily directed toward upgrading and remodeling the retail stores. Capital expenditures for the year are expected to be approximately $60.0 million, funded principally through the revolving credit facility. Other transactions affecting liquidity during the first half were cash dividends paid to shareholders of $2.1 million. The Company believes that borrowing under the revolving credit facility, proceeds from its sale of senior subordinated notes in 1998, other credit agreements, cash flows from operating activities and lease financing will be adequate to meet the Company's working capital needs, planned capital expenditures and debt service obligations for the foreseeable future. 17 FORWARD-LOOKING STATEMENTS The information contained in this Form 10-Q Report includes forward-looking statements made under the safe harbor provisions of the Private Securities Litigation by the use of words like "believes," "expects," "may," "will," "should," "anticipates," or similar expressions, as discussions of strategy. Although such statements represent management's current expectations based on available data, they are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those anticipated. Such risks, uncertainties and other factors may include, but are not limited to, the ability to: meet debt service obligations and maintain future financial flexibility; respond to continuing competitive pricing pressures; retain existing independent wholesale customers and attract new accounts; and fully integrate acquisitions and realize expected synergies. 18 PART II - OTHER INFORMATION Items 1, 2, 3 and 5 are not applicable. Item 4. Submission of Matters to a Vote of Security Holders. - -------- ---------------------------------------------------- (a) The annual meeting of stockholders was held on May 9, 2000. (b) Not required. (Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, there was no solicitation in opposition to management's nominees as listed in the proxy statement, and all of such nominees were elected.) (c) At the annual meeting, the following proposals were presented to the stockholders and voted upon: (1) election of directors, (2) adoption of the 2000 Stock Incentive Plan, and (3) adoption of an amendment to the 1995 Director Stock Option Plan. (1) ELECTION OF DIRECTORS. Three director nominees were elected to serve for three-year terms expiring in 2003, all of whom were incumbent directors. The terms of the other eight directors do not expire until 2001 and 2002. The director nominees and voting results are as follows:
Votes Broker Nominee Votes For Withheld Non-Votes ------------------------ -------------- ------------------- --------------- Jerry L. Ford 8,880,015 179,238 -0- Robert F. Nash 8,828,325 230,928 -0- John E. Stokley 8,887,223 172,030 -0-
(2) ADOPTION OF THE 2000 STOCK INCENTIVE PLAN. Stockholders approved the adoption of the 2000 Stock Incentive Plan . The voting results are as follows:
Votes Broker Votes For Against Abstentions Non-Votes --------------------- --------------- ---------------- -------------- 4,966,939 1,240,508 94,634 2,757,172
(3) AMENDMENT TO THE 1995 DIRECTOR STOCK OPTION PLAN. The stockholders approved the adoption of the amendment to the 1995 Director Stock Option Plan. The voting results are as follows:
Votes Broker Votes For Against Abstentions Non-Votes --------------------- --------------- ------------------ -------------- 5,443,448 736,327 122,306 2,757,172
19 Item 6. Exhibits and Reports on Form 8-K. - --------------------------------------------------- (a) Exhibits: --------- 10.1 Nash Finch 2000 Stock Incentive Plan 10.2 Nash Finch 1995 Director Stock Option Plan, as amended 27.1 Financial Data Schedule (b) Reports on Form 8-K. -------------------- Not applicable. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NASH-FINCH COMPANY ------------------ Registrant Date: July 21, 2000 By /s/ Ron Marshall --------------------- Ron Marshall President and Chief Executive Officer By /s/Leanne M. Stewart ------------------------- LeAnne M. Stewart Vice President and Corporate Controller 21 NASH FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Twenty-four Weeks Ended June 17, 2000
Item No. Item Method of Filing - -------- ---- ---------------- 10.1 Nash Finch 2000 Stock Incentive Plan Filed herewith 10.2 Nash Finch 1995 Director of Stock Option Plan, Filed herewith as amended 27.1 Financial Data Schedule Filed herewith
22 EX-10.1 2 ex-10_1.txt EXHIBIT 10.1 NASH-FINCH COMPANY 2000 STOCK INCENTIVE PLAN 1. PURPOSE OF PLAN. The purpose of the Nash-Finch Company 2000 Stock Incentive Plan (the "Plan") is to support the maximization of long-term value creation for Nash- Finch Company (the "Company") and its stockholders by enabling the Company and its Subsidiaries to attract and retain persons of ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its economic objectives. 2. DEFINITIONS. The following terms will have the meanings set forth below, unless the context clearly otherwise requires: 2.1 "BOARD" means the Board of Directors of the Company. 2.2 "BROKER EXERCISE NOTICE" means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer. 2.3 "CHANGE IN CONTROL" means an event described in Section 13.1 of the Plan. 2.4 "CODE" means the Internal Revenue Code of 1986, as amended. 2.5 "COMMITTEE" means the group of individuals administering the Plan, as provided in Section 3 of the Plan. 2.6 "COMMON STOCK" means the common stock of the Company, $1.66-2/3 par value, or the number and kind of shares of stock or other securities into which such common stock may be changed in accordance with Section 4.3 of the Plan. 2.7 "DISABILITY" means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code. 2.8 "ELIGIBLE RECIPIENTS" means all employees of the Company or any Subsidiary and any non-employee directors, consultants and independent contractors of the Company or any Subsidiary. 2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2.10 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote) (a) the mean between the reported high and low sale prices of the Common Stock if the Common Stock is listed, admitted to unlisted trading privileges or reported on any foreign or national securities exchange or on the Nasdaq National Market or an equivalent foreign market on which sale prices are reported; (b) if the Common Stock is not so listed, admitted to unlisted trading privileges or reported, the closing bid price as reported by the Nasdaq SmallCap Market, OTC Bulletin Board or the National Quotation Bureau, Inc. or other comparable service; or (c) if the Common Stock is not so listed or reported, such price as the Committee determines in good faith in the exercise of its reasonable discretion. 2.11 "INCENTIVE AWARD" means an Option, Stock Appreciation Right, Restricted Stock Award, Performance Unit or Stock Bonus granted to an Eligible Recipient pursuant to the Plan. 2.12 "INCENTIVE STOCK OPTION" means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an "incentive stock option" within the meaning of Section 422 of the Code. 2.13 "NON-STATUTORY STOCK OPTION" means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not qualify as an Incentive Stock Option. 2.14 "OPTION" means an Incentive Stock Option or a Non-Statutory Stock Option. 2.15 "PARTICIPANT" means an Eligible Recipient who receives one or more Incentive Awards under the Plan. 2.16 "PERFORMANCE UNIT" means a right granted to an Eligible Recipient pursuant to Section 9 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, upon the achievement of established employment, service, performance or other goals. 2.17 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are already owned by the Participant or, with respect to any Incentive Award, that are to be issued upon the grant, exercise or vesting of such Incentive Award. 2.18 "RESTRICTED STOCK AWARD" means an award of Common Stock granted to an Eligible Recipient pursuant to Section 8 of the Plan that is subject to the restrictions on transferability and the risk of forfeiture imposed by the provisions of such Section 8. 2.19 "RETIREMENT" means termination of employment or service pursuant to and in accordance with the regular (or, if approved by the Board for purposes of the Plan, early) retirement/pension plan or practice of the Company or Subsidiary then covering the Participant, provided that if the Participant is not covered by any such plan or practice, the Participant will be deemed to be covered by the Company's plan or practice for purposes of this determination. 2.20 "SECURITIES ACT" means the Securities Act of 1933, as amended. 2.21 "STOCK APPRECIATION RIGHT" means a right granted to an Eligible Recipient pursuant to Section 7 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more shares of Common Stock and the exercise price of such shares under the terms of such Stock Appreciation Right. 2.22 "STOCK BONUS" means an award of Common Stock granted to an Eligible Recipient pursuant to Section 10 of the Plan. 2.23 "SUBSIDIARY" means any entity that is directly or indirectly controlled the Company or any entity in which the Company has a significant equity interest, as determined by the Committee. 2 2.24 "TAX DATE" means the date any withholding tax obligation arises under the Code or other applicable tax statute for a Participant with respect to an Incentive Award. 3. PLAN ADMINISTRATION. 3.1 THE COMMITTEE. The Plan will be administered by the Board or by a committee of the Board. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, any committee administering the Plan will consist solely of two or more members of the Board who are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and, if the Board so determines in its sole discretion, who are "outside directors" within the meaning of Section 162(m) of the Code. Such a committee, if established, will act by majority approval of the members (but may also take action with the written consent of all of the members of such committee), and a majority of the members of such a committee will constitute a quorum. As used in the Plan, "Committee" will refer to the Board or to such a committee, if established. To the extent consistent with corporate law, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Eligible Recipients who are subject to Section 16 of the Exchange Act. The Committee may exercise its duties, power and authority under the Plan in its sole and absolute discretion without the consent of any Participant or other party, unless the Plan specifically provides otherwise. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the stockholders of the Company, the participants and their respective successors-in-interest. No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Incentive Award granted under the Plan. 3.2 AUTHORITY OF THE COMMITTEE. (a) In accordance with and subject to the provisions of the Plan, the Committee will have the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii) the nature and extent of the Incentive Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in which Incentive Awards will vest or become exercisable and whether Incentive Awards will be granted in tandem with other Incentive Awards) and the form of written agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions and other conditions to which the payment or vesting of Incentive Awards may be subject. In addition, the Committee will have the authority under the Plan in its sole discretion to pay the economic value of any Incentive Award in the form of cash, Common Stock or any combination of both. (b) The Committee will have the authority under the Plan to amend or modify the terms of any outstanding Incentive Award in any manner, including, without limitation, the authority to modify the number of shares or other terms and conditions of an Incentive Award, extend the term of an Incentive Award or accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award; provided, however that the amended or modified terms are permitted by the Plan as then in effect and that any Participant adversely affected by such amended or modified terms has consented to such amendment or modification. No amendment or modification to an Incentive Award, however, whether pursuant to this Section 3.2 or any other provisions of the Plan, will be deemed to be a re-grant of such Incentive Award for purposes of this Plan. 3 (c) In the event of (i) any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture (including a spin-off) or any other change in corporate structure or shares, (ii) any purchase, acquisition, sale or disposition of a significant amount of assets or a significant business, (iii) any change in accounting principles or practices, or (iv) any other similar change, in each case with respect to the Company or any other entity whose performance is relevant to the grant or vesting of an Incentive Award, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) may, without the consent of any affected Participant, amend or modify the vesting criteria of any outstanding Incentive Award that is based in whole or in part on the financial performance of the Company (or any Subsidiary or division thereof) or such other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors of the surviving corporation) following such event as prior to such event; provided, however, that the amended or modified terms are permitted by the Plan as then in effect. 4. SHARES AVAILABLE FOR ISSUANCE. 4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 600,000 shares of Common Stock, plus any shares of Common Stock which, as of the date the Plan is approved by the stockholders of the Company, are reserved for issuance under the Company's 1994 Stock Incentive Plan, as amended, and which are not thereafter issued or which have been issued but are subsequently forfeited and which would otherwise have been available for further issuance under such plan. Notwithstanding any other provisions of the Plan to the contrary, no Participant in the Plan may be granted any Options or Stock Appreciation Rights, or any other Incentive Awards with a value based solely on an increase in the value of the Common Stock after the date of grant, relating to more than 120,000 shares of Common Stock in the aggregate in any fiscal year of the Company (subject to adjustment as provided in Section 4.3 of the Plan); provided, however, that a Participant who is first appointed or elected as an officer, hired as an employee or retained as a consultant by the Company or who receives a promotion that results in an increase in responsibilities or duties may be granted, during the fiscal year of such appointment, election, hiring, retention or promotion, Options relating to up to 200,000 shares of Common Stock (subject to adjustment as provided in Section 4.3 of the Plan). 4.2 ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentive Awards will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Incentive Award that lapses, expires, is forfeited or for any reason is terminated unexercised or unvested and any shares of Common Stock that are subject to an Incentive Award that is settled or paid in cash or any form other than shares of Common Stock will automatically again become available for issuance under the Plan. Any shares of Common Stock that constitute the forfeited portion of a Restricted Stock Award, however, will not become available for further issuance under the Plan. 4.3 ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, he board of directors of the surviving corporation) will make 4 appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) available for issuance or payment under the Plan and, in order to prevent dilution or enlargement of the rights of Participants, (a) the number and kind of securities or other property (including cash) subject to outstanding Options, and (b) the exercise price of outstanding Options. 5. PARTICIPATION. Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the creation of value for the Company and its stockholders. Eligible Recipients may be granted from time to time one or more Incentive Awards, singly or in combination or in tandem with other Incentive Awards, as may be determined by the Committee in its sole discretion. Incentive Awards will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the date of any related agreement with the Participant. 6. OPTIONS. 6.1 GRANT. An Eligible Recipient may be granted one or more Options under the Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock Option. To the extent that any Incentive Stock Option granted under the Plan ceases for any reason to qualify as an "incentive stock option" for purposes of Section 422 of the Code, such Incentive Stock Option will continue to be outstanding for purposes of the Plan but will thereafter be deemed to be a Non-Statutory Stock Option. 6.2 EXERCISE PRICE. The per share price to be paid by a Participant upon exercise of an Option will be determined by the Committee in its discretion at the time of the Option grant; provided, however, that such price will not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant or, with respect to an Incentive Stock Option, 110% of the Fair Market Value if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company). 6.3 EXERCISABILITY AND DURATION. An Option will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Option may be exercisable prior to six months from its date of grant (other than in connection with a Participant's death or Disability) and no Incentive Stock Option may be exercisable after 10 years from its date of grant (five years from its date of grant if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company). 6.4 PAYMENT OF EXERCISE PRICE. The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, Previously Acquired Shares (including through delivery of a written attestation of ownership of such Previously Acquired Shares if permitted, and on terms acceptable, to the Committee in its sole discretion), a promissory note (on terms acceptable to the Committee in its sole discretion) or by a combination of such methods. 5 6.5 MANNER OF EXERCISE. An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Secretary) at its principal executive office in Minneapolis, Minnesota and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.4 of the Plan. 6.6 AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares of Common Stock with respect to which incentive stock options (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and any other incentive stock option plans of the Company or any subsidiary or parent corporation of the Company (within the meaning of the Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code from time to time), such excess Options will be treated as Non-Statutory Stock Options. The determination will be made by taking incentive stock options into account in the order in which they were granted. If such excess only applies to a portion of an Incentive Stock Option, the Committee, in its discretion, will designate which shares will be treated as shares to be acquired upon exercise of an Incentive Stock Option. 7. STOCK APPRECIATION RIGHTS. 7.1 GRANT. An Eligible Recipient may be granted one or more Stock Appreciation Rights under the Plan, and such Stock Appreciation Rights will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee will have the sole discretion to determine the form in which payment of the economic value of Stock Appreciation Rights will be made to a Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment. 7.2 EXERCISE PRICE. The exercise price of a Stock Appreciation Right will be determined by the Committee, in its discretion, at the date of grant but may not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant. 7.3 EXERCISABILITY AND DURATION. A Stock Appreciation Right will become exercisable at such time and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Stock Appreciation Right may be exercisable prior to six months from its date of grant (other than in connection with a Participant's death or Disability) or after 10 years from its date of grant. A Stock Appreciation Right will be exercised by giving notice in the same manner as for Options, as set forth in Section 6.5 of the Plan. 8. RESTRICTED STOCK AWARDS. 8.1 GRANT. An Eligible Recipient may be granted one or more Restricted Stock Awards under the Plan, and such Restricted Stock Awards will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Restricted Stock Awards as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or a Subsidiary for a certain period or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance goals or criteria; provided, however, that no Restricted Stock Award may vest prior to six months from its date of grant other than in connection with a Participant's death or Disability. 6 8.2 RIGHTS AS A STOCKHOLDER; TRANSFERABILITY. Except as provided in Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will have all voting, dividend, liquidation and other rights with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award under this Section 8 upon the Participant becoming the holder of record of such shares as if such Participant were a holder of record of shares of unrestricted Common Stock. 8.3 DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines otherwise in its sole discretion (either in the agreement evidencing the Restricted Stock Award at the time of grant or at any time after the grant of the Restricted Stock Award), any dividends or distributions (including regular quarterly cash dividends) paid with respect to shares of Common Stock subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the shares to which such dividends or distributions relate. In the event the Committee determines not to pay dividends or distributions currently, the Committee will determine in its sole discretion whether any interest will be paid on such dividends or distributions. In addition, the Committee in its sole discretion may require such dividends and distributions to be reinvested (and in such case the Participant consents to such reinvestment) in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions relate. 8.4 ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions referred to in this Section 8, the Committee may place a legend on the stock certificates referring to such restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock certificates, together with duly endorsed stock powers, in the custody of the Company or its transfer agent or to maintain evidence of stock ownership, together with duly endorsed stock powers, in a certificateless book-entry stock account with the Company's transfer agent. 9. PERFORMANCE UNITS. An Eligible Recipient may be granted one or more Performance Units under the Plan, and such Performance Units will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Performance Units as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or any Subsidiary for a certain period or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance goals or criteria. The Committee will have the sole discretion to determine the form in which payment of the economic value of Performance Units will be made to a Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment. 10. STOCK BONUSES. An Eligible Recipient may be granted one or more Stock Bonuses under the Plan, and such Stock Bonuses will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee. The Participant will have all voting, dividend, liquidation and other rights with respect to the shares of Common Stock issued to a Participant as a Stock Bonus under this Section 10 upon the Participant becoming the holder of record of such shares; provided, however, that the Committee may impose such restrictions on the assignment or transfer of a Stock Bonus as it deems appropriate. 11. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. 7 11.1 TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award: (a) In the event a Participant's employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability: (i) All outstanding Options and Stock Appreciation Rights then held by the Participant will become immediately exercisable in full and remain exercisable, for a period of three years after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right); (ii) All Restricted Stock Awards then held by the Participant will become fully vested; and (iii) All Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units or Stock Bonuses. (b) In the event a Participant's employment or other service with the Company and all Subsidiaries is terminated by reason of Retirement: (i) All outstanding Options and Stock Appreciation Rights then held by the Participant will remain exercisable, to the extent exercisable as of the date of such termination, for a period of three years after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right); (ii) All Restricted Stock Awards then held by the Participant that have not vested as of such termination will be terminated and forfeited; and (iii) All Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units or Stock Bonuses. 11.2 TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. (a) Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award, in the event a Participant's employment or other service is terminated with the Company and all Subsidiaries for any reason other than death, Disability or Retirement, or a Participant is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ or service of the Company or another Subsidiary), all rights of the Participant under the Plan and any agreements evidencing an Incentive Award will immediately terminate without notice of any kind, and no Options or Stock Appreciation Rights then held by the Participant will thereafter be exercisable, all Restricted Stock Awards then held by the Participant that have not vested will be terminated and forfeited, and all Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units or Stock Bonuses; provided, however, that if such termination is due to any reason other than voluntary termination by the Participant or termination by the Company or any Subsidiary for "cause," all outstanding Options and Stock Appreciation Rights then held by such Participant will remain exercisable, to the extent exercisable as of such termination, for a period of three months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right). 8 (b) For purposes of this Section 11.2, "cause" (as determined by the Committee) will be as defined in any employment or other agreement or policy applicable to the Participant or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Participant's overall duties, or (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with the Company or any Subsidiary. 11.3 MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the other provisions of this Section 11, upon a Participant's termination of employment or other service with the Company and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time on or after the date of grant, including following such termination), cause Options and Stock Appreciation Rights (or any part thereof) then held by such Participant to become or continue to become exercisable and/or remain exercisable following such termination of employment or service and Restricted Stock Awards, Performance Units and Stock Bonuses then held by such Participant to vest and/or continue to vest or become free of transfer restrictions, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee; provided, however, that no Option or Restricted Stock Award may become exercisable or vest prior to six months from its date of grant (other than in connection with a Participant's death or Disability) or remain exercisable or continue to vest beyond its expiration date. 11.4 EXERCISE OF INCENTIVE STOCK OPTIONS FOLLOWING TERMINATION. Any Incentive Stock Option that remains unexercised more than one year following termination of employment by reason of Disability or more than three months following termination for any reason other than death or Disability will thereafter be deemed to be a Non-Statutory Stock Option. 11.5 DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the Committee otherwise determines in its sole discretion, a Participant's employment or other service will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company or the Subsidiary for which the Participant provides employment or other service, as determined by the Committee in its sole discretion based upon such records. 9 12. PAYMENT OF WITHHOLDING TAXES. 12.1 GENERAL RULES. The Company is entitled to (a) withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all foreign, federal, state and local withholding and employment-related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (b) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to an Incentive Award. 12.2 SPECIAL RULES. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment- related tax obligation described in Section 12.1 of the Plan by electing to tender Previously Acquired Shares, a Broker Exercise Notice or a promissory note (on terms acceptable to the Committee in its sole discretion), or by a combination of such methods. 13. CHANGE IN CONTROL. 13.1 CHANGE IN CONTROL. For purposes of this Section 13, a "Change in Control" of the Company will mean the following: (a) the sale, lease, exchange or other transfer, directly or indirectly, of substantially all of the assets of the Company (in one transaction or in a series of related transactions) to any Person (as defined below); (b) the approval by the stockholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; (c) any Person, other than a Bona Fide Underwriter (as defined below), becomes after the effective date of the Plan the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20% or more, but not more than 50%, of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors, unless the transaction resulting in such ownership has been approved in advance by the Continuity Directors (as defined below), or (ii) more than 50% of the combined voting power of the Company's outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuity Directors); (d) a merger or consolidation to which the Company is a party if the stockholders of the Company immediately prior to effective time of such merger or consolidation have, solely on account of ownership of securities of the Company at such time, "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), immediately following the effective time of such merger or consolidation, of securities of the surviving corporation representing (i) 50% or more, but not more than 80%, of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors, unless such merger or consolidation has been approved in advance by the Continuity Directors, or (ii) less than 50% of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuity Directors); or 10 (e) the Continuity Directors cease for any reason to constitute at least a majority of the Board. 13.2 CHANGE IN CONTROL DEFINITIONS. For purposes of this Section 13: (a) "Continuity Director" means any individual who was a member of the Board on the effective date of the Plan, while he or she is a member of the Board, and any individual who subsequently becomes a member of the Board whose election or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors who are Continuity Directors (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director without objection to such nomination). For example, assuming that seven individuals comprise the entire Board as of the effective date of the Plan, if a majority of such individuals approved a proxy statement in which two different individuals were nominated to replace two of the individuals who were members of the Board as of the effective date of the Plan, these two newly elected directors would join the remaining five directors who were members of the Board as of the effective date of the Plan as Continuity Directors. Similarly, if subsequently a majority of these directors approved a proxy statement in which three different individuals were nominated to replace three other directors who were members of the Board as of the effective date of the Plan, these three newly elected directors would also become, along with the other four directors, Continuity Directors. Individuals subsequently joining the Board could become Continuity Directors under the principles reflected in this example. (b) "Bona Fide Underwriter" means a Person engaged in business as an underwriter of securities that acquires securities of the Company from the Company through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. (c) "Person" means any individual, corporation, partnership, group, association or other "person," as such term is used in Section 13(d) or Section 14(d) of the Exchange Act, other than the Company, any affiliate or any benefit plan sponsored by the Company or any affiliate. For this purpose, an affiliate is (i) any corporation at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned directly or indirectly by the Company or (ii) any other form of business entity in which the Company, by virtue of a direct or indirect ownership interest, has the right to elect a majority of the members of such entity's governing body. 13.3 ACCELERATION OF VESTING. Without limiting the authority of the Committee under Sections 3.2 and 4.3 of the Plan, if a Change in Control of the Company occurs, then, unless otherwise provided by the Committee in its sole discretion either in the agreement evidencing an Incentive Award at the time of grant or at any time after the grant of an Incentive Award, (a) all Options and Stock Appreciation Rights that have been outstanding for at least six months will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the Participant to whom such Options or Stock Appreciation Rights have been granted remains in the employ or service of the Company or any Subsidiary; (b) all Restricted Stock Awards that have been outstanding for at least six months will become immediately fully vested and non-forfeitable; and (c) all outstanding Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Stock Bonuses. 13.4 CASH PAYMENT FOR OPTIONS. If a Change in Control of the Company occurs, then the Committee, if approved by the Committee in its sole discretion either in an agreement evidencing an Incentive Award at the time of grant or at any time after the grant of an Incentive Award, and without the 11 consent of any Participant effected thereby, may determine that some or all Participants holding outstanding Options will receive, with respect to some or all of the shares of Common Stock subject to such Options, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to the effective date of such Change in Control of the Company over the exercise price per share of such Options. 13.5 LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything in Section 13.3 or 13.4 of the Plan to the contrary, if, with respect to a Participant, the acceleration of the vesting of an Incentive Award as provided in Section 13.3 or the payment of cash in exchange for all or part of an Incentive Award as provided in Section 13.4 (which acceleration or payment could be deemed a "payment" within the meaning of Section 280G(b)(2) of the Code), together with any other "payments" that such Participant has the right to receive from the Company or any corporation that is a member of an "affiliated group" (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the Code), then the "payments" to such Participant pursuant to Section 13.3 or 13.4 of the Plan will be reduced to the largest amount as will result in no portion of such "payments" being subject to the excise tax imposed by Section 4999 of the Code; provided, however, that if a Participant is subject to a separate agreement with the Company or a Subsidiary that expressly addresses the potential application of Sections 280G or 4999 of the Code (including, without limitation, that "payments" under such agreement or otherwise will be reduced, that the Participant will have the discretion to determine which "payments" will be reduced, that such "payments" will not be reduced or that such "payments" will be "grossed up" for tax purposes), then this Section 13.5 will not apply, and any "payments" to a Participant pursuant to Section 13.3 or 13.4 of the Plan will be treated as "payments" arising under such separate agreement. 14. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY. 14.1 EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or Participant any right to continue in the employ or service of the Company or any Subsidiary. 14.2 RIGHTS AS A STOCKHOLDER. As a holder of Incentive Awards (other than Restricted Stock Awards and Stock Bonuses), a Participant will have no rights as a stockholder unless and until such Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and the Participant becomes the holder of record of such shares. Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to such Incentive Awards as to which there is a record date preceding the date the Participant becomes the holder of record of such shares, except as the Committee may determine in its discretion. 14.3 RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, unless approved by the Committee in its sole discretion, no right or interest of any Participant in an Incentive Award prior to the exercise or vesting of such Incentive Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. A Participant will, however, be entitled to designate a beneficiary to receive an Incentive Award upon such Participant's death, and in the event of a Participant's death, payment of any amounts due under the Plan will be made to, and exercise of any Options (to the extent permitted pursuant to Section 11 of the Plan) may be made by, the Participant's legal representatives, heirs and legatees. 14.4 BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS. Notwithstanding anything in the Plan to the contrary, in the event that a Participant materially breaches the terms of any 12 confidentiality or non-compete agreement entered into with the Company or any Subsidiary, whether such breach occurs before or after termination of such Participant's employment or other service with the Company or any Subsidiary, the Committee in its sole discretion may immediately terminate all rights of the Participant under the Plan and any agreements evidencing an Incentive Award then held by the Participant without notice of any kind. 14.5 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable. 15. SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Incentive Awards granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state or foreign securities laws or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 16. PLAN AMENDMENT, MODIFICATION AND TERMINATION. The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Incentive Awards under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Section 422 of the Code or the rules of any stock exchange or Nasdaq or similar regulatory body. No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 3.2, 4.3 and 13 of the Plan. 17. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan is effective as of February 22, 2000, the date it was adopted by the Board. The Plan will terminate at midnight on February 22, 2010, and may be terminated prior to such time to by Board action, and no Incentive Award will be granted after such termination. Incentive Awards outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms. 13 18. MISCELLANEOUS. 18.1 GOVERNING LAW. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions. 18.2 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Participants. 14 EX-10.2 3 ex-10_2.txt EXHIBIT 10.2 NASH FINCH COMPANY 1995 DIRECTOR STOCK OPTION PLAN (As Amended by the Board of Directors on February 22, 2000) 1. PURPOSE OF PLAN. The purpose of the Nash Finch Company 1995 Director Stock Option Plan (the "Plan") is to advance the interests of Nash Finch Company (the "Company") and its stockholders by enabling the Company to attract and retain the services of experienced and knowledgeable directors and to increase the proprietary interests of such directors in the Company's long-term success and progress and their identification with the interests of the Company's stockholders. 2. DEFINITIONS. The following terms will have the meanings set forth below, unless the context clearly otherwise requires: 2.1 "BOARD" means the Board of Directors of the Company. 2.2 "CODE" means the Internal Revenue Code of 1986, as amended. 2.3 "COMMITTEE" means the group of individuals administering the Plan, as provided in Section 3 of the Plan. 2.4 "COMMON STOCK" means the common stock of the Company, par value $1.66 2/3 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3 of the Plan. 2.5 "DISABILITY" means the disability of an Eligible Director such as would entitle the Eligible Director to receive disability income benefits pursuant to the long-term disability plan of the Company then covering the Eligible Director or, if no such plan exists or is applicable to the Eligible Director, the permanent and total disability of the Eligible Director within the meaning of Section 22(e)(3) of the Code. 2.6 "ELIGIBLE DIRECTORS" means all directors of the Company who are not, as of the date of grant of an Option, full-time employees of the Company or any subsidiary of the Company. 2.7 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2.8 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote), the mean between the reported high and low sale prices of the Common Stock as reported on the NASDAQ National Market System or any stock exchange on which the Common Stock is listed. 2.9 "OPTION" means a right to purchase 2,500 shares of Common Stock (subject to adjustment as provided in Section 4.3 of the Plan) granted to an Eligible Director pursuant to Section 5 of the Plan that does not qualify as an "incentive stock option" within the meaning of Section 422 of the Code. 2.10 "RETIREMENT" means the retirement of an Eligible Director pursuant to and in accordance with the normal retirement/pension plan or practice of the Company then covering the Eligible Director. 2.11 "SECURITIES ACT" means the Securities Act of 1933, as amended. 3. PLAN ADMINISTRATION. The Plan will be administered by a committee (the "Committee") consisting solely of two or more members of the Board. All questions of interpretation of the Plan will be determined by the Committee, each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be conclusive and binding for all purposes and on all persons, and no member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Option granted under the Plan. The Committee, however, will have no power to determine the eligibility for participation in the Plan, the number of shares of Common Stock to be subject to Options, or the timing, pricing or other terms and conditions of the Options. 4. SHARES AVAILABLE FOR ISSUANCE. 4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 200,000 shares. The shares available for issuance under the Plan may, at the election of the Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury. 4.2 ACCOUNTING FOR OPTIONS. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Options will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Option that lapses, expires, or for any reason is terminated unexercised will automatically again become available for issuance under the Plan. 4.3 ADJUSTMENTS TO SHARES AND OPTIONS. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be - 2 - conclusive) as to the number and kind of securities available for issuance under the Plan and, in order to prevent dilution or enlargement of the rights of Eligible Directors, the number, kind and, where applicable, exercise price of securities subject to outstanding Options. 5. OPTIONS. 5.1 GRANT. On an annual basis, each director of the Company who qualifies as an Eligible Director immediately following each annual meeting of stockholders of the Company will be granted an Option. 5.2 EXERCISE PRICE. The per share price to be paid by an Eligible Director upon exercise of an Option will be 100% of the Fair Market Value of one share of Common Stock on the date of grant. The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order). 5.3 EXERCISABILITY AND DURATION. Each Option will become exercisable in full six months following its date of grant and, subject to earlier termination in accordance with Section 5.6 of the Plan, will expire and will no longer be exercisable five years from its date of grant. 5.4 MANNER OF EXERCISE. An Option may be exercised by an Eligible Director in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Corporate Secretary) at its principal executive office in Edina, Minnesota and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 5.2 of the Plan. 5.5 RIGHTS AS A STOCKHOLDER. As a holder of Options, an Eligible Director will have no rights as a stockholder unless and until such Options are exercised for shares of Common Stock and the Eligible Director becomes the holder of record of such shares. Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to Options as to which there is a record date preceding the date the Eligible Director becomes the holder of record of such shares. 5.6 EFFECT OF TERMINATION OF SERVICE AS DIRECTOR. (a) TERMINATION DUE TO DEATH OR DISABILITY. In the event an Eligible Director's service as a director of the Company is terminated by reason of death or Disability, all outstanding Options then held by the Eligible Director will become immediately exercisable in full and will remain exercisable for one year following such termination (but in no event after the expiration date of any such Option). (b) TERMINATION DUE TO RETIREMENT. In the event an Eligible Director's service as a director of the Company is terminated by reason of Retirement, all outstanding Options then held by the Eligible Director will become immediately exercisable in full and (i) if granted prior to February 22, 2000, will remain exercisable for one year following such termination (but in no - 3 - event after the expiration date of any such Option), and (ii) if granted after February 22, 2000, will continue to be exercisable in accordance with their terms. (c) TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. (i) In the event an Eligible Director's service as a director of the Company is terminated for any reason other than death, Disability or Retirement, all rights of the Eligible Director under the Plan and any agreements evidencing an Option will immediately terminate without notice of any kind and no Options then held by the Eligible Director will thereafter be exercisable; provided, however, that if such termination is due to any reason other than termination for "cause," all outstanding Options then held by the Eligible Director will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event after the expiration date of any such Option). (ii) For purposes of this Section 5.6, "cause" will be as defined in any agreement or policy applicable to the Eligible Director or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement or material and deliberate injury or attempted injury, in each case related to the Company or any subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any willful breach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any service, confidentiality or noncompete agreement entered into with the Company. 6. DATE OF TERMINATION OF SERVICE AS A DIRECTOR. An Eligible Director's service as a director of the Company will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company, as determined by the Committee based upon such records. 7. RIGHTS OF ELIGIBLE DIRECTORS; TRANSFERABILITY OF INTERESTS. 7.1 SERVICE AS A DIRECTOR. Nothing in the Plan will interfere with or limit in any way the right of the shareholders to remove an Eligible Director at any time, and neither the Plan, nor the granting of an Option nor any other action taken pursuant to the Plan, will constitute or be evidence of any agreement or understanding, express or implied, that an Eligible Director will be retained for any period of time or at any particular rate of compensation. 7.2 RESTRICTIONS ON TRANSFER OF INTERESTS. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of any Eligible Director in an Option prior to the exercise of Options will be assignable or transferable, or subjected to any lien, during the lifetime of the Eligible Director, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. In the event of an Eligible Director's death, exercise of any Options (to the extent permitted pursuant to - 4 - Section 5 of the Plan) may be made by the Eligible Director's legal representatives, heirs and legatees. 7.3 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable. 8. SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and an Eligible Director may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Options granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions. 9. PLAN AMENDMENT, MODIFICATION AND TERMINATION The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Options under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that (a) no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Rule 16b-3 under the Exchange Act or the rules of the NASD, and (b) to the extent prohibited by Rule 16b-3 of the Exchange Act, the Plan may not be amended more than once every six months. No termination, suspension or amendment of the Plan may adversely affect any outstanding Option without the consent of the affected Eligible Director; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Section 4.3 of the Plan. 10. EFFECTIVE DATE AND DURATION OF THE PLAN The Plan is effective as of March 24, 1995, the date it was adopted by the Board. The Plan will terminate at midnight on March 1, 2005, and may be terminated prior thereto by Board action, and no Option will be granted after such termination. Options outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms. - 5 - 11. MISCELLANEOUS 11.1 GOVERNING LAW. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions. 11.2 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Eligible Directors. - 6 - EX-27 4 ex-27.txt EXHIBIT 27
5 1,000 6-MOS DEC-30-2000 JAN-02-2000 JUN-17-2000 1,419 0 150,562 23,143 252,485 413,476 580,354 332,886 850,941 303,973 319,628 0 0 19,402 157,867 850,941 1,810,335 1,810,335 1,600,526 178,940 0 4,167 15,224 11,478 4,867 6,611 0 0 0 6,611 .58 .58
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