10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the twelve weeks ended June 15, 2002

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-785

NASH-FINCH COMPANY

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	41-0431960
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

7600 France Ave. South, Edina, Minnesota	55435
(Address of principal executive offices)	(Zip Code)

(952) 832-0534

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES   ý NO   o

As of July 22, 2001, 11,923,942 shares of Common Stock of the Registrant were outstanding.

PART I - FINANCIAL INFORMATION

                This report is for the twelve and twenty-four week interim periods beginning March 24, 2002 and December 30, 2001, respectively, and ended June 15, 2002.

                The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments necessary to a fair presentation have been included.

                For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2001.

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NASH FINCH COMPANY AND SUBSIDIARIESCondensed Consolidated Statements of Income (unaudited)(In thousands, except per share amounts)

	Twelve Weeks Ended			Twenty-four Weeks Ended
	June 15,		June 16,	June 15,	June 16,
	2002		2001	2002	2001
Total sales and revenues	$	937,050	949,559	1,857,891	1,854,498
Cost and expenses:
Cost of sales	828,477		842,447	1,645,403	1,644,320
Selling, general and administrative	79,342		79,380	157,554	158,043
Depreciation and amortization	9,165		10,631	18,472	21,278
Interest expense	6,651		8,085	13,298	16,287
Total costs and expenses	923,635		940,543	1,834,727	1,839,928
Earnings before income taxes	13,415		9,016	23,164	14,570
Income taxes	5,352		3,733	9,242	6,032
Net earnings	$	8,063	5,283	13,922	8,538
Basic earnings per share:	$	0.68	0.46	1.18	0.74
Diluted earnings per share:	0.66		0.44	1.15	0.72
Weighted average number of common shares outstanding and common equivalent shares outstanding:
Basic	11,795		11,579	11,752	11,543
Diluted	12,196		12,025	12,154	11,876

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands, except per share amounts)

	June 15,			December 29,		June 16,
	2002			2001		2001
	(unaudited)					(unaudited)
Assets
Current assets:
Cash	$	1,501		10,467		8,380
Accounts and notes receivable, net	165,119			166,808		131,736
Inventories	251,960			274,995		262,562
Prepaid expenses	14,322			16,345		15,911
Deferred tax assets	8,533			10,748		16,455
Total current assets	441,435			479,363		435,044
Investments in affiliates	556			621		704
Notes receivable, net	27,805			31,736		36,978
Property, plant and equipment:
Land	26,828			26,979		24,991
Buildings and improvements	158,540			157,159		152,066
Furniture, fixtures and equipment	319,906			319,378		309,347
Leasehold improvements	71,256			68,487		66,701
Construction in progress	7,977			4,309		1,678
Assets under capitalized leases	42,040			40,860		40,860
	626,547			617,172		595,643
Less accumulated depreciation and amortization	(355,253		)	(343,873	)	(335,508	)
Net property, plant and equipment	271,294			273,299		260,135
Goodwill, net	139,721			137,337		112,824
Investment in direct financing leases	13,017			13,490		13,945
Deferred tax asset, net	2,407			7,549		8,507
Other assets	25,308			26,850		25,883
Total assets	$	921,543		970,245		894,020
Liabilities and Stockholders’ Equity
Current liabilities:
Outstanding checks	$	13,408		57,750		10,662
Current maturities of long-term debt andcapitalized lease obligations	6,738			5,364		5,716
Accounts payable	216,284			217,822		236,670
Accrued expenses	81,281			90,869		76,149
Income taxes	7,267			11,819		14,127
Total current liabilities	324,978			383,624		343,324
Long-term debt	320,792			321,761		294,082
Capitalized lease obligations	47,027			47,046		48,120
Other liabilities	10,783			14,406		15,220
Stockholders’ equity:
Preferred stock — no par value
Authorized 500 shares;  none issued	—			—		—
Common stock of $1.66 2/3 par value
Authorized 50,000 shares, issued 11,981, 11,831 and11,764 shares, respectively	19,969			19,718		19,608
Additional paid-in capital	25,643			21,894		21,018
Restricted stock	(1,252		)	—		(4	)
Accumulated other comprehensive income	(2,479		)	(2,518	)	(949	)
Retained earnings	177,097			165,317		154,702
	218,978			204,411		194,375
Less cost of 68, 73 and 92 shares of common stock in treasury, respectively	(1,015		)	(1,003	)	(1,101	)
Total stockholders’ equity	217,963			203,408		193,274
Total liabilities and stockholders’ equity	$	921,543		970,245		894,020

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows (Unaudited)(In thousands)

	Twenty-four Weeks Ended
	June 15,			June 16,
	2002			2001
Operating activities:
Net earnings	$	13,922		8,538
Adjustments to reconcile net income to net cashprovided by operating activities:
Depreciation and amortization	18,472			21,278
Provision for bad debts	1,790			2,210
Deferred income tax expense	7,357			2,131
Other	62			(99	)
Changes in operating assets and liabilities, net of effectsof acquisitions
Accounts and notes receivable	(81		)	4,622
Inventories	23,889			9,278
Prepaid expenses	2,033			(3,958	)
Accounts payable	(1,568		)	49,369
Accrued expenses	(11,971		)	7,704
Income taxes	(4,553		)	727
Net cash provided by operating activities	49,352			101,800
Investing activities:
Disposal of property, plant and equipment	512			3,119
Additions to property, plant and equipment	(14,441		)	(20,413	)
Business acquired, net of cash	(3,356		)	(1,070	)
Loans to customers	(1,609		)	(9,954	)
Payments from customers on loans	6,022			3,667
Repurchase of receivables	—			(3,950	)
Other	1,767			(6,324	)
Net cash used in investing activities	(11,105		)	(34,925	)
Financing activities:
Payments of revolving debt	—			(17,300	)
Dividends paid	(2,142		)	(2,090	)
Payments of long-term debt	(990		)	(662	)
Payments of capitalized lease obligations	(987		)	(589	)
Decrease in outstanding checks	(44,342		)	(41,380	)
Other	1,248			1,992
Net cash used in financing activities	(47,213		)	(60,029	)
Net (decrease) increase in cash	$	(8,966	)	6,846
Supplemental disclosure of cash flow information:
Non cash investing and financing activities
Purchase of real estate under capital leases	$	1,180		3,866
Acquisition of minority interest	1,182			4,294

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIESConsolidated Statements of Stockholders’ Equity

Fiscal period ended June 15, 2002 December 29, 2001 and December 30, 2000	Common stock			Additionalpaid-in		Retained		Accumulated other  comprehensive		Restricted		Treasury stock					Totalstockholders’
(In thousands, except per share amounts)	Shares	Amount		capital		earnings		income (loss)		stock		Shares		Amount			equity
Balance at January 1, 2000	11,641	19,402		18,247		136,905		—		(57	)	(231	)	(1,823		)	172,674
Net earnings	—	—		—		15,471		—		—		—		—			15,471
Dividend declared of $.36 per share	—	—		—		(4,122	)	—		—		—		—			(4,122	)
Common stock issued for employee stock purchase plan	70	116		309		—		—		—		—		—			425
Amortized compensation under restricted stock plan	—	—		—		—		—		4		—		—			4
Repayment of notes receivable from holders ofrestricted stock	—	—		—		—		—		43		—		—			43
Distribution of stock pursuant to performance awards	—	—		8		—		—		—		5		37			45
Balance at December 30, 2000	11,711	19,518		18,564		148,254		—		(10	)	(226	)	(1,786		)	184,540
Net earnings	—	—		—		21,267		—		—		—		—			21,267
Other comprehensive income, net of tax
Deferred loss on hedging activities	—	—		—		—		(128	)	—		—		—			(128	)
Additional minimum pension liability	—	—		—		—		(2,390	)	—		—		—			(2,390	)
Comprehensive income	—	—		—		—		—		—		—		—			18,749
Dividend declared of $.36 per share	—	—		—		(4,204	)	—		—		—		—			(4,204	)
Treasury stock issued upon exercise of options	—	—		943		—		—		—		102		523			1,466
Common stock issued upon exercise of options	28	46		264		—		—		—		—		—			310
Common stock issued for employee stock purchase plan	92	154		655		—		—		—		—		—			809
Amortized compensation under restricted stock plan	—	—		—		—		—		1		—		—			1
Stock based deferred compensation	—	—		993		—		—		—		—		—			993
Repayment of notes receivable from holders ofrestricted stock	—	—		—		—		—		9		—		—			9
Distribution of stock pursuant to performance awards	—	—		475		—		—		—		51		260			735
Balance at December 29, 2001	11,831	19,718		21,894		165,317		(2,518	)	—		(73	)	(1,003		)	203,408
Net earnings	—	—		—		13,922		—		—		—		—			13,922
Other comprehensive income, net of tax
Deferred gain on hedging activities	—	—		—		—		39		—		—		—			39
Comprehensive income	—	—		—		—		—		—		—		—			13,961
Dividend declared of $.18 per share	—	—		—		(2,142	)	—		—		—		—			(2,142	)
Treasury stock issued upon exercise of options	—	—		73		—		—		—		7		37			110
Common stock issued upon exercise of options	15	24		120		—		—		—		—		—			144
Common stock issued for employee stock purchase plan	24	41		429		—		—		—		—		—			470
Issuance of restricted stock	50	84		1,373		—		—		(1,456	)	—		—			1
Amortized compensation under restricted stock plan	—	—		—		—		—		204		—		—			204
Stock based deferred compensation	—	—		81		—		—		—		—		—			81
Forfeiture of restricted stock issued pursuant to performance awards	—	—		(12	)	—		—		—		(3	)	(51		)	(63	)
Distribution of stock pursuant to performance awards	61	102		1,685		—		—		—		1		2			1,789
Balance at June 15, 2002 (unaudited)	11,981	$	19,969	25,643		177,097		(2,479	)	(1,252	)	(68	)	$	(1,015	)	217,963

See accompanying notes to condensed consolidated financial statements.

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Nash Finch Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

June 15, 2002

Note 1 — Basis of Presentation

                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 15, 2002, December 29, 2001, and June 16, 2001, and the results of operations and changes in cash flows for the 12 and 24-weeks ended June 15, 2002 and June 16, 2001, 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.

                The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

                Certain reclassifications have been made to the financial statements.  These reclassifications had no impact on net income, earnings per share or stockholders’ equity.

Note 2 — Inventories

                The Company uses the LIFO method for valuation of a substantial portion of inventories.  An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time.  Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of expected year-end inventory levels and costs.  Because these are subject to many forces beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation.  If the FIFO method had been used inventories would have been approximately $49.0 million, $47.8 million and $46.0 million higher at June 15, 2002, December 29, 2001 and June 16, 2001, respectively.  For the twenty-four week period ending June 15, 2002 and June 16, 2001, the Company recorded a LIFO charge of $1.2 million and $.9 million, respectively.

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Note 3 — Earning per share

                The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

	Twelve Weeks Ended			Twenty-four Weeks Ended
	June 15,		June 16,	June 15,	June 16,
	2002		2001	2002	2001
Numerator:
Net earnings	$	8,063	5,283	13,922	8,538
Denominator:
Denominator of basic earnings per share (weighted-average shares)	11,795		11,579	11,752	11,543
Effect of diluted options and awards	401		446	402	333
Denominator for diluted earnings per share (adjusted weighted average shares)	12,196		12,025	12,154	11,876
Basic earnings per share	$	.68	.46	1.18	.74
Diluted earnings per share	$	.66	.44	1.15	.72

Note 4 — Derivative Instruments

                The Company uses interest rate swap agreements that effectively convert a portion of variable rate debt to a fixed rate basis.  In addition, the Company is using a commodity swap agreement to reduce price risk associated with anticipated purchases of diesel fuel. Such swap agreements are considered to be a hedge against changes in future cash flows.  Accordingly, interest rate and commodity swap agreements are reflected at fair value in the Company’s consolidated balance sheet and the related gains or losses on these contracts are deferred in stockholders’ equity as a component of other comprehensive income.  These deferred gains and losses are then recognized as an adjustment to expense over the same period in which the related payments being hedged are recognized in the income statement.  For the twenty-four week period ending June 15, 2002 deferred gains in the amount of $.04 million, net of taxes, are recognized as other comprehensive income, increasing stockholder’s equity.

                At June 15, 2002 the Company had two outstanding interest rate swap agreements, which commenced on December 6, 2001, each with notional amounts of $35 million.  One expires on December 6, 2002 and the other on June 6, 2003.  The commodity swap, with a notional amount of 3,500 barrels, or approximately 40% of the Company’s monthly fuel consumption, expires in August 2003.

Note 5 — Recently Adopted Accounting Standards

                In July 2001, the Financial Accounting Standards Board (“FASB”) issued, Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.  These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should no longer be amortized but instead tested for impairment at least annually.  Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives.  These standards outline the criteria for initial recognition and measurement of

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intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing.  The Company was required to apply the provisions of SFAS No. 141 including the nonamortization provision of goodwill under SFAS No. 142 to all business combinations completed after June 30, 2001, while SFAS No. 142 is fully effective at the beginning of 2002.  The Company has performed the required impairment tests of goodwill and indefinite lived intangible assets and determined that no impairment issues exist.

Note 6 — Goodwill Amortization

                In conjunction with SFAS No. 142 the following table provides a reconciliation of 2001 reported earnings for the twelve and twenty-four weeks ended June 16, 2001 to adjusted earnings excluding goodwill amortization (in thousands, except per share amounts):

	Twelve Weeks			Twenty-four Weeks
	June 15, 2002		June 16, 2001	June 15, 2002	June 16, 2001
Reported net income:	$	8,063	5,283	13,922	8,538
Add back: Goodwill amortization net of income taxes	—		1,103	—	2,099
Adjusted net income	$	8,063	6,386	13,922	10,637
Basic earnings-per-share:
Reported net income	$	.68	.46	1.18	.74
Goodwill amortization net of income taxes	—		.09	—	.18
Adjusted net income	$	.68	.55	1.18	.92
Diluted earnings-per-share:
Reported net income	$	.66	.44	1.15	.72
Goodwill amortization net of income taxes	—		.09	—	.18
Adjusted net income	$	.66	.53	1.15	.90

Note 7 — Restricted Stock

On February 19, 2002 the Board of Directors awarded 50,000 shares of restricted stock to the Company’s Chief Executive Officer.  Under terms of the award, he has voting power over all of the shares, and is entitled to receive cash dividends or other distributions made to stockholders generally.  Investment power, however, will vest in 20% increments on February 19 of each of the years 2003 through 2007, inclusive.  The award provides for a cash payment in the amount equal to forty percent of the fair market value of each increment, at the time of vesting, to partially offset the taxes due upon lapse of the restrictions.  Compensation expense is recognized on a straight-line basis over the vesting period.

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Note 8 — Segment Reporting

A summary of the major segments of the business is as follows (in thousands):

Twelve weeks ended June 15, 2002

	Food Distribution		Retail	Military	Totals
Revenue from external customers	$	456,715	245,073	235,262	937,050
Inter-segment revenue	130,706		—	—	130,706
Segment profit	14,638		9,232	7,499	31,369

Twelve weeks ended June 16, 2001

	Food Distribution		Retail	Military	Totals
Revenue from external customers	$	478,360	237,117	234,082	949,559
Inter-segment revenue	131,296		—	—	131,296
Segment profit	13,644		8,723	7,713	30,080

Twenty-four weeks ended June 15, 2002

	Food Distribution		Retail	Military	Totals
Revenue from external customers	$	908,892	482,903	466,096	1,857,891
Inter-segment revenue	259,334		—	—	259,334
Segment profit	26,735		17,837	14,651	59,223

Twenty-four weeks ended June 16, 2001

	Food Distribution		Retail	Military	Totals
Revenue from external customers	$	932,722	466,644	455,132	1,854,498
Inter-segment revenue	260,140		—	—	260,140
Segment profit	25,494		15,684	14,183	55,361

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Reconciliation to statements of income:
(In thousands)

Twelve weeks ended June 15, 2002 and June 16, 2001

	2002			2001
Profit and loss
Total profit for segments	$	31,369		30,080
Unallocated amounts:
Adjustment of inventory to LIFO	(300		)	(692	)
Unallocated corporate overhead	(17,654		)	(20,372	)
Earnings before income taxes	$	13,415		9,016

Twenty-four weeks ended June 15, 2002 and June 16, 2001

	2002			2001
Profit and loss
Total profit for segments	$	59,223		55,361
Unallocated amounts:
Adjustment of inventory to LIFO	(1,223		)	(892	)
Unallocated corporate overhead	(34,836		)	(39,899	)
Earnings before income taxes	$	23,164		14,570

Note 9 — Subsequent Events

                On July 9, 2002 the Company extended two interest rate swap agreements, each with a notional amount of $35 million.  The agreements commence on December 6, 2002 and June 6, 2003 and are at rates of 3.50% and 3.97%, respectively.  Both agreements expire on October 6, 2004.

                In addition, the Company executed an additional swap agreement with a notional amount of $50 million at a rate of 2.75%.  The agreement begins on July 26, 2002 and expires on September 25, 2004.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Revenues

                Total revenues for the twelve-week second quarter were $937.1 million compared to $949.6 million last year, a decrease of 1.3%.  For the twenty-four weeks, total revenues increased .2% from $1.854 billion to $1.858 billion.

                Food distribution revenues for the twelve and twenty-four weeks ended June 15, 2002, were $456.7 million and $908.9 million respectively, compared to $478.4 million and $932.7 million for the same periods last year reflecting a decrease of 4.5%, and 2.6% for the twelve and twenty-four weeks, respectively.  The revenue decline is attributed to soft sales experienced by independent retailers because of new competition in certain markets, as well as the loss of marginal accounts the Company chose to no longer service.

                Retail segment revenues for the twelve and twenty-four weeks ended June 15, 2002, were $245.1 million and $482.9 million compared to $237.1 million and $466.6 million for the same periods last year, reflecting increases of 3.4% and 3.5% for the twelve and twenty-four weeks, respectively.  The increase is primarily attributed to the Company’s acquisition, in August 2001, of U Save Foods, Inc. (“U Save”), a privately held company operating 14 stores primarily in the state of Nebraska, offset by the sale of 20 stores in the Southeast region in 2001.  All U Save stores acquired have been converted to the Company’s primary banners.  Same store sales declined 3.6% compared to the twelve week second quarter last year and declined 2.2% compared to the twenty-four week period last year.  The decline is attributed to new store openings and increased competitive activity experienced system wide.  During the quarter the Company closed one under-performing conventional retail store that had reached the end of its lease.  In the first quarter of 2002 the Company acquired one conventional retail store and closed an additional under-performing store.  At the end of the quarter, the Company operated 112 stores compared to 105 stores at the end of the second quarter last year and 110 stores at the end of 2001.

                The Company has developed two specialty store formats, one designed to service the Hispanic market, which the Company believes is under-served by traditional grocery stores, and a second format under the Buy n Save® name to service low income, value conscious consumers.  During the quarter, the Company opened one new Buy n Save location.  In the first quarter, the Company opened one new Buy n Save store and converted two other existing stores to the Buy n Save format.  The Company currently operates a total of eight Buy n Save stores and expects to further expand this format in the Upper Midwest in 2002.  The Company currently operates three Hispanic format stores under the name Wholesale Food Outlet and has announced a new banner for the Hispanic stores called AVANZA™.  The first AVANZA store opened in the second quarter in Denver, Colorado, with expectation of opening additional stores during 2002.

                Military segment revenues for the quarter were $235.3 million compared to $234.1 million last year, an increase of .5%.  For the twenty-four weeks, revenues were $466.1 million compared to $455.1 million last year, an increase of 2.4%.  The increase resulted primarily from higher year-over-year exports to bases overseas. We expect overall sales to remain stable for the year.

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Gross Margin

                Gross margin for the quarter was 11.6% compared to 11.3% last year.  The improvement is attributed to increased productivity and efficient utilization of distribution facilities, improved retail store sales mix in higher margin departments and to a lesser degree the higher proportion of retail segment revenues.  For the twenty-four week period gross margin was an 11.4% in fiscal 2002 compared to 11.3% last year.

Selling, General and Administrative Expenses

                Selling, general and administrative expenses for the quarter, as a percent of total revenues, were 8.5% compared to 8.4% a year ago. The increase is largely due to a higher percentage of retail segment revenues that operate at higher expense levels than does food distribution or military offset by overhead cost reductions attained through implementation of many process improvements.  For the twenty-four week period selling, general and administration expenses were 8.5% for the current and prior year.

Depreciation and Amortization Expense

                Depreciation and amortization expense for the quarter was $9.2 million compared to $10.6 million last year, a decrease of 13.2%.  For the twenty-four weeks, depreciation and amortization expense decreased from $21.3 million last year to $18.5 million in 2002, a decrease of 13.1%.  The decrease primarily reflects the elimination of goodwill amortization of $1.4 million and $2.7 million for the twelve and twenty-four weeks, respectively, resulting from a new accounting standard (see Note 5 — Recently Adopted Accounting Standards) which was effective at the beginning of this year. 

Interest Expense

                Interest expense for the quarter was $6.7 million compared to $8.1 million last year, a decrease of 17.3%.  For the twenty-four week period interest expense was $13.3 million compared to $16.3 million, a decrease of 18.4%.  The decreased costs are attributed to lower borrowing rates this year, under the revolving credit facility, partially offset by an average borrowing level that was higher than last year.  The average borrowing rate under the revolving credit facility, which consists of a $100 million term loan and $150 million in revolving credit, including the impact of the swap agreements, was 4.39% this year compared to 9.30% last year.  Higher average borrowing levels under the revolving credit facility were a result of the termination of the receivable securitization agreement in December 2001.  The receivable securitization facility provided approximately $35 million in off balance sheet financing.

Income Taxes

                Income tax expense is provided on an interim basis using management’s estimate of the annual effective tax rate.  The effective income tax rate for 2002 decreased to 39.9% from 41.4% in fiscal 2001.  The reduction in the effective rate is primarily attributed to changes in accounting rules relating to elimination of goodwill amortization for financial reporting (see Note 5 — Recently Adopted Accounting Standards).

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Net Earnings

                Net earnings for the quarter were $8.1 million compared to $6.4 million last year, excluding goodwill amortization, an increase of 26.6%.  For the twenty-four weeks, net earnings increased 31.1% to $13.9 million from $10.6 million, excluding goodwill amortization.  The increase was driven by a combination of gross margin improvements, overhead cost reductions and lower interest rates.  All segments continue to contribute to the improvement over prior year performance through operational efficiencies, cost containment efforts and leveraging of procurement opportunities. Corporate overhead, which is not allocated back to business segments, generally decreased on a pretax basis by $2.7 million due to the elimination of goodwill amortization compared to last year.

EBITDA

                The Company’s revolving credit facility contains various restrictive covenants.  Several of these covenants are based on earnings from operations before interest, taxes, depreciation, amortization and non-recurring items (EBITDA).  At the end of the second quarter the Company is in compliance with all its debt convenants.  This information is not intended to be an alternative to performance measures under generally accepted accounting principles, but rather as a presentation important for understanding the Company’s performance relative to its debt covenants (in thousands):

	Twelve Weeks				Twenty-four Weeks
	June 15,			June 16,	June 15,	June 16,
	2002			2001	2002	2001
Earnings before income taxes
Add (Deduct):	$	13,415		9,016	23,164	14,570
LIFO effect	300			662	1,223	862
Depreciation and amortization	9,165			10,631	18,472	21,278
Interest expense	6,651			8,085	13,298	16,287
Other	(5		)	154	—	436
Total EBITDA	$	29,526		28,548	56,145	53,433

LIQUIDITY AND CAPITAL RESOURCES

                Historically, the Company has financed its capital needs through a combination of internal and external sources.  These sources include cash flow from operations, short-term bank borrowings, various types of long-term debt and lease financing.

                Cash provided by operating activities was $45.1 million for the first twenty-four weeks of 2002 compared to $101.8 million last year.  The change in cash flows from operating activities is primarily the result of changes in operating assets and liabilities as compared to the same period last year.

                Cash used in investing activities decreased from $34.9 million last year to $6.9 million for the twenty-four week period this year.  Investing activities in 2002 consisted primarily of $14.4 million in capital expenditures, offset by $8.6 million in net loan payments from customers.  The Company’s capital plan for the year is approximately $50 million with most initiatives scheduled during the remainder of the year. Also, during the twenty-four week period, the Company acquired a store in Wisconsin from an existing customer. Investing activities are funded by cash flows from operations and the revolving credit facility. Prior year investing activities primarily included $20.4 million for capital

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expenditures, $6.3 million of loans to customers, net of payments received, and the repurchase of $4.0 million in receivables under a revolving securitization agreement that was terminated in December 2001.

                Cash used in financing activities decreased from $60.0 million in 2001 to $47.2 million in 2002.  This change is primarily due to payments on the revolving credit facility in the prior year of $17.3 million.

                Working capital increased to $116.5 million from $95.7 million at year-end and $91.7 million last year.  The change from year-end is primarily attributed to a seasonal reduction in inventory and accounts payable including outstanding checks.  The increase compared to last year results primarily from an increase in accounts receivable largely due to the termination of the securitization agreement in December 2001.

                At June 15, 2002 total debt was $374.6 million compared to $374.2 million at the end of 2001 and $347.9 million last year. Amounts outstanding under the revolving credit facility were $40 million at the end of the quarter and at the end of last year as compared to $10 million at the end of the second quarter last year.  Changes in total debt largely reflect utilization of the revolving credit facility as a supplement to operating cash flows to fund transactions such as the U Save acquisition in August 2001 and the termination of the securitization agreement.  In December 2001, the Company entered into three swap agreements converting floating rate debt to fixed.  The agreements, each with notional amounts of $35 million, provide fixed interest rates of 2.35%, 2.58% and 2.97% expiring in six, twelve and eighteen month intervals, respectively.  The two remaining agreements were each extended through October 6, 2004 at rates of 3.50% and 3.97% subsequent to quarter end.  In addition the Company executed an additional swap agreement with a notional amount of $50 million at a rate of 2.75%.  The agreement begins on July 26, 2002 and expires on September 25, 2004.

                The Company believes that borrowing under the revolving credit facility, proceeds from its sale of subordinated notes, other credit agreements, cash flows from operating activities and lease financing will be adequate to meet the Company’s working capital needs, planned capital expenditures and debt service obligations for the foreseeable future.

FORWARD-LOOKING STATEMENTS

                This Form 10-Q and the documents that may be incorporated by reference into this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The words “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” and other similar expressions generally identify forward-looking statements.  These forward-looking statements are based largely on the Company’s current expectations and are subject to a number of risks and uncertainties, including, without limitation:

•risks related to the Company’s industry as a whole, including the emergence of new or growing competitors and the competitive practices in the Company’s industry, changes in the Company’s economic and business operating environments and changes in the food distribution and retail industry in which the Company operate;

•risks related to the Company’s business and strategy, including the Company’s ability to acquire, and successfully integrate, traditional grocery stores, successfully roll out the Company’s new store formats and retain the Company’s customers or acquire new customers, the risk of credit losses, the Company’s ability to attract and retain qualified personnel and the risk of issues with the quality,

15

safety or integrity of the food products the Company sells; and

•risks related to the Company’s indebtedness, including the adverse impact of outstanding debt on the Company’s operating results or of certain terms of the Company’s outstanding debt that could materially restrict the Company’s business and operating flexibility.

                Additional information regarding these and other risks is included in Exhibit 99.1, “Risk Factors,” filed with the Company’s Form 10-K for the fiscal year ended December 29, 2001.

                In light of these risks and uncertainties, there can be no assurance that the matters referred to in the forward-looking statements will in fact occur.  The forward-looking statements are based on the Company’s predictions of future performance and actual results may differ materially from those expressed in the forward-looking statements.  As a result, you should not place undue reliance on these forward-looking statements.  The Company does not undertake to update the Company’s forward-looking statements to reflect future events or circumstances.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                In December 2000 the Company completed the refinancing of a revolving credit facility.  The agreement has a five year term and provides a $100 million term loan and $150 million in revolving credit.  Borrowings under the term loan bear interest at the Eurodollar rate plus a margin increase and a commitment commission in the unused portion of the revolver.  The margin increase and the commitment commission are reset quarterly based on movement of a leverage ratio defined by the agreement.  The new agreement contains financial covenants which among other matters requires the Company to maintain predetermined ratio levels related to interest coverage, fixed charges, leverage and working capital.  The Company uses interest rate swap agreements to manage its exposure to variable rate debt.

                The Company is also subject to commodity price risk associated with the purchase of diesel fuel.  The Company uses a commodity swap agreement to hedge this risk (See Note 4 — Derivative Instruments and Note 9 — Subsequent Events).

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PART II - OTHER INFORMATION

Items 3 and 5 are not applicable.

Item  1                    Legal Proceedings

The Company is engaged from time to time in routine legal proceedings incidental to our business.  We do not believe that any pending legal proceedings will have a material impact on the business or financial condition of Nash Finch Company and its subsidiaries, taken as a whole.

Item  2                    Changes in Securities and Use of Proceeds

During the quarter, the Company and Wells Fargo Bank Minnesota, N.A. entered into an amendment to the Company’s Stockholder Rights Agreement.  The amendment further clarifies the terms of the Company’s Common Stock Purchase Rights, providing that the covenant to reserve shares of common stock to permit the exercise in full of all outstanding rights is not an immediate requirement and is applicable only if a Distribution Date, as defined under the Rights Agreement, occurs.

Item  4.                   Submission of Matters to a Vote of Security Holders.

(a) The annual meeting of stockholders was held on May 14, 2002.

(b) Not required.  (Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, there was no solicitation in opposition to management’s nominees as listed in the proxy statement, and all of such nominees were elected.)

(c) At the annual meeting, the following proposals were presented to the stockholders and voted upon:  (1) election of directors, (2) adoption to the amendment to Nash Finch’s Restated Certificate of Incorporation, (3) adoption of an amendment to the Nash Finch 2000 Stock Incentive Plan, (4) adoption of an amendment to the Nash Finch 1995 Director Stock Option Plan, and (5) adoption of the Nash Finch Performance Incentive Plan.

(1)           Election of Directors.
Three nominees, all incumbent directors, were elected to serve for three-year  terms expiring in 2005.  The terms of the other seven directors do not expire until  2003 and 2004.

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                The director nominees elected for and voting results are as follows:

Name	Votes For	Votes Withheld	Broker Non-Votes
Carole F. Bitter	9,790,304	924,319	-0-
John H Grunewald	9,773,654	940,969	-0-
William R. Voss	9,789,861	924,762	-0-

(2)           Amendment to Nash Finch’s Restated Certificate of Incorporation.
Stockholders approved the adoption of the amendment to Nash Finch’s Restated Certificate of Incorporation.  The voting results are as follows:

Votes For	Votes Against	Abstentions	Broker Non-Votes
8,210,839	2,434,733	69,051	-0-

(3)           Amendment to the Nash Finch 2002 Stock Incentive Plan.
The stockholders approved the adoption of the amendment to the Nash Finch 2000 Stock Incentive.  The voting results are as follows:

Votes For	Votes Against	Abstentions	Broker Non-Votes
8,112,493	2,541,050	61,080	-0-

(3)           Amendment to the Nash Finch 1995 Director Stock Option Plan.
The stockholders approved the adoption of the amendment to the Nash Finch 1995 Director Stock Option Plan.  The voting results are as follows:

Votes For	Votes Against	Abstentions	Broker Non-Votes
8,429,328	2,222,852	62,443	-0-

(3)           Adoption of the Nash Finch Performance Incentive Plan.
The stockholders approved the adoption of the Nash Finch Performance Incentive Plan. The voting results are as follows:

Votes For	Votes Against	Abstentions	Broker Non-Votes
9,955,658	688,020	70,945	-0-

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Item 6.                    Exhibits and Reports on Form 8-K.

(a)           Exhibits:

                The exhibits to this Form 10-Q are listed in the exhibit index on page 21.

(b) Reports on Form 8-K:

                Not applicable.

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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 25, 2002	By  /s/ Ron Marshall
	Ron Marshall
	President and Chief Executive Officer
	By  /s/ Robert B. Dimond
	Robert B. Dimond
	Executive Vice President and Chief Financial Officer

20

NASH FINCH COMPANY

EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Twelve Weeks Ended June 15, 2002

Item No.	Item	Method of Filing
3.1	Amendment to Restated Certificate of Incorporation of the Company, effective May 16, 2002	Filed herewith
4.1	Amendment to Restated Certificate of Incorporation of the Company, effective May 16, 2002	See Exhibit 3.1
10.1	Nash Finch 2000 Stock Incentive Plan, as amended	Filed herewith
10.2	Nash Finch 1995 Director Stock Option Plan, as amended	Filed herewith
10.3	Amendment to Stockholder Rights Agreement, dated October 30, 2001	Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company’s Registration Statement on Form 8-A (filed on July 26, 2002)
10.4	Form of letter agreement specifying benefits in the event of termination following a change in control, entered into by Michael Mott and Kathleen McDermott	Filed herewith
10.5	Restricted Stock Award Agreement between the Company and Ron Marshall, dated effective as of February 19, 2002	Filed herewith
10.6	Nash Finch Performance Incentive Plan	Filed herewith

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EX-3.1

Exhibit 3.1

CERTIFICATE OF AMENDMENT

TO THE

RESTATED CERTIFICATE OF INCORPORATION

OF

NASH-FINCH COMPANY

Nash-Finch Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies as follows:

1.The name of the corporation is Nash-Finch Company.

2.The date of filing of its original Certificate of Incorporation with the Secretary of State of Delaware was the 6^th day of October, 1921.  A Restated Certificate of Incorporation was filed on the 16^th day of May, 1985, with the Secretary of State of the State of Delaware.

3.That the Board of Directors of the Corporation, at duly called meetings held on August 10, 2001 and February 19, 2002, duly adopted resolutions and modifying resolutions, respectively, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth a proposed amendment to the Restated Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and recommending that said amendment be submitted to the Corporation’s stockholders for their consideration and approval.  The resolution setting forth the proposed amendment is as follows:

RESOLVED, That Article IV of the Restated Certificate of Incorporation of the Corporation shall be amended in its entirety to read as follows:

Article IV.

The corporation shall be authorized to issue two classes of shares of capital stock to be designated, respectively, “preferred stock” and “common stock”.  The total number of shares of capital stock which the corporation shall be authorized to issue is fifty million five hundred thousand, of which five hundred thousand shall be shares of preferred stock without par value and fifty million shall be shares of common stock of the par value of $1.66^2/3 per share.  No holder of any shares of preferred stock or any shares of common stock shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of capital stock or of securities of the corporation convertible into capital stock, of any class or series whatsoever, whether now or hereafter authorized and whether issued for cash, property, services or otherwise.  Shares of preferred stock of the corporation may be issued from time to time in one or more series, each of which series shall have such distinctive designation or title and such number of shares as shall be fixed by the Board of Directors prior to the issuance of any

shares thereof.  Each such series of preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue of such series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it.  The Board of Directors is further authorized to increase or decrease (but not below the number of shares then outstanding) the number of shares of any series of preferred stock subsequent to the issuance of shares of that series.  Except as provided in the resolution or resolutions of the Board of Directors creating any series of preferred stock, the shares of common stock shall have the exclusive right to vote for the election and removal of directors and for all other purposes.  Each holder of common stock shall be entitled to one vote for each share held.

4.The stockholders of the Corporation duly approved and adopted this Amendment to the Restated Certificate of Incorporation in accordance with Section 242 of the General Corporation Law of the State of Delaware by a vote of the holders of a majority of the shares of issued and outstanding common stock of the Corporation entitled to vote thereon at a duly called annual meeting of stockholders held on May 14, 2002, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said Nash-Finch Company has caused this Certificate of Amendment to be signed by Ron Marshall, its President and Chief Executive Officer, and attested by Kathleen E. McDermott, its Secretary, this 14th day of May, 2002.

	NASH-FINCH COMPANY
	/s/ Ron Marshall
	Ron Marshall
	President and Chief Executive Officer
ATTEST:
/s/ Kathleen E. McDermott
Kathleen E. McDermott
Secretary

2

EX-10.1

Exhibit 10.1

NASH-FINCH COMPANY

2000 STOCK INCENTIVE PLAN

(as amended effective February 19, 2002)

1.Purpose of Plan.

                The purpose of the Nash-Finch Company 2000 Stock Incentive Plan (the “Plan”) is to support the maximization of long-term value creation for Nash-Finch Company (the “Company”) and its stockholders by enabling the Company and its Subsidiaries to attract and retain persons of ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its economic objectives.

2.Definitions.

                The following terms will have the meanings set forth below, unless the context clearly otherwise requires:

                2.1           “Board” means the Board of Directors of the Company.

                2.2           “Broker Exercise Notice” means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer.

                2.3           “Change in Control” means an event described in Section 13.1 of the Plan.

                2.4           “Code” means the Internal Revenue Code of 1986, as amended.

                2.5           “Committee” means the group of individuals administering the Plan, as provided in Section 3 of the Plan.

                2.6           “Common Stock” means the common stock of the Company, $1.66 ²/₃ par value, or the number and kind of shares of stock or other securities into which such common stock may be changed in accordance with Section 4.3 of the Plan.

                2.7           “Disability” means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code.

                2.8           “Eligible Recipients” means all employees of the Company or any Subsidiary and any non-employee directors, consultants and independent contractors of the Company or any Subsidiary.

                2.9           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

                2.10         “Fair Market Value” means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote) (a) the mean between the reported high and low sale prices of the Common Stock during the regular trading session if the Common Stock is listed, admitted to unlisted trading privileges or reported on any foreign or national securities exchange or on the Nasdaq National Market or an equivalent foreign market on which sale prices are reported; (b) if the Common Stock is not so listed, admitted to unlisted trading privileges or reported, the closing bid price as reported by the Nasdaq SmallCap Market, OTC Bulletin Board or the National Quotation Bureau, Inc. or other comparable service; or (c) if the Common Stock is not so listed or reported, such price as the Committee determines in good faith in the exercise of its reasonable discretion.

                2.11         “Incentive Award” means an Option, Stock Appreciation Right, Restricted Stock Award, Performance Unit or Stock Bonus granted to an Eligible Recipient pursuant to the Plan.

                2.12         “Incentive Stock Option” means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code.

                2.13         “Non-Statutory Stock Option” means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not qualify as an Incentive Stock Option.

                2.14         “Option” means an Incentive Stock Option or a Non-Statutory Stock Option.

                2.15         “Participant” means an Eligible Recipient who receives one or more Incentive Awards under the Plan.

                2.16         “Performance Criteria” means the performance criteria that may be used by the Committee in granting Performance Units or Restricted Stock Awards contingent upon achievement of performance goals, consisting of specified levels of, or relating to, customer satisfaction as measured by a Company sponsored customer survey; employee engagement or employee relations as measured by a Company sponsored survey; employee safety; employee diversity; financial performance as measured by net sales, operating income, income before income taxes, net income, net income per share (basic or diluted), profitability as measured by return ratios (including return on assets, return on equity, return on investment and return on sales), cash flows, market share, cost reduction goals,

2

margins (including one or more of gross, operating and net income margins), stock price, total return to stockholders, economic value added, working capital and productivity improvements; retail store performance as determined by independent assessment; and operational performance as measured by on-time delivery, fill rate, selector accuracy, cost per case, sales per square foot, sales per labor hour and other, similar, objective productivity measures. The Committee may select one criterion or multiple criteria for measuring performance, and the measurement may be based upon Company, Subsidiary or business unit performance, either absolute or by relative comparison to other companies or any other external measure of the selected criteria.

                2.17         “Performance Unit” means a right granted to an Eligible Recipient pursuant to Section 9 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, upon the achievement of Performance Criteria or other established employment, service, performance or other goals during a specified period.

                2.18         “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.

                2.19         “Restricted Stock Award” means an award of Common Stock granted to an Eligible Recipient pursuant to Section 8 of the Plan that is subject to the restrictions on transferability and the risk of forfeiture imposed by the provisions of such Section 8.

                2.20         “Retirement” means termination of employment or service pursuant to and in accordance with the regular (or, if approved by the Board for purposes of the Plan, early) retirement/pension plan or practice of the Company or Subsidiary then covering the Participant, provided that if the Participant is not covered by any such plan or practice, the Participant will be deemed to be covered by the Company’s plan or practice for purposes of this determination.

                2.21         “Securities Act” means the Securities Act of 1933, as amended.

                2.22         “Stock Appreciation Right” means a right granted to an Eligible Recipient pursuant to Section 7 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more shares of Common Stock and the exercise price of such shares under the terms of such Stock Appreciation Right.

                2.23         “Stock Bonus” means an award of Common Stock granted to an Eligible Recipient pursuant to Section 10 of the Plan.

                2.24         “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.

3

                2.25         “Tax Date” means the date any withholding tax obligation arises under the Code or other applicable tax statute for a Participant with respect to an Incentive Award.

3.Plan Administration.

                3.1           The Committee. The Plan will be administered by the Board or by a committee of the Board. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, any committee administering the Plan will consist solely of two or more members of the Board who are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and, if the Board so determines in its sole discretion, who are “outside directors” within the meaning of Section 162(m) of the Code. Such a committee, if established, will act by majority approval of the members (but may also take action with the written consent of all of the members of such committee), and a majority of the members of such a committee will constitute a quorum. As used in the Plan, “Committee” will refer to the Board or to such a committee, if established. To the extent consistent with applicable corporate law of the Company’s jurisdiction of incorporation, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Eligible Recipients who are subject to Section 16 of the Exchange Act. The Committee may exercise its duties, power and authority under the Plan in its sole and absolute discretion without the consent of any Participant or other party, unless the Plan specifically provides otherwise. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the stockholders of the Company, the participants and their respective successors-in-interest. No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Incentive Award granted under the Plan.

                3.2           Authority of the Committee.

                (a)           In accordance with and subject to the provisions of the Plan, the Committee will have the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii) the nature and extent of the Incentive Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in which Incentive Awards will vest or become exercisable and whether Incentive Awards will be granted in tandem with other Incentive Awards) and the form of written agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions and other conditions to which the payment or vesting of Incentive Awards may be subject. In addition, the Committee will have the

4

authority under the Plan in its sole discretion to pay the economic value of any Incentive Award in the form of cash, Common Stock or any combination of both.

                (b)           The Committee will have the authority under the Plan to amend or modify the terms of any outstanding Incentive Award in any manner, including, without limitation, the authority to modify the number of shares or other terms and conditions of an Incentive Award, extend the term of an Incentive Award or accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award; provided, however that the amended or modified terms are permitted by the Plan as then in effect and that any Participant adversely affected by such amended or modified terms has consented to such amendment or modification. No amendment or modification to an Incentive Award, however, whether pursuant to this Section 3.2 or any other provisions of the Plan, will be deemed to be a re-grant of such Incentive Award for purposes of this Plan.

                (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, disposition or write-down of a significant amount of assets or a significant business; (iii) any change in accounting principles or practices, tax laws or other such laws or provisions affecting reported results; (iv) any uninsured catastrophic losses or extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 or in management’s discussion and analysis of financial performance appearing in the Company’s annual report to stockholders for the applicable year; or (v) 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 (including Performance 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.

                (d)           Notwithstanding any other provision of this Plan other than Section 4.3, the Committee may not, without prior approval of the Company’s stockholders, seek to effect any re-pricing of any previously granted, “underwater” Option by: (i) amending or modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement Options having a lower exercise price; (B) Restricted Stock Awards; or

5

(C) Performance Units in exchange; or (iii) repurchasing the underwater Options and granting new Incentive Awards under this Plan. For purposes of this Section 3.2(d), an Option will be deemed to be “underwater” at any time when the Fair Market Value of the Common Stock is less than the exercise price of the Option.

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 1,100,000 shares of Common Stock, plus any shares of Common Stock which, as of the date the Plan is approved by the stockholders of the Company, are reserved for issuance under the Company’s 1994 Stock Incentive Plan, as amended, and which are not thereafter issued or which have been issued but are subsequently forfeited and which would otherwise have been available for further issuance under such plan. Notwithstanding any other provisions of the Plan to the contrary, (i) no Participant in the Plan may be granted any Options or Stock Appreciation Rights, or any other Incentive Awards with a value based solely on an increase in the value of the Common Stock after the date of grant, relating to more than 120,000 shares of Common Stock in the aggregate in any fiscal year of the Company; provided, however, that a Participant who is first appointed or elected as an officer, hired as an employee or retained as a consultant by the Company or who receives a promotion that results in an increase in responsibilities or duties may be granted, during the fiscal year of such appointment, election, hiring, retention or promotion, Options relating to up to 200,000 shares of Common Stock; and (ii) no more than an aggregate of 220,000 shares of Common Stock may be granted pursuant to Restricted Stock Awards, Performance Units or Stock Bonuses under the Plan, other than in exchange for full value at the time of grant or as an incentive to the Participant to accept payment of other compensation in the form of shares of Common Stock, with all of the foregoing limitations subject to adjustment as provided in Section 4.3 of the Plan.

                4.2           Accounting for Incentive Awards. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentive Awards will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Incentive Award that lapses, expires, is forfeited or for any reason is terminated unexercised or unvested and any shares of Common Stock that are subject to an Incentive Award that is settled or paid in cash or any form other than shares of Common Stock will automatically again become available for issuance under the Plan.

                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

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adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) available for issuance or payment under the Plan and, in order to prevent dilution or enlargement of the rights of Participants, (a) the number and kind of securities or other property (including cash) subject to outstanding Options, and (b) the exercise price of outstanding Options.

5.Participation.

                Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the creation of value for the Company and its stockholders. Eligible Recipients may be granted from time to time one or more Incentive Awards, singly or in combination or in tandem with other Incentive Awards, as may be determined by the Committee in its sole discretion. Incentive Awards will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the date of any related agreement with the Participant.

6.Options.

                6.1           Grant. An Eligible Recipient may be granted one or more Options under the Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock Option. To the extent that any Incentive Stock Option granted under the Plan ceases for any reason to qualify as an “incentive stock option” for purposes of Section 422 of the Code, such Incentive Stock Option will continue to be outstanding for purposes of the Plan but will thereafter be deemed to be a Non-Statutory Stock Option.

                6.2           Exercise Price. The per share price to be paid by a Participant upon exercise of an Option will be determined by the Committee in its discretion at the time of the Option grant; provided, however, that such price will not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant or, with respect to an Incentive Stock Option, 110% of the Fair Market Value if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).

                6.3           Exercisability and Duration. An Option will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Option may be exercisable prior to six months from its date of grant (other than in connection with a Participant’s death or Disability) and no Option may be exercisable after 10 years from its date of grant (or, in the case of an Incentive Stock Option, five years from its date of grant if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).

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                6.4           Payment of Exercise Price. The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, Previously Acquired Shares (including through delivery of a written attestation of ownership of such Previously Acquired Shares if permitted, and on terms acceptable, to the Committee in its sole discretion), a promissory note (on terms acceptable to the Committee in its sole discretion) or by a combination of such methods.

                6.5           Manner of Exercise. An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Secretary) at its principal executive office in Minneapolis, Minnesota and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.4 of the Plan.

                6.6           Aggregate Limitation of Stock Subject to Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares of Common Stock with respect to which incentive stock options (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and any other incentive stock option plans of the Company or any subsidiary or parent corporation of the Company (within the meaning of the Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code from time to time), such excess Options will be treated as Non-Statutory Stock Options. The determination will be made by taking incentive stock options into account in the order in which they were granted. If such excess only applies to a portion of an Incentive Stock Option, the Committee, in its discretion, will designate which shares will be treated as shares to be acquired upon exercise of an Incentive Stock Option.

7.Stock Appreciation Rights.

                7.1           Grant. An Eligible Recipient may be granted one or more Stock Appreciation Rights under the Plan, and such Stock Appreciation Rights will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee will have the sole discretion to determine the form in which payment of the economic value of Stock Appreciation Rights will be made to a Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment.

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                7.2           Exercise Price. The exercise price of a Stock Appreciation Right will be determined by the Committee, in its discretion, at the date of grant but may not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant.

                7.3           Exercisability and Duration. A Stock Appreciation Right will become exercisable at such time and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Stock Appreciation Right may be exercisable prior to six months from its date of grant (other than in connection with a Participant’s death or Disability) or after 10 years from its date of grant. A Stock Appreciation Right will be exercised by giving notice in the same manner as for Options, as set forth in Section 6.5 of the Plan.

8.Restricted Stock Awards.

                8.1           Grant. An Eligible Recipient may be granted one or more Restricted Stock Awards under the Plan, and such Restricted Stock Awards will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Restricted Stock Awards as it deems appropriate, including, without limitation, (i) the achievement of one or more of the Performance Criteria; and/or that (ii) the Participant remain in the continuous employ or service of the Company or a Subsidiary for a certain period; provided, however, that no Restricted Stock Award may vest prior to six months from its date of grant other than in connection with a Participant’s death or Disability.

                8.2           Rights as a Stockholder; Transferability. Except as provided in Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will have all voting, dividend, liquidation and other rights with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award under this Section 8 upon the Participant becoming the holder of record of such shares as if such Participant were a holder of record of shares of unrestricted Common Stock.

                8.3           Dividends and Distributions. Unless the Committee determines otherwise in its sole discretion (either in the agreement evidencing the Restricted Stock Award at the time of grant or at any time after the grant of the Restricted Stock Award), any dividends or distributions (including regular quarterly cash dividends) paid with respect to shares of Common Stock subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the shares to which such dividends or distributions relate. In the event the Committee determines not to pay dividends or distributions currently, the Committee will determine in its sole discretion whether any interest will be paid on such dividends or distributions. In addition, the Committee in its sole discretion may require such dividends and distributions to be reinvested (and in such case the Participant consents to such reinvestment) in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions relate.

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                8.4           Enforcement of Restrictions. To enforce the restrictions referred to in this Section 8, the Committee may place a legend on the stock certificates referring to such restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock certificates, together with duly endorsed stock powers, in the custody of the Company or its transfer agent or to maintain evidence of stock ownership, together with duly endorsed stock powers, in a certificateless book-entry stock account with the Company’s transfer agent.

9.Performance Units.

                An Eligible Recipient may be granted one or more Performance Units under the Plan, and such Performance Units will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Performance Units as it deems appropriate, including, without limitation, (i) the achievement of one or more of the Performance Criteria; and/or that (ii) that the Participant remain in the continuous employ or service of the Company or any Subsidiary for a certain period. The Committee will have the sole discretion to determine the form in which payment of the economic value of Performance Units will be made to a Participant (i.e., cash, Common Stock, Restricted Stock Awards or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment.

10.Stock Bonuses.

                An Eligible Recipient may be granted one or more Stock Bonuses under the Plan, and such Stock Bonuses will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee, including, without limitation, (i) the achievement of one or more of the Performance Criteria; and/or that (ii) that the Participant remain in the continuous employ or service of the Company or any Subsidiary for a certain period. The Participant will have all voting, dividend, liquidation and other rights with respect to the shares of Common Stock issued to a Participant as a Stock Bonus under this Section 10 upon the Participant becoming the holder of record of such shares; provided, however, that the Committee may impose such restrictions on the assignment or transfer of a Stock Bonus as it deems appropriate.

11.Effect of Termination of Employment or Other Service.

                11.1         Termination Due to Death, Disability or Retirement. Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award:

                (a)           In the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability:

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                (i)            All outstanding Options and Stock Appreciation Rights then held by the Participant will become immediately exercisable in full and remain exercisable, for a period of three years after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right);

                (ii)           All Restricted Stock Awards then held by the Participant will become fully vested; and

                (iii)          All Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units or Stock Bonuses.

                (b)           In the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of Retirement:

                (i)            All outstanding Options and Stock Appreciation Rights then held by the Participant will remain exercisable, to the extent exercisable as of the date of such termination, for a period of three years after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right);

                (ii)           All Restricted Stock Awards then held by the Participant that have not vested as of such termination will be terminated and forfeited; and

                (iii)          All Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Units or Stock Bonuses.

11.2Termination for Reasons Other than Death, Disability or Retirement.

                (a)           Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award, in the event a Participant’s employment or other service is terminated with the Company and all Subsidiaries for any reason other than death, Disability or Retirement, or a Participant is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ or service of the Company or another Subsidiary), all rights of the Participant under the Plan and any agreements evidencing an Incentive Award will immediately terminate without notice of any kind, and no Options or Stock Appreciation Rights then held by the Participant will thereafter be exercisable, all Restricted Stock Awards then held by the Participant that have not vested will be terminated and forfeited, and all Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the

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agreement evidencing such Performance Units or Stock Bonuses; provided, however, that if such termination is due to any reason other than voluntary termination by the Participant or termination by the Company or any Subsidiary for “cause,” all outstanding Options and Stock Appreciation Rights then held by such Participant will remain exercisable, to the extent exercisable as of such termination, for a period of three months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right).

                (b)           For purposes of this Section 11.2, “cause” (as determined by the Committee) will be as defined in any employment or other agreement or policy applicable to the Participant or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Participant’s overall duties, or (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with the Company or any Subsidiary.

                11.3         Modification of Rights Upon Termination. Notwithstanding the other provisions of this Section 11, upon a Participant’s termination of employment or other service with the Company and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time on or after the date of grant, including following such termination), cause Options and Stock Appreciation Rights (or any part thereof) then held by such Participant to become or continue to become exercisable and/or remain exercisable following such termination of employment or service and Restricted Stock Awards, Performance Units and Stock Bonuses then held by such Participant to vest and/or continue to vest or become free of transfer restrictions, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee; provided, however, that no Option or Restricted Stock Award may become exercisable or vest prior to six months from its date of grant (other than in connection with a Participant’s death or Disability) or remain exercisable or continue to vest beyond its expiration date.

                11.4         Exercise of Incentive Stock Options Following Termination. Any Incentive Stock Option that remains unexercised more than one year following termination of employment by reason of Disability or more than three months following termination for any reason other than death or Disability will thereafter be deemed to be a Non-Statutory Stock Option.

                11.5         Date of Termination of Employment or Other Service. Unless the Committee otherwise determines in its sole discretion, a Participant’s employment or other service will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company or the Subsidiary for which the Participant provides employment or other service, as determined by the Committee in its sole discretion based upon such records.

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12.Payment of Withholding Taxes.

                12.1         General Rules. The Company is entitled to (a) withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all foreign, federal, state and local withholding and employment–related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (b) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to an Incentive Award.

                12.2         Special Rules. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment–related tax obligation described in Section 12.1 of the Plan by electing to tender Previously Acquired Shares, a Broker Exercise Notice or a promissory note (on terms acceptable to the Committee in its sole discretion), or by a combination of such methods.

13.Change in Control.

                13.1         Change in Control. For purposes of this Section 13, a “Change in Control” of the Company will mean the following:

                (a)           the sale, lease, exchange or other transfer, directly or indirectly, of substantially all of the assets of the Company (in one transaction or in a series of related transactions) to any Person (as defined below);

                (b)           consummation of any stockholder approved plan for the liquidation or dissolution of the Company;

                (c)           any Person, other than a Bona Fide Underwriter (as defined below), becoming after the effective date of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of (i) 20% or more, but not more than 50%, of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors, unless the transaction resulting in such ownership has been approved in advance by the Continuity Directors (as defined below), or (ii) more than 50% of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuity Directors);

                (d)           a merger or consolidation to which the Company is a party if the stockholders of the Company immediately prior to effective time of such merger or

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consolidation have, solely on account of ownership of securities of the Company at such time, “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), immediately following the effective time of such merger or consolidation, of securities of the surviving corporation representing (i) 50% or more, but not more than 80%, of the combined voting power of the surviving corporation’s then outstanding securities ordinarily having the right to vote at elections of directors, unless such merger or consolidation has been approved in advance by the Continuity Directors, or (ii) less than 50% of the combined voting power of the surviving corporation’s then outstanding securities ordinarily having the right to vote at elections of directors (regardless of any approval by the Continuity Directors); or

                (e)           the Continuity Directors cease for any reason to constitute at least a majority of the Board.

                13.2         Change in Control Definitions. For purposes of this Section 13:

                (a)           “Continuity Director” means any individual who was a member of the Board on the effective date of the Plan, while he or she is a member of the Board, and any individual who subsequently becomes a member of the Board whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors who are Continuity Directors (either by a specific vote or by approval of the proxy statement of the Company in which such individual is named as a nominee for director without objection to such nomination). For example, assuming that nine individuals comprise the entire Board as of the effective date of the Plan, if a majority of such individuals approved a proxy statement in which two different individuals were nominated to replace two of the individuals who were members of the Board as of the effective date of the Plan, these two newly elected directors would join the remaining seven directors who were members of the Board as of the effective date of the Plan as Continuity Directors. Similarly, if subsequently a majority of these directors approved a proxy statement in which three different individuals were nominated to replace three other directors who were members of the Board as of the effective date of the Plan, these three newly elected directors would also become, along with the other six directors, Continuity Directors. Individuals subsequently joining the Board could become Continuity Directors under the principles reflected in this example.

                (b)           “Bona Fide Underwriter” means a Person engaged in business as an underwriter of securities that acquires securities of the Company from the Company through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition.

                (c)           “Person” means any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 13(d) or Section 14(d) of the Exchange Act, other than the Company, any affiliate or any benefit plan

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sponsored by the Company or any affiliate. For this purpose, an affiliate is (i) any corporation at least a majority of whose outstanding securities ordinarily having the right to vote at elections of directors is owned directly or indirectly by the Company or (ii) any other form of business entity in which the Company, by virtue of a direct or indirect ownership interest, has the right to elect a majority of the members of such entity’s governing body.

                13.3         Acceleration of Vesting. Without limiting the authority of the Committee under Sections 3.2 and 4.3 of the Plan, if a Change in Control of the Company occurs, then, unless otherwise provided by the Committee in its sole discretion either in the agreement evidencing an Incentive Award at the time of grant or at any time after the grant of an Incentive Award, (a) all Options and Stock Appreciation Rights that have been outstanding for at least six months will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the Participant to whom such Options or Stock Appreciation Rights have been granted remains in the employ or service of the Company or any Subsidiary; (b) all Restricted Stock Awards that have been outstanding for at least six months will become immediately fully vested and non-forfeitable; and (c) all outstanding Performance Units and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Stock Bonuses.

                13.4         Cash Payment for Options. If a Change in Control of the Company occurs, then the Committee, if approved by the Committee in its sole discretion either in an agreement evidencing an Incentive Award at the time of grant or at any time after the grant of an Incentive Award, and without the consent of any Participant effected thereby, may determine that some or all Participants holding outstanding Options will receive, with respect to some or all of the shares of Common Stock subject to such Options, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to the effective date of such Change in Control of the Company over the exercise price per share of such Options.

                13.5         Limitation on Change in Control Payments. Notwithstanding anything in Section 13.3 or 13.4 of the Plan to the contrary, if, with respect to a Participant, the acceleration of the vesting of an Incentive Award as provided in Section 13.3 or the payment of cash in exchange for all or part of an Incentive Award as provided in Section 13.4 (which acceleration or payment could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Code), together with any other “payments” that such Participant has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504(a) of the Code without regard to Section 1504(b) of the Code) of which the Company is a member, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the “payments” to such Participant pursuant to Section 13.3 or 13.4 of the Plan will be reduced to the largest amount as will result in no portion of such “payments” being subject to the excise tax imposed by Section 4999 of the Code; provided, however, that if a Participant is subject to a separate agreement with the Company or a Subsidiary that expressly addresses the

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potential application of Sections 280G or 4999 of the Code (including, without limitation, that “payments” under such agreement or otherwise will be reduced, that the Participant will have the discretion to determine which “payments” will be reduced, that such “payments” will not be reduced or that such “payments” will be “grossed up” for tax purposes), then this Section 13.5 will not apply, and any “payments” to a Participant pursuant to Section 13.3 or 13.4 of the Plan will be treated as “payments” arising under such separate agreement.

14.Rights of Eligible Recipients and Participants; Transferability.

                14.1         Employment or Service. Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or Participant any right to continue in the employ or service of the Company or any Subsidiary.

                14.2         Rights as a Stockholder. As a holder of Incentive Awards (other than Restricted Stock Awards and Stock Bonuses), a Participant will have no rights as a stockholder unless and until such Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and the Participant becomes the holder of record of such shares. Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to such Incentive Awards as to which there is a record date preceding the date the Participant becomes the holder of record of such shares, except as the Committee may determine in its discretion.

                14.3         Restrictions on Transfer. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, unless approved by the Committee in its sole discretion, no right or interest of any Participant in an Incentive Award prior to the exercise or vesting of such Incentive Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. A Participant will, however, be entitled to designate a beneficiary to receive an Incentive Award upon such Participant’s death, and in the event of a Participant’s death, payment of any amounts due under the Plan will be made to, and exercise of any Options (to the extent permitted pursuant to Section 11 of the Plan) may be made by, the Participant’s legal representatives, heirs and legatees.

                14.4         Breach of Confidentiality or Non-Compete Agreements. Notwithstanding anything in the Plan to the contrary, in the event that a Participant materially breaches the terms of any 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.

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                14.5         Non-Exclusivity of the Plan. Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.

15.Securities Law and Other Restrictions.

                Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Incentive Awards granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state or foreign securities laws or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.

16.Performance–Based Compensation Provisions.

                The Committee, when it is comprised solely of two or more outside directors meeting the requirements of Section 162(m) of the Code (“Section 162(m)”), in its sole discretion, may designate whether any Incentive Awards are intended to be “performance–based compensation” within the meaning of Section 162(m). Any Incentive Awards so designated will, to the extent required by Section 162(m), be conditioned upon the achievement of one or more Performance Criteria, and such Performance Criteria will be established by the Committee within the time period prescribed by, and will otherwise comply with the requirements of, Section 162(m) giving due regard to the disparate treatment under Section 162(m) of Options and Stock Appreciation Rights (where compensation is determined based solely on an increase in the value of the underlying stock after the date of grant or award), as compared to other forms of compensation, including Restricted Stock Awards, Performance Units and Stock Bonuses. The Committee shall also certify in writing that such Performance Criteria have been met prior to payment of compensation to the extent required by Section 162(m).

17.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

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effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Section 422 of the Code or the rules of the Nasdaq Stock Market or any other stock exchange, if applicable at such time. No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 3.2, 4.3 and 13 of the Plan.

18.Effective Date and Duration of the Plan.

                The Plan is effective as of February 22, 2000, the date it was adopted by the Board. The Plan will terminate at midnight on February 22, 2010, and may be terminated prior to such time to by Board action, and no Incentive Award will be granted after such termination. Incentive Awards outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms.

19.Miscellaneous.

                19.1         Governing Law. Except to the extent expressly provided herein or in connection with other matters of corporate governance and authority (all of which shall be governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions.

                19.2         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.

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EX-10.2

Exhibit 10.2

NASH FINCH COMPANY

1995 DIRECTOR STOCK OPTION PLAN

(As amended on February 22, 2000 and February 19, 2002)

1.Purpose of Plan.

                The purpose of the Nash Finch Company 1995 Director Stock Option Plan (the “Plan”) is to advance the interests of Nash Finch Company (the “Company”) and its stockholders by enabling the Company to attract and retain the services of experienced and knowledgeable directors and to increase the proprietary interests of such directors in the Company’s long-term success and progress and their identification with the interests of the Company’s stockholders.

2.Definitions.

                The following terms will have the meanings set forth below, unless the context clearly otherwise requires:

                2.1           “Board” means the Board of Directors of the Company.

                2.2           “Code” means the Internal Revenue Code of 1986, as amended.

                2.3           “Committee” means the group of individuals administering the Plan, as provided in Section 3 of the Plan.

                2.4           “Common Stock” means the common stock of the Company, par value $1.66 ²/₃ per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3 of the Plan.

                2.5           “Disability” means the disability of an Eligible Director such as would entitle the Eligible Director to receive disability income benefits pursuant to the long-term disability plan of the Company then covering the Eligible Director or, if no such plan exists or is applicable to the Eligible Director, the permanent and total disability of the Eligible Director within the meaning of Section 22(e)(3) of the Code.

                2.6           “Eligible Directors” means all directors of the Company who are not, as of the date of grant of an Option, full-time employees of the Company or any subsidiary of the Company.

                2.7           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

                2.8           “Fair Market Value” means, with respect to the Common Stock, as of any date (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote), the mean between the reported high and low sale prices of the Common Stock during the regular trading session as reported on the Nasdaq National Market or any stock exchange on which the Common Stock is listed.

                2.9           “Option” means a right to purchase 5,000 shares of Common Stock (subject to adjustment as provided in Section 4.3 of the Plan) granted to an Eligible Director pursuant to Section 5 of the Plan.  An Option does not qualify as an “incentive stock option” within the meaning of Section 422 of the Code.

                2.10         “Retirement” means the retirement of an Eligible Director pursuant to and in accordance with the normal retirement/pension plan or practice of the Company then covering the Eligible Director.

                2.11         “Securities Act” means the Securities Act of 1933, as amended.

3.Plan Administration.

                The Plan will be administered by a committee (the “Committee”) consisting solely of two or more members of the Board.  All questions of interpretation of the Plan will be determined by the Committee, each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be conclusive and binding for all purposes and on all persons, and no member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Option granted under the Plan.  The Committee, however, will have no power to determine the eligibility for participation in the Plan, the number of shares of Common Stock to be subject to Options, or the timing, pricing or other terms and conditions of the Options.

4.Shares Available for Issuance.

                4.1           Maximum Number of Shares Available.  Subject to adjustment as provided in Section 4.3 of the Plan, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 250,000 shares.  The shares available for issuance under the Plan may, at the election of the Committee, be either treasury shares or shares authorized but unissued, and, if treasury shares are used, all references in the Plan to the issuance of shares will, for corporate law purposes, be deemed to mean the transfer of shares from treasury.

                4.2           Accounting for Options.  Shares of Common Stock that are issued under the Plan or that are subject to outstanding Options will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan.  Any shares of Common Stock that are subject to an Option that lapses, expires, or for any reason is terminated unexercised will automatically again become available for issuance under the Plan.

                4.3           Adjustments to Shares and Options.  In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities available for issuance under the Plan and, in order to prevent dilution or enlargement of the rights of Eligible Directors, the number, kind and, where applicable, exercise price of securities subject to outstanding Options.

5.Options.

                5.1           Grant.  On an annual basis, each director of the Company who qualifies as an Eligible Director immediately following each annual meeting of stockholders of the Company will be granted an Option.

                5.2           Exercise Price.  The per share price to be paid by an Eligible Director upon exercise of an Option will be 100% of the Fair Market Value of one share of Common Stock on the date of grant.  The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order).

                5.3           Exercisability and Duration.  Each Option will become exercisable in full six months following its date of grant and, subject to earlier termination in accordance with Section 5.6 of the Plan, will expire and will no longer be exercisable five years from its date of grant.

                5.4           Manner of Exercise.  An Option may be exercised by an Eligible Director in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by

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delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Corporate Secretary) at its principal executive office in Edina, Minnesota and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 5.2 of the Plan.

                5.5           Rights as a Stockholder.  As a holder of Options, an Eligible Director will have no rights as a stockholder unless and until such Options are exercised for shares of Common Stock and the Eligible Director becomes the holder of record of such shares.  Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to Options as to which there is a record date preceding the date the Eligible Director becomes the holder of record of such shares.

                5.6           Effect of Termination of Service as Director.

                (a)           Termination Due to Death or Disability.  In the event an Eligible Director’s service as a director of the Company is terminated by reason of death or Disability, all outstanding Options then held by the Eligible Director will become immediately exercisable in full and will remain exercisable for one year following such termination (but in no event after the expiration date of any such Option).

                (b)           Termination Due to Retirement.  In the event an Eligible Director’s services as a director of the Company is terminated by reason of Retirement, all outstanding options then held by the Eligible Director will become immediately exercisable in full and (i) if granted prior to February 22, 2000, will remain exercisable for one year following such termination (but in no event after the expiration date of any such Option), and (ii) if granted after February 22, 2000, will continue to be exercisable in accordance with their terms.

                (c)           Termination for Reasons Other than Death, Disability or Retirement.

                (i)            In the event an Eligible Director’s service as a director of the Company is terminated for any reason other than death, Disability or Retirement, all rights of the Eligible Director under the Plan and any agreements evidencing an Option will immediately terminate without notice of any kind and no Options then held by the Eligible Director will thereafter be exercisable; provided, however, that if such termination is due to any reason other than termination for “cause,” all outstanding Options then held by the Eligible Director will remain exercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event after the expiration date of any such Option).

                (ii)           For purposes of this Section 5.6, “cause” will be as defined in any agreement or policy applicable to the Eligible Director or, if no such agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement or material and deliberate injury or attempted injury, in each case related to the Company or any subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any willful breach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any service, confidentiality or noncompete agreement entered into with the Company.

6.Date of Termination of Service as a Director.

                An Eligible Director’s service as a director of the Company will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company, as determined by the Committee based upon such records.

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7.Rights of Eligible Directors; Transferability of Interests.

                7.1           Service as a Director.  Nothing in the Plan will interfere with or limit in any way the right of the shareholders to remove an Eligible Director at any time, and neither the Plan, nor the granting of an Option nor any other action taken pursuant to the Plan, will constitute or be evidence of any agreement or understanding, express or implied, that an Eligible Director will be retained for any period of time or at any particular rate of compensation.

                7.2           Restrictions on Transfer of Interests.  Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of any Eligible Director in an Option prior to the exercise of Options will be assignable or transferable, or subjected to any lien, during the lifetime of the Eligible Director, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise.  In the event of an Eligible Director’s death, exercise of any Options (to the extent permitted pursuant to Section 5 of the Plan) may be made by the Eligible Director’s legal representatives, heirs and legatees.

                7.3           Non-Exclusivity of the Plan.  Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.

8.Securities Law and Other Restrictions.

                Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and an Eligible Director may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Options granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable.  The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.

9.Plan Amendment, Modification and Termination

                The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Options under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to the rules of the Nasdaq Stock Market or any other stock exchange, if applicable at such time.  No termination, suspension or amendment of the Plan may adversely affect any outstanding Option without the consent of the affected Eligible Director; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Section 4.3 of the Plan.

10.Effective Date and Duration of the Plan

                The Plan is effective as of March 24, 1995, the date it was adopted by the Board.  The Plan will terminate at midnight on March 1, 2005, and may be terminated prior thereto by Board action, and no Option will be granted after such termination.  Options outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms.

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11.Miscellaneous

                11.1         Governing Law.  Except in connection with matters of corporate governance and authority (all of which shall be governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions.

                11.2         Successors and Assigns.  The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Eligible Directors.

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EX-10.4

Exhibit 10.4

[Date]

[Executive’s name]

[Executive’s address]

Dear [Executive]:

You are presently the [title] of [name of subsidiary, if appropriate, a subsidiary of] Nash Finch Company, a Delaware corporation.  The Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders.  In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.

Accordingly, the Board has determined that appropriate steps should be taken to minimize the risk that Company management will depart prior to a Change in Control, thereby leaving the Company without adequate management personnel during such a critical period, and that appropriate steps also be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management to their assigned duties without distraction in circumstances arising from the possibility of a Change in Control.  In particular, the Board believes it important, should Nash Finch Company or its stockholders receive a proposal of transfer of control, that you be able to continue your management responsibilities [and assess and advise the Board whether such proposal would be in the best interests of Nash Finch Company  and its stockholders and to take other action regarding such proposal as the Board might determine to be appropriate], without being influenced by the uncertainties of your own personal situation.

The Board recognizes that continuance of your position with the Company involves a substantial commitment to the Company in terms of your personal life and professional career and the possibility of foregoing present and future career opportunities, for which the Company receives substantial benefits.  Therefore, to induce you to remain in the employ of the Company, this letter agreement, which has been approved by the Board, sets forth the benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated in connection with a Change in Control under the circumstances described below.

                1.             Definitions.  The following terms will have the meaning set forth below unless the context clearly requires otherwise.  Terms defined elsewhere in this Agreement will have the same meaning throughout this Agreement.

                (a)           “Agreement” means this letter agreement as amended, extended or renewed from time to time in accordance with its terms.

                (b)           “Board” means the board of directors of the Parent Corporation duly qualified and acting at the time in question.

                (c)           “Cause” means:  (i) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your Disability or incapacity due to bodily injury or physical or mental illness) after a demand for substantial performance is delivered to you by the chair of the Board which specifically identifies the manner in which such executive believes that you have not substantially performed your duties; or (ii) your conviction (including a plea of nolo contendere) of willfully engaging in illegal conduct constituting a felony or gross misdemeanor under federal or state law which is materially and demonstrably injurious to the Company.  For purposes of this definition, no act, or failure to act, on your part will be considered “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board (or a committee hereof) or based upon the advice of counsel for the Company will be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company.  It is also expressly understood that your attention to matters not directly related to the business of the Company will not provide a basis for termination for Cause so long as the Board does not expressly disapprove in writing of your engagement on such activities either before or within a reasonable period of time after the Board knew or could reasonably have known that you engaged in those activities.  Notwithstanding the foregoing, you will not be deemed to have been terminated for Cause unless and until there has been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth above in clause (i) or (ii) of this definition and specifying the particulars thereof in detail.

(d)           “Change in Control” means:  (i) the sale, lease, exchange, or other transfer of all or substantially all of the assets of the Parent Corporation (in one transaction or in a series of related transactions) to a corporation that is not controlled by the Parent Corporation; (ii) the approval by the stockholders of the Parent Corporation of any plan or proposal for the liquidation or dissolution of the Parent Corporation; or (iii) a change in control of a nature that would be required to be reported (assuming such event has not been “previously reported”) in response to Item 1(a) of the Current Report on Form 8-K,

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as in effect on the date hereof, pursuant to section 13 or 15(d) of the Exchange Act, whether or not the Parent Corporation is then subject to such reporting requirement; provided that, without limitation, such a Change in Control will be deemed to have occurred at such time as:  (A) any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty percent (30%) or more of the combined voting power of the Parent Corporation’s outstanding securities  ordinarily having the right to vote at elections of directors, or (B) individuals who constitute the Board on the date of this Agreement (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election, by the Parent Corporation’s stockholders, was approved by a vote of at least a majority of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Parent Corporation in which such person is named as a nominee for director, without objection to such nomination) will, for purposes of this clause (B), be deemed to be a member of the Incumbent Board.

(e)           “Code” means the Internal Revenue Code of 1986, as amended.

(f)            “Company” means the Parent Corporation, any Subsidiary and any Successor.

(g)           “Confidential Information” means information which is proprietary to the Company or proprietary to others and entrusted to the Company, whether or not trade secrets.  It includes information relating to business plans and to business as conducted or anticipated to be conducted, and to past or current or anticipated products or services.  It also includes, without limitation, information concerning research, development, purchasing, accounting, marketing and selling.  All information which you have a reasonable basis to consider confidential is Confidential Information, whether or not originated by you and without regard to the manner in which you obtain access to that and any other proprietary information.

(h)           “Date of Termination” following a Change in Control (or prior to a Change in Control if your termination was either a condition of the Change in Control or was at the request or insistence of any Person (other than the Company) related to the Change in Control) means:  (i) if your employment is to be terminated for Disability, thirty (30) calendar days after Notice of Termination is given (provided that you have not returned to the performance of your duties on a full-time basis during such thirty (30)-calendar-day period); (ii) if your employment is to be terminated by the Company for Cause or by you for Good Reason, the date specified in the Notice of Termination; (iii) if your employment is to be terminated by the Company for any reason other than Cause, Disability, death or Retirement, the date specified in the Notice of Termination, which in no event may be a date earlier than ninety (90) calendar days after the date on which a Notice of Termination is given, unless an earlier date has been expressly agreed to by you in writing either in advance of, or after, receiving such Notice of Termination; or (iv) if your employment is terminated by reason of death or Retirement, the date of death or

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Retirement, respectively.  In the case of termination by the Company of your employment for Cause, if you have not previously expressly agreed in writing to the termination, then within thirty (30) calendar days after receipt by you of the Notice of Termination with respect thereto, you may notify the Company that a dispute exists concerning the termination, in which event the Date of Termination will be the date set either by mutual written agreement of the parties or by the judge or arbitrators in a proceeding as provided in Section 13 of this Agreement.  During the pendency of any such dispute, the Company will continue to pay you your full compensation and benefits in effect just prior to the time the Notice of Termination is given and until the dispute is resolved in accordance with Section 13 of this Agreement.

(i)            “Disability” means a disability as defined in the Company’s long-term disability plan as in effect immediately prior to the Change in Control or, in the absence of such a plan, means permanent and total disability as defined in section 22(e)(3) of the Code.

(j)            “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(k)           “Good Reason” means:

(i)            an adverse change in your status or position(s) as an executive of the Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in your status or position(s) as a result of a material diminution in your duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties or responsibilities which, in your reasonable judgment, are inconsistent with such status or position(s), or any removal of you from or any failure to reappoint or reelect you to such position(s) (except in connection with the termination of your employment for Cause, Disability or Retirement or as a result of your death or by you other than for Good Reason);

(ii)           a reduction by the Company in your rate of total compensation (including, without limitation, salary and bonuses) (or an adverse change in the form or timing of the payment thereof) as in effect immediately prior to the Change in Control;

(iii)          the failure by the Company to continue in effect any Plan in which you (and/or your family) are participating at any time during the ninety (90)-calendar-day period immediately preceding the Change in Control (or Plans providing you (and/or your family) with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect immediately prior to the ninety (90)-calendar-day period immediately preceding the time of the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your

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(and/or your family’s) continued participation in any of such Plans on at least as favorable a basis to you (and/or your family) as is the case on the date of the Change in Control or which would materially reduce your (and/or your family’s) benefits in the future under any of such Plans or deprive you (and/or your family) of any material benefit enjoyed by you (and/or your family) at the time of the Change in Control;

(iv)          the Company’s requiring you to be based anywhere other than where your office is located immediately prior to the Change in Control, except for required travel on the Company’s business, and then only to the extent substantially consistent with the business travel obligations which you undertook on behalf of the Company during the ninety (90)-calendar-day period immediately preceding the Change in Control (without regard to travel related or in anticipation of the Change in Control);

(v)           the failure by the Company to obtain from any Successor the assent to this Agreement contemplated by Section 6 of this Agreement.

(vi)          any purported termination by the Company of your employment which is not properly effected pursuant to a Notice of Termination and pursuant to any other requirements of this Agreement, and for purposes of this Agreement, no such purported termination will be effective; or

(vii)         any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which, at any time prior to the Change in Control, you were not expressly prohibited in writing by the Board from attending to or engaging in.

Notwithstanding anything in the foregoing to the contrary, your termination of employment with the Company for any reason other than death, Disability or Retirement within six (6) calendar months following a Change in Control will be conclusively deemed to be for Good Reason.

(l)            “Highest Monthly Compensation” means one-twelfth (1/12) of the highest amount of your compensation for any twelve (12) consecutive calendar-month period during the thirty-six (36) consecutive calendar-month period prior to the month that includes the Date of Termination.  For purposes of this definition, “compensation” means the amount reportable by the Company, for federal income tax purposes, as wages paid to you by the Company, increased by the amount of contributions made by the Company with respect to you under any qualified cash or deferred arrangement or cafeteria plan that is not then includable in your income by reason of the operation of section 402(a)(8) or section 125 of the Code, and increased further by any other compensation deferred for any reason, including, without limitation, amounts deferred (whether vested or nonvested) pursuant to the Company’s Executive Incentive Bonus and Deferred Compensation Plan.

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(m)          “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement pursuant to which the notice is given.  Any purported termination by the Company or by you following a Change in Control (or prior to a Change in Control if your termination was either a condition of the Change in Control or was at the request or insistence of any Person (other than the Company) related to the Change in Control) must be communicated by written Notice of Termination.

(n)           “Parent Corporation” means Nash Finch Company and any Successor.

(o)           “Person” means and includes any individual, corporation, partnership, group, association or other “person”, as such term is used in section 14(d) of the Exchange Act, other than the Parent Corporation, a wholly-owned subsidiary of the Parent Corporation or any employee benefit plan(s) sponsored by the Parent Corporation or a wholly-owned subsidiary of the Parent Corporation.

(p)           “Plan” means any compensation plan (such as a stock option, restricted stock plan or other equity-based plan), or any employee benefit plan (such as a thrift, pension, profit sharing, medical, dental, disability, accident, life insurance, relocation, salary continuation, expense reimbursements, vacation, fringe benefits, office and support staff plan or policy) or any other plan, program, policy or agreement of the Company intended to benefit employees (and/or their families) generally, management employees (and/or their families) as a group or you (and/or your family) in particular (including, without limitation the Company’s 2000 Stock Incentive Plan, Profit Sharing Plan, Income Deferral Plan and Executive Incentive Bonus and Deferred Compensation Plan).

(q)           “Retirement” means the day on which you attain the age of sixty-five (65).

(r)            “Subsidiary” means any corporation at least a majority of whose securities having ordinary voting power for the election of directors is at the time owned by the Company and/or one (1) or more Subsidiaries.

(s)           “Successor” means any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Parent Corporation’s business directly, by merger, consolidation or other form of business combination, or indirectly, by purchase of the Parent Corporation’s voting securities, all or substantially all of its assets or otherwise.

2.             Term of Agreement.  This Agreement is effective immediately and will continue in effect until December 31, 2003; provided, however, that commencing on January 1, 2003 and each January 1 thereafter, the term of this Agreement will automatically be extended for one (1) additional year beyond the expiration date otherwise then in effect, unless at least ninety (90) calendar days prior to any such January 1, the Company or you has been given notice that this Agreement will not be extended; and, provided, further, that this Agreement will continue in effect beyond the

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termination date then in effect for a period of twenty-four (24) calendar months following a Change in Control if a Change in Control has occurred during such term.

3.             Benefits upon a Change in Control Termination.  If your employment by the Company is terminated for any reason other than death, Cause, Disability or Retirement, or if you terminate your employment by the Company for Good Reason either within:  (a) twenty-four (24) calendar months following a Change in Control; or (b) prior to a Change in Control if your termination was either a condition of the Change in Control or was at the request or insistence of a Person (other than the Company) related to the Change in Control, then:

(i)            Cash Payment.  Within five (5) business days following the Date of Termination, the Company will make a lump-sum cash payment to you in an amount equal to the product of (A) your Highest Monthly Compensation multiplied by (B) the lesser of (I) the number of full or partial calendar months remaining until your Retirement or (II) twenty-four (24).

(ii)           Welfare Plans.  The Company will maintain in full force and effect, for the continued benefit of you and your dependents for a period terminating on the earliest of (A) twenty-four (24) calendar months after the Date of Termination or (B) your Retirement, all insured and self-insured employee welfare benefit Plans (including, without limitation, health, life, dental and disability plans) in which you were entitled to participate at any time during the ninety (90)-calendar-day period immediately preceding the Change in Control, provided that your continued participation is possible under the general terms and provisions of such Plans and any applicable funding media and without regard to any discretionary amendments to such Plans by the Company following the Change in Control (or prior to the Change in Control if amended as a condition or at the request or insistence of a Person (other than the Company) related to the Change in Control) and provided that you continue to pay an amount equal to your regular contribution under such Plans for such participation (based upon your level of benefits and employment status most favorable to you at any time during the ninety (90)-calendar-day period immediately preceding the Change in Control).  If the twenty-four (24)-month-period ends before you have reached Retirement and you have not previously received or are not then receiving equivalent benefits from a new employer (including coverage for any pre-existing conditions), the Company will arrange, at its sole cost and expense, to enable you to covert your and your dependents’ coverage under such plans to individual policies or programs under the same terms as executives of the Company may apply for such conversions.  In the event that you or your dependents’ participation in any such Plan is barred, the Company, at its sole cost and expense, will arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on a federal, state and local income and employment after-tax basis) to those which you otherwise would have been entitled to receive under such Plans pursuant to this clause (ii) or, if such

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insurance is not available at a reasonable cost to the Company, the Company will otherwise provide you and your dependents equivalent benefits (on a federal, state and local income and employment after-tax basis). You will not be required to pay any premiums or other charges in an amount greater than that which you would have paid in order to participate in such Plans.

(iii)          Limitation on Payments and Benefits. Notwithstanding anything in this Agreement to the contrary, if any of the payments or benefits to be made or provided in connection with this Agreement, together with any other payments or benefits which you have the right to receive from the Company or any corporation which 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, constitute an “excess parachute payment” (as defined in section 280G(b) of the Code), the payments or benefits to be made or provided in connection with this Agreement will be reduced to the extent necessary to prevent any portion of such payments or benefits from becoming subject to the excise tax imposed under section 4999 of the Code.  The determination as to whether any such decrease in the payments or benefits to be made or provided in connection with this Agreement is necessary must be made in good faith by legal counsel or a certified public accountant selected by you and reasonably acceptable to the Company, and such determination will be conclusive and binding upon you and the Company.  In the event that such a reduction is necessary, you will have the right to designate the particular payments or benefits that are to be reduced or eliminated so that no portion of the payments or benefits to be made or provided to you in connection with this Agreement will be excess parachute payments subject to the excise tax under Code section 4999.  The Company will pay or reimburse you on demand for the reasonable fees, costs and expenses of the counsel or accountant selected to make the determinations under the clause (iii).

4.             Indemnification.   Following a Change in Control, the Company will indemnify and advance expenses to you to the full extent permitted by law and the Company’s certificate of incorporation and bylaws for damages, costs and expenses (including, without limitation, judgments, fines, penalties, settlements and reasonable fees and expenses of your counsel) incurred in connection with all matters, events and transactions relating to your service to or status with the Company or any other corporation, employee benefit plan or other entity with whom you served at the request of the Company.

5.             Confidentiality.   You will not use, other than in connection with your employment with the Company, or disclose any Confidential Information to any person not employed by the Company or not authorized by the Company to receive such Confidential Information, without the prior written consent of the Company; and you will use reasonable and prudent care to safeguard and protect and prevent the unauthorized disclosure of Confidential Information.  Nothing in this Agreement will prevent you from using, disclosing or authorizing the disclosure of any Confidential Information:  (a) which

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is or hereafter becomes part of the public domain or otherwise becomes generally available to the public through no fault of yours; (b) to the extent and upon the terms and conditions that the Company may have previously made the Confidential Information available to certain persons; or (c) to the extent that you are required to disclose such Confidential Information by law or judicial or administrative process.

6.             Successors.  The Company will seek to have any Successor, by agreement in form and substance satisfactory to you, assent to the fulfillment by the Company of the Company’s obligations under this Agreement.  Failure of the Company to obtain such assent at least three (3) business days prior to the time a Person becomes a Successor (or where the Company does not have at least three (3) business days’ advance notice that a Person may become a Successor, within one (1) business day after having notice that such Person may become or has become a Successor) will constitute Good Reason for termination by you of your employment.

7.             Fees and Expenses.   The Company, upon demand, will pay or reimburse you for all reasonable legal fees, court costs, experts’ fees and related costs and expenses incurred by you in connection with any actual, threatened or contemplated litigation or legal, administrative, arbitration or other proceeding relating to this Agreement to which you are or reasonably expect to become a party, whether or not initiated by you, including, without limitation:  (a) all such fees and expenses, if any, incurred in contesting or disputing any such termination; or (b) your seeking to obtain or enforce any right or benefit provided by this Agreement; provided, however, you will be required to repay (without interest) any such amounts to the Company to the extent that a court issues a final and non-appealable order setting forth the determination that the position taken by you was frivolous or advanced by you in bad faith.

8.             Binding Agreement.  This Agreement inures to the benefit of, and is enforceable by, you, your personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If you die while any amount would still be payable to you under this Agreement if you had continued to live, all such amounts, unless otherwise provided in this Agreement, will be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.

9.             No Mitigation.  You will not be required to mitigate the amount of any payments or benefits the Company becomes obligated to make or provide to you in connection with this Agreement by seeking other employment or otherwise.  The payments or benefits to be made or provided to you in connection with this Agreement may not be reduced, offset or subject to recovery by the Company by any payments or benefits you may receive from other employment or otherwise.

10.           No Setoff.  The Company will have no right to setoff payments or benefits owed to you under this Agreement against amounts owed or claimed to be owed by you to the Company under this Agreement or otherwise.

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11.           Taxes.  All payments and benefits to be made or provided to you in connection with this Agreement will be subject to required withholding of federal, state and local income, excise and employment-related taxes.

12.           Notices.  For the purposes of this Agreement, notices and all other communications provided for in, or required under, this Agreement must be in writing and will be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid and addressed to each party’s respective address set forth on the first page of this Agreement (provided that all notices to the Company must be directed to the attention of the chair of the Board), or to such other address as either party may have furnished to the other in writing in accordance with these provisions, except that notice of change of address will be effective only upon receipt.

13.           Disputes.  Any dispute, controversy or claim for damages rising under or in connection with this Agreement may, in your sole discretion, be settled exclusively by such judicial remedies that you may seek to pursue or by arbitration in Minneapolis, Minnesota by three (3) arbitrators in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  The Company will be entitled to seek an injunction or restraining order in a court of competent jurisdiction (within or without the State of Minnesota) to enforce the provisions of Section 5 of this Agreement.

14.           Jurisdiction.  Except as specifically provided otherwise in  this Agreement, the parties agree that any action or proceeding arising under or in connection with this Agreement must be brought in a court of competent jurisdiction in the State of Minnesota, and hereby consent to the exclusive jurisdiction of said courts for this purpose and agree not to assert that such courts are an inconvenient forum.

15.           Related Agreements.  To the extent that any provision of any other Plan or agreement between the Company and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while such other Plan or agreement remains in force, the provision of this Agreement will control and such provision of such other Plan or agreement will be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.  Nothing in this Agreement prevents or limits your continuing or future participation in any Plan provided by the Company and for which you may qualify, and nothing in this Agreement limits or otherwise affects the rights you may have under any Plans or other agreements with the Company.  Amounts which are vested benefits or which you are otherwise entitled to receive under any Plan or other agreement with the Company at or subsequent to the Date of Termination will be payable in accordance with such Plan or other agreement.

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16.           No Employment or Service Contract.  Nothing in this Agreement is intended to provide you with any right to continue in the employ of the Company for any period of specific duration or interfere with or otherwise restrict in any way your rights or the rights of the Company, which rights are hereby expressly reserved by each, to terminate your employment at any time for any reason or no reason whatsoever, with or without cause.

17.           Change of Subsidiary Status.   In the event that, prior to a Change in Control:  (a) a Subsidiary is sold, merged, transferred or in any other manner or for any other reason ceases to be a Subsidiary; (b) your primary employment duties are with the Subsidiary at the time of the occurrence of such event; and (c) you do not, in conjunction therewith, transfer employment directly to the Company or another Subsidiary, then this Agreement will become null and void.

18.           Survival.  The respective obligations of, and benefits afforded to, the Company and you which by their express terms or clear intent survive termination of your employment with the Company or termination of this Agreement, as the case may be, including, without limitation, the provisions of Sections 3, 4, 5, 6, 7, 10, 11, 12 and 13 of this Agreement, will survive termination of your employment with the Company or termination of this Agreement, as the case may be, and will remain in full force and effect according to their terms.

19.           Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the chair of the Board.  No waiver by any party to this Agreement at any time of any breach by another party to this Agreement of, or of compliance with, any condition or provision of this Agreement to be performed by such party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter to this Agreement have been made by any party which are not expressly set forth in this Agreement.

This Agreement and the legal relations among the parties as to all matters, including, without limitation, matters of validity, interpretation, construction, performance and remedies, will be governed by and construed exclusively in accordance with the internal laws of the State of Minnesota (without regard to the conflict of laws provisions of any jurisdiction), except to the extent that the provisions of the corporate law of Delaware may apply to the internal affairs of the Company.  Headings are for purposes of convenience only and do not constitute a part of this Agreement.  The parties to this Agreement agree to perform, or cause to be performed, such further acts and deeds and to execute and deliver, or cause to be executed and delivered, such additional or supplemental documents or instruments as may be reasonably required by the other party to carry into effect the intent and purpose of this Agreement.  The invalidity or unenforceability of all or any part of any provision of this Agreement will not affect the validity or enforceability of the remainder of such provision or of any other provision of

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this Agreement, which will remain in full force and effect.  This Agreement may be executed in several counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument.

If this letter correctly sets forth our agreement on the subject matter discussed above, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,
NASH FINCH COMPANY	[NAME OF SUBSIDIARY,
	IF APPLICABLE]
By:	By:
Name:	Name:
Title:	Title:
Agreed to this        day of
, 20        .
[Executive’s Name]

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EX-10.5

Exhibit 10.5

RESTRICTED STOCK AWARD AGREEMENT

THIS AGREEMENT, effective as of February 19, 2002 (the “Date of Grant”), is entered into by and between Nash-Finch Company, a Delaware corporation (the “Company”), and Ron Marshall (the “Grantee”).

                A.  The Company has adopted the Nash Finch Company 2000 Stock Incentive Plan (the “Plan”) authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the “Committee”), to grant certain types of incentive awards to employees and non-employee directors, consultants and independent contractors of the Company and its Subsidiaries (as defined in the Plan).

                B.  The Company desires to provide the Grantee with the opportunity to acquire or increase the Grantee’s proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Grantee a Restricted Stock Award (as defined in the Plan).

                Accordingly, the parties agree as follows:

1.             Grant of Restricted Stock Award.

                The Company hereby grants to the Grantee a Restricted Stock Award of 50,000 shares (the “Restricted Stock Award Shares”) of the Company’s common stock, $1.66-2/3 par value (the “Common Stock”), according to the terms and subject to the conditions hereinafter set forth and as set forth in the Plan.

2.             Share Restrictions.

                2.1           Restriction and Forfeiture.  The Grantee’s right to retain the Restricted Stock Award Shares and any Dividend Proceeds (as defined below) related thereto will be subject to the Grantee remaining in the continuous employ or service of the Company through February 19, 2007.

                2.2           Vesting of Restricted Stock Award Shares.  The forfeiture restrictions provided for herein (the “Forfeiture Restrictions”) shall lapse, and the Grantee shall become vested in the Restricted Stock Award Shares in five respective installments on the anniversary of the Date of Grant in each of the years 2003 through 2007, inclusive (each, the “Vesting Date”), as follows:

Vesting Date	Number of Shares
February 19, 2003	10,000
February 19, 2004	10,000
February 19, 2005	10,000
February 19, 2006	10,000
February 19, 2007	10,000

                2.3           Vesting Date Cash Awards.  Within 30 days following each Vesting Date, the Company shall pay a cash award to the Grantee in an amount equal to forty percent (40%) of the Fair Market Value (as defined in the Plan), as of such Vesting Date, of the Restricted Stock Award Shares as to which the Forfeiture Restrictions lapse on the applicable Vesting Date (each, a “Cash Award”).

                2.4           Termination of Employment or Other Service.

                                (a)           Termination Due to Death, Disability or Retirement.

(i)            In the event the Grantee’s employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability (as defined in the Plan), all unvested Restricted Stock Award Shares then held by the Grantee will become fully vested and a Cash Award will be paid.

(ii)           In the event the Grantee’s employment or other service with the Company and all Subsidiaries is terminated by reason of Retirement (as defined in the Plan), all unvested Restricted Stock Award Shares then held by the Grantee will continue to vest in the manner provided in Section 2.2 hereof and Cash Awards will be paid in the manner proved in Section 2.3 hereof.

(b)           Termination for Reasons Other Than Death, Disability or Retirement.  In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated prior to February 19, 2007 for any reason other than death, Disability or Retirement, all rights of the Grantee under the Plan and this Agreement will immediately terminate without notice of any kind, and all Restricted Stock Award Shares then held by the Grantee that have not vested will be terminated and forfeited and no further Cash Awards will be paid; provided, however, that if such termination is due to any reason other than voluntary termination by the Grantee or termination by the Company for “cause” (as defined in the Plan), the Committee may, in its sole discretion and without obligation to exercise such discretion, and in such manner as the Committee may determine, cause Restricted Stock Award Shares 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.

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                2.5           Change in Control.

(a)           Impact of Change in Control.  If a Change in Control (as defined in the Plan) of the Company occurs, this Restricted Stock Award, if it has been outstanding for more than six months, will become immediately fully vested and non-forfeitable, regardless of whether the Grantee remains in the employ or other service of the Company.

(b)           Limitation on Change in Control Payments.  Notwithstanding anything in this Section 2.5 to the contrary, if, with respect to the Grantee, acceleration of the vesting of this Restricted Stock Award (which acceleration could be deemed a “payment” within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)), together with any other payments which the Grantee has the right to receive from the Company or any corporation which is a member of an “affiliated group” (as defined in 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), the payments to the Grantee as set forth herein 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 the Grantee is subject to a separate agreement with the Company that expressly addresses the potential application of Sections 280G or 4999 of the Code (including, without limitation, that “payments” under such agreement or otherwise will be reduced, that the Grantee will have the discretion to determine which “payments will be reduced, that such “payments” will not be reduced or that such “payments” will be “grossed up” for tax purposes), then this Section 2.5(b) will not apply, and any “payments” to the Grantee pursuant to Section 2.5(a) of this Agreement will be treated as “payments” arising under such separate agreement.

3.             Issuance of Restricted Stock Award Shares.

                3.1           Rights as a Stockholder; Transferability.  The Grantee will, as soon as practicable after the Date of Grant, be recorded on the books of the Company as the owner of the Restricted Stock Award Shares, and the Company will issue five duly issued and executed stock certificates evidencing the Restricted Stock Award Shares.  The Grantee will have all voting dividend, liquidation and other rights with respect to the Restricted Stock Award Shares in accordance with their terms upon becoming the holder of record of such Restricted Stock Award Shares; provided, however, that prior to the termination of the Forfeiture Restrictions, such Restricted Stock Award Shares will not be assignable or transferable by the Grantee, either voluntarily or involuntarily, and may not be subjected to any lien, directly or indirectly, by operation of law or otherwise.  Any attempt to transfer, assign or encumber the Restricted Stock Award Shares other than in accordance with this Agreement and the Plan will be null and void, and all Restricted Stock Award Shares will immediately be forfeited to the Company.

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                3.2           Enforcement of Forfeiture Restrictions.  To enforce the Forfeiture Restrictions, the Committee may place a legend on the stock certificates evidencing the Restricted Stock Award Shares that refers to the Forfeiture Restrictions and may require the Grantee to keep such stock certificates, together with stock powers executed in blank, in the custody of the Company or its transfer agent until the Forfeiture Restrictions have terminated.

                3.3           Dividend Proceeds.  Until the termination of the Forfeiture Restrictions, any and all dividends or distributions paid with respect to the Restricted Stock Award Shares, including stock dividends or distributions in kind, the proceeds of any stock split or the proceeds resulting from any changes or exchanges described in Section 4 of this Agreement, but excluding ordinary cash dividends paid generally with respect to shares of Common Stock, will be deemed to be “Dividend Proceeds” and will be subject to the Forfeiture Restrictions and other obligations provided for herein to the same extent as the Restricted Stock Award Shares to which such Dividend Proceeds relate.  The Committee may, however, in its sole discretion elect to distribute such Dividend Proceeds to the Grantee as they are made, retain and hold such Dividend Proceeds subject to the Forfeiture Restrictions and other obligations provided for herein or cause such Dividend Proceeds to be paid to the Company pursuant to Section 8 of this Agreement in order to satisfy any federal, state or local withholding or other employment-related tax requirements attributable to such Dividend Proceeds or the Grantee’s acquisition of the Restricted Stock Award Shares or the termination of the Forfeiture Restrictions applicable to the Restricted Stock Award Shares.

4.             Adjustments.

                In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering or divestiture (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), in order to prevent dilution or enlargement of the rights of the Grantee, will make appropriate adjustments (which determination will be conclusive) as to the number and kind of securities subject to this Agreement.

5.             Rights of Grantee.

5.1           Employment or Service.  Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or other service of the Grantee at any time, nor confer upon the Grantee any right to continue in the employ or other service of the Company or any Subsidiary at any particular position or rate of pay or for any particular period of time.

5.2           Rights as a Shareholder.  The Grantee will have no rights as a shareholder until the Grantee becomes the holder of record of the Restricted Stock Award Shares.  No

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adjustment will be made for ordinary cash dividends, Dividend Proceeds or any other rights as to which there is a record date preceding the date the Grantee becomes the holder of record of the Restricted Stock Award Shares.

5.4           Breach of Confidentiality or Non-Compete Agreements.  Notwithstanding anything in this Agreement or the Plan to the contrary, and in addition to the terms set forth in Section 6.3 of this Agreement, in the event that the Grantee materially breaches the terms of any confidentiality or non-compete agreement entered into with the Company or any Subsidiary, including but not limited to those provided for in Section 6 of this Agreement, whether such breach occurs before or after termination of the Grantee’s employment or other service with the Company or any Subsidiary, the Committee in its sole discretion may immediately terminate all rights of the Grantee under the Plan and this Agreement without notice of any kind.

6.             Grantee Covenants.

6.1           Competitive Activities.  Grantee agrees that in the event he voluntarily terminates his employment or service to the Company prior to February 19, 2008, he will not, without the prior written consent of the Company:

(a) alone or in any capacity (other than by way of holding shares listed on a stock exchange in a number not exceeding five percent of the outstanding class or series so listed) with any other person or entity, directly or indirectly engage in competition with the Company or any Subsidiary, in association with or as an officer, director, employee, principal, agent or consultant of any of the peer group companies named, for cumulative total stockholder return comparison purposes, in the Company’s proxy statements issued in the years 2002 through 2007, inclusive, for a period ending one year after the date of termination or on February 19, 2008, whichever is earlier; or

(b) directly or indirectly, solicit for employment, employ or attempt to employ any employee of the Company or any Subsidiary for a period of one year from the date of termination.

6.2           Remedies for Breach.  In the event of a breach of either of the covenants set forth in Section 6.1 of this Agreement, then in either such event, the Grantee shall forfeit all vested Restricted Stock Award Shares and any Dividend Proceeds related thereto to the Company, and shall immediately transfer and assign to the Company all such vested Restricted Stock Award Shares and any Dividend Proceeds related thereto, or the equivalent number or value thereof; and, in addition to any other legal remedies as may be available to it, the Company shall be entitled to an immediate injunction from a court of competent jurisdiction to prevent the continuation of the breach without further having to show damage.

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7.             Securities Law and Other Restrictions.

Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Grantee may not sell, assign, transfer or otherwise dispose of, any Restricted Stock Award Shares, unless (a) there is in effect with respect to the Restricted Stock Award Shares a registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or an exemption from such registration, 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 Restricted Stock Award Shares, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.

8.             Withholding Taxes.

The Company is entitled to (a) withhold and deduct from future wages of the Grantee, or cause to be paid to the Company out of Dividend Proceeds (or from other amounts that may be due and owing to the Grantee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the acquisition of the Restricted Stock Award Shares, the receipt of dividends or distributions on the Restricted Stock Award Shares or the termination of the Forfeiture Restrictions applicable to the Restricted Stock Award Shares, or (b) require the Grantee promptly to remit the amount of such withholding to the Company.  In the event that the Company is unable to withhold such amounts, for whatever reason, the Grantee agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law.

9.  Subject to Plan.

The Restricted Stock Award and the Restricted Stock Award Shares granted and issued pursuant to this Agreement have been granted and issued under, and are subject to the terms of, the Plan.  The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Grantee, by execution of this Agreement, acknowledges having received a copy of the Plan.  The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan.  In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

10.  Miscellaneous.

10.1         Binding Effect.  This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to this Agreement.

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10.2         Governing Law.  This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Minnesota, without regard to conflicts of laws provisions.  Any legal proceeding related to this Agreement will be brought in an appropriate Minnesota court, and the parties to this Agreement consent to the exclusive jurisdiction of the court for this purpose.

10.3         Entire Agreement.  This Agreement and the Plan set forth the entire agreement and understanding of the parties to this Agreement with respect to the grant and exercise of this Restricted Stock Award and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the grant and exercise of this Restricted Stock Award and the administration of the Plan.

10.4         Amendment and Waiver.  Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance.

10.5         Severability.  Whenever possible, each provision of this Agreement will be interpreted so that it is valid under the applicable law.  If any provision of this Agreement is to any extent invalid under the applicable law, that provision will still be effective to the extent it remains valid.  The remainder of this Agreement will also continue to be valid, and the entire Agreement will continue to be valid in other jurisdictions.

The parties to this Agreement have executed this Agreement effective the day and year first above written.

	NASH FINCH COMPANY
ATTEST:	By:
	Its:	President and CEO
By execution of this Agreement,	GRANTEE
the Grantee acknowledges having
received a copy of the Plan.
		(Signature)
		(Name and Address)

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EX-10.6

Exhibit 10.6

NASH-FINCH COMPANY

PERFORMANCE INCENTIVE PLAN

I. PURPOSE

A.General. In an effort to maintain a position of leadership in the industry in which Nash-Finch Company (the “Company”) competes, it is necessary to promote financial interests of the Company and its Subsidiaries, including its growth, by attracting and retaining certain highly qualified employees possessing outstanding ability, motivating such employees by means of performance related incentives, and providing incentive compensation opportunities which are competitive with those of major corporations. The Nash-Finch Company Performance Incentive Plan (the “Plan”) hereinafter described is designed to assist the Company in attaining these objectives.

B.Performance–Based Compensation. With respect to Covered Awards, the Plan is intended to constitute a qualified performance–based compensation plan under Section 162(m)(4)(C) of the Code and shall be construed and administered so as to ensure such compliance.

C.Cash Bonus Plan. The Plan is not intended to be (and shall not be construed and administered as) an employee benefit plan within the meaning of ERISA. Incentive Awards under this Plan are intended to be discretionary and shall not constitute a part of an employee’s regular rate of pay.

II. PLAN ADMINISTRATION

A.Plan Administration. The Company or its delegate has the authority and responsibility to manage and control the general administration of the Plan, except as to matters expressly reserved in this Plan to the Committee of the Board of Directors of the Company (as applicable, the “Committee”). This Plan is not intended to modify or limit the powers, duties or responsibilities of either the Board or the Committee as set forth under the Company’s Restated Certificate of Incorporation, as amended. Determinations, decisions and actions of the Company or, if applicable, the Committee, in connection with the construction, interpretation, administration, or application of the Plan will be final, conclusive, and binding upon any Participant and any person claiming under or through the Participant. No employee of an Employer, any member of the Board, any delegate of the Board, or any member of the Committee will be liable for any determination, decision, or action made in good faith with respect to the Plan or any Incentive Award made under the Plan.

B.Specific Authority of the Committee. The Committee shall have the sole authority and responsibility to review annually management’s recommendations for the Selected Performance Objectives and Selected Performance Factors under the Plan, to select the Selected Performance Objectives and Selected Performance Factors for an Award Year; and to otherwise administer Incentive Awards payable to Officers, including under Covered Awards.

C.Non-Assignability. A Participant’s rights and interests in and to payment of any Incentive Award under the Plan may not be assigned, transferred, encumbered or pledged other than by will or the laws of descent and distribution; and are not subject to attachment, garnishment, execution or other creditor’s processes.

D.Amendment or Termination; Term. The Plan may at any time be amended, modified, or terminated, as the Board in its discretion determines. Such amendment, modification, or termination of the Plan will not require the consent, ratification, or approval of any party, including any Participant. The Board or the Committee may amend the Selected Performance Objectives and/or the Selected Performance Factors as well as any Incentive Award (including increasing, decreasing or eliminating any or all Incentive Awards

for an Award Year) prior to the payment of the Award (or the date payment would have been made but for a Participant’s election to defer receipt) to the extent it deems appropriate for any reason, including compliance with applicable securities laws and local laws outside the U.S. Notwithstanding the foregoing, to the extent the Committee has expressly designated an Incentive Award as a Covered Award, the Committee will not have any authority to amend or modify the terms of any Covered Award in any manner which would impair its deductibility under Section 162(m) of the Code.

E.No Contract of Employment. Neither the Plan, nor any Incentive Award, constitutes a contract of employment, and participation in the Plan will not give any employee the right to be retained in the service of the Company or any Subsidiary or continue in any position or at any level of compensation.

F.Controlling Law. Except in connection with other matters of corporate governance and authority (all of which shall be governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, notwithstanding the conflicts of laws principles of any jurisdictions.

G.Compliance with Section 162(m) of the Code. To the extent any provision of the Plan or an Incentive Award or any action of the Committee or the Company as it relates to a Covered Award may result in the application of Section 162(m)(1) of the Code to compensation payable to a Covered Employee, such provision or action shall be deemed null and void to the extent permitted by law and deemed advisable to the Committee.

H.Unfunded, Unsecured Obligation. A Participant’s only interest under the Plan shall be the right to receive either a cash or Stock or a combination of cash and Stock payment for an Incentive Award pursuant to the terms of the Incentive Award and the Plan. No portion of the amount payable to a Participant under this Plan shall be held by the Company or any Subsidiary in trust or escrow or any other form of asset segregation. To the extent that a Participant acquires a right to receive a cash or Stock payment under the Plan, such right shall be no greater than the right of any unsecured, general creditor of the Company, and no trust in favor of any Participant will be implied.

III. DEFINITIONS

Unless the context requires otherwise, the following terms when used with initial capitalization have the following meanings:

A.Award Year—The fiscal year for which Incentive Awards, if any, are calculated under the Plan.

B.Board—The Board of Directors of the Company.

C.Code—The Internal Revenue Code of 1986, as from time to time amended including any related regulations.

D.Committee—the Compensation Committee of the Board of Directors of the Company, comprised solely of two or more outside directors meeting the requirements of Section 162(m) of the Code.

E.Company—Nash-Finch Company.

F.Compensation—Compensation means a Participant’s annual rate of base salary in effect at the time eligibility for participation for an Award Year is determined (but not later than 90 days following the beginning of such Award Year), or, if participation under the Plan commences during the Award Year, at such later commencement of participation, and without regard to any salary reduction agreement to make pre-tax elective contributions under any qualified Code Section 401(k) Plan or Code Section 125 cafeteria plan (including any HMO premium deductions).

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G.Covered Award—An Incentive Award (i) which will be paid to a Covered Employee, (ii) which the Committee expressly designates as performance–based compensation and intends to be fully deductible under Section 162(m) of the Code, and (iii) which will be paid following the shareholder approval required by Section 162(m)(4)(C)(ii) of the Code.

H.Covered Employee—An individual who is a “covered employee” within the meaning of Section 162(m)(3) of the Code.

I.Employer—The Company and any Subsidiary which, with the approval of the Chief Executive Officer of the Company, has adopted this Plan.

J.ERISA—The Employee Retirement Income Security Act of 1974, as from time to time amended, including any related regulations.

K.Fair Market Value. The Fair Market Value of a share of 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), as determined by (a) the mean between the reported high and low sale prices of the Stock during the regular trading session if the Stock is listed, admitted to unlisted trading privileges or reported on any foreign or national securities exchange or on the Nasdaq National Market or an equivalent foreign market on which sale prices are reported; (b) if the Stock is not so listed, admitted to unlisted trading privileges or reported, the closing bid price as reported by the Nasdaq SmallCap Market, OTC Bulletin Board or the National Quotation Bureau, Inc. or other comparable service; or (c) if the Stock is not so listed or reported, such price as the Committee determines in good faith in the exercise of its reasonable discretion.

L.Incentive Award—The dollar value of an award made to a Participant as determined under the Plan.

M.Incentive Opportunity—The amount, stated as a percentage of a Participant’s Compensation, determined with respect to an Award Year (or partial Award Year in the case of participation for a partial year), that will be included in a Participant’s Incentive Award formula under Paragraph V(A) of the Plan. If a Participant held more than one eligible position during the Award Year, his or her Incentive Opportunity will be separately determined based on each corresponding period of participation. The Incentive Opportunity for Participants who are Officers and the Incentive Opportunity upon which any Covered Award is based will be determined solely by the Committee.

N.Individual Performance Goal—The performance criteria or objectives established for a Participant for an Award Year for purposes of assisting the Company or the Committee in determining whether and to what extent an Incentive Award has been earned by such Participant for such Award Year.

O.Individual Performance Modifier—The numerical modifier (expressed as a percentage) determined for a Participant with respect to an Award Year, as follows:

1.In the case of a Participant who is a Key and Senior Management Employee other than an Officer, the Individual Performance Modifier shall be determined by the Company and may be based, in whole or in part, upon an evaluation of the extent to which such Participant achieved his or her Individual Performance Goals established for that Award Year.

2.In the case of a Participant who is an Officer other than an Officer who is to receive a Covered Award, the Individual Performance Modifier shall be determined by the Committee and may be based, in whole or in part, upon an evaluation of the extent to which such Participant achieved his or her Individual Performance Goals established for that Award Year.

3.In the case of a Participant who is to receive a Covered Award, the Individual Performance Modifier shall in all cases be 125%, subject to the Committee’s discretionary authority under Paragraph VIII(C) to reduce the amount of a Covered Award.

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A Participant’s evaluation under Paragraphs III(O)(l) and III(O)(2) above is wholly discretionary and subjective on the part of the Company.

P.Key and Senior Management Employee—Each Covered Employee, each Officer and each Management Employee who is designated by the Company as a Key and Senior Management Employee with respect to the Plan for an Award Year. Designation as a Key and Senior Management Employee will apply only for the Award Year for which the designation is made.

Q.Management Employee—An individual (i) who is classified by the Employer (without regard to any retroactive judicial or administrative reclassification of such individual) as a management employee (on other than a temporary reclassification basis), (ii) whose employment is for an indefinite period, and (iii) who is employed in an Employer established job classification not covered by a collective bargaining agreement.

R.Officer—Each officer of the Company and each senior officer of the Company’s Subsidiaries designated by the Board.

S.Participant—Each employee of an Employer who is designated as a Participant for an Award Year by the Company or the Committee, as the case may be.

T.Performance Objectives—One or more objectively determinable measures established at the beginning of an Award Year, related to: specified levels of, or relating to, customer satisfaction as measured by a Company sponsored customer survey; employee engagement or employee relations as measured by a Company sponsored employee survey; employee safety; employee diversity; financial performance as measured by net sales, operating income, income before income taxes, net income, net income per share (basic or diluted), profitability as measured by return ratios (including return on assets, return on equity, return on investment and return on sales), cash flows, market share, cost reduction goals, margins (including one or more of gross, operating and net income margins), stock price, total return to stockholders, economic value added, working capital and productivity improvements; retail store performance as determined by independent assessment; and operational performance as measured by on-time delivery, fill rate, selector accuracy, cost per case, sales per square foot, sales per labor hour and other, similar, objective productivity measures. Performance Objectives may be described in terms of Company, Subsidiary or business unit performance, either absolute or by relative comparison to other companies or any other external measure of the selected criteria. Performance Objectives shall be stated in terms of Threshold, Target and Maximum levels. For other than Covered Awards, the Company may add other Performance Objectives not specifically listed above.

U.Plan—The Nash-Finch Company Performance Incentive Plan, as evidenced by this written instrument as may be amended from time to time.

V.Selected Performance Factors—The numerical factors (expressed as a percentage) established by the Company relating to the Plan’s Selected Performance Objectives for the Award Year and which correspond to the actual achievement of the Threshold, Target and Maximum Selected Performance Objectives for such Award Year. The Selected Performance Factors as they relate to Officers and to Covered Awards shall be established by the Committee. If the actual achievement of the Selected Performance Objective for an Award Year, as determined by the Company (or by the Committee in the case of a Covered Award or an Incentive Award to any other Officer) shortly after the Award Year, is between the Threshold and Target or Target and Maximum Objectives, the Selected Performance Factor will be the amount determined by linear interpolation between the two corresponding Threshold, Target or Maximum Selected Performance Factors.

W.Selected Performance Objectives—One or more Performance Objectives selected for an Award Year. Subject to the provisions of Article VIII with respect to a Covered Award, the Committee shall establish at the beginning of an Award Year the Selected Performance Objectives, including the Threshold, Target and Maximum levels for Officers and with respect to any Covered Award.

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X.Stock—Shares of common stock of the Company, par value $1.66 2'3 per share.

Y.Subsidiary—Any entity, corporate or otherwise, in which the Company, directly or indirectly, owns or controls a greater than 50% interest.

IV. PARTICIPATION

A.Participants. Participants will be determined annually by the Company or the Committee from among the Key and Senior Management Employees who, in the judgment of the Company or the Committee, as the case may be, have contributed, are contributing or are expected to contribute to the creation of value for the Company and its stockholders. Designation as a Participant will apply only for the Award Year for which the designation is made and may include a partial year.

B.Termination of Employment. In order to be entitled to receive an Incentive Award for an Award Year, a Participant must be actively employed or on an approved leave of absence as of the last day of the Award Year; however, the Company (or the Committee, if applicable) may in its sole discretion pay an Incentive Award to a Participant who has terminated employment.

V. COMPUTATION OF INCENTIVE AWARDS

A.Formula. Subject to Paragraph B, a Participant’s Incentive Award for an Award Year will be an amount equal to the product of the following:

(a)The Participant’s Incentive Opportunity;

(b)The Participant’s Compensation;

(c)The sum of the Selected Performance Factors for the Award Year; and

(d)The Participant’s Individual Performance Modifier.

B.Covered Awards. A Covered Award shall be the greater of the Incentive Award determined under Paragraph A or an Award determined solely on the basis of one or more financial Performance Objectives as established by the Committee prior to the Award Year (or at such later date as may be permissible under Code Section 162(m)), subject to the Committee’s discretionary authority under Paragraph VIII(C) to reduce the amount of a Covered Award.

C.Classification Changes. Appropriate adjustments and computations, including computations for a partial Award Year, may be made to reflect changes in a Participant’s job classification, Individual Performance Modifier, or Selected Performance Factors during an Award Year. Subject to the provisions of Article VIII with respect to Covered Awards, the Committee shall determine all such adjustments and computations relating to Incentive Awards for Officers.

VI. PAYMENT OF INCENTIVE AWARDS

A.Cash Payment. Subject to a Participant’s right to elect payment in shares of Stock pursuant to Paragraph B below, payment of Incentive Awards will be made in cash as soon as practicable following the end of the Award Year, without interest.

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B.Election to Receive Payment in Stock; Matching Restricted Stock Award. A Participant may, by written notice given to the Committee prior to the payment of an Incentive Award, elect to receive payment of all or any portion of the Incentive Award in the form of a number of shares of Stock having an equal value, as determined by the Fair Market Value of the shares of Stock on the date the Committee approves payment of Incentive Awards. To the extent that a Participant elects to receive payment in the form of shares of Stock, the Participant will be granted additional, restricted shares of Stock, equal to 15% of the number of shares elected to be received in lieu of cash payment of the Incentive Award. All such shares of Stock will be granted under the Company’s 2000 Stock Incentive Plan, as amended. The restricted shares will vest in full on the date two years following the date the Committee approves the payment of the Incentive Award, provided that the Participant has retained beneficial ownership of the unrestricted shares, and will otherwise be subject to the terms and conditions of the 2000 Stock Incentive Plan.

VII. WITHHOLDING TAXES

Notwithstanding any of the foregoing provisions hereof, an Employer shall withhold from any payment to be made hereunder such amounts as it reasonably determines it may be required to withhold under any applicable federal, state or other law, and transmit such withheld amounts to the appropriate authorities. If cash payments under this Plan are not available to meet the withholding requirement, the Participant shall make available sufficient funds to meet the requirements of such withholding, and the Employer shall be entitled and authorized to take such steps as it may deem advisable, including but not limited to, withholding out of any funds or property due or to become due to the Participant, in order to have such funds made available to the Employer.

VIII. SPECIAL RULES FOR COVERED AWARDS

Notwithstanding any other provision of this Plan to the contrary, the following provisions shall control with respect to any Covered Award:

A.Preestablished Incentive Opportunity and Performance Objectives. The Selected Performance Factors, Selected Performance Objectives and Incentive Opportunity upon which a Covered Award is based or subject shall be established by the Committee in writing not later than 90 days after the commencement of the Award Year (or period of service as the case may be), provided that the outcome is substantially uncertain at the time the Committee actually establishes such factors and the objectives upon which they are based (or at such earlier time as may be required or such later time as may be permissible under Section 162(m) of the Code). The Committee shall not make Covered Awards based on Selected Performance Objectives not specifically provided under this Plan if it determines that use of such Performance Objectives would cause a Covered Award to not be deductible under Code Section 162(m).

B.Certification of Performance Objectives. Prior to the payment of a Covered Award, the Committee shall determine and certify in writing whether and to what extent the Selected Performance Objectives referred to in Paragraph A have been satisfied.

C.Discretionary Reduction of Covered Award. Notwithstanding the foregoing, the Committee may, in its sole discretion, reduce a Covered Award otherwise determined pursuant to the Plan.

D.Limited Adjustments of Selected Performance Objectives. 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, disposition or write-down of a significant amount of assets or a significant business; (iii) any change in accounting principles or practices, tax laws or other such laws or provisions affecting reported results; (iv) any uninsured catastrophic losses or extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 or in management’s discussion and analysis of financial performance appearing in the Company’s annual report to stockholders for the applicable year; or (v) any other similar change, in

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each case with respect to the Company or any other entity whose performance is relevant to the achievement of any Selected Performance Objective included in a Covered Award, the Committee (or, if the Company is not the surviving corporation in any such transaction, a committee of the board of directors of the surviving corporation consisting solely of two or more “outside directors” within the meaning of Section 162(m)(4)(C)(i) of the Code) may, without the consent of any affected Participant, amend or modify the terms of any outstanding Award that includes any Selected Performance Objectives 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, such that the criteria for evaluating such financial performance of the Company or such other entity (and the achievement of the corresponding Selected Performance Objectives) will be substantially the same (as determined by the Committee or such committee of the board of directors of the surviving corporation) following such event as prior to such event; provided, however, that any such change to any outstanding Covered Award pursuant to this Paragraph D must be made in such a manner that it is independently determinable by a hypothetical third party having knowledge of the relevant facts, and the Committee shall take no action pursuant to this Paragraph D which would constitute an impermissible exercise of discretion within the meaning of Section 162(m) of the Code, or would otherwise cause the Covered Award to not be deductible under Section 162(m) of the Code.

E.Changes Affecting Timing. No change shall be made to accelerate the payment of a Covered Award unless the amount of the Covered Award is discounted to reasonably reflect the time value of money. Further, no change shall be made to defer the payment of a Covered Award unless an increase in the amount paid with respect to such award is based on a reasonable rate of interest or on the actual returns on one or more predetermined actual investments (whether or not assets associated with the amount originally owed are actually invested therein).

F.Maximum Amount. The maximum amount of any Covered Award including the 15% restricted Stock match under Paragraph VI(B) payable to any Covered Employee with respect to an Award Year, determined as of the time the Covered Award is paid, shall not exceed $3,000,000.

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