INGLES MARKETS INC, 10-K405, 1995-12-15

INGLES MARKETS INC
10-K405, 1995-12-15
GROCERY STORES

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FACING PAGE
Page 1 of 2

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549

FORM 10-K

[X]

For the fiscal year ended September 30, 1995
------------------

[ ]

For the transition period from to
----------------- -----------------

Commission File Number 0-14706
-------

INGLES MARKETS, INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

North Carolina 56-0846267
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer ID no.)
incorporation or organization)

P.O. Box 6676, Asheville, NC 28816
- ------------------------------- ------------------------
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code: (704) 669-2941
---------------------------

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
- ------------------------------- ------------------------

None None
- ------------------------------- ------------------------

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.05 par value
Class B Common Stock, $0.05 par value
Convertible Subordinated Debentures due October 2008
----------------------------------------------------
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
--- ---

Exhibit Index is Located on pages 46 - 47
------ ------

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<PAGE> 2

FACING PAGE
Page 2 of 2

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)

As of December 1, 1995, the aggregate market value of voting stock held by
non-affiliates of the registrant, based on the closing sales price of the Class
A Common Stock on The Nasdaq Stock Market's National Market on December 1,
1995, was approximately $56.4 million.

As of December 1, 1995, the registrant had 4,578,741 shares of Class A
Common Stock outstanding and 13,325,409 shares of Class B Common Stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be used in connection with the
solicitation of proxies to be voted at the registrant's annual meeting of
stockholders to be held on February 20, 1996, to be filed with the Commission,
are incorporated by reference into Part III of this Report on Form 10-K.

2
<PAGE> 3

PART I

Item 1. BUSINESS

General

Ingles Markets, Incorporated ("Ingles" or the "Company") is a leading
supermarket chain with operations in six southeastern states. At September 30,
1995, the Company, headquartered in Asheville, North Carolina, operated 182
supermarkets in North Carolina, South Carolina, Georgia, Tennessee, Virginia
and Alabama. Ingles' strategy is to locate its supermarkets primarily in
suburban areas, small towns and rural communities, where management believes
the market may be underserved by existing supermarkets. The Company's existing
stores average approximately 34,000 square feet.

The Company resumed its new store opening, expansion, remodel and/or
replacement program in fiscal 1994 and continued this program in fiscal 1995.
During fiscal 1995, seven, net new stores were opened and eighteen older stores
were remodeled and/or replaced. All of the stores which were remodeled or
replaced were enlarged, the results of which have been excellent, as evidenced
by increased sales and market share. Fiscal 1995 capital expenditures,
including those relating to the expansion of the existing warehouse facility,
aggregated $118.2 million. The Company believes that as a result of its new
store opening, expansion, remodel and/or replacement program, it is ensuring
the continuing success of the Company which will improve monetary returns and
build stockholder value over the long-term. It is the Company's aim to make
Ingles among the most modern supermarket chains in the industry.

Substantially all stores are located within 250 miles of the Company's 760,000
(formally 450,000) square foot, "state-of-the-art" warehouse and distribution
center located outside of Asheville, North Carolina. This facility supplies
approximately 60% of the inventory requirements of the Company's stores. A
310,000 square foot addition to the existing warehouse facility was completed
in October and November 1995. The addition will accommodate an expanded
inventory of perishable goods and increase dry grocery space. The new addition
will enable the Company to warehouse and distribute produce for the first time
in its 32-year history, as well as store more dry goods, meat and dairy
products. The Company expects to realize improved quality and variety in the
produce it carries in its stores.

The Company's supermarkets, featuring brightly lit and spacious aisles, offer
the customer a broad selection of nationally advertised food and nonfood
products as well as quality private label items at competitive prices with an
emphasis on convenient locations and superior customer service. Each store is
staffed with helpful, friendly employees who provide customers with fast
check-out and carry-out service. Ingles was one of the first supermarket
chains in its region to introduce higher margin specialty departments, such as
delicatessens and bakeries, as well as offering extended operating hours. All
stores are open seven days a week; many are open 24 hours a day.

In conjunction with its supermarket operations, the Company owns and operates
73 neighborhood shopping centers, all but two of which contain an Ingles
supermarket. The Company also owns and holds for future development or sale
numerous outparcels and other acreage located adjacent to the shopping centers
it owns.

3
<PAGE> 4

Ingles also owns and operates, as a wholly-owned subsidiary, a milk processing
and packaging plant which sells approximately 55% of its milk and related dairy
products to unaffiliated customers.

During the past five years, the number of supermarkets operated by the Company
increased from 167 to 182. The aggregate sales area in all stores increased
from approximately 3.5 million square feet to approximately 4.4 million square
feet. In addition, weighted average sales per store increased from $6.0
million to $7.4 million.

The Company was founded in 1963 by Robert P. Ingle, the Company's Chairman of
the Board and Chief Executive Officer. As of September 30, 1995, Mr. Ingle
retains approximately 90% of the combined voting power and 69% of the total
number of shares of the Company's outstanding Class A Common Stock and Class B
Common Stock (in each case including stock deemed to be beneficially owned by
Mr. Ingle as one of the trustees of the Company's Investment/Profit Sharing
Plan and Trust). The Company became a publicly traded company in September
1987. Its Class A Common Stock is traded on The Nasdaq Stock Market's National
Market under the symbol IMKTA.

The Company is incorporated under the Laws of the State of North Carolina. Its
principal executive offices are located at P. O. Box 6676, Highway 70,
Asheville, North Carolina 28816, and its telephone number is 704-669-2941.

Business

The Company operates in two lines of business: retail grocery and food sales
(principally retail sales) and shopping center rentals. Information about the
Company's operations by lines of business (in millions) is as follows (for
information regarding the Company's industry segments, see Note 12 to the
Consolidated Financial Statements on page 41 of this report on Form 10-K):

<TABLE>
<CAPTION>
Fiscal Year Ended September
----------------------------------------------------
1995 1994 1993
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers:
Grocery and food sales $1,385.1 99.4% $1,233.5 99.2% $1,141.8 99.3%
Shopping center rentals 8.3 .6% 9.8 .8% 8.0 .7%
-------- ------ -------- ------ -------- ------
$1,393.4 100.0% $1,243.3 100.0% $1,149.8 100.0%
======== ====== ======== ====== ======== ======

Income from operations:
Grocery and food sales $ 45.3 91.7% $ 35.2 84.6% $ 29.9 86.7%
Shopping center rentals 4.1 8.3% 6.4 15.4% 4.6 13.3%
-------- ------ -------- ------ -------- ------
49.4 100.0% 41.6 100.0% 34.5 100.0%
====== ====== ======
Other income (expense),
net 1.9 1.9 1.1
Interest expense 24.7 17.3 17.3
-------- -------- --------
Income before income
taxes and cumulative
effect of change in
accounting principle $ 26.6 $ 26.2 $ 18.3
======== ======== ========
</TABLE>

Supermarket Operations

The Company follows the strategy of locating its supermarkets primarily in
small towns, rural communities, and in particular with respect to new stores,
suburban areas, where management believes the market may be underserved by
existing stores.

4
<PAGE> 5

At September 30, 1995, the Company operated 179 supermarkets under the name
"Ingles" and 3 supermarkets under the name "Best Food" in western North
Carolina, western South Carolina, northern Georgia, eastern Tennessee,
southwestern Virginia and northeastern Alabama. The "Best Food" store concept,
developed in 1994, accommodates a smaller shopping area in a 22,500 square foot
building. The store carries a full line of dry groceries, fresh meat and
produce, all of which are displayed in a modern readily accessible environment.
The store lives up to Ingles' high standards of service and quality products at
a low price.

The following table sets forth certain information with respect to the
Company's supermarket operations.

<TABLE>
<CAPTION>
Number of Supermarkets Percentage of Total
at Fiscal Net Sales for Fiscal
Year Ended September Year Ended September
---------------------- --------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
North Carolina 57 57 56 35% 35% 35%
South Carolina 28 28 28 14% 14% 15%
Georgia 72 65 64 38% 37% 37%
Tennessee 21 21 19 11% 12% 11%
Virginia 3 3 3 2% 2% 2%
Alabama 1 1 0 0% 0% 0%
---- ---- ---- ---- ---- ----
182 175 170 100% 100% 100%
==== ==== ==== ==== ==== ====
</TABLE>

The Company's supermarkets, featuring brightly lit and spacious aisles, offer
the customer a full line of food items, including grocery, meat and dairy
products, produce and frozen foods, as well as a number of non-food items, such
as health and beauty care products, at competitive prices with an emphasis on
convenient locations and superior customer service. All stores are open 7 days
a week and many are open 24 hours a day. Most of the Company's stores also
contain specialty departments such as delicatessens and bakeries. Management
believes that specialty departments result in higher inventory turnover than
other departments and improve overall profit margins. As an additional
convenience to its customers, the Company leases space to local banks who
independently operate branches in 18 stores.

The Company sells national brands of merchandise and carries a wide variety of
products under its "Laura Lynn" private label. The private label products are
packed to the Company's specifications and are generally sold at prices lower
than those of national brands.

Selected statistics on the Company's supermarket operations are presented
below:

<TABLE>
<CAPTION>
Fiscal Year Ended September
-------------------------------------------
1995(1) 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Weighted Average Sales
Per Store (000's) $ 7,445 $ 6,930 $ 6,495 $ 6,035 $ 5,990

Total Square Feet at
End of Year (000's) 6,217 5,575 5,299 5,278 5,237

Average Total Square
Feet per Store 34,160 31,859 31,170 31,047 30,628

Average Square Feet of
Selling Space per Store (2) 23,912 22,301 21,819 21,733 21,439
</TABLE>

5
<PAGE> 6

<TABLE>
<S> <C> <C> <C> <C> <C>
Average Sales Per Square
Foot of Selling Space (2) $ 321 $ 314 $ 299 $ 277 $ 282

Number of Stores:
Opened 25 9 3 6 6
Closed 18 4 3 7 2

Size of Stores:
Less than 19,999 Sq Ft. 4 5 6 6 7
20,000 - 29,999 Sq Ft. 43 53 54 55 59
30,000 - 39,999 Sq. Ft. 86 91 92 93 92
Greater than 40,000 Sq Ft. 49 26 18 16 13
------- ------- ------- ------- -------
Total Stores Open at
End of Year 182 175 170 170 171
======= ======= ======= ======= =======
</TABLE>

(1) Fiscal 1995 was a 53 week year.
(2) Selling space is estimated to be 70% of total store square footage.

Merchandising

The Company's merchandising strategy is to provide convenient supermarket
locations which offer the customer a broad selection of quality products at
competitive prices with an emphasis on superior customer service. Customer
service includes, among other things, maintaining an awareness of customer
tastes and preferences, offering cut-to-order meat, carry-out service to the
customer's automobiles and Sunday hours.

The Company attempts to reinforce its quality and superior service image
through advertising, which is conducted primarily in newspapers, through the
distribution of circulars, and on radio and television. During fiscal 1995,
1994, and 1993 advertising and promotion expenditures, net were approximately
$18.7 million, $17.1 million, and $17.3 million, or 1.4% of net sales in 1995,
1.4% of net sales in 1994 and 1.5% of net sales in 1993. The Company stresses
its American ownership in its merchandising and advertising programs as a
contrast to the foreign ownership of several of its principal competitors.
From time to time, the Company uses special promotions at many of its store
locations as part of its promotional strategy. The Company sponsors an annual
"food show" in Asheville, North Carolina where food vendors operate booths and
provide information about and samples of products that are offered for sale in
the Company's stores.

Purchasing and Distribution

The Company supplies approximately 60% of its supermarkets' inventory
requirements from a 760,000 (formerly 450,000) square foot, "state-of-the-art"
warehouse and distribution center located near Asheville, North Carolina. A
310,000 square foot addition to the facility was completed in October and
November 1995. The new addition will enable the Company to warehouse and
distribute produce for the first time in its 32-year history, as well as store
more dry goods, meat and dairy products. The warehouse services all of the
Company's stores and receives merchandise, principally by truck, from sources
located throughout the country. Goods from the facility are distributed to the
Company's stores by its fleet of 97 tractors and 411 trailers.

Approximately 22% of the Company's inventory requirements in fiscal 1995,
primarily produce, frozen food and slower moving items which the Company
preferred not to stock, were purchased from a wholesale grocery distributor

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<PAGE> 7

with which the Company has had a continuing relationship since 1963. Purchases
from the distributor were approximately $236 million in 1995, $207 million in
1994 and $179 million in 1993. The Company believes that alternative sources
of supply are readily available. This distributor owned approximately 6% of
the Company's Class A Common Stock and approximately 1% of the Company's Class
B Common Stock at September 30, 1995.

The remaining 18% of the Company's inventory requirements, primarily beverages,
bread and snack foods, are supplied directly to the Company's supermarkets by
local distributors and manufacturers.

The Company's purchasing and distribution operations are centrally managed
providing several advantages. The Company: (1) is able to negotiate and reduce
the cost of merchandise it purchases, (2) is able to decrease overhead costs,
(3) is able to better manage its inventory at both warehouse and store level,
(4) is able to decrease in-store stock room space due to frequent deliveries
increasing the square footage available for retail selling space and (5) is
able to turn inventory rapidly which enables the Company to offer consistently
high quality meat and produce items in its stores.

Stores order merchandise electronically. Shipments from the warehouse to the
stores are wrapped which reduces damage during shipment.

The Company engages in forward purchasing arrangements on high turnover
inventory items in order to take advantage of special prices offered by
manufacturers for limited periods. The ability to take advantage of forward
purchasing is limited by several factors including carrying costs and warehouse
space.

In 1982, the Company purchased an integrated milk processing and packaging
plant located in Asheville, North Carolina. The plant processes and packages
milk, fruit juices and spring water under the Sealtest, Pet and Biltmore
labels, as well as under the Company's own "Laura Lynn" private label.
Production from the plant has increased from a rate of 5 million gallons per
year at the time of acquisition to over 43 million gallons per year currently.
Sales to nonaffiliates in fiscal 1995 were approximately $41.9 million.

Expansion and Store Development

From the beginning of fiscal 1991 through the end of fiscal 1995, the number of
supermarkets operated by the Company increased from 167 to 182. During this
period, total supermarket square footage increased from 5.0 to 6.2 million
square feet and average square feet per store increased from 30,000 to 34,000.

The Company uses independent contractors to construct its supermarkets from
prototype designs. The designs may include specialty service departments such
as expanded meat and produce sections, delicatessens, in-store bakeries,
periodical and greeting card departments, and, in some instances, branch banks
and video departments in the store. The two current prototype designs for an
"Ingles" store are 44,000 or 52,000 square feet, depending on the store
location. The prototype design for a "Best Food" store is 22,500 square feet.
The construction of stores is closely monitored and controlled by the Company.

7
<PAGE> 8

The Company remodels older stores on a regular basis in order to increase
customer traffic, compete effectively against new store openings by competitors
and support its "quality image" merchandising strategy. The Company has
elected to relocate, rather than remodel, certain stores where relocation was
more economical. Most stores over ten years old have been or are currently
being remodeled. Inclusion of specialty departments typically found in new
stores is frequently a part of remodeling. The Company spent an aggregate of
approximately $274.4 million in capital expenditures during the past three
fiscal years, primarily on new stores, store expansions and remodeling,
including equipment.

The Company's ability to open new stores is subject to many factors, including
the acquisition of satisfactory sites and the successful negotiation of new
leases, and may be limited by zoning and other governmental regulation. In
addition, the Company's store expansion, remodeling and replacement plans are
continually reviewed and are subject to change.

Competition

The supermarket industry is highly competitive. The number and type of
competitors vary by location. Principal competitive factors include store
location, price, service, convenience, cleanliness, product quality and
variety.

The Company's principal competitors are Winn Dixie Stores, Inc., Kroger
Company, Food Lion, Inc. and BI-LO, Inc. The Company also competes with other
food store chains as well as local supermarkets, specialty and convenience food
stores and small chains that have significant market share in limited areas.
The Company believes that its principal competitive advantages are its clean
stores, which feature brightly lit and spacious aisles, their convenient
locations, the Company's quality image, superior level of customer service,
including fast check-out and carry-out service, and broad selection of
nationally advertised food and non-food products as well as quality private
label items at competitive prices.

Employees

At September 30, 1995, the Company had approximately 10,010 employees,
including 166 administrative and management personnel, 9,636 supermarket
personnel, and 208 employees engaged in the milk processing and packaging
operations. Approximately 57% of these employees work on a part-time basis,
substantially all of whom are supermarket personnel. None of the employees are
represented by a labor union. Management considers employee relations to be
excellent.

The Company pays monthly bonuses to certain managerial personnel based on their
store's performance. Annual bonuses based on pre-tax, pre-bonus income, as
defined, are paid to all eligible personnel. The Company believes that its
employee incentive compensation program is unique in its industry and provides
a competitive advantage by encouraging employees to respond to consumer
preferences and needs and results in improved employee morale and loyalty, thus
enhancing the Company's ability to retain experienced personnel.

Insurance

The Company maintains general liability, automobile insurance and excess
liability coverages. The Company carries $1 million liability insurance
coverage on four aircraft used in its business. The Company carries

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<PAGE> 9

casualty insurance only on those properties where it is required to do so. The
Company has elected to self-insure its other properties.

The Company is self-insured for workers' compensation and employee group
medical and dental benefits up to a maximum per occurrence of $300,000 for
workers' compensation and up to a maximum of $150,000 per covered person for
medical care benefits for a policy year. The Company is insured for covered
costs in excess of these limits.

Trademarks and Licenses

The Company employs various trademarks and service marks in its business, the
most important of which are its own "Laura Lynn" private label trademark and
the "Ingles" service mark. Each mark is federally registered. In addition,
the Company uses the "Sealtest", "Pet", and "Biltmore" trademarks pursuant to
agreements entered into in connection with its milk, fruit juice and spring
water processing and packaging operations. The Company believes it has all
licenses and permits necessary to conduct its business.

Item 2. PROPERTIES

At September 30, 1995, the Company owned and operated 73 shopping centers, all
but two of which contained an Ingles supermarket. The shopping centers contain
an aggregate of 5.1 million square feet of leasable space, of which 2.6
million square feet is used by the Company's supermarkets. The remainder of
the leasable space in each center is leased by the Company to third party
tenants. The Company also owns and holds for future development or sale
numerous outparcels and other acreage located adjacent to the shopping centers
it owns.

A breakdown by size of the shopping centers operated by the Company is as
follows:

<TABLE>
<S> <C>
Less than 50,000 square feet 27
50,000-100,000 square feet 34
Over 100,000 square feet 12
---
73
===
</TABLE>

In addition to an Ingles supermarket, many shopping centers include a national
drug store chain as a tenant. Shopping centers containing more than 50,000
square feet typically include space leased or subleased to a regional or
national discount department store. In some instances, space is also leased or
subleased to local tenants such as cleaners, restaurants and other service
businesses or specialty retailers. The Company believes that the businesses
operated by its tenants, combined with an Ingles supermarket, offer one-stop
shopping convenience and increase traffic in its stores.

Typically, Ingles offers a drug store tenant a 20 year lease with renewal
options for an average 40 year term. A department store tenant is typically
offered a 15 to 20 year lease with renewal options for an average 30 to 40 year
term. Leases to local tenants have a maximum five year term. Most tenant
leases contain percentage rent provisions based on sales volume and are triple
net leases. None of the tenant leases provide an option to purchase.

The Company manages the leasing of the shopping centers. It employs
maintenance workers and also engages local contractors to maintain the

9
<PAGE> 10

properties. The vacancy rate for shopping centers operated by the Company was
approximately 20.1% as of September 30, 1995. The total annual rental income
from third party tenants, including payments in connection with the early
termination of leases, was approximately $8.3 million, $9.8 million and $8.0
million in fiscal 1995, 1994 and 1993, respectively.

Of the 111 supermarket locations not included in shopping centers owned by the
Company, 22 are owned by the Company and 89 are leased from various
unaffiliated third parties. Most of the leases give the Company the right of
first refusal to purchase the entire shopping center in which the supermarkets
are located and have exclusivity clauses prohibiting the developer from renting
to another supermarket within a designated radius. The majority of leases
require that the Company pay property taxes, utilities, insurance, repairs and
certain other expenses incidental to occupation of the premises. In addition
to base rent, most leases require the Company to pay additional percentage rent
(ranging from .75% to 1%) for sales in excess of a specified amount.

Rental rates range from $1.00 to $5.50 per square foot. During fiscal year
1995, 1994 and 1993, the Company paid a total of $11.8 million, $12.0 million
and $12.0 million, respectively, in supermarket rent, exclusive of property
taxes, utilities, insurance, repairs and other expenses. The following table
summarizes lease expiration dates as of September 30, 1995, with respect to the
initial and any renewal option terms of leases of supermarkets not located in
shopping centers operated by the Company.

<TABLE>
<CAPTION>
Year of Expiration Number of Stores
(including renewal terms) With Leases Expiring
--------------------------- ----------------------
<S> <C>
2000-2019 12
2020-2039 5
2040 or after 72
</TABLE>

Management believes that the long-term rent stability provided by these leases
is a valuable asset of the Company.

The Company owns a 810,000 square foot facility which is strategically located
between Interstate 40 and Highway 70 near Asheville, North Carolina. The
facility includes the Company's principal executive offices and its 760,000
square foot "state-of-the-art" warehouse and distribution center, as well as
the 78 acres of land on which it is situated.

The Company's milk processing and packaging subsidiary, Milkco, Inc., owns a
54,000 square foot manufacturing and storage facility in Asheville, North
Carolina. In addition to the plant itself, the property includes truck
servicing and fuel storage facilities.

Item 3. LEGAL PROCEEDINGS

Various legal proceedings and claims arising in the ordinary course of business
are pending against the Company. In the opinion of management, the ultimate
liability, if any, from all pending legal proceedings and claims would not
materially affect the Company's financial position or the results of its
operations.

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to the vote of the security holders during the fourth
quarter of the fiscal year covered by this report.

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<PAGE> 11

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Market Information

The Company has two classes of Common Stock: Class A and Class B. Class A
Common Stock is traded on The Nasdaq Stock Market's National Market under the
symbol IMKTA. There is no public market for the Company's Class B Common
Stock. However, under the terms of the Company's Articles of Incorporation,
any holder of Class B Common Stock may convert any portion or all of his shares
of Class B Common Stock into an equal number of shares of Class A Common Stock
at any time. As of December 1, 1995, there were approximately 1,462 holders of
record of the Company's Class A Common Stock and 334 holders of record of the
Company's Class B Common Stock. The following table sets forth the reported
high and low closing sales price for the Class A Common Stock during the period
indicated as reported in the National Market System. The quotations reflect
actual sales prices without retail mark-up, mark-down or commissions.

<TABLE>
<CAPTION>
1995 Fiscal Year High Low
- ----------------- ---- ---
<S> <C> <C>
First Quarter (ended December 24, 1994) $12 $ 9-3/4
Second Quarter (ended March 25, 1995) $10-1/2 $ 9-1/4
Third Quarter (ended June 24, 1995) $11 $ 8-7/8
Fourth Quarter (ended September 30, 1995) $11 $10

<CAPTION>
1994 Fiscal Year High Low
- ---------------- ---- ---
<S> <C> <C>
First Quarter (ended December 25, 1993) $11-3/8 $ 8-3/8
Second Quarter (ended March 26, 1994) $12-3/4 $10-1/4
Third Quarter (ended June 25, 1994) $12-3/8 $10-1/8
Fourth Quarter (ended September 24, 1994) $12-1/4 $10-1/8
</TABLE>

On December 1, 1995, the closing sales price of the Company's Class A Common
Stock on The Nasdaq Stock Market's National Market was $10-5/8 per share.

Dividends

The Company has paid cash dividends on its Common Stock in each of the past
sixteen fiscal years, except for the 1984 fiscal year when the Company paid a
3% stock dividend. During fiscal 1995 the Company paid quarterly dividends
totalling $.66 per share of Class A Common Stock and $.60 per share of Class B
Common Stock. During fiscal 1994, the Company paid quarterly dividends
totalling $.5775 per share of Class A Common Stock and $.5250 per share of
Class B Common Stock.

The Company expects to continue the payment of regular dividends on a quarterly
basis. The Board of Directors, however, reconsiders the declaration of
dividends periodically, and there can be no assurance as to the declaration of
or the amount of dividends to be paid. The payment of dividends is subject to
the discretion of the Board of Directors and will depend upon the results of
operations, the financial condition of the Company and other factors which the
Board of Directors deems relevant. The payment of dividends is also subject to
restrictions contained in certain loan agreements entered into by the Company
and by the terms of the Debentures. See Note 7 to the Consolidated Financial
Statements on pages 36 through 37 of this report on Form 10-K.

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<PAGE> 12

Item 6. SELECTED FINANCIAL DATA

The selected financial data set forth below has been derived from the Company's
consolidated financial statements. The information should be read in
conjunction with MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION and the CONSOLIDATED FINANCIAL STATEMENTS and Notes
thereto included elsewhere herein.

<TABLE>
<CAPTION>
Selected Income Statement
Data for the Year Ended
September
(in thousands except
per share amounts) 1995 1994 1993 1992 1991
- -------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $1,385,127 $1,233,497 $1,141,800 $1,066,332 $1,044,452
Gross Profit 317,239 275,062 250,592 235,039 236,374

Income Before
Cumulative Effect
of Change in
Accounting Principle 17,023 16,572 11,701 5,499 10,745

Primary Earnings per
Common Share Before
Cumulative Effect of
Change in Accounting
Principle .93 .90 .65 .31 .60

Cash Dividends per
Common Share
Class A .66 .5775 .2475 .22 .22
Class B .60 .5250 .2250 .20 .20
</TABLE>

<TABLE>
<CAPTION>
Selected Balance Sheet
Data at September
(in thousands) 1995 1994 1993 1992 1991
- --------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current Assets $155,828 $141,500 $136,316 $141,453 $129,539
Property and Equipment,
net 450,541 359,670 312,516 258,882 262,546

Total Assets 611,827 506,593 456,549 404,988 396,939

Current Liabilities,
including Current
Portion of Long-Term
Liabilities 135,019 115,938 123,882 72,375 78,130

Long-Term Liabilities,
net of Current Portion 292,765 214,057 163,013 162,581 149,815

Stockholders' Equity 163,816 157,972 147,689 140,113 138,280
</TABLE>

12
<PAGE> 13

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

RESULTS OF OPERATIONS

The Company's fiscal year ends on the last Saturday in September. Fiscal
year 1995 was a 53-week year, while fiscal years 1994 and 1993 consisted of 52
weeks.

During the past five years, the Company's sales grew at an average annual
compound rate of 6.6%. This growth is attributable to both the opening of new
stores and increased sales in existing stores. During the period, the number
of stores increased from 167 to 182 and weighted average sales per store
increased from $6.0 million to $7.4 million. Sales also benefitted from modest
population growth in the Company's geographic markets and increased market
share resulting from the expansion, remodel and/or replacement of existing
stores and the addition of new stores. Sales are slightly seasonal with higher
volume in the summer months due to increased sales by stores located in
vacation and seasonal home areas.

The following table sets forth for the years indicated the percentage
which selected items in the consolidated statements of income bear to net sales
and the percentage changes in dollar amounts of such items as compared to the
indicated prior year.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PERCENTAGE CHANGE
-----------------
PERCENTAGE OF NET SALES FISCAL YEAR
FISCAL YEAR -----------------
ENDED SEPTEMBER 1995 1994
----------------------- VS. VS.
1995 1994 1993 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . 100.0% 100.0% 100.0% 12.3% 8.0%
Cost of goods sold . . . . . 77.1 77.7 78.1 11.4 7.5
----- ----- -----
Gross profit . . . . . . . . 22.9 22.3 21.9 15.3 9.8
Operating and administrative
expenses . . . . . . . . . 19.6 19.4 19.3 13.4 8.7
Rental income, net. . . . . . .3 .5 .4 (35.6) 38.2
----- ----- -----
Income from operations. . . . 3.6 3.4 3.0 18.8 20.6
Other income (expense), net . .1 .1 .1 3.9 71.0
----- ----- -----
Income before interest and
income taxes and cumulative
effect of change in
accounting principle. . . . 3.7 3.5 3.1 18.2 22.1
Interest expense . . . . . . 1.8 1.4 1.5 43.0 .1
----- ----- -----
Income before income taxes and
cumulative effect of change
in accounting principle . . 1.9 2.1 1.6 1.7 43.0
Income taxes . . . . . . . . .7 .8 .6 0.0 45.5
----- ----- -----
Income before cumulative
effect of change in
accounting principle. . . . 1.2% 1.3% 1.0% 2.7 41.6
===== ===== =====
- ---------------------------------------------------------------------------
</TABLE>

FISCAL 1995 COMPARED WITH FISCAL 1994

NET SALES

Net sales for the year ended September 30, 1995 increased $151.6 million,
to $1.385 billion, up 12.3% over sales of $1.233 billion last year.
Approximately 68% of the dollar increase in sales resulted from an

13
<PAGE> 14

increase in grocery sales, while the balance resulted substantially from
increased sales in the perishable departments. The continuation by the Company
of its lower price strategy on dry grocery goods, aggressive merchandising,
aggressive pricing and effective advertising helped boost sales. Sales also
benefited by increased volume in stores that were expanded, remodeled and/or
replaced. The Company estimates approximately 2% of the 12.3% increase in
sales is related to the additional week's operations. Growth in identical
store sales (grocery stores open for the entire duration of the previous fiscal
year) on a comparable 52 week basis was 6.5%. Fiscal 1995 was the 31st
consecutive year Ingles has achieved an increase in net sales.

During fiscal 1995, seven, net new stores were opened and eighteen older
stores were remodeled and/or replaced. All of the stores which were remodeled
and/or replaced were enlarged, the results of which have been excellent, as
evidenced by increased sales and market share. At September 30, 1995, the
Company operated 182 supermarkets in six states: North Carolina (57), South
Carolina (28), Georgia (72), Tennessee (21), Virginia (3) and Alabama (1).

GROSS PROFIT

Gross profit for the year was $317.2 million, or 22.9% of sales, compared
to $275.1 million, or 22.3% of sales, a year ago - an increase of 15.3%.
Grocery gross profit, as a percentage of sales, increased primarily because of
an aggressive purchasing program. Meat, produce and frozen food gross profit,
as a percentage of sales, improved due to better merchandising and aggressive
purchasing and pricing programs.

OPERATING AND ADMINISTRATIVE EXPENSES

Operating and administrative expenses, as a percentage of sales, were
19.6% this year compared to 19.4% last year. The percentage increase is
primarily due to increases in the cost of labor at the store level, increased
depreciation and amortization expense resulting from the Company's aggressive
new store opening, expansion, remodel and/or replacement program and higher
expense associated with repairs and maintenance. These increases were
partially offset by a decrease, as a percentage of sales, in rent expense.

RENTAL INCOME, NET

Rental income, net was $6.4 million last year - $4.1 million this year.
Fiscal 1994 included gains of $1.5 million in connection with the early
termination by tenants of three leases of premises in shopping centers owned by
the Company.

INCOME FROM OPERATIONS

Income from operations, in fiscal 1995 was $49.4 million, or 3.6% of
sales, compared with $41.6 million, or 3.4% of sales, the prior year. The
increase in operating income was due to the increase in sales and the related
increase in gross profit.

OTHER INCOME (EXPENSE), NET

Other income (expense), net was $1.8 million last year - $1.9 million this
year.

14
<PAGE> 15

INCOME BEFORE INTEREST AND INCOME TAXES

Income before interest and income taxes increased 18.2% to $51.4 million,
or 3.7% of sales, this year compared to $43.5 million, or 3.5% of sales, last
year.

INTEREST EXPENSE

Interest expense was $17.3 million in fiscal 1994 - $24.7 million in
fiscal 1995. The increase in interest expense was due to an increase in debt
to fund the Company's aggressive new store opening, expansion, remodel and/or
replacement program coupled with an increase in interest rates.

INCOME BEFORE INCOME TAXES

Income before income taxes was $26.6 million, or 1.9% of sales, this year
compared with $26.2 million, or 2.1% of sales, the prior year.

INCOME TAXES

Income tax expense, as a percentage of pre-tax income, was 36.1% this year
compared with 36.7% last year.

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Income before the cumulative effect of the change in accounting principle
for the year ended September 30, 1995 was $17.0 million compared to $16.6
million last year. Primary earnings per common share before the cumulative
effect of the change in account principle rose from $.90 last year to $.93 this
year.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE FOR INCOME TAXES

Effective September 26, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes". As permitted by Statement 109, the Company
elected not to restate the financial statements of any prior years. The
cumulative effect of the change increased net income for the year ended
September 24, 1994 by $3.3 million, or $.18 per common share.

FISCAL 1994 COMPARED WITH FISCAL 1993

NET SALES

Net sales for the year ended September 24, 1994 increased $91.7 million,
to $1.233 billion, up 8.0% over sales of $1.142 billion the prior year. Growth
in identical store sales (grocery stores open for the entire duration of the
previous fiscal year) was 7.0%. Fiscal 1994 was the 30th consecutive year
Ingles achieved an increase in net sales. Approximately one-half of the dollar
increase in sales resulted from an increase in grocery sales - the other half
from increased sales in the perishable departments. In addition to continuing
the lower price strategy on dry grocery goods, commenced during the third
quarter of fiscal 1992, the Company pursued an aggressive merchandising and
pricing strategy to boost sales in its perishable departments, conducted a more
effective advertising campaign, and increased variety in its grocery
department.

During fiscal 1994, nine new stores were opened and four older stores were
closed. At September 24, 1994, the Company operated 175 supermarkets

15
<PAGE> 16

in six states: North Carolina (57), South Carolina (28), Georgia (65),
Tennessee (21), Virginia (3) and Alabama (1).

GROSS PROFIT

Gross profit for the year ended September 24, 1994 increased 9.8% to
$275.1 million, or 22.3% of sales, compared to $250.6 million, or 21.9% of
sales, the prior year. Grocery gross profit, as a percentage of sales, was the
same as fiscal 1993. Lower gross margins on dry grocery goods due to reduced
pricing were compensated for by an aggressive purchasing program. Meat,
produce and frozen food gross profit, as a percentage of sales, improved due to
better merchandising, aggressive pricing and more effective advertising.

OPERATING AND ADMINISTRATIVE EXPENSES

Operating and administrative expenses, as a percentage of sales, were
19.4% in 1994 compared to 19.3% the prior year. Increases in the cost of
labor, warehouse and transportation expense and repairs and maintenance, as a
percentage of sales, were partially offset by a decrease, as a percentage of
sales, in advertising and promotional expenditures, rent expense and utilities.

Insurance expense, as a percentage of sales, increased slightly.
Approximately 71% of insurance costs in fiscal 1994 related to expenses of the
self-insured group medical and workers' compensation coverages. The Company
was insured for covered costs in excess of certain limits.

RENTAL INCOME, NET

Rental income, net increased from $4.6 million in 1993 to $6.4 million in
1994. Fiscal 1994 included gains of $1.5 million in connection with the early
termination by tenants of three leases of premises in shopping centers owned by
the Company.

INCOME FROM OPERATIONS

Income from operations increased 20.6% to $41.6 million, or 3.4% of sales,
compared to $34.5 million, or 3.0% of sales, the prior year. The increase in
operating income in fiscal 1994 was due to the increase in sales, the related
increase in gross profit and the increase in rental income, net.

OTHER INCOME (EXPENSE), NET

Other income (expense), net increased $.8 million. The increase was
primarily due to an increase in miscellaneous other income.

INCOME BEFORE INTEREST AND INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Income before interest and income taxes and the cumulative effect of the
change in accounting principle was $43.5 million, or 3.5% of sales, in 1994,
compared with $35.6 million, or 3.1% of sales, a year ago.

INTEREST EXPENSE

Despite an increase in debt in 1994, interest expense was $17.3 million in
both fiscal 1994 and fiscal 1993 due to lower borrowing rates in 1994 and an
increase in the capitalization of construction period interest.

16
<PAGE> 17

INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE

Income before income taxes and the cumulative effect of the change in
accounting principle increased $7.9 million to $26.2 million, or 2.1% of sales,
in fiscal 1994 compared to $18.3 million, or 1.6% of sales, the prior year.

INCOME TAXES

Income tax expense, as a percentage of pre-tax income, was 36.7% in 1994
compared with 36.1% in 1993 due primarily to the increase in the federal income
tax rate.

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE

Income before the cumulative effect of the change in accounting principle
for the year ended September 24, 1994 increased $4.9 million, to $16.6 million,
up 41.6% over income of $11.7 million a year ago. Primary earnings per common
share before the cumulative effect of the change in accounting principle rose
from $.65 in fiscal 1993 to $.90 in fiscal 1994.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
FOR INCOME TAXES

In February 1992, The Financial Accounting Standards Board issued a new
standard (SFAS 109), "Accounting for Income Taxes". A significant feature of
the standard is the use of an approach under which recorded deferred taxes are
adjusted for changes in tax rates. Under prior rules (APB 11), deferred taxes
were provided at current tax rates and were not adjusted for subsequent changes
in these rates. The new standard was adopted by the Company at the beginning
of fiscal 1994. The cumulative effect of adopting the standard resulted in a
non-cash credit to income for the year ended September 24, 1994 of $3.3
million, or $.18 per common share.

NET INCOME

Net income for the year ended September 24, 1994 was $19.9 million
compared to $11.7 million the prior year. Primary earnings per common share
rose from $.65 to $1.08.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

FISCAL 1995

OPERATING ACTIVITIES

Net cash provided by operating activities for the year ended September 30,
1995 totalled $45.3 million. Net income for the year was $17.0 million and
depreciation and amortization expense was $26.9 million. Accounts payable and
accrued expenses increased $11.9 million and inventory increased $12.9 million.

The increase in accounts payable ($4.7 million) was primarily due to an
increase in accounts payable-trade resulting from an increase in inventory.
The increase in inventory occurred at both store and warehouse levels and is
the result of seven, net new store openings, eighteen store expansions,

17
<PAGE> 18

remodels and/or replacements, increased variety and the Company's desire to
maintain inventory levels to support increased sales volume.

The increase in accrued expenses ($7.2 million) was principally due to an
increase(s) in: (a) property, payroll and other taxes payable ($2.2 million);
(b) income tax payable ($1.8 million); (c) salaries, wages and bonuses payable
($1.1 million); (d) interest payable ($.8 million) and (e) insurance accruals
($.6 million). Property, payroll and other taxes payable increased because of
increases in sales and ad valorem taxes payable. Income tax payable increased
due to a more profitable fourth quarter. Salaries, wages and bonuses payable
were more primarily because of an increase in annual bonuses due to the fact
the Company had a more profitable year.

INVESTING ACTIVITIES

Net cash used by investing activities-primarily expenditures for capital
assets-during fiscal 1995 was $117.3 million. The Company's capital
expenditure program was devoted primarily to obtaining land for new store
locations, the construction of new facilities including the expansion of the
existing warehouse facility, the renovation, modernization and/or expansion of
existing stores and the installation of electronic scanning systems in 29
stores. A portion of these expenditures were for new stores, store expansions,
remodels and/or replacements expected to become operational in fiscal 1996.

FINANCING ACTIVITIES

Net cash provided by financing activities totalled $73.7 million.
Proceeds from the issuance of long-term debt in fiscal 1995 aggregated $124.8
million. The proceeds of the loans were used to reduce short-term borrowings
outstanding under existing bank lines of credit, to pay for capital
expenditures and for general corporate purposes. Proceeds of short-term loans,
net were $15.0 million. Principal payments of long-term debt were $55.0
million. The Company paid cash dividends of $11.2 million.

FINANCIAL STRENGTH

The Company remains in sound financial condition. At September 30, 1995,
total assets were $611.8 million and stockholders' equity was $163.8 million
compared with $506.6 million and $158.0 million, respectively, at year-end,
September 24, 1994. Working capital at September 30, 1995 was $20.8 million.
Favorable inventory turnover rates (cost of sales divided by inventory) in 1995
of 9.1 helped generate cash flow from operations.

CAPITAL REQUIREMENTS

The Company plans to continue its new store opening, expansion, remodel
and/or replacement program in fiscal 1996, opening six new stores, remodeling
three and replacing two. Additional capital expenditures will be made to: (1)
upgrade and replace existing store equipment, (2) install electronic scanning
systems in new and existing stores and (3) secure sites for future store
expansion.

Fiscal 1996 capital expenditures, in the aggregate, are expected to be
approximately $60 million. Some of the expenditures that will be incurred
toward fiscal year-end will relate to assets that will be placed in service in
fiscal 1997.

18
<PAGE> 19

FINANCIAL RESOURCES

At September 30, 1995, the Company had lines of credit with six banks
totalling $95 million; of this amount $55 million was unused. The Company
monitors its cash position daily and makes draws or repayments on its lines of
credit. The lines provide the Company with various interest rate options
generally at rates less than prime. The Company is not required to maintain
compensating balances in connection with these lines of credit. The Company
has unencumbered property with a net book value of approximately $230 million
which is available to collateralize additional debt.

During October 1995, the Company obtained a seven year loan in the amount
of $28.3 million from a financial corporation at an interest rate fixed at
7.58%. The proceeds of this loan were or will be used to reduce short-term
borrowings outstanding September 30, 1995.

The Company believes that the financial resources available, including
amounts available under long-term financing arrangements, existing bank lines
of credit and internally generated funds, will be sufficient to meet planned
capital expenditures and working capital requirements for the foreseeable
future, including any debt servicing required by additional borrowings.

QUARTERLY CASH DIVIDENDS

At their quarterly meeting on December 3, 1993, the Company's Board of
Directors voted to increase the Company's regular quarterly cash dividends
100%. Effective with dividends paid December 27, 1993, the dividends were
increased from $.0825 (eight and one-quarter cents) per share on Class A Common
Stock to $.165 (sixteen and one-half cents) per share and from $.075 (seven and
one-half cents) per share on Class B Common Stock to $.15 (fifteen cents) per
share for an annual rate of $.66 and $.60 per share, respectively.

The Company expects to continue the payment of regular dividends on a
quarterly basis at the rates approved December 3, 1993. The Board of
Directors, however, reconsiders the declaration of dividends periodically, and
there can be no assurance as to the declaration of or the amount of dividends
to be paid. The payment of dividends is subject to the discretion of the Board
of Directors and will depend upon the results of operations, the financial
condition of the Company and other factors which the Board of Directors deems
relevant.

IMPACT OF INFLATION

Inflation in food prices continues to be lower than the overall increase
in the Consumer Price Index. Ingles primary costs, inventory and labor,
increase with inflation. Recovery of these costs has to come from improved
operating efficiencies and, to the extent possible, through improved gross
margins.

IMPACT OF SFAS 121 AND SFAS 123

The Financial Accounting Standards Board issued new standards (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" and (SFAS 123), "Accounting for Stock-based Compensation".
The standards must be adopted by the Company no later than

19
<PAGE> 20

the fiscal year ending September 1997. The effect of adopting the standards
has not been determined.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of the Company are included on
pages 25 through 43 of this report on Form 10-K:

Report of Ernst & Young LLP, Independent Auditors;

Consolidated Balance Sheets as of September 30, 1995, and September 24,
1994;

Consolidated Statements of Income for the years ended September 30, 1995,
September 24, 1994, and September 25, 1993;

Consolidated Statements of Changes in Stockholders' Equity for the years
ended September 30, 1995, September 24, 1994, and September 25, 1993;

Consolidated Statements of Cash Flows for the years ended September 30,
1995, September 24, 1994, and September 25, 1993;

Notes to Consolidated Financial Statements;

Selected quarterly financial data required by this Item is included in
Note 13 on page 42 of the Consolidated Financial Statements.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

20
<PAGE> 21

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated herein by reference from
the data under the heading "ELECTION OF DIRECTORS" in the Proxy Statement to be
used in connection with the solicitation of proxies for the Company's annual
meeting of stockholders to be held February 20, 1996, to be filed with the
Commission.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from
the data under the heading "EXECUTIVE COMPENSATION" in the Proxy Statement to
be used in connection with the solicitation of proxies for the Company's annual
meeting of stockholders to be held February 20, 1996, to be filed with the
Commission.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by reference from
the data under the heading "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" in
the Proxy Statement to be used in connection with the solicitation of proxies
for the Company's annual meeting of stockholders to be held February 20, 1996,
to be filed with the Commission.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by reference from
the data under the headings "EXECUTIVE COMPENSATION - Additional Information
with Respect to Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" and "CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS" in the Proxy Statement to be used in connection with the
solicitation of proxies for the Company's annual meeting of stockholders to be
held February 20, 1996, to be filed with the Commission.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report:

1. The following financial statements of the Registrant are
included in response to Item 8 of this 10- K:

Consolidated Balance Sheets as of September 30, 1995, and
September 24, 1994;

Consolidated Statements of Income for the years ended
September 30, 1995, September 24, 1994, and September 25,
1993;

Consolidated Statements of Changes in Stockholders' Equity for
the years ended September 30, 1995, September 24, 1994, and
September 25, 1993;

Consolidated Statements of Cash Flows for the years ended
September 30, 1995, September 24, 1994, and September 25,
1993;

Notes to Consolidated Financial Statements.

21
<PAGE> 22

2. The following financial statement schedule of the Registrant
required by Item 8 and Item 14(d) of Form 10-K is included as page 44
of this report:

Schedule II - Supplemental schedule of valuation and qualifying
accounts.

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.

3. The following exhibits required by Item 601 of Regulation S-K and
Item 14(c) of Form 10-K are filed herewith or incorporated by
reference as indicated.

EXHIBIT NUMBER AND DESCRIPTION
- ------------------------------

3.1 Articles of Incorporation of Ingles Markets, Incorporated, as amended.
(Included as Exhibit 3.1 to Registrant's S-1 Registration Statement,
File No. 33-23919, previously filed with the Commission and
incorporated herein by this reference.)

3.2 By-laws of Ingles Markets, Incorporated. (Included as Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the
Commission and incorporated herein by this reference.)

4.1 Indenture between Registrant and Connecticut National Bank (including
specimen Debenture as Exhibit A). (Included as Exhibit 4.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, File No. 0-14706, previously filed with the
Commission and incorporated herein by this reference.)

4.2 Letters dated October 11, 1990 to the Registrant's Board of Directors
from Kidder, Peabody & Co. Incorporated and Wheat First Butcher &
Singer relating to interest rate reset under Debentures. (Included as
Exhibit 4.2 to Registrant's Annual Report on Form 10-K for the fiscal
year ended September 29, 1990, File No. 0-14706, previously filed with
the Commission and incorporated herein by this reference.)

4.3 See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation,
as amended and By-laws of Registrant defining rights of holders of
capital stock of Registrant.

10.1 Amended and Restated Ingles Markets, Incorporated 1987 Employee
Incentive Stock Option Plan.

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.2 Restatement and Amendment by the Entirety of the Ingles Markets,
Incorporated Investment/Profit Sharing Plan effective September 26,
1993 (as amended through June 30, 1995).

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

22
<PAGE> 23
10.3 Loan Agreement between the Registrant and Metropolitan Life Insurance
Company dated March 21, 1990. (Included as Exhibit 19 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1990,
File 0-14706, previously filed with the Commission and incorporated
herein by this reference.)

10.4 Amended and Restated Ingles Markets, Incorporated 1991 Nonqualified
Stock Option Plan.

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.5 Amended and Restated Employment Agreement Between the Company and
Robert P. Ingle dated as of September 26, 1993. (Included as Exhibit
10.7 to Registrant's Annual Report on Form 10-K for the fiscal year
ended September 24, 1994, File No. 0-14706, previously filed with the
Commission and incorporated herein by this reference.)

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.6 Amended and Restated Stock Option Agreement Between the Company and
Robert P. Ingle, Chairman of the Board of Directors and Chief
Executive Officer of the Company, effective as of July 21, 1993.

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.7 Amended and Restated Stock Option Agreement Between the Company and
Landy B. Laney, President and Chief Operating Officer of the Company,
effective as of July 21, 1993.

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.8 Letter of Understanding dated September 8, 1992 between the Company
and IRT. (Included as Exhibit B to Registrant's Current Report on
Form 8-K dated October 1, 1992, File No. 0-14706, previously filed
with the Commission and incorporated herein by this reference.)

10.9 Stock Option Agreement Between the Company and Edward J. Kolodzieski,
Vice President-Strategic Planning of the Company, dated as of August
2, 1995.

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

23
<PAGE> 24
11 Statement Regarding Computation of Earnings Per Common Share.

12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.

21 Subsidiaries of the Registrant.

23 Consent of Ernst & Young LLP, Independent Auditors.

27 Financial Data Schedule (for SEC use only).

- --------------------------------

(b) The Registrant did not file any current reports on Form 8-K
during the fourth quarter of its fiscal year ending September
30, 1995.

(d) Financial Statement Schedules - The response to this portion
of Item 14 is submitted in the response to Item 14(a)(3) of
this report.

24
<PAGE> 25

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Stockholders and Board of Directors
Ingles Markets, Incorporated

We have audited the accompanying consolidated balance sheets of Ingles Markets,
Incorporated and subsidiaries as of September 30, 1995 and September 24, 1994,
and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
September 30, 1995. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
suporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Ingles Markets, Incorporated and subsidiaries at September 30, 1995 and
September 24, 1994, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended September 30, 1995,
in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for income taxes.

/s/ ERNST & YOUNG LLP

Greenville, South Carolina
November 17, 1995

25
<PAGE> 26

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND SEPTEMBER 24, 1994
- ---------------------------------------------

<TABLE>
<CAPTION>
ASSETS ------------- -------------
1995 1994
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . $ 20,120,776 $ 18,471,011
Receivables (less allowance for doubtful
accounts of $85,490 - 1995 and
$ 95,953 - 1994) . . . . . . . . . . . . . 15,176,746 16,663,805
Inventories . . . . . . . . . . . . . . . . 116,863,588 103,937,450
Other . . . . . . . . . . . . . . . . . . . 3,667,010 2,428,014

------------- -------------
Total current assets . . . . . . . . . . . 155,828,120 141,500,280

PROPERTY AND EQUIPMENT - Net . . . . . . . 450,540,776 359,670,105

OTHER ASSETS . . . . . . . . . . . . . . . 5,458,358 5,422,702

------------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . $ 611,827,254 $ 506,593,087
============= =============
</TABLE>

See notes to consolidated financial statements.

26
<PAGE> 27

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND SEPTEMBER 24, 1994
- ---------------------------------------------

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term loans and current
portion of long-term liabilities. . . . . . $ 36,899,696 $ 29,678,057
Accounts payable and accrued expenses. . . . 98,119,632 86,259,579

------------ ------------
Total current liabilities . . . . . . . . . 135,019,328 115,937,636

DEFERRED INCOME TAXES . . . . . . . . . . . 20,226,161 18,626,161

LONG-TERM LIABILITIES. . . . . . . . . . . . 292,765,280 214,056,944

------------ ------------
Total liabilities . . . . . . . . . . . . . 448,010,769 348,620,741

------------ ------------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock, $.05 par value;
10,000,000 shares authorized;
no shares issued
Common stocks:
Class A, $.05 par value; 150,000,000
shares authorized;
1995-4,577,541 shares issued and
outstanding
1994-4,412,167 shares issued and
outstanding . . . . . . . . . . . . . . . 228,877 220,609
Class B, $.05 par value; 100,000,000
shares authorized;
1995-13,326,609 shares issued and
outstanding
1994-13,491,983 shares issued and
outstanding . . . . . . . . . . . . . . . 666,331 674,599
Paid-in capital in excess of par value . . . 48,599,088 48,599,088
Retained earnings. . . . . . . . . . . . . . 114,322,189 108,478,050

------------ ------------
Total stockholders' equity . . . . . . . . . 163,816,485 157,972,346

------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY . . . . . . . . . . . . . . . . . . $611,827,254 $506,593,087
============ ============
</TABLE>

See notes to consolidated financial statements.

27
<PAGE> 28

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 24, 1994 AND SEPTEMBER 25, 1993
- ---------------------------------------------

<TABLE>
<CAPTION>
-------------- -------------- --------------
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
NET SALES $1,385,127,130 $1,233,496,726 $1,141,800,153
COST OF GOODS SOLD 1,067,888,239 958,434,847 891,208,237
-------------- -------------- --------------
GROSS PROFIT 317,238,891 275,061,879 250,591,916
OPERATING AND ADMINISTRATIVE
EXPENSES 271,912,200 239,834,915 220,714,164
RENTAL INCOME, NET 4,119,979 6,397,040 4,629,792
-------------- -------------- --------------
INCOME FROM OPERATIONS 49,446,670 41,624,004 34,507,544
OTHER INCOME (EXPENSE), NET 1,915,630 1,844,525 1,078,790
-------------- -------------- --------------
INCOME BEFORE INTEREST AND INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 51,362,300 43,468,529 35,586,334
INTEREST EXPENSE 24,739,770 17,296,406 17,285,113
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 26,622,530 26,172,123 18,301,221
-------------- -------------- --------------
INCOME TAXES:
Current 9,000,000 9,400,000 4,800,000
Deferred 600,000 200,000 1,800,000
-------------- -------------- --------------
9,600,000 9,600,000 6,600,000
-------------- -------------- --------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 17,022,530 16,572,123 11,701,221

CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR INCOME TAXES - 3,334,860 -
-------------- -------------- --------------

NET INCOME $ 17,022,530 $ 19,906,983 $ 11,701,221
============== ============== ==============

PER-SHARE AMOUNTS:
Earnings per common share:
Primary earnings per common
share before cumulative effect
of change in accounting principle $ .93 $ .90 $ .65
Cumulative effect of change in
accounting principle for income taxes - .18 -
-------------- -------------- --------------
Primary earnings per common share $ .93 $ 1.08 $ .65
============== ============== ==============

Fully diluted earnings per common
share before cumulative effect of
change in accounting principle $ .88 $ .86 $ .64
Cumulative effect of change in
accounting principle for income taxes - .15 -
-------------- -------------- --------------
Fully diluted earnings per common share $ .88 $ 1.01 $ .64
============== ============== ==============

Cash dividends per common share:
Class A $ .66 $ .5775 $ .2475
-------------- -------------- --------------
Class B $ .60 $ .5250 $ .2250
-------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

28
<PAGE> 29

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED SEPTEMBER 30, 1995, SEPTEMBER 24, 1994
AND SEPTEMBER 25, 1993

<TABLE>
<CAPTION>
PAID-IN
CLASS A CLASS B CAPITAL IN
...COMMON STOCK... ...COMMON STOCK... EXCESS OF RETAINED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS TOTAL
--------- -------- ---------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 26, 1992. 4,292,747 $214,637 13,610,953 $680,548 $48,594,115 $ 90,623,702 $140,113,002
NET INCOME . . . . . - - - - - 11,701,221 11,701,221
CASH DIVIDENDS . . . - - - - - (4,125,094) (4,125,094)
COMMON STOCK
CONVERSIONS . . . . 18,108 906 (18,108) (906) - - -

--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 25, 1993. 4,310,855 215,543 13,592,845 679,642 48,594,115 98,199,829 147,689,129
NET INCOME . . . . . - - - - - 19,906,983 19,906,983
CASH DIVIDENDS . . . - - - - - (9,628,762) (9,628,762)
CONVERSION OF
CONVERTIBLE
SUBORDINATED
DEBENTURES. . . . . 450 23 - - 4,973 - 4,996
COMMON STOCK
CONVERSIONS . . . . 100,862 5,043 (100,862) (5,043) - - -

--------- -------- ---------- -------- ----------- ------------ ------------
BALANCE,
SEPTEMBER 24, 1994. 4,412,167 220,609 13,491,983 674,599 48,599,088 108,478,050 157,972,346
NET INCOME . . . . . - - - - - 17,022,530 17,022,530
CASH DIVIDENDS . . . - - - - - (11,178,391) (11,178,391)
COMMON STOCK
CONVERSIONS . . . . 165,374 8,268 (165,374) (8,268) - - -
--------- -------- ---------- -------- ----------- ------------ ------------

BALANCE,
SEPTEMBER 30, 1995. 4,577,541 $228,877 13,326,609 $666,331 $48,599,088 $114,322,189 $163,816,485
========= ======== ========== ======== =========== ============ ============
</TABLE>

See notes to consolidated financial statements.

29
<PAGE> 30

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED SEPTEMBER 30, 1995, SEPTEMBER 24, 1994
AND SEPTEMBER 25, 1993
- ------------------------------------

<TABLE>
<CAPTION>
------------- ------------ ------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,022,530 $ 19,906,983 $ 11,701,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 26,852,645 22,496,341 20,838,311
Cumulative effect of change in
accounting principle for income taxes - (3,334,860) -
Amortization of deferred gains - (14,144) (27,334)
Gains on disposals of property and
equipment (181,070) (747,060) (503,796)
Receipt of advance payment on
purchases contract 2,000,000 - -
Recognition of advance payment on
purchases contracts (943,106) (834,469) (823,050)
Deferred income taxes 600,000 200,000 1,800,000
Decrease (increase) in receivables 1,531,021 (2,577,393) (2,365,350)
(Increase) decrease in inventory (12,926,138) (2,218,609) 1,112,913
(Increase) decrease in other assets (548,301) 1,197,040 (997,289)
Increase in accounts payable
and accrued expenses 11,860,053 6,209,809 18,715,593
------------- ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 45,267,634 40,283,638 49,451,219
------------- ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and
equipment 869,520 1,288,904 897,887
Capital expenditures (118,182,079) (68,921,873) (87,293,822)
------------- ------------ ------------
NET CASH (USED) BY
INVESTING ACTIVITIES (117,312,559) (67,632,969) (86,395,935)
------------- ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 124,846,585 51,744,393 9,100,000
Proceeds of short-term loans, net 15,000,000 7,000,000 35,000,000
Principal payments of long-term debt (54,973,504) (21,020,436) (10,053,583)
Conversion of Convertible Subordinated
Debentures - 4,996 -
Dividends paid (11,178,391) (9,628,762) (4,125,094)
------------- ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 73,694,690 28,100,191 29,921,323
------------- ------------ ------------

NET INCREASE (DECREASE) IN CASH 1,649,765 750,860 (7,023,393)
Cash at Beginning of Year 18,471,011 17,720,151 24,743,544
------------- ------------ ------------

CASH AT END OF YEAR $ 20,120,776 $ 18,471,011 $ 17,720,151
============= ============ ============
</TABLE>

See notes to consolidated financial statements.

30
<PAGE> 31

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of Ingles Markets, Incorporated and its wholly-owned subsidiaries, Sky
King, Inc., Ingles Markets Investments, Inc. and Milkco, Inc. (collectively,
the "Company"). All significant intercompany balances and transactions have
been eliminated in consolidation.

FISCAL YEAR - The Company's fiscal year ends on the last Saturday in September.
Fiscal year 1995 was a 53-week year, while fiscal years 1994 and 1993 each
consisted of 52 weeks.

CASH EQUIVALENTS - All highly liquid investments with a maturity of three
months or less when purchased are considered cash.

FINANCIAL INSTRUMENTS - The Company has overnight investments and short-term
certificates of deposit included in cash. The Company's policy is to invest
its excess cash nightly either in reverse repurchase agreements or in
commercial paper. Commercial paper is not secured; reverse repurchase
agreements are secured by government obligations. At September 30, 1995, all
investments were in certificates of deposit totaling $4,531,255. Certificates
of deposit and demand deposits of approximately $13,690,287 in 25 banks exceed
the $100,000 insurance limit per bank.

INVENTORIES - Warehouse inventories are valued at the lower of average cost or
market. Store inventories are valued at FIFO using the retail method.

PROPERTY, EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost and depreciated over the estimated useful lives (principally 5 to 30
years) of the various classes of assets by the straight-line method.

SELF-INSURANCE - Self-insurance reserves are established for workers'
compensation and employee group medical and dental benefits based on claims
filed and claims incurred but not reported. The Company is insured for covered
costs in excess of certain limits.

INCOME TAXES - Effective September 26, 1993, the Company adopted FASB Statement
No. 109, "Accounting for Income Taxes". Under Statement 109, the liability
method is used in accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
currently enacted tax rates.

PRE-OPENING COSTS - Costs associated with the opening of new stores are
expensed when the stores are opened.

RECLASSIFICATIONS - Certain amounts for 1994 and 1993 have been reclassified
for comparative purposes.

PER-SHARE AMOUNTS - Primary earnings per common share is computed by dividing
consolidated net income by the weighted average number of shares of common
stock and dilutive common stock equivalent shares outstanding during the
period. Fully diluted earnings per common share gives effect to the assumed

31
<PAGE> 32

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

conversion, if dilutive, of the Convertible Subordinated Debentures, after
elimination of related interest expense, net of the bonus and income tax
effect.

NEW PRONOUNCEMENTS - The Financial Accounting Standards Board issued new
standards (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" and (SFAS 123), "Accounting for
Stock-based Compensation". The standards must be adopted by the Company no
later than the fiscal year ended September 1997. The effect of adopting the
standards has not been determined.

2. INCOME TAXES

CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES - Effective September 26, 1993,
the Company adopted FASB Statement No. 109, "Accounting for Income Taxes". As
permitted by Statement 109, the Company elected not to restate the financial
statements of any prior years. The cumulative effect of the change increased
net income for the year ended September 24, 1994 by $3,334,860 or $.18 per
common share.

DEFERRED INCOME TAX LIABILITIES AND ASSETS - Significant components of the
Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
-------------- -------------
SEPTEMBER 30, September 24,
1995 1994
-------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation . . . . . . . . $ 24,123,000 $ 22,652,000
Property tax method. . . . . . . . . . . . 203,000 243,000
-------------- -------------
Total deferred tax liabilities . . . . . 24,326,000 22,895,000
-------------- -------------
Deferred tax assets:
Excess of tax basis over financial
reporting basis of property and equipment 3,971,000 3,971,000
Insurance reserves . . . . . . . . . . . . 2,192,000 1,605,000
Other. . . . . . . . . . . . . . . . . . . 898,000 654,000
-------------- -------------
Total deferred tax assets. . . . . . . . 7,061,000 6,230,000
-------------- -------------
Net deferred tax liabilities . . . . . . $ 17,265,000 $ 16,665,000
============== =============
</TABLE>

INCOME TAX EXPENSE - Income tax expense is different from the amounts computed
by applying the statutory federal rates to income before income taxes. The
reasons for the differences are as follows:

<TABLE>
<CAPTION>
LIABILITY METHOD Deferred Method
------------------------ ---------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Federal tax at statutory rate . . $9,318,000 $9,160,000 $6,405,000
State income tax, net of
federal tax benefits . . . . . 715,000 685,000 360,000
Other . . . . . . . . . . . . . . (433,000) (245,000) (165,000)
---------- ---------- ----------
Total . . . . . . . . . . . . . . $9,600,000 $9,600,000 $6,600,000
========== ========== ==========
</TABLE>

Income tax payments of $7,186,997, $9,769,130 and $4,194,801 were made during
fiscal years 1995, 1994 and 1993, respectively. Income taxes payable of

32
<PAGE> 33

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

$2,872,093 at September 30, 1995 and $1,059,090 at September 24, 1994 are
included in the accompanying balance sheets in accounts payable and accrued
expenses.

Current and deferred income tax expense are as follows:

---------- ---------- ----------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . $8,000,000 $8,400,000 $4,300,000
State . . . . . . . . . . . . . 1,000,000 1,000,000 500,000
----------- ---------- ----------
Total current . . . . . . 9,000,000 9,400,000 4,800,000
---------- ---------- ----------
Deferred:
Depreciation . . . . . . . . . 1,184,000 355,000 1,730,000
Deferred gains . . . . . . . . - 48,000 130,000
Self-insurance reserves . . . . (213,000) 12,000 (251,000)
Property taxes. . . . . . . . . (37,000) (26,000) 423,000
Other . . . . . . . . . . . . . (334,000) (189,000) (232,000)
---------- ---------- ----------
Total deferred . . . . . 600,000 200,000 1,800,000
---------- ---------- ----------
Total expense . . . . . . . . . $9,600,000 $9,600,000 $6,600,000
========== ========== ==========
</TABLE>

Current deferred income tax benefits of $2,960,690 and $1,960,690 for 1995 and
1994, respectively, included in other current assets, result from timing
differences arising from vacation pay, bad debts and self-insurance reserves
and from capitalization of certain overhead costs in inventory for tax
purposes.

3. PROPERTY AND EQUIPMENT

Property and equipment, net consist of the following:

------------- -------------
SEPTEMBER 30, September 24,
1995 1994
------------- -------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . $ 93,915,087 $ 74,303,692
Construction in progress . . . . . . 30,347,722 24,402,728
Buildings . . . . . . . . . . . . . 237,241,858 190,585,670
Store, office and warehouse
equipment . . . . . . . . . . . . 213,156,608 176,245,189
Transportation equipment . . . . . . 13,922,509 10,499,783
Property under capital leases. . . . 151,264 151,264
Leasehold improvements . . . . . . . 35,977,020 33,737,527
------------- -------------
Total. . . . . . . . . . . . . . . . 624,712,068 509,925,853
Less accumulated depreciation and
amortization. . . . . . . . . . . . 174,171,292 150,255,748
------------- -------------
Property and equipment,net . . . . . $ 450,540,776 $ 359,670,105
============= =============
</TABLE>

The Company currently maintains general liability, automobile insurance and
excess liability coverages. The Company maintains $1 million liability
insurance coverage on four aircraft used in its business. The Company

33
<PAGE> 34

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

maintains casualty insurance only on those properties where it is required to
do so. The Company has elected to self-insure its other properties.

4. PROPERTY HELD FOR LEASE AND RENTAL INCOME

At September 30, 1995, the Company owned and operated 73 shopping centers, in
conjunction with its supermarket operations. The Company leases to others a
portion of its shopping center properties. The leases are noncancelable
operating lease agreements for periods ranging up to twenty-five years.
Substantially all leases covering retail properties provide for one or more
renewal periods and for percentage rent based on gross sales of the lessee.

Rental income, net included in the accompanying consolidated statements of
income consists of the following:

----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Rents earned on owned and
subleased properties:
Base rentals including lease
termination payments. . . . $ 7,705,645 $ 9,398,680 $ 7,576,190
Contingent rentals. . . . . . 596,154 428,712 382,919
----------- ----------- -----------
Total. . . . . . . . . . . 8,301,799 9,827,392 7,959,109

Depreciation on owned
properties leased to others . . (3,027,886) (2,438,373) (2,402,905)

Other shopping center expenses . . (1,153,934) (991,979) (926,412)
----------- ----------- -----------
Total. . . . . . . . . . . . . $ 4,119,979 $ 6,397,040 $ 4,629,792
=========== =========== ===========
</TABLE>

Owned properties leased to others under operating leases by major classes are
summarized as follows:

------------
SEPTEMBER 30,
1995
------------
<S> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . $ 26,339,869
Buildings . . . . . . . . . . . . . . . . . . . . . 86,139,772
------------
Total . . . . . . . . . . . . . . . . . . . . . . 112,479,641
Less accumulated depreciation . . . . . . . . . . . 17,794,584
------------
Property leased to others, net . . . . . . . . . . $ 94,685,057
============
</TABLE>

The above amounts are included in the respective captions at Note 3.

34
<PAGE> 35

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

The following is a schedule of minimum future rental income on noncancelable
operating leases as of September 30, 1995:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 7,307,595
1997 . . . . . . . . . . . . . . . . . . . . . . . 6,568,145
1998 . . . . . . . . . . . . . . . . . . . . . . . 5,667,472
1999 . . . . . . . . . . . . . . . . . . . . . . . 4,440,995
2000 . . . . . . . . . . . . . . . . . . . . . . . 3,637,658
Thereafter . . . . . . . . . . . . . . . . . . . . 19,136,072
-----------
Total minimum future rental income . . . . . . . . . $46,757,937
===========
</TABLE>

5. LEASES AND RENTAL EXPENSE

The Company conducts part of its retail operations from leased facilities. The
initial terms of the leases expire at various times over the next twenty years.
The majority of the leases include one or more renewal options and provide that
the Company pay property taxes, utilities, repairs and certain other costs
incidental to occupation of the premises. Several leases contain clauses
calling for percentage rentals based upon gross sales of the supermarket
occupying the leased space.

OPERATING LEASES - Rent expense for all operating leases of $11,796,628,
$12,016,352 and $11,971,734 for fiscal years 1995, 1994 and 1993, respectively
is included in operating and administrative expenses.

The aggregate minimum rental commitments under noncancelable operating leases
as of September 30, 1995 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . $ 11,710,539
1997 . . . . . . . . . . . . . . . . . . . . . . . . 11,573,714
1998 . . . . . . . . . . . . . . . . . . . . . . . . 11,365,576
1999 . . . . . . . . . . . . . . . . . . . . . . . . 11,187,021
2000 . . . . . . . . . . . . . . . . . . . . . . . . 10,894,667
Thereafter . . . . . . . . . . . . . . . . . . . . . 79,600,921
------------
Total minimum future rental commitments. . . . . . . . $136,332,438
============
</TABLE>

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

------------- -------------
SEPTEMBER 30, September 24,
1995 1994
------------- -------------
<S> <C> <C>
Accounts payable-trade . . . . . . . . . $ 66,815,027 $ 62,135,297
Property, payroll, and
other taxes payable . . . . . . . . . 9,363,814 7,189,278
Salaries, wages, and bonuses payable . . 7,970,396 6,825,605
Other . . . . . . . . . . . . . . . . . . 13,970,395 10,109,399
------------- -------------
Total . . . . . . . . . . . . . . . . . . $ 98,119,632 $ 86,259,579
============= =============
</TABLE>

35
<PAGE> 36

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

7. LONG-TERM LIABILITIES AND SHORT-TERM LOANS

Long-term liabilities and short-term loans are summarized as follows:

<TABLE>
<CAPTION>
------------- -------------
SEPTEMBER 30, September 24,
1995 1994
------------- -------------
<S> <C>
Long-term debt:
10% Convertible Subordinated
Debentures, maturing 2008. . . . . . . . $ 37,459,000 $ 37,459,000
------------- -------------
Notes payable:
Real estate:
Weighted average interest rate of 9.92%,
maturing 1997-2015 . . . . . . . . . . 113,823,773 94,276,011
Equipment:
Weighted average interest rate of 8.52%,
maturing 1997-2000 . . . . . . . . . . 66,783,609 26,333,324
Interest rate at the average weekly yield
of one month commercial paper plus 1.9%,
maturing 1997-2000 . . . . . . . . . . 39,575,832 21,907,040
Other:
Interest at certain LIBOR rates plus
a specified margin, maturing 1997. . . 10,000,000 30,000,000
Interest at 8.9%, secured by stock of
Milkco, Inc., maturing 2002. . . . . . 17,857,145 -
Other. . . . . . . . . . . . . . . . . . 8,166,674 3,750,000
------------- -------------
256,207,033 176,266,375
------------- -------------
Short-term loans, interest rates at less
than the prime rate. . . . . . . . . . . . 30,000,000 25,000,000
------------- -------------
Other long-term liabilities:
Advance payments on purchases contracts. . 5,649,375 4,592,481
Other. . . . . . . . . . . . . . . . . . . 349,568 417,145
------------- -------------
Total . . . . . . . . . . . . . . . . . . 5,998,943 5,009,626
------------- -------------
Total long-term liabilities and short-term
loans . . . . . . . . . . . . . . . . . . 329,664,976 243,735,001
Less current portion . . . . . . . . . . . . 36,899,696 29,678,057
------------- -------------
Long-term liabilities, net of current
portion . . . . . . . . . . . . . . . . . $ 292,765,280 $ 214,056,944
============= =============
</TABLE>

The Convertible Subordinated Debentures (the "Debentures") are unsecured and
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined by the Indenture) of the Company. Interest is payable
semi-annually on April 15 and October 15.

The Debentures are convertible into Class A Common Stock of the Company at any
time prior to maturity or redemption at $11.10 per share, subject to adjustment
under certain conditions.

Mandatory annual redemption payments equal to 7% of the original principal
amount ($52,235,000) of the Debentures are required commencing October 15, 1998
and are calculated to retire 70% of the issue prior to maturity. The Company
may deliver Debentures, including converted and repurchased Debentures, in lieu
of cash as a credit against mandatory redemption payments.

36
<PAGE> 37

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

The Debentures are redeemable at any time, in whole or in part, at the option
of the Company under certain conditions. The Company has repurchased
$14,771,000 of the Debentures and $5,000 of the Debentures have been converted
into Class A Common Stock of the Company as of September 30, 1995.

During October 1995, the Company obtained a $28.3 million seven year loan from
a financial corporation at an interest rate of 7.58%. The proceeds from the
loan were or will be used to reduce short-term borrowings outstanding at
September 30, 1995. Short-term borrowings have been reclassified to long-term
liabilities at September 30, 1995 pursuant to this refinancing.

At September 30, 1995, property and equipment with an undepreciated cost of
approximately $184 million was pledged as collateral for long-term debt. Loan
agreements relating to certain debt contain various provisions which, among
other things, set minimum stockholders' equity balances. The most
restrictive of these provisions at September 30, 1995, has the effect of
restricting funds available for dividends to approximately $19.0 million.

At September 30, 1995, the Company had unused lines of credit of $55 million.
The lines provide the Company with various interest rate options, generally at
rates less than prime.

Components of interest costs are as follows:

----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Total interest costs . . . . $26,501,706 $18,184,443 $17,535,853
Interest capitalized . . . . (1,761,936) (888,037) (250,740)
----------- ----------- -----------
Interest expense . . . . . . $24,739,770 $17,296,406 $17,285,113
=========== =========== ===========
</TABLE>

Interest payments (net of amounts capitalized) were $23,914,428 for 1995,
$16,979,825 for 1994 and $17,325,002 for 1993.

ADVANCE PAYMENTS ON PURCHASES CONTRACTS - The Company has entered into
agreements with suppliers whereby payment is received in advance for
commitments to purchase product from these suppliers in the future. The
unearned portion, included in other long-term liabilities, will be recognized
in accordance with the terms of the contract.

Maturities of long-term liabilities at September 30, 1995 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 36,899,696
1997 . . . . . . . . . . . . . . . . . . . . . . . 47,767,668
1998 . . . . . . . . . . . . . . . . . . . . . . . 36,101,921
1999 . . . . . . . . . . . . . . . . . . . . . . . 35,555,042
2000 . . . . . . . . . . . . . . . . . . . . . . . 22,551,473
Thereafter . . . . . . . . . . . . . . . . . . . . 150,789,176
------------
Total $329,664,976
============
</TABLE>

37
<PAGE> 38

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

8. STOCKHOLDERS' EQUITY

The Company has two classes of Common Stock: Class A and Class B. Class A
Common Stock is traded on The Nasdaq Stock Market's National Market under the
symbol IMKTA. There is no public market for the Company's Class B Common
Stock. However, each share of Class B Common Stock is convertible at any time,
at the option of the holder, into one share of Class A Common Stock. Upon any
transfers of Class B Common Stock (other than to immediate family members and
the Investment/Profit Sharing Plan), such stock is automatically converted into
Class A Common Stock.

The holders of the Class A Common Stock and Class B Common Stock are entitled
to dividends and other distributions as and when declared out of assets legally
available therefor, subject to the dividend rights of any Preferred Stock that
may be issued in the future. Each share of Class A Common Stock is entitled to
receive a cash dividend and liquidation payment in an amount equal to 110% of
any cash dividend or liquidation payment on Class B Common Stock. Any stock
dividend must be paid in shares of Class A Common Stock with respect to Class A
Common Stock and in shares of Class B Common Stock with respect to Class B
Common Stock.

The voting powers, preferences and relative rights of Class A Common Stock and
Class B Common Stock are identical in all respects, except that the holders of
Class A Common Stock have one vote per share and the holders of Class B Common
Stock have ten votes per share. In addition, holders of Class A Common Stock,
as a separate class, are entitled to elect 25% of all directors constituting
the Board of Directors (rounded to the nearest whole number). As long as the
Class B Common Stock represents at least 12.5% of the total outstanding Common
Stock of both classes, holders of Class B Common Stock, as a separate class,
are entitled to elect 75% of the directors.

EARNINGS PER COMMON SHARE - Weighted average number of common shares used to
compute earnings per share is as follows:

---------- ---------- ----------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Primary . . . . . . . . . . 18,316,672 18,386,557 17,969,971
Fully diluted . . . . . . . 21,691,357 21,792,770 21,345,107
</TABLE>

9. EMPLOYEE BENEFIT PLANS

INVESTMENT/PROFIT SHARING PLAN - The purpose of the qualified profit sharing
plan is to provide retirement benefits to eligible employees. Assets of the
plan, including the Company's Class B Common Stock, are held in trust for
employees and distributed upon retirement, death, disability or other
termination of employment. Company contributions are discretionary and are
determined annually by the Board of Directors. On February 2, 1994, a 401(k)
feature was added to the Profit Sharing Plan. The Profit Sharing Plan
including the 401(k) feature was renamed the Ingles Markets, Incorporated

38
<PAGE> 39

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

Investment/Profit Sharing Plan. Company contributions for fiscal 1995 and 1994
were allocated only to employees participating in the 401(k) portion of the
plan.

Company contributions to the plan, included in operating and administrative
expenses, were $700,000 for 1995, $452,195 for 1994 and $775,000 for 1993.

CASH BONUS PLAN - The Company pays monthly bonuses to various managerial
personnel based on performance of the operating units controlled by these
personnel. Except for certain employees who receive monthly bonuses, annual
bonuses based on pre-tax, pre-bonus income are paid to all employees who worked
the entire fiscal year. The Company has a discretionary bonus plan for certain
executive officers providing for bonuses upon attainment of certain operating
goals. Operating and administrative expenses include bonuses of $4,241,183,
$3,602,687 and $2,842,329 for 1995, 1994 and 1993, respectively.

BONUS AGREEMENT WITH PRESIDENT - On December 23, 1994, the Company entered into
an agreement with its President, whereby the Company agreed to pay a bonus that
will accrue in the amount of $300,000 per year during fiscal years 1995 through
1999 up to a maximum aggregate bonus of $1,500,000. The President will receive
the full amount of the bonus if he continues to be employed by the Company
through September 25, 1999, and prior to that date only if his employment is
terminated by the Company with or without cause, or if, in the event of the
sale of the Company or a change in control of the Company, the President should
terminate his employment with the Company. The President would be entitled to
a pro-rata portion of the full amount of the bonus in the event of his death or
disability prior to September 25, 1999.

STOCK OPTIONS PLANS - The Company has stock option plans under which options
may be issued to salaried employees who are officers or are employed in an
executive, administrative, managerial or professional capacity by the Company.
The Company's stock option plans provide that stock may be issued at a price of
not less than 100% of fair market value of the Company's Class A Common Stock
at the date of the grant of the option. The options may be exercised within a
period of three months after five years from the date of issue or upon death,
disability or retirement. Information with respect to each stock option plan
is as follows:

1987 EMPLOYEE INCENTIVE STOCK OPTION PLAN - The Company has an incentive stock
option plan under which an aggregate of 250,000 shares of the Company's Class A
Common Stock may be issued to qualified employees from time to time on or
before September 8, 1997. No options may be granted to any employee who owns,
at the time of the proposed grant, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company. Options that
lapse or are canceled may be reissued by the Company. No options are currently
exercisable under this plan. Information with respect to options granted,
canceled and outstanding follows:

39
<PAGE> 40

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
<S> <C> <C> <C>
Outstanding,
September 26, 1992 . . . 169,500 $6.88-$12.75 $1,454,750
Granted . . . . . . . . 40,000 6.13 245,000
Canceled . . . . . . . . (46,000) 6.13-12.75 (432,500)
-------- ----------

Outstanding,
September 25, 1993 . . . 163,500 6.13-10.00 1,267,250
Granted . . . . . . . . 27,000 8.63 232,875
Canceled . . . . . . . . (35,500) 6.13-10.00 (323,000)
-------- ----------

Outstanding,
September 24, 1994 . . . 155,000 6.13-10.00 1,177,125
Granted . . . . . . . . 27,000 11.38 307,125
Canceled . . . . . . . . (46,500) 6.13-11.38 (425,375)
-------- ----------

OUTSTANDING,
SEPTEMBER 30, 1995 . . . 135,500 $6.13-$11.38 $1,058,875
======== ==========
</TABLE>

1991 NONQUALIFIED STOCK OPTION PLAN - The Company has a nonqualified stock
option plan under which an aggregate of 1,000,000 shares of the Company's Class
A Common Stock may be issued to qualified employees from time to time on or
before August 6, 1996, provided the plan is approved by the Company's
stockholders. Options that lapse or are cancelled may be reissued by the
Company. No options are currently exercisable under this plan. Information
with respect to options granted, canceled and outstanding follows:

<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE
OPTION PER SHARE TOTAL
-------- ------------- ----------
<S> <C> <C> <C>
Outstanding,
September 26, 1992 . . . 496,000 $6.88 $3,410,000
Granted . . . . . . . . 400,000 5.75- 6.00 2,350,000
-------- -----------
Outstanding,
September 25, 1993 . . . 896,000 5.75- 6.88 5,760,000
Granted . . . . . . . . 200,000 10.38-11.50 2,187,500
Canceled . . . . . . . . (100,000) 6.88 (687,500)
-------- -----------
Outstanding,
September 24, 1994 . . . 996,000 5.75-11.50 7,260,000
Granted . . . . . . . . - - -
Canceled . . . . . . . . - - -
-------- -----------
OUTSTANDING,
SEPTEMBER 30, 1995 . . . 996,000 $5.75-$11.50 $7,260,000
======== ==========
</TABLE>

STOCK OPTION AGREEMENTS WITH EXECUTIVE OFFICERS - On July 21, 1993, the Company
entered into nonqualified stock option agreements with each of Robert P. Ingle,
Chairman of the Board of Directors and Chief Executive Officer of the Company,
and Landy B. Laney, President and Chief Operating Officer of the Company, under
which an aggregate of 100,000 shares of the Company's Class A Common Stock may
be issued to each of them. The options may be exercised, after approval of the
respective agreements by the Company's stockholders, until July 20, 1998 at an
option price of $6.00 per share.

40
<PAGE> 41

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

The option, once approved, may also be exercised at any time upon the death of
the optionee prior to July 20, 1998.

On August 2, 1995, the Company entered into a nonqualified stock option
agreement with one of its executive officers under which 100,000 shares of the
Company's Class A Common Stock may be issued to him at $10.625 per share (the
fair market value of the stock at the date the option was granted). The option
is exercisable within a period of three months after five years from the date
of issue or upon death, disability, or retirement, provided the agreement is
approved by the Company's stockholders.

MEDICAL CARE PLAN - Medical and dental benefits are provided to qualified
employees under a self-insured plan. Expenses under the plan include claims
paid, administrative expenses and an estimated liability for claims incurred
but not yet paid.

10. MAJOR SUPPLIER

A large portion of inventory is purchased from a wholesale grocery distributor.
Purchases from the distributor were approximately $236 million in 1995, $207
million in 1994 and $179 million in 1993. This distributor owns approximately
6% of the Company's Class A Common Stock and approximately 1% of the Company's
Class B Common Stock at September 30, 1995. Amounts owed to this distributor,
included in accounts payable-trade, were $4.6 million and $3.1 million at
September 30, 1995 and September 24, 1994, respectively.

11. SUPPLEMENTARY INCOME STATEMENT DATA

Operating and administrative expenses include the following:

1995 1994 1993
----------- ----------- -----------
Advertising and promotion expense. . $18,656,718 $17,129,161 $17,295,081
=========== =========== ===========

12. LINES OF BUSINESS

----------- ----------- -----------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues from unaffiliated
customers:
Grocery and food sales . . . $ 1,385,127 $ 1,233,497 $ 1,141,800
Shopping center rentals. . . 8,302 9,827 7,959
Income from operations:
Grocery and food sales . . . 45,327 35,227 29,878
Shopping center rentals. . . 4,120 6,397 4,630
Assets:
Grocery and food sales . . . 517,142 428,944 377,242
Shopping center rentals. . . 94,685 77,649 79,307
Capital expenditures:
Grocery and food sales . . . 104,527 65,012 58,676
Shopping center rentals. . . 13,655 3,910 28,618
Depreciation and amortization:
Grocery and food sales . . . 23,825 20,058 18,435
Shopping center rentals. . . 3,028 2,438 2,403
</TABLE>

41
<PAGE> 42

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited financial data regarding the Company's
quarterly results of operations. Each of the quarters in the two fiscal years
presented contain thirteen weeks, except for the fourth quarter of fiscal 1995
which contains fourteen weeks.
<TABLE>
<CAPTION>
(in thousands except earnings per common share)
-------------------------------------------------------
1ST 2ND 3RD 4TH
1995 QUARTER QUARTER QUARTER QUARTER TOTAL
- ---- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET SALES . . . . . . . $330,206 $327,950 $347,779 $379,192 $1,385,127
GROSS PROFIT. . . . . . 73,584 74,522 79,336 89,797 317,239
NET INCOME. . . . . . . 3,838 2,187 4,543 6,455 17,023
PRIMARY EARNINGS
PER COMMON SHARE . . . .21 .12 .25 .35 .93

1994
- ----
Net sales . . . . . . . $297,875 $301,532 $313,862 $320,228 $1,233,497
Gross profit. . . . . . 65,377 67,977 69,644 72,064 275,062
Income before cumulative
effect of change in
accounting principle . 3,845 3,859 4,562 4,306 16,572
Net income. . . . . . . 7,180 3,859 4,562 4,306 19,907
Primary earnings per
common share before
cumulative effect of
change in accounting
principle . . . . . . .21 .21 .25 .23 .90
Primary earnings per
common share . . . . . .39 .21 .25 .23 1.08
</TABLE>

14. LITIGATION

15. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.

Receivables: The carrying amount reported in the balance sheet for
receivables approximates its fair value.

Long and short-term debt: The carrying amounts of the Company's short-term
borrowings approximate their fair value. The fair values of the Company's
long-term debt are based on quoted market prices, where available, or
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

42
<PAGE> 43

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended September 30, 1995, September 24, 1994
and September 25, 1993

The carrying amounts and fair values of the Company's financial instruments at
September 30, 1995 are as follows (amounts in thousands):

<TABLE>
<CAPTION>
Carrying Amount Fair Value
--------------- ----------
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . $ 20,121 $ 20,121
Receivables. . . . . . . . . . . . . . . . . 15,177 15,177
Short-term liabilities . . . . . . . . . . . 30,000 30,000
Long-term liabilities:
10% Convertible Subordinated Debentures . 37,459 38,770
Real Estate . . . . . . . . . . . . . . . 113,824 115,122
Equipment . . . . . . . . . . . . . . . . 106,359 106,359
Other . . . . . . . . . . . . . . . . . . 42,023 42,023
</TABLE>

43
<PAGE> 44

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES SEC SCHEDULE II

SUPPLEMENTAL SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION YEAR COSTS & EXPENSES DEDUCTIONS END OF YEAR
- ------------------------------------- ------------ ---------------- ---------- -----------
<S> <C> <C> <C>
Fiscal year ended September 30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $ 95,953 $10,463 (1) $ 85,490

Fiscal year ended September 24, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $ 100,000 $ 4,047 (1) $ 95,953

Fiscal year ended September 25, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts $ 118,000 $18,000 (1) $ 100,000
</TABLE>

(1) Uncollectible accounts written off, net of recoveries.

44
<PAGE> 45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

INGLES MARKETS, INCORPORATED

By: /s/ Robert P. Ingle
----------------------------
Robert P. Ingle
Chairman of the Board and
Chief Executive Officer

Date: December 15, 1995

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<S> <C>
/s/ Robert P. Ingle December 15, 1995
- ---------------------------------
Robert P. Ingle, Chairman of the
Board, Chief Executive Officer
and Director

/s/ Landy B. Laney December 15, 1995
- ---------------------------------
Landy B. Laney, President, Chief
Operating Officer and Director

/s/ Jack R. Ferguson December 15, 1995
- ---------------------------------
Jack R. Ferguson, Vice President-
Finance, Chief Financial Officer
and Director

/s/ Vaughn C. Fisher December 15, 1995
- ---------------------------------
Vaughn C. Fisher, Vice President-
Sales Manager and Director

/s/ Anthony S. Federico December 15, 1995
- ---------------------------------
Anthony S. Federico, Vice President-
Non-Foods and Director

/s/ Brenda S. Tudor December 15, 1995
- ---------------------------------
Brenda S. Tudor, CPA
Secretary and Controller
</TABLE>

45
<PAGE> 46

EXHIBIT INDEX

4.3 See Exhibits 3.1 and 3.2 for provisions of Articles of Incorporation,
as amended and By-laws of Registrant defining rights of holders of
capital stock of Registrant.

10.1 Amended and Restated Ingles Markets, Incorporated 1987 Employee
Incentive Stock Option Plan. (pages 48-55) [For SEC use only: see
document no. 2 of this Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.2 Restatement and Amendment by the Entirety of the Ingles Markets,
Incorporated Investment/Profit Sharing Plan effective
September 26, 1993 (as amended through June 30, 1995). (pages 56-133)
[For SEC use only: see document no. 3 of this Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.3 Loan Agreement between the Registrant and Metropolitan Life Insurance
Company dated March 21, 1990. (Included as Exhibit 19 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1990,
File 0-14706, previously filed with the Commission and incorporated
herein by this reference.)

10.4 Amended and Restated Ingles Markets, Incorporated 1991 Nonqualified
Stock Option Plan. (page 134-141) [For SEC use only: see document no.
4 of this Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

46
<PAGE> 47

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.6 Amended and Restated Stock Option Agreement Between the Company and
Robert P. Ingle, Chairman of the Board of Directors and Chief
Executive Officer of the Company, effective as of July 21, 1993.
(pages 142-148) [For SEC use only: see document no. 5 of this
Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.7 Amended and Restated Stock Option Agreement Between the Company and
Landy B. Laney, President and Chief Operating Officer of the Company,
effective as of July 21, 1993. (pages 149-155) [For SEC use only: see
document no. 6 of this Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

10.9 Stock Option Agreement Between the Company and Edward J. Kolodzieski,
Vice President-Strategic Planning of the Company, dated as of August
2, 1995. (pages 156-163) [For SEC use only: see document no. 7 of this
Edgarized report.]

(MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO
BE FILED AS AN EXHIBIT TO THIS REPORT ON FORM 10-K PURSUANT TO ITEM
14(C) OF FORM 10-K.)

11 Statement Regarding Computation of Earnings Per Common Share. (Page
164) [For SEC use only: see document no. 8 of this Edgarized report.]

12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
(page 165) [For SEC use only: see document no. 9 of this Edgarized
report.]

21 Subsidiaries of the Registrant. (Page 166) [FOR Sec use only: see
document no. 10 of this Edgarized report.]

23 Consent of Ernst & Young LLP, Independent Auditors. (page 167) [For
SEC use only: see document no. 11 of this Edgarized report.]

27 Financial Data Schedule (for SEC use only). [See document no. 12 of
this Edgarized report]

<PAGE> 1

EXHIBIT 10.1
AMENDED AND RESTATED
INGLES MARKETS, INCORPORATED
1987 EMPLOYEE INCENTIVE STOCK OPTION PLAN

1. PURPOSE

This Incentive Stock Option Plan (the "Plan") is intended as an
incentive to encourage stock ownership by selected officers and key executive
employees of Ingles Markets, Incorporated (the "Corporation") or of its
subsidiary corporations (the "Subsidiaries") as that term is defined in Section
425(f) of the Internal Revenue Code of 1986, as now or hereafter amended (the
"Code") so that they may acquire or increase their proprietary interest in the
success of the Corporation and its Subsidiaries, and to encourage them to
remain in the employ of the Corporation or its Subsidiaries. The Plan is also
intended to aid the Corporation in competing with other enterprises for the
services of new senior executives needed to help insure continued development.
It is further intended that options issued pursuant to this Plan (the
"Options") shall constitute incentive stock options within the meaning of Code
Section 422A.

2. ADMINISTRATION

The Plan shall be administered by a Stock Option Committee (the
"Committee") consisting of not less than two members. The Committee shall be
appointed by the Board of Directors of the Corporation (the "Board") from its
membership. Until such time as the Committee is appointed, the entire Board
shall serve as the Committee. Members of the Committee shall not include any
person who is eligible, while serving as a member of the Committee, or who was
eligible for a period of one (1) full year preceding the date on which such
member first is appointed to the Committee, to participate in this Plan or any
other plan of the Corporation or any of its affiliates which entitle the
participants therein to acquire stock, stock options or stock appreciation
rights of the Corporation or any of its affiliates.

The Committee shall hold meetings at such times and places as it may
determine. A majority of the vote of the Committee at a meeting or such acts
as are reduced to or approved in writing by the majority of the members of the
Committee shall be the valid acts of the Committee. The Committee may
interpret the Plan, prescribe, amend and rescind any rules and regulations
necessary or appropriate for the administration of the Plan and make such other
determinations and take such other action as it deems necessary or desirable
for the administration of the Plan and the protection of the Corporation except
as otherwise reserved to the Board or the shareholders of the Corporation.
Without limiting the generality of the foregoing, the Committee, in its
discretion, may treat all or any part of any period during which an optionee is
on military duty or on an approved leave of absence from the Corporation as a
period of employment of such optionee by the Corporation for purposes of
accrual of his rights under his Option. In addition, the Committee shall have
the specific authority to grant Options with different terms to different
optionees. Any interpretation, determination or other action made or taken by
the Committee shall be final, binding and conclusive.

<PAGE> 2

No member of the Committee shall be liable for any action taken or
omitted or determination made in good faith with respect to the Plan or any
Option granted under the Plan.

3. ELIGIBILITY

The persons who shall be eligible to receive Options shall be such
salaried key executive employees as the Committee shall select from time to
time who are officers (whether or not they are directors) of, or who are
employed in an executive, administrative or professional capacity by, the
Corporation or its Subsidiaries. An optionee may hold more than one Option,
but only on the terms and subject to the restrictions hereafter set forth. No
Option shall be granted to any employee who owns, at the time of such proposed
grant, directly or indirectly, stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation or
of its Subsidiaries. The granting of an Option to any employee shall neither
entitle such employee to, nor disqualify such employee from, participation in
any future Option grants.

4. AGGREGATE AMOUNT OF STOCK SUBJECT TO PLAN

Subject to the proper approval of the shareholders of the Corporation
for the authorization to issue Class A Common Stock (as hereinafter defined),
the stock subject to the Options shall be shares of the Corporation's
authorized but unissued $.05 Par Value Class A Common Stock, herein sometimes
called "Class A Stock." The aggregate number of shares which may be issued
pursuant to Options under the Plan shall not exceed 250,000 shares of Class A
Stock, subject to adjustment as described below.

If, for any reason, any outstanding Option under the Plan expires or
is terminated, the shares of Class A Stock allocable to the unexercised portion
of such Option may again be subjected to an Option under the Plan.

5. GRANT OF OPTIONS

The Committee shall have the authority, subject to the terms of the
Plan, to: (a) determine and designate from time to time those employees of the
Corporation to whom Options are to be granted, provided that no director of the
Corporation who is not also an employee of the Corporation shall be entitled to
receive any Option under the Plan; and (b) determine the number of shares
subject to each Option. The date of grant of an Option under the Plan will be
the later of (i) the date on which the Option is awarded by the Committee, or
(ii) the effective date of the Registration Statement relating to the initial
public offering of the Corporation's Class A Stock.

6. VALUE OF STOCK SUBJECT TO OPTIONS

The aggregate fair market value (determined as of the time the Option
is granted) of any stock with respect to which Options are exercisable for the
first time by an optionee during any

2
<PAGE> 3

calendar year (under all incentive stock option plans of the Corporation and
any of its Subsidiaries) shall not exceed $100,000.00.

7. TERMS AND CONDITIONS OF OPTIONS

Stock Options granted pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by agreements in such form as the Committee
shall from time to time approve, which agreements shall comply with and be
subject to the terms and conditions contained in Paragraphs A-H below;
provided, however, that no Option shall be subject to any condition that is
inconsistent with the provisions of Code Section 422A(b). In the event that
any condition imposed hereunder on an Option is at any time determined by the
Internal Revenue Service or a court of competent jurisdiction to be
inconsistent with Code Section 422A, then each Option shall be deemed to have
been granted without such condition and such Option shall continue in effect
under such remaining terms and conditions as may be applicable as if the
invalid condition had not been included.

A. Employment of Optionee. Any person to whom an Option may be
granted pursuant to the Plan shall be an employee of the Corporation or its
Subsidiaries at the time of the grant of the Option. Such grant, however,
shall not impose upon the Corporation any obligation to retain the optionee in
its employ for any period.

B. Number of Shares. Each Option shall state the number of shares to
which it pertains.

C. Option Price. Each Option shall state the Option price, which
shall not be less than 100% of the fair market value of the Option shares on
the date of the granting of the Option. Such price shall be subject to
adjustment as provided in Paragraph F of this Item. The fair market value of
the Corporation's Class A Stock for Options granted on the effective date of a
public offering of such stock shall be the price at which such shares are
offered to the public. In the event that the Corporation's Class A Stock is
listed upon an established stock exchange, such fair market value shall be
deemed to be the closing price of the Corporation's Class A Stock on such stock
exchange on the day the Option is granted or, if no sale of the Corporation's
Class A Stock shall have been made on any stock exchange on that day, the fair
market value shall be determined as such price for the next preceding day upon
which a sale shall have occurred. In the event that the Corporation's Class A
Stock is not listed upon an established exchange but is quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
fair market value shall be deemed to be the closing sale price (if included in
the national market list) or the mean between the closing dealer "bid" and
"asked" prices for the Corporation's Class A Stock as quoted on NASDAQ for the
day of the grant, and if no closing sale price or "bid" and "asked" prices are
quoted for the day of the grant, the fair market value shall be determined by
reference to such prices on the next preceding day on which such prices are
quoted. In the event that the Corporation's said Class A Stock is neither
listed on an established stock exchange nor quoted on NASDAQ, the fair market
value on the day the Option is granted shall be determined by the Committee.

3
<PAGE> 4

D. Term and Exercise of Options. No Option shall be exercisable
either in whole or in part prior to the expiration of five (5) years from the
date it is granted. After the expiration of said five (5) year period, then
the optionee shall have a period of three (3) months beyond said five (5) year
period to exercise his Option in accordance with the terms of this Plan and the
Option Agreement. No Option shall be exercisable after the expiration of
sixty-three (63) months from the date it is granted.

E. Termination of Employment. The Option of any optionee who shall
cease to be an employee of the Corporation shall immediately terminate upon
such cessation of employment, except when such cessation of employment is
caused by the death or disability of the optionee or the retirement of the
optionee with the consent of the Corporation (a "consented retirement"). The
personal representative of the optionee (in the event of his death) or the
optionee (in the event of his disability or consented retirement) may, subject
to the provisions hereof and before the earlier of the Option's expiration date
or the expiration of three (3) months after the date of such death or
disability or consented retirement, exercise the Option granted to such
optionee. To the extent that any Option is not exercisable at the date of the
death or disability or consented retirement of an optionee or is not exercised
in accordance herewith, it shall terminate at the earlier of the Option's
expiration date or the expiration of the three (3) month period following such
death, disability or consented retirement. Whether the termination of
employment of an optionee is due to his disability or is to be considered a
retirement with the consent of the Corporation shall be determined by the
Committee, which determination, unless overruled by the Board of Directors,
shall be final, binding and conclusive. Nothing in the Plan shall be construed
as imposing any obligation on the Corporation to continue the employment of any
optionee.

F. Recapitalization. In the event of any change in the number of
outstanding shares of the Class A Stock of the Corporation by reason of any
stock dividend, stock split, reverse stock split, recapitalization, merger,
consolidation, spin off, reorganization, combination or other exchange of
shares or other similar corporate change (other than the issuance of additional
stock in the Corporation or the exercise of any stock option by any person),
then the Committee shall make an equitable adjustment of the number of Option
shares and the Option price per share to reflect such change. The Committee's
determination in that respect shall be final, binding and conclusive upon all
parties. However, no Option granted pursuant to this Plan shall be adjusted in
a manner that causes the Option to fail to qualify as an incentive stock option
within the meaning of Code Section 422A. In the event of any merger,
consolidation or reorganization of the Corporation, in which the Corporation is
the surviving corporation, any Option granted under the Plan shall
automatically be deemed to pertain to the securities and other property, if
any, to which a holder of the number of shares of Class A Stock covered by the
Option would have been entitled to receive in connection with any such event.
A dissolution or liquidation of the Corporation or a merger, consolidation or
reorganization in which the Corporation is not the surviving corporation, and
which does not contain appropriate provisions for the substitution of options
to purchase appropriate stock of the surviving corporation on an equitable
basis, shall cause each outstanding Option to terminate, provided that each
optionee who has held an Option for more than one (1) year prior to the
effective date of such event shall have the right immediately prior to such
dissolution or liquidation, or

4
<PAGE> 5

merger, consolidation or reorganization in which the Corporation is not the
surviving corporation, to exercise his option in whole or in part, subject to
the exception that no option shall be exercisable after the expiration of
sixty-three (63) months from the date it is granted. Except as expressly
provided in this Paragraph, the optionee shall have no rights by reason of any
change in the stock in the Corporation. The grant of an Option pursuant to
this Plan shall not affect in any way the right or power of the Corporation to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.

G. Rights as a Shareholder. An optionee shall have no rights as a
shareholder with respect to any shares covered by his Option until the date of
the issuance to him of a stock certificate for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Paragraph F hereof.

H. Other Provisions. The option agreements authorized under the Plan
shall contain such other provisions including, without limitation, restrictions
upon the exercise of the Option, as the Committee shall deem advisable. Any
such Option shall contain such limitations and restrictions upon the exercise
of the Option as shall be necessary in order that such Option will be an
"incentive stock option" as defined in Code Section 422A, as now or hereafter
amended.

8. EXERCISE OF OPTION

The exercise of any Option under the Plan shall be subject to the
provisions of Paragraphs A, B and C below.

A. Method of Exercising Option. Any Option granted hereunder or any
portion thereof may be exercised by the optionee by delivering to the
Corporation at its main office (attention of its Secretary) written notice of
the number of shares with respect to which the Option rights are being
exercised and by paying in full the purchase price of the shares purchased.
Upon receipt of such notice and payment, the Corporation shall issue and
deliver to the optionee a certificate for the number of shares of Class A Stock
with respect to which Options were so exercised.

B. Payment of Purchase Price. The purchase price of the shares as to
which an Option is exercised shall be paid in full to the Corporation at the
time of exercise. The payment may be made either in cash or its equivalent, or
with unrestricted shares of the stock of the Corporation previously acquired by
the optionee, or any combination thereof; provided, however, that the
Committee, in its discretion, may suspend or terminate the right of optionees
to pay with stock of the Corporation should the Committee deem such action to
be in the best interests of the Corporation.

C. Withholding. The Corporation's obligation to deliver shares on
the exercise of any Option shall be subject to any applicable federal, state
and local tax withholding requirements.

5
<PAGE> 6

9. RESERVATION OF SHARES

The Corporation, during the term of any Options granted hereunder,
will at all times reserve and keep available, and will seek to obtain from any
regulatory body having jurisdiction any requisite authority in order to issue
and sell, such number of shares of Class A Stock as shall be sufficient to
satisfy the requirements of the Options granted under the Plan. If, in the
opinion of the Corporation's counsel, the issuance or sale of any shares of the
Corporation's stock hereunder shall not be lawful for any reason, including the
inability of the Corporation to obtain from any regulatory body having
jurisdictional authority deemed by such counsel to be necessary for such
issuance or sale, the Corporation shall not be obligated to issue or sell any
such shares.

10. SECURITIES LAWS

Upon the exercise of an Option at a time when there is not in effect
under the Securities Act of 1933, as amended (the "Act"), a current
registration statement relating to the shares of Class A Stock to be received
upon such exercise, the optionee shall represent and warrant in writing to the
Corporation that the shares purchased are being acquired for investment and not
with a view to the distribution thereof and shall agree to the imposition of a
legend on the certificate or certificates representing said shares in
substantially the following form and such other restrictive legends as are
required or advisable under the provisions of any applicable laws:

This stock certificate and the shares represented hereby have not been
registered under the Securities Act of 1933, as amended (the "Act"),
nor under any state securities laws and shall not be transferred at
any time in the absence of (i) an effective registration statement
under the Act with respect to such shares at such time; or (ii) an
opinion of counsel satisfactory to the Corporation and its counsel, to
the effect that such transfer at such time will not violate the Act or
any applicable state securities laws; or (iii) a "no action" letter
from the Securities and Exchange Commission and a comparable ruling
from any applicable state agency with respect to such state's
securities laws.

No shares of Class A Stock shall be issued or sold upon the exercise
of any Option unless and until (i) the full amount of the purchase price has
been paid as provided in Item 8 hereof and (ii) the then applicable
requirements of the Act, the North Carolina Business Corporation Act, the North
Carolina Securities Act, the applicable securities laws of any other
jurisdiction, as any of the same may be amended, the rules and regulations of
the Securities and Exchange Commission and any other regulations of any
securities exchange on which the Class A Stock may be listed shall have been
fully complied with and satisfied.

11. TRANSFERABILITY OF OPTIONS

No Option shall be assignable or transferable by an optionee except by
will or by the laws of descent and distribution. Any distributee by will or by
the laws of descent and distribution shall be bound by the provisions of the
Plan. During the life of an optionee, the Option shall be

6
<PAGE> 7

exercisable only by such optionee. Any attempt to assign, pledge, transfer,
hypothecate or otherwise dispose of any Option and any levy of execution,
attachment or similar process on an Option shall be null and void.

12. TERM OF PLAN

Options may be granted pursuant to the Plan from time to time solely
within a period of ten (10) years from the date the Plan is adopted, or the
date the Plan is approved by the shareholders, whichever is earlier.

13. APPLICATION OF FUNDS

The proceeds received by the Corporation from the sale of Class A
Stock pursuant to Options will be used for general corporate purposes.

14. NO OBLIGATION TO EXERCISE OPTION

The granting of an Option shall impose no obligation upon the optionee
to exercise such Option.

15. INDEMNIFICATION AND EXCULPATION

Each person who is or shall have been a member of the Board or of the
Committee shall be indemnified and held harmless by the Corporation against and
from any and all loss, cost, liability or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be or become involved by reason of
any action taken or failure to act under the Plan and against and from any and
all amounts paid by him in settlement thereof (with the Corporation's written
approval) or paid by him in satisfaction of a judgment in any such action, suit
or proceeding, except a judgment in favor of the Corporation based upon a
finding of his lack of good faith; subject, however, to the condition that upon
the institution of any claim, action, suit or proceeding against him, he shall
in writing give the Corporation any opportunity, at its expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
right to which such person may be entitled as a matter of law or otherwise, or
any power that the Corporation may have to indemnify him or hold him harmless.
Each member of the Board or of the Committee, and each officer and employee of
the Corporation shall be fully justified in relying or acting in good faith
upon any information furnished in connection with the administration of the
Plan by any appropriate person or persons other than himself. In no event
shall any person who is or shall have been a member of the Board or of the
Committee, or an officer or employee of the Corporation, be held liable for any
determination made, or other action taken, or any omission to act in reliance
upon any such information as referred to in the preceding sentence, or for any
action (including the furnishing of information) taken, or any omission to act,
when any such determination, action or omission is made in good faith.

7
<PAGE> 8

16. AMENDMENT AND DISCONTINUANCE

The Board or the shareholders of the Corporation may (x) modify,
extend or renew outstanding Options granted under the Plan or accept the
surrender of outstanding Options, and (y) terminate or amend the Plan in any
respect at any time, except that no action of the Board or the shareholders may
alter or impair an optionee's rights under any outstanding Option without his
consent and, without the prior approval of the shareholders: (i) the total
number of shares that may be optioned and sold under the Plan may not be
increased (except by adjustment pursuant to Item 7F), (ii) the price at which
shares may be purchased pursuant to Options granted hereunder may not be
reduced (except by adjustment pursuant to Item 7F), (iii) the expiration date
of the Plan may not be extended, (iv) the Plan may not be changed in such a
manner that the Options granted hereunder would fail to qualify as incentive
stock options under Code Section 422A, and (v) the provisions of this Item 16
may not be changed.

17. APPROVAL OF SHAREHOLDERS

The Plan shall not take effect (i) until the Plan is approved by the
holders of a majority of the outstanding shares of common stock of the
Corporation, which approval must occur within the period beginning twelve (12)
months before and ending twelve (12) months after the date the Plan is adopted
by the Board of Directors, and (ii) unless and until the Class A Stock is
properly authorized by the shareholders of the Corporation to be issued.

18. GENERAL

Except as the same may be governed by the Code and applicable federal
securities laws, the Plan and any Options granted hereunder shall be governed
by and construed in accordance with the laws of the State of North Carolina.
As herein used, the singular number shall include the plural, the plural the
singular, and the use of any gender shall be applicable to all genders, unless
the context or use shall fairly require a different construction. Section or
paragraph headings are employed herein solely for convenience of reference, and
such headings shall not affect the validity, meaning or enforceability of any
provision of the Plan. All references herein to "Item" or "paragraph" shall
mean the appropriately numbered Item or paragraph of the Plan except where
reference is made to the Code or any other specified law or instrument.

AS APPROVED BY THE SHAREHOLDERS OF THE CORPORATION ON SEPTEMBER 8,
1987, AND AS AMENDED AND RESTATED BY THE BOARD OF DIRECTORS OF THE CORPORATION
EFFECTIVE AS OF SEPTEMBER 8, 1987.

<PAGE> 1
Exhibit 10.2

RESTATEMENT AND AMENDMENT BY THE ENTIRETY

OF THE INGLES MARKETS, INCORPORATED

INVESTMENT/PROFIT SHARING PLAN

EFFECTIVE SEPTEMBER 26, 1993
(AS AMENDED THROUGH JUNE 30, 1995)
<PAGE> 2

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I. DEFINITION OF TERMS
1.1 Accrued Benefit 2
1.2 Act 2
1.3 Active Participant 2
1.4 Adjustment Factor 2
1.5 Affiliated Employer 2
1.6 Age 2
1.7 Alternate Payee 2
1.8 Annual Additions 3
1.9 Annuity Starting Date 3
1.10 Beneficiary 4
1.11 Board 4
1.12 Code 4
1.13 Committee 4
1.14 Compensation 4
1.15 Contract 5
1.16 Coverage Percentage 5
1.17 Determination Date 6
1.18 Discretionary Employer Contributions 6
1.19 Discretionary Employer Contribution 6
Account
1.20 Domestic Relations Order 6
1.21 Early Retirement Date 6
1.22 Effective Date 6
1.23 Effective Date of Restatement 6
1.24 Elective Deferrals 7
1.25 Eligibility Date 7
1.26 Employee 7
1.27 Employer 7
1.28 Employer Contribution Account 7
1.29 Employment Commencement Date 7
1.30 Entry Date 7
1.31 Failsafe Contributions 7
1.32 Failsafe Matching Contributions 7
1.33 Family Member 8
1.34 Five Percent Owner 8
1.35 Forfeitures 8
1.36 Fund 8
1.37 Highly Compensated Employee 8
</TABLE>

-i-
<PAGE> 3

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
1.38 Hour of Service 9
1.39 Inactive Participant 9
1.40 Includible Employees 9
1.41 Key Participant 10
1.42 Limitation Year 11
1.43 Matching Employer Contributions 11
1.44 Matching Employer Contribution Account 11
1.45 Minimum Contribution 11
1.46 Non-Highly Compensated Employee 11
1.47 Non-Key Participant 11
1.48 Normal Retirement Date 11
1.49 One-Year Break in Service 12
1.50 Paid Service 12
1.51 Participant 12
1.52 Participant's Contribution Account 12
1.53 Plan 12
1.54 Plan Administrator 12
1.55 Portfolio Investments 12
1.56 Plan Year 12
1.57 Qualified Deferral Account 12
1.58 Qualified Domestic Relations Order 12
1.59 Qualified Joint and Survivor Annuity 13
1.60 Qualified Nonelective Contributions 13
1.61 Qualified Preretirement Survivor Annuity 13
1.62 Qualifying Employer Securities 13
1.63 Regulations 14
1.64 Required Beginning Date 14
1.65 Retired Participant 15
1.66 Retirement Date 15
1.67 Salary Reductions 15
1.68 Segregated Accounts 15
1.69 Suspense Account 15
1.70 Terminated Participant 16
1.71 Top-Heavy Plan 16
1.72 Trust Agreement or Trust 16
1.73 Trustees 16
1.74 Valuation Date 16
1.75 Very Top-Heavy Plan 16
1.76 Year of Service 16
</TABLE>

-ii-

<PAGE> 4

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- -----
<S> <C>
II. PARTICIPATION
2.1 Employees Eligible to Participate 18
2.2 Credited Hours of Service for Performance of Duties 18
2.3 Credited Hours of Service for Which No Duties Are 18
Performed
2.4 Notice to Employees 21
2.5 Commencement of Participation 21
2.6 Termination of Employment 21
2.7 Termination of Participation 21
2.8 Reparticipation 22
2.9 Inactive Status 22
2.10 Provisions Relating to Leased Employees 22

III. CONTRIBUTIONS TO THE TRUST
3.1 Qualified Elective Deferral Contributions 24
3.2 Matching Employer Contributions 27
3.3 Discretionary Employer Contributions 32
3.4 No Voluntary Employee Contributions 34
3.5 General Rules Regarding Contributions 34
3.6 Rollovers from Individual Retirement
Accounts or Plans 35
3.7 Portability 35

IV. ALLOCATION
4.1 Separate Accounts 37
4.2 Employer Contributions 37
4.3 Certification of Allocations 37
4.4 Income and Loss 37
4.5 Appreciation and Depreciation 37
4.6 Forfeitures 37
4.7 Employer Contribution Account
After Reparticipation 38
4.8 Maximum Annual Additions 39
A. Limitations Applicable to this Plan 39
B. Limitations Where Participant
Participates in Another Defined
Contribution Plan 40
</TABLE>

-iii-
<PAGE> 5

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
C. Limitations Where Participant
Participates in a Defined Benefit
Plan 40
4.9 Discretionary Investments of Contributions 43

V. DISTRIBUTION OF BENEFITS
5.1 Employer Contribution Account 45
A. Distribution on Termination Prior to
Retirement 45
1. Distribution 45
2. Nonforfeitable Vested Interest 45
3. Forfeitures 47
4. Prior Service of Nonvested
Participants Upon
Reparticipation 48
5. Prior Service of Vested
Participants 48
6. Subsequent Service of
Terminated Participants 48
B. Distribution on Retirement at
Retirement Date 48
C. Distribution on Retirement After
Retirement Date 48
D. Distribution on Death 49
E. Distribution on Disability 51
F. Qualified Joint and Survivor Annuity 51
G. Qualified Preretirement Survivor
Annuity 53
H. Participant Consent to Distributions 54
I. Distributions After Earliest Retirement
Age Pursuant to Qualified
Domestic Relations Order 56
J. Distributions of Excess Deferrals 56
K. Distributions of Excess Contributions 57
L. Distributions of Excess Aggregate
Contributions 58
</TABLE>

-iv-
<PAGE> 6

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
M. Distribution Upon Plan Termination 60
N. Distribution Upon Sale of Assets 60
O. Hardship Withdrawals from Qualified
Deferral Account 60
P. Election of Later Benefit
Commencement Date 62
Q. Withdrawals from Employer
Contribution Account 62
5.2 Method of Distribution 63
5.3 Participant's Contribution Account 67
5.4 Segregated Accounts 67
5.5 Location of Terminated Participant or
Beneficiary Unknown 67

VI. AMENDMENT OF PLAN
6.1 Right to Amend 69
6.2 Limitations upon Right to Amend 69
6.3 Amendment Binding on All Participating
Employers 69

VII. TOP-HEAVY PLANS
7.1 Top-Heavy Plan 70
7.2 Top-Heavy Group of Plans 70
7.3 Rules for Determining Top-Heavy
Plan Status 70
7.4 Very Top-Heavy Plan 71
7.5 Alternate Vesting Schedule 72

VIII. TERMINATION OF PLAN
8.1 Right to Terminate 73
8.2 Adoption of Plan by Successor 73
8.3 Multiple Participating Employers 73
8.4 Allocation on Termination of Plan or
Permanent Discontinuance of
Contributions 73
8.5 Manner of Distribution 74
8.6 Merger or Consolidation of Plan or
Transfer of Plan Assets 74
</TABLE>
-v-
<PAGE> 7

INDEX

<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
IX. ADMINISTRATION
9.1 Appointment of Committee 76
9.2 Notification to Participants 76
A. Plan Summary and Forms 76
B. Account Balances 76
C. Notification Prior to Termination
Date 76
D. Claims Procedure 77
9.3 Records and Reports 77
9.4 Other Committee Powers and Duties 77
9.5 Committee Procedures 77
9.6 Authorization of Benefit Payments 78
9.7 Benefit Checks 78

X. GUARANTEES AND LIABILITIES
10.1 Nonguarantee of Employment 79
10.2 Rights to Fund Assets 79
10.3 No Diversion of Funds 79
10.4 Nonalienation of Benefits 80
10.5 Domestic Relations Order 80
10.6 Loans 81
10.7 Allocation of Responsibility Among
Employer, Committee and Trustees for
Plan and Trust Administration 83
10.8 Bonding 84
10.9 Guarantees to Participants 84

XI. MISCELLANEOUS
11.1 Governing Laws 85
11.2 Corporate Action 85
11.3 Alternative Acts 85
11.4 Interpretation 85
11.5 Gender and Tense 85
11.6 Title Headings 85
</TABLE>

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<PAGE> 8

RESTATEMENT AND AMENDMENT BY THE ENTIRETY
OF THE INGLES MARKETS, INCORPORATED
INVESTMENT/PROFIT SHARING PLAN

THIS IS A RESTATEMENT AND AMENDMENT BY THE ENTIRETY of the Profit

Sharing Plan for the employees of INGLES MARKETS, INCORPORATED, a North

Carolina corporation and MILKCO, Inc., a North Carolina corporation

(hereinafter collectively referred to as the "Employer").

W I T N E S S E T H:

WHEREAS, the Employer desires to have restated and amended by the

entirety said Profit Sharing Plan dated September 25, 1972, as last restated

and amended by the entirety on September 18, 1990, to meet the requirements of

the Internal Revenue Code, as amended by the Employee Retirement Income

Security Act of 1974, and to fully comply with the requirements of said Act,

and also to expand, as well as add, certain provisions to said Profit Sharing

Plan; and

WHEREAS, the Employer has approved the creation of this Restatement

and Amendment by the Entirety of the Profit Sharing Plan and has authorized

execution by its officers of a separate Trust Agreement for the management of

the assets of this Plan;

WHEREAS, the Plan shall hereafter be known as the INGLES MARKETS,

INCORPORATED INVESTMENT/PROFIT SHARING PLAN.

NOW, THEREFORE, in accordance with the terms of the Profit Sharing

Plan, said Plan is hereby restated andamended in its entirety to read as

follows:

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<PAGE> 9

ARTICLE I

DEFINITION OF TERMS

The following words and terms, as used in this Plan, shall have the

meanings set forth below, unless a different meaning is clearly required by the

context:

1.1 "Accrued Benefit": The Employer Contribution Account and the
Participant's Contribution Account attributable to a Participant.

1.2 "Act": The Employee Retirement Income Security Act of 1974, as amended
from time to time.

1.3 "Active Participant": With respect to any Plan Year, a Participant who
(i) is in the employ of the Employer on the last day of the quarter of
the Plan Year or on the last day of the Plan Year, as the case may be,
or (ii) retires after his Normal Retirement Date, dies or becomes
disabled in such quarter or Plan Year, as the case may be, or (iii)
for purposes of Section 3.3A only, is treated as an Active Participant
pursuant to Section 3.3A5.

1.4 "Adjustment Factor": The cost of living adjustment factor prescribed
by the Secretary of the Treasury under Section 415(d) of the Code for
years beginning after December 31, 1987, as applied to such items and
in such manner as the Secretary shall provide.

1.5 "Affiliated Employer": The Employer and any corporation which is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business
(whether or not incorporated) which is under common control (as
defined in Section 414(c) of the Code) with the Employer; any
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code)
which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Regulations under Section
414(o) of the Code.

1.6 "Age": The age of an Employee on his last birthday.

1.7 "Alternate Payee": Any spouse, former spouse, child or other dependent
of a Participant who is recognized by a Qualified Domestic Relations
Order as having a right to receive all, or a portion of, the benefits
payable under the Plan with respect to such Participant. Such spouse,
former spouse, child or other dependent shall be considered a
Beneficiary hereunder.

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<PAGE> 10

1.8 "Annual Additions": The amount allocated to a Participant's account
during the Limitation Year that constitutes:

(i) Employer contributions,
(ii) Employee contributions,
(iii) Forfeitures, and
(iv) Amounts described in Sections 415(1)(1),
419(e) and 419A(d)(2)
of the Code.

For purposes of applying the limitations of Code Section 415 with
respect to a Participant's Annual Additions for all defined
contribution plans, all amounts allocated to a Participant under such
plans and all of the Participant's Employee contributions to such
plans shall be aggregated.

For purposes of this Section, the following shall also apply:

A. Employer contributions shall not be deemed credited to a
Participant's account for a particular Plan Year unless the
contributions are actually made to the Plan no later than
thirty (30) days after the end of the period described in Code
Section 404(a)(6) applicable to the taxable year with or
within which the particular Plan Year ends. If, however,
contributions are made by an Employer exempt from Federal
income tax under Code Section 501(a), the contributions must
be made to the Plan no later than the 15th day of the sixth
calendar month following the close of the taxable year (or
fiscal year, if no taxable year) with or within which the
particular Limitation Year ends.

B. If, in a particular Plan Year, Employer contributions are
allocated to a Participant's account because of an erroneous
forfeiture in a prior Plan Year or because of an erroneous
failure to allocate amounts in a prior Plan Year, the
allocation will not be considered an Annual Addition with
respect to the Participant for that particular Plan Year, but
will be considered an Annual Addition for the Plan Year to
which it relates.

C. Annual Additions shall not include any amounts repaid to the
Plan pursuant to Section 4.7A by a Terminated Participant who
reparticipates in the Plan or any amounts restored to such
Participant's accounts pursuant to Section 4.7A.

1.9 "Annuity Starting Date": The first day of the first period for which
an amount is payable as an annuity, or in the case of a benefit not
payable in the form of an annuity, the first day on which all events
(including Participant consents) have occurred which entitle the
Participant to such benefit. In the case of an Annuity Starting Date
occurring on or after a Participant's Normal Retirement Date, such
Annuity Starting Date will also apply to any additional allocations to
such Participant's accounts thereafter. In the case of an Annuity

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<PAGE> 11

Starting Date occurring prior to a Participant's Normal Retirement
Date, such Annuity Starting Date will not apply to any additional
allocations to such Participant's accounts thereafter.

1.10 "Beneficiary": Any person or persons designated as provided in ARTICLE
V to receive benefits under this Plan in the event of the death of a
Participant, Retired Participant, Terminated Participant or Alternate
Payee.

1.11 "Board": The Board of Directors of the Employer.

1.12 "Code": The Internal Revenue Code of 1986, as amended.

1.13 "Committee": The Administrative Committee appointed by the Employer
and acting in accordance with the terms hereof.

1.14 "Compensation": Compensation paid by the Employer to the Participant
during the Plan Year which is required to be reported as wages on the
Participant's Form W-2, plus compensation paid during the Plan Year
which is not currently includible in the Participant's gross income by
reason of the application of Sections 125, 402(a)(8) [402(e)(3) after
December 31, 1992], 404(h)(1)(B) or 403(b) of the Code, but exclusive
of compensation paid prior to a Participant's Entry Date in the first
Plan Year in which the Participant participates in the Plan. For Plan
Years beginning on or after January 1, 1989, Compensation in any Plan
Year shall be limited to $200,000 multiplied by the Adjustment Factor.
For purposes of the limit on Compensation, the Compensation of an
Employee who is a Five Percent Owner or who is one of the ten Highly
Compensated Employees with the greatest Compensation for a Plan Year
shall include all Compensation for such Plan Year paid to such
Employee's spouse and lineal descendants who have not attained age 19
before the end of such Plan Year. If, as a result the $200,000, (as
adjusted) limit is exceeded, then the $200,000 (as adjusted)
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined under
this Section prior to the application of such $200,000 limitation.

In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual
compensation of each Employee taken into account under the Plan shall
not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the

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<PAGE> 12

numerator of which is the number of months in the determination
period, and the denominator of which is 12. For Plan Years beginning
on or after January 1, 1994, any reference in this Plan to the
limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision. If
compensation for any prior determination period is taken into account
in determining an employee's benefits accruing in the current Plan
Year, the compensation for that prior determination period is subject
to the OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.

For purposes of the limit on Compensation, the Compensation of an
Employee who is a Five Percent Owner or who is one of the ten Highly
Compensated Employees with the greatest Compensation for a Plan Year
shall include all Compensation for such Plan Year paid to such
Employee's spouse and lineal descendants who have not attained age 19
before the end of such Plan Year. If, as a result the $150,000 (as
adjusted) limitation is exceeded, then (except for purposes of
determining Compensation in excess of the Integration Level) the
$150,000 (as adjusted) limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of such
$150,000 limitation. For purposes of Sections 1.47 and 3.3A1,
Compensation shall include pay or salary paid prior to a Participant's
Entry Date in the first Plan Year in which the Participant
participates in the Plan.

If the exclusion of compensation paid prior to a Participant's Entry
Date in the first Plan Year in which the Participant participates in
the Plan causes the Plan to fail to meet the requirements of Code
Sections 401(a)(4), 401(a)(26) or 410(b), then for the purposes of
allocating all contributions under the Plan, Compensation shall not
exclude such compensation paid prior to a Participant's Entry Date in
the first Plan Year in which the Participant participates in the Plan
to the extent necessary to comply with the requirements of Code
Sections 401(a)(4), 401(a)(26) and 410(b).

For purposes of this Section, the rules of Code Section 414(q) will
apply.

1.15 "Contract": An annuity contract issued for the benefit of a
Participant, unless otherwise stated. Any such contract shall be
non-transferable, shall be issued by a legal reserve life insurance
company which is authorized to do business within the State of North
Carolina and may contain such provisions for death and other benefits
as the Committee may determine to be in accordance with the terms of
the Plan.

1.16 "Coverage Percentage": For any Plan Year, a percentage equal to (i)
the percentage equal to the number of Includible Employees who are
Non-Highly Compensated Employees and who "benefit" under the Plan for
all or a portion of such Plan Year divided by the

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<PAGE> 13

number of Includible Employees who are Non-Highly Compensated
Employees, divided by (ii) the percentage equal to the number of
Includible Employees who are Highly Compensated Employees and who
"benefit" under the Plan for all or a portion of such Plan Year
divided by the number of Includible Employees who are Highly
Compensated Employees.

1.17 "Determination Date": With respect to any Plan Year (i) the last day
of the preceding Plan Year, or (ii) in the case of the first Plan Year
of the Plan, the last day of such first Plan Year.

1.18 "Discretionary Employer Contributions": Those contributions made to
the Fund by the Employer pursuant to Section 3.3 hereof.

1.19 "Discretionary Employer Contribution Account": That account of each
Participant containing Discretionary Employer Contributions allocated
to such Participant under Section 3.3 and all adjustments thereto
pursuant to Sections 4.4 and 4.5.

1.20 "Domestic Relations Order": Any judgment, decree or order (including
approval of a property settlement agreement) which (i) relates to the
provision of child support, alimony payments or marital property
rights to a spouse, child or other dependent of a Participant and is
made pursuant to a state domestic relations law (including a community
property law); (ii) clearly specifies the name and last known mailing
address of the Participant and each Alternate Payee covered by the
order; the amount or percentage of the Participant's benefits to be
paid by the Plan to each Alternate Payee; the number of payments or
period to which such order applies; and each plan to which such order
applies; and (iii) does not require this Plan to provide any type or
form of benefit, or any option not otherwise provided under this Plan;
does not require this Plan to provide increased benefits (determined
on the basis of actuarial value); and (iv) does not require the
payment of benefits to an Alternate Payee which are required to be
paid to another Alternate Payee under another order previously
determined to be a Qualified Domestic Relations Order.

1.21 "Early Retirement Date": The date which is the later of the date on
which the Participant: (i) completes ten (10) Years of Service with
the Employer, or (ii) attains age sixty (60). For purposes of this
Plan, a Terminated Participant who has completed ten (10) Years of
Service with the Employer and has attained age sixty (60) shall be
entitled to the same rights under the Plan as a Participant who has
attained his Early Retirement Date.

1.22 "Effective Date": September 25, 1972.

1.23 "Effective Date of Restatement": September 26, 1993.

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<PAGE> 14

1.24 "Elective Deferrals": Contributions made to the Plan during the Plan
Year by the Employer, at the election of the Participant, in lieu of
cash compensation. Elective Deferrals shall include contributions made
pursuant to a salary reduction agreement. For purposes of Section 3.2,
Elective Deferrals shall not include any amounts which are "Excess
Contributions" as defined in Section 5.1K.

1.25 "Eligibility Date": The first day of each Plan Year and the 182nd day
of each Plan Year.

1.26 "Employee": Any person who is either: (i) employed by the Employer in
a capacity other than solely as a Director or other independent
contractor, or (ii) a leased employee within the meaning of Code
Sections 414(n) or 414(o). Notwithstanding the foregoing, if such
leased employees constitute less than twenty (20%) percent of the
Employer's nonhighly compensated work force within the meaning of
Section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall not
include those leased employees covered by a plan described in Section
414(n)(5)(B) of the Code.

1.27 "Employer": INGLES MARKETS, INCORPORATED and MILKCO, INC., or any
successors by merger, consolidation, purchase or otherwise, and any
other corporation, association or business organization that assumes
the obligations of this Plan.

For purposes of determining and crediting an Employee with Hours of
Service, Paid Service, Years of Service and One-Year Breaks in
Service, and for purposes of determining whether the Plan is a
Top-Heavy Plan, the Employer shall also include all trades or
businesses, whether or not incorporated, which are under common
control, within the meaning of Code Sections 414(b), (c) or (m) and
the Regulations adopted thereunder, with any Employer hereunder.

1.28 "Employer Contribution Account": The Qualified Deferral Account, the
Matching Employer Contribution Account and the Discretionary Employer
Contribution Account attributable to each Participant.

1.29 "Employment Commencement Date": The first date on which an Employee is
credited with an Hour of Service in accordance with Section 2.2 or 2.3
of the Plan.

1.30 "Entry Date": The date, beginning with the Effective Date, on which
any Employee becomes eligible to participate in the Plan as set forth
in Section 2.1.

1.31 "Failsafe Contributions": Those contributions made to the Fund by the
Employer pursuant to Section 3.1B.

1.32 "Failsafe Matching Contributions": Those contributions made to the
Fund by the Employer pursuant to Section 3.2B.

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<PAGE> 15

1.33 "Family Member": An individual described in Section 414(q)(6)(B) of
the Code.

1.34 "Five Percent Owner": If the Employer is a corporation, any person who
owns (or is considered as owning within the meaning of Code Section
318) more than five (5%) percent of the outstanding stock of the
corporation or stock possessing more than five (5%) percent of the
total combined voting power of all stock of the corporation, or if the
Employer is not a corporation, any person who owns more than five (5%)
percent of the capital or profits interest in the Employer.

1.35 "Forfeitures": The nonvested portion of the Employer Contribution
Accounts of a Terminated Participant as of the last day of a Plan Year
in which occurs the earlier of (i) the later of the day on which he
has received or is deemed to have received a distribution of his
entire vested interest in the Plan or the day on which he shall have
incurred a One-Year Break in Service, or (ii) the day on which he
shall have incurred five consecutive One-Year Breaks in Service.

1.36 "Fund": The trust funds established pursuant to the INGLES MARKETS,
INCORPORATED INVESTMENT/PROFIT SHARING TRUST "A" (the "A" Fund) and
the INGLES MARKETS, INCORPORATED INVESTMENT/PROFIT SHARING TRUST "B"
(the "B" Fund), to receive and invest contributions made under this
Plan and from which benefits are paid.

1.37 "Highly Compensated Employee": Highly compensated active employees and
highly compensated former employees.

A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year: (i) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (ii) received compensation from the employer in excess
of $50,000 (multiplied by the Adjustment Factor) and was a member of
the top-paid group for such year; or (iii) was an officer of the
Employer and received Compensation during such year that is greater
than 50% of the dollar limitation in effect under Code Section
415(b)(1)(A). The term Highly Compensated Employee also includes: (i)
employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and
the Employee is one of the 100 Employees who received the most
Compensation from the Employer during the determination year; and (ii)
Employees who are Five Percent Owners at any time during the look-back
year or determination year.

If no officer has satisfied the compensation requirement of (iii)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.

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<PAGE> 16

For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year.

A highly compensated former employee includes any employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.

If an Employee is, during a determination year or look-back year, a
Family Member of either a Five Percent Owner who is an active or
former Employee or a Highly Compensated Employee who is one of the 10
most highly compensated employees ranked on the basis of Compensation
paid by the Employer during such year, then the Family Member and the
Five Percent Owner or top-ten highly compensated employee shall be
aggregated. In such case, the Family Member and Five Percent Owner or
top-ten highly compensated employee shall be treated as a single
Employee receiving Compensation and Plan contributions or benefits
equal to the sum of such Compensation and contributions or benefits of
the Family Member and Five Percent Owner or top-ten highly compensated
employee. For purposes of this Section, Family Member includes the
spouse, lineal ascendants and descendants of the employee or former
employee and the spouses of such lineal ascendants and descendants.

The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 employees, the number of employees treated
as officers and the compensation that is considered, will be made in
accordance with Code Section 414(q) and the Regulations thereunder.

1.38 "Hour of Service": The period of Paid Service credited to an Employee
under Sections 2.2 and 2.3.

1.39 "Inactive Participant": A Participant who is not an Active
Participant.

1.40 "Includible Employees": All Employees of the Employer who performed
any services for the Employer during the Plan Year other than:

(i) Employees who are not eligible to participate
in the Plan under Section 2.1.

(ii) Terminated Participants.

(iii) Employees who are non-resident aliens and who
do not receive earned income within the
meaning of Code Section 911(d)(2) from the
Employer

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<PAGE> 17

that constitutes income from sources within
the United States within the meaning of Code
Section 861(a)(3).

(iv) Employees that are engaged in a separate line
of business under Code Section 414(r) for
purposes of Code Section 410(b).

1.41 "Key Participant": An Employee who at any time during the Plan Year or
any of the four preceding Plan Years is or was:

(i) an officer of the Employer having an annual
compensation greater than 50% of the amount
in effect under Code Section 415(b)(1)(A) for
any such Plan Year; or

(ii) one of the ten employees having annual
compensation from the Employer of more than
the limitation in effect under Code Section
415(c)(1)(A) and owning both (a) more than a
one-half of one (0.5%) percent interest and
(b) the largest interests in the Employer; or

(iii) a Five Percent Owner; or

(iv) a One Percent Owner who receives compensation
of more than $150,000 from the Employer
during such Plan Year.

For purposes of (i) above, no more than the lesser of: (a) fifty (50)
Employees, or (b) the greater of three (3) or ten (10%) percent of all
Employees shall be treated as officers. The Employees treated as
officers under (i) above shall be comprised of the individual
officers, selected from the group of all individuals who were officers
in the current Plan Year or any one of the four preceding Plan Years,
who had the largest annual compensation in that five year period.

For purposes of (ii) above, if two (2) or more employees own the same
interest in the Employer, the employee having greater annual
compensation from the Employer shall be treated as having a larger
interest.

For purposes of (iv) above, the term "One Percent Owner" means any
person who would be described in Section 1.34 if "one (1%) percent"
were substituted for "five (5%) percent" each place it appears in such
Section.

For purposes of this Section, in determining ownership of the
Employer, the constructive ownership rules of Code Section 318 as
modified by Code Section 416(i)(1)(B)(iii) shall apply.

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<PAGE> 18

For purposes of this Section, the term "Employee" shall include
Employees, former Employees, and the beneficiaries of Employees and
former Employees and the term "annual compensation" shall mean
compensation as defined in Code Section 415(c)(3), but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Employee's gross income under
Code Sections 125, 402(a)(8) [401(e)(3) after December 31, 1992],
402(h) or 403(b).

1.42 "Limitation Year": The Plan Year.

1.43 "Matching Employer Contributions": Those contributions made to the
Fund by the Employer pursuant to Section 3.2A.

1.44 "Matching Employer Contribution Account": That account of each
Participant containing the Matching Employer Contributions and
Failsafe Matching Contributions allocated to such Participant and all
adjustments thereto pursuant to Sections 4.4 through 4.7.

1.45 "Minimum Contribution": In Plan Years in which the Plan is a Top-Heavy
Plan, an amount equal to a percentage of the total Compensation of any
Inactive Participant who is employed on the last day of the Plan Year
or any Active Participant, which percentage is equal to the lesser of:

(i) three (3%) percent, or

(ii) the highest amount obtained by dividing (A)
the Employer contributions allocated to any
Key Participant for such Plan Year under this
Plan or any other plan maintained by the
Employer, by (B) the Compensation of such Key
Participant for such Plan Year.

In any Plan Year during which the Plan is a Top-Heavy Plan and in
which the Defined Contribution Fraction (as defined in Section 4.8)
plus the Defined Benefit Fraction (as defined in Section 4.8) for any
Participant exceeds 1.0 using 1.0 in place of 1.25 in the denominator
of each such fraction, "four (4%) percent" shall be substituted for
"three (3%) percent" in (i) above.

1.46 "Non-Highly Compensated Employee": An Employee of the Employer who is
neither a Highly Compensated Employee nor a Family Member of a Highly
Compensated Employee.

1.47 "Non-Kev Participant": A Participant who is not a Key Participant.

1.48 "Normal Retirement Date": Attainment by the Participant of age
sixty-five (65).

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<PAGE> 19

1.49 "One-Year Break in Service": With regard to eligibility for
participation requirements, a One-Year Break in Service means: (i) the
expiration of the twelve (12) consecutive month period, beginning with
an Employee's Employment Commencement Date, during which such Employee
is credited with not more than 500 Hours of Service, or (ii) the
expiration of any Plan Year which includes an anniversary of an
Employee's Employment Commencement Date, during which such Employee is
credited with not more than 500 Hours of Service.

With regard to the nonforfeitable interest of a Participant and for
all other purposes of the Plan, a One-Year Break in Service means a
Plan Year during which an Employee is credited with not more than 500
Hours of Service.

1.50 "Paid Service": A period of time for which an Employee is paid or is
entitled to payment by the Employer. Also, a period of time for which
an Employee is not originally paid or entitled to payment but for
which back pay for such Employee, irrespective of mitigation of
damages, is awarded or agreed to by the Employer.

1.51 "Participant": Any Employee who is eligible to be and becomes a
Participant as provided in ARTICLE II hereof, not including a Retired
Participant or a Terminated Participant.

1.52 "Participant's Contribution Account": That portion of the Fund
attributable to repayments of distributions pursuant to Section 4.7A
hereof.

1.53 "Plan": This entire instrument, and all amendments thereto, which
shall be known as the "INGLES MARKETS, INCORPORATED INVESTMENT/PROFIT
SHARING PLAN."

1.54 "Plan Administrator": INGLES MARKETS, INCORPORATED.

1.55 "Plan Year": The fifty-two (52)/fifty-three (53) week period ending on
the last Saturday in September of each year.

1.56 "Portfolio Investments": The kinds of investments or pooled investment
accounts offered by the Trustees or any investment manager serving
under the Trust in which all or a portion of the Fund may be
investing.

1.57 "Qualified Deferral Account": That account of each Participant
containing Elective Deferrals made by him pursuant to Section 3.1A and
any Failsafe Contributions allocated to him pursuant to Section 3.1B,
and all adjustments thereto pursuant to Sections 4.4 and 4.5.

1.58 "Qualified Domestic Relations Order": A Domestic Relations Order which
is determined to be qualified pursuant to the terms of Section 10.5
hereof and which creates or

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<PAGE> 20

recognizes the existence of an Alternate Payee's right to, or assigns
to an Alternate Payee the right to receive all or a portion of the
benefits payable to a Participant under this Plan.

1.59 "Qualified Joint and Survivor Annuity": For a married Participant, an
annuity based on the Participant's Accrued Benefit for the life of the
Participant with a survivor annuity for the life of his or her spouse
which is equal to fifty (50%) percent of the amount of the annuity
payable during the joint lives of the Participant and his or her
spouse. For an unmarried Participant, an annuity for the life of the
Participant. A Qualified Joint and Survivor Annuity is an annuity that
commences immediately. Any rollovers shall be included in determining
the amount of a Participant's Accrued Benefit.

1.60 "Qualified Nonelective Contributions": To the extent elected by the
Committee, contributions made by the Employer and allocated to
Participants' accounts that the Participant may not elect to receive
in cash until distributed from the Plan; that are 100% vested and
nonforfeitable when made; that satisfy the requirements of Section
401(a)(4) of the Code; and that are not distributable under the terms
of the Plan to Participants or their Beneficiaries earlier than the
earlier of:

(i) separation from service, retirement, death or
disability of the Participant;

(ii) attainment of age 59-1/2 by the Participant;

(iii) termination of the Plan without establishment or
maintenance of a successor plan (other than an
employee stock ownership plan as defined in Code
Section 4975(e)(7)); or

(iv) the event specified in Section 5.1M of the Plan.

1.61 "Qualified Preretirement Survivor Annuity": An annuity for the life of
the surviving spouse of a Participant the actuarial equivalent of
which is equal to fifty (50%) percent of the vested nonforfeitable
portion of the Accrued Benefit of the Participant as of the earlier
of: (i) the date of his death, or (ii) the date of his separation from
service from the Employer.

1.62 "Qualifying Employer Securities": An employer security as defined in
Section 407(d)(1) of the Act which is (a) stock issued by the Employer
or (b) a bond, debenture, note, certificate or other evidence of
indebtedness (hereinafter referred to as "obligation") if both:

(a) such obligation is acquired:

(1) on the market, either (i) at the price of the
obligation prevailing on a national securities
exchange which is registered with the Securities and

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<PAGE> 21

Exchange Commission, or (ii) if the obligation is not
traded on such a national securities exchange, at a
price not less favorable to the Plan than the
offering price for the obligation as established by
current bid and asked prices quoted by persons
independent of the Employer; or

(2) from an underwriter, at a price (i) not in excess of
the public offering price for the obligation as set
forth in a prospectus or offering circular filed with
the Securities and Exchange Commission, and (ii) at
which a substantial portion of the same issue is
acquired by persons independent of the Employer; or

(3) directly from the Employer at a price not less
favorable to the Plan than the price paid currently
for a substantial portion of the same issue by
persons independent of the Employer; and

(b) immediately following acquisition of such obligation:

(1) not more than twenty-five (25%) percent of the
aggregate amount of obligations issued in such issue
and outstanding at the time of acquisition is held by
the Plan; and

(2) at least fifty (50%) percent of the aggregate amount
referred to in subparagraph (1) is held by persons
independent of the Employer, and

(3) not more than twenty-five (25%) percent of the assets
of the Plan is invested in obligations of the
Employer or an affiliate of the Employer.

1.63 "Regulations": The Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, as amended.

1.64 "Required Beginning Date":

A. General Rule. Except as provided in Paragraph B below and in
Section 5.2F5, the Required Beginning Date for any Participant
is April 1 of the calendar year following the calendar year in
which such Participant attains age 70-1/2.

B. Transitional Rules.

1. For a Participant who attains age 70-1/2 before
January 1, 1988, and who is not a Five Percent Owner
(as defined in subparagraph 4 below), the Required
Beginning Date is April 1 of the calendar year
following the later

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<PAGE> 22

of (i) the calendar year in which the Participant
attains age 70-1/2, or (ii) the calendar year in
which the Participant retires.

2. For a Participant who attains age 70-1/2 before
January 1, 1988 and who, during any Plan Year
beginning after December 31, 1979, is a Five Percent
Owner (as defined in subparagraph 4 below), the
Required Beginning Date is April 1 of the calendar
year following the later of (i) the calendar year in
which the Participant attains age 70-1/2, or (ii) the
earlier of (a) the calendar year with or within which
ends the Plan Year in which the Participant becomes a
Five Percent Owner, or (b) the calendar year in which
the Participant retires. Notwithstanding anything
herein to the contrary, a Participant's Required
Beginning Date shall in no event be earlier than
December 31, 1987.

3. For a Participant who (i) is not a Five Percent
Owner, (ii) attains age 70-1/2 during 1988, and (iii)
has not retired as of January 1, 1989, the Required
Beginning Date is April 1, 1990.

4. A Participant is treated as a Five Percent Owner for
purposes of this Section 1.64, if such Participant is
a Five Percent Owner as defined in Section 1.34 at
any time during the Plan Year ending with or within
the calendar year in which such Participant attains
age 66-1/2, or any subsequent Plan Year. Once a
Participant is described in this subparagraph 4,
distributions must continue to such Participant even
if such Participant ceases to own more than five
percent of the Employer in a subsequent year.

1.65 "Retired Participant": A person who shall have been a Participant but
who upon retirement shall have become entitled to benefits as
hereinafter provided.

1.66 "Retirement Date": A Participant's Early Retirement Date or Normal
Retirement Date.

1.67 "Salary Reductions": Elective Deferrals.

1.68 "Segregated Accounts": Those accounts of the Participants which may be
set aside and held by the Trustees as a result of a distribution in a
form other than lump sum.

1.69 "Suspense Account": That account containing the contributions made to
the Plan for the current fiscal year, plus the net income or
appreciation and minus the net loss or depreciation of the Plan prior
to allocation to Participants.

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<PAGE> 23

1.70 "Terminated Participant": As provided in Section 2.7, a person who
shall have been a Participant but (i) who shall have incurred a
One-Year Break in Service other than by retirement, and (ii) whose
employment with the Employer is terminated.

1.71 "Top-Heavy Plan": This Plan shall be a Top-Heavy Plan only in Plan
Years during which it is either a Top-Heavy Plan or part of a
Top-Heavy Group of Plans determined under ARTICLE VII.

1.72 "Trust Agreement or Trust": The Trust Agreements for the Fund and all
amendments thereto, which constitutes a part of this Plan, known as
the "INGLES MARKETS, INCORPORATED INVESTMENT/PROFIT SHARING TRUST "A"
and "INGLES MARKETS, INCORPORATED INVESTMENT/PROFIT SHARING TRUST
"B"."

1.73 "Trustees": The Trustee or Trustees appointed by the Employer to
administer Fund "A" and Fund "B" in accordance with the terms of the
Trust Agreement.

1.74 "Valuation Date": The date and frequency for valuation of the Fund by
the Trustees, as specified by the Committee from time to time, said
Valuation to take place not less frequently than annually.

1.75 "Very Top-Heavy Plan": This Plan shall be a Very Top-Heavy Plan only
in Plan Years (i) during which it is a Very Top-Heavy Plan determined
under Section 7.4, or (ii) during which it is a Top-Heavy Plan and in
which the sum of the Defined Contribution Fraction (as defined in
Section 4.8) plus the Defined Benefit Fraction (as defined in Section
4.8) for each Key Participant does not exceed 1.0 using 1.0 in place
of 1.25 in the denominator of each such fraction.

1.76 "Year of Service": With regard to eligibility requirements to
participate, a Year of Service means: (i) the expiration of the twelve
(12) consecutive month period, beginning with an Employee's Employment
Commencement Date, during which such Employee is credited with at
least one thousand (1,000) Hours of Service, or (ii) the expiration of
a Plan Year which includes an anniversary of an Employee's Employment
Commencement Date, during which such Employee is credited with at
least 1,000 Hours of Service. For purposes of Section 2.1, Years of
Service before any period of consecutive One-Year Breaks in Service
shall not be taken into account in computing the Employee's Years of
Service, if the number of consecutive One-Year Breaks in Service
within such period equals or exceeds the greater of: (i) five (5), or
(ii) the aggregate number of such Years of Service prior to such
break. If any Years of Service are not required to be taken into
account by reason of a period of One-Year Breaks in Service to which
this subparagraph applies, such Years of Service shall not be taken
into account in applying this subparagraph to a subsequent period of
One-Year Breaks in Service.

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<PAGE> 24

With regard to the nonforfeitable interest of a Participant and for
all other purposes of the Plan, a Year of Service means a Plan Year,
inclusive of Plan Years prior to the Effective Date, during which the
Participant is credited with at least one thousand (1,000) Hours of
Service.

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<PAGE> 25

ARTICLE II

PARTICIPATION

2.1 "Employees Eligible to Participate". Every Employee who was a
Participant in the Plan prior to the execution date of the Restatement of the
Plan and whose participation in the Plan has not terminated prior thereto shall
continue as a Participant. Every other present or future Employee shall become
a Participant on the first Eligibility Date on which he is an Employee and that
coincides with or follows the date on which the Employee has completed one (1)
Year of Service with the Employer. If an Employee's employment is terminated
prior to the first Eligibility Date that coincides with or follows the date on
which the Employee has completed one (1) Year of Service with the Employer and
such Employee is rehired after that date, but prior to incurring a One-Year
Break in Service, then such Employee shall become a Participant on the date of
his rehire.

2.2 Credited Hours of Service for Performance of Duties. There
shall be credited one (1) Hour of Service for each hour or portion of an hour
of Paid Service for the performance of duties for the Employer; provided,
however, no more than one (1) Hour of Service shall be credited for any one (1)
hour or portion of an hour of performance of duties for the Employer.

Hours of Service shall be credited to an Employee, in accordance with this
Section 2.2, to the twelve (12) month period used to determine a Year of
Service or a One-Year Break in Service, as the case may be, in which such
duties are performed. Notwithstanding anything to the contrary in the preceding
sentence, the Committee may adopt a method of crediting Hours of Service, which
is and must be consistently applied with respect to all Employees within the
same job classification, as reasonably defined, so that all Hours of Service
for the performance of duties in any period of thirty-one (31) days or less
which begins in one such twelve (12) month period, used to determine a Year of
Service or a One-Year Break in Service, and ends in the next such twelve (12)
month period shall be credited either to the first or the second such twelve
(12) month period rather than being credited in part to each of the two twelve
(12) month periods in which such duties were actually performed.

All Employees under similar circumstances shall be treated alike in the
determination of crediting Hours of Service. The provisions of this Section 2.2
shall be construed so as to resolve any ambiguities in favor of crediting an
Employee with Hours of Service.

2.3 Credited Hours of Service for Which No Duties Are Performed.
There shall be credited one (1) Hour of Service for each hour or portion of an
hour of Paid Service (up to the number of hours regularly scheduled for the
performance of duties, or if there is no regular work schedule for an Employee,
up to eight (8) hours per day and forty (40) hours per week) for a period of
time during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or leave of
absence; provided however:

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<PAGE> 26

(i) an Employee shall not be credited with more than 501
Hours of Service on account of any single continuous
period during which the Employee performs no duties
irrespective of the length of such continuous period;

(ii) an Employee shall not be credited for any hour for
which payment is made or due under a plan maintained
solely for the purpose of complying with applicable
workmen's compensation, or unemployment compensation
or disability insurance laws; and

(iii) an Employee shall not be credited for any hour for
which payment is made solely to reimburse the
Employee for medical or medically related expenses
incurred by the Employee or for any hour during any
absence for which the Employee receives disability
payments from an insurance company.

For purposes of this Section 2.3, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.

In calculating the number of Hours of Service to be credited an Employee, if
the payment made or due, or the back pay award or agreement is calculated on
the basis of units of time, such as hours, days, weeks or months, the number of
Hours of Service to be credited shall be: (i) the number of regularly scheduled
working hours included in the units of time on the basis of which the payment
or back pay award or agreement is calculated; or (ii) if there is no regular
work schedule for an Employee, the number of hours based upon an eight (8) hour
work day and a forty (40) hour work week included in the units of time on the
basis of which the payment or back pay award or agreement is calculated.

In calculating the number of Hours of Service to be credited an Employee, whose
compensation is based on an hourly rate, if the payment made or due, or the
back pay award or agreement is not then calculated on the basis of units of
time, the number of Hours of Service to be credited shall be equal to the
amount of the payment or back pay award or agreement, divided by the Employee's
most recent hourly rate of compensation before the period during which no
duties are performed.

In calculating the number of Hours of Service to be credited an Employee whose
compensation is determined on the basis of a fixed rate for specified periods
of time (other than hours), such as days, weeks or months, if the payment made
or due, or the back pay award or agreement is not calculated on the basis of
units of time, then the number of Hours of Service to be credited shall be
equal to:

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<PAGE> 27

(i) the amount of the payment or back pay award or
agreement for the period of time during which no
duties were performed; multiplied by

(ii) the number of hours regularly scheduled for the
performance of duties during such period of time; or
if there is no regular work schedule for such
Employee, the number of hours in which duties would
be performed in such period, based upon an eight (8)
hour work day and a forty (40) hour work week;
divided by

(iii) the most recent rate of compensation for such period
of time.

In calculating the number of Hours of Service to be credited an Employee whose
compensation is not determined on the basis of a fixed rate for a specified
period of time, if the payment made or due, or the back pay award or agreement
is not calculated on the basis of units of time, then the number of Hours of
Service to be credited shall be equal to the amount of the payment or back pay
award or agreement divided by the Employee's hourly rate of compensation, which
shall be equal to the lowest hourly rate of compensation paid to Employees in
the same job classification, as reasonably defined, as that of the Employee or,
if no Employees in the same job classification, as reasonably defined, have an
hourly rate, the minimum wage as established from time to time under Section
6(a)(1) of the Fair Labor Standards Act of 1938, as amended.

Hours of Service shall be credited to an Employee in accordance with this
Section 2.3 on account of a payment that is calculated on the basis of units of
time, such as hours, days, weeks or months, to the twelve (12) month period
used to determine a Year of Service or a One-Year Break in Service, as the case
may be, in which the period during which no duties are performed occurs,
beginning with the first unit of time to which the payment relates.

Hours of Service shall be credited to an Employee in accordance with this
Section 2.3 by reason of a payment that is not calculated on the basis of units
of time to the twelve (12) month period used to determine a Year of Service or
a One-Year Break in Service, as the case may be, in which the period during
which no duties are performed occurs, or if the period during which no duties
are performed extends beyond one such twelve (12) month period, such Hours of
Service shall be allocated between not more than the first two such twelve (12)
month periods on any reasonable basis which is consistently applied with
respect to all Employees within the same job classifications, as reasonably
defined.

Hours of Service shall be credited to an Employee in accordance with this
Section 2.3 on account of an award or agreement for back pay to the twelve (12)
month period or periods used to determine a Year of Service or a One-Year Break
in Service, as the case may be, to which such award or agreement pertains
rather than to the twelve (12) month period or periods in which the award,
agreement or payment is made.

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<PAGE> 28

Notwithstanding anything to the contrary in the preceding three (3) paragraphs
of this Section 2.3, the Administrative Committee may adopt a method of
crediting Hours of Service which is and must be consistently applied with
respect to all Employees within the same job classification, as reasonably
defined, so that all Hours of Service for which no duties were performed in any
period of thirty-one (31) days or less which begins in one such twelve (12)
month period and ends in the next such twelve (12) month period shall be
credited either to the first or the second such twelve (12) month period.

All Employees under similar circumstances shall be treated alike in the
determination of crediting Hours of Service. The provisions of this Section 2.3
shall be construed so as to resolve any ambiguities in favor of crediting an
Employee with Hours of Service.

Solely for purposes of determining whether an Employee has incurred a One-Year
Break in Service, in the case of any Employee absent from work due to: (i)
pregnancy of such Employee, (ii) birth of a child of the Employee, (iii)
adoption of a child by the Employee, or (iv) child care immediately after the
birth or adoption of a child, the Plan shall treat the following as Hours of
Service: (a) the Hours of Service which otherwise normally would have been
credited to such Employee during such absence, or (b) in any case in which the
Plan is unable to determine such number of hours, eight (8) Hours of Service
per day during such absence; provided, however, that the total number of Hours
of Service to be credited for this purpose due to any such pregnancy, birth or
adoption shall not exceed 501 Hours of Service. The hours described in the two
immediately preceding sentences shall be credited as Hours of Service (1) only
in the year the absence from work begins if an Employee would be prevented from
incurring a One-Year Break in Service in such year by reason of crediting of
such Hours of Service, or (2) in any other case, to the immediately following
year. For purposes of this paragraph, the term "year" shall mean the
computation period defined in the definition of "One-Year Break in Service."

2.4 Notice to Employees. The Employer shall furnish to the
Committee the names of all Employees who become eligible as Participants. The
Committee shall notify every eligible Employee of the Employer, in writing, of
the existence of this Plan and of the basic provisions hereof in the form of a
Summary Plan Description.

2.5 Commencement of Participation. An Employee shall be deemed to
commence participation in the Plan on his Entry Date.

2.6 Termination of Employment. If a Participant's employment is
terminated, he shall remain a Participant until he shall have incurred a
One-Year Break in Service.

2.7 Termination of Participation. A Participant's participation in
the Plan shall terminate as of the last day of the Plan Year in which occurs
the later of (i) the date he shall have incurred a One-Year Break in Service,
or (ii) the date his employment with the Employer is terminated; provided that
the Participant is not performing services as an Employee of Employer on the
last day of such Plan Year.

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<PAGE> 29

2.8 Reparticipation. If a Participant's employment with the
Employer is terminated resulting in such Participant incurring one or more
One-Year Breaks in Service, then such Terminated Participant shall be entitled
to reparticipate in the Plan as of the date of his rehire. Notwithstanding
anything to the contrary in the Plan, if such Participant is not credited with
more than 500 Hours of Service in the Plan Year in which he was rehired, he
shall not incur a One-Year Break in Service for such Plan Year for purposes of
termination of participation in the Plan; instead, for such Plan Year he shall
be an Inactive Participant and shall be treated as if he had been credited with
501 Hours of Service.

2.9 Inactive Status. The Employer Contribution Account of any
Inactive Participant shall be placed on Inactive Status. In such case: (i)
service by such Participant during such Plan Year in which he shall not be
credited with at least 1,000 Hours of Service shall not be considered as a Year
of Service for the purposes of determining, in accordance with Section 5.1A2,
the Participant's vested interest in his Employer Contribution Account, and
(ii) his accounts shall continue to receive income or loss and appreciation or
depreciation allocations in accordance with Sections 4.4 and 4.5. In the event
such Participant shall become an Active Participant in a subsequent Plan Year,
his Employer Contribution Account shall revert to active status with full
rights and privileges under this Plan restored.

2.10 Provisions Relating to Leased Employees.

A. Safe-Harbor. Notwithstanding any other provisions of
the Plan, for purposes of determining the number or identity of Highly
Compensated Employees or for purposes of the requirements of Section 414(n)(3)
of the Code, the Employees of the Employer shall include leased employees as
defined in Paragraph C below.

B. Participation and Accrual. A leased employee within
the meaning of Section 414(n)(2) of the Code shall become a Participant in, and
accrue benefits under, this Plan based on service as a leased employee only as
provided in provisions of the Plan other than this Section.

C. Leased Employees. Leased employees shall mean any
person (other than an employee of the recipient) who pursuant to an agreement
between the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and related persons
determined in accordance with Code Section 414(n)(6)) on a substantially full
time basis for a period of at least one year, and such services are of a type
historically performed by employees in the business field of the recipient
employer. Contributions or benefits provided a leased employee by the leasing
organization which are attributable to services performed for the recipient
employer shall be treated as provided by the recipient employer.

A leased employee shall not be considered an employee of the recipient if: (i)
such employee is covered by a money purchase pension plan providing: (1) an
Unintegrated employer contribution rate of at least 10% of compensation, as
defined in Code Section 415(c)(3), but including

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<PAGE> 30

amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under Code Sections 125,
402(a)(8)[402(e)(3) after December 31, 1992], 402(h) or 403(b), (2) immediate
participation, and (3) full and immediate vesting; and (ii) leased employees do
not constitute more than 20% of the recipient's nonhighly compensated
workforce.

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<PAGE> 31

ARTICLE III

CONTRIBUTIONS TO THE TRUST

3.1 Qualified Elective Deferral Contributions.

A. Salary Reductions. Effective February 2, 1994, the
Employer shall contribute to the Qualified Deferral Account of each Participant
any amount (from 1% to 10%, in 1% increments) by which such Participant elects
to reduce his Compensation from the Employer for the Plan Year. Such election
shall be made in writing pursuant to such rules of uniform application as the
Committee may adopt. The Employer will specify a reasonable period at least
once each calendar year during which a Participant may elect to terminate such
election or modify the amount or frequency of his Elective Deferrals.

1. Maximum Amount of Elective Deferrals. No
Employee shall be permitted to have Elective Deferrals made under this
Plan during any calendar year in excess of $7,000 multiplied by the
Adjustment Factor applicable in such year.

2. Average Actual Deferral Percentage. In each
Plan Year, the Plan must meet the test in either (a) or (b) below (the
"average deferral percentage test").

(a) The Average Actual Deferral
Percentage for Eligible Employees who are Highly Compensated
Employees for the Plan Year shall not exceed the Average
Actual Deferral Percentage for Eligible Employees who are
Non-Highly Compensated Employees for the Plan Year multiplied
by 1.25; or

(b) The Average Actual Deferral
Percentage for Eligible Employees who are Highly Compensated
Employees for the Plan Year shall not exceed the Average
Actual Deferral Percentage for Eligible Employees who are
Non-Highly Compensated Employees for the Plan Year multiplied
by 2, provided that the Average Actual Deferral Percentage for
Eligible Employees who are Highly Compensated Employees does
not exceed the Average Actual Deferral Percentage for Eligible
Employees who are Non-Highly Compensated Employees by more
than two (2) percentage points.

The Employer shall maintain records
sufficient to demonstrate satisfaction of the average deferral
percentage test and the amount and type of all contributions
used in such test.

3. Definitions. For purposes of this Section 3.1
and Section 5.1K of the Plan, the following definitions shall be used:

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<PAGE> 32

(a) "Actual Deferral Percentage" shall
mean the ratio (expressed as a percentage to the nearest
one-hundredth of one percent), of Salary Reductions and
Qualified Nonelective Contributions allocated to the accounts
of an Eligible Employee for the Plan Year to such Eligible
Employee's Compensation for such Plan Year.

(b) "Average Actual Deferral Percentage"
shall mean the average (expressed as a percentage to the
nearest one-hundredth of one percent) of the Actual Deferral
Percentages of the Eligible Employees in a group.

(c) "Eligible Employee" shall mean any
Employee of the Employer who is directly or indirectly
eligible under the terms of the Plan to make Elective
Deferrals or to have Qualified Nonelective Contributions
allocated to his account for the Plan Year. An Employee shall
not fail to be treated as an Eligible Employee merely because
of the suspension provided in paragraph 6 below.

4. Time of Contribution. Elective Deferrals
shall be paid to the Trust no later than the end of the twelve (12)
month period immediately following the Plan Year to which the Elective
Deferrals relate.

5. Relation to Compensation. For purposes of
this Section 3.1, Elective Deferrals shall be taken into account only
if such Elective Deferral either (i) would have been received by the
Participant in the Plan Year but for the Participant's election to
make a Salary Reduction, or (ii) is attributable to services performed
by the Participant in the Plan Year and, but for the Participant's
election to make a Salary Reduction, would have been received by the
Participant within two and one-half (2-1/2) months after the end of
such Plan Year.

6. Suspension. A Participant's Salary Reductions
shall be suspended for a period not less than twelve (12) months
following receipt by the Participant of any withdrawal on account of
hardship as provided in Section 5.10 hereof and the amount of any such
Participant's Salary Reductions in his taxable year immediately
following the taxable year of receipt of such withdrawal shall not
exceed the applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's Salary Reductions
for the taxable year of the hardship withdrawal.

7. Special Rules.

(a) If any Eligible Employee who is a
Highly Compensated Employee for the Plan Year is eligible to
have Elective Deferrals allocated to his account under two or
more plans or arrangements described in Section 401(k) of the
Code that are maintained by the Employer or an Affiliated
Employer which

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<PAGE> 33

end with or within the same calendar year; then, for purposes
of this Paragraph 3.1A, the Actual Deferral Percentage for
such Employee shall be determined as if all such Elective
Deferrals and Qualified Nonelective Contributions allocated to
such Employee under such plans were made under a single
arrangement. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Code Section
401(k) only if they have the same plan year.

(b) In the event this Plan satisfies the
requirements of Section 410(b) of the Code only if aggregated
with one or more other plans with the same plan year, or if
one or more other plans satisfy the requirements of Section
410(b) of the Code only if aggregated with this Plan, then
this Paragraph 3.1A shall be applied by determining the Actual
Deferral Percentage of Eligible Employees as if all such plans
were a single plan.

(c) If any Highly Compensated Employee
of the Employer or any Affiliated Employer is eligible under
both a plan or arrangement described in Section 401(k) of the
Code and a plan subject to the requirements of Section 401(m)
of the Code, then the sum of (1) the Average Actual Deferral
Percentage, after the application of Sections 5.1J and 5.1K,
for the Highly Compensated Employees, plus (2) the Average
Contribution Percentage as determined in Section 3.2A2 after
the application of Section 5.1L for the Highly Compensated
Employees shall not exceed the sum of (i) plus (ii) below or
such other limitation as the Internal Revenue Service may
impose with regard to the multiple use of the alternative
limitation.

(i) 125 percent of the greater of
(x) the Average Actual Deferral Percentage of the
group of Eligible Employees who are Non-Highly
Compensated Employees for the Plan Year, or (y) the
Average Contribution Percentage of the group of
Eligible Employees who are Non-Highly Compensated
Employees for the Plan Year.

(ii) Two (2) plus the lesser of (x)
or (y) above. In no event, however, shall this amount
exceed 200 percent of the lesser of (x) or (y) above.

(d) For purposes of this Section 3.1, if
an Eligible Employee is a Highly Compensated Employee and is
either a Five Percent Owner or one of the ten most highly
compensated employees of the Employer, then such Highly
Compensated Employee and his Family Members shall be treated
as a single Highly Compensated Employee and the Actual
Deferral Percentage of such Highly Compensated Employee family
group shall be the Actual Deferral Percentage determined by
combining the Elective Deferrals, Qualified

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<PAGE> 34

Nonelective Contributions and Compensation of all Family
Members who are Eligible Employees.

The Elective Deferrals and Qualified
Nonelective Contributions of such Family Members shall be
disregarded in determining the Average Deferral Percentage for
all Eligible Employees who are Non-Highly Compensated
Employees.

(e) The determination and treatment of
the Elective Deferrals, Qualified Nonelective Contributions
and Average Deferral Percentage of any Eligible Employee shall
satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.

B. Failsafe Contributions. If the Plan would otherwise
fail to comply with the average deferral percentage test in Section 3.1A2 for a
Plan Year, the Employer may make a Failsafe Contribution for such Plan Year.
The Employer shall make such Failsafe Contribution in the amount which would
cause the Plan to comply with the average deferral percentage test for such
Plan Year. The Failsafe Contribution for any Plan Year shall be allocated, in
equal amounts without regard to Compensation, within the Plan Year to the
Non-Highly Compensated Employees who are Active Participants for such Plan
Year. The Failsafe Contribution for any Plan Year will be allocated to the
Qualified Deferral Account for each such Participant. All Failsafe
Contributions shall be Qualified Nonelective Contributions.

C. Special 1994 Contribution. For each Eligible Employee
on February 2, 1993 who is a Non-Highly Compensated Employee, the Employer
shall make a one-time Qualified Nonelective Contribution to the Plan equal to
$5.00. Such contribution shall be allocated to the Qualified Deferral Account
for each such Eligible Employee.

3.2 Matching Employer Contributions.

A. Effective February 2, 1994, subject to the rights of
the Employer under ARTICLES VI and VIII, the Employer shall decide the amount
of Matching Employer Contributions to be made to the Fund for a Plan Year and
shall make such contributions as follows:

1. Allocation. The Matching Employer
Contributions for a Plan Year shall be allocated within the Plan Year
with respect to each quarter of the Plan Year to the Matching Employer
Contribution Account of each Active Participant in the proportion that
the Elective Deferrals of each Active Participant pursuant to Section
3.1A for that quarter of the Plan Year bear to the total Elective
Deferrals of all Active Participants pursuant to Section 3.1A for that
quarter of the Plan Year.

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<PAGE> 35

2. Contribution Percentage. In each Plan Year,
the Plan must meet the test in either (a) or (b) below (the "average
contribution percentage test").

(a) The Average Contribution Percentage
for Eligible Employees who are Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution
Percentage for Eligible Employees who are Non-Highly
Compensated Employees for the Plan Year multiplied by 1.25; or

(b) The Average Contribution Percentage
for Eligible Employees who are Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution
Percentage for Eligible Employees who are Non-Highly
Compensated Employees for the Plan Year multiplied by 2,
provided that the Average Contribution Percentage for Eligible
Employees who are Highly Compensated Employees does not exceed
the Average Contribution Percentage for Eligible Employees who
are Non-Highly Compensated Employees by more than two (2)
percentage points.

The Employer shall maintain records
sufficient to demonstrate satisfaction of the average
contribution percentage test and the amount and type of all
contributions used in such test.

3. Definitions. For purposes of this Section
3.2A and Sections 3.1A and 5.1L of the Plan, the following definitions
shall apply:

(a) "Average Contribution Percentage"
shall mean the average (expressed as a percentage to the
nearest one-hundredth of one percent) of the Contribution
Percentages of the Eligible Employees in a group.

(b) "Contribution Percentage" shall mean
the ratio (expressed as a percentage to the nearest
one-hundredth of one percent), of the sum of the Matching
Employer Contributions and Failsafe Matching Contributions
under the Plan allocated to the accounts of an Eligible
Employee for the Plan Year to such Eligible Employee's
Compensation for the Plan Year.

(c) "Eligible Employee" shall mean any
Employee of the Employer who is directly or indirectly
eligible under the terms of the Plan to have Matching Employer
Contributions allocated to his account for the Plan Year. An
Employee shall not fail to be treated as an Eligible Employee
merely because of the suspension period in Section 3.1A6.

4. Matching Employer Contributions Taken Into
Account for a Plan Year. A Matching Employer Contribution is taken
into account under this Paragraph for a Plan Year only if such
contribution is allocated to the Employee's account as of any date

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<PAGE> 36

within such Plan Year, is actually paid to the Trust no later than the
end of the twelve-month period beginning on the day after the close of
such Plan Year and is made on behalf of an Employee on account of such
Employee's Elective Deferrals for the Plan Year.

5. Special Rules.

(a) For purposes of this Section 3.2A,
the Contribution Percentage for any Eligible Employee who is a
Highly Compensated Employee for the Plan Year and who is
eligible to have Matching Employer Contributions allocated to
his account under two or more plans described in Section
401(a) of the Code or arrangements described in Section 401(m)
of the Code that are maintained by the Employer or an
Affiliated Employer shall be determined as if all such
contributions were made under a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in
order to satisfy Code Section 401(m) only if they have the
same plan year.

(b) In the event this Plan satisfies the
requirements of Section 410(b) of the Code only if aggregated
with one or more other plans with the same plan year, or if
one or more other plans satisfy the requirements of Section
410(b) of the Code only if aggregated with this Plan, then
this Paragraph A shall be applied by determining the
Contribution Percentages of Eligible Employees as if all such
plans were a single plan.

(c) For purposes of this Paragraph, if
an Eligible Employee is a Highly Compensated Employee and
either a Five Percent Owner or one of the ten most highly
compensated employees of the Employer, then such Highly
Compensated Employee together with his Family Members shall be
the Contribution Percentage determined by combining the
Eligible Employee's Matching Employer Contributions and
Compensation with the Matching Employer Contributions and
Compensation of all his Family Members who are Eligible
Employees.

The Matching Employer Contributions and
Compensation of such Family Members shall be disregarded in
determining the Contribution Percentage for all Eligible
Employees who are Non-Highly Compensated Employees.

(d) For purposes of this Section 3.2A,
all or part of the Qualified Nonelective Contributions and
Elective Deferrals made with respect to Eligible Employees may
be treated as Matching Employer Contributions provided that
each of the following (to the extent applicable) is satisfied:

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<PAGE> 37

(i) The nonelective contributions,
including those Qualified Nonelective Contributions
treated as Matching Employer Contributions for
purposes of Section 3.2A, satisfy the requirements of
Code Section 401(a)(4).

(ii) The nonelective contributions,
excluding those Qualified Nonelective Contributions
treated as Matching Employer Contributions for
purposes of Section 3.2A and those Qualified
Nonelective Contributions treated as Elective
Deferrals for purposes of Section 3.1A, satisfy the
requirements of Code Section 401(a)(4).

(iii) The Elective Deferrals,
including those treated as Matching Employer
Contributions for purposes of this Section 3.2A,
satisfy the requirements of Section 3.1A.

(iv) The Elective Deferrals,
excluding those Elective Deferrals treated as
Matching Employer Contributions for purposes of this
Section 3.2A, satisfy the requirements of Section
3.1A.

(v) Except as provided in (i) and
(iii) above, the Qualified Nonelective Contributions
and the Elective Deferrals treated as Matching
Employer Contributions for purposes of this Section
3.2A are not taken into account in determining
whether any other contributions or benefits satisfy
Code Section 401(a)(4) or Section 3.1A hereof.

(vi) Qualified Nonelective
Contributions may not be treated as Matching Employer
Contributions if the effect is to increase the
difference between the Actual Contribution Percentage
for the group of Highly Compensated Employees and the
Actual Contribution Percentage for the group of all
other Eligible Employees.

(e) The determination and treatment of the
Contribution Percentage of any Eligible Employee shall satisfy
such other requirements as may be prescribed by the Secretary
of the Treasury.

B. Failsafe Matching Contributions. If the Plan would
otherwise fail to comply with the average contribution percentage test in
Section 3.2A2 for a Plan Year, the Employer may make a Failsafe Matching
Contribution for such Plan Year. The Employer shall make such Failsafe Matching
Contributions in the amount which would cause the Plan to comply with the
average contribution percentage test for such Plan Year. The Failsafe Matching
Contribution for any Plan Year shall be allocated, in equal amounts, within the
Plan Year to the Non-Highly Compensated Employees who are Active Participants
for such Plan Year. The

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<PAGE> 38

Failsafe Matching Contribution for any Plan Year will be allocated to the
Matching Employer Contribution Account for each such Participant.

C. Coverage Percentage.

1. If the Plan's Coverage Percentage as
determined under this Section 3.2 for any Plan Year is less than
seventy (70%) percent, then for purposes of this Section 3.2, the
Participants who are Non-Highly Compensated Employees in each of the
following groups of Participants, in the order of priority listed
below, shall be considered to be Active Participants for such Plan
Year to the extent such group's inclusion as Active Participants is
required to result in a Coverage Percentage of at least seventy (70%)
percent. For example, if, after the application of this paragraph to
the group of Participants who are Non-Highly Compensated Employees
listed in (i) below, the Plan's Coverage Percentage for a Plan Year is
at least seventy (70%) percent, this paragraph shall not be applied to
the group of Participants listed in (ii) below for such Plan Year.

(i) Inactive Participants who are
employed on the last day of the Plan Year and who are credited
with less than 1,000 Hours of Service with the Employer during
the Plan Year.

(ii) Inactive Participants who are not
employed on the last day of the Plan Year and who are credited
with at least 1,000 Hours of Service with the Employer during
the Plan Year.

(iii) Any other Inactive Participants.

2. For purposes of determining the Plan's
Coverage Percentage for purposes of this Section 3.2, an Employee
shall be considered to "benefit" under the Plan for any Plan Year in
which such Employee is directly or indirectly eligible to make
Elective Deferrals for such Plan Year or receives an allocation of any
Failsafe Matching Contribution made under Section 3.2B for such Plan
Year.

3. For purposes of determining the Plan's
Coverage Percentage, all Family Members of a Highly Compensated
Employee who is either a Five Percent Owner or one of Employer's ten
most highly compensated employees shall be considered to be a single
Highly Compensated Employee. In such case, if such Highly Compensated
Employee or any such Family Member is directly or indirectly eligible
to make Elective Deferrals or receives an allocation under Section
3.2B, then the deemed single Highly Compensated Employee shall be
considered to benefit under the Plan for purposes of this Section 3.2.
Only if no member of the deemed single Highly Compensated Employee is
directly or indirectly eligible to make Elective Deferrals or receives
an allocation under Section 3.2B will the deemed single Highly
Compensated Employee be treated as not benefiting under the Plan for
purposes of this Section 3.2.

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<PAGE> 39

4. For the Plan Year beginning in 1989, all
Participants who would have been Active Participants if (i) they were
employed on the last day of the Plan Year, or (ii) they had been
credited with at least 1,000 Hours of Service shall be considered to
benefit under the Plan for such Plan Year for purposes of determining
the Plan's Coverage Percentage for purposes of this Section 3.2.

5. Notwithstanding anything to the contrary in
this Section 3.2, the Plan shall not be required to have a Coverage
Percentage under this Section 3.2 of at least seventy percent (70%) if
for such purposes the Plan meets the average benefit percentage test
described in Code Section 410(b)(2) and the Regulations thereunder.

3.3 Discretionary Employer Contributions.

A. Subject to the rights of the Employer under ARTICLES
VI and VIII, the Employer shall decide the amount of Discretionary Employer
Contributions to be made to the Fund for its respective Employees for each Plan
Year and such Discretionary Employer Contributions shall be allocated as
follows:

1. Discretionary Employer Contributions for such
Plan Year shall be allocated to the Discretionary Employer
Contribution Account of each Active Participant in proportion to the
ratio which his Compensation for the Plan Year bears to the total
Compensation for that Plan Year paid to all such Active Participants.

2. Each Plan Year, the Employer shall contribute
to the Plan the amount by which (i) the nonvested portion of the
Employer Contribution Accounts (determined as of his last termination
of participation in the Plan) of any Terminated Participant who
reparticipates in the Plan prior to incurring five consecutive
One-Year Breaks in Service, exceeds (ii) the Forfeitures allocable
pursuant to Section 4.6A for such Plan Year. Such contributions shall
be allocated to restore the nonvested portion of the Employer
Contribution Accounts of such Terminated Participant.

3. All Discretionary Employer Contributions
allocated to a Participant under this Section 3.3 shall be allocated
to such Participant's Discretionary Employer Contribution Account.
Until so allocated, Discretionary Employer Contributions shall be held
in the Suspense Account.

4. Except as otherwise provided in subparagraph
6 below, only those Active Participants who are employed by the
Employer on the last day of the Plan Year shall be considered to be
Active Participants for such Plan Year for purposes of this Section
3.3.

5. If the Plan's Coverage Percentage as
determined under this Section 3.3 for any Plan Year is less than
seventy (70%) percent, then for purposes of this Section

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<PAGE> 40

3.3, the Participants in each of the following groups of Participants,
in the order of priority listed below, shall be considered to be
Active Participants for such Plan Year to the extent such group's
inclusion as Active Participants is required to result in a Coverage
Percentage of at least seventy (70%) percent. For example, if, after
the application of this paragraph to the group of Participants listed
in (i) below, the Plan's Coverage Percentage for a Plan Year is at
least seventy (70%) percent, this paragraph shall not be applied to
the groups of Participants listed in (ii) and (iii) below for such
Plan Year.

(i) Inactive Participants who are
employed on the last day of the Plan Year and who are credited
with less than 1,000 Hours of Service with the Employer during
the Plan Year.

(ii) Inactive Participants who are not
employed on the last day of the Plan Year and who are credited
with at least 1,000 Hours of Service with the Employer during
the Plan Year.

(iii) Any other Inactive Participants.

For purposes of determining the Plan's
Coverage Percentage for purposes of this Section 3.3, an
Employee shall be considered to "benefit" under the Plan for
any Plan Year in which such Employee receives an allocation
under this Section 3.3 for such Plan Year.

For purposes of determining the Plan's
Coverage Percentage, all Family Members of a Highly
Compensated Employee who is either a Five Percent Owner or one
of Employer's ten most highly compensated employees shall be
considered to be a single Highly Compensated Employee. In such
case, if such Highly Compensated Employee or any such Family
Member receives an allocation under Section 3.3, then the
deemed single Highly Compensated Employee shall be considered
to receive an allocation under Section 3.3. Only if no member
of the deemed single Highly Compensated Employee receives an
allocation under Section 3.3 will the deemed single Highly
Compensated Employee be treated as not receiving an allocation
under Section 3.3.

For the Plan Year beginning in 1989, all
Participants who would have been Active Participants if (i)
they were employed on the last day of the Plan Year or, (ii)
if they had been credited with at least 1,000 Hours of Service
shall be considered to be entitled to receive an allocation of
Employer contributions for such Plan Year under Section 3.3
for purposes of determining the Plan's Coverage Percentage.

Notwithstanding anything herein to the
contrary in this Section 3.3, the Plan shall not be required
to have a Coverage Percentage under this Section

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<PAGE> 41

3.3 of at least seventy percent (70%) if for such purposes the
Plan meets the average benefit percentage test described in
Code Section 410(b)(2) and the Regulations thereunder.

3.4 No Voluntary Employee Contributions. Contributions from
Participants, other than Elective Deferrals, are neither required nor
permitted.

3.5 General Rules Regarding Contributions:

A. Limitations. Employer contributions pursuant to
Sections 3.1, 3.2 and 3.3 shall be subject to the following limitations and
restrictions:

1. In no event shall the contribution for any
year under this Plan, together with any contributions paid pursuant to
a pension plan for the benefit of the Employees of the Employer,
exceed the maximum amount deductible by the Employer under Code
Section 404(a)(7).

2. The Employer shall, notwithstanding any other
provisions of the Plan, make all contributions to the Plan without
regard to current or accumulated earnings and profits for the taxable
year or years ending with or within such Plan Year. Notwithstanding
the foregoing, the Plan shall be considered to be a profit sharing
plan for purposes of Sections 401(a), 402, 412 and 417 of the Code.

3. The payment of all contributions by the
Employer to the Plan shall be conditioned upon the initial
qualification of the Plan and the deductibility of such contributions
under the applicable provisions of the Code.

4. If the Plan is a Top-Heavy Plan for the Plan
Year, there shall be allocated to the Discretionary Employer
Contribution Account of each Inactive Participant who is employed on
the last day of the Plan Year and each Active Participant
Discretionary Employer Contributions equal to but not in excess of (i)
the Minimum Contribution for such Inactive or Active Participant,
reduced by (ii) any Employer contribution, other than Elective
Deferrals, allocated to such Inactive or Active Participant under this
Plan or any other plan or plans of Employer for such Plan Year.

B. Time of Contributions. The contributions to be made
under the Plan may be paid to the Trustees on any date or dates which the
Employer may select, provided that the total contributions for each Plan Year
must be made on or before the final date on which contributions can be made and
still be deductible by the Employer for purposes of the Federal Income Tax.

C. Method of Payment. Payments on account of the
contributions due from the Employer for any year may be made in cash or in kind
or in investments authorized under the

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<PAGE> 42

Trust Agreement, including Qualifying Employer Securities, provided that such
payments shall not constitute prohibited transactions under Code Section 4975.

D. Allocations. Contributions made by the Employer shall
be allocated to the Participants as provided in Section 4.2.

E. Amount of Participating Employer Contributions. Each
Employer shall determine the amount, if any, of the contributions to be made by
it to the Fund under the terms of this Plan.

F. Multiple Participating Employers. Each participating
Employer shall make the contributions for its own Employees to the extent
provided herein. Any failure of any Employer to live up to any of its
obligations under the Plan shall have no effect on the remaining Employer or
Employers. The rights of each Participant in the Plan to the benefits shall be
based upon the service accrued with and compensation paid him by the particular
Employer by which he is employed; provided, however, that transfer of
employment from one Employer to another, both being parties to the Plan, shall
not be considered as an interruption of service under the Plan, and in such
event the Committee shall make appropriate and equitable adjustments in the
accounts in order that thereafter such transferring Employee will be
considered, insofar as concerns his rights to benefits under the Plan, as a
Participant Employee of the Employer to which he is transferred. The Plan shall
comply with Code Sections 401(a), 410, 411, 415 and 416 for all Employers
required to be aggregated pursuant to Code Sections 414(b), (c), (m) or (o).

3.6 Rollovers from Individual Retirement Accounts or Plan.
Pursuant to such rules of uniform application as the Committee may adopt, and
without regard to any dollar limitation under Section 4.8 or elsewhere in the
Plan, a Participant may transfer to the Trustees any amounts theretofore
received by such Participant from a Code Section 401(a) qualified plan, if
within sixty (60) days after receipt by such Participant, such amounts were
either (i) transferred to this Plan, or (ii) placed in a Code Section 408(a)
qualified Individual Retirement Account ("IRA") that contains no assets other
than those attributable to employer contributions under a Code Section 401(a)
qualified plan(s) in which such Participant was previously covered.
Notwithstanding anything to the contrary in ARTICLE V, a Participant's
"rollover" funds from another Plan or from an IRA to this Plan shall at all
times be 100% vested and nonforfeitable. For record keeping purposes under this
Plan, rollover funds shall be accounted for and distributed as a part of the
respective Participant's Employer Contribution Account; but until such time as
the respective Participant's Employer Contribution Account is 100% vested, such
rollover funds shall be accounted for as a subaccount of the Participant's
Employer Contribution Account. Any interest transferred to this Plan shall not
include employee contributions other than accumulated deductible employee
contributions within the meaning of Code Section 72(o)(5).

3.7 Portability. If (i) a Participant was covered under another
pension or profit sharing plan qualified under Code Section 401(a), (ii) such
Participant had a nonforfeitable interest in a portion of the assets of such
other plan, and (iii) the trustees of such other plan are authorized to

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<PAGE> 43

distribute to this Plan such Participant's nonforfeitable interest in such
other plan, then the Trustees of this Plan shall be authorized to accept,
without regard to any dollar limitation under Section 4.8 or elsewhere in this
Plan, the Participant's nonforfeitable interest under such other plan from the
trustees of such other plan upon the following terms and conditions:

A. Such interest transferred to this Plan shall be
reflected, for record keeping purposes, in a separate account in this Plan; and

B. Such interest transferred to this Plan shall be
nonforfeitable and 100% vested and shall not reduce in any way any obligations
of the Employer under this Plan.

If a Participant shall be entitled to receive benefits under
this Plan pursuant to any provision of ARTICLE V, and the Participant
subsequently becomes a participant in another pension or profit sharing plan
qualified under Code Section 401(a), then the Committee, upon request from such
Participant, shall direct the Trustees to transfer the Participant's
nonforfeitable interest under this Plan directly to the trustees of the other
plan in which he has become a participant upon the terms and conditions set
forth in A and B above, if the trustees of such other plan are authorized to
receive such interest.

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<PAGE> 44

ARTICLE IV

ALLOCATION

4.1 Separate Accounts. The Committee shall establish and maintain
for each Participant until his termination of participation a "Qualified
Deferral Account," a "Matching Employer Contribution Account" and a
"Discretionary Employer Contribution Account", and, when applicable, a
"Participant's Contribution Account" (sometimes collectively called "accounts"
and individually called "account"). Each such account shall be credited or
debited to the extent required by the following Sections of this ARTICLE IV.
Notwithstanding the foregoing, all contributions paid to the Trustees, and the
income therefrom, without distinction between principal and income, shall be
held and administered, except as otherwise provided in Section 4.9, as a single
Fund and the Trustees shall not be required to invest separately any share of
any Participant in the Fund.

4.2 Employer Contributions. The contributions paid or accrued by
the Employer for any Plan Year, irrespective of when actually paid to the
Trustees, shall be allocated within the Plan Year among the Employer
Contribution Accounts of the Participants for such Plan Year in the amounts
determined in accordance with Sections 3.1, 3.2 and 3.3 of the Plan. Until so
allocated, Employer contributions shall be held in the Suspense Account.

4.3 Certification of Allocations. Following each Valuation Date,
the Committee shall certify to the Trustees the names of the Participants and
the amount so allocable to the accounts of each of them, and the Trustees shall
maintain records of the amount allocated to each Participant and all
transactions with respect to the accounts of each Participant.

4.4 Income and Loss. As of any Valuation Date, the Committee shall
direct the Trustees to adjust each of the Participant's accounts for the amount
of net income or net losses earned or incurred by the investments of such
Participant's accounts since the last Valuation Date. Until allocated, the net
income or net loss shall be held in the Suspense Account.

4.5 Appreciation and Depreciation. The accounts of each
Participant shall be adjusted as of each Valuation Date for any net
appreciation or net depreciation in the value of the investments of such
Participant's accounts since the last Valuation Date. Assets of the Fund shall
always be valued at their fair market value.

4.6 Forfeitures. As of the end of each Plan Year, Forfeitures
arising pursuant to Section 5.1A3 during such Plan Year shall be allocated as
follows:

A. First, to restore the nonvested portion of the
Employer Contribution Accounts (determined as of the date of his last
termination of participation in the Plan) of any Terminated Participant who (i)
reparticipates in the Plan prior to incurring five consecutive

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<PAGE> 45

One-Year Breaks in Service, and (ii) repays to the Fund, pursuant to Section
4.7A, the amount of any distribution previously received upon termination.

B. The balance of such Forfeitures shall be applied at
the Employer's election, to reduce the Matching Employer Contribution, the
Discretionary Employer Contribution, or both.

4.7 Employer Contribution Account After Reparticipation.

A. If: (i) any Terminated Participant is rehired by the
Employer before incurring five (5) consecutive One-Year Breaks in Service, (ii)
the Terminated Participant received a distribution under Section 5.1A1, (iii)
the nonvested portion of such Terminated Participant's Employer Contribution
Account was forfeited pursuant to Section 5.1A3, and (iv) the Participant
repays to the Fund the amount previously distributed to him under Section 5.1A1
within the time period provided below, then the Participant's Contribution
Account of such Participant shall be credited with the amount repaid and such
Participant's Employer Contribution Account shall be credited with the amount
previously forfeited. Such repayment must be made before the earlier of (a)
five (5) years after the date the Terminated Participant is rehired, or (b) the
date the Terminated Participant incurs five (5) consecutive One-Year Breaks in
Service, but in no event later than the date the Plan is terminated pursuant to
Section 8.1.

B. If a Terminated Participant was deemed to have
received a distribution pursuant to Section 5.lAl and is rehired by the
Employer before incurring five (5) consecutive One Year Breaks in Service, then
such Participant's Employer Contribution Account shall be credited as of the
date of rehire with the amount previously forfeited.

C. Notwithstanding the foregoing, the nonvested portion
of a Terminated Participant's Employer Contribution Account which was forfeited
pursuant to Section 5.1A3 shall be restored by Forfeitures or Employer
contributions as provided in Section 4.6A or 3.1A4 without requirement of
repayment as described above if the Terminated Participant is rehired prior to
incurring five (5) consecutive One-Year Breaks in Service and if such
Terminated Participant had been a Participant in the Plan prior to February 2,
1994.

D. Should any Terminated Participant reparticipate in
the Plan at any time after he has incurred five (5) consecutive One-Year Breaks
in Service prior to full vesting, his new Employer Contribution Accounts shall
not be credited with any portion of any amount previously forfeited pursuant to
5.1A3.

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<PAGE> 46

4.8 Maximum Annual Additions.

A. Limitations Applicable to this Plan.

1. General Rule. The maximum Annual Additions
that may be contributed or allocated to a Participant's account under
the Plan for any Limitation Year shall not exceed the lesser of:

(a) the Defined Contribution Dollar
Limitation, or

(b) 25% of the Participant's
"compensation" (as defined below for
the purposes of this Section 4.8)
for the Limitation Year.

2. Special Rules. The compensation limitation
referred to in Section 4.8Al(b) shall not apply to:

(a) any contribution for medical
benefits (within the meaning of
Section 419A(f)(2) of the Code)
after separation from service which
is otherwise treated as an Annual
Addition, or

(b) any amount otherwise treated as an
Annual Addition under Section
415(1)(1) of the Code.

3. Definitions. For purposes of this Section
4.8, the "Defined Contribution Dollar Limitation" shall mean $30,000
or, if greater, one-fourth of the defined benefit dollar limitation
set forth in Section 415(b)(1) of the Code as in effect for the
Limitation Year and "compensation" shall mean compensation as defined
in Section 415(c)(3) of the Code.

4. Excess Allocations. If, as a result of the
allocation of Forfeitures, a reasonable error in estimating a
Participant's annual Compensation or under other limited facts and
circumstances which the Commissioner of the Internal Revenue Service
finds justify the availability of the rules set forth in this
Paragraph, the Annual Additions under the terms of the Plan for a
particular Participant would cause the limitations of Code Section 415
applicable to that Participant for the Plan Year to be exceeded, then
the excess amounts in the Participant's account must be held
unallocated in the Code Section 415 suspense account for the Plan Year
and allocated and reallocated in the next Plan Year (and succeeding
Plan Years, as necessary) to all of the Participants in the Plan in
accordance with Section 4.2 of the Plan as if such excess amounts
constituted a portion of the Employer contribution for such subsequent
Plan Year; provided, however, that such excess amounts shall be
subject to the limitations of this Section 4.8 and shall be

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<PAGE> 47

allocated before the allocation of any Discretionary Employer
Contributions and Matching Employer Contributions that would
constitute Annual Additions for such subsequent Plan Year. For
purposes of this subparagraph, excess amounts may not be distributed
to Participants or Retired or Terminated Participants.

B. Limitations Where Participant Participates in Another
Defined Contribution Plan. The total Annual Additions for any Participant under
this Plan shall be further reduced or limited to the extent necessary to
prevent disqualification of the Plan under any provisions of the Code that
impose limitations on contributions when a Participant is a member of more than
one qualified defined contribution plan of an Employer. If any reductions are
required to be made in the contributions allocated to any Participant in
defined contribution plans maintained by the Employer, such reductions shall
first be made under this Plan prior to adjustments under any pension plan
maintained by the Employer.

C. Limitation Where Participant Participates in a
Defined Benefit Plan.

1. For any Participant in this Plan who is also
covered by any defined benefit plan maintained or sponsored by the
Employer (the "DBP"), the sum of the Defined Benefit Fraction and the
Defined Contribution Fraction, as defined below, shall not exceed 1.0.

(a) Defined Benefit Fraction

Numerator: Projected actual benefit of
the Participant under the DBP (whether or not
terminated) assuming no increase in
compensation.

__________ over __________

Denominator: The lesser of (i) 1.25
multiplied by the maximum permissible dollar
amount of annual benefit under a DBP for the
Plan Year; or (ii) 1.4 multiplied by the
Participant's average compensation averaged
over his highest three (3) consecutive years
including any adjustments made under Code
Section 415(b).

PLUS

(b) Defined Contribution Fraction

Numerator: Sum of Annual Additions to such
Participant's accounts under this Plan and
any other defined contribution plan (whether
or not terminated) maintained by the Employer
(including the Annual Additions attributable
to the Participant's nondeductible

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<PAGE> 48

employee contributions to all defined benefit
plans, whether or not terminated, maintained
by the Employer, and the Annual Additions
attributable to all welfare benefit funds, as
defined in Code Section 419(e), and
individual medical accounts, as defined in
Code Section 415(1)(2).

_________ over _________

Denominator: The sum of the lesser of the
following amounts for each Plan Year during
which the Participant performed any service
for the Employer: (i) 1.25 multiplied by the
maximum permissible dollar amount of annual
additions to a defined contribution plan for
such Plan Year; or (ii) 1.4 multiplied by 25%
of the Participant's compensation for such
Plan Year.

For purposes of determining a Participant's Defined
Benefit Fraction, if a Participant has less than ten (10) Years of Service with
Employer, the denominator of the Defined Benefit Fraction shall be multiplied
by a fraction. The numerator of such fraction shall be the Participant's Years
of Service or part thereof with the Employer; provided, however, that the
numerator shall not be less than one (l). The denominator of such fraction
shall be ten (10).

Notwithstanding the above, if the Participant was a
Participant as of the first date of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the denominator of the Defined
Benefit Fraction will not be less than 125: of the sum of the annual benefits
under such plans which the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any changes in
the terms and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all Limitation Years
beginning before January 1, 1987.

If the Employee was a Participant as of the end of
the first day of the first limitation year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the employer which were
in existence on May 6, 1986, the numerator of the Defined Contribution Fraction
will be adjusted if the sum of the Defined Contribution Fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of (1) the excess of
the sum of the Fractions over 1.0 times (2) the denominator of the Defined
Contribution Fraction, will be permanently subtracted from the numerator of the
Defined Contribution Fraction. The adjustment is calculated using the Defined
Benefit and Defined Contribution Fractions as they would be computed as of the
end of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plan made after May
5, 1986, but using the Code

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<PAGE> 49

Section 415 limitation applicable to the first Limitation Year beginning on or
after January 1, 1987.

The Annual Addition for any Limitation Year beginning
before January 1, 1987, shall not be recomputed to treat all Employee
contributions as Annual Additions.

For purposes of determining a Participant's Defined
Contribution Fraction for any Plan Year in or after which there has been a
termination of or discontinuance of contributions to all DCP's covering such
Participant, the Defined Contribution Fraction shall be projected to such
Participant's Normal Retirement Date on the assumption that there will be no
further Annual Additions allocated to such Participant.

2. At the election of the Committee, for the Plan Year
ending in 1983 and each subsequent Plan Year, the Denominator of the Defined
Contribution Fraction shall be determined by substituting the following amount
for the portion of such Denominator attributable to all Plan Years ending
before January 1, 1983:

(a) The sum of the maximum permissible amount of
annual additions to the Participant's account
for all Plan Years ending on or before
January 1, 1983;

MULTIPLIED BY

(b) A fraction, (i) the numerator of which is the
lesser of (A) $51,875, or (B) 35% of the
Participant's compensation for the Plan Year
ending in 1981; and (ii) the denominator of
which is the lesser of (A) $41,500; or (B)
25% of the Participant's compensation for the
Plan Year ending in 1981.

3. The multiplier of 1.25 in the denominator of the
Defined Benefit Fraction and in the denominator of the Defined Contribution
Fraction shall be decreased to 1.0 and the numerator of the fraction in
Paragraph 4.8C2(b) shall be reduced to $41,500 for any Plan Year during which
the Plan is a Very Top-Heavy Plan. Notwithstanding the foregoing sentence, if
this Plan was not a Very Top-Heavy Plan in a prior Plan Year and thereafter
becomes a Very Top-Heavy Plan, a Participant's Accrued Benefit under this Plan
or any other Employer plan as of the end of such prior Plan Year shall not be
decreased on account of the reduction in maximum benefits otherwise provided in
this Paragraph.

4. If reductions must be made to the rate of benefit
accrual for such Participant under the DBP or to the allocations for such
Participant under this Plan to prevent disqualification of this Plan under Code
Section 415(e), such reductions shall first be made under this Plan prior to
any adjustments being made under the DBP.

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<PAGE> 50

5. Special Rules for Plans Subject to Overall
Limitations Under Code Section 415(e). For purposes of this Section 4.8:

(a) The Annual Addition for any
Limitation Year beginning before January 1, 1987, shall not be
recomputed to treat all Employee contributions as an Annual
Addition.

(b) If the Plan satisfied the applicable
requirements of Section 415 of the Code as in effect for all
Limitation Years beginning before January l, 1987, an amount
shall be subtracted from the numerator of the Defined
Contribution Fraction (not exceeding such numerator) as
prescribed by the Secretary of the Treasury so that the sum of
the Defined Benefit Fraction and Defined Contribution Fraction
computed under Section 415(e)(1) of the Code does not exceed
l.0 for such Limitation Year.

(c) Pursuant to regulations prescribed
by the Secretary of the Treasury, the Numerator of a
Participant's Defined Contribution Fraction shall be reduced
so that the sum of the Defined Benefit Fraction and the
Defined Contribution Fraction for such Participant for the
Plan Years beginning in 1982 and 1983 shall not exceed 1.0.

4.9 Discretionary Investments of Contributions. Each Participant,
while in the employ of the Employer, shall have the right, exercisable pursuant
to such uniform administrative procedures as the Committee may adopt, to direct
the Trustee of the "A" Fund to invest his respective accounts in Portfolio
Investments selected by him or in such other investments selected by him
provided that such investments are (i) permitted under the Trust Agreement,
(ii) are not debt-financed transactions described in Section 514 of the Code,
(iii) are not commodity future accounts or similar investments, and (iv) are
administratively feasible. Each Participant, while in the employ of the
Employer, shall have the right, exercisable pursuant to such uniform
administrative procedures as the Committee may adopt, to direct the Trustee of
the "B" Fund to invest up to 10% per year of his respective accounts in
Portfolio Investments selected by him or in such other investments selected by
him provided that such investments are (i) permitted under the Trust Agreement,
(ii) are not debt-financed transactions described in Section 514 of the Code,
(iii) are not commodity future accounts or similar investments, and (iv) are
administratively feasible. To the extent the Trustees do not receive individual
investment directions, they shall invest all accounts in Portfolio Investments
selected in the sole and absolute discretion of the Trustees. Any extraordinary
administrative expenses such as storage fees, handling costs and appraisal
costs incurred in connection with or as a result of any Participant's exercise
of individual investment discretion pursuant to this Section shall be charged
against the respective accounts of such Participants. Any ordinary
administrative expenses such as commissions and brokerage fees incurred in
connection with or as a result of any Participant's exercise of individual
investment discretion pursuant to this Section shall also be charged against
the respective accounts of such Participant. As of each Valuation Date, all
accounts invested as

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<PAGE> 51

directed by the Participant in accordance with this Section shall be adjusted
for the net income or net loss and net appreciation or net depreciation
attributable to the respective directed investments.

4.10 Qualifying Employer Securities. The Trustees are authorized
to acquire and hold shares of Class B Common Stock of Ingles Markets,
Incorporated and to acquire and hold other Qualifying Employer Securities as
contemplated under the provisions of the Plan, without regard to the
diversification requirement of the Act.

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<PAGE> 52

ARTICLE V
DISTRIBUTION OF BENEFITS

5.1 Employer Contribution Account. The amounts credited or debited
to Employer Contribution Accounts shall include only amounts theretofore
allocated by the Committee from the Suspense Account. The net credit to an
account shall be reduced by amounts distributed in accordance with the
provisions of this ARTICLE V.

A. Distribution on Termination Prior to Retirement.

1. Distribution. If a Participant's employment
with the Employer is terminated, except at normal retirement age,
death or disability as provided in Section 5.1E, the nonforfeitable
portion of such Participant's Employer Contribution Account shall be
distributed in accordance with Section 5.2. Except as provided in
Section 5.1H4, the Participant shall designate the time of the
distribution. Distribution shall be commenced not earlier than the
quarter of the Plan Year following the date the Participant's
employment is terminated. In no event shall distribution begin later
than April 1 following the calendar year in which the Participant
attains age 70-1/2. If the nonforfeitable portion of such
Participant's Employer Contribution Account is equal to zero, the
Participant shall be deemed to have received a distribution of such
nonforfeitable portion of his Employer Contribution Account on the
date such Participant terminates employment.

2. Nonforfeitable Vested Interest.

(a) Qualified Deferral Accounts and
Participant's Contribution Account. Every Participant shall
always have a 100% nonforfeitable vested interest in his
Qualified Deferral Account and his Participant Contribution
Account.

(b) Matching Employer Contribution
Account and Discretionary Employer Contribution Account. Every
Participant who first became a Participant in the Plan prior
to October 1, 1989 shall have a nonforfeitable vested interest
in his Discretionary Employer Contribution Account equal to
the percentage thereof as shown in detail below for the number
of Years of Service with the Employer as follows:

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<PAGE> 53

<TABLE>
<CAPTION>
Years of Service Vested-Nonforfeitable Nonvested-Forfeitable
Percentage Percentage
<S> <C> <C>
Less than 1 0% 100%

1 10% 90%

2 20% 80%

3 30% 70%

4 40% 60%

5 60% 40%

6 80% 20%

7 or more 100% 0%
</TABLE>

Every Participant who first becomes a Participant in the Plan on or
after October 1, 1989 shall have a nonforfeitable vested interest in
his Matching Employer Contribution Account and Discretionary Employer
Contribution Account equal to the percentage thereof as shown in
detail below for the number of Years of Service with the Employer as
follows:

<TABLE>
<CAPTION>
Years of Service Vested-Nonforfeitable Nonvested-Forfeitable
Percentage Percentage
<S> <C> <C>
Less than 3 0% 100%

3 20% 80%

4 40% 60%

5 60% 40%

6 80% 20%

7 or more 100% 0%
</TABLE>

Notwithstanding anything to the contrary in the above vesting
schedule, the nonforfeitable vested interest of the Matching Employer
Contribution Account and Discretionary Employer Contribution Account
of any Participant as of the date of the adoption of the Restatement
of the Plan shall not be less than the nonforfeitable vested
percentage computed in accordance with the Plan in effect immediately
prior to the Effective Date of Restatement of the Plan. In addition,
notwithstanding anything to the

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<PAGE> 54

contrary in the above vesting schedule, any Participant with three (3)
or more Years of Service with the Employer as of sixty (60) days after
the date he is notified of the adoption of the Restatement of the Plan
shall be permitted to elect in writing within sixty (60) days of the
date he is notified of the adoption of the Restatement of the Plan to
have his nonforfeitable vested interest computed in accordance with
the Plan in effect immediately prior to the Effective Date of
Restatement of Plan.

A Participant shall automatically have a 100% vested and
nonforfeitable interest in his Matching Employer Contribution Account
and Discretionary Employer Contribution Account if he attains his
Normal Retirement Date while in the employ of the Employer.

Notwithstanding anything in this Section 5.1A2 to the contrary, if a
Participant or Terminated Participant receives a distribution from his
Matching Employer Contribution Account and Discretionary Employer
Contribution Account, then separate accounts shall be established for
the Participant as of the date of such distribution and the vested
interest of such Participant or Terminated Participant in such
separate Matching Employer Contribution Account and Discretionary
Employer Contribution Account at all times prior to the Participant
incurring five (5) consecutive One-Year Breaks in Service or the date
he is 100% vested (whichever is earlier), shall be determined pursuant
to the following formula:

X = P (AB + [R x D]) - (R x D),

where X is the vested interest at the relevant time (the time at which
the vested percentage in the Matching Employer Contribution Account
and the Discretionary Employer Contribution Account cannot increase);
P is the vested percentage at the relevant time; AB is the Matching
Employer Contribution Account balance plus the Discretionary Employer
Contribution Account balance at the relevant time; D is the amount of
the distribution; and R is the ratio of the Matching Employer
Contribution Account balance plus the Discretionary Employer
Contribution Account balance at the relevant time over such account
balance after the distribution.

3. Forfeitures. If any Terminated Participant
shall incur a One-Year Break in Service prior to the time when the
Matching Employer Contribution Account and the Discretionary Employer
Contribution Account established for his benefit is 100%
nonforfeitable, the portions of his Matching Employer Contribution
Account and Discretionary Employer Contribution Account which are
forfeitable shall be treated as a Forfeiture pursuant to Section 4.6
as of the last day of the Plan Year in which occurs the earlier of (i)
the later of the date which he shall have received a distribution or
is deemed to have received a distribution of his entire interest in
the Plan pursuant to Section 5.1A1 or the date on which he shall have
incurred a One-Year Break in Service or (ii) the date on which he
shall have incurred five (5) consecutive One Year Breaks in Service.

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<PAGE> 55

4. Prior Service of Nonvested Participants Upon
Reparticipation. For purposes of Section 5.1A, in the case of a
Participant who does not have any vested interest in his Matching
Employer Contribution Account or his Discretionary Employer
Contribution Account, Years of Service before any period of
consecutive One-Year Breaks in Service shall not be taken into account
in computing the number of Years of Service if the number of
consecutive One-Year Breaks in Service within such period equals or
exceeds the greater of: (i) five (5), or (ii) the aggregate number of
such Years of Service prior to such break. If any Years of Service are
not required to be taken into account by reason of a period of
One-Year Breaks in Service to which this subparagraph applies, such
Years of Service shall not be taken into account in applying this
subparagraph to a subsequent period of One-Year Breaks in Service.

5. Prior Service of Vested Participants. Upon
reparticipation any Participant who has any vested interest in the
Plan shall be credited with all Years of Service, regardless of any
One-Year Break in Service, only after he has completed one (1) Year of
Service following the date of his rehire.

6. Subsequent Service of Terminated
Participants. Years of Service completed by a Participant after such
Participant has incurred five (5) consecutive One-Year Breaks in
Service shall not be taken into account for purposes of determining
the nonforfeitable vested interest of a Participant as of the last day
of the Plan Year in which the fifth (5th) consecutive One-Year Break
in Service occurred.

B. Distribution on Retirement at Retirement Date. Any
Participant shall be entitled to retire from service at any time upon attaining
his Retirement Date.

1. If a Participant retires on or after his
Retirement Date, the amount standing to his credit on such Retirement
Date shall be 100% nonforfeitable. Such amount shall be distributed
pursuant to the Qualified Joint and Survivor Annuity form of benefit
if required under Section 5.1F, commencing no later than sixty (60)
days after the close of the Plan Year in which the Participant
retires, otherwise, such amount shall be distributed in accordance
with Section 5.2.

2. Each Participant's election with respect to
the manner of distribution of his benefits at Retirement Date may be
made at any time within 90 days before his benefit commencement date.

C. Distribution on Retirement After Retirement Date. If
a Participant continues in the employ of the Employer after his Retirement
Date, he shall be treated in all respects as any other Participant until his
actual retirement. The amount standing to the credit of such Participant at the
time of his actual retirement shall be 100% nonforfeitable and shall become
distributable to such retiring Participant commencing no later than his
Required Beginning Date. Distribution shall be made pursuant to the Qualified
Joint and Survivor Annuity

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<PAGE> 56

form of benefit if required under Section 5.1F, otherwise, such distribution
shall be made in accordance with Section 5.2.

D. Distribution on Death.

1. If a Participant dies before his Annuity
Starting Date and the Participant has a surviving spouse, a Qualified
Preretirement Survivor Annuity shall be provided to the surviving
spouse of such Participant if required under Section 5.1G. Upon the
death of a Participant, all of the Accrued Benefit credited to such
Participant, reduced by the amount necessary to fund the Qualified
Preretirement Survivor Annuity, if applicable, shall be distributable
in accordance with Section 5.2B to his designated Beneficiary;
provided, however, that if a Participant has not designated a
Beneficiary or if no Beneficiary survives the Participant, then
distribution shall be made in a lump sum to the executor or
administrator of the Participant's estate.

2. If a Retired or Terminated Participant dies
after his Annuity Starting Date, his remaining Accrued Benefit shall
be distributed to his designated Beneficiary, or if no Beneficiary has
been designated or survives such Participant, then to the executor or
administrator of the Participant's estate.

3. The timing of the payment of death benefits
other than the Qualified Preretirement Survivor Annuity shall be in
accordance with the following:

(a) Except as provided in subparagraph
(c) or (f) below, if a Retired or Terminated Participant dies
after distribution of his interest has begun, then his
remaining Accrued Benefit must be distributed at least as
rapidly as under the method of distribution being used as of
the date of the Participant's death.

(b) Except as provided in subparagraph
(f) below, if a Participant dies prior to the commencement of
distributions, the entire interest of the deceased Participant
in the Plan must be distributed by December 31 of the calendar
year which contains the fifth anniversary of the date of the
Participant's death unless an election is made (pursuant to
subparagraph (e) below) to receive distributions in accordance
with subparagraph (c) or (d) below.

(c) If a deceased Participant's interest
in the Plan is payable to or for the benefit of a designated
Beneficiary, such interest may be distributed (in accordance
with the Regulations) over the life of such designated
Beneficiary or over a period not extending beyond the life
expectancy of such Beneficiary, commencing not later than
December 31 of the calendar year immediately following the
calendar year of the Participant's death.

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<PAGE> 57

(d) If the designated Beneficiary
referred to in subparagraph (c) above is the Participant's
surviving spouse, the date by which the distributions are
required to begin in accordance with subparagraph (c) above
shall not be before the later of (i) December 31 of the
calendar year in which the Participant would have attained age
70-1/2, or (ii) December 31 of the calendar year immediately
following the calendar year of the Participant's death. If the
surviving spouse dies before the distributions to such spouse
begin, this paragraph D3, with the exception of this
subparagraph (d), shall apply as if the surviving spouse were
the deceased Participant.

(e) The Participant may elect the timing
of distribution to be made under this Section 5.1D. If the
Participant has not made such an election under this Section
5.1D by the time of his death, then the Beneficiary shall have
the right to make such election. The Beneficiary's right to
make such an election shall expire in the case of a
distribution in a lump sum, on December 31 of the calendar
year which contains the fifth anniversary of the date of the
Participant's death and in the case of a distribution other
than in a lump sum, on December 31 of the calendar year
immediately following the calendar year of the Participant's
death. If the Participant has not made an election pursuant to
this Section 5.1D3 by the time of his death or if the
Participant's Beneficiary does not elect the time of
distribution by the time required above, then in the case of
distribution in a lump sum, distribution of the Participant's
entire interest shall be made as of the December 31 referred
to in subparagraph (b) above or in the case of distribution
other than in a lump sum, distribution of the Participant's
interest shall commence to be paid as of the December 31
referred to in subparagraph (c) above.

(f) Subparagraphs (a), (b) and (c) above
shall not apply (i) if the Participant has elected a longer
payout period prior to January 1, 1984, which is otherwise
permitted under the prior Plan of which this is a restatement
and such Participant's spouse has consented to such
distribution in accordance with Section 5.1F3, and (ii) to the
extent the Qualified Preretirement Survivor Annuity form of
benefit is required and not waived in accordance with Section
5.1G. If the Qualified Preretirement Survivor Annuity form of
benefit is required and not waived in accordance with Section
5.1G, then the payment of benefits pursuant to the Qualified
Preretirement Survivor Annuity shall commence, at the
direction of the surviving spouse of the deceased Participant,
as soon as practicable after the Participant's death.

4. The Committee may require such proper proof
of death and such evidence of the right of any person to receive
payment of the account of a deceased Participant, as the Committee may
deem desirable. The Committee's determination of death and of the
right of any person to receive payment shall be conclusive; subject,
however, to the adjudication of any claim of any such person pursuant
to Section 9.2D.

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<PAGE> 58

5. To the extent provided in any Qualified
Domestic Relations Order, the former spouse of a Participant shall be
treated as a surviving spouse of such Participant for purposes of the
Qualified Joint and Survivor Annuity and the Qualified Preretirement
Survivor Annuity provided in Sections 5.1F and 5.1G.

6. If a Participant's designated Beneficiary is
his spouse, then in the event the Participant and such spouse are
divorced after the date of such Participant's last designation of
beneficiary form, the Participant's designation of such spouse as his
designated Beneficiary shall be automatically revoked upon such
divorce.

E. Distribution on Disability. If, prior to his Normal
Retirement Date, a Participant shall be certified as disabled by the Social
Security Administration and is incapable of performing his duties, and if his
employment is terminated, the Committee shall direct the Trustees to pay to
such Participant all of the Employer Contribution Account credited to him as of
the last Valuation Date, provided that in no event shall such disability
include a condition resulting from self-inflicted injury, or injury incurred
while committing an illegal act. The method of distribution shall be in
accordance with Section 5.2. Any election under Section 5.2 must be made by the
Participant or his legal representative within a reasonable time after notice
from the Committee that the Participant's employment is terminated due to such
disability (said notice to include reference to the right of the Participant to
elect the manner of distribution).

F. Qualified Joint and Survivor Annuity.

1. The payment of benefits to any Participant
who does not die prior to his Annuity Starting Date shall be made in
the form of a Qualified Joint and Survivor Annuity unless, as
hereinafter provided, the Participant or, if the Participant is
married, the Participant and his spouse, have elected in writing to
waive the Qualified Joint and Survivor Annuity form of payment during
the "applicable election period." The applicable election period is
the ninety (90) day period which ends on the Participant's Annuity
Starting Date. Each Participant shall receive, within a reasonable
period of time before his Annuity Starting Date, a written explanation
of: (i) the terms and conditions of the Qualified Joint and Survivor
Annuity, (ii) the Participant's right to make, and the effect of, an
election to waive the Qualified Joint and Survivor Annuity form of
benefit, (iii) the requirement that the Participant's spouse consent
to such a waiver, (iv) the right to make, and the effect of, a
revocation of an election to waive the Qualified Joint and Survivor
Annuity, and (v) a general description of the eligibility conditions
and other material features of the optional forms of benefits
available under the Plan and sufficient additional information to
explain the relative values of such optional forms of benefits.

2. The election to waive the Qualified Joint and
Survivor Annuity shall not take effect unless: (i) the Participant's
spouse consents in writing to such election, such election and such
consent acknowledge the specific non-spouse beneficiary (if any) and
the form of benefits that requires the waiver, and such consent
acknowledges

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<PAGE> 59

the effect of such election and is witnessed by a Plan representative
or notary public, or (ii) the Participant shall establish to the
satisfaction of a Plan representative that such consent may not be
obtained because (1) there is no spouse, (2) the spouse cannot be
located, or (3) such other circumstances prescribed by applicable
Regulations.

3. Any election made pursuant to this Paragraph
F may be revoked by the Participant (but not his spouse) in writing at
any time during the applicable election period and after such
revocation, a new election pursuant to this Paragraph F may be made in
writing during such applicable election period. Each subsequent change
in beneficiary or form of benefits shall require the consent of the
Participant's spouse, as provided in subparagraph 2 immediately above,
unless the prior consent of a Participant's spouse is a general
consent which expressly permits such a change in designations by the
Participant without the further consent of the spouse. No general
consent is valid unless the general consent acknowledges that the
spouse has the right to limit consent to a specific beneficiary and a
specific optional form of benefit, where applicable, and that the
spouse voluntarily elects to relinquish both of such rights.
Notwithstanding the previous sentence, a spouse may execute a general
consent that is limited to certain beneficiaries or forms of benefit
payment (i.e., a "limited general consent"). A general consent,
including a limited general consent, is not effective unless it is
made during the applicable election period.

4. Except for payment in the form of (i) a
Qualified Joint and Survivor Annuity, or (ii) a lump sum distribution
in an amount not to exceed $3,500 as provided in Section 5.1F5, no
distribution will be allowed under the Plan to a Participant unless
the Participant and his spouse (if required) execute a waiver of the
Qualified Joint and Survivor Annuity as provided in this Paragraph F.

5. The Qualified Joint and Survivor Annuity
provisions of this Section 5.1F shall not apply to the distribution in
a lump sum of a Participant's account balance if the nonforfeitable
portion of such account balance does not exceed $3,500 and if the
distribution occurs on or before the Participant's Annuity Starting
Date.

6. For purposes of this Section 5.1F, to the
extent provided in any Qualified Domestic Relations Order, the former
spouse of a Participant shall be treated as a surviving spouse of such
Participant and any spouse of such Participant shall not be treated as
a spouse of such Participant (unless and until the former spouse dies
prior to the Participant's Annuity Starting Date).

7. The Qualified Joint and Survivor Annuity
shall not apply to the spouse of an Alternate Payee.

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<PAGE> 60

G. Qualified Preretirement Survivor Annuity.

1. A Qualified Preretirement Survivor Annuity
shall be provided automatically to the surviving spouse of a vested
Participant who dies before his Annuity Starting Date. Such Qualified
Preretirement Survivor Annuity shall be commenced within a reasonable
period after the Participant's death. For purposes of this Section, a
vested Participant is any Participant who has a nonforfeitable right
to any portion of his Accrued Benefit. Each Participant may elect at
any time during the "applicable election period" to waive the
Qualified Preretirement Survivor Annuity. The applicable election
period is the period which ends on the date of the Participant's
death. Each Participant (other than a nonvested Participant not then
employed by the Employer) shall receive, within the information period
for such Participant, a written explanation with respect to a
Qualified Preretirement Survivor Annuity comparable to that required
for a Qualified Joint and Survivor Annuity under Section 5.lFl. The
information period for such Participant is whichever of the following
periods ends last:

(a) the period beginning with the first
day of the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age 35, or

(b) a one-year period after the
individual becomes a Participant, or

However, with respect to a Participant who separates from service
before age 35, the information period is the period beginning one year
before and ending one year after such separation.

2. The election to waive the Qualified
Preretirement Survivor Annuity shall not take effect unless: (i) the
Participant's spouse consents in writing to such election, such
election and such consent acknowledges the specific non-spouse
beneficiary (if any) and the form of benefits that requires the waiver
and such consent acknowledges the effect of such election and is
witnessed by a Plan representative or notary public, or (ii) the
Participant shall establish to the satisfaction of a Plan
representative that such consent may not be obtained because (1) there
is no spouse, (2) the spouse cannot be located, or (3) such other
circumstances prescribed by applicable Regulations. Unless a
Participant specifies otherwise, his surviving spouse shall have the
right to elect within ninety (90) days after the Participant's death
to receive the amount necessary to fund the Qualified Preretirement
Survivor Annuity in any form selected that is allowable under the
terms of the Plan.

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3. Any election made pursuant to this Paragraph
G may be revoked by the Participant (but not his spouse) in writing at
any time during the applicable election period and after such
revocation, a new election pursuant to this Paragraph G may be made in
writing during such applicable election period. Each subsequent change
in beneficiary or form of benefits shall require the consent of the
Participant's spouse, as provided in subparagraph 2 immediately above,
unless the prior consent of a Participant's spouse is a general
consent which expressly permits such a change in designations by the
Participant without the further consent of the spouse. No general
consent is valid unless the general consent acknowledges that the
spouse has the right to limit consent to a specific beneficiary and a
specific optional form of benefit, where applicable, and that the
spouse voluntarily elects to relinquish both of such rights.
Notwithstanding the previous sentence, a spouse may execute a general
consent that is limited to certain beneficiaries or forms of benefit
payment (i.e., a "limited general consent"). A general consent,
including a limited general consent, is not effective unless it is
made during the applicable election period.

4. Any election made pursuant to this Paragraph
G (with a spouse's consent) to waive the Qualified Preretirement
Survivor Annuity prior to the first day of the Plan Year in which a
Participant attains age thirty-five (35) shall be effective only if
the Participant receives a written explanation of the Qualified
Preretirement Survivor Annuity. Any such election shall become invalid
upon the first day of the Plan Year in which the Participant's 35th
birthday occurs.

5. For purposes of this Section 5.1G, to the
extent provided in any Qualified Domestic Relations Order, the former
spouse of a Participant shall be treated as a surviving spouse of such
Participant and any spouse of such Participant shall not be treated as
a spouse of such Participant (unless and until the former spouse dies
prior to the Participant's Annuity Starting Date).

6. The Qualified Preretirement Survivor Annuity
shall not apply to the spouse of an Alternate Payee.

H. Participant Consent to Distributions.

1. Except as otherwise provided in this Section
5.1H, Participant consent is required in writing for any distribution
while it is immediately distributable (i.e., prior to the later of the
time a Participant has attained his Normal Retirement Date or age 62).
Such written consent must be given not more than 90 days prior to the
Participant's Annuity Starting Date. Once a distribution is no longer
immediately distributable, a Participant's benefit may be distributed
in the form of a Qualified Joint and Survivor Annuity without his
consent.

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2. No consent is valid unless the Participant
has received a general description and explanation of his rights under
this Paragraph H and the material features and the relative values of
the optional forms of benefit available under the Plan. Such
explanation shall be provided to the Participant no less than 30 and
no more than 90 days prior to the Participant's Annuity Starting Date.
In addition, so long as a benefit is immediately distributable, a
Participant must be informed of his right, if any, to defer receipt of
the distribution. Consent is not valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to a
distribution.

3. Written consent of the Participant to the
distribution must not be made before the Participant receives the
notice of his rights under this Paragraph H and must not be made more
than 90 days before his Annuity Starting Date.

4. Consent of the Participant is not required if
the Participant's nonforfeitable account balance is not greater than
$3,500, in which event, the Participant's account balance shall be
distributed to him as a single sum not earlier than the quarter of the
Plan Year following the date of the Participant's termination of
employment. If a Participant's nonforfeitable account balance at the
time of distribution exceeds $3,500, then his account balance at any
subsequent time shall be deemed to exceed $3,500.

5. The Participant's consent is not required
after the death of the Participant.

6. The Participant's consent is not required for
payments to an Alternate Payee, except to the extent provided in the
Qualified Domestic Relations Order.

7. The Participant's consent is not required to
the extent that a distribution is required to satisfy the requirements
of Code Section 401(a)(9) or 415.

8. The failure of a Participant to consent is
deemed to be an election to defer commencement of payment of the
benefit for purposes of Code Section 401(a)(14) and Regulation
1.401(a)-14.

9. The requirements of this Paragraph H apply
before, on and after a plan termination. If the Employer or any entity
within the same controlled group as the Employer maintains another
defined contribution plan, other than an employee stock ownership plan
(as defined in Code Section 4975(e)(7)), then the Participant's
account balance may be transferred without the Participant's consent
to the other plan if the Participant does not consent to an immediate
distribution from the terminating plan.

10. No consent of the Participant or spouse is
needed for distribution of a Qualified Joint and Survivor Annuity or
Qualified Preretirement Survivor Annuity after the benefit is no
longer immediately distributable [after the Participant attains (or

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would have attained if not dead) the later of Normal Retirement Date
or age 62]. No consent of the spouse is needed for distribution of a
Qualified Joint and Survivor Annuity at any time. After the
Participant's death, a benefit may be paid to a nonspouse beneficiary
without the beneficiary's consent. A distribution cannot be made at
any time in a form other than a Qualified Joint and Survivor Annuity
unless such Qualified Joint and Survivor Annuity has been waived by
the Participant and the spouse has consented to such waiver.

I. Distributions After Earliest Retirement Age Pursuant
to Qualified Domestic Relations Order. An Alternate Payee's interest in a
Participant's benefit under the Plan shall be distributed in accordance with
Section 5.2B. The Alternate Payee shall designate the time of distribution.
Distribution to the Alternate Payee shall be commenced not earlier than the
quarter of the Plan Year following the date of the Alternate Payee's election
to commence distribution. A Domestic Relations Order shall not be treated as
requiring the Plan to provide any type or form of benefit, or any option, not
otherwise provided under the Plan, solely because such order requires that
payment of benefits be made to an Alternate Payee: (i) at the time of
distribution designated by the Alternate Payee, (ii) as if the Participant had
retired on the date on which such payment is to begin under such order, and
(iii) in any form in which such benefits may be paid under Section 5.2B of the
Plan to the Participant (other than in the form of a Qualified Joint and
Survivor Annuity with respect to the Alternate Payee and his subsequent
spouse).

J. Distribution of Excess Deferrals.

1. In General. Notwithstanding any other
provision of the Plan, Excess Deferral Amounts plus any income and
minus any loss allocable thereto shall be distributed no later than
April 15 to Participants who claim such Excess Deferral Amounts for
the preceding calendar year. The Employer shall be subject to a 10%
excise tax pursuant to Code Section 4979 with respect to any Excess
Deferral Amounts distributed more than 2-1/2 months after the last day
of the Plan Year in which such Excess Deferral Amounts arose.

2. Definitions. For purposes of this Paragraph,
"Excess Deferral Amount" shall mean the amount of Elective Deferrals
for a calendar year that the Participant allocates to this Plan
pursuant to the claim procedure set forth in subparagraph 3 below.

3. Claims. The Participant's claim shall be in
writing; shall be submitted to the Plan Administrator no later than
March 1; shall specify the Participant's Excess Deferral Amount for
the preceding calendar year; and shall be accompanied by the
Participant's written statement that if such amounts are not
distributed, such Excess Deferral Amount, when added to amounts
deferred under other plans or arrangements described in Sections
401(k), 408(k) or 403(b) of the Code, will exceed the limit imposed

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on the Participant by Section 402(g) of the Code for the year in which
the deferral occurred.

4. Determination of Income or Loss. The Excess
Deferral Amount shall be adjusted for income or loss for the Plan
Year. The income or loss allocable to the Excess Deferral Amount for a
Plan Year shall be determined by multiplying the income or loss
allocable to the Participant's Excess Deferrals for the Plan Year by a
fraction, the numerator of which is the Excess Deferral Amount on
behalf of the Participant for the preceding Plan Year and the
denominator of which is the Participant's account balance attributable
to Excess Deferrals on the last day of the preceding Plan Year.

5. Excess Deferral Amounts. Excess Deferral
Amounts shall be considered Elective Deferrals for the purposes of the
average deferral percentage test in Section 3.1A2. However, Excess
Deferral Amounts made by Non-Highly Compensated Employees shall not be
counted as Elective Deferrals for the purposes of the average deferral
percentage test in Section 3.1A2 to the extent they are made under
other plans of the same Employer.

K. Distribution of Excess Contributions.

1. In General. Notwithstanding any other
provision of the Plan, Excess Contributions plus any income and minus
any loss allocable thereto shall be distributed no later than the last
day of each Plan Year to Participants on whose behalf such Excess
Contributions were made for the preceding Plan Year. Any distribution
of the Excess Contributions for any Plan Year shall be made to Highly
Compensated Employees on the basis of the respective portions of the
Excess Contributions attributable to each of such Highly Compensated
Employees. The Employer shall be subject to a 10% excise tax pursuant
to Code Section 4979 with respect to any Excess Contributions
distributed more than 2-1/2 months after the last day of the Plan Year
in which such Excess Contributions arose.

2. Excess Contributions. For purposes of this
Paragraph, "Excess Contributions" shall mean with respect to any Plan
Year, the excess of:

(a) the aggregate amount of Elective
Deferrals and Qualified Nonelective Contributions actually
paid over to the Trust on behalf of Highly Compensated
Employees for such Plan Year, over

(b) the maximum amount of such
contributions permitted under the limitations of Section 3.1A2
(determined by reducing Elective Deferrals and Qualified
Nonelective Deferrals made on behalf of Highly Compensated
Employees in order of the Actual Deferral Percentages
beginning with the highest of such percentages).

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3. Determination of Income or Loss. The Excess
Contributions shall be adjusted for income or loss for the Plan Year
and for the period between the end of the Plan Year and the date of
distribution. The income or loss allocable to Excess Contributions for
a Plan Year shall be determined by multiplying the income or loss
allocable to the Participant's Salary Reductions for the Plan Year by
a fraction, the numerator of which is the Excess Contributions on
behalf of the Participant for the preceding Plan Year and the
denominator of which is the Participant's account balance attributable
to Salary Reductions on the last day of the preceding Plan Year. The
income or loss allocable to Excess Contributions for the period
between the end of the Plan Year and the date of distribution shall
equal ten (10%) percent of the income or loss allocable to the Excess
Contributions for such Plan Year multiplied by the number of calendar
months between the end of such Plan Year and the date of distribution.
A distribution on or before the fifteenth day of a month will be
treated as having been made on the last day of the preceding month and
a distribution after the fifteenth day of the month shall be treated
as having been made on the first day of the next month.

4. Reduction for Excess Deferrals Distributed.
The Excess Contributions which would otherwise be distributed to the
Participant shall be reduced, in accordance with the Regulations, by
the amount of Excess Deferrals distributed to the Participant.

5. Family Aggregation. In the event the Deferral
Percentage for a Highly Compensated Employee is calculated under
Section 3.1A7(d), distribution of Excess Contributions to such Highly
Compensated Employee shall be in accordance with Regulation 1.401(k)
l(f)(5)(ii).

6. Accounting for Excess Contributions. Amounts
distributed under this Paragraph shall first be treated as
distributions from the Participant's Elective Deferrals and shall be
treated as distributed from the Participant's Qualified Nonelective
Contributions only to the extent such Excess Contributions exceed the
amount of Elective Deferrals in the Participant's Qualified Deferral
Account.

L. Distribution of Excess Aggregate Contributions.

1. In General. Excess Aggregate Contributions
plus any income and minus any loss allocable thereto, shall be
distributed no later than the last day of each Plan Year to
Participants to whose accounts Matching Employer Contributions were
allocated for the preceding Plan Year. Any distribution of the Excess
Aggregate Contributions for any Plan Year shall be made to Highly
Compensated Employees on the basis of the respective portions of such
amounts attributable to each of such Employees (determined by reducing
contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such

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percentages). Forfeitures of Excess Aggregate Contributions may not be
allocated to Participants whose contributions are reduced under this
Paragraph.

2. Excess Aggregate Contributions. For purposes
of this Section 5.1L, "Excess Aggregate Contributions" shall mean with
respect to any Plan Year, the excess of:

(a) the aggregate amount of Matching
Employer Contributions actually made on behalf of Highly
Compensated Employees for such Plan Year, over

(b) the maximum amount of such
contributions permitted under the limitations of Section 3.2A2
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).

3. Determination of Income or Loss. The Excess
Aggregate Contributions shall be adjusted for income or loss for the
Plan Year and for the period between the end of the Plan Year and the
date of distribution. The income or loss allocable to Excess Aggregate
Contributions for a Plan Year shall be determined by multiplying the
income or loss allocable to the Matching Employer Contributions for
the Plan Year by a fraction, the numerator of which the Excess
Aggregate Contributions on behalf of the Participant for the preceding
Plan Year and the denominator of which is the Participant's account
balance attributable to Matching Employer Contributions on the last
day of the preceding Plan Year. The income or loss allocable to Excess
Aggregate Contributions for the period between the end of the Plan
Year and the date of distribution shall equal ten (10%) percent of the
income or loss allocable to the Excess Aggregate Contributions for
such Plan Year multiplied by the number of calendar months between the
end of such Plan Year and the date of distribution. A distribution on
or before the fifteenth day of a month will be treated as having been
made on the last day of the preceding month and a distribution after
the fifteenth day of the month shall be treated as having been made on
the first day of the next month.

4. Family Aggregation. In the event the
Contribution Percentage for a Highly Compensated Employee is
calculated under Section 3.2A7(c), distribution of Excess Aggregate
Contributions to such Highly Compensated Employee shall be in
accordance with Regulation 1.401(m)-l(e)(2)(iii).

5. Accounting for Excess Aggregate
Contributions. Excess Aggregate Contributions shall be distributed to
a Participant from the Matching Employer Contribution Account of such
Participant.

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6. Excess Deferrals and Excess Contributions.
The determination of the Excess Aggregate Contributions shall be made
after first determining the Excess Deferral Amount, and then
determining the Excess Contributions.

M. Distributions Upon Plan Termination. All Elective
Deferrals, Qualified Nonelective Contributions and income or loss attributable
thereto shall be distributed to Participants or their Beneficiaries as soon as
administratively feasible after the termination of the Plan, provided that
neither the Employer nor an Affiliated Employer maintains or establishes a
successor plan, in which event all such Elective Deferrals, Qualified
Nonelective Contributions and income or loss attributable thereto shall be
transferred to such successor plan.

N. Distributions Upon Sale of Assets. All Elective
Deferrals, Qualified Nonelective Contributions and income or loss attributable
thereto shall be distributed to Participants as soon as administratively
feasible after the disposition, to an entity that is not an Affiliated
Employer, of substantially all of the assets used by the Employer in the trade
or business in which the Participant is employed; provided that (i) the
Employer continues to maintain this Plan after such disposition, (ii) the
Participant continues employment with the corporation acquiring such assets,
and (iii) the Participant receives such amounts in a lump sum distribution.

O. Hardship Withdrawals from Qualified Deferral Account.
A Participant may withdraw from his Qualified Deferral Account an amount not to
exceed the total of all of such Participant's Elective Deferrals under the Plan
by submitting his written request to the Committee subject to the following
provisions: (i) the withdrawal request must be for immediate and heavy
financial need; (ii) the amount withdrawn may not exceed the amount necessary
to satisfy such financial need; and (iii) the maximum amount which may be
withdrawn is the balance in the Participant's Qualified Deferral Account.

1. The determination of whether a Participant
has an immediate and heavy financial need is to be made on the basis
of all relevant facts and circumstances.

2. A request for withdrawal will be deemed to be
made on account of an immediate and heavy financial need of the
Participant only if the withdrawal is on account of:

(a) Medical expenses described in Code
Section 213(d) incurred by the Participant or his spouse or
dependents (as defined in Code Section 152); or

(b) Purchase (excluding mortgage
payments) of a principal residence for the Participant; or

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(c) Payment of tuition for the next year
of post-secondary education and related educational fees for
the Participant or his spouse, children or dependents; or

(d) The need to prevent the eviction of
the Participant from his principal residence or foreclosure on
the mortgage of the Participant's principal residence.

3. A withdrawal will not be treated as necessary
to satisfy an immediate and heavy financial need of a Participant to
the extent the amount of the withdrawal is in excess of the amount
required to relieve the financial need or to the extent such need may
be satisfied from other resources that are reasonably available to the
Participant; provided, however, that the amount of the immediate and
heavy financial need of a Participant shall include any amounts
necessary to pay any federal, state or local taxes or penalties
reasonably anticipated to result from a plan distribution. A
withdrawal may be treated as necessary to satisfy a financial need if
the Employer reasonably relies upon the Participant's representation
that the need cannot be relieved:

(a) through reimbursement or
compensation by insurance or otherwise,

(b) by reasonable liquidation of the
Participant's assets, but only to the extent such liquidation
would not itself cause an immediate and heavy financial need,

(d) by other distributions or nontaxable
(at the time of the loan) loans from plans maintained by the
Employer or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms.

For purposes of this subparagraph 3, the
Participant's resources shall be deemed to include those
assets of his spouse and minor children that are reasonably
available to the Participant.

4. A withdrawal will be deemed to be necessary
to satisfy an immediate and heavy financial need of a Participant if
all of the following requirements are satisfied:

(a) The withdrawal is not in excess of
the amount of the immediate and heavy financial need of the
Participant,

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(b) The Participant has obtained all
distributions, other than hardship withdrawals, and all
nontaxable loans currently available under all plans
maintained by the Employer,

(c) The Plan, and all other plans
maintained by the Employer, provide that the Participant's
Elective Deferrals and employee contributions will be
suspended for at least 12 months after receipt of the hardship
withdrawal, and

(d) The Plan, and all other plans
maintained by the Employer, provide that the Participant may
not make Elective Deferrals for the Participant's taxable year
immediately following the taxable year of the hardship
withdrawal in excess of the applicable limit under Code
Section 402(g) for such next taxable year less the amount of
such Participant's Elective Deferrals for the taxable year of
the hardship withdrawal.

5. Any withdrawal approved by the Committee
shall be paid to the Participant as soon as practicable after such
approval.

6. In order to make any withdrawal under this
Paragraph, a married Participant's spouse must consent to such
withdrawal distribution in writing and such consent must be witnessed
by a Plan representative or notary public.

P. Election of Later Benefit Commencement Date. The
payment of the applicable benefits to any Participant, Retired Participant or
Terminated Participant may, at the election of such Participant, commence at a
later date than that otherwise provided for herein, provided that such election
is made under Code Section 401(a)(9) prior to January 1, 1984, and does not
violate the incidental death benefit requirements of the Act.

Q. Withdrawals from Employer Contribution Account.

1. A Participant who has attained the age of
70-1/2 may at any time thereafter withdraw any portion or all of his
Employer Contribution Account.

2. A Participant shall notify the Committee on a
form provided by the Committee of his election to make a withdrawal
under this Section. Any election shall be effective as of the date
specified in the notice, and the Committee shall direct the Trustee to
pay to the electing Participant the amount requested as soon as
practicable. In order to make any withdrawal under this Paragraph, a
married Participant's spouse shall consent to such withdrawal
distribution by executing a waiver consent election form after due
notice of information is received by such spouse in the same manner as
provided in Section 5.1F for spousal waivers prescribed therein.

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5.2 Method of Distribution.

A. Except to the extent otherwise provided in Section
5.1F, the requirements of this Section 5.2 shall apply to any distribution of a
Participant's interest and will take precedence over any inconsistent
provisions of this Plan.

B. All amounts distributable to a Participant under this
ARTICLE V shall be distributed in the form of a Qualified Joint and Survivor
Annuity if required under Section 5.1F. If a Participant's benefit is not
required to be distributed in the form of a Qualified Joint and Survivor
Annuity, or if all or a portion of a Participant's benefit is required to be
distributed to an Alternate Payee, then benefits shall, subject to Section
5.1H4, be paid in a single lump sum or, at the election of the Participant or
Alternate Payee, as the case may be, in one or a combination of the following
optional forms selected by the Participant or Alternate Payee:

1. in installments over a period of years; or

2. a joint and survivor annuity with or without
a term certain; provided, however, that a joint and survivor annuity
optional form of benefit shall not be available as a method of
distribution with respect to the Alternate Payee and her subsequent
spouse.

A Participant or his designated beneficiary may, at
the time of his retirement, death, disability or termination of employment,
elect to be paid out in the form of Company Stock, provided that the value of
the Participant's account balance which he desires to convert to Company stock
equals or exceeds the market price of 100 shares of such Company Stock.

If a Participant fails to select a method of distribution,
benefits shall be paid in accordance with Sections 5.1F and 5.1H4.

C. If the amount standing to the credit of the
Participant is to be paid to the Participant other than in a lump sum payment,
payments shall be made accordingly and the entire amount distributable to such
Participant shall be placed in a Segregated Account or invested in an annuity,
as the case may be.

D. In addition to the net credit in a Participant's
account, the Participant may have an interest in a Contract. Whenever
distribution is required to be made other than in a lump sum, then in order to
accomplish a distribution in equal annual installments, or a distribution over
the remaining life of a Participant, or a distribution under any other approved
plan of life and annual payments, all or part of the amount standing to the
credit of a Participant may be used to convert any ordinary life policy into an
annuity contract, and after such conversion, the insurance company shall be
instructed to make payment of the cash value to the Participant by

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utilizing a mode of settlement which will result in the required annual or life
or combination distribution.

E. Whenever distribution is required to be made of a
Participant's vested interest in any Contract for any reason other than the
death of the Participant, then, notwithstanding anything herein to the
contrary, the Participant shall elect either to cause the Contract to be
conveyed and assigned to him, or cause the conversion of such Contract; and
thereupon, the Committee shall provide the Trustees with directions for
surrender, conversion, endorsement, assignment or splitting of such Contract,
in whole or in part. All Contracts which may be used to effect distribution
either over a period of years, or over life, or under a plan involving the
combination of life and annual payments, shall be irrevocably assigned to or
issued in the name of the Participant and shall contain such provisions as may
be required to make the distributions under such Contract consistent with
Sections 5.1F, 5.1G and 5.1H.

F. All distributions required under this ARTICLE V shall
be determined and made in accordance with Code Section 401(a)(9), including the
minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of
the Regulations as hereinafter provided:

1. If a Participant's benefit is to be
distributed in a form other than an annuity, the amount required to be
distributed for each calendar year, beginning with distributions for
the first distribution calendar year, must at least equal the quotient
obtained by dividing the Participant's benefit by the applicable life
expectancy. For calendar years beginning before January 1, 1989, if
the Participant's spouse is not the designated beneficiary, the method
of distribution selected must assure that at least 50% of the present
value of the amount available for distribution is paid within the life
expectancy of the Participant.

2. If the Participant's benefit is to be
distributed in the form of an annuity, the amount to be distributed
each calendar year, beginning with distributions for the first
distribution calendar year shall not be less than the quotient
obtained by dividing the participant's benefit by the lesser of (a)
the applicable life expectancy or (b) if the participant's spouse is
not the designated beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the
Regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in subparagraph 1
above as the relevant divisor without regard to section 1.401(a)(9)-2
of the Regulations.

3. The minimum distribution required for the
Participant's first distribution calendar year must be made on or
before the Participant's Required Beginning Date. The minimum
distribution for other calendar years, including the minimum
distribution for the distribution calendar year in which the
Participant's Required Beginning Date occurs, must be made on or
before December 31 of that distribution calendar year.

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4. For purposes of this Section 5.2F:

(a) The life expectancy of a Participant
shall be recalculated annually. The life expectancy of the
Participant's spouse or of any non-spouse Beneficiary shall
not be recalculated.

(b) Life expectancy and joint and last
survivor expectancy shall be computed using the expected
return multiples in Tables V and VI of Section 1.72-9 of the
Regulations.

(c) The term "Designated Beneficiary"
means (i) the spouse of a Participant in case of a Qualified
Joint and Survivor Annuity if the Participant and his spouse
shall have been married throughout the one year period ending
on his Required Beginning Date, or otherwise (ii) any
individual designated as a Beneficiary by the Employee in
accordance with Code Section 401(a)(9) and the Regulations
thereunder.

(d) Pursuant to the Regulations, any
amount paid to a child shall be treated as if it had been paid
to the surviving spouse if such amount will become payable to
the surviving spouse upon such child reaching majority (or
other designated event permitted under the Regulations).

(e) The term "applicable life
expectancy" means the life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the
Participant's (or Designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated the succeeding calendar year in which the
recalculation is being made. If distribution is in the form of
an immediate annuity purchased after the Participant's death
with the Participant's remaining interest, the applicable
calendar year is the year of purchase.

(f) The term "distribution calendar
year" means a calendar year for which a minimum distribution
is required. For distributions beginning before the
Participant's death, the first distribution calendar year is
the calendar year immediately preceding the calendar year
which contains the Participant's Required Beginning Date. For
distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 5.1D.

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5. Notwithstanding anything herein to the
contrary, if a Participant's Required Beginning Date is on or before
April 1, 1987 and such Participant is alive on December 31, 1987, the
Participant's first distribution calendar year, the amount of the
minimum distribution required for distribution calendar years 1985,
1986 and 1987, and the date when such minimum distribution must be
made shall be determined in accordance with Q&A I-2 and I-3 of Section
1.401(a)(9)-1 of the Regulations.

G. Eligible Rollover Distributions.

1. This Paragraph G applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this
Paragraph G. a Distributee may elect, at the time and in the manner prescribed
by the plan administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a direct rollover.

2. Definitions.

(a) "Eligible Rollover Distribution": An Eligible
Rollover Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).

(b) "Eligible Retirement Plan": An Eligible
Retirement Plan is an individual retirement account described in
Section 408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a)
of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement Plan is
an individual retirement account or individual retirement annuity.

(c) "Distributee": A Distributee includes an
Employee or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former Employee's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code,
are Distributees with regard to the interest of the spouse or former
spouse.

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(d) "Direct Rollover": A Direct Rollover is a
payment by the Plan to the Eligible Retirement Plan specified by the
Distributee.

H. Waiver of 30-Day Notice. If a distribution is one to
which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the notice required
under Section 1.411(a)-ll(c) of the Income Tax Regulations is given, provided
that:

(1) the Plan Administrator clearly informs the
Participant that the Participant has a right to a period of at least
30 days after receiving the notice to consider the decision of whether
or not to elect a distribution (and, if applicable, a particular
distribution option), and

(2) the Participant, after receiving the notice,
affirmatively elects a distribution.

5.3 Participant's Contribution Account. Every Participant
shall always have a 100% vested nonforfeitable interest in his Participant's
Contribution Account. The balance in the Participant's Contribution Account
shall be distributed to the Participant, his Beneficiary, legal representative
or relative as set forth in Sections 5.1 and 5.2 when the Participant's
employment with the Employer is terminated or by reason of retirement,
disability, death or any other event resulting in a distribution to the
Participant hereunder.

5.4 Segregated Accounts. If distribution of benefits is
not made in one lump sum upon retirement, death or termination of participation
in the Plan, the Committee shall direct the Trustees to segregate the entire
amount distributable to the Participant into a Segregated Account or to invest
such Segregated Account as a part of the general assets of the Fund. The option
selected by the Committee shall apply in all future instances in which
distribution is not to be made in one lump sum. If not invested in the Fund
generally, such Segregated Account shall be invested in government bonds,
savings certificates or accounts or other similar investments. The net income
or net loss of each Segregated Account for each Plan Year and the net
appreciation or net depreciation of each Segregated Account for each Plan Year
shall be reflected on the credit balance of that Segregated Account as of the
Valuation Date and as of the date of any final distribution from such
Segregated Account. Any net income and any net appreciation so allocated to the
Segregated Account of a Participant shall be paid to such Participant at the
time and in the manner provided for herein.

5.5 Location of Terminated Participant or Beneficiary
Unknown. Notwithstanding anything to the contrary in the Plan, if the Committee
shall not be able to locate a Terminated Participant or his Beneficiary
hereunder by sending a letter by registered mail, return receipt requested, to
the Social Security Administration for forwarding to such Terminated
Participant or his Beneficiary, then such Terminated Participant or his
Beneficiary shall forfeit such Participant's Accrued Benefit. Such forfeiture
shall be effective as of the later of (i) the last

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day of the Plan Year in which occurs the second anniversary of the date such
letter was mailed to the Social Security Administration, or (ii) the last day
of the Plan Year in which the Participant has incurred his fifth consecutive
One-Year Break in Service. Such forfeitures shall be allocated to the Employer
Contribution Accounts of the Active Participants for such Plan Year in the
proportion that each Active Participant's Compensation for the Plan Year bears
to the total Compensation of all Active Participants for such Plan Year. If, in
a subsequent Plan Year, the Committee shall locate such Participant or his
Beneficiary, then any amounts so forfeited shall be restored by Employer
contributions to the accounts of such Participant from which they were
forfeited.

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ARTICLE VI

AMENDMENT OF PLAN

6.1 Right to Amend. To provide for contingencies which may require
the clarification, modification or amendment of the Plan, the Employer reserves
the right to amend any of the provisions of this Plan at any time.

6.2 Limitations upon Right to Amend. Notwithstanding the
foregoing, the Employer shall not have the right to amend the Plan in any way
which will:

A. Diminish any right or benefit under the Plan which
shall have the effect of depriving any Active, Inactive, Retired or Terminated
Participant or his Beneficiary of any Accrued Benefit;

B. Divert the Fund to purposes other than for the
exclusive benefit of Participants and their Beneficiaries;

C. Alter the basic purpose of the Plan;

D. Give the Employer any rights to assets contributed to
the Fund or in any assets of the Fund; or

E. Alter the duties or liabilities of the Plan
Administrator or the Committee without their prior written consent.

6.3 Amendment Binding on All Participating Employers. Any
amendment made to this Plan by Ingles Markets, Incorporated shall be binding
upon all Employers participating hereunder. This Section 6.3 may be changed at
any time by any Employer with respect to that Employer only by giving notice to
all Employers that such Employer has a right to amend the Plan with respect to
such Employer without affecting Plan provisions in effect for other Employers.

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ARTICLE VII

TOP-HEAVY PLANS

7.1. Top-Heavy Plan. This Plan will be a Top-Heavy Plan for a Plan
Year if the Employer has not maintained any other qualified retirement plan or
simplified employee pension plan and the value of the accounts of Key
Participants under the Plan exceeds 6070 of the value of the accounts of all
Participants or Beneficiaries under the Plan, determined in accordance with the
rules of Section 7.3 hereof.

7.2 Top-Heavy Group of Plans. This Plan will be a Top-Heavy Plan
for a Plan Year if the sum of (i) the value of accounts of Key Participants
under this Plan, (ii) the value of the accounts of Key Participants under any
other qualified defined contribution plan maintained by the Employer, (iii) the
present value of accrued benefits of Key Participants under any qualified
defined benefit plan maintained by the Employer, plus (iv) the aggregate
Employer contributions on behalf of Key Participants to any simplified employee
pension plan maintained by the Employer exceeds 60% of a similar sum computed
with respect to all Participants and Beneficiaries under such plans. Each plan
of the Employer in which a Key Participant participates and each other plan of
the Employer which enables this Plan to meet the requirements of Code Section
401(a) or 410 is required to be aggregated with this Plan for purposes of
determining whether this Plan is a Top-Heavy Plan. The Employer may treat any
plan not required to be aggregated as being part of the group of plans
maintained by the Employer if such group would, taking such plan into account,
continue to meet the requirements of Code Sections 401(a)(4) and 410.

7.3 Rules for Determining Top-Heavy Plan Status. The following
rules shall apply for purposes of determining whether this Plan is a Top-Heavy
Plan for a Plan Year:

A. If Section 7.1 applies, the value of accrued benefits
and accounts shall be determined as of the Determination Date. If Section 7.2
applies, the value of accrued benefits and accounts shall be determined for
each plan that is a part of the Top-Heavy group of plans as of the
Determination Date for each such plan that occurs in the same calendar year as
the Determination Date for this Plan.

B. The value of accrued benefits for any qualified
defined benefit pension plan maintained by the Employer that is a part of the
Top-Heavy group of plans shall be determined as of the most recent valuation
date for cost determination within the twelve (12) month period preceding the
Determination Date for any such plan.

C. The value of accrued benefits and accounts shall
include the amount of all distributions made to a Participant during the five
(5) year period ending on the Determination Date. The preceding sentence shall
also apply to distributions under a terminated plan which, if it

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had not been terminated, would have been required to be aggregated with this
Plan for purposes of determining whether this Plan is a Top-Heavy Plan.

D. The present value of a Participant's accrued benefit
and accounts shall be determined without regard to any rollover contribution to
the Plan (or direct transfer from another qualified trust), if such rollover or
transfer was both (i) initiated by the Participant, and (ii) made from a plan
maintained by an employer that is not an Employer hereunder.

E. The value of a Participant's accrued benefit and
accounts shall be determined without regard to such Participant's contributions
that are deductible by such Participant under Code Section 219, and the
earnings thereon.

F. The value of a Participant's accrued benefit and
accounts for a Plan Year shall not be counted for any purpose if he is not a
Key Participant for such Plan Year but he was a Key Participant for a prior
Plan Year.

G. For purposes of this Article, the present value of
accrued benefits under any defined benefit plan shall be determined by using
the same assumptions used in determining actuarial equivalence under such
defined benefit plan.

H. The value of accrued benefits and accounts shall be
determined without regard to the accrued benefit or account of any person who
has not performed any services for the Employer at any time during the five (5)
year period ending on the Determination Date.

I. The accrued benefit of any Employee (other than a Key
Employee) shall be determined:

(i) under the method which is used for accrual
purposes for all plans of the Employer, or

(ii) if there is no method described in clause
(i), as if such benefit accrued not more
rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C).

7.4 Very Top-Heavy Plan. This Plan will be a Very Top-Heavy Plan
for a Plan Year if it would be considered a Top-Heavy Plan under Section 7.1 or
7.2 if "90%" were substituted for "60%" in Sections 7.1 and 7.2.

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<PAGE> 79

7.5 Alternate Vesting Schedule. In Top-Heavy Plan Years the
following vesting schedule will apply instead of that contained in ARTICLE V:

<TABLE>
<CAPTION>
Years of Service Vested-Nonforfeitable Nonvested-Forfeitable
Percentage Percentage
<S> <C> <C>
Less than 2 0% 100%

2 20% 80%

3 40% 60%

4 60% 40%

5 80% 20%

6 or more 100% 0%
</TABLE>

The above schedule applies only to Top-Heavy Plan Years. If
the Plan subsequently returns to non-Top-Heavy status, the Participant's vested
interest will again be determined under ARTICLE V; provided, however, that a
Participant's vested percentage may not be reduced from any level attained in
any prior Plan Year.

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ARTICLE VIII

TERMINATION OF PLAN

8.1 Right to Terminate. It is the present intention of the
Employer to maintain the Plan throughout its corporate existence. Nevertheless,
the Employer reserves the right, at any time, to terminate the Plan or to
temporarily suspend contributions for a fixed or indeterminate period of time
upon giving to the Committee notice in writing of its intention so to do. In
the event of the termination of this Plan, the liability or any obligation of
the Employer hereunder shall cease.

8.2 Adoption of Plan by Successor. In the event of the merger or
consolidation of the Employer, or the transfer of the assets of the Employer to
another corporation, association, or business organization, the Plan may be
adopted by the surviving corporation, association, or other business
organization which employs a substantial number of the Participants of the
Plan. Such adoption of the Plan shall be expressed in an agreement between such
surviving or other corporation, association, or business organization and the
Committee under which such other corporation, association, or business
organization adopts the Plan with respect to the Participants employed by it.
If, pursuant to the terms hereof, the Plan is adopted by any other corporation,
association, or business organization, such other corporation, association, or
business organization shall be deemed to succeed to the position of the
Employer under the Plan. Any Participants under the Plan who do not become
Employees of such other corporation, association, or business organization
shall have the rights provided in this Plan for Employees whose employment is
terminated after their Employer Contribution Account becomes 100%
nonforfeitable.

8.3 Multiple Participating Employers. If there is more than one
participating Employer, upon termination of the Plan with respect to all, or
any one or more of the participating Employers, the Committee shall determine
in an equitable manner from its accounts for each participating Employer
(taking into account the relative contributions and increments to the Fund and
the disbursements therefrom in respect to each of the participating Employers)
the proportionate share of the value of the assets of the Fund attributable to
the participating Employer or Employers for whom the Plan is then being
terminated, after providing for a reserve to cover the expense incident to such
termination. Allocation and distribution of such proportionate share or shares
of the value of the assets of the Fund attributable to each of the
participating Employers for which the Plan is then being terminated shall then
be made to the participants of such terminating Employer or Employers, pursuant
to the directions of the Committee as specified in the Plan. The Plan shall
continue in full force and effect with respect to the participating Employer or
Employers, if any, for which the Plan is not then being terminated.

8.4 Allocation on Termination of Plan or Permanent Discontinuance
of Contributions. On the partial or complete termination of the Plan, or upon
permanent discontinuance of

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<PAGE> 81

contributions by the Employer, the accounts of all affected Participants who
are employed by the Employer on the date of such termination or discontinuance
of contributions shall thereupon become nonforfeitable. As of the date of
partial or complete termination or upon permanent discontinuance of
contributions by the Employer, which shall be deemed to occur no later than the
last day of the Plan Year for which a substantial contribution was made under
the Plan, all assets in the Suspense Account shall be allocated to the accounts
of the Participants in accordance with the provisions of Sections 4.4 and 4.5
except that:

A. The term "Valuation Date" shall be considered to be
the last day of the month preceding such termination; and

B. Employer contributions in the Suspense Account shall
be allocated in accordance with the provisions of Section 4.2 as of such
Valuation Date based on Compensation during the Plan Year through the Valuation
Date.

8.5 Manner of Distribution. To the extent no discrimination in
value results, after termination of the Plan any distribution may be made in
accordance with ARTICLE V hereof, in whole or in part, in cash, in securities
or other assets in kind, or in nontransferable annuity contracts, provided that
any insurance policies which may then comprise part of the Fund assets, other
than key man insurance, shall be distributed to the respective insureds. The
Plan shall continue until the Fund has been entirely transferred, paid over and
distributed pursuant to the directions of the Plan Administrator. In the event
the Committee shall not be able to locate a Terminated Participant or his
Beneficiary pursuant to Section 5.4, the Accrued Benefit of such Participant
shall be paid into an escrow account in the name of the Employer. In the event
of the dissolution, merger or consolidation of the Employer, the members of the
last Board of Directors of the Employer shall thereafter have all of the rights
and powers exercisable by the Employer hereunder, and any certificate,
instrument or direction signed by such person or persons shall have the same
effect as if signed by the Employer.

8.6 Merger or Consolidation of Plan or Transfer of Plan Assets. In
the event of any merger or consolidation of the Plan, or transfer in whole or
in part of the assets and liabilities of the Fund to another trust fund held
under any other plan of deferred compensation maintained or to be established
for the benefit of all or some of the Participants of this Plan, the assets of
the Fund applicable to such Participants shall be transferred to the other
trust fund only if:

A. Each Participant would (if either this Plan or the
other plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated); and

B. Not less than 30 days prior to such merger,
consolidation or transfer, the Employer shall file, if applicable, an actuarial
statement of valuation in accordance with Code

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Section 6058(b) to the effect that the requirements of paragraph A will be
complied with upon such merger, consolidation or transfer; and

C. Resolutions of the Board of Directors of the Employer
and any new or successor employer are adopted that authorize such transfer of
assets of the affected Participants; and, in the case of the new or successor
employer of the affected Participants, its resolution shall include an
assumption of liabilities with respect to such Participants' inclusion in the
new employer's plan; and

D. Such other plan and trust are qualified under Code
Sections 401(a) and 501(a).

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ARTICLE IX

ADMINISTRATION

9.1 Appointment of Committee. The Plan shall be administered by
the Committee. The Committee, consisting of at least two persons, shall be
appointed by and serve at the pleasure of the Board of Directors of the
Employer to assist in the administration of the Plan. All usual and reasonable
expenses of the Committee may be paid in whole or in part by the Employer and
any expenses not so paid shall be paid by the Trustees out of the principal or
income of the Fund. No member of the Committee who is an Employee shall receive
compensation with respect to his services for the Committee.

9.2 Notification to Participants. The Committee shall be
responsible for certain requirements placed upon the Employer by the Act,
including the following:

A. Plan Summary and Forms. The Committee shall furnish
to each Participant and to each Beneficiary receiving benefits under the Plan,
a summary of the Plan and the periodic revisions of the summary, within the
time limits specified in the Act. The Committee's responsibility shall include
notifying Participants of amendments to the Plan and of applications to be
filed with the Internal Revenue Service when determination letters are
requested with respect to the qualification of the Plan. The Committee shall
also furnish to each Participant, and to each Beneficiary receiving benefits
under the Plan, a summary of the annual report filed with the Department of
Labor, and shall advise individuals of the procedures to be followed and the
charges levied for complete copies of forms filed with the Department of Labor
and instruments under which the Plan is established and operates.

B. Account Balances. Within a reasonable time after the
close of each Plan Year, the Committee shall furnish each Participant and
Beneficiary with a summary of the annual report prepared with respect to the
Fund together with an individual report disclosing the amounts in such
Participant's accounts, and the Participant's vested percentage of his Employer
Contribution Account.

C. Notification Prior to Termination Date. Within a
reasonable period, subject to Treasury and/or Labor Department Regulations
which may be issued under the Act, before the date a Participant is entitled to
receive benefits under the Plan, the Committee shall supply the Participant
with a written explanation of the nature, form and amount of the benefit to
which he is entitled. Reference to the methods of payment that are available
under the Plan shall be included in the written explanation; and upon the
request of the Participant, the Committee shall furnish him with a written
explanation of the features of and amounts applicable to such Participant's
accounts under any such option.

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<PAGE> 84

D. Claims Procedure. The Committee shall make a
determination as to the right of any person to a benefit, and shall afford any
person dissatisfied with such determination the right to a hearing thereon. Any
denial by the Committee of the claim for benefits under the Plan by a
Participant or Beneficiary shall be stated in writing by the Committee and
delivered or mailed to the Participant or Beneficiary and such notice shall set
forth the specific reasons for the denial, written to the best of the
Committee's ability in a manner that may be understood without legal or
actuarial counsel. In addition, the Committee shall afford a reasonable
opportunity to any Participant whose claim for benefits has been denied for a
full and fair review by the Employer of the decision denying the claim pursuant
to Labor Department Regulations.

9.3 Records and Reports. The Employer shall delegate to the
Committee such responsibilities as it deems appropriate in order to comply with
Treasury and/or Labor Department Regulations issued under the Act relating to
records of Participants' service, Participants' account balances and the
nonforfeitable percentage of such accounts, annual registration with the
Internal Revenue Service and annual reports to the Department of Labor.

9.4 Other Committee Powers and Duties. Subject to the provisions
of Treasury and/or Labor Department Regulations under the Act, the Committee
shall have such other duties and powers as may be necessary to discharge its
duties hereunder, including, but not limited to, the following:

A. To receive from the Employer and from Participants
such information as shall be necessary for the proper administration of the
Plan;

B. To furnish the Employer, upon request, such annual
reports with respect to the administration of the Plan as are reasonable and
appropriate;

C. To receive and review reports of the financial
condition and of the receipts and disbursements of the Fund from the Trustees;

D. To appoint or employ individuals to assist in the
administration of the Plan and any other agents it deems advisable, including
legal and actuarial counsel.

The Committee shall have no power to add to, subtract
from or modify any of the terms of the Plan, or to change or add to any
benefits provided by the Plan, or to waive or fail to apply any requirements of
eligibility for benefits under the Plan. However, in reviewing claims, the
Employer has the discretion to accept or deny claims for benefits based on its
good faith interpretation of the terms of the Plan.

9.5 Committee Procedures. The Committee may act at a meeting or in
writing without a meeting. The Committee shall elect one of its members as
chairman and another as secretary and advise the Trustees of such election in
writing. The secretary shall keep a record of all meetings and forward all
necessary communications to the Trustees. The Committee may adopt

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such bylaws and regulations as it deems desirable for the conduct of its
affairs. All decisions of the Committee shall be made by majority vote. The
Committee may adopt such rules as it deems necessary or desirable, subject to
the provisions of Treasury and/or Labor Department Regulations under the Act.
All rules and decisions of the Committee shall be uniformly and consistently
applied to all persons in similar circumstances. The Committee shall be
entitled to rely upon information furnished by the Employer and the legal or
actuarial counsel of the Employer.

9.6 Authorization of Benefit Payments. The Committee shall issue
directions to the Trustees concerning all benefits which are to be paid from
the Fund pursuant to the provisions of the Plan. The Committee shall keep on
file, in such manner as it may deem convenient or proper, all reports from the
Trustees.

9.7 Benefit Checks. If, in the Committee's judgment, any person to
whom benefits are payable is unable to care for his affairs because of illness,
accident or other incapacity, the Committee may authorize his benefits to be
paid to any person who, or institution which, in the Committee's judgment, is
responsible for caring for the person entitled to such benefit. If an amount
becomes distributable to a minor or a person under legal disability, the
Committee may direct that such distribution may be made to such person without
the intervention of any legal guardian or conservator, or to a relative of such
person for the benefit of such person, or to the legal guardian or conservator
of such person. Any such distribution shall constitute a full discharge with
respect to the Committee as well as the Trustees, and the Committee and the
Trustees shall not be required to see to the application of any distribution so
made.

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ARTICLE X

GUARANTEES AND LIABILITIES

10.1 Nonguarantee of Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Employer and any
Employee, or as a right of any Employee to be continued in the employment of
the Employer or as a limitation of the right of the Employer to discharge any
of its Employees with or without cause.

10.2 Rights to Fund Assets. No Participant, Retired Participant,
Terminated Participant or Beneficiary shall have any right to, or interest in,
any part of the Fund upon termination of employment or otherwise, except as
specifically provided herein. All benefits provided by the Plan shall be paid
solely out of the assets of the Fund.

10.3 No Diversion of Funds. The Fund shall be maintained for the
exclusive benefit of Participants, Retired Participants, Terminated
Participants and their Beneficiaries, and it shall be impossible for any part
of the Fund to be used for or diverted to any purpose other than the exclusive
benefit of such persons, except to the extent that:

A. Such portion of the Fund may be applied to pay
expenses of the Committee and the Trustees as provided herein and in the Trust;
and

B. If a contribution, which is made by reason of a
mistake of fact or in accordance with Section 3.1A, is attributable to a good
faith mistake of fact or a good faith mistake in determining the deductibility
of the contribution, then the net excess contribution (as hereinafter defined)
shall be returned to the Employer if it is returned within one year of the
mistaken payment of the contribution or the disallowance of the deduction, as
the case may be. The "excess contribution" shall equal the excess of such
contribution over the amount that would have been contributed had there not
occurred a mistake of fact or mistake in determining the deductibility of the
contribution. The "net excess contribution" shall equal the excess
contribution reduced by: (a) any losses attributable to such excess
contribution and (b) the amount necessary to prevent the balance of the
individual account of any participant from being reduced below the balance that
would have been in the account had the mistaken amount not been contributed.
Earnings attributable to the excess contribution shall not be returned to the
Employer.

C. Upon the termination of the Plan, excess Annual
Additions being held in the Code Section 415 suspense account in accordance
with the provisions of Section 4.8A shall be returned to the Employer. Except
as so provided in paragraphs B and C above, it shall be impossible for any part
of the Fund to revert to or inure to the benefit of the Employer.

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10.4 Plaintiff denies the allegations contained in Paragraph
Nonalienation of Benefits.

A. Except as otherwise provided by law, benefits payable
under this Plan shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any kind, either voluntary or involuntary, prior to
actually being received by the person entitled to the benefit under the terms
of the Plan, and any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, charge or otherwise dispose of any right to benefits payable
hereunder shall be void. The Fund shall not in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements or torts of any
person entitled to benefits hereunder.

B. The above paragraph shall apply to the creation,
assignment or recognition of a right to any benefit payable to a Participant
according to a Domestic Relations Order; provided, however, in no event shall
it apply to a Qualified Domestic Relations Order.

10.5 Domestic Relations Orders.

A. If a Plan representative receives any Domestic
Relations Order, then the Committee shall promptly notify the Participant and
each Alternate Payee of the receipt of such order and shall determine the
qualified status of the Domestic Relations Order in accordance with the
following procedure:

1. The Plan Administrator shall refer to the
Domestic Relations Order issued by the state court of jurisdiction to
legal counsel for the Plan to render an opinion as to whether the
Domestic Relations Order is a Qualified Domestic Relations Order.

2. Upon receiving counsel's opinion as to the
status of the Domestic Relations Order, the concerned Participant and
each Alternate Payee, or his designated representative, shall be
furnished a copy of such legal opinion. If it has been determined that
the Domestic Relations Order is a Qualified Domestic Relations Order,
the terms and directions will be promptly communicated to each payee
or his designated representative at the address specified in the
Domestic Relations Order.

3. The Plan Administrator shall, as soon as
practicable, ascertain the dollar amount payable to each Alternate
Payee pursuant to the Domestic Relations Order and thereafter disburse
the amounts payable to each Alternate Payee in accordance with the
terms of the Plan and the Qualified Domestic Relations Order. If there
is to be a delay for any reason in making payments of the amounts due
to an Alternate Payee, the Plan Administrator shall direct that the
amount payable be placed into a separate account within the Fund in
the name of the Alternate Payee, and such Alternate Payee shall have
the right, exercisable pursuant to such uniform administrative
procedures as the Committee may adopt, to direct the Trustee to invest
the Alternate Payee's separate account in Portfolio Investments
selected by the Alternate Payee; provided, however, that

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if no such investment direction is received from the Alternate Payee,
such separate account shall be invested proportionately in the same
Portfolio Investments as selected by the Participant for his accounts.

B. During any period in which the issue of whether a
Domestic Relations Order is a Qualified Domestic Relations Order is being
determined (by the Committee, by a court or otherwise), the Committee shall
direct the Trustees to place in a separate account in the Trust in the name of
the Alternate Payee, the amounts which would have been payable to the Alternate
Payee during such period if the order had been determined to be a Qualified
Domestic Relations Order. During such determination period, such separate
account shall remain invested in the same Portfolio Investments as selected by
the Participant with respect to his accounts.

C. If within eighteen (18) months the order (or
modification thereof) is determined to be a Qualified Domestic Relations Order,
the Committee shall direct the Trustees to pay such amounts (adjusted for any
income or loss thereon) to the person(s) entitled thereto in accordance with
the terms of the Plan and the Qualified Domestic Relations Order. If within
eighteen (18) months it is determined the order is not a Qualified Domestic
Relations Order or the issues as to whether such order is a Qualified Domestic
Relations Order are not resolved, the Committee shall direct the Trustees to
return the amounts (adjusted for any income or loss thereon) being held in the
name of the Alternate Payee to the Participant's account.

D. Any order determined to be a Qualified Domestic
Relations Order after the close of the eighteen (18) month period shall be
applied prospectively only.

E. For purposes of Paragraphs C and D above, the
18-month period referred to therein shall begin with the date on which the
first payment would be required to be made under the Domestic Relations Order.

F. In the event the Domestic Relations Order is later
determined not to be a valid Qualified Domestic Relations Order, any amount
being held in an account for the Alternate Payee shall be restored or
distributed to the Participant.

10.6 Loans. Loans from the Plan may be made to Participants,
Retired Participants or Beneficiaries (hereinafter collectively referred to as
"Borrower" or "Borrowers") in accordance with the following terms and
conditions:

A. Loans shall be made available to all Borrowers on a
reasonably equivalent basis without regard to any individual's race, color,
religion, sex, age or national origin. In making any decision with regard to
making any loan, consideration shall be given only to those factors, such as
creditworthiness and financial need, which would be considered in a normal
commercial setting by an entity in the business of making similar loans. No
loan for less than $500 may be made to any Borrower.

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B. Loans shall not be made available to Borrowers who
are Highly Compensated Employees in an amount greater than the amount made
available to other Borrowers. Loans may be obtained only from a Borrower's
Qualified Deferral Account. The maximum amount of a loan to any Borrower, when
added to the outstanding balance of all other loans to such Borrower, shall not
exceed the lesser of: (i) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans during the one year period ending on the day
before the loan is made, over the outstanding balance of loans from the Plan on
the date the loan is made, or (ii) one-half (1/2) of such Borrower's vested
nonforfeitable interest in his Qualified Deferral Account under the Plan. For
purposes of this Paragraph, all loans from all plans maintained by the Employer
or a related employer within the meaning of Code Sections 414(b), (c), (m) or
(o) shall be aggregated.

C. Each loan shall bear interest at a reasonable rate to
be fixed by the Committee. The rate of interest shall provide the Plan with a
return commensurate with the prevailing interest rates being charged by persons
in the business of lending money for loans under similar circumstances. The
Committee shall not discriminate among Borrowers regarding interest rates;
however, loans granted at different times may bear different interest rates if,
in the opinion of the Committee, the difference in interest rates is justified
by a change in general economic conditions.

D. Each loan shall be secured by the assignment of the
Borrower's entire right, title and interest in and to such Borrower's vested
nonforfeitable interest in the Fund, supported by the Borrower's promissory
note for the amount of the loan, including interest, payable to the order of
the Trustees.

E. A Participant must obtain the consent of his or her
spouse, if any, to use his account balance as security for the loan unless the
Participant shall establish to the satisfaction of the Trustees that such
consent may not be obtained because there is no spouse, the spouse cannot be
located or such other circumstances prescribed by the applicable Regulations.
Spousal consent shall be obtained no earlier than the beginning of the 90-day
period that ends on the date on which the loan is to be so secured. The consent
must be in writing, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting spouse or any subsequent
spouse with respect to that loan. A new consent shall be required if the
Participant's account balance is used as security for renegotiation, extension,
renewal or other revision of the loan.

If a valid spousal consent has been obtained, then,
notwithstanding any other provision of this Plan, for the purposes of
determining the amount of a Qualified Joint and Survivor Annuity under Section
5.1F or a Qualified Preretirement Survivor Annuity under Section 5.1G, the
Accrued Benefit of a Participant shall be reduced by any security interest held
by the Trustees by reason of a loan outstanding to the Borrower at the time of
death or distribution if the reduction is used as repayment of the loan.

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F. Each loan shall require that repayment (principal and
interest) be amortized in level payments, not less frequently than quarterly.
The period of repayment for any loan shall be arrived at by mutual agreement
between the Committee and the Borrower, but in no event shall such period
exceed five (5) years.

G. An application for a loan by a Borrower shall be made
in writing to the Committee. The application shall specify the purpose of the
loan and the desired amount and repayment period of the loan. The Committee
shall investigate each application for a loan. All loans shall be subject to
the approval of the Committee. Within thirty (30) days after the Committee
receives the application, it shall give consideration to and arrive at a
decision upon said application. Notice of the decision of the Committee shall
be furnished to the Participant within forty-five (45) days after the receipt
of the application by the Committee. The Committee shall provide to every
Participant who is denied a loan written notice setting forth the reason or
reasons for denial.

H. Loans shall be permitted for any purpose.

I. Notwithstanding any provision of the Plan which may
be to the contrary, (i) the entire principal balance of any loan from the Plan
and any accrued interest thereon shall become immediately due and payable at
such time as distributions under the Plan are scheduled to commence to a
Borrower, or, at the option of the Trustees, (ii) any distribution to be made
to a Borrower pursuant to ARTICLE V hereof may, without the Borrower's consent
or action, be applied against the outstanding balance of any unpaid loan to
such Borrower.

J. In the event of a default on any loan, the Trustees
shall be authorized to have the Employer withhold the amount in default from
the Borrower's pay and to pay over such amount to the Trustees to be applied
against such loan.

K. The Committee shall be authorized to establish
additional procedures for the implementation of the loan program hereunder.

L. In the event a loan is made to a Borrower,
withdrawals under Section 5.10 shall be limited such that no withdrawals shall
result in the Participant's vested nonforfeitable interest in his Accrued
Benefit under the Plan being less than two (2) multiplied by the total
outstanding balance of loans from this Plan on the date of such withdrawal.

10.7 Allocation of Responsibility Among Employer. Committee and
Trustees for Plan and Trust Administration. The Employer, Committee and
Trustees (hereinafter for purposes of this Section referred to as the
"Fiduciaries") shall have only those specific powers, duties, responsibilities
and obligations as are specifically given them under this Plan or the Trust. In
general, the Employer shall have the sole responsibility for making the
contributions provided for under Section 3.1, reviewing Participant or
Beneficiary claims as provided under Section 9.2D, and shall have the sole
authority to appoint and remove the Trustees, members of the

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Committee and to amend or terminate, in whole or in part, this Plan or the
Trust. The Committee shall have the sole responsibility for the administration
of this Plan, which responsibility is specifically described in this Plan and
the Trust. The Trustees shall have the sole responsibility for the
administration of the Trust and the management of the assets held under the
Trust, all as specifically provided in the Trust. Each Fiduciary warrants that
any directions given, information furnished, or action taken by it shall be in
accordance with the provisions of this Plan or the Trust, as the case may be,
authorizing or providing for such direction, information or action.
Furthermore, each Fiduciary may rely upon any such direction, information or
action of another Fiduciary as being proper under this Plan or the Trust, and
is not required under this Plan or the Trust to inquire into the propriety of
any such direction, information or action. It is intended under this Plan and
the Trust that each Fiduciary shall be responsible for the proper exercise of
its own powers, duties, responsibilities and obligations under this Plan and
the Trust and shall not be responsible for any act or failure to act of another
Fiduciary. No Fiduciary guarantees the trust Fund in any manner against
investment loss or depreciation in asset value.

10.8 Bonding. All members of the Committee, and every individual
officer or Employee designated by the Employer to direct the Committee and/or
the Trustees with respect to the receipt, handling, disbursement, or other
exercise of the custody or control of the funds or other property held under
the Plan shall be bonded to the extent required by the Act.

10.9 Guarantees to Participants. No member of the Committee and no
individual officer or Employee designated by the Employer to direct the
Committee or the Trustees shall (i) fail or refuse to comply with a request to
furnish information to a Participant or Beneficiary that is required to be
furnished under the Plan or pursuant to the Act and that is reasonably within
his control (such information to be delivered or mailed by first class mail to
the last known address of the requesting Participant or Beneficiary within 30
days after receipt of the request) or (ii) restrain, coerce, intimidate, or
attempt to restrain, coerce or intimidate any Participant or Beneficiary for
the purpose of interfering with or preventing the exercise of any right to
which he is or may become entitled under the Plan or pursuant to the Act.

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ARTICLE XI

MISCELLANEOUS

11.1 Governing Laws. This Plan shall be construed and enforced
under the Act and the laws of the State of North Carolina and all provisions
hereof shall be administered in accordance with the provisions of the Act and
according to the laws of the State of North Carolina, provided that in case of
conflict, the provisions of the Act shall control.

11.2 Corporate Action. Whenever the Employer, under the terms of
this Plan, is permitted or required to do or perform any act, it shall be done
and performed by the Board of Directors of the Employer, or an Executive
Committee thereof, and shall be evidenced by proper resolutions certified by
the Secretary of either the Employer or such Executive Committee.

11.3 Alternative Acts. In the event it becomes impossible for the
Employer or the Committee to perform any act required by this Plan, then the
Employer or the Committee may perform such alternative act which most nearly
carries out the intent and purpose of this Plan.

11.4 Interpretation. This Plan has been executed for the exclusive
benefit of the Participants and their Beneficiaries. So far as possible, this
Plan shall be interpreted and administered in a manner consistent with this
intent and with the intention of the Employer that this Plan shall at all times
fully comply with the requirements of the Act. Neither the Employer nor the
Committee shall exercise any power or right to do or perform any act which is
in conflict with or violates the Act, and/or the Regulations construing the Act
which now exist or may be hereafter adopted by the Treasury and/or Labor
Departments. Any power or right granted under this Plan or retained by the
Employer shall be void to the extent that its exercise or retention shall
violate the Act. The Employer and the Trustees shall make any and all
retroactive amendments to this Plan and the Trust that are required under the
Act or under Treasury and/or Labor Department Regulations in order to establish
and maintain this Plan and the Trust in conformity with the Act as a qualified
retirement plan and trust pursuant to Code Sections 401(a) and 501(a).

11.5 Gender and Tense. All pronouns and all variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identity of the person, persons or entity may require.

11.6 Title Headings. The headings in this Plan are solely for the
convenience of reference and shall not affect its interpretation.

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<PAGE> 1

Exhibit 10.4
AMENDED AND RESTATED
INGLES MARKETS, INCORPORATED
1991 NONQUALIFIED STOCK OPTION PLAN

THE INGLES MARKETS, INCORPORATED 1991 NONQUALIFIED STOCK OPTION
PLAN is amended and restated effective as of August 6, 1991.

W I T N E S S E T H

WHEREAS, on August 6, 1991, Ingles Markets, Incorporated, a North
Carolina corporation ("Ingles") adopted the INGLES MARKETS, INCORPORATED 1991
NONQUALIFIED STOCK OPTION PLAN (the "Plan"); and

WHEREAS, the Board of Directors of Ingles deems it to be in the
best interests of Ingles to amend and restate the Plan; and

WHEREAS, the amendment and restatement of the Plan has been
approved by unanimous written consent of the Board of Directors without a
meeting; and

WHEREAS, any reference herein to the "Company" shall be deemed to
include Ingles and its subsidiaries, which subsidiaries, as of the date of the
adoption of the Plan, include Milkco, Inc., Sky King, Inc. and Ingles Markets
Investments, Inc.

NOW, THEREFORE, the terms of the Plan are as follows:

1. PURPOSES OF THE PLAN

The purposes of the Plan are (a) to insure the retention of
executive personnel and key employees as that term is defined in Article 3
below; (b) to attract new executive personnel and other key employees; and (c)
to provide incentive to all such personnel to devote their utmost effort and
skill to the advancement and betterment of the Company, by permitting them to
participate in the ownership of the Company and thereby in the success and
increased value of which they have helped to produce.

It is intended that options issued pursuant to this Plan (the
"Options") shall not constitute incentive stock options within the meaning of
Section 422A of the Internal Revenue Code of 1986, as now or hereafter amended
(the "Code"); rather, the Options are intended to constitute nonqualified stock
options.

<PAGE> 2

2. ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Audit/Compensation Committee
of the Company's Board of Directors (hereinafter called the "Committee"). The
Committee shall hold meetings at such times and places as it may determine.
The Committee shall from time to time at its discretion determine which key
employees shall be granted Options and the amount of stock covered by such
Options. Members of the Committee shall not be eligible to participate in this
Plan.

The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be final unless
otherwise determined by the Board of Directors. No member of the Committee or
the Board of Directors shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under it.

3. ELIGIBILITY

Options may be granted only to salaried employees who are officers
or who are employed in an executive, administrative, managerial or professional
capacity by the Company. An Option may be granted to a director of the Company
provided that the director is also an officer or salaried employee and provided
the director is not a member of the Committee.

4. SHARES SUBJECT TO THE PLAN

As of August 6, 1991, the date of the Company's adoption of this
Ingles Markets, Incorporated 1991 Nonqualified Stock Option Plan, the aggregate
number of shares which may be issued under Options shall not exceed 1,000,000
shares of the Company's $.05 par value Class A Common Stock (the "Class A
Stock").

If any Option or portion thereof shall lapse by the failure of the
optionee or his heirs or personal representative to exercise the same or shall
be surrendered by such persons, the Committee shall have the power to grant
additional Options in lieu of those so lapsed or surrendered. In the event
that any outstanding Option under the Plan for any reason expires or is
terminated, the shares of Class A Stock allocable to the unexercised portion of
such Option may again be subjected to an Option under the Plan.

5. TERMS AND CONDITIONS OF OPTIONS

Stock Options granted pursuant to the Plan shall be authorized by
the Committee and shall be evidenced by agreements in such form as the
Committee shall from time to time approve, which

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<PAGE> 3

agreements shall comply with and be subject to the following terms and
provisions:

(a) Number of Shares.

Each Option shall state the number of shares to which it
pertains.

(b) Option Price.

Each Option shall state the option price, which shall not
be less than 100% of the fair market value of the shares of
the Company's Class A Stock on the date of the granting of
the Option. The fair market value of the Company's Class A
Stock for Options granted on the effective date of a public
offering of such stock shall be the public offering price.
In the event that the Company's Class A Stock is listed
upon an established stock exchange, such fair market value
shall be deemed to be the closing price of the Company's
Class A Stock on such stock exchange on the day the Option
is granted or, if no sale of the Company's Class A Stock
shall have been made on any stock exchange that day, the
fair market value shall be determined as such price for the
next preceding day upon which a sale shall have occurred.
In the event that the Company's Class A Stock is not listed
upon an established exchange but is quoted on the National
Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the fair market value shall be deemed to
be the closing sale price (if included in the National
Market List) or the mean between the closing dealer "bid"
and "asked" prices for the Corporation's Class A Stock as
quoted on NASDAQ for the day of the grant, and if no such
closing sale price or "bid" and "asked" prices are quoted
for the day of the grant, the fair market value shall be
determined by reference to such prices on the next
preceding day on which such prices are quoted. In the
event that the Company's Class A Stock is neither listed on
an established stock exchange nor quoted on NASDAQ, the
fair market value on the day the Option is granted shall be
determined by the Committee. Subject to the foregoing, the
Committee, in fixing the Option price, shall have full
authority and discretion and be fully protected in doing
so.

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<PAGE> 4

The Option price shall be payable in cash or by means of
unrestricted shares of the Company's capital stock or any
combination thereof upon the exercise of the Option.
Payment in currency or by check, bank draft, cashier's
check or postal money order shall be considered payment in
cash. In the event of payment in the Company's capital
stock, the shares used in payment of the purchase price
shall be taken at the fair market value thereof. Fair
market value shall be determined in the same manner
provided for in Article 5(b) above on the date immediately
preceding the day of payment. The Company shall not loan
any monies to any employees for purchase of these
aforementioned stock Options.

(d) Term and Exercise of Option.

Each Option shall state the date upon which it is granted.
No Option shall be exercisable either in whole or in part
prior to sixty (60) months from the date it is granted.
Except as otherwise provided in case of retirement,
disability or death, pursuant to Articles 5(f) and 5(g), no
Option shall be exercisable after an optionee ceases to be
employed by the Company.

All stock Options shall become exercisable sixty (60)
months from the date issued. The optionee shall have three
(3) months beyond this sixty (60) month period to exercise
his stock Option at the predetermined price. If any part
of the Option has not been exercised after sixty-three (63)
months from the time of granting, the unexercised portion
immediately becomes null and void and no longer of any
force and effect.

(e) Assignability and Transfer of Options.

The Option shall be exercisable only by the optionee during
his lifetime and shall not be assignable or transferable by
him otherwise than by will or the laws of descent and
distribution, and no other person shall acquire any rights
therein.

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<PAGE> 5

(f) Termination of Employment Other Than By Reason of Death.

In the event that an optionee shall cease to be employed by
the Company for any reason other than his death, a material
disability or retirement with the consent of the Company,
all Options held by him pursuant to the Plan and not
previously exercised at the date of such termination shall
terminate immediately and become null and void and of no
longer any force or effect.

If the termination is due to a material disability or
retirement with the consent of the Company, such disabled
or retiring optionee shall have the right to exercise his
Options which have not previously been exercised at the
date of such termination and employment at any time within
three (3) months after such termination, subject to the
conditions that no Option shall be exercisable after the
expiration of sixty-three (63) months from the date it was
granted. Whether termination of employment is due to a
material disability or is to be considered a retirement
with the consent of the Company shall be determined by the
Committee, which determination, unless overruled by the
Board of Directors, shall be final and conclusive. Any
disability to be considered "material" must result in a
permanent and total disability of an employee as defined in
Code Section 22(e)(3), as amended, or if such Section is no
longer of any force or effect, an employee shall be deemed
to be permanently and totally disabled if he is unable to
engage in any substantial gainful employment by reason of
any medically determinable physical or mental impairment
which can be expected to result in death or which has
lasted or can be expected to last for a continuous period
of not less than twelve (12) months.

If an employee covered under this Plan leaves the Company
for any reason other than death, material disability or
Company approved retirement, before sixty-three (63) months
has expired from granting of this Option, all of employee's
stock options under this Plan shall become null and void
and no longer of any force or effect.

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<PAGE> 6

(g) Death of Optionee.

If the optionee shall die while in the employ of the
Company or within a period of three (3) months after the
termination of his employment as a result of a Company
approved retirement or disability as determined in Article
5(f) above, such optionee's Options may be exercised in
whole or in part at any time within three (3) months after
the optionee's death, by the executor or administrators of
the optionee's estate or by any person or persons who shall
have acquired the Options directly from the optionee by
bequest or inheritance, subject to the condition that no
Option shall be exercisable after the expiration of
sixty-three (63) months from the date it is granted.

(h) Adjustments to Class A Stock Subject to Options.

The number of shares of Class A Stock covered by this Plan
and each outstanding Option, and the price per share for
each outstanding Option shall be proportionately adjusted
for any increase or decrease in the number of issued shares
of Class A Stock of the Company resulting from a
subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Class A Stock) or any other
increase or decrease in the number of such shares affected
without receipt of consideration by the Company.

If the Company shall be the surviving corporation in any
merger, consolidation or reorganization, each outstanding
Option shall pertain to and apply to the same number and
kind of securities to which the optionee would have been
entitled had he then been the record holder of the number
of shares of Class A Stock subject to the Option. A
dissolution or liquidation of the Company or a merger,
consolidation or reorganization (i) in which the Company is
not the surviving corporation, and (ii) which does not
contain appropriate provisions for the substitution of
Options to purchase appropriate stock of the surviving
corporation, on an equitable basis, shall cause each
outstanding Option to terminate, provided that each
optionee who has held an Option for more than one (1) year
prior to the effective date of such event shall have the
right immediately prior to such dissolution or liquidation,
or merger, consolidation or reorganization in which the
Company is not the

6
<PAGE> 7

surviving corporation, to exercise his Option in whole or
in part, subject to the exception that no Option shall be
exercisable after the expiration of sixty-three (63) months
from the date it is granted.

In the event of a change in the Class A Stock of the
Company, which is limited to a change of all of its
authorized shares with par value into the same number of
shares with a different par value, the shares resulting
from any such shares shall be deemed to be the Class A
Stock within the meaning of the Plan.

To the extent that the foregoing adjustments relate to
stock or securities of the Company such adjustments shall
be made by the Committee, whose determination in that
respect shall be final, binding and conclusive.

Except as hereinbefore expressly provided in this Article
5, (i) the optionee shall have no rights by reason of any
subdivision or consolidation of shares of Class A Stock or
the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or
by reason of any dissolution, merger, consolidation,
reorganization or spinoff of assets or stock of another
corporation, and (ii) any issuance by the Company of shares
of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to,
the number or price of shares of Class A Stock subject to
the Option.

The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell or transfer
all or any part of its business or assets.

(i) No Rights as a Stockholder.

An optionee or transferee of an Option shall have no rights
as a stockholder with respect to shares covered by his
Option until the date of the issuance of a stock
certificate to him for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or

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<PAGE> 8

distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except
as provided in this Article 5.

(j) Exercise Procedures.

Any Option granted hereunder or any portion thereof may be
exercised by the optionee by: (1) delivering to the Company
at its main office (attention of its Vice
President-Finance) written notice of the number of shares
with respect to which the Option rights are being
exercised, (2) paying in full the purchase price of the
shares purchased, and (3) remitting to the Company the
federal income tax, state income tax and F.I.C.A. to be
withheld by the Company (in such amounts as may be
determined by the Company) with respect to the compensation
to be recognized by the optionee upon the exercise of such
Option. Upon receipt of such notice and payment, the
Company shall issue and deliver to the optionee a
certificate for the number of shares of Class A Stock with
respect to which Options were so exercised.

(k) Modification, Extension and Renewal of Options.

Subject to the terms and conditions and within the
limitations of the Plan, the Board of Directors, upon
recommendation of the Committee, may modify, extend or
renew outstanding Options granted under the Plan, or accept
the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new
Options in substitution therefore (to the extent not
theretofore exercised). The Board of Directors shall not,
however, modify any outstanding Options so as to specify a
lower price or accept the surrender of outstanding Options
and authorize the granting of new Options, in substitution
therefore specifying a lower price. Notwithstanding the
foregoing, however, no modifications of an Option shall,
without the consent of the optionee, alter or impair any
rights or obligations under any Option theretofore granted
under the Plan.

(l) General Restrictions.

Each Option shall be subject to the requirement that, if at
any time the Board of Directors or the Committee shall
determine, in its discretion, that the listing,

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<PAGE> 9

registration or qualification of the shares subject to such
Option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of such Option or
the issue or purchase of shares thereunder, such Option may
not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not
acceptable to the Board of Directors.

(m) Leave of Absence.

In the case of any employee on an approved Leave of
Absence, the Committee may make such provision respecting
continuance of the Option while the employee is on such
Leave of Absence as it may deem equitable, except that in
no event shall an Option be exercised after the expiration
of sixty-three (63) months from the date such Option was
granted.

(n) Reservation of Class A Stock.

The Company, during the term of any Options granted
hereunder, will at all times reserve and keep available,
and will seek to obtain from any regulatory body having
jurisdiction, any requisite authority in order to issue and
sell such number of shares of Class A Stock as shall be
sufficient to satisfy the requirements of the Options
granted under the Plan.

(o) Corporate Resolutions.

Each Option agreement shall refer to, and specifically
incorporate by reference, the Plan.

(p) Other Provisions.

The Option agreements authorized under the Plan shall
contain such other provisions, including, without
limitation, such restrictions upon the exercise of the
Option as the Committee or the Board of Directors of the
Company shall deem advisable.

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<PAGE> 10

6. TERM OF PLAN

Options may be granted pursuant to the Plan from time to time on or
before the 6th day of August, 1996.

7. INDEMNIFICATION OF COMMITTEE

In addition to such other rights of indemnification as they may
have as Directors of the Company, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including
attorney's fees actually and necessarily incurred in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in satisfaction of a
judgment in any such proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his duties;
provided that within sixty (60) days after institution of any such action, suit
or proceeding, a Committee member shall in writing offer the Company the
opportunity at its own expense, to handle and defend the same.

8. AMENDMENTS TO THE PLAN

The Board of Directors of the Company, may insofar as permitted by
law, from time to time (i) with respect to any shares at the time not subject
to Options, suspend or discontinue the Plan; or (ii) revise or amend the Plan
in any respect whatsoever.

9. APPLICATION OF FUNDS

The proceeds received by the Company from the issuance of Class A
Stock pursuant to Options will be used for general corporate purposes.

10. NO OBLIGATION TO EXERCISE OPTION

The granting of an Option shall impose no obligation upon the
optionee to exercise such Option.

AS ADOPTED BY THE BOARD OF DIRECTORS ON AUGUST 6, 1991, AND AS
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS EFFECTIVE AS OF AUGUST 6, 1991.

<PAGE> 1

Exhibit 10.6
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
WITH RESPECT TO
INGLES MARKETS, INCORPORATED

THIS AMENDED AND RESTATED STOCK OPTION AGREEMENT (this "Agreement") is made
and entered into effective as of the 21st day of July, 1993, by and between
INGLES MARKETS, INCORPORATED a North Carolina corporation (the "Company") and
ROBERT P. INGLE (the "Optionee").

W I T N E S S E T H

WHEREAS, the Company and the Optionee entered into a Stock Option Agreement
dated July 21, 1993; and

WHEREAS, the Company and the Optionee desire to amend Paragraph 4(c) hereof;
and

WHEREAS, the Board of Directors of the Company (the "Board") deems it to be
in the best interests of the Company to amend and restate this Agreement; and

WHEREAS, the amendment of this Agreement has been approved by unanimous
written consent of the Board without a meeting.

NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as follows:

1. Purposes of this Agreement. The purposes of this Agreement are (a)
to insure the retention of the Optionee as Chief Executive Officer of the
Company and (b) to provide incentive to the Optionee to devote his utmost
effort and skill to the advancement and betterment of the Company, by
permitting him to participate in the ownership of the Company and, thereby, in
the success and increased value of the Company that he has helped to produce.
It is intended that the option issued pursuant to this Agreement shall not
constitute an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as now or hereafter amended (the "Code");
rather, the Option is intended to constitute a nonqualified stock option.

2. Grant Of Option. The Company hereby grants to the Optionee an
option (the "Option") to purchase all or any part of one hundred thousand
(100,000) shares (the "Option Shares") of the Company's

<PAGE> 2

Class A Common Stock, $.05 par value (the "Class A Stock"), on the terms and
conditions set forth herein. The date of the grant of this Option shall be the
day and year first above written (the "Grant Date").

3. Exercise Price.

(a) Exercise Price. The exercise price (the "Exercise Price") for
each Option Share shall be $6.00 per share.

(b) Medium and Time of Payment. The Exercise Price shall be
payable in cash or its equivalent, or, subject to the approval of the
Audit/Compensation Committee of the Company's Board of Directors (the
"Committee"), by means of unrestricted shares of the Company's capital stock or
any combination thereof upon the exercise of the Option. Payment in currency
or by check, bank draft, cashier's check or postal money order shall be
considered payment in cash. The Company shall not loan any monies to the
Optionee for purchase of any Option Shares. In the event of payment in the
Company's capital stock, the shares used in payment of the purchase price shall
be taken at the Fair Market Value thereof (as defined below), which, for
purposes of this Section 3(b), shall be determined on the date immediately
preceding the day of payment. The "Fair Market Value" of the Company's capital
stock shall mean (i) if payment date occurs on the day after the effective date
of a public offering of such stock, the public offering price; (ii) if the
Company's capital stock is listed on an established stock exchange, the closing
price of the Company's capital stock on such stock exchange on the relevant
date or, if no sale of the Company's capital stock shall have been made on such
stock exchange that day, such price for the next preceding day upon which a
sale shall have occurred; (iii) if the Company's capital stock is not listed
upon an established exchange but is quoted on National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the closing sale
price (if the stock is listed in the National Market List) or the mean between
the closing dealer "bid" and "asked" prices for the Corporation's capital stock
as quoted on NASDAQ on the relevant date or, if no such closing sale price or
"bid" and "asked" prices are quoted for the day of the grant, such prices on
the next preceding day on which such prices are quoted; or (iv) if the
Company's capital stock is neither listed on an established stock exchange nor
quoted on NASDAQ, the fair market value of such stock on the relevant date as
determined by the Committee. Subject to the foregoing, the Committee, in
fixing the Fair Market Value, shall have full authority and discretion and be
fully protected in doing so.

2
<PAGE> 3

4. Exercise of Options.

(a) Partial and Total Exercise. Subject to the terms of
Section 6 of this Agreement, the Option may be exercised for all or a part of
the Option Shares as provided in this Section 4(a). The Option shall not be
exercisable, either in whole or in part, prior to twelve (12) months from the
Grant Date. The Option shall not be exercisable after the Optionee ceases to
be employed by the Company.

The Option shall become exercisable twelve (12) months from the
Grant Date. The Optionee shall have forty-eight (48) months beyond this
twelve (12) month period to exercise the Option at the Exercise Price. If any
part of the Option has not been exercised after sixty (60) months from the
Grant Date, the unexercised portion immediately becomes null and void and no
longer of any force and effect.

(b) Death of Optionee. If the Optionee shall die prior to
sixty (60) months from the Grant Date, the Option may be exercised, in whole or
in part, at any time after the Optionee's death, by the executor or
administrators of the Optionee's estate or by any person or persons who shall
have acquired the Option directly from the Optionee by bequest or inheritance,
subject to the condition that the Option shall not be exercisable after the
expiration of sixty (60) months from the Grant Date.

(c) Method of Exercising Option. The Option or any portion
thereof may be exercised by the Optionee by (i) delivering to the Company at
its main office (to the attention of its Vice President-Finance) written notice
which shall set forth the Optionee's election to exercise a portion or all of
the Option, the number of Option Shares with respect to which the Option rights
are being exercised and such other representations and agreements as may be
required by the Company to comply with applicable securities laws and (ii)
paying in full the purchase price of the Option Shares as set forth in Section
3(b), and (iii) remitting, in cash or its equivalent, to the Company the
federal income tax, state income tax and F.I.C.A. to be withheld by the Company
(in such amounts as may be determined by the Company) with respect to the
compensation to be recognized by the Optionee upon the exercise of the Option.
Upon receipt of such notice and payment, the Company shall issue and deliver to
the Optionee a certificate for the number of shares of Class A Stock with
respect to which the Option was so exercised.

(d) Nonassignability of Option. The Option shall not be
assignable or transferrable by the Optionee except by will or by the laws of
descent and distribution in accordance with Sections 4(b). Any distributee by
will or by the laws of descent and distribution

3
<PAGE> 4

shall be bound by the provisions of this Agreement. During the life of the
Optionee, the Option shall be exercisable only by the Optionee. Any attempt to
assign, pledge, transfer, hypothecate or otherwise dispose of the Option, and
any levy of execution, attachment or similar process on the Option shall be
null and void.

(e) General Restrictions. The Option shall be subject to the
requirement that, if at any time the Board of Directors or the Committee shall
determine, in its discretion, that the listing, registration or qualification
of the Option Shares upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase of Option Shares, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions that are not
acceptable to the Board of Directors.

(f) Leave of Absence. If the Optionee goes on an approved
leave of absence, the Committee may make such provision respecting continuance
of the Option while the Optionee is on such leave of absence as it may deem
equitable, except that in no event shall the Option be exercised after the
expiration of sixty (60) months from the Grant Date.

5. Adjustments to Class A Stock Subject to Option. The number of
shares of Class A Stock covered by the Option, and the Exercise Price shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Class A Stock of the Company resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Class A Stock) or any other increase or decrease in the number of such shares
affected without receipt of consideration by the Company.

If the Company shall be the surviving corporation in any merger,
consolidation or reorganization, the Option shall pertain to and apply to the
same number and kind of securities to which the Optionee would have been
entitled had he then been the record holder of the number of shares of Class A
Stock subject to the Option. A dissolution or liquidation of the Company or a
merger, consolidation or reorganization (a) in which the Company is not the
surviving corporation, and (b) which does not contain appropriate provisions
for the substitution of options to purchase appropriate stock of the surviving
corporation, on an equitable basis, shall cause the Option to terminate,
provided that if the Optionee has held the Option for more than (1) year prior
to the effective date of such event, he shall have the right immediately prior
to such dissolution or liquidation, or merger, consolidation or reorganization
in which the

4
<PAGE> 5

Company is not the surviving corporation, to exercise the Option in whole or in
part, subject to the exception that the Option shall not be exercisable after
the expiration of sixty (60) months from the date it is granted.

In the event of a change in the Class A Stock of the Company, which is
limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value, the shares resulting from any
such shares shall be deemed to be the Class A Stock within the meaning of this
Agreement.

To the extent that the foregoing adjustments relate to stock or securities
of the Company such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.

Except as hereinbefore expressly provided in this Agreement, (a) the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of Class A Stock or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, merger, consolidation, reorganization or spinoff of assets
or stock of another corporation, and (b) any issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or Exercise Price of shares of Class A Stock subject to
the Option.

The grant of the Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

6. Securities Laws - Restrictions on Issuance of Shares. No shares of
Class A Stock shall be issued or sold upon the exercise of the Option unless
and until (a) the full amount of the Exercise Price has been paid as provided
in Section 4(c) of this Agreement and (b) in accordance with Section 4(e) of
this Agreement, the then applicable requirements of the Securities Act of l933,
as amended, and the applicable securities laws of any state, as any of the same
may be amended, the rules and regulations of the Securities and Exchange
Commission and any other regulations of any securities exchange on which the
Class A Stock may be listed, (including, without limitation for such purposes,
NASDAQ) shall have been fully complied with and satisfied.

5
<PAGE> 6

7. No Rights as a Stockholder. The Optionee and any transferee of the
Option shall have no rights as a stockholder of the Company with respect to any
Option Shares until the date of the issuance of a stock certificate(s) to him
or her for the Option Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
any such stock certificate is issued, except as provided in Section 4.

8. Interpretation of Option; Indemnification of Committee. The
interpretation and construction by the Committee of any provisions of this
Agreement or any terms of the Option shall be final unless otherwise determined
by the Board of Directors. No member of the Committee or the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Option. In addition to such other rights of
indemnification as they may have as Directors of the Company, the members of
the Committee shall be indemnified by the Company against the reasonable
expenses, including attorney's fees actually and necessarily incurred in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with
this Agreement or the Option, and against all amounts paid by them in
satisfaction of a judgment in any such proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit, or proceeding
that the Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding, a Committee member shall in
writing offer the Company the opportunity at its own expense, to handle and
defend the same.

9. Application of Funds. The proceeds received by the Company from
the issuance of Class A Stock pursuant to the Option will be used for general
corporate purposes.

10. No Obligation To Exercise Option. The granting of the Option shall
impose no obligation upon the Optionee to exercise such Option.

11. Binding Effect. This Agreement shall be binding upon the executors,
administrators, heirs, legal representatives and successors of the parties
hereto.

12. No Employment Rights. This Agreement shall not confer upon
Optionee any right with respect to the continuance of employment by the
Company, nor shall it interfere in any way with the right of the Company to
terminate such employment at any time.

6
<PAGE> 7

13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina.

14. Notices. All notices and other communications under this Agreement
shall be in writing, and shall be deemed to have been duly given on the date of
delivery if delivered personally or when received if mailed to the party to
whom notice is to be given, by certified mail, return receipt requested,
postage pre-paid, and addressed as follows, until any such address is changed
by notice duly given:

To Optionee at: The address indicated
on the signature page hereof

To Company at: Ingles Markets, Incorporated
Post Office Box 6676
Asheville, NC 28816
Attention: Jack R. Ferguson
Vice President-Finance

15. Enforcement. If any portion of this Agreement shall be determined
to be invalid or unenforceable, the remainder shall be valid and enforceable to
the extent possible.

16. Shareholder Approval. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to issue any Option Shares
or any other consideration upon any exercise of the Option if the Shareholders
of the Company have not approved this Agreement.

[SIGNATURES BEGIN ON NEXT PAGE]

7
<PAGE> 8

IN WITNESS WHEREOF, this Agreement has been duly executed effective
as of the date first above written.

INGLES MARKETS, INCORPORATED

By:/s/ Landy B. Laney
-------------------------
Landy B. Laney
President

(CORPORATE SEAL)

OPTIONEE:

/s/ Robert P. Ingle (SEAL)
---------------------------
ROBERT P. INGLE

Address: Route 1, Highway 70 East
Black Mountain, NC 28711

<PAGE> 1

Exhibit 10.7
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
WITH RESPECT TO
INGLES MARKETS, INCORPORATED

WHEREAS, the Company and the Optionee entered into a Stock Option Agreement
dated July 21, 1993; and

WHEREAS, the Company and the Optionee desire to amend Paragraph 4(c)
hereof; and

WHEREAS, the Board of Directors of the Company (the "Board") deems it to be
in the best interests of the Company to amend and restate this Agreement; and

WHEREAS, the amendment of this Agreement has been approved by unanimous
written consent of the Board without a meeting.

1. Purposes of this Agreement. The purposes of this Agreement are (a)
to insure the retention of the Optionee as Chief Operating Officer of the
Company and (b) to provide incentive to the Optionee to devote his utmost
effort and skill to the advancement and betterment of the Company, by
permitting him to participate in the ownership of the Company and, thereby, in
the success and increased value of the Company that he has helped to produce.
It is intended that the option issued pursuant to this Agreement shall not
constitute an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as now or hereafter amended (the "Code");
rather, the Option is intended to constitute a nonqualified stock option.

2. Grant Of Option. The Company hereby grants to the Optionee an
option (the "Option") to purchase all or any part of one hundred thousand
(100,000) shares (the "Option Shares") of the Company's

<PAGE> 2

3. Exercise Price.

(a) Exercise Price. The exercise price (the "Exercise Price") for
each Option Share shall be $6.00 per share.

2
<PAGE> 3

4. Exercise of Options.

3
<PAGE> 4

4
<PAGE> 5

In the event of a change in the Class A Stock of the Company, which is
limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value, the shares resulting from any
such shares shall be deemed to be the Class A Stock within the meaning of this
Agreement.

To the extent that the foregoing adjustments relate to stock or securities
of the Company such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.

5
<PAGE> 6

9. Application of Funds. The proceeds received by the Company from
the issuance of Class A Stock pursuant to the Option will be used for general
corporate purposes.

10. No Obligation To Exercise Option. The granting of the Option shall
impose no obligation upon the Optionee to exercise such Option.

11. Binding Effect. This Agreement shall be binding upon the executors,
administrators, heirs, legal representatives and successors of the parties
hereto.

6
<PAGE> 7

13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina.

To Optionee at: The address indicated
on the signature page hereof

To Company at: Ingles Markets, Incorporated
Post Office Box 6676
Asheville, NC 28816
Attention: Jack R. Ferguson
Vice President-Finance

15. Enforcement. If any portion of this Agreement shall be determined
to be invalid or unenforceable, the remainder shall be valid and enforceable to
the extent possible.

[SIGNATURES BEGIN ON NEXT PAGE]

7
<PAGE> 8

IN WITNESS WHEREOF, this Agreement has been duly executed effective
as of the date first above written.

INGLES MARKETS, INCORPORATED

By: /s/ Robert P. Ingle
-------------------------
Robert P. Ingle
Chairman of the Board and
Chief Executive Officer

(CORPORATE SEAL)

OPTIONEE:

/s/ Landy B. Laney (SEAL)
---------------------------
LANDY B. LANEY

Address: Route 1, Highway 70 East
Black Mountain, NC 28711

<PAGE> 1

Exhibit 10.9
STOCK OPTION AGREEMENT
WITH RESPECT TO
INGLES MARKETS, INCORPORATED

THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of the 2nd day of August, 1995, by and between INGLES MARKETS, INCORPORATED a
North Carolina corporation (the "Company") and EDWARD J. KOLODZIESKI(the
"Optionee").

W I T N E S S E T H

WHEREAS, the Audit/Compensation Committee (the "Committee") of the Board of
Directors of the Company deems it to be in the best interests of the Company to
enter into this Agreement; and

WHEREAS, this Agreement has been approved by the vote of the members of the
Committee; and

1. Purposes of this Agreement. The purposes of this Agreement are (a)
to insure the retention of the Optionee as Vice President-Strategic Planning of
the Company and (b) to provide incentive to the Optionee to devote his utmost
effort and skill to the advancement and betterment of the Company, by
permitting him to participate in the ownership of the Company and, thereby, in
the success and increased value of the Company that he has helped to produce.
It is intended that the option issued pursuant to this Agreement shall not
constitute an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as now or hereafter amended (the "Code");
rather, the Option is intended to constitute a nonqualified stock option.

2. Grant Of Option. The Company hereby grants to the Optionee an
option (the "Option") to purchase all or any part of one hundred thousand
(100,000) shares (the "Option Shares") of the Company's Class A Common Stock,
$.05 par value (the "Class A Stock"), on the terms and conditions set forth
herein. The date of the grant of this Option shall be the day and year first
above written (the "Grant Date").

<PAGE> 2

3. Exercise Price.

(a) Exercise Price. The exercise price (the "Exercise Price") for
each Option Share shall be $10.625 per share.

(b) Medium and Time of Payment. The Exercise Price shall be
payable in cash or its equivalent, or, subject to the approval of the
Committee, by means of unrestricted shares of the Company's capital stock or
any combination thereof upon the exercise of the Option. Payment in currency
or by check, bank draft, cashier's check or postal money order shall be
considered payment in cash. The Company shall not loan any monies to the
Optionee for purchase of any Option Shares. In the event of payment in the
Company's capital stock, the shares used in payment of the purchase price shall
be taken at the Fair Market Value thereof (as defined below), which, for
purposes of this Section 3(b), shall be determined on the date immediately
preceding the day of payment. The "Fair Market Value" of the Company's capital
stock shall mean (i) if payment date occurs on the day after the effective date
of a public offering of such stock, the public offering price; (ii) if the
Company's capital stock is listed on an established stock exchange, the closing
price of the Company's capital stock on such stock exchange on the relevant
date or, if no sale of the Company's capital stock shall have been made on such
stock exchange that day, such price for the next preceding day upon which a
sale shall have occurred; (iii) if the Company's capital stock is not listed
upon an established exchange but is quoted on National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the closing sale
price (if the stock is listed in the National Market List) or the mean between
the closing dealer "bid" and "asked" prices for the Corporation's capital stock
as quoted on NASDAQ on the relevant date or, if no such closing sale price or
"bid" and "asked" prices are quoted for the day of the grant, such prices on
the next preceding day on which such prices are quoted; or (iv) if the
Company's capital stock is neither listed on an established stock exchange nor
quoted on NASDAQ, the fair market value of such stock on the relevant date as
determined by the Committee. Subject to the foregoing, the Committee, in
fixing the Fair Market Value, shall have full authority and discretion and be
fully protected in doing so.

2
<PAGE> 3

4. Exercise of Options.

(a) Partial and Total Exercise. Subject to the terms of
Section 6 of this Agreement, the Option may be exercised for all or a part of
the Option Shares as provided in this Section 4(a). The Option shall not be
exercisable, either in whole or in part, prior to sixty (60) months from the
Grant Date. The Option shall not be exercisable after the Optionee ceases to
be employed by the Company.

The Option shall become exercisable sixty (60) months from the
Grant Date. The Optionee shall have three(3) months beyond this sixty (60)
month period to exercise the Option at the Exercise Price. If any part of the
Option has not been exercised after sixty-three (63) months from the Grant
Date, the unexercised portion immediately becomes null and void and no longer
of any force and effect.

(b) Termination of Employment Other Than By Reason of Death. In
the event that the Optionee shall cease to be employed by the Company for any
reason other than his death, a material disability or retirement with the
consent of the Company, the Option shall terminate immediately and become null
and void and no longer be of any force or effect.

If the termination is due to a material disability or retirement of
the Optionee with the consent of the Company, the Optionee shall have the
right to exercise the Option at the date of such termination of employment at
any time within three (3) months after such termination, subject to the
conditions that the Option shall not be exercisable after the expiration of
sixty-three (63) months from the date it was granted. Whether termination of
employment is due to a material disability or is to be considered a retirement
with the consent of the Company shall be determined by the Committee, which
determination, unless overruled by the Board of Directors, shall be final and
conclusive. Any disability to be considered "material" must result in a
permanent and total disability of an employee as defined in Code Section
22(e)(3), as amended, or if such Section is no longer of any force or effect,
an employee shall be deemed to be permanently and totally disabled if he is
unable to engage in any substantial gainful employment by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.

3
<PAGE> 4

If the Optionee leaves the Company for any reason other than death,
material disability or Company approved retirement, before sixty-three (63)
months has expired from the Grant Date, the Option shall become null and void
and no longer of any force or effect.

(c) Death of Optionee. If the Optionee shall die while in the
employ of the Company or within a period of three (3) months after the
termination of his employment as a result of a Company approved retirement or
disability as determined in Section 4(b) above, the Option may be exercised in
whole or in part at any time within three (3) months after the Optionee's
death, by the executor or administrators of the Optionee's estate or by any
person or persons who shall have acquired the Option directly from the optionee
by bequest or inheritance, subject to the condition that the Option shall not
be exercisable after the expiration of sixty-three (63) months from the Grant
Date.

(d) Method of Exercising Option. The Option or any portion
thereof may be exercised by the Optionee by (i) delivering to the Company at
its main office (to the attention of its Vice President-Finance) written notice
which shall set forth the Optionee's election to exercise a portion or all of
the Option, the number of Option Shares with respect to which the Option rights
are being exercised and such other representations and agreements as may be
required by the Company to comply with applicable securities laws and (ii)
paying in full the purchase price of the Option Shares as set forth in Section
3(b), and (iii) remitting, in cash or its equivalent, to the Company the
federal income tax, state income tax and F.I.C.A. to be withheld by the Company
(in such amounts as may be determined by the Company) with respect to the
compensation to be recognized by the Optionee upon the exercise of the Option.
Upon receipt of such notice and payment, the Company shall issue and deliver to
the Optionee a certificate for the number of shares of Class A Stock with
respect to which the Option was so exercised.

(e) Nonassignability of Option. The Option shall not be
assignable or transferrable by the Optionee except by will or by the laws of
descent and distribution in accordance with Sections 4(b). Any distributee by
will or by the laws of descent and distribution shall be bound by the
provisions of this Agreement. During the life of the Optionee, the Option
shall be exercisable only by the Optionee. Any attempt to assign, pledge,
transfer, hypothecate or otherwise dispose of the Option, and any levy of
execution, attachment or similar process on the Option shall be null and void.

4
<PAGE> 5

(f) General Restrictions. The Option shall be subject to the
requirement that, if at any time the Board of Directors or the Committee shall
determine, in its discretion, that the listing, registration or qualification
of the Option Shares upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase of Option Shares, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions that are not
acceptable to the Board of Directors.

(g) Leave of Absence. If the Optionee goes on an approved
leave of absence, the Committee may make such provision respecting continuance
of the Option while the Optionee is on such leave of absence as it may deem
equitable, except that in no event shall the Option be exercised after the
expiration of sixty-three (63) months from the Grant Date.

5
<PAGE> 6

be exercisable after the expiration of sixty-three (63) months from the date it
is granted.

In the event of a change in the Class A Stock of the Company, which is
limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value, the shares resulting from any
such shares shall be deemed to be the Class A Stock within the meaning of this
Agreement.

To the extent that the foregoing adjustments relate to stock or securities
of the Company such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.

6
<PAGE> 7

9. Application of Funds. The proceeds received by the Company from
the issuance of Class A Stock pursuant to the Option will be used for general
corporate purposes.

10. No Obligation To Exercise Option. The granting of the Option shall
impose no obligation upon the Optionee to exercise such Option.

11. Binding Effect. This Agreement shall be binding upon the executors,
administrators, heirs, legal representatives and successors of the parties
hereto.

7
<PAGE> 8

13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina.

To Optionee at: The address indicated
on the signature page hereof

To Company at: Ingles Markets, Incorporated
Post Office Box 6676
Asheville, NC 28816
Attention: Jack R. Ferguson
Vice President-Finance

15. Enforcement. If any portion of this Agreement shall be determined
to be invalid or unenforceable, the remainder shall be valid and enforceable to
the extent possible.

16. Shareholder Approval. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to issue any Option Shares
or any other consideration upon any exercise to the Option if the Shareholders
of the Company have not approved this Agreement.

[SIGNATURES BEGIN ON NEXT PAGE]

8
<PAGE> 9

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.

INGLES MARKETS, INCORPORATED

By: /s/ Robert P. Ingle
-------------------------
Robert P. Ingle,
Chairman of the Board
and Chief Executive Officer

(CORPORATE SEAL)

OPTIONEE:

/s/ Edward J. Kolodzieski (SEAL)
---------------------------
Edward J. Kolodzieski

Address: Route 1, Highway 70 East
Black Mountain, NC 28711

<PAGE> 1
Exhibit 11

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER
--------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY
Income before cumulative effect of
change in accounting principle $17,022,530 $16,572,123 $11,701,221
Cumulative effect of change in
accounting for income taxes - 3,334,860 -
----------- ----------- -----------
Net Income $17,022,530 $19,906,983 $11,701,221
=========== =========== ===========
Shares
Weighted average number of common
shares and common stock
equivalent shares outstanding 18,316,672 18,386,557 17,969,971
=========== =========== ===========
Primary earnings per common
share before cumulative effect
of change in accounting principle $ .93 $ .90 $ .65
Cumulative effect of change in
accounting for income taxes - .18 -
----------- ----------- -----------
Primary earnings per common share $ .93 $ 1.08 $ .65
=========== =========== ===========

FULLY DILUTED
Income before cumulative effect of
change in accounting principle $17,022,530 $16,572,123 $11,701,221
Add after tax and bonus effect of
interest expense applicable to
Convertible Subordinated
Debentures 2,138,566 2,081,397 2,023,308
----------- ----------- -----------
Fully diluted earnings before
cumulative effect of change
in accounting principle 19,161,096 18,653,520 13,724,529
Cumulative effect of change in
accounting for income taxes - 3,334,860 -
----------- ----------- -----------
Fully diluted earnings $19,161,096 $21,988,380 $13,724,529
=========== =========== ===========

Shares
Weighted average number of common
shares and common stock
equivalent shares outstanding 18,316,672 18,418,085 17,969,971
Additional shares assuming
conversion of Convertible
Subordinated Debentures * 3,374,685 3,374,685 3,375,136
----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted 21,691,357 21,792,770 21,345,107
=========== =========== ===========

Fully diluted earnings per common
share before cumulative effect of
change in accounting principle $ .88 $ .86 $ .64
Cumulative effect of change in
accounting for income taxes - .15 -
----------- ----------- -----------
Fully diluted earnings per common
share $ .88 $ 1.01 $ .64
=========== =========== ===========

</TABLE>

* Additional shares assuming conversion of the Convertible Subordinated
Debentures are computed using the weighted average of Debentures outstanding
during the period.

<PAGE> 1
Exhibit 12

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(in thousands except ratios)
<S> <C> <C> <C> <C> <C>
Income Before Income Taxes . . . . . $26,623 $26,172 $18,301 $ 8,424 $16,595
Fixed Charges. . . . . . . . . . . . 30,555 22,306 21,645 21,450 22,510
Less Capitalized Interest. . . . . . (1,762) (888) (251) (300) (545)
------- ------- ------- ------- -------
Total Earnings . . . . . . . . . $55,416 $47,590 $39,695 $29,574 $38,560
======= ======= ======= ======= =======

Fixed Charges
Interest Expense . . . . . . . . . $24,740 $17,296 $17,285 $16,196 $16,927
Capitalized Interest . . . . . . . 1,762 888 251 300 545
Amortization of Debt Expense . . . 121 117 118 120 141
1/3 of Rent Expense. . . . . . . . 3,932 4,005 3,991 4,834 4,897
------- ------- ------- ------- -------
Total Fixed Charges. . . . . . . $30,555 $22,306 $21,645 $21,450 $22,510
======= ======= ======= ======= =======

Ratio of Earnings to Fixed
Charges. . . . . . . . . . . . . . 1.8x 2.1x 1.8x 1.4x 1.7x

</TABLE>

<PAGE> 1
Exhibit 21

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

SUBSIDIARIES OF THE REGISTRANT

Milkco, Inc., a North Carolina corporation.

Sky King, Inc., a North Carolina corporation.

Ingles Markets Investments, Inc., a Nevada corporation.

<PAGE> 1
EXHIBIT 23 - CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in Post Effective Amendment No. 2
to the Registration Statement (Form S-8, No. 33-24187) pertaining to the Ingles
Markets, Incorporated 1983 Stock Option Plan and in the related Prospectus, in
the Registration Statement (Form S-8 No. 33-52103) pertaining to the Ingles
Markets, Incorporated Investment/Profit Sharing Plan and in the related
Prospectus, in the Registration Statement (Form S-8 No. 33-63167) pertaining to
the Ingles Markets, Incorporated 1991 Nonqualified Stock Option Plan and in the
related Prospectus, in the Registration Statement (Form S-8 No. 33-63165)
pertaining to the Option Agreement dated July 21, 1993 entered into by Ingles
Markets, Incorporated with Robert P. Ingle and in the related Prospectus, and
in the Registration Statement (Form S-8 No. 33-63163) pertaining to the Option
Agreement dated July 21, 1993 entered into by Ingles Markets, Incorporated with
Landy B. Laney and in the related Prospectus, of our report dated November 17,
1995 with respect to the consolidated financial statements and schedule of
Ingles Markets, Incorporated and subsidiaries included in the Annual Report
(Form 10-K) for the year ended September 30, 1995.

/s/ ERNST & YOUNG LLP

Greenville, South Carolina
December 14, 1995

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> SEP-25-1994
<PERIOD-END> SEP-30-1995
<CASH> 20,120,776
<SECURITIES> 0
<RECEIVABLES> 15,262,236
<ALLOWANCES> 85,490
<INVENTORY> 116,863,588
<CURRENT-ASSETS> 155,828,120
<PP&E> 624,712,068
<DEPRECIATION> 174,171,292
<TOTAL-ASSETS> 611,827,254
<CURRENT-LIABILITIES> 135,019,328
<BONDS> 292,765,280
<COMMON> 895,208
0
0
<OTHER-SE> 162,921,277
<TOTAL-LIABILITY-AND-EQUITY> 611,827,254
<SALES> 1,385,127,130
<TOTAL-REVENUES> 1,393,428,929
<CGS> 1,067,888,239
<TOTAL-COSTS> 1,072,070,059
<OTHER-EXPENSES> (1,915,630)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,739,770
<INCOME-PRETAX> 26,622,530
<INCOME-TAX> 9,600,000
<INCOME-CONTINUING> 17,022,530
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,022,530
<EPS-PRIMARY> .93
<EPS-DILUTED> .88

</TABLE>