<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 20, 2000
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 Thursday, April 20, 2000, at 2:00
p.m., local time, for the purpose of considering and acting upon the following:
1. The election of four Directors.
2. A proposal to ratify the selection of KPMG LLP as independent public
accountants for fiscal year 2000.
3. A proposal to approve an amendment to the Company's 1997 Incentive
Equity Plan to increase the number of shares of Common Stock
authorized by 1,500,000 to 3,000,000.
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 March 1, 2000 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 17, 2000
<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
Thursday, April 20, 2000. This Proxy Statement and accompanying Proxy are first
being sent to the stockholders of the Company on or about March 17, 2000.
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 the accompanying 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 Common Stock of the Company held by them of record at the
close of business on March 1, 2000, 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 March
1, 2000 was 28,960,647.
<PAGE> 4
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
At February 1, 2000, 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:
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF AND NATURE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING (1)
- ------------------- -------------------- ----------------
Nan Davis Van Every 1,843,977 (2) 6.3%
6001 Pelican Bay Boulevard
Naples, FL 33963
S. Lance Van Every 2,150,622 (3) 7.4%
4010 Seminole Court
Charlotte, NC 28210
- --------------------
(1) Based on 29,172,397 shares outstanding on February 1, 2000 plus options
held by such person that are currently exercisable or exercisable within 60
days.
(2) Includes 154,635 shares subject to options currently exercisable to buy
shares owned by S. Lance Van Every. Includes 1,597,743 shares held in trust
as to which Mrs. Van Every will acquire sole power to vote and dispose on
April 30, 2000 of which 1,289,245 shares are held in a trust as to which S.
Lance Van Every currently has sole power to vote and dispose.
(3) Includes 66,500 shares subject to options currently exercisable. Mr. Van
Every had sole power to vote and dispose of all of these shares, except for
231,669 shares 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, 2000, approximately 11,500,000 shares
of the Common Stock of the Company (approximately 39% 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 90 Van Every family stockholders, including stockholders who are
minors.
The following table sets forth, as of February 1, 2000, 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.
NUMBER OF SHARES PERCENT OF
AND NATURE OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING (2)
- ------------------------ ------------------------ ---------------
Alan T. Dickson 50,700 (3) *
J.W. Disher 33,685 (4) *
1,409,292 (5) 4.8%
James H. Hance, Jr. 13,500 (6) *
William R. Holland 13,500 (7) *
Weldon H. Johnson 8,500 (8) *
Scott C. Lea 23,500 (9) *
Nancy Van Every McLaurin 960,888 (10) 3.3%
Wilbur J. Prezzano 2,500 (11) *
2
<PAGE> 5
NUMBER OF SHARES PERCENT OF
AND NATURE OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OUTSTANDING (2)
- ------------------------ ------------------------ ---------------
Robert V. Sisk 247,800 (12) *
Paul A. Stroup, III 88,123 (13) *
1,409,292 (5) 4.8%
Isaiah Tidwell 12,000 (7) *
S. Lance Van Every 2,150,622 (14) 7.4%
B. Clyde Preslar 32,053 (15) *
Dominic J. Sidari 10,900 (16) *
Richard G. Tucker 66,142 (17) *
Gregory M. Venner 15,075 (18) *
Directors and executive officers 5,230,414 (19) 17.7%
as a group (22 persons)
- --------------------
* 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,
2000.
(2) Based on 29,172,397 shares outstanding on February 1, 2000 plus options
held by such person that are currently exercisable or exercisable within
60 days.
(3) Includes 11,500 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 Bank of America, N.A., a
subsidiary of Bank of America Corporation (Bank of America), are
co-trustees.
(4) Includes 11,500 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, which holds sole voting and dispositive power over such
shares, and Bank of America, N.A. is trustee.
(6) Includes 11,500 shares subject to exercisable options but does not include
shares held by Bank of America, or its subsidiaries, of which Mr. Hance is
Vice Chairman and Chief Financial Officer.
(7) Includes 11,500 shares subject to exercisable options.
(8) Includes 8,000 shares subject to exercisable options.
(9) Includes 12,000 shares held by a revocable trust of which Mr. Lea is the
grantor and beneficiary and 11,500 shares subject to exercisable options.
(10) Includes 11,500 shares subject to exercisable options and 39,788 shares
held by Mrs. McLaurin as custodian for her children or by her children who
reside in the same household.
(11) Includes 2,500 shares subject to exercisable options.
(12) Includes 11,500 shares subject to exercisable options and 236,242 shares
held by Mr. Sisk's wife.
3
<PAGE> 6
(13) Includes 52,238 shares subject to exercisable options, 589 shares held by
Mr. Stroup's wife and 14,550 shares of restricted stock.
(14) Includes 66,500 shares subject to options currently exercisable. Mr. Van
Every had sole power to vote and dispose of all of these shares, except
for 231,669 shares as to which he had shared power to vote and dispose.
(15) Includes 17,100 shares subject to exercisable options and 7,875 shares of
restricted stock.
(16) Includes 5,750 shares subject to exercisable options and 4,650 shares of
restricted stock.
(17) Includes 16,638 shares subject to exercisable options and 3,275 shares of
restricted stock.
(18) Includes 5,750 shares subject to exercisable options and 2,750 shares of
restricted stock.
(19) Includes 315,876 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
Bank of America, N.A. is trustee and 51,000 shares of restricted stock.
Does not include shares held by Bank of America (other than shares held by
Bank of America, N.A. as trustee of the Foundation) of which Mr. Hance is
Vice Chairman and Chief Financial Officer and Mr. Dickson is a director.
ELECTION OF DIRECTORS
At the meeting, four Directors will be elected to serve until the Annual
Meeting of Stockholders in 2003. 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.
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 four nominees
including such substitutes as shall be designated by the Board of Directors.
The 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 2000, at the Annual Meeting of Stockholders held April 18, 1997,
except Weldon H. Johnson was elected at the Annual Meeting of Stockholders on
April 17, 1998.
They are nominees for election to a term expiring in 2003.
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
William R. Holland (2) 61 Chairman and Chief Executive Officer of
1993 United Dominion Industries Limited,
Charlotte, NC (Diversified manufacturing
company) since 1986; Director of United
Dominion Industries Limited and The BF
Goodrich Company
Weldon H. Johnson 62 Private investor since 1997; Senior Vice
1997 President of The Coca-Cola Company, and
President Coca-Cola Latin America Group
1987-1996; Director of NorAm Energy Corp.
and Panamerican Beverages, Inc.
Paul A. Stroup, III (2) 48 Chairman of the Board of the Company since
1986 1999, Chief Executive Officer of the
Company since 1995, President since 1994
and Executive Vice President 1989-1994;
Member, Regional Board of Wachovia Bank,
N.A.
4
<PAGE> 7
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
Isaiah Tidwell 55 President, Georgia Banking - Wachovia Bank,
1995 N.A., Atlanta, GA since 1999; Executive Vice
President and Southern/Western Regional
Executive of Wachovia Bank, N.A., 1996-1999
and Southern Regional Executive 1993-1995;
Director of Ruddick Corporation
The four members of the Board of Directors listed below were elected to
their current terms, which expire in 2002, at the Annual Meeting of Stockholders
held on April 16, 1999.
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
J. W. Disher (2) 66 Private Investor since 1996; Chairman of the
1968 Board of the Company 1991-1996 and Chief
Executive Officer 1990-1995
Scott C. Lea (2) 68 Private Investor since 1992; Chairman of the
1994 Board of the Company 1996-1999; 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.
Wilbur J. Prezzano 59 Private Investor since 1997; Vice Chairman
1998 of the Board of Directors of Eastman Kodak,
Inc., Rochester, NY 1996-1997 and Chairman
of its Greater China Region 1994-1997;
Director of Canada Trust and Roper
Industries, Inc.
Robert V. Sisk (2)(3) 64 President of Piedmont Engineering Corp.,
1990 Charlotte, NC (Industrial refrigeration
systems) since 1965
The four members of the Board of Directors listed below were elected to
their current terms, which expire in 2001, at the Annual Meeting of Stockholders
held April 17, 1998.
NAME AND DIRECTOR SINCE (1) AGE INFORMATION ABOUT NOMINEES AND DIRECTORS
- --------------------------- --- ----------------------------------------
Alan T. Dickson (2) 68 Chairman of the Board and Chief Executive
1983 Officer of Ruddick Corporation, Charlotte,
NC (Diversified holding company) since 1994;
Director of Ruddick Corporation, Bank of
America, Sonoco Products Company and Bassett
Furniture Industries, Inc.
James H. Hance, Jr. 55 Vice Chairman of Bank of America,
1995 Charlotte, NC since 1993 and Chief
Financial Officer since 1988; Director of
Caraustar Industries, Inc., Family Dollar
Stores, Inc., Summit Properties, Inc. and
Bank of America
Nancy Van Every McLaurin (3) 55 Private investor for more than the past five
1995 years
S. Lance Van Every (3) 52 Private investor for more than the past five
1990 years
- ---------------------
(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.
5
<PAGE> 8
Bank of America, N.A. provided a line of credit to the Company which was
replaced by a $60 million revolving credit facility under which Bank of America,
N.A., Wachovia Bank, N.A. and one other bank are lenders under which $32.5
million was outstanding on March 1, 2000. Bank of America, N.A. is also party to
a Financing and Share Purchase Agreement with the Company pursuant to which the
Company must pay interest semi-annually and repay the principal balance of
Canadian $50 million on August 14, 2005. Also, a subsidiary of Bank of America
provides securities brokerage services to the Company for which the Company pays
Bank of America's standard fees. Mr. Dickson is a director of Bank of America
and Mr. Hance is the Vice Chairman and Chief Financial Officer of Bank of
America. Mr. Tidwell is President, Georgia Banking of Wachovia Bank, N.A.
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.
Mr. Tidwell is a Director 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 all Committees on which he or she served.
The Audit Committee is composed of Robert V. Sisk, Chairman, James H.
Hance, Jr., Weldon H. Johnson, Scott C. Lea, Nancy Van Every McLaurin, Wilbur J.
Prezzano 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.
The Compensation/Stock Option Committee provides overall guidance to the
Company's compensation and benefit programs. The Committee is currently composed
of seven members of the Board of Directors: Alan T. Dickson, Chairman, J. W.
Disher, James H. Hance, Jr., William R. Holland, Weldon H. Johnson, Scott C. Lea
and S. Lance Van Every. The Committee met three times during the fiscal year.
The Committee's recommendations regarding the compensation 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 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 an independent consulting firm a
comprehensive review of the Company's compensation programs. The Company and the
Committee have continued to utilize consulting firms to assist in the design and
implementation of the executive and other compensation programs of the Company.
Substantially all of the employees of the Company participate in incentive
compensation plans.
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 1999, the stock based incentives were limited to stock options, performance
restricted stock and restricted stock awards. For 1999, the Board of Directors
adopted the Lance, Inc. 1999 Annual Corporate Performance Incentive Plan for
Officers (the Annual Incentive Plan) as recommended by the Committee to reward
advancement of annual financial performance goals and the Lance, Inc. 1999
Long-Term Incentive Plan for Officers (the Long-Term Plan) pursuant to the
Company's 1997 Incentive Equity Plan, which was approved by the stockholders in
1997.
6
<PAGE> 9
In addition during 1997, in consultation with compensation consultants,
the Committee designed Compensation and Benefits Assurance Agreements and
Executive Severance Agreements for key executives of the Company. Currently the
Company has entered into such agreements with the Chief Executive Officer and
seven other senior executives of the Company and its subsidiaries. The
Compensation and Benefits Assurance Agreements and the Executive Severance
Agreements are described under "Executive Officer Compensation" below.
In 1999 and prior years, the Committee recommended to the Board of
Directors increases in base salary 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 the Chief
Executive Officer's recommendations. In 1999, 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 has
entered into a Compensation and Benefits Assurance Agreement and an Executive
Severance Agreement, each described below.
In considering base salaries for 1999, 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 stock awards. The salaries of the Named Executive Officers, excluding
the Chief Executive Officer, were increased an average of 5.3% for 1999 over
1998.
With respect to the Chief Executive Officer during 1999, 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 3.3% for 1999 over 1998.
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 create 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 1999, the specified performance goals were not achieved and no
cash bonuses were earned under the Annual Incentive Plan.
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 1999, the
7
<PAGE> 10
Committee awarded stock options for an aggregate of 70,050 shares, 8,350 shares
of performance restricted stock and 5,800 shares of restricted stock to the
Named Executive Officers, excluding the Chief Executive Officer. Mr. Stroup was
awarded stock options to purchase 32,700 shares, 3,850 shares of performance
restricted stock and 2,700 restricted shares. In addition, the Committee awarded
stock options totaling 694,350 shares to approximately 130 other executives and
senior managers, approximately 35 executives (not including Named Executive
Officers), senior managers and key employees received an aggregate of 34,400
restricted shares and 9 executives (other than Named Executive Officers) and
senior managers received an aggregate of 6,900 shares of performance restricted
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, Jr., William R. Holland, Weldon H. Johnson, Scott C. Lea and S.
Lance Van Every.
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 if he or she is not otherwise an employee of the Company) 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 received a monthly fee of $16,500 for serving as Chairman of the
Board of Directors which began upon his election in April 1996 pursuant to the
agreement executed upon his election (the 1996 Agreement) and ended in April
1999. He served substantially full time as an adviser to the Company during such
term. His focus was on the Company's strategic direction, management development
and creation of stockholder value. Under the 1996 Agreement, 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
$15.8125 per share. In February 1999, the 1996 Agreement was amended to provide
that the Highest Average Sales Price would be the higher of (i) 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 four years after April 16, 1999 or
(ii) the average of the highest sales price of the Common Stock on The Nasdaq
Stock Market for any 10 consecutive trading days during the period from April
19, 1996 until four years after April 16, 1999. Such incentive compensation will
be paid in one lump sum four years after April 16, 1999. In October 1998, the
Board of Directors of the Company, upon recommendation of the Compensation/Stock
Option Committee, approved additional incentive compensation for Mr. Lea because
his service as Chairman of the Board had required a greatly expanded commitment
of time, energy and expertise than had been contemplated when the 1996 Agreement
was approved. The additional incentive compensation is outlined in the 1998
agreement (the 1998 Agreement) which provides for a bonus of $162,000 paid to
Mr. Lea on April 16, 1999 and additional incentive compensation equal to $25,000
for each 1% of the Highest Average Sales Price (as described below) exceeds
$20.875 per share. In February 1999, the 1998 Agreement was amended to provide
that the Highest Average Sales Price means the higher of (i) 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 1998 and ending four years after April 16, 1999 or
(ii) the average of the highest sales price of the Common Stock on The Nasdaq
Stock Market for any 10 consecutive trading days during the period from April
17, 1998 until four years after April 16, 1999. This additional incentive
compensation will be paid in one lump sum four years after April 16, 1999. In
the event of a Change of Control, the Highest Average Sales Price for all such
incentive compensation 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. For purposes of the 1996 and
8
<PAGE> 11
1998 Agreements, a Change in Control means the acquisition of 35% or more of the
voting securities of the Company by any persons or group other than members of
the Van Every Family which consists of the descendents of Salem A. Van Every,
Sr. and their spouses. 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 to purchase 4,000 shares of Common Stock 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. Each current non-employee director
will be granted an option to purchase 4,000 shares of Common Stock on May 1,
2000 at an option price equal to the fair market value of the Common Stock on
such date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 25, 1999, all Section 16(a) filing
requirements applicable to its executive officers, Directors and greater than
10% beneficial owners were complied with, except Scott C. Lea filed late the
report of the purchase in April 1999 of 5,000 shares of the Company's Common
Stock.
STOCKHOLDER RETURN PERFORMANCE GRAPH
Included below is a line graph and a table 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 30, 1994
and ending December 23, 1999 covering the Company's five fiscal years ended
December 30, 1995, December 28, 1996, December 27, 1997, December 26, 1998 and
December 25, 1999.
9
<PAGE> 12
The Company has selected a Peer Group consisting of the four
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
DATE LANCE, INC. NASDAQ STOCK MARKET PEER GROUP
---- ----------- ------------------- ----------
December 30, 1994 100.000 100.000 100.000
December 29, 1995 96.114 141.335 104.545
December 27, 1996 110.292 174.107 119.770
December 26, 1997 169.804 205.073 156.576
December 24, 1998 135.990 296.196 163.675
December 23, 1999 66.634 528.921 160.759
This graph and table assumes that $100 was invested on December 30, 1994
in the Company's Common Stock, in The Nasdaq Stock Market (U.S. Companies) Index
and in the Peer Group, which consists of Golden Enterprises, Inc., J&J Snack
Foods Corp., Ralcorp Holdings, Inc. and Tasty Baking Company and that dividends
were reinvested.
10
<PAGE> 13
EXECUTIVE OFFICER COMPENSATION
The table below shows the compensation paid or accrued by the Company, for
the three fiscal years ended December 25, 1999, December 26, 1998 and December
27, 1997 to or for the account of each of those persons who served during the
1999 fiscal year as the Chief Executive Officer and the Company's four other
highest paid executive officers (collectively, the Named Executive Officers).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL FISCAL COMPENSATION RESTRICTED STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) (1) AWARD(S) ($)(2) OPTIONS (#SH) ($) (3)
- --------- ---- ---------- --------- ------------ ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul A. Stroup, III 1999 257,427 0 -- 105,826 32,700 13,321
President and 1998 249,171 0 -- 86,761 13,650 24,556
Chief Executive Officer 1997 236,032 189,000 -- 89,119 18,300 24,194
Richard G. Tucker 1999 203,634 0 -- 71,089 21,850 11,072
Vice President 1998 180,185 0 -- 48,084 7,400 15,859
1997 170,918 104,400 -- 46,856 9,650 5,718
B. Clyde Preslar 1999 186,573 0 -- 57,356 17,700 10,051
Vice President 1998 179,646 0 -- 48,084 7,400 15,977
1997 170,718 103,000 -- 46,856 9,650 6,027
Gregory M. Venner (4) 1999 163,015 0 -- 50,893 15,500 8,116
Vice President 1998 158,449 0 -- 33,450 5,150 6,227
1997 130,098 73,200 -- 39,506 8,000 345
Dominic J. Sidari (5) 1999 161,111 42,625 -- 49,278 15,000 4,771
Vice President 1998 133,025 0 -- 0 0 515
</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.
(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 25, 1999, the market value and holdings
for each Named Executive Officer was as follows: Mr. Stroup $132,769
(5,400 restricted shares (including 2,700 restricted shares granted on
February 16, 1999) and 9,150 performance restricted shares); Mr. Tucker
$79,615 (3,275 restricted shares (including 1,800 restricted shares
granted on February 16, 1999) and 5,450 performance restricted shares);
Mr. Preslar $71,860 (2,925 restricted shares (including 1,450 restricted
shares granted on February 16, 1999) and 4,950 performance restricted
shares); Mr. Venner $59,541 (2,325 restricted shares (including 1,300
restricted shares granted on February 16, 1999) and 4,200 performance
shares) and Mr. Sidari $42,432 (1,900 restricted shares (including 1,250
restricted shares granted on February 16, 1999) and 2,750 performance
restricted shares). Vesting of 50% of the restricted shares occurs on each
of the second and fourth anniversaries of the award date of such shares 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 a specified financial performance goal for the three fiscal years
following the award date. Dividends are payable on all restricted shares
and performance restricted shares.
(3) For fiscal year 1999, includes amounts contributed by the Company under
the Company's Profit-Sharing Retirement Plan as follows: Mr. Stroup
$6,901, Mr. Tucker $6,717, Mr. Preslar $6,717, Mr. Venner $6,709 and Mr.
Sidari $4,266; amounts contributed by the Company under the Company's
Employee Stock Purchase Plan as follows: Mr. Stroup $1,460, Mr. Tucker
$1,866, Mr. Preslar $1,627 and Mr. Venner $950; premiums paid by the
Company for term life insurance for the benefit of the respective Named
Executive Officer as
11
<PAGE> 14
follows: Mr. Stroup $886, Mr. Tucker $665, Mr. Preslar $603, Mr. Venner
$314 and Mr. Sidari $505; and amounts contributed by the Company under the
Company's Benefit Restoration Plan as follows: Mr. Stroup $4,074, Mr.
Tucker $1,824, Mr. Preslar $1,104 and Mr. Venner $125. For fiscal year
1998 for Mr. Sidari, includes $515 of premiums paid by the Company for
term life insurance for his benefit.
(4) Mr. Venner's employment with the Company will terminate on March 27, 2000.
(5) Mr. Sidari joined the Company in April 1998 and his employment will
terminate on March 27, 2000.
Each of the Named Executive Officers, entered into a Compensation and
Benefits Assurance Agreement (a Benefits Agreement) and an Executive Severance
Agreement (a Severance Agreement) with the Company.
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, of the liquidation of the
Company or of 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 if one of the following events occurs within
three years of a Change in Control: 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 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 prior
Executive Employment Agreement, his Severance Agreement provides for the
continuation of supplemental retirement benefits similar to those under his
prior Executive Employment Agreement. His Severance Agreement provides for
supplemental 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 the
last day of the Company's fiscal year in which he reaches age 60. Severance
benefits for Mr. Stroup consists of accrued compensation and benefits including
current year's bonus and 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
12
<PAGE> 15
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 outplacement services.
The table below shows the individual grants to the Named Executive
Officers of stock options during the fiscal year ended December 25, 1999.
OPTION GRANTS IN THE 1999 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 ($)(1)
- ---- ------------- ------------ ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Paul A. Stroup, III 32,700 4.1 16.1565 2/15/09 93,457
B. Clyde Preslar 17,700 2.2 16.1565 2/15/09 50,587
Richard G. Tucker 21,850 2.7 16.1565 2/15/09 62,447
Gregory M. Venner 15,500 1.9 16.1565 2/15/09 44,299
Dominic J. Sidari 15,000 1.9 16.1565 2/15/09 42,870
</TABLE>
- --------------------
(1) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under the model are based on
arbitrary assumptions as follows: options to be exercised in ten years,
stock price volatility at .303, annual dividend yield of 6.05% and a
risk-free interest rate of 5.35%. No downward adjustments are made to the
resulting grant-date option values to account for potential forfeitures or
non-transferability of the options. The actual value of the options
depends upon the actual performance of the Company's stock during the
applicable period.
The table below shows, on an aggregated basis, each exercise of stock
options or tandem SARs during the fiscal year ended December 25, 1999 by each of
the Named Executive Officers and the 1999 fiscal year-end value of unexercised
options and SARs.
AGGREGATED OPTION/SAR EXERCISES IN THE 1999 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($) (1)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#SH) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Paul A. Stroup, III 0 0 44,062/59,388 0/0
B. Clyde Preslar 0 0 12,675/30,075 0/0
Richard G. Tucker 0 0 10,675/34,225 0/0
Gregory M. Venner 0 0 5,287/28,363 0/0
Dominic J. Sidari 0 0 2,000/21,000 0/0
</TABLE>
- --------------------
(1) No options were in-the-money.
AMENDMENT TO 1997 INCENTIVE EQUITY PLAN
The Company maintains the Lance, Inc. 1997 Incentive Equity Plan (the
Plan). As originally adopted, 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. In January 2000, the Board of Directors adopted an amendment to the Plan
to increase by 1,500,000 (approximately 5.2% of the outstanding shares of Common
13
<PAGE> 16
Stock) the number of shares of Common Stock available under the Plan (the
Amendment). Unless the context requires otherwise, all references to the Plan
herein describe the Plan both before and after the Amendment. The Amendment will
be effective upon approval by the stockholders. If the Amendment is not approved
by the Stockholders, the Plan will continue in effect without the additional
number of available shares.
As of March 1, 2000, awards outstanding or previously exercised under the
Plan, without giving effect to the Amendment, covered a total of 1,329,188
shares of Common Stock and 170,812 shares remain available for grant.
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 Plan was
adopted to provide such long-term incentive compensation. Most of the shares
originally allocated under the Plan have been issued. The purpose of the
Amendment is to increase the number of shares available for use under the Plan.
Without the Amendment, the Company will be largely unable to issue additional
awards under the Plan. Below is a summary of the material terms of the Plan.
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 Plan
provides equity-based incentive compensation.
Number of Shares. If the Amendment is approved, the number of shares of
Common Stock available for awards under the Plan will be increased by 1,500,000
to 3,000,000 (approximately 10.4% of the outstanding shares of Common Stock).
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 is 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 for more than 150,000 shares or options for 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. Currently, approximately 144 employees are 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.
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 1, 2000
was $10 1/16 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
14
<PAGE> 17
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 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
15
<PAGE> 18
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 has the
power to amend, modify or terminate the Plan on a prospective basis. Stockholder
approval is 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
or market 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.
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 of 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
16
<PAGE> 19
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.
The Board recommends a vote FOR approval of the Amendment 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, in person or by proxy, at the Annual Meeting is required for approval
of the Amendment.
Abstentions and shares not voted are not counted in determining a majority.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Inasmuch as all executive officers of the Company are eligible for awards
under the Company's 1997 Incentive Equity Plan, each has a substantial interest
in the Amendment. See "Amendment to 1997 Incentive Equity Plan" above.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as independent public
accountants to audit the financial statements of the Company and its
subsidiaries for the 2000 fiscal year, ending December 30, 2000. This selection
is being presented to the stockholders for their ratification or rejection at
this Annual Meeting. KPMG 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
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 LLP as independent public accountants to audit the financial
statements of the Company and its subsidiaries for the 2000 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 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 2001
Annual Meeting of Stockholders, currently scheduled for April 20, 2001, must be
received by the Company no later than November 17, 2000, in order for the
proposal to be included in the proxy statement and form of proxy for the 2001
Annual Meeting of Stockholders. In addition, if the Company receives notice of
shareholder proposals after January 31, 2001, then the persons named as proxies
in such proxy statement and form of proxy will have discretionary authority to
vote on such shareholder proposals, without discussion of the matters in the
proxy statement and without such proposals appearing as separate items on the
proxy card. Shareholder proposals should be sent to Secretary, Lance, Inc., Box
32368, Charlotte, North Carolina 28232.
17
<PAGE> 20
APPENDIX A
[LOGO] LANCE, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD APRIL 20, 2000
The undersigned hereby appoints Paul A. Stroup, III, Richard G. Tucker and
B. Clyde Preslar and each 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 20, 2000, 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?
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(side 2)
1. ELECTION OF DIRECTORS: Nominees are William R. Holland, Weldon H. Johnson,
Paul A. Stroup, III and Isaiah Tidwell.
[ ] 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.)
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2. RATIFICATION OF SELECTION OF KPMG LLP AS AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AN AMENDMENT TO THE COMPANY'S 1997 INCENTIVE EQUITY PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED BY 1,500,000 TO 3,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and of which Lance, Inc.
did not have notice on or before February 3, 2000.
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. [ ]
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Stockholder sign here Date Co-owner sign here Date
