Snyder's-Lance, Inc.
SNYDER'S-LANCE, INC. (Form: 10-Q, Received: 05/08/2012 17:07:59)
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarter ended March 31, 2012

Commission File Number 0-398

 

LOGO

SNYDER’S-LANCE, INC.

(Exact name of registrant as specified in its charter)

 

North Carolina

(State or other jurisdiction of

incorporation or organization)

  

56-0292920

(I.R.S. Employer Identification No.)

 

13024 Ballantyne Corporate Place

Suite 900

Charlotte, North Carolina

   28277
(Address of principal executive offices)    (Zip Code)

704-554-1421

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ         No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ         No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  þ   Accelerated filer ¨    Non-accelerated filer ¨   Smaller reporting company  ¨
    

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨         No þ

The number of shares outstanding of the registrant’s $0.83-1/3 par value Common Stock, its only outstanding class of Common Stock as of April 27, 2012, was 68,104,723 shares.


Table of Contents

SNYDER’S-LANCE, INC. AND SUBSIDIARIES

INDEX

 

       Page  

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

     3   

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements

  

Condensed Consolidated Statements of Income (Unaudited) – Quarters Ended March 31, 2012 and April 2, 2011

     4   

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Quarters Ended March 31, 2012 and April 2, 2011

     5   

Condensed Consolidated Balance Sheets – As of March 31, 2012 (Unaudited) and December 31, 2011

     6   

Condensed Consolidated Statements of Cash Flows (Unaudited) – Quarters Ended March 31, 2012 and April 2, 2011

     7   

Notes to the Condensed Consolidated Financial Statements (Unaudited)

     8   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     15   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     19   

Item 4. Controls and Procedures

     19   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     20   

Item 1A. Risk Factors

     20   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     20   

Item 3. Defaults Upon Senior Securities

     21   

Item 4. Mine Safety Disclosures

     21   

Item 5. Other Information

     21   

Item 6. Exhibits

     22   

SIGNATURE

     23   

 

2


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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our estimates, expectations, beliefs, intentions, or strategies for the future, and the assumptions underlying such statements. We use the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Factors that could cause these differences include, but are not limited to, the risks and uncertainties set forth in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2011, and those described from time to time in our other reports filed with the Securities and Exchange Commission.

Caution should be taken not to place undue reliance on our forward-looking statements, which reflect our management’s expectations only as of the time such statements are made. Except as required by law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

3


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

For the Quarters Ended March 31, 2012 and April 2, 2011

(in thousands, except per share data)

 

0000000000 0000000000
     Quarter Ended  
     March 31,
2012
    April 2,
2011
 

Net revenue

   $ 392,843      $ 388,471   

Cost of sales

     265,460        247,299   
  

 

 

   

 

 

 

Gross margin

     127,383        141,172   
  

 

 

   

 

 

 

Selling, general and administrative

     110,703        120,905   

Gain on sale of route businesses, net

     (9,287     (89

Other (income)/expense, net

     (89     128   
  

 

 

   

 

 

 

Income before interest and income taxes

     26,056        20,228   

Interest expense, net

     2,263        2,660   
  

 

 

   

 

 

 

Income before income taxes

     23,793        17,568   

Income tax expense

     9,469        6,525   
  

 

 

   

 

 

 

Net income

     14,324        11,043   

Net income attributable to noncontrolling interests

     111        194   
  

 

 

   

 

 

 

Net income attributable to Snyder’s-Lance, Inc.

   $ 14,213      $ 10,849   
  

 

 

   

 

 

 

Basic earnings per share

   $ 0.21      $ 0.16   

Weighted average shares outstanding – basic

     67,912        66,732   

Diluted earnings per share

   $ 0.21      $ 0.16   

Weighted average shares outstanding – diluted

     69,053        68,060   

Cash dividends declared per share

   $ 0.16      $ 0.16   

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Quarters Ended March 31, 2012 and April 2, 2011

(in thousands)

 

0000000000 0000000000
     Quarter Ended  
     March 31,
2012
    April 2,
2011
 

Net income

   $ 14,324      $ 11,043   

Net unrealized gains on derivative instruments, net of tax of $55 and $238, respectively

     134        366   

Foreign currency translation adjustment

     1,589        2,389   
  

 

 

   

 

 

 

Total comprehensive income

     16,047        13,798   

Comprehensive income attributable to noncontrolling interests, net of tax of $30 and $60, respectively

     (111     (194
  

 

 

   

 

 

 

Total comprehensive income attributable to Snyder’s-Lance, Inc.

   $ 15,936      $ 13,604   
  

 

 

   

 

 

 

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

As of March 31, 2012 (Unaudited) and December 31, 2011

(in thousands, except share data)

 

00000000000 00000000000
     March 31,
2012
     December 31,
2011
 
ASSETS      

Current assets:

     

Cash and cash equivalents

   $ 22,149       $ 20,841   

Accounts receivable, net of allowances of $1,881 and $1,884, respectively

     147,871         143,238   

Inventories

     102,193         106,261   

Income tax receivable

     -         18,119   

Deferred income taxes

     18,046         21,042   

Assets held for sale

     71,678         57,822   

Prepaid expenses and other current assets

     22,506         20,705   
  

 

 

    

 

 

 

Total current assets

     384,443         388,028   

Noncurrent assets:

     

Fixed assets, net of accumulated depreciation of $324,529 and $328,648, respectively

     306,725         313,043   

Goodwill

     366,199         367,853   

Other intangible assets, net

     371,884         376,062   

Other noncurrent assets

     20,293         21,804   
  

 

 

    

 

 

 

Total assets

   $ 1,449,544       $ 1,466,790   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current liabilities:

     

Accounts payable

   $ 49,939       $ 52,930   

Accrued compensation

     25,544         29,248   

Income tax payable

     2,435         -   

Other payables and accrued liabilities

     56,291         68,712   

Current portion of long-term debt

     4,430         4,256   
  

 

 

    

 

 

 

Total current liabilities

     138,639         155,146   

Noncurrent liabilities:

     

Long-term debt

     247,256         253,939   

Deferred income taxes

     193,139         196,244   

Other noncurrent liabilities

     23,777         22,870   
  

 

 

    

 

 

 

Total liabilities

     602,811         628,199   

Commitments and contingencies

     -         -   

Stockholders’ equity:

     

Common stock, 68,074,130 and 67,820,798 shares outstanding, respectively

     56,726         56,515   

Preferred stock, no shares outstanding

     -         -   

Additional paid-in capital

     733,096         730,338   

Retained earnings

     38,878         35,539   

Accumulated other comprehensive income

     15,442         13,719   
  

 

 

    

 

 

 

Total Snyder’s-Lance, Inc. stockholders’ equity

     844,142         836,111   

Noncontrolling interests

     2,591         2,480   
  

 

 

    

 

 

 

Total stockholders’ equity

     846,733         838,591   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,449,544       $ 1,466,790   
  

 

 

    

 

 

 

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Quarters Ended March 31, 2012 and April 2, 2011

(in thousands)

 

00000000000 00000000000
     Quarter Ended  
     March 31,
2012
    April 2,
2011
 

Operating activities

    

Net income

   $ 14,324      $ 11,043   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     12,867        14,061   

Stock-based compensation expense

     1,008        338   

(Gain)/Loss on sale of fixed assets

     (259     41   

Gain on sale of route businesses, net

     (9,287     (89

Changes in operating assets and liabilities

     1,928        (12,982
  

 

 

   

 

 

 

Net cash provided by operating activities

     20,581        12,412   
  

 

 

   

 

 

 

Investing activities

    

Purchases of fixed assets

     (13,782     (17,471

Purchases of route businesses

     (21,712     (622

Proceeds from sale of fixed assets

     2,852        521   

Proceeds from sale of route businesses

     28,929        676   

Proceeds from sale of investments

     -        960   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,713     (15,936
  

 

 

   

 

 

 

Financing activities

    

Dividends paid to stockholders

     (10,873     (10,584

Dividends paid to noncontrolling interests

     -        (182

Issuances of common stock

     2,282        1,935   

Repurchases of common stock

     (322     -   

Repayments of long-term debt

     (610     -   

Net repayments of existing credit facilities

     (5,899     (9,243
  

 

 

   

 

 

 

Net cash used in financing activities

     (15,422     (18,074
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (138     83   
  

 

 

   

 

 

 

Increase/(Decrease) in cash and cash equivalents

     1,308        (21,515

Cash and cash equivalents at beginning of period

     20,841        27,877   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 22,149      $ 6,362   
  

 

 

   

 

 

 

Supplemental information:

    

Cash (received)/paid for income taxes, net of refunds of $12,283 and $2, respectively

   $ (11,650   $ 449   

Cash paid for interest

   $ 1,231      $ 1,478   

See Notes to the Condensed Consolidated Financial Statements (Unaudited).

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

1. BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements of Snyder’s-Lance, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These condensed financial statements should be read in conjunction with the audited financial statements and notes included in our Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2012. In our opinion, these Condensed Consolidated Financial Statements reflect all adjustments, consisting of only normal, recurring accruals, necessary to present fairly our Condensed Consolidated Financial Statements for the interim periods presented herein. The consolidated results of operations for the quarter ended March 31, 2012, are not necessarily indicative of the results to be expected for the full year.

The preparation of these financial statements requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty. Therefore, management’s determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors, including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. We routinely evaluate our estimates, including those related to customer returns and promotions, allowances for doubtful accounts, inventory valuations, useful lives of fixed assets and related impairment, long-term investments, hedge transactions, postemployment benefits including severance, intangible asset valuations and impairments, incentive compensation, income taxes, self-insurance, contingencies and litigation. Actual results may differ from these estimates.

Prior year amounts shown in the accompanying Condensed Consolidated Financial Statements have been reclassified for consistent presentation.

 

2. NEW ACCOUNTING STANDARDS

In June 2011, the FASB issued an Accounting Standards Update (“ASU”) regarding the presentation of comprehensive income. The new standard requires comprehensive income to be reported either as a single statement or in two consecutive statements reporting net income and other comprehensive income. In addition, the standard eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity. The ASU requires retrospective application and became effective for us in the first quarter of 2012. We adopted this standard in 2011 and have included the Condensed Consolidated Statements of Comprehensive Income in our Condensed Consolidated Financial Statements.

 

3. MERGER AND INTEGRATION ACTIVITIES

On December 6, 2010, Lance, Inc. and Snyder’s of Hanover, Inc. completed a merger (“Merger”) to create Snyder’s-Lance, Inc. The primary focus of our integration activities has been on the continued execution of our plan to convert the vast majority of company-owned routes to an independent business owner (“IBO”) distribution structure. The conversion is expected to be substantially completed by the middle of 2012.

During the quarters ended March 31, 2012, and April 2, 2011, we incurred $1.5 million and $1.6 million, respectively, in severance costs and professional fees related to Merger and integration activities, which are included in selling, general and administrative expenses on the Condensed Consolidated Statements of Income. In addition, for the quarter ended March 31, 2012, we recorded a net gain of $9.3 million from the sale of route businesses associated with the conversion to an IBO distribution structure.

The closure of the Corsicana, Texas manufacturing facility was completed during the quarter ended March 31, 2012. Upon closure of the facility, many assets were relocated to other manufacturing locations. Expenses incurred as part of the relocation process were $1.4 million in the first quarter of 2012 and were included in cost of sales in the Condensed Consolidated Statements of Income. No adjustments were made in the first quarter of 2012 to the $2.3 million Corsicana impairment charges taken in the fourth quarter of 2011.

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to Snyder’s-Lance, Inc. by the weighted average number of shares outstanding during each period. Diluted earnings per share gives effect to all securities representing potential common shares that were dilutive and outstanding during the period. In the calculation of diluted earnings per share, the denominator includes the number of additional common shares that would have been outstanding if our outstanding dilutive stock options had been exercised, as determined pursuant to the treasury stock method.

For the quarter ended March 31, 2012, no shares were excluded from the calculation of diluted earnings per share because their effects were antidilutive. Approximately 200,000 shares were excluded from the calculation of diluted earnings per share for the quarter ended April 2, 2011, because their effects were antidilutive.

 

5. EQUITY-BASED INCENTIVES

Compensation expense related to equity-based incentive plans of $1.0 million and $0.3 million was recognized for the quarters ended March 31, 2012, and April 2, 2011, respectively. During the quarter ended March 31, 2012, we issued 533,994 non-qualified stock options at $22.41 per share and 123,867 restricted shares to employees. During the quarter ended April 2, 2011, we issued 1,020,765 non-qualified stock options at $17.32 per share and 152,748 restricted shares to employees.

During the quarter ended March 31, 2012, we repurchased 14,336 shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of restricted stock. There were no share repurchases during the quarter ended April 2, 2011.

 

6. INVENTORIES

Inventories as of March 31, 2012, and December 31, 2011, consisted of the following:

 

0000000000000 0000000000000

(in thousands)

   March 31,
2012
     December 31,
2011
 

Finished goods

   $ 58,268       $ 60,488   

Raw materials

     17,985         19,968   

Maintenance parts and supplies

     25,940         25,805   
  

 

 

    

 

 

 

Total inventories

   $ 102,193       $ 106,261   
  

 

 

    

 

 

 

 

7. INVESTMENTS

We own a non-controlling equity interest in Late July Snacks LLC (“Late July”), an organic snack food company. Equity earnings, which are not material, are included in other income/(expense), net. We also manufacture products for Late July. Contract manufacturing revenue from Late July was approximately $1.3 million and $1.1 million during the first quarter of 2012 and 2011, respectively. As of March 31, 2012, and December 31, 2011, accounts receivable due from Late July totaled $0.6 million and $0.4 million, respectively. During the first quarter of 2011, we purchased manufacturing equipment from Late July for $2.0 million.

As of March 31, 2012, and December 31, 2011, we had $6.4 million and $7.0 million, respectively, in long-term investments consisting of limited partnerships and real estate investment trusts. During the first quarter of 2011, one of these investments was sold for approximately $1.0 million resulting in an immaterial loss. No investments were sold in the first quarter of 2012. Since our ownership interests are less than 5%, these investments are recorded at cost and adjusted for impairments considered other than temporary. Distributions received are recorded as either a return of capital or as investment income if in the form of a dividend.

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

8. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the quarter ended March 31, 2012, are as follows:

 

0000000000000

(in thousands)

   Carrying
Amount
 

Balance as of December 31, 2011

   $ 367,853   

Goodwill acquired in the purchase of route businesses

     5,786   

Goodwill attributable to the sale of route businesses

     (7,690

Change in goodwill allocated to assets held for sale

     (697

Change in foreign currency exchange rate

     947   
  

 

 

 

Balance as of March 31, 2012

   $ 366,199   
  

 

 

 

As of March 31, 2012 and December 31, 2011, other intangible assets consisted of the following:

 

(in thousands)

   Gross  Carrying
Amount
     Accumulated
Amortization
    Net Carrying
Amount
 

As of March 31, 2012:

       

Customer and contractual relationships – amortized

   $ 69,468       $ (6,358   $ 63,110   

Reacquired rights – amortized

     3,100         (253     2,847   

Routes – unamortized

     11,666         -        11,666   

Trademarks – unamortized

     294,787         (526     294,261   
  

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2012

   $ 379,021       $ (7,137   $ 371,884   
  

 

 

    

 

 

   

 

 

 

As of December 31, 2011:

       

Customer and contractual relationships – amortized

   $ 69,468       $ (5,252   $ 64,216   

Reacquired rights – amortized

     3,100         (156     2,944   

Routes – unamortized

     14,641         -        14,641   

Trademarks – unamortized

     294,787         (526     294,261   
  

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2011

   $ 381,996       $ (5,934   $ 376,062   
  

 

 

    

 

 

   

 

 

 

The intangible assets related to customer and contractual relationships are being amortized over a weighted average useful life of 17.6 years and will be amortized through November 2029. Reacquired rights are being amortized over 8 years. Amortization expense related to intangibles was $1.2 million and $0.9 million for the quarters ended March 31, 2012, and April 2, 2011, respectively. We estimate that annual amortization expense for these intangible assets will be approximately $4.8 million per year for 2012, 2013 and 2014, $4.7 million for 2015, and $4.6 million for 2016.

Routes and trademarks are deemed to have indefinite useful lives because they are expected to generate cash flows indefinitely. Although not amortized, they are reviewed for impairment as conditions change or at least on an annual basis.

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

For the quarter ended March 31, 2012, changes in the carrying value of routes are as follows:

 

0000000000000

(in thousands)

   Carrying
Amount
 

Balance of routes as of December 31, 2011

   $ 14,641   

Purchases of routes, exclusive of goodwill acquired

     15,926   

Sales of routes

     (11,952

Change in routes allocated to assets held for sale

     (6,949
  

 

 

 

Balance of routes as of March 31, 2012

   $ 11,666   
  

 

 

 

Routes and associated goodwill allocated to assets held for sale represent assets available for sale in their present condition and for which actions to complete a sale have been initiated. As of March 31, 2012, $44.7 million of route intangibles and $17.5 million of goodwill are included in assets held for sale on the Condensed Consolidated Balance Sheets. As of December 31, 2011, $37.8 million of route intangibles and $16.8 million of goodwill were included in assets held for sale.

 

9. INCOME TAXES

We have recorded gross unrecognized tax benefits as of March 31, 2012 totaling $6.1 million and related interest and penalties of $2.4 million in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. Of this amount, $6.9 million would affect the effective tax rate if subsequently recognized. As of December 31, 2011, we recorded gross unrecognized tax benefits totaling $6.1 million and related interest and penalties of $2.3 million in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. The increase is related to the accrual of interest and penalties on existing positions. We expect that statutes of limitation will likely expire in the next twelve months and may result in a $1.2 million decrease in the unrecognized tax benefit amount. We classify interest and penalties associated with income tax positions within income tax expense.

The effective income tax rate increased from 37.1% for the first quarter of 2011 to 39.8% for the first quarter of 2012. The increase in the effective income tax rate was due to higher non-tax deductible expenses, primarily related to the goodwill associated with the sale of route businesses.

We have open years for income tax audit purposes in our major taxing jurisdictions according to statutes as follows:

 

Jurisdiction    Open Years

U.S. federal

   2008 and forward

Canada federal

   2007 and forward

Ontario provincial

   2005 and forward

Massachusetts

   2008 and forward

North Carolina

   2006 and forward

New York

   2008 and forward

Illinois

   2008 and forward

Georgia

   2008 and forward

 

10. FAIR VALUE MEASUREMENTS

We have classified assets and liabilities required to be measured at fair value into the fair value hierarchy as set forth below:

 

Level 1

  

-    quoted prices in active markets for identical assets and liabilities.

Level 2

  

-    observable inputs other than quoted prices for identical assets and liabilities.

Level 3

  

-    unobservable inputs in which there is little or no market data available, which requires us to develop our own assumptions.

We measure our derivative instruments at fair value using Level 2 inputs. There were no changes among the levels during the first quarter of 2012.

 

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SNYDER’S-LANCE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

The carrying amount of cash and cash equivalents, receivables and accounts payable approximates fair value due to their short-term nature. The fair value of outstanding debt, including current maturities, was approximately $260 million and $269 million at March 31, 2012, and December 31, 2011, respectively. These Level 2 fair value estimates were based on values of similar debt with the same maturities, debt rating, and interest rates.

 

11. DERIVATIVE INSTRUMENTS

We are exposed to certain risks relating to our ongoing business operations. We use derivative instruments to manage interest rate and foreign exchange rate risks.

The fair value of the derivative instrument asset/(liability) in the Condensed Consolidated Balance Sheets using Level 2 inputs is as follows:

 

0000000000000 0000000000000

(in thousands)

   March 31,
2012
    December 31,
2011
 

Interest rate swaps (included in Other noncurrent liabilities)

   $ (1,322   $ (1,309 )  

Foreign currency forwards (included in Prepaid expenses and other current assets)

     375        126   
  

 

 

   

 

 

 

Total fair value of derivative instruments

   $ (947   $ (1,183
  

 

 

   

 

 

 

Interest Rate Swaps

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate and the U.S. base rate. To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt. The notional amount of the interest rate swaps designated as hedging instruments as of March 31, 2012 and December 31, 2011 was $55.8 million and $56.3 million, respectively.

Foreign Currency Forwards

We have exposure to foreign exchange rate fluctuations through the operations of our Canadian subsidiary. A majority of the revenue of our Canadian operations is denominated in U.S. dollars and a substantial portion of its costs, such as raw materials and direct labor, are denominated in Canadian dollars. We have entered into a series of derivative forward contracts to mitigate a portion of this foreign exchange rate exposure. These contracts have maturities through December 2012. The notional amount for foreign currency forwards decreased to $12.6 million at March 31, 2012, from $18.1 million at December 31, 2011, due to contracts that matured in 2012.

The pre-tax income/(expense) effect of derivative instruments on the Condensed Consolidated Statements of Income is as follows:

 

0000000000000 0000000000000
     Quarter Ended  

(in thousands)

   March 31,
2012
    April 2,
2011
 

Interest rate swaps (included in Interest expense, net)

   $ (191   $ (702

Foreign currency forwards (included in Net revenue)

     126        198   

Foreign currency forwards (included in Other income/(expense), net)

     2        (14
  

 

 

   

 

 

 

Total net pre-tax expense from derivative instruments

   $ (63   $ (518
  

 

 

   

 

 

 

 

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

The change in unrealized pre-tax losses included in other comprehensive income due to fluctuations in interest rates and foreign exchange rates were as follows:

 

0000000000000 0000000000000
     Gain/(Loss) for the
Quarter Ended
 

(in thousands)

   March 31,
2012
    April 2,
2011
 

Interest rate swaps

   $ (60   $ 679   

Foreign currency forwards

     249        (75
  

 

 

   

 

 

 

Total change in unrealized pre-tax losses from derivative instruments (effective portion)

   $ 189      $ 604   
  

 

 

   

 

 

 

The counterparty credit risk associated with our derivative instruments in an asset position is considered to be low because we limit our exposure to creditworthy counterparties.

 

12. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections, and expected usage levels. Purchase commitments for certain ingredients, packaging materials and energy increased from $184.7 million as of December 31, 2011, to $198.9 million as of March 31, 2012. We currently contract from approximately three to twelve months in advance for all major ingredients and packaging.

Customer Concentration

Sales to our largest customer, Wal-Mart Stores, Inc., were approximately 17% and 18% for the quarters ended March 31, 2012 and April 2, 2011, respectively. In addition, third-party distributors, which account for approximately 12% of sales, purchase and resell our products to customers including Wal-Mart Stores, Inc. thereby increasing our sales attributable to Wal-Mart Stores, Inc. by an amount we are unable to reasonably estimate. Accounts receivable at March 31, 2012 and December 31, 2011, included receivables from Wal-Mart Stores, Inc. totaling $25.2 million and $24.8 million, respectively.

Guarantees

We currently guarantee loans made to IBOs by third party financial institutions for the purchase of distribution routes and trucks. The outstanding aggregate balance on these loans was approximately $65.6 million as of March 31, 2012. The annual maximum amount of future payments we could be required to make under the guarantee equates to 25% of the outstanding loan balance on the first day of each calendar year plus 25% of the amount of any new loans issued during such calendar year. These loans are collateralized by the routes and trucks for which the loans are made. Accordingly, we have the ability to recover substantially all of the outstanding loan value.

Legal Matters

On January 19, 2012, a purported class action was filed in the United States District Court for the District of New Jersey by Joseph A. McPeak individually and allegedly on behalf of other similarly situated individuals against S-L Distribution Company, Inc., a subsidiary of the Company. The complaint alleges a single cause of action for damages for violations of New Jersey’s Franchise Practices Protection Act. The Company is investigating this claim and cannot estimate any possible loss at this time. The Company intends to vigorously defend against this action.

In addition, we are currently subject to various lawsuits and environmental matters arising in the normal course of business. In our opinion, such claims should not have a material effect upon our Condensed Consolidated Financial Statements taken as a whole.

 

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Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

13. RELATED PARTY TRANSACTIONS

We own 51% of Patriot Snacks Real Estate, LLC (“Patriot”) and consolidate its balance sheet and operating results into our Condensed Consolidated Financial Statements. The remaining 49% is owned by an employee.

We own 80% of Michaud Distributors, which distributes our products in the northeastern United States. The remaining 20% is owned by two employees. As of March 31, 2012, we have notes receivable from stockholders and employees of Michaud Distributors of $0.3 million. The notes are unsecured, due upon demand, and bear interest at the best rate available to Michaud Distributors by its primary commercial lenders.

ARWCO Corporation, MAW Associates, LP and Warehime Enterprises, Inc. are significantly owned or controlled by the Chairman of the Board of Snyder’s-Lance, Inc. or direct family members. Among other unrelated business activities, these entities provide financing to IBOs for the purchase of trucks and routes. We have entered into loan service agreements with these related parties that allow us to repurchase certain distribution assets in the event an IBO defaults on a loan with the related party. We have the right to repurchase the assets 30 days after default at the value as defined in the loan service agreement which should approximate fair market value. As of March 31, 2012, there were outstanding loans made to IBOs by the related parties for the purchase of distribution routes and trucks with an aggregate principal balance of approximately $31.1 million. Our Chairman of the Board also serves as an officer and/or director of these entities. Transactions with these related parties are primarily related to the collection and remittance of loan payments on notes receivable held by the affiliates. We are reimbursed for certain overhead and administrative services associated with the services provided to these related parties. The receivables from, payables to, and administrative fees from these entities are not significant.

One of our directors, C. Peter Carlucci, Jr., is a member of Eckert Seamans Cherin & Mellott, LLC (“Eckert”), which serves as one of our outside legal firms. There were $0.1 million in payments made to Eckert during the first quarter of 2012.

 

14. ACCUMULATED OTHER COMPREHENSIVE INCOME AND NONCONTROLLING INTERESTS

Accumulated other comprehensive income presented in the Condensed Consolidated Balance Sheets as of March 31, 2012, and December 31, 2011 consists of the following:

 

0000000000 0000000000

(in thousands)

   March 31,
2012
    December 31,
2011
 

Foreign currency translation adjustment

   $ 15,778      $ 14,189   

Net unrealized loss on derivative instruments, net of tax

     (336     (470
  

 

 

   

 

 

 

Accumulated other comprehensive income

   $ 15,442      $ 13,719   
  

 

 

   

 

 

 

Noncontrolling Interests

For the quarter ended March 31, 2012, our noncontrolling interests are associated with our 51% ownership of Patriot and 80% ownership of Michaud Distributors. For the quarter ended April 2, 2011, our noncontrolling interests consisted of our 51% ownership of Patriot, 80% ownership of Michaud Distributors, and 80% ownership of Melisi Snacks, Inc. During the second and third quarters of 2011, we acquired the remaining ownership interest in Melisi Snacks, Inc. (20%) increasing our total ownership to 100%.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an assessment of our financial condition, results of operations, liquidity and capital resources and should be read in conjunction with the accompanying consolidated financial statements, and notes to the financial statements. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2011, and those described from time to time in our other reports filed with the Securities and Exchange Commission.

Management’s discussion and analysis of our financial condition and results of operations are based on the Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The consolidated results of operations for the quarter ended March 31, 2012, are not necessarily indicative of the results to be expected for the full year. Future events and their effects cannot be determined with absolute certainty. Therefore, management’s determination of estimates and judgments about the carrying values of assets and liabilities requires the exercise of judgment in the selection and application of assumptions based on various factors, including historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances. We routinely evaluate our estimates, including those related to customer returns and promotions, allowances for doubtful accounts, inventory valuations, useful lives of fixed assets and related impairment, long-term investments, hedge transactions, postemployment benefits including severance, intangible asset valuations and impairments, incentive compensation, income taxes, self-insurance, contingencies and litigation. Actual results may differ from these estimates.

Overview

During the first quarter of 2012, we continued to focus on our plan of converting routes, increasing the distribution of our products and lowering our operating costs. The conversion of the vast majority of company-owned routes to an independent business owner (“IBO”) distribution structure is expected to be substantially completed by the middle of 2012. The conversion and other significant first quarter activity affected our results as follows:

 

   

Net Revenue – Total revenue increased compared to the first quarter of 2011 despite lower revenue per unit sold as we continue to shift from a company-owned to an IBO distribution structure. We expect revenue per unit sold to continue to decline throughout the second quarter as we complete the conversion. However, we expect to largely offset this decline in revenue through increased product distribution and new product introductions.

   

Gross margin – Lower revenue per unit sold as a result of the conversion is driving lower gross margin as a percentage of net revenue. This trend is expected to continue throughout the year. Also, the first quarter of 2012 continued to be negatively affected by higher commodity costs compared to the first quarter of 2011. We expect that commodity costs throughout 2012 will continue to be higher than the prior year but we also expect that selling price increases will mitigate a substantial portion of higher commodity costs. Additionally, $1.4 million in expenses were recorded in cost of sales in the first quarter of 2012 due to the relocation of assets from the Corsicana, Texas facility to other manufacturing locations.

   

Selling, general and administrative expenses – As we complete the conversion to an IBO distribution structure, we believe our distribution-related expenses will decline more than the decline in gross margin dollars. Declines in selling, general and administrative expenses were realized during the first quarter of 2012, but we expect additional efficiencies throughout 2012 as we complete the IBO conversion.

   

Gains on the sale of route businesses – We recorded net gains of $9.3 million from the sale of route businesses to IBOs during the first quarter of 2012. As of March 31, 2012, we have completed the sale of more than half of the routes associated with the IBO conversion.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Quarter Ended March 31, 2012 Compared to Quarter Ended April 2, 2011

 

         Quarter Ended    

Favorable/

(Unfavorable)

 

(in thousands)

       March 31, 2012     April 2, 2011     Variance  

Net revenue

     $ 392,843        100.0   $ 388,471        100.0   $ 4,372        1.1

Cost of sales

       265,460        67.6     247,299        63.7     (18,161     -7.3
    

 

 

 

Gross margin

       127,383        32.4     141,172        36.3     (13,789     -9.8

Selling, general and administrative

       110,703        28.2     120,905        31.1     10,202        8.4

Gain on sale of route businesses, net

       (9,287     -2.4     (89     0.0     9,198        nm   

Other (income)/expense, net

       (89     0.0     128        0.0     217        169.5
    

 

 

 

Income before interest and taxes

       26,056        6.6     20,228        5.2     5,828        28.8

Interest expense, net

       2,263        0.6     2,660        0.7     397        14.9

Income tax expense

       9,469        2.4     6,525        1.7     (2,944     -45.1
    

 

 

 

Net income

     $ 14,324        3.6   $ 11,043        2.8   $ 3,281        29.7
    

 

 

 

nm = not meaningful.

Net Revenue

Net revenue increased $4.4 million compared to the first quarter of 2011. Net revenue declines attributable to the IBO conversion of approximately 3% were more than offset by increases in both volume and pricing. Volume growth was primarily due to increased distribution from our IBO distribution structure, and was led by significant growth from each of our core brands (Snyder’s of Hanover pretzels, Lance sandwich crackers, and Cape Cod kettle chips). Selling price increases were implemented beginning in the second quarter of 2011 and continued into the first quarter of 2012 to mitigate the effect of higher commodity costs.

Revenue by product category was as follows (in millions):

 

00000000000 00000000000
     Quarter Ended  
     March 31,
2012
     April 2,
2011
 

Branded Products

   $ 230.4       $ 228.5   

Non-Branded Products

     162.4         160.0   
  

 

 

    

 

 

 

Net Revenue

   $ 392.8       $ 388.5   
  

 

 

    

 

 

 

Gross Margin

Gross margin decreased $13.8 million, or 3.9% as a percentage of net revenue, during the first quarter of 2012 compared to the same quarter last year. The decrease in gross margin was primarily driven by the reduction in selling prices as a result of the conversion to an IBO distribution structure. In addition, selling price increases, excluding the impact of the IBO conversion, offset higher commodity costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $10.2 million, or 2.9% as a percentage of net revenue, during the first quarter of 2012 compared to the first quarter of 2011. The decrease was primarily driven by reduced infrastructure costs and lower compensation and benefit expenses due to the conversion to an IBO distribution structure and synergies recognized as a result of our Merger integration activities in 2011 and 2012. During the first quarter of 2012, we recognized $1.5 million of severance and professional fee charges associated with Merger integration activities which were comparable to $1.6 million in the first quarter of 2011. We expect selling, general and administrative costs to continue to decrease as a percentage of net revenue when compared to 2011 as we complete the conversion to an IBO distribution structure and realize additional synergies. In addition, we expect to have significantly less severance and professional fee expenses associated with the Merger integration throughout the remainder of 2012 as compared to 2011.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Gain on Sale of Route Businesses, Net

During the first quarter of 2012, we recognized gains of $9.3 million from the sale of route businesses associated with the IBO conversion. As we continue to convert the company-owned routes to an IBO distribution structure, additional gains on the sale of routes are anticipated.

Interest Expense

Interest expense decreased $0.4 million during the first quarter of 2012 compared to the first quarter of 2011, primarily as a result of lower average interest rates.

Income Tax Expense

The effective income tax rate increased from 37.1% for the first quarter of 2011 to 39.8% for the first quarter of 2012. The increase in the effective income tax rate was due to higher non-tax deductible expenses, primarily related to the goodwill associated with the sale of route businesses.

Liquidity and Capital Resources

Liquidity

Liquidity represents our ability to generate sufficient cash flows from operating activities to meet our obligations as well as our ability to obtain appropriate financing. Therefore, liquidity should not be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives. Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures for fixed assets, purchases of route businesses, acquisitions, and dividends. We believe we have sufficient liquidity available to enable us to meet these demands.

We have a universal shelf registration statement that, subject to our ability to consummate a transaction on acceptable terms, provides the flexibility to sell up to $250 million of debt or equity securities, which is effective through February 27, 2015.

Operating Cash Flows

Net cash provided by operating activities was $20.6 million during the first quarter of 2012 and $12.4 million during the first quarter of 2011. Cash provided by changes in operating assets and liabilities was $1.9 million during the first quarter of 2012, an increase from cash used by changes in operating assets and liabilities of $13.0 million in the first quarter of 2011. During the first quarter of 2012, the use of cash from increases in accounts receivable and decreases in accounts payable and other payables and accrued liabilities was more than offset by the $18.1 million in cash provided by the reduction in the income tax receivable.

Investing Cash Flows

Net cash used in investing activities was $3.7 million and $15.9 million for the first quarters of 2012 and 2011, respectively. Capital expenditures for fixed assets, principally manufacturing equipment, totaled $13.8 million during the first quarter of 2012, partially offset by proceeds from the sale of fixed assets of $2.9 million. Capital expenditures for 2012 are projected to be between $80 and $85 million. Expenditures for the purchase of route businesses were $21.7 million in the first quarter of 2012, and were more than offset by proceeds from the sale of route businesses of $28.9 million. The majority of route purchases required for the IBO conversion were completed as of the end of the first quarter of 2012. We anticipate total proceeds, net of purchases, of $50 million to $60 million in 2012 once the IBO conversion is completed and all funds are collected.

Net cash used in investing activities during the first quarter of 2011 represented capital expenditures of $17.5 million, partially offset by proceeds from the sale of fixed assets of $0.5 million. Capital expenditures for purchases of fixed assets were $57.7 million for the year ended December 31, 2011.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Financing Cash Flows

Net cash used in financing activities was $15.4 million for the first quarter of 2012 compared with $18.1 million in the first quarter of 2011. Dividends of $0.16 per common share totaling $10.9 million and $10.6 million were paid in the first quarters of 2012 and 2011, respectively, with the slight increase in 2012 due to the change in number of shares outstanding. We received cash and related tax benefits of $2.3 million and $1.9 million during the first quarters of 2012 and 2011, respectively, as a result of stock option exercises. Net repayments of long-term debt and credit facilities totaling $6.5 million and $9.2 million for the first quarters of 2012 and 2011, respectively, were primarily funded by cash on hand and cash provided by operating activities.

On May 3, 2012, the Board of Directors declared a quarterly cash dividend of $0.16 per share, payable on May 31, 2012, to stockholders of record on May 23, 2012.

Debt

Additional borrowings available under our existing credit facility totaled $126.0 million as of March 31, 2012. We have complied with all financial covenants contained in the credit agreement. We also maintain standby letters of credit in connection with our self-insurance reserves for casualty claims. The total amount of these letters of credit was $17.4 million as of March 31, 2012.

Contractual Obligations

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections, and expected usage levels. Purchase commitments for certain ingredients, packaging materials and energy increased from $184.7 million as of December 31, 2011, to $198.9 million as of March 31, 2012. We currently contract from approximately three to twelve months in advance for all major ingredients and packaging.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations or cash flows.

Market Risks

The principal market risks that may adversely impact results of operations and financial position relate to ingredient, packaging and energy costs, interest and foreign exchange rates, and credit risks.

See the “ Contractual Obligations” section above for a discussion of market risks associated with ingredient, packaging and energy costs.

Our variable-rate debt obligations incur interest at floating rates based on changes in the Eurodollar rate and the U.S. base rate. To manage exposure to changing interest rates, we selectively enter into interest rate swap agreements to maintain a desirable proportion of fixed to variable-rate debt. While these interest rate swap agreements fixed a portion of the interest rate at a predictable level, pre-tax interest expense would have been $0.2 million lower without these agreements during the first quarter of 2012.

We are exposed to foreign exchange rate fluctuations through the operations of our Canadian subsidiary. A majority of the revenue of our Canadian operations is denominated in U.S. dollars and a substantial portion of the operations’ costs, such as raw materials and direct labor, are denominated in Canadian dollars. We have entered into a series of derivative forward contracts to mitigate a portion of this foreign exchange rate exposure. These contracts have maturities through December 2012. The effect of foreign exchange rate fluctuations, net of the effect of derivative forward contracts, was unfavorable by $0.1 million for the first quarter of 2012 compared to the first quarter of 2011.

We do not have or use market risk sensitive instruments for trading or speculative purposes. See Note 11 to our Condensed Consolidated Financial Statements for additional information about our derivative instruments.

We are exposed to credit risks related to our accounts receivable. We perform ongoing credit evaluations of our customers to minimize the potential exposure. For the first quarter of 2012 and 2011, net bad debt expense was $0.3 million and $0.4 million, respectively. Allowances for doubtful accounts were $1.9 million at both March 31, 2012 and December 31, 2011.

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about these market risks are included under “Market Risks” in Item  2 above, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures

As of the end of the period covered by this report and pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), we conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2012.

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2012, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On January 19, 2012, a purported class action was filed in the United States District Court for the District of New Jersey by Joseph A. McPeak individually and allegedly on behalf of other similarly situated individuals against S-L Distribution Company, Inc., a subsidiary of the Company. The complaint alleges a single cause of action for damages for violations of New Jersey’s Franchise Practices Protection Act. The Company is investigating this claim and cannot estimate any possible loss at this time. The Company intends to vigorously defend against this action.

We are also currently subject to various lawsuits and environmental matters arising in the normal course of business. In our opinion, such matters should not have a material effect upon our Condensed Consolidated Financial Statements taken as a whole.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which factors could materially affect our business, financial condition or future results. There have been no material changes to such risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our revolving credit agreement restricts our payment of cash dividends and repurchases of our common stock if, after payment of any such dividends or any such repurchases of our common stock, our consolidated stockholders’ equity would be less than $200 million. As of March 31, 2012, our consolidated stockholders’ equity was $846.7 million. We were in compliance with these covenants at March 31, 2012. The private placement agreement for $100 million of senior notes assumed as part of the Merger has provisions no more restrictive than the revolving credit agreement.

The following table presents information with respect to purchases of common stock of the Company made during the quarter ended March 31, 2012, by the Company or any “affiliated purchaser” of the Company as defined in Rule 10b-18(a)(3) under the Exchange Act:

 

Period

   Total Number
of Shares
Purchased (1)
     Average
Price Paid
Per Share
     Total Number of Shares
Purchase as Part of
Publicly Announced
Plans or Programs
     Maximum Number
of Shares  that May Yet
Be Purchased Under the
Plans or Programs (1)
 

January 1, 2012 — January 31, 2012

     -         -         -         -   

February 1, 2012 — February 29, 2012

     14,336       $ 22.41         -         185,664   

March 1, 2012 — March 31, 2012

     -         -         -         -   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     14,336       $ 22.41         -         185,664   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

In November 2011, the Board of Directors authorized the repurchase of up to 200,000 shares of common stock from employees. The purpose of the repurchase program is to permit the Company to acquire shares of common stock from employees to cover withholding taxes payable by employees upon the vesting of shares of restricted stock. The repurchase program expires in February 2014. All of the shares reflected in the table were repurchased by the Company in accordance with the repurchase program.

 

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Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

 

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Item 6. Exhibits

Exhibit Index

 

No.

 

Description

3.1   Restated Articles of Incorporation of Snyder’s-Lance, Inc. as amended through April 17, 1998, incorporated herein by reference to Exhibit 3 to the Registrant’s Quarterly Report on Form 10-Q for the twelve weeks ended June 13, 1998 (File No. 0-398).
3.2   Articles of Amendment to Amended and Restated Articles of Incorporation of Snyder’s-Lance, Inc., incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 6, 2010 (File No. 0-398).
3.3   Bylaws of Snyder’s-Lance, Inc., as amended through December 6, 2010, incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on December 6, 2010 (File No. 0-398).
10.1*   Amended and restated Snyder’s-Lance, Inc. Compensation Deferral Plan, dated as of January 1, 2012, filed herewith.
10.2*   Amended and restated Snyder’s of Hanover Executive Deferred Compensation Plan, dated as of October 1, 2005, filed herewith.
10.3*   Snyder’s-Lance, Inc. Long-Term Performance Incentive Plan for Officers and Key Managers, dated as of February 8, 2012, filed herewith.
10.4*   Snyder’s-Lance, Inc. Annual Performance Incentive Plan for Officers, dated as of February 8, 2012, filed herewith.
10.5*   President Relocation Benefits Letter, dated April 9, 2012, between the Registrant and Carl E. Lee, Jr., filed herewith.
10.6*   Chairman of the Board Compensation Letter, dated February 9, 2012, between the Registrant and Michael A. Warehime, filed herewith.
31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith.
31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), filed herewith.
32   Certification pursuant to Rule 13a-14(b), as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
101   The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements.

 

*

Management contract.

 

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

SNYDER’S-LANCE, INC.

By:    

 

/s/ Rick D. Puckett

 

Rick D. Puckett

  Executive Vice President, Chief Financial Officer
  and Treasurer

Dated: May 8, 2012

 

23

Exhibit 10.1

SNYDER’S-LANCE, INC.

COMPENSATION DEFERRAL PLAN

(as amended and restated effective January 1, 2012)

 

1.

Name:

This plan shall be known as the “Snyder’s-Lance, Inc. Compensation Deferral Plan” (the “Plan”).

 

2.

Purpose and Intent:

Snyder’s-Lance, Inc. (formerly, Lance, Inc.) (the “Corporation”) established the Plan for the purposes of (i) providing certain employees with the opportunity to defer payment of a portion of base salary and certain annual incentives and (ii) providing benefits to certain employees whose benefits under the Savings Plan are adversely affected by the limitations of Sections 401(a)(17) and 415 of the Code. The Corporation is hereby amending and restating the Plan effective as of January 1, 2012 (the “Restatement Date”) to reflect certain design changes in connection with changes in the design and administration of the Savings Plan and to otherwise meet current needs. It is the intent of the Corporation that amounts deferred under the Plan shall not be taxable to the employee for income tax purposes until the time actually received by the employee. The provisions of the Plan shall be construed and interpreted to effectuate that intent.

 

3.

Definitions:

For purposes of the Plan, the following terms have the following meanings:

Account ” means the account established and maintained on the books of the Corporation to record a Participant’s interest under the Plan attributable to amounts credited to the Participant pursuant to the Plan.

Annual Incentive Award ” means, with respect to a Participant, any annual incentive award payable to the Participant pursuant to any incentive compensation plan of a Participating Employer approved for purposes of this Plan by the Plan Administrator, provided such annual incentive award is payable prior to the date of the Participant’s Termination of Employment. However, if a Participant first becomes eligible to participate in the Plan after the beginning of a Plan Year, the Annual Incentive Award for such first year of eligibility shall be the pro-rated portion of the total Annual Incentive Award payable for that Plan Year that is attributable to the Participant’s service with the Participating Employers rendered after the date the Participant makes a deferral election for that Plan Year to the extent required by Section 409A of the Code.

Beneficiary ” means any person or trust designated by a Participant in accordance with procedures adopted by the Plan Administrator to receive the Participant’s Account in the event of the Participant’s death. If the Participant


does not designate a Beneficiary, the Participant’s Beneficiary is his or her spouse, or if not then living, his or her estate.

CEO ” means the Chief Executive Officer of the Corporation.

Class Year Deferrals ” means the deferrals under Paragraph 5(b) of a Participant’s base salary for the Plan Year plus the deferral of any portion of the Participant’s Annual Incentive Award earned for services rendered during the Plan Year, including any related adjustments for deemed investments in accordance with Paragraph 5(e) below. Deferrals of base salary and Annual Incentive Awards for a Plan Year may be established by the Plan Administrator as separate Class Year Deferrals at the time deferral elections are made.

Code ” means the Internal Revenue Code of 1986, as amended from time to time, and includes any valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder.

Compensation Committee ” means the committee of individuals who are serving from time to time as the Compensation Committee of the Board of Directors of the Corporation.

Eligible Employee ” means an Employee designated as an Eligible Employee pursuant to Paragraph 5(a).

Employee ” means an individual employed by a Participating Employer.

Participant ” means an Eligible Employee who has elected to defer compensation under the Plan as provided in Paragraph 5(b) or has received restoration credits to his Account pursuant to Paragraph 5(c).

Participating Employer ” means the Corporation and any other incorporated or unincorporated trade or business that adopts the Plan.

Payment Sub-Account ” means a portion of a Participant’s Account established by the Plan Administrator to facilitate the administration of distributions under the Plan, including without limitation Payment Sub-Accounts representing (i) each separate set of Class Year Deferrals and (ii) restoration credits under Paragraph 5(c) below.

Plan Administrator ” means the person or entity designated as the “Plan Administrator” by the Compensation Committee.

Plan Year ” means the calendar year.

 

2


Profit-Sharing Restoration Credit ” means the profit-sharing contribution restoration credits as defined in Paragraph 5(c).

Savings Plan ” means the defined contribution profit-sharing plan maintained by the Corporation known as the “Snyder’s-Lance, Inc. Retirement Savings Plan,” as amended from time to time.

Termination of Employment ” means a Participant’s “separation from service” with the Participating Employers within the meaning of Section 409A of the Code and any related administrative policies of the Corporation.

 

4.

Administration:

The Plan Administrator shall be responsible for administering the Plan. The Plan Administrator shall have all of the powers necessary to enable it to properly carry out its duties under the Plan. Not in limitation of the foregoing, the Plan Administrator shall have the power to construe and interpret the Plan and to determine all questions that arise thereunder. The Plan Administrator shall have such other and further specified duties, powers, authority and discretion as are elsewhere in the Plan either expressly or by necessary implication conferred upon it. The Plan Administrator may appoint any agents that it deems necessary for the effective performance of its duties, and may delegate to those agents those powers and duties that the Plan Administrator deems expedient or appropriate that are not inconsistent with the intent of the Plan. All decisions of the CEO, the Plan Administrator and the Compensation Committee upon all matters within the scope of his or its authority shall be made in the CEO’s, Plan Administrator’s or Compensation Committee’s sole discretion and shall be final and conclusive on all persons, except to the extent otherwise provided by law.

 

5.

Eligibility, Deferrals and Account Adjustments:

(a) Eligibility . For each Plan Year, (i) the Compensation Committee shall designate which Employees who are “named executive officers” in the Corporation’s annual proxy statement shall be Eligible Employees for the Plan Year, and (ii) the CEO shall designate which Employees other than the “named executive officers” shall be Eligible Employees for the Plan Year; provided , however , that the determination of Eligible Employees shall be made consistent with the requirement that the Plan be a “top hat” plan for purposes of the Employee Retirement Income Security Act of 1974, as amended. An Employee designated as an Eligible Employee with respect to one Plan Year need not be designated as an Eligible Employee for any subsequent Plan Year.

(b) Elections to Defer . A person who is an Eligible Employee for a Plan Year may elect to defer from one percent (1%) to sixty percent (60%), in one percent (1%) increments, of the Eligible Employee’s base salary for the Plan Year. In addition, the Eligible Employee may elect to defer from one percent (1%) to ninety percent (90%), in one percent (1%) increments, of the Eligible Employee’s Annual Incentive Award for the Plan Year. Elections to defer base salary or Annual Incentive Awards for a Plan Year must be made before the first day of the Plan Year; provided , however , that (A) a newly hired or promoted Eligible Employee who first

 

3


becomes eligible to participate in the Plan after the start of a Plan Year may make a deferral election within thirty (30) days after first becoming eligible to participate in the Plan if and to the extent so notified by the Plan Administrator in its discretion; and (B) if the Plan Administrator determines that Annual Incentive Awards qualify as “performance-based compensation” under Section 409A of the Code, the Plan Administrator may in its discretion permit deferral elections to be made as late as June 30 of the Plan Year in accordance with and subject to the requirements of Section 409A of the Code. All elections made under this Paragraph 5(b) shall be made in writing on a form, or pursuant to other non-written procedures, as may be prescribed from time to time by the Plan Administrator and shall be irrevocable for the Plan Year. An election to defer made by an Eligible Employee with respect to any base salary or Annual Incentive Award payable for a Plan Year shall not automatically apply with respect to any base salary or Annual Incentive Award payable for any subsequent Plan Year. Amounts deferred under the Plan shall not be taken into account for purposes of determining contributions or allocations under the Savings Plan.

(c) Restoration Credits for 2011 Plan Year . For the 2011 Plan Year, the Accounts for certain Eligible Employees (who were previously authorized to receive restoration credits) shall be credited with an amount (the “Profit-Sharing Restoration Credit”) equal to the excess, if any, of:

 

  (A)

the aggregate amount of the “Profit-Sharing Contribution” that would have been allocated to the Participant’s “Individual Account” under the Savings Plan for the 2011 Plan Year had (i) the limitation imposed by Section 415 of the Code not been in effect, (ii) had the amount of the Participant’s compensation used in calculating the amount of said Profit-Sharing Contribution so allocated to said account under the terms of the Savings Plan not been limited by Section 401(a)(17) of the Code, and (iii) had the Participant’s compensation for such purpose included the amounts, if any, deferred by the Participant under this Plan, over

 

  (B)

the amount of the “Profit-Sharing Contribution” actually allocated to the Participant’s “Individual Account” under the Savings Plan for the 2011 Plan Year.

No Profit-Sharing Restoration Credits shall be credited to the Plan for any Plan Years beginning on or after the Restatement Date.

(d) Establishment of Accounts . A Participating Employer shall establish and maintain on its books an Account for each Participant employed by the Participating Employer. Each Account shall be designated by the name of the Participant for whom established. The amount of any base salary or Annual Incentive Award deferred by a Participant pursuant to Paragraph 5(b) shall be credited to the Participant’s Account as of the date the base salary or Annual Incentive Award would have otherwise been paid to the Participant. The amount of any Profit-Sharing Restoration Credit shall be credited to the Participant’s Account pursuant to Paragraph 5(c) as of

 

4


the date such amounts would have been allocated to the Participant’s “Individual Account” under the Savings Plan.

(e) Account Adjustments for Deemed Investments . The Plan Administrator shall from time to time designate one or more investment vehicle(s) in which the Accounts of Participants shall be deemed to be invested. The investment vehicle(s) may be designated by reference to the investments available under other plans sponsored by a Participating Employer. Each Participant may designate the investment vehicle(s) in which his or her Account shall be deemed to be invested according to the procedures developed by the Plan Administrator, except as otherwise required by the terms of the Plan. No Participating Employer shall be under an obligation to acquire or invest in any of the deemed investment vehicle(s), and any acquisition of or investment in a deemed investment vehicle by a Participating Employer shall be made in the name of the Participating Employer and shall remain the sole property of the Participating Employer. The Plan Administrator shall also establish from time to time a default investment vehicle into which a Participant’s Account shall be deemed to be invested if the Eligible Employee fails to provide investment instructions to the Plan Administrator. Account adjustments shall be applied pro rata among a Participant’s various Payment Sub-Accounts.

(f) Timing of Adjustments . The adjustments to Accounts for deemed investments as provided in Paragraph 5(e) shall be made from time to time at such intervals as determined by the Plan Administrator. The Plan Administrator may determine the frequency of account adjustments by reference to the frequency of Account adjustments under another plan sponsored by a Participating Employer. The amount of the adjustment shall equal the amount that the Participant’s Account would have earned (or lost) for the period since the last adjustment had the Account actually been invested in the deemed investment vehicle(s) designated by the Participant for the period.

(g) Statements of Account . Each Participant shall receive an annual statement of the Participant’s Account balance.

 

6.

Distribution Provisions:

(a) Class Year Payment Elections . A Participant shall elect the form of payment that shall apply to the Payment Sub-Account comprised of the Class Year Deferrals for each Plan Year. The payment election shall be made coincident with the deferral elections under Paragraph 5(b) above for such Plan Year and shall apply to the entire Payment Sub-Account for such Class Year Deferrals. The available forms of payment shall be as follows:

 

  (i)

Payment Following Termination of Employment . The Participant may elect to have the applicable Payment Sub-Account paid in either of the following two methods following Termination of Employment:

Lump Sum : The balance of the applicable Payment Sub-Account shall be payable in a single cash payment on or as soon as administratively practicable (but not more than 75 days) after the

 

5


beginning of the seventh month following the Participant’s Termination of Employment with the Participating Employers.

Installments : The balance of the applicable Payment Sub-Account shall be payable in annual installments over a period of years selected by the Participant not to exceed ten (10) commencing on or as soon as administratively practicable (but not more than 75 days) after the beginning of the seventh month following the Participant’s Termination of Employment with the Participating Employers.

The Payment Sub-Account shall be paid under the “Lump Sum” provisions above if the Participant fails to make an election under this clause (i).

 

  (ii)

Payment at a Fixed Date Before Termination of Employment . The Participant may elect to have the applicable Payment Sub-Account paid in a single cash payment on or as soon as administratively practicable (but not more than 75 days) after the first day of the calendar month and calendar year indicated in the election; provided , however , that (A) such calendar year shall be no earlier than the second calendar year after the applicable Plan Year to which the Payment Sub-Account relates and (B) if the Participant has a Termination of Employment prior to the elected date, the payment method applicable under clause (i) above with respect to that Payment Sub-Account shall apply.

(b) Payment Provisions for Restoration Credits . Notwithstanding any provision herein to the contrary, the Payment Sub-Account comprised of Profit-Sharing Restoration Credits shall be payable in a single cash payment on or as soon as administratively practicable (but not more than 75 days) after the beginning of the seventh month following the Participant’s Termination of Employment with the Participating Employers; provided , however , that if the Participant made an installment payment election with respect to the Payment Sub-Account comprised of Profit-Sharing Restoration Credits prior to the Restatement Date, such prior payment election shall control.

(c) Subsequent Changes to Payment Elections . A Participant may change the timing of the fixed date payment elected under Paragraph 6(a)(ii) above with respect to a Payment Sub-Account only if (i) such election is made at least twelve (12) months prior to the date the payment of the Payment Sub-Account would have otherwise commenced, and (ii) the effect of such election is to defer the specified fixed date for such payment by at least five (5) years (i.e., such election will not change the requirement that the Payment Sub-Account be paid earlier due to Termination of Employment occurring before the applicable fixed date).

(d) Default Lump Sum Payment . Notwithstanding any provision herein to the contrary, a Participant’s entire Account balance shall be payable in a single cash payment on or as soon as administratively practicable (but not more than 75 days) after the beginning of the

 

6


seventh month following the Participant’s Termination of Employment with the Participating Employers if, as of the Participant’s date of Termination of Employment with the Participating Employers, the amount of the Participant’s Account balance equals Twenty Thousand Dollars ($20,000) or less. This provision shall not apply to Payment Sub-Accounts for Class Year Deferrals elected for Plan Years beginning on or after the Restatement Date.

(e) Installments . If amounts are payable to a Participant in the form of annual installments, the first annual installment shall be paid commencing per the applicable election set forth in Paragraph 6(a)(i) above, and each subsequent annual installment shall be paid on or about the anniversary of the first installment. The amount payable on each payment date shall be equal to the balance of the applicable Payment Sub-Account on the applicable payment date divided by the number of remaining installments (including the installment then payable).

(f) Death . If a Participant dies after having commenced installment payments, any remaining unpaid installment payments shall be paid to the Participant’s Beneficiary as and when they would have otherwise been paid to the Participant had the Participant not died. If a Participant terminates employment due to death, the Participant’s Account shall be payable to the Participant’s Beneficiary commencing as soon as administratively practicable after the Participant’s death in a single cash payment.

(g) Withdrawals on Account of an Unforeseeable Emergency . A Participant who is in active service with a Participating Employer may, if permitted by the Plan Administrator, receive a refund of all or any part of the amounts previously credited to the Participant’s Account in the case of an “unforeseeable emergency.” A Participant requesting a payment pursuant to this Paragraph 6(g) shall have the burden of proof of establishing, to the Plan Administrator’s satisfaction, the existence of an “unforeseeable emergency,” and the amount of the payment needed to satisfy the same. In that regard, the Participant must provide the Plan Administrator with such financial data and information as the Plan Administrator may request. If the Plan Administrator determines that a payment should be made to a Participant under this Paragraph 6(g), the payment shall be made within a reasonable time after the Plan Administrator’s determination of the existence of the “unforeseeable emergency” and the amount of payment so needed. As used herein, the term “unforeseeable emergency” means a severe financial hardship to a Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that constitute an “unforeseeable emergency” shall depend upon the facts of each case, but, in any case, payment may not be made to the extent that the hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Examples of what are not considered to be “unforeseeable emergencies” include the need to send a Participant’s child to college or the desire to purchase a home. Withdrawals of amounts because of an “unforeseeable emergency” may not exceed an amount reasonably needed to satisfy the emergency need.

(h) Other Payment Provisions . To be effective, any elections under this Paragraph 6 shall be made on such form, at such time and pursuant to such procedures as determined by the

 

7


Plan Administrator in its sole discretion from time to time. Any deferral or payment hereunder shall be subject to applicable payroll and withholding taxes. In the event any amount becomes payable under the provisions of the Plan to a Participant, Beneficiary or other person who is a minor or an incompetent, whether or not declared incompetent by a court, such amount may be paid directly to the minor or incompetent person or to such person’s fiduciary (or attorney-in-fact in the case of an incompetent) as the Plan Administrator, in its sole discretion, may decide, and the Plan Administrator shall not be liable to any person for any such decision or any payment pursuant thereto.

 

7.

Amendment, Modification and Termination of the Plan:

The Compensation Committee shall have the right and power at any time and from time to time to amend the Plan in whole or in part and at any time to terminate the Plan; provided , however , that no amendment or termination may reduce the amount actually credited to a Participant’s Account on the date of the amendment or termination, or further defer the due dates for the payment of the amounts, without the consent of the affected Participant. Notwithstanding any provision of the Plan to the contrary but subject to the requirements of Section 409A of the Code, in connection with any termination of the Plan the Compensation Committee shall have the authority to cause the Accounts of all Participants (and Beneficiaries of any deceased Participants) to be paid in a single cash payment as of a date determined by the Compensation Committee or to otherwise accelerate the payment of all Accounts in such manner as the Compensation Committee determines in its discretion.

 

8.

Claims Procedures:

Claims for benefits under the Plan shall be addressed pursuant to the claims procedures applicable under the Savings Plan. Any decision pursuant to such claims procedures shall be final and conclusive upon all persons interested therein, except to the extent otherwise provided by applicable law.

 

9.

Indemnity of Plan Administrator:

The Participating Employers shall indemnify and hold harmless the Plan Administrator and any Employee to whom the duties of the Plan Administrator may be delegated from and against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to the Plan, except in the case of willful misconduct by the Plan Administrator or any such Employee.

 

10.

Applicable Law:

The Plan shall be governed and construed in accordance with the laws of the State of North Carolina, except to the extent such laws are preempted by the laws of the United States of America.

 

8


11.

Compliance With Section 409A of the Code

The Plan is intended to comply with Section 409A of the Code. Notwithstanding any provision of the Plan to the contrary, the Plan shall be interpreted, operated and administered consistent with this intent.

 

12.

Limited Effect Of Restatement

Notwithstanding anything to the contrary contained in the Plan, to the extent permitted by the Employee Retirement Income Security Act of 1974 and the Code, this instrument shall not affect the availability, amount, form or method of payment of benefits originally deferred for Plan Years beginning before the Restatement Date, said availability, amount, form or method of payment of benefits, if any, to be determined in accordance with the applicable provisions of the Plan as in effect prior to the Restatement Date.

 

13.

Miscellaneous:

A Participant’s rights and interests under the Plan may not be assigned or transferred by the Participant. In that regard, no part of any amounts credited or payable hereunder shall, prior to actual payment, (i) be subject to seizure, attachment, garnishment or sequestration for the payment of debts, judgments, alimony or separate maintenance owed by the Participant or any other person, (ii) be transferable by operation of law in the event of the Participant’s or any person’s bankruptcy or insolvency or (iii) be transferable to a spouse as a result of a property settlement or otherwise. The Plan shall be an unsecured and unfunded arrangement. To the extent the Participant acquires a right to receive payments from the Participating Employers under the Plan, the right shall be no greater than the right of any unsecured general creditor of the Participating Employers. Nothing contained herein may be deemed to create a trust of any kind or any fiduciary relationship between a Participating Employer and any Participant. Designation as an Eligible Employee or Participant in the Plan shall not entitle or be deemed to entitle the person to continued employment with the Participating Employers. The Plan shall be binding on the Corporation and any successor in interest of the Corporation.

APPROVED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE CORPORATION ON DECEMBER 7, 2011.

 

9

Exhibit 10.2

SNYDER’S OF HANOVER, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

Amendment and Restatement

Effective as of October 1, 2005


SNYDER’S OF HANOVER, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

Amendment and Restatement

Effective as of October 1, 2005

TABLE OF CONTENTS

ARTICLE 1

DEFINITIONS

 

1.1   

ACCOUNT

     1   
1.2   

BENEFICIARY

     1   
1.3   

BOARD

     1   
1.4   

CHANGE IN CONTROL

     1   
1.5   

CODE

     1   
1.6   

COMPENSATION

     2   
1.7   

COMPENSATION DEFERRAL ACCOUNT

     2   
1.8   

COMPENSATION DEFERRALS

     2   
1.9   

DESIGNATION DATE

     2   
1.10   

DISABILITY

     2   
1.11   

EFFECTIVE DATE

     2   
1.12   

ELECTION FORM

     2   
1.13   

ELIGIBLE EMPLOYEE

     2   
1.14   

EMPLOYER

     2   
1.15   

ENTRY DATE

     3   
1.16   

PARTICIPANT

     3   
1.17   

PERFORMANCE-BASED COMPENSATION

     3   
1.18   

PLAN

     3   
1.19   

PLAN YEAR

     3   
1.20   

SEPARATION FROM SERVICE

     3   
1.21   

SPECIFIED EMPLOYEE

     3   
1.22   

TRUST

     3   
1.23   

TRUSTEE

     3   
1.24   

VALUATION DATE

     4   

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

  

  

2.1   

REQUIREMENTS

     4   
2.2   

RE-EMPLOYMENT

     4   
2.3   

CHANGE OF EMPLOYMENT CATEGORY

     4   

ARTICLE 3

CONTRIBUTIONS AND CREDITS

  

  

3.1   

PARTICIPANT COMPENSATION DEFERRALS

     4   
3.2   

CONTRIBUTIONS TO THE TRUST

     6   

 

i


ARTICLE 4

ALLOCATION OF FUNDS

 
4.1    ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS      6   
4.2    ACCOUNTING FOR DISTRIBUTIONS      6   
4.3    SEPARATE ACCOUNTS      7   
4.4    INTERIM VALUATIONS      7   
4.5    DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS      7   
4.6    EXPENSES AND TAXES      8   

ARTICLE 5

ENTITLEMENT TO BENEFITS

  

  

5.1    SEPARATION FROM SERVICE      8   
5.2    FIXED PAYMENT DATES; CHANGE IN CONTROL      8   
5.3    UNFORESEEABLE EMERGENCY DISTRIBUTIONS      9   
5.4    DEATH; DISABILITY      10   
5.5    CHANGE IN CONTROL      10   

ARTICLE 6

DISTRIBUTION OF BENEFITS

  

  

6.1    AMOUNT      10   
6.2    METHOD OF PAYMENT      10   
6.3    ACCELERATIONS      11   
6.4    DEATH OR DISABILITY BENEFITS      12   

ARTICLE 7

BENEFICIARIES: PARTICIPANT DATA

  

  

7.1    DESIGNATION OF BENEFICIARIES      12   
7.2   

INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES

     13   

ARTICLE 8

ADMINISTRATION

  

  

8.1    ADMINISTRATIVE AUTHORITY      13   
8.2    LITIGATION      14   
8.3    CLAIMS PROCEDURE      14   

ARTICLE 9

AMENDMENT

  

  

9.1    RIGHT TO AMEND      17   
9.2    AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN      17   

 

ii


ARTICLE 10

SUSPENSION OR TERMINATION OF THE PLAN

  

  

10.1    EMPLOYER’S RIGHT TO SUSPEND PLAN      18   
10.2    AUTOMATIC TERMINATION OF THE PLAN      18   
10.3    TERMINATION AND LIQUIDATION OF PLAN      18   
  

ARTICLE 11

THE TRUST

  
11.1    ESTABLISHMENT OF TRUST      18   
  

ARTICLE 12

MISCELLANEOUS

  
12.1    LIABILITY OF EMPLOYER: LIMITATIONS ON LIABILITY OF EMPLOYER OR EMPLOYER      19   
12.2    CONSTRUCTION      19   
12.3    SPENDTHRIFT PROVISION      19   
12.4    PROHIBITED ACCELERATION/DISTRIBUTION TIMING      20   
12.5    DELAY IN PAYMENT      20   
12.6    AGGREGATION OF EMPLOYERS      20   
12.7    AGGREGATION OF PLANS      20   
12.8    USERRA      21   
12.9    TAX WITHHOLDING      21   

 

iii


SNYDER’S OF HANOVER, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

Amendment and Restatement

Effective as of October 1, 2005

RECITALS

This amended and restated Snyder’s of Hanover, Inc. Executive Deferred Compensation Plan (the “Plan”) is adopted by Snyder’s of Hanover, Inc. (the “Employer”) for the benefit of certain of the Employer’s management and highly compensated employees. The purpose of the Plan is to offer participants an opportunity to elect to defer the receipt of compensation in order to provide deferred compensation benefits taxable pursuant to section 451 of the Internal Revenue Code of 1986, as amended (the “Code”). The Plan is intended to be a “top-hat” plan (i.e., an unfunded deferred compensation plan maintained for a select group of management or highly-compensated employees) under sections 201(2), 301 (a)(3) and 401 (a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan also is intended to comply with the requirements of Code section 409A, as added by the American Jobs Creation Act of 2004, and the Treasury regulations or any other authoritative guidance issued thereunder.

Accordingly, this amended and restated Plan is adopted, effective as of October 1, 2005.

ARTICLE 1

DEFINITIONS

1.1 ACCOUNT means the balance credited to a Participant’s or Beneficiary’s Plan account, including amounts credited under the Compensation Deferral Account and deemed income, gains and losses (as determined by the Employer, in its discretion) credited thereto. A Participant’s or Beneficiary’s Account shall be determined as of the date of reference.

1.2 BENEFICIARY means any person or person so designated in accordance with the provisions of Article 7.

1.3 BOARD means the Employer’s Board of Directors or a committee thereof, if any, duly authorized to make determinations and act for the Board under this Plan.

1.4 CHANGE IN CONTROL means a change in control of the Employer within the meaning of Code section 409A and Internal Revenue Service guidance under Code Section 409A (e.g. Treas. Reg. 1.409A-3(i)(5)(v)).

1.5 CODE means the Internal Revenue Code of 1986 and the Treasury regulations or any other authoritative guidance issued under the Code, as amended from time to time.

 

1


1.6 COMPENSATION means the total current cash remuneration, including regular salary and bonus awards, paid by the Employer to an Eligible Employee with respect to his or her service for the Employer (as determined by the Employer, in its discretion).

1.7 COMPENSATION DEFERRAL ACCOUNT is described in Section 3.1.

1.8 COMPENSATION DEFERRALS is described in Section 3.1.

1.9 DESIGNATION DATE means the date or dates as of which a designation of deemed investment directions by an individual pursuant to Section 4.5, or any change in a prior designation of deemed investment directions by an individual pursuant to Section 4.5, shall become effective. The Designation Dates in any Plan Year shall be designated by the Employer.

1.10 DISABILITY means a period of disability during which a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer, or (iii) is determined to be totally disabled by the Social Security Administration.

1.11 EFFECTIVE DATE means the effective date of the Amendment and Restatement of this Plan, October 1, 2005.

1.12 ELECTION FORM means the form or forms on which a Participant elects to defer Compensation under this Plan and/or on which the Participant makes certain other designations as required under this Plan.

1.13 ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable portion thereof), an employee of the Employer who is determined by the Employer to be a member of a select group of management or highly compensated employees of the Employer and who is designated by the Board to be an Eligible Employee under the Plan.

By each November 1 (or such other date established by the Employer), the Employer shall notify those individuals, if any, who will be Eligible Employees for the next Plan Year. If the Employer determines that an individual first becomes an Eligible Employee during a Plan Year, the Employer shall notify such individual of its determination and the individual shall first become an Eligible Employee as of the date of such notification.

1.14 EMPLOYER means Snyder’s of Hanover, Inc. and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of Snyder’s of Hanover, Inc., or its successors or assigns, assumes the Employer’s obligations under this Plan, or any other corporation or business organization which agrees, with the consent of Snyder’s of Hanover, Inc., to become a party to the Plan.

 

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1.15 ENTRY DATE with respect to an individual means the January 1 coincident with or next following the date on which the individual first becomes an Eligible Employee.

1.16 PARTICIPANT means any person so designated in accordance with the provisions of Article 2, including, where appropriate according to the context of the Plan, any former employee who is or may become (or whose Beneficiaries may become) eligible to receive a benefit under the Plan.

1.17 PERFORMANCE-BASED COMPENSATION means that portion of an Eligible Employee’s Compensation which is based on the performance by the Eligible Employee of services for the Employer over a period of at least twelve (12) months and which qualifies as “performance- based compensation” under Code section 409A.

1.18 PLAN means this amended and restated Snyder’s of Hanover, Inc. Executive Deferred Compensation Plan, as amended from time to time.

1.19 PLAN YEAR means the twelve (12) month period ending on the December 31 of each year during which the Plan is in effect. The Plan will experience a short, first Plan Year from October 1, 2005 until December 31, 2005.

1.20 SEPARATION FROM SERVICE means the Participant’s “separation from service,” within the meaning of Code section 409A, treating as a Separation from Service an anticipated permanent reduction in the level of bona fide services to twenty percent (20%) or less of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Participant performed services for the Employer, if that is less than thirty-six (36) months). For this purpose, upon a sale or other disposition of the assets of the Employer to an unrelated purchaser, the Employer reserves the right to the extent permitted by Code section 409A to determine whether Participants providing services to the purchaser after and in connection with the purchase transaction have experienced a Separation from Service

1.21 SPECIFIED EMPLOYEE means, with respect to a corporation any stock of which is publicly traded on an established securities market or otherwise, a key employee, as currently defined in Code section 416(i) (without regard to paragraph (5) of that Section) to mean, as of the Effective Date, an employee of the Employer who, at any time during the Plan Year, is (1) an officer of the Employer having an annual compensation greater than one hundred thirty-five thousand dollars ($135,000) for 2005 (indexed for inflation in future years); (ii) a five-percent (5%) owner of the Employer; or (iii) a one-percent (1%) owner of the Employer having an annual compensation from the Employer of more than one hundred fifty thousand dollars ($ 150,000).

1.22 TRUST means the Trust described in Article 11.

1.23 TRUSTEE means the trustee of the Trust described in Article 11.

 

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1.24 VALUATION DATE means the last day of each Plan Year and any other date that the Employer, in its sole discretion, designates as a Valuation Date.

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

2.1 REQUIREMENTS . Every Eligible Employee on the Effective Date shall be eligible to become a Participant on the Effective Date. Every other Eligible Employee shall be eligible to become a Participant on his or her first Entry Date. No individual shall become a Participant, however, if he or she is not an Eligible Employee on the date his or her participation is to begin.

Participation in the Compensation Deferral portion of the Plan is voluntary. In order to participate in the Compensation Deferral portion of the Plan, an otherwise Eligible Employee must make written application on an Election Form at such time and in such manner as maybe required by Section 3.1 and by the Employer and must agree to make Compensation Deferrals as provided in Article 3.

2.2 RE-EMPLOYMENT . If a Participant whose employment with the Employer is terminated is subsequently re-employed, he or she shall become a Participant in accordance with the provisions of Section 2.1; provided, however, the individual maybe treated as being initially eligible to participate in the Plan under Section 3.1 if the individual had not been eligible to participate in the Plan (other than the accrual of earnings) at any time during the twenty-four (24) month period ending on the date the individual again becomes eligible to participate in the Plan.

2.3 CHANGE OF EMPLOYMENT CATEGORY . During any period in which a Participant remains in the employ of the Employer, but ceases to be an Eligible Employee. For any year following a year in which a Participant remains in the employ of the Employer but ceases to be an Eligible Employee, he or she shall not be eligible to make Compensation Deferrals. If, after a change of employment category as described in this Section 2.3, a Participant subsequently becomes an Eligible Employee, he or she shall become a Participant in accordance with the provisions of Section 2.1; provided, however, the individual may be treated as being initially eligible to participate in the Plan under Section 3.1 if the individual had not been eligible to participate in the Plan (other than the accrual of earnings) at any time during the twenty-four (24) month period ending on the date the individual again becomes eligible to participate in the Plan.

ARTICLE 3

CONTRIBUTIONS AND CREDITS

3.1 PARTICIPANT COMPENSATION DEFERRALS . Subject to the remaining paragraphs of this Section and in accordance with rules established by the Employer and subject to such amount limitations as might be imposed by the Employer in its discretion, a Participant may elect to defer Compensation which is due to be earned and which would otherwise be paid to the Participant, in any fixed periodic dollar amounts or percentages designated by the Participant. Amounts so deferred will be considered a Participant’s “Compensation Deferrals.” Except as

 

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provided below, a Participant shall make such election(s) under this paragraph with respect to a coming Plan Year during the period beginning on the November 1 and ending on the December 31 of the prior calendar year, or during such other period as might be established by the Employer, which period ends no later than the last day of the Plan Year preceding the Plan Year in which the services giving rise to the Compensation to be deferred are to be performed.

Subject to Sections 2.2 and 2.3, in the case of the first Plan Year in which an Eligible Employee initially becomes eligible to become a Participant, if and to the extent permitted by the Employer, the Eligible Employee may make an irrevocable election no later than thirty (30) days after the date he or she becomes eligible to become a Participant to defer Compensation for services to be performed after the election.

If and to the extent permitted by the Employer, a Participant may make an election to defer Performance-Based Compensation no later than (and the election shall become irrevocable no later than) six (6) months prior to the last day of the period over which the services giving rise to the Performance-Based Compensation are performed (provided that the Participant performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date of the deferral election, and provided further that in no event may an election to defer be made with respect to any portion of the Performance-Based Compensation that has become readily ascertainable, as defined under Code Section 409A, prior to making the election).

Compensation Deferrals shall be made through regular payroll deductions. Except with respect to Performance-Based Compensation, the Participant’s Compensation Deferral election shall be irrevocable as of the December 31 preceding the Plan Year in which the services giving rise to the Compensation to be deferred are to be performed. Notwithstanding the preceding, a Participant’s Compensation Deferral election may be cancelled as permitted under Code section 409A upon a disability, unforeseeable emergency, or hardship distribution. For purposes of this paragraph only, “disability” means any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his or her position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months. To the extent permitted under Code section 409A and by the Employer, a Participant may cancel a deferral election under the Plan at any time during the 2005 calendar year.

Once made, a Compensation Deferral regular payroll deduction election shall continue in force only for the Plan Year to which the election relates, unless cancelled as provided above. Compensation Deferrals shall be deducted by the Employer from the pay of a deferring Participant and shall be credited to the Compensation Deferral Account of the deferring Participant.

There shall be established and maintained a separate Compensation Deferral Account in the name of each Participant to which shall be credited or debited: (a) amounts equal to the Participant’s Compensation Deferrals; and (b) amounts equal to any deemed earnings or losses (to the extent realized, based upon deemed fair market value of the Compensation Deferral Account’s deemed assets, as determined by the Employer, in its discretion) attributable or allocable thereto.

 

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A Participant shall at all times be 100% vested in amounts credited to his or her Compensation Deferral Account.

3.2 CONTRIBUTIONS TO THE TRUST . An amount shall be contributed by the Employer to the Trust maintained under Section 11.1 equal to the amount(s) required to be credited to the Participant’s Account under Section 3.1. The Employer shall make a good faith effort to contribute these amounts to the Trust as soon as practicable following the date on which the contribution credit amount(s) are determined.

ARTICLE 4

ALLOCATION OF FUNDS

4.1 ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS . Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to the date on which a direction will become effective, the Participant shall have the right to direct the Employer as to how amounts in his or her Account shall be deemed to be invested. The Employer, may, but is not required to, direct the Trustee to invest the account maintained in the Trust on behalf of the Participant pursuant to the deemed investment directions the Employer properly has received from the Participant.

The value of the Participant’s Account shall be equal to the value of the deemed investments maintained under the Trust on behalf of the Participant. As of each valuation date of the Trust, the Participant’s Account will be credited or debited to reflect the Participant’s deemed investments of the Trust. The Participant’s Plan Account will be credited or debited with the increase or decrease in the realizable net asset value or credited interest, as applicable, of the designated deemed investments, as follows. As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Trustee), of each deemed investment option within the Account since the preceding Valuation Date shall be allocated among all Participants’ Accounts deemed to be invested in that investment option in accordance with the ratio which the portion of the Account of each Participant which is deemed to be invested within that investment option, determined as provided herein, bears to the aggregate of all amounts deemed to be invested within that investment option.

4.2 ACCOUNTING FOR DISTRIBUTIONS . As of the date of any distribution under this Plan, the distribution made to the Participant or his or her Beneficiary or Beneficiaries shall be charged to such Participant’s Account. The amount of the distribution shall first be charged against the investments of the Trust in which the Participant’s Account is deemed to be invested, on a pro rata basis, until such deemed investments are exhausted. If an in-kind distribution is requested, the amount of the distribution shall be charged on a pro rata basis against all the investments of the Trust in which the Participant’s Account is deemed to be invested.

 

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4.3 SEPARATE ACCOUNTS . A separate bookkeeping account under the Plan shall be established and maintained by the Employer to reflect the Account for each Participant. Each Account will separately account for the credits and debits described in Article 3.

4.4 INTERIM VALUATIONS . If it is determined by the Employer that the value of a Participant’s Account as of any date on which distributions are to be made differs materially from the value of the Participant’s Account on the prior Valuation Date upon which the distribution is to be based, the Employer, in its discretion, shall have the right to designate any date in the interim as a Valuation Date for the purpose of revaluing the Participant’s Account so that the Account will, prior to the distribution, reflect its share of such material difference in value.

4.5 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS . Subject to such limitations as may from time to time be required by law, imposed by the Employer, the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Employer, prior to and effective for each Designation Date, each Participant may communicate to the Employer a direction (in accordance with (a), below) as to how his or her Plan Accounts should be deemed to be invested among such categories of deemed investments as may be made available by the Employer under this Plan, which may be unlimited, at the Employer’s sole discretion. Such direction shall designate the percentage (in any whole percent multiples) of each portion of the Participant’s Plan Accounts which is requested to be deemed to be invested in such categories of deemed investments, and shall be subject to the following rules:

(a) Any initial or subsequent deemed investment direction shall be in writing, on a form supplied by and filed with the Employer, and/or, as required or permitted by the Employer, shall be by oral designation and/or electronic transmission designation. A designation shall be effective as of the Designation Date next following the date the direction is received and accepted by the Employer on which it would be reasonably practicable for the Employer to effect the designation.

(b) All amounts credited to the Participant’s Account shall be deemed to be invested in accordance with the then effective deemed investment direction, and as of the Designation Date with respect to any new deemed investment direction, all or a portion of the Participant’s Account at that date shall be reallocated among the designated deemed investment funds according to the percentages specified in the new deemed investment direction unless and until a subsequent deemed investment direction shall be filed and become effective. An election concerning deemed investment choices shall continue indefinitely as provided in the Participant’s most recent investment direction form provided by and filed with the Employer.

(c) If the Employer receives an initial or revised deemed investment direction which it deems to be incomplete, unclear or improper, the Participant’s investment direction then in effect shall remain in effect (or, in the case of a deficiency in an initial deemed investment direction, the Participant shall be deemed to have filed no deemed investment direction) until the next Designation Date, unless the Employer provides for, and permits the application of, corrective action prior thereto.

 

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(d) If the Employer possesses (or is deemed to possess as provided in (c), above) at any time directions as to the deemed investment of less than all of a Participant’s Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income or similar fund made available under the Plan as determined by the Employer in its discretion.

(e) Each Participant, as a condition to his or her participation in this Plan, agrees to indemnify and hold harmless the Employer and its agents and representatives from any losses or damages of any kind relating to the deemed investment of the Participant’s Account.

(f) Each reference in this Section to a Participant shall be deemed to include, where applicable, a reference to a Beneficiary of a deceased Participant.

4.6 EXPENSES AND TAXES . Expenses, including Trustee fees, associated with the administration or operation of the Plan shall be paid by the Employer from its general assets unless the Employer elects to charge such expenses against the appropriate Participant’s Account or Participants’ Accounts. Any taxes allocable to an Account (or portion thereof) maintained under the Plan which are payable prior to the distribution of the Account (or portion thereof), as determined by the Employer, shall be paid by the Employer unless the Employer elects to charge such taxes against the appropriate Participant’s Account or Participants’ Accounts.

ARTICLE 5

ENTITLEMENT TO BENEFITS

5.1 SEPARATION FROM SERVICE . Upon a Participant’s Separation from Service with the Employer for any reason, the Participant’s as-yet undistributed vested Account shall be valued and payable according to the provisions of Article 6; provided, however, that any payment made on account of a Participant’s Separation from Service shall be made (or commence) on the January 1 coincident with or next following the date of the Participant’s Separation from Service. Notwithstanding the foregoing, if and when the Employer becomes a corporation whose stock is publicly traded on an established securities market or otherwise, any Participant who is a Specified Employee and who incurs a Separation from Service with the Employer shall not be entitled to receive any portion of his or her vested Account under this Section until the date which is six (6) months after the date or his or her Separation from Service (or, if earlier, his or her death).

5.2 FIXED PAYMENT DATES; CHANGE IN CONTROL . At the time the Participant makes his or her initial Compensation Deferral election (or as otherwise required by Code section 409A), a Participant may select a fixed payment date for the payment of all or any portion of his or her vested Account (“Fixed Payment Date”), which portion will be valued and payable according to the provisions of Article 6. Alternatively, the Participant may elect to receive payment of all or any portion of his or her vested Account on the January 1 after a Change in Control or upon the earlier of, or later of, a Fixed Payment Date or the January 1 after a Change in Control.

The Fixed Payment Date elected by a Participant must be a date no earlier than the January 1 of the third calendar year after the calendar year in which the earliest Compensation

 

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Deferrals subject to the Fixed Payment Date are to be made by or on behalf of the Participant (or, if applicable, the January 1 of the third calendar year in which a new Compensation Deferral is made after the Participant has received a distribution of his or her previously vested Account). By way of example, an Eligible Employee who enrolls as a Participant in the Plan in October 2005 and who elects to defer Compensation to be earned during 2006 may elect at that time as his or her initial Fixed Payment Date any date which is no earlier than January 1, 2009, in which case the selected portion of the Participant’s vested Plan Account as of December 31, 2008 (including his or her 2006, 2007 and 2008 Compensation Deferrals, and any earnings thereon) shall be paid on January 1, 2009.

Any Fixed Payment Date may be extended on a continual basis, to a later Fixed Payment Date, so long as any election to so extend the date is made by the Participant at least twelve (12) months prior to the date on which the distribution is to be made and such extension is at least five (5) full calendar years in length. Such Fixed Payment Date may not be accelerated, except as provided in the remaining Sections of this Article.

Notwithstanding the preceding, a Participant who selects payment of the designated portion of his or her vested Account on a Fixed Payment Date, or who selects payment of the designated portion of his or her vested Account at the earlier of a Fixed Payment Date or a Change in Control, shall receive payment (or commencement of payment, if applicable) of the designated portion of his or her vested Account at the earlier of such elected date or dates (as extended, if applicable) or his or her Separation from Service with the Employer.

If a Participant fails to designate properly the timing of payment of the Participant’s benefit under the Plan, the Participant will be deemed to have elected distribution on the January 1 after Separation from Service.

Notwithstanding the preceding, to the extent permitted under Code section 409A and by the Employer, the Participant may elect the timing of distributions during 2006, 2007 and 2008 (except that a Participant cannot in a year change payment elections with respect to payments that the Participant would otherwise receive in that same year, or make an election that causes payments scheduled for subsequent years to be made in the year the election is made), and such election shall not be treated as a change in the form and timing of payment or an acceleration of payment.

5.3 UNFORESEEABLE EMERGENCY DISTRIBUTIONS . In the event the Participant incurs an unforeseeable emergency, as defined below, the Participant may apply to the Employer for the distribution of all or any part of his or her Account attributable to Compensation Deferrals. The Employer shall consider the circumstances of each such case, and the best interests of the Participant and his or her family, and shall have the right, in its sole discretion, if applicable, to allow such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution; provided, however, that such distribution shall be permitted solely to the extent permitted under Code section 409A. Upon a finding of unforeseeable emergency, the Employer shall direct that the appropriate distribution is made to the Participant with respect to the Participant’s vested Account in a lump sum payment. In no event shall the aggregate amount of the distribution exceed either the full value of the Participant’s vested Account or the amount determined by the Employer to be necessary to satisfy the unforeseeable emergency plus amounts necessary to

 

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pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which the hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of assets would not itself cause severe financial hardship) or by cessation of deferrals under the Plan. For purposes of this Section, the value of the Participant’s vested Account shall be determined as of the date of the distribution.

For purposes of this Section, an “unforeseeable emergency” means (a) a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, beneficiary or a dependent (as defined in Code section 152(a)) of the Participant, (b) loss of the Participant’s property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, each as determined to exist by the Employer. A distribution may be made under this Section only with the consent of the Employer.

5.4 DEATH, DISABILITY . Upon the Participant’s death or Disability, the Participant’s entire vested Account shall be valued and paid to the Participant or the Participant’s designated Beneficiary(ies), as applicable, as provided in Article 6.

5.5 CHANGE IN CONTROL . Upon a Change in Control, the Participant’s entire vested Account shall be valued and paid to the Participant, if elected by the Participant in accordance with Section 5.2, as provided in Article 6.

ARTICLE 6

DISTRIBUTION OF BENEFITS

6.1 AMOUNT . A Participant (or his or her Beneficiary) shall become entitled to receive, on the date determined in accordance with Article 5, a distribution (or commencement of distributions) in an aggregate amount equal to the Participant’s vested Account (or applicable portion thereof). Any payment due under the terms of the Plan from the Trust which is not paid by the Trust for any reason will be paid by the Employer from its general assets.

6.2 METHOD OF PAYMENT .

(a) Cash or In-kind Payments . All payments under the Plan shall be made in cash or in-kind, as agreed upon by the Participant and the Employer.

(b) Timing and Manner of Payment . Except as otherwise provided in this Plan, on the date determined in accordance with Article 5, an aggregate amount equal to the Participant’s vested Account will be paid by the Trust or the Employer, as provided in Section 6.1, in a lump sum or in up to ten annual installments (adjusted for gains and losses) as selected by the Participant at the time he or she makes his or her initial Compensation Deferral election (or as otherwise required by Code section 409A). If a Participant fails to designate properly the manner of payment of the

 

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Participant’s benefit under the Plan, the Participant will be deemed to have elected a lump sum payment.

Subject to Section 6.3, the Participant may change his or her timing and manner elections (or deemed election) by submitting a new Election Form to the Employer, provided that the Election Form is submitted at least 12 months prior to the date on which the distribution is to be made (or commence) and delays the distribution (or commencement of distributions) date at least 5 full calendar years from the previously scheduled distribution date. Any such change in election may not result in an acceleration of any payment as described under Code section 409A.

If the whole or any part of a payment under this Plan is to be in installments, the total to be so paid shall continue to be deemed to be invested pursuant to Article 4 under such procedures as the Employer may establish, in which case any deemed income, gain, loss or expense or tax allocable thereto (as determined by the Employer, in its discretion) shall be reflected in the installment payments, using such method for the calculation of the installments as the Employer shall reasonably determine.

However, a Participant shall make separate elections in accordance with the above with respect to his or her Compensation Deferrals (if any) made for (i) the 2005 Plan Year, (ii) the 2006 Plan Year and (iii) the 2007 and later Plan Years. In order to be able to give effect to these separate elections, the Employer shall separately account for each Participant’s Compensation Deferrals (and earnings or losses on those amounts), if any, for (i) the 2005 Plan Year, (ii) the 2006 Plan Year and (iii) the 2007 and later Plan Years.

Notwithstanding the preceding, to the extent permitted under Code section 409A and by the Employer, the Participant may elect the timing and manner of distributions during 2006, 2007 and 2008 (except that a Participant cannot in a year change payment elections with respect to payments that the Participant would otherwise receive in that same year, or make an election that causes payments scheduled for subsequent years to be made in the year the election is made), and such election shall not be treated as a change in the form and timing of payment or an acceleration of payment.

6.3 ACCELERATIONS . Notwithstanding anything in the Plan to the contrary, no change submitted on an Election Form shall be accepted by the Employer if the change accelerates the time over which distributions shall be made to the Participant (except as otherwise permitted by Code section 409A) and the Employer shall deny any change made to an election if the Employer determines that the change violates the requirement under Code section 409A that the first payment with respect to which such election is made be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made.

Notwithstanding the preceding, the Employer, in its discretion, may accelerate distributions under the Plan to the extent permitted under Code section 409A (e.g., Treas. Reg. 1.409A-3(j)(4)).

 

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6.4 DEATH OR DISABILITY BENEFITS . If a Participant dies or becomes Disabled before incurring a Separation from Service and before the commencement of payments to the Participant under this Plan, the entire value of the Participant’s Account shall be paid, ninety (90) days following the Participant’s death or Disability, as applicable, in a lump sum, to the Participant or to the Participant’s Beneficiary, as applicable.

Upon the death or Disability of a Participant after payments under this Plan have begun but before he or she has received all payments to which he or she is entitled under the Plan, the remaining benefit payments shall be paid, ninety (90) days following the Participant’s death or Disability, as applicable, in a lump sum to the Participant or to the Participant’s Beneficiary, as applicable.

ARTICLE 7

BENEFICIARIES: PARTICIPANT DATA

7.1 DESIGNATION OF BENEFICIARIES . Each Participant from time to time may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant’s death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Employer, and will be effective only when filed in writing with the Employer during the Participant’s lifetime.

In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Employer shall pay any such benefit payment to the Participant’s spouse, if then living, but otherwise to the Participant’s then living descendants, if any, per stirpes , but, if none, to the Participant’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Participant’s personal representative, executor or administrator. If a question arises as to the existence or identity of anyone entitled to receive a benefit payment as aforesaid, or if a dispute arises with respect to any such payment, then, notwithstanding the foregoing, the Employer, in its sole discretion, may distribute or direct that the Trustee distribute such payment to the Participant’s estate without liability for any tax or other consequences which might flow therefrom, or may take such other action as the Employer deems to be appropriate.

 

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7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES: INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES . Any communication, statement or notice addressed to a Participant or to a Beneficiary at his or her last post office address as shown on the Company’s records shall be binding on the Participant or Beneficiary for all purposes of the Plan. The Employer shall not be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Employer notifies any Participant or Beneficiary that he or she is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his or her location known to the Employer within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and Code section 409A (unless, if not paid, the Participant or Beneficiary takes further enforcement measures within 180 days after such latest date), then, except as otherwise required by law, the amount payable shall be deemed to be a forfeiture. If a benefit payable to an unlocated Participant or Beneficiary is subject to escheat pursuant to applicable state law, the Employer shall not be liable to any person for any payment made in accordance with such law.

ARTICLE 8

ADMINISTRATION

8.1 ADMINISTRATIVE AUTHORITY . Except as otherwise specifically provided herein, the Employer shall be the Plan Administrator (the “Plan Administrator”) and shall have the sole responsibility for and the sole control of the operation and administration of the Plan, and shall have the power and authority to take all action and to make all decisions and interpretations which may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty and responsibility to:

(a) Resolve and determine all disputes or questions arising under the Plan, and to remedy any ambiguities, inconsistencies or omissions in the Plan.

(b) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan.

(c) Implement the Plan in accordance with its terms and the rules and regulations adopted as above.

(d) Make determinations with respect to the eligibility of any Eligible Employee as a Participant and make determinations concerning the crediting of Plan Accounts.

(e) Appoint any persons or firms, or otherwise act to secure specialized advice or assistance, as it deems necessary or desirable in connection with the administration and operation of the Plan, and the Employer shall be entitled to rely conclusively upon, and shall be fully protected in any action or omission taken by it in good faith reliance upon, the advice or opinion of such firms or persons. The Employer shall have the power and authority to delegate from time to time by written instrument all or any part of its duties, powers or responsibilities under the Plan, both ministerial and discretionary, as it deems appropriate, to any person or committee, and in the same manner to revoke

 

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any such delegation of duties, powers or responsibilities. Any action of such person or committee in the exercise of such delegated duties, powers or responsibilities shall have the same force and effect for all purposes under this Plan as if such action had been taken by the Employer. Further, the Employer may authorize one or more persons to execute any certificate or document on behalf of the Employer, in which event any person notified by the Employer of such authorization shall be entitled to accept and conclusively rely upon any such certificate or document executed by such person as representing action by the Employer until such notified person shall have been notified of the revocation of such authority.

8.2 LITIGATION . Except as may be otherwise required by law, in any action or judicial proceeding affecting the Plan, no Participant or Beneficiary shall be entitled to any notice or service of process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan.

8.3 CLAIMS PROCEDURE . This Section 8.3 is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at section 2560.503-1 of the Department of Labor Regulations. If any provision of this Section 8.3 conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

(a) Initial Claim . A Participant or Beneficiary who believes he or she is entitled to any Benefit (a “Claimant”) under this Plan may file a claim with the Plan Administrator. The Plan Administrator will review the claim itself or appoint another individual or entity to review the claim.

(i) Benefit Claims that do not Require a Determination of Disability . If the claim is for a benefit other than a disability benefit, the Claimant will be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Plan Administrator or appointee of the Plan Administrator before the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed.

(ii) Disability Benefit Claims . In the case of a benefits claim that requires a determination by the Plan Administrator of a Participant’s disability status, the Plan Administrator will notify the Claimant of the Plan’s adverse benefit determination within a reasonable period of time, but not later than forty-five (45) days after receipt of the claim. If, due to matters beyond the control of the Plan, the Plan Administrator needs additional time to process a claim, the Claimant will be notified, within forty-five (45) days after the Plan Administrator receives the claim, of those circumstances and of when the Plan Administrator expects to make its decision but not beyond seventy-five (75) days. If, prior to the end of the extension period, due to matters beyond the control of the Plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to one hundred five (105) days, provided that the Plan Administrator notifies the Claimant of the circumstances requiring the extension and the date as of which the Plan expects to render a decision. The extension notice will specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a

 

14


decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant will be afforded at least forty-five (45) days within which to provide the specified information.

(iii) Manner and Content of Denial of Initial Claims . If the Plan Administrator denies a claim, it must provide to the Claimant, in writing or by electronic communication:

(A) The specific reasons for the denial;

(B) A reference to the Plan provision or insurance contract provision upon which the denial is based;

(C) A description of any additional information or material that the Claimant must provide in order to perfect the claim;

(D) An explanation of why such additional material or information is necessary;

(E) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and

(F) A statement of the participant’s right to bring a civil action under ERISA section 502(a) following a denial on review of the initial denial.

In addition, in the case of a denial of disability benefits on the basis of the Plan Administrator’s independent determination of the Participant’s disability status, the Plan Administrator will provide a copy of any rule, guideline, protocol, or other similar criterion relied upon in making the adverse determination (or a statement that the same will be provided upon request by the Claimant and without charge).

(b) Review Procedures .

(i) Benefit Claims that do not Require a Determination of Disability . Except for claims requiring an independent determination of a Participant’s disability status, a request for review of a denied claim must be made in writing to the Plan Administrator within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Plan Administrator’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision.

 

15


The reviewer will afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Plan Administrator. The reviewer will take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

(ii) Disability Benefit Claims . In addition to having the right to review documents and submit comments as described in (i) above, a Claimant whose claim for disability benefits requires an independent determination by the Plan Administrator of the Participant’s disability status has at least one hundred eighty (180) days following receipt of a notification of an adverse benefit determination within which to request a review of the initial determination. In such cases, the review will meet the following requirements:

(A) The Plan will provide a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the Plan who did not make the initial determination that is the subject of the appeal, nor is a subordinate of the individual who made the determination.

(B) The appropriate named fiduciary of the Plan will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment before making a decision on review of any adverse initial determination based in whole or in part on a medical judgment. The professional engaged for purposes of a consultation in the preceding sentence will not be an individual who was consulted in connection with the initial determination that is the subject of the appeal or the subordinate of any such individual.

(C) The Plan will identify to the Claimant the medical or vocational experts whose advice was obtained on behalf of the Plan in connection with the review, without regard to whether the advice was relied upon in making the benefit review determination.

(D) The decision on review will be made within forty-five (45) days after the Plan Administrator’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than ninety (90) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial forty-five (45) day period and must explain the special circumstances and provide an expected date of decision.

(iii) Manner and Content of Notice of Decision on Review . Upon completion of its review of an adverse initial claim determination, the Plan Administrator will give the Claimant, in writing or by electronic notification, a notice containing:

(A) its decision;

(B) the specific reasons for the decision;

 

16


(C) the relevant Plan provisions or insurance contract provisions on which its decision is based;

(D) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan’s files which is relevant to the Claimant’s claim for benefits;

(E) a statement describing the Claimant’s right to bring an action for judicial review under ERISA section 502(a); and

(F) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.

(c) Calculation of Time Periods . For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

(d) Failure of Plan to Follow Procedures . If the Plan fails to follow the claims procedures required by this Section 8.3, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under ERISA section 502(a) on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

(e) Failure of Claimant to Follow Procedures . A Claimant’s compliance with the foregoing provisions of this Section 8.3 is a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

ARTICLE 9

AMENDMENT

9.1 RIGHT TO AMEND . Subject to Code section 409A, the Employer, by action of its Board, shall have the right to amend the Plan, at any time and with respect to any provisions hereof, and all parties hereto or claiming any interest under this Plan shall be bound by such amendment; provided, however, that no such amendment shall deprive a Participant or a Beneficiary of a benefit amount accrued prior to the date of the amendment.

9.2 AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN . Notwithstanding the provisions of Section 9.1, the Plan may be amended by the Employer at any time, retroactively if required, in the opinion of the Employer, in order to ensure that the Plan is

 

17


characterized as “top-hat” plan as described under ERISA sections 201(2), 301(a)(3), and 401(a)(1), to ensure that the Trust that may be established is characterized as a grantor trust as described in Code sections 671 through 679, to conform the Plan to the provisions of Code section 409A and to conform the Plan and Trust to the provisions and requirements of any applicable law (including ERISA and the Code). No such amendment shall be considered prejudicial to any interest of a Participant or a Beneficiary in the Plan.

ARTICLE 10

SUSPENSION OR TERMINATION OF THE PLAN

10.1 EMPLOYER’S RIGHT TO SUSPEND PLAN . The Employer reserves the right to suspend the operation of the Plan for a fixed or indeterminate period of time, by action of the Board. In the event of a suspension of the Plan, during the period of the suspension, the Employer shall continue all aspects of the Plan and, effective with the first day of the Plan Year following the date the Plan is suspended, Compensation Deferrals. Payments of distributions will continue to be made during the period of the suspension in accordance with Articles 5 and 6.

10.2 AUTOMATIC TERMINATION OF PLAN . The Plan automatically shall terminate upon the dissolution of the Employer, or upon a merger into or consolidation with any other corporation or business organization if there is a failure by the surviving corporation or business organization to adopt specifically and agree to continue the Plan. If the merger or consolidation qualifies as a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation as defined in Treas. Reg. 1.409A-3(i)(5), the Plan shall be liquidated upon such a termination in accordance with Treas. Reg. 1.409A-3(j)(4)(ix)(B). If the Plan is not liquidated, payments of distributions will continue to be made following the termination in accordance with Articles 5 and 6.

10.3 TERMINATION AND LIQUIDATION OF THE PLAN . The Employer may terminate and liquidate the Plan in connection with a corporate dissolution or approval by a bankruptcy court, certain change in control events, or the termination and liquidation of all plans of the Employer that are required to be aggregated, as described under Treas. Reg. 1.409A-3(j)(4)(ix). Upon the date of termination, the value of the vested Accounts of all affected Participants and Beneficiaries shall be determined. After deduction of estimated expenses in liquidating and paying Plan benefits, vested Accounts shall be paid to Participants and Beneficiaries in a lump sum distribution in accordance with Treas. Reg. 1.409A-3(j)(4)(ix).

ARTICLE 11

THE TRUST

11.1 ESTABLISHMENT OF TRUST . The Employer shall establish the Trust with the Trustee pursuant to such terms and conditions as are set forth in the Trust agreement to be entered into between the Employer and the Trustee or the Employer shall cause to be maintained one or more separate subaccounts in an existing Trust maintained with the Trustee with respect to one or more other plans of the Employer, which subaccount or subaccounts represent Participants’ interests in the Plan. Any such Trust shall be intended to be treated as a “grantor trust” under the Code and the

 

18


establishment of the Trust or the utilization of any existing Trust for Plan benefits, as applicable, shall not be intended to cause any Participant to realize current income on amounts contributed thereto, and the Trust shall be so interpreted.

ARTICLE 12

MISCELLANEOUS

12.1 LIABILITY OF EMPLOYER; LIMITATIONS ON LIABILITY OF EMPLOYER . Notwithstanding anything herein that may suggest otherwise, the Employer shall be solely liable for the payment of any benefits due under this Plan. However, neither the establishment of the Plan nor any modification thereof, nor the creation of any Account under the Plan, nor the payment of any benefits under the Plan shall be construed as giving to any Participant or other person any legal or equitable right against the Employer or any officer or employer thereof except as provided by law or by any Plan provision. The Employer shall not in any way guarantee any Participant’s Account from loss or depreciation, whether caused by poor investment performance of a deemed investment or the inability to realize upon an investment due to an insolvency affecting an investment vehicle or any other reason. In no event shall the Employer or any successor, employee, officer, director or stockholder of the Employer, be liable to any person on account of any claim arising by reason of the provisions of the Plan or of any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other person to be entitled to any particular tax consequences with respect to the Plan, or any credit or distribution under the Plan.

12.2 CONSTRUCTION . If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. For all purposes of the Plan, where the context admits, the singular shall include the plural, and the plural shall include the singular. Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. The laws of Pennsylvania shall govern, control and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Participation under the Plan will not give any Participant the right to be retained in the service of the Employer or any right or claim to any benefit under the Plan unless such right or claim has specifically accrued under the Plan.

The Plan is intended to be and at all times shall be interpreted and administered so as to qualify as an unfunded deferred compensation plan, and no provision of the Plan shall be interpreted so as to give any individual any right in any assets of the Employer which is greater than the rights of a general unsecured creditor of the Employer.

12.3 SPENDTHRIFT PROVISION . No amount payable to a Participant or a Beneficiary under the Plan will, except as otherwise specifically provided by law, be subject in any manner to anticipation, alienation, attachment, garnishment, sale, transfer, assignment (either at law or in equity), levy, execution, pledge, encumbrance, charge or any other legal or equitable process, and any attempt to do so will be void; nor will any benefit be in any manner liable for or subject to the

 

19


debts, contracts, liabilities, engagements or torts of the person entitled thereto. Further, subject to Code section 409A, (i) the withholding of taxes from Plan benefit payments, (ii) the recovery under the Plan of overpayments of benefits previously made to a Participant or Beneficiary, (iii) if applicable, the transfer of benefit rights from the Plan to another plan, or (iv) the direct deposit of benefit payments to an account in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation.

12.4 PROHIBITED ACCELERATION/DISTRIBUTION TIMING . This Section shall take precedence over any other provision of the Plan or this Article 12 to the contrary. If the timing of any distribution would result in any tax or other penalty (other than ordinarily payable Federal, state or local income or payroll taxes), which tax or penalty can be avoided by payment of the distribution at a later time, then the distribution shall be made on (or as soon as practicable after) the first date on which such distribution can be made without such tax or penalty; except to the extent that Code section 409A requires that this Section 12.4 be disregarded because it purports to nullify Plan terms that are not in compliance with Code section 409A.

12.5 DELAY IN PAYMENT . If the Employer reasonably anticipates that any payment scheduled to be made hereunder would violate securities laws (or other applicable laws) or jeopardize the ability of the Employer to continue as a going concern if paid as scheduled, then the Employer may defer that payment, provided the Employer treats payments to all similarly situated Participants on a reasonably consistent basis. In addition, the Employer may, in its discretion, delay a payment upon such other events and conditions as the IRS may prescribe, provided the Employer treats payments to all similarly situated Participants on a reasonably consistent basis. Any amounts deferred pursuant to this Section shall continue to be credited or debited on the books of the Employer with additional amounts in accordance with Section 3.1 above. The amounts so deferred and amounts credited or debited thereon shall be distributed to the Participant or his Beneficiary (in the event of the Participant’s death) at the earliest possible date on which the Employer reasonably anticipates that such violation or material harm would be avoided or as otherwise prescribed by the IRS.

12.6 AGGREGATION OF EMPLOYERS . If the Employer is a member of a controlled group of corporations or a group of trades or business under common control (as described in Code Section 414(b) or (c), but substituting a fifty percent (50%) ownership level for the eighty percent (80%) level set forth in those Code Sections), all members of the group shall be treated as a single Employer for purposes of whether there has occurred a Separation from Service and for any other purposes under the Plan as Code section 409A shall require. For purposes of Article 10, in the case of a change in control event, the entities to be treated as a single Employer shall be determined immediately following the change in control event.

12.7 AGGREGATION OF PLANS . If the Employer offers other account balance deferred compensation plans in addition to the Plan, those plans together with the Plan shall be treated as a single plan to the extent required under Code section 409A for purposes of cashing out de minimus amounts pursuant and for any other purposes under the Plan as Code section 409A shall require.

 

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12.8 USERRA . Notwithstanding anything herein to the contrary, any distribution election provided to a Participant as necessary to satisfy the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended, shall be permissible hereunder.

12.9 TAX WITHHOLDING . All distributions under the Plan are subject to any applicable tax withholding, as determined by the Employer in its discretion. The Employer shall have the right to deduct from a Participant’s Compensation that is not being deferred under this Plan any federal, state, local or employment taxes which it deems are required by law to be withheld with respect to any Compensation Deferrals or Plan distributions.

IN WITNESS WHEREOF , the Employer has caused the amended and restated Plan to be executed and its seal to be affixed hereto, effective as of the 1st day of October, 2005.

 

ATTEST/WITNESS:     SNYDER’S OF HANOVER, INC.

LOGO

   

By:

 

LOGO

 

(SEAL)

Print:

 

Penny Opalka

   

Print Name:

 

Charles E. Good

 
       

CHIEF FINANCIAL OFFICER

 
     

Date:

 

12-07-07

 

 

21

Exhibit 10.3

SNYDER’S-LANCE, INC.

Long-Term Performance Incentive Plan for Officers and Key Managers

Purposes and Introduction . The Long-Term Performance Incentive Plan for Officers and Key Managers (the “Plan”) provides for Stock Options, Restricted Stock and Performance Awards under the Snyder’s-Lance, Inc. 2007 Key Employee Incentive Plan (the “Incentive Plan”). Except as otherwise expressly defined herein, capitalized terms shall be as defined in the Incentive Plan. The primary purposes of the Plan are to:

 

   

Align officers’ and managers’ interests with those of stockholders by linking a substantial portion of compensation to the price of the Company’s Common Stock and to the Company’s financial performance based on performance measures as described below.

 

   

Provide a way to attract and retain key executives and managers who are critical to the Company’s future success.

 

   

Provide competitive total compensation for executives and managers commensurate with Company performance.

Plan Year and Performance Periods . Awards shall be made under the Plan for each fiscal year of the Company (the “Plan Year”) as determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”). As described below, a portion of the awards for a Plan Year may be made in the form of Performance Awards which become earned and payable based on attainment of specified performance conditions measured over a specified period of one or more years that includes the applicable Plan Year (the “Performance Period”).

Eligibility and Participation . Eligibility in the Plan is limited to Executive Officers and Key Managers who are key to the Company’s success as reviewed and approved on an annual basis. The Compensation Committee will review and approve participants nominated by the Chief Executive Officer. An employee hired or promoted into an eligible position during a Plan Year will not participate in the Plan for that Plan Year, except to the extent otherwise determined


by the Compensation Committee. Participation in the Plan for a Plan Year does not guarantee participation in the Plan for any subsequent Plan Year, but instead will be reevaluated and determined on an annual basis.

Target Incentive . Each participant will be assigned a Target Incentive for a Plan Year, stated as a percent of base salary or such other amount as determined by the Compensation Committee. The amount of the Target Incentive will be delivered in the form of one or more awards as described below.

Awards . The Target Incentive for a Plan Year will be divided between an award of Nonqualified Stock Options, an award of Restricted Stock and a Performance Award (or such other forms of awards as permitted under the Incentive Plan), as determined by the Compensation Committee. Unless and until changed by the Compensation Committee, these percentages are as follows: Nonqualified Stock Options – 25% of the Target Incentive (the “Stock Option Incentive”); Restricted Stock – 25% of the Target Incentive (the “Restricted Stock Incentive”); and Performance Award – 50% of the Target Incentive (the “Performance Award Incentive”). The following provides additional details about the terms of these awards, unless and until changed by the Compensation Committee:

1. Stock Options . The number of Stock Options awarded to each participant for a Plan Year will equal the dollar value of the participant’s Stock Option Incentive divided by the Black-Scholes value of the Stock Options, with the result rounded up to the nearest multiple of three shares. The grant date for Stock Options will be the date during the Plan Year specified by the Compensation Committee upon approval of the awards and the exercise price will be the Fair Market Value of the Common Stock, which is the closing price of the Common Stock, on the grant date. Each Stock Option will vest in three substantially equal annual installments beginning one year after the grant date and the term of each Stock Option will be ten years.

2. Restricted Stock . The number of shares of Restricted Stock awarded to each participant for a Plan Year will equal the dollar value of the participant’s Restricted Stock Incentive divided by the closing price of the Common Stock on the grant date, with the results rounded up to the nearest multiple of three shares. The grant date for Restricted Stock will be the date during the Plan Year specified by the Compensation Committee upon approval of the

 

2


awards and the value shall be the Fair Market Value of the Common Stock on the grant date. Each award of Restricted Stock will vest in three substantially equal annual installments beginning one year after the grant date.

3. Performance Awards . The Performance Award awarded to each participant for a Plan Year will have a Target value equal to the Performance Award Incentive. The Compensation Committee will establish the applicable Performance Period, Performance Goals and formula, including Threshold, Target and Maximum performance levels (to the extent applicable), for the Performance Award. The Target amount of the Performance Award for a participant will equal the Performance Award Incentive. If more than one Performance Goal applies for a Plan Year, the Compensation Committee will establish the relative weighting of the Performance Goals. For awards intended to be Qualified Performance-Based Awards, the Compensation Committee will establish the Performance Goals in a manner consistent with that intent. Award funding levels will be determined based on actual performance over the Performance Period as follows:

 

     Threshold    Target     Maximum

Award Level Funded

   TBD      100   TBD

The Threshold and Maximum funding levels will be determined by the Compensation Committee at the time the terms of the Performance Award are established. Percent of payout will be determined on a straight line basis from Threshold to Target and from Target to Maximum, and may be subject to further adjustment as specified in the formula established by the Compensation Committee (e.g., based on attainment of a specified level of relative total stockholder return). There will be no payout unless the Threshold for the applicable Performance Goal is reached. Threshold, Target and Maximum levels will be defined at the beginning of each Plan Year for the applicable Performance Goal. The Performance Goals and formula for a Performance Period will be communicated to each participant as soon as practicable after they have been established. Final Performance Awards will be calculated after the Compensation Committee has reviewed the Company’s audited financial statements for the Performance Period and determined the performance level achieved. The following definitions for the terms Maximum, Target and Threshold should help set the goals for each year, as well as evaluate the payouts:

 

3


   

Maximum : Excellent; deserves an above-market incentive

 

   

Target : Normal or expected performance; deserves market-level incentive

 

   

Threshold : Lowest level of performance deserving payment above base salary; deserves below-market incentive

Progress reports should be made to participants annually, showing performance results. Performance Awards for a Performance Period will be payable in cash as soon as practicable following the Performance Period after the performance level has been determined and approved by the Compensation Committee. All awards will be rounded to the nearest $100.

Certain Termination of Employment . Unless and until the Compensation Committee determines otherwise, the following provides the impact of a participant’s termination of employment on awards made under the Plan:

1. Stock Options. In the event a participant voluntarily terminates employment (other than by Retirement) or is terminated involuntarily or in the event of death, Disability or Retirement, vesting and the post-termination exercise period for Stock Options will be as follows:

Voluntary termination (other than Retirement) : Vested Stock Options will remain exercisable for a period of 90 days following the date of termination (or, if earlier, the original expiration date of the option); unvested Stock Options will be forfeited as of the date of termination.

Involuntary termination : Vested Stock Options will remain exercisable for a period of 90 days following the date of termination (or, if earlier, the original expiration date of the option); unvested Stock Options will be forfeited as of the date of termination.

Death : Stock Options will remain exercisable for a period of one year following the date of death (or, if earlier, the original expiration date of the option); unvested Stock Options will become fully vested as of the date of termination.

 

4


Disability : Vested Stock Options will remain exercisable through the original expiration date of the option; unvested Stock Options will become fully vested as of the date of termination.

Retirement : Vested Stock Options will remain exercisable for a period of three years following retirement (or, if earlier, the original expiration date of the option); unvested Stock Options will continue to vest for a period of six months after Retirement and any remaining unvested Stock Options will be forfeited as of such date.

2. Restricted Stock. In the event a participant voluntarily terminates employment (other than by Retirement) or is terminated involuntarily or in the event of death, Disability or Retirement, vesting for Restricted Stock will be as follows:

Voluntary termination (other than Retirement) : Unvested Restricted Stock will be forfeited as of the date of termination.

Involuntary termination : Unvested Restricted Stock will be forfeited as of the date of termination.

Death : Unvested Restricted Stock will become fully vested on the date of such event.

Disability : Unvested Restricted Stock will become fully vested on the date of such event.

Retirement : Unvested Restricted Stock will become vested pro rata based on the number of full months elapsed on the date of such event since the award date and any remaining unvested Restricted Stock will be forfeited as of such date.

3. Performance Awards. In the event a participant voluntarily terminates employment (other than by Retirement) or is terminated involuntarily during or after the end of a Performance Period but before the applicable award payment date, the participant shall not receive any Performance Award hereunder.

 

5


In the event of a participant’s death or Disability before the end of a Performance Period, any Performance Award will be determined on and prorated to the date of such event based on target performance and paid out all in cash as soon as administratively practicable (but in no event more than 75 days) after the date of such event. In the event of a participant’s death or Disability on or after the end of the Performance Period but before the applicable award payment date, any Performance Award will be determined based on actual performance and paid out all in cash on or about the applicable award payment date.

If the event of a participant’s Retirement during or after the end of the Performance Period but before the applicable award payment date, any Performance Award will be determined based on actual performance, pro rated for the portion of the Performance Period worked through Retirement, and paid out all in cash on or about the applicable award payment date.

“Retirement” is defined under the Incentive Plan to mean the participant’s termination of employment with the Company either (i) after attainment of age 65 or (ii) after attainment of age 55 with the prior consent of the Compensation Committee.

Change in Control . In the event of a Change in Control (which will occur only in the event of the closing of the relevant transaction), (i) unvested Stock Options and unvested Restricted Stock will vest as provided in the Incentive Plan upon the closing of the Change in Control transaction and (ii) for outstanding Performance Awards, pro rata payouts will be made all in cash at target through the closing date with such proration based on the number of days in the Performance Period preceding the closing of the Change in Control transaction. Payouts will be made within 30 days after the relevant transaction has been closed.

Withholding . The Company shall withhold from awards any Federal, foreign, state or local income or other taxes required to be withheld, as and when so required.

Executive Officers . Notwithstanding any provisions to the contrary above, participation, awards and pro-rations for Executive Officers, including the Chief Executive Officer, shall be approved by the Compensation Committee.

 

6


Stockholder Approval . The Plan and the awards hereunder are made pursuant to the Incentive Plan, which was most recently approved by the Company’s stockholders at the Annual Meeting of Stockholders held on May 4, 2010.

Governance . The Compensation Committee is ultimately responsible for the administration and governance of the Plan. Actions requiring Compensation Committee approval include final determination of plan eligibility and participation, identification of types of awards provided, performance measures and performance objectives and final award determinations. The Compensation Committee may adjust any award due to extraordinary events such as acquisitions, dispositions, discontinued operations, required accounting adjustments or similar events, all as specified in Section 11(d) of the Incentive Plan; provided, however, that the Compensation Committee shall at all times be required to exercise this discretionary power in a manner, and subject to such limitations, as will permit all payments under the Plan to “covered employees,” as defined in Section 162(m) of the Internal Revenue Code, to continue to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code. In addition, under the Incentive Plan, the Compensation Committee retains the discretion to reduce any award amount from the amount otherwise determined under the applicable formula. Subject to the foregoing, the decisions of the Compensation Committee shall be conclusive and binding on all participants.

APPROVED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE CORPORATION ON FEBRUARY 8, 2012

 

7

Exhibit 10.4

SNYDER’S-LANCE, INC.

Annual Performance Incentive Plan for Officers

Purposes and Introduction . The Annual Performance Incentive Plan for Officers (the “Plan”) provides the framework for establishing annual Performance Cash Awards under the Snyder’s-Lance, Inc. 2007 Key Employee Incentive Plan (the “Incentive Plan”). Except as otherwise expressly defined herein, capitalized terms shall be as defined in the Incentive Plan. The primary purposes of the Plan are to:

 

   

Motivate behaviors that lead to the successful achievement of specific sales, financial and operations goals that support Snyder’s-Lance, Inc. stated business strategy and to align participants’ interests with those of stockholders.

 

   

Emphasize link between participants’ performance and rewards for meeting predetermined, specific goals.

 

   

Focus participant’s attention on operational effectiveness from both an earnings and an investment perspective.

 

   

Promote the performance orientation at Snyder’s-Lance, Inc. and communicate to employees that greater responsibility carries greater rewards.

Plan Year . The period over which performance will be measured is the Company’s fiscal year (the “Plan Year”).

Eligibility and Participation . Eligibility in the Plan is limited to Officers of Snyder’s-Lance, Inc. who are key to Snyder’s-Lance, Inc. success. The Compensation Committee of the Board of Directors (the “Compensation Committee”) will review and approve for each Plan Year the participants nominated by the Chief Executive Officer. Participation in one year does not guarantee participation in a following year, but instead will be reevaluated and determined on an annual basis. Participants in the Plan for a Plan Year may not participate in any other annual incentive plan (e.g., sales incentives, etc.) offered by Snyder’s-Lance, Inc. or its affiliates for that Plan Year.

 

1


Target Incentives Awards . Each participant will be assigned a Target Incentive expressed as a percentage of his or her base salary. Participants may be assigned Target Incentives by position, by salary level or based on other factors as determined by the Compensation Committee. Target Incentives will be reevaluated at least every other year, if not annually. If the job responsibility of a position changes during the year, or base salary is increased significantly, the Target Incentive shall be revised as appropriate. Target Incentives will be communicated to each participant as close to the beginning of the year as practicable, in writing. Final awards will be calculated by multiplying each participant’s Target Incentive by the appropriate percentage (based on performance for the year, as described below).

Performance Goals and Award Funding . For each Plan Year, the Compensation Committee will establish the applicable Performance Goals and formula, including Threshold, Target and Maximum performance levels. If more than one Performance Goal applies for a Plan year, the Compensation Committee will establish the relative weighting of the Performance Goals. For awards intended to be Qualified Performance-Based Awards, the Compensation Committee will establish the Performance Goals in a manner consistent with that intent. Award funding levels will be determined based on actual performance as follows:

 

     Threshold    Target     Maximum

Award Level Funded

   TBD      100   TBD

The Threshold and Maximum funding levels will be determined by the Compensation Committee each year. Percent of payout will be determined on a straight line basis from Threshold to Target and from Target to Maximum. There will be no payout unless the Threshold for the applicable Performance Goal is reached. Threshold, Target and Maximum levels will be defined at the beginning of each Plan Year for each Performance Goal. The Performance Goals and formula will be communicated to each participant as soon as practicable after they have been established. Final Target Incentive Awards will be calculated after the Compensation Committee has reviewed the Company’s audited financial statements for the Plan Year and determined the performance level achieved. The following definitions for the terms

 

2


Maximum, Target and Threshold should help set the goals for each year, as well as evaluate the payouts:

 

   

Maximum : Excellent; deserves an above-market incentive

 

   

Target : Normal or expected performance; deserves market-level incentive

 

   

Threshold : Lowest level of performance deserving payment above base salary; deserves below-market incentive

Form and Timing of Payments . Final award payments for a Plan Year will be made in cash as soon as practicable after award amounts are approved by the Compensation Committee, but not more than 75 days after the end of the Plan Year. All awards will be rounded to the nearest $100.

Change in Status . An employee hired into an eligible position during the Plan Year may participate in the Plan for the balance of the Plan Year on a pro rata basis.

Certain Terminations of Employment . In the event a participant voluntarily terminates employment (other than Retirement) or is terminated involuntarily during the Plan Year, any award will be forfeited. In the event of death, Disability or Retirement during the Plan Year, the award will be paid on a pro rata basis based on the actual performance determined after the end of the Plan Year. In the event of any termination of employment after the end of the Plan Year (including death, Disability, Retirement, voluntary termination or involuntary termination for any reason), any award will be determined based on actual performance and paid at the same time as awards are paid to all other participants. “Retirement” is defined under the Incentive Plan to mean the participant’s termination of employment with the Company either (i) after attainment of age 65 or (ii) after attainment of age 55 with the prior consent of the Compensation Committee.

Change In Control . In the event of a Change in Control (which will occur only in the event of the closing of the relevant transaction), pro rata payouts will be made at target for the year-to-date, based on the number of days in the Plan Year preceding the closing of the Change

 

3


in Control transaction. Payouts will be made within 30 days after the relevant transaction has been completed.

Withholding . The Company shall withhold from award payments any Federal, foreign, state or local income or other taxes required to be withheld.

Communications . Progress reports should be made to participants quarterly showing the year-to-date performance results and the percentage of Target Incentives that would be earned if results remain at that level for the entire year.

Executive Officers . Notwithstanding any provisions to the contrary above, participation, Target Incentive Awards and pro-rations for executive officers, including the Chief Executive Officer, shall be approved by the Compensation Committee.

Stockholder Approval . The Plan and the awards hereunder are made pursuant to the Incentive Plan, which was most recently approved by the Company’s stockholders at the Annual Meeting of Stockholders held on May 4, 2010.

Governance . The Compensation Committee is ultimately responsible for the administration and governance of the Plan. Actions requiring Compensation Committee approval include final determination of plan eligibility and participation, identification of performance measures, performance objectives and final award determination. The Compensation Committee may adjust any award due to extraordinary events such as acquisitions, dispositions, discontinued operations, required accounting adjustments or similar events, all as specified in Section 11(d) of the Incentive Plan; provided, however, that the Compensation Committee shall at all times be required to exercise this discretionary power in a manner, and subject to such limitations, as will permit all payments under the Plan to “covered employees,” as defined in Section 162(m) of the Internal Revenue Code, to continue to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code. In addition, under the Incentive Plan, the Compensation Committee retains the discretion to reduce any award amount from the amount otherwise determined under the applicable formula. Subject to

 

4


the foregoing, the decisions of the Compensation Committee shall be conclusive and binding on all participants.

APPROVED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE CORPORATION ON FEBRUARY 8, 2012

 

5

Exhibit 10.5

 

LOGO

    

13024 Ballantyne Corporate Place

    

Harris Building Suite 900

    

Charlotte, NC 28277

    

(704) 554-1421

    

 

April 9, 2012

Mr. Carl E. Lee, Jr.

1250 York Street

Hanover, PA 17331

Re: Relocation Benefits

The purpose of this letter is to confirm the relocation benefits you are eligible to receive associated with your move from York, PA to Charlotte, NC in connection with your role as President and Chief Operating Officer at Snyder’s-Lance, Inc.

You are entitled to the standard benefits that are provided to relocating employees as outlined below:

 

   

House hunting & temporary lodging

 

   

Approved miscellaneous relocation expenses

 

   

Transportation of household goods

 

   

Home sale marketing assistance

 

   

Home purchase assistance

In recognition of the current real estate market and the expectation of a loss on the sale of your current home, the Compensation Committee of the Board of Directors have approved in lieu of your participation in the Company’s relocation relief fund, a payment of Two-Hundred and Fifty Thousand Dollars ($250,000.00) that will be made in cash to you following your purchase of a home in Charlotte, NC. This payment will be made following the closing of the purchase transaction and will be subject to normal withholdings.

 

Very truly yours,

David V. Singer

Chief Executive Officer

Exhibit 10.6

 

LOGO

    

13024 Ballantyne Corporate Place

    

Harris Building Suite 900

    

Charlotte, NC 28277

    

(704) 554-1421

February 9, 2012

Mr. Michael A. Warehime

1250 York Street

Hanover, PA 17331

Re: Equity Compensation

Pursuant to the Agreement and Plan of Merger dated as of July 21, 2010, as amended, among Lance, Inc., Lima Merger Corp. and Snyder’s of Hanover, Inc., your compensation for serving as Chairman of the Board has been set for 2012.

The above Agreement provides for “an annual incentive target at 150% of annual remuneration as determined consistent with the annual incentive for the Chief Executive Officer and the President.”

The purpose of this letter is to confirm the amendments to your annual incentive for 2012 that have been agreed upon. Your Incentive Target will be 100% of annual remuneration under the Snyder’s-Lance, Inc. Annual Performance Incentive Plan for Officers for 2012.

In addition, you will receive $165,000 of restricted stock and $165,000 of nonqualified stock options to be granted at the same time and on the same terms and conditions as grants of restricted stock and nonqualified stock options under the Snyder’s-Lance, Inc. Long Term Performance Incentive Plan for Officers and Key Managers for 2012, except that such shares of restricted stock and such nonqualified stock options will vest one year after the date of grant but only to the extent of the attainment of the Performance Goals under the Snyder’s-Lance, Inc. Annual Performance Incentive Plan for Officers for 2012. Any shares of restricted stock or nonqualified stock options that do not so vest shall be forfeited. Vested shares and options will be rounded to the closest full number of shares or options. In the event that the Performance Goals attainment with respect to the amounts designated for restricted stock and nonqualified stock options is more than 100%, such amount will be paid in cash.

 

Very truly yours,

David V. Singer

Chief Executive Officer

SNYDER’S-LANCE, INC. AND SUBSIDIARIES

 

EXHIBIT 31.1

MANAGEMENT CERTIFICATION

I, David V. Singer, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Snyder’s-Lance, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2012

 

/s/ David V. Singer

David V. Singer
Chief Executive Officer

SNYDER’S-LANCE, INC. AND SUBSIDIARIES

 

EXHIBIT 31.2

MANAGEMENT CERTIFICATION

I, Rick D. Puckett, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Snyder’s-Lance, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2012

 

/s/ Rick D. Puckett
Rick D. Puckett

Executive Vice President, Chief Financial Officer

and Treasurer

SNYDER’S-LANCE, INC. AND SUBSIDIARIES

 

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Snyder’s-Lance, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, David V. Singer, Chief Executive Officer of the Company, and Rick D. Puckett, Executive Vice President, Chief Financial Officer, and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Snyder’s-Lance, Inc. and will be retained by Snyder’s-Lance, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

/s/ David V. Singer

   

/s/ Rick D. Puckett

David V. Singer

   

Rick D. Puckett

Chief Executive Officer

May 8, 2012

   

Executive Vice President, Chief Financial Officer and Treasurer

   

May 8, 2012