We account for share-based compensation awards in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 – Compensation-Stock Compensation (“ASC 718”) which requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period. We recognized share-based compensation expense as a component of selling, general and administrative expense in our Consolidated Statements of Income in the amount of $1.4 million during the second quarter 2011 versus $1.9 million during the second quarter 2010. During year-to-date 2011, share-based compensation expense was $2.5 million as compared to $3.5 million during year-to-date 2010.

We have four equity compensation plans under which incentive stock options, non-qualified stock options and other forms of share-based compensation have been, or may be, granted primarily to key employees and non-employee members of the Board of Directors. These plans include the 2009 Incentive Award Plan (as Amended and Restated as of March 2, 2010) (“2009 Plan”), the 2000 Stock Incentive Plan (as amended and restated on July 14, 2008) (“2000 Plan”), the Director Deferred Compensation Plan, and the 1997 Non-Employee Director Stock Compensation Plan. These plans are more fully described in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011 under the caption “Footnote 10 – Share-based Compensation Plans” and in our Definitive Proxy Statement on Form DEF 14A filed on April 15, 2011.

Since 2005, awards have taken the form of performance units (including share units pursuant to our Long-Term Incentive Plan (“LTIP”)), restricted stock units (“RSUs”) and Stock Appreciation Rights (“SARs”).

Performance units have been granted during each of fiscal years 2005 through 2011 pursuant to our LTIP. These units vest at the end of a three-year performance period. All units under the 2007 plan were settled in shares of our common stock during the second quarter 2010. Under the 2008 plan, 104,111 units vested on January 1, 2011 and were settled in the second quarter 2011 for approximately 122,000 shares of common stock, of which approximately 96,000 were deferred by recipients until termination of employment as provided in the plan.

During year-to-date 2011, a total of 109,236 units were granted pursuant to our 2011 LTIP. Depending on a comparison of the Company’s three-year compound annual growth rate of Consolidated EBITDA results to the Company’s peer group and the Company’s ranking on absolute return on net assets and compound annual growth rate for return on net assets among the companies in the peer group, a participant could receive a number of shares ranging from zero to 200% of the number of performance units granted. Because these units can only be settled in stock, compensation expense (for shares expected to vest) is recorded over the three-year period for the grant date fair value.

During fiscal 2006 through 2010, RSUs were awarded to certain executives of the Company. Awards vest in increments over the term of the grant or cliff vest on the fifth anniversary of the grant date, as designated in the award documents. In addition to the time vesting criteria, awards granted in 2008 and 2009 to two of the Company’s executives include performance vesting conditions. The Company records expense for such awards over the service vesting period if the Company anticipates the performance vesting conditions will be satisfied.

On December 17, 2008, in connection with the Company’s announcement of its planned acquisition of certain military distribution assets of GSC Enterprises, Inc., eight executives of the Company were granted a total of 267,345 SARs with a per share price of $38.44. The SARs are eligible to become vested during the 36 month period commencing on closing of the acquisition of the GSC assets which was January 31, 2009. The SARs will vest on (i) the first business day during the vesting period that follows the date on which the closing prices on NASDAQ for a share of Nash Finch common stock for the previous 90 market days is at least $55.00, (ii) a change in control occurs following the six month anniversary of the grant date or (iii) termination of the executive’s employment due to death or disability. Upon exercise, the Company will award the executive a number of shares of restricted stock equal to (a) the product of (i) the number of shares with respect to which the SAR is exercised and (ii) the excess, if any, of (x) the fair market value per share of common stock on the date of exercise over (y) the base price per share relating to such SAR, divided by (b) the fair market value of a share of common stock on the date such SAR is exercised. The restricted stock shall vest on the first anniversary of the date of exercise so long as the executive remains continuously employed with the Company.

The fair value of SARs is estimated on the date of grant using a modified binomial lattice model which factors in the market and service vesting conditions. The modified binomial lattice model used by the Company incorporates a risk-free interest rate based on the 5-year treasury rate on the date of the grant. The model uses an expected volatility calculated as the daily price variance over 60, 200 and 400 days prior to grant date using the Fair Market Value (average of daily high and low market price of Nash Finch common stock) on each day. Dividend yield utilized in the model is calculated by the Company as the average of the daily yield (as a percent of the Fair Market Value) over 60, 200 and 400 days prior to the grant date. The modified binomial lattice model calculated a fair value of $8.44 per SAR which is recorded over a derived service period of 3.55 years.

The following assumptions were used to determine the fair value of SARs granted during fiscal 2008:

Assumptions - SARs Valuation

Weighted-average risk-free interest rate		1.37%
Expected dividend yield		1.86%
Expected volatility		35%
Exercise price		$38.44
Market vesting price (90 consecutive market days at or above this price)		$55.00
Contractual term		5.1 years

The following table summarizes activity in our share-based compensation plans during the year-to-date 2011:

(in thousands, except vesting periods)	Service Based Grants (Board Units and RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)	Performance Based Grants (LTIP & Performance RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)

Outstanding at January 1, 2011	646.5	0.6	568.8	0.7
Granted	11.6		109.5
Forfeited/cancelled	-		(16.1)
Restrictions lapsed/ units settled	(33.2)		(104.1)
Shares deferred upon vesting/settlement & dividend equivalents on deferred shares⁽¹⁾	36.6		96.4
Outstanding at June 18, 2011	661.5	0.3	654.5	0.8

Exercisable/unrestricted at January 1, 2011	322.1		323.7
Exercisable/unrestricted at June 18, 2011	358.6		316.0

⁽¹⁾“Shares deferred upon vesting/settlement” above are net of the performance adjustment factor applied to the “units settled” for the participants that deferred shares as provided in the plan.

(in thousands, except per share amounts)	Stock Appreciation Rights	Weighted Average Base/Exercise Price Per SAR

Outstanding at January 1, 2011	267.3	$ 38.44
Granted	-
Exercised/restrictions lapsed	-
Forfeited/cancelled	-
Outstanding at June 18, 2011	267.3	38.44

Exercisable/unrestricted at January 1, 2011	-
Exercisable/unrestricted at June 18, 2011	-

The weighted-average grant-date fair value of time vesting equity units and performance vesting units granted during year-to-date 2011 was $35.58 and $39.69, respectively.