<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
/x/ OF THE SECURITIES EXCHANGE ACT OF 1934
For the twenty-four weeks ended June 14, 1997
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-785
NASH-FINCH COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 410431960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7600 France Ave. South, Minneapolis Minnesota 55435
(Address of principal executive offices) (Zip Code)
(612) 832-0534
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Number of shares of common stock outstanding at July 25, 1997:
11,307,424 shares
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the twenty-four week interim period beginning December
29, 1996, through June 14, 1997.
The accompanying financial information has been prepared in conformity with
generally accepted accounting principles and practices, and methods of applying
accounting principles and practices, (including consolidation practices) as
reflected in the financial information included in the Company's Annual Report
on Form 10-K, filed with the Securities and Exchange Commission for the
preceding fiscal year. The financial statements included in this quarterly
report include all adjustments which are, in the opinion of management,
necessary to a fair presentation of the Company's financial position and results
of operations for the interim period.
The information contained herein has not been audited by independent
auditors and is subject to any adjustments which may develop in connection
with the annual audit of the Company's accounts by Ernst & Young LLP, its
independent auditors.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
------------------ -----------------------
June 14, June 15, June 14, June 15,
1997 1996 1997 1996
--------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $960,600 723,806 1,896,597 1,399,290
Other revenues 14,850 11,436 26,685 20,446
--------- -------- ----------- ----------
Total revenues 975,450 735,242 1,923,282 1,419,736
Cost and Expenses:
Cost of sales 845,450 635,315 1,670,639 1,228,460
Selling, general and administrative
and other operating expenses 100,486 79,041 199,644 155,521
Depreciation and amortization 10,888 7,553 21,793 14,800
Interest expense 7,500 3,080 14,821 6,003
--------- -------- ----------- ----------
Total costs and expenses 964,324 724,989 1,906,897 1,404,784
Earnings before income taxes 11,126 10,253 16,385 14,952
Income taxes 4,662 4,153 6,865 6,056
--------- -------- ----------- ----------
Net earnings $ 6,464 6,100 9,520 8,896
--------- -------- ----------- ----------
--------- -------- ----------- ----------
Weighted average number of
common shares outstanding 11,303 10,921 11,289 10,905
--------- -------- ----------- ----------
--------- -------- ----------- ----------
Earnings per share $ 0.57 0.56 0.84 0.82
--------- -------- ----------- ----------
--------- -------- ----------- ----------
</TABLE>
- ----------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 14, December 28,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 909 921
Accounts and notes receivable, net 219,131 206,062
Inventories 297,904 293,458
Prepaid expenses 24,313 20,492
Deferred tax assets 4,663 4,663
----------- ------------
Total current assets 546,920 525,596
Investments in affiliates 9,239 10,300
Notes receivable, noncurrent 20,207 21,652
Property, plant and equipment:
Land 32,700 33,753
Buildings and improvements 144,094 148,227
Furniture, fixtures and equipment 306,424 295,147
Leasehold improvements 56,030 54,925
Construction in progress 12,367 7,543
Assets under capitalized leases 25,659 26,105
----------- ------------
577,274 565,700
Less accumulated depreciation and amortization (306,340) (293,845)
----------- ------------
Net property, plant and equipment 270,934 271,855
Intangible assets, net 77,897 80,312
Investment in direct financing leases 21,588 22,011
Deferred tax asset - net 2,098 4,076
Other assets 10,918 9,675
----------- ------------
Total assets $ 959,801 945,477
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks $ 21,574 32,492
Short-term debt payable to banks 1,478 16,171
Current maturities of long-term debt and capitalized lease obligations 7,963 7,795
Accounts payable 190,686 183,501
Accrued expenses 66,847 54,130
Income taxes 4,180 2,999
----------- ------------
Total current liabilities 292,728 297,088
Long-term debt 377,171 361,819
Capitalized lease obligations 41,478 41,832
Deferred compensation 7,085 7,476
Other 2,187 4,401
Stockholders' equity:
Preferred stock - no par value
Authorized 500 shares; none issued - -
Common stock of $1.66 2/3 par value
Authorized 25,000 shares, issued 11,575 shares in 1997
and 11,574 shares in 1996 19,292 19,290
Additional paid-in capital 17,396 16,816
Foreign currency translation adjustment - net of a $633
deferred tax benefit (950) (950)
Restricted stock (406) (500)
Retained earnings 205,797 200,322
----------- ------------
241,129 234,978
Less cost of 271 and 307 shares of common stock in treasury,
respectively. (1,977) (2,117)
----------- ------------
Total stockholders' equity 239,152 232,861
----------- ------------
Total liabilities and stockholders' equity $ 959,801 945,477
----------- ------------
----------- ------------
</TABLE>
- ----------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
-----------------------
June 14, June 15,
1997 1996
----------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 9,520 8,896
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,793 14,800
Provision for bad debts 2,139 702
Provision for losses on closed lease locations (295) (172)
Deferred income taxes 1,978 (957)
Deferred compensation (392) (180)
Earnings of equity investments (539) (356)
Other 869 128
Changes in operating assets and liabilities:
Accounts and notes receivable (11,633) (14,150)
Inventories 10,369 8,469
Prepaid expenses (3,171) (3,537)
Accounts payable and outstanding checks (5,232) 1,958
Accrued expenses 10,449 5,936
Income taxes 1,181 2,325
----------- ----------
Net cash provided by operating activities 37,036 23,862
----------- ----------
Investing activities:
Dividends received 1,600 -
Disposal of property, plant and equipment 6,110 3,680
Additions to property, plant and equipment
excluding capital leases (22,666) (20,782)
Business acquired, net of cash acquired (16,633) (87,823)
Loans to customers (7,536) (1,766)
Payments from customers on loans 5,829 2,563
Other (359) (274)
----------- ----------
Net cash used for investing activities (33,655) (104,402)
----------- ----------
Financing activities:
Proceeds from long-term debt - 30,000
Proceeds from revolving debt 20,000 44,700
Dividends paid (4,045) (3,923)
Payments of short-term debt (14,693) -
Payments of long-term debt (4,371) (2,345)
Payments of capitalized lease obligations (463) (252)
Other 179 87
----------- ----------
Net cash (used for) provided by financing activities (3,393) 68,267
----------- ----------
Net (decrease) in cash $ (12) (12,273)
----------- ----------
----------- ----------
</TABLE>
- ----------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
Fiscal period ended June 14, 1997,
December 28, 1996 and December 30, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Foreign
Common Stock Additional currency Treasury stock Total
--------------- paid-in Retained translation Restricted -------------- stockholders'
Shares Amount capital earnings adjustment Stock Shares Amount equity
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 11,224 $18,706 11,977 179,212 (572) - (349) $(3,054) 206,269
Net earnings - - - 17,414 - - - 17,414
Dividend declared of $.74 per share - - - (8,048) - - - (8,048)
Treasury stock issued upon exercise
of options - - 36 - - - 3 20 56
Foreign currency translation
adjustment - net of a $252 deferred
tax benefit - - - - (378) - - - (378)
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
Balance at December 30, 1995 11,224 18,706 12,013 188,578 (950) - (346) (3,034) 215,313
Net earnings - - - 20,032 - - - - 20,032
Dividend declared of $.75 per share - - - (8,288) - - - - (8,288)
Shares issued in connection with
acquisition of a business 350 584 5,064 - - - - - 5,648
Treasury stock issued upon exercise
of options - - 47 - - 6 42 89
Issuance of restricted stock - - (308) - - (524) 40 995 163
Amortized compensation under restricted
stock plan - - - - - 24 - - 24
Treasury stock purchased - - - - - - (7) (120) (120)
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
Balance at December 28, 1996 11,574 19,290 16,816 200,322 (950) (500) (307) (2,117) 232,861
Net earnings - - - 9,520 - - - - 9,520
Dividend declared of $.36 per share - - - (4,045) - - - - (4,045)
Treasury stock issued upon exercise
of options - - 106 - - - 9 43 149
Amortized compensation under restricted
stock plan - - - - - 14 - - 14
Repayment of notes receivable from
holder of restricted stock - - - - - 80 - - 80
Distribution of stock pursuant to
performance awards - - 456 - - - 30 147 603
Treasury stock purchased - - - - - - (3) (50) (50)
Other 1 2 18 - - - - - 20
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
Balance at June 14, 1997 (unaudited) 11,575 $19,292 17,396 205,797 (950) (406) (271) $(1,977) $239,152
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
------ ------ ---------- -------- ----------- ---------- ------ ------ ------------
</TABLE>
- ----------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 14, 1997
NOTE 1
The accompanying financial statements include all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of the Company and its subsidiaries at June 14, 1997 and December
28, 1996, and the results of operations for the 12 and 24-weeks ending
June 14, 1997 and June 15, 1996, and the changes in cash flows for the
24-week periods ending June 14, 1997 and June 15, 1996, respectively.
All material intercompany accounts and transactions have been eliminated in
the consolidated financial statements. Results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the full year.
NOTE 2
The Company uses the LIFO method for valuation of a substantial portion
of inventories. If the FIFO method had been used, inventories would have
been approximately $41.6 million higher at both June 14, 1997 and at December
28, 1996.
NOTE 3
Companies will be required to present earnings per share data, in
accordance with Statement of Financial Accounting Standards (SFAS) NO. 128,
EARNINGS PER SHARE, commencing with fiscal 1997. Currently earnings per
share calculations are performed pursuant to Accounting Principles Board
Opinion No. 15. The computation of earnings per share for both the quarter
and year to date of fiscal 1997 and 1996 would be substantially the same under
either method.
NOTE 4
On September 8, 1995, the Company entered into an agreement with a
financial institution which allowed the Company to sell on a revolving basis
customer notes receivable. Although the agreement lapsed on December 28,
1996, the notes, which have maturities through the year 2002, were sold at
face value with recourse. As a result, the Company is contingently liable
should these notes become uncollectible.
The remaining balances of such sold notes receivable totaled $11.9
million and $14.0 million at June 14, 1997 and December 28, 1996,
respectively.
<PAGE>
NOTE 5
On November 7, 1996 the Company completed a tender offer to purchase the
outstanding shares of common stock of Super Food Services, Inc. ("Super
Food"), a wholesale grocery distributor based in Dayton, Ohio, for $15.50 per
share in cash. The purchase price exceeded the fair value of the assets
acquired resulting in goodwill of approximately $29.8 million which is being
amortized on a straight line basis over 25 years.
Effective July 31, 1996, the Company acquired all of the outstanding stock
of T. J. Morris Company ("T. J. Morris"), a full line food wholesaler located
in Statesboro, Georgia. The excess of purchase price over fair value of the
assets acquired resulted in goodwill of approximately $3.1 million which is
being amortized on a straight line basis over a 15-year period.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Super Food and T. J. Morris had been
acquired as of the beginning of 1996, after including the impact of certain
adjustments such as amortization of intangibles, increased interest expense
on acquisition debt and related income tax effects:
Twenty-four Weeks Ended
-----------------------
PRO FORMA INFORMATION (Unaudited) June 15, 1996
-----------------------
Net revenues $2,005,937
Earnings before income taxes 15,165
Net income 9,048
Earnings per share $.80
-----
-----
The pro forma information is provided for informational purposes only.
It is based on historical information and does not necessarily reflect
results that would have occurred had the acquisitions been made as of those
dates or results which may occur in the future.
<PAGE>
NOTE 6
On June 9, 1997, the Company acquired the business and certain
assets of United-A.G. Cooperative, Inc. ("United-A.G."), a cooperative
wholesale grocery distributor located in Omaha for approximately $17 million
in cash. Real estate which was not included in the purchase price, is being
leased under a five-year agreement from a third party. This operating lease
contains an option to purchase the property at fair market value, or a
renewal option for an additional five years at the end of the initial lease
term. In addition, the Company has guaranteed a residual value for the leased
real estate. United-A.G., with pre-acquisition annual revenues of
approximately $200 million, served stores in Nebraska, Kansas, Iowa, Colorado
and South Dakota.
NOTE 7
On May 13, 1997, the Company entered into a three-year swap agreement
with a major financial institution as a means of managing its interest rate
risk. The agreement, which is based on a notional amount of $30.0 million,
calls for an exchange of interest payments with the Company receiving
payments based on a Libor floating rate and making payments based on a fixed
rate of 6.54% without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received from
counterparties as interest rates change is included in other liabilities or
assets, with the corresponding amount accrued and recognized as an adjustment
of interest expense related to the debt.
The fair values of the swap agreements are not recognized in the
financial statements. Gains and losses on terminations of interest-rate swap
agreements are deferred as an adjustment to the carrying amount of the
outstanding debt and amortized as an adjustment to interest expense related
to the debt over the remaining term of the original contract life of the
terminated swap agreement. In the event of the early extinguishment of a
designated debt obligation, any realized or unrealized gain or loss from the
swap would be recognized in income coincident with the extinguishment. Any
swap agreements that are not designated with outstanding debt are recorded as
an asset or liability at fair value, with changes in fair value recorded in
other income or expense.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the second quarter and the first half of fiscal 1997
increased 32.7% and 35.5%, respectively, over comparable periods last year.
The revenue increases are attributable to the acquisitions of Super Food and
T. J. Morris which occurred in the second half of 1996. In addition to the
acquisitions, the east coast military division continued its revenue growth
by further expansion of the product lines it distributes to military
installations.
Retail revenues declined during the second quarter and year to date by
6.6% and 5.6% respectively, primarily reflecting a reduction in the number of
corporate stores operated by the Company since last year. At June 14, 1997
the Company operated 105 conventional, warehouse and mass merchandise
stores, compared to 113 at the same time last year. Since the prior year
quarter, a total of 12 stores were sold or closed, offset partially by the
acquisition or opening of four other stores. Competitive pressures in
certain market areas resulted in a decline of .38% for the quarter and .47%
year to date in same store sales compared to last year.
Gross margins for the quarter were 13.3% compared to 13.6% last year. On
a year to date basis, margins were 13.1% in fiscal 1997 compared to 13.5% for
the first half of fiscal 1996. The decline in both period and year to date
resulted from a greater proportion of wholesale revenues which contribute
lower gross margins than the retail segment. Retail margins increased 13
basis points over the prior year quarter. The negative effect of competitive
pricing pressures in some markets were offset by an overall greater
proportion of retail sales in higher-margin perishables and specialty
departments. Wholesale margins continue to improve as a result of a
consolidation in buying offices. Substantially all procurement activities
are centrally located in Minneapolis for the Midwest and in North Carolina
for the Southeast wholesale operations, except military and acquisitions
completed in the second half of fiscal 1996. Centralization of procurement
has resulted in operating efficiencies and lower product costs.
Operating expenses as a percent of total revenues were 10.3% and 10.4%
for the quarter and year to date, respectively, compared to 10.8% and 11.0% for
the comparable periods last year. Expense levels continue to compare
favorably to last year because of the significant growth of the wholesale
segment which typically operates at lower expense levels. However, operating
expenses for the quarter and year to date included additional costs of
approximately $1.1 million and $2.1 million, respectively, associated with
the redesign of the Company's computer system to client/server technology.
This project is expected to continue to increase operating expenses until
roll-out and implementation are completed in fiscal 1999.
<PAGE>
Bad debt expense for the first half of fiscal 1997 was $2.1 million
compared to $.7 million in the prior year. The increase is attributed to
maintaining adequate reserve levels to correspond to the growth in
receivables resulting from recent acquisitions.
Depreciation and amortization expense increased 44.2% for the quarter and
47.3% year to date compared to last year, primarily due to acquisitions.
Amortization expense related to goodwill and other intangibles for the
quarter and year to date was $1.5 million and $3.1 million, respectively,
compared to $1.1 million and $2.2 million, respectively, last year. In
addition, capital expenditures related to the computer system project
increased depreciation expenses by $.5 million for the quarter and $1.0
million year to date compared to last year.
Interest expense increased $4.4 million and $8.8 million for the quarter
and year to date, respectively, over the same periods last year primarily due
to the debt incurred to finance the acquisition of Super Food. Average
short-term borrowings used to fund working capital needs, were higher during
the quarter compared to last year. However, outstanding short-term
borrowings at June 14, 1997 were $14.7 million lower than year end levels.
Income tax expense increased due to higher pretax earnings, and a higher
effective tax rate which increased from 40.5% to 41.9% due to
non-deductibility of certain expenses relating to the Super Food and T. J.
Morris acquisitions. On a comparative basis, the additional tax expense
negatively impacted net earnings by $.01 per share for the quarter, and $.02
per share on a year to date basis.
Net earnings for the quarter were $6.5 million compared to $6.1 million
last year, an increase of 6.0%. On a pretax basis, earnings from operations
before interest for the quarter was $17.5 million, an increase of 36.0% over
last year. On a year to date basis, operating earnings before interest were
$28.5 million compared to $20.0 million, an increase of 42.6%. The operating
earnings improvements related to the acquisitions of Super Food and T. J.
Morris, continued growth of the military division, and better results from
the Company's retail operations.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements and certain capital expenditures continue to
be funded principally from internally generated funds. However, the Company
uses short and long-term debt to supplement the financing of major capital
projects and acquisitions.
Cash provided from operations was $37.0 million compared to $23.9 million
last year. The improvement is attributed to higher cash basis earnings and
changes in the composition of working capital. Working capital at the end of
the quarter was $254.2 million, an increase of $25.1 million during the first
half of fiscal 1997. The current ratio was 1.87 compared to 1.77 at the end
of last year. The Company funded the $17 million acquisition of United-A.G.
through its existing revolving credit agreement.
<PAGE>
In an effort to manage its interest rate risk, the Company has entered into
a series of four interest rate swap agreements for notional amounts of $30.0
million each. During the second quarter, one agreement took effect while the
remaining agreements with separate financial institutions, are effective in July
1997.
The Company believes it will continue to have adequate access to short-term
and long-term credit necessary to meet its needs for growth and expansion in the
foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 are not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders was held May 13, 1997.
(b) Not required. (Proxies were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, there was no solicitation in opposition to
management's nominees as listed in the proxy statement, and all of such
nominees were elected.)
(c) At the annual meeting, the following proposals were presented to the
shareholders and voted upon: (1) Election of Directors, (2) Adoption of
1997 Non-Employee Director Stock Compensation Plan, and (3) Amendment to
1994 Stock Incentive Plan.
(1) ELECTION OF DIRECTORS.
Three director nominees were elected to serve for three-year terms
expiring in 2000, two of whom were incumbent directors. The terms of
the other eight directors do not expire until 1998 and 1999.
The director nominees and voting results are as follows:
Votes Broker
Nominee Votes For Withheld Non-votes
------- --------- -------- ---------
Jerry L. Ford 8,800,562.382 57,013.916 - 0 -
Donald R. Miller 8,718,837.727 138,738.571 - 0 -
Robert F. Nash 8,715,182.108 142,394.190 - 0 -
(2) ADOPTION OF 1997 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN.
Pursuant to the 1997 Non-Employee Director Stock Compensation Plan, a
portion of the director's annual retainer is paid in the form of
shares of Nash Finch Company common stock either currently as earned
or on a deferred basis when a director leaves the Board of Directors.
The voting results are as follows:
Votes For Votes Against Abstentions Broker Non-Votes
--------- ------------- ----------- ----------------
8,433,209.117 310,033.839 77,433.342 36,900
(3) AMENDMENT TO 1994 STOCK INCENTIVE PLAN.
Pursuant to the amendment to the 1994 Stock Incentive Plan, the number
of shares of Nash Finch Company common stock subject to the 1994 Stock
<PAGE>
Incentive Plan was increased by 200,000 shares and the limitation on
the number of shares available for issuance pursuant to non-option
awards was increased by 150,000 shares.
The voting results are as follows:
Votes For Votes Against Abstentions Broker Non-votes
--------- ------------- ----------- ----------------
8,447,476.890 295,268.561 77,930.847 36,900
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
10.1 Nash Finch 1997 Non-Employee Director Stock Compensation Plan
10.2 Nash Finch 1994 Stock Incentive Plan, as amended
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASH-FINCH COMPANY
Registrant
Date: July 29, 1997 By /s/ Alfred N. Flaten
------------------ -------------------------------------
Alfred N. Flaten
President and Chief Executive Officer
By /s/ Lawrence A. Wojtasiak
-------------------------------------
Lawrence A. Wojtasiak
Controller
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Twenty-four Weeks Ending June 14, 1997
Item No. Item Method of Filing
- -------- ---- ----------------
10.1 Nash Finch 1997
Non-Employee Director
Stock Compensation Plan Filed herewith.
10.2 Nash Finch 1994 Stock
Incentive Plan, as amended Filed herewith.
27.1 Financial Data Schedule Filed herewith.
<PAGE>
NASH FINCH COMPANY
1997 NON-EMPLOYEE DIRECTOR
STOCK COMPENSATION PLAN
1. DESCRIPTION.
1.1 NAME. The name of the Plan is the "Nash Finch Company 1997
Non-Employee Director Stock Compensation Plan."
1.2 PURPOSES. The purposes of the Plan are (a) to provide Qualified
Directors with 50 percent of their Annual Retainer in the form of either
Shares or credits to their Share Accounts, and (b) to provide Qualified
Directors with the opportunity to defer receipt of Other Director
Compensation through credits to their Share or Cash Accounts.
1.3 TYPE. The Plan is maintained primarily for the purpose of providing
deferred compensation for Qualified Directors and is intended to be unfunded
for tax purposes. The Plan will be construed and administered in a manner
that is consistent with and gives effect to the foregoing.
1.4 BACKGROUND. Previously, the Company compensated its Qualified
Directors through payment in cash of the Annual Retainer and fees for
attending regular or special meetings of the Board or Board committees. In
addition, the Company previously adopted Director Fee Deferral Agreements,
which provided Qualified Directors with the ability to defer their
compensation for service as a Qualified Director into an interest bearing
account. Commencing as of the Effective Time, all Qualified Directors (a)
will receive 50 percent (33-1/3 percent with respect to the calendar quarters
in the 1997 calendar year) of their Annual Retainer in the form of either
Shares or credits to their Share Accounts under this Plan, and (b) will
become entitled to defer receipt of Other Director Compensation through
credits to their Cash or Share Accounts under this Plan. The unfunded
deferred compensation plan established pursuant to resolutions of the Board
effective as of February 13, 1990 and of the Executive Committee of the Board
effective as of December 21, 1990 will be terminated, effective as of the
Effective Time.
2. PARTICIPATION.
2.1 ELIGIBILITY.
(a) Each individual who is a Qualified Director at any point during a
calendar quarter will receive the portion of the Annual Retainer payable
with respect to the quarter in the form of Retainer Shares to the extent
provided and in accordance with Section 3.2.
(b) Each individual who is a Qualified Director on the first day of a
calendar year is eligible to make deferral elections pursuant to Section
3.3 with respect to such calendar year. An individual who becomes a
Qualified Director after the first day of the calendar year is eligible to
make deferral elections pursuant to Section 3.3 with respect to the
remainder of such calendar year. A Participant who receives a
distribution, pursuant to Section 4.1(d)(i) or (iii), is not eligible to
elect additional deferrals pursuant to Section 3.3 until the one-year
anniversary of such distribution.
<PAGE>
2.2 CEASING TO BE ELIGIBLE. An individual who ceases to be a Qualified
Director is not eligible to (a) receive Retainer Shares pursuant to Section
3.2 other than such shares relating to the Annual Retainer payable with
respect to calendar quarters ending with the calendar quarter during which
the individual ceases to be a director or (b) make or receive any further
deferral credits pursuant to Section 3.3 after such cessation.
2.3 CONDITION OF PARTICIPATION. Each Qualified Director, as a condition
of participation in the Plan, is bound by all the terms and conditions of the
Plan and the Plan Rules, including but not limited to the reserved right of
the Company to amend or terminate the Plan, and must furnish to the
Administrator such pertinent information, and execute such election forms and
other instruments, as the Administrator or Plan Rules may require by such
dates as the Administrator or Plan Rules may establish.
2.4 TERMINATION OF PARTICIPATION. A Participant will cease to be such as
of the date on which he or she is not then eligible to receive Retainer
Shares or make deferrals and his or her entire Account balance has been
distributed.
3. BENEFITS.
3.1 PARTICIPANT ACCOUNTS. For each Participant, the Administrator will
establish and maintain a Cash Account, a Share Account or both to evidence
amounts credited with respect to the Participant pursuant to Sections 3.2,
3.3 and 3.4.
3.2 ISSUANCE OF RETAINER SHARES. As of the first day of the calendar
quarter that first follows the Effective Time and as of the first day of each
calendar quarter thereafter, each individual who is a Qualified Director at
any time during the immediately preceding calendar quarter will, unless a
deferral election is properly made pursuant to Section 3.3(a), be entitled to
receive (as soon as reasonably practical after such immediately preceding
calendar quarter) the Retainer Shares relating to his or her services as a
Qualified Director during such immediately preceding calendar quarter.
3.3 DEFERRAL CREDITS.
(a) Commencing with respect to services to be performed after the
Effective Time, a Qualified Director may elect to defer all (but not less
than all) of the Retainer Share Amount relating to his or her services as a
Qualified Director during a calendar year. Any such election will
automatically apply to the Qualified Director's Retainer Share Amount for
the year as adjusted from time to time.
(b) Commencing with respect to services to be performed after the
Effective Time, a Qualified Director may elect to defer all or any portion
of his or her Other Director Compensation relating to his or her services
as a Qualified Director during a calendar year. Any portion so elected
will automatically apply to the Qualified Director's Other Director
Compensation for the year as adjusted from time to time.
(c) Elective deferrals of a Qualified Director's Retainer Share
Amount and Other Director Compensation will be made in accordance with the
following rules:
(i) An election made pursuant to this Section 3.3 will not be
effective unless it is made on a properly completed election form
received by the Administrator by the last day of the calendar year
immediately preceding the calendar year to which the election relates
or, in the case of an individual who becomes a Qualified Director
after
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the first day of the calendar year, within 30 days after the
date such individual becomes a Qualified Director. Notwithstanding
the foregoing, with respect to an initial deferral election that is
made in connection with the adoption of the Plan, such election will
be effective if received by the Administrator by April 30, 1997. Any
deferral elections under this Section 3.3 will apply only to a
Qualified Director's Retainer Share Amount and Other Director
Compensation relating to services performed after the effective date
of the election.
(ii) A Qualified Director may revoke a deferral election made
pursuant to this Section 3.3 at any time. Any such revocation will be
effective with respect to any payment of a Qualified Director's
Retainer Share Amount and Other Director Compensation that (A) follows
by at least 30 days (or such shorter period as Plan Rules may allow)
the Administrator's receipt of a properly completed form, and (B)
relates to services as a Qualified Director after the date on which
the Administrator receives such notice. Upon making a revocation, the
Qualified Director will be unable to make further deferrals of his or
her Retainer Share Amount and Other Director Compensation until the
next calendar year.
(iii) In conjunction with each deferral election made
pursuant to Section 3.3(b), a Qualified Director must elect, in
accordance with and subject to Plan Rules, how the deferral is to be
allocated (in increments of five percent only) among his or her Cash
Account and Share Account. Such an election is irrevocable after the
latest date by which the deferral election to which it relates must be
received by the Administrator to be effective. All deferrals of a
Qualified Director's Retainer Share Amount will automatically be
credited to such Qualified Director's Share Account.
(iv) Deferrals of the Retainer Share Amount pursuant to Section
3.3(a) will be credited to a Qualified Director's Share Account as of
the date on which the Retainer Shares would have been issued pursuant
to Section 3.2 but for his or her deferral election. Deferrals of
Other Director Compensation pursuant to Section 3.3(b) will be
credited to a Qualified Director's Cash Account or Share Account, as
the case may be, as of the date on which such Other Director
Compensation would have been paid but for his or her deferral
election. Such credits to the Qualified Director's Cash Account will
be in U.S. dollars in an amount equal to the amount of the deferral
allocated to the Cash Account by the Qualified Director. Such credits
to a Qualified Director's Share Account will be the number of full and
fractional Share Units determined by dividing the Retainer Share
Amount to be allocated to the Share Account by the Market Price on the
date as of which the credit is made.
3.4 EARNINGS CREDITS.
(a) CASH ACCOUNT. As of the first day of each calendar quarter, a
Participant's Cash Account will be credited with interest, calculated on
the basis of the balance in the Participant's Cash Account as of the last
day of the immediately preceding calendar quarter, in an amount equal to
the "applicable percentage" of the average daily balance of the Account for
such immediately preceding calendar quarter. The applicable percentage for
a given calendar quarter is the quarterly equivalent of the average of the
annual yield set forth for each month during such calendar quarter in the
MOODY'S BOND RECORD, published by Moody's Investor's Service, Inc. (or any
successor thereto) under the heading of "Moody's Corporate Bond Yield
Averages -- Av.
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Corp." or, if such yield is no longer available, a substantially similar
average selected by the Administrator.
(b) SHARE ACCOUNT.
(i) As of the first day of the calendar quarter first following
the date on which dividends are paid on Shares, a Participant's Share
Account will be credited with that number of full and fractional Share
Units determined by dividing the dollar amount of the dividends that
would have been payable to the Participant if the number of Share
Units credited to the Participant's Share Account on the record date
for such dividend payment had then been Shares registered in the name
of such Participant by the Market Price on the date as of which the
credit is made.
(ii) In the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation,
rights offering or any other change in the Company's corporate
structure or Shares, the Administrator will make such adjustment, if
any, as the Administrator may deem appropriate in the number and kind
of Share Units credited to Share Accounts.
3.5 VESTING. Each Participant always has a fully vested nonforfeitable
interest in his or her Account.
4. DISTRIBUTION.
4.1 DISTRIBUTION TO PARTICIPANT.
(a) FORM. Distribution to a Participant will be made in the form of
a lump sum payment unless (i) the Participant elects, on a properly
completed form, to receive his or her distribution in the form of annual
installment payments for a period of not more than 10 years and (ii) other
than cessation resulting from Disability, the date on which he or she
ceases to be a member of the Board follows by more than one year the date
on which a properly completed election form is received by the
Administrator. Any election made pursuant to this Section 4.1(a) may be
changed from time to time upon the Administrator's receipt of a properly
completed form, provided that, other than cessation resulting from
Disability, such change will not be valid and will not have any effect
unless it is made on a properly completed form received by the
Administrator more than one year prior to a Participant's cessation of
service as a member of the Board. Any election made pursuant to this
Section 4.1(a) will apply to the entire balance of the Participant's
Account attributable to deferral credits with respect to the period through
the date on which he or she ceases to be a member of the Board. Any
distribution from a Participant's Cash Account will be made in cash only.
Any distribution from a Participant's Share Account will be made in full
Shares only and cash in lieu of any fractional Share.
(b) TIME. Distribution to a Participant will be made or commence on
or as soon as administratively practicable after the first day of the
calendar quarter that follows the date on which the Participant ceases to
be a member of the Board.
(c) AMOUNT.
(i) CASH ACCOUNT.
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(A) LUMP SUM. The amount of a lump sum payment from a
Participant's Cash Account will be equal to the balance of the
Account as of the first day of the calendar month coinciding with
or immediately preceding the date on which the payment is made.
(B) INSTALLMENTS. The amount of an installment payment
from a Participant's Cash Account will be determined by dividing
the balance of the Account as of the first day of the calendar
month coinciding with or immediately preceding the date on which
the payment is made by the total number of remaining payments
(including the current payment).
(ii) SHARE ACCOUNT.
(A) LUMP SUM. A lump sum distribution from a Participant's
Share Account will consist of the number of Shares equal to the
number of full Share Units credited to the Account as of the
first day of the calendar month coinciding with or immediately
preceding the date on which the distribution is made plus cash in
lieu of any fractional Share Units then credited to the Account
in an amount based on the Market Price on that date.
(B) INSTALLMENTS. Installment distributions from a
Participant's Share Account, other than the final distribution,
will consist of the number of Shares determined by dividing the
number of full Share Units credited to the Account as of the
first day of the calendar month coinciding with or immediately
preceding the date on which the distribution is made by the total
number of remaining payments (including the current payment) and
rounding the quotient to the next higher full Share. The amount
of the final payment will be determined in accordance with clause
(A).
(d) SPECIAL RULES. The provisions of this Section 4.1(d) will apply
notwithstanding Section 4.1(a), (b) or (c) or any election by a Participant
to the contrary.
(i) WITHDRAWALS DUE TO UNFORESEEABLE EMERGENCY. A distribution
will be made to a Participant from his or her Share or Cash Account if
the Participant submits a written distribution request to the
Administrator and the Administrator determines that the Participant
has experienced an Unforeseeable Emergency. The amount of the
distribution may not exceed the lesser of (a) the amount necessary to
satisfy the emergency, as determined by the Administrator, or (b) the
balance of the Participant's Account as of the date of the
distribution determined in accordance with Section 4.1(c). Payments
made on account of an Unforeseeable Emergency will not be made to the
extent that such Unforeseeable Emergency is or may be relieved through
reimbursement or compensation by insurance or otherwise, by
liquidation of the Participant's assets (to the extent that such
liquidation would not itself cause severe financial hardship) or by
cessation of deferrals under Section 3.3. Any distribution pursuant
to this Section 4.1(d)(i) will be made in the form of a lump sum
payment (in cash from the Cash Account and in Shares from the Share
Account) as soon as administratively practicable after the
Administrator's determination that the Participant has experienced an
Unforeseeable Emergency and will be made first from the Participant's
Cash Account and then from the Participant's Share Account, with the
amount distributed from the
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Share Account determined based upon the Market Price as of the first
day immediately preceding the date on which the distribution is made.
(ii) SMALL BENEFITS. If the balance of the Cash Account of a
Participant who has ceased to be a member of the Board is less than
$5,000 as of the first day of a calendar month, such balance will be
distributed to the Participant in the form of a lump sum cash payment
as soon as administratively practicable thereafter.
(ii) ACCELERATED DISTRIBUTION. A Participant may, at any time,
elect an immediate distribution of his or her Account in an amount
equal to 90 percent of the balance of the Account as of the date of
the distribution determined in accordance with Section 4.1(c), in
which case the remaining balance of the Account will be forfeited.
The distribution will be made in the form of a lump sum payment as
soon as administratively practicable after the Administrator's receipt
of a written application on a form furnished by the Administrator.
Any distribution from a Participant's Cash Account will be made in
cash only. Any distribution from a Participant's Share Account will be
made in full Shares only and cash in lieu of any fractional Share.
(e) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from
which a distribution is made will be reduced by the amount of the
distribution as of the date of the distribution.
4.2 DISTRIBUTION TO BENEFICIARY.
(a) FORM. In the event of a Participant's death, the balance of the
Participant's Account will be distributed to the Participant's Beneficiary
in a lump sum payment whether or not payments had commenced to the
Participant in the form of installments prior to his or her death. Any
distribution from a Participant's Cash Account will be made in cash and any
distribution from a Participant's Share Account will be made in full Shares
and cash in lieu of any fractional Share.
(b) TIME. Distribution to a Beneficiary will be made as soon as
administratively practicable after the date on which the Administrator
receives notice of the Participant's death.
(c) AMOUNT. The amount of the payment will be determined in
accordance with Section 4.1(c).
(d) REDUCTION OF ACCOUNT BALANCE. The balance of the Account from
which a distribution is made will be reduced by the amount of the
distribution as of the date of the distribution.
(e) BENEFICIARY DESIGNATION.
(i) Each Participant may designate, on a form furnished by the
Administrator, one or more primary Beneficiaries or alternative
Beneficiaries to receive all or a specified part of his or her Account
after his or her death, and the Participant may change or revoke any
such designation from time to time. No such designation, change or
revocation is effective unless executed by the Participant and
received by the Administrator during the Participant's lifetime.
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(ii) If, for all or any portion of his or her Account, a
Participant fails to designate a Beneficiary, revokes a Beneficiary
designation without naming another Beneficiary or designates one or
more Beneficiaries, none of whom survives the Participant or exists at
the time in question, such Account or portion will be paid to the
Participant's surviving spouse or, if the Participant is not survived
by a spouse, to the representative of the Participant's estate.
(iii) The automatic Beneficiaries specified above and, unless
the designation otherwise specifies, the Beneficiaries designated by
the Participant, become fixed as of the Participant's death so that,
if a Beneficiary survives the Participant but dies before the receipt
of the payment due such Beneficiary, the payment will be made to the
representative of such Beneficiary's estate. Any designation of a
Beneficiary by name that is accompanied by a description of
relationship or only by statement of relationship to the Participant
is effective only to designate the person or persons standing in such
relationship to the Participant at the Participant's death.
4.3 LIMITATIONS ON SHARE DISTRIBUTIONS. Notwithstanding any other provision
of the Plan to the contrary, neither the Company nor the Trustee is required to
issue or distribute any Shares under this Plan, and a distributee may not sell,
assign, transfer or otherwise dispose of Shares issued or distributed pursuant
to the Plan, unless (a) there is in effect with respect to such Shares a
registration statement under the Securities Act and any applicable state
securities laws or an exemption from such registration under the Securities Act
and applicable state securities laws, and (b) there has been obtained any other
consent, approval or permit from any other regulatory body which the Company
deems necessary or advisable. The Company or the Trustee may condition such
issuance, distribution, sale or transfer upon the receipt of any representations
or agreements from the parties involved, and the placement of any legends on
certificates representing Shares, as may be deemed necessary or advisable by the
Company in order to comply with such securities laws or other restrictions.
4.4 PAYMENT IN EVENT OF INCAPACITY. If any individual entitled to receive
any payment under the Plan is, in the judgment of the Administrator, physically,
mentally or legally incapable of receiving or acknowledging receipt of the
payment, and no legal representative has been appointed for the individual, the
Administrator may (but is not required to) cause the payment to be made to any
one or more of the following as may be chosen by the Administrator: the
Beneficiary (in the case of the incapacity of a Participant); the institution
maintaining the individual; a custodian for the individual under the Uniform
Transfers to Minors Act of any state; or the individual's spouse, children,
parents, or other relatives by blood or marriage. The Administrator is not
required to see to the proper application of any such payment, and the payment
completely discharges all claims under the Plan against the Company, the Plan
and the Trust to the extent of the payment.
5. SOURCE OF PAYMENTS; NATURE OF INTEREST.
5.1 ESTABLISHMENT OF TRUST.
(a) The Company may establish a Trust with an independent corporate
trustee. The Trust must be a grantor trust with respect to which the
Company is treated as grantor for purposes of Code section 677 and must
provide that, upon the insolvency of the Company, Trust assets will be used
to satisfy claims of the Company's general creditors. The Company will pay
all taxes of any and all kinds whatsoever payable in respect of the Trust
assets or any transaction with respect to the Trust assets. The Company
may from time to time transfer to the Trust cash,
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marketable securities or other property acceptable to the Trustee in
accordance with the terms of the Trust.
(b) Notwithstanding subsection (a), not later than the effective date
of a Change in Control, the Company must transfer to the Trust an amount
not less than the amount by which (i) 125 percent of the aggregate balance
of all Participants' Accounts as of the last day of the month immediately
preceding the effective date of the Change in Control exceeds (ii) the
value of the Trust assets attributable to amounts previously contributed by
the Company as of the most recent date as of which such value was
determined.
5.2 SOURCE OF PAYMENTS.
(a) The Company will pay, from its general assets, the benefits
pursuant to Section 4 attributable to a Participant's Account, and all
costs, charges and expenses relating thereto.
(b) The Trustee will make distributions to Participants and
Beneficiaries from the Trust in satisfaction of the Company's obligations
under the Plan in accordance with the terms of the Trust. The Company is
responsible for paying any benefits attributable to a Participant's Account
that are not paid by the Trust.
5.3 STATUS OF PLAN. Nothing contained in the Plan or Trust is to be
construed as providing for assets to be held for the benefit of any Participant
or any other person or persons to whom benefits are to be paid pursuant to the
terms of the Plan, the Participant's or other person's only interest under the
Plan being the right to receive the benefits set forth herein. The Trust is
established only for the convenience of the Company and the Participants, and no
Participant has any interest in the assets of the Trust prior to distribution of
such assets pursuant to the Plan. Until such time as Shares are distributed to
a Participant, Beneficiary of a deceased Participant or other person, he or she
has no rights as a shareholder with respect to any Shares Units credited to a
Share Account pursuant to the Plan. To the extent that the Participant or any
other person acquires a right to receive benefits under the Plan or the Trust,
such right is no greater than the right of any unsecured general creditor of the
Company.
5.4 NON-ASSIGNABILITY OF BENEFITS. The benefits payable under the Plan and
the right to receive future benefits under the Plan may not be anticipated,
alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any
charge or legal process.
6. AMENDMENT AND TERMINATION.
6.1 AMENDMENT.
(a) The Company reserves the right to amend the Plan at any time to
any extent that it may deem advisable. To be effective, an amendment must
be stated in a written instrument approved in advance or ratified by the
Board and executed in the name of the Company by its President or a Vice
President and attested by the Secretary or an Assistant Secretary.
(b) An amendment adopted in accordance with Section 6.1(a) is binding
on all interested parties as of the effective date stated in the amendment;
provided, however, that no amendment will have any retroactive effect so as
to deprive any Participant, or the Beneficiary of a deceased Participant,
of any benefit to which he or she is entitled under the terms of the Plan
in effect immediately prior to the effective date of the amendment,
determined as if such
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Participant had terminated service as a director immediately prior to
the effective date of the amendment.
(c) Without limiting Section 6.1(a), the Company reserves the right
to amend this Plan to change the method of determining the earnings
credited to Participants' Accounts pursuant to Section 3.4 and to apply
such new method not only with respect to the portion of the Accounts
attributable to credits made after the date on which such amendment is
adopted but also with respect to the portion of the Accounts attributable
to credits made prior to the date on which such amendment is adopted and
regardless of whether such new method would result in materially lower
earnings credits than the old method.
(d) The provisions of the Plan in effect at the termination of a
Participant's service as a director will, except as otherwise expressly
provided by a subsequent amendment, continue to apply to such Participant.
6.2 TERMINATION. The Company reserves the right to terminate the Plan at any
time. The Plan will terminate as of the date specified by the Company in a
written instrument by its authorized officers to the Administrator, adopted in
the manner of an amendment. Upon the termination of the Plan, any benefits to
which Participants have become entitled prior to the effective date of the
termination will continue to be paid in accordance with the provisions of
Section 4, provided that a majority of the members of the Board who are not then
Participants may cause the entire interest in the Plan of any or all
Participants, or the Beneficiaries of any or all deceased Participants, to be
distributed in the form of an immediate lump sum payment.
7. DEFINITIONS, CONSTRUCTION AND INTERPRETATION.
The definitions and rules of construction and interpretation set forth in
this Section 7 apply in construing the Plan unless the context otherwise
indicates.
7.1 ACCOUNT. "Account" means the bookkeeping account or accounts maintained
with respect to a Participant pursuant to Section 3.1.
7.2 ADMINISTRATOR. The "Administrator" of the Plan is the Nominating
Committee of the Board or such other committee or the person to whom
administrative duties are delegated pursuant to the provisions of Section 8.1,
as the context requires.
7.3 ANNUAL RETAINER. "Annual Retainer" means the regular retainer payable
by the Company to a Qualified Director for a 12-month period of service as a
Qualified Director, exclusive of fees specifically paid for attending or
chairing regular or special meetings of the Board and Board committees, fees or
special retainers paid for membership on standing Board committees or for
serving as the chair of the Board or standing Board committees, expense
allowances or reimbursements, insurance premiums and any other payments that are
determined by reference to factors other than holding office as a Qualified
Director.
7.4 BENEFICIARY. "Beneficiary" with respect to a Participant is the person
designated or otherwise determined under the provisions of Section 4.2(e) as the
distributee of benefits payable after the Participant's death. A person
designated or otherwise determined to be a Beneficiary under the terms of the
Plan has no interest in or right under the Plan until the Participant in
question has died. A Beneficiary will cease to be such on the day on which all
benefits to which he, she or it is entitled under the Plan have been
distributed.
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7.5 BOARD. "Board" means the board of directors of the Company.
7.6 CASH ACCOUNT. "Cash Account" means an Account to which amounts are
credited in U.S. dollars.
7.7 CHANGE IN CONTROL. "Change in Control" means any of the following:
(a) the sale, lease, exchange or other transfer, directly or
indirectly, of all or substantially all of the assets of the Company, in
one transaction or in a series of related transactions, to any person;
(b) the approval by the stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
any person is or becomes after the Effective Time the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of (i) 20 percent or more, but not more than 50 percent, of the combined
voting power of the Company's outstanding securities ordinarily having the
right to vote at elections of directors, unless the transaction resulting
in such ownership has been approved in advance by the continuity directors,
or (ii) more than 50 percent of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the continuity directors);
(d) a merger or consolidation to which the Company is a party if the
stockholders of the Company immediately prior to the effective date of such
merger or consolidation have beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) immediately following the effective date of such
merger or consolidation of securities of the surviving company representing
(a) 50 percent or more, but not more than 80 percent, of the combined
voting power of the surviving corporation's then outstanding securities
ordinarily having the right to vote at elections of directors, unless such
merger or consolidation has been approved in advance by the continuity
directors, or (b) less than 50 percent of the combined voting power of the
surviving corporation's then outstanding securities ordinarily having the
right to vote at elections of directors (regardless of any approval by the
continuity directors);
(e) the continuity directors cease for any reason to constitute at
least a majority of the Company's board of directors; or
(f) a change in control of the Company of a nature that would be
required to be reported pursuant to section 13 or 15(d) of the Exchange
Act, whether or not the Company is then subject to such reporting
requirement.
(g) For purposes of this Section 7.7:
(i) a "continuity director" means any individual who is a member
of the Board as of the Effective Time while he or she is a member of
the Board, and any individual who subsequently becomes a member of the
Board whose election or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the
directors who are continuity directors (either by a specific vote or
by approval of the proxy statement of the Company in which such
individual is named as a nominee for director without objection to
such nomination);
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(ii) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time; and
(iii) "person" means any individual, corporation,
partnership, group, association or other "person," as such term is
defined in section 14(d) of the Exchange Act, other than (A) the
Company; (B) any corporation at least a majority of whose securities
having ordinary voting power for the election of directors is owned,
directly or indirectly, by the Company; (C) any other entity in which
the Company, by virtue of a direct or indirect ownership interest, has
the right to elect a majority of the members of the entity's governing
body; or (D) any benefit plan sponsored by the Company, a corporation
described in clause (B) or an entity described in clause (C).
7.8 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to a specific provision of the Code includes a reference to
that provision as it may be amended from time to time and to any successor
provision.
7.9 COMPANY. "Company" means Nash Finch Company.
7.10 CROSS REFERENCE. References in the Plan to a particular section
refer to that section within the Plan, references within a section of the
Plan to a particular subsection refer to that subsection within the same
section, and references within a section or subsection to a particular clause
refer to that clause within the same section or subsection, as the case may
be.
7.11 DISABILITY. "Disability" means the disability of a Qualified
Director such as would entitle the Qualified Director to receive income
benefits pursuant to the long-term disability plan of the Company then
covering the Qualified Director or, if no such plan exists or is applicable
to the Qualified Director, the permanent and total disability of the
Qualified Director within the meaning of Code section 22(e)(3).
7.12 EFFECTIVE TIME. "Effective Time" means such time as the Plan is
approved by the Company's stockholders.
7.13 GOVERNING LAW. All questions pertaining to the construction,
validity, effect and enforcement of the Plan will be determined in accordance
with the internal, substantive laws of the State of Minnesota without regard
to the conflict of laws rules of the State of Minnesota or any other
jurisdiction.
7.14 HEADINGS. The headings of sections are included solely for
convenience of reference; if there exists any conflict between such headings
and the text of the Plan, the text will control.
7.15 MARKET PRICE. "Market Price" means the closing sale price for
Shares on a specified date or, if Shares were not then traded, on the most
recent prior date when Shares were traded, all as reported on the Nasdaq
National Market or such other exchange as the Shares may be traded from time
to time.
7.16 NUMBER AND GENDER. Wherever appropriate, the singular may be read
as the plural, the plural may be read as the singular, and one gender may be
read as the other gender.
7.17 OTHER DIRECTOR COMPENSATION. "Other Director Compensation" means
all amounts payable by the Company to a Qualified Director for his or her
services to the Company as a Qualified
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Director, (a) including, without limitation, fees specifically paid for
attending or chairing regular or special meetings of the Board and Board
committees, but (b) excluding the Retainer Share Amount, expense allowances
or reimbursements and insurance premiums
7.18 PARTICIPANT. "Participant" is a current or former Qualified
Director to whose Account amounts have been credited pursuant to Section 3
and who has not ceased to be a Participant pursuant to Section 2.4.
7.19 PLAN. "Plan" means the Nash Finch Company 1997 Non-Employee
Director Stock Compensation Plan, as from time to time amended or restated.
7.20 PLAN RULES. "Plan Rules" are rules, policies, practices or
procedures adopted by the Administrator pursuant to Section 8.2.
7.21 QUALIFIED DIRECTOR. "Qualified Director" means an individual who is
a member of the Board and who is not a current employee of the Company or any
of its subsidiaries.
7.22 RETAINER SHARES. "Retainer Shares" means the number of full and
fractional Shares determined by dividing the Retainer Share Amount for a
calendar quarter by the Market Price on the first day of the calendar quarter
that first follows the calendar quarter for which such Retainer Share Amount
has been determined.
7.23 RETAINER SHARE AMOUNT. "Retainer Share Amount" means, with respect
to any calendar quarter, the amount determined by (i) taking an amount equal
to 50 percent (33-1/3 percent with respect to the calendar quarters in the
1997 calendar year) of the Annual Retainer payable by the Company to
Qualified Directors for such calendar quarter and (ii) multiplying such
amount by a fraction, the numerator of which is the number of days during
such calendar quarter (or the number of days after the Effective Time with
respect to the calendar quarter in which the Effective Time occurs) that the
individual served as a Qualified Director and the denominator of which is the
total number of days in such calendar quarter.
7.24 SECURITIES ACT. "Securities Act" means the Securities Act of 1933,
as amended. Any reference to a specific provision of the Securities Act
includes a reference to that provision as it may be amended from time to time
and to any successor provision.
7.25 SHARE ACCOUNT. "Share Account" means an Account to which amounts
are credited in Share Units.
7.26 SHARE UNITS. "Share Units" means a unit credited to a Participant's
Share Account pursuant to the Plan, each of which represents the equivalent
of one Share.
7.27 SHARES. "Shares" means shares of common stock of the Company,
$1.66-2/3 par value, or such other class or kind of shares or other
securities as may be applicable pursuant to Section 3.3(b)(ii).
7.28 TRUST. "Trust" means any trust or trusts established by the Company
pursuant to Section 5.1.
7.29 TRUSTEE. "Trustee" means the independent corporate trustee or
trustees that at the relevant time has or have been appointed to act as
Trustee of the Trust.
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7.30 UNFORESEEABLE EMERGENCY. "Unforeseeable Emergency" means an
unanticipated emergency that is caused by an event beyond the Participant's
control resulting in a severe financial hardship that cannot be satisfied
through other means. The existence of an unforeseeable emergency will be
determined by the Administrator.
8. ADMINISTRATION.
8.1 ADMINISTRATOR. The general administration of the Plan and the duty
to carry out its provisions will be vested in the Nominating Committee of the
Board or such other Board committee as may be subsequently designated as
Administrator by the Board. Such committee may delegate such duty or any
portion thereof to a named person and may from time to time revoke such
authority and delegate it to another person.
8.2 PLAN RULES AND REGULATIONS. The Administrator has the discretionary
power and authority to make such Plan Rules as the Administrator determines
to be consistent with the terms, and necessary or advisable in connection
with the administration, of the Plan and to modify or rescind any such Plan
Rules.
8.3 ADMINISTRATOR'S DISCRETION. The Administrator has the sole
discretionary power and authority to make all determinations necessary for
administration of the Plan, except those determinations that the Plan
requires others to make, and to construe, interpret, apply and enforce the
provisions of the Plan and Plan Rules whenever necessary to carry out its
intent and purpose and to facilitate its administration, including, without
limitation, the discretionary power and authority to remedy ambiguities,
inconsistencies, omissions and erroneous benefit calculations. In the
exercise of its discretionary power and authority, the Administrator will
treat all similarly situated persons uniformly.
8.4 SPECIALIST'S ASSISTANCE. The Administrator may retain such
actuarial, accounting, legal, clerical and other services as may reasonably
be required in the administration of the Plan, and may pay reasonable
compensation for such services. All costs of administering the Plan will be
paid by the Company.
8.5 INDEMNIFICATION. The Company agrees to indemnify and hold harmless,
to the extent permitted by law, each director, officer and employee of the
Company and any subsidiary or affiliate of the Company against any and all
liabilities, losses, costs and expenses (including legal fees) of every kind
and nature that may be imposed on, incurred by, or asserted against such
person at any time by reason of such person's services in connection with the
Plan, but only if such person did not act dishonestly or in bad faith or in
willful violation of the law or regulations under which such liability, loss,
cost or expense arises. The Company has the right, but not the obligation, to
select counsel and control the defense and settlement of any action for which
a person may be entitled to indemnification under this provision.
9. MISCELLANEOUS.
9.1 WITHHOLDING AND OFFSETS. The Company and the Trustee retain the
right to withhold from any compensation, deferral and/or benefit payment
pursuant to the Plan, any and all tax as the Company or Trustee deems
necessary, and the Company and the Trustee may offset against amounts payable
to a Participant or Beneficiary under the Plan any amounts then owing to the
Company by such Participant or Beneficiary. The Company or the Trustee, as
the case may be, in its sole discretion, may permit Participants to elect
whether to satisfy their obligations under this Section 9.1 by having such
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amounts withheld from any compensation, deferral and/or benefit payment
pursuant to the Plan or by remitting such amounts to the Company or the
Trustee, or by a combination of such methods.
9.2 OTHER BENEFITS. Neither amounts deferred nor amounts paid pursuant to
the Plan constitute salary or compensation for the purpose of computing benefits
under any other benefit plan, practice, policy or procedure of the Company
unless otherwise expressly provided thereunder.
9.3 NO WARRANTIES REGARDING TAX TREATMENT. The Company makes no
warranties regarding the tax treatment to any person of any deferrals or
payments made pursuant to the Plan, and each Participant will hold the
Administrator and the Company and their officers, directors, employees,
agents and advisors harmless from any liability resulting from any tax
position taken in good faith in connection with the Plan.
9.4 NO RIGHTS TO CONTINUED SERVICE CREATED. Neither the establishment of
or participation in the Plan gives any individual the right to continued
service on the Board or limits the right of the Company or its stockholders
to terminate or modify the terms and conditions of service of such individual
on the Board or otherwise deal with any individual without regard to the
effect that such action might have on him or her with respect to the Plan.
9.5 SUCCESSORS. Except as otherwise expressly provided in the Plan, all
obligations of the Company under the Plan are binding on any successor to the
Company whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise of all or substantially
all of the business and/or assets of the Company.
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NASH-FINCH COMPANY
1994 STOCK INCENTIVE PLAN
(As amended, effective May 13, 1997)
1. PURPOSE OF PLAN.
The purpose of the Nash-Finch Company 1994 Stock Incentive Plan (the
"Plan") is to advance the interests of Nash-Finch Company (the "Company") and
its shareholders by enabling the Company and its Subsidiaries to attract and
retain persons of ability to perform services for the Company and its
Subsidiaries by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals who contribute
to the achievement by the Company of its economic objectives.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1. "BOARD" means the Board of Directors of the Company.
2.2. "BROKER EXERCISE NOTICE" means a written notice pursuant to which
a Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.3. "CHANGE IN CONTROL" means an event described in Section 11.1 of the
Plan.
2.4. "CODE" means the Internal Revenue Code of 1986, as amended.
2.5. "COMMITTEE" means the group of individuals administering the Plan,
as provided in Section 3 of the Plan.
2.6. "COMMON STOCK" means the common stock of the Company, $1.66 2/3 par
value per share, or the number and kind of shares of stock or other
securities into which such Common Stock may be changed in accordance with
Section 4.3 of the Plan.
2.7. "DISABILITY" means the disability of the Participant such as would
entitle the Participant to receive disability income benefits pursuant to the
long-term disability plan of the Company or Subsidiary then covering the
Participant or, if no such plan exists or is applicable to the Participant,
the permanent and total disability of the Participant within the meaning of
Section 22(e)(3) of the Code.
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2.8. "ELIGIBLE RECIPIENTS" means all full-time, salaried employees
(including, without limitation, officers and directors who are also
employees) of the Company or any Subsidiary.
2.9. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.10. "FAIR MARKET VALUE" means, with respect to the Common Stock, as of
any date (or, if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote), the mean between
the reported high and low sale prices of the Common Stock as reported on the
National Association of Securities Dealers Automated Quotation National
Market System, or any exchange on which the Common Stock is listed.
2.11. "INCENTIVE AWARD" means an Option, Restricted Stock Award or
Performance Unit granted to an Eligible Recipient pursuant to the Plan.
2.12. "INCENTIVE STOCK OPTION" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.13. "NON-STATUTORY STOCK OPTION" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that does
not qualify as an Incentive Stock Option.
2.14. "OPTION" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.15. "PARTICIPANT" means an Eligible Recipient who receives one or more
Incentive Awards under the Plan.
2.16. "PERFORMANCE UNIT" means a right granted to an Eligible Recipient
pursuant to Section 8 of the Plan to receive a payment from the Company, in
the form of stock, cash or a combination of both, upon the achievement of
established performance goals.
2.17. "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that are
already owned by the Participant or, with respect to any Incentive Award,
that are to be issued upon the grant, exercise or vesting of such Incentive
Award.
2.18. "RESTRICTED STOCK AWARD" means an award of Common Stock granted to
an Eligible Recipient pursuant to Section 7 of the Plan that is subject to
the restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 7.
2.19. "RETIREMENT" means termination of employment or service pursuant to
and in accordance with the regular (or, if approved by the Board for purposes
of the Plan, early) retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant.
2.20. "SECURITIES ACT" means the Securities Act of 1933, as amended.
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2.21 "SUBSIDIARY" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a
significant equity interest, as determined by the Committee.
2.22. "TAX DATE" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.
3. PLAN ADMINISTRATION.
3.1. THE COMMITTEE. So long as the Company has a class of its equity
securities registered under Section 12 of the Exchange Act, the Plan will be
administered by a committee (the "Committee") consisting solely of not less
than two members of the Board who are "disinterested persons" within the
meaning of Rule 16b-3 under the Exchange Act. To the extent consistent with
corporate law, the Committee may delegate to any officers of the Company the
duties, power and authority of the Committee under the Plan pursuant to such
conditions or limitations as the Committee may establish; provided, however,
that only the Committee may exercise such duties, power and authority with
respect to Eligible Recipients who are subject to Section 16 of the Exchange
Act. Each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan will be conclusive and
binding for all purposes and on all persons, and no member of the Committee
will be liable for any action or determination made in good faith with
respect to the Plan or any Incentive Award granted under the Plan.
3.2. AUTHORITY OF THE COMMITTEE.
(a) In accordance with and subject to the provisions of the Plan, the
Committee will have the authority to determine all provisions of Incentive
Awards as the Committee may deem necessary or desirable and as consistent
with the terms of the Plan, including, without limitation, the following:
(i) the Eligible Recipients to be selected as Participants; (ii) the nature
and extent of the Incentive Awards to be made to each Participant
(including the number of shares of Common Stock to be subject to each
Incentive Award, any exercise price, the manner in which Incentive Awards
will vest or become exercisable and whether Incentive Awards will be
granted in tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award; (iii) the time or times
when Incentive Awards will be granted; (iv) the duration of each Incentive
Award; and (v) the restrictions and other conditions to which the payment
or vesting of Incentive Awards may be subject. In addition, the Committee
will have the authority under the Plan in its sole discretion to pay the
economic value of any Incentive Award in the form of Common Stock, cash, or
any combination of both.
(b) The Committee will have the authority under the Plan to amend or
modify the terms of any outstanding Incentive Award in any manner,
including, without limitation, the authority to modify the number of shares
or other terms and conditions of an Incentive Award, extend the term of an
Incentive Award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive Award, accept the
surrender of any outstanding Incentive Award or, to the extent not
previously
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exercised or vested, authorize the grant of new Incentive Awards
in substitution for surrendered Incentive Awards; provided, however that
the amended or modified terms are permitted by the Plan as then in effect
and that any Participant adversely affected by such amended or modified
terms has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to this
Section 3.2 or any other provisions of the Plan, will be deemed to be a
regrant of such Incentive Award for purposes of this Plan.
(c) In the event of (i) any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in corporate
structure or shares, (ii) any purchase, acquisition, sale or disposition of
a significant amount of assets or a significant business, (iii) any change
in accounting principles or practices, or (iv) any other similar change, in
each case with respect to the Company or any other entity whose performance
is relevant to the grant or vesting of an Incentive Award, the Committee
(or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) may,
without the consent of any affected Participant, amend or modify the
vesting criteria of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary
or division thereof) or such other entity so as equitably to reflect such
event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the
board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect.
4. SHARES AVAILABLE FOR ISSUANCE.
4.1. MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
provided in Section 4.3 of the Plan, the maximum number of shares of Common
Stock that will be available for issuance under the Plan will be the sum of
(a) 600,000 shares of Common Stock, and (b) any shares of Common Stock that,
as of the date the Plan is approved by the Company's stockholders, are then
available for issuance under the Company's 1988 Long-Term Stock Incentive
Plan, which shall be terminated upon stockholder approval of the Plan.
Notwithstanding the foregoing, no more than 450,000 shares of Common Stock
may be cumulatively available for issuance under the Plan pursuant to
Incentive Awards which are not Options, subject to adjustment as provided in
Section 4.3 of the Plan. The maximum number of shares authorized and
reserved may be increased from time to time by approval of the Board and, if
required pursuant to Rule 16b-3 under the Exchange Act, Section 422 of the
Code, or the rules of any securities exchange or the National Association of
Securities Dealers, Inc., the shareholders of the Company. Notwithstanding
any other provision of the Plan to the contrary, no Participant in the Plan
may be granted, during the term of the Plan, any Options or other Incentive
Awards with a value based solely on an increase in the value of the Common
Stock after the date of grant, relating to more than an aggregate of 10% of
the total number of shares of Common Stock reserved under the Plan.
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4.2. ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards
will be applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan. Any shares of Common Stock
that are subject to an Incentive Award that lapses, expires, is forfeited or
for any reason is terminated unexercised or unvested and any shares of Common
Stock that are subject to an Incentive Award that is settled or paid in cash
or any form other than shares of Common Stock will automatically again become
available for issuance under the Plan. Any shares of Common Stock that
constitute the forfeited portion of a Restricted Stock Award, however, will
not become available for further issuance under the Plan.
4.3. ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) will make
appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities available for issuance under the Plan and, in
order to prevent dilution or enlargement of the rights of Participants, the
number, kind and, where applicable, exercise price of securities subject to
outstanding Incentive Awards.
5. PARTICIPATION.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected
to contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or
more Incentive Awards, singly or in combination or in tandem with other
Incentive Awards, as may be determined by the Committee in its sole
discretion. Incentive Awards will be deemed to be granted as of the date
specified in the grant resolution of the Committee, which date will be the
date of any related agreement with the Participant.
6. OPTIONS.
6.1. GRANT. An Eligible Recipient may be granted one or more Options
under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may
designate whether an Option is to be considered an Incentive Stock Option or
a Non-Statutory Stock Option.
6.2. EXERCISE PRICE. The per share price to be paid by a Participant
upon exercise of an Option will be determined by the Committee in its
discretion at the time of the Option grant, provided that such price will not
be less than 100% of the Fair Market Value of one share of Common Stock on
the date of grant (110% of the Fair Market Value if, at the time an Incentive
Stock Option is granted, the Participant owns, directly or indirectly, more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company).
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6.3. EXERCISABILITY AND DURATION. An Option will become exercisable at
such times and in such installments as may be determined by the Committee in
its sole discretion at the time of grant; provided, however, that no Option
may be exercisable after 10 years from its date of grant.
6.4. PAYMENT OF EXERCISE PRICE. The total purchase price of the shares
to be purchased upon exercise of an Option will be paid entirely in cash
(including check, bank draft or money order); provided, however, that the
Committee, in its sole discretion and upon terms and conditions established
by the Committee, may allow such payments to be made, in whole or in part, by
tender of a Broker Exercise Notice, Previously Acquired Shares, a promissory
note (on terms acceptable to the Committee in its sole discretion) or by a
combination of such methods.
6.5. MANNER OF EXERCISE. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained in
the Plan and in the agreement evidencing such Option, by delivery in person,
by facsimile or electronic transmission or through the mail of written notice
of exercise to the Company (Attention: Secretary) at its principal executive
office in Minneapolis, Minnesota and by paying in full the total exercise
price for the shares of Common Stock to be purchased in accordance with
Section 6.4 of the Plan.
6.6. AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK OPTIONS.
To the extent that the aggregate Fair Market Value (determined as of the date
an Incentive Stock Option is granted) of the shares of Common Stock with
respect to which incentive stock options (within the meaning of Section 422
of the Code) are exercisable for the first time by a Participant during any
calendar year (under the Plan and any other incentive stock option plans of
the Company or any subsidiary or parent corporation of the Company) exceeds
$100,000 (or such other amount as may be prescribed by the Code from time to
time), such excess Options will be treated as Non-Statutory Stock Options.
The determination will be made by taking Incentive Stock Options into account
in the order in which they were granted. If such excess only applies to a
portion of an Incentive Stock Option, the Committee, in its discretion, will
designate which shares will be treated as shares to be acquired upon exercise
of an Incentive Stock Option.
7. RESTRICTED STOCK AWARDS.
7.1. GRANT. An Eligible Recipient may be granted one or more Restricted
Stock Awards under the Plan, and such Restricted Stock Awards will be subject
to such terms and conditions, consistent with the other provisions of the
Plan, as may be determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, not inconsistent with
the provisions of the Plan, to the vesting of such Restricted Stock Awards as
it deems appropriate, including, without limitation, that the Participant
remain in the continuous employ or service of the Company or a Subsidiary for
a certain period or that the Participant or the Company (or any Subsidiary or
division thereof) satisfy certain performance goals or criteria.
7.2. RIGHTS AS A SHAREHOLDER; TRANSFERABILITY. Except as provided in
Sections 7.1, 7.3 and 12.3 of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of Common Stock
issued to the Participant as a Restricted Stock Award under
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this Section 7 upon the Participant becoming the holder of record of such
shares as if such Participant were a holder of record of shares of
unrestricted Common Stock.
7.3. DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines
otherwise in its sole discretion (either in the agreement evidencing the
Restricted Stock Award at the time of grant or at any time after the grant of
the Restricted Stock Award), any dividends or distributions (including
regular quarterly cash dividends) paid with respect to shares of Common Stock
subject to the unvested portion of a Restricted Stock Award will be subject
to the same restrictions as the shares to which such dividends or
distributions relate. In the event the Committee determines not to pay such
dividends or distributions currently, the Committee will determine in its
sole discretion whether any interest will be paid on such dividends or
distributions. In addition, the Committee in its sole discretion may require
such dividends and distributions to be reinvested (and in such case the
Participants consent to such reinvestment) in shares of Common Stock that
will be subject to the same restrictions as the shares to which such
dividends or distributions relate.
7.4. ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions referred
to in this Section 7, the Committee may place a legend on the stock
certificates referring to such restrictions and may require the Participant,
until the restrictions have lapsed, to keep the stock certificates, together
with duly endorsed stock powers, in the custody of the Company or its
transfer agent or to maintain evidence of stock ownership, together with duly
endorsed stock powers, in a certificateless book-entry stock account with the
Company's transfer agent.
8. PERFORMANCE UNITS.
8.1. GRANT. An Eligible Recipient may be granted one or more Performance
Units under the Plan, and such Performance Units will be subject to such
terms and conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion. The Committee may
impose such restrictions or conditions, not inconsistent with the provisions
of the Plan, to the vesting of such Performance Units as it deems
appropriate, including, without limitation, that the Participant remain in
the continuous employ or service of the Company or any Subsidiary for a
certain period or that the Participant or the Company (or any Subsidiary or
division thereof) satisfy certain performance goals or criteria. The
Committee will have the sole discretion to determine the form in which
payment of the economic value of vested Performance Units will be made to the
Participant (i.e., Common Stock, cash or any combination thereof), and to the
extent shares of Common Stock are issued, whether such shares will be subject
to any transferability restrictions.
8.2 DIVIDEND EQUIVALENTS. The Committee shall determine in its sole
discretion whether to credit a Participant's Performance Units for dividend
equivalents representing dividends or distributions (including cash dividends
as distributions) paid with respect to shares of Common Stock during the
period such Performance Units are outstanding.
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9. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
9.1. TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event a
Participant's employment or other service with the Company and all
Subsidiaries is terminated by reason of death, Disability or Retirement;
(a) All outstanding Options then held by the Participant will
become immediately exercisable in full and will remain exercisable for a
period of one year after such termination (but in no event after the
expiration date of any such Option);
(b) All outstanding Restricted Stock Awards and Performance Units
then held by the Participant will terminate, vest and/or continue to vest
in the manner determined by the Committee and set forth in the agreement
evidencing such Restricted Stock Awards and/or Performance Units.
9.2. TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR RETIREMENT.
In the event a Participant's employment or other service is terminated with
the Company and all Subsidiaries for any reason other than death, Disability
or Retirement, or a Participant is in the employ or service of a Subsidiary
and the Subsidiary ceases to be a Subsidiary of the Company (unless the
Participant continues in the employ or service of the Company or another
Subsidiary), all rights of the Participant under the Plan and any agreements
evidencing an Incentive Award will immediately terminate without notice of
any kind, and no Options then held by the Participant will thereafter be
exercisable, all Restricted Stock Awards then held by the Participant that
have not vested will be terminated and forfeited, and all Performance Units
then held by the Participant will terminate, vest and/or continue to vest in
the manner determined by the Committee and set forth in the agreement
evidencing such Performance Units.
9.3. MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the other
provisions of this Section 9, upon a Participant's termination of employment
or other service with the Company and all Subsidiaries, the Committee may, in
its sole discretion (which may be exercised at any time on or after the date
of grant, including following such termination), cause Options then held by
such Participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service and
Restricted Stock Awards and Performance Units then held by such Participant
to vest and/or continue to vest or become free of transfer restrictions, as
the case may be, following such termination of employment or service, in each
case in the manner determined by the Committee; provided, however, that no
Option may remain exercisable beyond its expiration date.
9.4. BREACH OF CONFIDENTIALITY OR NON-COMPETE AGREEMENTS.
Notwithstanding anything in this Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality or
non-compete agreement entered into with the Company or any Subsidiary,
whether such breach occurs before or after termination of such Participant's
employment or other service with the Company or any Subsidiary, the Committee
in its sole discretion may immediately terminate all rights of the
Participant under the Plan and any agreements evidencing an Incentive Award
then held by the Participant without notice of any kind.
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9.5. DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the
Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the
Company or the Subsidiary for which the Participant provides employment or
other service.
10. PAYMENT OF WITHHOLDING TAXES.
10.1. GENERAL RULES. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts that may be due
and owing to the Participant from the Company or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any and all federal, state and local withholding and
employment-related tax requirements attributable to an Incentive Award,
including, without limitation, the grant, exercise or vesting of, or payment
of dividends with respect to, an Incentive Award or a disqualifying
disposition of stock received upon exercise of an Incentive Stock Option, or
(b) require the Participant promptly to remit the amount of such withholding
to the Company before taking any action, including issuing any shares of
Common Stock, with respect to an Incentive Award.
10.2. SPECIAL RULES. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 10.1 of the Plan by
electing to tender Previously Acquired Shares, a Broker Exercise Notice or a
promissory note (on terms acceptable to the Committee in its sole
discretion), or by a combination of such methods.
11. CHANGE IN CONTROL.
11.1. CHANGE IN CONTROL. For purposes of this Section 11.1, a "Change
in Control" of the Company will mean the following:
(a) the sale, lease, exchange or other transfer, directly or
indirectly, of all or substantially all of the assets of the Company (in
one transaction or in a series of related transactions) to any Person (as
defined in Section 11.3 below).
(b) the approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
(c) a merger or consolidation to which the Company is a party if
the shareholders of the Company immediately prior to the effective date
of such merger or consolidation have "beneficial ownership" (as defined
in Rule 13d-3 under the Exchange Act), immediately following the
effective date of such merger or consolidation, of securities of the
surviving corporation representing (i) 50% or more, but not more than
80%, of the combined voting power of the surviving corporation's then
outstanding securities ordinarily having the right to vote at elections
of directors, unless such merger or consolidation has been approved in
advance by the Incumbent Directors (as defined in
9
<PAGE>
Section 11.2 below), or (ii) less than 50% of the combined
voting power of the surviving corporation's then outstanding securities
ordinarily having the right to vote at elections of directors (regardless
of any approval by the Incumbent Directors);
(d) any person becomes after the effective date of the Plan the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of (i) 20% or more, but not 50% or more, of the
combined voting power of the Company's outstanding securities ordinarily
having the right to vote at elections of directors, unless the transaction
resulting in such ownership has been approved in advance by the Incumbent
Directors, or (ii) more than 50% of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors (regardless of any approval by the Incumbent
Directors);
(e) the Incumbent Directors cease for any reason to constitute at
least a majority of the Board; or
(f) a change in control of the Company of a nature that would be
required to be reported pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is then subject to such reporting
requirements.
11.2. INCUMBENT DIRECTORS. For purposes of this Section 11, "Incumbent
Directors" of the Company means any individuals who are members of the Board
on the effective date of the Plan and any individual who subsequently becomes
a member of the Board whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors comprising the Board on the effective date of the Plan (either by
specific vote or by approval of the Company's proxy statement in which such
individual is named as a nominee for director without objection to such
nomination).
11.3. PERSON. For purposes of this Section 11, "Person" includes any
individual, corporation, partnership, group, association or other "person,"
as such term is defined in Section 14(d) of the Exchange Act, other than (i)
the Company; (ii) any corporation at least a majority of whose securities
having ordinary voting power for the election of directors is owned, directly
or indirectly, by the Company; (iii) any other entity in which the Company,
by virtue of a direct or indirect ownership interest, has the right to elect
a majority of the members of the entity's governing body; or (iv) any benefit
plan sponsored by the Company, a corporation described in clause (ii) or an
entity described in clause (iii).
11.4. ACCELERATION OF VESTING. Without limiting the authority of the
Committee under Section 3.2 of the Plan, if a Change in Control of the
Company occurs, then, if approved by the Committee in its sole discretion
either in the agreement evidencing an Incentive Award at the time of grant or
at any time after the grant of an Incentive Award, (a) all outstanding
Options then held by the Participant will become immediately exercisable in
full and will remain exercisable for the remainder of their terms, regardless
of whether the Participant to whom such Options have been granted remains in
the employ or service of the Company or any Subsidiary; (b) all outstanding
Restricted Stock Awards then held by the Participant will become immediately
fully vested and non-forfeitable; and (c) all outstanding Performance Units
then
10
<PAGE>
held by the Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement evidencing such
Performance Units.
11.5. CASH PAYMENT FOR OPTIONS. If a Change in Control of the Company
occurs, then the Committee, in its sole discretion, either in an agreement
evidencing an Incentive Award at the time of grant or at any time after the
grant of an Incentive Award, and without the consent of any Participant
effected thereby, may determine that some or all Participants holding
outstanding Options will receive, with respect to some or all of the shares
of Common Stock subject to such Options, as of the effective date of any such
Change in Control of the Company, cash in an amount equal to the excess of
the Fair Market Value of such shares immediately prior to the effective date
of such Change in Control of the Company over the exercise price per share of
such Options.
11.6. LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
anything in Section 11.4 or 11.5 of the Plan to the contrary, if, with
respect to a Participant, the acceleration of the vesting of an Incentive
Award as provided in Section 11.4 or the payment of cash in exchange for all
or part of an Incentive Award as provided in Section 11.5 (which acceleration
or payment could be deemed a "payment" within the meaning of Section
280G(b)(2) of the Code), together with any other payments which such
Participant has the right to receive from the Company or any corporation that
is a member of an "affiliated group" (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which the Company is a
member, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), then the payments to such Participant pursuant to
Section 11.4 or 11.5 will be reduced to the largest amount as will result in
no portion of such payments being subject to the excise tax imposed by
Section 4999 of the Code; provided, however, that if such Participant is
subject to a separate agreement with the Company or a Subsidiary which
specifically provides that payments attributable to one or more forms of
employee stock incentives or to payments made in lieu of employee stock
incentives will not reduce any other payments under such agreement, even if
it would constitute an excess parachute payment, or provides that the
Participant will have the discretion to determine which payments will be
reduced in order to avoid an excess parachute payment, then the limitations
of this Section 11.6 will, to that extent, not apply.
12. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.
12.1. EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time,
nor confer upon any Eligible Recipient or Participant any right to continue
in the employ or service of the Company or any Subsidiary.
12.2. RIGHTS AS A SHAREHOLDER. As a holder of Incentive Awards (other
than Restricted Stock Awards), a Participant will have no rights as a
shareholder unless and until such Incentive Awards are exercised for, or the
Incentive Awards are paid in the form of, shares of Common Stock and the
Participant becomes the holder of record of such shares. Except as otherwise
provided in the Plan, no adjustment will be made for dividends or
distributions with respect to such Incentive Awards as to which there is a
record date preceding the date the Participant
11
<PAGE>
becomes the holder of record of such shares, except as the Committee may
determine in its discretion.
12.3. RESTRICTIONS ON TRANSFER. Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by
the Plan, no right or interest of any Participant in an Incentive Award prior
to the exercise or vesting of such Incentive Award will be assignable or
transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise. A Participant will, however, be entitled to
designate a beneficiary to receive an Incentive Award upon such Participant's
death, and in the event of a Participant's death, payment of any amounts due
under the Plan will be made to, and exercise of any Options (to the extent
permitted pursuant to Section 9 of the Plan) may be made by, the
Participant's legal representatives, heirs and legatees.
12.4. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans or
programs of the Company or create any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as
the Board may deem necessary or desirable.
13. SECURITIES LAW AND OTHER RESTRICTIONS.
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue
any shares of Common Stock under this Plan, and a Participant may not sell,
assign, transfer or otherwise dispose of shares of Common Stock issued
pursuant to Incentive Awards granted under the Plan, unless (a) there is in
effect with respect to such shares a registration statement under the
Securities Act and any applicable state securities laws or an exemption from
such registration under the Securities Act and applicable state securities
laws, and (b) there has been obtained any other consent, approval or permit
from any other regulatory body which the Committee, in its sole discretion,
deems necessary or advisable. The Company may condition such issuance, sale
or transfer upon the receipt of any representations or agreements from the
parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable
by the Company in order to comply with such securities law or other
restrictions.
14. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the
Board may deem advisable in order that Incentive Awards under the Plan will
conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company;
provided, however, that no amendments to the Plan will be effective without
approval of the shareholders of the Company if shareholder approval of the
amendment is then required pursuant to Rule 16b-3 under the Exchange Act,
Section 422 or 162(m) of the Code or the rules of the National Association of
Securities Dealers, Inc. No termination, suspension or amendment of the Plan
may adversely affect any outstanding Incentive Award without the consent of
the affected Participant;
12
<PAGE>
provided, however, that this sentence will not impair the right of the
Committee to take whatever action it deems appropriate under Sections 3.2(c),
4.3 and 11 of the Plan.
15. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan is effective as of February 22, 1994, the date it was adopted
by the Board. The Plan will terminate at midnight on February 22, 2004, and
may be terminated prior to such time to by Board action, and no Incentive
Award will be granted after such termination. Incentive Awards outstanding
upon termination of the Plan may continue to be exercised, or become free of
restrictions, in accordance with their terms.
16. MISCELLANEOUS
16.1. GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in
accordance with the laws of the State of Minnesota.
16.2. SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the Company and the
Participants.
13
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