NASH-FINCH COMPANY

LONG-TERM INCENTIVE PROGRAM UTILIZING

PERFORMANCE UNIT AWARDS

      The purpose of this document is to set forth the general terms and conditions applicable to the Long-Term Incentive Program Utilizing Performance Unit Awards (the “LTIP”) established by the Compensation Committee of the Board of Directors of Nash-Finch Company (the “Company”) pursuant to Section 9 of the Company’s 2000 Stock Incentive Plan, as amended and restated (the “Plan”). The LTIP is intended to carry out the purposes of the Plan by awarding selected key employees of the Company with Performance Units whose vesting and payout will be based on the Company’s level of achievement of pre-established performance goals over a multi-year measurement period.

      1.     Definitions. Any capitalized term used but not defined in this LTIP description will have the meaning assigned to it in the Plan. The following terms used in this LTIP description will have the meanings indicated:

 

 

 

      (a) “Committee” means the Compensation Committee of the Board of Directors of Nash-Finch Company.

 

 

 

      (b) “Cover Sheet” means the Cover Sheet for Individual Grant related to the Performance Units that are granted to a Participant under this LTIP.

 

 

 

      (c) “Consolidated EBITDA” means, for any fiscal period of an entity, that entity’s net income adjusted by (i) adding thereto the entity’s interest expense, provision for income taxes, depreciation and amortization expense, and other non-cash charges that were deducted in computing net income for the period; (ii) excluding the amount of any extraordinary gains or losses and gains or sales from sales of assets other than inventory in the ordinary course of business; and (iii) subtracting cash payments made during the period with respect to non-cash charges incurred in a previous period. Each of the measures specified in items (i)-(iii) shall be as reported by the entity for such fiscal period in its periodic reports filed with the Securities and Exchange Commission (“SEC”) under the Exchange Act.

 

 

 

      (d) “Measurement Period” means a period of three consecutive fiscal years of the Company. Measurement Periods may overlap. For purposes of comparing the Performance Measures of the Company with other members of the Peer Group, the Company will compute Performance Measures for each other company in the Peer Group over the most recent twelve consecutive fiscal quarters of that company that end at or prior to the end of the Measurement Period.

 

 

 

      (e) “Participant” means a key employee of the Company who has been selected by the Committee to participate in this LTIP.

 

 

 

      (f) “Peer Group” means the companies selected by the Committee as “peer issuers” for purposes of the performance graph required to be included in the proxy statement for the Company’s annual meeting of stockholders under Item 402(l) of the SEC’s Regulation S-K. To the extent that the composition of the Peer Group changes during any Measurement Period and the stock of the company that joined or departed the Peer Group was publicly traded for the entire Measurement Period, the company’s Performance Measures for the entire Measurement Period shall be considered. To the extent that a company joins or departs the Peer Group and its stock was not publicly traded for the entire Measurement Period (due, for example, to merger or acquisition, bankruptcy, initial public offering or spin-off), the Performance Measures for such company shall be extrapolated (based on information in the company’s periodic reports filed with the SEC) as if the company had been in the Peer Group for the entire Measurement Period and as if the Performance Measures of the company for the period during which its stock was publicly traded during the Measurement Period were representative of the Performance Measures the company would have experienced during the entire Measurement Period.

 

 

 

      (g) “Performance Adjustment Factor” means the percentage multiple determined by the Company’s decile ranking, relative to the members of the Peer Group during the applicable Measurement Period, on each of the two Performance Measures, equally weighted. A matrix is attached to that Participant’s Cover Sheet by which the applicable Performance Adjustment Factor for each Participant based on the Participant’s Category is determined.

 

 

 

      (h) “Performance Measures” means (i) compound annual growth rate in Consolidated EBITDA, and (ii) compound annual growth rate in RONA, in which Consolidated EBITDA and RONA for the third fiscal year of the Measurement Period shall be compared to such measures for the fiscal year immediately preceding the Measurement Period.

 

 

 

      (i“RONA” means return on net assets for any fiscal period of an entity, and is calculated as the quotient of (i) net income divided by (ii) net fixed assets plus the difference between current assets and current liabilities, each of which measures in (i) and (ii) shall be as reported by the entity for such fiscal period in periodic reports filed with the SEC under the Exchange Act.

      2.     Grant and Settlement of Performance Units.

      2.1     Grant and Vesting of Performance Units. The Company hereby grants to the Participant the number of Performance Units set forth on the Cover Sheet. Subject to Section 3, as long as the Participant remains employed by the Company, the Performance Units will vest at the end of the Measurement Period.

      2.2     Settlement of Performance Units. At the end of the Measurement Period, the Performance Measures of the Company will be compared to the Performance Measures of the other companies in the Peer Group, giving equal weight to each Performance Measure. The Performance Units will be settled as soon as administratively practicable after audited financial statements are available for the Company’s last fiscal year in the Measurement Period and information is publicly available with respect to the Performance Measures of the members of the Peer Group. The settlement payment, expressed as a number of shares of Common Stock, will equal the product of the number of Performance Units times the Performance Adjustment Factor (the “Settlement Share Amount”). If the Committee grants a Participant a Performance Unit during the Measurement Period due to the Participant commencing employment at the Company or being promoted, the Settlement Share Amount payable to such Participant shall be multiplied by a fraction, the numerator of which shall be the number of whole months after such employment or promotion commenced until the end of the Measurement Period, and the denominator of which shall be 36.

      2.3     Form of Payment. Payment of the Settlement Share Amount will be made, at the election of the Participant made at any time at least one year prior to the end of the Measurement Period, either in a number of shares of Common Stock equal to such Settlement Share Amount, or in the cash equivalent of the Settlement Share Amount, or in a combination of cash and shares of Common Stock. If the Participant fails to submit an election indicating the form of payment, the Participant will be deemed to have elected to receive the Settlement Share Amount in shares of Common Stock. The cash equivalent of the Settlement Share Amount shall be equal to the Settlement Share Amount times the average of the Fair Market Value of a share of Common Stock over the last 20 trading days prior to the date the of the Committee’s certification of the Performance Measures.

      2.4     Tax Withholding. The Company will withhold from the shares of Common Stock or cash to be issued to the Participant, a number of shares of Common Stock or an amount of cash (or, if the Participant elects both shares and cash, a prorated amount from each type of payment) to satisfy any and all foreign, federal, state and local withholding and employment-related tax requirements attributable to the Performance Unit.

      3.     Effect of Termination of Service.

      3.1     Death, Disability or Retirement. If the Participant’s employment by the Company ends prior to the end of the Measurement Period because of the Participant’s death, Disability or Retirement, the Participant (or his or her beneficiary) will be entitled to receive a settlement payment equal to the Settlement Share Amount that the Participant would have received, if any, if his or her employment had not been terminated due to death, Disability or Retirement, multiplied by a fraction whose numerator is the number of

full months in which the Participant was employed during the applicable Measurement Period and whose denominator is 36. Any such payment will be made at the time of settlement of the Performance Units at the end of the Measurement Period.

      3.2     Other Terminations. If the Participant’s employment by the Company ends prior to the end of the Measurement Period for any reason other than the Participant’s death, Disability or Retirement, all of the Participant’s Performance Units will be cancelled upon such termination and the Participant will have no right to any payment with respect to the Performance Units.

      3.3     Leave of Absence. For purposes of this LTIP, if a Participant is on a leave of absence from the Company pursuant to which he or she would still be classified as an employee under the Company’s existing policies, Participant will continue to be considered employed for purposes of this LTIP. If Participant does not return to active employment upon the expiration of the leave of absence, Participant will be considered to have voluntarily terminated employment as of the beginning of the leave of absence.

      4.     Adjustments for Other Distributions and Events.

      If any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering or divestiture (including a spin-off) or any other similar change in the corporate structure or shares of the Company occurs, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation), in order to prevent dilution or enlargement of the rights of the Participant, will make appropriate adjustment (which determination will be conclusive) in the number of Performance Units credited to the Participant’s Account and/or as to the number and kind of securities or other property (including cash) subject to the Performance Units; provided, however, that any such securities or other property distributable with respect to the Performance Units shall be, unless otherwise determined by the Committee, distributed to the Participant in the manner described in Section 2 and shall, together with the Performance Units, otherwise be subject to the provisions of Sections 3 and 5 and the other terms and conditions of this LTIP description.

      5.     Change in Control.

      If, prior to the date that all Performance Units subject to this award have been settled and all of the resulting shares of Common Stock and/or cash has been distributed to the Participant pursuant to Section 2, a Change in Control of the Company shall occur, then any Performance Units that were issued at least six months prior to the Change in Control shall be settled and all the resulting shares of Common Stock and/or cash shall be distributed to the Participant on the day the Change in Control becomes effective. For purposes of determining the amounts to be distributed in the event of a Change in Control, the Measurement Period shall be deemed to have terminated at the end of the last full fiscal quarter before the Change in Control and to have commenced at the beginning of twelfth full fiscal quarter occurring prior to the Change in Control. In effecting such distribution, the Committee may make such arrangements, including deposits in escrow or in trust in advance of the anticipated effective date of the Change in Control, as it may deem advisable to carry out the foregoing and to protect the interests of the Company in the event the Change in Control does not occur. Any Performance Units that were issued less than six months prior to the Change in Control will terminate and the Participant will have no right to any payment with respect to such Performance Units.

      6.     Beneficiary Designation.

      Participant shall have the right, at any time, to designate any person or persons as beneficiary or beneficiaries to receive the Participant’s Performance Units upon the Participant’s death. In the event of the Participant’s death, distribution of the cash or shares of Common Stock underlying such Performance Units will be made to such beneficiary or beneficiaries. The Participant shall have the right to change his or her beneficiary designation at any time. Each beneficiary designation shall become effective only when filed in writing with the Company during the Participant’s life on a form prescribed by or approved by the Company. If the Participant fails to designate a beneficiary as provided above, or if all designated beneficiaries die before the Participant, then the beneficiary shall be the Participant’s estate.

      7.     Deferral of Receipt of Settlement Share Amount. At any time prior to the commencement of the third fiscal year of the Measurement Period, or such earlier deadline as may be imposed by the Committee, the Participant may submit an election to defer receipt of all or any portion of the Settlement Share Amount pursuant to the terms of the Company’s Deferred Compensation Plan.

      8.     Subject to the Plan.

      The Performance Units subject to this LTIP description have been granted under, and are subject to the terms of, the Plan. The provisions of this LTIP description will be interpreted so as to be consistent with the terms of the Plan, and any ambiguities in this LTIP description will be interpreted by reference to the Plan. If any provision of this LTIP description is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

      9.     Miscellaneous.

      9.1     Binding Effect. This LTIP will be binding upon the heirs, executors, administrators and successors of the parties hereto.

      9.2     Governing Law. This LTIP description and all rights and obligations hereunder shall be construed in accordance with the Plan and governed by the laws of the State of Minnesota, without regard to conflicts of laws provisions. Any legal proceeding related to this award of Performance Units or this LTIP will be brought in an appropriate Minnesota court, and the parties hereto consent to the exclusive jurisdiction of the court for this purpose.

      9.3     Entire Agreement. This LTIP description (including the Participant’s Cover Sheet) and the Plan set forth the entire agreement and understanding between the parties hereto with respect to the grant of the Performance Units hereunder and the administration of the Plan, and supersede all prior agreements, arrangements and understandings relating to the grant of the Performance Units hereunder and the administration of the Plan.

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

      9.5     Forfeiture of Incentive Compensation. Notwithstanding anything to the contrary in this LTIP description, if the Chief Executive Officer and the Chief Financial Officer of the Company do not receive, or are required to reimburse the Company for, the Settlement Share Amount for any Measurement Period otherwise payable to them under the LTIP because of the application of section 304 of the Sarbanes-Oxley Act of 2002, then any Participant who is a corporate or operating officer of the Company shall not be entitled to any Settlement Share Amount for such Measurement Period, and shall be obligated to reimburse the Company for, any such Settlement Share Amount already received.

All Participants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Year Compound Annual Growth Rate in RONA vs. Performance Peer Group

 

 

 

 

 

 

 

1st

 

 

2nd

 

 

3rd

 

 

4th

 

 

5th

 

 

6th

 

 

7th

 

 

8th

 

 

9th

 

 

10th

 

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

Decile

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Year Compound Annual Growth Rate in EBITDA vs. Performance Peer Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

 

160.0%

 

 

 

170.0%

 

 

 

180.0%

 

 

 

190.0%

 

 

 

200.0%

 

 

9th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

 

160.0%

 

 

 

170.0%

 

 

 

180.0%

 

 

 

190.0%

 

 

8th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

 

160.0%

 

 

 

170.0%

 

 

 

180.0%

 

 

7th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

100.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

 

160.0%

 

 

 

170.0%

 

 

6th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

87.5%

 

 

 

100.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

 

160.0%

 

 

5th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

75.0%

 

 

 

87.5%

 

 

 

100.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

 

150.0%

 

 

4th Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

62.5%

 

 

 

75.0%

 

 

 

87.5%

 

 

 

100.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

 

140.0%

 

 

3rd Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

50.0%

 

 

 

62.5%

 

 

 

75.0%

 

 

 

87.5%

 

 

 

100.0%

 

 

 

110.0%

 

 

 

120.0%

 

 

 

130.0%

 

 

2nd Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

1st Decile

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXAMPLE:

 

Original Grant
10,000 Performance
Units

 

ð

 

(Assumed results)
5th Decile RONA
and
6th Decile EBITDA

 

= 110%

 

ð

 

11,000 shares, or
cash equivalent

40