<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Lance, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LANCE, INC. LOGO]
CHARLOTTE, NORTH CAROLINA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 18, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Lance,
Inc. (the Company) will be held at the principal office of the Company, 8600
South Boulevard, Charlotte, North Carolina, on Friday, April 18, 1997, at 2:00
p.m., Local Time, for the purpose of considering and acting upon the following:
1. The election of five Directors.
2. A proposal to approve the Lance, Inc. 1997 Incentive Equity Plan.
3. A proposal to ratify the selection of KPMG Peat Marwick LLP as
independent public accountants for fiscal year 1997.
4. Any and all other matters that may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on February 20, 1997
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof, and only holders of Common
Stock of the Company of record at such date will be entitled to notice of or to
vote at the meeting.
THE BOARD OF DIRECTORS WILL APPRECIATE THE PROMPT RETURN OF THE ENCLOSED
PROXY, DATED AND SIGNED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT
IS EXERCISED AND WILL NOT BE EXERCISED IF YOU ATTEND THE MEETING AND VOTE IN
PERSON.
By Order of the Board of Directors
JAMES W. HELMS, JR.
Secretary and Treasurer
Charlotte, North Carolina
March 18, 1997
<PAGE> 3
LANCE, INC.
P. O. Box 32368, Charlotte, North Carolina 28232
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of proxies to be used at the Annual Meeting of
Stockholders of Lance, Inc. (the Company) to be held at its principal office,
8600 South Boulevard, Charlotte, North Carolina, at 2:00 p.m., Local Time, on
Friday, April 18, 1997. This Proxy Statement and accompanying Proxy are being
sent to the stockholders of the Company on or about March 18, 1997.
Solicitation other than by mail may be made personally and by telephone by
regularly employed officers and employees of the Company who will not be
additionally compensated therefor. The Company will request brokers, dealers,
banks or voting trustees, or their nominees, who hold stock in their names for
others or hold stock for others who have the right to give voting instructions,
to forward proxy material to their principals and request authority for the
execution of the proxy and will reimburse such institutions for their reasonable
expenses in so doing. In addition, the Company has engaged Corporate Investor
Communications, Inc. (CIC) to deliver proxy materials to, and solicit proxies
from, these institutions. CIC will be reimbursed for its printing costs, postage
and freight charges, and other expenses and be paid a solicitation fee of
$5,500. The total cost of soliciting proxies will be borne by the Company.
Any proxy delivered in the accompanying form may be revoked by the person
executing the proxy at any time before the authority thereby granted is
exercised by written request addressed to Secretary, Lance, Inc., Box 32368,
Charlotte, North Carolina 28232 or by attending the meeting and electing to vote
in person. Proxies received in such form will be voted as therein set forth at
the meeting or any adjournment thereof.
The only matters to be considered at the meeting, so far as known to the
Board of Directors, are the matters set forth in the Notice of Annual Meeting of
Stockholders and routine matters incidental to the conduct of the meeting.
However, if any other matters should come before the meeting or any adjournment
thereof, it is the intention of the persons named in the accompanying form of
proxy, or their substitutes, to vote said proxy in accordance with their
judgment on such matters.
Stockholders present or represented and entitled to vote on a matter at the
meeting or any adjournment thereof will be entitled to one vote on such matter
for each share of the Common Stock of the Company held by them of record at the
close of business on February 20, 1997, which is the record date for determining
the stockholders entitled to notice of and to vote at such meeting or any
adjournment thereof. Voting on all matters, including the election of Directors,
will be by voice vote or by show of hands, unless the holders of at least 25% of
the shares entitled to vote on such matter demand a vote by ballot prior to the
vote. The number of shares of Common Stock of the Company outstanding on
February 20, 1997 was 29,874,904.
<PAGE> 4
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
At February 1, 1997, the only persons known to the Company to be the
beneficial owners of more than 5% of the Common Stock of the Company were as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF AND NATURE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------- -------------------- ------------
<S> <C> <C>
NationsBank Corporation 2,224,871 (1) 7.4%
Charlotte, NC 28255
Nancy Van Every McLaurin 1,737,569 (2) 5.8%
P. O. Box 21009
Charlotte, NC 28277
Nan Davis Van Every 1,647,392 (3) 5.5%
6001 Pelican Bay Boulevard
Naples, FL 33963
S. Lance Van Every 2,180,064 (4) 7.3%
8913 Winged Bourne
Charlotte, NC 28210
</TABLE>
- --------------
(1) These shares represent shares held by wholly owned banking subsidiaries of
NationsBank Corporation, a bank holding company (NationsBank). NationsBank
had sole voting power with respect to 1,114,456 shares and shared voting
power with respect to 90,415 shares and had sole power to dispose with
respect to 701,030 shares and shared power to dispose with respect to
813,215 shares. Information with respect to NationsBank is as of December
31, 1996 and is derived from its Schedule 13G dated February 14, 1997.
Shares held by the Philip L. Van Every Foundation, for which NationsBank,
N. A., a wholly owned subsidiary of NationsBank, is trustee, are not
included as voting and disposition of such shares is directed by the
Foundation's Board of Administrators.
(2) Includes 2,500 shares subject to options currently exercisable, 897,880
shares held under power of attorney from her mother and 24,589 shares held
by Mrs. McLaurin as custodian for her children.
(3) Nan Davis Van Every had sole power to vote and dispose of 118,840 of these
shares and no power to vote and shared power to dispose of 1,535,520
shares; 1,297,920 of such shares are held in a trust as to which S. Lance
Van Every had sole power to vote and shared power to dispose.
(4) Includes 33,500 shares subject to options currently exercisable and 39,651
shares held by S. Lance Van Every either as custodian or in trust for his
children and grandchild or held by his children who reside in the same
household. Mr. Van Every had sole power to vote and dispose of all of these
shares except for 1,297,920 shares held in trust as to which he had the
sole power to vote and shared power to dispose and except for 52,044 shares
held as co-trustee as to which he had shared power to vote and dispose.
Based on information available to the Company, the Van Every family,
consisting of the descendants of Salem A. Van Every, Sr., deceased, and their
spouses, owned beneficially on February 1, 1997, approximately 12,600,000 shares
of the Common Stock of the Company
2
<PAGE> 5
(approximately 42% of the outstanding shares). Of such shares, approximately
800,000 shares are held by fiduciaries having the sole power to vote and
dispose. Members of the Van Every family may own or may have disposed of shares
in nominee or other accounts, information as to the amounts of which may not be
available to the Company. There are approximately 75 Van Every family
stockholders, including stockholders who are minors.
The following table sets forth, as of February 1, 1997, information as to
the beneficial ownership of the Company's $.83-1/3 par value Common Stock by all
Directors, named Executive Officers (as defined herein), and Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
AND NATURE OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING (2)
------------------------ ----------------------- ---------------
<S> <C> <C>
Alan T. Dickson 41,700 (3) *
J.W. Disher 24,685 (4) *
1,409,292 (5) 4.7%
James H. Hance, Jr. 4,500 (6) *
William R. Holland 3,500 (7) *
Scott C. Lea 9,500 (8) *
Nancy Van Every McLaurin 1,737,569 (9) 5.8%
Robert V. Sisk 251,170 (10) *
Paul A. Stroup, III 34,116 (11) *
1,409,292 (5) 4.7%
Isaiah Tidwell 3,000 (7) *
S. Lance Van Every 2,180,064 (12) 7.3%
Richard A. Zimmerman 4,000 (7) *
Peter M. Duggan 3,104 (13) *
Thomas B. Horack 29,334 (14) *
E. D. Leake 16,242 (15) *
G. R. Melvin 29,062 (16) *
B. Clyde Preslar 0 *
Directors and executive officers 5,787,755 (17) 19.3%
as a group (18 persons)
</TABLE>
- -------------------
* Less than 1%.
(1) All shares are owned directly and with sole voting and dispositive power
except as otherwise noted. Common Stock ownership is as of February 1,
1997.
(2) Based on the number of shares outstanding plus options held by Directors
and executive officers that are currently exercisable or exercisable
within 60 days of February 1, 1997.
3
<PAGE> 6
(3) Includes 2,500 shares subject to exercisable options, 32,000 shares held
by The Dickson Foundation, Inc. of which Mr. Dickson is a member of the
Board of Directors and its investment committee and 7,200 shares held by
a trust for which Mr. Dickson, his brother and NationsBank, N. A. are
co-trustees.
(4) Includes 2,500 shares subject to exercisable options and 700 shares held
by Mr. Disher's wife.
(5) Consists of shares held by the Philip L. Van Every Foundation (the
Foundation) of which Messrs. Disher and Stroup are members of the Board
of Administrators and NationsBank, N.A. is trustee.
(6) Includes 2,500 shares subject to exercisable options but does not include
shares held by NationsBank. See Principal Stockholders and Holdings of
Management above and note 17 below.
(7) Includes 2,500 shares subject to exercisable options.
(8) Includes 7,000 shares held by a revocable trust of which Mr. Lea is the
grantor and beneficiary and 2,500 shares subject to exercisable options.
(9) Includes 2,500 shares subject to exercisable options, 897,880 shares held
under power of attorney from her mother and 24,589 shares held by Mrs.
McLaurin as custodian for her children.
(10) Includes 2,500 shares subject to exercisable options and 248,612 shares
held by Mr. Sisk's wife.
(11) Includes 23,700 shares subject to exercisable options and 589 shares held
by Mr. Stroup's wife.
(12) Includes 33,500 shares subject to exercisable options, 39,651 shares held
by S. Lance Van Every either as custodian or in trust for his children and
grandchild or held by his children who reside in the same household,
1,297,920 shares held in trust as to which Mr. Van Every has the sole
power to vote and the shared power to dispose and 52,044 shares held in
trust as to which Mr. Van Every has shared power to vote and dispose.
(13) Includes 3,000 shares subject to exercisable options.
(14) Includes 19,200 shares subject to exercisable options and 88 shares held
by Mr. Horack as custodian for his son.
(15) Includes 14,850 shares subject to exercisable options and 82 shares held
by Mr. Leake as custodian for his minor child.
(16) Includes 14,400 shares subject to exercisable options, 1,800 shares held
by Mr. Melvin's wife and 364 shares held by Mr. Melvin as custodian for
his grandchildren.
(17) Includes 136,850 shares subject to exercisable options held by Directors
and executive officers and 1,409,292 shares held by the Foundation of
which Messrs. Disher and Stroup are members of the Board of Administrators
and NationsBank, N.A. is trustee. Does not include shares held by Mr.
Horack or NationsBank (other than shares held as trustee of the
Foundation), of which James H. Hance, Jr. is Vice Chairman and Chief
Financial Officer.
ELECTION OF DIRECTORS
At the meeting, five Directors will be elected. Four Directors will be
elected to serve, subject to the provisions of the Bylaws, until the Annual
Meeting of Stockholders in 2000 and until their successors are duly elected and
qualified. One Director will be elected to serve, subject to the
4
<PAGE> 7
provisions of the Bylaws, until the Annual Meeting of Stockholders in 1999 and
until his successor is duly elected and qualified. Directors are elected by a
plurality of the votes cast by the holders of the shares entitled to vote at a
meeting at which a quorum is present. Provided a quorum is present, abstentions
and shares not voted are not taken into account in determining a plurality.
The Board of Directors has set the number of Directors at twelve. If each
of the five nominees are elected at the Annual Meeting of Stockholders, one
vacancy will remain unfilled unless sooner filled by the stockholders. The
Nominating Committee has not yet identified anyone to fill this vacancy.
However, stockholders may vote their proxies for no more than five Directors.
It is the intention of the persons named in the accompanying proxy to vote
all proxies solicited by the Board of Directors FOR all the nominees indicated
below unless authority to vote for the nominees or any individual nominee is
withheld by a stockholder in such stockholder's proxy. If for any reason any
nominee shall not become a candidate for election as a Director at the meeting,
an event not now anticipated, the proxies will be voted for five nominees
including such substitutes as shall be designated by the Board of Directors.
The first four nominees are listed below, all of whom are currently members
of the Board of Directors. The nominees were elected to their current terms,
which expire in 1997, at the Annual Meeting of Stockholders held April 15, 1994,
except Isaiah Tidwell and Richard A. Zimmerman who were elected at the Annual
Meeting of Stockholders held April 21, 1995.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE(1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- -------------------------- --- ----------------------------------------
<S> <C> <C>
Paul A. Stroup, III (2) 45 Chief Executive Officer of the Company since 1995,
1986 President since 1994 and Executive Vice President 1989-1994
William R. Holland (2) 58 Chairman and Chief Executive Officer of United Dominion
1993 Industries Limited, Charlotte, NC (Diversified manufacturing
company) since 1986; Director of United Dominion
Industries Limited and Morgan Products Ltd.
Richard A. Zimmerman 64 Private investor since 1993; Chairman of the Board of
1995 Hershey Foods Corporation, Hershey, PA (Candy manufacturer)
1985-1993 and Chief Executive Officer 1984-1993;
Director of Westvaco Corporation and Eastman Kodak
Company
Isaiah Tidwell 52 Executive Vice President and Southern/Western Regional
1995 Executive of Wachovia Bank of North Carolina, N.A.,
Charlotte, NC since 1996, Southern Regional Executive 1993-
1995 and Regional Vice President since 1990
</TABLE>
The fifth nominee listed below is currently a Director and was elected to
his current term, which expires in 1997, at the Annual Meeting of Stockholders
held April 15, 1994. Mr. Lea is being nominated to fill the vacancy created by
the resignation of Gary C. Costley and to serve the balance of Mr. Costley's
term, which expires in 1999.
5
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE(1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- -------------------------- --- ----------------------------------------
<S> <C> <C>
Scott C. Lea (2) 65 Chairman of the Board of the Company since 1996; Private
1994 Investor since 1992; Chairman of the Board of Rexham,
Inc. (Manufacturer of packaging and coated and laminated
products) 1989-1991; President, Chief Executive Officer
and Director of Rexham 1974-1989; Director of Speizman
Industries, Inc.
</TABLE>
The four members of the Board of Directors listed below were elected to
their current terms, which expire in 1998, at the Annual Meeting of Stockholders
held on April 21, 1995.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE(1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- -------------------------- --- ----------------------------------------
<S> <C> <C>
Alan T. Dickson (2) 65 Chairman of the Board of Ruddick Corporation, Charlotte,
1983 NC (Diversified holding company) since 1994 and President
1968-1994; Director of Ruddick Corporation, NationsBank
Corporation, Sonoco Products Company and Bassett
Furniture Industries, Inc.
S. Lance Van Every (3) 49 Private investor for more than the past five years
1990
Nancy Van Every McLaurin (3) 52 Private investor for more than the past five years
1995
James H. Hance, Jr. 52 Vice Chairman of NationsBank Corporation, Charlotte, NC
1995 since 1993 and Chief Financial Officer since 1988; Director
of Caraustar Industries, Inc., Family Dollar Stores, Inc.,
NationsBank, N.A. and Summit Properties, Inc.
</TABLE>
The two members of the Board of Directors listed below were elected to
their current terms, which expire in 1999, at the Annual Meeting of Stockholders
held on April 19, 1996.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE(1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- -------------------------- --- ----------------------------------------
<S> <C> <C>
J. W. Disher (2) 63 Private Investor since 1996; Chairman of the Board of the
1968 Company 1991-1996, Chief Executive Officer 1990-1995
and President 1988-1994; Director of First Union National
Bank of North Carolina
Robert V. Sisk (2)(3) 61 President of Piedmont Engineering Corp., Charlotte, NC
1990 (Industrial refrigeration systems) since 1965
</TABLE>
- -----------
(1) The information about the Directors was furnished to the Company by the
Directors.
(2) Member of the Executive Committee.
(3) S. Lance Van Every and Nancy Van Every McLaurin are cousins and Mr. Sisk's
wife is their cousin.
NationsBank, N.A. provides a line of credit to the Company which the
Company has not used. Also, a subsidiary of NationsBank provides securities
brokerage services to the Company for which the Company pays NationsBank's
standard fees. Mr. Dickson is a director of NationsBank and Mr. Hance is the
Vice Chairman and Chief Financial Officer of NationsBank and a director of
NationsBank, N.A.
6
<PAGE> 9
First Union National Bank of North Carolina acts as trustee of the
Company's Profit Sharing Trust and the Company's 401(k) Retirement Savings Plan,
for which the Company pays the bank's standard fees. Mr. Disher is a director of
First Union National Bank of North Carolina.
Subsidiaries of Ruddick Corporation purchase products from the Company in
the ordinary course of business at the Company's standard prices. Mr. Dickson is
the Chairman of the Board and Chief Executive Officer of Ruddick Corporation.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times during the fiscal year. Each director
attended 75% or more of the total number of meetings of the Board of Directors
and meetings of all Committees on which he or she served.
The Audit Committee is composed of Robert V. Sisk, Chairman, James H.
Hance, Jr., William R. Holland, Scott C. Lea, Nancy Van Every McLaurin and
Isaiah Tidwell and is responsible for recommending independent auditors for the
Company, reviewing the Company's financial statements, audit report, internal
financial controls and internal audit procedures and approving services to be
performed by the Company's independent auditors. The Audit Committee met four
times during the fiscal year.
The Nominating Committee is composed of J. W. Disher, Chairman, Alan T.
Dickson, Scott C. Lea, Robert V. Sisk, Paul A. Stroup, III and S. Lance Van
Every. Its functions include the screening and recommendation of candidates for
election to the Board of Directors of the Company. The Committee will consider
nominees recommended by stockholders, which nominations may be made in writing
and directed to J. W. Disher, Chairman of the Committee. The Nominating
Committee met one time during the fiscal year.
Information with respect to the Compensation/Stock Option Committee is
provided below.
COMPENSATION/STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year, the following served on the Compensation/Stock
Option Committee: Alan T. Dickson, J. W. Disher, James H. Hance, Jr., Scott C.
Lea, S. Lance Van Every and Richard A. Zimmerman. Mr. Disher, who retired as
Chief Executive Officer in April 1995, was appointed to the Compensation/Stock
Option Committee after his retirement. As Chairman of the Board, Mr. Lea serves
substantially full time as an adviser to the Company. See Director Compensation
below. He resigned from the Compensation/Stock Option Committee effective August
15, 1996.
COMPENSATION/STOCK OPTION COMMITTEE REPORT
The Compensation/Stock Option Committee of the Board of Directors of the
Company provides overall guidance to the Company's executive compensation
process. The Committee is currently composed of five members of the Board of
Directors. The Committee met four times during the fiscal year. The Committee's
recommendations regarding the salary of the Chief Executive Officer and the
other officers of the Company are subject to approval by the Board, except for
decisions about grants under the Company's stock option plans, which are made
solely by the Committee in order for the grants to satisfy tax and securities
law requirements. Those who served during the fiscal year as Chief Executive
Officer and the five other highest paid executive officers are collectively
referred to as the named Executive Officers.
In late 1995, in connection with its restructuring, the Company
commissioned an independent outside consulting firm to undertake a comprehensive
review of the Company's total compensation program. The consulting firm
conducted an extensive review of the Company's compensation history,
7
<PAGE> 10
compensation strategy and a comparative analysis of compensation strategies and
levels for similar food processing companies. Historically, all of the officers'
annual compensation has consisted of a base salary which has been supplemented
by long-term incentive awards in the form of stock options. This compensation
review, which was presented to the Committee in January and February 1996, and
the compensation programs which resulted from the review are designed to produce
performance oriented results. In 1996, the Board of Directors adopted the 1996
Lance Annual Incentive Plan (the Annual Incentive Plan) as recommended by the
Committee to reward advancement of annual financial performance goals.
Thus, beginning in 1996, the compensation program is composed of three
elements: base salary, cash bonus and long-term stock based incentives. The cash
bonus is performance based and the long-term incentives are tied to stock price
performance. For 1996, the stock based incentives were limited to stock options
granted pursuant to the 1991 Stock Option Plan. In 1997, the Committee and the
Board of Directors adopted and recommended to the stockholders the Lance, Inc.
1997 Incentive Equity Plan which is described below.
Based on the compensation review, the Committee determined that the base
salaries for officers of the Company would be generally below the 50th
percentile for comparable positions at similar food processing companies. In
1996 and prior years, the Committee has granted increases to the officers based
on recommendations from the Chief Executive Officer who has consulted with other
officers of the Company. From time to time, the Committee has made adjustments
to such recommendations. In 1996, the Board accepted and approved the
recommendations of the Committee. The Committee also takes into account the fact
that each of the named Executive Officers, except for Mr. Duggan and Mr.
Preslar, has entered into an Executive Employment Agreement described below
which provides for supplemental retirement benefits.
In considering base salaries for 1996, the Committee considered the
compensation review described above, the grant of stock options and the adoption
of the Annual Incentive Plan and recommended increases in the salary rates of
the named Executive Officers, excluding the Chief Executive Officer, which
averaged 5.3% for 1996 over 1995.
With respect to the Chief Executive Officer during 1996, Mr. Stroup, the
Committee did not make special note of performance factors with respect to Mr.
Stroup but considered the same factors as it considered for all officers of the
Company. Mr. Stroup's salary rate was increased 5.6% for 1996 over 1995.
The purposes of the Annual Incentive Plan include the following:
- Foster a discipline of setting goals and measuring performance against
the goals.
- Emphasize a pay-for-performance philosophy.
- Clearly communicate to all participants the Company's key goals and
strategies and the awards they will receive when the goals are
achieved.
- Broaden each participant's sense of ownership of all Company
activities and results.
- Improve the competitive opportunities under the Company's compensation
program for executives and middle managers.
Under the Annual Incentive Plan, cash bonus awards will be paid as a percentage
of base salary depending on the attainment of specified financial performance
goals. In 1996, there were approximately 78 participants in the Annual Incentive
Plan, including the Chief Executive Officer and
8
<PAGE> 11
the named Executive Officers. For 1996, the participants in the Annual Incentive
Plan received cash awards based on meeting specified financial performance
goals, which were based on earnings per share of the Company's Common Stock.
Long-term incentives provide the third element of executive compensation.
The principal type of long-term incentives awarded to executives to date are
stock options. Stock options provide executives with the opportunity to buy and
maintain an equity interest in the Company and share the appreciation of the
value of the Company's Common Stock. During 1996, the Committee awarded stock
options for an aggregate 59,600 shares under the Company's 1991 Stock Option
Plan to the named Executive Officers, excluding the Chief Executive Officer. Mr.
Stroup was awarded stock options to purchase 29,200 shares of the Company's
Common Stock.
The above report is presented by the following current members of the
Compensation/Stock Option Committee: Alan T. Dickson, Chairman, J. W. Disher,
James H. Hance, S. Lance Van Every and Richard A. Zimmerman.
DIRECTOR COMPENSATION
Directors who are employees of the Company or its subsidiaries receive no
additional compensation for serving as directors. Directors who are not
employees of the Company or its subsidiaries (other than the Chairman of the
Board) receive an annual fee of $12,000 plus $600 for each Board meeting
attended and $450 for each Committee meeting attended, except the fee for a
Committee meeting held on the same day as a Board meeting is $300. Non-employee
directors who serve as a Committee Chairman receive an additional $1,500 per
year.
Mr. Lea receives a monthly fee of $16,500 for serving as Chairman of the
Board of Directors which began upon his election in April 1996. Upon
recommendation of the Compensation/Stock Option Committee and approval of the
Board of Directors, he received $49,500 for consulting prior to election as
Chairman of the Board and an additional $49,500 to encourage and facilitate his
acquisition of shares of the Common Stock of the Company in July 1996. He
invested these amounts in shares of the Common Stock of the Company and has
agreed to retain such shares while serving as Chairman of the Board. He serves
substantially full time as an adviser to the Company. His focus is on the
Company's strategic direction, management development and creation of
stockholder value. It is expected that Mr. Lea will serve as Chairman of the
Board for two additional years subject to annual renewal upon mutual agreement
of Mr. Lea and Mr. Stroup. The Company has agreed to continue Mr. Lea's monthly
fee for 12 months after his death or disability while serving as Chairman of the
Board. In addition, Mr. Lea will receive incentive compensation equal to $10,000
for each 1% that the Highest Average Sales Price (as defined below) of the
Company's Common Stock exceeds $16 per share. The Highest Average Sales Price
means the average of the highest sales price of the Company's Common Stock on
The Nasdaq Stock Market during the four consecutive interim (quarterly
accounting) periods of the Company which have the highest average sales price of
the Company's Common Stock, beginning in March 1996 and ending two years after
Mr. Lea's completion of service as Chairman of the Board. Such incentive
compensation will be paid in one lump sum two years after Mr. Lea completes his
service as Chairman of the Board. In the event of a Change of Control as defined
and described under the heading "Executive Officer Compensation" below, the
Highest Average Sales Price will be the highest per share consideration paid or
payable for the Company's Common Stock in connection with the transaction that
results in a Change of Control. The incentive compensation will be paid in one
lump sum concurrently with a Change of Control.
Non-employee directors are also eligible to receive stock options under
the Company's 1995 Nonqualified Stock Option Plan for Non-Employee Directors
under which each current non-employee director (including Mr. Lea) has been
granted options to purchase 3,500 shares of Common Stock and
9
<PAGE> 12
will be granted an option to purchase 1,000 shares of Common Stock on May 1,
1997 at an option price equal to the fair market value of the Common Stock on
such date.
STOCKHOLDER RETURN PERFORMANCE GRAPH
Included below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of The Nasdaq Stock Market (U.S. Companies) Index
and the Company's Peer Group for the period commencing December 28, 1991 and
ending December 28, 1996 covering the Company's five fiscal years ended December
26, 1992, December 25, 1993, December 31, 1994, December 30, 1995 and December
28, 1996.
The Company has selected a Peer Group consisting of the three
publicly-traded companies named below, which are in the snack foods industry.
Virtually all of the Company's direct competitors and peers are privately-held
companies or subsidiaries or divisions of larger publicly-held companies so that
the available members of the Peer Group are limited.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ STOCK MARKET INDEX AND PEER GROUP
[NOTE: A graph using the plot points
presented in the table below appears here.]
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered)
Nasdaq
Stock Market Peer
Company (US) Index Group
<S> <C> <C> <C>
1991 100.000 100.000 100.000
1992 112.361 114.503 90.653
1993 96.134 130.259 117.113
1994 94.578 130.583 98.923
1995 90.903 184.673 99.473
1996 104.312 227.456 103.723
</TABLE>
This graph assumes that $100 was invested in the Company's Common Stock on
December 26, 1991, in The Nasdaq Stock Market (U.S. Companies) Index and in the
Peer Group, which consists of Golden Enterprises, Inc., Grist Mill Company and
J&J Snack Foods Corp., and that dividends were reinvested.
10
<PAGE> 13
EXECUTIVE OFFICER COMPENSATION
The table below shows the compensation paid or accrued by the Company, for
the three fiscal years ended December 28, 1996, December 30, 1995 and December
31, 1994 to or for the account of each of those persons who served during the
1996 fiscal year as the Chief Executive Officer, the Company's five other
highest paid executive officers (collectively, the named Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- ----------------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL FISCAL COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#SH) ($) (2)
- --------- ------ --------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Stroup, III 1996 232,110 181,100 -- 29,200 11,117
President and 1995 214,933 0 -- 0 9,852
Chief Executive Officer 1994 186,020 0 -- 4,500 11,034
Thomas B. Horack (3) 1996 187,312 107,900 -- 14,600 1,615,971
Executive Vice President 1995 179,104 0 -- 0 7,099
1994 145,482 0 -- 3,000 7,768
G. R. Melvin 1996 173,624 99,000 -- 13,500 7,488
Senior Vice President 1995 168,368 0 -- 0 6,726
1994 159,024 0 -- 3,000 8,581
Peter M. Duggan (4) 1996 170,752 99,500 -- 12,700 7,084
Senior Vice President 1995 156,181 0 -- 0 9,071
1994 123,071 0 62,892 3,000 0
Earl D. Leake 1996 141,972 79,700 -- 10,800 6,210
Vice President 1995 131,931 0 -- 0 5,861
1994 103,108 0 -- 2,400 5,868
B. Clyde Preslar (5) 1996 111,220 95,700 80,428 8,000 20,000
Vice President
</TABLE>
- --------------
(1) Other than Messrs. Preslar and Duggan, no named Executive Officer has
received personal benefits during the listed years in excess of 10% of the
total of annual salary and bonus. The amount for Mr. Duggan in 1994 and
$75,343 of the amount for Mr. Preslar in 1996 was for moving expenses in
connection with their employment by the Company.
(2) For fiscal year 1996, includes amounts contributed by the Company under
the Company's Profit-Sharing Retirement Plan as follows: Mr. Stroup
$6,164, Mr. Horack $6,204, Mr. Melvin $6,260, Mr. Duggan $5,996 and Mr.
Leake $5,614 and amounts contributed by the Company under the Company's
Employee Stock Purchase Plan as follows: Mr. Stroup $1,590, Mr. Horack
$27, Mr. Melvin $24, Mr. Duggan $133, Mr. Leake $596 and amounts
contributed by the Company under the Company's Benefit Restoration Plan as
follows: Mr. Stroup $3,363, Mr. Horack $1,501, Mr. Melvin $955 and Mr.
Duggan $1,204. Also includes $1,608,239 which the Company agreed to pay to
Mr. Horack during 1996 in connection with his early retirement and $20,000
paid to Mr. Preslar as a signing bonus.
(3) Mr. Horack resigned as an officer and Director of the Company on November
22, 1996.
(4) Mr. Duggan was first elected an executive officer in July 1994.
(5) Mr. Preslar was first elected an executive officer in April 1996.
11
<PAGE> 14
The named Executive Officers, except Messrs. Duggan and Preslar, have each
executed an Executive Employment Agreement with the Company. The provisions of
all these agreements are substantially identical. Each agreement provides for
the continued full-time employment of the executive by the Company in the same
or another executive position until retirement (which includes termination after
a Change of Control of the Company, as described below, or termination due to
disability) or death, whereupon the Company will pay the executive or his
beneficiary supplemental retirement or death benefits, subject to certain
conditions of forfeiture. The executive, however, may be terminated by the
Company for cause (as defined in the agreement). The maximum amount payable upon
retirement is five times the annual salary being received by the executive at
the time of retirement. Payment is made in thirteen installments each year over
the period between the date of actual retirement and the earlier of (1) the end
of the Company's fiscal year in which the executive reaches the age of 75, or
(2) the end of the fiscal year in which the fifteenth anniversary date of the
executive's termination of employment occurs. Lesser amounts are payable in the
event of death. The agreement also provides that as long as the executive is
entitled to payments under the agreement he will not become an employee,
director or consultant to a corporation, partnership or have any ownership
interest therein, which competes with the Company. The executive loses all
rights to payment under the agreement if he voluntarily quits the Company or is
terminated for cause. The agreement also provides for the executive to provide
ongoing services to the Company after his retirement, generally of a consulting
nature. The Company will pay the executive a reasonable per diem amount and will
reimburse him for his costs of providing such services. The Company has entered
into a Trust Agreement with First Union National Bank of North Carolina to
create the Lance, Inc. Key Executive Employee Benefit Plan Trust (the Trust)
which provides that, in the event of a Change of Control of the Company, the
Company will fund the Trust with cash in an amount sufficient to pay the full
amount payable under each Executive Employment Agreement. A Change of Control
for the purposes of the Executive Employment Agreements and the Trust means the
acquisition or contracting for the acquisition or otherwise controlling in
excess of 35% of the voting securities of the Company by any person excluding
voting securities beneficially owned by members of the Van Every Family which
consists of the descendants of Salem A. Van Every, Sr., deceased, and their
spouses.
Mr. Preslar has executed a salary continuation agreement with the Company
that provides for salary continuation for 18 months in the event his employment
is terminated by the Company without cause.
Mr. Horack's Executive Employment Agreement was terminated pursuant to an
Early Retirement Agreement dated November 22, 1996. Under the Early Retirement
Agreement, Mr. Horack resigned as an officer and director of the Company on
November 22, 1996 and released the Company of its obligations under his
Executive Employment Agreement. The Company agreed to pay Mr. Horack his salary
through December 28, 1996, any bonus earned under the Annual Incentive Plan and
an aggregate $1,608,239 in cash, benefits and property including the value of
his vested stock options, certain outplacement services and certain benefits
until age 60. The Company has also agreed to provide Mr. Horack with retiree
medical insurance after age 60.
12
<PAGE> 15
The table below shows the individual grants to the named Executive
Officers of stock options during the fiscal year ended December 28, 1996.
OPTION GRANTS IN THE 1996 FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS/
SARS
GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION PRESENT
NAME GRANTED (#SH) FISCAL YEAR PRICE ($/SH) DATE VALUE ($)(1)
- ---- ------------- ------------ ---------------- ---------- ------------
<S> <S> <S> <S> <S> <S>
Paul A. Stroup, III 29,200 11.8 15.8125 4/18/06 89,644
Thomas B. Horack 14,600 5.9 15.8125 4/18/06 44,822
G. R. Melvin 13,500 5.5 15.8125 4/18/06 41,445
Peter M. Duggan 12,700 5.2 15.8125 4/18/06 38,989
Earl D. Leake 10,800 4.4 15.8125 4/18/06 33,156
B. Clyde Preslar 8,000 3.2 15.875 4/28/06 24,560
</TABLE>
- ---------
(1) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
arbitrary assumptions as follows: options to be exercised in eight years,
stock price volatility at 0.25, annual dividend yield of 5.33% and a
risk-free interest rate of 6.53%. No downward adjustments are made to the
resulting grant-date option values to account for potential forfeitures or
non-transferability of the options. The actual value of the options depends
upon the actual performance of the Company's stock during the applicable
period.
The table below shows, on an aggregated basis, each exercise of stock
options or tandem SARs during the fiscal year ended December 28, 1996 by each of
the named Executive Officers and the 1996 fiscal year-end value of unexercised
options and SARs.
AGGREGATED OPTION/SAR EXERCISES IN THE 1996 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
AT FY-END (#) OPTIONS/SARS
AT FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#SH) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------------- ------------------ ------------- -------------
<S> <C> <C> <C>
Paul A. Stroup, III 0 0 23,700/29,200 0/56,575
Thomas B. Horack 0 0 19,200/14,600 0/28,288
G. R. Melvin 0 0 14,400/13,500 0/26,156
Peter M. Duggan 0 0 3,000/12,700 750/24,606
Earl D. Leake 0 0 14,850/10,800 0/20,925
B. Clyde Preslar 0 0 0/8,000 0/15,000
</TABLE>
APPROVAL OF 1997 INCENTIVE EQUITY PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Lance, Inc. 1997 Incentive Equity Plan (the Plan). The Plan reserves 1,500,000
shares of the Company's Common Stock for issuance to certain key employees of
the Company. The Plan authorizes the issuance of such shares to key employees in
the form of stock options, stock appreciation rights (SARs), restricted stock
and performance shares. The Plan also authorizes other awards denominated in
monetary units or shares of Common Stock payable in cash or shares of Common
Stock.
13
<PAGE> 16
Background and Purpose. As described in the Compensation/Stock Option
Committee Report, one of the fundamental components of compensation for the
Company's key employees is long-term incentive compensation. The Company has for
a number of years provided long-term incentive compensation to its key employees
pursuant to the Lance, Inc. 1991 Stock Option Plan (the Prior Plan). The Prior
Plan provides only for equity-based long term incentive awards in the form of
stock options and SARs and only approximately 80,000 shares remain available for
future awards under the Prior Plan. The Plan would have a great deal more
flexibility than the Prior Plan in the types of awards that could be made under
it and the terms and conditions, including performance-related conditions,
applicable to those awards and increase the number of shares available for
awards. Approval of the Plan would better position the Company to take advantage
of the "performance-based compensation" exception to the deduction limits of
Section 162(m) (described below) and would enhance the Company's ability to
recruit and retain key management employees and to put greater emphasis on
variable, performance-related compensation. Below is a summary of the material
terms of the Plan as proposed.
Section 162(m) of the Internal Revenue Code (Section 162(m)) limits the
deductibility to the Company of certain compensation paid to certain key
employees in excess of $1 million dollars. Section 162(m) excludes from this
limit compensation that qualifies as "performance-based compensation." In order
to provide both short and long-term equity-based incentive awards that meet the
requirements of "performance-based compensation" under Section 162(m), the Board
recommends the adoption of the Plan to succeed the Prior Plan, which would
provide equity-based incentive compensation.
Number of Shares. Initially, 1,500,000 shares of Common Stock
(approximately 5.0% of the outstanding Common Stock) will be available for
awards under the Plan. All shares available for awards in any year that are not
used, as well as shares allocated to awards under the Plan that are canceled or
forfeited, will be available in subsequent years.
Administration. The Plan will be administered by the Compensation/Stock
Option Committee of the Board of Directors (the Committee). It is intended that
the Committee will at all times be composed of "non-employee directors" within
the meaning of Rule 16b-3 promulgated under Section 16(b) of the Securities
Exchange Act of 1934 and that all of its members acting with respect to matters
governed by Section 162(m) will be "outside directors" within the meaning of
Section 162(m). Under the Plan, the Committee will (i) select the key employees
to receive awards from time to time, (ii) make awards in such form and amounts
as it determines, (iii) impose such limitations, restrictions and conditions
upon awards as it deems appropriate, (iv) interpret the Plan and adopt, amend
and rescind administrative guidelines and other rules and regulations relating
to the Plan, (v) correct any defect or omission or reconcile any inconsistency
in the Plan or any award granted thereunder and (vi) make all other
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. The Committee will also have the
authority to accelerate the vesting and/or waive any restrictions, or otherwise
amend the terms of any award within its discretion, of any outstanding awards.
The Plan will terminate on March 31, 2007. Each participant receiving an award
under the Plan shall enter into an agreement with the Company in the form
specified by the Committee. In no event may an individual receive awards under
the Plan during any calendar year covering in excess of 150,000 shares.
Eligibility. Only managerial and other key employees of the Company may
participate in the Plan. Key employees are those employees who occupy managerial
or other important positions and who have made or are expected to make important
contributions to the business of the Company or a subsidiary, as determined by
the Committee. Initially, approximately 100 employees are expected to be
eligible to participate. As mentioned above, the Committee in its discretion
will select which key employees will in fact receive awards from time to time.
14
<PAGE> 17
Awards of Stock Options and Stock Appreciation Rights. The Plan provides
for the grant of options to purchase shares of Common Stock at option prices
determined by the Committee as of the date of grant. For stock option awards
intended to qualify as "performance-based compensation" under Section 162(m) or
for incentive stock options (described below), the option price will not be less
than the fair market value of shares of Common Stock at the close of business on
the date of grant. The fair market value of the Common Stock on March 12, 1997
was $18.56 per share.
The Plan also provides for the grant of SARs (either in tandem with stock
options or freestanding), which entitle holders upon exercise to receive either
cash or shares of Common Stock or a combination thereof, as the Committee in its
discretion shall determine, with a value equal to the difference between (i) the
fair market value on the exercise date of the shares with respect to which an
SAR is exercised and (ii) the fair market value of such shares on the date of
grant (or such other price as set by the Committee).
Awards to key employees of options under the Plan, which may be either
incentive stock options (which qualify for special tax treatment) or
nonqualified stock options, are determined by the Committee. The terms and
conditions of each such option and of any SAR are to be determined by the
Committee at the time of grant.
Exercise of an option (or an SAR) will result in the cancellation of any
related SAR (or option) to the extent of the number of shares in respect of
which such option or SAR has been exercised. Options and SARs granted under the
Plan will expire not more than 10 years from the date of grant, and the option
agreements entered into with the optionees will specify the extent to which
options and SARs may be exercised during their respective terms, including in
the event of the optionee's death, disability or termination of employment.
Payment for shares issuable pursuant to the exercise of an option may be
made either in cash or by tendering shares of Common Stock of the Company with a
fair market value at the date of the exercise equal to the portion of the
exercise price which is not paid in cash.
Restricted Awards, Performance Awards and Other Awards. The Plan provides
for the issuance of restricted awards in the form of shares of restricted stock
or restricted units representing shares of Common Stock on such terms and
conditions as are determined from time to time by the Committee, in addition to
or in combination with other awards under the Plan. Such restrictions may
include the continued service of the participant with the Company, the
attainment of specified performance goals or any other conditions deemed
appropriate by the Committee.
The stock certificates evidencing the restricted stock will bear an
appropriate legend and will be held in the custody of the Company until the
applicable restrictions have been satisfied. The participant cannot sell,
transfer, pledge, assign or hypothecate shares of restricted stock until the
applicable restrictions have been satisfied. Once the restrictions are
satisfied, the shares will be delivered to the participant. During the period of
restriction, the participant may exercise full voting rights and receive cash
dividends with respect to the restricted stock. The participant will also be
credited with stock dividends, if any, with respect to the restricted stock,
subject to the same restrictions of the underlying restricted stock. Awards of
restricted units will be paid in cash or shares of Common Stock upon vesting
with each unit having a value equal to the fair market value of one share of
Common Stock.
The Committee may also make performance awards in the form of performance
equity grants or performance unit grants to selected key employees, in addition
to or in combination with other awards under the Plan. Performance equity grants
are made in units representing shares of Common Stock and performance unit
grants are made in monetary units. The Plan provides that the number of
performance awards granted and/or the vesting of granted performance awards
shall be contingent on
15
<PAGE> 18
the attainment of certain performance goals or other conditions over a period of
time (called the "performance period"), all as determined by the Committee.
During the performance period, the Committee will determine what number (if any)
of performance awards have been earned. Earned performance awards may be paid in
cash, shares of Common Stock or a combination thereof having an aggregate fair
market value equal to the value of the earned performance awards as of the
payment date.
In addition, the Plan permits the Committee to make grants of other awards
of Common Stock or awards denominated in units of Common Stock, including ones
valued using measures other than market values.
Code Section 162(m). Because stock options and SARs granted under the Plan
that are intended to qualify as "performance-based compensation" under Section
162(m) must have an exercise price equal at least to fair market value at the
date of grant, compensation from the exercise of such stock options and SARs
should be treated as "performance-based compensation" for Section 162(m)
purposes.
In addition, the Plan authorizes the Committee to grant restricted awards
or performance awards that are conditioned on the satisfaction of certain
performance criteria. For such awards intended to result in "performance-based
compensation," the Committee will establish prior to or within 90 days after the
start of the applicable performance period the applicable performance
conditions. The Committee shall establish the performance conditions in its sole
discretion using such measures of performance as it deems appropriate. The
performance conditions will be stated in the form of an objective,
nondiscretionary formula and the Committee will certify in writing the
attainment of such performance conditions prior to any payout with respect to
such awards.
Withholding for Payment of Taxes. The Plan provides for the withholding
and payment by a participant of any payroll or withholding taxes required by
applicable law. The Plan permits a participant to satisfy such requirement, with
the approval of the Committee and subject to the terms of the Plan, by having
the Company withhold from the participant a number of shares of Common Stock
otherwise issuable under the award having a fair market value equal to the
amount of the applicable payroll and withholding taxes.
Changes in Capitalization and Similar Changes. In the event of any change
in the outstanding shares of Common Stock of the Company by reason of any stock
dividend, split, spin-off, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise, the aggregate number of shares of Common Stock
with respect to which awards may be made under the Plan, the terms, types of
shares and number of shares of any outstanding awards under the Plan and the
individual calendar year award limit set forth above may be equitably adjusted
by the Committee in its discretion.
Changes in Control. The Plan provides that in the event of a change in
control of the Company, all options and SARs will be fully exercisable as of the
date of the change in control and shall remain exercisable through their full
term. Outstanding restricted awards and performance awards will become
immediately vested, and any applicable performance conditions shall be deemed
satisfied (at the target performance condition, if applicable) as of the date of
the change in control.
Amendment and Termination of the Plan. The Board of Directors will have
the power to amend, modify or terminate the Plan on a prospective basis.
Stockholder approval will be required for any change to the material terms of
the Plan to the extent required by Section 162(m), the rules of any national
securities exchange upon which the Common Stock is listed at the time the
amendment is proposed or Section 422 of the Internal Revenue Code with respect
to incentive stock options.
16
<PAGE> 19
Federal Income Tax Treatment. Incentive Stock Options. Incentive stock
options (ISOs) granted under the Plan will be subject to the applicable
provisions of the Internal Revenue Code, including Code Section 422. If shares
of Common Stock of the Company are issued to an optionee upon the exercise an
ISO, and if no "disqualifying disposition" of such shares is made by such
optionee within one year after the exercise of the ISO or within two years after
the date the ISO was granted, then (i) no income will be recognized by the
optionee at the time of the grant of the ISO, (ii) no income, for regular income
tax purposes, will be realized by the optionee at the date of exercise, (iii)
upon sale of the shares acquired by exercise of the ISO, any amount realized in
excess of the option price will be taxed to the optionee, for regular income tax
purposes, as a long-term capital gain and any loss sustained will be a long-term
capital loss and (iv) no deduction will be allowed to the Company for federal
income tax purposes. If a "disqualifying disposition" of such shares is made,
the optionee will realize taxable ordinary income in an amount equal to the
excess of the fair market value of the shares purchased at the time of exercise
over the option price (the bargain purchase element) and the Company will be
entitled to a federal income tax deduction equal to such amount. The amount of
any gain in excess of the bargain purchase element realized upon a
"disqualifying disposition" will be taxable as capital gain to the holder (for
which the Company will not be entitled a federal income tax deduction). Upon
exercise of an ISO, the optionee may be subject to alternative minimum tax.
Nonqualified Stock Options. With respect to nonqualified stock options
(NQSOs) granted to optionees under the Plan, (i) no income is realized by the
optionee at the time the NQSO is granted, (ii) at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise, and the
Company receives a tax deduction for the same amount and (iii) on disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on whether the shares
have been held for more than one year.
Restricted Stock. Upon becoming entitled to receive shares at the end of
the applicable restriction period without a forfeiture, the recipient has
ordinary income in an amount equal to the fair market value of the shares at
that time. However, a recipient who makes an election under Code Section 83(b)
within 30 days of the date of the grant will have ordinary taxable income on the
date of the grant equal to the fair market value of the shares of restricted
stock as if the shares were unrestricted and could be sold immediately. If the
shares subject to such election are forfeited, the recipient will not be
entitled to any deduction, refund or loss for tax purposes. Upon sale of the
shares after the forfeiture period has expired, the holding period to determine
whether the recipient has long-term or short-term capital gain or loss begins
when the restriction period expires, and the tax basis will be equal to the fair
market value of the shares when the restriction period expires. However, if the
recipient timely elects to be taxed as of the date of grant, the holding period
commences on the date of the grant and the tax basis will be equal to the fair
market value of the shares on the date of the grant as if the shares were then
unrestricted and could be sold immediately. The Company generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
compensation income to the participant.
Performance Awards. A participant who receives a performance award will
not recognize income and the Company will not be allowed a deduction at the time
the award is made. When a participant receives payment for a performance award
in cash or shares of Common Stock of the Company, the amount of the cash and the
fair market value of the shares received will be ordinary income to the
participant and the Company will receive a tax deduction for the same amount.
However, if there is a substantial risk that any shares used to pay out earned
performance shares will be forfeited (for example, because the Committee
conditions such shares on the performance of future services), the taxable event
is deferred until the risk of forfeiture lapses. In this case, the participant
can make a Code Section 83(b) election as previously described. The Company
generally will be entitled to a deduction at the time the income is recognized
by the participant.
17
<PAGE> 20
The Board recommends a vote FOR approval of the Plan and proxies solicited
by the Board of Directors will be so voted unless stockholders specify
otherwise. The affirmative vote of a majority of the shares voting on the
proposal, present in person or represented by proxy, at the Annual Meeting is
required for approval of the Plan. Abstentions and shares not voted are not
counted in determining a majority.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP as independent
public accountants to audit the financial statements of the Company and its
subsidiaries for the 1997 fiscal year, ending December 27, 1997. This selection
is being presented to the stockholders for their ratification or rejection at
this Annual Meeting.
KPMG Peat Marwick LLP served as the Company's independent certified public
accountants to audit the financial statements of the Company and its
subsidiaries beginning with the 1991 fiscal year. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting of Stockholders and
will have an opportunity to make a statement if they desire to do so. The
representatives of KPMG Peat Marwick LLP are expected to be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the
selection of KPMG Peat Marwick LLP as independent public accountants to audit
the financial statements of the Company and its subsidiaries for the 1997 fiscal
year, and proxies solicited by the Board of Directors will be so voted unless
stockholders specify a different choice.
If the stockholders do not ratify the selection of KPMG Peat Marwick LLP,
the selection of independent public accountants will be reconsidered by the
Board of Directors.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder intends to present for action at the 1998
Annual Meeting of Stockholders, currently scheduled for April 17, 1998, must be
received by the Company no later than November 21, 1997, in order for the
proposal to be included in the proxy statement and form of proxy for the 1998
Annual Meeting of Stockholders. The proposal should be sent to Secretary, Lance,
Inc., Box 32368, Charlotte, North Carolina 28232.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and executive officers and persons who own more than 10% of
the Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the Common
Stock. Officers, Directors and greater than 10% stockholders are required to
furnish the Company with copies of all such reports they file. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company and written representations that no other reports were required,
during the fiscal year ended December 28, 1996, all Section 16(a) filing
requirements applicable to its executive officers, Directors and greater than
10% beneficial owners were complied with, except that a Form 4 for S. Lance Van
Every with respect to a transaction by his daughter was filed after the required
date.
18
<PAGE> 21
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
UPON THE WRITTEN REQUEST OF ANY PERSON WHO AT FEBRUARY 20, 1997 WAS A
RECORD OR BENEFICIAL STOCKHOLDER OF THE COMPANY, THE COMPANY WILL PROVIDE
WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996, INCLUDING
THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES. THE COMPANY'S
ANNUAL REPORT TO STOCKHOLDERS HAS BEEN MAILED WITH THIS PROXY STATEMENT TO EACH
STOCKHOLDER. REQUESTS FOR COPIES OF THE ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION SHOULD BE ADDRESSED TO SECRETARY, LANCE, INC., BOX 32368,
CHARLOTTE, NORTH CAROLINA 28232.
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<PAGE> 22
APPENDIX A
[LOGO] LANCE, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD APRIL 18, 1997
The undersigned hereby appoints Scott C. Lea and Paul A. Stroup, III, and
each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated on the reverse hereof, all shares of the $.83-1/3 par value Common
Stock of the undersigned in Lance, Inc. at the Annual Meeting of Stockholders to
be held on April 18, 1997, and at any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE HEREOF AND, UNLESS
OTHERWISE DIRECTED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS
AND FOR PROPOSALS 2 AND 3. The Board of Directors recommends voting FOR on each
item.
HAS YOUR ADDRESS CHANGED:
- -------------------------
- -------------------------
- -------------------------
(side 2)
1. ELECTION OF DIRECTORS: Nominees are Paul A. Stroup, III, William R.
Holland, Richard A. Zimmerman, Isaiah Tidwell and Scott C. Lea.
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
(INSTRUCTION: To withhold authority for any nominee, mark the "For All
Except" box and write that nominee's name below.)
---------------------------------------------------------
2. APPROVAL OF THE 1997 INCENTIVE EQUITY PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF SELECTION OF KPMG PEAT MARWICK LLP AS AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Receipt of Notice of Annual Meeting and accompanying Proxy Statement is
hereby acknowledged.
PLEASE DATE AND SIGN EXACTLY AS PRINTED TO THE LEFT AND RETURN PROMPTLY IN
THE ENCLOSED POSTAGE PAID ENVELOPE. (When signing as attorney, executor,
administrator, trustee, guardian, etc., give title as such. If joint account,
each joint owner should sign.)
Mark box at right if address change has been noted on the revere of
this card. [ ]
--------------------------------
Date
- ---------------------------------- --------------------------------
Stockholder sign here Co-owner sign here
<PAGE> 23
APPENDIX B
LANCE, INC.
1997 INCENTIVE EQUITY PLAN
<PAGE> 24
LANCE, INC.
1997 INCENTIVE EQUITY PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Purpose............................................................1
Section 2. Definitions........................................................1
Section 3. Administration.....................................................3
Section 4. Duration of and Common Stock Subject to Plan.......................4
Section 5. Eligibility........................................................4
Section 6. Stock Options......................................................4
Section 7. Stock Appreciation Rights..........................................5
Section 8. Restricted Awards..................................................6
Section 9. Performance Awards.................................................7
Section 10. Other Stock-Based and Combination Awards...........................9
Section 11. Deferral Elections.................................................9
Section 12. Termination of Employment..........................................9
Section 13. Non-transferability of Awards......................................9
Section 14. Adjustments Upon Changes in Capitalization, Etc...................10
Section 15. Change in Control.................................................10
Section 16. Amendment and Termination.........................................11
Section 17. Miscellaneous.....................................................11
</TABLE>
<PAGE> 25
LANCE, INC.
1997 INCENTIVE EQUITY PLAN
SECTION 1. PURPOSE. The purpose of the Lance, Inc. 1997 Incentive Equity
Plan (the "Plan") is to attract and retain managerial and other key employees,
and to reward such employees for making major contributions to the success of
Lance, Inc. (the "Company"). The Plan is designed to meet these objectives by
offering performance-based stock and cash incentives and other equity-based
incentive awards, thereby providing such employees a proprietary interest in the
long term growth and performance of the Company.
SECTION 2. DEFINITIONS. For purposes of the Plan, unless the context
clearly indicates otherwise, the following terms shall have the meanings set
forth below:
(a) "Award" (collectively, "Awards") means an award or grant made to a
Participant under Sections 6 through 10, inclusive, of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time, or any successor thereto, together with rules, regulations
and interpretations promulgated thereunder.
(d) "Common Stock" means the $.83 1/3 par value Common Stock of the
Company or any security of the Company issued in substitution, exchange or
lieu thereof pursuant to Section 14 hereof.
(e) "Company" means Lance, Inc., a North Carolina corporation, and any
subsidiary corporations within the meaning of Section 424(f) of the Code,
as well as any successor corporation or corporations thereto.
(f) "Compensation Committee" means the committee of the Board
constituted as provided in Section 3 of the Plan.
(g) "Disability" means the inability, by reason of physical or mental
infirmity or both, of an individual to perform satisfactorily the duties
then assigned to such individual or any other duties the Company is willing
to assign to such individual for which compensation is payable. Disability
shall be determined by the Compensation Committee based upon such evidence
as the Compensation Committee shall deem sufficient and, upon medical
evidence, if available, and, in the discretion of the Compensation
Committee, upon certification of such Disability by an independent
qualified physician.
<PAGE> 26
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.
(i) "Fair Market Value," with respect to a share of the Common Stock
at a particular time, shall be that value as determined by the Compensation
Committee which shall be (i) if such Common Stock is listed on a national
securities exchange or traded on the National Market System, the mean
between the highest price and the lowest price at which the Common Stock
shall have been sold regular way on a national securities exchange or the
National Market System on said date, or, if no sales occur on said date,
then on the next preceding date on which there were such sales of Common
Stock, (ii) if the Common Stock shall not be listed on a national
securities exchange or traded on the National Market System, the mean
between the bid and asked prices last reported by the National Association
of Securities Dealers, Inc. for the over-the-counter market on said date
or, if no bid and asked prices are reported on said date, then on the next
preceding date on which there were such quotations, or (iii) if at any time
quotations for the Common Stock shall not be reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market and
the Common Stock shall not be listed on any national securities exchange or
traded on the National Market System, the fair market value determined by
the Compensation Committee in such manner as it may deem reasonable.
(j) "Incentive Stock Option" means any Stock Option granted pursuant
to the provisions of Section 6 of the Plan that is intended to be and is
specifically designated as an "incentive stock option" within the meaning
of Section 422 of the Code.
(k) "Non-Qualified Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of the Plan that is not an
Incentive Stock Option.
(l) "Participant" means an employee of the Company who is granted an
Award under the Plan.
(m) "Performance Award" means an Award granted pursuant to the
provisions of Section 9 of the Plan the vesting of which is contingent on
performance attainment.
(n) "Performance Equity Grant" means an Award of units representing
shares of Common Stock granted pursuant to the provisions of Section 9 of
the Plan.
(o) "Performance Unit Grant" means an Award of monetary units granted
pursuant to the provisions of Section 9 of the Plan.
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<PAGE> 27
(p) "Plan" means the Lance, Inc. 1997 Incentive Equity Plan as set
forth herein, as the same may be hereafter amended and from time to time in
effect.
(q) "Restricted Award" means an Award granted pursuant to the
provisions of Section 8 of the Plan.
(r) "Restricted Stock Grant" means an Award of shares of Common Stock
granted pursuant to the provisions of Section 8 of the Plan.
(s) "Restricted Unit Grant" means an Award of units representing
shares of Common Stock granted pursuant to the provisions of Section 8 of
the Plan.
(t) "Retirement" means the termination of an employee's employment
with the Company at any time after the last day of the calendar month
immediately preceding the calendar month in which the employee attains the
age of 60 years.
(u) "Stock Appreciation Right" means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Section
7 of the Plan.
(v) "Stock Option" means an Award to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by those members of the
Compensation/Stock Option Committee of the Board who are "nonemployee directors"
for purposes of Rule 16b-3 under the Exchange Act.
(b) The Compensation Committee is authorized to grant Awards under the
Plan, to construe and interpret the Plan, to promulgate, amend and rescind rules
and regulations relating to the implementation of the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
Any determination, decision or action of the Compensation Committee in
connection with the construction, interpretation, administration or application
of the Plan shall be final, conclusive and binding upon all persons
participating in the Plan and any person validly claiming under or through
persons participating in the Plan. The Company shall effect the granting of
Awards under the Plan in accordance with the determinations made by the
Compensation Committee, by execution of instruments in writing in such form as
are approved by the Compensation Committee.
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<PAGE> 28
SECTION 4. DURATION OF AND COMMON STOCK SUBJECT TO PLAN.
(a) Term. The Plan shall be effective on April 18, 1997, subject to
approval by a plurality of the shares voting on approval of the Plan at the
Annual Meeting of Stockholders held on said date or any adjournment thereof. The
Plan shall terminate on March 31, 2007.
(b) Shares of Common Stock Subject to Plan. The maximum number of shares of
Common Stock with respect to which Awards may be granted under the Plan, subject
to adjustment as provided in Section 14 of the Plan, shall be 1,500,000 shares
of the total authorized shares of the Common Stock. For the purpose of computing
the total number of shares of Common Stock available for Awards under the Plan,
there shall be counted against the foregoing limitation the number of shares of
Common Stock subject to issuance upon exercise or settlement of Awards and the
number of shares of Common Stock which equal the value of Restricted Unit Grants
and Performance Equity Grants and other stock-based Awards in each case
determined as of the dates on which such Awards are granted. If any Awards are
forfeited, terminated, settled in cash in lieu of stock, exchanged for other
Awards, or expire unexercised, the shares of Common Stock which were theretofore
subject to such Awards shall again be available for Awards under the Plan to the
extent of such forfeiture, termination, settlement, exchange or expiration.
Further, any shares of Common Stock which are used as full or partial payment to
the Company by a Participant of the purchase price of shares of Common Stock
upon exercise of Stock Options shall again be available for Awards under the
Plan, as shall any shares covered by Stock Appreciation Rights which are not
issued as payment upon exercise. Common Stock which may be issued under the Plan
may be either authorized and unissued shares or issued shares which have been
reacquired by the Company. No fractional shares of Common Stock shall be issued
under the Plan.
(c) Individual Award Limit. In no event shall a Participant receive an
Award or Awards during any one calendar year covering in the aggregate more than
150,000 shares of Common Stock.
SECTION 5. ELIGIBILITY. Only managerial and other key employees shall be
eligible to be granted Awards under the Plan. The Compensation Committee shall,
from time to time, (i) determine those managerial and other key employees to
whom Awards shall be granted and the conditions of each such Award or issue and
sale and (ii) grant such Awards. No member of the Compensation Committee while
serving as such shall be eligible to receive any Award hereunder.
SECTION 6. STOCK OPTIONS. Stock Options may be granted under the Plan in
the form of Incentive Stock Options or Non-Qualified Stock Options; and such
Stock Options shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Compensation Committee shall determine:
(a) Grant. Stock Options may be granted under the Plan on such terms
and conditions not inconsistent with the provisions of the Plan and in such
form as the Compensation Committee may from time to time approve. Stock
Options may be granted alone, in addition to or in combination with other
Awards under the Plan.
4
<PAGE> 29
(b) Stock Option Price. The option exercise price per share of Common
Stock purchasable under a Stock Option shall be determined by the
Compensation Committee at the time of grant, but in no event shall the
exercise price of an Incentive Stock Option be less than 100% of the Fair
Market Value of the Common Stock on the date of the grant of such Incentive
Stock Option.
(c) Option Term. The term of each Stock Option shall be fixed by the
Compensation Committee; except that the term of Incentive Stock Options
shall not exceed 10 years after the date the Incentive Stock Option is
granted.
(d) Exercisability. A Stock Option shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Compensation Committee at the date of grant.
(e) Method of Exercise. A Stock Option may be exercised, in whole or
in part, by a Participant's giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall
be accompanied by payment in full of the purchase price in cash or, if
acceptable to the Compensation Committee in its sole discretion, in shares
of Common Stock already owned by the Participant, or by surrendering
outstanding Awards denominated in stock or stock units.
(f) Special Rule for Incentive Stock Options. With respect to
Incentive Stock Options granted under the Plan, the aggregate Fair Market
Value (determined as of the date the Incentive Stock Option is granted) of
the number of shares with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year
shall not exceed $100,000 or such other limit as may be required by the
Code.
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted under the Plan subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the express
terms of the Plan, as the Compensation Committee shall determine:
(a) Stock Appreciation Rights. A Stock Appreciation Right is an Award
entitling a Participant to receive an amount equal to (or if the
Compensation Committee shall so determine at the time of grant, less than)
the excess of the Fair Market Value of a share of Common Stock on the date
of exercise over the Fair Market Value of a share of Common Stock on the
date of grant of the Stock Appreciation Right, or such other price as is
set by the Compensation Committee, multiplied by the number of shares of
Common Stock with respect to which the Stock Appreciation Right shall have
been exercised.
5
<PAGE> 30
(b) Grant. A Stock Appreciation Right may be granted in combination
with, in addition to or completely independent of a Stock Option or any
other Award under the Plan.
(c) Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Compensation
Committee, except that in no event shall a Stock Appreciation Right be
exercisable within the first six months after the date of grant. The
Compensation Committee may also provide that a Stock Appreciation Right
shall be automatically exercised on one or more specified dates.
(d) Form of Payment. Payment upon exercise of a Stock Appreciation
Right may be made in cash, in shares of Common Stock, or any combination
thereof, as the Compensation Committee shall determine; provided, however,
that any Stock Appreciation Right exercised upon or subsequent to the
occurrence of a Change in Control (as defined in Section 15) shall be paid
in cash.
SECTION 8. RESTRICTED AWARDS. Restricted Awards may be granted under the
Plan in the form of either Restricted Stock Grants or Restricted Unit Grants.
Restricted Awards shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Compensation Committee shall determine:
(a) Restricted Stock Grants. A Restricted Stock Grant is an Award of
shares of Common Stock to a Participant subject to such terms and
conditions as the Compensation Committee deems appropriate, including,
without limitation, restrictions on the sale, assignment, transfer or other
disposition of such shares and the requirement that the Participant forfeit
such shares back to the Company upon termination of employment prior to
vesting.
(b) Restricted Unit Grants. A Restricted Unit Grant is an Award of
units to be paid in cash upon vesting (with each unit having a value
equivalent to the Fair Market Value of one share of Common Stock) granted
to a Participant subject to such terms and conditions as the Compensation
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units upon termination of employment
prior to vesting.
(c) Grants of Awards. Restricted Awards may be granted under the Plan
in such form and on such terms and conditions as the Compensation Committee
may from time to time approve. Restricted Awards may be granted alone, in
addition to or in combination with other Awards under the Plan. Subject to
the terms of the Plan, the Compensation Committee shall determine the
number of Restricted Awards to be granted to a Participant and the
Compensation Committee may impose different terms and conditions on any
particular Restricted Award made to any Participant. Each Participant
receiving a Restricted Stock Grant shall be
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<PAGE> 31
issued a stock certificate in respect of such shares of Common Stock. Such
certificate shall be registered in the name of such Participant, shall be
accompanied by a stock power duly executed by such Participant, and shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award; which certificate evidencing such
shares shall be held in custody by the Company until the restrictions
thereon shall have lapsed.
(d) Restriction Period. Restricted Awards shall provide that in order
for a Participant's rights to vest in such Awards, the Participant must
remain in the employment of the Company, subject to relief for specified
reasons, for a period of time commencing on the date of the Award and
ending on such later date or dates as the Compensation Committee may
designate at the time of the Award ("Restriction Period"). During the
Restriction Period, a Participant may not sell, assign, transfer, pledge,
encumber or otherwise dispose of shares of Common Stock received under a
Restricted Stock Grant. The Compensation Committee, in its sole discretion,
may provide for the lapse of restrictions in installments during the
Restriction Period. Upon expiration of the applicable Restriction Period
(or lapse of restrictions during the Restriction Period where the
restrictions lapse in installments), the Participant shall be entitled to
receive his or her Restricted Award or portion thereof, as the case may be.
(e) Payment of Awards. A Participant shall be entitled to receive
payment for a Restricted Unit Grant (or portion thereof) upon expiration of
the applicable Restriction Period. Payment in settlement of a Restricted
Unit Grant shall be made as soon as practicable following the expiration of
the Restriction Period in cash, in shares of Common Stock equal to the
number of units granted under the Restricted Unit Grant with respect to
which such payment is made, or in any combination thereof, as the
Compensation Committee in its sole discretion shall determine. The
Compensation Committee may also, in its discretion, permit a Participant to
elect to receive, in lieu of shares of unrestricted stock at the conclusion
of a Restriction Period, a cash payment equal to the Fair Market Value of
the Restricted Stock vesting on the date the restrictions expire.
(f) Rights as a Stockholder. A Participant shall have, with respect to
the shares of Common Stock received under a Restricted Stock Grant, all of
the rights of a Stockholder of the Company, including the right to vote the
shares, and the right to receive any cash dividends. Stock dividends issued
with respect to the shares covered by a Restricted Stock Grant shall be
treated as additional shares under the Restricted Stock Grant and shall be
subject to the same restrictions and other terms and conditions that apply
to shares under the Restricted Stock Grant with respect to which such
dividends are issued.
SECTION 9. PERFORMANCE AWARDS. Performance Awards may be granted under the
Plan in the form of either Performance Equity Grants or Performance Unit Grants.
Performance Awards may be subject to the following terms and conditions and may
contain such additional
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<PAGE> 32
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Compensation Committee shall determine:
(a) Performance Equity Grants. A Performance Equity Grant is an Award
of units (with each unit equivalent in value to one share of Common Stock
as it varies throughout the term of the designated performance period) to a
Participant and may be subject to such terms and conditions as the
Compensation Committee deems appropriate, including, without limitation,
the requirement that the Participant forfeit such units or a portion of
such units in the event certain performance criteria are not met within a
designated period of time.
(b) Performance Unit Grants. A Performance Unit Grant is an Award of
units to be paid in cash upon vesting (with each unit representing such
monetary amount as designated by the Compensation Committee) to a
Participant subject to such terms and conditions as the Compensation
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units or a portion of such units in the
event certain performance criteria are not met within a designated period
of time.
(c) Grants of Awards. Performance Awards may be granted under the Plan
in such form as the Compensation Committee may from time to time approve.
Performance Awards may be granted alone, in addition to or in combination
with other Awards under the Plan. Subject to the terms of the Plan, the
Compensation Committee shall determine the number of Performance Awards to
be granted to a Participant and the Compensation Committee may impose
different terms and conditions on any particular Performance Award made to
any Participant.
(d) Performance Goals and Performance Periods. Performance Awards
shall provide that in order for a Participant's rights to vest in such
Awards the Company or the Participant, or a combination thereof, must
achieve certain performance goals ("Performance Goals") over a designated
performance period ("Performance Period"). The Performance Goals and
Performance Period shall be established by the Compensation Committee, in
its sole discretion. The Compensation Committee shall establish Performance
Goals for each Performance Period before, or as soon as practicable after,
the commencement of the Performance Period. The Compensation Committee may
also establish a schedule or formula for such Performance Period setting
forth the portion of the Performance Award which will be earned or
forfeited based on the degree of achievement of the Performance Goals
actually achieved or exceeded. In setting Performance Goals, the
Compensation Committee may use such measures of performance as it deems
appropriate.
(e) Payment of Awards. In the case of a Performance Equity Grant, the
Participant shall be entitled to receive payment for each unit earned in an
amount equal to the Fair Market Value of a share of Common Stock on the
date on which
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<PAGE> 33
the Compensation Committee determines the number of units earned by the
Participant. In the case of a Performance Unit Grant, the Participant shall
be entitled to receive payment for each unit earned in an amount equal to
the dollar value of each unit times the number of units earned. Payment in
settlement of a Performance Award shall be made as soon as practicable
following the conclusion of the respective Performance Period in cash, in
shares of Common Stock, or in any combination thereof, as the Compensation
Committee in its sole discretion shall determine.
SECTION 10. OTHER STOCK-BASED AND COMBINATION AWARDS.
(a) The Compensation Committee may grant other Awards under the Plan
pursuant to which Common Stock is or may in the future be acquired, or Awards
denominated in stock units, including ones valued using measures other than
market value. Such other stock-based Awards may be granted either alone, in
addition to or in combination with any other type of Award granted under the
Plan.
(b) The Compensation Committee may also grant Awards under the Plan in
combination with other Awards or in exchange of Awards, or in combination with
or as alternatives to grants or rights under any other employee plan of the
Company, including the plan of any acquired entity.
(c) Subject to the provisions of the Plan, the Compensation Committee shall
have authority to determine the individuals to whom and the time or times at
which such Awards shall be made, the number of shares of Common Stock to be
granted or covered pursuant to such Awards, and any and all other conditions
and/or terms of the Awards.
SECTION 11. DEFERRAL ELECTIONS. The Compensation Committee may permit a
Participant to elect to defer his or her receipt of the payment of cash or the
delivery of shares of Common Stock that would otherwise be due to such
Participant by virtue of the exercise or earn out of an Award made under the
Plan. If any such election is permitted, the Compensation Committee may
establish rules and procedures for such payment deferrals, including the
possible (a) payment or crediting of reasonable interest on such deferred
amounts credited in cash, and (b) the payment or crediting dividend equivalents
in respect of deferrals credited in units of Common Stock.
SECTION 12. TERMINATION OF EMPLOYMENT. The terms and conditions under which
an Award may be exercised after a Participant's termination of employment shall
be determined by the Compensation Committee.
SECTION 13. NON-TRANSFERABILITY OF AWARDS. No Award under the Plan, and no
rights or interests therein, shall be assignable or transferable by a
Participant except by will or the laws of descent and distribution. During the
lifetime of a Participant, Stock Options and Stock Appreciation Rights are
exercisable only by, and payments in settlement of Awards will be payable only
to, the Participant or his or her legal representative.
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<PAGE> 34
SECTION 14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
(a) The existence of the Plan and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
Stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, other debentures, preferred or prior preference stocks, the
dissolution or liquidation of the Company or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding.
(b) In the event that a dividend shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock then
subject to any Award and the number of shares reserved for issuance pursuant to
the Plan but not yet covered by an Award shall be adjusted by adding to each
such share the number of shares which would be distributable thereon if such
share had been outstanding on the date fixed for determining the Stockholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock shall be changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there shall be substituted
for each share of Common Stock subject to any Award and for each share of Common
Stock reserved for issuance pursuant to the Plan but not yet covered by an
Award, the number and kind of shares of stock or other securities into which
each outstanding share of Common Stock shall be so changed or for which each
such share shall be exchanged. In the event there shall be any change other than
as specified above in this Section 14, in the number or kind of outstanding
shares of Common Stock or of any stock or other securities into which such
Common Stock shall have been changed or for which it shall have been exchanged,
then if the Compensation Committee shall in its sole discretion determine that
such change equitably requires an adjustment in the number or kind of shares
theretofore reserved for issuance pursuant to the Plan but not yet covered by an
Award and of the shares then subject to an Award or Awards, such adjustment
shall be made by the Compensation Committee and shall be effective and binding
for all purposes of the Plan and each agreement entered into with a Participant
under the Plan. In the case of any such substitution or adjustment as provided
for in this Section 14, the Award price for each share covered thereby prior to
such substitution or adjustment will be the Award price for all shares of stock
or other securities which shall have been substituted for such share or to which
such share shall have been adjusted pursuant to this Section 14. No adjustment
or substitution provided for in this Section 14 shall require the Company in any
agreement with a Participant to issue a fractional share and the total
substitution or adjustment with respect to each agreement with a Participant
shall be limited accordingly. In the event that the number of shares of Common
Stock subject to an Award is adjusted pursuant to the provisions of this Section
14, then any Stock Appreciation Rights related to such Award shall be
appropriately and equitably adjusted.
SECTION 15. CHANGE IN CONTROL.
(a) In the event of a Change in Control (as defined below) of the Company,
(i) all Stock Options or Stock Appreciation Rights then outstanding shall become
fully exercisable as of the date
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<PAGE> 35
of the Change in Control, whether or not then exercisable, (ii) all restrictions
and conditions of all Restricted Stock Grants and Restricted Unit Grants then
outstanding shall be deemed satisfied as of the date of the Change in Control,
and (iii) all Performance Equity Grants and Performance Unit Grants shall be
deemed to have been fully earned as of the date of the Change in Control.
(b) "Change in Control" means the acquisition or contracting to acquire or
otherwise control beneficial ownership of in excess of thirty-five percent (35%)
of the then outstanding voting securities of the Company by any person,
corporation or other entity and its "affiliates" (as defined in Rule 13d-5(b)(1)
promulgated under the Exchange Act, as amended from time to time) excluding,
however, for purposes of determining such ownership (but not the number of
shares outstanding) voting securities beneficially owned by members of the Van
Every Family and any trust, custodian or fiduciary account for the benefit of
any one or more members of the Van Every Family. Van Every Family means the
lineal descendants of Salem A. Van Every, Sr. (whether by blood or adoption) and
their spouses.
SECTION 16. AMENDMENT AND TERMINATION. Without further approval of the
Stockholders, the Board may at any time terminate the Plan, or may amend it from
time to time in such respects as the Board may deem advisable, except that the
Board may not, without approval of the Stockholders, make any amendment which
would (i) require Stockholder approval for Incentive Stock Options granted or to
be granted under the Plan to qualify as incentive stock options within the
meaning of Section 422 of the Code or (ii) require Stockholder approval under
applicable law or the rules of any national securities exchange upon which the
Common Stock is listed at the time such amendment is proposed.
SECTION 17. MISCELLANEOUS.
(a) Tax Withholding. The Company shall have the right to deduct from any
settlement, including the delivery or vesting of shares, made under the Plan any
federal, state or local taxes of any kind required by law to be withheld with
respect to such payments or to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such taxes.
If Common Stock is used to satisfy tax withholding, such stock shall be valued
based on the Fair Market Value when the tax withholding is required to be made.
(b) No Right To Employment. Neither the adoption of the Plan nor the
granting of any Award hereunder shall confer upon any employee of the Company
any right to continued employment with the Company, nor shall it interfere in
any way with the right of the Company to terminate the employment of any of its
employees at any time, with or without cause.
(c) Unfunded Plan. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan shall be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.
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(d) Payments to Trust. The Compensation Committee is authorized to cause to
be established a trust agreement or several trust agreements whereunder the
Company may make payments of amounts due or to become due to Participants in the
Plan.
(e) Engaging in Competition With Company. In the event a Participant's
employment with the Company is terminated for any reason whatsoever, and within
18 months after the date thereof such Participant accepts employment with any
competitor of, or otherwise engages in competition with, the Company, the
Compensation Committee, in its sole discretion, may require such Participant to
return to the Company the economic value of any Award which is realized or
obtained (measured at the date of exercise, vesting or payment) by such
Participant at any time during the period beginning on that date which is six
months prior to the date of such Participant's termination of employment with
the Company.
(f) Securities Law Restrictions. No shares of Common Stock shall be issued
under the Plan unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable Federal and state securities
laws. Certificates for shares of Common Stock delivered under the Plan may be
subject to such stop-transfer orders and other restrictions as the Compensation
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed, and any applicable federal or state
securities law. The Compensation Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
(g) Award Agreement. Each Participant receiving an Award under the Plan
shall enter into an agreement with the Company in a form specified by the
Compensation Committee agreeing to the terms and conditions of the Award and
such related matters as the Compensation Committee shall, in its sole
discretion, determine.
(h) Costs of Plan. The costs and expenses of administering the Plan shall
be borne by the Company.
(i) Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of North
Carolina.
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