<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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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 17, 1998
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 17, 1998, 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 an amendment to the Company's 1995 Nonqualified
Stock Option Plan for Non-employee Directors to increase the number of
shares of Common Stock authorized from 100,000 to 300,000.
3. A proposal to amend the Company's Restated Charter to create a class
of 5,000,000 shares of Preferred Stock, par value $1 per share, to be
issued in such series and with such preferences, limitations and
relative rights as the Board of Directors may determine from time to
time.
4. A proposal to ratify the selection of KPMG Peat Marwick LLP as
independent public accountants for fiscal year 1998.
5. 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, 1998
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
Robert S. Carles
Secretary
Charlotte, North Carolina
March [20], 1998
<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 17, 1998. This Proxy Statement and accompanying Proxy are first
being sent to the stockholders of the Company on or about March [20], 1998.
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 materials 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, 1998, 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, 1998 was 29,931,303.
<PAGE> 4
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
At February 2, 1998, 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 1,852,612 (1) 6.2%
Charlotte, NC 28255
Nancy Van Every McLaurin 1,738,060 (2) 5.8%
P. O. Box 21009
Charlotte, NC 28277
Nan Davis Van Every 1,645,867 (3) 5.5%
6001 Pelican Bay Boulevard
Naples, FL 33963
S. Lance Van Every 2,143,722 (3)(4) 7.2%
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 1,843,212 shares and shared voting
power with respect to 9,400 shares and had sole power to dispose with
respect to 1,044,862 shares and shared power to dispose with respect to
791,294 shares. Information with respect to NationsBank is as of December
31, 1997 and is derived from its Schedule 13G dated February 18, 1998.
Shares held by the Philip L. Van Every Foundation, for which 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 3,500 shares subject to options currently exercisable, 897,880
shares held under power of attorney from her mother and 24,080 shares
held by Mrs. McLaurin as custodian for her children.
(3) Includes 1,580,793 shares held in trust as to which Mrs. Van Every will
acquire sole power to vote and dispose on April 9, 1998 of which 1,294,295
are held in a trust as to which S. Lance Van Every currently has sole power
to vote and sole power to dispose.
(4) Includes 34,500 shares subject to options currently exercisable and 33,712
shares held by S. Lance Van Every either as custodian or in trust for his
children and grandchildren. Mr. Van Every had sole power to vote and
dispose of all of these shares 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 2, 1998, approximately [12,600,000]
shares of the Common Stock of the Company (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.
2
<PAGE> 5
The following table sets forth, as of February 2, 1998, 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 42,700 (3) *
J.W. Disher 25,685 (4) *
[1,409,292] (5) 4.7%
James H. Hance, Jr. 5,500 (6) *
William R. Holland 4,500 (7) *
Weldon H. Johnson 4,500 (8) *
Scott C. Lea 10,500 (9) *
Nancy Van Every McLaurin 1,738,060 (10) 5.8%
Robert V. Sisk 255,920 (11) *
Paul A. Stroup, III 42,549 (12) *
[1,409,292] (5) 4.7%
Isaiah Tidwell 4,000 (7) *
S. Lance Van Every 2,143,722 (13) 7.2%
Peter M. Duggan 9,004 (14) *
G. R. Melvin 29,502 (15) *
B. Clyde Preslar 5,069 (16) *
Richard G. Tucker 6,665 (17) *
Directors and executive officers 5,756,857 (18) 19.1%
as a group (21 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 2,
1998.
(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 2, 1998.
(3) Includes 3,500 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 3,500 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.
3
<PAGE> 6
(6) Includes 3,500 shares subject to exercisable options but does not include
shares held by NationsBank. See Principal Stockholders and Holdings of
Management above and note 18 below.
(7) Includes 3,500 shares subject to exercisable options.
(8) Includes 2,500 shares subject to exercisable options.
(9) Includes 7,000 shares held by a revocable trust of which Mr. Lea is the
grantor and beneficiary and 3,500 shares subject to exercisable options.
(10) Includes 3,500 shares subject to exercisable options, 897,880 shares held
under power of attorney from her mother and 24,080 shares held by Mrs.
McLaurin as custodian for her children.
(11) Includes 3,500 shares subject to exercisable options and 252,362 shares
held by Mr. Sisk's wife.
(12) Includes 26,200 shares subject to exercisable options, 589 shares held
by Mr. Stroup's wife and 4,850 shares of restricted stock.
(13) Includes 34,500 shares subject to exercisable options, 33,712 shares held
by S. Lance Van Every either as custodian or in trust for his children and
grandchildren and 52,044 shares held in trust as to which Mr.
Van Every has shared power to vote and dispose.
(14) Includes 6,175 shares subject to exercisable options and 2,650 shares
of restricted stock.
(15) Includes 12,975 shares subject to exercisable options, 1,800 shares held
by Mr. Melvin's wife, 381 shares held by Mr. Melvin as custodian for his
grandchild and 2,650 shares of restricted stock.
(16) Includes 2,000 shares subject to exercisable options and 2,550 shares
of restricted stock.
(17) Includes 1,500 shares subject to exercisable options and 2,550 shares
of restricted stock.
(18) Includes 130,925 shares subject to exercisable options held by
Directors and executive officers, [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 and 23,250 shares of
restricted stock. Does not include shares held by NationsBank (other
than shares held as trustee of the Foundation), of which James H.
Hance, Jr. is Vice Chairman, Chief Financial Officer and a director or
shares held by Mr. Melvin.
ELECTION OF DIRECTORS
At the meeting, five Directors will be elected. Four Directors will be
elected to serve until the Annual Meeting of Stockholders in 2001 and one
Director will be elected to serve until the Annual Meeting of Stockholders in
2000. Each such Director shall be elected to serve, subject to the provisions of
the Bylaws and until their successors are 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 a nominee 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
4
<PAGE> 7
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 1998, 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>
Alan T. Dickson (2) 66 Chairman of the Board and Chief Executive Officer of Ruddick
1983 Corporation, Charlotte, NC (Diversified holding company) since 1994
and President 1968-1994; Director of Ruddick Corporation,
NationsBank Corporation, Sonoco Products Company and Bassett
Furniture Industries, Inc.
James H. Hance, Jr. 53 Vice Chairman of NationsBank Corporation, Charlotte, NC since 1993
1995 and Chief Financial Officer since 1988; Director of Caraustar
Industries, Inc., Family Dollar Stores, Inc., NationsBank
Corporation and Summit Properties, Inc.
Nancy Van Every McLaurin (3) 53 Private investor for more than the past five years
1995
S. Lance Van Every (3) 50 Private investor for more than the past five years
1990
</TABLE>
The fifth nominee is Weldon H. Johnson. Mr. Johnson, who was appointed a
Director on April 18, 1997 to fill a vacancy on the Board of Directors, is being
nominated to serve until 2000 to fill the vacancy created by the resignation of
Richard A. Zimmerman. Mr. Zimmerman was elected to the Board of Directors at the
Annual Meeting of Stockholders held on April 18, 1997 for a term expiring in
2000.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
<S> <C> <C>
Weldon H. Johnson 61 Private investor since 1997; Senior Vice President of The Coca-Cola
1997 Company and President Coca-Cola Latin America group 1987-1996;
Director of NorAm Energy Corp. and Panamerican Beverages, Inc.
</TABLE>
The three members of the Board of Directors listed below were elected to
their current terms, which expire in 2000, at the Annual Meeting of Stockholders
held April 18, 1997.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
<S> <C> <C>
William R. Holland (2) 59 Chairman and Chief Executive Officer of United Dominion Industries
1993 Limited, Charlotte, NC (Diversified manufacturing company) since
1986; Director of United Dominion Industries Limited and Morgan
Products Ltd.
Paul A. Stroup, III (2) 46 Chief Executive Officer of the Company since 1995, President since
1986 1994 and Executive Vice President 1989-1994
Isaiah Tidwell 53 Executive Vice President and Southern/Western Regional Executive of
1995 Wachovia Bank, N.A., Charlotte, NC since 1996, Southern Regional
Executive 1993-1995 and Regional Vice President 1990-1995
</TABLE>
5
<PAGE> 8
The three 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 except Scott C. Lea was elected at the Annual Meeting of
Stockholders on April 18, 1997.
<TABLE>
<CAPTION>
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
<S> <C> <C>
J. W. Disher (2) 64 Private Investor since 1996; Chairman of the Board of the Company
1968 1991-1996, Chief Executive Officer 1990-1995 and President
1988-1994; Director of First Union National Bank
Scott C. Lea (2) 66 Chairman of the Board of the Company since 1996; Private Investor
1994 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.
Robert V. Sisk (2)(3) 62 President of Piedmont Engineering Corp., Charlotte, NC (Industrial
1990 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 and a director of NationsBank and
NationsBank, N.A.
First Union National Bank 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.
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, Weldon H. Johnson, 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 three time during the fiscal year.
6
<PAGE> 9
The Compensation/Stock Option Committee provides overall guidance to the
Company's executive compensation program. The Committee is currently composed of
four members of the Board of Directors: Alan T. Dickson, Chairman, J. W. Disher,
James H. Hance, Jr. and S. Lance Van Every. Richard A. Zimmerman served on the
Committee until his resignation from the Board of Directors on September 9,
1997. 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 incentive plans, which are made
solely by the Committee in order for the grants to satisfy tax and securities
law requirements.
COMPENSATION/STOCK OPTION COMMITTEE REPORT
The Company's philosophy for executive compensation is designed to link
executive pay with the Company's annual and long-term performance and to
attract, motivate and retain excellent people by providing compensation
opportunities that are both competitive and consistent with Company performance.
The compensation program provides for lower base salaries and a significant
portion of compensation that is "at risk." In connection with its restructuring
in 1996, the Company received from its independent consulting firm a
comprehensive review of the Company's compensation programs. The consulting firm
has continued to assist the Company and the Committee in the design of its
executive and other compensation programs.
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, continued
employment and the achievement of a multiple year financial performance goal.
For 1997, the stock based incentives were limited to stock options and
restricted stock awards granted. For 1997, the Board of Directors adopted the
Lance, Inc. Annual Corporate Performance Incentive Plan for Officers for 1997
(the Annual Incentive Plan) as recommended by the Committee to reward
advancement of annual financial performance goals and the Lance, Inc. Long-Term
Incentive Plan for Officers for 1997 (the Long-Term Plan) pursuant to the
Company's 1997 Incentive Equity Plan, which was approved by the stockholders in
1997.
In addition during 1997, in consultation with its compensation consultants,
the Committee designed Compensation and Benefits Assurance Agreements and
Executive Severance Agreements for the Chief Executive Officer and six other
senior executives of the Company, except for G. R. Melvin. The Compensation and
Benefits Assurance Agreements are designed to provide the senior executives of
the Company assurance of compensation and benefits in the event of a change in
control of the Company and termination of their employment so they can
concentrate their full efforts and attention on the operation and management of
the Company, the protection of stockholders and the creation of stockholder
value in the event of a potential change in ownership. The Executive Severance
Agreements are designed to provide salary continuation benefits for a specified
term for the senior executive officers in the event of termination of their
employment. The Agreement with Paul A. Stroup, III contains differing provisions
as he agreed at the same time to the termination of his prior Executive
Employment Agreement. The Agreements were recommended by the Committee, approved
by the Board of Directors and executed in November 1997. The Agreements were not
provided in response to any particular potential change in ownership of the
Company and are similar to those provided by many public companies. The
Compensation and Benefits Assurance Agreements and the Executive Severance
Agreements are described under "Executive Officer Compensation" below.
In 1997 and prior years, the Committee 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 1997, the Board accepted and approved
the recommendations of the Committee. Those who served during the fiscal year as
Chief Executive Officer and the four other highest paid executive officers are
collectively referred to as the named Executive Officers. The Committee also
takes into account the fact that each of the named Executive Officers, except
for Mr. Melvin, has entered into a Compensation and Benefits Assurance Agreement
and an Executive Severance Agreement, each described above, and that Mr. Melvin
has entered into an Executive Employment Agreement described below.
In considering base salaries for 1997, the Committee considered the
compensation review, participation in the Annual Incentive Plan and
participation in the Long-Term Plan, including the grant of stock options and
restricted
7
<PAGE> 10
stock awards. The salaries of the named Executive Officers, excluding the Chief
Executive Officer, were increased an average of 4.0 % for 1997 over 1996.
With respect to the Chief Executive Officer during 1997, Mr. Stroup, the
Committee did not make special note of performance factors but considered the
same factors as it considered for all officers of the Company.
Mr. Stroup's salary rate was increased 5.7% for 1997 over 1996.
The purposes of the Annual Incentive Plan and the Long-Term Plan include
the following:
- motivate behavior that leads to the successful achievement of
specific financial and operations goals that support the Company's
stated business strategy
- emphasize the link between performance and rewards for meeting
predetermined specific goals
- improve the competitiveness of total cash pay opportunities
- continue to help establish performance orientation at the Company
and communicate that greater responsibilities creates greater
rewards because more pay is "at risk"
- aligning the interests of executives and senior managers with those
of stockholders by linking a substantial portion of pay to the price
of the Company's Common Stock
- provide a way to attract and retain executives and senior managers
who are critical to the Company's future success
- increase total pay for executives and senior managers to competitive
levels
- keep fixed compensation costs low.
Under the Annual Incentive Plan, cash bonus awards are paid as a
percentage of base salary depending on the attainment of specified financial
performance goals as to 75% of the bonus, with the balance determined at the
discretion of the Committee based on the executive meeting individual
objectives. In 1997, there were ten participants in the Annual Incentive Plan,
including the Chief Executive Officer and the named Executive Officers. For
1997, the participants in the Annual Incentive Plan received cash awards based
75% on meeting specified financial performance goals measured in earnings per
share of the Company's Common Stock, with 25% based on meeting individual
objectives. In addition, there were approximately 332 executive and senior
manager participants in a substantially similar Annual Corporate Performance
Incentive Plan who received cash awards. Substantially all of the employees of
the Company participate in incentive compensation plans.
Under the Long-Term Plan, the long-term incentives awarded to executives to
date are stock options and restricted stock awards. Stock options provide
executives with the opportunity to buy and maintain an equity interest in the
Company and share the appreciation in the value of the Company's Common Stock.
During 1997, the Committee awarded stock options for an aggregate of 39,350
shares and 10,400 shares of restricted stock to the named Executive Officers,
excluding the Chief Executive Officer. Mr. Stroup was awarded stock options to
purchase 18,300 shares and 4,850 restricted shares. In addition, the Committee
awarded stock options totaling 241,750 shares to approximately 100 other
executives and senior managers and eight of these executives and senior managers
received an aggregate of 14,950 restricted shares.
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, Jr. and S. Lance Van Every.
8
<PAGE> 11
COMPENSATION/STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. W. Disher, who retired as Chief Executive Officer of the Company in
April 1995, was appointed to the Compensation/Stock Option Committee after his
retirement.
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. 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 one more year 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 in the Executive Employment Agreements 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
(the Director Plan). Each non-employee director receives an initial option grant
to purchase 2,500 shares of Common Stock upon becoming a director (exercisable
after six months of service). The Director Plan also provides for annual option
grants on every May 1 to each non-employee director continuing in office (other
than the initial year) which become exercisable after one year's service. In
1996, each non-employee director continuing in office was awarded an option to
purchase 1,000 shares of Common Stock. In 1997, the Board of Directors amended
the Director Plan to increase the annual option grant to 4,000 shares of Common
Stock. Each current non-employee director (including Mr. Lea) has been granted
options to purchase 7,500 shares of Common Stock, except Weldon H. Johnson who
has been granted options to purchase 2,500 shares. Each current non-employee
director will be granted an option to purchase 4,000 shares of Common Stock on
May 1, 1998 at an option price equal to the fair market value of the Common
Stock on such date, subject to stockholder approval of the increase in the
number of shares of Common stock available under the Director Plan. See
"Amendment to 1995 Nonqualified Stock Option Plan for Non-Employee Directors"
below. If the stockholders do not approve the amendment to the Directors Plan,
each award will be reduced to the proportionate number of shares remaining
available under the Director Plan.
9
<PAGE> 12
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 26, 1992 and
ending December 27, 1997 covering the Company's five fiscal years ended December
25, 1993, December 31, 1994, December 30, 1995, December 28, 1996 and December
27, 1997.
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
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Company 100 85.558 83.005 80.903 92.836 142.93
Nasdaq Stock Market 100 113.764 112.537 161.298 198.632 234.8
Peer Group 100 129.189 109.681 109.729 114.333 134.671
</TABLE>
This graph assumes that $100 was invested in the Company's Common Stock on
December 26, 1992, in The Nasdaq Stock Market (U.S. Companies) Index and in the
Peer Group, which consists of Golden Enterprises, Inc., Grist Mill Company and
J&J Snack Foods Corp., and that dividends were reinvested.
10
<PAGE> 13
EXECUTIVE OFFICER COMPENSATION
The table below shows the compensation paid or accrued by the Company, for
the three fiscal years ended December 27, 1997, December 28, 1996 and December
30, 1995 to or for the account of each of those persons who served during the
1997 fiscal year as the Chief Executive Officer, the Company's four other
highest paid executive officers (collectively, the named Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL FISCAL COMPENSATION RESTRICTED STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (1) AWARD(S) ($)(2) OPTIONS (#SH) ($) (3)
- ---------- ------ ---------- --------- ------------ ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Stroup, III 1997 237,692 189,000 -- 89,119 18,300 22,165
President and 1996 227,032 181,100 -- 0 29,200 11,117
Chief Executive Officer 1995 214,933 0 -- 0 0 9,852
G. R. Melvin(4) 1997 173,856 100,400 -- 48,694 10,000 13,627
Senior Vice President 1996 170,768 99,000 -- 0 13,500 7,488
1995 168,368 0 -- 0 0 6,726
Peter M. Duggan 1997 176,914 96,200 -- 48,694 10,050 13,611
Senior Vice President 1996 171,600 99,500 -- 0 12,700 7,084
1995 156,181 0 -- 0 3,000 9,071
B. Clyde Preslar (5) 1997 160,748 103,000 -- 46,856 9,650 5,286
Vice President and 1996 111,220 95,700 80,428 0 8,000 20,000
Treasurer
Richard G. Tucker (5) 1997 157,746 104,400 -- 46,856 9,650 5,069
Vice President 1996 97,158 57,000 21,882 0 6,000 --
</TABLE>
- --------------------
(1) No named Executive Officer has received personal benefits during the
listed years in excess of 10% of the total of annual salary and bonus,
except Mr. Preslar and Mr. Tucker who received $75,343 and $21,882,
respectively, in 1996 for moving expenses in connection with their
employment by the Company.
(2) Amount represents the dollar value of shares of restricted stock and
performance restricted stock issued to the named Executive Officers as of
the date of the award. At December 27, 1997, the market value and holdings
for each named Executive Officer was as follows: Mr. Stroup $126,100
(2,000 restricted shares and 2,850 performance restricted shares); Mr.
Melvin $68,900 (1,100 restricted shares and 1,550 performance restricted
shares); Mr. Duggan $68,900 (1,100 restricted shares and 1,550 performance
restricted shares); Mr. Preslar $66,300 (1,050 restricted shares and 1,500
performance restricted shares) and Mr. Tucker $66,300 (1,050 restricted
shares and 1,500 performance restricted shares). Vesting of 50% of the
restricted shares occurs on each of the second and fourth anniversaries of
the award date if still employed by the Company. Vesting of the
performance restricted shares occurs on the third anniversary of the award
date if the Company achieves specified financial performance goal for the
three fiscal years ending December 25, 1999. Dividends are payable on all
restricted shares and performance restricted shares.
(3) For fiscal year 1997, includes amounts contributed by the Company under
the Company's Profit-Sharing Retirement Plan as follows: Mr. Stroup
$8,020, Mr. Melvin $8,137, Mr. Duggan $7,816,
11
<PAGE> 14
Mr. Preslar $4,224 and Mr. Tucker $4,234; amounts contributed by the
Company under the Company's Employee Stock Purchase Plan as follows:
Mr. Stroup $1,560, Mr. Duggan $130, Mr. Preslar $1,062 and Mr. Tucker
$835 and amounts contributed by the Company under the Company's Benefit
Restoration Plan as follows: Mr. Stroup $12,585, Mr. Melvin $5,490 and
Mr. Duggan $5,665.
(4) Mr. Melvin retired in January 1998.
(5) Mr. Preslar and Mr. Tucker were first appointed officers of the Company in
1996.
In 1997, each of the named Executive Officers, except Mr. Melvin, entered
into a Compensation and Benefits Assurance Agreement (a Benefits Agreement) and
an Executive Severance Agreement (a Severance Agreement) with the Company.
In prior years, Messrs. Stroup and Melvin had entered into an Executive
Employment Agreement with the Company, described below. In connection with the
execution of a Benefits Agreement and a Severance Agreement in 1997, Mr. Stroup
agreed to the termination of his Executive Employment Agreement.
The Benefits Agreements for the named Executive Officers are substantially
identical except that the initial term for Mr. Stroup extends until December 31,
2011, the year in which he reaches age 60, which was the same end of term date
under his prior Executive Employment Agreement. The Benefits Agreements provide
for the payment of specified benefits in the event of a Change in Control, as
defined. A Change in Control for the purposes of a Benefits Agreement and a
Severance Agreement means the acquisition of 25% or more of the voting
securities of the Company by a person or group other than members of the Van
Every Family which consists of the descendants of Salem A. Van Every, Sr. and
their spouses; a change in the majority of the Board of Directors of the Company
over a two year period or approval by the stockholders of the Company of a sale
of substantially all of the assets to an entity of which current Company
stockholders own less than 60% of voting control, liquidation of the Company or
a merger, consolidation or reorganization after which current Company
stockholders own less than 60% of voting control. Benefits are payable under a
Benefits Agreement only in the event of a Change in Control and one of the
following occurring within three years thereafter: involuntary termination of
the executive without Cause, as defined; voluntary termination for Good Reason,
as defined, including demotion, relocation or pay reduction; voluntary
termination for any reason during the 13th month after the Change in Control or
breach of the Benefits Agreement by the Company or a successor to the Company.
In such event, the executive would receive accrued compensation and benefits
including the current year's bonus; an amount equal to three times base salary
plus three times the greater of the prior year's actual or current year's target
bonus; an amount equal to the Profit Sharing Plan contribution based on the base
salary and target bonus payment; up to 36 months of health insurance coverage,
outplacement services and an amount equal to any Federal excise taxes payable by
the executive. The initial term for the named Executive Officers under a
Benefits Agreement is three years except for Mr. Stroup, as described above.
After the initial term, each Benefit Agreement automatically renews for
successive one year terms and may be terminated by the Company on one year's
notice prior to the end of an initial or renewal term. In the event of a Change
in Control, there is an automatic three year extension.
Each of the named Executive Officers, except for Mr. Melvin, entered
into a Severance Agreement. The provisions of the Severance Agreements are
identical for each of the named Executive Officers except for Mr. Stroup. In the
event of involuntary termination of the executive without Cause, as defined, and
prior to a Change in Control, as defined, the executive will receive accrued
compensation and benefits including current year's bonus plus an amount equal to
base salary plus the current year's target bonus. The initial term for a
Severance Agreement is three years with automatic renewals for successive one
year terms. Each Severance Agreement may be terminated on one year's notice
prior to the end of an initial or renewal term.
In connection with the agreement by Mr. Stroup to terminate his Executive
Employment Agreement, his Severance Agreement provides for the continuation of
supplement retirement benefits similar to those under his prior Executive
Employment Agreement. His Severance Agreement provides for supplemental
12
<PAGE> 15
retirement benefits equal to five times base salary payable over 15 years after
retirement or until age 75, if earlier. He may elect a lump sum equal to present
value. There is a death benefit equal to 75% of the remaining retirement
benefit. He is eligible for retirement benefits at any time after December 31,
2011 or upon death or Disability, as defined. In the event of a Change in
Control, as defined, he receives a lump sum equal to the present value of the
retirement benefit on termination of employment following a Change in Control.
He would also receive a severance benefit upon involuntary termination without
Cause, as defined, prior to the earlier of a Change in Control or December 31,
2011. Severance benefits for Mr. Stroup consists of accrued compensation and
benefits including current year's bonus; two and one-half times the highest base
salary paid to him plus current year's target bonus, provided that the amount is
reduced for severance after age 57 1/2. There is also an immediate commencement
of the supplemental retirement benefit, transfer of his Company car to him,
payment for unexercised vested stock options, health and medical insurance to
age 60 and out placement services.
Messrs. Stroup and Melvin have executed an Executive Employment Agreement
with the Company. However, the Executive Employment Agreement with Mr. Stroup
was terminated in 1997. The provisions of 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 13 installments each year over the period between the date of actual
retirement and the earlier of the end of the Company's fiscal year in which the
executive reaches the age of 75, or the end of the fiscal year in which the 15th
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 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. Melvin retired in January 1998 and began
receiving supplemental retirement payments then.
Mr. Preslar's separate salary continuation agreement with the Company
was terminated upon execution of a Severance Agreement.
13
<PAGE> 16
The table below shows the individual grants to the named Executive
Officers of stock options during the fiscal year ended December 27, 1997.
OPTION GRANTS IN THE 1997 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 ($)(1)
- ---- ------------- ------------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Paul A. Stroup, III 18,300 6.1 18.375 April 17, 2007 56,730
G. R. Melvin 10,000 3.3 18.375 April 17, 2007 31,000
Peter M. Duggan 10,050 3.3 18.375 April 17, 2007 31,155
B. Clyde Preslar 9,650 3.2 18.375 April 17, 2007 29,915
Richard G. Tucker 9,650 3.2 18.375 April 17, 2007 29,915
</TABLE>
(1) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
arbitrary assumptions as follows: options to be exercised in ten years,
stock price volatility at .186, annual dividend yield of 5.22% and a
risk-free interest rate of 7.01%. No downward adjustments are made to the
resulting grant-date option values to account for potential forfeitures or
non-transferability of the options. The actual value of the options
depends upon the actual performance of the Company's stock during the
applicable period.
The table below shows, on an aggregated basis, each exercise of stock
options or tandem SARs during the fiscal year ended December 27, 1997 by each of
the named Executive Officers and the 1997 fiscal year-end value of unexercised
options and SARs.
AGGREGATED OPTION/SAR EXERCISES IN THE 1997 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNEXERCISED UNDERLYING UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
AT FY-END (#) OPTIONS/SARS
AT FY-END ($)
SHARES ACQUIRED EXERCISABLE/ UNEXERCISABLE
NAME ON EXERCISE (#SH) VALUE REALIZED ($) UNEXERCISABLE EXERCISABLE/
- ---- ---------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C>
Paul A. Stroup, III 0 0 26,200/40,200 163,166/362,644
G. R. Melvin 0 0 12,975/20,125 67,758/103,148
Peter M. Duggan 0 0 6,175/19,575 57,845/173,667
B. Clyde Preslar 0 0 2,000/15,650 18,750/129,831
Richard G. Tucker 2,000 18,438 1,500/14,150 14,063/115,769
</TABLE>
AMENDMENT TO 1995 NONQUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Company maintains the Lance, Inc. 1995 Nonqualified Stock Option Plan
for Non-employee Directors (the Director Plan). In January 1998, the Board of
Directors adopted an amendment to the Director Plan to increase by 200,000 the
number of shares of Common Stock available for the grant of options (the Plan
Amendment). The Plan Amendment will be effective upon approval by the
stockholders. If the Plan Amendment is not approved by stockholders, the
Director Plan will continue in effect without the additional number of available
shares and under its current terms. However, the annual option grants to
non-employee directors on May 1, 1998 will exhaust the remaining shares
available under the Director Plan.
14
<PAGE> 17
Under the Director Plan, as adopted by the Company's stockholders on April
21, 1995, 100,000 shares of Common Stock were authorized for issuance in
connection with the grant of options to purchase shares of Common Stock to
non-employee directors. The only persons eligible to receive options under the
Director Plan are Directors of the Company who are not regular employees on the
date of grant of the option. There are currently 10 Directors, including the
current nominees, that are eligible to participate in the Director Plan. Each
non-employee director automatically receives an initial option grant to purchase
2,500 shares of Common Stock on the first May 1 after becoming a director
(exercisable after six months of service). The Directors Plan also provides that
each non-employee director continuing in office receives a subsequent annual
option grant on every May 1 thereafter to purchase 4,000 shares of Common Stock
(exercisable after one year of service). On April 18, 1997, the Board of
Directors approved an amendment to the Director Plan to increase the annual
option grant from 1,000 to 4,000 shares of Common Stock. As of February 2, 1998,
options outstanding or previously exercised under the Director Plan covered a
total of 76,000 shares of Common Stock and 24,000 shares remained available for
grant. The annual option grants scheduled for May 1, 1998 will exhaust the
currently available shares of Common Stock. The exercise price of options
granted under the Director Plan will be the fair market value of the Common
Stock on the date of grant. The fair market value of the Company's Common Stock
on March [3], 1998 was $22.625 per share. The Company intends to register the
shares issuable pursuant to the Director Plan under the Securities Act of 1933.
The Board of Directors believes that the proposed increase in the shares
available for issuance of options under the Director Plan is necessary for the
Company to attract, motivate and retain non-employee directors with the desired
experience and ability and to further enhance their identity of interest with
the Company's stockholders. The Board of Directors also believes the
availability of stock options is essential for the Company to compete with other
companies offering similar plans in attracting and retaining experienced and
qualified non-employee directors.
For federal income tax purposes, the optionee will realize no taxable
income when the option is granted. Upon the exercise of an option granted under
the Director Plan, the amount by which the fair market value of the shares
purchased pursuant to such exercise exceeds the option price will be treated as
compensation income received by the optionee. The amount of compensation income
recognized by the optionee is deductible by the Company in the year the income
is recognized. Upon the subsequent disposition of shares received upon the
exercise of an option, generally any amount realized in excess of the optionee's
basis will be taxed as a capital gain and any amount realized which is less than
the optionee's basis will be treated as a capital loss.
Approval of a stock option plan amendment that increases the number of
shares available for issuance pursuant to Options is no longer required by Rule
16b-3 under the Securities Exchange Act of 1934. However, approval of the
Amendment to the Director Plan is being sought in accordance with the
requirements of the Nasdaq Stock Market and Section 162(m) of the Internal
Revenue Code.
The Plan Amendment must be approved by the holders of a plurality of the
shares of Common Stock voting on the proposal at the Annual Meeting, provided
that a quorum is present. Abstentions and broker non-votes are not counted in
determining a plurality. The Board of Directors recommends a vote FOR approval
of the Plan Amendment and proxies solicited by the Board of Directors will be so
voted unless stockholders specify otherwise.
AMENDMENT TO RESTATED CHARTER AUTHORIZING PREFERRED STOCK.
On February 17, 1998, the Board of Directors of the Company approved
resolutions declaring it advisable to amend Paragraph 4 of the Restated Charter
to create a class of Preferred Stock, and directing that the proposed amendment
be submitted to the stockholders for approval at the Annual Meeting. The
proposed amendment provides for the creation of a class of 5,000,000 shares of
Preferred Stock, $1 par value (the Preferred Stock), which would be of the type
commonly known as "blank-check" preferred stock. No change is proposed in the
authorized number of shares of $.83 1/3 par value Common Stock. The full text of
Paragraph 4, as proposed to be amended in the Company's Restated Charter, is set
forth below.
"4. The number of shares the Corporation is authorized to issue is
80,000,000 divided into shares as follows:
15
<PAGE> 18
(a) 5,000,000 shares of Preferred Stock with a par value of $1 per
share, with the Preferred Stock to be issued in such series and with such
preferences, limitations and relative rights as shall be determined from
time to time by the Board of Directors; and
(b) 75,000,000 shares of Common Stock with a par value of $.83-1/3 per
share."
The Board of Directors believes the proposed amendment would provide it
with flexibility in managing the Company's capital structure. The Preferred
Stock could be issued in connection with public offerings or private placements
or other financing transactions, acquisitions, stock dividends, employee stock
plans and for other general corporate purposes. In addition, the Preferred Stock
could be issued in connection with a stockholder rights plan or to prevent or
impede a merger, tender offer or other takeover attempts as described below, if
the Board so determines. The Board has no current plans, arrangements,
agreements or understandings regarding the issuance of any series of Preferred
Stock, should the proposed amendment be approved and adopted. Issuances of
Preferred Stock could be made without further action of the stockholders, unless
such action were required by applicable law or the rules of the The Nasdaq Stock
Market or any other stock exchange on which the Company's securities may then be
listed or traded.
DESCRIPTION OF THE PREFERRED STOCK
The amendment would authorize the Board of Directors, from time to time,
to divide the Preferred Stock into series, to designate each series, and to
determine for each series its respective rights and preferences, including,
without limitation, any of the following: (i) the number of shares in each
series; (ii) the rate of dividends, and whether dividends were cumulative or
have a preference over the Common Stock in right of payment; (ii) the terms and
conditions upon which shares may be redeemed and the redemption price; (iii)
sinking fund provisions for the redemption of shares; (iv) the amount payable in
respect of each share upon a voluntary or involuntary liquidation of the
Company; (v) the terms and conditions upon which shares may be converted into
other securities of the Company, including Common Stock; (vi) limitations and
restrictions on payment of dividends or other distributions on, or redemptions
of, other classes of stock of the Company junior to such series, including the
Common Stock; (vii) conditions and restrictions on the creation of indebtedness
or the issuance of other senior classes of stock; and (viii) voting rights. The
Board of Directors has not fixed and does not believe it advisable at this time
to fix the characteristics for any particular series of Preferred Stock. Each
series of Preferred Stock will have the characteristics stated in articles of
amendment adopted by the Board of Directors prior to issuance of shares of such
series. Such characteristics may affect the voting rights of capital
stockholders as well as funds available for dividends and the distribution of
assets upon liquidation.
All the shares of any one series of the Preferred Stock shall be identical
in all respects. It is not possible to determine the actual effects of the
Preferred Stock on the rights of the stockholders of the Company until the Board
of Directors determines the rights of the holders of a series of the Preferred
Stock. However, such effects might include (i) restrictions on the payment of
dividends to holders of the Common Stock; (ii) dilution of voting power to the
extent that the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power of holders of Common
Stock if the Preferred Stock is convertible into Common Stock; and (iv)
restrictions upon any distribution of assets to the holders of the Common Stock
upon liquidation or dissolution and until the satisfaction of any liquidation
preference granted to the holders of Preferred Stock.
CERTAIN ANTI-TAKEOVER EFFECTS OF THE PROPOSED AMENDMENT
The Board of Directors will make any determination to issue shares of
Preferred Stock based upon its judgment as to the best interests of the
stockholders and the Company. Although the Board of Directors has no present
intention of doing so, it could issue shares of Preferred Stock (within the
limits imposed by applicable law) that could, depending on the terms of such
series, make more difficult or discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or other means. When
in the judgment of the Board of Directors such action would be in the best
interests of the stockholders and the Company, the issuance of shares of
Preferred Stock could be used to create voting or other impediments including a
stockholder rights plan or to discourage persons seeking to gain control of the
Company, for example, by the sale of Preferred Stock to purchasers favorable to
the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of Common Stock, on any merger,
16
<PAGE> 19
sale or exchange of assets by the Company or any other extraordinary corporate
transaction. The existence of the additional authorized shares could have the
effect of discouraging unsolicited takeover attempts. The issuance of new shares
could also be used to dilute the stock ownership of a person or entity seeking
to obtain control of the Company should the Board of Directors consider the
action of such entity or person not to be in the best interests of the
stockholders and the Company. Such issuance of Preferred Stock could also have
the effect of diluting the earnings per share and book value per share of the
Common Stock held by the holders of the Common Stock. In addition to the
potential anti-takeover effects of this proposal, the Company's current Restated
Charter provides for a 75% voting requirement for certain corporate
transactions, including a merger, sale of substantially all of the Company's
assets or dissolution of the Company and the Company's current Bylaws provide
for a staggered Board of Directors.
VOTE REQUIRED FOR APPROVAL
The proposed amendment to the Company's Restated Charter to authorize the
creation of a new class of Preferred Stock will be submitted to stockholders for
their approval at the Annual Meeting. Approval and adoption of the proposed
amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock voting on the matter at the Annual Meeting, provided that
a quorum is present. Abstentions and broker non-votes (shares held in street
name that are not voted on the matter) will not be included in determining the
necessary number of affirmative votes required to approve the proposal.
The Board of Directors has unanimously approved and recommends a vote FOR
approval of the proposed amendment to the Company's Restated Charter and proxies
solicited by the Board of Directors will be so voted unless stockholders specify
otherwise.
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 1998 fiscal year, ending December 26, 1998. This selection
is being presented to the stockholders for their ratification or rejection at
this Annual Meeting.
KPMG Peat Marwick LLP has served as the Company's independent certified
public accountants and has audited 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 and 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 1998 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 1999
Annual Meeting of Stockholders, currently scheduled for April 16, 1999, must be
received by the Company no later than November [21], 1998, in order for the
proposal to be included in the proxy statement and form of proxy for the 1999
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
17
<PAGE> 20
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 27, 1997, all
Section 16(a) filing requirements applicable to its executive officers,
Directors and greater than 10% beneficial owners were complied with, except that
Weldon H. Johnson failed to report one transaction on a Form 4 that was
subsequently reported on a Form 5, Richard G. Tucker failed to report one
transaction on a Form 4 that was subsequently reported on a Form 4, Robert S.
Carles failed to report one transaction on a Form 4 which was subsequently
reported on a Form 5, James C. Melton failed to file a Form 3, Nancy Van Every
McLaurin was three days late filing a Form 5 and Richard A. Zimmerman was nine
days late filing a Form 4.
18
<PAGE> 21
APPENDIX A
[LOGO] LANCE, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD APRIL 17, 1998
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 17, 1998, 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, 3 AND 4. The Board of Directors recommends voting FOR on
each item.
HAS YOUR ADDRESS CHANGED?
- -------------------------
- -------------------------
- -------------------------
(side 2)
1. ELECTION OF DIRECTORS: Nominees are Alan T. Dickson, James H. Hance, Jr.,
Nancy Van Every McLaurin, S. Lance Van Every and Weldon H. Johnson.
[ ] 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 AN AMENDMENT TO THE COMPANY'S 1995 NONQUALIFIED STOCK OPTION
PLAN FOR NON-EMPLOYEE DIRECTORS TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK AUTHORIZED
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED CHARTER TO CREATE A
CLASS OF PREFERRED STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF SELECTION OF KPMG PEAT MARWICK LLP AS AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE> 22
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 reverse of this
card. [ ]
- ---------------------------------- ------------------------------------
Stockholder sign here Date Co-owner sign here Date
<PAGE> 23
Appendix B
LANCE, INC.
1995 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(As amended)
1. PURPOSE. This Plan is intended to provide Directors who are not
employees of the Company a sense of proprietorship and personal involvement in
the development and financial success of the Company and to encourage such
Directors to remain with and to devote their best efforts to the Company.
2. DEFINITIONS. Whenever used in the Plan, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(c) "Common Stock" means the Common Stock, $.83-1/3 par value, of the
Company and any other stock or securities resulting from the adjustment
thereof or substitution therefor as described in Section 8 below.
(d) "Company" means Lance, Inc., a North Carolina corporation, and any
corporation succeeding to the Company's rights and obligations hereunder.
(e) "Director" means a member of the Board of Directors of the Company
who is not a regular employee of the Company or its subsidiaries.
(f) "Disability" means the condition which results when an individual
has become permanently and totally disabled within the meaning of Section
105(d)(4) of the Internal Revenue Code of 1986.
(g) "Fair Market Value", with respect to a share of the Common Stock on
a particular date, shall be (i) if such Common Stock is listed on a
national securities exchange or a foreign securities exchange or traded on
the National Market System, the closing sale price of the Common Stock on
said date on the national securities exchange, the foreign securities
exchange or the National Market System on which the Common Stock is
principally traded, or, if no sales occur on said date, then on the next
preceding date on which there were such sales of Common Stock, or (ii) if
the Common Stock shall not be listed on a national securities exchange or
a foreign securities exchange or traded on the National Market System, the
mean between the closing bid and asked prices last reported by the
National Association of Securities Dealers, Inc. for the over-the-counter
market on said
<PAGE> 24
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 any foreign securities exchange or traded on the National
Market System, the fair market value based on quotations for the Common
Stock by market makers or other securities dealers as determined by the
Board of Directors in such manner as the Board may deem reasonable.
(h) "Option" means a stock option granted pursuant to this Plan.
(i) "Optionee" means the person to whom an Option is granted.
(j) "Option Price" is defined in Section 6.
(k) "Plan" means this 1995 Nonqualified Stock Option Plan for
Non-Employee Directors, as in effect from time to time.
(l) "Stock Option Agreement" means the written agreement between an
Optionee and the Company evidencing the grant of an Option under the Plan
and setting forth or incorporating the terms and conditions thereof.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors. The Board shall have all of the powers necessary to enable it
properly to carry out its duties under the Plan, including but not limited to
the power and duty to construe and interpret the Plan and to determine all
questions that shall arise under the Plan, which interpretations and
determinations shall be conclusive and binding upon all persons. Subject to the
express provisions of the Plan, the Board may establish from time to time such
regulations, provisions and procedures which in its opinion may be advisable in
the administration of the Plan.
Notwithstanding the foregoing or any other provision of this Plan to the
contrary, no discretion concerning decisions regarding the Plan shall be
afforded to a person who is not a "disinterested person" (as defined in the
rules and regulations of the Securities and Exchange Commission under Section 16
of the Act, as in effect from time to time). In the event that it is necessary
for the proper administration of the Plan to exercise any such discretion, and
the Board is so precluded from exercising such discretion, the Board may
delegate any authority to exercise such discretion to a person or committee of
persons, each of whom is a "disinterested person" as so defined.
4. ELIGIBILITY; OPTION GRANTS. Each Director serving on May 1 of each
calendar year beginning May 1, 1995 shall automatically be granted an option to
purchase shares of the Common Stock on May 1 of such calendar year. The first
such Option for a Director shall be for 2,500 shares and each subsequent Option
shall be for 4,000 shares with the number of shares being subject to adjustment
or substitution as provided in Section 8 hereof; provided, however, that such
automatic grants shall be made pro rata to all Directors if on the date of a
grant there shall not be a sufficient number of shares of Common Stock available
under the Plan to make all such grants.
<PAGE> 25
5. SHARES AVAILABLE FOR OPTION. The Board of Directors shall reserve for
the purposes of the Plan, and by adoption of the Plan does hereby reserve, out
of the authorized but unissued Common Stock, a total of 300,000 shares of Common
Stock of the Company, subject to adjustment or substitution as provided in
Section 8 hereof. In the event that an Option expires or is terminated
unexercised as to any shares covered thereby, such shares shall not thereafter
be available for the granting of Options under the Plan and the reserve for such
shares shall be terminated.
6. OPTION PRICE. The price at which each share of Common Stock, subject to
adjustment as provided in Section 8 hereof, may be purchased upon the exercise
of an Option (the "Option Price") shall be the Fair Market Value of the shares
of Common Stock subject to the Option on the date such Option is granted.
7. EXERCISE OF OPTIONS.
(a) Each Option by its terms shall require the Optionee granted such
Option to remain available to serve as a Director of the Company for one
year from the date of the grant of such Option before the right to
exercise any part of such Option will accrue; provided, however, the first
such Option granted to a Director by its terms shall require the Optionee
to remain available to serve as a Director of the Company for only six
months from the date of grant of such Option before the right to exercise
any part of such Option will accrue. The Optionee may thereafter exercise
any or all of such option until the expiration or termination of the
option; provided, that not less than 100 shares may be purchased at any
one time unless the number of shares purchased is the total number at such
time purchasable under the Option. Subject to earlier termination as
provided herein, all Options granted shall expire ten years from the date
of grant thereof.
(b) If an Optionee shall cease to be a Director otherwise than by
such Optionee's death or Disability, then, subject to Subsection 7(a)
hereof, the Option shall be exercisable at any time prior to the earlier
of (i) the expiration date of such Option or (ii) that date which is three
months from the date such Optionee ceases to be a Director, such three
month period to include the date on which such termination occurs. If an
Optionee ceases to be a Director as a result of such Optionee's death or
Disability, then, subject to Subsection 7(a) hereof, the Option shall be
exercisable at any time prior to the earlier of (i) the expiration date of
such option or (ii) that date which is one year from the date such
Optionee ceases to be a Director.
(c) Each Option by its terms shall not be transferable by the
Optionee otherwise than by will, or if the Optionee dies intestate, by the
laws of descent and distribution, and such Option shall be exercisable
during such Optionee's lifetime only by such Optionee. In the event of the
death of an Optionee, then such Optionee's Options shall be exercisable to
the extent herein provided by the executor or personal representative of
the Optionee's estate or by any person who acquired the right to exercise
such Option by bequest under the Optionee's will or by inheritance.
<PAGE> 26
(d) Each Option shall be confirmed by a Stock Option Agreement.
(e) The Option Price for each share of Common Stock purchased
pursuant to the exercise of each Option shall, at the time of the exercise
of the Option, be paid in full in cash or equivalent. An Option shall be
deemed exercised only when written notice of such exercise, together with
payment of the Option Price, is received from the Optionee by the Company
at its principal office. No Optionee shall have any rights as a
shareholder of the Company with respect to Common Stock issuable pursuant
to such Optionee's Option until such Option is duly exercised.
(f) To the extent that an Option is not exercised within the period
of time prescribed therefor as set forth in the Plan, the Option shall
lapse and all rights of the Optionee thereunder shall terminate.
8. ADJUSTMENT OF NUMBER OF SHARES. In the event that a dividend shall be
declared on the Common Stock payable in shares of the Common Stock, the number
of shares of Common Stock subject to grant to each Director each calendar year,
the number of shares then subject to any Option and the number of shares
reserved for issuance pursuant to the Plan 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 shareholders
entitled to receive such stock dividend. In the event that the outstanding
shares of Common Stock generally 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, or changed into or exchanged for cash or property or
the right to receive cash or property (but not including any dividend payable in
cash or property other than a liquidating distribution), 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 grant to each Director each calendar year and subject to any Option,
and for each share of Common Stock reserved for issuance pursuant to the Plan,
the number and kind of shares of stock or other securities or cash or property
or right to receive cash or property into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged. In
the case of any such substitution or adjustment as provided for in this Section
8, the Option Price for each share covered thereby prior to such substitution or
adjustment shall be the Option Price for all shares of stock or other securities
or cash or property or right to receive cash or property which shall have been
substituted for such share or to which such share shall have been adjusted
pursuant to this Section 8. No adjustment or substitution provided for in this
Section 8 shall require the Company in any Stock Option Agreement to issue a
fractional share and the total substitution or adjustment with respect to each
Stock Option Agreement shall be limited accordingly.
9. AMENDMENT OF PLAN. The Board of Directors shall have the right to
amend, suspend or terminate the Plan at any time; provided that, except as and
to the extent authorized and permitted by Section 8 above, (a) no amendment,
suspension or termination shall adversely affect the rights of any Optionee as
to any outstanding Option without the consent of such Optionee, subject to any
limitation on such rights set forth in the Plan or such Optionee's Stock Option
<PAGE> 27
Agreement except for any amendment the Board deems necessary to preserve or
provide exemptions from the applicability of Section 16(b) of the Act to the
grant, lapse, disposition, cancellation or exercise of Options; and (b) no
amendment relating to the determination of the Optionees or of the grant dates
or of the number of Options granted to any Optionee, or of the requirement that
no discretion concerning decisions regarding the Plan shall be afforded to a
person who is not a "disinterested person," shall be made more than once every
six months, other than to comport with changes in the Internal Revenue Code of
1986 or the rules thereunder.
10. RESALES OF SHARES. The Company may impose such restrictions on the
sale or other disposition of shares issued pursuant to the exercise of Options
as the Board deems necessary to comply with applicable securities laws.
Certificates for shares issued upon the exercise of Options may bear such
legends as the Company deems necessary to give notice of such restrictions.
11. COMPLIANCE WITH LAW AND OTHER CONDITIONS. No shares shall be issued
pursuant to the exercise of any Option prior to compliance by the Company, to
the satisfaction of its counsel, with any applicable laws. The Company shall not
be obligated to (but may in its discretion) take any action under applicable
federal or state securities laws (including registration or qualification of the
Plan, the Options or the Common Stock) necessary for compliance therewith in
order to permit the issuance of shares upon the exercise of Options or the
immediate resale thereof by Optionees, except for actions (other than
registration or qualification) that may be taken by the Company without
unreasonable effort or expense and without the incurrence of any material
exposure to liability.
12. NONQUALIFIED OPTIONS. Options granted under the Plan will not be
treated as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986.
13. EFFECTIVE DATE. The Plan shall be effective on February 21, 1995,
subject to approval of the Plan by a plurality of the shares voting on the
approval of the Plan at the 1995 Annual Meeting of Stockholders. Until such
approval shall be obtained, no Options shall be exercisable and if such approval
shall not be obtained prior to the completion of the 1995 Annual Meeting of
Stockholders, this Plan and all Options granted hereunder shall be void.
