-----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, DcSJT6TqfDi+cVH7YhftcVthDRRasNCN+r1YOJs3aGK5AvLkK0Y51h9mJaqG1wtq yyZ8cqAf+n9kTZJbR7gsYQ== 0000912057-97-025359.txt : 19970730 0000912057-97-025359.hdr.sgml : 19970730 ACCESSION NUMBER: 0000912057-97-025359 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970614 FILED AS OF DATE: 19970729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASH FINCH CO CENTRAL INDEX KEY: 0000069671 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410431960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00785 FILM NUMBER: 97647432 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 FORM 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 14, 1997 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 410431960 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7600 France Ave. South, Minneapolis Minnesota 55435 (Address of principal executive offices) (Zip Code) (612) 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 --- --- Number of shares of common stock outstanding at July 25, 1997: 11,307,424 shares PART I - FINANCIAL INFORMATION This report is for the twenty-four week interim period beginning December 29, 1996, through June 14, 1997. 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 a fair presentation of 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 the Company's accounts by Ernst & Young LLP, its independent auditors. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited) (In thousands, except per share amounts)
Twelve Weeks Ended Twenty-four Weeks Ended ------------------ ----------------------- June 14, June 15, June 14, June 15, 1997 1996 1997 1996 --------- -------- ----------- ---------- Revenues: Net sales $960,600 723,806 1,896,597 1,399,290 Other revenues 14,850 11,436 26,685 20,446 --------- -------- ----------- ---------- Total revenues 975,450 735,242 1,923,282 1,419,736 Cost and Expenses: Cost of sales 845,450 635,315 1,670,639 1,228,460 Selling, general and administrative and other operating expenses 100,486 79,041 199,644 155,521 Depreciation and amortization 10,888 7,553 21,793 14,800 Interest expense 7,500 3,080 14,821 6,003 --------- -------- ----------- ---------- Total costs and expenses 964,324 724,989 1,906,897 1,404,784 Earnings before income taxes 11,126 10,253 16,385 14,952 Income taxes 4,662 4,153 6,865 6,056 --------- -------- ----------- ---------- Net earnings $ 6,464 6,100 9,520 8,896 --------- -------- ----------- ---------- --------- -------- ----------- ---------- Weighted average number of common shares outstanding 11,303 10,921 11,289 10,905 --------- -------- ----------- ---------- --------- -------- ----------- ---------- Earnings per share $ 0.57 0.56 0.84 0.82 --------- -------- ----------- ---------- --------- -------- ----------- ----------
- ---------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands)
June 14, December 28, 1997 1996 ----------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 909 921 Accounts and notes receivable, net 219,131 206,062 Inventories 297,904 293,458 Prepaid expenses 24,313 20,492 Deferred tax assets 4,663 4,663 ----------- ------------ Total current assets 546,920 525,596 Investments in affiliates 9,239 10,300 Notes receivable, noncurrent 20,207 21,652 Property, plant and equipment: Land 32,700 33,753 Buildings and improvements 144,094 148,227 Furniture, fixtures and equipment 306,424 295,147 Leasehold improvements 56,030 54,925 Construction in progress 12,367 7,543 Assets under capitalized leases 25,659 26,105 ----------- ------------ 577,274 565,700 Less accumulated depreciation and amortization (306,340) (293,845) ----------- ------------ Net property, plant and equipment 270,934 271,855 Intangible assets, net 77,897 80,312 Investment in direct financing leases 21,588 22,011 Deferred tax asset - net 2,098 4,076 Other assets 10,918 9,675 ----------- ------------ Total assets $ 959,801 945,477 ----------- ------------ ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Outstanding checks $ 21,574 32,492 Short-term debt payable to banks 1,478 16,171 Current maturities of long-term debt and capitalized lease obligations 7,963 7,795 Accounts payable 190,686 183,501 Accrued expenses 66,847 54,130 Income taxes 4,180 2,999 ----------- ------------ Total current liabilities 292,728 297,088 Long-term debt 377,171 361,819 Capitalized lease obligations 41,478 41,832 Deferred compensation 7,085 7,476 Other 2,187 4,401 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 11,575 shares in 1997 and 11,574 shares in 1996 19,292 19,290 Additional paid-in capital 17,396 16,816 Foreign currency translation adjustment - net of a $633 deferred tax benefit (950) (950) Restricted stock (406) (500) Retained earnings 205,797 200,322 ----------- ------------ 241,129 234,978 Less cost of 271 and 307 shares of common stock in treasury, respectively. (1,977) (2,117) ----------- ------------ Total stockholders' equity 239,152 232,861 ----------- ------------ Total liabilities and stockholders' equity $ 959,801 945,477 ----------- ------------ ----------- ------------
- ---------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Twenty-four Weeks Ended ----------------------- June 14, June 15, 1997 1996 ----------- ---------- Operating activities: Net earnings $ 9,520 8,896 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,793 14,800 Provision for bad debts 2,139 702 Provision for losses on closed lease locations (295) (172) Deferred income taxes 1,978 (957) Deferred compensation (392) (180) Earnings of equity investments (539) (356) Other 869 128 Changes in operating assets and liabilities: Accounts and notes receivable (11,633) (14,150) Inventories 10,369 8,469 Prepaid expenses (3,171) (3,537) Accounts payable and outstanding checks (5,232) 1,958 Accrued expenses 10,449 5,936 Income taxes 1,181 2,325 ----------- ---------- Net cash provided by operating activities 37,036 23,862 ----------- ---------- Investing activities: Dividends received 1,600 - Disposal of property, plant and equipment 6,110 3,680 Additions to property, plant and equipment excluding capital leases (22,666) (20,782) Business acquired, net of cash acquired (16,633) (87,823) Loans to customers (7,536) (1,766) Payments from customers on loans 5,829 2,563 Other (359) (274) ----------- ---------- Net cash used for investing activities (33,655) (104,402) ----------- ---------- Financing activities: Proceeds from long-term debt - 30,000 Proceeds from revolving debt 20,000 44,700 Dividends paid (4,045) (3,923) Payments of short-term debt (14,693) - Payments of long-term debt (4,371) (2,345) Payments of capitalized lease obligations (463) (252) Other 179 87 ----------- ---------- Net cash (used for) provided by financing activities (3,393) 68,267 ----------- ---------- Net (decrease) in cash $ (12) (12,273) ----------- ---------- ----------- ----------
- ---------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Stockholders' Equity Fiscal period ended June 14, 1997, December 28, 1996 and December 30, 1995 (In thousands, except per share amounts)
Foreign Common Stock Additional currency Treasury stock Total --------------- paid-in Retained translation Restricted -------------- stockholders' Shares Amount capital earnings adjustment Stock Shares Amount equity ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------ Balance at December 31, 1994 11,224 $18,706 11,977 179,212 (572) - (349) $(3,054) 206,269 Net earnings - - - 17,414 - - - 17,414 Dividend declared of $.74 per share - - - (8,048) - - - (8,048) Treasury stock issued upon exercise of options - - 36 - - - 3 20 56 Foreign currency translation adjustment - net of a $252 deferred tax benefit - - - - (378) - - - (378) ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------ Balance at December 30, 1995 11,224 18,706 12,013 188,578 (950) - (346) (3,034) 215,313 Net earnings - - - 20,032 - - - - 20,032 Dividend declared of $.75 per share - - - (8,288) - - - - (8,288) Shares issued in connection with acquisition of a business 350 584 5,064 - - - - - 5,648 Treasury stock issued upon exercise of options - - 47 - - 6 42 89 Issuance of restricted stock - - (308) - - (524) 40 995 163 Amortized compensation under restricted stock plan - - - - - 24 - - 24 Treasury stock purchased - - - - - - (7) (120) (120) ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------ Balance at December 28, 1996 11,574 19,290 16,816 200,322 (950) (500) (307) (2,117) 232,861 Net earnings - - - 9,520 - - - - 9,520 Dividend declared of $.36 per share - - - (4,045) - - - - (4,045) Treasury stock issued upon exercise of options - - 106 - - - 9 43 149 Amortized compensation under restricted stock plan - - - - - 14 - - 14 Repayment of notes receivable from holder of restricted stock - - - - - 80 - - 80 Distribution of stock pursuant to performance awards - - 456 - - - 30 147 603 Treasury stock purchased - - - - - - (3) (50) (50) Other 1 2 18 - - - - - 20 ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------ Balance at June 14, 1997 (unaudited) 11,575 $19,292 17,396 205,797 (950) (406) (271) $(1,977) $239,152 ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------ ------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
- ---------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 14, 1997 NOTE 1 The accompanying financial statements include all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and its subsidiaries at June 14, 1997 and December 28, 1996, and the results of operations for the 12 and 24-weeks ending June 14, 1997 and June 15, 1996, and the changes in cash flows for the 24-week periods ending June 14, 1997 and June 15, 1996, respectively. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. 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 $41.6 million higher at both June 14, 1997 and at December 28, 1996. NOTE 3 Companies will be required to present earnings per share data, in accordance with Statement of Financial Accounting Standards (SFAS) NO. 128, EARNINGS PER SHARE, commencing with fiscal 1997. Currently earnings per share calculations are performed pursuant to Accounting Principles Board Opinion No. 15. The computation of earnings per share for both the quarter and year to date of fiscal 1997 and 1996 would be substantially the same under either method. NOTE 4 On September 8, 1995, the Company entered into an agreement with a financial institution which allowed the Company to sell on a revolving basis customer notes receivable. Although the agreement lapsed on December 28, 1996, the notes, which have maturities through the year 2002, were sold at face value with recourse. As a result, the Company is contingently liable should these notes become uncollectible. The remaining balances of such sold notes receivable totaled $11.9 million and $14.0 million at June 14, 1997 and December 28, 1996, respectively. NOTE 5 On November 7, 1996 the Company completed a tender offer to purchase the outstanding shares of common stock of Super Food Services, Inc. ("Super Food"), a wholesale grocery distributor based in Dayton, Ohio, for $15.50 per share in cash. The purchase price exceeded the fair value of the assets acquired resulting in goodwill of approximately $29.8 million which is being amortized on a straight line basis over 25 years. Effective July 31, 1996, the Company acquired all of the outstanding stock of T. J. Morris Company ("T. J. Morris"), a full line food wholesaler located in Statesboro, Georgia. The excess of purchase price over fair value of the assets acquired resulted in goodwill of approximately $3.1 million which is being amortized on a straight line basis over a 15-year period. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if Super Food and T. J. Morris had been acquired as of the beginning of 1996, after including the impact of certain adjustments such as amortization of intangibles, increased interest expense on acquisition debt and related income tax effects: Twenty-four Weeks Ended ----------------------- PRO FORMA INFORMATION (Unaudited) June 15, 1996 ----------------------- Net revenues $2,005,937 Earnings before income taxes 15,165 Net income 9,048 Earnings per share $.80 ----- ----- The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect results that would have occurred had the acquisitions been made as of those dates or results which may occur in the future. NOTE 6 On June 9, 1997, the Company acquired the business and certain assets of United-A.G. Cooperative, Inc. ("United-A.G."), a cooperative wholesale grocery distributor located in Omaha for approximately $17 million in cash. Real estate which was not included in the purchase price, is being leased under a five-year agreement from a third party. This operating lease contains an option to purchase the property at fair market value, or a renewal option for an additional five years at the end of the initial lease term. In addition, the Company has guaranteed a residual value for the leased real estate. United-A.G., with pre-acquisition annual revenues of approximately $200 million, served stores in Nebraska, Kansas, Iowa, Colorado and South Dakota. NOTE 7 On May 13, 1997, the Company entered into a three-year swap agreement with a major financial institution as a means of managing its interest rate risk. The agreement, which is based on a notional amount of $30.0 million, calls for an exchange of interest payments with the Company receiving payments based on a Libor floating rate and making payments based on a fixed rate of 6.54% without an exchange of the notional amount upon which the payments are based. The differential to be paid or received from counterparties as interest rates change is included in other liabilities or assets, with the corresponding amount accrued and recognized as an adjustment of interest expense related to the debt. The fair values of the swap agreements are not recognized in the financial statements. Gains and losses on terminations of interest-rate swap agreements are deferred as an adjustment to the carrying amount of the outstanding debt and amortized as an adjustment to interest expense related to the debt over the remaining term of the original contract life of the terminated swap agreement. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income coincident with the extinguishment. Any swap agreements that are not designated with outstanding debt are recorded as an asset or liability at fair value, with changes in fair value recorded in other income or expense. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Total revenues for the second quarter and the first half of fiscal 1997 increased 32.7% and 35.5%, respectively, over comparable periods last year. The revenue increases are attributable to the acquisitions of Super Food and T. J. Morris which occurred in the second half of 1996. In addition to the acquisitions, the east coast military division continued its revenue growth by further expansion of the product lines it distributes to military installations. Retail revenues declined during the second quarter and year to date by 6.6% and 5.6% respectively, primarily reflecting a reduction in the number of corporate stores operated by the Company since last year. At June 14, 1997 the Company operated 105 conventional, warehouse and mass merchandise stores, compared to 113 at the same time last year. Since the prior year quarter, a total of 12 stores were sold or closed, offset partially by the acquisition or opening of four other stores. Competitive pressures in certain market areas resulted in a decline of .38% for the quarter and .47% year to date in same store sales compared to last year. Gross margins for the quarter were 13.3% compared to 13.6% last year. On a year to date basis, margins were 13.1% in fiscal 1997 compared to 13.5% for the first half of fiscal 1996. The decline in both period and year to date resulted from a greater proportion of wholesale revenues which contribute lower gross margins than the retail segment. Retail margins increased 13 basis points over the prior year quarter. The negative effect of competitive pricing pressures in some markets were offset by an overall greater proportion of retail sales in higher-margin perishables and specialty departments. Wholesale margins continue to improve as a result of a consolidation in buying offices. Substantially all procurement activities are centrally located in Minneapolis for the Midwest and in North Carolina for the Southeast wholesale operations, except military and acquisitions completed in the second half of fiscal 1996. Centralization of procurement has resulted in operating efficiencies and lower product costs. Operating expenses as a percent of total revenues were 10.3% and 10.4% for the quarter and year to date, respectively, compared to 10.8% and 11.0% for the comparable periods last year. Expense levels continue to compare favorably to last year because of the significant growth of the wholesale segment which typically operates at lower expense levels. However, operating expenses for the quarter and year to date included additional costs of approximately $1.1 million and $2.1 million, respectively, associated with the redesign of the Company's computer system to client/server technology. This project is expected to continue to increase operating expenses until roll-out and implementation are completed in fiscal 1999. Bad debt expense for the first half of fiscal 1997 was $2.1 million compared to $.7 million in the prior year. The increase is attributed to maintaining adequate reserve levels to correspond to the growth in receivables resulting from recent acquisitions. Depreciation and amortization expense increased 44.2% for the quarter and 47.3% year to date compared to last year, primarily due to acquisitions. Amortization expense related to goodwill and other intangibles for the quarter and year to date was $1.5 million and $3.1 million, respectively, compared to $1.1 million and $2.2 million, respectively, last year. In addition, capital expenditures related to the computer system project increased depreciation expenses by $.5 million for the quarter and $1.0 million year to date compared to last year. Interest expense increased $4.4 million and $8.8 million for the quarter and year to date, respectively, over the same periods last year primarily due to the debt incurred to finance the acquisition of Super Food. Average short-term borrowings used to fund working capital needs, were higher during the quarter compared to last year. However, outstanding short-term borrowings at June 14, 1997 were $14.7 million lower than year end levels. Income tax expense increased due to higher pretax earnings, and a higher effective tax rate which increased from 40.5% to 41.9% due to non-deductibility of certain expenses relating to the Super Food and T. J. Morris acquisitions. On a comparative basis, the additional tax expense negatively impacted net earnings by $.01 per share for the quarter, and $.02 per share on a year to date basis. Net earnings for the quarter were $6.5 million compared to $6.1 million last year, an increase of 6.0%. On a pretax basis, earnings from operations before interest for the quarter was $17.5 million, an increase of 36.0% over last year. On a year to date basis, operating earnings before interest were $28.5 million compared to $20.0 million, an increase of 42.6%. The operating earnings improvements related to the acquisitions of Super Food and T. J. Morris, continued growth of the military division, and better results from the Company's retail operations. LIQUIDITY AND CAPITAL RESOURCES Working capital requirements and certain capital expenditures continue to be funded principally from internally generated funds. However, the Company uses short and long-term debt to supplement the financing of major capital projects and acquisitions. Cash provided from operations was $37.0 million compared to $23.9 million last year. The improvement is attributed to higher cash basis earnings and changes in the composition of working capital. Working capital at the end of the quarter was $254.2 million, an increase of $25.1 million during the first half of fiscal 1997. The current ratio was 1.87 compared to 1.77 at the end of last year. The Company funded the $17 million acquisition of United-A.G. through its existing revolving credit agreement. In an effort to manage its interest rate risk, the Company has entered into a series of four interest rate swap agreements for notional amounts of $30.0 million each. During the second quarter, one agreement took effect while the remaining agreements with separate financial institutions, are effective in July 1997. The Company believes it will continue to have adequate access to short-term and long-term credit necessary to meet its needs for growth and expansion in the foreseeable future. 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 May 13, 1997. (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 shareholders and voted upon: (1) Election of Directors, (2) Adoption of 1997 Non-Employee Director Stock Compensation Plan, and (3) Amendment to 1994 Stock Incentive Plan. (1) ELECTION OF DIRECTORS. Three director nominees were elected to serve for three-year terms expiring in 2000, two of whom were incumbent directors. The terms of the other eight directors do not expire until 1998 and 1999. The director nominees and voting results are as follows: Votes Broker Nominee Votes For Withheld Non-votes ------- --------- -------- --------- Jerry L. Ford 8,800,562.382 57,013.916 - 0 - Donald R. Miller 8,718,837.727 138,738.571 - 0 - Robert F. Nash 8,715,182.108 142,394.190 - 0 - (2) ADOPTION OF 1997 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN. Pursuant to the 1997 Non-Employee Director Stock Compensation Plan, a portion of the director's annual retainer is paid in the form of shares of Nash Finch Company common stock either currently as earned or on a deferred basis when a director leaves the Board of Directors. The voting results are as follows: Votes For Votes Against Abstentions Broker Non-Votes --------- ------------- ----------- ---------------- 8,433,209.117 310,033.839 77,433.342 36,900 (3) AMENDMENT TO 1994 STOCK INCENTIVE PLAN. Pursuant to the amendment to the 1994 Stock Incentive Plan, the number of shares of Nash Finch Company common stock subject to the 1994 Stock Incentive Plan was increased by 200,000 shares and the limitation on the number of shares available for issuance pursuant to non-option awards was increased by 150,000 shares. The voting results are as follows: Votes For Votes Against Abstentions Broker Non-votes --------- ------------- ----------- ---------------- 8,447,476.890 295,268.561 77,930.847 36,900 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. 10.1 Nash Finch 1997 Non-Employee Director Stock Compensation Plan 10.2 Nash Finch 1994 Stock Incentive Plan, as amended 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K. Not applicable. 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 29, 1997 By /s/ Alfred N. Flaten ------------------ ------------------------------------- Alfred N. Flaten President and Chief Executive Officer By /s/ Lawrence A. Wojtasiak ------------------------------------- Lawrence A. Wojtasiak Controller NASH FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Twenty-four Weeks Ending June 14, 1997 Item No. Item Method of Filing - -------- ---- ---------------- 10.1 Nash Finch 1997 Non-Employee Director Stock Compensation Plan Filed herewith. 10.2 Nash Finch 1994 Stock Incentive Plan, as amended Filed herewith. 27.1 Financial Data Schedule Filed herewith. EX-10.1 2 1997 DIRECTOR STOCK COMPENSATION PLAN NASH FINCH COMPANY 1997 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN 1. DESCRIPTION. 1.1 NAME. The name of the Plan is the "Nash Finch Company 1997 Non-Employee Director Stock Compensation Plan." 1.2 PURPOSES. The purposes of the Plan are (a) to provide Qualified Directors with 50 percent of their Annual Retainer in the form of either Shares or credits to their Share Accounts, and (b) to provide Qualified Directors with the opportunity to defer receipt of Other Director Compensation through credits to their Share or Cash Accounts. 1.3 TYPE. The Plan is maintained primarily for the purpose of providing deferred compensation for Qualified Directors and is intended to be unfunded for tax purposes. The Plan will be construed and administered in a manner that is consistent with and gives effect to the foregoing. 1.4 BACKGROUND. Previously, the Company compensated its Qualified Directors through payment in cash of the Annual Retainer and fees for attending regular or special meetings of the Board or Board committees. In addition, the Company previously adopted Director Fee Deferral Agreements, which provided Qualified Directors with the ability to defer their compensation for service as a Qualified Director into an interest bearing account. Commencing as of the Effective Time, all Qualified Directors (a) will receive 50 percent (33-1/3 percent with respect to the calendar quarters in the 1997 calendar year) of their Annual Retainer in the form of either Shares or credits to their Share Accounts under this Plan, and (b) will become entitled to defer receipt of Other Director Compensation through credits to their Cash or Share Accounts under this Plan. The unfunded deferred compensation plan established pursuant to resolutions of the Board effective as of February 13, 1990 and of the Executive Committee of the Board effective as of December 21, 1990 will be terminated, effective as of the Effective Time. 2. PARTICIPATION. 2.1 ELIGIBILITY. (a) Each individual who is a Qualified Director at any point during a calendar quarter will receive the portion of the Annual Retainer payable with respect to the quarter in the form of Retainer Shares to the extent provided and in accordance with Section 3.2. (b) Each individual who is a Qualified Director on the first day of a calendar year is eligible to make deferral elections pursuant to Section 3.3 with respect to such calendar year. An individual who becomes a Qualified Director after the first day of the calendar year is eligible to make deferral elections pursuant to Section 3.3 with respect to the remainder of such calendar year. A Participant who receives a distribution, pursuant to Section 4.1(d)(i) or (iii), is not eligible to elect additional deferrals pursuant to Section 3.3 until the one-year anniversary of such distribution. 2.2 CEASING TO BE ELIGIBLE. An individual who ceases to be a Qualified Director is not eligible to (a) receive Retainer Shares pursuant to Section 3.2 other than such shares relating to the Annual Retainer payable with respect to calendar quarters ending with the calendar quarter during which the individual ceases to be a director or (b) make or receive any further deferral credits pursuant to Section 3.3 after such cessation. 2.3 CONDITION OF PARTICIPATION. Each Qualified Director, as a condition of participation in the Plan, is bound by all the terms and conditions of the Plan and the Plan Rules, including but not limited to the reserved right of the Company to amend or terminate the Plan, and must furnish to the Administrator such pertinent information, and execute such election forms and other instruments, as the Administrator or Plan Rules may require by such dates as the Administrator or Plan Rules may establish. 2.4 TERMINATION OF PARTICIPATION. A Participant will cease to be such as of the date on which he or she is not then eligible to receive Retainer Shares or make deferrals and his or her entire Account balance has been distributed. 3. BENEFITS. 3.1 PARTICIPANT ACCOUNTS. For each Participant, the Administrator will establish and maintain a Cash Account, a Share Account or both to evidence amounts credited with respect to the Participant pursuant to Sections 3.2, 3.3 and 3.4. 3.2 ISSUANCE OF RETAINER SHARES. As of the first day of the calendar quarter that first follows the Effective Time and as of the first day of each calendar quarter thereafter, each individual who is a Qualified Director at any time during the immediately preceding calendar quarter will, unless a deferral election is properly made pursuant to Section 3.3(a), be entitled to receive (as soon as reasonably practical after such immediately preceding calendar quarter) the Retainer Shares relating to his or her services as a Qualified Director during such immediately preceding calendar quarter. 3.3 DEFERRAL CREDITS. (a) Commencing with respect to services to be performed after the Effective Time, a Qualified Director may elect to defer all (but not less than all) of the Retainer Share Amount relating to his or her services as a Qualified Director during a calendar year. Any such election will automatically apply to the Qualified Director's Retainer Share Amount for the year as adjusted from time to time. (b) Commencing with respect to services to be performed after the Effective Time, a Qualified Director may elect to defer all or any portion of his or her Other Director Compensation relating to his or her services as a Qualified Director during a calendar year. Any portion so elected will automatically apply to the Qualified Director's Other Director Compensation for the year as adjusted from time to time. (c) Elective deferrals of a Qualified Director's Retainer Share Amount and Other Director Compensation will be made in accordance with the following rules: (i) An election made pursuant to this Section 3.3 will not be effective unless it is made on a properly completed election form received by the Administrator by the last day of the calendar year immediately preceding the calendar year to which the election relates or, in the case of an individual who becomes a Qualified Director after 2 the first day of the calendar year, within 30 days after the date such individual becomes a Qualified Director. Notwithstanding the foregoing, with respect to an initial deferral election that is made in connection with the adoption of the Plan, such election will be effective if received by the Administrator by April 30, 1997. Any deferral elections under this Section 3.3 will apply only to a Qualified Director's Retainer Share Amount and Other Director Compensation relating to services performed after the effective date of the election. (ii) A Qualified Director may revoke a deferral election made pursuant to this Section 3.3 at any time. Any such revocation will be effective with respect to any payment of a Qualified Director's Retainer Share Amount and Other Director Compensation that (A) follows by at least 30 days (or such shorter period as Plan Rules may allow) the Administrator's receipt of a properly completed form, and (B) relates to services as a Qualified Director after the date on which the Administrator receives such notice. Upon making a revocation, the Qualified Director will be unable to make further deferrals of his or her Retainer Share Amount and Other Director Compensation until the next calendar year. (iii) In conjunction with each deferral election made pursuant to Section 3.3(b), a Qualified Director must elect, in accordance with and subject to Plan Rules, how the deferral is to be allocated (in increments of five percent only) among his or her Cash Account and Share Account. Such an election is irrevocable after the latest date by which the deferral election to which it relates must be received by the Administrator to be effective. All deferrals of a Qualified Director's Retainer Share Amount will automatically be credited to such Qualified Director's Share Account. (iv) Deferrals of the Retainer Share Amount pursuant to Section 3.3(a) will be credited to a Qualified Director's Share Account as of the date on which the Retainer Shares would have been issued pursuant to Section 3.2 but for his or her deferral election. Deferrals of Other Director Compensation pursuant to Section 3.3(b) will be credited to a Qualified Director's Cash Account or Share Account, as the case may be, as of the date on which such Other Director Compensation would have been paid but for his or her deferral election. Such credits to the Qualified Director's Cash Account will be in U.S. dollars in an amount equal to the amount of the deferral allocated to the Cash Account by the Qualified Director. Such credits to a Qualified Director's Share Account will be the number of full and fractional Share Units determined by dividing the Retainer Share Amount to be allocated to the Share Account by the Market Price on the date as of which the credit is made. 3.4 EARNINGS CREDITS. (a) CASH ACCOUNT. As of the first day of each calendar quarter, a Participant's Cash Account will be credited with interest, calculated on the basis of the balance in the Participant's Cash Account as of the last day of the immediately preceding calendar quarter, in an amount equal to the "applicable percentage" of the average daily balance of the Account for such immediately preceding calendar quarter. The applicable percentage for a given calendar quarter is the quarterly equivalent of the average of the annual yield set forth for each month during such calendar quarter in the MOODY'S BOND RECORD, published by Moody's Investor's Service, Inc. (or any successor thereto) under the heading of "Moody's Corporate Bond Yield Averages -- Av. 3 Corp." or, if such yield is no longer available, a substantially similar average selected by the Administrator. (b) SHARE ACCOUNT. (i) As of the first day of the calendar quarter first following the date on which dividends are paid on Shares, a Participant's Share Account will be credited with that number of full and fractional Share Units determined by dividing the dollar amount of the dividends that would have been payable to the Participant if the number of Share Units credited to the Participant's Share Account on the record date for such dividend payment had then been Shares registered in the name of such Participant by the Market Price on the date as of which the credit is made. (ii) In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering or any other change in the Company's corporate structure or Shares, the Administrator will make such adjustment, if any, as the Administrator may deem appropriate in the number and kind of Share Units credited to Share Accounts. 3.5 VESTING. Each Participant always has a fully vested nonforfeitable interest in his or her Account. 4. DISTRIBUTION. 4.1 DISTRIBUTION TO PARTICIPANT. (a) FORM. Distribution to a Participant will be made in the form of a lump sum payment unless (i) the Participant elects, on a properly completed form, to receive his or her distribution in the form of annual installment payments for a period of not more than 10 years and (ii) other than cessation resulting from Disability, the date on which he or she ceases to be a member of the Board follows by more than one year the date on which a properly completed election form is received by the Administrator. Any election made pursuant to this Section 4.1(a) may be changed from time to time upon the Administrator's receipt of a properly completed form, provided that, other than cessation resulting from Disability, such change will not be valid and will not have any effect unless it is made on a properly completed form received by the Administrator more than one year prior to a Participant's cessation of service as a member of the Board. Any election made pursuant to this Section 4.1(a) will apply to the entire balance of the Participant's Account attributable to deferral credits with respect to the period through the date on which he or she ceases to be a member of the Board. Any distribution from a Participant's Cash Account will be made in cash only. Any distribution from a Participant's Share Account will be made in full Shares only and cash in lieu of any fractional Share. (b) TIME. Distribution to a Participant will be made or commence on or as soon as administratively practicable after the first day of the calendar quarter that follows the date on which the Participant ceases to be a member of the Board. (c) AMOUNT. (i) CASH ACCOUNT. 4 (A) LUMP SUM. The amount of a lump sum payment from a Participant's Cash Account will be equal to the balance of the Account as of the first day of the calendar month coinciding with or immediately preceding the date on which the payment is made. (B) INSTALLMENTS. The amount of an installment payment from a Participant's Cash Account will be determined by dividing the balance of the Account as of the first day of the calendar month coinciding with or immediately preceding the date on which the payment is made by the total number of remaining payments (including the current payment). (ii) SHARE ACCOUNT. (A) LUMP SUM. A lump sum distribution from a Participant's Share Account will consist of the number of Shares equal to the number of full Share Units credited to the Account as of the first day of the calendar month coinciding with or immediately preceding the date on which the distribution is made plus cash in lieu of any fractional Share Units then credited to the Account in an amount based on the Market Price on that date. (B) INSTALLMENTS. Installment distributions from a Participant's Share Account, other than the final distribution, will consist of the number of Shares determined by dividing the number of full Share Units credited to the Account as of the first day of the calendar month coinciding with or immediately preceding the date on which the distribution is made by the total number of remaining payments (including the current payment) and rounding the quotient to the next higher full Share. The amount of the final payment will be determined in accordance with clause (A). (d) SPECIAL RULES. The provisions of this Section 4.1(d) will apply notwithstanding Section 4.1(a), (b) or (c) or any election by a Participant to the contrary. (i) WITHDRAWALS DUE TO UNFORESEEABLE EMERGENCY. A distribution will be made to a Participant from his or her Share or Cash Account if the Participant submits a written distribution request to the Administrator and the Administrator determines that the Participant has experienced an Unforeseeable Emergency. The amount of the distribution may not exceed the lesser of (a) the amount necessary to satisfy the emergency, as determined by the Administrator, or (b) the balance of the Participant's Account as of the date of the distribution determined in accordance with Section 4.1(c). Payments made on account of an Unforeseeable Emergency will not be made to the extent that such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant's assets (to the extent that such liquidation would not itself cause severe financial hardship) or by cessation of deferrals under Section 3.3. Any distribution pursuant to this Section 4.1(d)(i) will be made in the form of a lump sum payment (in cash from the Cash Account and in Shares from the Share Account) as soon as administratively practicable after the Administrator's determination that the Participant has experienced an Unforeseeable Emergency and will be made first from the Participant's Cash Account and then from the Participant's Share Account, with the amount distributed from the 5 Share Account determined based upon the Market Price as of the first day immediately preceding the date on which the distribution is made. (ii) SMALL BENEFITS. If the balance of the Cash Account of a Participant who has ceased to be a member of the Board is less than $5,000 as of the first day of a calendar month, such balance will be distributed to the Participant in the form of a lump sum cash payment as soon as administratively practicable thereafter. (ii) ACCELERATED DISTRIBUTION. A Participant may, at any time, elect an immediate distribution of his or her Account in an amount equal to 90 percent of the balance of the Account as of the date of the distribution determined in accordance with Section 4.1(c), in which case the remaining balance of the Account will be forfeited. The distribution will be made in the form of a lump sum payment as soon as administratively practicable after the Administrator's receipt of a written application on a form furnished by the Administrator. Any distribution from a Participant's Cash Account will be made in cash only. Any distribution from a Participant's Share Account will be made in full Shares only and cash in lieu of any fractional Share. (e) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from which a distribution is made will be reduced by the amount of the distribution as of the date of the distribution. 4.2 DISTRIBUTION TO BENEFICIARY. (a) FORM. In the event of a Participant's death, the balance of the Participant's Account will be distributed to the Participant's Beneficiary in a lump sum payment whether or not payments had commenced to the Participant in the form of installments prior to his or her death. Any distribution from a Participant's Cash Account will be made in cash and any distribution from a Participant's Share Account will be made in full Shares and cash in lieu of any fractional Share. (b) TIME. Distribution to a Beneficiary will be made as soon as administratively practicable after the date on which the Administrator receives notice of the Participant's death. (c) AMOUNT. The amount of the payment will be determined in accordance with Section 4.1(c). (d) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from which a distribution is made will be reduced by the amount of the distribution as of the date of the distribution. (e) BENEFICIARY DESIGNATION. (i) Each Participant may designate, on a form furnished by the Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of his or her Account after his or her death, and the Participant may change or revoke any such designation from time to time. No such designation, change or revocation is effective unless executed by the Participant and received by the Administrator during the Participant's lifetime. 6 (ii) If, for all or any portion of his or her Account, a Participant fails to designate a Beneficiary, revokes a Beneficiary designation without naming another Beneficiary or designates one or more Beneficiaries, none of whom survives the Participant or exists at the time in question, such Account or portion will be paid to the Participant's surviving spouse or, if the Participant is not survived by a spouse, to the representative of the Participant's estate. (iii) The automatic Beneficiaries specified above and, unless the designation otherwise specifies, the Beneficiaries designated by the Participant, become fixed as of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of the payment due such Beneficiary, the payment will be made to the representative of such Beneficiary's estate. Any designation of a Beneficiary by name that is accompanied by a description of relationship or only by statement of relationship to the Participant is effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. 4.3 LIMITATIONS ON SHARE DISTRIBUTIONS. Notwithstanding any other provision of the Plan to the contrary, neither the Company nor the Trustee is required to issue or distribute any Shares under this Plan, and a distributee may not sell, assign, transfer or otherwise dispose of Shares issued or distributed pursuant to 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 Company deems necessary or advisable. The Company or the Trustee may condition such issuance, distribution, 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, as may be deemed necessary or advisable by the Company in order to comply with such securities laws or other restrictions. 4.4 PAYMENT IN EVENT OF INCAPACITY. If any individual entitled to receive any payment under the Plan is, in the judgment of the Administrator, physically, mentally or legally incapable of receiving or acknowledging receipt of the payment, and no legal representative has been appointed for the individual, the Administrator may (but is not required to) cause the payment to be made to any one or more of the following as may be chosen by the Administrator: the Beneficiary (in the case of the incapacity of a Participant); the institution maintaining the individual; a custodian for the individual under the Uniform Transfers to Minors Act of any state; or the individual's spouse, children, parents, or other relatives by blood or marriage. The Administrator is not required to see to the proper application of any such payment, and the payment completely discharges all claims under the Plan against the Company, the Plan and the Trust to the extent of the payment. 5. SOURCE OF PAYMENTS; NATURE OF INTEREST. 5.1 ESTABLISHMENT OF TRUST. (a) The Company may establish a Trust with an independent corporate trustee. The Trust must be a grantor trust with respect to which the Company is treated as grantor for purposes of Code section 677 and must provide that, upon the insolvency of the Company, Trust assets will be used to satisfy claims of the Company's general creditors. The Company will pay all taxes of any and all kinds whatsoever payable in respect of the Trust assets or any transaction with respect to the Trust assets. The Company may from time to time transfer to the Trust cash, 7 marketable securities or other property acceptable to the Trustee in accordance with the terms of the Trust. (b) Notwithstanding subsection (a), not later than the effective date of a Change in Control, the Company must transfer to the Trust an amount not less than the amount by which (i) 125 percent of the aggregate balance of all Participants' Accounts as of the last day of the month immediately preceding the effective date of the Change in Control exceeds (ii) the value of the Trust assets attributable to amounts previously contributed by the Company as of the most recent date as of which such value was determined. 5.2 SOURCE OF PAYMENTS. (a) The Company will pay, from its general assets, the benefits pursuant to Section 4 attributable to a Participant's Account, and all costs, charges and expenses relating thereto. (b) The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of the Company's obligations under the Plan in accordance with the terms of the Trust. The Company is responsible for paying any benefits attributable to a Participant's Account that are not paid by the Trust. 5.3 STATUS OF PLAN. Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of the Plan, the Participant's or other person's only interest under the Plan being the right to receive the benefits set forth herein. The Trust is established only for the convenience of the Company and the Participants, and no Participant has any interest in the assets of the Trust prior to distribution of such assets pursuant to the Plan. Until such time as Shares are distributed to a Participant, Beneficiary of a deceased Participant or other person, he or she has no rights as a shareholder with respect to any Shares Units credited to a Share Account pursuant to the Plan. To the extent that the Participant or any other person acquires a right to receive benefits under the Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Company. 5.4 NON-ASSIGNABILITY OF BENEFITS. The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process. 6. AMENDMENT AND TERMINATION. 6.1 AMENDMENT. (a) The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable. To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Board and executed in the name of the Company by its President or a Vice President and attested by the Secretary or an Assistant Secretary. (b) An amendment adopted in accordance with Section 6.1(a) is binding on all interested parties as of the effective date stated in the amendment; provided, however, that no amendment will have any retroactive effect so as to deprive any Participant, or the Beneficiary of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment, determined as if such 8 Participant had terminated service as a director immediately prior to the effective date of the amendment. (c) Without limiting Section 6.1(a), the Company reserves the right to amend this Plan to change the method of determining the earnings credited to Participants' Accounts pursuant to Section 3.4 and to apply such new method not only with respect to the portion of the Accounts attributable to credits made after the date on which such amendment is adopted but also with respect to the portion of the Accounts attributable to credits made prior to the date on which such amendment is adopted and regardless of whether such new method would result in materially lower earnings credits than the old method. (d) The provisions of the Plan in effect at the termination of a Participant's service as a director will, except as otherwise expressly provided by a subsequent amendment, continue to apply to such Participant. 6.2 TERMINATION. The Company reserves the right to terminate the Plan at any time. The Plan will terminate as of the date specified by the Company in a written instrument by its authorized officers to the Administrator, adopted in the manner of an amendment. Upon the termination of the Plan, any benefits to which Participants have become entitled prior to the effective date of the termination will continue to be paid in accordance with the provisions of Section 4, provided that a majority of the members of the Board who are not then Participants may cause the entire interest in the Plan of any or all Participants, or the Beneficiaries of any or all deceased Participants, to be distributed in the form of an immediate lump sum payment. 7. DEFINITIONS, CONSTRUCTION AND INTERPRETATION. The definitions and rules of construction and interpretation set forth in this Section 7 apply in construing the Plan unless the context otherwise indicates. 7.1 ACCOUNT. "Account" means the bookkeeping account or accounts maintained with respect to a Participant pursuant to Section 3.1. 7.2 ADMINISTRATOR. The "Administrator" of the Plan is the Nominating Committee of the Board or such other committee or the person to whom administrative duties are delegated pursuant to the provisions of Section 8.1, as the context requires. 7.3 ANNUAL RETAINER. "Annual Retainer" means the regular retainer payable by the Company to a Qualified Director for a 12-month period of service as a Qualified Director, exclusive of fees specifically paid for attending or chairing regular or special meetings of the Board and Board committees, fees or special retainers paid for membership on standing Board committees or for serving as the chair of the Board or standing Board committees, expense allowances or reimbursements, insurance premiums and any other payments that are determined by reference to factors other than holding office as a Qualified Director. 7.4 BENEFICIARY. "Beneficiary" with respect to a Participant is the person designated or otherwise determined under the provisions of Section 4.2(e) as the distributee of benefits payable after the Participant's death. A person designated or otherwise determined to be a Beneficiary under the terms of the Plan has no interest in or right under the Plan until the Participant in question has died. A Beneficiary will cease to be such on the day on which all benefits to which he, she or it is entitled under the Plan have been distributed. 9 7.5 BOARD. "Board" means the board of directors of the Company. 7.6 CASH ACCOUNT. "Cash Account" means an Account to which amounts are credited in U.S. dollars. 7.7 CHANGE IN CONTROL. "Change in Control" means any of the following: (a) the sale, lease, exchange or other transfer, directly or indirectly, of all or substantially all of the assets of the Company, in one transaction or in a series of related transactions, to any person; (b) the approval by the stockholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; any person is or becomes after the Effective Time the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20 percent or more, but not more than 50 percent, 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, or (ii) more than 50 percent 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 the effective date of such merger or consolidation have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or consolidation of securities of the surviving company representing (a) 50 percent or more, but not more than 80 percent, 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 (b) less than 50 percent 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); (e) the continuity directors cease for any reason to constitute at least a majority of the Company's board of directors; or (f) a change in control of the Company of a nature that would be required to be reported pursuant to section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such reporting requirement. (g) For purposes of this Section 7.7: (i) a "continuity director" means any individual who is a member of the Board as of the Effective Time 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); 10 (ii) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time; and (iii) "person" means any individual, corporation, partnership, group, association or other "person," as such term is defined in section 14(d) of the Exchange Act, other than (A) the Company; (B) any corporation at least a majority of whose securities having ordinary voting power for the election of directors is owned, directly or indirectly, by the Company; (C) any other 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 the entity's governing body; or (D) any benefit plan sponsored by the Company, a corporation described in clause (B) or an entity described in clause (C). 7.8 CODE. "Code" means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes a reference to that provision as it may be amended from time to time and to any successor provision. 7.9 COMPANY. "Company" means Nash Finch Company. 7.10 CROSS REFERENCE. References in the Plan to a particular section refer to that section within the Plan, references within a section of the Plan to a particular subsection refer to that subsection within the same section, and references within a section or subsection to a particular clause refer to that clause within the same section or subsection, as the case may be. 7.11 DISABILITY. "Disability" means the disability of a Qualified Director such as would entitle the Qualified Director to receive income benefits pursuant to the long-term disability plan of the Company then covering the Qualified Director or, if no such plan exists or is applicable to the Qualified Director, the permanent and total disability of the Qualified Director within the meaning of Code section 22(e)(3). 7.12 EFFECTIVE TIME. "Effective Time" means such time as the Plan is approved by the Company's stockholders. 7.13 GOVERNING LAW. All questions pertaining to the construction, validity, effect and enforcement of the Plan will be determined in accordance with the internal, substantive laws of the State of Minnesota without regard to the conflict of laws rules of the State of Minnesota or any other jurisdiction. 7.14 HEADINGS. The headings of sections are included solely for convenience of reference; if there exists any conflict between such headings and the text of the Plan, the text will control. 7.15 MARKET PRICE. "Market Price" means the closing sale price for Shares on a specified date or, if Shares were not then traded, on the most recent prior date when Shares were traded, all as reported on the Nasdaq National Market or such other exchange as the Shares may be traded from time to time. 7.16 NUMBER AND GENDER. Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular, and one gender may be read as the other gender. 7.17 OTHER DIRECTOR COMPENSATION. "Other Director Compensation" means all amounts payable by the Company to a Qualified Director for his or her services to the Company as a Qualified 11 Director, (a) including, without limitation, fees specifically paid for attending or chairing regular or special meetings of the Board and Board committees, but (b) excluding the Retainer Share Amount, expense allowances or reimbursements and insurance premiums 7.18 PARTICIPANT. "Participant" is a current or former Qualified Director to whose Account amounts have been credited pursuant to Section 3 and who has not ceased to be a Participant pursuant to Section 2.4. 7.19 PLAN. "Plan" means the Nash Finch Company 1997 Non-Employee Director Stock Compensation Plan, as from time to time amended or restated. 7.20 PLAN RULES. "Plan Rules" are rules, policies, practices or procedures adopted by the Administrator pursuant to Section 8.2. 7.21 QUALIFIED DIRECTOR. "Qualified Director" means an individual who is a member of the Board and who is not a current employee of the Company or any of its subsidiaries. 7.22 RETAINER SHARES. "Retainer Shares" means the number of full and fractional Shares determined by dividing the Retainer Share Amount for a calendar quarter by the Market Price on the first day of the calendar quarter that first follows the calendar quarter for which such Retainer Share Amount has been determined. 7.23 RETAINER SHARE AMOUNT. "Retainer Share Amount" means, with respect to any calendar quarter, the amount determined by (i) taking an amount equal to 50 percent (33-1/3 percent with respect to the calendar quarters in the 1997 calendar year) of the Annual Retainer payable by the Company to Qualified Directors for such calendar quarter and (ii) multiplying such amount by a fraction, the numerator of which is the number of days during such calendar quarter (or the number of days after the Effective Time with respect to the calendar quarter in which the Effective Time occurs) that the individual served as a Qualified Director and the denominator of which is the total number of days in such calendar quarter. 7.24 SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as amended. Any reference to a specific provision of the Securities Act includes a reference to that provision as it may be amended from time to time and to any successor provision. 7.25 SHARE ACCOUNT. "Share Account" means an Account to which amounts are credited in Share Units. 7.26 SHARE UNITS. "Share Units" means a unit credited to a Participant's Share Account pursuant to the Plan, each of which represents the equivalent of one Share. 7.27 SHARES. "Shares" means shares of common stock of the Company, $1.66-2/3 par value, or such other class or kind of shares or other securities as may be applicable pursuant to Section 3.3(b)(ii). 7.28 TRUST. "Trust" means any trust or trusts established by the Company pursuant to Section 5.1. 7.29 TRUSTEE. "Trustee" means the independent corporate trustee or trustees that at the relevant time has or have been appointed to act as Trustee of the Trust. 12 7.30 UNFORESEEABLE EMERGENCY. "Unforeseeable Emergency" means an unanticipated emergency that is caused by an event beyond the Participant's control resulting in a severe financial hardship that cannot be satisfied through other means. The existence of an unforeseeable emergency will be determined by the Administrator. 8. ADMINISTRATION. 8.1 ADMINISTRATOR. The general administration of the Plan and the duty to carry out its provisions will be vested in the Nominating Committee of the Board or such other Board committee as may be subsequently designated as Administrator by the Board. Such committee may delegate such duty or any portion thereof to a named person and may from time to time revoke such authority and delegate it to another person. 8.2 PLAN RULES AND REGULATIONS. The Administrator has the discretionary power and authority to make such Plan Rules as the Administrator determines to be consistent with the terms, and necessary or advisable in connection with the administration, of the Plan and to modify or rescind any such Plan Rules. 8.3 ADMINISTRATOR'S DISCRETION. The Administrator has the sole discretionary power and authority to make all determinations necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan Rules whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations. In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly. 8.4 SPECIALIST'S ASSISTANCE. The Administrator may retain such actuarial, accounting, legal, clerical and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services. All costs of administering the Plan will be paid by the Company. 8.5 INDEMNIFICATION. The Company agrees to indemnify and hold harmless, to the extent permitted by law, each director, officer and employee of the Company and any subsidiary or affiliate of the Company against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person's services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Company has the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision. 9. MISCELLANEOUS. 9.1 WITHHOLDING AND OFFSETS. The Company and the Trustee retain the right to withhold from any compensation, deferral and/or benefit payment pursuant to the Plan, any and all tax as the Company or Trustee deems necessary, and the Company and the Trustee may offset against amounts payable to a Participant or Beneficiary under the Plan any amounts then owing to the Company by such Participant or Beneficiary. The Company or the Trustee, as the case may be, in its sole discretion, may permit Participants to elect whether to satisfy their obligations under this Section 9.1 by having such 13 amounts withheld from any compensation, deferral and/or benefit payment pursuant to the Plan or by remitting such amounts to the Company or the Trustee, or by a combination of such methods. 9.2 OTHER BENEFITS. Neither amounts deferred nor amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of the Company unless otherwise expressly provided thereunder. 9.3 NO WARRANTIES REGARDING TAX TREATMENT. The Company makes no warranties regarding the tax treatment to any person of any deferrals or payments made pursuant to the Plan, and each Participant will hold the Administrator and the Company and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan. 9.4 NO RIGHTS TO CONTINUED SERVICE CREATED. Neither the establishment of or participation in the Plan gives any individual the right to continued service on the Board or limits the right of the Company or its stockholders to terminate or modify the terms and conditions of service of such individual on the Board or otherwise deal with any individual without regard to the effect that such action might have on him or her with respect to the Plan. 9.5 SUCCESSORS. Except as otherwise expressly provided in the Plan, all obligations of the Company under the Plan are binding on any successor to the Company whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Company. 14 EX-10.2 3 1994 STOCK INCENTIVE PLAN NASH-FINCH COMPANY 1994 STOCK INCENTIVE PLAN (As amended, effective May 13, 1997) 1. PURPOSE OF PLAN. The purpose of the Nash-Finch Company 1994 Stock Incentive Plan (the "Plan") is to advance the interests of Nash-Finch Company (the "Company") and its shareholders 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 11.1 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 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. 2.7. "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. 1 2.8. "ELIGIBLE RECIPIENTS" means all full-time, salaried employees (including, without limitation, officers and directors who are also employees) 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), the mean between the reported high and low sale prices of the Common Stock as reported on the National Association of Securities Dealers Automated Quotation National Market System, or any exchange on which the Common Stock is listed. 2.11. "INCENTIVE AWARD" means an Option, Restricted Stock Award or Performance Unit 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 8 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 performance 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 7 of the Plan that is subject to the restrictions on transferability and the risk of forfeiture imposed by the provisions of such Section 7. 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. 2.20. "SECURITIES ACT" means the Securities Act of 1933, as amended. 2 2.21 "SUBSIDIARY" means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant equity interest, as determined by the Committee. 2.22. "TAX DATE" means the date any withholding tax obligation arises under the Code for a Participant with respect to an Incentive Award. 3. PLAN ADMINISTRATION. 3.1. THE COMMITTEE. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, the Plan will be administered by a committee (the "Committee") consisting solely of not less than two members of the Board who are "disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act. 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. 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 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 Common Stock, cash, 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, accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award, accept the surrender of any outstanding Incentive Award or, to the extent not previously 3 exercised or vested, authorize the grant of new Incentive Awards in substitution for surrendered Incentive Awards; 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 regrant of such Incentive Award for purposes of this Plan. (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 the sum of (a) 600,000 shares of Common Stock, and (b) any shares of Common Stock that, as of the date the Plan is approved by the Company's stockholders, are then available for issuance under the Company's 1988 Long-Term Stock Incentive Plan, which shall be terminated upon stockholder approval of the Plan. Notwithstanding the foregoing, no more than 450,000 shares of Common Stock may be cumulatively available for issuance under the Plan pursuant to Incentive Awards which are not Options, subject to adjustment as provided in Section 4.3 of the Plan. The maximum number of shares authorized and reserved may be increased from time to time by approval of the Board and, if required pursuant to Rule 16b-3 under the Exchange Act, Section 422 of the Code, or the rules of any securities exchange or the National Association of Securities Dealers, Inc., the shareholders of the Company. Notwithstanding any other provision of the Plan to the contrary, no Participant in the Plan may be granted, during the term of the Plan, any Options or 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 an aggregate of 10% of the total number of shares of Common Stock reserved under the Plan. 4 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, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be 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 Participants, the number, kind and, where applicable, exercise price of securities subject to outstanding Incentive Awards. 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 achievement of economic objectives of the Company or its Subsidiaries. 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. 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 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 (110% of the Fair Market Value if, at the time an 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). 5 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 after 10 years from its date of grant. 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, a promissory note (on terms acceptable to the Committee in its sole discretion) or by a combination of such methods. 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) 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. RESTRICTED STOCK AWARDS. 7.1. 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. 7.2. RIGHTS AS A SHAREHOLDER; TRANSFERABILITY. Except as provided in Sections 7.1, 7.3 and 12.3 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 6 this Section 7 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. 7.3. 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 such 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 Participants consent 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. 7.4. ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions referred to in this Section 7, 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. 8. PERFORMANCE UNITS. 8.1. GRANT. 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 vested Performance Units will be made to the Participant (i.e., Common Stock, cash or any combination thereof), and to the extent shares of Common Stock are issued, whether such shares will be subject to any transferability restrictions. 8.2 DIVIDEND EQUIVALENTS. The Committee shall determine in its sole discretion whether to credit a Participant's Performance Units for dividend equivalents representing dividends or distributions (including cash dividends as distributions) paid with respect to shares of Common Stock during the period such Performance Units are outstanding. 7 9. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. 9.1. TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event a Participant's employment or other service with the Company and all Subsidiaries is terminated by reason of death, Disability or Retirement; (a) All outstanding Options then held by the Participant will become immediately exercisable in full and will remain exercisable for a period of one year after such termination (but in no event after the expiration date of any such Option); (b) All outstanding Restricted Stock Awards and Performance Units then held by the Participant will terminate, vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Restricted Stock Awards and/or Performance Units. 9.2. TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT. 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 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 then held by the Participant will terminate, vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units. 9.3. MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the other provisions of this Section 9, 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 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 and Performance Units 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 may remain exercisable beyond its expiration date. 9.4. BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS. Notwithstanding anything in this Plan to the contrary, in the event that a Participant materially breaches the terms of any 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. 8 9.5. 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. 10. PAYMENT OF WITHHOLDING TAXES. 10.1. 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 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. 10.2. 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 10.1 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. 11. CHANGE IN CONTROL. 11.1. CHANGE IN CONTROL. For purposes of this Section 11.1, a "Change in Control" of the Company will mean the following: (a) the sale, lease, exchange or other transfer, directly or indirectly, of all or substantially all of the assets of the Company (in one transaction or in a series of related transactions) to any Person (as defined in Section 11.3 below). (b) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; (c) a merger or consolidation to which the Company is a party if the shareholders of the Company immediately prior to the effective date of such merger or consolidation have "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), immediately following the effective date 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 Incumbent Directors (as defined in 9 Section 11.2 below), 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 Incumbent Directors); (d) any person 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 50% or more, 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 Incumbent Directors, 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 Incumbent Directors); (e) the Incumbent Directors cease for any reason to constitute at least a majority of the Board; or (f) a change in control of the Company of a nature that would be required to be reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such reporting requirements. 11.2. INCUMBENT DIRECTORS. For purposes of this Section 11, "Incumbent Directors" of the Company means any individuals who are members of the Board on the effective date of the Plan and any individual who subsequently becomes a member of the Board whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors comprising the Board on the effective date of the Plan (either by specific vote or by approval of the Company's proxy statement in which such individual is named as a nominee for director without objection to such nomination). 11.3. PERSON. For purposes of this Section 11, "Person" includes any individual, corporation, partnership, group, association or other "person," as such term is defined in Section 14(d) of the Exchange Act, other than (i) the Company; (ii) any corporation at least a majority of whose securities having ordinary voting power for the election of directors is owned, directly or indirectly, by the Company; (iii) any other 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 the entity's governing body; or (iv) any benefit plan sponsored by the Company, a corporation described in clause (ii) or an entity described in clause (iii). 11.4. ACCELERATION OF VESTING. Without limiting the authority of the Committee under Section 3.2 of the Plan, if a Change in Control of the Company occurs, then, if approved 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 outstanding Options then held by the Participant 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 have been granted remains in the employ or service of the Company or any Subsidiary; (b) all outstanding Restricted Stock Awards then held by the Participant will become immediately fully vested and non-forfeitable; and (c) all outstanding Performance Units then 10 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. 11.5. CASH PAYMENT FOR OPTIONS. If a Change in Control of the Company occurs, then 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 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. 11.6. LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything in Section 11.4 or 11.5 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 11.4 or the payment of cash in exchange for all or part of an Incentive Award as provided in Section 11.5 (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 which 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 11.4 or 11.5 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 such Participant is subject to a separate agreement with the Company or a Subsidiary which specifically provides that payments attributable to one or more forms of employee stock incentives or to payments made in lieu of employee stock incentives will not reduce any other payments under such agreement, even if it would constitute an excess parachute payment, or provides that the Participant will have the discretion to determine which payments will be reduced in order to avoid an excess parachute payment, then the limitations of this Section 11.6 will, to that extent, not apply. 12. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY. 12.1. 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. 12.2. RIGHTS AS A SHAREHOLDER. As a holder of Incentive Awards (other than Restricted Stock Awards), a Participant will have no rights as a shareholder unless and until such Incentive Awards are exercised for, or the Incentive Awards are 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 11 becomes the holder of record of such shares, except as the Committee may determine in its discretion. 12.3. RESTRICTIONS ON TRANSFER. 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 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 9 of the Plan) may be made by, the Participant's legal representatives, heirs and legatees. 12.4. 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. 13. 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 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. 14. 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 shareholders of the Company if shareholder approval of the amendment is then required pursuant to Rule 16b-3 under the Exchange Act, Section 422 or 162(m) of the Code or the rules of the National Association of Securities Dealers, Inc. No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of the affected Participant; 12 provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 3.2(c), 4.3 and 11 of the Plan. 15. EFFECTIVE DATE AND DURATION OF THE PLAN The Plan is effective as of February 22, 1994, the date it was adopted by the Board. The Plan will terminate at midnight on February 22, 2004, 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. 16. MISCELLANEOUS 16.1. 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. 16.2. 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. 13 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JAN-03-1998 DEC-29-1996 JUN-14-1997 909 0 241,653 22,522 297,904 546,920 577,274 (306,340) 964,903 292,728 377,171 0 0 19,292 219,860 964,903 1,896,597 1,923,282 1,670,639 1,889,938 0 2,139 14,820 16,385 6,865 9,520 0 0 0 9,520 .84 .84
-----END PRIVACY-ENHANCED MESSAGE-----