Exhibit 10.1
NASH FINCH COMPANY
March 16, 2006
Mr. Alec Covington
304 View Point
St. Augustine, FL 3280

     
Re:
  Employment Terms

Dear Alec:
On behalf of the Board of Directors (the “Board”) of Nash-Finch Company (the
“Company”), I am pleased to offer you employment with the Company on the
following terms:
     1. COMMENCEMENT DATE: Your employment with the Company will commence on
May 1, 2006 (your “Commencement Date”).
     2. POSITION; PRINCIPAL PLACE OF EMPLOYMENT: You will be employed as the
President and Chief Executive of the Company (“CEO”). Your principal place of
employment will be at the Company’s headquarters in Edina, Minnesota.
     3. BOARD MEMBERSHIP: The Board shall take such action as may be necessary
to appoint or elect you as a member of the Board as of your Commencement Date.
Thereafter, during your employment with the Company, the Board shall nominate
you for re-election as a member of the Board at the expiration of your
then-current term. You agree to serve without additional compensation as an
officer and director of any of the Company’s subsidiaries. You may, with the
Board’s approval, serve on up to two (2) outside boards of directors so long as
your duties as a board member do not interfere with your performance as CEO.
     4. BASE SALARY: You will be paid a base salary (the “Base Salary”) at an
annual rate of not less than eight hundred fifty thousand dollars ($850,000),
payable in accordance with the regular payroll practices of the Company. Your
Base Salary shall be reviewed annually by the Board (or a committee thereof) and
may be increased, but not decreased, from time to time by the Board.
     5. ANNUAL BONUS: You will be eligible to participate in the Company’s
annual bonus and other incentive compensation plans and programs for the
Company’s senior executives at a level commensurate with your position. You will
have the opportunity to earn an annual maximum bonus measured against objective
criteria to be determined by the Board (or a committee thereof) of up to one
hundred percent (100%) of Base Salary. Your 2006 annual bonus shall be your full
annual maximum bonus, less any annual bonus amounts earned from your prior
employer for performance during 2006.

 

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Mr. Alec Covington
March 16, 2006
Page 2
     6. INITIAL EQUITY AWARDS: The Board or the Committee (as defined in the
Company’s 2000 Stock Incentive Plan (the “Stock Incentive Plan”)) shall award
you fifty-four thousand (54,000) performance units denominated as restricted
stock units as of your Commencement Date (the “Time-Vesting RSUs”). Subject to
accelerated vesting as set forth in this Agreement, the Time-Vesting RSUs shall
vest in three (3) equal amounts on the first three anniversaries of your
Commencement Date, provided that you are employed on each vesting date.
The Board or the Committee shall award you as of the Commencement Date one
hundred thousand (100,000) performance units (the “Performance-Vesting RSUs”).
Subject to accelerated vesting as set forth in this Agreement, the
Performance-Vesting RSUs shall vest in five (5) equal amounts on the first five
anniversaries of your Commencement Date only if the EBITDA for the 4 fiscal
quarters ending on or before such anniversary date exceeds the EBITDA for the
2005 fiscal year of the Company (as such 2005 EBITDA may be equitably adjusted
by the Board in its discretion to take into account acquisitions or divestitures
that take place after your Commencement Date). The Company will make additional
cash payments equal to forty-eight percent (48%) of the value of the Performance
RSUs that are settled on any particular date.
If on any date the Company shall pay any dividend on its common stock (“Common
Stock”) (other than a dividend payable in Common Stock), the number of RSUs
credited to you will as of such date be increased by an amount equal to: (x) the
product of the number of RSUs credited to you as of the record date for such
dividend multiplied by the per share amount of any dividend (or, in the case of
any dividend payable in property other than cash, the per share value of such
dividend, as determined in good faith by the Board), divided by (y) the fair
market value of a share of Common Stock on the payment date of such dividend as
determined under the Stock Incentive Plan. In the case of any dividend declared
on Common Stock which is payable in Common Stock, the number of RSUs credited to
you will be increased by a number equal to the product of (x) the aggregate
number of RSUs that have been credited to you through the related dividend
record date multiplied by (y) the number of shares Common Stock (including any
fraction thereof) payable as a dividend on a share of Common Stock. The number
and terms of the RSUs shall be adjusted in accordance with the provisions of the
Stock Incentive Plan.
At the earlier of (x) thirty (30) days after any termination of employment or
(y) a Change in Control (as defined on Exhibit A) as provided in Section 12, the
Company shall pay to you a number of shares of Common Stock equal to the
aggregate number of vested RSUs credited to you as of such date (provided that
all RSUs awarded pursuant to this Section 6 shall vest in full upon a Change in
Control); provided, however, that in the event that the Company is involved in a
transaction in which the shares of Common Stock will be exchanged for cash, the
Company shall pay to you immediately prior to the consummation of such
transaction a number of shares of Common Stock equal to the aggregate number of
RSUs credited to you (whether vested or unvested) as of such date.

 

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Mr. Alec Covington
March 16, 2006
Page 3
     7. ANNUAL LONG-TERM INCENTIVE COMPENSATION: The Company shall grant to you
with respect to the performance period whose first fiscal year contains the
Commencement Date an award of performance units with a value of one million two
hundred fifty thousand dollars ($1,250,000), subject to the Company’s Long Term
Incentive Program. The value actually paid for such grant will depend on the
degree to which performance goals are achieved over the performance period.
Awards for future long term incentive performance periods will be determined in
the discretion of the Board, however, in no event shall the value of such awards
be less than $1,250,000.
     8. EMPLOYEE BENEFITS; PERQUISITES; VACATION: You will be entitled to
participate in all employee benefit plans that the Company has adopted or may
adopt, maintain or contribute to for the benefit of its senior executives at a
level commensurate with your position, subject to satisfying the applicable
eligibility requirements. You will be eligible as of your Commencement Date to
participate in the Company’s Supplemental Executive Retirement Plan. You will be
entitled to annual paid vacation in accordance with the Company’s policy
applicable to senior executives, but in no event less than four (4) weeks per
year (as prorated for partial years). The Company shall provide to you, at the
Company’s cost, all perquisites which other senior executives of the Company are
generally entitled to receive in accordance with Company policy as set by the
Board from time to time.
     9. LIFE INSURANCE: The Company will maintain term life insurance on your
behalf with a death benefit of at least $2 million.
     10. RELOCATION: You will relocate to the vicinity of the Company’s
headquarters within a time frame mutually agreed upon between you and the Board.
You will be entitled to relocation benefits in accordance with the Company’s
relocation policy (other than reasonable costs that may exceed dollar
limitations) plus an additional cash payment of eighty thousand dollars
($80,000) for the payment of relocation expenses outside Company policy. With
the exception of the $80,000 payment described in the preceding sentence, the
Company shall gross up for tax purposes any income taxable to you arising
pursuant to the payment or benefits provided under this Section 9, so that the
economic benefit is the same to you as if such payment or benefits were provided
on a non-taxable basis to you. In addition, the Company will reimburse you for
reasonable expenses that you incur for tax planning relating to your family
charitable trust in connection with your relocation.
     11. TERMINATION: Your employment may be terminated by either party at any
time, and shall terminate on the first of the following to occur of your death,
Disability, termination by the Company for Cause, termination by the Company
without Cause, termination by you for Good Reason or termination by you without
Good Reason (Disability, Cause and Good Reason are each defined on Exhibit A).
Any termination payments made and benefits provided under this Agreement to you
shall be in lieu of any termination or severance payments or benefits for which
you may be eligible under any of the plans, policies or programs of the Company
or its affiliates. Except to the extent otherwise provided in this Agreement,
all benefits, including, without limitation, restricted stock units and other
awards under the

 

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Mr. Alec Covington
March 16, 2006
Page 4
Company’s long-term incentive programs, shall be subject to the terms and
conditions of the plan or arrangement under which such benefits accrue, are
granted or are awarded.
          (a) DISABILITY. In the event that your employment ends on account of
your Disability, the Company shall pay or provide you (i) any unpaid Base Salary
through the date of termination and any accrued vacation in accordance with
Company policy; (ii) any unpaid bonus earned with respect to any fiscal year
ending on or preceding the date of termination; (iii) reimbursement for any
unreimbursed expenses incurred through the date of termination;
(iv) reimbursement for any unpaid relocation expenses (including the related
gross-up) in accordance with Section 10; and (v) all other payments, benefits or
perquisites to which you may be entitled under the terms of any applicable
compensation arrangement or benefit, equity or perquisite plan or program or
grant or this Agreement (collectively, “Accrued Amounts”). You will also be paid
a pro-rata portion of your annual bonus for the performance year in which your
termination occurs, payable at the time that annual bonuses are paid to other
senior executives (determined by multiplying the amount you would have received
based upon target performance had employment continued through the end of the
performance year by a fraction, the numerator of which is the number of days
during the performance year of termination that you are employed by the Company
and the denominator of which is 365) (the “Termination Year Bonus”). Upon such
termination, the Time-Vesting RSUs will fully vest and become nonforfeitable,
and the Performance-Vesting RSUs will continue to be outstanding and shall vest
or not vest in accordance with their terms.
          (b) DEATH. In the event that your employment ends on account of your
death, your estate (or to the extent a beneficiary has been designated in
accordance with a program, the beneficiary under such program) shall be entitled
to any Accrued Amounts and the Termination Year Bonus. Upon such termination,
the Time-Vesting RSUs will fully vest and become nonforfeitable, and the
Performance-Vesting RSUs will continue to be outstanding and shall vest or not
vest in accordance with their terms.
          (c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If your employment
should be terminated (i) by the Company for Cause, or (ii) by you without Good
Reason, the Company will pay you only the Accrued Amounts.
          (d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If your employment
is terminated by the Company without Cause (other than a termination due to
Disability or death) or by you for Good Reason, the Company shall pay or provide
you with (i) the Accrued Amounts; (ii) the Termination Year Bonus; (iii) an
amount equal to the product of (A) the sum of (1) your then Base Salary and
(2) your then target annual bonus multiplied by (B) two, payable in
substantially equal installments in accordance with the Company’s regular
payroll cycle over a period of twenty-four (24) months from your date of
termination (with such payments commencing on the earliest payroll date that
does not result in adverse tax consequences you under Section 409A of the
Internal Revenue Code, and with the initial payment, including any payments that
have been delayed because of Code Section 409A); and (iv) subject to your
continued co-payment of premiums, continued participation for two years in all
medical, dental and vision plans which cover you (and eligible dependents) upon
the same

 

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Mr. Alec Covington
March 16, 2006
Page 5
terms and conditions (except for the requirements of your continued employment)
in effect for active employees of the Company. In the event you obtain other
employment that offers substantially similar or improved benefits, as to any
particular medical, dental or vision plan, such continuation of coverage by the
Company for such similar or improved benefit under such plan under this
subsection shall immediately cease. The continuation of health benefits under
this subsection shall reduce and count against your rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).
Upon such termination, the Time-Vesting RSUs described in Paragraph 6 will fully
vest and become nonforfeitable, and the Performance-Vesting RSUs described in
Paragraph 6 will continue to be outstanding and shall vest or not vest in
accordance with their terms and based upon the actual performance of the
Company. In the event that you die before all payments pursuant to this
Section 11 have been paid, all remaining payments shall be made to the
beneficiary specifically designated by you in writing prior to your death, or,
if no such beneficiary was designated (or the Company is unable in good faith to
determine the beneficiary designated), to your personal representative or
estate.
     12. CONDITIONS: Any payments or benefits made or provided pursuant to
Section 11 (other than Accrued Amounts) are subject to your:
          (a) compliance with the restrictive covenant provisions of Section 14
hereof;
          (b) delivery to the Company of an executed Agreement and General
Release (the "General Release”), which shall be substantially in the form
attached hereto as Exhibit B (with such changes therein or additions thereto as
needed under then applicable law to give effect to its intent and purpose)
within twenty-one (21) days of presentation thereof by the Company to you; and
          (c) delivery to the Company of a resignation from all offices,
directorships and fiduciary positions with the Company, its affiliates and
employee benefit plans.
     13. CHANGE IN CONTROL: As of your Commencement Date, you and the Company
shall enter into the change in control agreement attached hereto as Exhibit C
(the “Change in Control Agreement”). Upon a Change in Control of the Company, in
addition to any payments and benefits provided under the Change in Control
Agreement, the RSUs will fully vest and become nonforfeitable. Except as set
forth in the immediately preceding sentence, in the event that your employment
is terminated and you are due payments and benefits from the Company under the
Change in Control Agreement and such payments and benefits are greater than
those provided in this Agreement, then you will only receive benefits and
payments under the Change in Control Agreement and no benefits or payments shall
be provided or paid under this Agreement. However, should the benefits and
payments due you under this Agreement be greater than those under the Change in
Control Agreement, then benefits and payments will only be paid and provided
under this Agreement and no benefits or payments will be provided or paid under
the Change in Control Agreement.

 

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Mr. Alec Covington
March 16, 2006
Page 6
     14. RESTRICTIVE COVENANTS
          (a) CONFIDENTIALITY. You agree that you shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
person, other than in the course of your employment and for the benefit of the
Company, either during the period of your employment or at any time thereafter,
any nonpublic, proprietary or confidential information, knowledge or data
relating to the Company, any of its subsidiaries, affiliated companies or
businesses, which shall have been obtained by you during your employment by the
Company. The foregoing shall not apply to information that (i) was known to the
public prior to its disclosure to you; (ii) becomes known to the public
subsequent to disclosure to you through no wrongful act of you or any
representative of you; or (iii) you are required to disclose by applicable law,
regulation or legal process (provided that you provides the Company with prior
notice of the contemplated disclosure and reasonably cooperates with the Company
at its expense in seeking a protective order or other appropriate protection of
such information). Notwithstanding clauses (i) and (ii) of the preceding
sentence, your obligation to maintain such disclosed information in confidence
shall not terminate where only portions of the information are in the public
domain.
          (b) NONSOLICITATION. During your employment with the Company and for
the two (2)-year period thereafter, you agree that you will not, directly or
indirectly, individually or on behalf of any other person, firm, corporation or
other entity, knowingly solicit, aid or induce (i) any managerial level employee
of the Company or any of its subsidiaries or affiliates to leave such employment
in order to accept employment with or render services to or with any other
person, firm, corporation or other entity unaffiliated with the Company or
knowingly take any action to materially assist or aid any other person, firm,
corporation or other entity in identifying or hiring any such employee
(provided, that the foregoing shall not be violated by general advertising not
targeted at Company employees nor by serving as a reference for an employee with
regard to an entity with which you are not affiliated) or (ii) any customer of
the Company or any of its subsidiaries or affiliates to purchase goods or
services then sold by the Company or any of its subsidiaries or affiliates from
another person, firm, corporation or other entity or assist or aid any other
persons or entity in identifying or soliciting any such customer (provided, that
the foregoing shall not apply to any product or service which is not covered by
the noncompetition provision set forth in Section 14(c), below).
          (c) NONCOMPETITION. During your employment hereunder and for the two
(2)-year period thereafter, you agree that you will not, directly or indirectly,
own, manage, operate, control, be employed by (whether as an employee,
consultant, independent contractor or otherwise, and whether or not for
compensation) or render services to Supervalu Inc., C&S Wholesale Grocers, Inc.,
Spartan Stores, Inc., Roundy’s Supermarkets, Inc., or any successors or
affiliates thereof. This Section 14(c) shall not prevent you from owning not
more than one percent (1%) of the total shares of all classes of stock
outstanding of any publicly held entity engaged in such business.

 

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Mr. Alec Covington
March 16, 2006
Page 7
          (d) RETURN OF COMPANY PROPERTY AND RECORDS. You agree that upon
termination of your employment, for any cause whatsoever, you will surrender to
the Company in good condition (reasonable wear and tear excepted) all property
and equipment belonging to the Company and all records kept by you containing
the names, addresses or any other information with regard to customers or
customer contacts of the Company, or concerning any proprietary or confidential
information of the Company or any operational, financial or other documents
given to you during your employment with the Company.
          (e) COOPERATION. You agree that, following termination of your
employment for any reason, you will upon reasonable advance notice, and to the
extent it does not interfere with previously scheduled travel plans and does not
unreasonably interfere with other business activities or employment obligations,
assist and cooperate with the Company with regard to any matter or project in
which you were involved during your employment, including any litigation. The
Company shall compensate you for any lost wages or expenses associated with such
cooperation and assistance.
          (f) EQUITABLE RELIEF AND OTHER REMEDIES. You acknowledge and agree
that the Company’s remedies at law for a breach or threatened breach of any of
the provisions of this Section would be inadequate and, in recognition of this
fact, the parties agree that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the other party, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, a temporary or permanent injunction or
any other equitable remedy which may then be available.
          (g) REFORMATION. If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 14 is excessive
in duration or scope or is unreasonable or unenforceable under the laws of that
state, it is the intention of the parties that such restriction may be modified
or amended by the court to render it enforceable to the maximum extent permitted
by the law of that state.
          (h) SURVIVAL OF PROVISIONS. The obligations contained in this
Section 14 shall survive the termination or expiration of your employment with
the Company and shall be fully enforceable thereafter.
     15. INDEMNIFICATION; LIABILITY INSURANCE: The Company agrees to indemnify
you and hold you harmless to the fullest extent permitted by applicable law and
under the by-laws of the Company against and in respect to any and all actions,
suits, proceedings, claims, demands, judgments, costs, expenses (including
reasonable attorneys’ fees), losses, and damages resulting from your good faith
performance of your duties and obligations with the Company. The Company shall
cover you under directors and officers liability insurance both during and,
while potential liability exists, after the term of this Agreement in the same
amount and to the same extent as the Company covers its other officers and
directors.

 

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Mr. Alec Covington
March 16, 2006
Page 8
On behalf of the Board, I am excited to offer you employment with the Company
and look forward to a mutually rewarding relationship.

            Very truly yours,

Allister Graham
          Chairman of the Board
                       

Agreed and Accepted

 
 
 
 
Alec Covington

Dated:                                         , 2006

 

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EXHIBIT A
Definitions
          “Board” means the board of directors of the Parent Corporation duly
qualified and acting at the time in question.
          “Cause” shall mean (i) your indictment for or conviction of (or a plea
of guilty or nolo contendere to) a felony or any crime involving moral
turpitude, dishonesty, fraud, theft or financial impropriety; or (ii) a
determination by the Board that you have (A) willfully and continuously failed
to perform substantially your duties (other than any such failure resulting from
the your Disability or incapacity due to bodily injury or physical or mental
illness), after a written demand for substantial performance is delivered to you
by the Board which specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, (B) engaged in
illegal conduct, an act of dishonesty or gross misconduct in the cause of your
employment injurious to the Company, or (C) willfully violated a material
requirement of the Company’s code of conduct or your fiduciary duty to the
Company. No act or failure to act on your part shall be considered “willful”
unless it is done, or omitted to be done, by your in bad faith and without
reasonable belief that your action or omission was in, or not opposed to, the
best interests of the Company. Notwithstanding the foregoing, the Company may
not terminate your employment for Cause unless and until (A) a determination
that Cause exists is made and approved by a majority of the Company’s Board,
(B) you are given written notice of the Board meeting called to make such
determination, and (C) you and your legal counsel are given the opportunity to
address such meeting.
          “Change in Control” means: (i) the sale, lease, exchange, or other
transfer of all or substantially all of the assets of the Parent Corporation (in
one transaction or in a series of related transactions) to a corporation that is
not controlled by the Parent Corporation; (ii) the approval by the stockholders
of the Parent Corporation of any plan or proposal for the liquidation or
dissolution of the Parent Corporation; or (iii) a change in control of a nature
that would be required to be reported (assuming such event has not been
“previously reported”) in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to section 13 or 15(d) of the
Exchange Act, whether or not the Parent Corporation is then subject to such
reporting requirement; provided that, without limitation, such a Change in
Control will be deemed to have occurred at such time as: (A) any Person is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of thirty percent (30%) or more of the combined
voting power of the Parent Corporation’s outstanding securities ordinarily
having the right to vote at elections of directors, or (B) individuals who
constitute the Board on the date of this Agreement (the “Incumbent Board”) cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date of this Agreement whose
election, or nomination for election, by the Parent Corporation’s stockholders,
was approved by a vote of at least a majority of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy statement
of the Parent Corporation in which such person is named as a nominee for
director, without objection to such nomination) will, for purposes of this
clause (B), be deemed to be a member of the Incumbent Board.
          “Disability” shall (i) have the meaning defined under the Company’s
then-current long-term disability insurance plan, policy, program or contract as
entitles you to payment of disability benefits thereunder, or (ii) if there
shall be no such plan, policy, program or contract,

 

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mean permanent and total disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”).
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          (a) “Good Reason” shall mean, without your express written consent,
the occurrence of any of the following events:
          (i) an adverse change in your status or positions as President and
Chief Executive Officer of the Company (including as a result of a material
diminution in your duties or responsibilities) other than, if applicable, any
such change directly attributable to the fact that the Company is no longer
publicly owned or the assignment to you of any duties or responsibilities which,
in your reasonable judgment, are inconsistent in any material respect with your
positions (including titles and reporting relationships), authority, duties or
responsibilities as contemplated by this Agreement, or any removal of you from
or any failure to reappoint or reelect you to such positions (except in
connection with the termination of your employment for Cause or Disability, as a
result of your death or by you other than for Good Reason);
          (ii) any failure by the Company to comply with any of the material
provisions regarding your Base Salary, bonus, annual long-term incentive
compensation, benefits and perquisites, relocation, and other benefits and
amounts payable to you under this Agreement;
          (iii) your being required to relocate to a principal place of
employment more than sixty (60) miles from your principal place of employment
with the Company as of the Commencement Date;
          (iv) the failure by the Company to elect or to reelect you as a
director or the removal of you from such position; or
          (v) the failure of the Company to obtain an agreement from any
successor to all or substantially all of the assets or business of the Company
to assume and agree to perform this Agreement within fifteen (15) days after a
merger, consolidation, sale or similar transaction.
          “Parent Corporation” means Nash-Finch Company and any Successor.
          “Person” means and includes any individual, corporation, partnership,
group, association or other “person”, as such term is used in section 14(d) of
the Exchange Act, other than the Parent Corporation, a wholly-owned subsidiary
of the Parent Corporation or any employee benefit plan(s) sponsored by the
Parent Corporation or a wholly-owned subsidiary of the Parent Corporation.
          “Successor” means any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the Parent
Corporation’s business directly, by merger, consolidation or other form of
business combination, or indirectly, by purchase of the Parent Corporation’s
voting securities, all or substantially all of its assets or otherwise.