SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-398
NORTH CAROLINA 56-0292920
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(State of Incorporation) (I.R.S. Employer Identification Number)
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Registrant's telephone number, including area code: (704) 554-1421
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: $.83-1/3
PAR VALUE COMMON STOCK
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of shares of the Registrant's $.83-1/3 par value Common Stock, its only outstanding class of voting stock, held by non-affiliates as of February 20, 1998 was approximately $600,100,000.
The number of shares outstanding of the Registrant's $.83-1/3 par value Common Stock, its only outstanding class of Common Stock, as of February 20, 1998, was 29,929,773 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following annual report to security holders and proxy statement are incorporated by reference into the indicated parts of this Annual Report on Form 10-K:
Incorporated Documents Parts into which Incorporated ---------------------- ----------------------------- Proxy Statement for Annual Meeting of Parts I and III Stockholders to be held April 17, 1998 Annual Report to Stockholders for the Part II fiscal year ended December 27, 1997 |
PART I
ITEM 1. BUSINESS
The Registrant manufactures, markets and distributes branded and private label snack foods and bakery products.
The Registrant manufactures, markets and distributes packaged snack and bread basket items primarily under the LANCE label. The principal snack items are filled sandwich crackers, filled sandwich cookies, peanuts, potato chips, corn chips, popcorn, cakes, cookies, candies, chewing gum and meat snacks. The principal bread basket items are wafers, crackers, melba toast and bread sticks, individually packaged for restaurants and similar institutions. Various items purchased from others and resold account for approximately 24% of net sales and other operating revenue.
The Registrant's products are sold under various trade names and registered trademarks that it owns, including TOASTCHEE, LANCHEE, RYE CHEE, CHOC-O-LUNCH, VAN-O-LUNCH, NEKOT, GOLD-N-CHEES, BIG TOWN, CAPTAIN'S WAFERS and VISTA.
The Registrant sells and distributes its products through convenience stores, independent and chain supermarkets, discount stores, mass merchandisers, club stores, drug stores, military and governmental establishments, schools, hospitals, other institutional food service providers, restaurants, wholesale grocers and through company-owned vending machines. The Registrant sells and distributes most of its products through its own direct-store-delivery ("DSD") organization in 32 states and the District of Columbia. In addition, sales of both branded and private label products are made throughout the United States and portions of Canada by the Registrant's sales representatives, brokers and distributors and delivered by others. Several of the most popular snack and bread basket items are packaged in multi-pack configurations or larger size bags and boxes for distribution to grocers, supermarkets and discount and club stores.
The Registrant's DSD organization is administered through 22 sales districts that are divided into 272 sales branches, each under the direction of a branch manager. Within each branch are sales territories, each serviced by one representative. At December 27, 1997, there were 1,962 sales territories. The Registrant uses its own fleet of tractors and trailers to make weekly deliveries of its products to the sales territories. The Registrant provides its representatives with stockroom space for their inventory requirements. The representatives load their own trucks from these stockrooms for delivery to customers and to service vending machines owned by the Registrant. The Registrant owns and operates vending machines in approximately 60,000 locations. These vending machines are made available to customers primarily on a commission or rental basis. The machines are not designed or manufactured specifically for the Registrant, and their use is not limited to any particular sales area or class of customer.
In late 1996, the Registrant completed the restructuring of its operations designed to significantly reduce costs. Throughout 1997, the Registrant focused on profitable sales growth and profit margin enhancement. This included continued reductions in stock keeping units and elimination of certain products. The principal snack items discontinued in 1997 were Wheat Wafers, Gum Ball Pops, Nacho Mini Rounds, Reduced Fat GOLD-N-CHEES and Fat Free Fig Bars. Profitable sales growth efforts also included new product introductions to complement existing product lines. The principal new snack items introduced in 1997 included Snack Mix, Crispy Marshmallow Treats, Buffalo Wings Flavored Potato Chips and Honey Mustard Flavored Potato Chips. The Registrant also introduced its Kids Pack line of filled sandwich crackers in 1997. This product offers four sandwich crackers per pack rather than the traditional six sandwich crackers to provide smaller-portion packages preferred by children.
In 1997, there were significant increases in product promotions, including the Kids Pack introduction. The Registrant also increased its television, radio and print advertising and added sales and marketing personnel to focus on specific sales and marketing channels.
During 1997, the Registrant continued efforts to improve efficiency of its sales and delivery processes. Within its DSD organization, five sales territories were closed and 62 sales territories were consolidated. The Registrant also continued to add distributors and brokers to cover certain markets and categories of customers. Also, the Registrant increased its capital expenditures for vending machines and added vending service personnel.
The principal raw materials used in the manufacture of snack foods and bakery products are flour, peanuts, peanut butter, oils, shortenings, potatoes, shelled corn, popcorn, cornmeal, pork skins, tree nuts, starch, sugar, cheese, corn syrup, cocoa, fig paste and seasonings. The principal supplies used are flexible film, cartons, trays, boxes and bags. These raw materials and supplies are generally available in adequate quantities in the open market either from sources in the United States or from other countries and are generally contracted for a season in advance. The principal supplies of energy used in the manufacture of these products are electricity, natural and propane gas, fuel oil and diesel fuel, all of which are currently available in adequate quantities.
All of the Registrant's products are sold in highly competitive markets in which there are many competitors. In the case of many of its products, the Registrant competes with manufacturers with greater total revenues and greater resources than the Registrant does. The principal methods of competition are price, delivery, service and product quality. Generally, the Registrant believes that it is competitive in these methods as a whole. The methods of competition and the Registrant's competitive position vary according to the locality, the particular products and the policies of its competitors. Although reliable statistics are unavailable as to production and sales by others in the industry, the Registrant believes that in its areas of distribution it is one of the largest producers of filled sandwich crackers.
On December 27, 1997, the Registrant and its subsidiaries had 4,573 employees, none of whom were covered by a collective bargaining agreement.
ITEM 2. PROPERTIES
The Registrant's principal plant and general offices are located in Charlotte, North Carolina on a 288 acre tract owned by the Registrant. The main facility at this location is an air-conditioned and sprinklered plant, office building and cafeteria of brick and steel containing approximately 670,000 square feet. The manufacturing portion of this facility houses seven oven lines and is equipped with storage facilities to handle many of the Registrant's raw materials in bulk and is operated on a continuous three-shift basis. Adjacent to the main facility is an air-conditioned and sprinklered plant of brick and steel used for processing potato chips, corn chips and similar products containing approximately 140,000 square feet and is operated on a continuous two-shift basis. Also adjacent to the main facility are a 70,400 square foot precast concrete building, which houses a vending machine repair and maintenance facility, an 11,000 square foot brick and steel building, which houses vehicle maintenance operations, 40,000 square foot and 14,000 square foot metal warehouse buildings and a 5,500 square foot brick veneer office building. During 1998, the Registrant intends to add a 50,000 square foot metal building for finished goods storage and shipping.
The Registrant also owns a plant located on an 18.5 acre tract in Burlington, Iowa. The plant is of masonry and steel and contains approximately 313,000 square feet. This plant houses seven oven lines and certain of which are operated on a continuous three-shift basis. One line operates on a continuous basis seven days a week. The Registrant intends to add an additional oven line to this facility during 1998. Adjacent to the plant is a steel storage building of approximately 5,800 square feet.
The Registrant leases office space and most of its stockroom space in various towns and cities, mainly on month-to-month tenancies, and a building in Greenville, Texas containing approximately 6,150 square feet which serves as a distribution and vending maintenance center.
During 1997, the Registrant sold plants located in Greenville, Texas and Columbia, South Carolina. These facilities were closed during 1996 as part of the restructuring of operations announced in December 1995.
The Registrant believes that it has sufficient production capacity to meet foreseeable demand in 1998.
SEPARATE ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
Information as to executive officers of the Registrant who are directors or nominees of the Registrant is incorporated herein by reference to the section captioned Election of Directors in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held April 17, 1998. Information as to each executive officer of the Registrant who is not a director or a nominee is as follows:
Name Age Information About Officer
---- --- -------------------------
Peter M. Duggan 57 Senior Vice President of the Company since 1995, Vice
President 1994-1995 and a Group Vice President for
the Snacks and International Consumer Products
Division of Borden, Inc. (consumer products company)
1985-1993
G. R. Melvin 61 Senior Vice President of the Company 1996-1998
(retired from the Company in January 1998) and Vice
President 1978-1996
L. Rudy Gragnani 44 Vice President of the Company since 1997; Vice
President of Coca-Cola Bottling Company of New York
1996-1997 and Director of Information Services of
Coca-Cola Bottling Co. Consolidated 1988-1996
Earl D. Leake 46 Vice President of the Company since 1995 and
Treasurer and Assistant Secretary 1988-1995
B. Clyde Preslar 43 Vice President and Chief Financial Officer of the
Company since 1996; Director, Financial Services of
Worldwide Power Tools Group (a consumer products
division of The Black and Decker Corporation)
1993-1996 and Director, Corporate Business Planning
and Analysis of The Black and Decker Corporation
1991-1993
R. Gerald Swain 61 Vice President of the Company 1991-1998 (retired from
the Company in February 1998)
Richard G. Tucker 43 Vice President of the Company since 1996; Plant
Manager (bakery division) of RJR Nabisco Holdings
Corporation (consumer products company) 1989-1996
Gregory M. Venner 40 Vice President of the Company since 1997; Marketing
Director and Business Director, Tropicana Products
(food products company) 1993-1996 and Marketing Director,
Conagra Frozen Foods 1990-1993
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H. Dean Fields 56 President of Vista Bakery, Inc. (subsidiary of the
Company) since 1996 and Manager, Columbia, South
Carolina Plant of Vista Bakery, Inc. 1993-1996
James C. Melton 38 Corporate Controller and Principal Accounting Officer
since 1997; independent financial consultant 1995-1996;
Corporate Controller and Assistant Treasurer, Kayser-Roth
Corporation (consumer products company) 1990-1994
Robert S. Carles 57 Secretary of the Company since 1997, Assistant
Secretary 1981-1997 and Corporate Attorney since 1976
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All the Company's executive officers were appointed to their current positions at the Annual Meeting of the Board of Directors effective April 18, 1997, except that Mr. Gragnani was appointed effective May 1, 1997. All of the Registrant's executive officers' terms of office extend until the next Annual Meeting of the Board of Directors and until their successors shall have been duly elected and qualified.
Items 3 and 4 are inapplicable and have been omitted.
PART II
Items 5 through 8 are incorporated herein by reference to pages 13 through 34 of the Registrant's 1997 Annual Report to Stockholders.
Item 9 is inapplicable and has been omitted.
PART III
Items 10 through 13 are incorporated herein by reference to the sections captioned Principal Stockholders and Holdings of Management, Election of Directors, Compensation/Stock Option Committee Interlocks and Insider Participation, Director Compensation, Executive Officer Compensation and Compliance with Section 16(a) of the Securities Exchange Act of 1934 in the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held April 17, 1998 and to the Separate Item in Part I of this Annual Report captioned Executive Officers of the Registrant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements.
See Table of Contents to Financial Statements filed herewith as a separate part of this Annual Report.
2. Financial Schedules.
Schedules have been omitted because of the absence of conditions under which they are required or because information required is included in financial statements or the notes thereto.
3. Exhibits.
3.1 Restated Charter of Lance, Inc. incorporated herein by reference to Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1992.
3.2 Bylaws of Lance, Inc., as amended through April 21, 1995, incorporated herein by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 17, 1995.
4 See 3.1 and 3.2 above.
10.1 Lance, Inc. 1991 Stock Option Plan incorporated herein by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8, Registration No. 33-41866.
10.2* The Lance, Inc. Key Executive Employee Benefit Plan incorporated herein by reference to Exhibit 10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1983.
10.3* Form of Executive Employment Agreement between Lance, Inc. and the Key Executives incorporated herein by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1992.
10.4 Lance, Inc. 1983 Incentive Stock Option Plan incorporated herein by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1987.
10.5* Lance, Inc. Key Executive Employee Benefit Plan Trust, dated December 3, 1993, between Lance, Inc. and First Union National Bank of North Carolina incorporated herein by reference to Exhibit 10(v) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 25, 1993.
10.6 Lance, Inc. 1995 Nonqualified Stock Option Plan for Non-Employee Directors as amended on April 18, 1997 incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 14, 1997.
10.7 Lance, Inc. 1997 Incentive Equity Plan incorporated herein by reference to Exhibit 4 to the Registrant's Registration Statement on Form S-8, File No. 333-25539.
10.8* Lance, Inc. Benefit Restoration Plan incorporated herein by reference to Exhibit 10(vi) to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 11, 1994.
10.9* Lance, Inc. Annual Corporate Performance Incentive Plan
- Officers - 1997 incorporated herein by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 14,
1997.
10.10* Lance, Inc. Long-Term Incentive Plan - Officers - 1997 incorporated herein by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 14, 1997.
10.11* Chairman of the Board Compensation Letter dated April 19, 1996 incorporated herein by reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 15, 1996.
10.12* Salary Continuation Agreement dated as of April 29, 1996 between the Registrant and B. Clyde Preslar incorporated herein by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1996.
10.13* Termination Agreement dated as of November 7, 1997 between the Registrant and B. Clyde Preslar terminating the Salary Continuation Agreement between the Registrant and B. Clyde Preslar dated April 29, 1996.
10.14* Form of Compensation and Benefits Assurance Agreement dated November __, 1997 between the Registrant and each of Paul A. Stroup, III, Earl D. Leake, Peter M. Duggan, B. Clyde Preslar, Richard G. Tucker, Gregory M. Venner and L. R. Gragnani.
10.15* Executive Severance Agreement dated November 7, 1997 between the Registrant and Paul A. Stroup, III.
10.16* Executive Severance Agreement dated November 7, 1997 between the Registrant and Earl D. Leake.
10.17* Form of Executive Severance Agreement dated November __, 1997 between the Registrant and each of Peter M. Duggan, B. Clyde Preslar, Richard G. Tucker, Gregory M. Venner and L. R. Gragnani.
13 The Registrant's 1997 Annual Report to Stockholders. This Annual Report to Stockholders is furnished for the information of the Commission only and, except for the parts thereof incorporated by reference in this Report on Form 10-K, is not to be deemed "filed" as a part of this filing.
21 List of the Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule. (Filed in electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.)
27.2 Restated Financial Data Schedule for the twelve weeks ended March 22, 1997. (Filed in electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.)
27.3 Restated Financial Data Schedule for the twelve weeks ended June 14, 1997. (Filed in electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.)
99 Cautionary Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
(b) Reports on Form 8-K
There were no reports on Form 8-K required to be filed by the Registrant during the 16 weeks ended December 27, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
LANCE, INC.
Dated: March 25, 1998 By: /s/ B. Clyde Preslar
-------------------------------
B. Clyde Preslar
Vice President
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Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Scott C. Lea Chairman of the Board March 25, 1998
---------------------------------------- and Director
Scott C. Lea
/s/ P. A. Stroup, III President, Chief Executive March 25, 1998
---------------------------------------- Officer and Director
P. A. Stroup, III (Principal Executive Officer)
/s/ B. Clyde Preslar Vice President (Principal March 25, 1998
---------------------------------------- Financial Officer)
B. Clyde Preslar
/s/ James C. Melton Controller (Principal March 25, 1998
---------------------------------------- Accounting Officer)
James C. Melton
/s/ Alan T. Dickson Director March 25, 1998
----------------------------------------
Alan T. Dickson
/s/ J. W. Disher Director March 25, 1998
----------------------------------------
J. W. Disher
/s/ James H. Hance, Jr. Director March 25, 1998
----------------------------------------
James H. Hance, Jr.
Director March __, 1998
----------------------------------------
William R. Holland
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/s/ Weldon H. Johnson Director March 25, 1998
----------------------------------------
Weldon Johnson
Director March __, 1998
----------------------------------------
Nancy Van Every McLaurin
/s/ Robert V. Sisk Director March 25, 1998
----------------------------------------
Robert V. Sisk
/s/ Isaiah Tidwell Director March 25, 1998
----------------------------------------
Isaiah Tidwell
/s/ S. Lance Van Every Director March 25, 1998
----------------------------------------
S. Lance Van Every
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-K
FOR CORPORATIONS
ITEM 14(a) - FINANCIAL STATEMENTS
TABLE OF CONTENTS
Annual Report to Stockholders
Page
----
Data incorporated by reference from the 1997
Annual Report to Stockholders of Lance, Inc.
and Subsidiaries:
Independent Auditors' Report..................................................................................13
Consolidated Balance Sheets, December 27, 1997 and December 28, 1996..........................................14
For the Fiscal Years Ended December 27, 1997, December 28, 1996
and December 30, 1995:
Consolidated Statements of Income .........................................................................15
Consolidated Statements of Changes in Stockholders' Equity.................................................16
Statements of Consolidated Cash Flows......................................................................17
Notes to Consolidated Financial
Statements...................................................................................................18
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FINANCIAL STATEMENTS AND SCHEDULES OMITTED
The above listed financial statements are presented on only a consolidated basis since the Company is primarily an operating company and its subsidiaries included for the periods presented in the consolidated financial statements are totally-held subsidiaries. Schedules have been omitted because of the absence of conditions under which they are required or because information required is included in financial statements or the notes thereto.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
Item 14(a)(3)
FORM 10-K
ANNUAL REPORT
For the fiscal year ended Commission File Number December 27, 1997 0-398
LANCE, INC.
EXHIBIT INDEX
Exhibit
No. Exhibit Description
---- -------------------
3.1 Restated Charter of Lance, Inc. incorporated herein by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1992.
3.2 Bylaws of Lance, Inc., as amended through April 21, 1995, incorporated herein by reference
to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended
June 17, 1995.
4 See 3.1 and 3.2 above.
10.1 Lance, Inc. 1991 Stock Option Plan incorporated herein by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-8, Registration No. 33-41866.
10.2* The Lance, Inc. Key Executive Employee Benefit Plan incorporated herein by reference to
Exhibit 10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1983.
10.3* Form of Executive Employment Agreement between Lance, Inc. and the Key Executives
incorporated herein by reference to Exhibit 10(c) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 26, 1992.
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10.4 Lance, Inc. 1983 Incentive Stock Option Plan incorporated herein by reference to Exhibit
10.1 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 26, 1987.
10.5* Lance, Inc. Key Executive Employee Benefit Plan Trust, dated December 3, 1993, between Lance,
Inc. and First Union National Bank of North Carolina incorporated herein by reference to
Exhibit 10(v) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December
25, 1993.
10.6 Lance, Inc. 1995 Nonqualified Stock Option Plan for Non-Employee Directors incorporated
herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
the twelve weeks ended June 14, 1997.
10.7 Lance, Inc. 1997 Incentive Equity Plan incorporated herein by reference to Exhibit 4 to the
Registrant's Registration Statement on Form S-8, File No. 333-25539.
10.8* Lance, Inc. Benefit Restoration Plan incorporated herein by reference to Exhibit 10(vi) to
the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended June 11, 1994.
10.9* Lance, Inc. Annual Corporate Performance Incentive Plan - Officers - 1997 incorporated
herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
for the twelve weeks ended June 14, 1997.
10.10* Lance, Inc. Long-Term Incentive Plan - Officers - 1997 incorporated herein by reference to
Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended
June 14, 1997.
10.11* Chairman of the Board Compensation Letter dated April 19, 1996 incorporated herein by
reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the twelve
weeks ended June 15, 1996.
10.12* Salary Continuation Agreement dated as of April 29, 1996 between the Registrant and
B.Clyde Preslar incorporated herein by reference to Exhibit 10.10 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996.
10.13* Termination Agreement dated as of November 7, 1997 between the Registrant and B. Clyde
Preslar terminating the Salary Continuation Agreement between the Registrant and B. Clyde
Preslar dated April 29, 1996.
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10.14* Form of Compensation and Benefits Assurance Agreement dated November __, 1997 between the
Registrant and each of Paul A. Stroup, III, Earl D. Leake, Peter M. Duggan, B. Clyde
Preslar, Richard G. Tucker, Gregory M. Venner and L. R. Gragnani.
10.15* Executive Severance Agreement dated November 7, 1997 between the Registrant and
Paul A. Stroup, III.
10.16* Executive Severance Agreement dated November 7, 1997 between the Registrant and
Earl D. Leake.
10.17* Form of Executive Severance Agreement dated November __, 1997 between the Registrant and
each of Peter M. Duggan, B. Clyde Preslar, Richard G. Tucker, Gregory M. Venner and
L. R. Gragnani.
13 The Registrant's 1997 Annual Report to Stockholders. This Annual Report to Stockholders
is furnished for the information of the Commission only and, except for the parts thereof
incorporated by reference in this Report on Form 10-K, is not to be deemed "filed" as a
part of this filing.
21 List of the Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule. (Filed in electronic format only. Pursuant to Rule 402 of
Regulation S-T, this schedule shall not be deemed filed for purposes of Section 11 of the
Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934.)
27.2 Restated Financial Data Schedule for the twelve weeks ended March 22, 1997. (Filed in
electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not
be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934.)
27.3 Restated Financial Data Schedule for the twelve weeks ended June 14, 1997. (Filed in
electronic format only. Pursuant to Rule 402 of Regulation S-T, this schedule shall not
be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934.)
99 Cautionary Statement under the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995.
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EXHIBIT 10.13
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, made as of this 7th day of November, 1997, by and between B. CLYDE PRESLAR (Preslar) and LANCE, INC. (Lance).
STATEMENT OF PURPOSE
In connection with the execution by Preslar and Lance of the Executive Severance Agreement dated the date hereof, Preslar and Lance have agreed that the Salary Continuation Agreement dated April 28, 1996 shall be terminated along with the letter agreement dated March 22, 1996 from Lance to Preslar.
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, the parties hereto agree as follows:
1. TERMINATION. The Salary Continuation Agreement dated April 29, 1996 between Preslar and Lance and the letter agreement from Lance to Preslar dated March 22, 1996 are hereby terminated in all respects and are of no further force or effect.
2. MISCELLANEOUS. This Agreement shall be binding upon the parties hereto, their heirs and assigns; this Agreement may not be amended or modified except by written amendment signed by the parties hereto and this Agreement shall be construed and interpreted under the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
/s/ B. Clyde Preslar --------------------------- B. Clyde Preslar |
LANCE, INC.
By /s/ P. A. Stroup III ------------------------- President |
EXHIBIT 10.14
STATE OF NORTH CAROLINA
COMPENSATION AND BENEFITS
COUNTY OF MECKLENBURG ASSURANCE AGREEMENT
THIS COMPENSATION AND BENEFITS ASSURANCE AGREEMENT, entered into this ______ day of November, 1997, by and between Lance, Inc., a North Carolina corporation, (the "Company,") and __________________________, (the "Executive");
STATEMENT OF PURPOSE
Executive is a key employee of the Company, has contributed materially to the successful operation of the Company's business and has rendered valuable services to the Company. Moreover, Executive possesses intimate knowledge of the Company, its history, operating methods, manufacturing and distribution systems, personnel and products. Therefore, it is important to the continued success of the Company that the Company continue to have the benefit of Executive's advice, counsel and services, and for such reasons the Company desires to provide Executive with the benefits set forth in this Compensation and Benefits Assurance Agreement.
NOW, THEREFORE, in consideration of the Statement of Purpose and of the mutual covenants and agreements herein set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive do hereby agree as follows:
1. Definitions. As used in this Compensation and Benefits Assurance Agreement, unless the context expressly indicates otherwise, the following terms have the following meanings:
(a) "Affiliates" of an entity means any and all corporations and other business entities which, directly or indirectly, control, are controlled by, or are under common control with such entity.
(b) "Base Salary" means, at any time, the then regular annual rate of pay which Executive is receiving as annual salary, excluding amounts (i) designated by the Company as payment toward reimbursement of expenses or (ii) received under incentive or other bonus plans, regardless of whether or not the amounts are deferred.
(c) "Beneficial Owner" has the meaning ascribed to such term in Section 13(d) of the Exchange Act and Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(d) "Board" means the Board of Directors of the Company or any committee of the Board to which the Board has delegated, either specifically or generally, the duties and authority of the Board for the particular action or determination required or permitted to be made by the Board.
(e) "Cause" means the occurrence of any one or more of the following:
(i) A demonstrably willful and deliberate act or failure to act by Executive (other than as a result of incapacity due to physical or mental illness) which is committed in bad faith, without reasonable belief that such action or inaction is in the best interests of the Company, which causes actual material financial injury to the Company and which act or inaction is not remedied within fifteen (15) business days of written notice from the Company; or
(ii) The Executive's conviction for committing an act of fraud, embezzlement, theft, or any other act constituting a felony involving moral turpitude or causing material harm, financial or otherwise, to the Company.
"Cause" must be determined by the Board in the exercise of good faith and reasonable judgment.
(f) "Change in Control" means, and shall be deemed to have occurred upon, the first to occur of any of the following events:
(i) Any Outside Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive years (not including any period prior to the date hereof), individuals who at the beginning of such period constitute the Board of Directors of the Company (and any new Director, whose nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then in office who either were Directors at the beginning of the period or whose nomination for election was so approved) cease for any reason to constitute a majority of the members of the Board of Directors of the Company; or
(iii) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all of the Company's assets other than a sale or disposition of all or substantially all of the Company's assets to an entity at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by the stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition; or
(iv) The stockholders of the Company approve a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) or any parent thereof at least sixty percent (60%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization.
However, in no event shall a "Change in Control" be deemed to have occurred if Executive is part of a purchasing group which consummates the Change in Control transaction. Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if Executive is an equity participant in the acquiring company or group or surviving entity (the "Purchaser") except for ownership of less than one percent (1%) of the equity of the Purchaser.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means Lance, Inc., a North Carolina corporation, and such term includes any or all of its Affiliates.
(i) "Effective Date" means the date of this Compensation and Benefits Assurance Agreement.
(j) "Excess Parachute Payment" means "excess parachute payment" within the meaning of Section 280G of the Code.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
(l) "Excise Tax" means the tax imposed on Excess Parachute Payments pursuant to Section 280G and Section 4999 of the Code.
(m) "Good Reason" means the occurrence of any one or more of the following, without Executive's prior express written consent, within the thirty-six (36) calendar months immediately following a Change in Control:
(i) The assignment of Executive to duties inconsistent with Executive's authorities, duties, responsibilities, and status as an officer of the Company, or a reduction or alteration in the nature or status of Executive's authorities, duties or responsibilities from those in effect as of one hundred eighty (180) calendar days prior to the Change in Control, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by Executive;
(ii) The Company's requiring Executive to be based at a location in excess of fifty (50) miles from the location of Executive's principal job location or office immediately prior to the Change in Control, except for required travel on the Company's business to an extent consistent with Executive's then present business travel obligations;
(iii) A reduction by the Company of Executive's Base Salary in effect on the date hereof, or as the same shall be increased from time to time;
(iv) The failure of the Company to keep in effect any of the Company's compensation, health and welfare benefits, or perquisite programs under which Executive receives value, as such programs exist immediately prior to the Change in Control; provided, however, the replacement of an existing program with a new program will be permissible (and not grounds for a Good Reason termination if done for all employees generally and the value to be delivered to Executive under the new program is at least as great as the value delivered to Executive under the existing program); or
(v) Any breach by the Company of its obligations under Paragraph 6 herein or any failure of a successor company to assume and agree to perform the Company's entire obligations under this Compensation and Benefits Assurance Agreement as required by Paragraph 6 herein.
"Good Reason" shall be determined by Executive in the exercise of good faith and reasonable judgment. Executive's right to terminate employment for Good Reason shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein, and any such consent or waiver must be in writing and signed by Executive.
(n) "Member of the Van Every Family" means (i) a lineal descendant of Salem A. Van Every, Sr., including adopted persons as well as persons related by blood, (ii) a spouse of an individual described in clause (i) of this Paragraph 1(n) or (iii) a trust, estate, custodian and other fiduciary or similar account for an individual described in clause (i) or (ii) of this Paragraph 1(n).
(o) "Outside Person" means any Person other than (i) a Member of the Van Every Family, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or (iii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
(p) "Person" has the meaning ascribed to said term in Section 3(a)(9) of the Exchange Act as modified and used in Sections 13(d) and 14(d) of the Exchange Act, including a "group" as defined in Section 13(d) of the Exchange Act.
(q) "Qualifying Termination" has the meaning ascribed to said term in Paragraph 4(b) hereof.
(r) "Severance Benefits" has the meaning ascribed to said term in Paragraph 4(c) hereof.
(s) "Termination of Employment" means any termination of employment with either the Company or any successor to the Company that acquires all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise); provided, however, no termination of employment shall be deemed to have occurred by reason of such an acquisition unless there is either (i) a termination of employment with both the Company and such successor or (ii) a termination of employment with the Company and no successive employment by such successor.
2. Term of Agreement.
(a) [PAUL STROUP AND EARL LEAKE VERSION] The term of this Compensation and Benefits Assurance Agreement will commence on the Effective Date and shall continue in effect through December 31, 2011 (the "Initial Term").
(a) [STANDARD VERSION] The term of this Compensation and Benefits Assurance Agreement will commence on the Effective Date and shall continue in effect until the third anniversary of the Effective Date (the "Initial Term").
(b) The Initial Term of this Compensation and Benefits Assurance Agreement automatically shall be extended for one additional year at the end of the Initial Term, and then again after each one (1) year period thereafter (each such one (1) year period following the Initial Term being hereinafter referred to as a "Successive Period"). However, subject to Paragraph 2(c) herein either party may terminate this Compensation and Benefits Assurance Agreement effective at the end of the Initial Term or at the end of any Successive Period thereafter (the "Expiration Date") by giving the other party written notice of such termination and intent not to renew, delivered at least one (1) year prior to the Expiration Date. If such notice is properly delivered by either party, this Compensation and Benefits Assurance Agreement, along with all corresponding rights, duties and covenants, shall automatically expire on the Expiration Date.
(c) Notwithstanding the foregoing, in the event that a Change in Control occurs during the Initial Term or any Successive Period, upon the effective date of such Change in Control the term of this Compensation and Benefits Assurance Agreement shall automatically and irrevocably be renewed and extended for a period of thirty-six (36) full calendar months from the effective date of such Change in Control (the "Change in Control Renewal Period"), and this Compensation and Benefits Assurance Agreement shall automatically terminate upon the expiration of the Change in Control Renewal Period. Further, this Compensation and Benefits Assurance Agreement shall be assigned to, and shall be assumed by, the successor to the Company in such Change in Control as further provided in Paragraph 6 herein.
3. Employment. The Company shall employ Executive to perform such tasks as the Company shall specify from time to time. Executive agrees to devote his full time during customary business hours and his best efforts to the business and affairs of the Company. Executive's employment with the Company, however, may be terminated by either Executive or the Company at any time, with or without Cause, upon notice by the party wishing to terminate such employment to the other party, and nothing in this Compensation and Benefits Assurance Agreement shall give Executive any right to be retained in the employ of the Company or, upon dismissal, any rights except as expressly otherwise provided herein.
4. Change in Control Severance Benefits.
(a) The Company shall pay Executive the Severance Benefits described in
Paragraph 4(c) herein if during the Initial Term or any Successive Period a
Change in Control occurs and if within the thirty-six (36) calendar months
immediately following such Change in Control, Executive incurs a Qualifying
Termination. The Severance Benefits described in Subparagraphs (4)(c)(i) through
(iv) herein shall be paid to
Executive in cash in a single lump sum as soon as practicable following Executive's Qualifying Termination, but in no event later than thirty (30) calendar days after such date. Notwithstanding the foregoing, however, Severance Benefits which become due pursuant to Paragraphs 4(b)(iv) and 6(a) herein shall be paid immediately.
(b) The occurrence of any one or more of the following events (a "Qualifying Termination") within the thirty-six (36) calendar months immediately following a Change in Control of the Company which occurred during the Term or any Successive Period shall entitle Executive to receive the Severance Benefits:
(i) Executive's involuntary Termination of Employment without Cause;
(ii) Executive's voluntary Termination of Employment for Good Reason;
(iii) Executive's voluntary Termination of Employment, with or without Good Reason, during the thirteenth (13th) calendar month following the month during which the Change in Control occurs; or
(iv) The Company, or any successor company, commits a material breach of any of the provisions of this Compensation and Benefits Assurance Agreement.
A Qualifying Termination shall not include Executive's Termination of Employment within thirty-six (36) calendar months following a Change in Control by reason of death, disability [as such term is defined under the Company's governing disability plan (or any successor plan thereto)], Executive's voluntary Termination of Employment without Good Reason except as otherwise expressly provided in Paragraph 4(b)(iii) above, or Executive's involuntary Termination of Employment for Cause. Moreover, a Termination of Employment which occurs before a Change in Control or later than thirty-six (36) months following a Change in Control shall not constitute a Qualifying Termination.
(c) The "Severance Benefits" provided for in Paragraphs 4(a) and (b) herein are as follows:
(i) A lump-sum cash amount equal to the Executive's unpaid Base Salary , accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to the Executive through and including the date of Executive's Qualifying Termination. Such payment shall constitute full satisfaction for these amounts owed to Executive.
(ii) A lump-sum cash amount equal to the sum of (A) three
(3) multiplied by the Executive's Base Salary in
effect upon the date of the Qualifying Termination
or, if greater, by Executive's Base Salary in effect
immediately prior to the occurrence of the Change in
Control plus (B) three (3) multiplied by the greater
of (I) Executive's annual bonus actually earned by
Executive (whether or not deferred) during the bonus
plan year which ended immediately prior to the
Qualifying Termination or (II) Executive's
then-current target bonus opportunity (stated in
terms of a percentage of Base Salary) established
under the Company's Annual Corporate Performance
Incentive Plan for Officers (or any successor plan
thereto), if any, for the incentive plan year in
which the date of Executive's Qualifying Termination
occurs.
(iii) A lump-sum cash amount equal to the greater of (A)
the Executive's then-current target bonus opportunity
(stated in terms of a percentage of Base Salary)
established under the Company's Annual Corporate
Performance Incentive Plan for Officers (or any
successor plan thereto), if any, for the incentive
plan year in which the date of Executive's Qualifying
Termination occurs, adjusted on a pro rata basis
based on the number of days Executive was actually
employed during such incentive plan year (but in no
event shall such target bonus be less than that in
effect for the period immediately prior to the
occurrence of the Change in Control); or (B) the
actual bonus earned through the date of the
Qualifying Termination under the Company's Annual
Corporate Performance Incentive Plan for Officers (or
any successor plan thereto), if any, based on the
then-current level of goal achievement. Such payment
shall constitute full satisfaction for these amounts
owed to Executive.
(iv) A lump-sum cash amount equal to the product
determined by multiplying (A) the sum of the amounts
payable under Subparagraphs 4(c) (i), (ii) and (iii)
herein by (B) the highest percentage of Executive's
compensation (eligible for such contributions)
contributed to the Executive's account under the
Lance, Inc. Profit-Sharing Retirement Plan and Trust
(the "Retirement Plan") during the three (3)
consecutive plan years ended immediately prior to the
Qualifying Termination. The source of payment of this
sum shall be the general assets of the Company unless
the payment of such amounts is otherwise permissible
from the
Retirement Plan without violating any governmental regulations or statutes including, but not limited to, ERISA discrimination testing requirements.
(v) At the exact same cost to Executive, and at the same coverage level as in effect as of the date of Executive's Qualifying Termination (subject to changes in coverage levels applicable to all employees generally), a continuation of the Executive's (and Executive's eligible dependents') health insurance coverage for thirty-six (36) months from the date of the Qualifying Termination. The applicable COBRA health insurance benefit continuation period shall begin coincident with the beginning of this thirty-six (36) month benefit continuation period.
Provided, however, the provision of these health insurance benefits shall be discontinued prior to the end of the thirty-six (36) month continuation period to the extent that Executive becomes covered under the health insurance coverage of a subsequent employer which does not contain any exclusion or limitation with respect to any preexisting condition of Executive or Executive's eligible dependents. For purposes of enforcing this offset provision, Executive shall have a duty to inform the Company if Executive becomes covered under any such health insurance of a subsequent employer. Executive shall provide, or cause to provide, to the Company in writing correct, complete, and timely information concerning the same.
(vi) At no expense to Executive, standard outplacement services for Executive from a nationally recognized outplacement firm of Executive's selection, for a period of up to two (2) years from the date of Executive's Qualifying Termination. However, such services shall be at the Company's expense to a maximum amount not to exceed twenty percent (20%) of the Executive's Base Salary as of the date of Executive's Qualifying Termination.
5. Excise Tax Payment.
(a) Following a Qualifying Termination, if any portion of the Severance Benefits or any other payment or benefits under any agreement with or plan of the Company, including but not limited to stock options and other long-term incentives, (hereinafter referred to in the aggregate as "Total Payments") will be subject to the Excise Tax, the Company shall pay to Executive, in cash, an additional amount (the "Gross-Up
Payment") sufficient to cover the full cost of all Excise Taxes and Executive's federal, state and local income and employment taxes on this additional payment so that the net amount retained by Executive, after the payment of all Excise Taxes on the Total Payments and all federal, state and local income and employment taxes and Excise Taxes on the Gross-Up Payment, shall be equal to the Total Payments. The Total Payments, however, shall be subject to any federal, state and local income and employment taxes thereon. For this purpose, Executive shall be deemed to be in the highest marginal rate of federal, state and local taxes. The Gross-Up Payment shall be made at the same time as the Severance Benefits described in Subparagraphs 4(c)(i) through (iv) herein are due.
(b) In the event the Internal Revenue Service subsequently adjusts the Excise Tax computation made pursuant to Paragraph 5(a) above, the Company shall pay Executive an additional Gross-Up Payment in the full amount necessary to make Executive whole on an after-tax basis (less any amounts received by Executive that Executive would not have received had the computations initially been computed as subsequently adjusted), including the amount of any underpaid Excise Tax, and any related interest and/or penalties due to the Internal Revenue Service.
6. Assignment of This Agreement or Benefits Hereunder.
(a) Successors. The Company will require any successor (whether via a Change in Control, direct or indirect, by purchase, merger, consolidation, or otherwise) of the Company to expressly assume and agree to perform the obligations under this Compensation and Benefits Assurance Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall, as of the date immediately preceding the date of a Change in Control, automatically provide Executive with Good Reason to collect, immediately, full benefits hereunder as a Qualifying Termination.
(b) Assignment by Executive. This Compensation and Benefits Assurance Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If an Executive should die while any amount is still payable to Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Compensation and Assurance Benefits Agreement to Executive's estate. Executive's rights hereunder shall not otherwise be assignable.
7. Notices. Any notice required to be delivered to the Company by Executive hereunder shall be properly delivered to the Company when personally delivered to (including by a reputable overnight courier), or actually received through the U.S. mail, postage prepaid, by:
Lance, Inc. P. O. Box 32368 8600 South Boulevard Charlotte, NC 28232
Attn: President
Any notice required to be delivered to Executive by the Company hereunder shall be properly delivered to Executive when personally delivered to (including by a reputable overnight courier), or actually received through the U.S. mail, postage prepaid, by, Executive at his last known address as reflected on the books and records of the Company.
8. Contractual Rights to Benefits. This Compensation and Benefits Assurance Agreement establishes in Executive a right to the benefits to which Executive is entitled hereunder. However, except as expressly stated herein, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. This Compensation and Benefits Assurance Agreement is intended to be an unfunded general asset promise for a select, highly compensated member of the Company's management and, therefore, is intended to be exempt from the substantive provisions of the Employee Retirement Income Security Act of 1974, as amended.
9. Legal Fees and Expenses. The Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses which are incurred in good faith by Executive as a result of the Company's refusal to provide the benefits to which Executive becomes entitled under this Compensation and Assurance Benefits Agreement or under any other agreement with or plan of the Company which would provide Executive with benefits or payments following a Qualifying Termination (collectively "Termination Benefit Arrangements"), or as a result of the Company's (or any third party's) contesting the validity, enforceability, or interpretation of this Compensation and Benefits Assurance Agreement or any Termination Benefits Arrangement, or as a result of any conflict between the parties pertaining to this Compensation and Benefits Assurance Agreement or any Termination Benefits Arrangement.
10. Exclusivity of Benefits. Unless specifically provided herein, neither the provisions of this Compensation and Benefits Assurance Agreement nor the benefits provided hereunder shall reduce any amounts otherwise payable, or in any way diminish Executive's rights as an employee of the Company, whether existing now or hereafter, under any compensation and/or benefit plans, programs, policies, or practices provided by the Company, for which Executive may qualify. Vested benefits or other amounts which Executive is otherwise entitled to receive under any plan, policy, practice, or program of the Company (i.e., including, but not limited to, vested benefits under the Company's qualified employee benefit plans), at or subsequent to the date of Executive's Qualifying
Termination shall be payable in accordance with such plan, policy, practice, or program except as expressly modified by this Compensation and Benefits Assurance Agreement.
11. Includable Compensation. Severance Benefits provided hereunder shall not be considered "includable compensation" for purposes of determining Executive's benefits under any other plan or program of the Company unless otherwise provided by such other plan or program.
12. Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Compensation and Benefits Assurance Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of employment by another employer, other than as provided in Subparagraph 4(c)(v) herein.
13. Entire Agreement. This Compensation and Benefits Assurance Agreement represents the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior discussions, negotiations, and agreements concerning the subject matter hereof, including, but not limited to, any prior severance agreement made between Executive and the Company other than the Executive Severance Agreement between Executive and the Company entered into on the date hereof.
14. Tax Withholding. The Company shall withhold from any amounts payable under this Compensation and Benefits Assurance Agreement all federal, state, city, or other taxes as legally required to be withheld.
15. Waiver of Rights. Except as otherwise provided herein, Executive's acceptance of Severance Benefits, the Gross-Up Payment (if applicable) and any other payments required hereunder shall be deemed to be a waiver of all rights and claims of Executive against the Company pertaining to any matters arising under this Compensation and Benefits Assurance Agreement.
16. Severability. In the event any provision of this Compensation and Benefits Assurance Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Compensation and Benefits Assurance Agreement, and this Compensation and Benefits Assurance Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
17. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of North Carolina shall be the controlling law in all matters relating to this Compensation and Benefits Assurance Agreement.
18. Execution. This Compensation and Benefits Assurance Agreement is hereby executed in duplicate originals, one of which is being retained by each of the parties hereto.
IN WITNESS WHEREOF, Lance, Inc. has caused this Compensation and Benefits Assurance Agreement to be signed by its duly authorized officers, and Executive has hereunto set his hand and seal, all as of the day and year first above written.
"Company"
Lance, Inc.
[Corporate Seal]
Attest: By:
-----------------------
__________ President
-------------------------
Secretary
|
"Executive"
EXHIBIT 10.15
STATE OF NORTH CAROLINA EXECUTIVE
SEVERANCE AGREEMENT
COUNTY OF MECKLENBURG
THIS AGREEMENT, entered into this 7th day of November, 1997, by and between Lance, Inc., a North Carolina corporation, hereinafter referred to as the "Company", and Paul A. Stroup, III, hereinafter referred to as "Executive";
STATEMENT OF PURPOSE
On April 20, 1990, the Company and Executive entered into an Executive Employment Agreement (the "Employment Agreement") pursuant to which the Company continued Executive's employment as Executive Vice President of the Company and provided Executive with certain benefits under the Lance, Inc. Key Executive Employee Benefit Plan. Executive currently holds the title of President and Chief Executive Officer of the Company, is a member of the Company's Board of Directors and holds various other positions with the Company and its Affiliates.
The Board of Directors of the Company has recently authorized a program (the "New Severance Program") designed to provide certain executives of the Company with severance benefits upon the termination of their employment with the Company and its Affiliates under certain circumstances following a Change in Control of the Company. Certain of the benefits provided Executive under the Employment Agreement would be duplicative of the benefits offered under the New Severance Program. Moreover, the benefits which would be provided Executive under the Employment Agreement in the event of Executive's involuntary termination of employment without Cause prior to a Change in Control are not clear.
Therefore, the Company and Executive have decided that it is desirable and in their respective best interests that the Employment Agreement be terminated and in lieu thereof that Executive and the Company enter into (i) a Compensation and Benefits Assurance Agreement pursuant to the New Severance Program and (ii) this Agreement which provides Executive certain benefits in the event of Executive's termination of employment under certain circumstances prior to a Change in Control and in the event of Executive's Retirement.
NOW, THEREFORE, in consideration of the Statement of Purpose and the terms and provisions of this Agreement, the parties hereto mutually agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement that (i) are not expressly defined herein and (ii) are defined in the Compensation and Benefits Assurance Agreement shall have the respective meanings given to those terms in the Compensation and
Benefits Assurance Agreement. In addition, as used herein, the following terms shall have the following meanings:
(a) "Cause" means:
(i) Executive's failure to devote his best efforts and substantially full time during normal business hours to the discharge of the duties and responsibilities of Executive's position reasonably assigned to him, other than during reasonable periods of vacation and other reasonable leaves of absence commensurate with Executive's position and length of service; or
(ii) A material and willful breach of Executive's fiduciary duties to the Company and its stockholders; or
(iii) In connection with the discharge of Executive's duties with the Company, one or more material acts of fraud or dishonesty or gross abuse of authority; or
(iv) Executive's commission of any willful act involving moral turpitude which materially and adversely affects (A) the name and good will of the Company or (B) the Company's relationship with its employees, customers or suppliers; or
(v) Executive's habitual and intemperate use of alcohol or drugs to the extent that the same materially interferes with Executive's ability to competently, diligently and substantially perform the duties of his employment.
(b) "Compensation and Benefits Assurance Agreement" means that certain Compensation and Benefits Assurance Agreement between Executive and the Company entered into on the date hereof.
(c) "Current Annual Salary" means the amount of Base Salary actually paid to Executive during the 52-week year immediately prior to his Termination of Employment.
(d) "Disability" means the inability, by reason of physical or mental infirmity or both, of an apparently permanent nature of Executive to perform satisfactorily the duties then assigned to him or the duties of any other executive position to which the Board is willing to assign him; Disability must be determined by the Board and shall be based
upon certification of such Disability by an independent qualified physician or other credible medical evidence, if available.
(e) "Payment Period" means the time beginning with the Period following the Period in which Executive's Retirement occurs and ending upon the earlier of (i) the end of the Period during which occurs the fifteenth anniversary of the date of Executive's Retirement or (ii) the last day of the Company's fiscal year during which occurs the seventy-fifth anniversary of Executive's birth.
(f) "Period" means the Company's accounting period as hereinafter described. In accordance with the provisions of ss.441(f) of the Internal Revenue Code of 1986, as amended, the Company uses a fiscal year varying from 52 to 53 weeks ending on the last Saturday in December in each year, which fiscal year consists of 13 accounting periods of 4 weeks each, except that in a year consisting of 53 weeks, the last accounting period consists of 5 weeks. In the event that the Company changes its fiscal year for income tax purposes, the Company shall have the right to alter and adjust payment dates under Paragraph 3 of this Agreement to coincide with its then existing accounting period, provided, however, that under no circumstances shall the Company have the right to adjust such payment dates hereunder to dates more than 31 days apart.
(g) "Retire" and "Retirement" mean any Termination of Employment (including on account of death or Disability) on or after the Retirement Date.
(h) "Retirement Date" means the earlier of:
(i) the last day of the Company's fiscal year during which Executive attains the age of sixty (60) years (i.e., December 31, 2011);
(ii) the date of Executive's death while employed by the Company; or
(iii) the date of Executive's Termination of Employment by reason of Executive's Disability.
(i) "Severance Multiple" means the lesser of (i) two and one half (2 1/2) or (ii) the quotient obtained by dividing (A) the number of full months between Executive's Termination of Employment and the last day of the Company's fiscal year during which Executive will attain the age of sixty (60) years (i.e., December 31, 2011) by (B) 12.
(j) "Stock Options" means Executive's options to purchase shares of the Company's common stock pursuant to options granted to Executive by the Company prior to Executive's Termination of Employment, which options are otherwise vested in Executive on the date of his Termination of Employment and remain unexercised upon the expiration of such options in accordance with their terms upon or subsequent to Executive's Termination of Employment.
(k) "Termination Date" means the date of Executive's Termination of Employment.
(l) "Value" with reference to Executive's Stock Options means the estimated present value of the Stock Options determined on the basis of a "Black-Scholes" valuation calculation using the price of the shares of the Company's common stock and comparable U.S. Treasury Strip Rates with a term equivalent to the remaining term of the respective Stock Options as reported in the Wall Street Journal for the date of Executive's Termination of Employment, using the dividends paid during the twelve month period immediately prior to the date of Executive's Termination of Employment and using a stock price volatility factor as reflected in the Company's most recent proxy statement.
2. TERMINATION OF EMPLOYMENT AGREEMENT. The Employment Agreement is hereby terminated and neither the Company nor Executive have any further obligations thereunder.
3. RETIREMENT.
(a) RETIREMENT BENEFITS PAYMENT. Subject to Paragraph 3(d), following Executive's Retirement the Company agrees to pay Executive in each Period during the Payment Period retirement benefits in an amount to be determined as hereinafter provided in this Paragraph 3(a). The amount payable to Executive in each Period during the Payment Period under this Paragraph 3(a) shall be determined as follows:
(i) determine the product obtained by multiplying Executive's Current Annual Salary by five (5), and
(ii) divide said product so obtained by the number of full Periods during the Payment Period.
Said retirement benefit payments shall be made at the end of each Period. In the event that Executive dies after Retirement and prior to the end of the Payment Period, retirement benefit payments under this Paragraph 3(a) shall
terminate with the payment for the Period in which death occurs. Payments under this Paragraph 3(a) are on account of Executive's retirement.
(b) DEATH BENEFIT PAYMENTS. In the event of Executive's Retirement by reason of his death or in the event of Executive's death after his Retirement but prior to the end of the Payment Period, subject to Paragraph 3(d), the Company agrees to pay to the beneficiary designated by Executive [or to Executive's estate in the event (i) he has not designated a beneficiary, or (ii) the beneficiary designated by Executive fails to survive him] in each Period during the remainder of the Payment Period, a death benefit in an amount equal to seventy-five percent (75%) of the retirement benefit amount otherwise payable in each Period to Executive under Paragraph 3(a) above. Said 75% of the amount otherwise payable in each period under Paragraph 3(a) is the total amount payable by the Company under this Agreement to such beneficiary. If Executive's Retirement is by reason of his death, then the "retirement benefit amount otherwise payable in each period to Executive under Paragraph 3(a) above" shall be the retirement benefit amount which Executive would have received if he had otherwise Retired and commenced receiving retirement benefits on his date of death. The payments under this Paragraph 3(b) shall begin with the Period following the Period in which death occurs and shall end with the expiration of the Payment Period. Said death benefit payments shall be made at the end of each Period.
(c) DESIGNATION OF BENEFICIARY. Executive may designate a beneficiary to receive payments payable hereunder after his death by filing with the Company a beneficiary designation on a form approved by the Company, bearing the name, address and relationship of the beneficiary, which beneficiary designation form shall be acknowledged by Executive before a Notary Public or other officer authorized to administer oaths, and shall be in such other form and shall contain such other information as shall be satisfactory to the Company. The beneficiary may be changed by Executive at any time by filing a new beneficiary designation form with the Company, said new beneficiary designation form to comply with the provisions of this Paragraph 3(c). If Executive shall not be survived by the beneficiary designated in accordance with the provisions herein set forth, then upon Executive's death, any and all payments provided for herein shall be made to Executive's estate. If Executive shall be survived by the beneficiary designated as provided herein, and such beneficiary shall die prior to receiving all amounts payable hereunder to such deceased beneficiary if such beneficiary had lived, then all remaining amounts that would have been paid to such deceased beneficiary if living shall be paid to the estate of such deceased beneficiary.
(d) LUMP SUM PAYMENTS. Notwithstanding the foregoing, in lieu of the periodic payments provided for in Paragraphs 3(a) and 3(b) above, Executive or his beneficiary or estate, as the case may be, may elect prior to the time
such payments are to commence to have the present value of such payments made in a single cash payment within thirty (30) days of the date such payments would otherwise commence, said present value to be determined using the interest rate equal to the yield on the 10-year United States Treasury Bond on the date payments would otherwise commence and, in the case of payments under Paragraph 3(a), without any discount for mortality. In any case where payments hereunder are to be made to an estate (either the estate of Executive or the estate of a deceased beneficiary), the Company may elect in lieu of making the periodic payments provided in Paragraph 3(b) to have the present value of such payments made in a single cash payment within thirty (30) days of the date such payments would otherwise commence, said present value to be determined in the same manner as provided above.
4. TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL AND PRIOR TO RETIREMENT.
(a) COMPENSATION AND BENEFITS ASSURANCE AGREEMENT. Contemporaneously herewith, the Company and Executive have entered into the Compensation and Benefits Assurance Agreement. In no event shall any payments or benefits be made to or provided Executive under the terms of this Agreement upon Executive's Termination of Employment after a Change in Control and prior to Executive's Retirement Date except for the benefit expressly provided for in Paragraph 4(b).
(b) PRE-RETIREMENT PAYMENT. In the event of Executive's Termination of Employment, whether voluntary or involuntary, with or without Cause, after a Change in Control but prior to Executive's Retirement Date, the Company agrees to pay Executive a single lump sum cash payment within thirty (30) days after the Termination Date in an amount equal to the "current value" [computed as hereinafter provided in this Paragraph 4(b)] of the per period amount of the retirement benefits to which Executive would have been entitled to under Paragraph 3 of this Agreement determined as if Executive's Retirement had occurred on the Termination Date. The "current value" of such per period amount of such retirement benefits shall be the present value on the Termination Date of such retirement benefits based on the following assumptions:
(i) Payment of such per period amount of such retirement benefits would commence with the Period following the last day of the Company's fiscal year during which the Executive would attain the age of sixty (60) years (i.e., December 31, 2011) and the Payment Period would continue through the end of the Period during which occurs December 31, 2026;
(ii) Such present value shall be determined by using the interest rate equal to the yield on the 10-year United States Treasury Bond on the Termination Date; and
(iii) Such present value shall be determined without any discount for mortality.
5. INVOLUNTARY TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL OR EXECUTIVE'S RETIREMENT DATE. In the event of Executive's involuntary Termination of Employment without Cause prior to the earlier of a Change in Control or Executive's Retirement Date, the Company agrees to pay to or provide Executive with the following:
(a) A single cash payment in an amount equal to the Severance Multiple multiplied by the sum of (i) the highest Base Salary paid to Executive during his employment by the Company plus (ii) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, in effect on the Termination Date, which payment shall be made within thirty (30) days after the Termination Date.
(b) Payment of retirement benefits and death benefits, computed in accordance with Paragraph 3 of this Agreement as if Executive's Retirement had occurred on the Termination Date, which such payments shall be made in accordance with the provisions of Paragraph 3 as if Executive's Retirement had occurred on the Termination Date.
(c) A single cash payment in an amount equal to Executive's unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to Executive through the Termination Date.
(d) A single cash payment in an amount equal to the greater of (i) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for the incentive plan year in which the Termination Date occurs, adjusted on a pro-rata basis based on the number of days Executive was actually employed during such incentive plan year or (ii) the actual bonus earned through the Termination Date under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, based on the then-current level of goal achievement; which payment shall be made at the same time as the payments are made to the Company's other employees under the Company's
Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for the incentive plan year during which the Termination Date occurs.
(e) Conveyance of possession and title to the Company-owned automobile, if any, used by Executive in connection with his employment immediately prior to the Termination Date within thirty (30) days after such Termination Date.
(f) A single cash payment of the Value of the Stock Options, which payment shall be paid within ten (10) days following the expiration of such Stock Options.
(g) Medical Insurance coverage for Executive until Executive reaches the age of sixty (60) (July 12, 2011) or his earlier death under such terms and conditions as are most closely comparable to the "Plan B" or HMO coverage option provided Executive under the Company's Group Medical Benefits Plan on the Termination Date and as shall be thereafter customarily provided by the Company to the Company's executives from time to time during such period. During this period, Executive shall be entitled to obtain at Executive's expense such optional coverages, such as dental coverage and family/dependent medical coverage, under the Company's Group Medical Benefits Plan as are available for the Company's employees generally. After age sixty (60) Executive may elect to obtain at Executive's expense coverage as a "retiree" under such Group Medical Benefits Plan, if any, as may be then available to the Company's retired executives.
(h) Life Insurance, accidental death and dismemberment insurance and disability insurance for Executive until Executive reaches age sixty (60) (July 12, 2011) or his earlier death under such terms and conditions that are reasonably comparable to the coverages provided Executive under the Company's plans for such insurance on the Termination Date and as shall be thereafter customarily provided by the Company to Company's executives from time to time during such period.
(i) Indemnification of Executive from any claims asserted against Executive arising out of the prior performance of Executive's duties with the Company or its Affiliates to the same extent as the Company indemnifies retired officers or directors of the Company.
(j) Payment of Executive's vested interest under the Company sponsored qualified profit sharing and 401(k) Plans when and as provided in, and otherwise subject to, the terms, provisions and conditions of said
Plans, and nothing in this Agreement shall modify or override the terms, provisions and conditions of such Plans.
(k) At no expense to Executive, standard outplacement services for Executive from a nationally recognized outplacement firm of Executive's selection, for a period of up to two (2) years from the Termination Date. However, such services shall be at the Company's expense to a maximum amount not to exceed twenty percent (20%) of the Executive's Base Salary as of the Termination Date.
6. OTHER TERMINATION OF EMPLOYMENT. Except as otherwise expressly provided to the contrary in the Compensation and Benefits Assurance Agreement and in Paragraph 4 of this Agreement, Executive shall not be entitled to any payments or benefits upon his Termination of Employment in the following events:
(a) Executive's voluntary Termination of Employment prior to his Retirement Date, or
(b) Executive's involuntary Termination of Employment for Cause prior to his Retirement Date, or
(c) Executive's Termination of Employment, whether voluntary or involuntary, with or without Cause, prior to his Retirement Date and following a Change in Control.
7. MITIGATION. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of employment by another employer.
8. ADEA WAIVER. Executive understands that the severance benefits
provided in Paragraph 5 will decline as Executive approaches the age of sixty
(60) years and will be eliminated at the end of the Company's fiscal year during
which Executive attains the age of sixty (60) years. Moreover, the Compensation
and Benefits Assurance Agreement may be terminated by the Company at the end of
the Company's fiscal year during which Executive attains the age of sixty (60)
years. If such reduction and/or elimination of benefits is construed to violate
the Age Discrimination in Employment Act of 1967, as amended, Executive does
hereby release and waive any claim he may have by reason of such violation.
Executive acknowledges that this Agreement and the Compensation and Benefits
Agreement provide new consideration which he was not previously entitled to
receive, that he has consulted an attorney before executing the agreements, and
that he has been given up to twenty-one (21) days within which to consider the
agreements. This Agreement will not become effective or enforceable until seven
(7) days following Executive's execution of this Agreement, and Executive may
revoke this Agreement at any time during such seven-day period by delivering (or
causing to be delivered) to the principal office of the Company a
notice of his revocation of this Agreement. The execution of the Compensation and Benefits Assurance Agreement is in part consideration for and an integral part of this Agreement, and therefore, any such revocation of this Agreement will also constitute a revocation and cancellation of the Compensation and Benefits Assurance Agreement.
9. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses ("Legal Expenses") which are incurred in good faith by Executive as a result of the Company's refusal to provide the benefits to which Executive becomes entitled under this Agreement, or as a result of the Company's (or any third party's) contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement; provided, however, in no event shall the Company be required to pay any such expenses if it is finally determined that Executive's Termination of Employment was for Cause.
10. APPLICABLE LAW. This Agreement is made and executed with the intention that the construction, interpretation and validity hereof shall be determined in accordance with and governed by the laws of the State of North Carolina.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. This Agreement shall be binding upon and inure to the benefit of Executive, his heirs, executors and administrators.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized officers and its corporate seal to be hereunto affixed, and Executive has hereunto set his hand and seal, all as of the day and year first above written.
Lance, Inc.
[CORPORATE SEAL]
ATTEST: By: /s/ Earl D. Leake
--------------------------------
Vice President
/s/ Robert S. Carles
--------------------
Secretary
/s/ Paul A. Stroup, III [SEAL]
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Paul A. Stroup, III
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STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, Carolyn H. Martin , a Notary Public for said County and State, do hereby certify that Paul A. Stroup, III personally appeared before me this day and acknowledged the due execution of the foregoing instrument.
WITNESS my hand and notarial seal, this 7th day of November, 1997.
/s/ Carolyn H. Martin
------------------------------
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
December 22, 2001
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|
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
This 7th day of November, 1997, personally came before me Earl D. Leake, who, being by me duly sworn, says that he is a Vice President of Lance, Inc., that the seal affixed to the foregoing instrument in writing is the corporate seal of said Corporation, and that said writing was signed and sealed by him, in behalf of said Corporation, by its authority duly given. And the said Earl D. Leake acknowledged the said writing to be the act and deed of said Corporation.
/s/ Myrna Chromzak
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Notary Public
|
[NOTARIAL SEAL]
My Commission Expires:
EXHIBIT 10.16
STATE OF NORTH CAROLINA EXECUTIVE
SEVERANCE AGREEMENT
COUNTY OF MECKLENBURG
THIS AGREEMENT, entered into this 7th day of November, 1997, by and between Lance, Inc., a North Carolina corporation, hereinafter referred to as the "Company", and Earl D. Leake, hereinafter referred to as "Executive";
STATEMENT OF PURPOSE
On February 21, 1995, the Company and Executive entered into an Executive Employment Agreement (the "Employment Agreement") pursuant to which the Company continued Executive's employment as Treasurer and Assistant Secretary of the Company and provided Executive with certain benefits under the Lance, Inc. Key Executive Employee Benefit Plan. Executive currently holds the title of Vice President of Human Resources and holds various other positions with the Company and its Affiliates.
The Board of Directors of the Company has recently authorized a program (the "New Severance Program") designed to provide certain executives of the Company with severance benefits upon the termination of their employment with the Company and its Affiliates under certain circumstances following a Change in Control of the Company. Certain of the benefits provided Executive under the Employment Agreement would be duplicative of the benefits offered under the New Severance Program. Moreover, the benefits which would be provided Executive under the Employment Agreement in the event of Executive's involuntary termination of employment without Cause prior to a Change in Control are not clear.
Therefore, the Company and Executive have decided that it is desirable and in their respective best interests that the Employment Agreement be terminated and in lieu thereof that Executive and the Company enter into (i) a Compensation and Benefits Assurance Agreement pursuant to the New Severance Program and (ii) this Agreement which provides Executive certain benefits in the event of Executive's termination of employment under certain circumstances prior to a Change in Control and in the event of Executive's Retirement.
NOW, THEREFORE, in consideration of the Statement of Purpose and the terms and provisions of this Agreement, the parties hereto mutually agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement that (i) are not expressly defined herein and (ii) are defined in the Compensation and Benefits Assurance Agreement shall have the respective meanings given to those terms in the Compensation and Benefits Assurance Agreement. In addition, as used herein, the following terms shall have the following meanings:
(a) "Cause" means:
(i) Executive's failure to devote his best efforts and substantially full time during normal business hours to the discharge of the duties and responsibilities of Executive's position reasonably assigned to him, other than during reasonable periods of vacation and other reasonable leaves of absence commensurate with Executive's position and length of service; or
(ii) A material and willful breach of Executive's fiduciary duties to the Company and its stockholders; or
(iii) In connection with the discharge of Executive's duties with the Company, one or more material acts of fraud or dishonesty or gross abuse of authority; or
(iv) Executive's commission of any willful act involving moral turpitude which materially and adversely affects (A) the name and good will of the Company or (B) the Company's relationship with its employees, customers or suppliers; or
(v) Executive's habitual and intemperate use of alcohol or drugs to the extent that the same materially interferes with Executive's ability to competently, diligently and substantially perform the duties of his employment.
(b) "Compensation and Benefits Assurance Agreement" means that certain Compensation and Benefits Assurance Agreement between Executive and the Company entered into on the date hereof.
(c) "Current Annual Salary" means the amount of Base Salary actually paid to Executive during the 52-week year immediately prior to his Termination of Employment.
(d) "Disability" means the inability, by reason of physical or mental infirmity or both, of an apparently permanent nature of Executive to perform satisfactorily the duties then assigned to him or the duties of any other executive position to which the Board is willing to assign him; Disability must be determined by the Board and shall be based upon certification of such Disability by an independent qualified physician or other credible medical evidence, if available.
(e) "Payment Period" means the time beginning with the Period following the Period in which Executive's Retirement occurs and ending upon the earlier of (i) the end of the Period during which occurs the fifteenth anniversary of the date of Executive's Retirement or (ii) the last day of the Company's fiscal year during which occurs the seventy-fifth anniversary of Executive's birth.
(f) "Period" means the Company's accounting period as hereinafter described. In accordance with the provisions of ss.441(f) of the Internal Revenue Code of 1986, as amended, the Company uses a fiscal year varying from 52 to 53 weeks ending on the last Saturday in December in each year, which fiscal year consists of 13 accounting periods of 4 weeks each, except that in a year consisting of 53 weeks, the last accounting period consists of 5 weeks. In the event that the Company changes its fiscal year for income tax purposes, the Company shall have the right to alter and adjust payment dates under Paragraph 3 of this Agreement to coincide with its then existing accounting period, provided, however, that under no circumstances shall the Company have the right to adjust such payment dates hereunder to dates more than 31 days apart.
(g) "Retire" and "Retirement" mean any Termination of Employment (including on account of death or Disability) on or after the Retirement Date.
(h) "Retirement Date" means the earlier of:
(i) the last day of the Company's fiscal year during which Executive attains the age of sixty (60) years (i.e., December 31, 2011);
(ii) the date of Executive's death while employed by the Company; or
(iii) the date of Executive's Termination of Employment by reason of Executive's Disability.
(i) "Severance Multiple" means the lesser of (i) two and one half (2 1/2) or (ii) the quotient obtained by dividing (A) the number of full months between Executive's Termination of Employment and the last day of the Company's fiscal year during which Executive will attain the age of sixty (60) years (i.e., December 31, 2011) by (B) 12.
(j) "Stock Options" means Executive's options to purchase shares of the Company's common stock pursuant to options granted to Executive by the Company prior to Executive's Termination of Employment,
which options are otherwise vested in Executive on the date of his Termination of Employment and remain unexercised upon the expiration of such options in accordance with their terms upon or subsequent to Executive's Termination of Employment.
(k) "Termination Date" means the date of Executive's Termination of Employment.
(l) "Value" with reference to Executive's Stock Options means the estimated present value of the Stock Options determined on the basis of a "Black-Scholes" valuation calculation using the price of the shares of the Company's common stock and comparable U.S. Treasury Strip Rates with a term equivalent to the remaining term of the respective Stock Options as reported in the Wall Street Journal for the date of Executive's Termination of Employment, using the dividends paid during the twelve month period immediately prior to the date of Executive's Termination of Employment and using a stock price volatility factor as reflected in the Company's most recent proxy statement.
2. TERMINATION OF EMPLOYMENT AGREEMENT. The Employment Agreement is hereby terminated and neither the Company nor Executive have any further obligations thereunder.
3. RETIREMENT.
(a) RETIREMENT BENEFITS PAYMENT. Subject to Paragraph 3(d), following Executive's Retirement the Company agrees to pay Executive in each Period during the Payment Period retirement benefits in an amount to be determined as hereinafter provided in this Paragraph 3(a). The amount payable to Executive in each Period during the Payment Period under this Paragraph 3(a) shall be determined as follows:
(i) determine the product obtained by multiplying Executive's Current Annual Salary by five (5), and
(ii) divide said product so obtained by the number of full Periods during the Payment Period.
Said retirement benefit payments shall be made at the end of each Period. In the event that Executive dies after Retirement and prior to the end of the Payment Period, retirement benefit payments under this Paragraph 3(a) shall terminate with the payment for the Period in which death occurs. Payments under this Paragraph 3(a) are on account of Executive's retirement.
(b) DEATH BENEFIT PAYMENTS. In the event of Executive's Retirement by reason of his death or in the event of Executive's death after his Retirement but prior to the end of the Payment Period, subject to Paragraph 3(d), the Company agrees to pay to the beneficiary designated by Executive [or to Executive's estate in the event (i) he has not designated a beneficiary, or (ii) the beneficiary designated by Executive fails to survive him] in each Period during the remainder of the Payment Period, a death benefit in an amount equal to seventy-five percent (75%) of the retirement benefit amount otherwise payable in each Period to Executive under Paragraph 3(a) above. Said 75% of the amount otherwise payable in each period under Paragraph 3(a) is the total amount payable by the Company under this Agreement to such beneficiary. If Executive's Retirement is by reason of his death, then the "retirement benefit amount otherwise payable in each period to Executive under Paragraph 3(a) above" shall be the retirement benefit amount which Executive would have received if he had otherwise Retired and commenced receiving retirement benefits on his date of death. The payments under this Paragraph 3(b) shall begin with the Period following the Period in which death occurs and shall end with the expiration of the Payment Period. Said death benefit payments shall be made at the end of each Period.
(c) DESIGNATION OF BENEFICIARY. Executive may designate a beneficiary to receive payments payable hereunder after his death by filing with the Company a beneficiary designation on a form approved by the Company, bearing the name, address and relationship of the beneficiary, which beneficiary designation form shall be acknowledged by Executive before a Notary Public or other officer authorized to administer oaths, and shall be in such other form and shall contain such other information as shall be satisfactory to the Company. The beneficiary may be changed by Executive at any time by filing a new beneficiary designation form with the Company, said new beneficiary designation form to comply with the provisions of this Paragraph 3(c). If Executive shall not be survived by the beneficiary designated in accordance with the provisions herein set forth, then upon Executive's death, any and all payments provided for herein shall be made to Executive's estate. If Executive shall be survived by the beneficiary designated as provided herein, and such beneficiary shall die prior to receiving all amounts payable hereunder to such deceased beneficiary if such beneficiary had lived, then all remaining amounts that would have been paid to such deceased beneficiary if living shall be paid to the estate of such deceased beneficiary.
(d) LUMP SUM PAYMENTS. Notwithstanding the foregoing, in lieu of the periodic payments provided for in Paragraphs 3(a) and 3(b) above, Executive or his beneficiary or estate, as the case may be, may elect prior to the time such payments are to commence to have the present value of such payments made in a single cash payment within thirty (30) days of the date such payments would otherwise commence, said present value to be determined
using the interest rate equal to the yield on the 10-year United States Treasury Bond on the date payments would otherwise commence and, in the case of payments under Paragraph 3(a), without any discount for mortality. In any case where payments hereunder are to be made to an estate (either the estate of Executive or the estate of a deceased beneficiary), the Company may elect in lieu of making the periodic payments provided in Paragraph 3(b) to have the present value of such payments made in a single cash payment within thirty (30) days of the date such payments would otherwise commence, said present value to be determined in the same manner as provided above.
4. TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL AND PRIOR TO RETIREMENT.
(a) COMPENSATION AND BENEFITS ASSURANCE AGREEMENT. Contemporaneously herewith, the Company and Executive have entered into the Compensation and Benefits Assurance Agreement. In no event shall any payments or benefits be made to or provided Executive under the terms of this Agreement upon Executive's Termination of Employment after a Change in Control and prior to Executive's Retirement Date except for the benefit expressly provided for in Paragraph 4(b).
(b) PRE-RETIREMENT PAYMENT. In the event of Executive's Termination of Employment, whether voluntary or involuntary, with or without Cause, after a Change in Control but prior to Executive's Retirement Date, the Company agrees to pay Executive a single lump sum cash payment within thirty (30) days after the Termination Date in an amount equal to the "current value" [computed as hereinafter provided in this Paragraph 4(b)] of the per period amount of the retirement benefits to which Executive would have been entitled to under Paragraph 3 of this Agreement determined as if Executive's Retirement had occurred on the Termination Date. The "current value" of such per period amount of such retirement benefits shall be the present value on the Termination Date of such retirement benefits based on the following assumptions:
(i) Payment of such per period amount of such retirement benefits would commence with the Period following the last day of the Company's fiscal year during which the Executive would attain the age of sixty (60) years (i.e., December 31, 2011) and the Payment Period would continue through the end of the Period during which occurs December 31, 2026;
(ii) Such present value shall be determined by using the interest rate equal to the yield on the 10-year United States Treasury Bond on the Termination Date; and
(iii) Such present value shall be determined without any discount for mortality.
5. INVOLUNTARY TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL OR EXECUTIVE'S RETIREMENT DATE. In the event of Executive's involuntary Termination of Employment without Cause prior to the earlier of a Change in Control or Executive's Retirement Date, the Company agrees to pay to or provide Executive with the following:
(a) A single cash payment in an amount equal to the Severance Multiple multiplied by the sum of (i) the highest Base Salary paid to Executive during his employment by the Company plus (ii) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, in effect on the Termination Date, which payment shall be made within thirty (30) days after the Termination Date.
(b) Payment of retirement benefits and death benefits, computed in accordance with Paragraph 3 of this Agreement as if Executive's Retirement had occurred on the Termination Date, which such payments shall be made in accordance with the provisions of Paragraph 3 as if Executive's Retirement had occurred on the Termination Date.
(c) A single cash payment in an amount equal to Executive's unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to Executive through the Termination Date.
(d) A single cash payment in an amount equal to the greater of (i) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for the incentive plan year in which the Termination Date occurs, adjusted on a pro-rata basis based on the number of days Executive was actually employed during such incentive plan year or (ii) the actual bonus earned through the Termination Date under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, based on the then-current level of goal achievement; which payment shall be made at the same time as the payments are made to the Company's other employees under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for the incentive plan year during which the Termination Date occurs.
(e) Conveyance of possession and title to the Company-owned automobile, if any, used by Executive in connection with his employment immediately prior to the Termination Date within thirty (30) days after such Termination Date.
(f) A single cash payment of the Value of the Stock Options, which payment shall be paid within ten (10) days following the expiration of such Stock Options.
(g) Medical Insurance coverage for Executive until Executive reaches the age of sixty (60) (July 24, 2011) or his earlier death under such terms and conditions as are most closely comparable to the "Plan B" or HMO coverage option provided Executive under the Company's Group Medical Benefits Plan on the Termination Date and as shall be thereafter customarily provided by the Company to the Company's executives from time to time during such period. During this period, Executive shall be entitled to obtain at Executive's expense such optional coverages, such as dental coverage and family/dependent medical coverage, under the Company's Group Medical Benefits Plan as are available for the Company's employees generally. After age sixty (60) Executive may elect to obtain at Executive's expense coverage as a "retiree" under such Group Medical Benefits Plan, if any, as may be then available to the Company's retired executives.
(h) Life Insurance, accidental death and dismemberment insurance and disability insurance for Executive until Executive reaches age sixty (60) (July 24, 2011) or his earlier death under such terms and conditions that are reasonably comparable to the coverages provided Executive under the Company's plans for such insurance on the Termination Date and as shall be thereafter customarily provided by the Company to Company's executives from time to time during such period.
(i) Indemnification of Executive from any claims asserted against Executive arising out of the prior performance of Executive's duties with the Company or its Affiliates to the same extent as the Company indemnifies retired officers or directors of the Company.
(j) Payment of Executive's vested interest under the Company sponsored qualified profit sharing and 401(k) Plans when and as provided in, and otherwise subject to, the terms, provisions and conditions of said Plans, and nothing in this Agreement shall modify or override the terms, provisions and conditions of such Plans.
(k) At no expense to Executive, standard outplacement services for Executive from a nationally recognized outplacement firm of Executive's selection, for a period of up to two (2) years from the Termination Date. However, such services shall be at the Company's expense to a maximum amount not to exceed twenty percent (20%) of the Executive's Base Salary as of the Termination Date.
6. OTHER TERMINATION OF EMPLOYMENT. Except as otherwise expressly provided to the contrary in the Compensation and Benefits Assurance Agreement and in Paragraph 4 of this Agreement, Executive shall not be entitled to any payments or benefits upon his Termination of Employment in the following events:
(a) Executive's voluntary Termination of Employment prior to his Retirement Date, or
(b) Executive's involuntary Termination of Employment for Cause prior to his Retirement Date, or
(c) Executive's Termination of Employment, whether voluntary or involuntary, with or without Cause, prior to his Retirement Date and following a Change in Control.
7. MITIGATION. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of employment by another employer.
8. ADEA WAIVER. Executive understands that the severance benefits
provided in Paragraph 5 will decline as Executive approaches the age of sixty
(60) years and will be eliminated at the end of the Company's fiscal year during
which Executive attains the age of sixty (60) years. Moreover, the Compensation
and Benefits Assurance Agreement may be terminated by the Company at the end of
the Company's fiscal year during which Executive attains the age of sixty (60)
years. If such reduction and/or elimination of benefits is construed to violate
the Age Discrimination in Employment Act of 1967, as amended, Executive does
hereby release and waive any claim he may have by reason of such violation.
Executive acknowledges that this Agreement and the Compensation and Benefits
Agreement provide new consideration which he was not previously entitled to
receive, that he has consulted an attorney before executing the agreements, and
that he has been given up to twenty-one (21) days within which to consider the
agreements. This Agreement will not become effective or enforceable until seven
(7) days following Executive's execution of this Agreement, and Executive may
revoke this Agreement at any time during such seven-day period by delivering (or
causing to be delivered) to the principal office of the Company a notice of his
revocation of this Agreement. The execution of the Compensation and Benefits
Assurance Agreement is in part consideration for and an integral part of this
Agreement, and
therefore, any such revocation of this Agreement will also constitute a revocation and cancellation of the Compensation and Benefits Assurance Agreement.
9. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses ("Legal Expenses") which are incurred in good faith by Executive as a result of the Company's refusal to provide the benefits to which Executive becomes entitled under this Agreement, or as a result of the Company's (or any third party's) contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement; provided, however, in no event shall the Company be required to pay any such expenses if it is finally determined that Executive's Termination of Employment was for Cause.
10. APPLICABLE LAW. This Agreement is made and executed with the intention that the construction, interpretation and validity hereof shall be determined in accordance with and governed by the laws of the State of North Carolina.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. This Agreement shall be binding upon and inure to the benefit of Executive, his heirs, executors and administrators.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized officers and its corporate seal to be hereunto affixed, and Executive has hereunto set his hand and seal, all as of the day and year first above written.
Lance, Inc.
[CORPORATE SEAL]
ATTEST: By: /s/ P. A. Stroup, III
--------------------------------
President
/s/ Robert S. Carles
--------------------
Secretary
/s/ Earl D. Leake [SEAL]
------------------------------
Earl D. Leake
|
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, Carolyn H. Martin, a Notary Public for said County and State, do hereby certify that Earl D. Leake personally appeared before me this day and acknowledged the due execution of the foregoing instrument.
WITNESS my hand and notarial seal, this 7th day of November, 1997.
/s/ Carolyn H. Martin
------------------------------
Notary Public
|
[NOTARIAL SEAL]
My Commission Expires:
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
This 7th day of November, 1997, personally came before me Paul A. Stroup, III, who, being by me duly sworn, says that he is President of Lance, Inc., that the seal affixed to the foregoing instrument in writing is the corporate seal of said Corporation, and that said writing was signed and sealed by him, in behalf of said Corporation, by its authority duly given. And the said Paul A. Stroup, III acknowledged the said writing to be the act and deed of said Corporation.
/s/ Myrna Chromzck
------------------------------
Notary Public
|
[NOTARIAL SEAL]
My Commission Expires:
EXHIBIT 10.17
STATE OF NORTH CAROLINA EXECUTIVE
SEVERANCE AGREEMENT
COUNTY OF MECKLENBURG
THIS AGREEMENT, entered into this _______ day of November, 1997, by and between Lance, Inc., a North Carolina corporation, hereinafter referred to as the "Company," and ______________________, hereinafter referred to as "Executive";
STATEMENT OF PURPOSE
The Board of Directors of the Company has recently authorized a program (the "New Severance Program") designed to provide certain executives of the Company with severance benefits upon the termination of their employment with the Company and its Affiliates under certain circumstances following a Change in Control of the Company.
In addition to the benefits under the New Severance Program, the Company desires to provide Executive with certain benefits in the event of Executive's involuntary termination of employment without cause prior to a Change in Control.
Therefore, the Company and Executive have entered into (i) a Compensation and Benefits Assurance Agreement pursuant to the New Severance Program and (ii) this Agreement which provides Executive certain benefits in the event of Executive's termination of employment under certain circumstances prior to a Change in Control.
NOW, THEREFORE, in consideration of the Statement of Purpose and the terms and provisions of this Agreement, the parties hereto mutually agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement that (i) are not expressly defined herein and (ii) are defined in the Compensation and Benefits Assurance Agreement shall have the respective meanings given to those terms in the Compensation and Benefits Assurance Agreement. In addition, as used herein, the following terms shall have the following meanings:
(a) "Cause" means:
(i) Executive's failure to devote his best efforts and substantially full time during normal business hours to the discharge of the duties and responsibilities of Executive's position reasonably assigned to him, other than during reasonable periods of vacation and other reasonable leaves of absence commensurate with Executive's position and length of service; or
(ii) A material and willful breach of Executive's fiduciary duties to the Company and its stockholders; or
(iii) In connection with the discharge of Executive's duties with the Company, one or more material acts of fraud or dishonesty or gross abuse of authority; or
(iv) Executive's commission of any willful act involving moral turpitude which materially and adversely affects (A) the name and good will of the Company or (B) the Company's relationship with its employees, customers or suppliers; or
(v) Executive's habitual and intemperate use of alcohol or drugs to the extent that the same materially interferes with Executive's ability to competently, diligently and substantially perform the duties of his employment.
(b) "Compensation and Benefits Assurance Agreement" means that certain Compensation and Benefits Assurance Agreement between Executive and the Company entered into on the date hereof.
(c) "Effective Date" means the date of this Agreement.
(d) "Termination Date" means the date of Executive's Termination of Employment.
2. TERM OF AGREEMENT.
(a) This Agreement will commence on the Effective Date and shall continue in effect until the third anniversary of the Effective Date (the "Initial Term").
(b) The Initial Term of this Agreement automatically shall be extended for one additional year at the end of the Initial Term, and then again after each successive one (1) year period thereafter (each such one (1) year period following the Initial Term being hereinafter referred to as a "Successive Period"). However, either party may terminate this Agreement effective at the end of the Initial Term or at the end of any Successive Period thereafter (the "Expiration Date") by giving the other party written notice of such termination and intent not to renew, delivered at least one (1) year prior to the Expiration Date. If such notice is properly delivered by either party, this Agreement, along with all corresponding rights, duties, and covenants shall automatically expire on the Expiration Date.
3. COMPENSATION AND BENEFITS ASSURANCE AGREEMENT. Contemporaneously herewith, the Company and Executive have entered into the Compensation and Benefits Assurance Agreement. Notwithstanding anything to the contrary contained herein, in no event shall any payments or benefits be made to or provided Executive under the terms of
this Agreement if Severance Benefits are payable under the Compensation and Benefits Assurance Agreement.
4. INVOLUNTARY TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. In the event of Executive's involuntary Termination of Employment without Cause prior to a Change in Control, the Company agrees to pay to or provide Executive with the following:
(a) A single cash payment in an amount equal to the sum of (i) Executive's Base Salary in effect on the Termination Date plus (ii) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, in effect on the Termination Date, which payment shall be made within thirty (30) days after the Termination Date.
(b) A single cash payment in an amount equal to Executive's unpaid Base Salary, accrued vacation pay, unreimbursed business expenses, and all other items earned by and owed to Executive through the Termination Date.
(c) A single cash payment in an amount equal to the greater of (i) the Executive's then-current target bonus opportunity (stated in terms of a percentage of Base Salary) established under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for the incentive plan year in which the Termination Date occurs, adjusted on a pro-rata basis based on the number of days Executive was actually employed during such incentive plan year or (ii) the actual bonus earned through the Termination Date under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, based on the then-current level of goal achievement; which payment shall be made at the same time as the payments are made to the Company's other employees under the Company's Annual Corporate Performance Incentive Plan for Officers (or any successor plan thereto), if any, for incentive plan year during which the Termination Date occurs.
(d) Indemnification of Executive from any claims asserted against Executive arising out of the prior performance of Executive's duties with the Company or its Affiliates to the same extent as the Company indemnifies retired officers or directors of the Company.
(e) Payment of Executive's vested interest under the Company sponsored qualified profit sharing and 401(k) Plans when and as provided in, and otherwise subject to, the terms, provisions and conditions of said Plans, and nothing in this Agreement shall modify or override the terms, provisions and conditions of such Plans.
5. OTHER TERMINATION OF EMPLOYMENT. Except as otherwise expressly provided to the contrary in the Compensation and Benefits Assurance Agreement, Executive shall not be entitled to any payments or benefits upon his Termination of Employment in the following events:
(a) Executive's voluntary Termination of Employment, or
(b) Executive's involuntary Termination of Employment for Cause, or
(c) Executive's Termination of Employment, whether voluntary or involuntary, with or without Cause, following a Change in Control.
6. MITIGATION. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of employment by another employer.
7. APPLICABLE LAW. This Agreement is made and executed with the intention that the construction, interpretation and validity hereof shall be determined in accordance with and governed by the laws of the State of North Carolina.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns. This Agreement shall be binding upon and inure to the benefit of Executive, his heirs, executors and administrators.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and cancels all prior or contemporaneous oral or written agreements and understandings between them with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized officers and its corporate seal to be hereunto affixed, and Executive has hereunto set his hand and seal, all as of the day and year first above written.
Lance, Inc.
[CORPORATE SEAL]
ATTEST: By:______________________________
President
------------------------------
Secretary
____________________________[SEAL]
|
EXHIBIT 13
1997 ANNUAL REPORT TO STOCKHOLDERS (EXCERPT)
KPMG PEAT MARWICK LLP
Suite 2800
Two First Union Center
Charlotte, NC 28282-8290
Independent Auditors' Report
The Board of Directors and Stockholders
Lance, Inc.:
We have audited the accompanying consolidated balance sheets of Lance, Inc. and subsidiaries as of December 27, 1997 and December 28, 1996 and the related consolidated statements of income, stockholders' equity and cash flows for each of the fiscal years in the three-year period ended December 27, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lance, Inc. and its subsidiaries as of December 27, 1997 and December 28, 1996, and the results of their operations and their cash flows for each of the fiscal years in the three-year period ended December 27, 1997 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 9 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", during the fiscal year ended December 30, 1995.
February 17, 1998
KPMG PEAT MARWICK LLP
[LOGO] Member Firm of
Kynveld Peat Marwick Goerdeler
CONSOLIDATED BALANCE SHEETS
December 27, 1997 and December 28, 1996
(In thousands, except share and per share data)
ASSETS NOTES 1997 1996
===================================================================================================================
CURRENT ASSETS:
Cash and cash equivalents $ 34,040 $ 29,764
Marketable securities 2 25,430 25,482
Accounts receivable (less allowance for doubtful accounts
of $1,054 in 1997 and $867 in 1996, respectively) 34,057 32,050
Inventories 3 17,882 22,175
Deferred income tax benefit 5 6,913 7,099
Prepaid expenses and other 1,275 1,348
-------------------------------------------------------------------------------------------------------------------
Total current assets 119,597 117,918
PROPERTY, NET 4,9 130,264 126,193
OTHER 2,879 3,094
===================================================================================================================
TOTAL $ 252,740 $ 247,205
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
===================================================================================================================
CURRENT LIABILITIES:
Accounts payable $ 5,821 $ 7,050
Accrued compensation 13,142 14,636
Accrued for profit-sharing retirement plan 7 5,396 4,543
Accrued income taxes 5 1,072 129
Accrual for insurance claims 4,632 3,899
Other payables and accrued liabilities 7,215 5,491
-------------------------------------------------------------------------------------------------------------------
Total current liabilities 37,278 35,748
-------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES AND DEFERRED CREDITS:
Deferred income taxes 5 10,005 6,553
Accrued postretirement health care costs 6 11,180 10,034
Accrual for insurance claims 4,449 6,458
Supplemental retirement benefits 3,306 3,550
-------------------------------------------------------------------------------------------------------------------
Total other liabilities and deferred credits 28,940 26,595
-------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY: 7,8
Common stock, $.83 1/3 par value (authorized: 75,000,000
shares; issued and outstanding: 29,923,287 shares in 1997,
29,888,265 shares in 1996) 24,936 24,907
Additional paid in capital 999 -
Unamortized portion of restricted stock awards 7 (488) -
Retained earnings 160,682 159,700
Net unrealized gain on marketable securities 2 393 255
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 186,522 184,862
-------------------------------------------------------------------------------------------------------------------
TOTAL $ 252,740 $ 247,205
===================================================================================================================
|
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Years Ended December 27, 1997, December 28, 1996 and December 30, 1995
(In thousands, except share and per share data)
1997 1996 1995
NOTES (52 WEEKS) (52 Weeks) (52 Weeks)
======================================================================================================================
NET SALES AND OTHER OPERATING REVENUE $ 486,854 $ 477,015 $ 480,810
----------------------------------------------------------------------------------------------------------------------
COST OF SALES AND OPERATING EXPENSES:
Cost of sales 228,583 232,715 240,624
Selling and delivery 187,047 181,780 191,199
General and administrative 20,649 22,031 18,923
Provisions for profit-sharing retirement plan 7 5,456 4,477 4,849
Loss from restructuring and impairment 9 - - 35,897
----------------------------------------------------------------------------------------------------------------------
Total 441,735 441,003 491,492
----------------------------------------------------------------------------------------------------------------------
PROFIT (LOSS) FROM OPERATIONS 45,119 36,012 (10,682)
OTHER INCOME, NET (INCLUDING INTEREST
INCOME OF $2,581 IN 1997, $2,221 IN 1996
AND $2,036 IN 1995) 9 3,569 4,768 582
----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 48,688 40,780 (10,100)
----------------------------------------------------------------------------------------------------------------------
INCOME TAX EXPENSE (BENEFIT): 5
Current 15,044 13,703 13,477
Deferred 3,547 2,485 (16,638)
----------------------------------------------------------------------------------------------------------------------
Total 18,591 16,188 (3,161)
----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 30,097 $ 24,592 $ (6,939)
======================================================================================================================
SHARE AND PER SHARE INFORMATION: 1
Net income (loss) - basic $ 1.01 $ 0.82 $ (0.23)
=========== =========== ============
Net income (loss) - diluted $ 1.00 $ 0.82 $ (0.23)
=========== =========== ============
Cash dividends $ 0.96 $ 0.96 $ 0.96
=========== =========== ============
Weighted average shares of common stock
outstanding - basic 29,893,000 30,075,000 30,400,000
=========== =========== ============
Weighted average shares of common stock
outstanding - diluted 30,018,000 30,086,000 30,400,000
=========== =========== ============
----------------------------------------------------------------------------------------------------------------------
|
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
For the Fiscal Years Ended December 27, 1997, December 28, 1996 and December 30, 1995
(In thousands, except share data)
UNAMORTIZED NET
PORTION OF UNREALIZED
ADDITIONAL RESTRICTED GAIN ON
COMMON PAID-IN STOCK RETAINED MARKETABLE
SHARES STOCK CAPITAL AWARDS EARNINGS SECURITIES TOTAL
=========================================================================================================================
BALANCE, DECEMBER 31, 1994 30,433,407 $25,361 $ - $ - $208,800 $ - $234,161
Net loss - - - - (6,939) - (6,939)
Cash dividends paid to stockholders - - - - (29,183) - (29,183)
Stock options exercised (Note 7) 13,858 12 - - 144 - 156
Retirement of common stock (110,000) (92) - - (1,858) - (1,950)
Net change in unrealized gain on
marketable securities - - - - - 298 298
-------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 30, 1995 30,337,265 25,281 - - 170,964 298 196,543
Net income - - - - 24,592 - 24,592
Cash dividends paid to stockholders - - - - (28,879) - (28,879)
Retirement of common stock (449,000) (374) - (6,977) - (7,351)
Net change in unrealized gain on
marketable securities - - - - - (43) (43)
-------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 28, 1996 29,888,265 24,907 - - 159,700 255 184,862
Net income - - - - 30,097 30,097
Cash dividends paid to stockholders - - - - (28,699) - (28,699)
Stock options exercised (Note 7) 29,822 25 328 - - - 353
Issuance of restricted stock 30,200 25 671 (488) - - 208
Retirement of common stock (25,000) (21) - (416) - (437)
Net change in unrealized gain on
marketable securities - - - - - 138 138
-------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 27, 1997 29,923,287 $24,936 $ 999 $ (488) $160,682 $ 393 $186,522
=========================================================================================================================
|
See notes to consolidated financial statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Fiscal Years Ended December 27, 1997, December 28, 1996 and December 30, 1995
(In thousands)
1997 1996 1995
(52 WEEKS) (52 Weeks) (52 Weeks)
-------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income (loss) $ 30,097 $ 24,592 $ (6,939)
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation 20,025 20,295 24,626
(Gain) loss on sale and impairment of property, net (976) (1,953) 30,873
Deferred income taxes 3,638 2,485 (16,637)
Other, net 358 495 4,595
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,007) (2,256) 1,570
Decrease (increase) in refundable income taxes - 4,765 (2,806)
Decrease in inventory 4,293 10,346 6,431
(Increase) decrease in prepaid expenses and other
current assets 73 (438) (311)
Increase (decrease) in accounts payable (1,229) 618 (2,140)
Increase (decrease) in accrued income taxes 943 129 (461)
Increase in other payables and accrued liabilities 704 4,374 9,011
-------------------------------------------------------------------------------------------------------------------
Net cash flow from operating activities 55,919 63,452 47,812
-------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (34,129) (19,223) (19,984)
Proceeds from sale of property 11,009 3,689 1,209
Purchases of marketable securities (16,103) (10,276) (9,156)
Maturities of marketable securities 12,125 11,917 3,274
Sales of marketable securities 4,050 4,747 7,436
Other, net (20) 312 (202)
-------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (23,068) (8,834) (17,423)
-------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Dividends paid (28,699) (28,879) (29,183)
Issuance (purchase) of common stock, net 124 (7,351) (1,794)
-------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (28,575) (36,230) (30,977)
-------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,276 18,388 (588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF FISCAL YEAR 29,764 11,376 11,964
-------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF FISCAL YEAR $ 34,040 $ 29,764 $ 11,376
===================================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 14,050 $ 10,829 $ 16,743
-------------------------------------------------------------------------------------------------------------------
|
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Lance, Inc. (the Company) manufactures and purchases snack foods and bakery products which are sold and distributed through the Company's own sales organization to convenience stores, supermarkets, discount stores, restaurants, and similar establishments, in schools, office buildings, manufacturing plants, and similar locations through Company vending machines and through distributors and brokers. Sales are concentrated primarily in the Southeastern and Midwestern United States. The Company's policy is to recognize a sale at the time the product is delivered to the customer.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include in consolidation the accounts of Lance, Inc. and its wholly-owned subsidiaries. All material intercompany items have been eliminated. Certain 1996 and 1995 amounts shown in the accompanying consolidated financial statements have been reclassified for consistent presentation.
USE OF ESTIMATES
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Examples include provisions for bad debts and the useful lives of buildings and equipment. Actual results may differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts and notes receivable, marketable securities and accounts payable approximate fair value.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities at December 27, 1997 are principally instruments of the U.S. government and its agencies, of state governments, and of municipalities. Debt and marketable equity securities are classified in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. All of the Company's marketable securities were classified as available-for-sale at December 27,1997 and December 28,1996.
Available-for-sale securities are recorded at market value. Unrealized holding gains and losses, net of the related income tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders' equity until
realized. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available-for-sale are included in earnings and are derived using the specific identification method for determining the cost of securities sold.
INVENTORIES AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company's primary raw materials include peanuts, peanut butter, flour and other similar grain products. Supplies principally consist of packaging materials including overwrap film and boxes.
Inventories are valued at the lower of cost or market; 78% of the cost of the inventories in 1997 and 77% in 1996 was determined using the last-in, first-out (LIFO) method and the remainder was determined using the first-in, first-out (FIFO) method.
The Company enters into various forward purchase agreements and derivative financial instruments to reduce the impact of volatility in raw materials ingredients prices. The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. These transactions meet the requirements for hedge accounting, including designation to specific inventory amounts and probable future purchases, and high correlation. Amounts payable or receivable under the agreements are recognized as deferred gains or losses and included in other assets or liabilities. These deferred amounts are charged or credited to cost of sales as the related raw materials are charged to operations.
PROPERTY AND DEPRECIATION
Depreciation is computed over estimated useful lives of depreciable property, using the straight-line method, generally as follows:
Land improvements 20 years Buildings 20-50 years Machinery and equipment 5-12 years Vending machines on location 8 years Trucks and automobiles 3-9 years Furniture and fixtures 10 years |
Property is recorded at cost less accumulated depreciation with the exception of assets held for disposal which are recorded at their estimated fair value. Upon retirement or disposal of any item of property, the cost is removed from the property account and the accumulated depreciation applicable to such item is removed from accumulated depreciation. Major renewals and betterments are capitalized, maintenance and repairs are expensed as incurred, and gains and losses on dispositions are reflected in income.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.
INSURANCE CLAIMS
The Company maintains a self-insurance program covering portions of workers' compensation, automobile and general liability costs. Self-insured accruals are based on claims filed and an estimate for significant claims incurred but not reported and are covered by standby letters of credit with the Company's claims administrators. Claims in excess of the self-insured levels are fully insured.
During the year ended December 30, 1995, the Company modified its assumptions for future cost increases of incurred but unpaid workers' compensation, auto, general and product liability insurance claims. The result was a change in accounting estimate which increased insurance expense by $2,958,000 and reduced net income and net income per share (diluted) by $1,923,000 and $.06 respectively, in 1995.
POST RETIREMENT PLANS
The Company has a defined benefit health care plan for substantially all retirees and employees. The Company measures the costs of its obligation based on its best estimate. The net periodic costs are recognized as employees perform the services necessary to earn the postretirement benefits.
The Company also provides supplemental retirement benefits to certain officers. Provision for these benefits, made over the period of employment of such officers, was $246,000 in 1997, $278,000 in 1996, and $364,000 in 1995.
STOCK OPTION PLANS
On December 31, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of the Accounting Principles Board ("APB") Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
EARNINGS PER SHARE
On December 27, 1997, the Company adopted SFAS No. 128, "Earnings Per Share" which redefines the calculation of primary earnings per share ("basic earnings per share") and requires entities with complex capital structures to present both basic and diluted earnings per share amounts. In addition, SFAS No. 128 requires entities with complex capital structures to provide a reconciliation of the numerator and denominator used in computing basic earnings per share to the numerator and denominator used in computing diluted earnings per share.
The following table provides a reconciliation of the denominator used in computing basic earnings per share to the denominator used in computing diluted earnings per share (there were no reconciling items for the numerator amounts of basic and diluted earnings per share):
1997 1996 1995
-------------------------------------------------
Weighted average number of common shares
used in computing basic earnings per share 29,893,000 30,075,000 30,400,000
Effect of dilutive stock options 125,000 11,000 -
-------------------------------------------------
Weighted average number of common shares
and dilutive potential common stock used
in computing diluted earnings per share 30,018,000 30,086,000 30,400,000
=================================================
Stock options excluded from the above
reconciliation because they are anti-dilutive 46,000 313,000 453,000
=================================================
|
ADVERTISING COSTS
The Company reports the costs of all advertising in the periods in which the costs are incurred or the first time the advertising takes place, except for certain direct-response advertising that results in probable and measurable future economic benefits. Direct-response advertising is to be capitalized and amortized over its expected period of future benefit. Advertising expense was $12,630,000, $7,674,000 and $6,577,000 for the fiscal years 1997, 1996 and 1995, respectively.
2. MARKETABLE SECURITIES
At December 27, 1997 and December 28, 1996, the Company has classified all investments as available-for-sale. The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of the available-for-sale securities by major security type at December 27, 1997 and December 28, 1996 were as follows (in thousands):
Gross Gross
Unrealized Unrealized
Amortized Holding Holding
Cost Gains Losses Fair Value
------------------------------------------------------------------------------------------------------------------
At December 27, 1997:
U.S. government agencies $ 5,501 $ 2 $ (7) $ 5,496
Municipal obligations 19,222 146 (6) 19,362
Equity securities 58 518 (4) 572
------------------------------------------------------------------------------------------------------------------
Total $ 24,781 $ 666 $ (17) $ 25,430
===================================================================================================================
At December 28, 1996:
U.S. government agencies $ 6,981 $ 11 $ (11) $ 6,981
Municipal obligations 18,023 84 (9) 18,098
Equity securities 58 349 (4) 403
------------------------------------------------------------------------------------------------------------------
Total $ 25,062 $ 444 $ (24) $ 25,482
===================================================================================================================
|
Maturities of investment securities were as follows at December 27, 1997 (in thousands):
Amortized Fair
Cost Value
-------------------------------------------------------------------------------------------------------------------
Due within one year $ 3,698 $ 3,706
Due after one year through five years 18,292 18,400
Due after five years through ten years 374 376
Due after ten years through fifteen years 557 562
Due after fifteen years 1,802 1,814
Equity securities 58 572
-------------------------------------------------------------------------------------------------------------------
Total $24,781 $25,430
===================================================================================================================
|
3. INVENTORIES
Inventories at December 27, 1997 and December 28, 1996 consisted of the following (in thousands):
1997 1996
-------------------------------------------------------------------------------------------------------------------
Finished goods $15,047 $14,600
Raw materials 4,133 6,784
Supplies, etc. 3,986 6,978
-------------------------------------------------------------------------------------------------------------------
Total inventories at FIFO cost 23,166 28,362
Less: Adjustment to reduce FIFO cost to LIFO cost (5,284) (6,187)
-------------------------------------------------------------------------------------------------------------------
Total inventories $17,882 $22,175
===================================================================================================================
|
The Company purchases wheat futures contracts as a hedge against fluctuations in the cost of processed flour. At December 27, 1997 and December 28, 1996 the Company owned futures contracts to purchase 140,000 and 170,000 bushels of wheat totaling $491,000 and $584,000, respectively. These contracts do not represent a significant quantity of the Company's annual flour usage and are expected to be realized within one year at no significant gain or loss to the Company.
4. PROPERTY
Property at December 27, 1997 and December 28, 1996 consisted of (in thousands):
1997 1996
-------------------------------------------------------------------------------------------------------------------
Land and land improvements $ 11,398 $ 11,312
Buildings 62,040 60,905
Machinery and equipment 108,853 98,735
Vending machines on location 84,503 83,981
Trucks and automobiles 28,676 28,101
Furniture and fixtures 3,492 3,409
Assets held for disposal 2,124 10,425
Construction in progress 20,189 9,254
-------------------------------------------------------------------------------------------------------------------
Total 321,275 306,122
Accumulated depreciation and amortization (191,011) (179,929)
-------------------------------------------------------------------------------------------------------------------
Property, net $ 130,264 $ 126,193
===================================================================================================================
|
5. INCOME TAXES
Income tax expense (benefit) consists of the following (in thousands):
1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
Current:
Federal $12,433 $11,133 $11,024
State and local 2,611 2,570 2,453
-------------------------------------------------------------------------------------------------------------------
Total current 15,044 13,703 13,477
-------------------------------------------------------------------------------------------------------------------
Deferred:
Federal 3,310 2,162 (14,644)
State and local 237 323 (1,994)
-------------------------------------------------------------------------------------------------------------------
Total deferred 3,547 2,485 (16,638)
-------------------------------------------------------------------------------------------------------------------
Total income tax expense (benefit) $18,591 $16,188 ($3,161)
===================================================================================================================
|
A reconciliation of income taxes computed using the statutory rates to income tax (benefit) expense follows (in thousands):
1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
Statutory income tax rate 35% 35% 35%
Income taxes (benefits) at statutory tax rate $17,040 $14,273 $(3,535)
Increase (decrease) in taxes resulting from:
State and local income taxes,
net of federal income tax benefit 1,801 1,945 298
Tax exempt interest (418) (373) (339)
Other items, net 168 343 415
-------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense $18,591 $16,188 ($3,161)
===================================================================================================================
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 27, 1997 and December 28, 1996 are presented below (in thousands):
1997 1996
---------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Reserves for employee compensation and benefits, deductible $11,010 $11,210
when paid for income tax purposes, accrued for financial
reporting purposes
Other reserves deductible when paid for income tax purposes,
accrued for financial reporting purposes 1,684 1,263
Inventories, principally due to additional costs capitalized for
income tax purposes 1,629 1,646
Net state operating loss carryforwards (expiring after 2006) 670 670
---------------------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 14,993 14,789
Less valuation allowance (670) (670)
---------------------------------------------------------------------------------------------------------------------
Net deferred tax assets 14,323 14,119
---------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation, net of impairment reserves (17,089) (13,411)
Other (326) (162)
---------------------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities (17,415) (13,573)
---------------------------------------------------------------------------------------------------------------------
Total net deferred tax (liabilities) assets $(3,092) $ 546
=====================================================================================================================
|
The net deferred tax (liabilities) assets at December 27, 1997 and December 28, 1996 are shown on the accompanying financial statements as follows:
1997 1996
-------------------------------------------------------------------------------------------------------------------
Current deferred tax assets $ 6,913 $ 7,099
Noncurrent deferred tax liabilities (10,005) (6,553)
-------------------------------------------------------------------------------------------------------------------
Total net deferred tax (liabilities) assets $ (3,092) $ 546
===================================================================================================================
|
Based on the Company's historical and current earnings, management believes it is more likely than not that the Company will realize the benefit of the remaining deferred tax assets that are not covered by the valuation allowance.
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides postretirement medical benefits for retirees and their spouses to age 65. Retirees pay contributions toward medical coverage based on the medical plan and coverage they select. The Company's postretirement health care plan currently is not funded.
The following table presents the plan's accumulated postretirement benefit obligation reconciled with amounts recognized in the Company's consolidated balance sheet as of December 27, 1997 and December 28, 1996 (in thousands):
1997 1996
-------------------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ 1,121 $ 1,424
Fully eligible active plan participants 1,233 1,508
Other active plan participants 7,547 8,229
-------------------------------------------------------------------------------------------------------------------
Total 9,901 11,161
Net unrecognized gain (loss) from past experience
different from that assumed 1,374 (1,024)
Unrecognized prior service cost (95) (103)
-------------------------------------------------------------------------------------------------------------------
Accrued postretirement health care costs $11,180 $10,034
===================================================================================================================
|
Net periodic postretirement benefit cost for each of the fiscal years in the three-year period ended December 27, 1997 consisted of the following components (in thousands):
1997 1996 1995
--------------------------------------------------------------------------------------------
Service cost - benefits attributed to service
during the year $ 865 $ 714 $ 604
Interest cost on accumulated postretirement
benefit obligation 785 647 619
Amortization of unrecognized loss - 1 -
Amortization of prior service cost 8 8 -
--------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,658 $1,370 $1,223
============================================================================================
|
For measurement purposes, a 10.38% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1998; the rate was assumed to decrease gradually to 5.25% at 2018 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 27, 1997 by $865,000 and the aggregate of the service and interest cost components of postretirement expense for the year ended December 27, 1997 by $159,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% at the beginning of the 1997 fiscal year and 6.75% at the end of the 1997 fiscal year and was 7.00% at the beginning of the 1996 fiscal year and 7.25% at the end of the 1996 fiscal year.
7. EMPLOYEE BENEFIT PLANS AND STOCK OPTION PLANS
EMPLOYEE PROFIT-SHARING RETIREMENT PLAN
The Company has a retirement plan covering substantially all of its employees. The plan is a defined contribution retirement plan providing for contributions equal to 10% of income before taxes. Plan funding is made in accordance with the provisions of the plan.
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan under which shares of common stock are purchased on the open market with employee and Company contributions. The plan provides for the Company to contribute an amount equal to 10% of the employees' contributions. A total of 800,000 shares of common stock has been registered under the Securities Act of 1933 for purchase under the plan. Company contributions amounted to $83,000 in 1997, $106,000 in 1996 and $122,000 in 1995.
EMPLOYEE STOCK OPTION PLANS
The Company has stock option plans under which 1,466,666 shares of common stock may be issued to key employees of the Company, as defined in the plans. The plans authorize the grant of incentive stock options, non-qualified stock options and stock appreciation rights. The plans require, among other things, that before the stock options and stock appreciation rights may be exercised, such key employees must remain in continuous employment of the Company not less than six months from the date of grant.
Exercised stock options are accounted for through the issuance of previously retired stock. Granted options generally become exercisable in three or four installments from six to forty-eight months after date of grant. The option price, which equals the fair market value of the Company's common stock at the date of grant, ranges from $15.81 to $24.13 per share.
Activity under the plans for each of the years in the three-year period ended December 27, 1997 is as follows:
Weighted
Number of Average
Shares Exercise Price
------------------------------------------------------------------------------------------------------------------
Balance at December 25, 1994 507,643 $ 20.72
Stock options granted - -
Stock options exercised, including
stock appreciation rights (25,086) 4.81
Stock options expired (8,300) 9.88
------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 474,257 21.04
Stock options granted 248,480 15.81
Stock options exercised - -
Stock options expired (188,931) 20.45
------------------------------------------------------------------------------------------------------------------
Balance at December 30, 1996 533,806 18.82
Stock options granted 299,400 18.38
Stock options exercised, including
stock appreciation rights (57,752) 17.91
Stock options expired (123,550) 18.84
------------------------------------------------------------------------------------------------------------------
Balance at December 27, 1997 651,904 $ 18.31
------------------------------------------------------------------------------------------------------------------
|
NON-EMPLOYEE STOCK OPTION PLANS
In 1995, the Company adopted a Nonqualified Stock Option Plan for Non-Employee Directors (the Director Plan). The Company has 100,000 shares of common stock which may be issued to non-employee directors under this plan. The Director Plan requires among other things that the options are not exercisable unless the optionee remains available to serve as a director of the Company until the first anniversary of the date of grant, except that the initial option shall be exercisable after six months. Options granted under the Director Plan shall expire ten years from the date of grant. There were 42,500 and 12,500 options granted during 1997 and 1996, respectively. The option price, which equals the fair market value of the Company's common stock at the date of grant, was $18.00 and $15.63 at December 27, 1997 and December 28, 1996.
FAIR VALUE OF STOCK OPTIONS
There were 721,904 options exercisable under all stock option plans at December 27, 1997. The Company applies APB Opinion No. 25 in accounting for its plans and, accordingly, no compensation cost has been recognized for stock options in the financial statements. The table below presents the assumptions and pro-forma net income effect of the options using the Black-Scholes option-pricing model prescribed under SFAS No. 123.
1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------
Weighted-average:
Expected dividend yield 5.22% 5.30% 5.30%
Risk-free interest rate 7.01% 6.50% 6.40%
Expected life 10 YEARS 8 years 8 years
Volatility 18.60% 25.00% 25.00%
Per share weighted-average fair value of
stock options granted using Black-Scholes
option-pricing model $ 3.10 $ 3.07 $ 3.38
Pro-forma net income (loss) (in thousands) $29,591 $24,449 $ (7,024)
Pro-forma earnings per share - diluted $ 0.99 $ 0.81 $ (0.23)
==================================================================================================================
|
RESTRICTED STOCK AWARDS
During 1997 the Company awarded 30,200 shares of common stock to certain employees under one of its incentive programs, subject to certain vesting and performance restrictions. Compensation costs associated with these restricted shares are deferred until earned, at which time the earned portion is charged against current earnings. The deferred portion of these restricted shares is included in the accompanying 1997 consolidated balance sheet as unamortized portion of restricted stock awards.
8. COMMITMENTS AND CONTINGENCIES
At December 27, 1997 the Company had an unsecured bank line of credit of $5,000,000 against which there have been no borrowings. The Company also maintains standby letters of credit in connection with its self insurance reserves for casualty claims against which there have been no borrowings.
The Company and its subsidiaries lease certain facilities and equipment under contracts classified as operating leases. Commitments under leases with terms extending beyond one year are not material. Rental expense was $4,707,000 in 1997, $4,426,000 in 1996 and $4,481,000 in 1995.
The Company and its subsidiaries have sundry claims and other lawsuits pending against them and also have certain guarantees which were made in the ordinary course of business. It is not possible to determine with any certainty the ultimate liability, if any, of the Company in any of these matters, but in the opinion of management, their outcome should have no material adverse effect upon the Company's consolidated financial statements taken as a whole.
9. RESTRUCTURING
During 1995 and 1996 the Company underwent a restructuring of its operations designed to improve profitability and make it more competitive in the marketplace. The restructuring plan included the closing of plants in Columbia, South Carolina and Greenville, Texas resulting in workforce reductions of approximately 500 employees. Termination benefits, plant closing charges and other related expenses totaled $6,496,000 and are included as a component of restructuring and impairment expense in the accompanying 1995 consolidated statement of income.
In addition, the Company determined that certain buildings and equipment at its closed facilities were impaired. Fair value of the impaired assets (determined through third-party appraisals) resulted in impairment losses totaling $29,368,000. These losses are included as a component of restructuring and impairment expense in the accompanying 1995 consolidated statement of income. During 1997 and 1996 the Company sold impaired assets which resulted in gains of approximately $868,000 and $957,000 respectively. The expected disposal date of the remaining assets is not presently determinable.
10. INTERIM FINANCIAL INFORMATION (UNAUDITED)
A summary of interim financial information follows (in thousands, except per share data):
1997 Interim Period Ended
--------------------------------------------------------------
March 22 June 14 September 6 December 27
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
-------------------------------------------------------------------------------------------------------------------
NET SALES AND OTHER OPERATING REVENUES $112,803 $118,107 $110,341 $145,603
Cost of sales 54,543 55,428 51,288 67,324
Selling and delivery expenses 43,329 44,785 43,112 55,821
General and administrative expenses 4,533 4,702 4,366 7,048
Provisions for profit-sharing
retirement plan 1,122 1,446 1,247 1,641
-------------------------------------------------------------------------------------------------------------------
PROFIT FROM OPERATIONS 9,276 11,746 10,328 13,769
Other income, net 730 1,108 780 951
Income taxes 3,858 4,919 4,202 5,612
-------------------------------------------------------------------------------------------------------------------
NET INCOME $6,148 $7,935 $6,906 $9,108
===================================================================================================================
Net income per common share - basic $ 0.21 $ 0.27 $ 0.23 $ 0.30
Net income per common share - diluted 0.20 0.26 0.23 0.30
Dividends per common share 0.24 0.24 0.24 0.24
|
1996 Interim Period Ended
-------------------------------------------------------------
March 23 June 15 September 7 December 28
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks)
===================================================================================================================
NET SALES AND OTHER OPERATING REVENUES $110,604 $112,639 $107,718 $146,054
Cost of sales 55,519 53,544 52,823 70,829
Selling and delivery expenses 42,964 42,852 40,996 54,968
General and administrative expenses 4,300 4,952 4,945 7,834
Provisions for profit-sharing
retirement plan 1,003 1,117 1,013 1,344
===================================================================================================================
PROFIT FROM OPERATIONS 6,818 10,174 7,941 11,079
Other income, net 1,472 737 1,247 1,312
Income taxes 3,199 4,182 3,951 4,856
===================================================================================================================
NET INCOME $ 5,091 $ 6,729 $ 5,237 $ 7,535
===================================================================================================================
Net income per common share - basic $ 0.17 $ 0.22 $ 0.17 $ 0.25
Net income per common share - diluted 0.17 0.22 0.17 0.25
Dividends per common share 0.24 0.24 0.24 0.24
===================================================================================================================
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
During 1997, Lance, Inc. ("the Company" or "Lance") continued the execution of its strategic plan to increase market share through profitable sales growth. The Company expanded its advertising, promotion and new product development to increase its penetration in key distribution channels.
Lance also improved its operating and distribution efficiencies to reduce costs. The Company sold underperforming assets and reinvested the proceeds to upgrade manufacturing and distribution systems. These strategies have allowed Lance to increase revenues and improve operating profitability during the year.
RESULTS OF OPERATIONS, 1997 COMPARED TO 1996
(Amounts in millions)
1997 1996 CHANGE
---------------------------------------------------------------------------------------------------------------------
Revenues $486.8 100.0% $477.0 100.0% $9.9 2.1%
---------------------------------------------------------------------------------------------------------------------
Cost of sales 228.6 47.0% 232.7 48.8% (4.1) (1.8%)
Selling and delivery costs 187.0 38.4% 181.8 38.1% 5.2 2.9%
General and administrative costs 20.6 4.2% 22.0 4.6% (1.4) (6.4%)
Profit-sharing provisions 5.5 1.1% 4.5 0.9% 1.0 22.2%
---------------------------------------------------------------------------------------------------------------------
Total cost of sales and
operating expenses 441.7 90.7% 441.0 92.5% 0.7 0.2%
---------------------------------------------------------------------------------------------------------------------
Operating profit 45.1 9.3% 36.0 7.5% 9.1 25.3%
Other income, net 3.6 0.7% 4.8 1.0% (1.2) (25.0%)
Income taxes 18.6 3.8% 16.2 3.4% 2.4 14.8%
---------------------------------------------------------------------------------------------------------------------
Net income $ 30.1 6.2% $ 24.6 5.2% $5.5 22.4%
=====================================================================================================================
|
REVENUES
Net sales and other operating revenue increased $9.9 million, or 2.1% due to higher unit volume of Lance branded products and private label goods. The increased unit volume was a result of expanded advertising and promotional programs as well as expanded participation in key distribution channels. The increase in 1997 revenues occurred during the Company's first three quarters with a slight decrease in the fourth quarter.
COST OF SALES AND OPERATING EXPENSES
Cost of sales of $228.6 million decreased to 47.0% of revenues for 1997, compared to $232.7 million, or 48.8%, in 1996. This improvement was primarily due to lower raw materials costs and effective expense control on labor and overhead items. The cost of sales percentage was also favorably impacted by improvements in production efficiencies achieved through the Company's modernization initiatives.
Selling and delivery expenses in 1997 increased $5.2 million in 1997, or 2.9% over prior year and to 38.4% of revenues. This increase primarily reflects expanded advertising and media promotion activities to increase market share for Lance branded products. This increase was partially offset by lower distribution costs reflecting efficiencies in the route distribution system.
General and administrative expenses for 1997 were $1.4 million lower than prior year. This decrease was due primarily to a reduction in severance provisions and a reduction in outside consulting fees associated with information systems implementation.
The provision for profit sharing contributions increased $1.0 million during 1997 due to higher operating profits.
OTHER INCOME AND INCOME TAXES
Other income decreased $1.3 million in 1997 primarily due to a net decrease in gain on assets sold during the year. Income tax expense as a percentage of revenues increased from 3.4% in 1996 to 3.8% in 1997 due to the utilization of loss carryforwards in 1996.
NET INCOME
As a result of the factors discussed above, net income increased $5.5 million to $30.1 million in 1997.
RESULTS OF OPERATIONS, 1996 COMPARED TO 1995
(Amounts in millions)
1996 1995 CHANGE
---------------------------------------------------------------------------------------------------------------------
Revenues $477.0 100.0% $480.8 100.0% $(3.8) (0.8%)
---------------------------------------------------------------------------------------------------------------------
Cost of sales 232.7 48.8% 240.6 50.0% (7.9) (3.3%)
Selling and delivery costs 181.8 38.1% 191.2 39.8% (9.4) (4.9%)
General and administrative costs 22.0 4.6% 18.9 3.9% 3.1 16.4%
Profit sharing provisions 4.5 0.9% 4.9 1.0% (0.4) (8.2%)
Restructuring charges - 0.0% 35.9 7.5% (35.9) 100.0%)
---------------------------------------------------------------------------------------------------------------------
Total cost of sales and
operating expenses 441.0 92.5% 491.5 102.2% (50.5) (10.3%)
---------------------------------------------------------------------------------------------------------------------
Operating profit 36.0 7.5% (10.7) -2.2% 46.7 436.4%
Other income, net 4.8 1.0% 0.6 0.1% 4.2 700.0%
Income taxes 16.2 3.4% (3.2) -0.7% 19.4 606.3%
---------------------------------------------------------------------------------------------------------------------
Net income $ 24.6 5.2% $ (6.9) -1.4% $31.5 456.5%
=====================================================================================================================
|
REVENUES
Net sales and other operating revenue decreased $3.8 million, or 0.8% due primarily to route profitability improvement efforts and severe weather during the first quarter. The revenue decline was partially offset by an increase in unit volume and prices for the Company's private label products.
COST OF SALES AND OPERATING EXPENSES
Cost of sales of $232.7 million decreased to 48.8% of revenues for 1996, compared to $240.6 million, or 50.0%, in 1995. This improvement was due largely to lower labor and overhead costs resulting from the closing of the Texas and South Carolina production facilities in 1996. The cost of sales percentage was also favorably impacted by improvements in production efficiencies achieved at the Iowa and North Carolina facilities.
Selling and delivery expenses in 1996 decreased $9.4 million in 1996, or 4.9% compared to prior year. This reduction reflects improvements in the effectiveness of Lance's route sales system and vending operations.
General and administrative expenses were $3.1 million higher in 1996. This increase was due primarily to employee severance and early retirement programs initiated during the year. Increases in general and administrative costs attributed to information systems implementation and incentive compensation provisions were partially offset by costs eliminated through the restructuring efforts.
The Company's restructuring plan was completed during 1996 with no additional charges incurred during the year.
The provision for profit-sharing contributions decreased $0.4 million during 1996. The 1995 provision excluded the impact of restructuring and other one-time charges in determining profitability and also provided for discretionary contributions. The 1996 provision was determined under the plan formula.
OTHER INCOME AND INCOME TAXES
Other income increased $4.2 million in 1996 primarily due to the absence of certain one-time charges recorded in 1995 and gain on impaired assets sold during the year. Income tax expense increased due to a return to profitability in 1996.
NET INCOME
As a result of the factors discussed above, net income increased $31.5 million to $24.6 million in 1996.
IMPACT OF INFLATION AND CHANGING PRICES
The impact of inflation on Lance has lessened in recent years as the rate of inflation has declined. The effects of rising costs cannot always be passed along to customers through price increases because of competitive conditions. The Company attempts to minimize the effects of inflation on its operations through improvements in operating efficiencies.
YEAR 2000 COMPLIANCE FOR SYSTEMS AND APPLICATIONS
Lance management has initiated a company-wide program to prepare the Company's computer systems and applications for the year 2000 including an assessment of compliance of its customers and key vendors. Costs for testing and conversion of system applications is expected to total approximately $0.5 million to $1.0 million over the next two years. The Company expects to incur internal staff costs as well as consulting and other expenses related to infrastructure and facilities enhancements necessary to prepare the systems for the year 2000. A significant portion of these costs are not likely to be incremental costs to the Company, but rather will represent the redeployment of existing information technology resources.
FINANCIAL POSITION
LIQUIDITY
In 1997, Lance increased its liquidity by generating an additional $4.2 million of cash and marketable securities. The Company continues its ability to meet regular operating needs, capital investment program, cash dividends and stock repurchases through its cash flow from operations and investments. A conservative investment strategy of investing in bank paper and government securities provides ready funds to meet operating, capital and other requirements. Lance also has a $5 million bank line of credit, which was unused in 1997. There are no immediate plans for its use in 1998.
CAPITAL RESOURCES
Net cash flow from operations provided $55.9 million in 1997, a decrease of $6.9 million from 1996. This decrease is attributed to changes in the Company's operating assets and liabilities during 1997 as follows:
A $2.0 million increase in accounts receivable due to higher sales and timing of billing cycle,
A $4.3 million decline in inventories reflecting improved inventory managment and production scheduling,
A $1.2 million decrease in accounts payable due to timing of disbursements,
A $1.5 million decrease in accrued compensation reflecting reduction of employee severance,
A $1.8 million increase in accrual for profit sharing and accrued income taxes due to increased profits,
A $1.3 million decline in the accruals for insurance claims reflecting the workforce reductions associated with the 1996 plant closings in Texas and South Carolina,
A net increase of $3.6 million in deferred income taxes due to utilization of deferred tax assets from the sale of impaired property and equipment and
A $1.7 million increase in other payables and accrued liabilities due to timing of disbusrements.
CAPITAL SPENDING
The Company's capital spending totaled $34.1 million in 1997 reflecting a $14.9 million increase over 1996. 1997 capital spending included replacement and upgrades for production, information systems, transportation and vending equipment. Sales of underutilized assets, including property and equipment from the South Carolina and Texas facilities closed in 1996 provided cash proceeds of $11.0 million in 1997.
Lance plans to continue its investment in facilities and equipment in 1998. At the end of 1997, commitments for capital expenditures totaled $17.4 million. Total 1998 capital spending is projected at 50% above 1997 levels. Planned expenditures include expanding and upgrading the number of vending machines, upgrading information systems and increased investment in modern production equipment.
The Company continued its cash dividend at $0.96 per share, which amounted to $28.7 million in 1997 compared to $28.9 million in 1996. During 1997, Lance repurchased 25,000 shares of its common stock. On February 17,1998, the Board of Directors authorized the repurchase of an additional 100,000 shares.
FIVE YEAR SUMMARY
Consolidated Financial Highlights
For the Five Fiscal Years Ended December 27, 1997
(In thousands, except per share data)
1997 1996 1995* 1994 1993
(52 WEEKS) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
-------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
Net sales and other operating
revenue $486,854 $477,015 $480,810 $487,982 $472,786
Loss from restructuring and
impairment - - (35,897) - -
Profit (loss) from operations 45,119 36,012 (10,682) 42,294 47,392
Income (loss) before income taxes 48,688 40,780 (10,100) 42,027 48,507
Income taxes (benefit) 18,591 16,188 (3,161) 17,343 19,531
Net income (loss) 30,097 24,592 (6,939) 26,984 30,798
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 29,893 30,075 30,400 30,774 31,236
PER SHARE OF COMMON STOCK:
Profit (loss) from operations - basic $ 1.51 1.12 $ (0.43) $ 1.30 $ 1.45
Profit (loss) from operations - diluted $ 1.50 1.12 $ (0.43) $ 1.30 $ 1.44
Net income (loss) - basic 1.01 0.82 (0.23) 0.88 0.99
Net income (loss) - diluted 1.00 0.82 (0.23) 0.88 0.98
Cash dividends 0.96 0.96 0.96 0.96 0.96
FINANCIAL STATUS AT YEAR-END:
Total assets $252,740 $247,205 $251,345 $296,996 $308,474
|
* 1995 financial data reflects the effect of restructuring and other one-time charges
MARKET AND DIVIDEND INFORMATION
The Company had 4,903 stockholders of record at February 20, 1998.
The $.83-1/3 par value Common Stock of Lance, Inc. is traded in the over-the-counter market under the symbol LNCE and transactions are reported on The Nasdaq Stock Market. The following table sets forth the high and low sales prices and dividends paid during the interim periods in fiscal years 1997 and 1996.
1997 INTERIM
HIGH LOW DIVIDENDS
PERIODS PRICE PRICE PAID
------- ------- -------- ------
First............................................... $19 3/4 $17 1/4 $ 0.24
Second.............................................. 20 1/2 17 1/2 0.24
Third............................................... 22 3/4 18 5/8 0.24
Fourth.............................................. 26 1/2 20 1/4 0.24
1996 INTERIM
HIGH LOW DIVIDENDS
PERIODS PRICE PRICE PAID
------- ------- --------- ------
First............................................... $18 1/8 $15 3/8 $ 0.24
Second.............................................. 17 1/4 15 3/16 0.24
Third............................................... 17 1/2 16 1/8 0.24
Fourth.............................................. 18 7/8 17 0.24
|
EXHIBIT 21
LIST OF THE SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary (1) State of Incorporation
------------------ ----------------------
Caronuts, Inc. North Carolina
Vista Bakery, Inc. North Carolina
South MECKCA, LLC Delaware
West MECKCA, LLC Delaware
Norbehouse, LP(2) Delaware
HSW Mortgage Corp.(3) North Carolina
|
(1) Each subsidiary does business under only its corporate name.
(2) Subsidiary of South MECKCA, LLC and West MECKCA, LLC.
(3) Subsidiary of Norbehouse, L.P.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lance, Inc.
We consent to incorporation by reference in Registration Statements No. 2-77150, No. 2-88540, No. 33-41866, No. 33-58839 and No. 333-25539 of Lance, Inc. on Form S-8 of our report dated February 17, 1998 relating to the consolidated balance sheets of Lance, Inc. and subsidiaries as of December 27, 1997 and December 28, 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the fiscal years in the three-year period ended December 27, 1997, which report is incorporated by reference in the December 27, 1997 annual report on Form 10-K of Lance, Inc.
Our report refers to the adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-lived Assets and Long-lived Assets to be Disposed Of" during the fiscal year ended December 30, 1995.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
March 25, 1998
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF LANCE, INC. FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 27 1997 |
| PERIOD START | DEC 29 1996 |
| PERIOD END | DEC 27 1997 |
| CASH | 34,040 |
| SECURITIES | 25,430 |
| RECEIVABLES | 35,111 |
| ALLOWANCES | 1,054 |
| INVENTORY | 17,882 |
| CURRENT ASSETS | 119,597 |
| PP&E | 321,275 |
| DEPRECIATION | 191,011 |
| TOTAL ASSETS | 252,740 |
| CURRENT LIABILITIES | 37,278 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 24,936 |
| OTHER SE | 161,586 |
| TOTAL LIABILITY AND EQUITY | 252,740 |
| SALES | 486,854 |
| TOTAL REVENUES | 486,854 |
| CGS | 228,583 |
| TOTAL COSTS | 441,735 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | 48,688 |
| INCOME TAX | 18,591 |
| INCOME CONTINUING | 30,097 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 30,097 |
| EPS PRIMARY | 1.01 |
| EPS DILUTED | 1.00 |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF LANCE, INC. FOR THE TWELVE WEEKS ENDED MARCH 22, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | DEC 27 1997 |
| PERIOD START | DEC 29 1996 |
| PERIOD END | MAR 22 1997 |
| CASH | 31,211 |
| SECURITIES | 26,839 |
| RECEIVABLES | 32,662 |
| ALLOWANCES | 607 |
| INVENTORY | 22,387 |
| CURRENT ASSETS | 121,527 |
| PP&E | 315,474 |
| DEPRECIATION | 196,797 |
| TOTAL ASSETS | 246,444 |
| CURRENT LIABILITIES | 32,719 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 24,888 |
| OTHER SE | 158,670 |
| TOTAL LIABILITY AND EQUITY | 246,444 |
| SALES | 112,096 |
| TOTAL REVENUES | 112,096 |
| CGS | 54,543 |
| TOTAL COSTS | 102,817 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | 10,006 |
| INCOME TAX | 3,858 |
| INCOME CONTINUING | 6,148 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 6,148 |
| EPS PRIMARY | .21 |
| EPS DILUTED | .20 1 |
| 1 | THIS SCHEDULE REFLECTS A RESTATEMENT OF EARNINGS PER SHARE DUE TO THE ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE", WHICH WAS ADOPTED BY LANCE, INC. AND SUBSIDIARIES EFFECTIVE DECEMBER 27, 1997. |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF LANCE, INC. FOR THE TWENTY-FOUR WEEKS ENDED JUNE 14, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | OTHER |
| FISCAL YEAR END | DEC 27 1997 |
| PERIOD START | DEC 29 1996 |
| PERIOD END | JUN 14 1997 |
| CASH | 33,395 |
| SECURITIES | 26,433 |
| RECEIVABLES | 35,527 |
| ALLOWANCES | 1,057 |
| INVENTORY | 19,873 |
| CURRENT ASSETS | 122,504 |
| PP&E | 321,216 |
| DEPRECIATION | 196,049 |
| TOTAL ASSETS | 253,123 |
| CURRENT LIABILITIES | 39,624 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 24,914 |
| OTHER SE | 159,289 |
| TOTAL LIABILITY AND EQUITY | 253,153 |
| SALES | 230,910 |
| TOTAL REVENUES | 230,910 |
| CGS | 109,971 |
| TOTAL COSTS | 209,888 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | 22,860 |
| INCOME TAX | 8,777 |
| INCOME CONTINUING | 14,083 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 14,083 |
| EPS PRIMARY | .47 |
| EPS DILUTED | .46 1 |
| 1 | THIS SCHEDULE REFLECTS A RESTATEMENT OF EARNINGS PER SHARE DUE TO THE ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE", WHICH WAS ADOPTED BY LANCE, INC. AND SUBSIDIARIES EFFECTIVE DECEMBER 27, 1997. |
EXHIBIT 99
CAUTIONARY STATEMENT UNDER SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Lance, Inc. (the Company), from time to time, makes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which may be written or oral, reflect expectations of management of the Company at the time such statements are made. The Company is filing this cautionary statement to identify certain important factors that could cause the Company's actual results to differ materially from those in any forward-looking statements made by or on behalf of the Company.
PRICE COMPETITION AND CONSOLIDATION
The sales of most of the Company's products are subject to intense competition primarily through discounting and other price cutting techniques by competitors, many of whom are significantly larger and have greater resources than the Company. In addition, there is a continuing consolidation by the major companies in the snack food industry which could increase competition.
RAW MATERIALS
The Company's cost of sales can be adversely impacted by changes in the cost of raw materials, principally flour, peanuts and peanut butter. While the Company obtains substantial commitments for the future delivery of certain of its raw materials and engages in limited hedging to reduce the price risk of these raw materials, continuing long-term increases in the costs of raw materials could adversely impact the Company's cost of sales.
SALES GROWTH
The Company's plans for profitable sales growth depend upon the ability of the Company to develop and execute effective marketing and sales strategies for its products.
There are other important factors not described above which could also cause actual results to differ materially from those in any forward-looking statement made by or on behalf of the Company.